-----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, CntjHUWkzQ5Rogfl9AhFkLXx3Jg6ocWQztRAckTIBbKXPLzix0FXhouwD9QpdidD cMk1czcpQRoSkl5cftIz9A== 0000950136-03-001670.txt : 20030703 0000950136-03-001670.hdr.sgml : 20030703 20030703085431 ACCESSION NUMBER: 0000950136-03-001670 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20030531 FILED AS OF DATE: 20030703 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: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05742 FILM NUMBER: 03773719 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: RACK RITE DISTRIBUTORS DATE OF NAME CHANGE: 19680510 FORMER COMPANY: FORMER CONFORMED NAME: LEHRMAN LOUIS & CO DATE OF NAME CHANGE: 19680510 10-Q 1 file001.htm FORM 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For The Quarterly Period Ended May 31, 2003


	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For The Transition Period From To

Commission File Number 1-5742

RITE AID CORPORATION

(Exact name of registrant as specified in its charter)

Registrant's telephone number, including area code: (717) 761-2633

(Former name, former address and former fiscal year, if changed since last report) Not Applicable

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes No

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

The registrant had 515,408,556 shares of its $1.00 par value common stock outstanding as of June 27, 2003.

RITE AID CORPORATION

TABLE OF CONTENTS


		Page
	Cautionary Statement Regarding Forward Looking Statements		3
PART I FINANCIAL INFORMATION
ITEM 1.	Financial Statements:
	Condensed Consolidated Balance Sheets as of May 31, 2003 and March 1, 2003		4
	Condensed Consolidated Statements of Operations for the Thirteen Week Periods Ended May 31, 2003 and June 1, 2002		5
	Condensed Consolidated Statements of Cash Flows for the Thirteen Week Periods Ended May 31, 2003 and June 1, 2002		6
	Notes to Condensed Consolidated Financial Statements		7
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		18
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk		26
ITEM 4.	Controls and Procedures		27
PART II OTHER INFORMATION
ITEM 1.	Legal Proceedings		28
ITEM 2.	Changes in Securities and Use of Proceeds		28
ITEM 3.	Defaults Upon Senior Securities		28
ITEM 4.	Submission of Matters to a Vote of Security Holders		28
ITEM 5.	Other Information		28
ITEM 6.	Exhibits and Reports on Form 8-K		29

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by terms and phrases such as "anticipate," "believe," "intend," "estimate," "expect," "continue," "should," "could," "may," "plan," "project," "predict," "will" and similar expressions and include references to assumptions and relate to our future prospects, developments and business strategies.

Factors that could cause actual results to differ materially from those expressed or implied in such forward-looking statements include, but are not limited to:

•

our high level of indebtedness;

•

our ability to make interest and principal payments on our debt and satisfy the other covenants contained in our new senior secured credit facility and other debt agreements;

•

our ability to improve the operating performance of our existing stores in accordance with our management's long term strategy;

•

our ability to hire and retain pharmacists and other store personnel;

•

the outcomes of pending lawsuits and governmental investigations;

•

competitive pricing pressures and continued consolidation of the drugstore industry; and

•

the efforts of third party payors to reduce prescription drug costs, changes in state or federal legislation or regulations, the success of planned advertising and merchandising strategies, general economic conditions and inflation, interest rate movements, access to capital, and our relationships with our suppliers.

We undertake no obligation to revise the forward-looking statements included in this report to reflect any future events or circumstances. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Factors that could cause or contribute to such differences are discussed in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations—Overview and Factors Affecting Our Future Prospects" included in our Annual Report on Form 10-K for the fiscal year ended March 1, 2003 ("the Fiscal 2003 10-K"), which we filed with the Securities and Exchange Commission ("SEC") on May 2, 2003 and is available on the SEC's website at www.sec.gov.

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

RITE AID CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
(unaudited)


	May 31, 2003			March 1, 2003
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	342,742		$	365,321
Accounts receivable, net		628,348			575,518
Inventories, net		2,226,611			2,195,030
Prepaid expenses and other current assets		98,851			108,018
Total current assets		3,296,552			3,243,887
PROPERTY, PLANT AND EQUIPMENT, NET		1,932,726			1,868,579
GOODWILL		684,535			684,535
OTHER INTANGIBLES, NET		195,190			199,768
OTHER ASSETS		130,097			136,746
Total assets	$	6,239,100		$	6,133,515
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Short-term debt and current maturities of long-term debt and lease financing obligations	$	70,911		$	103,715
Accounts payable		837,445			755,284
Accrued salaries, wages and other current liabilities		684,434			707,999
Total current liabilities		1,592,790			1,566,998
CONVERTIBLE NOTES		244,875			244,500
LONG-TERM DEBT, LESS CURRENT MATURITIES		3,465,797			3,345,365
LEASE FINANCING OBLIGATIONS, LESS CURRENT MATURITIES		167,121			169,048
OTHER NONCURRENT LIABILITIES		889,464			900,270
Total liabilities		6,360,047			6,226,181
COMMITMENTS AND CONTINGENCIES		—			—
REDEEMABLE PREFERRED STOCK		19,689			19,663
STOCKHOLDERS' DEFICIT:
Preferred stock, par value $1 per share, liquidation value $100 per share		393,705			393,705
Common stock, par value $1 per share		515,372			515,115
Additional paid-in capital		3,135,246			3,119,619
Accumulated deficit		(4,156,941	)		(4,118,119	)
Stock-based and deferred compensation		—			5,369
Accumulated other comprehensive loss		(28,018	)		(28,018	)
Total stockholders' deficit		(140,636	)		(112,329	)
Total liabilities and stockholders' deficit	$	6,239,100		$	6,133,515

See accompanying notes to condensed consolidated financial statements.

RITE AID CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)


	Thirteen Week Period Ended
	May 31, 2003			June 1, 2002
REVENUES	$	4,046,168		$	3,923,731
COSTS AND EXPENSES:
Cost of goods sold, including occupancy costs		3,068,175			2,993,778
Selling, general and administrative expenses		889,733			899,143
Stock-based compensation expense		9,835			8,094
Store closing and impairment charges (credits)		6,366			(4,117	)
Interest expense		78,958			84,631
Interest rate swap contracts		—			264
Loss (gain) on debt modifications and retirements, net		33,427			(270	)
Gain on sale of assets and investments, net		(1,504	)		(16,865	)
		4,084,990			3,964,658
Loss before income taxes		(38,822	)		(40,927	)
INCOME TAX BENEFIT		—			43,511
Net (loss) income	$	(38,822	)	$	2,584
COMPUTATION OF LOSS APPLICABLE TO COMMON STOCKHOLDERS
Net (loss) income	$	(38,822	)	$	2,584
Accretion of redeemable preferred stock		(26	)		(25	)
Cumulative preferred stock dividends		—			(7,230	)
Net loss attributable to common stockholders	$	(38,848	)	$	(4,671	)
BASIC AND DILUTED LOSS PER SHARE
Net loss per share	$	(0.08	)	$	(0.01	)

See accompanying notes to condensed consolidated financial statements.

RITE AID CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)


	Thirteen Week Period Ended
	May 31, 2003			June 1, 2002
OPERATING ACTIVITIES:
Net (loss) income	$	(38,822	)	$	2,584
Adjustments to reconcile to net cash (used in) provided by operations:
Depreciation and amortization		65,575			75,019
Stock-based compensation expense		9,835			8,094
Store closing and impairment charges (credits)		6,366			(4,117	)
Loss (gain) on debt modifications and retirements, net		33,427			(270	)
Gain on sale of assets and investments, net		(1,504	)		(16,865	)
Changes in income tax receivables and payables		—			(43,708	)
Changes in operating assets and liabilities		(25,077	)		17,376
NET CASH PROVIDED BY OPERATING ACTIVITIES		49,800			38,113
INVESTING ACTIVITIES:
Expenditures for property, plant and equipment		(128,760	)		(20,244	)
Intangible assets acquired		(4,895	)		(2,056	)
Proceeds from dispositions		8,523			18,866
NET CASH USED IN INVESTING ACTIVITIES		(125,132	)		(3,434	)
FINANCING ACTIVITIES:
Principal payments on long-term debt		(185,464	)		(4,500	)
Principal payments on bank credit facilities		(1,372,500	)		(5,000	)
Proceeds from issuance of new bank credit facility		1,150,000			—
Change in zero balance cash accounts		(14,971	)		18,092
Proceeds from issuance of stock		848			34
Proceeds from issuance of bonds		502,950			—
Deferred financing costs paid		(28,110	)		(841	)
NET CASH PROVIDED BY FINANCING ACTIVITIES		52,753			7,785
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(22,579	)		42,464
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		365,321			344,055
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	342,742		$	386,519
SUPPLEMENTARY CASH FLOW DATA:
Cash paid for interest (net of capitalized amounts of $48 and $95)	$	61,205		$	70,688
Cash (refunds) payments of income taxes, net	$	(413	)	$	412

See accompanying notes to condensed consolidated financial statements.

RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Thirteen Week Periods Ended May 31, 2003 and June 1, 2002
(Dollars and share information in thousands, except per share amounts)
(unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X and therefore do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete annual financial statements. The accompanying financial information reflects all adjustments (consisting primarily of normal recurring adjustments except as described in these notes) which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods. The results of operations for the thirteen week period ended May 31, 2003 are not necessarily indicative of the results to be expected for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Fiscal 2003 Annual Report on Form 10-K filed with the SEC.

Certain reclassifications have been made to prior period amounts to conform to current period classifications.

2. Recent Accounting Pronouncements

In April 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 145, "Rescission of FASB Statements No. 4, "Reporting Gains and Losses from Extinguishment of Debt," SFAS No. 44, "Accounting for Intangible Assets of Motor Carriers" and SFAS No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements," Amendment of SFAS No. 13, "Accounting for Leases," and Technical Corrections." The provisions of SFAS No. 145 that relate to the rescission of SFAS No. 4 are required to be applied in fiscal years beginning after May 15, 2002. Any gain or loss on extinguishment of debt that was classified as an extraordinary item in prior periods presented that does not meet the criteria in APB Opinion No. 30, "Reporting the Results of Operations – Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions" for classification as an extraordinary item shall be reclassified. Such reclassifications have been reflected in the accompanying financial statements. The provisions related to SFAS No. 13 are effective for transactions occurring after May 15, 2002 and have been adopted without material impact. All other provisions of SFAS No. 145, which are effective for financial statements issued on or after May 15, 2002, have been adopted without material impact.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." This Statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. This differs from the guidance in EITF 94-3, which requires that a liability for costs associated with an exit plan or disposal activity be recognized at the date of an entity's commitment to an exit plan. SFAS No. 146 also requires all charges related to an exit activity, including accretion of interest related to the discounting of the future liability related to that activity, to be classified in the same line item on the statement of operations. The provisions of the Statement are effective for exit or disposal activities that are initiated after December 31, 2002. The Company has adopted SFAS No. 146 effective January 1, 2003. This adoption impacts the timing of recognition of liabilities for exit or severance plans committed to after the adoption date, but had no impact on liabilities recorded by the Company for exit or severance costs as of December 31, 2002. Effective January 1, 2003, the Company records accretion of interest related to the discounting of the future liability related to that activity as a component of store closing and impairment charges on the statement of operations.

In September 2002, EITF Issue No. 02-16, "Accounting by a Reseller for Cash Consideration Received from a Vendor" was issued. The pronouncement addresses two issues. The first issue requires that vendor consideration received by a reseller be characterized as a reduction of cost of sales unless the consideration is either (i) a payment for assets or services delivered by the vendor, in which case the consideration should be characterized as revenue or (ii) a reimbursement of costs incurred to sell the vendor's product, in which case, the consideration should be characterized as a reduction of that cost. The requirements for this issue are to be applied to new arrangements, including modifications to existing arrangements, entered into after December 31, 2002. The second issue requires that rebates or refunds payable only if the customer completes a specified cumulative level of purchases or remains a customer for a specified period of time should be recognized as a reduction of cost of sales based on a systematic and rational allocation over the purchase period provided the amounts are probable and reasonably estimable. This portion of the pronouncement is to be applied to all new arrangements initiated after November 21, 2002. The adoption of this pronouncement had no impact on the Company's financial position or results of operations.

The Company has several stock option plans, which are described in detail in the Company's Form 10-K for the year ended March 1, 2003. Prior to fiscal 2004, the Company accounted for these plans under the recognition and measurement provisions of APB Opinion No. 25, "Accounting for Stock Issued to Employees" and related Interpretations. Effective March 2, 2003, the Company adopted the fair value recognition provisions of SFAS No. 123, "Accounting for Stock Based Compensation". Under the modified prospective method of adoption selected by the Company under the provisions of SFAS No. 148, "Accounting for Stock Based Compensation – Transition and Disclosure", compensation cost recognized in the thirteen week period ended May 31, 2003 is the same as that which would have been recognized had the recognition provisions of Statement 123 been applied from its original effective date. Results for prior years have not been restated. The following table illustrates the effect on net income and earnings per share if the fair value method had been applied to all outstanding and unvested awards in all periods presented.


	Thirteen Week Period Ended
	May 31, 2003			June 1, 2002
Net (loss) income, as reported:	$	(38,822	)	$	2,584
Add: Stock based compensation expense included in reported net income (loss)		9,541			8,094
Deduct: Total stock based compensation determined under the fair value method for all awards		(9,541	)		(8,403	)
Pro forma net (loss) income	$	(38,822	)	$	2,275
Loss per share:
Basic and diluted – as reported	$	(0.08	)	$	(0.01	)
Basic and diluted – pro forma	$	(0.08	)	$	(0.01	)

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement No. 133 on Derivative Instruments and Hedging Activities". This Statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts. The Statement clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative, clarifies when a derivative contains a financing component, amends the definition of an underlying to conform it to language used in FASB Interpretation ("FIN") No. 45, and amends certain other existing pronouncements. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. All provisions of the Statement, except those related to forward purchases or sales of "when-issued" securities, should be applied prospectively. The Company currently has no instruments that meet the

definition of a derivative, and therefore, the adoption of this Statement will have no impact on the Company's financial position or results of operations.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity." This Statement requires that certain instruments that were previously classified as equity on a company's statement of financial position now be classified as liabilities. The Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. Upon adoption, the Company's redeemable preferred stock will be classified as a liability on the statement of financial position.

In November of 2002, the FASB issued FIN No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees Including Guarantees of Indebtedness of Others." FIN No. 45 requires entities to establish liabilities for certain types of guarantees, and expands financial statement disclosures for others. The accounting requirements of FIN No. 45 are effective for guarantees issued or modified after December 31, 2002, and the disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002. The adoption of FIN No. 45 did not have any impact on the Company's financial position or results of operations.

In January of 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest Entities." FIN No. 46 requires the consolidation of entities that cannot finance their activities without the support of other parties and that lack certain characteristics of a controlling interest, such as the ability to make decisions about the entity's activities via voting rights or similar rights. The entity that consolidates the variable interest entity is the primary beneficiary of the entity's activities. FIN No. 46 applies immediately to variable interest entities created after January 31, 2003, and must be applied in the first period beginning after June 15, 2003 for entities in which an enterprise holds a variable interest entity that it acquired before February 1, 2003. The adoption will not have any impact on the Company's financial position or results of operations.

3. Loss Per Share

Following is a summary of the components of the numerator and denominator of the basic and diluted loss per share computation:


	Thirteen Week Period Ended
	May 31, 2003			June 1, 2002
Numerator for earnings per share:
Net (loss) income	$	(38,822	)	$	2,584
Accretion of redeemable preferred stock		(26	)		(25	)
Cumulative preferred stock dividends		—			(7,230	)
Net loss attributable to common stockholders	$	(38,848	)	$	(4,671	)
Denominator:
Basic weighted average shares		515,198			515,119
Diluted weighted average share		515,198			515,119
Basic and diluted loss per share:
Net loss per share	$	(0.08	)	$	(0.01	)

No potential shares of common stock have been included in the computation of diluted earnings per share as the Company incurred losses attributable to common shareholders for the thirteen week periods ended May 31, 2003 and June 1, 2002, and the amount would be antidilutive. At May 31, 2003, an

aggregate of 173,836 potential common shares related to stock options, convertible notes and preferred stock have been excluded from the computation of diluted earnings per share. At June 1, 2002, an aggregate of 169,764 potential common shares related to stock options, convertible notes and preferred stock and warrants have been excluded from the computation of diluted earnings per share.

4. Store Closing and Impairment Charges

Store closing and impairment charges (credits) consist of:


	Thirteen Week Period Ended
	May 31, 2003		June 1, 2002
Impairment charges	$	831	$	860
Store and equipment lease exit charges (credits)		5,535		(4,977	)
	$	6,366	$	(4,117	)

Impairment charges

Impairment charges include non-cash charges of $831 and $860 for the thirteen week periods ended May 31, 2003 and June 1, 2002, respectively, for the impairment of long-lived assets at 11 and 13 stores, respectively. These amounts include the write-down of long-lived assets at stores that were assessed for impairment because of management's intention to relocate or close the store or because of changes in circumstances that indicate the carrying value of the asset may not be recoverable.

Store and equipment lease exit charges (credits)

The Company recorded a charge for one store closed in the thirteen week period ended May 31, 2003. During the thirteen week period ended June 1, 2002, the Company did not record any charges for stores to be closed or relocated. Through December 31, 2002, costs incurred to close a store, which principally include lease termination costs, were recorded at the time management committed to closing the store, which is the date the closure was formally approved by senior management, or in the case of a store to be relocated, the date the new property was leased or purchased. Effective January 1, 2003, the Company adopted SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Pursuant to the adoption of SFAS No. 146, the Company now records costs to close the store at the time the store is closed and all inventory is liquidated. The Company calculates its liability for closed stores on a store-by-store basis. The calculation includes future minimum lease payments and related ancillary costs, from the date of closure to the end of the remaining lease term, net of estimated cost recoveries that may be achieved through subletting properties or through favorable lease terminations. This liability is discounted using a risk-free rate of interest. The Company evaluates these assumptions each quarter and adjusts the liability accordingly. The Company recorded net closed store expense of $5,535 in the thirteen week period ended May 31, 2003, due to the impact of interest accretion and adjustments to the risk-free rate of interest on the provision. The effect of lease terminations and changes in the risk-free rate of interest during the thirteen week period ended June 1, 2002 resulted in a credit of $4,977 to store closing.

The reserve for store and equipment lease exit costs includes the following activity:


	Thirteen Week Period Ended
	May 31, 2003			June 1, 2002
Balance — beginning of period	$	306,485		$	287,464
Provision for present value of noncancellable lease payments of stores designated to be closed		(95	)		1,093
Changes in assumptions about future sublease income, terminations and changes in interest rates		3,604			(5,430	)
Reversals of reserves for stores that management has determined will remain open		—			(640	)
Interest accretion		2,027			2,457
Cash payments, net of sublease income		(14,886	)		(12,749	)
Balance — end of period	$	297,135		$	272,195

The Company's revenues and loss from operations for the thirteen week periods ended May 31, 2003 and June 1, 2002 include results from stores that have been closed as of May 31, 2003. The revenue and operating losses of these stores for the periods are presented as follows:


	Thirteen Week Period Ended
	May 31, 2003			June 1, 2002
Revenues	$	27,687		$	72,257
Loss from operations		(806	)		(14,359	)

Included in loss from operations for the thirteen weeks ended May 31, 2003, are depreciation and amortization charges of $226 and closed store liquidation charges of $983. Included in loss from operations for the thirteen weeks ended June 1, 2002, are depreciation charges of $744 and closed store liquidation charges of $7,693. The above results are not necessarily indicative of the impact that these closures will have on revenues and operating results of the Company in the future, as the Company often transfers the business of a closed store to another Company store, thereby retaining a portion of these revenues.

5. Goodwill and Other Intangibles

The Company evaluates goodwill for impairment on an annual basis, pursuant to the provisions of SFAS No. 142, "Goodwill and Other Intangibles." Intangible assets other than goodwill are finite-lived and amortized over their useful lives. Following is a summary of the Company's amortizable intangible assets as of May 31, 2003 and March 1, 2003.


	May 31, 2003					March 1, 2003
	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Favorable leases and other	$	304,586	$	(170,820	)	$	303,334	$	(167,544	)
Prescription files		350,236		(288,812	)		347,182		(283,204	)
Total	$	654,822	$	(459,632	)	$	650,516	$	(450,748	)

Amortization expense for these intangible assets was $9,415 for the thirteen weeks ended May 31, 2003. The anticipated annual amortization expense for these intangible assets is $33,295, $17,882, $14,070, $15,969 and $13,965 in fiscal 2004, 2005, 2006, 2007 and 2008, respectively.

6. Sale of Investments

On April 29, 2002 and May 6, 2002, the Company sold shares of drugstore.com. As a result of these transactions, the Company no longer has an equity investment in drugstore.com. These sales resulted in a gain of $15,777, which is included in the $16,865 gain on sale of assets and investments, net, for the thirteen weeks ended June 1, 2002.

7. Income Taxes

The income tax benefit of the operating loss generated in the thirteen week periods ended May 31, 2003 and June 1, 2002 have been fully offset by a valuation allowance as a result of the Company's determination that, based on available evidence, it is more likely than not that the deferred tax assets will not be realized.

The tax benefit of $43,511 for the thirteen week period ended June 1, 2002 is primarily related to the federal tax law change, enacted on March 9, 2002, which increased the carryback period of net operating losses incurred in fiscal 2001 and 2002 from two years to five.

The Company has undergone an ownership change for statutory purposes during fiscal 2002, which resulted in a limitation on the future use of net operating loss carryforwards. The Company believes that this limitation does not further impair the net operating loss carryforwards because they are fully reserved.

8. Indebtedness and Credit Agreements

General

Following is a summary of indebtedness and lease financing obligations at May 31, 2003 and March 1, 2003:


	May 31, 2003		March 1, 2003
Secured Debt:
Senior secured credit facility due April 2008	$	1,150,000	$	—
Senior secured credit facility due March 2005		—		1,372,500
12.5% senior secured notes due September 2006 ($152,025 face value less unamortized discount of $5,714 and $6,143)		146,311		145,882
8.125% senior secured notes due May 2010 ($360,000 face value less unamortized discount of $4,667)		355,333		—
9.5% senior secured notes due February 2011		300,000		300,000
Other		6,190		6,540
		1,957,834		1,824,922

Lease Financing Obligations		174,378		176,186

Unsecured Debt:
6.0% dealer remarketable securities due October 2003		58,125		58,125
6.0% fixed-rate senior notes due December 2005		38,047		75,895
7.625% senior notes due April 2005		198,000		198,000


	May 31, 2003			March 1, 2003
4.75% convertible notes due December 2006 ($250,000 face valueless unamortized discount of $5,125 and $5,500)	$	244,875		$	244,500
7.125% notes due January 2007		210,074			335,000
6.125% fixed-rate senior notes due December 2008		150,000			150,000
11.25% senior notes due July 2008		150,000			150,000
6.875% senior debentures due August 2013		184,773			200,000
9.25% senior notes due June 2013 ($150,000 face value less unamortized discount of $2,402)		147,598			—
7.7% notes due February 2027		295,000			300,000
6.875% fixed-rate senior notes due December 2028		140,000			150,000
		1,816,492			1,861,520
Total debt		3,948,704			3,862,628

Short-term debt and current maturities of long-term debt and lease financing obligations		(70,911	)		(103,715	)

Long-term debt and lease financing obligations, less current maturities	$	3,877,793		$	3,758,913

New Credit Facility

On May 28, 2003, the Company replaced its senior secured credit facility with a new senior secured credit facility. The new facility consists of a $1,150,000 term loan and a $700,000 revolving credit facility, and will mature on April 30, 2008. The proceeds of the loans made on the closing date of the new credit facility were used, among other things, to repay the outstanding amounts under the old facility and to purchase the land and buildings at the Company's Perryman, MD and Lancaster, CA distribution centers, which had previously been leased through a synthetic lease arrangement. The purchase price of these assets was $106,850.

Borrowings under the new facility currently bear interest either at LIBOR plus 3.50%, if the Company chooses to make LIBOR borrowings, or at Citibank's base rate plus 2.50%. The Company is required to pay fees of 0.50% per annum on the daily unused amount of the revolving facility. Amortization payments of $2,875 related to the term loan begin on May 31, 2004, and continue on a quarterly basis until February 28, 2008, with a final payment of $1,104,000 due April 30, 2008.

Substantially all of Rite Aid Corporation's wholly owned subsidiaries guarantee the obligations under the new senior secured credit facility. The subsidiary guarantees are secured by a first priority lien on, among other things, the inventory, accounts receivable and prescription files of the subsidiary guarantors. Rite Aid Corporation is a holding company with no direct operations and is dependent upon dividends, distributions and other payments from its subsidiaries to service payments under the new senior secured credit facility. Rite Aid Corporation's direct obligations under the new senior secured credit facility are unsecured.

The new senior secured credit facility allows for the issuance of up to $150,000 in additional term loans or additional revolver availability. Rite Aid may request the additional loans at any time prior to the maturity of the senior secured credit facility, provided the Company is not in default of any terms of the facility, nor is in violation of any financial covenants. The new senior secured credit facility allows the Company to have outstanding, at any time, up to $1,000,000 in additional secured or unsecured debt. We

also have the ability to incur an unlimited amount of unsecured debt, if the terms of such unsecured indebtedness comply with certain terms set forth in the credit agreement and subject to the Company's compliance with certain financial covenants. At May 31, 2003, the remaining additional permitted secured debt under the new senior credit facility is $188,000. The new senior secured credit facility also allows for the repurchase of any debt with a maturity prior to April 30, 2008, and for a limited amount of debt with a maturity after April 30, 2008, based upon outstanding borrowings under the revolving credit facility and available cash at the time of the repurchase.

The new senior secured credit facility contains customary covenants, which place restrictions on the incurrence of debt, the payment of dividends, mergers, liens and sale and leaseback transactions. The new senior secured credit facility also requires the Company to meet various financial ratios and limits capital expenditures. Beginning with the twelve months ended May 31, 2003, the covenants require the Company to maintain a maximum leverage ratio of 6.65:1, gradually decreasing to 3.8:1 for the twelve months ending March 1, 2008. The Company must also maintain a minimum interest coverage ratio of 1.9:1 for the twelve months ended May 31, 2003, gradually increasing to 3.25:1 for the twelve months ending March 1, 2008. In addition, the Company must maintain a minimum fixed charge ratio of 1.05:1 for the twelve months ended May 31, 2003, gradually increasing to 1.25:1 for the twelve months ending March 1, 2008. Capital expenditures are limited to $250,000 for the fiscal year ending February 28, 2004, with the allowable amount increasing in subsequent years.

The new senior secured credit facility provides for customary events of default, including nonpayment, misrepresentation, breach of covenants and bankruptcy. It is also an event of default if any event occurs that enables, or which with the giving of notice or the lapse of time would enable, the holder of the Company's debt to accelerate the maturity of debt having a principal amount in excess of $25,000.

The Company's ability to borrow under the new senior secured credit facility is based on a specified borrowing base consisting of eligible accounts receivable, inventory and prescription files. At May 31, 2003, the term loan was fully drawn and the Company had no outstanding draws on the revolving credit facility. At May 31, 2003, the Company had letters of credit outstanding against the credit facility of $123,491.

As a result of the above transaction, the Company recorded a loss on debt modification in the thirteen weeks ended May 31, 2003 of $43,197 (which included the write-off of previously deferred debt issue costs of $35,120).

Other Transactions

In May 2003, the Company issued $150,000 aggregate principal amount of 9.25% senior notes due 2013. These notes are unsecured and effectively subordinate to the secured debt of the Company. The indenture governing the 9.25% senior notes contains customary covenant provisions that, among other things, include limitations on the Company's ability to pay dividends, make investments or other restricted payments, incur debt, grant liens, sell assets and enter into sale lease-back transactions.

In April 2003, the Company issued $360,000 aggregate principal amount of 8.125% senior secured notes due 2010. The notes are unsecured, unsubordinated obligations to Rite Aid Corporation and rank equally in right of payment with all other unsecured, unsubordinated indebtedness. The obligations under the notes are guaranteed, subject to certain limitations, by subsidiaries that guarantee the obligations under the Company's new senior secured credit facility. The guarantees are secured, subject to permitted liens, by shared second priority liens, with the holders of our 12.5% senior secured notes and our 9.5% senior secured notes, granted by subsidiary guarantors on all of their assets that secure the obligations under the new senior credit facility, subject to certain exceptions. The indenture governing the 8.125% senior secured notes contains customary covenant provisions that, among other things, include limitations on the Company's ability to pay dividends, make investments or other restricted payments, incur debt, grant liens, sell assets and enter into sale lease-back transactions.

During the thirteen week period ended May 31, 2003, the Company made open market purchases of the following securities:


Debt Redeemed	Principal Amount Redeemed		Amount Paid		Gain
6.0% fixed rate senior notes due 2005	$	37,848	$	36,853	$	865
7.125% notes due 2007		124,926		120,216		4,314
6.875% senior debentures due 2013		15,227		13,144		1,981
7.7% notes due 2027		5,000		4,219		715
6.875% fixed rate senior notes due 2028		10,000		7,975		1,895
Total	$	193,001	$	182,407	$	9,770

The gain on the transactions listed above is recorded as a gain on debt modification in the accompanying statement of operations for the thirteen week period ended May 31, 2003.

During the thirteen week period ended June 1, 2002, the Company redeemed $4,500 of its 6.0% dealer remarketable securities due 2003 for $4,230. The early redemption resulted in a gain on debt modification of $270.

Other

The aggregate annual principal payments of long-term debt for the remainder of fiscal 2004 and the succeeding four fiscal years are as follows: 2004-$58,698, 2005-$14,092, 2006-$247,984, 2007-$613,265, 2008-$12,429, and $2,827,858 in 2009 and thereafter.

Substantially all of Rite Aid Corporation's wholly-owned subsidiaries guarantee the obligations under the new senior secured credit facility. These subsidiary guarantees are secured by a first priority lien on the inventory, accounts receivable and prescription files. Rite Aid Corporation is a holding company with no direct operations and is dependent upon dividends and other payments from its subsidiaries to service payments due under the new senior credit facility. Rite Aid Corporation's direct obligations under the new senior credit facility are unsecured. The 12.5% senior secured notes due 2006, the 8.125% senior secured notes due 2010 and the 9.5% senior secured notes due 2011 are guaranteed by substantially all of the Company's wholly-owned subsidiaries that guarantee the new senior secured credit facility and the Company's obligations under such notes are secured on a second priority basis by the same collateral as the new senior secured credit facility.

The subsidiary guarantees related to the Company's new senior secured credit facility and second priority bond issuances are full and unconditional and joint and several. Also, the parent company's assets and operations are not material and subsidiaries not guaranteeing the new senior secured credit facility and bond issuances are minor. Accordingly, condensed consolidating financial information for the parent and subsidiaries is not presented.

9. Commitments and Contingencies

The Company is party to numerous legal proceedings, as discussed below.

Federal investigations

There are currently pending federal governmental investigations, both civil and criminal, by the United States Attorney, involving various matters related to prior management's business practices. The Company is cooperating fully with the United States Attorney. The Company has begun settlement discussions with the United States Attorney of the Middle District of Pennsylvania. The United States

Attorney has proposed that the government would not institute any criminal proceedings against us if the Company enters into a consent judgment providing for a civil penalty payable over a period of years. The amount of the civil penalty has not been agreed to and there can be no assurance that a settlement will be reached or that the amount of such penalty will not have a material adverse effect on the Company's financial condition and results of operations. The Company recorded an accrual of $20,000 in the thirteen weeks ended June 1, 2002 in connection with the resolution for these matters; however, the Company may incur charges in excess of that amount and the Company is unable to estimate the possible range of loss. Management will continue to evaluate the estimate and, to the extent that additional information arises or the Company's strategy changes, the Company will adjust the accrual accordingly. These investigations and settlement discussions are ongoing, and the Company cannot predict their outcomes. If the Company were convicted of any crime, certain licenses and government contracts such as Medicaid plan reimbursement agreements that are material to the Company's operations may be revoked, which would have a material adverse effect on the Company's results of operations, financial condition or cash flows. In addition, substantial penalties, damages or other monetary remedies assessed against the Company, including a settlement, could also have a material adverse effect on the Company's results of operations, financial condition or cash flows.

The investigations conducted by the U.S. Department of Labor and by an independent trustee of matters related to the Company's employee benefits plans have been concluded. In addition, the class action lawsuit filed on behalf of the plans and their participants in the United States District Court for the Eastern District of Pennsylvania has been settled. Under the agreement, the Company's insurance companies paid $5,500 and in November 2002 the Company paid $4,000 into a settlement fund for the benefit of plan participants. The Company also agreed to implement certain changes in the way in which the Company administers its employee benefit plans and to maintain the current level of benefits through December 31, 2006. On March 11, 2003, the District Court approved the settlement and dismissed the complaint with prejudice.

Stockholder litigation

The Company's settlement of the consolidated securities class action lawsuits brought on behalf of securityholders who purchased its securities on the open market between May 2, 1997 and November 10, 1999 (and based on the allegation that the Company's financial statements for fiscal 1997, fiscal 1998 and fiscal 1999 fraudulently misrepresented its financial position and results of operations for these periods) was approved by the United States District Court for the Eastern District of Pennsylvania by Order entered August 16, 2001. Although that Order was appealed by certain non-settling defendants (including the Company's former auditor, KPMG, the Company's former chief executive officer, Martin Grass, and the Company's former chief financial officer, Frank Bergonzi), those non-settling defendants have now also settled with plaintiffs, which settlement received final approval by the District Court on June 2, 2003. On June 9, 2003 all parties to the appeal filed a stipulation of dismissal of the appeal. In accordance with the agreement settling plaintiffs' claims against the Company, in April 2002, the Company issued $149,500 of senior secured (shareholder) notes (subsequently redeemed in February 2003) and paid $45,000 in cash, which was fully funded by the Company's officers' and directors' liability insurance. Several members of the class have elected to "opt-out" of the class and, as a result, they will be free to pursue their claims. Management believes that their claims, individually and in the aggregate, are not material.

On May 29, 2003, the Delaware Supreme Court affirmed the dismissal by the Delaware Chancery Court of the purported class action instituted by a stockholder against the Company on behalf of stockholders who purchased shares of the Company's common stock prior to March 1, 1997, and who continued to hold them to October 18, 1999, alleging claims similar to the claims alleged in the consolidated securities class action lawsuits described above.

Reimbursement Matters

The Company is being investigated by multiple state attorneys general for its reimbursement practices relating to partially filled perscriptions and fully filled prescriptions that are not picked up by ordering customers. The Company supplied similar information with respect to these matters to the United States Department of Justice. The Company believes that these investigations are similar to investigations which were, and are being, undertaken with respect to the practices of others in the retail drug industry. The Company also believes that its existing policies and procedures fully comply with the requirements of applicable law and intend to fully cooperate with these investigations. The Company cannot, however, predict their outcomes at this time. An individual acting on behalf of the United States of America has filed a lawsuit in the United States District Court of the Eastern District of Pennsylvania under the Federal False Claims Act alleging that the Company defrauded federal healthcare plans by failing to appropriately issue refunds for partially filled prescriptions, which were not picked up by customers. The United States Department of Justice has intervened in this lawsuit, as is its right under the law. The Company has reached an agreement to settle these investigations and the lawsuit filed by the private individual for $7,225, which is subject to court approval. The Company has reserved $7,225 related to this potential liability.

Other

The Company, together with a significant number of major U.S. retailers, has been sued by the Lemelson Foundation in a complaint which alleges that portions of the technology included in the Company's point-of-sale system infringe upon a patent held by the plaintiffs. The amount of damages sought is unspecified, and may be material. Management cannot predict the outcome of this litigation or whether it could result in a material adverse effect on the Company's results of operations, financial conditions or cash flows.

The Company is subject from time to time to lawsuits arising in the ordinary course of business. In the opinion of the Company's management, these matters are adequately covered by insurance or, if not so covered, are without merit or are of such nature or involve amounts that would not have a material adverse effect on the Company's financial condition, results of operations or cash flows if decided adversely.

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

Net loss for the thirteen week period ended May 31, 2003 was $38.8 million, compared to net income of $2.6 million for the thirteen week period ended June 1, 2002. However, revenues, gross margin and selling, general and administrative expenses ("SG&A") as a percent of sales all improved in the thirteen week period ended May 31, 2003. The factors that drove these improvements are described in further detail in the Results of Operations section below. Other items that had significant impact on our results of operations are as follows:

Loss on Debt Modifications and Retirements. During the thirteen week period ended May 31, 2003, we recorded a loss on debt modifications and retirements of $33.4 million. This loss consisted of a loss of $43.2 million related to the termination of the old senior secured credit facility and the issuance of the new senior secured credit facility, offset by net gains of $9.8 million related to several debt instruments that were retired in the thirteen week period ended May 31, 2003. These transactions are described in more detail in the Liquidity and Capital Resources section below.

Stock-Based Compensation Expense. We recorded stock based compensation expense of $9.8 million and $8.1 million in the thirteen week periods ended May 31, 2003 and June 1, 2002, respectively. The expense recorded in the thirteen week period ended May 31, 2003 resulted from the application of the fair value method of accounting for stock-based compensation expense, which we adopted as of the beginning of the period. Under the fair value method, assuming no new grants during the year, we expect expense for the remainder of fiscal 2004 to be approximately $18.5 million. The expense recorded in the thirteen week period ended June 1, 2002 resulted primarily from the impact of applying variable plan accounting to several of our stock-based compensation plans.

Income Tax Benefit. In the thirteen week period ended June 1, 2002, we recorded a $43.5 million income tax benefit. The benefit resulted primarily from a federal law change, enacted on March 9, 2002, which increased the carryback period of net operating losses incurred in fiscal 2001 and 2002 from two years to five.

Substantial Investigation Expenses. We incurred $6.0 million and $6.7 million in the thirteen week periods ended May 31, 2003 and June 1, 2002, respectively, in connection with defense against litigation related to prior management's business practices and the defense of prior management. We expect to incur an additional $9.0 million in the remainder of fiscal 2004, and expect to continue to incur significant legal and other expenses until the resolution of the U.S. Attorney's case against certain of our former executive officers and the investigations of certain other matters.

Gain on Sale of Assets and Investments: In the thirteen week period ended June 1, 2002, we recorded a gain of $15.8 million resulting from the sale of our investment in drugstore.com.

Results of Operations

Revenues and Other Operating Data


	Thirteen Week Period Ended
	May 31, 2003			June 1, 2002
	(dollars in thousands)
Revenues	$	4,046,168		$	3,923,731
Revenue growth		3.1	%		5.8	%
Same store sales growth		4.3	%		8.3	%
Pharmacy sales growth		4.6	%		9.2	%
Same store pharmacy sales growth		5.7	%		11.8	%
Pharmacy sales as a % of total sales		64.5	%		63.5	%
Third party sales as a % of total pharmacy sales		93.1	%		92.5	%
Front-end sales growth		0.5	%		0.4	%
Same store front end sales growth		1.8	%		2.7	%
Front end sales as a % of total sales		35.5	%		36.5	%
Store data:
Total stores (beginning of period)		3,404			3,497
New stores		—			1
Closed stores		(8	)		(45	)
Store acquisitions, net		—			1
Total stores (end of period)		3,396			3,454
Relocated stores		1			4

Revenues

The 3.1% growth in revenues for the thirteen week period ended May 31, 2003 was driven by pharmacy sales growth of 4.6% and front end sales growth of 0.5%. The 5.8% growth in revenues for the thirteen week period ended June 1, 2002 was driven by pharmacy sales growth of 9.2%, and front end sales growth of 0.4%.

Pharmacy same store sales increased by 5.7% for the thirteen week period ended May 31, 2003, due to an increase in sales price per prescription, partially offset by a change in prescription mix. Additional factors contributing to our pharmacy same store sales increase include inflation and favorable industry trends. These trends include an aging population, the use of pharmaceuticals to treat a growing number of healthcare problems and the introduction of a number of successful new prescription drugs. These favorable factors were partially offset by an increase in generic sales mix, a reduction in hormone replacement therapy and non-sedating antihistamine prescriptions, the impact of a less severe cold and flu season than in the prior year and a slow start to the allergy season. Front end same store sales increased 1.8% in the thirteen week period ended May 31, 2003, primarily as a result of improvement in most core categories, such as over-the-counter items, consumables and vitamins, and improved assortments.

Pharmacy same store sales increased by 11.8% for the thirteen week period ended June 1, 2002, as compared to the same thirteen week period in the prior year. Factors contributing to pharmacy same store sales increases include inflation, improved attraction and retention of managed care customers, reduced cash pricing, our increased focus on pharmacy initiatives, such as predictive refill, and favorable industry trends. Front end same store sales increased 2.7% for the thirteen week period ended June 1, 2002, due to the same factors as described above for the thirteen week period ended May 31, 2003.

Costs and Expenses


	Thirteen Week Period Ended
	May 31, 2003			June 1, 2002
	(dollars in thousands)
Cost of goods sold, including occupancy costs	$	3,068,175		$	2,993,778
Gross profit		977,993			929,953
Gross margin		24.2	%		23.7	%
Selling, general and administrative expenses		889,733			899,143
Selling, general and administrative expenses as a percentage of revenues		22.0	%		22.9	%
Stock-based compensation expense		9,835			8,094
Store closing and impairment charges (credits)		6,366			(4,117	)
Interest expense		78,958			84,631
Interest rate swap contracts		—			264
Loss (gain) on debt modifications and retirements, net		33,427			(270	)
Gain on sale of assets and investments, net		(1,504	)		(16,865	)

Cost of Goods Sold

Gross margin was 24.2% for the thirteen week period ended May 31, 2003 compared to 23.7% for the thirteen week period ended June 1, 2002. Gross margin was positively impacted by improvements in pharmacy margin, driven by increased generic mix and improved third party reimbursements. Gross margin was also positively impacted by a decrease in the LIFO provision, due to a lower estimated rate of inflation, a reduction in inventory liquidation losses related to closed stores and lower depreciation and amortization charges. Although front end margin rate was improved, the lower mix of front-end sales caused a decline in front-end margin contribution, which partially offset the positive pharmacy margin contribution.

We use the last-in, first-out (LIFO) method of inventory valuation, which is determined annually when inflation rates and inventory levels are finalized. Therefore, LIFO costs for interim period financial statements are estimated. Cost of sales includes a LIFO provision of $15.0 million for the thirteen week period ended May 31, 2003 versus $17.3 million for the thirteen week period ended June 1, 2002.

Selling, General and Administrative Expenses

SG&A as a percentage of sales was lower in the thirteen week period ended May 31, 2003 than in the thirteen week period ended June 1, 2002 due to a non-recurring litigation charge of $20.0 million in the thirteen week period ended June 1, 2002, decreased labor as a percentage of revenue, lower depreciation and amortization charges resulting from a reduced store count, reduction in professional fees and better leveraging of our fixed costs resulting from higher sales volume, partially offset by higher associate benefit costs.

Store Closing and Impairment Charges

Store closing and impairment charges (credits) consist of:


	Thirteen Week Period Ended
	May 31, 2003		June 1, 2002
	(dollars in thousands)
Impairment charges	$	831	$	860
Store and equipment lease exit charges (credits)		5,535		(4,977	)
	$	6,366	$	(4,117	)

Impairment Charges: Impairment charges include non-cash charges of $0.8 million and $0.9 million in the thirteen week periods ended May 31, 2003 and June 1, 2002, respectively, for the impairment of long-lived assets at 11 and 13 stores, respectively. These amounts include the write-down of long-lived assets at stores that were assessed for impairment because of management's intention to relocate or close the store or because of changes in circumstances that indicate that the carrying value of the assets may not be recoverable.

Store and Equipment Lease Exit Charges: We recorded a charge for one store closed in the thirteen week period ended May 31, 2003. During the thirteen week period ended June 1, 2002, we did not record any charges for stores to be closed or relocated. Effective January 1, 2003, charges to close a store, which principally consist of lease termination costs, are recorded at the time the store is closed and all inventory is liquidated, pursuant to the guidance set forth in SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". Prior to January 1, 2003, charges incurred to close a store were recorded at the time management committed to closing the store. We calculate our liability for closed stores on a store-by-store basis. The calculation includes the future minimum lease payments and related ancillary costs, from the date of closure to the end of the remaining lease term, net of estimated cost recoveries that may be achieved through subletting properties or favorable lease terminations. This liability is discounted using a risk free rate of interest. We evaluate these assumptions each quarter and adjust the liability accordingly. We recorded closed store expense of $5.5 million in the thirteen week period ended May 31, 2003, due to the impact of interest accretion and adjustments to the risk-free rate of interest on the provision. The effect of lease terminations and changes in the risk-free rate of interest during the thirteen week period ended June 1, 2002 resulted in a credit of $5.0 million for store closing.

As part of our ongoing business activities, we assess stores for potential closure. Decisions to close stores in future periods would result in charges for store lease exit costs and liquidation of inventory, as well as impairment of assets at these stores.

Interest Expense

Interest expense was $79.0 million for the thirteen week period ended May 31, 2003, compared to $84.6 million for the thirteen week period ended June 1, 2002. The decrease was primarily due to a reduction in LIBOR rates, which reduced our interest rate on the senior secured credit facility, a lower average debt balance, and the reclassification of the accretion of closed store interest expense, which, pursuant to SFAS No. 146, is classified as a component of store closing and impairment charges in the thirteen week period ended May 31, 2003. Assuming no further changes in LIBOR rates, and reflecting the recent debt modifications and retirements, we expect interest expense for the remainder of the year to be $243 million. The weighted average interest rates, excluding capital leases, on our indebtedness for the thirteen week periods ended May 31, 2003 and June 1, 2002, were 6.87% and 8.08% respectively.

Income Taxes

We experienced an ownership change for statutory purposes during fiscal 2002, which resulted in a limitation on the future use of net operating loss carryforwards. We believe that this limitation does not further impair the net operating loss carryforwards because they are fully reserved.

Liquidity and Capital Resources

General

We have two primary sources of liquidity: (i) cash provided by operations and (ii) the revolving credit facility under our new senior secured credit facility. Our principal uses of cash are to provide working capital for operations, service our obligations to pay interest and principal on debt, to provide funds for capital expenditures and to provide funds for repurchases of our publicly traded debt.

Our ability to borrow under the new senior secured credit facility is based on a specified borrowing base consisting of eligible accounts receivable, inventory and prescription files. On May 31, 2003, we had $576.5 million in additional available borrowing capacity under the revolving credit facility net of outstanding letters of credit of $123.5 million.

New Credit Facility

On May 28, 2003, we replaced our senior secured credit facility with a new senior secured credit facility. The new facility consists of a $1.15 billion term loan and a $700.0 million revolving credit facility, and will mature on April 30, 2008. The proceeds of the loans made on the closing of the new credit facility were, among other things, used to repay the outstanding amounts under the old facility and to purchase the land and buildings at our Perryman, MD and Lancaster, CA distribution centers, which had previously been leased through a synthetic lease arrangement.

Substantially all of Rite Aid Corporation's wholly owned subsidiaries guarantee the obligations under the new senior secured credit facility. The subsidiary guarantees are secured by a first priority lien on, among other things, the inventory, accounts receivable and prescription files of the subsidiary guarantors. Rite Aid Corporation is a holding company with no direct operations and is dependent upon dividends, distributions and other payments from its subsidiaries to service payments under the senior secured credit facility. Rite Aid Corporation's direct obligations under the new senior secured credit facility are unsecured.

The new senior secured credit facility allows for the issuance of up to $150.0 million in additional term loans or additional revolver availability. We may request the additional loans at any time prior to the maturity of the senior secured credit facility, provided we are not in default of any terms of the facility, nor are in violation of any financial covenants. The new senior secured credit facility allows us to have outstanding, at any time, up to $1.0 billion in additional secured or unsecured debt. We also have the ability to incur an unlimited amount of unsecured debt, if the terms of such unsecured indebtedness comply with certain terms set forth in the credit agreement and subject to our compliance with certain financial covenants. At May 31, 2003, the remaining additional permitted secured debt under the new senior credit facility is $188.0 million. The new senior secured credit facility also allows for the repurchase of any debt with a maturity prior to April 30, 2008, and for a limited amount of debt with a maturity after April 30, 2008, based upon outstanding borrowings under the revolving credit facility and available cash at the time of the repurchase.

The new senior secured credit facility contains customary covenants, which place restrictions on the incurrence of debt, the payment of dividends, mergers, liens and sale and leaseback transactions. The senior secured credit facility also requires us to meet various financial ratios and limits capital expenditures. Beginning with the twelve months ended May 31, 2003, the covenants require us to maintain a maximum leverage ratio of 6.65:1, gradually decreasing to 3.8:1 for the twelve months ended March 1, 2008. We must also maintain a minimum interest coverage ratio of 1.9:1 for the twelve months ended May 31, 2003, gradually increasing to 3.25:1 for the twelve months ending March 1, 2008. In addition, we must maintain a minimum fixed charge ratio of 1.05:1 for the twelve months ended May 31, 2003, gradually increasing to 1.25:1 for the twelve months ending March 1, 2008. Capital expenditures are limited to $250.0 million for the fiscal year ending February 28, 2004, with the allowable amount increasing in subsequent years.

We were in compliance with the covenants of the new senior secured credit facility and our other debt instruments as of May 31, 2003. With continuing improvements in operating performance, we anticipate that we will remain in compliance with our debt covenants. However, variations in our operating performance and unanticipated developments may adversely affect our ability to remain in compliance with the applicable debt maintenance covenants.

The new senior secured credit facility provides for customary events of default, including nonpayment, misrepresentation, breach of covenants and bankruptcy. It is also an event of default if any event occurs that enables, or which with the giving of notice or the lapse of time would enable, the holder of our debt to accelerate the maturity of debt having a principal amount in excess of $25.0 million.

Other Transactions

In May 2003, we issued $150.0 million aggregate principal amount of 9.25% senior notes due 2013. These notes are unsecured and effectively subordinate to our secured debt. The indenture governing the 9.25% senior notes contains customary covenant provisions that, among other things, include limitations on our ability to pay dividends, make investments or other restricted payments, incur debt, grant liens, sell assets and enter into sale lease-back transactions.

In April 2003, we issued $360.0 million aggregate principal amount of 8.125% senior secured notes due 2010. The notes are unsecured, unsubordinated obligations to Rite Aid Corporation and rank equally in right of payment with all other unsecured, unsubordinated indebtedness. Our obligations under the notes are guaranteed, subject to certain limitations, by subsidiaries that guarantee the obligations under our new senior secured credit facility. The guarantees are secured, subject to the permitted liens, by shared second priority liens, with the holders of our 12.5% senior secured notes and our 9.5% senior secured notes, granted by subsidiary guarantors on all of their assets that secure the obligations under the new senior secured credit facility, subject to certain exceptions. The indenture governing the 8.125% senior secured notes contains customary covenant provisions that, among other things, include limitations on our ability to pay dividends, make investments or other restricted payments, incur debt, grant liens, sell assets and enter into sale lease-back transactions.

During the thirteen week period ended May 31, 2003, we redeemed the following securities (in thousands):


Debt Redeemed	Principal Amount Redeemed		Amount Paid		Gain
6.0% fixed rate senior notes due 2005	$	37,848	$	36,853	$	865
7.125% notes due 2007		124,926		120,216		4,314
6.875% senior debentures due 2013		15,227		13,144		1,981
7.7% notes due 2027		5,000		4,219		715
6.875% fixed rate senior notes due 2028		10,000		7,975		1,895
Total	$	193,001	$	182,407	$	9,770

The gain on the transactions listed above is recorded as a gain on debt modification in the accompanying statement of operations for the thirteen week period ended May 31, 2003.

During the thirteen week period ended June 1, 2002, we redeemed $4.5 million of our 6.0% dealer remarketable securities due 2003 for $4.2 million. The early redemption resulted in a gain on debt modification of $0.3 million.

The aggregate annual principal payments of long-term debt for the remainder of fiscal 2004 and the succeeding four fiscal years are as follows: 2004-$58.7 million, 2005-$14.1 million, 2006-$248.0 million, 2007-$613.2 million, 2008-$12.4 million, and $2.8 billion in 2009 and thereafter.

Net Cash Provided by/Used in Operating, Investing and Financing Activities

Our operating activities provided $49.8 million of cash in the thirteen week period ended May 31, 2003 and provided $38.1 million of cash in the thirteen week period ended June 1, 2002. Operating cash flow for the thirteen week period ended May 31, 2003 was provided through improved operating results and increases in accounts payable, which offset $61.2 million of interest payments and increases in accounts receivable and inventory. Operating cash flow for the thirteen week period ended June 1, 2002 was negatively impacted by $70.8 million in interest payments offset by increases in current liabilities.

Cash used in investing activities was $125.1 million for the thirteen week period ended May 31, 2003, due primarily to the purchase of land and buildings at our Perryman, MD and Lancaster, CA distribution centers, which had previously been held under a synthetic lease arrangement. Also impacting cash used in investing activities were expenditures for property, plant and equipment as well as intangible assets, offset by proceeds from asset dispositions. Cash used in investing activities was $3.4 million for the thirteen week period ended June 1, 2002, due primarily to expenditures for property, plant and equipment as well as intangible assets, offset by proceeds from asset dispositions.

Cash provided by financing activities was $52.8 million and $7.8 million for the thirteen week periods ended May 31, 2003 and June 1, 2002, respectively. Cash used in financing activities in the thirteen week period ended May 31, 2003 was positively impacted by proceeds from the bond issuances referenced in "Liquidity and Capital Resources — Other Transactions", offset by the change in our credit facility and the early redemption of several bonds.

Working capital was $1,703.8 million at May 31, 2003, compared to $1,676.9 million at March 1, 2003.

Capital Expenditures

During the thirteen week period ended May 31, 2003, we incurred capital expenditures of $106.9 million related to the purchase of land and buildings at our Perryman, MD and Lancaster, CA distribution centers, which had previously been held under a synthetic lease arrangement. Excluding this transaction, which was incurred in connection with the issuance of our new senior secured credit facility, we plan to make total capital expenditures of approximately $170 to $190 million during fiscal 2004. These expenditures consist of approximately $77 to $87 million related to new store construction, store relocation and store remodel projects, $73 to $78 million dedicated to technology enhancements, improvements to distribution centers and other corporate requirements, and $20 to $25 million dedicated to the purchase of prescription files from independent pharmacies. Management expects that these capital expenditures will be financed primarily with cash flow from operations and borrowings under the revolving credit facility available under our senior secured credit facility. During the thirteen week period ended May 31, 2003, we spent $26.8 million on capital expenditures (excluding the synthetic lease buyout noted above), consisting of $11.0 million related to new store construction, store relocation and other store construction projects. An additional $15.8 million was related to other store improvement activities and the purchase of prescription files from independent pharmacists.

Future Liquidity

We are highly leveraged. Our high level of indebtedness: (a) limits our ability to obtain additional financing; (b) limits our flexibility in planning for, or reacting to, changes in our business and the industry; (c) places us at a competitive disadvantage relative to our competitors with less debt; (d) renders us more vulnerable to general adverse economic and industry conditions; and (e) requires us to dedicate a substantial portion of our cash flow to service our debt. Based upon current levels of operations and planned improvements in our operating performance, management believes that cash flow from operations together with available borrowing under the new senior secured credit facility and other sources of liquidity will be adequate to meet our anticipated annual requirements for working capital, debt service and capital expenditures through the end of fiscal 2004. We will continue to assess our liquidity position and potential sources of supplemental liquidity in light of our operating performance and other relevant circumstances. Should we determine, at any time, that it is necessary to seek additional short-term liquidity, we will evaluate our alternatives and take appropriate steps to obtain sufficient additional funds. The restrictions on the incurrence of additional indebtedness in our new senior secured credit facility and several of our bond indentures may limit our ability to obtain additional funds. There can be no assurance that any such supplemental funding, if sought, could be obtained or, if obtained, would be on terms acceptable to us.

Recent Accounting Pronouncements

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." This Statement addresses financial accounting and reporting for costs associated

with exit or disposal activities and nullifies EITF 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. This differs from the guidance in EITF 94-3, which requires that a liability for costs associated with an exit plan or disposal activity be recognized at the date of an entity's commitment to an exit plan. SFAS No. 146 also requires all charges related to an exit activity, including accretion of interest related to the discounting of the future liability related to that activity, to be classified in the same line item on the statement of operations. The provisions of the Statement are effective for exit or disposal activities that are initiated after December 31, 2002. We have adopted SFAS No. 146 effective January 1, 2003. This adoption impacts the timing of recognition of liabilities for exit or severance plans committed to after the adoption date, but had no impact on liabilities recorded for exit or severance costs as of December 31, 2002. Effective January 1, 2003, we recorded accretion of interest related to the discounting of the future liability related to that activity as a component of store closing and impairment charges on the statement of operations.

We have several stock option plans, which are described in detail in our Form 10-K for the year ended March 1, 2003. Prior to fiscal 2004, we accounted for these plans under the recognition and measurement provisions of APB Opinion No. 25, "Accounting for Stock Issued to Employees" and related Interpretations. Effective March 2, 2003, we adopted the fair value recognition provisions of SFAS No. 123, "Accounting for Stock Based Compensation". Under the modified prospective method of adoption selected by us under the provisions of SFAS No. 148, "Accounting for Stock Based Compensation – Transition and Disclosure", compensation cost recognized in the thirteen week period ended May 31, 2003 is the same as that which would have been recognized had the recognition provisions of Statement 123 been applied from its original effective date. Results for prior years have not been restated.

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement No. 133 on Derivative Instruments and Hedging Activities". This Statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts. The Statement clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative, clarifies when a derivative contains a financing component, amends the definition of an underlying to conform it to language used in FASB Interpretation ("FIN) No. 45, and amends certain other existing pronouncements. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. All provisions of the Statement, except those related to forward purchases or sales of "when-issued" securities, should be applied prospectively. We currently have no instruments that meet the definition of a derivative, and therefore, the adoption of this Statement will have no impact on our financial position or results of operations.

and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. Upon adoption, our redeemable preferred stock will be classified as a liability on the statement of financial position.

In January of 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest Entities". FIN No. 46 requires the consolidation of entities that cannot finance their activities without the support of other parties and that lack certain characteristics of a controlling interest, such as the ability to make decisions about the entity's activities via voting rights or similar rights. The entity that consolidates the variable interest entity is the primary beneficiary of the entity's activities. FIN No. 46 applies immediately to variable interest entities created after January 31, 2003, and must be applied in the first period beginning after June 15, 2003 for entities in which an enterprise holds a variable interest entity that it acquired before February 1, 2003. We do not expect the adoption to have any impact on our financial position or results of operations.

Factors Affecting Our Future Prospects

For a discussion of risks related to our financial condition, operations and industry, refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations---Overview" and "Factors Affecting our Future Prospects" included in our Annual Report on Form 10-K for the fiscal year ended March 1, 2003, which we filed with the SEC on May 2, 2003.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Our future earnings, cash flow and fair values relevant to financial instruments are dependent upon prevalent market rates. Market risk is the risk of loss from adverse changes in market prices and interest rates. The major market risk exposure is changing interest rates. Increases in interest rates would increase our interest expense. Since the end of fiscal 2003, our primary risk exposure has not changed. We enter into debt obligations to support capital expenditures, acquisitions, working capital needs and general corporate purposes. Our policy is to manage interest rates through the use of a combination of variable-rate credit facilities, fixed-rate long-term obligations and derivative transactions.

The table below provides information about our financial instruments that are sensitive to changes in interest rates. The table presents principal payments and the related weighted average interest rates by expected maturity dates as of May 31, 2003.


	2004			2005			2006			2007			2008			Thereafter			Total			Fair Value at May 31, 2003
	(dollars in thousands)
Long-term debt,
Including current portion
Fixed rate	$	58,698		$	2,592		$	236,484		$	601,765		$	929		$	1,723,858		$	2,624,326		$	2,516,507
Average Interest Rate		6.02	%		11.41	%		7.36	%		7.63	%		8.00	%		8.29	%		8.00	%
Variable Rate		—		$	11,500		$	11,500		$	11,500		$	11,500		$	1,104,000		$	1,150,000		$	1,150,000
Average Interest Rate					4.88	%		4.88	%		4.88	%		4.88	%		4.88	%		4.88	%

As of May 31, 2003, 30.5% of our total debt is exposed to fluctuations in variable interest rates.

Our ability to satisfy interest payment obligations on our outstanding debt will depend largely on our future performance, which, in turn, is subject to prevailing economic conditions and to financial, business and other factors beyond our control. If we do not have sufficient cash flow to service our interest payment obligations on our outstanding indebtedness and if we cannot borrow or obtain equity financing to satisfy

those obligations, our business and results of operations will be materially adversely affected. We cannot assure you that any such borrowing or equity financing could be successfully completed.

As of May 31, 2003, the ratings on our new senior secured credit facility were BB by Standard & Poor's and B1 by Moody's. The interest rate on the variable rate borrowings on this facility are LIBOR plus 3.50%.

ITEM 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures. The Company's Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Exchange Act Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's periodic filings under the Exchange Act.

(b) Changes in internal controls. Since the Evaluation Date, there have not been any significant changes in the Company's internal controls or in other factors that could significantly affect such controls.

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

The investigations conducted by the U.S. Department of Labor and by an independent trustee of matters related to our employee benefits plans have been concluded. In addition, the class action lawsuit filed on behalf of the plans and their participants in the United States District Court for the Eastern District of Pennsylvania has been settled. Under the agreement, our insurance companies paid $5.5 million and in November 2002 we paid $4.0 million into a settlement fund for the benefit of plan participants. We also agreed to implement certain changes in the way in which we administer our employee benefit plans and to maintain the current level of benefits through December 31, 2006. On March 11, 2003, the District Court approved the settlement and dismissed the complaint with prejudice.

Our settlement of the consolidated securities class action lawsuits brought on behalf of securityholders who purchased our securities on the open market between May 2, 1997 and November 10, 1999 (and based on the allegation that our financial statements for fiscal 1997, fiscal 1998 and fiscal 1999 fraudulently misrepresented our financial position and results of operations for these periods) was approved by the United States District Court for the Eastern District of Pennsylvania by Order entered August 16, 2001. Although that Order was appealed by certain non-settling defendants (including our former auditor, KPMG, our former chief executive officer, Martin Grass, and our former chief financial officer, Frank Bergonzi), those non-settling defendants have now also settled with plaintiffs, which settlement received final approval by the District Court on June 2, 2003. On June 9, 2003 all parties to the appeal filed a stipulation of dismissal of the appeal. In accordance with the agreement settling plaintiffs' claims against us, in April 2002, we issued $149.5 million of senior secured (shareholder) notes (subsequently redeemed in February 2003) and paid $45.0 million in cash, which was fully funded by our officers' and directors' liability insurance. Several members of the class have elected to "opt-out" of the class and, as a result, they will be free to pursue their claims. Management believes that their claims, individually and in the aggregate, are not material.

ITEM 2. Changes in Securities and Use of Proceeds

Not applicable.

ITEM 3. Defaults Upon Senior Securities

Not applicable.

ITEM 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of the security holders during the thirteen week period ended May 31, 2003.

ITEM 5. Other Information

Not applicable.

ITEM 6. Exhibits and Reports on Form 8-K

(a) The following exhibits are filed as part of this report.


Exhibit Numbers	Description	Incorporation by Reference to
3.1	Restated Certificate of Incorporation dated December 12, 1996	Exhibit 3(i) to Form 8-K, filed on November 2, 1999
3.2	Certificate of Amendment to the Restated Certificate of Incorporation dated October 25, 1999	Exhibit 3(ii) to Form 8-K, filed on November 2, 1999
3.3	Certificate of Amendment to the Restated Certificate of Incorporation dated June 27, 2001	Exhibit 3.4 to Registration Statement on Form S-1, File No. 333-64950, filed on July 12, 2001
3.4	8% Series D Cumulative Pay-in-Kind Preferred Stock Certificate of Designation dated October 3, 2001	Exhibit 3.5 to Form 10-Q, filed on October 12, 2001
3.5	By-laws, as amended on November 8, 2000	Exhibit 3.1 to Form 8-K, filed on November 13, 2000
3.6	Amendment to By-laws, adopted January 30, 2002	Exhibit T3B.2 to Form T-3, filed on March 4, 2002
4.1	Indenture, dated August 1, 1993 by and between Rite Aid Corporation, as issuer, and Morgan Guaranty Trust Company of New York, as trustee, related to the Company's 6.70% Notes due 2001, 7.125% Notes due 2007, 7.70% Notes due 2027, 7.625% Notes due 2005 and 6.875% Notes due 2013	Exhibit 4A to Registration Statement on Form S-3, File No. 333-63794, filed on June 3, 1993
4.2	Supplemental Indenture dated as of February 3, 2000, between Rite Aid Corporation, as issuer, and U.S. Bank Trust National Association as successor to Morgan Guaranty Trust Company of New York,, to the Indenture dated as of August 1, 1993, relating to the Company's 6.70% Notes due 2001, 7.125% Notes due 2007, 7.70% Notes due 2027, 7.625% Notes due 2005 and 6.875% Notes due 2013	Exhibit 4.1 to Form 8-K filed on February 7, 2000
4.3	Indenture, dated as of September 22, 1998 by and between Rite Aid Corporation, as issuer, and Harris Trust and Savings Bank, as trustee, related to the Company's 6% Dealer Remarketable Securities	Exhibit 4.1 to Registration Statement on Form S-4, File No. 333-66901, filed on November 6, 1998
4.4	Supplemental Indenture, dated as of February 3, 2000, between Rite Aid Corporation and Harris Trust and Savings Bank, to the Indenture dated September 22, 1998, between Rite Aid Corporation and Harris Trust and Savings Bank, related to the Company's 6% Dealer Remarketable Securities	Exhibit 4.3 to Form 8-K filed on February 7, 2000


Exhibit Numbers	Description	Incorporation by Reference to
4.5	Indenture, dated as of December 21, 1998, between Rite Aid Corporation, as issuer, and Harris Trust and Savings Bank, as trustee, related to the Company's 5.50% Notes due 2000, 6% Notes due 2005, 6.125% Notes due 2008 and 6.875% Notes due 2028	Exhibit 4.1 to Registration Statement on Form S-4, File No. 333-74751, filed on March 19, 1999
4.6	Supplemental Indenture, dated as of February 3, 2000, between Rite Aid Corporation and Harris Trust and Savings Bank, to the Indenture dated December 21, 1998, between Rite Aid Corporation and Harris Trust and Savings Bank, related to the Company's 5.50% Notes due 2003, 6% Notes due 2005, 6.125% Notes due 2008 and 6.875% Notes due 2028	Exhibit 4.4 to Form 8-K, filed on February 7, 2000
4.7	Indenture, dated as of June 27, 2001, between Rite Aid Corporation, as issuer and State Street Bank and Trust Company, as trustee, related to the Company's 12.50% Senior Secured Notes due 2006	Exhibit 4.7 to Registration Statement on Form S-1, File No. 333-64950, filed on July 12, 2001
4.8	Indenture, dated as of June 27, 2001 between Rite Aid Corporation, as issuer and BNY Midwest Trust Company, as trustee, related to the Company's 11¼% Senior Notes due 2008	Exhibit 4.8 to Registration Statement on Form S-1, File No. 333-64950, filed on July 12, 2001
4.9	Indenture, dated as of November 19, 2001, between Rite Aid Corporation, as issuer, and BNY Midwest Trust Company, as trustee, related to the Company's 4.75% Convertible Notes due December 1, 2006	Exhibit 4.3 to Form 10-Q, filed on January 15, 2002
4.10	Indenture, dated as of February 12, 2003, between Rite Aid Corporation, as issuer, and BNY Midwest Trust Company, as trustee, related to the Company's 9½% Senior Secured Notes due 2011	Exhibit 4.1 to Form 8-K, filed on March 5, 2003
4.11	Indenture, dated as of April 22, 2003, between Rite Aid Corporation, as issuer, and BNY Midwest Trust Company, as trustee, related to the Company's 8.125% Senior Secured Notes due 2010	Exhibit 4.11 to Form 10-K, filed on May 2, 2003
4.12	Indenture, dated as of May 20, 2003, between Rite Aid Corporation, as issuer, and BNY Midwest Trust Company, as trustee, related to the Company's 9.25% Senior Notes due 2013	Filed herewith
10.1	Employment Agreement by and between Rite Aid Corporation and Robert G. Miller, dated as of April 9, 2003	Exhibit 10.7 to Form 10-K, filed on May 2, 2003


Exhibit Numbers	Description	Incorporation by Reference to
10.2	Credit Agreement, dated as of June 27, 2001, as amended and restated as of May 28, 2003 among Rite Aid Corporation, the Lenders named therein, Citicorp North America, Inc., as Administrative Agent and Collateral Processing Co-Agent, JPMorgan Chase Bank, as Syndication Agent and Collateral Processing Co-Agent, Fleet Retail Finance Inc., as Co-Documentation Agent and Collateral Agent, CIT Group/Business Credit, Inc., as Co-Documentation Agent, and General Electric Capital Corporation, as Co-Documentation Agent	Exhibit 10.1 to Form 8-K, filed on May 30, 2003
10.3	Amended and Restated Collateral Trust and Intercreditor Agreement dated as of June 27, 2001, as amended and restated as of May 28, 2003, among Rite Aid Corporation, each Subsidiary of Rite Aid named therein or which becomes a party thereto, Wilmington Trust Company, as Collateral Trustee for the holders from time to time of the Second Priority Debt Obligations, Citicorp North America, Inc., as Senior Collateral Processing Co-Agent for the Senior Secured Parties under the Senior Loan Documents, U.S. Bank and Trust, as Trustee under the 12.5% Note Indenture, BNY Midwest Trust Company, as Trustee under the 9.5% Note Indenture, and each other Second Priority Representative which becomes a party thereto	Exhibit 10.2 to Form 8-K, filed on May 30, 2003
10.4	Senior Subsidiary Security Agreement, dated as of June 27, 2001, as amended and restated as of May 28, 2003, made by the Subsidiary Guarantors and any other Person that becomes a Subsidiary Guarantor pursuant to the Senior Credit Agreement, in favor of Citicorp North America, Inc., as Senior Collateral Processing Co-Agent, and JPMorgan Chase Bank, as Senior Collateral Processing Co-Agent	Exhibit 10.3 to Form 8-K, filed on May 30, 2003
10.5	Senior Subsidiary Guarantee Agreement dated as of June 27, 2001, as amended and restated as of May 28, 2003, among each of the subsidiaries named therein of Rite Aid Corporation, Citicorp North America, Inc., as Senior Collateral Processing Co-Agent and JPMorgan Chase Bank, as Senior Collateral Processing Co-Agent	Exhibit 10.4 to Form 8-K, filed on May 30, 2003


Exhibit Numbers	Description	Incorporation by Reference to
10.6	Amendment No. 1 to the Second Priority Subsidiary Security Agreement, the Second Priority Subsidiary Guarantee and the Second Priority Indemnity, Subrogation and Contribution Agreement dated as of April 15, 2003, by Rite Aid Corporation, the Subsidiary Guarantors/Grantors and Wilmington Trust Company, as Second Priority Collateral Trustee	Exhibit 10.27 to Form 10-K, filed May 2, 2003
10.7	Exchange and Registration Rights Agreement, dated as of April 22, 2003, between Rite Aid Corporation, the Subsidiary Guarantors named therein, and Citicorp Global Markets Inc., J.P. Morgan Securities Inc., and Fleet Securities, Inc., as initial purchasers of the Company's 8.125% Senior Secured Notes due 2010	Exhibit 10.32 to Form 10-K, filed on May 2, 2003
10.8	Purchase Agreement, dated April 15, 2003 by and between Rite Aid Corporation and Citicorp Global Markets Inc., J.P. Morgan Securities Inc. and Fleet Securities, Inc., as representatives of the initial purchasers of the Company's 8.125% Senior Secured Notes due 2010	Exhibit 10.33 to Form 10-K, filed on May 2, 2003
10.9	Purchase Agreement, dated May 13, 2003, between Rite Aid Corporation, and Citigroup Global Markets Inc., J.P. Morgan Securities Inc. and Fleet Securities, Inc., as representatives of the initial purchasers of the Company's 9.25% Senior Notes due 2013	Filed herewith
10.10	Exchange and Registration Rights Agreement, dated as of May 20, 2003, between Rite Aid Corporation, and Citigroup Global Markets, Inc., J.P. Morgan Securities Inc. and Fleet Securities, Inc., as initial purchasers of the Company's 9.25% Senior Notes due 2013	Filed herewith
10.11	Statement regarding computation of earnings per share. (See Note 3 to the condensed consolidated financial statements)	Filed herewith
99.1	Certification of CEO and CFO pursuant to 18 United States Code, Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith

Rite Aid filed the following current reports on Form 8-K during the thirteen week period ended May 31, 2003:

Rite Aid Corporation filed a Current Report on Form 8-K on April 15, 2003, discussing under Item 5 a press released dated April 14, 2003 announcing Rite Aid's plan to offer $350 million aggregate principal amount of seven-year senior secured notes due 2010. The 8-K also disclosed under Item 5 a press release dated April 15, 2003 announcing the terms of the previously announced offering of senior secured notes.

Rite Aid Corporation filed a Current Report on Form 8-K on May 14, 2003, discussing under Item 5 a press release dated May 13, 2003 announcing Rite Aid's plan to offer $150 million aggregate principal amount of ten-year senior notes due 2013. The 8-K disclosed under Item 5 a press release dated May 13, 2003 announcing the terms of the previously announced offering of senior notes.

Rite Aid Corporation filed a Current Report on Form 8-K on May 30, 2003, discussing under Item 5 a press release dated May 28, 2003 announcing the completion of Rite Aid's new senior secured credit facility.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: July 3, 2003

RITE AID CORPORATION
By: /s/ ROBERT B. SARI
Robert B. Sari
Senior Vice President and
General Counsel

Date: July 3, 2003

By: /s/ CHRISTOPHER S. HALL
Christopher S. Hall
Executive Vice President and
Chief Financial Officer

CERTIFICATIONS

I, Mary F. Sammons, Chief Executive Officer, certify that:

I have reviewed this quarterly report on Form 10-Q of Rite Aid Corporation;

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors:

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: July 3, 2003

By: /s/ MARY F. SAMMONS

Mary F. Sammons
Chief Executive Officer

CERTIFICATIONS

I, Christopher S. Hall, Executive Vice President and Chief Financial Officer, certify that:

I have reviewed this quarterly report on Form 10-Q of Rite Aid Corporation;

evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors:

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

Date: July 3, 2003

By: /s/ CHRISTOPHER S. HALL

Christopher S. Hall
Executive Vice President and
Chief Financial Officer

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                                                                  EXECUTION COPY





                              RITE AID CORPORATION

                           9.25% Senior Notes due 2013



                               -------------------



                                    INDENTURE



                            Dated as of May 20, 2003



                               -------------------



                           BNY Midwest Trust Company,

                                     Trustee







                                TABLE OF CONTENTS

                                                                                                      Page
                                    ARTICLE I

                   Definitions and Incorporation by Reference

   SECTION 1.01. Definitions.............................................................................1
   SECTION 1.02. Other Definitions......................................................................28
   SECTION 1.03. Incorporation by Reference of Trust Indenture Act......................................29
   SECTION 1.04. Rules of Construction..................................................................29

                                   ARTICLE II

                                 The Securities

   SECTION 2.01. Amount of Securities; Issuable in Series...............................................30
   SECTION 2.02. Form and Dating........................................................................31
   SECTION 2.03. Execution and Authentication...........................................................31
   SECTION 2.04. Registrar and Paying Agent.............................................................32
   SECTION 2.05. Paying Agent To Hold Money in Trust....................................................32
   SECTION 2.06. Holder Lists...........................................................................33
   SECTION 2.07. Replacement Securities.................................................................33
   SECTION 2.08. Outstanding Securities.................................................................33
   SECTION 2.09. Temporary Securities...................................................................33
   SECTION 2.10. Cancellation...........................................................................34
   SECTION 2.11. Defaulted Interest.....................................................................34
   SECTION 2.12. CUSIP Numbers..........................................................................34

                                   ARTICLE III

                                   Redemption

   SECTION 3.01. Notices to Trustee.....................................................................34
   SECTION 3.02. Selection of Securities To Be Redeemed.................................................35
   SECTION 3.03. Notice of Redemption...................................................................35
   SECTION 3.04. Effect of Notice of Redemption.........................................................36
   SECTION 3.05. Deposit of Redemption Price............................................................36
   SECTION 3.06. Securities Redeemed in Part............................................................36

                                   ARTICLE IV

                                    Covenants

   SECTION 4.01. Payment of Securities..................................................................36
   SECTION 4.02. SEC Reports............................................................................36
   SECTION 4.03. Limitation on Debt.....................................................................37
   SECTION 4.04. Limitation on Restricted Payments......................................................40



   SECTION 4.05. Limitation on Liens....................................................................43
   SECTION 4.06. Limitation on Asset Sales..............................................................44
   SECTION 4.07. Limitation on Restrictions on Distributions from Restricted Subsidiaries...............47
   SECTION 4.08. Limitation on Transactions with Affiliates.............................................48
   SECTION 4.09. Limitation on Guarantees by Restricted Subsidiaries....................................50
   SECTION 4.10. Limitation on Sale and Leaseback Transactions..........................................51
   SECTION 4.11. Designation of Restricted and Unrestricted Subsidiaries................................51
   SECTION 4.12. Change of Control......................................................................52
   SECTION 4.13. Further Instruments and Acts...........................................................54

                                    ARTICLE V

                                Successor Company

   SECTION 5.01. When Company May Merge or Transfer Assets..............................................54

                                   ARTICLE VI

                              Defaults and Remedies

   SECTION 6.01. Events of Default......................................................................55
   SECTION 6.02. Acceleration...........................................................................57
   SECTION 6.03. Other Remedies.........................................................................57
   SECTION 6.04. Waiver of Past Defaults................................................................58
   SECTION 6.05. Control by Majority....................................................................58
   SECTION 6.06. Limitation on Suits....................................................................58
   SECTION 6.07. Rights of Holders to Receive Payment...................................................59
   SECTION 6.08. Collection Suit by Trustee.............................................................59
   SECTION 6.09. Trustee May File Proofs of Claim.......................................................59
   SECTION 6.10. Priorities.............................................................................59
   SECTION 6.11. Undertaking for Costs..................................................................59
   SECTION 6.12. Waiver of Stay or Extension Laws.......................................................60

                                   ARTICLE VII

                                     Trustee

   SECTION 7.01. Duties of Trustee......................................................................60
   SECTION 7.02. Rights of Trustee......................................................................61
   SECTION 7.03. Individual Rights of Trustee...........................................................62
   SECTION 7.04. Trustee's Disclaimer...................................................................62
   SECTION 7.05. Notice of Defaults.....................................................................62
   SECTION 7.06. Reports by Trustee to Holders..........................................................62
   SECTION 7.07. Compensation and Indemnity.............................................................62
   SECTION 7.08. Replacement of Trustee.................................................................63
   SECTION 7.09. Successor Trustee by Merger............................................................64



                                                         Table of Contents, p. 2


   SECTION 7.10. Eligibility; Disqualification..........................................................64
   SECTION 7.11. Preferential Collection of Claims Against Company......................................65

                                  ARTICLE VIII

                       Discharge of Indenture; Defeasance

   SECTION 8.01. Discharge of Liability on Securities; Defeasance.......................................65
   SECTION 8.02. Conditions to Defeasance...............................................................66
   SECTION 8.03. Application of Trust Money.............................................................67
   SECTION 8.04. Repayment to Company...................................................................67
   SECTION 8.05. Indemnity for Government Obligations...................................................67
   SECTION 8.06. Reinstatement..........................................................................68

                                   ARTICLE IX

                                   Amendments

   SECTION 9.01. Without Consent of Holders.............................................................68
   SECTION 9.02. With Consent of Holders................................................................69
   SECTION 9.03. Compliance with Trust Indenture Act....................................................70
   SECTION 9.04. Revocation and Effect of Consents and Waivers..........................................70
   SECTION 9.05. Notation on or Exchange of Securities..................................................70
   SECTION 9.06. Trustee To Sign Amendments.............................................................71
   SECTION 9.07. Payment for Consent....................................................................71

                                    ARTICLE X

                                  Miscellaneous

   SECTION 10.01. Trust Indenture Act Controls..........................................................71
   SECTION 10.02. Notices  71
   SECTION 10.03. Communication by Holders with Other Holders...........................................72
   SECTION 10.04. Certificate and Opinion as to Conditions Precedent....................................72
   SECTION 10.05. Statements Required in Certificate or Opinion.........................................72
   SECTION 10.06. When Securities Disregarded...........................................................73
   SECTION 10.07. Rules by Trustee, Paying Agent and Registrar..........................................73
   SECTION 10.08. Governing Law.........................................................................73
   SECTION 10.09. No Recourse Against Others............................................................73
   SECTION 10.10. Successors............................................................................73
   SECTION 10.11. Multiple Originals....................................................................73
   SECTION 10.12. Table of Contents; Headings...........................................................73



                                                         Table of Contents, p. 3


Appendix A          -   Provisions Relating to Initial Securities
                        and Exchange Securities
Exhibit 1 to
Appendix A          -   Form of Initial Security
Exhibit A           -   Form of Exchange Security
Exhibit B           -   Form of Transferee Letter of Representation







                              CROSS-REFERENCE TABLE

TIA                                                                 Indenture
Section                                                               Section

310   (a)(1).............................................................7.10
      (a)(2).............................................................7.10
      (a)(3).............................................................N.A.
      (a)(4).............................................................N.A.
      (b)...............................................................7.08;
      ...................................................................7.10
      (c)................................................................N.A.
311   (a)................................................................7.11
      (b)................................................................7.11
      (c)................................................................N.A.
312   (a)................................................................2.06
      (b)...............................................................10.03
      (c)...............................................................10.03
313   (a)................................................................7.06
      (b)(1).............................................................N.A.
      (b)(2).............................................................7.06
      (c)...............................................................7.06;
                                                                        10.02
      (d)................................................................7.06
314   (a)...............................................................4.02;
                                                                        10.02
      (b)................................................................N.A.
      (c)(1)............................................................10.04
      (c)(2)............................................................10.04
      (c)(3).............................................................N.A.
      (d)................................................................N.A.
      (e)...............................................................10.05
      (f)................................................................4.13
315   (a)................................................................7.01
      (b)...............................................................7.05;
                                                                        10.02
      (c)................................................................7.01
      (d)................................................................7.01
      (e)................................................................6.11
316   (a)
      (last sentence)...................................................10.06
      (a)(1)(A)..........................................................6.05
      (a)(1)(B)..........................................................6.04
      (a)(2).............................................................N.A.
      (b)................................................................6.07
317   (a)(1).............................................................6.08
      (a)(2).............................................................6.09
      (b)................................................................2.05
318   (a)...............................................................10.01
                           N.A. Means Not Applicable.

Note: This Cross-Reference Table shall not, for any purposes, be deemed to be
part of this Indenture.





                                    INDENTURE dated as of May 20, 2003, between
                           RITE AID CORPORATION, a Delaware corporation (the
                           "Company"), and BNY MIDWEST TRUST COMPANY, an
                           Illinois trust company, as Trustee (the "Trustee").


                  Each party agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders of the Company's
9.25% Senior Notes due 2013, to be issued, from time to time, in one or more
series as provided in this Indenture (the "Initial Securities") and, if and when
issued pursuant to a registered or private exchange for the Initial Securities,
the Company's 9.25% Senior Notes due 2013 (the "Exchange Securities" and,
together with the Initial Securities, the "Securities"):

                                   ARTICLE I

                   Definitions and Incorporation by Reference

                  SECTION 1.01.  Definitions.

                  "Additional Assets" means:

                  (a) any Property (other than cash, cash equivalents and
         securities) to be owned by the Company or any Restricted Subsidiary and
         used in a Related Business; or

                  (b) Capital Stock of a Person that becomes a Restricted
         Subsidiary as a result of the acquisition of such Capital Stock by the
         Company or another Restricted Subsidiary from any Person other than the
         Company or an Affiliate of the Company; provided, however, that, in the
         case of this clause (b), such Restricted Subsidiary is primarily
         engaged in a Related Business.

                  "Affiliate" of any specified Person means:

                  (a) any other Person directly or indirectly controlling or
         controlled by or under direct or indirect common control with such
         specified Person; or

                  (b) any other Person who is a director or executive officer of:

                           (1) such specified Person;

                           (2) any Subsidiary of such specified Person; or

                           (3) any Person described in clause (a) above.

                  For the purposes of this definition, "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or


                                                                               2


otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.

                  "Asset Sale" means any sale, lease, transfer, issuance or
other disposition (or series of related sales, leases, transfers, issuances or
dispositions) by the Company or any Restricted Subsidiary, including any
disposition by means of a merger, consolidation or similar transaction (each
referred to for the purposes of this definition as a "disposition"), of:

                  (a) any shares of Capital Stock of a Restricted Subsidiary
         (other than directors' qualifying shares); or

                  (b) any other assets of the Company or any Restricted
         Subsidiary outside of the ordinary course of business of the Company or
         such Restricted Subsidiary,

in the case of either clause (a) or clause (b) above, whether in a single
transaction or a series of related transactions, (i) that have a Fair Market
Value in excess of $10 million or (ii) for aggregate consideration in excess of
$10 million, other than, in the case of clause (a) or (b) above:

                           (1) any disposition by a Restricted Subsidiary to the
                  Company or by the Company or a Restricted Subsidiary to a
                  Wholly Owned Restricted Subsidiary;

                           (2) any disposition that constitutes a Permitted
                  Investment or Restricted Payment permitted by Section 4.04;

                           (3) any disposition effected in compliance with
                  Section 5.01(a);

                           (4) a sale of accounts receivable and related assets
                  of the type specified in the definition of "Qualified
                  Receivables Transaction" to a Receivables Entity;

                           (5) a transfer of accounts receivable and related
                  assets of the type specified in the definition of "Qualified
                  Receivables Transaction" (or a fractional undivided interest
                  therein) by a Receivables Entity in connection with a
                  Qualified Receivables Transaction; or

                           (6) a sale by the Company or a Restricted Subsidiary
                  of Property by way of a Sale and Leaseback Transaction but
                  only if (A) such Property was owned by the Company or a
                  Restricted Subsidiary on the Issue Date, (B) the requirements
                  of clause (a) of Section 4.10 are satisfied with respect to
                  such Sale and Leaseback Transaction, (C) the requirements of
                  clauses (a), (b) and (c) of the first paragraph of Section
                  4.06 are satisfied as though such Sale and Leaseback
                  Transaction constituted an Asset Sale and (D) the aggregate
                  Fair Market Value of such Property, when added to the Fair
                  Market Value of all other sales of Property pursuant to this
                  clause (6) since the Issue Date, does not exceed $150 million.



                                                                               3


                  "Attributable Debt" in respect of a Sale and Leaseback
Transaction or Synthetic Lease means, at any date of determination:

                  (a) if such Sale and Leaseback Transaction is a Capital Lease
         Obligation, the amount of Debt represented thereby according to the
         definition of "Capital Lease Obligation," and

                  (b) in all other instances, the greater of:

                           (1) the Fair Market Value of the Property subject to
                  such Sale and Leaseback Transaction or Synthetic Lease; and

                           (2) the present value (discounted at the interest
                  rate borne by the Securities, compounded annually) of the
                  total obligations of the lessee for rental payments during the
                  remaining term of the lease included in such Sale and
                  Leaseback Transaction or such Synthetic Lease (in each case
                  including any period for which such lease has been extended).

                  "Average Life" means, as of any date of determination, with
respect to any Debt or Preferred Stock, the quotient obtained by dividing:

                  (a) the sum of the product of the numbers of years (rounded to
         the nearest one-twelfth of one year) from the date of determination to
         the dates of each successive scheduled principal payment of such Debt
         or redemption or similar payment with respect to such Preferred Stock
         multiplied by the amount of such payment by

                  (b) the sum of all such payments.

                  "Board of Directors" means the Board of Directors of the
Company or any duly authorized and constituted committee thereof.

                  "Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.

                  "Business Day" means any day other than a Saturday, a Sunday
or a day on which banking institutions in The City of New York, New York are
authorized or obligated by law, regulation, executive order or governmental
decree to close.

                  "Capital Lease Obligations" means any obligation under a lease
that is required to be capitalized for financial reporting purposes in
accordance with GAAP; and the amount of Debt represented by such obligation
shall be the capitalized amount of such obligations determined in accordance
with GAAP; and the Stated Maturity thereof shall be the date of the last payment
of rent or any other amount due under such lease prior to the first date upon
which such lease may be terminated by the lessee without


                                                                               4


payment of a penalty. For purposes of Section 4.05, a Capital Lease Obligation
shall be deemed secured by a Lien on the Property being leased.

                  "Capital Stock" means, with respect to any Person, any shares
or other equivalents (however designated) of any class of corporate stock or
partnership interests or any other participations, rights, warrants, options or
other interests in the nature of an equity interest in such Person, including
Preferred Stock, but excluding any debt security convertible or exchangeable
into such equity interest.

                  "Capital Stock Sale Proceeds" means the aggregate cash
proceeds received by the Company from the issuance or sale (other than to a
Subsidiary of the Company or an employee stock ownership plan or trust
established by the Company or any such Subsidiary for the benefit of their
employees) by the Company of its Capital Stock (other than Disqualified Stock)
after the Issue Date, net of attorneys' fees, accountants' fees, underwriters'
or placement agents' fees, discounts or commissions and brokerage, consultant
and other fees actually incurred in connection with such issuance or sale and
net of taxes paid or payable as a result thereof.

                  "Change of Control" means the occurrence of any of the
following events:

                  (a) if any "person" or "group" (as such terms are used in
         Sections 13(d) and 14(d) of the Exchange Act or any successor
         provisions to either of the foregoing), including any group acting for
         the purpose of acquiring, holding, voting or disposing of securities
         within the meaning of Rule 13d-5(b)(1) under the Exchange Act (other
         than one or more Permitted Holders), becomes the "beneficial owner" (as
         defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
         of 40% or more of the total voting power of the Voting Stock of the
         Company (for purposes of this clause (a), such person or group shall be
         deemed to beneficially own any Voting Stock of a corporation held by
         any other corporation (the "parent corporation") so long as such person
         or group beneficially owns, directly or indirectly, in the aggregate a
         majority of the total voting power of the Voting Stock of such parent
         corporation); or

                  (b) the sale, transfer, assignment, lease, conveyance or other
         disposition, directly or indirectly, of all or substantially all the
         assets of the Company and the Restricted Subsidiaries, considered as a
         whole (other than a disposition of such assets as an entirety or
         virtually as an entirety to a Wholly Owned Restricted Subsidiary) shall
         have occurred, or the Company merges, consolidates or amalgamates with
         or into any other Person or any other Person merges, consolidates or
         amalgamates with or into the Company, in any such event pursuant to a
         transaction in which the outstanding Voting Stock of the Company is
         reclassified into or exchanged for cash, securities or other Property,
         other than any such transaction where:

                           (1) the outstanding Voting Stock of the Company is
                  reclassified into or exchanged for other Voting Stock of the
                  Company or for Voting Stock of the surviving corporation; and



                                                                               5


                           (2) the holders of the Voting Stock of the Company
                  immediately prior to such transaction own, directly or
                  indirectly, not less than a majority of the Voting Stock of
                  the Company or the surviving corporation immediately after
                  such transaction and in substantially the same proportion as
                  before the transaction; or

                  (c) during any period of two consecutive years commencing
         after May 1, 2003, individuals who at the beginning of such period
         constituted the Board of Directors (together with any new directors
         whose election or appointment by such Board of Directors or whose
         nomination for election by the shareholders of the Company was approved
         by a vote of not less than three-fourths of the directors then still in
         office who were either directors at the beginning of such period or
         whose election or nomination for election was previously so approved)
         cease for any reason to constitute a majority of the Board of Directors
         then in office; or

                  (d) the shareholders of the Company shall have approved any
         plan of liquidation or dissolution of the Company.

                  "Class A Cumulative Preferred Stock" means Rite Aid Lease
Management Company's Preferred Stock, par value $100.00 per share, designated as
Class A Cumulative.

                  "Class C Cumulative Preferred Stock" means the Rite Aid Risk
Management Corp.'s Preferred Stock, par value $1.00 per share, designated as
Class C Cumulative Participating Voting.

                  "Class D Cumulative Preferred Stock" means the Rite Aid Risk
Management Corp.'s Preferred Stock, par value $100.00 per share, designated as
Class D Cumulative Participating Voting.

                  "Code" means the Internal Revenue Code of 1986, as amended.

                  "Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act, or, if at any
time after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.

                  "Commodity Price Protection Agreement" means, in respect of a
Person, any forward contract, commodity swap agreement, commodity option
agreement or other similar agreement or arrangement designed to protect such
Person against fluctuations in commodity prices.

                  "Company" means the Person named as the "Company" in the first
paragraph of this Indenture until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person and, for purposes of any provision
contained herein and expressly required by the TIA, each other obligor on the
indenture securities.



                                                                               6


                  "Consolidated Interest Coverage Ratio" means, as of any date
of determination, the ratio of:

                  (a) the aggregate amount of EBITDA for the most recent four
         consecutive fiscal quarters for which financial statements have been
         filed with the Commission to

                  (b) Consolidated Interest Expense for such four fiscal
         quarters;

provided, however, that:

                           (1) if

                                    (A) since the beginning of such period the
                           Company or any Restricted Subsidiary has Incurred any
                           Debt that remains outstanding or Repaid any Debt; or

                                    (B) the transaction giving rise to the need
                           to calculate the Consolidated Interest Coverage Ratio
                           is an Incurrence or Repayment of Debt,

                  Consolidated Interest Expense for such period shall be
                  calculated after giving effect on a pro forma basis to such
                  Incurrence or Repayment as if such Debt was Incurred or Repaid
                  on the first day of such period, provided that, in the event
                  of any such Repayment of Debt, EBITDA for such period shall be
                  calculated as if the Company or such Restricted Subsidiary had
                  not earned any interest income actually earned during such
                  period in respect of the funds used to Repay such Debt, and

                           (2) if

                                    (A) since the beginning of such period the
                           Company or any Restricted Subsidiary shall have made
                           any Asset Sale or an Investment (by merger or
                           otherwise) in any Restricted Subsidiary (or any
                           Person which becomes a Restricted Subsidiary) or an
                           acquisition of Property which constitutes all or
                           substantially all of an operating unit of a business;

                                    (B) the transaction giving rise to the need
                           to calculate the Consolidated Interest Coverage Ratio
                           is such an Asset Sale, Investment or acquisition; or

                                    (C) since the beginning of such period any
                           Person (that subsequently became a Restricted
                           Subsidiary or was merged with or into the Company or
                           any Restricted Subsidiary since the beginning of such
                           period) shall have made such an Asset Sale,
                           Investment or acquisition,



                                                                               7


                  EBITDA for such period shall be calculated after giving pro
                  forma effect to such Asset Sale, Investment or acquisition as
                  if such Asset Sale, Investment or acquisition occurred on the
                  first day of such period.

                  If any Debt bears a floating rate of interest and is being
given pro forma effect, the interest expense on such Debt shall be calculated as
if the base interest rate in effect for such floating rate of interest on the
date of determination had been the applicable base interest rate for the entire
period (taking into account any Interest Rate Agreement applicable to such Debt
if such Interest Rate Agreement has a remaining term in excess of 12 months). In
the event the Capital Stock of any Restricted Subsidiary is sold during the
period, the Company shall be deemed, for purposes of clause (1) above, to have
Repaid during such period the Debt of such Restricted Subsidiary to the extent
the Company and its continuing Restricted Subsidiaries are no longer liable for
such Debt after such sale.

                  "Consolidated Interest Expense" means, for any period, the
total interest expense of the Company and its consolidated Restricted
Subsidiaries (excluding the non-cash interest expense related to (x) litigation
reserves, (y) closed store liability reserves and (z) self-insurance reserves),
plus, to the extent not included in such total interest expense, and to the
extent Incurred by the Company or its Restricted Subsidiaries, and without
duplication:

                  (a) interest expense attributable to Capital Lease
         Obligations;

                  (b) amortization of debt discount and debt issuance cost,
         including commitment fees;

                  (c) capitalized interest;

                  (d) non-cash interest expense other than expenses under
         clauses (x), (y) and (z) above;

                  (e) commissions, discounts and other fees and charges owed
         with respect to letters of credit and bankers' acceptance financing;

                  (f) net costs associated with Hedging Obligations (including
         amortization of fees but excluding costs associated with forward
         contracts for inventory in the ordinary course of business);

                  (g) Disqualified Stock Dividends;

                  (h) Preferred Stock Dividends;

                  (i) interest Incurred in connection with Investments in
         discontinued operations;



                                                                               8


                  (j) interest accruing on any Debt of any other Person to the
         extent such Debt is Guaranteed by the Company or any Restricted
         Subsidiary; and

                  (k) the cash contributions to any employee stock ownership
         plan or similar trust to the extent such contributions are used by such
         plan or trust to pay interest or fees to any Person (other than the
         Company) in connection with Debt Incurred by such plan or trust.

                  "Consolidated Net Income" means, for any period, the net
income (loss) of the Company and its consolidated Subsidiaries; provided,
however, that there shall not be included in such Consolidated Net Income:

                  (a) any net income (loss) of any Person (other than the
         Company) if such Person is not a Restricted Subsidiary, except that:

                           (1) subject to the exclusion contained in clause (d)
                  below, the Company's equity in the net income of any such
                  Person for such period shall be included in such Consolidated
                  Net Income up to the aggregate amount of cash distributed by
                  such Person during such period to the Company or a Restricted
                  Subsidiary as a dividend or other distribution (subject, in
                  the case of a dividend or other distribution to a Restricted
                  Subsidiary, to the limitations contained in clause (c) below);
                  and

                           (2) the Company's equity in a net loss of any such
                  Person other than an Unrestricted Subsidiary for such period
                  shall be included in determining such Consolidated Net Income;

                  (b) for purposes of Section 4.04 only, any net income (loss)
         of any Person acquired by the Company or any of its consolidated
         Subsidiaries in a pooling of interests transaction for any period prior
         to the date of such acquisition;

                  (c) any net income (loss) of any Restricted Subsidiary if such
         Restricted Subsidiary is subject to restrictions, directly or
         indirectly, on the payment of dividends or the making of distributions,
         directly or indirectly, to the Company, except that:

                           (1) subject to the exclusion contained in clause (d)
                  below, the Company's equity in the net income of any such
                  Restricted Subsidiary for such period shall be included in
                  such Consolidated Net Income up to the aggregate amount of
                  cash distributed by such Restricted Subsidiary during such
                  period to the Company or another Restricted Subsidiary as a
                  dividend or other distribution (subject, in the case of a
                  dividend or other distribution to another Restricted
                  Subsidiary, to the limitation contained in this clause); and

                           (2) the Company's equity in a net loss of any such
                  Restricted Subsidiary for such period shall be included in
                  determining such Consolidated Net Income;



                                                                               9


                  (d) any gain or loss realized upon the sale or other
         disposition of any Property of the Company or any of its consolidated
         Subsidiaries (including pursuant to any Sale and Leaseback Transaction)
         that is not sold or otherwise disposed of in the ordinary course of
         business;

                  (e) any extraordinary gain or loss;

                  (f) the cumulative effect of a change in accounting
         principles;

                  (g) any non-cash compensation expense realized for grants of
         performance shares, stock options or other rights to officers,
         directors and employees of the Company or any Restricted Subsidiary,
         provided that such shares, options or other rights can be redeemed at
         the option of the holder only for Capital Stock of the Company (other
         than Disqualified Stock);

                  (h) store closing costs;

                  (i) non-cash charges or credits that relate to use of the
         last-in-first-out method of accounting for inventory; and

                  (j) loss on debt modifications.

Notwithstanding the foregoing, for purposes of Section 4.04 only, there shall be
excluded from Consolidated Net Income any dividends, repayments of loans or
advances or other transfers of assets from Unrestricted Subsidiaries to the
Company or a Restricted Subsidiary to the extent such dividends, repayments or
transfers increase the amount of Restricted Payments permitted by Section 4.04
pursuant to clause (c)(4) thereof.

                  "corporation" means a corporation, association, company,
limited liability company, joint-stock company, partnership or business trust.

                  "Credit Facilities" means, with respect to the Company or any
Restricted Subsidiary, one or more debt or commercial paper facilities with
banks or other institutional lenders (including the Senior Credit Facilities),
providing for revolving credit loans, term loans, receivables or inventory
financing (including through the sale of receivables or inventory to such
lenders or to special purpose, bankruptcy remote entities formed to borrow from
such lenders against such receivables or inventory), Synthetic Leases or trade
letters of credit, in each case together with Refinancings thereof on any basis
so long as such Refinancing constitutes Debt.

                  "Currency Exchange Protection Agreement" means, in respect of
a Person, any foreign exchange contract, currency swap agreement, currency
option or other similar agreement or arrangement designed to protect such Person
against fluctuations in currency exchange rates.

                  "Debt" means, with respect to any Person on any date of
determination (without duplication):



                                                                              10


                  (a) the principal of and premium (if any) in respect of:

                           (1) debt of such Person for money borrowed; and

                           (2) debt evidenced by notes, debentures, bonds or
                  other similar instruments for the payment of which such Person
                  is responsible or liable;

                  (b) all Capital Lease Obligations of such Person and all
         Attributable Debt in respect of Sale and Leaseback Transactions and
         Synthetic Leases entered into by such Person;

                  (c) all obligations of such Person issued or assumed as the
         deferred purchase price of Property, all conditional sale obligations
         of such Person and all obligations of such Person under any title
         retention agreement (but excluding trade accounts payable arising in
         the ordinary course of business);

                  (d) all obligations of such Person for the reimbursement of
         any obligor on any letter of credit, banker's acceptance or similar
         credit transaction (other than obligations with respect to letters of
         credit securing obligations (other than obligations described in (a)
         through (c) above) entered into in the ordinary course of business of
         such Person to the extent such letters of credit are not drawn upon or,
         if and to the extent drawn upon, such drawing is reimbursed no later
         than the third Business Day following receipt by such Person of a
         demand for reimbursement following payment on the letter of credit);

                  (e) the amount of all obligations of such Person with respect
         to the Repayment of any Disqualified Stock or, with respect to any
         Subsidiary of such Person, any Preferred Stock (but excluding, in each
         case, any accrued dividends);

                  (f) all obligations of the type referred to in clauses (a)
         through (e) of other Persons and all dividends of other Persons for the
         payment of which, in either case, such Person is responsible or liable,
         directly or indirectly, as obligor, guarantor or otherwise, including
         by means of any Guarantee;

                  (g) all obligations of the type referred to in clauses (a)
         through (f) of other Persons secured by any Lien on any Property of
         such Person (whether or not such obligation is assumed by such Person),
         the amount of such obligation being deemed to be the lesser of the
         value of such Property or the amount of the obligation so secured; and

                  (h) to the extent not otherwise included in this definition,
         Hedging Obligations of such Person.

The amount of Debt of any Person at any date shall be the outstanding balance at
such date of all unconditional obligations as described above and the maximum
liability, upon the occurrence of the contingency giving rise to the obligation,
of any contingent obligations at such date. The amount of Debt represented by a
Hedging Obligation shall be equal to:



                                                                              11


                           (1) zero if such Hedging Obligation has been Incurred
                  pursuant to clause (g) or (h) of the second paragraph of
                  Section 4.03 or

                           (2) the notional amount of such Hedging Obligation if
                  not Incurred pursuant to such clauses.

                  "Debt Issuances" means, with respect to the Company or any
Restricted Subsidiary, one or more issuances of Debt evidenced by notes,
debentures, bonds or other similar securities or instruments.

                  "Default" means any event which is, or after notice or passage
of time or both would be, an Event of Default.

                  "Disqualified Stock" means, with respect to any Person, any
Capital Stock that by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable, in either case at the option of
the holder thereof) or otherwise:

                  (a) matures or is mandatorily redeemable pursuant to a sinking
         fund obligation or otherwise;

                  (b) is or may become redeemable or repurchaseable at the
         option of the holder thereof, in whole or in part; or

                  (c) is convertible or exchangeable at the option of the holder
         thereof for Debt or Disqualified Stock;

on or prior to, in the case of clause (a), (b) or (c), the first anniversary of
the Stated Maturity of the Securities.

                  "Disqualified Stock Dividends" means all dividends with
respect to Disqualified Stock of the Company held by Persons other than a Wholly
Owned Restricted Subsidiary. The amount of any such dividend shall be equal to
the quotient of such dividend divided by the difference between one and the
maximum statutory federal income tax rate (expressed as a decimal number between
1 and 0) then applicable to the Company.

                  "EBITDA" means, for any period, an amount equal to, for the
Company and its consolidated Restricted Subsidiaries:

                  (a) the sum of Consolidated Net Income for such period, plus
         the following to the extent reducing Consolidated Net Income for such
         period:

                           (1) the provision for taxes based on income or
                  profits or utilized in computing net loss;

                           (2) Consolidated Interest Expense and non-cash
                  interest expense related to litigation reserves, closed store
                  liability reserves and self-


                                                                              12


                  insurance reserves, to the extent excluded from Consolidated
                  Interest Expense;

                           (3) depreciation;

                           (4) amortization of intangibles;

                           (5) non-cash impairment charges;

                           (6) non-cash losses relating to the Investment in
                  drugstore.com resulting from accounting for drugstore.com on
                  the equity method of accounting, except to the extent such
                  losses relate to Investments made after the Issue Date;

                           (7) charges relating to the investigations of the
                  Company pending on the Issue Date by the United States
                  Attorney and by the U.S. Department of Labor and amounts paid
                  in satisfaction of any judgment, fine or settlement resulting
                  therefrom; and

                           (8) any other non-cash items (other than any such
                  non-cash item to the extent that it represents an accrual of
                  or reserve for cash expenditures in any future period), minus

                  (b) all non-cash items increasing Consolidated Net Income for
         such period (other than any such non-cash item to the extent that it
         will result in the receipt of cash payments in any future period).

Notwithstanding the foregoing clause (a), the provision for taxes and the
depreciation, amortization and non-cash items of a Restricted Subsidiary shall
be added to Consolidated Net Income to compute EBITDA only to the extent (and in
the same proportion) that the net income of such Restricted Subsidiary was
included in calculating Consolidated Net Income and only if a corresponding
amount would be permitted at the date of determination to be dividended to the
Company by such Restricted Subsidiary without prior approval (that has not been
obtained), pursuant to the terms of its charter and all agreements, instruments,
judgments, decrees, orders, statutes, rules and governmental regulations
applicable to such Restricted Subsidiary or its shareholders.

                  "8.125% Notes" means the Company's 8.125% Senior Secured Notes
Due 2010 issued under the indenture dated as of April 22, 2003, among the
Company, the Subsidiary Guarantors named therein and BNY Midwest Trust Company,
as trustee, and outstanding on the Issue Date.

                  "11 1/4% Notes Issue Date" means June 27, 2001.

                  "Equipment Financing Transaction" means any arrangement
(together with any Refinancing thereof) with any Person pursuant to which the
Company or any Restricted Subsidiary Incurs Debt secured by a Lien on equipment
or equipment related property of the Company or any Restricted Subsidiary.



                                                                              13


                  "Equity Offering" means (i) an underwritten offering of common
stock of the Company by the Company pursuant to an effective registration
statement under the Securities Act or (ii) so long as the Company's common stock
is, at the time, listed or quoted on a national securities exchange (as such
term is defined in the Exchange Act, an offering of common stock by the Company
in a transaction exempt from or not subject to the registration requirements of
the Securities Act.

                  "Event of Default" has the meaning set forth under Section
6.01.

                  "Exchange Act" means the Securities Exchange Act of 1934.

                  "Expansion Capital Expenditure" means any capital expenditure
incurred by the Company or any Restricted Subsidiary in developing, relocating,
remodeling and refurbishing a warehouse, distribution center, store or other
facility (other than ordinary course maintenance) for carrying on the business
of the Company and its Restricted Subsidiaries that the Board of Directors
determines in good faith will enhance the income generating ability of the
warehouse, distribution center, store or other facility.

                  "Fair Market Value" means, with respect to any Property, the
price that could be negotiated in an arm's-length free market transaction, for
cash, between a willing seller and a willing buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair Market Value
shall be determined, except as otherwise provided:

                  (a) if such Property has a Fair Market Value equal to or less
         than $25 million, by any Officer of the Company; or

                  (b) if such Property has a Fair Market Value in excess of $25
         million, by a majority of the Board of Directors and evidenced by a
         Board Resolution, dated within 30 days of the relevant transaction,
         delivered to the Trustee.

                  "GAAP" means United States generally accepted accounting
principles as in effect on the Issue Date, including those set forth:

                  (a) in the opinions and pronouncements of the Accounting
         Principles Board of the American Institute of Certified Public
         Accountants;

                  (b) in the statements and pronouncements of the Financial
         Accounting Standards Board;

                  (c) in such other statements by such other entity as approved
         by a significant segment of the accounting profession; and

                  (d) the rules and regulations of the Commission governing the
         inclusion of financial statements (including pro forma financial
         statements) in periodic reports required to be filed pursuant to
         Section 13 of the Exchange Act, including opinions and pronouncements
         in staff accounting bulletins and similar written statements from the
         accounting staff of the Commission.



                                                                              14


                  "Guarantee" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Debt of any other Person and
any obligation, direct or indirect, contingent or otherwise, of such Person:

                  (a) to purchase or pay (or advance or supply funds for the
         purchase or payment of) such Debt of such other Person (whether arising
         by virtue of partnership arrangements, or by agreements to keep-well,
         to purchase assets, goods, securities or services, to take-or-pay or to
         maintain financial statement conditions or otherwise); or

                  (b) entered into for the purpose of assuring in any other
         manner the obligee against loss in respect thereof (in whole or in
         part);

         provided, however, that the term "Guarantee" shall not include:

                           (1) endorsements for collection or deposit in the
                  ordinary course of business; or

                           (2) a contractual commitment by one Person to invest
                  in another Person for so long as such Investment is reasonably
                  expected to constitute a Permitted Investment under clause (b)
                  of the definition of "Permitted Investment."

The term "Guarantee" used as a verb has a corresponding meaning. The term
"Guarantor" shall mean any Person Guaranteeing any obligation.

                  "Hedging Obligation" of any Person means any obligation of
such Person pursuant to any Interest Rate Agreement, Currency Exchange
Protection Agreement, Commodity Price Protection Agreement or any other similar
agreement or arrangement.

                  "Holder" means the Person in whose name a Security is
registered in the Security Register.

                  "Incur" means, with respect to any Debt or other obligation of
any Person, to create, issue, incur (by merger, conversion, exchange or
otherwise), extend, assume, Guarantee or become liable in respect of such Debt
or other obligation or the recording, as required pursuant to GAAP or otherwise,
of any such Debt or obligation on the balance sheet of such Person (and
"Incurrence" and "Incurred" shall have meanings correlative to the foregoing);
provided, however, that a change in GAAP that results in an obligation of such
Person that exists at such time, and is not theretofore classified as Debt,
becoming Debt shall not be deemed an Incurrence of such Debt; provided further,
however, that any Debt or other obligations of a Person existing at the time
such Person becomes a Subsidiary (whether by merger, consolidation, acquisition
or otherwise) shall be deemed to be Incurred by such Subsidiary at the time it
becomes a Subsidiary; and provided further, however, that solely for purposes of
determining compliance with Section 4.03, amortization of debt discount shall
not be deemed to be the Incurrence of Debt, provided that in the case of Debt
sold at a discount, the amount of such Debt Incurred shall at all times be the
aggregate principal amount at Stated Maturity.



                                                                              15


                  "Indenture" means this instrument as originally executed or as
it may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.

                  "Independent Financial Advisor" means an investment banking
firm of national standing or any third party appraiser of national standing,
provided that such firm or appraiser is not an Affiliate of the Company.

                  "Interest Rate Agreement" means, for any Person, any interest
rate swap agreement, interest rate cap agreement, interest rate collar agreement
or other similar agreement designed to protect against fluctuations in interest
rates.

                  "Investment" by any Person means any direct or indirect loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of such Person), advance or
other extension of credit or capital contribution (by means of transfers of cash
or other Property to others or payments for Property or services for the account
or use of others, or otherwise) to, or Incurrence of a Guarantee of any
obligation of, or purchase or acquisition of Capital Stock, bonds, notes,
debentures or other securities or evidence of Debt issued by, any other Person.
For purposes of Sections 4.04 and 4.11 and the definition of "Restricted
Payment," "Investment" shall include the portion (proportionate to the Company's
equity interest in such Subsidiary) of the Fair Market Value of the net assets
of any Subsidiary of the Company at the time that such Subsidiary is designated
an Unrestricted Subsidiary; provided, however, that upon a redesignation of such
Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue
to have a permanent "Investment" in an Unrestricted Subsidiary of an amount (if
positive) equal to:

                  (a) the Company's "Investment" in such Subsidiary at the time
         of such redesignation; less

                  (b) the portion (proportionate to the Company's equity
         interest in such Subsidiary) of the Fair Market Value of the net assets
         of such Subsidiary at the time of such redesignation.

In determining the amount of any Investment made by transfer of any Property
other than cash, such Property shall be valued at its Fair Market Value at the
time of such Investment.

                  "Issue Date" means the date on which the Original Securities
are initially issued.

                  "Lien" means, with respect to any Property of any Person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement (other than any easement
not materially impairing usefulness or marketability), encumbrance, preference,
priority or other security


                                                                              16


agreement or preferential arrangement of any kind or nature whatsoever on or
with respect to such Property (including any Capital Lease Obligation,
conditional sale or other title retention agreement having substantially the
same economic effect as any of the foregoing or any Sale and Leaseback
Transaction).

                  "Moody's" means Moody's Investors Service, Inc. or any
successor to the rating agency business thereof.

                  "Net Available Cash" from any Asset Sale means cash payments
received therefrom (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise,
but only as and when received, but excluding any other consideration received in
the form of assumption by the acquiring Person of Debt or other obligations
relating to the Property that is the subject of such Asset Sale or received in
any other non-cash form), in each case net of:

                  (a) all legal, title and recording tax expenses, commissions
         and other fees and expenses incurred, and all Federal, state,
         provincial, foreign and local taxes required to be accrued as a
         liability under GAAP, as a consequence of such Asset Sale;

                  (b) all payments made on any Debt that is secured by any
         Property subject to such Asset Sale, in accordance with the terms of
         any Lien upon or other security agreement of any kind with respect to
         such Property, or which must by its terms, or in order to obtain a
         necessary consent to such Asset Sale, or by applicable law, be repaid
         out of the proceeds from such Asset Sale;

                  (c) all distributions and other payments required to be made
         to minority interest holders in Subsidiaries or joint ventures as a
         result of such Asset Sale; and

                  (d) the deduction of appropriate amounts provided by the
         seller as a reserve, in accordance with GAAP, against any liabilities
         associated with the Property disposed in such Asset Sale and retained
         by the Company or any Restricted Subsidiary after such Asset Sale.

                  "9 1/2% Notes" means the Company's 9 1/2% Senior Secured Notes
Due 2011 issued under the indenture dated as of February 12, 2003, among the
Company, the Subsidiary Guarantors named therein and BNY Midwest Trust Company,
as trustee, and outstanding on the Issue Date.

                  "Officer" means the Chief Executive Officer, the President,
the Chief Financial Officer or any Executive Vice President of the Company.

                  "Officers' Certificate" means a certificate signed by two
Officers of the Company, at least one of whom shall be the principal executive
officer or principal financial officer of the Company, and delivered to the
Trustee.

                                                                              17


                  "Opinion of Counsel" means a written opinion from legal
counsel who is acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.

                  "Permitted Holder" means Leonard Green & Partners L.P. or any
of its Affiliates.

                  "Permitted Investment" means any Investment by the Company or
a Restricted Subsidiary in:

                  (a)(i) the Company, (ii) any Restricted Subsidiary or (iii)
         any Person that will, upon the making of such Investment, become a
         Restricted Subsidiary;

                  (b) any Person if as a result of such Investment such Person
         is merged or consolidated with or into, or transfers or conveys all or
         substantially all its Property to, the Company or a Restricted
         Subsidiary;

                  (c) cash and Temporary Cash Investments;

                  (d) receivables owing to the Company or a Restricted
         Subsidiary, if created or acquired in the ordinary course of business
         and payable or dischargeable in accordance with customary trade terms;
         provided, however, that such trade terms may include such concessionary
         trade terms as the Company or such Restricted Subsidiary deems
         reasonable under the circumstances;

                  (e) payroll, travel and similar advances to cover matters that
         are expected at the time of such advances ultimately to be treated as
         expenses for accounting purposes and that are made in the ordinary
         course of business;

                  (f) loans and advances to employees made in the ordinary
         course of business consistent with past practices of the Company or
         such Restricted Subsidiary, as the case may be, provided that such
         loans and advances do not exceed $25 million at any one time
         outstanding;

                  (g) stock, obligations or other securities received in
         settlement of debts created in the ordinary course of business and
         owing to the Company or a Restricted Subsidiary or in satisfaction of
         judgments;

                  (h) any Person to the extent such Investment represents the
         non-cash portion of the consideration received in connection with an
         Asset Sale consummated in compliance with Section 4.06;

                  (i) Hedging Obligations permitted under clause (g), (h) or (i)
         of Section 4.03;

                  (j) any Person if the Investments are outstanding on the Issue
         Date and not otherwise described in clauses (a) through (i) above;



                                                                              18


                  (k) Investments in Unrestricted Subsidiaries or joint venture
         entities (including purchasing cooperatives) that do not exceed $10
         million outstanding at any one time in the aggregate;

                  (l) other Investments that do not exceed $5 million
         outstanding at any one time in the aggregate;

                  (m) Investments in any entity, formed by the Company or a
         Restricted Subsidiary, organized under Section 501(c)(3) of the Code,
         that do not exceed an aggregate amount of $5 million in any fiscal
         year; and

                  (n) any assets, Capital Stock or other securities to the
         extent acquired in exchange for shares of Capital Stock of the Company
         (other than Disqualified Stock).

                  "Permitted Liens" means:

                  (a) Liens to secure Debt permitted to be Incurred under clause
         (b), (c), (d), (l) or (p) of the second paragraph of Section 4.03;

                  (b) Liens to secure Debt permitted to be Incurred under clause
         (e), (q) or (r) of the second paragraph of Section 4.03; provided that
         (i) any such Lien may not extend to any Property of the Company or any
         Restricted Subsidiary, other than the Property acquired, developed,
         constructed or leased with the proceeds of such Debt and any
         improvements or additions to such Property;

                  (c) Liens for taxes, assessments or governmental charges or
         levies on the Property of the Company or any Restricted Subsidiary if
         the same shall not at the time be delinquent or thereafter can be paid
         without penalty, or are being contested in good faith and by
         appropriate proceedings promptly instituted and diligently concluded,
         provided that any reserve or other appropriate provision that shall be
         required in conformity with GAAP shall have been made therefor;

                  (d) Liens imposed by law, such as carriers', warehousemen's
         and mechanics' Liens and other similar Liens, on the Property of the
         Company or any Restricted Subsidiary arising in the ordinary course of
         business and securing payment of obligations that are not more than 60
         days past due or are being contested in good faith and by appropriate
         proceedings;

                  (e) Liens on the Property of the Company or any Restricted
         Subsidiary Incurred in the ordinary course of business to secure
         performance of obligations with respect to statutory or regulatory
         requirements, performance or return-of-money bonds, surety bonds or
         other obligations of a like nature and Incurred in a manner consistent
         with industry practice, in each case which are not Incurred in
         connection with the borrowing of money, the obtaining of advances or
         credit or the payment of the deferred purchase price of Property and
         which do not in the aggregate impair in any material respect the use of
         Property in the operation of the business of the Company and the
         Restricted Subsidiaries taken as a whole;



                                                                              19


                  (f) Liens on Property at the time the Company or any
         Restricted Subsidiary acquired such Property, including any acquisition
         by means of a merger or consolidation with or into the Company or any
         Restricted Subsidiary; provided, however, that any such Lien may not
         extend to any other Property of the Company or any Restricted
         Subsidiary; provided further, however, that such Liens shall not have
         been Incurred in anticipation of or in connection with the transaction
         or series of transactions pursuant to which such Property was acquired
         by the Company or any Restricted Subsidiary;

                  (g) Liens on the Property of a Person at the time such Person
         becomes a Restricted Subsidiary; provided, however, that any such Lien
         may not extend to any other Property of the Company or any other
         Restricted Subsidiary that is not a direct Subsidiary of such Person;
         provided further, however, that any such Lien was not Incurred in
         anticipation of or in connection with the transaction or series of
         transactions pursuant to which such Person became a Restricted
         Subsidiary;

                  (h) pledges or deposits by the Company or any Restricted
         Subsidiary under workmen's compensation laws, unemployment insurance
         laws or similar legislation, or good faith deposits in connection with
         bids, tenders, contracts (other than for the payment of Debt) or leases
         to which the Company or any Restricted Subsidiary is party, or deposits
         to secure public or statutory obligations of the Company or any
         Restricted Subsidiary, or deposits for the payment of rent, in each
         case Incurred in the ordinary course of business;

                  (i) utility easements, building restrictions and such other
         encumbrances or charges against real Property as are of a nature
         generally existing with respect to properties of a similar character;

                  (j) Liens arising out of judgments or awards against the
         Company or a Restricted Subsidiary with respect to which the Company or
         the Restricted Subsidiary shall then be proceeding with an appeal or
         other proceeding for review and which do not give rise to an Event of
         Default;

                  (k) leases or subleases of real property granted by the
         Company or a Restricted Subsidiary to any other Person in the ordinary
         course of business and not materially impairing the use of the real
         property in the operation of the business of the Company or the
         Restricted Subsidiary;

                  (l) licenses of intellectual property in the ordinary course
         of business;

                  (m) Liens existing on the Issue Date not otherwise described
         in clauses (a) through (l) above;

                  (n) Liens on the Property of the Company or any Restricted
         Subsidiary to secure any Refinancing, in whole or in part, of any Debt
         secured by Liens referred to in clause (a) (but only to the extent it
         relates to clause (c) or (d) referred to therein), (b) (other than
         Liens securing Debt Incurred pursuant to clause (r) referred to
         therein), (f), (g), or (m) above; provided, however, that any


                                                                              20


         such Lien shall be limited to all or part of the same Property that
         secured the original Lien (together with improvements and accessions to
         such Property) and the aggregate principal amount of Debt that is
         secured by such Lien shall not be increased to an amount greater than
         the sum of:

                           (1) the outstanding principal amount, or, if greater,
                  the committed amount, of the Debt secured by Liens described
                  under clause (b) (except as referred to above), (f), (g), or
                  (m) above, as the case may be, at the time the original Lien
                  became a Permitted Lien under this Indenture; and

                           (2) an amount necessary to pay any fees and expenses,
                  including premiums and defeasance costs, incurred by the
                  Company or such Restricted Subsidiary in connection with such
                  Refinancing; and

                  (o) Liens not otherwise permitted by clauses (a) through (n)
         above encumbering assets that have an aggregate Fair Market Value not
         in excess of $2 million.

                  "Permitted Refinancing Debt" means any Debt that Refinances
any other Debt, including any successive Refinancings, so long as:

                  (a) such Debt is in an aggregate principal amount (or if
         Incurred with original issue discount, an aggregate issue price) not in
         excess of the sum of:

                           (1) the aggregate principal amount (or if Incurred
                  with original issue discount, the aggregate accreted value)
                  then outstanding of the Debt being Refinanced; and

                           (2) an amount necessary to pay any fees and expenses,
                  including premiums and defeasance costs, related to such
                  Refinancing;

                  (b) the Average Life of such Debt is equal to or greater than
         the Average Life of the Debt being Refinanced;

                  (c) the Stated Maturity of such Debt is no earlier than the
         Stated Maturity of the Debt being Refinanced; and

                  (d) the new Debt shall not be senior in right of payment to
         the Debt that is being Refinanced;

provided, however, that Permitted Refinancing Debt shall not include: (x) Debt
of a Subsidiary that Refinances Debt of the Company, or (y) Debt of the Company
or a Restricted Subsidiary that Refinances Debt of an Unrestricted Subsidiary.

                  "Person" means any individual, corporation, company (including
any limited liability company), association, partnership, joint venture, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.



                                                                              21


                  "Preferred Stock" means any Capital Stock of a Person, however
designated, which entitles the holder thereof to a preference with respect to
the payment of dividends, or as to the distribution of assets upon any voluntary
or involuntary liquidation or dissolution of such Person, over shares of any
other class of Capital Stock issued by such Person.

                  "Preferred Stock Dividends" means all dividends with respect
to Preferred Stock of Restricted Subsidiaries held by Persons other than the
Company or a Wholly Owned Restricted Subsidiary. The amount of any such dividend
shall be equal to the quotient of such dividend divided by the difference
between one and the maximum statutory federal income rate (expressed as a
decimal number between 1 and 0) then applicable to the issuer of such Preferred
Stock.

                  "pro forma" means, with respect to any calculation made or
required to be made pursuant to the terms hereof, a calculation performed in
accordance with Article 11 of Regulation S-X promulgated under the Securities
Act, as interpreted in good faith by the Board of Directors after consultation
with the independent certified public accountants of the Company, or otherwise a
calculation made in good faith by the Board of Directors after consultation with
the independent certified public accountants of the Company, as the case may be.

                  "Property" means, with respect to any Person, any interest of
such Person in any kind of property or asset, whether real, personal or mixed,
or tangible or intangible, including Capital Stock in, and other securities of,
any other Person. For purposes of any calculation required pursuant to this
Indenture, the value of any Property shall be its Fair Market Value.

                  "Purchase Money Debt" means Debt Incurred to finance the
acquisition, development, construction or lease by the Company or a Restricted
Subsidiary of Property, including additions and improvements thereto, where the
maturity of such Debt does not exceed the anticipated useful life of the
Property being financed; provided, however, that such Debt is Incurred within 24
months after the completion of the acquisition, development construction or
lease of such Property by the Company or such Restricted Subsidiary.

                  "Qualified Consideration" means, with respect to any Asset
Sale (or any other transaction or series of related transactions required to
comply with clause (b) of the first paragraph of Section 4.06), any one or more
of (a) cash or cash equivalents, (b) notes or obligations that are converted
into cash (to the extent of the cash received) within 90 days of such Asset
Sale, (c) equity securities listed on a national securities exchange (as such
term is defined in the Exchange Act) or quoted on the Nasdaq National Market and
converted into cash (to the extent of the cash received) within 120 days of such
Asset Sale, (d) the assumption by the purchaser of liabilities of the Company or
any Restricted Subsidiary (other than liabilities that are by their terms
subordinated to the Securities) as a result of which the Company and the
Restricted Subsidiaries are no longer obligated with respect to such
liabilities, (e) Additional Assets or (f) other Property, provided that the
aggregate Fair Market Value of all Property received since the Issue Date by the


                                                                              22


Company and its Restricted Subsidiaries pursuant to Asset Sales (or such other
transactions) that is used to determine Qualified Consideration pursuant to this
clause (f) does not exceed $100 million.

                  "Qualified Receivables Transaction" means any transaction or
series of transactions that may be entered into by the Company or any of its
Subsidiaries pursuant to which the Company or any of its Subsidiaries may sell,
convey or otherwise transfer to:

                  (a) a Receivables Entity (in the case of a transfer by the
         Company or any of its Subsidiaries); and

                  (b) any other Person (in the case of a transfer by a
         Receivables Entity),

or may grant a security interest in, any accounts receivable (whether now
existing or arising in the future) of the Company or any of its Subsidiaries,
and any assets related thereto including, without limitation, all collateral
securing those accounts receivable, all contracts and all Guarantees or other
obligations in respect of those accounts receivable, proceeds of those accounts
receivable and other assets which are customarily transferred or in respect of
which security interests are customarily granted in connection with asset
securitization transactions involving accounts receivable; provided that:

                           (1) if the transaction involves a transfer of
                  accounts receivable with Fair Market Value equal to or greater
                  than $25.0 million, the Board of Directors shall have
                  determined in good faith that the Qualified Receivables
                  Transaction is economically fair and reasonable to the Company
                  and the Receivables Entity;

                           (2) all sales of accounts receivable and related
                  assets to or by the Receivables Entity are made at Fair Market
                  Value; and

                           (3) the financing terms, covenants, termination
                  events and other provisions thereof shall be market terms (as
                  determined in good faith by the Board of Directors).

                  "Real Estate Financing Transaction" means any arrangement with
any Person pursuant to which the Company or any Restricted Subsidiary Incurs
Debt secured by a Lien on real property of the Company or any Restricted
Subsidiary and related personal property together with any Refinancings thereof.

                  "Receivables Entity" means a Wholly Owned Subsidiary of the
Company (or another Person formed for the purposes of engaging in a Qualified
Receivables Transaction with the Company in which the Company or any Subsidiary
of the Company makes an Investment and to which the Company or any Subsidiary of
the Company transfers accounts receivable and related assets) which engages in
no activities other than in connection with the financing of accounts receivable
of the Company and its Subsidiaries, all proceeds thereof and all rights
(contractual or other), collateral and other assets relating thereto, and any
business or activities incidental or related to that business,


                                                                              23


and (with respect to any Receivables Entity formed after the Issue Date) which
is designated by the Board of Directors (as provided below) as a Receivables
Entity and:

                  (a) no portion of the Debt or any other obligations
         (contingent or otherwise) of which:

                           (1) is Guaranteed by the Company or any Subsidiary of
                  the Company (excluding Guarantees of obligations (other than
                  the principal of, and interest on, Debt) pursuant to Standard
                  Securitization Undertakings);

                           (2) is recourse to or obligates the Company or any
                  Subsidiary of the Company in any way other than pursuant to
                  Standard Securitization Undertakings; or

                           (3) subjects any property or asset of the Company or
                  any Subsidiary of the Company, directly or indirectly,
                  contingently or otherwise, to the satisfaction thereof, other
                  than pursuant to Standard Securitization Undertakings;

                  (b) with which neither the Company nor any Subsidiary of the
         Company has any material contract, agreement, arrangement or
         understanding other than on terms which the Company reasonably believes
         to be no less favorable to the Company or the Subsidiary than those
         that might be obtained at the time from Persons that are not Affiliates
         of the Company; and

                  (c) to which neither the Company nor any Subsidiary of the
         Company has any obligation to maintain or preserve the entity's
         financial condition or cause the entity to achieve certain levels of
         operating results other than pursuant to Standard Securitization
         Undertakings.

Any designation of this kind by the Board of Directors shall be evidenced to the
Trustee by filing with the Trustee a certified copy of the Board Resolution
giving effect to the designation and an Officers' Certificate certifying that
the designation complied with the foregoing conditions.

                  "Refinance" means, in respect of any Debt, to refinance,
extend, renew, refund, repay, prepay, repurchase, redeem, defease or retire, or
to issue other Debt, in exchange or replacement for, such Debt. "Refinanced" and
"Refinancing" shall have correlative meanings.

                  "Related Business" means any business that is related,
ancillary or complementary to the businesses of the Company and the Restricted
Subsidiaries on the Issue Date.

                  "Repay" means, in respect of any Debt, to repay, prepay,
repurchase, redeem, legally defease or otherwise retire such Debt. "Repayment"
and "Repaid" shall have correlative meanings. For purposes of Section 4.06 and
the definition of "Consolidated Interest Coverage Ratio," Debt shall be
considered to have been Repaid


                                                                              24


only to the extent the related loan commitment, if any, shall have been
permanently reduced in connection therewith.

                  "Restricted Payment" means:

                  (a) any dividend or distribution (whether made in cash,
         securities or other Property) declared or paid on or with respect to
         any shares of Capital Stock of the Company or any Restricted Subsidiary
         (including any payment in connection with any merger or consolidation
         with or into the Company or any Restricted Subsidiary), except for any
         dividend or distribution that is made solely to the Company or a
         Restricted Subsidiary (and, if such Restricted Subsidiary is not a
         Wholly Owned Restricted Subsidiary, to the other shareholders of such
         Restricted Subsidiary on a pro rata basis or on a basis that results in
         the receipt by the Company or a Restricted Subsidiary of dividends or
         distributions of greater value than it would receive on a pro rata
         basis) or any dividend or distribution payable solely in shares of
         Capital Stock (other than Disqualified Stock) of the Company;

                  (b) the purchase, repurchase, redemption, acquisition or
         retirement for value of any Capital Stock of the Company or any
         Restricted Subsidiary (other than from the Company or a Restricted
         Subsidiary);

                  (c) the purchase, repurchase, redemption, acquisition or
         retirement for value, prior to the date for any scheduled maturity,
         sinking fund or amortization or other installment payment, of any
         Subordinated Obligation (other than the purchase, repurchase or other
         acquisition of any Subordinated Obligation purchased in anticipation of
         satisfying a scheduled maturity, sinking fund or amortization or other
         installment obligation, in each case due within one year of the date of
         acquisition);

                  (d) any Investment (other than Permitted Investments) in any
         Person; or

                  (e) the issuance, sale or other disposition of Capital Stock
         of any Restricted Subsidiary to a Person other than the Company or
         another Restricted Subsidiary if the result thereof is that such
         Restricted Subsidiary shall cease to be a Restricted Subsidiary, in
         which event the amount of such "Restricted Payment" shall be the Fair
         Market Value of the remaining interest, if any, in such former
         Restricted Subsidiary held by the Company and the other Restricted
         Subsidiaries.

Notwithstanding the foregoing, no payment or other transaction permitted by
clause (c) or (f) of the second paragraph of Section 4.08 will be considered a
Restricted Payment.

                  "Restricted Subsidiary" means any Subsidiary of the Company
other than an Unrestricted Subsidiary.

                  "S&P" means Standard & Poor's Ratings Service or any successor
to the rating agency business thereof.



                                                                              25


                  "Sale and Leaseback Transaction" means any direct or indirect
arrangement relating to Property now owned or hereafter acquired whereby the
Company or a Restricted Subsidiary transfers such Property to another Person and
the Company or a Restricted Subsidiary leases it from such Person.

                  "Secured Debt" means indebtedness for money borrowed which is
secured by a mortgage, pledge, lien, security interest or encumbrance on
property of the Company or any Restricted Subsidiary, but shall not include
guarantees arising in connection with the sale, discount, guarantee or pledge of
notes, chattel mortgages, leases, accounts receivable, trade acceptances and
other paper arising, in the ordinary course of business, out of installment or
conditional sales to or by, or transactions involving title retention with,
distributors, dealers or other customers, of merchandise, equipment or services.

                  "Securities Act" means the Securities Act of 1933.

                  "Senior Credit Facility" means the Senior Credit Agreement
dated as of June 27, 2001 (as heretofore amended, modified or supplemented and
as may be further amended, modified, supplemented or Refinanced from time to
time), among the Company, the Banks as defined therein, Citicorp USA, Inc. as
senior administrative agent, Citicorp USA, Inc. as senior collateral agent, and
the Chase Manhattan Bank, Credit Suisse First Boston and Fleet Retail Finance
Inc. as the syndication agents.

                  "Series D Preferred Stock" means the Company's Preferred
Stock, par value $1.00 per share, designated as Series D.

                  "Significant Subsidiary" means any Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the Commission.

                  "Standard Securitization Undertakings" means representations,
warranties, covenants and indemnities entered into by the Company or any
Subsidiary of the Company which are customary in an accounts receivable
securitization transaction involving a comparable company.

                  "Stated Maturity" means, with respect to any security, the
date specified in such security as the fixed date on which the payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency beyond the control of the issuer unless such
contingency has occurred).

                  "Subordinated Obligation" means any Debt of the Company
(whether outstanding on the Issue Date or thereafter Incurred) that is
subordinate or junior in right of payment to the Securities pursuant to a
written agreement to that effect.

                  "Subsidiary" means, in respect of any Person, any corporation,
company (including any limited liability company), association, partnership,
joint venture or other


                                                                              26


business entity of which a majority of the total voting power of the Voting
Stock is at the time owned or controlled, directly or indirectly, by:

                  (a) such Person;

                  (b) such Person and one or more Subsidiaries of such Person;
         or

                  (c) one or more Subsidiaries of such Person.

                  "Synthetic Lease" means a lease which is treated as an
operating lease under GAAP but as ownership of the leased asset by the lessee
for purposes of the Code.

                  "Synthetic Lease Documents" means the documents governing the
Synthetic Lease Facility, as the same may be amended, restated, supplemented or
otherwise modified from time to time.

                  "Synthetic Lease Facility" means the Synthetic Lease entered
into by Rite Aid Realty Corp. and guaranteed by the Company on June 27, 2001.

                  "Synthetic Lease Obligations" means all rent and supplemental
rent, all fees and all other expenses or amounts payable by Rite Aid Realty
Corp. or the Company to any Synthetic Lease Parties under any Synthetic Lease
Document and all increases, renewals, extensions or Refinancings of the
foregoing.

                  "Synthetic Lease Parties" means all parties to the Synthetic
Lease Documents from time to time other than the Company.

                  "Temporary Cash Investments" means any of the following:

                  (a) Investments in U.S. Government Obligations maturing within
         365 days of the date of acquisition thereof;

                  (b) Investments in time deposit accounts, certificates of
         deposit, money market deposits maturing within 90 days of the date of
         acquisition thereof issued by a bank or trust company organized under
         the laws of the United States of America or any state thereof having
         capital, surplus and undivided profits aggregating in excess of $500
         million and whose long-term debt is rated "A-3" or "A-" or higher
         according to Moody's or S&P (or such similar equivalent rating by at
         least one "nationally recognized statistical rating organization" (as
         defined in Rule 436 under the Securities Act));

                  (c) repurchase obligations with a term of not more than 30
         days for underlying securities of the types described in clause (a)
         entered into with:

                           (1) a bank meeting the qualifications described in
                  clause (b) above; or

                           (2) any primary government securities dealer
                  reporting to the Market Reports Division of the Federal
                  Reserve Bank of New York;



                                                                              27


                  (d) Investments in commercial paper, maturing not more than 90
         days after the date of acquisition, issued by a corporation (other than
         an Affiliate of the Company) organized and in existence under the laws
         of the United States of America with a rating at the time as of which
         any Investment therein is made of "P-1" (or higher) according to
         Moody's or "A-1" (or higher) according to S&P (or such similar
         equivalent rating by at least one "nationally recognized statistical
         rating organization" (as defined in Rule 436 under the Securities
         Act));

                  (e) direct obligations (or certificates representing an
         ownership interest in such obligations) of any state of the United
         States of America (including any agency or instrumentality thereof) for
         the payment of which the full faith and credit of such state is pledged
         and which are not callable or redeemable at the issuer's option,
         provided that:

                           (1) the long-term debt of such state is rated "A-3"
                  or "A-" or higher according to Moody's or S&P (or such similar
                  equivalent rating by at least one "nationally recognized
                  statistical rating organization" (as defined in Rule 436 under
                  the Securities Act)); and

                           (2) such obligations mature within 180 days of the
                  date of acquisition thereof; and

                  (f) money market funds at least 95% of the assets of which
         constitute Temporary Cash Equivalents of the kinds described in clauses
         (a) through (e) of this definition.

                  "Trust Indenture Act" or "TIA" means the Trust Indenture Act
of 1939 as in force at the date as of which this Indenture was executed, except
as provided in Section 9.03; provided, however, that in the event the Trust
Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means,
to the extent required by any such amendment, the Trust Indenture Act of 1939 as
so amended.

                  "Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.

                  "Trust Officer" means any officer within the Corporate Trust
department of the Trustee (or any successor group of the Trustee) with direct
responsibility for the administration of this Indenture and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of his knowledge of and familiarity with the
particular subject.

                  "12.5% Notes" means the Company's 12.5% Senior Secured Notes
Due 2006 issued under the indenture dated as of June 27, 2001, among the
Company, the Subsidiary Guarantors named therein and State Street Bank and Trust
Company, as trustee, and outstanding on the Issue Date.



                                                                              28


                  "Uniform Commercial Code" means the New York Uniform
Commercial Code as in effect from time to time.

                  "Unrestricted Subsidiary" means:

                  (a) any Subsidiary of the Company that is designated after the
         Issue Date as an Unrestricted Subsidiary as permitted or required
         pursuant to Section 4.11 and is not thereafter redesignated as a
         Restricted Subsidiary as permitted pursuant thereto; and

                  (b) any Subsidiary of an Unrestricted Subsidiary.

                  "U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable or redeemable at the issuer's option.

                  "Voting Stock" of any Person means all classes of Capital
Stock or other interests (including partnership interests) of such Person then
outstanding and normally entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof.

                  "Wholly Owned Restricted Subsidiary" means, at any time, a
Restricted Subsidiary all the Voting Stock of which (except directors'
qualifying shares) is at such time owned, directly or indirectly, by the Company
and its other Wholly Owned Subsidiaries.

                  SECTION 1.02. Other Definitions.


                                    Term                Defined in Section
"Affiliate Transaction"................................               4.08
"Asset Sales Prepayment Offer".........................               4.06
"Bankruptcy Law".......................................               6.01
"Change of Control Offer"..............................               4.12
"Change of Control Payment Date".......................               4.12
"Change of Control Purchase Price".....................               4.12
"covenant defeasance option"...........................               8.01
"Custodian"............................................               6.01
"Exchange Security"....................................         Appendix A
"Global Security"......................................         Appendix A
"legal defeasance option"..............................               8.01


                                                                              29


"Offer Amount".........................................               4.06
"Offer Period".........................................               4.06
"OID"..................................................               2.01
"Original Securities"..................................               2.01
"Paying Agent".........................................               2.04
"Purchase Date"........................................               4.06
"Registered Exchange Offer"............................         Appendix A
"Registrar"............................................               2.04
"Registration Agreement"...............................         Appendix A
"Securities Custodian".................................         Appendix A
"Shelf Registration Statement".........................         Appendix A
"Surviving Person".....................................               5.01

                  SECTION 1.03. Incorporation by Reference of Trust Indenture
Act. This Indenture is subject to the mandatory provisions of the TIA, which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:

                  "Commission" means the SEC.

                  "indenture securities" means the Securities.

                  "indenture security holder" means a Holder.

                  "indenture to be qualified" means this Indenture.

                  "indenture trustee" or "institutional trustee" means the
Trustee.

                  "obligor" on the indenture securities means the Company and
any other obligor on the indenture securities.

                  All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule have
the meanings assigned to them by such definitions.

                  SECTION 1.04. Rules of Construction. Unless the context
otherwise requires:

                           (1) a term has the meaning assigned to it;

                           (2) an accounting term not otherwise defined has the
                  meaning assigned to it in accordance with GAAP;

                           (3) "or" is not exclusive;



                                                                              30


                           (4) "including" means including without limitation;

                           (5) words in the singular include the plural and
                  words in the plural include the singular;

                           (6) unsecured Debt shall not be deemed to be
                  subordinate or junior to secured Debt merely by virtue of its
                  nature as unsecured Debt;

                           (7) the principal amount of any noninterest bearing
                  or other discount security at any date shall be the principal
                  amount thereof that would be shown on a balance sheet of the
                  issuer dated such date prepared in accordance with GAAP; and

                           (8) the principal amount of any Preferred Stock shall
                  be the greater of (i) the maximum liquidation value of such
                  Preferred Stock or (ii) the maximum mandatory redemption or
                  mandatory repurchase price with respect to such Preferred
                  Stock.

                                   ARTICLE II

                                 The Securities

                  SECTION 2.01. Amount of Securities; Issuable in Series. The
aggregate principal amount of Securities which may be authenticated and
delivered under this Indenture is unlimited. All Securities shall be identical
in all respects other than issue prices and issuance dates. The Securities may
be issued in one or more series; provided, however, that any Securities issued
with original issue discount ("OID") for Federal income tax purposes shall not
be issued as part of the same series as any Securities that are issued with a
different amount of OID or are not issued with OID. All Securities of any one
series shall be substantially identical except as to denomination.

                  Subject to Section 2.03, the Trustee shall authenticate
Securities for original issue on the Issue Date in the aggregate principal
amount of $150,000,000 (the "Original Securities"). With respect to any
Securities issued after the Issue Date (except for Securities authenticated and
delivered upon registration of transfer of, or in exchange for, or in lieu of,
Original Securities pursuant to Section 2.07, 2.08, 2.09 or 3.06 or Appendix A),
there shall be established in or pursuant to a Board Resolution, and subject to
Section 2.03, set forth, or determined in the manner provided in an Officers'
Certificate, or established in one or more indentures supplemental hereto, prior
to the issuance of such Securities:

                           (1) whether such Securities shall be issued as part
                  of a new or existing series of Securities and, if issued as
                  part of a new series, the title of such Securities (which
                  shall distinguish the Securities of the series from Securities
                  of any other series);



                                                                              31


                           (2) the aggregate principal amount of such Securities
                  to be authenticated and delivered under this Indenture, which
                  may be issued for an unlimited aggregate principal amount
                  (except for Securities authenticated and delivered upon
                  registration of transfer of, or in exchange for, or in lieu
                  of, other Securities of the same series pursuant to Section
                  2.07, 2.08, 2.09 or 3.06 or Appendix A and except for
                  Securities which, pursuant to Section 2.03, are deemed never
                  to have been authenticated and delivered hereunder);

                           (3) the issue price and issuance date of such
                  Securities, including the date from which interest on such
                  Securities shall accrue;

                           (4) if applicable, that such Securities shall be
                  issuable in whole or in part in the form of one or more Global
                  Securities and, in such case, the respective depositories for
                  such Global Securities; the form of any legend or legends that
                  shall be borne by any such Global Security in addition to or
                  in lieu of that set forth in Exhibit 1 to Appendix A and any
                  circumstances in addition to or in lieu of those set forth in
                  Section 2.3 of Appendix A in which any such Global Security
                  may be exchanged in whole or in part for Securities
                  registered; and any transfer of such Global Security in whole
                  or in part may be registered in the name or names of Persons
                  other than the depository for such Global Security or a
                  nominee thereof; and

                           (5) if applicable, that such Securities shall not be
                  issued in the form of Initial Securities subject to Appendix
                  A, but shall be issued in the form of Exchange Securities as
                  set forth in Exhibit A.

                  SECTION 2.02. Form and Dating. Provisions relating to the
Initial Securities of each series and the Exchange Securities are set forth in
Appendix A, which is hereby incorporated in and expressly made part of this
Indenture. The Initial Securities of each series and the Trustee's certificate
of authentication shall be substantially in the form of Exhibit 1 to Appendix A
which is hereby incorporated in and expressly made a part of this Indenture. The
Exchange Securities and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A, which is hereby incorporated in and
expressly made a part of this Indenture. The Securities of each series may have
notations, legends or endorsements required by law, stock exchange rule,
agreements to which the Company is subject, if any, or usage, provided that any
such notation, legend or endorsement is in a form reasonably acceptable to the
Company. Each Security shall be dated the date of its authentication. The terms
of the Securities of each series set forth in Exhibit 1 to Appendix A and
Exhibit A are part of the terms of this Indenture.

                  SECTION 2.03. Execution and Authentication. An Officer (and
for purposes of this Section 2.03, the term Officer shall include any Vice
President of the Company authorized by the Board of Directors) shall sign the
Securities for the Company by manual or facsimile signature.



                                                                              32


                  If an Officer whose signature is on a Security no longer holds
that office at the time the Trustee authenticates the Security, the Security
shall be valid nevertheless.

                  At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities of any series
executed by the Company to the Trustee for authentication, together with a
written order of the Company in the form of an Officers' Certificate for the
authentication and delivery of such Securities, and the Trustee in accordance
with such written order of the Company shall authenticate and deliver such
Securities.

                  A Security shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the Security.
The signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.

                  The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate the Securities. Unless limited by the
terms of such appointment, an authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as any Registrar, Paying Agent or agent
for service of notices and demands.

                  SECTION 2.04. Registrar and Paying Agent. The Company shall
maintain an office or agency in the city of New York where Securities may be
presented for registration of transfer or for exchange (the "Registrar") and an
office or agency in the city of New York where Securities may be presented for
payment (the "Paying Agent"). The Registrar shall keep a register of the
Securities and of their transfer and exchange. The Company may have one or more
co-registrars and one or more additional paying agents. The term "Paying Agent"
includes any additional paying agent.

                  The Company shall enter into an appropriate agency agreement
with any Registrar, Paying Agent or co-registrar not a party to this Indenture,
which shall incorporate the terms of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such agent. The Company shall notify
the Trustee of the name and address of any such agent. If the Company fails to
maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be
entitled to appropriate compensation therefor pursuant to Section 7.07. The
Company or any of its domestically incorporated Wholly Owned Subsidiaries may
act as Paying Agent, Registrar, co-registrar or transfer agent.

                  The Company initially appoints the Trustee as Registrar and
Paying Agent in connection with the Securities.

                  SECTION 2.05. Paying Agent To Hold Money in Trust. Prior to
each due date of the principal and interest on any Security, the Company shall
deposit with the Paying Agent a sum sufficient to pay such principal and
interest when so becoming due. The Company shall require each Paying Agent
(other than the Trustee) to agree in writing that the Paying Agent shall hold in
trust for the benefit of Holders or the Trustee all


                                                                              33


money held by the Paying Agent for the payment of principal of or interest on
the Securities and shall notify the Trustee of any default by the Company in
making any such payment. If the Company or a Wholly Owned Subsidiary acts as
Paying Agent, it shall segregate the money held by it as Paying Agent and hold
it as a separate trust fund. The Company at any time may require a Paying Agent
to pay all money held by it to the Trustee and to account for any funds
disbursed by the Paying Agent. Upon complying with this Section 2.05, the Paying
Agent shall have no further liability for the money delivered to the Trustee.

                  SECTION 2.06. Holder Lists. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Holders. If the Trustee is not the Registrar, the
Company shall furnish to the Trustee, in writing at least five Business Days
before each interest payment date and at such other times as the Trustee may
request in writing, a list in such form and as of such date as the Trustee may
reasonably require of the names and addresses of Holders.

                  SECTION 2.07. Replacement Securities. If a mutilated Security
is surrendered to the Registrar or if the Holder of a Security claims that such
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Security if the requirements of
Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies
any other reasonable requirements of the Trustee. If required by the Trustee or
the Company, such Holder shall furnish an indemnity bond sufficient in the
judgment of the Company and the Trustee to protect the Company, the Trustee, the
Paying Agent, the Registrar and any co-registrar from any loss which any of them
may suffer if a Security is replaced. The Company and the Trustee may charge the
Holder for their expenses in replacing a Security.

                  Every replacement Security is an additional obligation of the
Company.

                  SECTION 2.08. Outstanding Securities. Securities outstanding
at any time are all Securities authenticated by the Trustee except for those
canceled by it, those delivered to it for cancellation and those described in
this Section 2.08 as not outstanding. A Security does not cease to be
outstanding because the Company or an Affiliate of the Company holds the
Security.

                  If a Security is replaced pursuant to Section 2.07, it ceases
to be outstanding unless the Trustee and the Company receive proof satisfactory
to them that the replaced Security is held by a bona fide purchaser.

                  If the Paying Agent segregates and holds in trust, in
accordance with this Indenture, on a redemption date or maturity date money
sufficient to pay all principal and interest payable on that date with respect
to the Securities (or portions thereof) to be redeemed or maturing, as the case
may be, then on and after that date such Securities (or portions thereof) cease
to be outstanding and interest on them ceases to accrue.

                  SECTION 2.09. Temporary Securities. Until definitive
Securities are ready for delivery, the Company may prepare and the Trustee shall
authenticate


                                       34


temporary Securities. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate definitive Securities and
deliver them in exchange for temporary Securities.

                  SECTION 2.10. Cancellation. The Company at any time may
deliver Securities to the Trustee for cancellation. The Registrar and the Paying
Agent shall forward to the Trustee any Securities surrendered to them for
registration of transfer, exchange or payment. The Trustee and no one else shall
cancel and destroy (subject to the record retention requirements of the Exchange
Act) all Securities surrendered for registration of transfer, exchange, payment
or cancellation and deliver a certificate of such destruction to the Company
unless the Company directs the Trustee to deliver canceled Securities to the
Company. The Company may not issue new Securities to replace Securities it has
redeemed, paid or delivered to the Trustee for cancellation.

                  SECTION 2.11. Defaulted Interest. If the Company defaults in a
payment of interest on the Securities, the Company shall pay the defaulted
interest (plus interest on such defaulted interest to the extent lawful) in any
lawful manner. The Company may pay the defaulted interest to the persons who are
Holders on a subsequent special record date. The Company shall fix or cause to
be fixed any such special record date and payment date to the reasonable
satisfaction of the Trustee and shall promptly mail to each Holder a notice that
states the special record date, the payment date and the amount of defaulted
interest to be paid.

                  SECTION 2.12. CUSIP Numbers. The Company in issuing the
Securities may use "CUSIP" numbers (if then generally in use) and, if so, the
Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to
Holders; provided, however, that neither the Company nor the Trustee shall have
any responsibility for any defect in the "CUSIP" number that appears on any
Security, check, advice of payment or redemption notice, and any such notice may
state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be affected
by any defect in or omission of such numbers.

                                  ARTICLE III

                                   Redemption

                  SECTION 3.01. Notices to Trustee. If the Company elects to
redeem Securities pursuant to paragraph 5 of the Securities or is required to
redeem Securities pursuant to paragraph 8 of the Securities, it shall notify the
Trustee in writing of the redemption date, the principal amount of Securities to
be redeemed and that such redemption is being made pursuant to either paragraph
5 or paragraph 8 of the Securities.



                                                                              35


                  The Company shall give each notice to the Trustee provided for
in this Section 3.01 at least 45 days before the redemption date unless the
Trustee consents to a shorter period. Such notice shall be accompanied by an
Officers' Certificate from the Company to the effect that such redemption will
comply with the conditions herein.

                  SECTION 3.02. Selection of Securities To Be Redeemed. If fewer
than all the Securities are to be redeemed pursuant to paragraph 5 of the
Securities, the Trustee shall select the Securities to be redeemed pro rata or
by lot or by a method that complies with applicable legal and securities
exchange requirements, if any, and that the Trustee considers fair and
appropriate and in accordance with methods generally used at the time of
selection by fiduciaries in similar circumstances. The Trustee shall make the
selection from outstanding Securities not previously called for redemption. The
Trustee may select for redemption portions of the principal of Securities that
have denominations larger than $1,000. Securities and portions of them the
Trustee selects shall be in amounts of $1,000 or a whole multiple of $1,000.
Provisions of this Indenture that apply to Securities called for redemption also
apply to portions of Securities called for redemption. The Trustee shall notify
the Company promptly of the Securities or portions of Securities to be redeemed.

SECTION 3.03. Notice of Redemption. At least 30 days but not more than 60
days before a date for redemption of Securities, the Company shall mail a notice
of redemption by first-class mail to each Holder of Securities to be redeemed at
such Holder's registered address.

                  The notice shall identify the Securities to be redeemed and
shall state:

                           (1) the redemption date;

                           (2) the redemption price;

                           (3) the name and address of the Paying Agent;

                           (4) that Securities called for redemption must be
                  surrendered to the Paying Agent to collect the redemption
                  price;

                           (5) if fewer than all the outstanding Securities are
                  to be redeemed, the identification and principal amounts of
                  the particular Securities to be redeemed;

                           (6) that, unless the Company defaults in making such
                  redemption payment, interest on Securities (or portion
                  thereof) called for redemption ceases to accrue on and after
                  the redemption date, and the only remaining right of the
                  Holders is to receive payment of the redemption price upon
                  surrender to the Paying Agent; and

                           (7) that no representation is made as to the
                  correctness or accuracy of the CUSIP number, if any, listed in
                  such notice or printed on the Securities.



                                                                              36


                  At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section 3.03 at least 45 days before the redemption date.

                  SECTION 3.04. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest, if any, to the redemption
date (subject to the right of Holders of record on the relevant record date to
receive interest due on the related interest payment date that is on or prior to
the date of redemption). Failure to give notice or any defect in the notice to
any Holder shall not affect the validity of the notice to any other Holder.

                  SECTION 3.05. Deposit of Redemption Price. Prior to or on the
redemption date, the Company shall deposit with the Paying Agent (or, if the
Company or a Wholly Owned Subsidiary is the Paying Agent, shall segregate and
hold in trust) money sufficient to pay the redemption price of and accrued
interest, if any (subject to the right of Holders of record on the relevant
record date to receive interest due on the related interest payment date that is
on or prior to the date of redemption), on all Securities to be redeemed on that
date other than Securities or portions of Securities called for redemption that
have been delivered by the Company to the Trustee for cancellation.

                  SECTION 3.06. Securities Redeemed in Part. Upon surrender of a
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder (at the Company's expense) a new Security
equal in principal amount to the unredeemed portion of the Security surrendered.

                                  ARTICLE IV.

                                    Covenants

                  SECTION 4.01. Payment of Securities. The Company shall
promptly pay the principal of and interest on the Securities on the dates and in
the manner provided in the Securities and in this Indenture. Principal and
interest shall be considered paid on the date due if on such date the Trustee or
the Paying Agent holds in accordance with this Indenture money sufficient to pay
all principal and interest then due.

                  The Company shall pay interest on overdue principal at the
rate per annum specified therefor in the Securities, and it shall pay interest
on overdue installments of interest at the rate borne by the Securities, to the
extent lawful.

                  SECTION 4.02. SEC Reports. Notwithstanding that the Company
may not be subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, the Company shall file with the Commission and provide the Trustee
with such annual and quarterly reports and such information, documents and other
reports as are specified


                                                                              37


in Sections 13 and 15(d) of the Exchange Act and applicable to a U.S.
corporation subject to such Sections, such information, documents and reports to
be so filed and provided at the times specified for the filing of such
information, documents and reports under such Sections; provided, however, that
the Company shall not be so obligated to file such information, documents and
reports with the Commission if the Commission does not permit such filings;
provided further, however, that the Company shall be required also to provide to
Holders any such information, documents or reports that are not so filed. The
Company shall also comply with the other provisions of TIA ss. 314(a).

                  SECTION 4.03. Limitation on Debt. The Company shall not, and
shall not permit any Restricted Subsidiary to, Incur, directly or indirectly,
any Debt unless, after giving effect to the application of the proceeds thereof,
no Default or Event of Default would occur as a consequence of such Incurrence
and no Default or Event of Default would be continuing following such Incurrence
and application of proceeds and either:

                           (1) after giving effect to the Incurrence of such
                  Debt and the application of the proceeds thereof, the
                  Consolidated Interest Coverage Ratio would be greater than (i)
                  if such Incurrence occurs within two years of the 11 1/4%
                  Notes Issue Date, 1.75 to 1.00 or (ii) if such Incurrence
                  occurs at any time thereafter, 2.00 to 1.00 provided that, if
                  such Debt is Debt of a Restricted Subsidiary then,
                  simultaneously with the Incurrence of such Debt, the
                  Restricted Subsidiary executes and delivers a supplemental
                  indenture providing for a full and unconditional Guarantee of
                  payment of the Securities by such Restricted Subsidiary; or

                           (2) such Debt is Permitted Debt.

                  The term "Permitted Debt" is defined to include the following:

                  (a) Debt of the Company evidenced by the Original Securities
         and of Restricted Subsidiaries evidenced by guarantees relating to the
         Securities;

                  (b) Debt of the Company or a Restricted Subsidiary (including
         Guarantees thereof) (i) under any Credit Facilities, (ii) Incurred
         pursuant to a Real Estate Financing Transaction, a Sale and Leaseback
         Transaction or an Equipment Financing Transaction, (iii) Incurred in
         respect of Capital Lease Obligations, (iv) Incurred pursuant to Debt
         Issuances or (v) Incurred by a Receivables Entity in a Qualified
         Receivables Transaction that is not recourse to the Company or any
         other Restricted Subsidiary (except for Standard Securitization
         Undertakings), provided that the aggregate principal amount of
         all such Debt in clauses (i) through (v) hereof at any one time
         outstanding together with the aggregate principal amount of all Debt
         described in clause (c)(ii) below shall not exceed the greater of (1)
         $2,500 million, which amount shall be permanently reduced by the amount
         of Net Available Cash used to Repay Debt under the Credit Facilities,
         and not subsequently reinvested in Additional Assets or used to
         purchase Securities or Repay other Debt, pursuant to Section 4.06 and
         (2) the sum of the amount equal


                                                                              38


         to (A) 60% of the book value of the inventory (determined using the
         first-in-first-out method of accounting) of the Company and the
         Restricted Subsidiaries and (B) 85% of the book value of the accounts
         receivables of the Company and the Restricted Subsidiaries, in each
         case as of the most recently ended quarter of the Company for which
         financial statements have been filed with the Commission;

                  (c) Debt of (i) the Company outstanding on the Issue Date
         evidenced by the 9 1/2% Notes and of Restricted Subsidiaries evidenced
         by Guarantees relating to the 9 1/2% Notes and (ii) the Company
         outstanding on the Issue Date evidenced by the 8.125% Notes and of
         Restricted Subsidiaries evidenced by guarantees relating to the 8.125%
         Notes;

                  (d) Debt of the Company outstanding on the Issue Date and
         evidenced by the 12.5% Notes and of Restricted Subsidiaries evidenced
         by Guarantees relating to the 12.5% Notes;

                  (e) Debt Incurred after the Issue Date in respect of Purchase
         Money Debt, provided that the aggregate principal amount of such Debt
         does not exceed 80% of the Fair Market Value (on the date of the
         Incurrence thereof) of the Property acquired, constructed, developed or
         leased, including additions and improvements thereto;

                  (f) Debt of the Company owing to and held by any consolidated
         Restricted Subsidiary and Debt of a Restricted Subsidiary owing to and
         held by the Company or any consolidated Restricted Subsidiary;
         provided, however, that any subsequent issue or transfer of Capital
         Stock or other event that results in any such consolidated Restricted
         Subsidiary ceasing to be a consolidated Restricted Subsidiary or any
         subsequent transfer of any such Debt (except to the Company or a
         consolidated Restricted Subsidiary) shall be deemed, in each case, to
         constitute the Incurrence of such Debt by the issuer thereof;

                  (g) Debt under Interest Rate Agreements entered into by the
         Company or a Restricted Subsidiary for the purpose of limiting interest
         rate risk in the ordinary course of the financial management of the
         Company or such Restricted Subsidiary and not for speculative purposes,
         provided that the obligations under such agreements are directly
         related to payment obligations on Debt otherwise permitted by the terms
         of this Section 4.03;

                  (h) Debt under Currency Exchange Protection Agreements entered
         into by the Company or a Restricted Subsidiary for the purpose of
         limiting currency exchange rate risks directly related to transactions
         entered into by the Company or such Restricted Subsidiary in the
         ordinary course of business and not for speculative purposes;

                  (i) Debt under Commodity Price Protection Agreements entered
         into by the Company or a Restricted Subsidiary in the ordinary course
         of the financial management of the Company or that Restricted
         Subsidiary and not for speculative purposes;



                                                                              39


                  (j) Debt in connection with one or more standby letters of
         credit, banker's acceptance, performance or surety bonds or completion
         guarantees issued by the Company or a Restricted Subsidiary in the
         ordinary course of business or pursuant to self-insurance obligations
         and not in connection with the borrowing of money or the obtaining of
         advances or credit;

                  (k) Debt outstanding on the Issue Date not otherwise described
         in clauses (a) through (j) above or clauses (p) through (q) below;

                  (l) other Debt of the Company or a Restricted Subsidiary
         (including Guarantees thereof) in an aggregate principal amount
         outstanding at any one time not to exceed $400 million;

                  (m) Debt of a Restricted Subsidiary outstanding on the date on
         which that Restricted Subsidiary was acquired by the Company or
         otherwise became a Restricted Subsidiary (other than Debt Incurred as
         consideration in, or to provide all or any portion of the funds or
         credit support utilized to consummate, the transaction or series of
         transactions pursuant to which that Restricted Subsidiary became a
         Subsidiary of the Company or was otherwise acquired by the Company),
         provided that at the time that Restricted Subsidiary was acquired by
         the Company or otherwise became a Restricted Subsidiary and after
         giving effect to the Incurrence of that Debt, the Company would have
         been able to Incur $1.00 of additional Debt pursuant to clause (1) of
         the first paragraph of this Section 4.03;

                  (n) Debt arising from the honoring by a bank or other
         financial institution of a check or draft or other similar instrument
         inadvertently drawn against insufficient funds in the ordinary course
         of business, provided that such Debt is extinguished within five
         Business Days of its Incurrence;

                  (o) endorsements of negotiable instruments for deposit or
         collection or similar transactions in the ordinary course of business;

                  (p) Debt of the Company or a Restricted Subsidiary (including
         Guarantees thereof) Incurred in respect of Synthetic Leases or other
         Debt in an aggregate principal amount outstanding at any one time not
         to exceed $107 million;

                  (q) Debt in respect of Sale and Leaseback Transactions or Real
         Estate Financing Transactions involving only real property (and the
         related personal property) owned by the Company or a Restricted
         Subsidiary on the Issue Date in an aggregate principal amount
         outstanding at any one time not to exceed $150 million, provided that
         such Sale and Leaseback Transactions or Real Estate Financing
         Transactions may involve Property other than real property (and the
         related personal property) owned on the Issue Date to the extent the
         portion of the


                                                                              40


         Debt related to such Property is permitted by another provision of this
         Section 4.03 at the time of Incurrence;

                  (r) Debt in respect of Sale and Leaseback Transactions that
         are not Capital Lease Obligations Incurred to finance the acquisition,
         construction and development of Property after the Issue Date,
         including additions and improvements thereto, provided that any
         reclassification of such Debt as a Capital Lease Obligation shall be
         deemed an Incurrence of such Debt;

                  (s) Permitted Refinancing Debt Incurred in respect of Debt
         Incurred pursuant to clause (1) of the first paragraph of this Section
         4.03 and clauses (a), (c)(i), (d), (e), (k) and (q) above; and

                  (t) Debt arising from agreements of the Company or any
         Restricted Subsidiary providing for indemnification, adjustment of
         purchase price or similar obligations, in each case, Incurred or
         assumed in connection with the disposition of any business, assets or a
         Subsidiary, other than Guarantees of Debt incurred by any Person
         acquiring all or any portion of such business, assets or Restricted
         Subsidiary for the purpose of financing such acquisition; provided,
         however, that (a) such Debt is not reflected on the balance sheet of
         the Company or any Restricted Subsidiary (contingent obligations
         referred to in a footnote or footnotes to financial statements and not
         otherwise reflected on the balance sheet will not be deemed to be
         reflected on such balance sheet for purposes of this clause (a)) and
         (b) the maximum assumable liability in respect of such Debt will at no
         time exceed the gross proceeds including non-cash proceeds (the fair
         market value of such non-cash proceeds being measured at the time
         received and without giving effect to any subsequent changes in value)
         actually received by the Company or such Restricted Subsidiary in
         connection with such disposition.

                  For purposes of determining compliance with this Section 4.03,
(1) in the event that an item of Debt meets the criteria of more than one of the
types of Debt described herein, the Company, in its sole discretion, will
classify such item of Debt at the time of Incurrence and only be required to
include the amount and type of such Debt in one of the above clauses, (2) the
Company will be entitled at the time of such Incurrence to divide and classify
an item of Debt in more than one of the types of Debt described herein and (3)
with respect to Debt permitted under clause (k) or (p) of the second paragraph
of this Section 4.03 in respect of Synthetic Lease Obligations or Sale and
Leaseback Transactions that are not Capital Lease Obligations on the Issue Date,
any reclassification of such Debt as a Capital Lease Obligation shall not be
deemed an Incurrence of such Debt; provided, however, that (x) all outstanding
Debt under the Senior Credit Facility immediately following the Issue Date will
be deemed to have been Incurred pursuant to clause (b) of the second paragraph
of this Section 4.03, (y) all outstanding obligations under the Synthetic Lease
Facility immediately following the Issue Date will be deemed to be Debt Incurred
pursuant to clause (p) of the second paragraph of this Section 4.03 and (z) any
Permitted Debt may later be reclassified as having been Incurred pursuant to any
other clause of the second paragraph of this Section


                                                                              41


4.03 to the extent such Debt could be Incurred pursuant to such clause at the
time of such reclassification.

                  SECTION 4.04. Limitation on Restricted Payments. The Company
shall not make, and shall not permit any Restricted Subsidiary to make, directly
or indirectly, any Restricted Payment if at the time of, and after giving effect
to, such proposed Restricted Payment:

                  (a) a Default or Event of Default shall have occurred and be
         continuing;

                  (b) the Company could not Incur at least $1.00 of additional
         Debt pursuant to clause (1) of the first paragraph of Section 4.03; or

                  (c) the aggregate amount of such Restricted Payment and all
         other Restricted Payments declared or made since the Issue Date (the
         amount of any Restricted Payment, if made other than in cash, to be
         based upon Fair Market Value) would exceed an amount equal to the sum
         of:

                           (1) 50% of the aggregate amount of Consolidated Net
                  Income accrued during the period (treated as one accounting
                  period) from the beginning of the first fiscal quarter that
                  commences after the Issue Date occurs to the end of the most
                  recent fiscal quarter for which financial statements have been
                  filed with the Commission (or if the aggregate amount of
                  Consolidated Net Income for such period shall be a deficit,
                  minus 100% of such deficit); plus

                           (2) 100% of Capital Stock Sale Proceeds; plus

                           (3) the sum of:

                                    (A) the aggregate net cash proceeds received
                           by the Company or any Restricted Subsidiary from the
                           issuance or sale after the Issue Date of convertible
                           or exchangeable Debt that has been converted into or
                           exchanged for Capital Stock (other than Disqualified
                           Stock) of the Company; and

                                    (B) the aggregate amount by which Debt
                           (other than Subordinated Obligations) of the Company
                           or any Restricted Subsidiary is reduced on the
                           Company's consolidated balance sheet after the Issue
                           Date upon the conversion or exchange of any Debt
                           (other than convertible or exchangeable debt issued
                           or sold after the Issue Date) for Capital Stock
                           (other than Disqualified Stock) of the Company;

                  excluding, in the case of clause (A) or (B):

                                    (x) any such Debt issued or sold to the
                           Company or a Subsidiary of the Company or an employee
                           stock ownership plan


                                                                              42


                           or trust established by the Company or any such
                           Subsidiary for the benefit of their employees; and

                                    (y) the aggregate amount of any cash or
                           other Property distributed by the Company or any
                           Restricted Subsidiary upon any such conversion or
                           exchange;

                  plus

                           (4) an amount equal to the sum of:

                                    (A) the net reduction in Investments in any
                           Person other than the Company or a Restricted
                           Subsidiary resulting from dividends, repayments of
                           loans or advances or other transfers of Property, in
                           each case to the Company or any Restricted Subsidiary
                           from such Person less the cost of the disposition of
                           such Investments; and

                                    (B) the portion (proportionate to the
                           Company's equity interest in such Unrestricted
                           Subsidiary) of the Fair Market Value of the net
                           assets of an Unrestricted Subsidiary at the time such
                           Unrestricted Subsidiary is designated a Restricted
                           Subsidiary;

         provided, however, that the foregoing sum shall not exceed, in the case
         of any Person, the amount of Investments previously made (and treated
         as a Restricted Payment) by the Company or any Restricted Subsidiary in
         such Person.

         Notwithstanding the foregoing limitation, the Company may:

                  (a) pay dividends on its Capital Stock within 60 days of the
         declaration thereof if, on said declaration date, such dividends could
         have been paid in compliance with the Indenture; provided, however,
         that at the time of such payment of such dividend, no other Default or
         Event of Default shall have occurred and be continuing (or result
         therefrom); provided further, however, that such dividend shall be
         included in the calculation of the amount of Restricted Payments;

                  (b) purchase, repurchase, redeem, legally defease, acquire or
         retire for value Capital Stock of the Company or Subordinated
         Obligations in exchange for, or out of the proceeds of the
         substantially concurrent sale of, Capital Stock of the Company (other
         than Disqualified Stock and other than Capital Stock issued or sold to
         a Subsidiary of the Company or an employee stock ownership plan or
         trust established by the Company or any such Subsidiary for the benefit
         of their employees); provided, however, that:

                           (1) such purchase, repurchase, redemption, legal
                  defeasance, acquisition or retirement shall be excluded in the
                  calculation of the amount of Restricted Payments; and



                                                                              43


                           (2) the Capital Stock Sale Proceeds from such
                  exchange or sale shall be excluded from the calculation
                  pursuant to clause (c)(2) above;

                  (c) purchase, repurchase, redeem, legally defease, acquire or
         retire for value any Subordinated Obligations in exchange for, or out
         of the proceeds of the substantially concurrent sale of, Permitted
         Refinancing Debt; provided, however, that such purchase, repurchase,
         redemption, legal defeasance, acquisition or retirement shall be
         excluded in the calculation of the amount of Restricted Payments;

                  (d) so long as no Default or Event of Default shall have
         occurred or be continuing, declare and pay dividends to the holders of
         Series D Preferred Stock, Class A Cumulative Preferred Stock, Class C
         Cumulative Preferred Stock and Class D Cumulative Preferred Stock
         outstanding on the Issue Date or issued after the Issue Date solely in
         payment of dividends on the same class of stock; provided, however,
         that such dividends shall be included in the calculation of the amount
         of Restricted Payments;

                  (e) so long as no Default or Event of Default has occurred and
         is continuing the repurchase or other acquisition of shares of or
         options to purchase shares of, Capital Stock of the Company or any of
         its Subsidiaries from employees, former employees, directors or former
         directors of the Company or any of its Subsidiaries (or permitted
         transferees of such employees, former employees, directors or former
         directors), pursuant to the terms of the agreements (including
         employment agreements) or plans (or amendments thereto) approved by the
         Board of Directors under which such individuals purchase or sell or are
         granted the option to purchase or sell, shares of such Capital Stock;
         provided, however, that the aggregate amount of such repurchases and
         other acquisitions shall not exceed $10 million; provided further,
         however, that such repurchases and other acquisitions shall be included
         in the calculation of the amount of Restricted Payments;

                  (f) make payments not to exceed $1 million in the aggregate to
         enable the Company to make payments to holders of its Capital Stock in
         lieu of the issuance of fractional shares of its Capital Stock;
         provided, however, that such payments shall be included in the
         calculation of the amount of Restricted Payments; and

                  (g) make any other Restricted Payments not to exceed an
         aggregate amount of $25 million; provided, however, that such payments
         shall be included in the calculation of the amount of Restricted
         Payments.

                  SECTION 4.05. Limitation on Liens. The Company shall not, and
shall not permit any Restricted Subsidiary to, directly or indirectly, Incur or
suffer to exist, any Lien (other than Permitted Liens) upon any of its Property
(including Capital Stock of a Restricted Subsidiary), whether owned at the Issue
Date or thereafter acquired, or any interest therein or any income or profits
therefrom, unless it has made or will make effective provision whereby the
Securities will be secured by such Lien equally and


                                                                              44


ratably with (or prior to) all other Debt of the Company or any Restricted
Subsidiary secured by such Lien.

                  Notwithstanding anything in the preceding paragraph, the
aggregate principal amount of all Secured Debt at any one time outstanding under
clauses (b), (c), (l) and (s) (as it relates to clause (c)(i)) of Section 4.03
shall not exceed the aggregate amount of Debt that at such time may be
outstanding at any one time under such clauses (b), (c)(ii) and (l).

                  SECTION 4.06. Limitation on Asset Sales. The Company will not,
and will not permit any Restricted Subsidiary to, directly or indirectly,
consummate any Asset Sale unless:

                  (a) the Company or such Restricted Subsidiary receives
         consideration at the time of such Asset Sale at least equal to the Fair
         Market Value of the Property subject to such Asset Sale;

                  (b) at least 75% of the consideration paid to the Company or
         such Restricted Subsidiary in connection with such Asset Sale is in the
         form of Qualified Consideration; and

                  (c) the Company delivers an Officers' Certificate to the
         Trustee certifying that such Asset Sale complies with the foregoing
         clauses (a) and (b).

                  The Net Available Cash (or any portion thereof) from Asset
Sales may be applied by the Company or a Restricted Subsidiary, to the extent
the Company or such Restricted Subsidiary elects (or is required by the terms of
any Debt):

                  (a) to Repay the Credit Facilities, the 12.5% Notes, the 9
         1/2% Notes, the 8.125% Notes or any other Debt of the Company or any
         Restricted Subsidiary secured by a Lien on Property of the Company or
         any Restricted Subsidiary of the Company (excluding, in any such case,
         any Debt owed to the Company or an Affiliate of the Company); or

                  (b) to reinvest in Additional Assets or Expansion Capital
         Expenditures (including by means of an Investment in Additional Assets
         or Expansion Capital Expenditures by a Restricted Subsidiary with Net
         Available Cash received by the Company or another Restricted
         Subsidiary); provided, however, that the Net Available Cash (or any
         portion thereof) from Asset Sales from the Company to any Subsidiary
         must be reinvested in Additional Assets or Expansion Capital
         Expenditures of the Company.

                  Pending application of Net Available Cash pursuant to this
Section 4.06, which shall not be required in respect of an Asset Sale if the Net
Available Cash from such Asset Sale is less than $1 million, such Net Available
Cash shall be invested in Temporary Cash Investments or applied to temporarily
reduce revolving credit indebtedness. If the Net Available Cash from an Asset
Sale equals or exceeds $1 million, any Net Available Cash from such Asset Sale
not applied in accordance with the


                                                                              45


preceding paragraph within 270 days from the date of the receipt of such Net
Available Cash or that is not segregated from the general funds of the Company
for investment in identified Additional Assets in respect of a project that
shall have been commenced, and for which binding contractual commitments have
been entered into, prior to the end of such 270-day period and that shall not
have been completed or abandoned shall constitute "Excess Proceeds"; provided,
however, that the amount of any Net Available Cash that ceases to be so
segregated as contemplated above and any Net Available Cash that is segregated
in respect of a project that is abandoned or completed shall also constitute
"Excess Proceeds" at the time any such Net Available Cash ceases to be so
segregated or at the time the relevant project is so abandoned or completed, as
applicable; provided further, however, that the amount of any Net Available Cash
that continues to be segregated for investment and that is not actually
reinvested within 24 months from the date of the receipt of such Net Available
Cash shall also constitute "Excess Proceeds".

                  When the aggregate amount of Excess Proceeds exceeds $20.0
million (taking into account income earned on such Excess Proceeds, if any), the
Company will be required to make an offer to purchase (the "Asset Sales
Prepayment Offer") the Securities which offer shall be in the amount of the
Allocable Excess Proceeds, on a pro rata basis according to principal amount at
maturity, at a purchase price equal to 100% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the purchase date (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date), in accordance with the procedures
(including prorating in the event of oversubscription) set forth in this
Indenture. To the extent that any portion of the amount of Net Available Cash
remains after compliance with the preceding sentence and provided that all
Holders have been given the opportunity to tender their Securities for purchase
in accordance with this Indenture, the Company or such Restricted Subsidiary may
use such remaining amount for any purpose permitted by this Indenture and the
amount of Excess Proceeds will be reset to zero.

                  The term "Allocable Excess Proceeds" will mean the product of:

                  (a) the Excess Proceeds and

                  (b) a fraction,

                           (1) the numerator of which is the aggregate principal
                  amount of the Securities outstanding on the date of the Asset
                  Sales Prepayment Offer, and

                           (2) the denominator of which is the sum of the
                  aggregate principal amount of the Securities outstanding on
                  the date of the Asset Sales Prepayment Offer and the aggregate
                  principal amount of other Debt of the Company outstanding on
                  the date of the Asset Sales Prepayment Offer that is pari
                  passu in right of payment with the Securities and subject to
                  terms and conditions in respect of Asset Sales similar in all
                  material respects to this Section 4.06 and requiring the
                  Company to make an offer


                                                                              46


                  to purchase such Debt or otherwise repay such Debt at
                  substantially the same time as the Asset Sales Prepayment
                  Offer.

                  Within five Business Days after the Company is obligated to
make an Asset Sales Prepayment Offer as described in the preceding paragraph,
the Company shall send a written notice, by first-class mail, to the Holders,
accompanied by such information regarding the Company and its Subsidiaries as
the Company in good faith believes will enable such Holders to make an informed
decision with respect to such Asset Sales Prepayment Offer. Such notice shall
state, among other things, the purchase price and the purchase date (the
"Purchase Date"), which shall be, subject to any contrary requirements of
applicable law, a Business Day no earlier than 30 days nor later than 60 days
from the date such notice is mailed.

                  Not later than the date upon which written notice of an Asset
Sales Prepayment Offer is delivered to the Trustee as provided above, the
Company shall deliver to the Trustee an Officers' Certificate as to (i) the
amount of the Asset Sales Prepayment Offer (the "Offer Amount"), (ii) the
allocation of the Net Available Cash from the Asset Sales pursuant to which such
Prepayment Offer is being made and (iii) the compliance of such allocation with
the provisions of clause (b) of the second paragraph of this Section 4.06. On or
before the Purchase Date, the Company shall also irrevocably deposit with the
Trustee or with the Paying Agent (or, if the Company or a Wholly Owned
Subsidiary is the Paying Agent, shall segregate and hold in trust) in Temporary
Cash Investments (other than in those enumerated in such clause (b) of the
definition of Temporary Cash Investments), maturing on the last day prior to the
Purchase Date or on the Purchase Date if funds are immediately available by open
of business, an amount equal to the Offer Amount to be held for payment in
accordance with the provisions of this Section 4.06. Upon the expiration of the
period for which the Prepayment Offer remains open (the "Offer Period"), the
Company shall deliver to the Trustee for cancellation the Securities or portions
thereof that have been properly tendered to and are to be accepted by the
Company. The Trustee or the Paying Agent shall, on the Purchase Date, mail or
deliver payment to each tendering Holder in the amount of the purchase price. In
the event that the aggregate purchase price of the Securities delivered by the
Company to the Trustee is less than the Offer Amount, the Trustee or the Paying
Agent shall deliver the excess to the Company immediately after the expiration
of the Offer Period for application in accordance with this Section 4.06.

                  Holders electing to have a Security purchased shall be
required to surrender the Security, with an appropriate form duly completed, to
the Company or its agent at the address specified in the notice at least three
Business Days prior to the Purchase Date. Holders shall be entitled to withdraw
their election if the Trustee or the Company receives not later than one
Business Day prior to the Purchase Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Security that was delivered for purchase by the Holder and a
statement that such Holder is withdrawing its election to have such Security
purchased. If at the expiration of the Offer Period the aggregate principal
amount of Securities surrendered by Holders exceeds the Offer Amount, the
Company shall select the Securities to be purchased on a pro rata basis for all
Securities (with such adjustments as may be deemed


                                                                              47


appropriate by the Company so that only Securities in denominations of $1,000,
or integral multiples thereof, shall be purchased). Holders whose Securities are
purchased only in part shall be issued new Securities equal in principal amount
to the unpurchased portion of the Securities surrendered.

                  At the time the Company delivers Securities to the Trustee
that are to be accepted for purchase, the Company shall also deliver an
Officers' Certificate stating that such Securities are to be accepted by the
Company pursuant to and in accordance with the terms of this Section 4.06. A
Security shall be deemed to have been accepted for purchase at the time the
Trustee or the Paying Agent mails or delivers payment therefor to the
surrendering Holder.

                  The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section 4.06. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.06, the Company will
comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations under this Section 4.06 by virtue
thereof.

                  SECTION 4.07. Limitation on Restrictions on Distributions from
Restricted Subsidiaries. The Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, create or otherwise cause or
suffer to exist any consensual restriction on the right of any Restricted
Subsidiary to:

                  (a) pay dividends, in cash or otherwise, or make any other
         distributions on or in respect of its Capital Stock, or pay any Debt or
         other obligation owed, to the Company or any other Restricted
         Subsidiary;

                  (b) make any loans or advances to the Company or any other
         Restricted Subsidiary; or

                  (c) transfer any of its Property to the Company or any other
         Restricted Subsidiary.

                  The foregoing limitations will not apply:

                           (1) with respect to clauses (a), (b) and (c), to
                  restrictions:

                                    (A) in effect on the Issue Date;

                                    (B) relating to Debt of a Restricted
                           Subsidiary and existing at the time it became a
                           Restricted Subsidiary if such restriction was not
                           created in connection with or in anticipation of the
                           transaction or series of transactions pursuant to
                           which such Restricted Subsidiary became a Restricted
                           Subsidiary or was acquired by the Company;



                                                                              48


                                    (C) that result from the Refinancing of Debt
                           Incurred pursuant to an agreement referred to in
                           clause (1)(A) or (B) above or in clause (2)(A) or (B)
                           below, provided such restriction is no less favorable
                           to the Holders in any material respect, as reasonably
                           determined by the Board of Directors (as evidenced by
                           a Board Resolution), than those under the agreement
                           evidencing the Debt so Refinanced;

                                    (D) resulting from the Incurrence of any
                           Permitted Debt permitted pursuant to Section 4.03,
                           provided that (i) the restriction is no less
                           favorable to the Holders in any material respect, as
                           reasonably determined by the Board of Directors (as
                           evidenced by a Board Resolution), than the
                           restrictions of the same type contained in this
                           Indenture and (ii) the Board of Directors determines
                           (as evidenced by a Board Resolution) in good faith
                           that such restrictions will not impair the ability of
                           the Company to make payments of principal and
                           interest on the Securities when due;

                                    (E) existing by reason of applicable law; or

                                    (F) any contractual requirements incurred
                           with respect to Qualified Receivables Transactions
                           relating exclusively to a Receivables Entity that, in
                           the good faith determination of the Board of
                           Directors, are customary for Qualified Receivables
                           Transactions; and

                           (2) with respect to clause (c) only, to restrictions:

                                    (A) relating to Debt that is permitted to be
                           Incurred and secured without also securing the
                           Securities pursuant to Sections 4.03 and 4.05 that
                           limit the right of the debtor to dispose of the
                           Property securing such Debt;

                                    (B) encumbering Property at the time such
                           Property was acquired by the Company or any
                           Restricted Subsidiary, so long as such restriction
                           relates solely to the Property so acquired and was
                           not created in connection with or in anticipation of
                           such acquisition;

                                    (C) resulting from customary provisions
                           restricting subletting or assignment of leases or
                           customary provisions in other agreements that
                           restrict assignment of such agreements or rights
                           thereunder; or

                                    (D) customary restrictions contained in
                           agreements relating to the sale or other disposition
                           of Property limiting the transfer of such Property
                           pending the closing of such sale.



                                                                              49


                  SECTION 4.08. Limitation on Transactions with Affiliates. The
Company shall not, and shall not permit any Restricted Subsidiary to, directly
or indirectly, conduct any business or enter into or suffer to exist any
transaction or series of transactions (including the purchase, sale, transfer,
assignment, lease, conveyance or exchange of any Property or the rendering of
any service) with, or for the benefit of, any Affiliate of the Company (an
"Affiliate Transaction"), unless:

                  (a) the terms of such Affiliate Transaction are:

                           (1) set forth in writing;

                           (2) in the best interest of the Company or such
                  Restricted Subsidiary, as the case may be; and

                           (3) no less favorable to the Company or such
                  Restricted Subsidiary, as the case may be, than those that
                  could be obtained in a comparable arm's-length transaction
                  with a Person that is not an Affiliate of the Company;

                  (b) if such Affiliate Transaction involves aggregate payments
         or value to the Affiliate in excess of $25.0 million in any 12-month
         period, the Board of Directors (including a majority of the
         disinterested members of the Board of Directors) approves such
         Affiliate Transaction and, in its good faith judgment, believes that
         such Affiliate Transaction complies with clauses (a)(2) and (3) of this
         Section 4.08 as evidenced by a Board Resolution promptly delivered to
         the Trustee; and

                  (c) if such Affiliate Transaction involves aggregate payments
         or value to the Affiliate in excess of $50.0 million in any 12-month
         period, the Company obtains a written opinion from an Independent
         Financial Advisor to the effect that the consideration to be paid or
         received in connection with such Affiliate Transaction is fair, from a
         financial point of view, to the Company and the Restricted
         Subsidiaries, taken as a whole.

                  Notwithstanding the foregoing limitation, the Company or any
Restricted Subsidiary may enter into or suffer to exist the following:

                  (a) any transaction or series of transactions between the
         Company and one or more Restricted Subsidiaries or between two or more
         Restricted Subsidiaries in the ordinary course of business, provided
         that no more than 5% of the total voting power of the Voting Stock (on
         a fully diluted basis) of any such Restricted Subsidiary is owned by an
         Affiliate of the Company (other than a Restricted Subsidiary);

                  (b) any Restricted Payment permitted to be made pursuant to
         Section 4.04 or any Permitted Investment (other than pursuant to
         clauses (a)(iii), (b), (g), (h), (i), or (l) of the definition of
         "Permitted Investment");



                                       50


                  (c) the payment of compensation (including amounts paid
         pursuant to employee benefit plans) for the personal services of and
         related indemnities provided to officers, directors, consultants and
         employees of the Company or any of the Restricted Subsidiaries, so long
         as the Board of Directors in good faith shall have approved the terms
         thereof and deemed the services theretofore or thereafter to be
         performed for such compensation to be fair consideration therefor;

                  (d) loans and advances to employees made in the ordinary
         course of business and consistent with the past practices of the
         Company or such Restricted Subsidiary, as the case may be, provided
         that such loans and advances do not exceed $25 million in the aggregate
         at any one time outstanding;

                  (e) any transaction effected as part of a Qualified
         Receivables Transaction or any transaction involving the transfer of
         accounts receivable of the type specified in the definition of "Credit
         Facilities" and permitted under clause (b) of Section 4.03;

                  (f) payments of customary fees by the Company or any of its
         Restricted Subsidiaries to Leonard Green & Partners L.P. or any of its
         Affiliates made for any corporate advisory services or financial
         advisory, financing, underwriting or placement services or in respect
         of other investment banking activities including in connection with
         acquisitions or divestitures, which are approved by a majority of the
         Board of Directors in good faith;

                  (g) if such Affiliate Transaction is with any Person solely in
         its capacity as a holder of Debt or Capital Stock of the Company or any
         of its Restricted Subsidiaries, where such Person is treated no more
         favorably than any other holder of such Debt or Capital Stock of the
         Company or any of its Restricted Subsidiaries; and

                  (h) any agreement as in effect on the Issue Date or any
         amendment thereto (so long as such amendment is not disadvantageous to
         the Holders of the Securities in any material respect) or any
         transaction contemplated thereby.

                  SECTION 4.09. Limitation on Guarantees by Restricted
Subsidiaries. The Company shall not permit any Restricted Subsidiary to
Guarantee the payment of any Debt or Capital Stock of the Company (other than
Guarantees of Debt incurred under clause (a), (b), (c), (d), (l) or (p) of the
second paragraph of Section 4.03 or Guarantees permitted pursuant to clause (j)
of the second paragraph of Section 4.03 or Guarantees permitted by clause (s) of
the second paragraph of Section 4.03 as it relates to clause (c) or (d) of the
second paragraph of Section 4.03), except that a Restricted Subsidiary may
Guarantee Debt of the Company provided that:

                  (a) such Debt and the Debt represented by such Guarantee is
         permitted by Section 4.03;

                  (b) such Restricted Subsidiary simultaneously executes and
         delivers a supplemental indenture to this Indenture providing for a
         Guarantee of payment of


                                       51


         the Securities by such Restricted Subsidiary and such Guarantee of Debt
         of the Company:

                           (1) unless such Debt is a Subordinated Obligation,
                  shall be pari passu (or subordinate) in right of payment to
                  and on substantially the same terms as (or less favorable to
                  such Debt than) such Restricted Subsidiary's Guarantee with
                  respect to the Securities; and

                           (2) if such Debt is a Subordinated Obligation, shall
                  be subordinated in right of payment to such Restricted
                  Subsidiary's Guarantee with respect to the Securities to at
                  least the same extent as such Debt is subordinated to the
                  Securities; and

                  (c) such Restricted Subsidiary shall deliver to the Trustee an
         Opinion of Counsel to the effect that:

                           (1) such Guarantee of the Securities has been duly
                  executed and authorized; and

                           (2) such Guarantee of the Securities constitutes a
                  valid, binding and enforceable obligation of such Restricted
                  Subsidiary, except insofar as enforcement thereof may be
                  limited by bankruptcy, insolvency or similar laws (including,
                  without limitation, all laws relating to fraudulent transfers)
                  and except insofar as enforcement thereof is subject to
                  general principles of equity.

                  SECTION 4.10. Limitation on Sale and Leaseback Transactions.
The Company shall not, and shall not permit any Restricted Subsidiary to, enter
into any Sale and Leaseback Transaction with respect to any Property unless:

                  (a) the Company or such Restricted Subsidiary would be
         entitled to:

                           (1) Incur Debt in an amount equal to the Attributable
                  Debt with respect to such Sale and Leaseback Transaction
                  pursuant to Section 4.03; and

                           (2) create a Lien on such Property securing such
                  Attributable Debt without also securing the Securities
                  pursuant to Section 4.05; and

                  (b) such Sale and Leaseback Transaction is effected in
         compliance with Section 4.06; provided that such Sale and Leaseback
         Transaction constitutes an Asset Sale.

                  SECTION 4.11. Designation of Restricted and Unrestricted
Subsidiaries. The Board of Directors may designate any Subsidiary of the Company
to be an Unrestricted Subsidiary if:



                                                                              52


                  (a) the Subsidiary to be so designated does not own any
         Capital Stock or Debt of, or own or hold any Lien on any Property of,
         the Company or any other Restricted Subsidiary; and

                  (b) either:

                           (1) the Subsidiary to be so designated has total
                  assets of $1,000 or less; or

                           (2) such designation is effective immediately upon
                  such entity becoming a Subsidiary of the Company.

                  Unless so designated as an Unrestricted Subsidiary, any Person
that becomes a Subsidiary of the Company will be classified as a Restricted
Subsidiary; provided, however, that such Subsidiary shall not be designated a
Restricted Subsidiary and shall be automatically classified as an Unrestricted
Subsidiary if either of the requirements set forth in clauses (x) and (y) of the
second immediately following paragraph will not be satisfied after giving pro
forma effect to such classification as a Restricted Subsidiary or if such Person
is a Subsidiary of an Unrestricted Subsidiary.

                  Except as provided in the first sentence of the preceding
paragraph, no Restricted Subsidiary may be redesignated as an Unrestricted
Subsidiary. In addition, neither the Company nor any Restricted Subsidiary shall
at any time be directly or indirectly liable for any Debt that provides that the
holder thereof may (with the passage of time or notice or both) declare a
default thereon or cause the payment thereof to be accelerated or payable prior
to its Stated Maturity upon the occurrence of a default with respect to any
Debt, Lien or other obligation of any Unrestricted Subsidiary (including any
right to take enforcement action against such Unrestricted Subsidiary).

                  The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary if, immediately after giving pro forma
effect to such designation, (x) the Company could Incur at least $1.00 of
additional Debt pursuant to clause (1) of the first paragraph of Section 4.03
and (y) no Default or Event of Default shall have occurred and be continuing or
would result therefrom.

                  Any such designation or redesignation by the Board of
Directors will be evidenced to the Trustee by filing with the Trustee a Board
Resolution giving effect to such designation or redesignation and an Officers'
Certificate that:

                  (a) certifies that such designation or redesignation complies
         with the foregoing provisions; and

                  (b) gives the effective date of such designation or
         redesignation,

such filing with the Trustee to occur within 45 days after the end of the fiscal
quarter of the Company in which such designation or redesignation is made (or,
in the case of a designation or redesignation made during the last fiscal
quarter of the Company's fiscal year, within 90 days after the end of such
fiscal year).



                                       53


                  SECTION 4.12. Change of Control. (a) Upon the occurrence of a
Change of Control, each Holder shall have the right to require the Company to
repurchase all or any part of such Holder's Securities pursuant to the offer
described below (the "Change of Control Offer") at a purchase price (the "Change
of Control Purchase Price") equal to 101.0% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the purchase date (subject to the
right of holders of record on the relevant record date to receive interest due
on the relevant interest payment date). If the purchase date is on or after a
record date and on or before the relevant interest payment date, the accrued and
unpaid interest, if any, will be paid to the person or entity in whose name the
Security is registered at the close of business on that record date, and no
additional interest will be payable to Holders whose Securities shall be subject
to redemption.

                  (b) Within 30 days following any Change of Control, the
Company shall (i) cause a notice of the Change of Control Offer to be sent at
least once to the Dow Jones News Service or similar business news service in the
United States and (ii) send, by first-class mail, with a copy to the Trustee, to
each Holder, at such Holder's address appearing in the Security Register, a
notice stating: (A) that a Change of Control Offer is being made pursuant to
this Section 4.12 and that all Securities timely tendered will be accepted for
payment; (B) the Change of Control Purchase Price and the purchase date, which
shall be, subject to any contrary requirements of applicable law, a Business Day
no earlier than 30 days nor later than 60 days from the date such notice is
mailed (the "Change of Control Payment Date"); (C) the circumstances and
relevant facts regarding the Change of Control (including, to the extent
reasonably practicable, information with respect to pro forma historical income,
cash flow and capitalization after giving effect to the Change of Control); and
(D) the procedures that Holders must follow in order to tender their Securities
(or portions thereof) for payment and the procedures that Holders must follow in
order to withdraw an election to tender Securities (or portions thereof) for
payment.

                  (c) Holders electing to have a Security purchased shall be
required to surrender the Security, with an appropriate form duly completed, to
the Company or its agent at the address specified in the notice at least three
Business Days prior to the Change of Control Payment Date. Holders shall be
entitled to withdraw their election if the Trustee or the Company receives not
later than one Business Day prior to the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Security that was delivered for purchase by
the Holder and a statement that such Holder is withdrawing its election to have
such Security purchased.

                  (d) On or prior to the Change of Control Payment Date, the
Company shall irrevocably deposit with the Trustee or with the Paying Agent (or,
if the Company or any of its Wholly Owned Subsidiaries is acting as the Paying
Agent, segregate and hold in trust) in cash an amount equal to the Change of
Control Purchase Price payable to the Holders entitled thereto, to be held for
payment in accordance with the provisions of this Section 4.12. On the Change of
Control Payment Date, the Company shall deliver to the Trustee the Securities or
portions thereof that have been properly tendered to and are


                                       54


to be accepted by the Company for payment. The Trustee or the Paying Agent
shall, on the Change of Control Payment Date, mail or deliver payment to each
tendering Holder of the Change of Control Purchase Price. In the event that the
aggregate Change of Control Purchase Price is less than the amount delivered by
the Company to the Trustee or the Paying Agent, the Trustee or the Paying Agent,
as the case may be, shall deliver the excess to the Company immediately after
the Change of Control Payment Date.

                  (e) The Company will comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the purchase of Securities pursuant to
this Section 4.12. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of this Section 4.12, the Company will
comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations under this Section 4.12 by virtue
thereof.

                  SECTION 4.13. Further Instruments and Acts. Upon request of
the Trustee, the Company shall execute and deliver such further instruments and
do such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.

                                   ARTICLE V

                                Successor Company

                  SECTION 5.01. When Company May Merge or Transfer Assets. The
Company shall not merge, consolidate or amalgamate with or into any other Person
(other than a merger of a Wholly Owned Restricted Subsidiary into the Company)
or sell, transfer, assign, lease, convey or otherwise dispose of all or
substantially all its Property in any one transaction or series of transactions
unless:

                  (a) the Company will be the surviving Person (the "Surviving
         Person") or the Surviving Person (if other than the Company) formed by
         such merger, consolidation or amalgamation or to which such sale,
         transfer, assignment, lease, conveyance or disposition is made will be
         a corporation organized and existing under the laws of the United
         States of America, any State thereof or the District of Columbia;

                  (b) the Surviving Person (if other than the Company) expressly
         assumes, by supplemental indenture in form satisfactory to the Trustee,
         executed and delivered to the Trustee by such Surviving Person, the due
         and punctual payment of the principal of, premium, if any, and interest
         on, all the Securities, according to their tenor, and the due and
         punctual performance and observance of all the covenants and conditions
         of this Indenture to be performed by the Company;

                  (c) in the case of a sale, transfer, assignment, lease,
         conveyance or other disposition of all or substantially all the
         Property of the Company, such Property shall have been transferred as
         an entirety or virtually as an entirety to one Person;



                                                                              55


                  (d) immediately before and after giving effect to such
         transaction or series of transactions on a pro forma basis (and
         treating, for purposes of this clause (d) and clause (e) below, any
         Debt that becomes, or is anticipated to become, an obligation of the
         Surviving Person or any Restricted Subsidiary as a result of such
         transaction or series of transactions as having been Incurred by the
         Surviving Person or such Restricted Subsidiary at the time of such
         transaction or series of transactions), no Default or Event of Default
         shall have occurred and be continuing;

                  (e) immediately after giving effect to such transaction or
         series of transactions on a pro forma basis, either (i) the Company or
         the Surviving Person, as the case may be, would be able to Incur at
         least $1.00 of additional Debt under clause (1) of the first paragraph
         of Section 4.03 or (ii) the Surviving Person would have a Consolidated
         Interest Coverage Ratio which is not less than the Consolidated
         Interest Coverage Ratio of the Company immediately prior to such
         transaction or series of transactions; and

                  (f) the Company shall deliver, or cause to be delivered, to
         the Trustee, in form and substance reasonably satisfactory to the
         Trustee, an Officers' Certificate and an Opinion of Counsel, each
         stating that such transaction and the supplemental indenture, if any,
         in respect thereto comply with this Section 5.01 and that all
         conditions precedent herein provided for relating to such transaction
         have been satisfied.

                  The Surviving Person shall succeed to, and be substituted for,
and may exercise every right and power of the Company under the Indenture, but
the predecessor Company in the case of:

                  (a) a sale, transfer, assignment, conveyance or other
         disposition (unless such sale, transfer, assignment, conveyance or
         other disposition is of all the assets of the Company as an entirety or
         virtually as an entirety); or

                  (b) a lease,

shall not be released from any obligation to pay the principal of, premium, if
any, and interest on, the Securities.

                                   ARTICLE VI

                              Defaults and Remedies

                  SECTION 6.01. Events of Default. The following events shall be
"Events of Default":

                           (1) the Company fails to make the payment of any
                  interest on any of the Securities when the same becomes due
                  and payable, and such failure continues for a period of 30
                  days;



                                                                              56


                           (2) the Company fails to make the payment of any
                  principal of, or premium, if any, on any of the Securities
                  when the same becomes due and payable at its Stated Maturity,
                  upon acceleration, redemption, optional redemption, required
                  repurchase or otherwise;

                           (3) the Company fails to comply with Article V;

                           (4) the Company fails to comply with any covenant or
                  agreement in the Securities or in this Indenture (other than a
                  failure that is the subject of the foregoing clauses (1), (2)
                  or (3)) and such failure continues for 30 days after written
                  notice is given to the Company as provided below;

                           (5) a default under any Debt by the Company or any
                  Restricted Subsidiary that results in acceleration of the
                  final maturity of such Debt, or the failure to pay any such
                  Debt at final maturity (giving effect to applicable grace
                  periods), in an aggregate amount in excess of $35,000,000 or
                  its foreign currency equivalent at the time;

                           (6) the Company or any Significant Subsidiary
                  pursuant to or within the meaning of any Bankruptcy Law:

                                    (A) commences a voluntary case;

                                    (B) consents to the entry of an order for
                           relief against it in an involuntary case;

                                    (C) consents to the appointment of a
                           Custodian of it or for any substantial part of its
                           property; or

                                    (D) makes a general assignment for the
                           benefit of its creditors;

                  or takes any comparable action under any foreign laws relating
                  to insolvency;

                           (7) a court of competent jurisdiction enters an order
                  or decree under any Bankruptcy Law that:

                                    (A) is for relief against the Company or any
                           Significant Subsidiary in an involuntary case;

                                    (B) appoints a Custodian of the Company or
                           any Significant Subsidiary or for any substantial
                           part of its property; or

                                    (C) orders the winding up or liquidation of
                           the Company or any Significant Subsidiary;

                  and in each such case the order or decree remains unstayed and
                  in effect for 45 days; or



                                                                              57


                           (8) any judgment or judgments for the payment of
                  money in an aggregate amount in excess of $35,000,000 or its
                  foreign currency equivalent at the time is rendered against
                  the Company or any Restricted Subsidiary and shall not be
                  waived, satisfied or discharged for any period of 30
                  consecutive days during which a stay of enforcement shall not
                  be in effect.

                  The foregoing will constitute Events of Default whatever the
reason for any such Event of Default and whether it is voluntary or involuntary
or is effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body.

                  The term "Bankruptcy Law" means Title 11, United States Code,
or any similar Federal or state law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator, custodian or
similar official under any Bankruptcy Law.

                  A Default under clause (4) is not an Event of Default until
the Trustee or the Holders of not less than 25% in aggregate principal amount of
the Securities then outstanding notify the Company (and in the case of such
notice by Holders, the Trustee) of the Default and the Company does not cure
such Default within the time specified after receipt of such notice. Such notice
must specify the Default, demand that it be remedied and state that such notice
is a "Notice of Default".

                  The Company shall deliver to the Trustee, within 30 days after
the occurrence thereof, written notice in the form of an Officers' Certificate
of any event that with the giving of notice or the lapse of time would become an
Event of Default, its status and what action the Company is taking or proposes
to take with respect thereto.

                  SECTION 6.02. Acceleration. If an Event of Default with
respect to the Securities (other than an Event of Default specified in Section
6.01(6) or (7) with respect to the Company) shall have occurred and be
continuing, the Trustee by notice to the Company, or the Holders of not less
than 25% in aggregate principal amount of the Securities then outstanding by
notice to the Company and the Trustee, may declare to be immediately due and
payable the principal amount at maturity of all the Securities then outstanding,
plus accrued but unpaid interest to the date of acceleration on all the
Securities to be due and payable. Upon such a declaration, such principal and
interest shall be due and payable immediately. If an Event of Default specified
in Section 6.01(6) or 6.01(7) with respect to the Company occurs, the principal
of and accrued and unpaid interest on all the Securities shall, automatically
and without any action by the Trustee or any Holder, become and be immediately
due and payable. The Holders of a majority in aggregate principal amount of the
outstanding Securities by notice to the Trustee and the Company may rescind and
annul such declaration of acceleration if the rescission would not conflict with
any judgment or decree and if all existing Events of Default have been cured or
waived except nonpayment of principal, premium or interest that has become due
solely because of the acceleration. No such rescission shall affect any
subsequent Default or impair any right consequent thereto.



                                                                              58


                  SECTION 6.03. Other Remedies. If an Event of Default occurs
and is continuing, the Trustee may pursue any available remedy to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.

                  The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the proceeding.
A delay or omission by the Trustee or any Holder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.

                  SECTION 6.04. Waiver of Past Defaults. The Holders of a
majority in aggregate principal amount of the Securities then outstanding by
notice to the Trustee may waive an existing Default and its consequences except
(i) a Default in the payment of the principal of, premium, if any, or interest
on a Security or (ii) a Default in respect of a provision that under Section
9.02 cannot be amended without the consent of each Holder affected. When a
Default is waived, it is deemed cured, but no such waiver shall extend to any
subsequent or other Default or impair any consequent right.

                  SECTION 6.05. Control by Majority. The Holders of a majority
in aggregate principal amount of the Securities then outstanding may direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or of exercising any trust or power conferred on the Trustee with
respect to the Securities. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture or, subject to Section 7.01,
that the Trustee determines is unduly prejudicial to the rights of other Holders
or would involve the Trustee in personal liability; provided, however, that the
Trustee may take any other action deemed proper by the Trustee that is not
inconsistent with such direction. Prior to taking any action or following any
direction hereunder, the Trustee shall be entitled to reasonable indemnification
against all losses and expenses caused by taking or not taking such action.

                  SECTION 6.06. Limitation on Suits. A Holder may not pursue any
remedy with respect to this Indenture or the Securities unless:

                           (1) such Holder shall have previously given to the
                  Trustee written notice of a continuing Event of Default;

                           (2) the Holders of at least 25% in aggregate
                  principal amount of the Securities then outstanding shall have
                  made a written request, and such Holder of or Holders shall
                  have offered reasonable indemnity, to the Trustee to pursue a
                  remedy; and

                           (3) the Trustee has failed to institute such
                  proceeding and has not received from the Holders of at least a
                  majority in aggregate principal amount of the Securities
                  outstanding a direction inconsistent with such request, within
                  60 days after such notice, request and offer.



                                                                              59


                  The foregoing limitations on the pursuit of remedies by a
Holder shall not apply to a suit instituted by a Holder for the enforcement of
payment of the principal of or interest on such Security on or after the
applicable due date specified in such Security. A Holder may not use this
Indenture to prejudice the rights of another Holder or to obtain a preference or
priority over another Holder.

                  SECTION 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder
to receive payment of principal of and interest on the Securities held by such
Holder, on or after the respective due dates expressed in the Securities, or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.

                  SECTION 6.08. Collection Suit by Trustee. If an Event of
Default specified in Section 6.01(1) or (2) occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Company for the whole amount then due and owing (together with
interest on any unpaid interest to the extent lawful) and the amounts provided
for in Section 7.07.

                  SECTION 6.09. Trustee May File Proofs of Claim. The Trustee
may file such proofs of claim and other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee and the Holders allowed
in any judicial proceedings relative to the Company, its creditors or its
property and, unless prohibited by law or applicable regulations, may vote on
behalf of the Holders in any election of a trustee in bankruptcy or other Person
performing similar functions, and any Custodian in any such judicial proceeding
is hereby authorized by each Holder to make payments to the Trustee and, in the
event that the Trustee shall consent to the making of such payments directly to
the Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and its counsel, and any other amounts due the Trustee under Section 7.07.

                  SECTION 6.10. Priorities. If the Trustee collects any money or
property pursuant to this Article VI, it shall pay out the money or property in
the following order:

                  FIRST: to the Trustee for amounts due under Section 7.07;

                  SECOND: to Holders for amounts due and unpaid on the
         Securities for principal and interest, ratably, without preference or
         priority of any kind, according to the amounts due and payable on the
         Securities for principal and interest, respectively; and

                  THIRD: to the Company.

                  The Trustee may fix a record date and payment date for any
payment to Holders pursuant to this Section 6.10. At least 15 days before such
record date, the Company shall mail to each Holder and the Trustee a notice that
states the record date, the payment date and amount to be paid.



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                  SECTION 6.11. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as Trustee, a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section 6.11 does not apply
to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit
by Holders of more than 10% in aggregate principal amount of the Securities.

                  SECTION 6.12. Waiver of Stay or Extension Laws. The Company
(to the extent it may lawfully do so) shall not at any time insist upon, or
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, that may affect the covenants or the performance of this Indenture; and
the Company (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and shall not hinder, delay or impede
the execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law had been enacted.

                                  ARTICLE VII

                                     Trustee

                  SECTION 7.01. Duties of Trustee. (a) If an Event of Default
has occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.

                  (b) Except during the continuance of an Event of Default:

                           (1) the Trustee undertakes to perform such duties and
                  only such duties as are specifically set forth in this
                  Indenture, and no implied covenants or obligations shall be
                  read into this Indenture against the Trustee; and

                           (2) in the absence of bad faith on its part, the
                  Trustee may conclusively rely, as to the truth of the
                  statements and the correctness of the opinions expressed
                  therein, upon certificates or opinions furnished to the
                  Trustee and conforming to the requirements of this Indenture.
                  However, the Trustee shall examine the certificates and
                  opinions to determine whether or not they conform to the
                  requirements of this Indenture.

                  (c) The Trustee may not be relieved from liability for its own
         negligent action, its own negligent failure to act or its own wilful
         misconduct, except that:



                                                                              61


                           (1) this paragraph does not limit the effect of
                  paragraph (b) of this Section 7.01;

                           (2) the Trustee shall not be liable for any error of
                  judgment made in good faith by a Trust Officer unless it is
                  proved that the Trustee was negligent in ascertaining the
                  pertinent facts; and

                           (3) the Trustee shall not be liable with respect to
                  any action it takes or omits to take in good faith in
                  accordance with a direction received by it pursuant to Section
                  6.05.

                  (d) Every provision of this Indenture that in any way relates
         to the Trustee is subject to paragraphs (a), (b) and (c) of this
         Section 7.01.

                  (e) The Trustee shall not be liable for interest on any money
         received by it except as the Trustee may agree in writing with the
         Company.

                  (f) Money held in trust by the Trustee need not be segregated
         from other funds except to the extent required by law.

                  (g) No provision of this Indenture shall require the Trustee
         to expend or risk its own funds or otherwise incur financial liability
         in the performance of any of its duties hereunder or in the exercise of
         any of its rights or powers.

                  (h) Every provision of this Indenture relating to the conduct
         or affecting the liability of or affording protection to the Trustee
         shall be subject to the provisions of this Section and to the
         provisions of the TIA, and the provisions of this Article VII shall
         apply to the Trustee in its role as Registrar, Paying Agent and
         Security Custodian.

                  (i) The Trustee shall not be deemed to have notice of a
         Default or an Event of Default unless (a) the Trustee has received
         written notice thereof from the Company or any Holder or (b) a Trust
         Officer shall have actual knowledge thereof.

                  SECTION 7.02. Rights of Trustee. (a) The Trustee may rely on
any document believed by it to be genuine and to have been signed or presented
by the proper person. The Trustee need not investigate any fact or matter stated
in the document. The Trustee may, however, in its discretion make such further
inquiry or investigation into such facts or matters as it may see fit and, if
the Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the Company,
personally or by agent or attorney.

                  (b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
the Officers' Certificate or Opinion of Counsel.



                                                                              62


                  (c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care and with the consent of the Company.

                  (d) The Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within its
rights or powers; provided, however, that the Trustee's conduct does not
constitute wilful misconduct or negligence.

                  (e) The Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such counsel.

                  (f) The permissive rights of the Trustee to do things
enumerated in this Indenture shall not be construed as a duty unless so
specified herein.

                  SECTION 7.03. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent, Registrar or
co-registrar may do the same with like rights. However, the Trustee must comply
with Sections 7.10 and 7.11.

                  SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity, priority or
adequacy of this Indenture or the Securities, it shall not be accountable for
the Company's use of the proceeds from the Securities, and it shall not be
responsible for any statement of the Company in this Indenture or in any
document issued in connection with the sale of the Securities or in the
Securities other than the Trustee's certificate of authentication.

                  SECTION 7.05. Notice of Defaults. If a Default or Event of
Default occurs and is continuing and if it is known to the Trustee, the Trustee
shall mail to each Holder notice of the Default or Event of Default within 30
days after it is known to a Trust Officer or written notice of it is received by
the Trustee. Except in the case of a Default or Event of Default in payment of
principal of or interest on any Security, the Trustee may withhold the notice if
and so long as a committee of its Trust Officers in good faith determines that
withholding the notice is in the interests of Holders.

                  SECTION 7.06. Reports by Trustee to Holders. Within 60 days
after February 1 each year beginning with February 1, 2004, the Trustee shall
mail to each Holder a brief report dated as of such February 1 that complies
with TIA ss. 313(a), if and to the extent required by such subsection. The
Trustee shall also comply with TIA ss. 313(b).

                  A copy of each report at the time of its mailing to Holders
shall be filed with the Commission and each stock exchange (if any) on which the
Securities are listed. The Company agrees to notify promptly the Trustee
whenever the Securities become listed on any stock exchange and of any delisting
thereof.



                                                                              63


                  SECTION 7.07. Compensation and Indemnity. The Company shall
pay to the Trustee from time to time reasonable compensation for its services.
The Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection, in addition to the compensation for its services.
Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Trustee's agents, counsel, accountants and
experts. The Company shall indemnify the Trustee against any and all loss,
liability or expense (including reasonable attorneys' fees) incurred by it in
connection with the acceptance and administration of this trust and the
performance of its duties hereunder. The Trustee shall notify the Company
promptly of any claim for which it may seek indemnity. Failure by the Trustee to
so notify the Company shall not relieve the Company of its obligations hereunder
unless the Company has been prejudiced thereby. The Company shall defend the
claim, and the Trustee may have separate counsel and the Company shall pay the
reasonable fees and expenses of such counsel. The Company need not reimburse any
expense or indemnify against any loss, liability or expense incurred by the
Trustee through the Trustee's own wilful misconduct, negligence or bad faith.
The Company need not pay for any settlement made by the Trustee without the
Company's consent, such consent not to be unreasonably withheld. All
indemnifications and releases from liability granted hereunder to the Trustee
shall extend to its officers, directors, employees, agents, successors and
assigns.

                  To secure the Company's payment obligations in this Section,
the Trustee shall have a lien prior to the Securities on all money or property
held or collected by the Trustee other than money or property held in trust to
pay principal of and interest on particular Securities.

                  The Company's payment obligations pursuant to this Section
7.07 shall survive the resignation or removal of the Trustee and the discharge
of this Indenture. When the Trustee incurs expenses after the occurrence of a
Default specified in Section 6.01(6) or (7) with respect to the Company, the
expenses are intended to constitute expenses of administration under the
Bankruptcy Law.

                  SECTION 7.08. Replacement of Trustee. The Trustee may resign
at any time by so notifying the Company. The Holders of a majority in aggregate
principal amount of the Securities the outstanding may remove the Trustee by so
notifying the Trustee and may appoint a successor Trustee, provided that so long
as no Default or Event of Default has occurred and is continuing, the Company
shall have the right to consent to the successor Trustee, such consent not to be
unreasonably withheld. The Company shall remove the Trustee if:

                           (1) the Trustee fails to comply with Section 7.10;

                           (2) the Trustee is adjudged bankrupt or insolvent;

                           (3) a receiver or other public officer takes charge
                  of the Trustee or its property; or



                                                                              64


                           (4) the Trustee otherwise becomes incapable of
                  acting.

                  If the Trustee resigns or is removed by the Company or by the
Holders of a majority in aggregate principal amount of the Securities then
outstanding, and such Holders do not reasonably promptly appoint a successor
Trustee, or if a vacancy exists in the office of Trustee for any reason (the
Trustee in such event being referred to herein as the retiring Trustee), the
Company shall promptly appoint a successor Trustee.

                  A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, subject to the lien provided for
in Section 7.07.

                  If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee or the
Holders of 10% in aggregate principal amount of the Securities then outstanding
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.

                  If the Trustee fails to comply with Section 7.10, any Holder
who has been a bona fide Holder of a Security for at least six months may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.

                  Notwithstanding the replacement of the Trustee pursuant to
this Section 7.08, the Company's obligations under Section 7.07 shall continue
for the benefit of the retiring Trustee.

                  SECTION 7.09. Successor Trustee by Merger. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation or banking
association without any further act shall be the successor Trustee.

                  In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture any of the Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any such successor to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of the
successor to the Trustee; and in all such cases such certificates shall have the
full force which it is anywhere in the Securities or in this Indenture provided
that the certificate of the Trustee shall have.



                                                                              65


                  SECTION 7.10. Eligibility; Disqualification. The Trustee shall
at all times satisfy the requirements of TIA ss. 310(a). The Trustee shall have
(or, in the case of a corporation included in a bank holding company system, the
related bank holding company shall have) a combined capital and surplus of at
least $50,000,000 as set forth in its (or its related bank holding company's)
most recent published annual report of condition. The Trustee shall comply with
TIA ss. 310(b), subject to the penultimate paragraph thereof; provided, however,
that there shall be excluded from the operation of TIA ss. 310(b)(1) any
indenture or indentures under which other securities or certificates of interest
or participation in other securities of the Company are outstanding if the
requirements for such exclusion set forth in TIA ss. 310(b)(1) are met.

                  SECTION 7.11. Preferential Collection of Claims Against
Company. The Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated.

                                  ARTICLE VIII

                       Discharge of Indenture; Defeasance

                  SECTION 8.01. Discharge of Liability on Securities;
Defeasance. (a) When (i) the Company delivers to the Trustee all outstanding
Securities (other than Securities replaced pursuant to Section 2.07) for
cancellation or (ii) all outstanding Securities have become due and payable,
whether at maturity or as a result of the mailing of a notice of redemption
pursuant to Article III and the Company irrevocably deposits with the Trustee
funds sufficient to pay at maturity or upon redemption all outstanding
Securities, including interest thereon to maturity or such redemption date
(other than Securities replaced pursuant to Section 2.07), and if in either case
the Company pays all other sums payable hereunder by the Company, then this
Indenture shall, subject to Section 8.01(c), cease to be of further effect. The
Trustee shall acknowledge satisfaction and discharge of this Indenture on demand
of the Company accompanied by an Officers' Certificate and an Opinion of Counsel
and at the cost and expense of the Company.

                  (b) Subject to Sections 8.01(c) and 8.02, the Company at any
time may terminate (i) all of its obligations under the Securities and this
Indenture ("legal defeasance option") or (ii) its obligations under Sections
4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12 and 4.13 and
the operation of Sections 6.01(5), 6.01(6), 6.01(7) and 6.01(8) (but, in the
case of Sections 6.01(6) and (7), with respect only to Significant Subsidiaries)
and the limitations contained in Section 5.01 (e) ("covenant defeasance
option"). The Company may exercise its legal defeasance option notwithstanding
its prior exercise of its covenant defeasance option.

                  If the Company exercises its legal defeasance option, payment
of the Securities may not be accelerated because of an Event of Default. If the
Company exercises its covenant defeasance option, payment of the Securities may
not be accelerated because of an Event of Default specified in Sections 6.01(4)
(with respect to


                                       66


the covenants of Article IV identified in the immediately preceding paragraph),
6.01(5), 6.01(6), 6.01(7) and 6.01(8) (with respect only to Significant
Subsidiaries in the case of Sections 6.01(6) and 6.01(7)) or because of the
failure of the Company to comply with the limitations contained in Section 5.01
(e).

                  Upon satisfaction of the conditions set forth herein and upon
request of the Company, the Trustee shall acknowledge in writing the discharge
of those obligations that the Company terminates.

                  (c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.04, 2.05, 2.06, 2.07, 7.07, 7.08, 8.05 and 8.06 shall
survive until the Securities have been paid in full. Thereafter, the Company's
obligations in Sections 7.07 and 8.05 shall survive.

                  SECTION 8.02. Conditions to Defeasance. The Company may
exercise its legal defeasance option or its covenant defeasance option only if:

                           (1) the Company irrevocably deposits in trust with
                  the Trustee money or U.S. Government Obligations for the
                  payment of principal of and interest on the Securities to
                  maturity or redemption, as the case may be;

                           (2) the Company delivers to the Trustee a certificate
                  from a nationally recognized firm of independent certified
                  public accountants expressing their opinion that the payments
                  of principal and interest when due and without reinvestment on
                  the deposited U.S. Government Obligations plus any deposited
                  money without investment will provide cash at such times and
                  in such amounts as will be sufficient to pay principal and
                  interest when due on all the Securities to maturity or
                  redemption, as the case may be;

                           (3) 123 days pass after the deposit is made and
                  during the 123-day period no Default specified in Section
                  6.01(7) occurs with respect to the Company or any other Person
                  making such deposit which is continuing at the end of the
                  period;

                           (4) no Default or Event of Default has occurred and
                  is continuing on the date of such deposit and after giving
                  effect thereto;

                           (5) such deposit does not constitute a default under
                  any other agreement or instrument binding on the Company;

                           (6) the Company delivers to the Trustee an Opinion of
                  Counsel to the effect that the trust resulting from the
                  deposit does not constitute, or is qualified as, a regulated
                  investment company under the Investment Company Act of 1940;



                                                                              67


                           (7) in the case of the legal defeasance option, the
                  Company delivers to the Trustee an Opinion of Counsel stating
                  that:

                                    (A) the Company has received from the
                           Internal Revenue Service a ruling; or

                                    (B) since the date of this Indenture there
                           has been a change in the applicable Federal income
                           tax law, to the effect, in either case, that, and
                           based thereon such Opinion of Counsel shall confirm
                           that, the Holders will not recognize income, gain or
                           loss for Federal income tax purposes as a result of
                           such defeasance and will be subject to Federal income
                           tax on the same amounts, in the same manner and at
                           the same time as would have been the case if such
                           defeasance has not occurred;

                           (8) in the case of the covenant defeasance option,
                  the Company shall have delivered to the Trustee an Opinion of
                  Counsel to the effect that the Holders will not recognize
                  income, gain or loss for Federal income tax purposes as a
                  result of such covenant defeasance and will be subject to
                  Federal income tax on the same amounts, in the same manner and
                  at the same times as would have been the case if such covenant
                  defeasance had not occurred; and

                           (9) the Company delivers to the Trustee an Officers'
                  Certificate and an Opinion of Counsel, each stating that all
                  conditions precedent to the defeasance and discharge of the
                  Securities as contemplated by this Article VIII have been
                  complied with.

                  Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article III.

                  SECTION 8.03. Application of Trust Money. The Trustee shall
hold in trust money or U.S. Government Obligations deposited with it pursuant to
this Article VIII. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal of and interest on the Securities.

                  SECTION 8.04. Repayment to Company. The Trustee and the Paying
Agent shall promptly turn over to the Company upon request any excess money or
securities held by them at any time.

                  Subject to any applicable abandoned property law, the Trustee
and the Paying Agent shall pay to the Company upon request any money held by
them for the payment of principal or interest that remains unclaimed for two
years, and, thereafter, Holders entitled to the money must look to the Company
for payment as general creditors.



                                                                              68


                  SECTION 8.05. Indemnity for Government Obligations. The
Company shall pay and shall indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against deposited U.S. Government Obligations or
the principal and interest received on such U.S. Government Obligations.

                  SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with this
Article VIII by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article VIII until such time as the
Trustee or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article VIII; provided, however, that, if
the Company has made any payment of interest on or principal of any Securities
because of the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Securities to receive such payment from the
money or U.S. Government Obligations held by the Trustee or Paying Agent.

                                   ARTICLE IX

                                   Amendments

                  SECTION 9.01. Without Consent of Holders. The Company and the
Trustee may amend this Indenture or the Securities without notice to or consent
of any Holder:

                           (1) to cure any ambiguity, omission, defect or
                  inconsistency;

                           (2) to provide for the assumption by a successor
                  corporation of the obligations of the Company under this
                  Indenture in accordance with Article V;

                           (3) to provide for uncertificated Securities in
                  addition to or in place of certificated Securities; provided,
                  however, that the uncertificated Securities are issued in
                  registered form for purposes of Section 163(f) of the Code or
                  in a manner such that the uncertificated Securities are
                  described in Section 163(f)(2)(B) of the Code;

                           (4) to add Guarantees with respect to the Securities
                  or to secure the Securities;

                           (5) to add to the covenants of the Company for the
                  benefit of the Holders or to surrender any right or power
                  herein conferred upon the Company;



                                                                              69


                           (6) to make any change to comply with any
                  requirements of the Commission in connection with the
                  qualification of this Indenture under the TIA; or

                           (7) to make any change that does not adversely affect
                  the rights of any Holder.

                  After an amendment under this Section 9.01 becomes effective,
the Company shall mail to Holders a notice briefly describing such amendment.
The failure to give such notice to all Holders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section 9.01.

                  SECTION 9.02. With Consent of Holders. The Company, when
authorized by a Board Resolution, and the Trustee may amend this Indenture or
the Securities and waive any past default or compliance with any provisions
(except, in the case of this Indenture, as provided in Section 6.04), with the
consent of the Holders of at least a majority in aggregate principal amount of
the Securities then outstanding (including consents obtained in connection with
a tender offer or exchange offer for the Securities). However, without the
consent of each Holder affected thereby, an amendment may not:

                           (1) reduce the amount of Securities whose Holders
                  must consent to an amendment or waiver;

                           (2) reduce the rate of or extend the time for payment
                  of interest on any Security;

                           (3) reduce the principal of or extend the Stated
                  Maturity of any Security;

                           (4) impair the right of any Holder to receive payment
                  of principal of and interest on such Holder's Securities on or
                  after the due dates therefor or to institute suit for the
                  enforcement of any payment on or with respect to such Holder's
                  Securities;

                           (5) reduce the premium payable upon the redemption of
                  any Security or change the time at which any Security may be
                  redeemed in accordance with Article III;

                           (6) reduce the premium payable upon a Change of
                  Control or, at any time after a Change of Control has
                  occurred, amend the definition of "Change of Control" or
                  change the time at which any Change of Control Offer relating
                  thereto must be made or at which the Securities must be
                  repurchased pursuant to such Change of Control Offer;

                           (7) at any time after the Company is obligated to
                  make an Asset Sales Prepayment Offer with the Excess Proceeds
                  from Asset Sales,


                                       70


                  change the time at which such Asset Sales Prepayment Offer
                  must be made or at which the Securities must be repurchased
                  pursuant thereto;

                           (8) make any Security payable in money other than
                  that stated in the Security; or

                           (9) subordinate the Securities to any other
                  obligation of the Company.

                  It shall not be necessary for the consent of the Holders under
this Section 9.02 to approve the particular form of any proposed amendment, but
it shall be sufficient if such consent approves the substance thereof.

                  After an amendment under this Section 9.02 becomes effective,
the Company shall mail to each Holder at such Holder's address appearing in the
Security Register a notice briefly describing such amendment. The failure to
give such notice to all Holders, or any defect therein, shall not impair or
affect the validity of an amendment under this Section 9.02.

                  SECTION 9.03. Compliance with Trust Indenture Act. Every
amendment to this Indenture or the Securities shall comply with the TIA as then
in effect.

                  SECTION 9.04. Revocation and Effect of Consents and Waivers. A
consent to an amendment or a waiver by a Holder shall bind the Holder and every
subsequent Holder of that Security or portion of the Security that evidences the
same debt as the consenting Holder's Security, even if notation of the consent
or waiver is not made on the Security. However, any such Holder or subsequent
Holder may revoke the consent or waiver as to such Holder's Security or portion
of the Security if the Trustee receives the notice of revocation before the date
the amendment or waiver becomes effective. After an amendment or waiver becomes
effective, it shall bind every Holder. An amendment or waiver becomes effective
upon the execution of such amendment or waiver by the Trustee.

                  The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to give their consent
or take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Holders at such record
date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall be valid or effective for more than 120
days after such record date.

                  SECTION 9.05. Notation on or Exchange of Securities. If an
amendment changes the terms of a Security, the Trustee may require the Holder of
the Security to deliver such Security to the Trustee. The Trustee may place an
appropriate notation on the Security regarding the changed terms and return such
Security to the Holder. Alternatively, if the Company or the Trustee so
determines, the Company in exchange for


                                                                              71


the Security shall issue and the Trustee shall authenticate a new Security that
reflects the changed terms. Failure to make the appropriate notation or to issue
a new Security shall not affect the validity of such amendment.

                  SECTION 9.06. Trustee To Sign Amendments. The Trustee shall
sign any amendment authorized pursuant to this Article IX if the amendment does
not adversely affect the rights, duties, liabilities or immunities of the
Trustee. If such amendment does adversely affect the rights, duties, liabilities
or immunities of the Trustee, the Trustee may but need not sign it. In signing
such amendment the Trustee shall be entitled to receive indemnity reasonably
satisfactory to it and to receive, and (subject to Section 7.01) shall be fully
protected in relying upon, an Officers' Certificate and an Opinion of Counsel
stating that such amendment is authorized or permitted by this Indenture.

                  SECTION 9.07. Payment for Consent. Neither the Company nor any
Affiliate of the Company shall, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
for or as an inducement to any consent, waiver or amendment of any of the terms
or provisions of this Indenture or the Securities unless such consideration is
offered to be paid to all Holders that so consent, waive or agree to amend in
the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.

                                   ARTICLE X

                                  Miscellaneous

                  SECTION 10.01. Trust Indenture Act Controls. If any provision
of this Indenture limits, qualifies or conflicts with another provision that is
required to be included in this Indenture by the TIA, the required provision
shall control.

                  SECTION 10.02. Notices. Any notice or communication shall be
in writing and delivered in person or mailed by first-class mail or sent by
facsimile (with a hard copy delivered in person or by mail promptly thereafter)
and addressed as follows:

                                    if to the Company:

                                    Rite Aid Corporation
                                    30 Hunter Lane
                                    Camp Hill, Pennsylvania 17011
                                    facsimile: 717-760-7867

                                    Attention of:  Robert B. Sari, Esq.


                                    if to the Trustee:

                                    BNY Midwest Trust Company



                                                                              72

                                    2 North LaSalle Street, Suite 1020
                                    Chicago, IL 60602
                                    facsimile: 312-827-8542

                                    Attention of: Corporate Trust

                  The Company or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices or
communications.

                  Any notice or communication mailed to a Holder shall be mailed
to the Holder at the Holder's address as it appears on the registration books of
the Registrar and shall be sufficiently given if so mailed within the time
prescribed.

                  Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders. If
a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.

                  SECTION 10.03. Communication by Holders with Other Holders.
Holders may communicate pursuant to TIA ss. 312(b) with other Holders with
respect to their rights under this Indenture or the Securities. The Company, the
Trustee, the Registrar and anyone else shall have the protection of TIA ss.
312(c).

                  SECTION 10.04. Certificate and Opinion as to Conditions
Precedent. Upon any request or application by the Company to the Trustee to take
or refrain from taking any action under this Indenture, the Company shall
furnish to the Trustee:

                           (1) an Officers' Certificate in form and substance
                  reasonably satisfactory to the Trustee stating that, in the
                  opinion of the signers, all conditions precedent, if any,
                  provided for in this Indenture relating to the proposed action
                  have been complied with; and

                           (2) except in the case of Section 3.01 under which an
                  opinion will not be required, an Opinion of Counsel in form
                  and substance reasonably satisfactory to the Trustee stating
                  that, in the opinion of such counsel, all such conditions
                  precedent have been complied with; provided, however, that
                  with respect to matters of fact an Opinion of Counsel may rely
                  on an Officers' Certificate or certificates of public
                  officials.

                  SECTION 10.05. Statements Required in Certificate or Opinion.
Each certificate with respect to compliance with a covenant or condition
provided for in this Indenture shall include:

                           (1) a statement that the individual making such
                  certificate has read such covenant or condition;



                                                                              73


                           (2) a brief statement as to the nature and scope of
                  the examination or investigation upon which the statements
                  contained in such certificate are based;

                           (3) a statement that, in the opinion of such
                  individual, he has made such examination or investigation as
                  is necessary to enable him to express an informed opinion as
                  to whether or not such covenant or condition has been complied
                  with; and

                           (4) a statement as to whether or not, in the opinion
                  of such individual, such covenant or condition has been
                  complied with.

Each opinion with respect to compliance with a covenant or condition provided
for in this Indenture shall be in form and substance reasonably satisfactory to
the party requesting such opinion and the party giving such opinion.

                  SECTION 10.06. When Securities Disregarded. In determining
whether the Holders of the required principal amount of Securities have
concurred in any direction, waiver or consent, Securities owned by the Company
or by any Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company shall be disregarded and
deemed not to be outstanding, except that, for the purpose of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Securities that the Trustee knows are so owned shall be so
disregarded. Also, subject to the foregoing, only Securities outstanding at the
time shall be considered in any such determination.

                  SECTION 10.07. Rules by Trustee, Paying Agent and Registrar.
The Trustee may make reasonable rules for action by or a meeting of Holders. The
Registrar and the Paying Agent or co-registrar may make reasonable rules for
their functions.

                  SECTION 10.08. Governing Law. THIS INDENTURE AND THE
SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF
CONFLICTS OF LAW.

                  SECTION 10.09. No Recourse Against Others. A director,
officer, employee or stockholder, as such, of the Company shall not have any
liability for any obligations of the Company under the Securities or this
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Security, each Holder shall waive
and release all such liability. The waiver and release shall be part of the
consideration for the issue of the Securities.

                  SECTION 10.10. Successors. All agreements of the Company in
this Indenture and the Securities shall bind its successors. All agreements of
the Trustee in this Indenture shall bind its successors.



                                                                              74


                  SECTION 10.11. Multiple Originals. The parties may sign any
number of copies of this Indenture. Each signed copy shall be an original, but
all of them together represent the same agreement. One signed copy is enough to
prove this Indenture.

                  SECTION 10.12. Table of Contents; Headings. The table of
contents, cross-reference sheet and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not
intended to be considered a part hereof and shall not modify or restrict any of
the terms or provisions hereof.




                                                                              75




                  IN WITNESS WHEREOF, the parties have caused this Indenture to
be duly executed as of the date first written above.

                                           RITE AID CORPORATION,

                                           By
                                             -----------------------------------
                                              Name:
                                              Title:


                                           BNY MIDWEST TRUST COMPANY,

                                           By
                                             -----------------------------------
                                              Name:
                                              Title:






                                                                      APPENDIX A


           FOR OFFERINGS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT TO
            RULE 144A, TO CERTAIN PERSONS IN OFFSHORE TRANSACTIONS IN
             RELIANCE ON REGULATION S AND, SUBJECT TO THE APPLICABLE
                 PURCHASE AGREEMENT, TO INSTITUTIONAL ACCREDITED
                                   INVESTORS.

                    PROVISIONS RELATING TO INITIAL SECURITIES
                             AND EXCHANGE SECURITIES

         1.  Definitions

         1.1  Definitions

         For the purposes of this Appendix A the following terms shall have the
meanings indicated below:

                  "Definitive Security" means a certificated Initial Security or
Exchange Security or Private Exchange Security bearing, if required, the
restricted securities legend set forth in Section 2.3(d).

                  "Depository" means The Depository Trust Company, its nominees
and their respective successors.

                  "Exchange Securities" means the 9.25% Senior Notes due 2013 to
be issued pursuant to this Indenture in connection with a Registered Exchange
Offer pursuant to a Registration Agreement.

                  "IAI" means an institutional "accredited investor" as
described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.

                  "Initial Purchasers" means Citigroup Global Markets Inc., J.P.
Morgan Securities Inc. and Fleet Securities, Inc.

                  "Initial Securities" means the 9.25% Senior Notes due 2013, to
be issued from time to time, in one or more series as provided for in this
Indenture.

                  "Original Securities" means Initial Securities in the
aggregate principal amount of $150,000,000 issued on May 20, 2003.

                  "Private Exchange" means the offer by the Company, pursuant to
Section 1 of the Registration Agreement, or pursuant to any similar provision of
any other Registration Agreement, to issue and deliver to certain purchasers, in
exchange for the Initial Securities held by such purchasers as part of their
initial distribution, a like aggregate principal amount of Private Exchange
Securities.

                  "Private Exchange Securities" means the 9.25% Senior Notes due
2013 to be issued pursuant to this Indenture in connection with a Private
Exchange pursuant to a Registration Agreement.




                  "Purchase Agreement" means the Purchase Agreement dated May
13, 2003, among the Company and the Initial Purchasers relating to the Original
Securities, or any similar agreement relating to any future sale of Initial
Securities by the Company.

                  "QIB" means a "qualified institutional buyer" as defined in
Rule 144A.

                  "Registered Exchange Offer" means the offer by the Company,
pursuant to a Registration Agreement, to certain Holders of Initial Securities,
to issue and deliver to such Holders, in exchange for the Initial Securities, a
like aggregate principal amount of Exchange Securities registered under the
Securities Act.

                  "Registration Agreement" means the Exchange and Registration
Rights Agreement dated May 20, 2003, among the Company and the Initial
Purchasers relating to the Original Securities, or any similar agreement
relating to any additional Initial Securities.

                  "Rule 144A Securities" means all Initial Securities offered
and sold to QIBs in reliance on Rule 144A.

                  "Securities" means the Initial Securities and the Exchange
Securities, treated as a single class.

                  "Securities Act" means the Securities Act of 1933, as amended.

                  "Securities Custodian" means the custodian with respect to a
Global Security (as appointed by the Depository) or any successor person
thereto, who shall initially be the Trustee.

                  "Shelf Registration Statement" means a registration statement
issued by the Company in connection with the offer and sale of Initial
Securities or Private Exchange Securities pursuant to the Registration
Agreement.

                  "Transfer Restricted Securities" means Definitive Securities
and any other Securities that bear or are required to bear the legend set forth
in Section 2.3(c) hereto.

         1.2  Other Definitions

                             Term                            Defined in Section
                             ----                            ------------------
"Agent Members"..............................................            2.1(b)
"Global Security"............................................            2.1(a)
"IAI Global Security"........................................            2.1(a)
"Regulation S"...............................................               2.1
"Regulation S Global Security"...............................            2.1(a)
"Rule 144A"..................................................               2.1
"Rule 144A Global Security"..................................            2.1(a)

         2.  The Securities




         2.1  Form and Dating

                  The Initial Securities will be offered and sold by the
Company, from time to time, pursuant to one or more Purchase Agreements. The
Initial Securities will be resold initially only to QIBs in reliance on Rule
144A under the Securities Act ("Rule 144A") and in reliance on Regulation S
under the Securities Act ("Regulation S"). Initial Securities may thereafter be
transferred to, among others, QIBs, purchasers in reliance on Regulation S and
IAIs under Rule 501(a)(1), (2), (3) or (7) under the Securities Act, subject to
the restrictions on transfer set forth herein.

                  (a) Global Securities. Initial Securities initially resold
pursuant to Rule 144A shall be issued initially in the form of one or more
permanent global Securities in definitive, fully registered form (collectively,
the "Rule 144A Global Security"), Initial Securities initially resold pursuant
to Regulation S shall be issued initially in the form of one or more global
securities (collectively, the "Regulation S Global Security") and, subject to
Section 2.4 hereof, Initial Securities transferred subsequent to the initial
resale thereof to IAIs shall be issued initially in the form of one or more
permanent global securities in definitive, fully registered form (collectively,
the "IAI Global Security"), in each case without interest coupons and with the
global securities legend and restricted securities legend set forth in Exhibit 1
hereto, which shall be deposited on behalf of the purchasers of the Initial
Securities represented thereby with the Securities Custodian, and registered in
the name of the Depository or a nominee of the Depository, duly executed by the
Company and authenticated by the Trustee as provided in this Indenture. The Rule
144A Global Security, IAI Global Security, and Regulation S Global Security are
collectively referred to herein as "Global Securities." The aggregate principal
amount of the Global Securities may from time to time be increased or decreased
by adjustments made on the records of the Trustee and the Depository or its
nominee as hereinafter provided.

                  (b) Book-Entry Provisions. This Section 2.1(b) shall apply
only to a Global Security deposited with or on behalf of the Depository.

                  The Company shall execute and the Trustee shall, in accordance
with this Section 2.1(b) and pursuant to an order of the Company, authenticate
and deliver initially one or more Global Securities that (a) shall be registered
in the name of the Depository for such Global Security or Global Securities or
the nominee of such Depository and (b) shall be delivered by the Trustee to such
Depository or pursuant to such Depository's instructions or held by the Trustee
as Securities Custodian.

                  Members of, or participants in, the Depository ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Security held on their behalf by the Depository or by the Trustee as Securities
Custodian or under such Global Security, and the Depository may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depository
or



impair, as between the Depository and its Agent Members, the operation of
customary practices of such Depository governing the exercise of the rights of a
holder of a beneficial interest in any Global Security.

                  (c) Definitive Securities. Except as provided in Section 2.3
or 2.4, owners of beneficial interests in Global Securities will not be entitled
to receive physical delivery of Definitive Securities.

         2.2 Authentication. The Trustee shall authenticate and deliver: (1)
Original Securities for original issue in an aggregate principal amount of
$150,000,000, (2) additional Initial Securities, if and when issued, in an
unlimited aggregate principal amount, and (3) the Exchange Securities or Private
Exchange Securities for issue only in a Registered Exchange Offer or a Private
Exchange, respectively, pursuant to a Registration Agreement, for a like
principal amount of Initial Securities or Private Exchange Securities, as
applicable, upon a written order of the Company signed by two Officers of the
Company, at least one of whom shall be the principal executive officer or
principal financial officer of the Company. Such order shall specify the amount
of the Securities to be authenticated and the date on which the original issue
of Securities is to be authenticated and whether the Securities are to be
Initial Securities or Exchange Securities.

         2.3 Transfer and Exchange. (a) Transfer and Exchange of Definitive
Securities. When Definitive Securities are presented to the Registrar or a
co-registrar with a request:

                  (x) to register the transfer of such Definitive Securities; or

                  (y) to exchange such Definitive Securities for an equal
         principal amount of Definitive Securities of other authorized
         denominations,

the Registrar or co-registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
provided, however, that the Definitive Securities surrendered for transfer or
exchange:

                  (i) shall be duly endorsed or accompanied by a written
         instrument of transfer in form reasonably satisfactory to the Company
         and the Registrar or co-registrar, duly executed by the Holder thereof
         or his attorney duly authorized in writing; and

                  (ii) if such Definitive Securities bear a restricted
         securities legend, they are being transferred or exchanged pursuant to
         an effective registration statement under the Securities Act or
         pursuant to clause (A), (B) or (C) below, and are accompanied by the
         following additional information and documents, as applicable:

                           (A) if such Definitive Securities are being delivered
                  to the Registrar by a Holder for registration in the name of
                  such Holder, without transfer, a certification from such
                  Holder to that effect; or




                           (B) if such Definitive Securities are being
                  transferred to the Company, a certification to that effect; or

                           (C) if such Definitive Securities are being
                  transferred pursuant to an exemption from registration in
                  accordance with Rule 144 under the Securities Act or in
                  reliance upon another exemption from the registration
                  requirements of the Securities Act, (i) a certification to
                  that effect (in the form set forth on the reverse of the
                  Initial Security) and (ii) if the Company so requests, as
                  provided in the form set forth on the reverse of the Initial
                  Security, an opinion of counsel or other evidence reasonably
                  satisfactory to it as to the compliance with the restrictions
                  set forth in the legend set forth in Section 2.3(c)(i).

                  (b) Transfer and Exchange of Global Securities. (i) The
transfer and exchange of Global Securities or beneficial interests therein shall
be effected through the Depository, in accordance with this Indenture (including
applicable restrictions on transfer set forth herein, if any) and the procedures
of the Depository therefor. A transferor of a beneficial interest in a Global
Security shall deliver a written order given in accordance with the Depository's
procedures containing information regarding the participant account of the
Depository to be credited with a beneficial interest in the Global Security, and
such account shall be credited in accordance with such instructions with a
beneficial interest in the Global Security, and the account of the Person making
the transfer shall be debited by an amount equal to the beneficial interest in
the Global Security being transferred. In the case of a transfer of a beneficial
interest in a Global Security to an IAI, the transferee must furnish a signed
letter to the Trustee containing certain representations and agreements in the
form of Exhibit B hereto.

                  (ii) If the proposed transfer is a transfer of a beneficial
         interest in one Global Security to a beneficial interest in another
         Global Security, the Registrar shall reflect on its books and records
         the date and an increase in the principal amount of the Global Security
         to which such interest is being transferred in an amount equal to the
         principal amount of the interest to be so transferred, and the
         Registrar shall reflect on its books and records the date and a
         corresponding decrease in the principal amount of the Global Security
         from which such interest is being transferred.

                  (iii) Notwithstanding any other provisions of this Appendix A
         (other than the provisions set forth in Section 2.4), a Global Security
         may not be transferred as a whole except by the Depository to a nominee
         of the Depository or by a nominee of the Depository to the Depository
         or another nominee of the Depository or by the Depository or any such
         nominee to a successor Depository or a nominee of such successor
         Depository.

                  (iv) In the event that a Global Security is exchanged for
         Definitive Securities pursuant to Section 2.4 prior to the consummation
         of a Registered Exchange Offer or the effectiveness of a Shelf
         Registration Statement with respect to such Securities, such Securities
         may be exchanged only in accordance



         with such procedures as are substantially consistent with the
         provisions of this Section 2.3 (including the certification
         requirements set forth on the reverse of the Initial Securities
         intended to ensure that such transfers comply with Rule 144A,
         Regulation S or such other applicable exemption from registration under
         the Securities Act, as the case may be) and such other procedures as
         may from time to time be adopted by the Company.

                  (c)  Legend.

                  (i) Except as permitted by the following paragraphs (ii),
         (iii) and (iv), each certificate evidencing the Global Securities and
         the Definitive Securities (and all Securities issued in exchange
         therefor or in substitution thereof) shall bear a legend in
         substantially the following form:

                  "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
                  ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER
                  HEREOF, BY PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF
                  THE COMPANY THAT THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR
                  OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY OF
                  THE ISSUANCE HEREOF (OR ANY PREDECESSOR SECURITY HERETO) OR
                  (Y) BY ANY HOLDER THAT WAS AN "AFFILIATE" (WITHIN THE MEANING
                  OF RULE 144 OF THE SECURITIES ACT) OF THE COMPANY AT ANY TIME
                  DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER,
                  IN EITHER CASE OTHER THAN (1) TO THE COMPANY, (2) SO LONG AS
                  THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A
                  UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON WHOM THE
                  SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
                  WITHIN THE MEANING OF RULE 144A, PURCHASING FOR ITS OWN
                  ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER
                  TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER
                  TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED
                  BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF
                  TRANSFER ON THE REVERSE OF THIS SECURITY), (3) IN AN OFFSHORE
                  TRANSACTION (AS DEFINED UNDER REGULATION S UNDER THE
                  SECURITIES ACT) IN ACCORDANCE WITH REGULATION S UNDER THE
                  SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE
                  TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF
                  THIS SECURITY), (4) TO AN INSTITUTION THAT IS AN "ACCREDITED
                  INVESTOR" AS



                  DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE
                  SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE
                  TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF
                  THIS SECURITY) THAT IS ACQUIRING THIS SECURITY FOR INVESTMENT
                  PURPOSES AND NOT FOR DISTRIBUTION, AND A CERTIFICATE WHICH MAY
                  BE OBTAINED FROM THE COMPANY OR THE TRUSTEE IS DELIVERED BY
                  THE TRANSFEREE TO THE COMPANY AND TRUSTEE, (5) PURSUANT TO AN
                  EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED
                  BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT, OR (6)
                  PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
                  SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE
                  SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. AN
                  INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS SECURITY AGREES
                  THAT IT WILL FURNISH TO THE COMPANY AND THE TRUSTEE SUCH
                  CERTIFICATES AND OTHER INFORMATION AS THEY MAY REASONABLY
                  REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF THIS SECURITY
                  COMPLIES WITH THE FOREGOING RESTRICTIONS. THE HOLDER HEREOF,
                  BY PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE
                  BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED
                  INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2)
                  PURCHASING FROM A PERSON NOT PARTICIPATING IN THE INITIAL
                  DISTRIBUTION OF THIS SECURITY (OR ANY PREDECESSOR SECURITY),
                  THAT IT IS AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS
                  DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE
                  SECURITIES ACT AND THAT IT IS HOLDING THIS SECURITY FOR
                  INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION OR (3) A NON-U.S.
                  PERSON OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN
                  ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (k)(2)(i) OF
                  RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT."




Each Definitive Security will also bear the following additional legend:

                  "IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO
                  THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER
                  INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO
                  CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
                  RESTRICTIONS."

                  (ii) Upon any sale or transfer of a Transfer Restricted
         Security (including any Transfer Restricted Security represented by a
         Global Security) pursuant to Rule 144 under the Securities Act:

                       (A) in the case of any Transfer Restricted Security that
                  is a Definitive Security, the Registrar shall permit the
                  Holder thereof to exchange such Transfer Restricted Security
                  for a Security that does not bear the legends set forth above
                  and rescind any restriction on the transfer of such Transfer
                  Restricted Security; and

                       (B) in the case of any Transfer Restricted Security that
                  is represented by a Global Security, the Registrar shall
                  permit the Holder thereof to exchange such Transfer Restricted
                  Security for a Security that does not bear the legends set
                  forth above and rescind any restriction on the transfer of
                  such Transfer Restricted Security,

in either case, if the Holder certifies in writing to the Registrar that its
request for such exchange was made in reliance on Rule 144 (such certification
to be in the form set forth on the reverse of the Initial Security).

                  (iii) After a transfer of any Initial Securities or Private
         Exchange Securities, as the case may be, during the period of the
         effectiveness of a Shelf Registration Statement with respect to such
         Initial Securities or Private Exchange Securities, all requirements
         pertaining to restricted securities legends on such Initial Security or
         such Private Exchange Security will cease to apply, and an Initial
         Security or Private Exchange Security, as the case may be, in global
         form without restricted security legends will be available to the
         transferee of the beneficial interests of such Initial Securities or
         Private Exchange Securities. Upon the occurrence of any of the
         circumstances described in this paragraph, the Company will deliver an
         Officers' Certificate to the Trustee instructing the Trustee to issue
         Securities without restricted security legends.

                  (iv) Upon the consummation of a Registered Exchange Offer with
         respect to the Initial Securities pursuant to which certain Holders of
         such Initial Securities are offered Exchange Securities in exchange for
         their Initial Securities, Exchange Securities in global form without
         the restricted security legends will be available to Holders or
         beneficial owners that exchange such Initial Securities (or beneficial
         interests therein) in such Registered Exchange Offer. Upon the
         occurrence of any



         of the circumstances described in this paragraph, the Company will
         deliver an Officers' Certificate to the Trustee instructing the Trustee
         to issue Securities without restricted security legends.

                  (d) Cancellation or Adjustment of Global Security. At such
time as all beneficial interests in a Global Security have either been exchanged
for Definitive Securities, redeemed, repurchased or canceled, such Global
Security shall be returned by the Depository to the Trustee for cancellation or
retained and canceled by the Trustee. At any time prior to such cancellation, if
any beneficial interest in a Global Security is exchanged for Definitive
Securities, redeemed, repurchased or canceled, the principal amount of
Securities represented by such Global Security shall be reduced, and an
adjustment shall be made on the books and records of the Trustee (if it is then
the Securities Custodian for such Global Security) with respect to such Global
Security, by the Trustee or the Securities Custodian, to reflect such reduction.

                  (e) Obligations with Respect to Transfers and Exchanges of
Securities.

                  (i) To permit registrations of transfers and exchanges, the
         Company shall execute and the Trustee shall authenticate Definitive
         Securities and Global Securities at the Registrar's or co-registrar's
         request.

                  (ii) No service charge shall be made for any registration of
         transfer or exchange, but the Company or the Trustee may require
         payment of a sum sufficient to cover any transfer tax, assessments, or
         similar governmental charge payable in connection therewith (other than
         any such transfer taxes, assessments or similar governmental charge
         payable upon exchange or transfer pursuant to Sections 3.06, 4.06, 4.12
         and 9.05 of this Indenture).

                  (iii) The Registrar or co-registrar shall not be required to
         register the transfer of or exchange of any Security for a period
         beginning 15 days before the mailing of a notice of redemption or an
         offer to repurchase Securities or 15 days before an interest payment
         date.

                  (iv) Prior to the due presentation for registration of
         transfer of any Security, the Company, the Trustee, the Paying Agent,
         the Registrar or any co-registrar may deem and treat the person in
         whose name a Security is registered as the absolute owner of such
         Security for the purpose of receiving payment of principal of and
         interest on such Security and for all other purposes whatsoever,
         whether or not such Security is overdue, and none of the Company, the
         Trustee, the Paying Agent, the Registrar or any co-registrar shall be
         affected by notice to the contrary.

                  (v) All Securities issued upon any transfer or exchange
         pursuant to the terms of this Indenture shall evidence the same debt
         and shall be entitled to the same benefits under this Indenture as the
         Securities surrendered upon such transfer or exchange.


                  (f)  No Obligation of the Trustee.

                  (i) The Trustee shall have no responsibility or obligation to
         any beneficial owner of a Global Security, a member of, or a
         participant in the Depository or any other Person with respect to the
         accuracy of the records of the Depository or its nominee or of any
         participant or member thereof, with respect to any ownership interest
         in the Securities or with respect to the delivery to any participant,
         member, beneficial owner or other Person (other than the Depository) of
         any notice (including any notice of redemption or repurchase) or the
         payment of any amount, under or with respect to such Securities. All
         notices and communications to be given to the Holders and all payments
         to be made to Holders under the Securities shall be given or made only
         to the registered Holders (which shall be the Depository or its nominee
         in the case of a Global Security). The rights of beneficial owners in
         any Global Security shall be exercised only through the Depository
         subject to the applicable rules and procedures of the Depository. The
         Trustee may rely and shall be fully protected in relying upon
         information furnished by the Depository with respect to its members,
         participants and any beneficial owners.

                  (ii) The Trustee shall have no obligation or duty to monitor,
         determine or inquire as to compliance with any restrictions on transfer
         imposed under this Indenture or under applicable law with respect to
         any transfer of any interest in any Security (including any transfers
         between or among Depository participants, members or beneficial owners
         in any Global Security) other than to require delivery of such
         certificates and other documentation or evidence as are expressly
         required by, and to do so if and when expressly required by, the terms
         of this Indenture, and to examine the same to determine substantial
         compliance as to form with the express requirements hereof.

         2.4  Definitive Securities

                  (a) A Global Security deposited with the Depository or with
the Trustee as Securities Custodian pursuant to Section 2.1 shall be transferred
to the beneficial owners thereof in the form of Definitive Securities in an
aggregate principal amount equal to the principal amount of such Global
Security, in exchange for such Global Security, only if such transfer complies
with Section 2.3 and (i) the Depository notifies the Company that it is
unwilling or unable to continue as a Depository for such Global Security or if
at any time the Depository ceases to be a "clearing agency" registered under the
Exchange Act, and a successor Depository is not appointed by the Company within
90 days of such notice, or (ii) a Default or an Event of Default has occurred
and is continuing or (iii) the Company, in its sole discretion, notifies the
Trustee in writing that it elects to cause the issuance of Definitive Securities
under this Indenture.

                  (b) Any Global Security that is transferable to the beneficial
owners thereof pursuant to this Section 2.4 shall be surrendered by the
Depository to the Trustee, to be so transferred, in whole or from time to time
in part, without charge, and the Trustee shall authenticate and deliver, upon
such transfer of each portion of such Global Security,



an equal aggregate principal amount of Definitive Securities of authorized
denominations. Definitive Securities issued in exchange for any portion of a
Global Security transferred pursuant to this Section shall be executed,
authenticated and delivered only in denominations of $1,000 and any integral
multiple thereof and registered in such names as the Depository shall direct.
Any Definitive Security delivered in exchange for an interest in the Global
Security shall, except as otherwise provided by Section 2.3(c), bear the
restricted securities legend set forth in Exhibit 1 hereto.

                  (c) The registered Holder of a Global Security may grant
proxies and otherwise authorize any Person, including Agent Members and Persons
that may hold interests through Agent Members, to take any action that a Holder
is entitled to take under this Indenture or the Securities.

                  (d) In the event of the occurrence of any of the events
specified in Section 2.4(a)(i), (ii) or (iii), the Company will promptly make
available to the Trustee a reasonable supply of Definitive Securities in
definitive, fully registered form without interest coupons.








                                                                       EXHIBIT 1
                                                                   to APPENDIX A

                       [FORM OF FACE OF INITIAL SECURITY]

                           [Global Securities Legend]

                  UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

                  TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

                         [Restricted Securities Legend]

         THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY OF
THE ISSUANCE HEREOF (OR ANY PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER
THAT WAS AN "AFFILIATE" (WITHIN THE MEANING OF RULE 144 OF THE SECURITIES ACT)
OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH
TRANSFER, IN EITHER CASE, OTHER THAN (1) TO THE COMPANY, (2) SO LONG AS THIS
SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT
("RULE 144A"), TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A, PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS
GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE
OF TRANSFER ON THE REVERSE OF THIS SECURITY), (3) IN AN OFFSHORE TRANSACTION (AS
DEFINED UNDER REGULATION S UNDER THE SECURITIES ACT) IN ACCORDANCE WITH
REGULATION S UNDER THE SECURITIES ACT (AS



INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON
THE REVERSE OF THIS SECURITY), (4) TO AN INSTITUTION THAT IS AN "ACCREDITED
INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT
(AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF
TRANSFER ON THE REVERSE OF THIS SECURITY) THAT IS ACQUIRING THIS SECURITY FOR
INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND A CERTIFICATE WHICH MAY BE
OBTAINED FROM THE COMPANY OR THE TRUSTEE IS DELIVERED BY THE TRANSFEREE TO THE
COMPANY AND TRUSTEE, (5) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT, OR
(6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN
EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES. AN INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS SECURITY AGREES
THAT IT WILL FURNISH TO THE COMPANY AND THE TRUSTEE SUCH CERTIFICATES AND OTHER
INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF
THIS SECURITY COMPLIES WITH THE FOREGOING RESTRICTIONS. THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY
THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
OR (2) PURCHASING FROM A PERSON NOT PARTICIPATING IN THE INITIAL DISTRIBUTION OF
THIS SECURITY (OR ANY PREDECESSOR SECURITY), THAT IT IS AN INSTITUTION THAT IS
AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT AND THAT IT IS HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND
NOT FOR DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN
THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (k)(2)(i)
OF RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT.

                         [Definitive Securities Legend]

IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND
TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT
MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS.


                                        2







                       [FORM OF FACE OF INITIAL SECURITY]

No.______                                                    [Up to]**$_________





                           9.25% Senior Note due 2013

                                                              CUSIP No. ________

                  RITE AID CORPORATION, a Delaware corporation, promises to pay
to [Cede & Co.]**, or registered assigns, the principal sum [of [ ] Dollars]*
[as set forth on the Schedule of Increases or Decreases annexed hereto]** on
June 1, 2013.

                  Interest Payment Dates: June 1 and December 1, commencing on
December 1, 2003.

                  Record Dates:  May 15 and November 15.

- ------------------------

*  Insert for Definitive Securities.

** Insert for Global Securities. If the Security is to be issued in global form,
add the Global Securities Legend from Exhibit 1 to Appendix A and the attachment
from such Exhibit 1 captioned "TO BE ATTACHED TO GLOBAL SECURITIES - SCHEDULE OF
INCREASES OR DECREASES IN GLOBAL SECURITY".









                  Additional provisions of this Security are set forth on the
other side of this Security.

                  IN WITNESS WHEREOF, the parties have caused this instrument to
be duly executed.

                                           RITE AID CORPORATION,

                                           By
                                             ----------------------------------
                                              Name:
                                              Title:

TRUSTEE'S CERTIFICATE OF
    AUTHENTICATION

Dated:

BNY MIDWEST TRUST COMPANY,

                  as Trustee, certifies
                  that this is one of
                  the Securities referred
                  to in the Indenture.

By:
   ----------------------------------
         Authorized Signatory






                   [FORM OF REVERSE SIDE OF INITIAL SECURITY]

                           9.25% Senior Note due 2013

1.  Interest

                  (a) RITE AID CORPORATION, a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on the
principal amount of this Security at the rate per annum shown above. The Company
will pay interest semiannually on June 1 and December 1 of each year, commencing
December 1, 2003. Interest on the Securities will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from May
20, 2003. Interest shall be computed on the basis of a 360-day year of twelve
30-day months. The Company shall pay interest on overdue principal at the rate
per annum borne by the Securities plus 1% per annum, and it shall pay interest
on overdue installments of interest at the rate per annum borne by the
Securities to the extent lawful.

                  (b) Special Interest. The holder of this Security is entitled
to the benefits of a Exchange and Registration Rights Agreement, dated as of May
20, 2003, among the Company and the Initial Purchasers named therein (the
"Registration Agreement"). Capitalized terms used in this paragraph (b) but not
defined herein have the meanings assigned to them in the Registration Agreement.
In the event that (i) neither the Exchange Offer Registration Statement nor the
Shelf Registration Statement, as the case may be, is filed with the Commission
on or prior to the date which is 90 days following the date of the original
issuance of the Securities, (ii) the Exchange Offer Registration Statement or
the Shelf Registration Statement, as the case may be, is not declared effective
within 180 days after the original issuance of the Securities, (iii) if the
Exchange Offer Registration Statement is declared effective, the Registered
Exchange Offer is not consummated on or prior to 210 days after the date of the
original issuance of Securities, (iv) if the Company is required to file the
Shelf Registration Statement in accordance with Section 2 of the Registration
Agreement, the Company does not so file the Shelf Registration Statement on or
prior to the 30th day after the Company's obligation to file such Shelf
Registration Statement arises, (v) the applicable Registration Statement is
filed and declared effective but shall thereafter cease to be effective (at any
time that the Company is obligated to maintain the effectiveness thereof)
without being again effective within 30 days or being succeeded within 30 days
by an additional Registration Statement filed and declared effective, provided
that such 30-day period shall toll during a Suspension Period, or (vi) any
Suspension Periods exceed, in the aggregate, 75 days during any 365-day period
(each such event referred to in clauses (i) through (vi), a "Registration
Default"), the Company shall be obligated to pay Additional Interest from and
including the date on which the first such Registration Default shall occur to
but excluding the date on which all Registration Defaults have been cured, at a
rate of 0.25% per annum on the applicable principal amount of Securities held by
such Holder for the first 90-day period immediately following the occurrence of
a Registration Default, and such rate will increase by an additional 0.25% with
respect to each subsequent 90-day



period until all Registration Defaults have been cured, provided that the
maximum additional rate may in no event exceed 0.50% per annum.

2.  Method of Payment

                  The Company will pay interest on the Securities (except
defaulted interest) to the Persons who are registered Holders at the close of
business on the May 15 or November 15 next preceding the interest payment date
even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in money
of the United States of America that at the time of payment is legal tender for
payment of public and private debts. Payments in respect of the Securities
represented by a Global Security (including principal and interest) will be made
by wire transfer of immediately available funds to the accounts specified by the
Depository. The Company will make all payments in respect of a Definitive
Security (including principal and interest), by mailing a check to the
registered address of each Holder thereof; provided, however, that payments on
the Securities may also be made, in the case of a Holder of at least $1,000,000
aggregate principal amount of Securities, by wire transfer to a U.S. dollar
account maintained by the payee with a bank in the United States if such Holder
elects payment by wire transfer by giving written notice to the Trustee or the
Paying Agent to such effect designating such account no later than 30 days
immediately preceding the relevant due date for payment (or such other date as
the Trustee may accept in its discretion).

3.  Paying Agent and Registrar

                  Initially, BNY Midwest Trust Company, an Illinois trust
company (the "Trustee"), will act as Paying Agent and Registrar. The Company may
appoint and change any Paying Agent, Registrar or co-registrar without notice.
The Company or any of its domestically incorporated Wholly Owned Subsidiaries
may act as Paying Agent, Registrar or co-registrar.

4.  Indenture

                  The Company issued the Securities under an Indenture dated as
of May 20, 2003 (the "Indenture"), between the Company and the Trustee. The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.
ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture (the "TIA").
Terms defined in the Indenture and not defined in the Securities have the
meanings ascribed thereto in the Indenture. The Securities are subject to all
such terms, and Holders are referred to the Indenture and the TIA for a
statement of those terms.

                  The Securities are unsubordinated, unsecured obligations of
the Company. This Security is one of the Original Securities referred to in the
Indenture issued in an aggregate principal amount of $150,000,000. The
Securities include the Original Securities, an unlimited aggregate principal
amount of additional Initial Securities that


                                       2


may be issued under the Indenture, and any Exchange Securities issued in
exchange for Initial Securities. The Original Securities, such additional
Initial Securities and the Exchange Securities are treated as a single class of
securities under the Indenture. The Indenture imposes certain limitations on the
ability of the Company and its Restricted Subsidiaries to, among other things,
make certain Investments and other Restricted Payments, pay dividends and other
distributions, incur Debt, enter into consensual restrictions upon the payment
of certain dividends and distributions by such Restricted Subsidiaries, enter
into or permit certain transactions with Affiliates, create or incur Liens and
make Asset Sales. The Indenture also imposes limitations on the ability of the
Company to consolidate or merge with or into any other Person or sell, transfer,
assign, lease, convey or otherwise dispose of all or substantially all of the
Property of the Company.

5.  Optional Redemption

                  The Company may choose to redeem the Securities at any time.
If it does so, it may redeem all or any portion of the Securities, at once or
over time, after giving the required notice under the Indenture.

                  To redeem the Securities prior to June 1, 2008, the Company
must pay a redemption price equal to 100% of the principal amount of the
Securities to be redeemed plus the Applicable Premium as of, and accrued and
unpaid interest, if any, to, the redemption date (subject to the right of
holders of record on the relevant record date to receive interest due on the
relevant Interest Payment Date that is on or prior to the redemption date). Any
notice to Holders of such a redemption needs to include the appropriate
calculation of the redemption price, but need not include the redemption price
itself. The actual redemption price must be set forth in an Officers'
Certificate delivered to the Trustee no later than two Business Days prior to
the redemption date.

                  "Applicable Premium" means, with respect to any Security on
any redemption date, the greater of (i) 1.0% of the principal amount of such
Security and (ii) the excess of (A) the present value at such redemption date of
(1) the redemption price of such Security at June 1, 2008 (such redemption price
being set forth in the table below) plus (2) all required interest payments due
on such Security through June 1, 2008 (excluding accrued but unpaid interest),
computed using a discount rate equal to the Treasury Rate on such redemption
date plus 75 basis points over (B) the principal amount of such Security.

                  "Treasury Rate" means, as of any redemption date, the yield to
maturity as of such redemption date of United States Treasury securities with a
constant maturity (as compiled and published in the most recent Federal Reserve
Statistical Release H.15 (519) that has become publicly available at least two
Business Days prior to the redemption date (or, if such statistical release is
no longer published, any publicly available source of similar market data)) most
nearly equal to the period from the redemption date to June 1, 2008; provided,
however, that if the period from the redemption date to June 1, 2008 is less
than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.



                                       3


                  On and after June 1, 2008, the Company may redeem the
Securities in whole at any time or in part from time to time at the following
redemption prices (expressed in percentages of principal amount), plus accrued
and unpaid interest, if any, to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant Interest Payment Date that is on or prior to the redemption date), if
redeemed during the 12-month period beginning on June 1 of the years set forth
below:

Redemption Period                                        Price
- -----------------                                        -----
2008................................................     104.625%
2009................................................     103.083%
2010................................................     101.542%
2011 and thereafter.................................     100.000%

                  Notwithstanding the foregoing, at any time and from time to
time prior to June 1, 2007, the Company may redeem up to 35% of the original
aggregate principal amount of the Securities (including Securities issued after
May 20, 2003, if any) with the proceeds from one or more Equity Offerings by the
Company, at a redemption price equal to 109.25% of the principal amount thereof,
plus accrued and unpaid interest thereon, if any, to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant Interest Payment Date that is on or prior
to the redemption date); provided, however, that after giving effect to any such
redemption, at least 65% of the original aggregate principal amount of the
Securities (including Securities issued after May 20, 2003) remains outstanding.
Any such redemption shall be made within 75 days of such Equity Offering upon
not less than 30 nor more than 60 days' prior notice.

                  If the optional redemption date is on or after a record date
and on or before the relevant Interest Payment Date, the accrued and unpaid
interest if any, will be paid to the person or entity in whose name the Security
is registered at the close of business on that record date, and no additional
interest will be payable to Holders whose Securities shall be subject to
repurchase.

6.  Sinking Fund

                  The Securities are not subject to any sinking fund.

7.  Notice of Redemption

                  Notice of redemption will be mailed by first-class mail at
least 30 days but not more than 60 days before the redemption date to each
Holder of Securities to be redeemed at his or her registered address. Securities
in denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued interest on all Securities (or portions thereof) to be redeemed on the
redemption date is deposited with the Paying Agent on or before the


                                       4


redemption date and certain other conditions are satisfied, on and after such
date interest ceases to accrue on such Securities (or such portions thereof)
called for redemption.

8.  (a) Repurchase of Securities at the Option of Holders upon Change of Control

                  Upon a Change of Control, any Holder will have the right,
subject to certain conditions specified in the Indenture, to cause the Company
to repurchase all or any part of the Securities of such Holder at a purchase
price equal to 101% of the principal amount of the Securities to be repurchased
plus accrued and unpaid interest, if any, to the date of purchase (subject to
the right of Holders of record on the relevant record date to receive interest
due on the relevant Interest Payment Date that is on or prior to the date of
purchase) as provided in, and subject to the terms of, the Indenture.

8.  (b)Prepayment Offer Upon Asset Sale

                  When the aggregate amount of Excess Proceeds exceeds $20.0
million (taking into account income earned on such Excess Proceeds, if any), the
Company will be required to make an offer to purchase (the "Asset Sales
Prepayment Offer") the Securities, which offer shall be in the amount of the
Allocable Excess Proceeds, on a pro rata basis according to principal amount at
maturity, at a purchase price equal to 100% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the purchase date (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant Interest Payment Date), in accordance with the procedures
(including prorating in the event of oversubscription) set forth in the
Indenture. To the extent that any portion of the amount of Net Available Cash
remains after compliance with the preceding sentence and provided that all
Holders have been given the opportunity to tender their Securities for purchase
in accordance with the Indenture, the Company or such Restricted Subsidiary may
use such remaining amount for any purpose permitted by the Indenture and the
amount of Excess Proceeds will be reset to zero.

9.  Denominations; Transfer; Exchange

                  The Securities are in registered form without coupons in
denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or
exchange Securities in accordance with the Indenture. Upon any transfer or
exchange, the Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements or transfer documents and to pay any
taxes required by law or permitted by the Indenture. The Registrar need not
register the transfer of or exchange any Securities selected for redemption
(except, in the case of a Security to be redeemed in part, the portion of the
Security not to be redeemed) or to transfer or exchange any Securities for a
period of 15 days prior to a selection of Securities to be redeemed or 15 days
before an Interest Payment Date.

10.  Persons Deemed Owners

                  The registered Holder of this Security may be treated as the
owner of it for all purposes.



                                       5


11.  Unclaimed Money

                  If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back to
the Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.

12.  Discharge and Defeasance

                  Subject to certain conditions, the Company at any time may
terminate some of or all its obligations under the Securities and the Indenture
if the Company deposits with the Trustee money or U.S. Government Obligations
for the payment of principal and interest on the Securities to redemption or
maturity, as the case may be.

13.  Amendment, Waiver

                  Subject to certain exceptions set forth in the Indenture, (i)
the Indenture or the Securities may be amended without prior notice to any
Holder but with the written consent of the Holders of at least a majority in
aggregate principal amount of the outstanding Securities and (ii) any default or
noncompliance with any provision may be waived with the written consent of the
Holders of at least a majority in principal amount of the outstanding
Securities. Subject to certain exceptions set forth in the Indenture, without
the consent of any Holders, the Company, when authorized by a Board Resolution,
and the Trustee may amend the Indenture or the Securities (i) to cure any
ambiguity, omission, defect or inconsistency; (ii) to provide for the assumption
by a successor corporation of the obligations of the Company in accordance with
Article V under the Indenture; (iii) to provide for uncertificated Securities in
addition to or in place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of Section
163(f) of the Code, or in a manner such that the uncertificated Securities are
described in Section 163(f)(2)(B) of the Code; (iv) to add Guarantees with
respect to the Securities; (v) to secure the Securities; (vi) to add additional
covenants or to surrender rights and powers conferred on the Company; (vii) to
comply with the requirements of the Commission in connection with the
qualification of the Indenture under the TIA; or (viii) to make any change that
does not adversely affect the rights of any Holder.

14.  Defaults and Remedies

                  If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in aggregate principal amount of the Securities
then outstanding, subject to certain limitations, may declare all the Securities
to be immediately due and payable. Certain events of bankruptcy or insolvency
are Events of Default and shall result in the Securities being immediately due
and payable upon the occurrence of such Events of Default without any further
act of the Trustee or any Holder.

                  Holders of Securities may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may refuse to
enforce the Indenture or


                                       6


the Securities unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in aggregate principal amount of the
Securities then outstanding may direct the Trustee in its exercise of any trust
or power under the Indenture. The Holders of a majority in aggregate principal
amount of the Securities then outstanding, by written notice to the Company and
the Trustee, may rescind any declaration of acceleration and its consequences if
the rescission would not conflict with any judgment or decree, and if all
existing Events of Default have been cured or waived except nonpayment of
principal, premium or interest that has become due solely because of the
acceleration.

15.  Trustee Dealings with the Company

                  Subject to certain limitations imposed by the TIA, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its Affiliates and may otherwise deal
with the Company or its Affiliates with the same rights it would have if it were
not Trustee.

16.  No Recourse Against Others

                  A director, officer, employee or stockholder, as such, of the
Company shall not have any liability for any obligations of the Company under
the Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Security, each
Securityholder waives and releases all such liability. The waiver and release
are part of the consideration for the issue of the Securities.

17.  Successors

                  Subject to certain exceptions set forth in the Indenture, when
a successor assumes all the obligations of its predecessor under the Securities
and the Indenture in accordance with the terms of the Indenture, the predecessor
will be released from those obligations.

18.  Authentication

                  This Security shall not be valid until an authorized signatory
of the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.

19.  Abbreviations

                  Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship
and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to
Minors Act).



                                       7


20.  Governing Law

                  THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW.

21.  CUSIP Numbers

                  Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company has caused CUSIP numbers
to be printed on the Securities and has directed the Trustee to use CUSIP
numbers in notices of redemption as a convenience to Holders. No representation
is made as to the accuracy of such numbers either as printed on the Securities
or as contained in any notice of redemption and reliance may be placed only on
the other identification numbers placed thereon.

                  The Company will furnish to any Holder upon written request
and without charge to the Holder a copy of the Indenture which has in it the
text of this Security.




                                       8




                                 ASSIGNMENT FORM


To assign this Security, fill in the form below:

I or we assign and transfer this Security to

         (Print or type assignee's name, address and zip code)

         (Insert assignee's soc. sec. or tax I.D. No.)

and irrevocably appoint                          as agent to transfer this
Security on the books of the Company. The agent may substitute another to act
for him.

- ------------------------------------------------------------

Date:                  Your Signature:
     -----------------                ----------------------

- ------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.

In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act after the later of the date of original issuance
of such Securities and the last date, if any, on which such Securities were
owned by the Company or any Affiliate of the Company, the undersigned confirms
that such Securities are being transferred in accordance with its terms:

CHECK ONE BOX BELOW

         (1) [ ]  to the Company; or

         (2) [ ]  pursuant to an effective registration statement under the
                  Securities Act of 1933; or

         (3) [ ]  inside the United States to a "qualified institutional buyer"
                  (as defined in Rule 144A under the Securities Act of 1933)
                  that purchases for its own account or for the account of a
                  qualified institutional buyer to whom notice is given that
                  such transfer is being made in reliance on Rule 144A, in each
                  case pursuant to and in compliance with Rule 144A under the
                  Securities Act of 1933; or

         (4) [ ]  outside the United States in an offshore transaction within
                  the meaning of Regulation S under the Securities Act in
                  compliance with Rule 904 under the Securities Act of 1933; or

         (5) [ ]  to an institutional "accredited investor" (as defined in Rule
                  501(a)(1), (2), (3) or (7) under the Securities Act of 1933)
                  that has furnished to the Trustee a signed letter containing
                  certain



                  representations and agreements (the form of which letter can
                  be obtained from the Trustee or the Company); or

         (6) [ ]  pursuant to another available exemption from registration
                  provided by Rule 144 under the Securities Act of 1933.

         Unless one of the boxes is checked, the Trustee will refuse to register
         any of the Securities evidenced by this certificate in the name of any
         person other than the registered holder thereof; provided, however,
         that if box (5) or (6) is checked, the Trustee may require, prior to
         registering any such transfer of the Securities, such legal opinions,
         certifications and other information as the Company has reasonably
         requested to confirm that such transfer is being made pursuant to an
         exemption from, or in a transaction not subject to, the registration
         requirements of the Securities Act of 1933.


                                              ----------------------------------
                                              Your Signature

Signature Guarantee:


Date:
     --------------------------------------   ----------------------------------
Signature must be guaranteed by a participant            Signature of
in a recognized signature guaranty medallion         Signature Guarantee
program or other signature guarantor
acceptable to the Trustee

- --------------------------------------------------------------------------------

              TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.

                  The undersigned represents and warrants that it is purchasing
this Security for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.

Dated:
     --------------------------------------   ----------------------------------
Signature must be guaranteed by a participant    NOTICE:  To be executed by
in a recognized signature guaranty medallion              an executive officer
program or other signature guarantor
acceptable to the Trustee



                                       2






                      [TO BE ATTACHED TO GLOBAL SECURITIES]

              SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY

                  The initial principal amount of this Global Security is $[ ].
The following increases or decreases in this Global Security have been made:

                                                                                  Signature of
                                                            Principal amount of   authorized
                 Amount of decrease    Amount of increase   this Global           signatory of
                 in Principal Amount   in Principal         Security following    Trustee or
Date of          of this Global        Amount of this       such decrease or      Securities
Exchange         Security              Global Security      increase              Custodian













                       OPTION OF HOLDER TO ELECT PURCHASE

                  If you want to elect to have this Security purchased by the
Company pursuant to Section 4.06 (Asset Sale) or 4.12 (Change of Control) of the
Indenture, check the box:

                                       / /

                  If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.06 or 4.12 of the Indenture,
state the amount:

$


Date:                                  Your Signature:
     ------------------------------                   --------------------------
(Sign exactly as your name appears on the other side of the Security)


Signature Guarantee:
                    --------------------------------------
                    Signature must be guaranteed by a
                    participant in a recognized signature
                    guaranty medallion program or other
                    signature guarantor acceptable to the
                    Trustee.







                                    EXHIBIT A

                       [FORM OF FACE OF EXCHANGE SECURITY]

No.______                                                  [Up to]** $__________

                           9.25% Senior Note due 2013

                                                              CUSIP No. ________

                  RITE AID CORPORATION, a Delaware corporation, promises to pay
to [Cede & Co.]**, or registered assigns, the principal sum [of [ ] Dollars]*
[as set forth on the Schedule of Increases or Decreases annexed hereto]** on
June 1, 2013.

                  Interest Payment Dates: June 1 and December 1, commencing on
December 1, 2003.

                  Record Dates:  May 15 and November 15.




- ----------------
         ** Insert for Global Securities. If the Security is to be issued in
global form, add the Global Securities Legend from Exhibit 1 to Appendix A and
the attachment from such Exhibit 1 captioned "TO BE ATTACHED TO GLOBAL
SECURITIES - SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY."

         * Insert for Definitive Securities.







                  Additional provisions of this Security are set forth on the
other side of this Security.

                  IN WITNESS WHEREOF, the parties have caused this instrument to
be duly executed.

                                         RITE AID CORPORATION,

                                         By
                                           -------------------------------------
                                            Name:
                                            Title:




TRUSTEE'S CERTIFICATE OF
    AUTHENTICATION

Dated:

BNY MIDWEST TRUST COMPANY,

         as Trustee, certifies
         that this is one of
         the Securities referred
         to in the Indenture.

By:
   ---------------------------------
         Authorized Signatory


                                        2





                   [FORM OF REVERSE SIDE OF EXCHANGE SECURITY]

                           9.25% Senior Note due 2013

1.  Interest

                  RITE AID CORPORATION, a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on the
principal amount of this Security at the rate per annum shown above. The Company
will pay interest semiannually on June 1 and December 1 of each year, commencing
December 1, 2003. Interest on the Securities will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from May
20, 2003. Interest shall be computed on the basis of a 360-day year of twelve
30-day months. The Company shall pay interest on overdue principal at the rate
per annum borne by the Securities plus 1% per annum, and it shall pay interest
on overdue installments of interest at the rate per annum borne by the
Securities to the extent lawful.

2.  Method of Payment

                  The Company will pay interest on the Securities (except
defaulted interest) to the Persons who are registered Holders at the close of
business on the May 15 or November 15 next preceding the interest payment date
even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in money
of the United States of America that at the time of payment is legal tender for
payment of public and private debts. Payments in respect of the Securities
represented by a Global Security (including principal and interest) will be made
by wire transfer of immediately available funds to the accounts specified by the
Depository. The Company will make all payments in respect of a Definitive
Security (including principal and interest), by mailing a check to the
registered address of each Holder thereof; provided, however, that payments on
the Securities may also be made, in the case of a Holder of at least $1,000,000
aggregate principal amount of Securities, by wire transfer to a U.S. dollar
account maintained by the payee with a bank in the United States if such Holder
elects payment by wire transfer by giving written notice to the Trustee or the
Paying Agent to such effect designating such account no later than 30 days
immediately preceding the relevant due date for payment (or such other date as
the Trustee may accept in its discretion).

3.  Paying Agent and Registrar

                  Initially, BNY Midwest Trust Company, an Illinois trust
company (the "Trustee"), will act as Paying Agent and Registrar. The Company may
appoint and change any Paying Agent, Registrar or co-registrar without notice.
The Company or any of its domestically incorporated Wholly Owned Subsidiaries
may act as Paying Agent, Registrar or co-registrar.




4.  Indenture

                  The Company issued the Securities under an Indenture dated as
of May 20, 2003 (the "Indenture"), between the Company and the Trustee. The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.
ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture (the "TIA").
Terms defined in the Indenture and not defined in the Securities have the
meanings ascribed thereto in the Indenture. The Securities are subject to all
such terms, and Holders are referred to the Indenture and the TIA for a
statement of those terms.

                  The Securities are unsubordinated, unsecured obligations of
the Company. This Security is one of the Original Securities referred to in the
Indenture issued in an aggregate principal amount of $150,000,000. The
Securities include the Original Securities, an unlimited aggregate principal
amount of additional Initial Securities that may be issued under the Indenture,
and any Exchange Securities issued in exchange for Initial Securities. The
Original Securities, such additional Initial Securities and the Exchange
Securities are treated as a single class of securities under the Indenture. The
Indenture imposes certain limitations on the ability of the Company and its
Restricted Subsidiaries to, among other things, make certain Investments and
other Restricted Payments, pay dividends and other distributions, incur Debt,
enter into consensual restrictions upon the payment of certain dividends and
distributions by such Restricted Subsidiaries, enter into or permit certain
transactions with Affiliates, create or incur Liens and make Asset Sales. The
Indenture also imposes limitations on the ability of the Company to consolidate
or merge with or into any other Person or sell, transfer, assign, lease, convey
or otherwise dispose of all or substantially all of the Property of the Company.

5.  Optional Redemption

                  The Company may choose to redeem the Securities at any time.
If it does so, it may redeem all or any portion of the Securities, at once or
over time, after giving the required notice under the Indenture.

                  To redeem the Securities prior to June 1, 2008, the Company
must pay a redemption price equal to 100% of the principal amount of the
Securities to be redeemed plus the Applicable Premium as of, and accrued and
unpaid interest, if any, to, the redemption date (subject to the right of
holders of record on the relevant record date to receive interest due on the
relevant Interest Payment Date that is on or prior to the redemption date). Any
notice to Holders of such a redemption needs to include the appropriate
calculation of the redemption price, but need not include the redemption price
itself. The actual redemption price must be set forth in an Officers'
Certificate delivered to the Trustee no later than two Business Days prior to
the redemption date.

                  "Applicable Premium" means, with respect to any Security on
any redemption date, the greater of (i) 1.0% of the principal amount of such
Security and (ii) the excess of (A) the present value at such redemption date of
(1) the redemption price of


                                       2


such Security at June 1, 2008 (such redemption price being set forth in the
table below) plus (2) all required interest payments due on such Security
through June 1, 2008 (excluding accrued but unpaid interest), computed using a
discount rate equal to the Treasury Rate on such redemption date plus 75 basis
points over (B) the principal amount of such Security.

                  "Treasury Rate" means, as of any redemption date, the yield to
maturity as of such redemption date of United States Treasury securities with a
constant maturity (as compiled and published in the most recent Federal Reserve
Statistical Release H.15 (519) that has become publicly available at least two
Business Days prior to the redemption date (or, if such statistical release is
no longer published, any publicly available source of similar market data)) most
nearly equal to the period from the redemption date to June 1, 2008; provided,
however, that if the period from the redemption date to June 1, 2008 is less
than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.

                  On and after June 1, 2008, the Company may redeem the
Securities in whole at any time or in part from time to time at the following
redemption prices (expressed in percentages of principal amount), plus accrued
and unpaid interest, if any, to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant Interest Payment date that is on or prior to the redemption date), if
redeemed during the 12-month period beginning on June 1 of the years set forth
below:

Redemption Period                                        Price
- -----------------                                        -----
2008................................................     104.625%
2009................................................     103.083%
2010................................................     101.542%
2011 and thereafter.................................     100.000%

                  Notwithstanding the foregoing, at any time and from time to
time prior to June 1, 2007, the Company may redeem up to 35% of the original
aggregate principal amount of the Securities (including Securities issued after
May 20, 2003, if any) with the proceeds from one or more Equity Offerings by the
Company, at a redemption price equal to 109.25% of the principal amount thereof,
plus accrued and unpaid interest thereon, if any, to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant Interest Payment Date that is on or prior
to the redemption date); provided, however, that after giving effect to any such
redemption, at least 65% of the original aggregate principal amount of the
Securities (including Securities issued after May 20, 2003) remains outstanding.
Any such redemption shall be made within 75 days of such Equity Offering upon
not less than 30 nor more than 60 days' prior notice.

                  If the optional redemption date is on or after a record date
and on or before the relevant Interest Payment Date, the accrued and unpaid
interest if any, will be paid to the person or entity in whose name the Security
is registered at the close of business on


                                       3


that record date, and no additional interest will be payable to Holders whose
Securities shall be subject to repurchase.

6.  Sinking Fund

                  The Securities are not subject to any sinking fund.

7.  Notice of Redemption

                  Notice of redemption will be mailed by first-class mail at
least 30 days but not more than 60 days before the redemption date to each
Holder of Securities to be redeemed at his or her registered address. Securities
in denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued interest on all Securities (or portions thereof) to be redeemed on the
redemption date is deposited with the Paying Agent on or before the redemption
date and certain other conditions are satisfied, on and after such date interest
ceases to accrue on such Securities (or such portions thereof) called for
redemption.

8.  (a) Repurchase of Securities at the Option of Holders upon Change of Control

                  Upon a Change of Control, any Holder will have the right,
subject to certain conditions specified in the Indenture, to cause the Company
to repurchase all or any part of the Securities of such Holder at a purchase
price equal to 101% of the principal amount of the Securities to be repurchased
plus accrued and unpaid interest, if any, to the date of purchase (subject to
the right of Holders of record on the relevant record date to receive interest
due on the relevant Interest Payment Date that is on or prior to the date of
purchase) as provided in, and subject to the terms of, the Indenture.

8.  (b) Prepayment Offer Upon Asset Sale

                  When the aggregate amount of Excess Proceeds exceeds $20.0
million (taking into account income earned on such Excess Proceeds, if any), the
Company will be required to make an offer to purchase (the "Asset Sales
Prepayment Offer") the Securities, which offer shall be in the amount of the
Allocable Excess Proceeds, on a pro rata basis according to principal amount at
maturity, at a purchase price equal to 100% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the purchase date (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant Interest Payment Date), in accordance with the procedures
(including prorating in the event of oversubscription) set forth in the
Indenture. To the extent that any portion of the amount of Net Available Cash
remains after compliance with the preceding sentence and provided that all
Holders have been given the opportunity to tender their Securities for purchase
in accordance with the Indenture, the Company or such Restricted Subsidiary may
use such remaining amount for any purpose permitted by the Indenture and the
amount of Excess Proceeds will be reset to zero.



                                       4


9.  Denominations; Transfer; Exchange

                  The Securities are in registered form without coupons in
denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or
exchange Securities in accordance with the Indenture. Upon any transfer or
exchange, the Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements or transfer documents and to pay any
taxes required by law or permitted by the Indenture. The Registrar need not
register the transfer of or exchange any Securities selected for redemption
(except, in the case of a Security to be redeemed in part, the portion of the
Security not to be redeemed) or to transfer or exchange any Securities for a
period of 15 days prior to a selection of Securities to be redeemed or 15 days
before an Interest Payment Date.

10.  Persons Deemed Owners

                  The registered Holder of this Security may be treated as the
owner of it for all purposes.

11.  Unclaimed Money

                  If money for the payment of principal or interest remains
unclaimed for two years, the Trustee or Paying Agent shall pay the money back to
the Company at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Company and not to the Trustee for payment.

12.  Discharge and Defeasance

                  Subject to certain conditions, the Company at any time may
terminate some of or all its obligations under the Securities and the Indenture
if the Company deposits with the Trustee money or U.S. Government Obligations
for the payment of principal and interest on the Securities to redemption or
maturity, as the case may be.

13.  Amendment, Waiver

                  Subject to certain exceptions set forth in the Indenture, (i)
the Indenture or the Securities may be amended without prior notice to any
Holder but with the written consent of the Holders of at least a majority in
aggregate principal amount of the outstanding Securities and (ii) any default or
noncompliance with any provision may be waived with the written consent of the
Holders of at least a majority in principal amount of the outstanding
Securities. Subject to certain exceptions set forth in the Indenture, without
the consent of any Holders, the Company, when authorized by a Board Resolution,
and the Trustee may amend the Indenture or the Securities (i) to cure any
ambiguity, omission, defect or inconsistency; (ii) to provide for the assumption
by a successor corporation of the obligations of the Company in accordance with
Article V under the Indenture; (iii) to provide for uncertificated Securities in
addition to or in place of certificated Securities; provided, however, that the


                                       5


uncertificated Securities are issued in registered form for purposes of Section
163(f) of the Code, or in a manner such that the uncertificated Securities are
described in Section 163(f)(2)(B) of the Code; (iv) to add Guarantees with
respect to the Securities; (v) to secure the Securities; (vi) to add additional
covenants or to surrender rights and powers conferred on the Company; (vii) to
comply with the requirements of the Commission in connection with the
qualification of the Indenture under the TIA; or (viii) to make any change that
does not adversely affect the rights of any Holder.

14.  Defaults and Remedies

                  If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in aggregate principal amount of the Securities
then outstanding, subject to certain limitations, may declare all the Securities
to be immediately due and payable. Certain events of bankruptcy or insolvency
are Events of Default and shall result in the Securities being immediately due
and payable upon the occurrence of such Events of Default without any further
act of the Trustee or any Holder.

                  Holders of Securities may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may refuse to
enforce the Indenture or the Securities unless it receives reasonable indemnity
or security. Subject to certain limitations, Holders of a majority in aggregate
principal amount of the Securities then outstanding may direct the Trustee in
its exercise of any trust or power under the Indenture. The Holders of a
majority in aggregate principal amount of the Securities then outstanding, by
written notice to the Company and the Trustee, may rescind any declaration of
acceleration and its consequences if the rescission would not conflict with any
judgment or decree, and if all existing Events of Default have been cured or
waived except nonpayment of principal, premium or interest that has become due
solely because of the acceleration.

15.  Trustee Dealings with the Company

                  Subject to certain limitations imposed by the TIA, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with and collect
obligations owed to it by the Company or its Affiliates and may otherwise deal
with the Company or its Affiliates with the same rights it would have if it were
not Trustee.

16.  No Recourse Against Others

                  A director, officer, employee or stockholder, as such, of the
Company shall not have any liability for any obligations of the Company under
the Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Security, each
Securityholder waives and releases all such liability. The waiver and release
are part of the consideration for the issue of the Securities.



                                       6


17.  Successors

                  Subject to certain exceptions set forth in the Indenture, when
a successor assumes all the obligations of its predecessor under the Securities
and the Indenture in accordance with the terms of the Indenture, the predecessor
will be released from those obligations.

18.  Authentication

                  This Security shall not be valid until an authorized signatory
of the Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.

19.  Abbreviations

                  Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship
and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to
Minors Act).

20.  Governing Law

                  THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW.

21.  CUSIP Numbers

                  Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company has caused CUSIP numbers
to be printed on the Securities and has directed the Trustee to use CUSIP
numbers in notices of redemption as a convenience to Holders. No representation
is made as to the accuracy of such numbers either as printed on the Securities
or as contained in any notice of redemption and reliance may be placed only on
the other identification numbers placed thereon.

                  The Company will furnish to any Holder upon written request
and without charge to the Holder a copy of the Indenture which has in it the
text of this Security.




                                       7







                                 ASSIGNMENT FORM

To assign this Security, fill in the form below:

I or we assign and transfer this Security to

         (Print or type assignee's name, address and zip code)

         (Insert assignee's soc. sec. or tax I.D. No.)

and irrevocably appoint                           as agent to transfer this
Security on the books of the Company. The agent may substitute another to act
for him.

- ------------------------------------------------------------

Date:                  Your Signature:
     -----------------                ----------------------

- ------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security. Signature
must be guaranteed by a participant in a recognized signature guaranty medallion
program or other signature guarantor acceptable to the Trustee.







                       OPTION OF HOLDER TO ELECT PURCHASE

                  If you want to elect to have this Security purchased by the
Company pursuant to Section 4.06 (Asset Sale) or 4.12 (Change of Control) of the
Indenture, check the box:

                                       / /

                  If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.06 or 4.12 of the Indenture,
state the amount:

$


Date:                  Your Signature:
     -----------------                ----------------------
(Sign exactly as your name appears on the other side of the Security)


Signature Guarantee:
                    --------------------------------------
                    Signature must be guaranteed by a
                    participant in a recognized signature
                    guaranty medallion program or other
                    signature guarantor acceptable to the
                    Trustee.


                                        2





                                                                       EXHIBIT B


                                     Form of
                       Transferee Letter of Representation

[Company]

In care of
[          ]
[          ]
[          ]


Ladies and Gentlemen:


         This certificate is delivered to request a transfer of $[ ] principal
amount of the 9.25% Senior Notes due 2013 (the "Securities") of Rite Aid
Corporation (the "Company").

         Upon transfer, the Securities would be registered in the name of the
new beneficial owner as follows:

Name:
     ---------------------------------------

Address:
        ------------------------------------

Taxpayer ID Number:
                   -------------------------

         The undersigned represents and warrants to you that:

         1. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the
"Securities Act")), purchasing for our own account or for the account of such an
institutional "accredited investor" at least $250,000 principal amount of the
Securities, and we are acquiring the Securities not with a view to, or for offer
or sale in connection with, any distribution in violation of the Securities Act.
We have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Securities,
and we invest in or purchase securities similar to the Securities in the normal
course of our business. We, and any accounts for which we are acting, are each
able to bear the economic risk of our or its investment.

         2. We understand that the Securities have not been registered under the
Securities Act and, unless so registered, may not be sold except as permitted in
the following sentence. We agree on our own behalf and on behalf of any investor
account for which we are purchasing Securities to offer, sell or otherwise
transfer such Securities prior to the date that is two years after the later of
the date of original issue and the last date on which the Company or any
affiliate of the Company was the owner of such Securities (or any predecessor
thereto) (the "Resale Restriction Termination Date") only (a) to the Company,
(b) pursuant to a registration statement that has been declared effective under
the Securities Act, (c) in a transaction complying with the requirements of Rule
144A under the Securities Act ("Rule 144A"), to a person we reasonably believe
is a qualified institutional buyer under Rule 144A (a "QIB") that is purchasing
for its own account or for the account of a QIB and



to whom notice is given that the transfer is being made in reliance on Rule
144A, (d) pursuant to offers and sales that occur outside the United States
within the meaning of Regulation S under the Securities Act, (e) to an
institutional "accredited investor" within the meaning of Rule 501(a)(1), (2),
(3) or (7) under the Securities Act that is purchasing for its own account or
for the account of such an institutional "accredited investor," in each case in
a minimum principal amount of Securities of $100,000, or (f) pursuant to any
other available exemption from the registration requirements of the Securities
Act, subject in each of the foregoing cases to any requirement of law that the
disposition of our property or the property of such investor account or accounts
be at all times within our or their control and in compliance with any
applicable state securities laws. The foregoing restrictions on resale will not
apply subsequent to the Resale Restriction Termination Date. If any resale or
other transfer of the Securities is proposed to be made pursuant to clause (e)
above prior to the Resale Restriction Termination Date, the transferor shall
deliver a letter from the transferee substantially in the form of this letter to
the Company and the Trustee, which shall provide, among other things, that the
transferee is an institutional "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act and that it is acquiring
such Securities for investment purposes and not for distribution in violation of
the Securities Act. Each purchaser acknowledges that the Company and the Trustee
reserve the right prior to the offer, sale or other transfer prior to the Resale
Restriction Termination Date of the Securities pursuant to clause (d), (e) or
(f) above to require the delivery of an opinion of counsel, certifications or
other information satisfactory to the Company and the Trustee.

                                        TRANSFEREE:                            ,
                                                   ----------------------------
                                             by:
                                                -------------------------------




                                        2

EX-10.9 7 file003.htm PURCHASE AGREEMENT




                                                                  EXECUTION COPY

                              RITE AID CORPORATION

                                  $150,000,000

                           9.25% Senior Notes Due 2013

                               Purchase Agreement

                                                              New York, New York
                                                                    May 13, 2003


Citigroup Global Markets Inc.
J.P. Morgan Securities Inc.
Fleet Securities, Inc.
As Representatives of the Initial Purchasers
c/o Citigroup Global Markets Inc.
388 Greenwich Street
New York, New York  10013

Ladies and Gentlemen:

                  Rite Aid Corporation, a corporation organized under the laws
of Delaware (the "Company"), proposes to issue and sell to the several parties
named in Schedule I hereto (the "Initial Purchasers"), for whom you (the
"Representatives") are acting as representatives, $150,000,000 principal amount
of its 9.25% Senior Notes Due 2013 (the "Securities"). The Securities are to be
issued under an indenture (the "Indenture"), to be dated as of May 20, 2003,
between the Company and BNY Midwest Trust Company, as trustee (the "Trustee").
The Securities have the benefit of a Registration Rights Agreement (the
"Registration Rights Agreement"), to be dated May 20, 2003, among the Company
and the Initial Purchasers, pursuant to which the Company has agreed to file
with the Commission (i) a registration statement under the Securities Act
registering an issue of senior notes of the Company (the "Exchange Notes"),
which are identical in all material respects to the Securities (except that the
Exchange Notes will not contain terms with respect to transfer restrictions) and
(ii) under certain circumstances, a shelf registration statement pursuant to
Rule 415 under the Securities Act. To the extent there are no additional parties
listed on Schedule I other than you, the term Representatives as used herein
shall mean you as the Initial Purchasers, and the terms Representatives and
Initial Purchasers shall mean either the singular or plural as the context
requires. The use of the neuter in this Agreement shall include the feminine and
masculine wherever appropriate. Certain terms used herein are defined in Section
17 hereof. Capitalized terms used but not defined herein shall have the meanings
given to such terms in the Final Memorandum (as defined below).

                  The sale of the Securities to the Initial Purchasers will be
made without registration of the Securities under the Securities Act in reliance
upon exemptions from the registration requirements of the Securities Act.



                                                                               2


                  In connection with the sale of the Securities, the Company has
prepared a final offering memorandum, dated May 13, 2003 (as amended or
supplemented at the Execution Time, including any and all exhibits thereto and
any information incorporated by reference therein, the "Final Memorandum"),
which sets forth certain information concerning the Company and the Securities.
The Company hereby confirms that it has authorized the use of the Final
Memorandum, and any amendment or supplement thereto, in connection with the
offer and sale of the Securities by the Initial Purchasers.

                  1. Representations and Warranties. The Company represents and
warrants to each Initial Purchaser as set forth below in this Section 1.

                  (a) At the Execution Time and on the Closing Date (as defined
         in Section 3 hereof), the Final Memorandum did not, and will not (and
         any amendment or supplement thereto, at the date thereof and at the
         Closing Date, will not), contain any untrue statement of a material
         fact or omit to state any material fact necessary to make the
         statements therein, in light of the circumstances under which they were
         made, not misleading; provided, however, that the Company makes no
         representation or warranty as to the information contained in or
         omitted from the Final Memorandum, or any amendment or supplement
         thereto, in reliance upon and in conformity with information furnished
         in writing to the Company by or on behalf of the Initial Purchasers
         through any of the Representatives specifically for inclusion therein.

                  (b) Neither the Company, nor any of its Affiliates, nor any
         person acting on its or their behalf (other than the Initial Purchasers
         or anyone acting on their behalf, as to whom the Company makes no
         representation) has, directly or indirectly, made offers or sales of
         any security, or solicited offers to buy any security, under
         circumstances that would require the registration of the Securities
         under the Securities Act.

                  (c) Neither the Company, nor any of its Affiliates, nor any
         person acting on its or their behalf (other than the Initial Purchasers
         or anyone acting on their behalf, as to whom the Company makes no
         representation) has engaged in any form of general solicitation or
         general advertising (within the meaning of Regulation D) in connection
         with any offer or sale of the Securities in the United States.

                  (d) The Securities satisfy the eligibility requirements of
         Rule 144A(d)(3) under the Securities Act.

                  (e) Neither the Company, nor any of its Affiliates, nor any
         person acting on its or their behalf (other than the Initial Purchasers
         or anyone acting on their behalf, as to whom the Company makes no
         representation) has engaged in any directed selling efforts with
         respect to the Securities being sold in reliance on Regulation S, and
         each of them has complied with the offering restrictions requirements
         of Regulation S. Terms used in this paragraph have the meanings given
         to them by Regulation S.

                  (f) The Company is not, and after giving effect to the
         offering and sale of the Securities and the application of the proceeds
         thereof as described in the Final


                                                                               3


         Memorandum will not be, an "investment company" within the meaning of
         the Investment Company Act.

                  (g) The Company is subject to and in compliance, in all
         material respects, with the reporting requirements of Section 13 or
         Section 15(d) of the Exchange Act.

                  (h) The Company has not paid or agreed to pay to any person
         any compensation for soliciting another to purchase any Securities
         (except as contemplated by this Agreement).

                  (i) The Company has not taken, directly or indirectly, any
         action designed to or that would constitute or that might reasonably be
         expected to cause or result in, under the Exchange Act or otherwise,
         the stabilization or manipulation of the price of any security of the
         Company to facilitate the sale or resale of the Securities.

                  (j) On the Closing Date, the Indenture will conform in all
         material respects to the description thereof contained in the Final
         Memorandum.

                  (k) Each of the Company and its subsidiaries has been duly
         incorporated, is validly existing as a corporation and is in good
         standing under the laws of the jurisdiction in which it is chartered or
         organized with full corporate power and authority to own or lease, as
         the case may be, and to operate its properties and conduct its business
         as described in the Final Memorandum, and is duly qualified to do
         business as a foreign corporation and is in good standing under the
         laws of each jurisdiction which requires such qualification except to
         the extent that failure to be so qualified or be in good standing would
         not reasonably be expected to have a material adverse effect on the
         condition (financial or otherwise), prospects, earnings, business or
         properties of the Company and its subsidiaries, taken as a whole,
         whether or not arising from transactions in the ordinary course of
         business (a "Material Adverse Effect").

                  (l) All the outstanding shares of capital stock of each
         subsidiary have been duly and validly authorized and issued and are
         fully paid and nonassessable, and, except for Rx USA, Inc., Rite Aid
         Lease Management Company, Read's, Inc., Thrifty PayLess Health
         Services, L.L.P. and Rite Aid Risk Management Corp., all outstanding
         shares of capital stock of the subsidiaries of the Company are owned by
         the Company either directly or through wholly owned subsidiaries free
         and clear of any perfected security interest or any other security
         interests, claims, liens or encumbrances.

                  (m) The Company's authorized equity capitalization is as set
         forth in the Final Memorandum.

                  (n) The statements in the Final Memorandum under the headings
         "Certain United States Federal Tax Considerations for Non-United States
         Holders", "Description of Notes", "Exchange Offer; Registration
         Rights", "Business-Regulation" and "Business-Legal Proceedings",
         "Description of Other Indebtedness" and "Risk Factors" fairly summarize
         the matters therein described.



                                                                               4


                  (o) This Agreement has been duly authorized, executed and
         delivered by the Company; the Indenture has been duly authorized and,
         assuming due authorization, execution and delivery thereof by the
         Trustee, when executed and delivered by the Company, will constitute a
         legal, valid and binding instrument enforceable against the Company in
         accordance with its terms (subject, as to the enforcement of remedies,
         to applicable bankruptcy, fraudulent conveyance, reorganization,
         insolvency, moratorium or other laws affecting creditors' rights
         generally from time to time in effect and to general principles of
         equity, good faith and fair dealing, regardless of whether in a
         proceeding at law or in equity); the Securities have been duly
         authorized, and, when executed and authenticated in accordance with the
         provisions of the Indenture and delivered to and paid for by the
         Initial Purchasers, will have been duly executed and delivered by the
         Company and (assuming the due authorization, execution and delivery of
         the Indenture by the Trustee) will constitute the legal, valid and
         binding obligations of the Company entitled to the benefits of the
         Indenture (subject, as to the enforcement of remedies, to applicable
         bankruptcy, fraudulent conveyance, reorganization, insolvency,
         moratorium or other laws affecting creditors' rights generally from
         time to time in effect and to general principles of equity, good faith
         and fair dealing, regardless of whether in a proceeding at law or in
         equity); and the Registration Rights Agreement has been duly authorized
         and, when executed and delivered by the Company, will constitute a
         legal, valid and binding instrument enforceable against the Company in
         accordance with its terms (subject, as to the enforcement of remedies,
         to applicable bankruptcy, fraudulent conveyance, reorganization,
         insolvency, moratorium or other laws affecting creditors' rights
         generally from time to time in effect and to general principles of
         equity, good faith and fair dealing, regardless of whether in a
         proceeding at law or in equity, and except that the enforceability of
         any rights to contribution or indemnification may be violative of
         public policy under any law, rule or regulation).

                  (p) Subject to compliance by the Initial Purchasers with the
         representations, warranties and agreements set forth in Section 4 of
         this Agreement, no consent, approval, authorization, filing with or
         order of any court or governmental agency or body is required in
         connection with the transactions contemplated herein, in the Indenture
         or the Registration Rights Agreement, except such as will be obtained
         under the Securities Act and the Trust Indenture Act (with respect to
         the Registration Rights Agreement), the securities laws of any
         jurisdiction outside the U.S. in which the Securities are offered and
         such as may be required under the blue sky laws of any jurisdiction and
         the National Association of Securities Dealers Inc. in connection with
         the purchase and distribution of the Securities by the Initial
         Purchasers in the manner contemplated herein and in the Final
         Memorandum and the Registration Rights Agreement.

                  (q) On the Closing Date, neither the execution and delivery of
         the Indenture, this Agreement or the Registration Rights Agreement, the
         issue and sale of the Securities, nor the fulfillment of the terms
         hereof or thereof will conflict with, result in a breach or violation
         of, or imposition of any lien, charge or encumbrance upon any property
         or assets of the Company or any of its subsidiaries pursuant to, (i)
         the charter or by-laws of either of the Company or any subsidiary, (ii)
         any statute, rule, regulation or order of any governmental agency or
         body or any court, domestic or foreign, having jurisdiction over the
         Company or any subsidiary of the Company or any of their properties, as
         applicable,


                                                                               5


         or (iii) any agreement or instrument to which the Company or any such
         subsidiary is a party or by which the Company or any such subsidiary is
         bound or to which any of the properties of the Company or any of its
         subsidiaries is subject.

                  (r) The consolidated historical financial statements and
         schedules of the Company and its consolidated subsidiaries included in
         or incorporated by reference in the Final Memorandum present fairly in
         all material respects the financial condition, results of operations
         and cash flows of the Company as of the dates and for the periods
         indicated, comply as to form with the applicable accounting
         requirements of the Securities Act and the Exchange Act and have been
         prepared in conformity with generally accepted accounting principles
         applied on a consistent basis throughout the periods involved (except
         as otherwise noted therein); the selected financial data set forth
         under the caption "Selected Consolidated Financial Information" in the
         Final Memorandum fairly present, on the basis stated in the Final
         Memorandum, the information included therein.

                  (s) No action, suit or proceeding by or before any court or
         governmental agency, authority or body or any arbitrator involving the
         Company or any of its subsidiaries or its or their property is pending
         or, to the best knowledge of the Company, threatened that (i) could
         reasonably be expected to have a material adverse effect on the
         performance of this Agreement, the Indenture or the Registration Rights
         Agreement, or the consummation of any of the transactions contemplated
         hereby or thereby; or (ii) could reasonably be expected to have a
         Material Adverse Effect, except as set forth in or contemplated in the
         Final Memorandum (exclusive of any amendment or supplement thereto).

                  (t) The Company and each of its subsidiaries own or lease all
         such properties as are necessary to the conduct of their respective
         operations as presently conducted, except where the failure to own or
         lease such property could not reasonably be expected to have a Material
         Adverse Effect.

                  (u) Neither the Company nor any subsidiary is in violation or
         default of (i) any provision of its charter or bylaws; (ii) the terms
         of any agreement or instrument to which it is a party or bound or to
         which its property is subject; or (iii) any statute, rule, regulation
         or order of any governmental agency or body or any court, domestic or
         foreign, having jurisdiction over the Company or any subsidiary of the
         Company or any of their properties, as applicable, except in the case
         of (ii) and (iii), such violation or default that could not reasonably
         by expected to have a Material Adverse Effect.

                  (v) Deloitte & Touche LLP, who have certified certain
         financial statements of the Company and its consolidated subsidiaries
         and delivered their report with respect to the audited consolidated
         financial statements included in or incorporated by reference in the
         Final Memorandum, are, to the knowledge of the Company, independent
         public accountants with respect to the Company within the meaning of
         the Securities Act and the applicable published rules and regulations
         thereunder.



                                                                               6


                  (w) There are no stamp or other issuance or transfer taxes or
         duties or other similar fees or charges required to be paid in
         connection with the execution and delivery of this Agreement or the
         issuance or sale by the Company of the Securities.

                  (x) The Company has filed all foreign, federal, state and
         local tax returns that are required to be filed or has requested
         extensions thereof (except in any case in which the failure so to file
         would not have a Material Adverse Effect, except as set forth in or
         contemplated in the Final Memorandum (exclusive of any amendment or
         supplement thereto)) and has paid all taxes required to be paid by it
         and any other assessment, fine or penalty levied against it, to the
         extent that any of the foregoing is due and payable, except for any
         such assessment, fine or penalty that is currently being contested in
         good faith or as would not have a Material Adverse Effect, except as
         set forth in or contemplated in the Final Memorandum (exclusive of any
         amendment or supplement thereto).

                  (y) No labor problem or dispute with the employees of the
         Company or any of its subsidiaries exists or is threatened or imminent,
         and the Company is not aware of any existing or imminent labor
         disturbance by the employees of any of its or its subsidiaries'
         principal suppliers, contractors or customers that could reasonably be
         expected to have a Material Adverse Effect, except as set forth in or
         contemplated in the Final Memorandum (exclusive of any amendment or
         supplement thereto).

                  (z) The Company and each of its subsidiaries are insured by
         insurers of recognized financial responsibility against such losses and
         risks and in such amounts as are prudent and customary in the
         businesses in which they are engaged; the Company and its subsidiaries
         are in compliance with the terms of such policies and instruments in
         all material respects, except where noncompliance could not reasonably
         be expected to have a Material Adverse Effect; and neither the Company
         nor any such subsidiary has any reason to believe that it will not be
         able to renew or replace its existing insurance coverage as and when
         such coverage expires or to obtain similar coverage from similar
         insurers as may be necessary to continue its business at a cost that
         would not have a Material Adverse Effect, except as set forth in or
         contemplated in the Final Memorandum (exclusive of any amendment or
         supplement thereto).

                  (aa) No subsidiary of the Company is currently prohibited,
         directly or indirectly, from paying any dividends to the Company, from
         making any other distribution on such subsidiary's capital stock, from
         repaying to the Company any loans or advances to such subsidiary from
         the Company or from transferring any of such subsidiary's property or
         assets to the Company or any other subsidiary of the Company, except as
         described in or contemplated by the Final Memorandum.

                  (bb) The Company and its subsidiaries possess all licenses,
         certificates, permits and other authorizations issued by the
         appropriate federal, state or foreign regulatory authorities necessary
         to conduct their respective businesses, except where the failure to
         possess such licenses, certificates, permits and other authorizations
         could not reasonably be expected to have a Material Adverse Effect, and
         neither the Company nor any such subsidiary has received any notice of
         proceedings relating to the revocation or modification of any such
         certificate, authorization or permit which, singly or in the


                                                                               7


         aggregate, if the subject of an unfavorable decision, ruling or
         finding, could reasonably be expected to have a Material Adverse
         Effect, except as set forth in or contemplated in the Final Memorandum
         (exclusive of any amendment or supplement thereto).

                  (cc) The Company and its subsidiaries (i) are in compliance
         with any and all applicable foreign, federal, state and local laws and
         regulations relating to the protection of human health and safety, the
         environment or hazardous or toxic substances or wastes, pollutants or
         contaminants ("Environmental Laws"); (ii) have received and are in
         compliance with all permits, licenses or other approvals required of
         them under applicable Environmental Laws to conduct their respective
         businesses; and (iii) have not received notice of any actual or
         potential liability for the investigation or remediation of any
         disposal or release of hazardous or toxic substances or wastes,
         pollutants or contaminants, except where such non-compliance with
         Environmental Laws, failure to receive required permits, licenses or
         other approvals, or liability would not, individually or in the
         aggregate, have a Material Adverse Effect, except as set forth in the
         Final Memorandum (exclusive of any amendment or supplement thereto);
         except as set forth in the Final Memorandum, neither the Company nor
         any of the subsidiaries has been named as a "potentially responsible
         party" under the Comprehensive Environmental Response, Compensation,
         and Liability Act of 1980, as amended, which, if the subject of any
         unfavorable ruling, decision or finding could, individually or in the
         aggregate, reasonably be expected to have a Material Adverse Effect.

                  (dd) Each of the Company and its subsidiaries has fulfilled
         its obligations, if any, under the minimum funding standards of Section
         302 of the United States Employee Retirement Income Security Act of
         1974, as amended ("ERISA"), and the regulations and published
         interpretations thereunder with respect to each "plan" (as defined in
         Section 3(3) of ERISA and such regulations and published
         interpretations) in which employees of the Company and its subsidiaries
         are eligible to participate; the Company and its subsidiaries have not
         incurred any unpaid liability to the Pension Benefit Guaranty
         Corporation (other than for the payment of premiums in the ordinary
         course) or to any such plan under Title IV of ERISA.

                  (ee) The Company and its subsidiaries own, possess, license or
         have other rights to use, on reasonable terms, all patents, patent
         applications, trade and service marks, trade and service mark
         registrations, trade names, copyrights, licenses, inventions, trade
         secrets, technology, know-how and other intellectual property
         (collectively, the "Intellectual Property") necessary for the conduct
         of the Company's business as now conducted or as proposed in the Final
         Memorandum to be conducted, except as otherwise referenced in the Final
         Memorandum or where the failure to own such Intellectual Property could
         not reasonably be expected to have a Material Adverse Effect. Neither
         the Company nor any of its subsidiaries has received any charge,
         complaint, claim, demand or notice alleging any interference,
         infringement, misappropriation or violation of a third party's right in
         Intellectual Property (including any claim that the Company or any of
         its subsidiaries must license or refrain from using such Intellectual
         Property), which, if the subject of any unfavorable ruling, decision or
         finding could, individually or in the aggregate, reasonably be expected
         to have a Material Adverse Effect.



                                                                               8


                  (ff) The Company maintains, and has maintained during the
         periods covered by the financial statements incorporated by reference
         in the Final Memorandum, disclosure controls and procedures (as such
         term is defined in Rule 13a-14 under the Exchange Act) that are
         effective in ensuring that information required to be disclosed in the
         reports that it files or submits under the Exchange Act is recorded,
         processed, summarized and reported with the time periods specified in
         the rules and forms of the Commission, including, without limitation,
         effective controls and procedures designed to ensure that information
         required to be so described is accumulated and communicated to the
         Company's management, including its principal executive officer or
         officers, and its principal financial officer or officers, as
         appropriate to allow timely decisions regarding required disclosure,
         except as disclosed in such reports with respect to the Company's 1997
         fiscal year and that the Company restated its financial statements for
         the 1998 and 1999 fiscal years.

                  Any certificate signed by any officer of the Company and
delivered to the Representatives or counsel for the Initial Purchasers in
connection with the offering of the Securities shall be deemed a representation
and warranty by the Company, as to matters covered thereby, to each Initial
Purchaser.

                  2. Purchase and Sale. Subject to the terms and conditions and
in reliance upon the representations and warranties herein set forth, the
Company agrees to sell to each Initial Purchaser, and each Initial Purchaser
agrees, severally and not jointly, to purchase from the Company, at a purchase
price of 96.726% of the principal amount thereof, plus accrued interest, if any,
from May 20, 2003 to the Closing Date, the principal amount of Securities set
forth opposite such Initial Purchaser's name on Schedule I hereto.

                  3. Delivery and Payment. Delivery of and payment for the
Securities shall be made at 10:00 A.M., New York City time, on May 20, 2003,
which date and time may be postponed by agreement between the Representatives
and the Company or as provided in Section 9 hereof (such date and time of
delivery and payment for the Securities being herein called the "Closing Date").
Delivery of the Securities shall be made to the Representatives for the
respective accounts of the several Initial Purchasers against payment by the
several Initial Purchasers through the Representatives of the purchase price
thereof to or upon the order of the Company by wire transfer payable in same-day
funds to the account specified by the Company. Delivery of the Securities shall
be made through the facilities of The Depository Trust Company unless the
Representatives shall otherwise instruct.

                  4. Offering by Initial Purchasers. Each Initial Purchaser,
severally and not jointly, represents and warrants to and agrees with the
Company that:

                  (a) It is a qualified institutional buyer (as defined in Rule
         144A under the Securities Act) or an institutional accredited investor
         (as defined in Rule 501(a) under the Securities Act).

                  (b) It has not offered or sold, and will not offer or sell,
         any Securities except (i) to those persons it reasonably believes to be
         qualified institutional buyers (as defined in Rule 144A under the
         Securities Act) and that, in connection with each such sale, it has


                                                                               9


         taken or will take reasonable steps to ensure that the purchaser of
         such Securities is aware that such sale is being made in reliance on
         Rule 144A; or (ii) in accordance with the restrictions set forth in
         Exhibit A hereto.

                  (c) Neither it nor any person acting on its behalf has made or
         will make offers or sales of the Securities in the United States by
         means of any form of general solicitation or general advertising
         (within the meaning of Regulation D) in the United States.

                  5. Agreements. The Company agrees with each Initial Purchaser
that:

                  (a) The Company will furnish to each Initial Purchaser and to
         counsel for the Initial Purchasers, without charge, during the period
         referred to in paragraph (c) below, as many copies of the Final
         Memorandum and any amendments and supplements thereto as you may
         reasonably request.

                  (b) The Company will not amend or supplement the Final
         Memorandum without the prior written consent of the Representatives,
         which consent will not be unreasonably withheld or delayed.

                  (c) If at any time prior to the completion of the sale of the
         Securities by the Initial Purchasers (as determined by the
         Representatives), any event occurs as a result of which the Final
         Memorandum, as then amended or supplemented, would include any untrue
         statement of a material fact or omit to state any material fact
         necessary to make the statements therein, in the light of the
         circumstances under which they were made, not misleading, or if it
         shall be necessary to amend or supplement the Final Memorandum to
         comply with applicable law, the Company promptly (i) will notify the
         Representatives of any such event; (ii) subject to the requirements of
         paragraph (b) of this Section 5, will prepare an amendment or
         supplement that will correct such statement or omission or effect such
         compliance; and (iii) will supply any supplemented or amended Final
         Memorandum to the several Initial Purchasers and counsel for the
         Initial Purchasers without charge in such quantities as you may
         reasonably request.

                  (d) The Company will arrange, if necessary, for the
         qualification of the Securities for sale by the Initial Purchasers
         under the laws of such jurisdictions as the Representatives may
         designate and will maintain such qualifications in effect so long as
         required for the sale of the Securities, provided that in no event
         shall the Company or any subsidiary be obligated to qualify to do
         business in any jurisdiction where it is not now so qualified or to
         take any action that would subject it to service of process in suits,
         other than those arising out of the offering or sale of the Securities,
         in any jurisdiction where it is not now so subject. The Company will
         promptly advise the Representatives of the receipt by the Company of
         any notification with respect to the suspension of the qualification of
         the Securities for sale in any jurisdiction or the initiation or
         threatening of any proceeding for such purpose.

                  (e) The Company will not, and will not permit any of its
         controlled Affiliates to, and will use its reasonable best efforts not
         to permit any of its other Affiliates to, resell any Securities that
         have been acquired by any of them.



                                                                              10


                  (f) Neither the Company, nor any of its Affiliates, nor any
         person acting on its or their behalf (other than the Initial Purchasers
         or anyone acting on their behalf, as to whom the Company makes no
         agreement) will, directly or indirectly, make offers or sales of any
         security, or solicit offers to buy any security, under circumstances
         that would require the registration of the Securities under the
         Securities Act.

                  (g) Neither the Company, nor any of its Affiliates, nor any
         person acting on its or their behalf (other than the Initial Purchasers
         or anyone acting on their behalf, as to whom the Company makes no
         agreement) will engage in any form of general solicitation or general
         advertising (within the meaning of Regulation D) in connection with any
         offer or sale of the Securities in the United States.

                  (h) So long as any of the Securities are "restricted
         securities" within the meaning of Rule 144(a)(3) under the Securities
         Act, the Company will, during any period in which it is not subject to
         and in compliance with Section 13 or 15(d) of the Exchange Act or it is
         not exempt from such reporting requirements pursuant to and in
         compliance with Rule 12g3-2(b) under the Exchange Act, provide to each
         holder of such restricted securities and to each prospective purchaser
         (as designated by such holder) of such restricted securities, upon the
         request of such holder or prospective purchaser, any information
         required to be provided by Rule 144A(d)(4) under the Securities Act.
         This covenant is intended to be for the benefit of the holders, and the
         prospective purchasers designated by such holders, from time to time of
         such restricted securities.

                  (i) Neither the Company, nor any of its Affiliates, nor any
         person acting on its or their behalf (other than the Initial Purchasers
         or anyone acting on their behalf, as to whom the Company makes no
         agreement) will engage in any directed selling efforts with respect to
         the Securities, and each of them will comply with the offering
         restrictions requirements of Regulation S. Terms used in this paragraph
         have the meanings given to them by Regulation S.

                  (j) The Company will cooperate with the Representatives and
         use its best efforts to permit the Securities to be eligible for
         clearance and settlement through The Depository Trust Company.

                  (k) The Company will not offer, sell, contract to sell, grant
         any other option to purchase or otherwise dispose of, directly or
         indirectly, or announce the offering of, or file a registration
         statement for, any debt securities issued or guaranteed by the Company
         or any of its direct or indirect subsidiaries, or enter into any
         agreement to do any of the foregoing (other than (i) the Securities and
         the Exchange Securities, (ii) exchange notes issued in exchange for the
         9 1/2% Notes on the same basis, and having the same terms, as the 9
         1/2% Notes, (iii) exchange notes issued in exchange for the 8.125%
         Notes on the same basis, and having the same terms, as the 8.125%
         Notes, (iv) pursuant to any credit facility permitted under the
         Indenture, (v) purchase money debt permitted under the Indenture and
         (vi) notes on similar terms to the 9 1/2% Notes or the 8.125% Notes in
         order to refinance or in exchange for the 12.5% Notes) for a period of
         90 days from the date the Securities are issued without the prior
         written consent of Citigroup Global Markets Inc.



                                                                              11


                  (l) The Company will not take, directly or indirectly, any
         action designed to or that would constitute or that might reasonably be
         expected to cause or result in, under the Exchange Act or otherwise,
         the stabilization or manipulation of the price of any security of the
         Company to facilitate the sale or resale of the Securities.

                  (m) The Company currently has no plan or intent to be or
         become, or be or become owned by, an open-end investment company, unit
         investment trust or face-amount certificate company that is or is
         required to be registered under Section 8 of the Investment Company
         Act.

                  (n) The Company agrees to pay the costs and expenses relating
         to the following matters: (i) the preparation of the Indenture and the
         Registration Rights Agreement and the issuance of the Securities; (ii)
         the preparation, printing or reproduction of the Final Memorandum and
         each amendment or supplement thereto; (iii) the printing (or
         reproduction) and delivery (including postage, air freight charges and
         charges for counting and packaging) of such copies of the Final
         Memorandum, and all amendments or supplements thereto, as may be
         reasonably requested for use in connection with the offering and sale
         of the Securities; (iv) the preparation, printing, authentication,
         issuance and delivery of certificates for the Securities, including any
         stamp or transfer taxes in connection with the original issuance and
         sale of the Securities; (v) the printing (or reproduction) and delivery
         of this Agreement, any blue sky memorandum and all other agreements or
         documents printed (or reproduced) and delivered in connection with the
         offering of the Securities; (vi) any registration or qualification of
         the Securities for offer and sale under the securities or blue sky laws
         of the several states (including filing fees and the reasonable fees
         and expenses of counsel for the Initial Purchasers relating to such
         registration and qualification); (vii) admitting the Securities for
         trading in The Portal Market of the NASD; (viii) the transportation and
         other expenses incurred by or on behalf of Company representatives in
         connection with presentations to prospective purchasers of the
         Securities; (ix) the fees and expenses of the Company's accountants and
         the fees and expenses of counsel (including local and special counsel)
         for the Company; and (x) all other costs and expenses incident to the
         performance by the Company of its and their obligations hereunder and
         under the Indenture and the Registration Rights Agreement. It is
         understood, however, that, except as provided in this Section 5 and
         Sections 7 and 8 of this Agreement, the Initial Purchasers will pay all
         of their own costs and expenses, including the fees and expenses of
         their counsel.

                  6. Conditions to the Obligations of the Initial Purchasers.
The obligations of the Initial Purchasers to purchase the Securities shall be
subject to the accuracy of the representations and warranties on the part of the
Company contained herein at the Execution Time and the Closing Date, to the
accuracy of the statements of the Company made in any certificates pursuant to
the provisions hereof, to the performance by the Company of its obligations
hereunder and to the following additional conditions:

                  (a) The Initial Purchasers shall have received an opinion,
         dated the Closing Date, of Robert Sari, Esq., general counsel for the
         Company, in form and substance satisfactory to the Initial Purchasers,
         substantially in the form set forth in Schedule II or as otherwise
         agreed to by the parties hereto.



                                                                              12


                  (b) The Initial Purchasers shall have received three opinions,
         dated the Closing Date, of Skadden, Arps, Slate, Meagher & Flom LLP,
         counsel for the Company, in form and substance satisfactory to the
         Initial Purchasers, substantially in the forms set forth in Schedules
         III, IV and V or as otherwise agreed to by the parties hereto.

                  (c) The Representatives shall have received from Cravath,
         Swaine & Moore LLP, counsel for the Initial Purchasers, such opinion or
         opinions, dated the Closing Date and addressed to the Representatives,
         with respect to the issuance and sale of the Securities, the Indenture,
         the Registration Rights Agreement, the Final Memorandum (as amended or
         supplemented at the Closing Date) and other related matters as the
         Representatives may reasonably require, and the Company shall have
         furnished to such counsel such documents as they reasonably request for
         the purpose of enabling them to pass upon such matters.

                  (d) The Company shall have furnished to the Representatives a
         certificate of the Company, signed by the Chairman of the Board or the
         President and the principal financial or accounting officer of the
         Company, dated the Closing Date, to the effect that the signers of such
         certificate have carefully examined the Final Memorandum, any amendment
         or supplement to the Final Memorandum and this Agreement and that:

                           (i) the representations and warranties of the Company
                  in this Agreement are true and correct on and as of the
                  Closing Date with the same effect as if made on the Closing
                  Date, and the Company has complied with all the agreements and
                  satisfied all the conditions on its part to be performed or
                  satisfied hereunder at or prior to the Closing Date; and

                           (ii) since the date of the most recent financial
                  statements included or incorporated by reference in the Final
                  Memorandum (exclusive of any amendment or supplement thereto),
                  there has been no material adverse change in the condition
                  (financial or otherwise), prospects, earnings, business or
                  properties of the Company and its subsidiaries, taken as a
                  whole, whether or not arising from transactions in the
                  ordinary course of business, except as set forth in or
                  contemplated by the Final Memorandum (exclusive of any
                  amendment or supplement thereto).

                  (e) At the Execution Time and at the Closing Date, the Company
         shall have requested and caused Deloitte & Touche LLP to furnish to the
         Representatives letters, dated respectively as of the Execution Time
         and as of the Closing Date, in form and substance satisfactory to the
         Representatives, confirming that they are independent accountants
         within the meaning of the Securities Act and the Exchange Act and the
         respective applicable rules and regulations adopted by the Commission
         thereunder, and stating in effect that:

                           (i) in their opinion the audited financial statements
                  included or incorporated in the Final Memorandum and reported
                  on by them comply as to form in all material respects with the
                  applicable accounting requirements of the Exchange Act and the
                  related rules and regulations adopted by the Commission


                                                                              13


                  thereunder that would apply to the Final Memorandum if the
                  Final Memorandum were a prospectus included in a registration
                  statement on Form S-1 under the Securities Act;

                           (ii) on the basis of a reading of the latest
                  unaudited financial statements made available by the Company
                  and its subsidiaries; carrying out certain specified
                  procedures (but not an examination in accordance with
                  generally accepted auditing standards) which would not
                  necessarily reveal matters of significance with respect to the
                  comments set forth in such letter; a reading of the minutes of
                  the meetings of the stockholders, directors and audit,
                  executive and compensation committees of the Company and the
                  Subsidiaries; and inquiries of certain officials of the
                  Company who have responsibility for financial and accounting
                  matters of the Company and its subsidiaries as to transactions
                  and events subsequent to March 1, 2003, nothing came to their
                  attention which caused them to believe that:

                                    (1) with respect to the period subsequent to
                           March 1, 2003, there were any changes, at a specified
                           date not more than five days prior to the date of the
                           letter, in the long-term debt less current maturities
                           of the Company and its subsidiaries or common stock
                           of the Company or increases in the stockholders'
                           deficit of the Company as compared with the amounts
                           shown on the March 1, 2003 consolidated balance sheet
                           included or incorporated in the Final Memorandum, or
                           for the period from March 2, 2003 to such specified
                           date there were any decreases, as compared with the
                           corresponding period in the preceding year, in
                           revenues, increases in net loss or loss from
                           continuing operations before income taxes and
                           cumulative effect of accounting change or in net loss
                           per share of the Company and its subsidiaries, except
                           in all instances for changes, increases or decreases
                           set forth in such letter, in which case the letter
                           shall be accompanied by an explanation by the Company
                           as to the significance thereof unless said
                           explanation is not deemed necessary by the
                           Representatives; or

                                    (2) the information included in response to
                           Regulation S-K, Item 301 (Selected Financial Data),
                           Item 302 (Supplementary Financial Information), Item
                           402 (Executive Compensation) and Item 503(d) (Ratio
                           of Earnings to Fixed Charges) is not in conformity
                           with the disclosure requirements of Regulation S-K;
                           and

                           (iii) they have performed certain other specified
                  procedures as a result of which they determined that certain
                  information of an accounting, financial or statistical nature
                  (which is limited to accounting, financial or statistical
                  information derived from the general accounting records of the
                  Company and its subsidiaries) set forth in the Final
                  Memorandum, including the information set forth under the
                  captions "Summary", "Risk Factors", "Use of Proceeds",
                  "Capitalization", "Selected Consolidated Financial
                  Information", "Management's Discussion and Analysis of
                  Financial Condition and Results of Operations", "Business",
                  "Management", "Security Ownership of Certain Beneficial Owners


                                                                              14


                  and Management", "Certain Relationships and Related
                  Transactions", "Description of Other Indebtedness" and
                  "Description of Notes" in the Final Memorandum, agrees with
                  the accounting records of the Company and its subsidiaries,
                  excluding any questions of legal interpretation.

                  References to the Final Memorandum in this Section 6(e)
         include any amendment or supplement thereto at the date of the
         applicable letter.

                  (f) Subsequent to the Execution Time or, if earlier, the dates
         as of which information is given in the Final Memorandum (exclusive of
         any amendment or supplement thereto), there shall not have been, other
         than any repurchase of indebtedness, (i) any change or decrease
         specified in the letter or letters referred to in paragraph (e) of this
         Section 6; or (ii) any change, or any development involving a
         prospective change, in or affecting the condition (financial or
         otherwise), prospects, earnings, business or properties of the Company
         and its subsidiaries, taken as a whole, whether or not arising from
         transactions in the ordinary course of business, except as set forth in
         or contemplated in the Final Memorandum (exclusive of any amendment or
         supplement thereto) the effect of which, in any case referred to in
         clause (i) or (ii) above, is, in the sole judgment of the
         Representatives, so material and adverse as to make it impractical or
         inadvisable to market the Securities as contemplated by the Final
         Memorandum (exclusive of any amendment or supplement thereto).

                  (g) The Securities shall have been designated as
         Portal-eligible securities in accordance with the rules and regulations
         of the NASD, and the Securities shall be eligible for clearance and
         settlement through The Depository Trust Company.

                  (h) Subsequent to the Execution Time, there shall not have
         been any decrease in the rating of any of the Company's debt securities
         by any "nationally recognized statistical rating organization" (as
         defined for purposes of Rule 436(g) under the Securities Act), any
         notice given of any intended or potential decrease in any such rating
         (including notice of an adverse change in the outlook for such rating)
         or of a possible change in any such rating that does not indicate the
         direction of the possible change.

                  (i) On or prior to the Closing Date, the Registration Rights
         Agreement shall be in form and substance satisfactory to the
         Representatives, shall have been executed and delivered by the parties
         thereto and shall be in full force and effect.

                  (j) Prior to the Closing Date, the Company shall have
         furnished to the Representatives such further information, certificates
         and documents as the Representatives may reasonably request.

                  If any of the conditions specified in this Section 6 shall not
have been fulfilled in all material respects when and as provided in this
Agreement, or if any of the opinions and certificates mentioned above or
elsewhere in this Agreement shall not be in all material respects reasonably
satisfactory in form and substance to the Representatives and counsel for the
Initial Purchasers, this Agreement and all obligations of the Initial Purchasers
hereunder may be canceled at, or at any time prior to, the Closing Date by the
Representatives. Notice of such


                                                                              15


cancellation shall be given to the Company in writing or by telephone or
facsimile confirmed in writing.

                  The documents required to be delivered by this Section 6 will
be delivered at the office of counsel for the Initial Purchasers, at Cravath,
Swaine & Moore LLP, 825 Eighth Avenue, New York, NY 10019, on the Closing Date.

                  7. Reimbursement of Expenses. If the sale of the Securities
provided for herein is not consummated because any condition to the obligations
of the Initial Purchasers set forth in Section 6 hereof is not satisfied,
because of any termination pursuant to Section 10 hereof or because of any
refusal, inability or failure on the part of the Company to perform any
agreement herein or comply with any provision hereof other than by reason of a
default by any of the Initial Purchasers, the Company will reimburse the Initial
Purchasers severally through Citigroup Global Markets Inc. on demand for all
reasonable out-of-pocket expenses (including reasonable fees and disbursements
of counsel) that shall have been incurred by them in connection with the
proposed purchase and sale of the Securities.

                  8. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless each Initial Purchaser, the directors, officers,
employees, affiliates and agents of each Initial Purchaser and each person who
controls any Initial Purchaser within the meaning of either the Securities Act
or the Exchange Act against any and all losses, claims, damages or liabilities,
joint or several, to which they or any of them may become subject under the
Securities Act, the Exchange Act or other Federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained in
the Final Memorandum (or in any supplement or amendment thereto), or arise out
of or are based upon the omission or alleged omission to state therein a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and agrees to
reimburse each such indemnified party, as incurred, for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made in
the Final Memorandum, or in any amendment thereof or supplement thereto, in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of any Initial Purchasers through the Representatives
specifically for inclusion therein. This indemnity agreement will be in addition
to any liability which the Company may otherwise have.

                  (b) Each Initial Purchaser severally and not jointly agrees to
indemnify and hold harmless the Company, each of its directors, each of its
officers, and each person who controls the Company within the meaning of either
the Securities Act or the Exchange Act, to the same extent as the foregoing
indemnity from the Company to each Initial Purchaser, but only with reference to
written information relating to such Initial Purchaser furnished to the Company
by or on behalf of such Initial Purchaser through the Representatives
specifically for inclusion in the Final Memorandum (or in any amendment or
supplement thereto). This indemnity agreement will be in addition to any
liability which any Initial Purchaser may otherwise have. The


                                                                              16


Company acknowledges that the statements set forth in the last paragraph of the
cover page regarding the delivery of the Securities and, under the heading "Plan
of Distribution", (i) the list of Initial Purchasers and their respective
participation in the sale of the Securities; (ii) the sentences related to
concessions and reallowances; and (iii) the paragraph related to stabilization,
syndicate covering transactions and penalty bids in the Final Memorandum,
constitute the only information furnished in writing by or on behalf of the
Initial Purchasers for inclusion in the Final Memorandum (or in any amendment or
supplement thereto).

                  (c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless and
to the extent it did not otherwise learn of such action and such failure results
in the forfeiture by the indemnifying party of substantial rights and defenses;
and (ii) will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligation
provided in paragraph (a) or (b) above. The indemnifying party shall be entitled
to appoint counsel of the indemnifying party's choice at the indemnifying
party's expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to appoint
counsel to represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel if (i) the use of counsel chosen by the indemnifying party
to represent the indemnified party would present such counsel with a conflict of
interest; (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party; (iii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such action; or (iv) the indemnifying party
shall authorize the indemnified party to employ separate counsel at the expense
of the indemnifying party. An indemnifying party will not, without the prior
written consent of the indemnified parties (which consent shall not be
unreasonably withheld), settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding.

                  (d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the Initial Purchasers
severally agree to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending same) (collectively "Losses") to which the
Company


                                                                              17


and one or more of the Initial Purchasers may be subject in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and by the Initial Purchasers on the other from the offering of the
Securities; provided, however, that in no case shall any Initial Purchaser
(except as may be provided in any agreement among the Initial Purchasers
relating to the offering of the Securities) be responsible for any amount in
excess of the purchase discount or commission applicable to the Securities
purchased by such Initial Purchaser hereunder. If the allocation provided by the
immediately preceding sentence is unavailable for any reason, the Company and
the Initial Purchasers severally shall contribute in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and of the Initial Purchasers on the other
in connection with the statements or omissions which resulted in such Losses, as
well as any other relevant equitable considerations. Benefits received by the
Company shall be deemed to be equal to the total net proceeds from the offering
(before deducting expenses) received by the Company, and benefits received by
the Initial Purchasers shall be deemed to be equal to the total purchase
discounts and commissions in each case set forth in the Final Memorandum or this
Agreement. Relative fault shall be determined by reference to, among other
things, whether any untrue or any alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to information
provided by the Company on the one hand or the Initial Purchasers on the other,
the intent of the parties and their relative knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
Company and the Initial Purchasers agree that it would not be just and equitable
if contribution were determined by pro rata allocation or any other method of
allocation which does not take account of the equitable considerations referred
to above. Notwithstanding the provisions of this paragraph (d), no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Initial Purchasers' obligation
to contribute pursuant to this Section 8(d) are several in proportion to their
respective purchase obligations and not joint. For purposes of this Section 8,
each person who controls an Initial Purchaser within the meaning of either the
Securities Act or the Exchange Act and each director, officer, employee,
affiliate and agent of an Initial Purchaser shall have the same rights to
contribution as such Initial Purchaser, and each person who controls the Company
within the meaning of either the Securities Act or the Exchange Act and each
officer and director of the Company shall have the same rights to contribution
as the Company, subject in each case to the applicable terms and conditions of
this paragraph (d).

                  9. Default by an Initial Purchaser. If any one or more Initial
Purchasers shall fail to purchase and pay for any of the Securities agreed to be
purchased by such Initial Purchaser hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Initial Purchasers shall be obligated severally to take
up and pay for (in the respective proportions which the principal amount of
Securities set forth opposite their names on Schedule I hereto bears to the
aggregate principal amount of Securities set forth opposite the names of all the
remaining Initial Purchasers) the Securities which the defaulting Initial
Purchaser or Initial Purchasers agreed but failed to purchase; provided,
however, that in the event that the aggregate principal amount of Securities
which the defaulting Initial Purchaser or Initial Purchasers agreed but failed
to purchase shall exceed 10% of the aggregate principal amount of Securities set
forth on Schedule I hereto, the remaining Initial Purchasers shall have the
right to purchase all, but shall not be under any obligation to


                                                                              18


purchase any, of the Securities, and if such nondefaulting Initial Purchasers do
not purchase all the Securities, this Agreement will terminate without liability
to any nondefaulting Initial Purchaser or the Company. In the event of a default
by any Initial Purchaser as set forth in this Section 9, the Closing Date shall
be postponed for such period, not exceeding two Business Days, as the
Representatives and the Company shall determine in order that the required
changes in the Final Memorandum or in any other documents or arrangements may be
effected. Nothing contained in this Agreement shall relieve any defaulting
Initial Purchaser of its liability, if any, to the Company or any nondefaulting
Initial Purchaser for damages occasioned by its default hereunder.

                  10. Termination. This Agreement shall be subject to
termination in the absolute discretion of the Representatives, by notice given
to the Company prior to delivery of and payment for the Securities, if at any
time prior to such time (i) trading in the Company's Common Stock shall have
been suspended by the Commission, the New York Stock Exchange or the Pacific
Exchange or trading in securities generally on the New York Stock Exchange or
the Pacific Exchange shall have been suspended or limited or minimum prices
shall have been established on either such Exchange; (ii) a banking moratorium
shall have been declared either by Federal or New York State authorities; or
(iii) there shall have occurred any outbreak or escalation of hostilities,
declaration by the United States of a national emergency or war or other
calamity or crisis the effect of which on financial markets is such as to make
it, in the sole judgment of the Representatives, impracticable or inadvisable to
proceed with the offering or delivery of the Securities as contemplated by the
Final Memorandum (exclusive of any amendment or supplement thereto).

                  11. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company or its officers and of the Initial Purchasers set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation made by or on behalf of the Initial Purchasers or the Company
or any of the officers, directors, employees, agents or controlling persons
referred to in Section 8 hereof, and will survive delivery of and payment for
the Securities. The provisions of Sections 7 and 8 hereof shall survive the
termination or cancellation of this Agreement.

                  12. Notices. All communications hereunder will be in writing
and effective only on receipt, and, if sent to the Representatives, will be
mailed, delivered or telefaxed to Citigroup Global Markets Inc. General Counsel
(fax no.: (212) 816-7912) and confirmed to the General Counsel, Citigroup Global
Markets Inc. at 388 Greenwich Street, New York, New York 10013, Attention:
General Counsel; or, if sent to the Company, will be mailed, delivered or
telefaxed to Robert Sari, Esq. (fax no.: (717) 760-7867) and confirmed to Robert
Sari, Esq., Rite Aid Corporation, 30 Hunter Lane, Camp Hill, Pennsylvania 17011.

                  13. Successors. This Agreement will inure to the benefit of
and be binding upon the parties hereto and their respective successors and the
officers, directors, employees, agents and controlling persons referred to in
Section 8 hereof, and, except as expressly set forth in Section 5(h) hereof, no
other person will have any right or obligation hereunder.



                                                                              19


                  14. Applicable Law. This Agreement will be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York.

                  15. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument.

                  16. Headings. The section headings used herein are for
convenience only and shall not affect the construction hereof.

                  17. Definitions. The terms which follow, when used in this
Agreement, shall have the meanings indicated.

                  "Affiliate" shall have the meaning specified in Rule 501(b) of
Regulation D.

                  "Business Day" shall mean any day other than a Saturday, a
Sunday or a legal holiday or a day on which banking institutions or trust
companies are authorized or obligated by law to close in The City of New York.

                  "Commission" shall mean the Securities and Exchange
Commission.

                  "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Commission promulgated
thereunder.

                  "Execution Time" shall mean the date and time that this
Agreement is executed and delivered by the parties hereto.

                  "Investment Company Act" shall mean the Investment Company Act
of 1940, as amended, and the rules and regulations of the Commission promulgated
thereunder.

                  "NASD" shall mean the National Association of Securities
Dealers, Inc.

                  "Regulation D" shall mean Regulation D under the Securities
Act.

                  "Regulation S" shall mean Regulation S under the Securities
Act.

                  "Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission promulgated thereunder.

                  "Trust Indenture Act" shall mean the Trust Indenture Act of
1939, as amended, and the rules and regulations of the Commission promulgated
thereunder.




                                                                              20




                  If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this Agreement and your acceptance shall represent a binding agreement
between the Company and the several Initial Purchasers.

                                                Very truly yours,

                                                Rite Aid Corporation,

                                                by
                                                  --------------------------
                                                   Name:
                                                   Title:






                                                                              21







The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.

Citigroup Global Markets Inc.
J.P. Morgan Securities Inc.
Fleet Securities, Inc.

By:  Citigroup Global Markets Inc.


by
   ----------------------
   Name:
   Title:

For themselves and the other several Initial Purchasers named in Schedule I to
the foregoing Agreement.



                                                                              22




                                   SCHEDULE I


                                                               Principal Amount
                                                                of Securities
                    Initial Purchasers                         to be Purchased
Citigroup Global Markets Inc..................................    $90,000,000
J.P. Morgan Securities Inc....................................    $56,250,000
Fleet Securities, Inc.........................................    $ 3,750,000
                                                              ----------------
      Total...................................................   $150,000,000






                                                                              23




                                   SCHEDULE II


      Form of Opinion of Robert Sari, Esq., General Counsel of the Company

                  (1) Each of Rite Aid Corporation (the "Company") and its
subsidiaries has been duly incorporated or formed and is an existing corporation
or limited liability company in good standing under the laws of its respective
state of incorporation or formation, with corporate, limited liability company
or other power and authority to own or lease, as the case may be, and to operate
its properties and conduct its business as described in the final offering
memorandum, dated May 13, 2003 (the "Final Memorandum").

                  (2) Each of the Company and its subsidiaries, is duly
qualified as a foreign corporation, entity or limited liability company to
transact business and is in good standing as a foreign corporation, entity or
limited liability company, as the case may be, under the laws of each
jurisdiction in which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except where the
failure to be so qualified or to be in good standing could not reasonably be
expected to have a Material Adverse Effect (as defined in the Purchase
Agreement).

                  (3) All of the issued and outstanding shares of capital stock
(or membership interests in the case of the Company's subsidiaries that are
limited liability companies) of each subsidiary have been duly authorized and
validly issued, are fully paid and non-assessable and, except for Rx USA, Inc.,
Rite Aid Lease Management Company, Read's Inc., Thrifty Payless Health Services,
L.L.P., and Rite Aid Risk Management Corp., are owned of record, directly or
through wholly owned subsidiaries, by the Company free and clear of any
perfected security interest, and to the best of my knowledge, after due inquiry,
any other security interests, claims, liens or encumbrances.

                  (4) The Company's authorized capital stock is as set forth in
the Final Memorandum under the caption "Capitalization."

                  (5) Each of the Transaction Documents (as defined below) has
been duly authorized, executed and delivered by the Company.

                  (6) To such counsel's knowledge, there is no pending or
threatened action, suit or proceeding by or before any court or governmental
agency, authority or body or any arbitrator involving the Company or any of its
subsidiaries or its or their property that would be required to be disclosed in
a registration statement on Form S-1 under the Securities Act of 1933 (the
"Securities Act") that is not adequately disclosed in the Final Memorandum,
except in each case for such proceedings that, if the subject of an unfavorable
decision, ruling or finding, would not, singly or in the aggregate, result in a
Material Adverse Effect.

                  (7) No consent, approval, authorization, filing with or order
of any court or governmental agency or body is required in connection with the
transactions contemplated by the Purchase Agreement, the Indenture (as defined
in the Purchase Agreement) or the Registration Rights Agreement (as defined in
the Purchase Agreement), except such as will be obtained under the Securities
Act and the Trust Indenture Act in connection with the transactions contemplated


                                                                              24


by the Registration Rights Agreement and such as may be required under the blue
sky or securities laws of any jurisdiction in connection with the transactions
contemplated by the Purchase Agreement and the Registration Rights Agreement.

(8) The execution and delivery by the Company of the Indenture, the
Purchase Agreement and the Registration Rights Agreement, the issue and sale of
the Securities (as defined in the Purchase Agreement), the consummation of any
other transactions contemplated by the Purchase Agreement, the Registration
Rights Agreement and the Indenture (together the "Transaction Documents"), and
the fulfillment of the terms of each Transaction Document, will not conflict
with, or result in a breach or violation of, or imposition of any lien, charge
or encumbrance upon any property or asset of the Company or any of its
subsidiaries pursuant to (i) the charter (or other applicable constituent
documents) or bylaws of the Company or any of its subsidiaries, (ii) the terms
of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan
agreement or other agreement, obligation, condition, covenant or instrument to
which the Company or any of its subsidiaries is a party or bound or to which any
of their respective properties is subject, or (iii) any statute, law, rule,
regulation, judgment, order or decree applicable to the Company or any of its
subsidiaries of any court, regulatory body, administrative agency, governmental
body, arbitrator or other authority having jurisdiction over the Company, any of
its subsidiaries or any of their respective properties, except in the case of
clauses (ii) and (iii) such conflicts, breaches or violations as could not
reasonably be expected to have a Material Adverse Effect; or could not
reasonably be expected to have a material adverse effect on the Company's
performance of the Transaction Documents, or the consummation of any of the
transactions contemplated by the Purchase Agreement or such other agreements.

(9) The statements in the Final Memorandum under the captions "Business -
Regulation" and "Business - Legal Proceedings," accurately and fairly summarize
the matters discussed therein in all material respects.

(10) The Company has the corporate or limited liability company power and
authority to consummate the transactions contemplated by the Transaction
Documents.

(11) No facts have come to such counsel's attention that have led such
counsel to believe that the Final Memorandum, as of its date or as of the date
of such opinion, contained or contains an untrue statement of a material fact or
omitted or omits to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that such counsel need not express any opinion or belief
with respect to the financial statements, schedules and other financial data
included or incorporated by reference therein or excluded therefrom.






                                                                              25




                                  SCHEDULE III


           Form of Opinion of Skadden, Arps, Slate, Meagher & Flom LLP

                  (1) Rite Aid Corporation (the "Company") is validly existing
as a corporation in good standing under the laws of the state of Delaware, and
the Company has the corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Final Memorandum (as
defined in the the Purchase Agreement).

                  (2) The Purchase Agreement has been duly authorized, executed
and delivered by the Company.

                  (3) Each of the Indenture (as defined in the Purchase
Agreement) and the Registration Rights Agreement (as defined in the Purchase
Agreement) has been duly authorized, executed and delivered by the Company and
is a valid and binding agreement of the Company, enforceable against the Company
in accordance with its terms.

                  (4) The Securities (as defined in the Purchase Agreement) have
been duly authorized and executed by the Company and, when issued and delivered
by the Company against payment therefor in accordance with the terms of the
Purchase Agreement and the Indenture, will constitute valid and binding
obligations of the Company entitled to the benefits of the Indenture and
enforceable against the Company in accordance with their terms.

                  (5) To such counsel's knowledge, there is no pending or
threatened action, suit or proceeding by or before any court or governmental
agency, authority or body or any arbitrator involving the Company or any of its
subsidiaries, or their property that would be required to be disclosed in the
Final Memorandum if the offering were made pursuant to a registration statement
on Form S-1 under the Securities Act of 1933 (the "Securities Act") that is not
disclosed in the Final Memorandum.

                  (6) The Company is not, and solely after giving effect to the
issuance and sale of the Securities and the application of the net proceeds
therefrom as described in the Final Memorandum, will not be, an "investment
company" as such term is defined in the Investment Company Act of 1940, as
amended.

                  (7) No Governmental Approval (as defined in such opinion),
which has not been obtained or taken and is not in full force and effect, is
required to authorize or is required in connection with, the execution and
delivery of each of the Purchase Agreement, the Indenture or the Registration
Rights Agreement by the Company or the consummation by the Company of the
transactions contemplated thereby, including the issuance and sale of the
Securities.

                  (8) The execution and delivery by the Company of each of the
Transaction Documents and the consummation by the Company of the transactions
contemplated thereby, including the issuance and sale of the Securities, will
not (i) conflict with the Certificate of Incorporation or the By-laws of the
Company, (ii) constitute a violation of, or a breach or a default under, the
terms of any Applicable Contract (as defined in such opinion) or (iii) violate
or conflict with, or result in any contravention of, any Applicable Law (as
defined in such opinion)


                                                                              26


or Applicable Order (as defined in such opinion). Such counsel need not express
any opinion, however, as to whether the execution, delivery or performance by
the Company of any of the Transaction Documents or the consummation of the
transactions contemplated thereby, including the issuance and sale of the
Securities, will constitute a violation of, or a default under, any covenant,
restriction or provision with respect to financial ratios or tests or any aspect
of the financial condition or results of operations of the Company or any of its
subsidiaries.

                  (9) The statements in the Final Memorandum under the captions
"Description of Other Indebtedness," "Description of Notes," and "Exchange
Offer; Registration Rights," insofar as such statements purport to summarize
certain provisions of the Transaction Documents and the indentures referred to
therein, fairly summarize such provisions in all material respects.

                  (10) Assuming (i) the accuracy of the representations and
warranties of the Company in Section 1 of the Purchase Agreement and of the
Initial Purchasers in Section 4 of the Purchase Agreement, (ii) the due
performance by the Company of the covenants and agreements set forth in Section
5 of the Purchase Agreement, (iii) the Initial Purchasers' compliance with the
offering and transfer procedures and restrictions described in the Final
Memorandum, (iv) the accuracy of the representations and warranties made in
accordance with the Final Memorandum by purchasers to whom the Initial
Purchasers initially resell the Securities and (v) that reasonable steps have
been taken to ensure that purchasers to whom the Initial Purchasers initially
resell the Securities have been informed that the Initial Purchasers may be
relying on the exemption from the provisions of Section 5 of the Securities Act
provided by Rule 144A in connection with such sales, the offer, sale and
delivery of the Securities to the Initial Purchasers in the manner contemplated
by the Purchase Agreement and the Final Memorandum, and the initial resale of
the Securities by the Initial Purchasers in the manner contemplated in the Final
Memorandum and the Purchase Agreement, do not require registration under the
Securities Act, and the Indenture does not require qualification under the Trust
Indenture Act of 1939, as amended, it being understood that we do not express
any opinion as to any subsequent resale of any Security.





                                                                              27




                                   SCHEDULE IV


 Form of Negative Assurance Opinion of Skadden, Arps, Slate, Meagher & Flom LLP


         No facts have come to such counsel's attention that have caused such
counsel to believe that the Final Memorandum (as defined in the Purchase
Agreement), as of its date or as of the date of such opinion, contained or
contains an untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading (except that in each
case such counsel need not express any view as to the financial statements,
schedules and other financial data included or incorporated by reference therein
or excluded therefrom).




                                                                              28




                                   SCHEDULE V


         Form of Tax Opinion of Skadden, Arps, Slate, Meagher & Flom LLP


         The statements in the Final Memorandum (as defined in the Purchase
Agreement) under the caption "Certain United States Federal Tax Considerations
for Non-United States Holders," insofar as such statements purport to summarize
certain provisions of the laws referred to therein, fairly summarize such
provisions in all material respects.





                                                                       EXHIBIT A

                       Selling Restrictions for Offers and
                         Sales outside the United States


                  1. (a) The Securities have not been and will not be registered
under the Securities Act and may not be offered or sold within the United States
or to, or for the account or benefit of, U.S. persons except in accordance with
Regulation S under the Securities Act or pursuant to an exemption from the
registration requirements of the Securities Act. Each Initial Purchaser
represents and agrees that, except as otherwise permitted by Section 4(b)(i) of
the Agreement to which this is an exhibit, it has offered and sold the
Securities, and will offer and sell the Securities, (i) as part of their
distribution at any time; and (ii) otherwise until 40 days after the later of
the commencement of the offering and the Closing Date, only in accordance with
Rule 903 of Regulation S under the Securities Act. Accordingly, each Initial
Purchaser represents and agrees that neither it, nor any of its Affiliates nor
any person acting on its or their behalf has engaged or will engage in any
directed selling efforts with respect to the Securities, and that it and they
have complied and will comply with the offering restrictions requirement of
Regulation S. Each Initial Purchaser agrees that, at or prior to the
confirmation of sale of Securities (other than a sale of Securities pursuant to
Section 4(b)(i) of the Agreement to which this is an exhibit), it shall have
sent to each distributor, dealer or person receiving a selling concession, fee
or other remuneration that purchases Securities from it during the distribution
compliance period a confirmation or notice to substantially the following
effect:

                  "The Securities covered hereby have not been registered under
                  the U.S. Securities Act of 1933 (the "Securities Act") and may
                  not be offered or sold within the United States or to, or for
                  the account or benefit of, U.S. persons (i) as part of their
                  distribution at any time or (ii) otherwise until 40 days after
                  the later of the commencement of the offering and May 20,
                  2003, except in either case in accordance with Regulation S or
                  Rule 144A under the Securities Act. Terms used above have the
                  meanings given to them by Regulation S."

                  (b) Each Initial Purchaser also represents and agrees that it
         has not entered and will not enter into any contractual arrangement
         with any distributor with respect to the distribution of the
         Securities, except with its Affiliates or with the prior written
         consent of the Company.

                  (c) Terms used in this section have the meanings given to them
         by Regulation S.

                  2. Each Initial Purchaser represents and agrees that (i) it
has not offered or sold, and prior to the expiry of six months from the closing
of the offering of the Securities will not offer or sell, any Securities to
persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding managing or disposing of investments, whether
as a principal or agent, for purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers Securities
Regulations 1995; (ii) it has only communicated or caused to be communicated and
will only communicate or cause to be communicated any invitation or inducement
to engage in investment activity (within the meaning of section 21 of the
Financial Services and Markets Act 2000 (the "FSMA")) received by it in
connection with the issue or sale of any Securities in circumstances in which
section 21(1) of the FSMA does not apply to the Company; and (iii) it has
complied and will comply with applicable provisions of FSMA with


                                                                               2


respect to anything done by it in relation to the Securities in, from or
otherwise involving the United Kingdom.

EX-10.10 8 file004.htm REGISTRATION RIGHTS AGREEMENT



                                                                  EXECUTION COPY


                              RITE AID CORPORATION
                    $150,000,000 9.25% Senior Notes due 2013

                   EXCHANGE AND REGISTRATION RIGHTS AGREEMENT


                                                                    May 20, 2003


Citigroup Global Markets Inc.
J.P. Morgan Securities Inc.
Fleet Securities, Inc.
As Representatives of the Initial Purchasers
c/o Citigroup Global Markets Inc.
388 Greenwich Street
New York, New York 10013


Ladies and Gentlemen:

                  Rite Aid Corporation, a Delaware corporation (the "Company"),
proposes to issue and sell, upon the terms set forth in a purchase agreement
dated May 20, 2003 (the "Purchase Agreement"), to the initial purchasers set
forth in the Purchase Agreement (the "Initial Purchasers"), $150,000,000
aggregate principal amount of its 9.25% Senior Notes due 2013 (the "Securities")
relating to the initial placement of the Securities (the "Initial Placement").
Capitalized terms used but not defined herein shall have the meanings given to
such terms in the Purchase Agreement.

                  As an inducement to the Initial Purchasers to enter into the
Purchase Agreement, and as satisfaction of the conditions thereunder, the
Company agrees with you for your benefit and the benefit of the holders from
time to time of the Securities (including the Initial Purchasers) and the
Exchange Securities (as defined herein) (each a "Holder" and collectively, the
"Holders"), as follows:

                  1. Registered Exchange Offer. Unless the Registered Exchange
Offer (as defined herein) shall not be permitted by applicable law or applicable
interpretation of the staff of the Securities and Exchange Commission (the "SEC"
or "Commission"), the Company shall (i) prepare and, not later than 90 days
following the date of the original issuance of the Securities (the date of such
filing being referred to herein as the "Filing Date"), file with the Commission
a registration statement (the "Exchange Offer Registration Statement") on an
appropriate form under the Securities Act with respect to a proposed offer to
the Holders of the Securities (the "Registered Exchange Offer") to issue and
deliver to such Holders, in exchange for the Securities a like aggregate
principal amount of debt securities of the Company (the "Exchange Securities")
that are identical in all material respects to the Securities, except for the
transfer restrictions relating to the Securities, (ii) use their best efforts to
cause the Exchange Offer Registration Statement to become effective under the
Securities Act no later than




180 days after the Filing Date and (iii) as soon as practicable after the
effectiveness of the Exchange Offer Registration Statement, initiate the
Registered Exchange Offer as set forth in the following paragraph. The Exchange
Securities will be issued under the same indenture as the Securities (the
"Indenture") to be dated as of May 20, 2003, between the Company and the Trustee
or such other bank or trust company that is reasonably satisfactory to the
Initial Purchasers, as trustee (the "Trustee"), with such modifications as may
be appropriate to account for the registration of the Exchange Securities under
the Securities Act.

                  Upon the effectiveness of the Exchange Offer Registration
Statement, the Company shall commence the Registered Exchange Offer, it being
the objective of such Registered Exchange Offer to enable each Holder electing
to exchange Securities for Exchange Securities (assuming that such Holder (a) is
not an affiliate of the Company or an Exchanging Dealer (as defined herein) not
complying with the requirements of the next sentence, (b) is not holding
Securities that have, or that are reasonably likely to have, the status of an
unsold allotment in the Initial Placement, (c) acquires the Exchange Securities
in the ordinary course of such Holder's business and (d) has no arrangements or
understandings with any person to participate, and is not participating, in the
distribution of the Exchange Securities) and to trade such Exchange Securities
from and after their receipt without any limitations or restrictions under the
Securities Act and without material restrictions under the securities laws of
the several states of the United States. The Company, the Holders and each
Exchanging Dealer (as defined herein) acknowledge that, pursuant to current
interpretations by the Commission's staff of Section 5 of the Securities Act,
each Holder that is a Broker-Dealer electing to exchange Securities, acquired
for its own account as a result of market-making activities or other trading
activities, for Exchange Securities (an "Exchanging Dealer"), is required, in
connection with a sale of any such Exchange Securities received by such
Exchanging Dealer pursuant to the Registered Exchange Offer, to deliver a
prospectus containing substantially the information set forth (i) in Annex A
hereto on the cover of such prospectus, (ii) in Annex B hereto in the "Exchange
Offer Procedures" section and the "Purpose of the Exchange Offer" section of
such prospectus and (iii) in Annex C hereto in the "Plan of Distribution"
section of such prospectus, in each case subject to any changes, additions,
deletions or moving of such disclosure required by the SEC.

                  In connection with the Registered Exchange Offer, the Company
shall:

                  (a) mail to each Holder of Securities a copy of the prospectus
forming part of the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;

                  (b) keep the Registered Exchange Offer open for not less than
30 days and not more than 45 business days (or, in each case, longer, if
required by applicable law) after the date on which notice of the Registered
Exchange Offer is mailed to the Holders of Securities and the Initial
Purchasers;

                  (c) utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City of New
York;




                  (d) permit Holders to withdraw tendered Securities at any time
prior to the end of the Registered Exchange Offer, as set forth in the materials
originally mailed to Holders of Securities or otherwise extended by the Company;

                  (e) comply with all requests of the Commission in order to
consummate the Registered Exchange Offer; and

                  (f) comply in all respects with all laws that are applicable
to the Registered Exchange Offer.

                  As soon as practicable after the close of the Registered
Exchange Offer, the Company shall:

                  (a) accept for exchange all Securities tendered and not
validly withdrawn pursuant to the Registered Exchange Offer;

                  (b) deliver to the Trustee for due cancelation all Securities
so accepted for exchange; and

                  (c) cause the Trustee for the Exchange Securities promptly to
authenticate and deliver to each Holder, Exchange Securities equal in principal
amount to the Securities of such Holder so accepted for exchange.

                  The Company shall use its best efforts to keep the Exchange
Offer Registration Statement effective and to amend and supplement the
prospectus contained therein in order to permit such prospectus to be used by
all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Securities; provided that (i) in the case where
such prospectus and any amendment or supplement thereto must be delivered by an
Exchanging Dealer, such period shall be the earlier of one year from the close
of the Registered Exchange Offer and the date on which all Exchanging Dealers
have sold all Exchange Securities held by them and (ii) the Company shall make
such prospectus and any amendment or supplement thereto available to any
Broker-Dealer for use in connection with any resale of any Exchange Securities
for a period of not less than 90 days after the consummation of the Registered
Exchange Offer.

                  Notwithstanding the foregoing, during any 365-day period, the
Company may suspend the effectiveness of the Exchange Offer Registration
Statement or the Shelf Registration Statement for up to 2 periods (each a
"Suspension Period") of up to 45 consecutive days (except for the consecutive
45-day period immediately prior to maturity of the Securities), but no more than
an aggregate of 75 days during any 365-day period, if there is a possible
acquisition or business combination or other transaction, business development
or event involving the Company that may require disclosure in the Exchange Offer
Registration Statement or the Shelf Registration Statement and the Company
determines in the exercise of its reasonable judgment that such disclosure is
not in the best interests of the Company and its stockholders or obtaining any
financial statements relating to an acquisition or business combination required
to be included in



the Exchange Offer Registration Statement or the Shelf Registration Statement
would be impracticable. In such a case, the Company shall promptly notify any
such Broker-Dealers of the suspension of the effectiveness of the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case may be,
provided that such notice shall not require the Company to disclose the possible
acquisition or business combination or other transaction, business development
or event if the Company determines in good faith that such acquisition or
business combination or other transaction, business development or event should
remain confidential. Upon the abandonment, consummation or termination of the
possible acquisition or business combination or other transaction, business
development or event or the availability of the required financial statements
with respect to a possible acquisition or business combination, the suspension
of the use of the Exchange Offer Registration Statement or the Shelf
Registration Statement, as the case may be, pursuant to this paragraph shall
cease and the Company shall promptly notify such Broker-Dealers that the use of
the prospectus contained in the Exchange Offer Registration Statement or the
Shelf Registration Statement, as the case may be, as amended or supplemented, as
applicable, may resume. The Company shall provide sufficient copies of the
latest version of such prospectus to such Broker-Dealers, promptly upon written
request, and in no event later than one Business Day after such request, at any
time during such period.

                  The Indenture shall provide that the Securities and the
Exchange Securities shall vote and consent together on all matters as to which
the Indenture provides for voting and consent as one class and that neither the
Securities nor the Exchange Securities will have the right to vote or consent as
a separate class on any matter.

                  Interest on each Exchange Security issued pursuant to the
Registered Exchange Offer will accrue from the last interest payment date on
which interest was paid on the Securities surrendered in exchange therefor or,
if no interest has been paid on the Securities, from the date of original
issuance of the Securities.

                  Each Holder hereby acknowledges and agrees that any such
Holder using the Registered Exchange Offer to participate in a distribution of
the Exchange Securities (x) could not under Commission policy as in effect on
the date of this Agreement rely on the position of the Commission in Morgan
Stanley and Co., Inc. (pub. avail. June 5, 1991) and Exxon Capital Holdings
Corporation (pub. avail. May 13, 1988), as interpreted in the Commission's
letter to Shearman & Sterling dated July 2, 1993 and similar no-action letters,
and (y) must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any secondary resale transaction which
must be covered by an effective registration statement containing the selling
security holder information required by Item 507 or 508, as applicable, of
Regulation S-K under the Securities Act if the resales are of Exchange
Securities obtained by such Holder in exchange for Securities acquired by such
Holder directly from the Company or one of its affiliates. Accordingly, each
Holder participating in the Registered Exchange Offer shall be required to
represent to the Company that at the time of the consummation of the Registered
Exchange Offer (i) any Exchange Securities received by such Holder will be
acquired in the ordinary course of business, (ii) such Holder will have no
arrangements or



understanding with any person to participate, and is not participating, in the
distribution of the Securities or the Exchange Securities within the meaning of
the Securities Act, (iii) such Holder is not an affiliate of the Company or, if
it is such an affiliate (as defined in Section 10(e)), such Holder will comply
with the registration and prospectus delivery requirements of the Securities Act
to the extent applicable, (iv) it is not acting on behalf of any person who, to
its knowledge, could not truthfully make the foregoing representations and (v)
it shall have made such other representations as may be reasonably necessary
under applicable SEC rules, regulations or interpretations to render the use of
Form S-4 or another appropriate form under the Securities Act available or for
the Exchange Offer Registration Statement to be declared effective. To the
extent permitted by law, upon the written request of the Initial Purchasers, the
Company shall inform the Initial Purchasers of the names and addresses of the
Holders to whom the Exchange Offer is made, and the Initial Purchasers shall
have the right to contact such Holders and otherwise facilitate the tender of
Securities in the Exchange Offer.

                  Notwithstanding any other provisions hereof, the Company will
ensure that (i) any Exchange Offer Registration Statement and any amendment
thereto and any prospectus forming part thereof and any supplement thereto shall
comply in all material respects with the Securities Act and the rules and
regulations of the Commission thereunder, (ii) any Exchange Offer Registration
Statement and any amendment thereto shall not, when it becomes effective,
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading and (iii) any prospectus forming part of any Exchange Offer
Registration Statement, and any supplement to such prospectus, shall not, as of
the consummation of the Registered Exchange Offer, include an untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading.

                  If any Initial Purchaser determines that it is not eligible to
participate in the Registered Exchange Offer with respect to the exchange of
Securities constituting any portion of an unsold allotment, at the written
request of such Initial Purchaser, the Company shall issue and deliver to such
Initial Purchaser or the person purchasing Exchange Securities registered under
a Shelf Registration Statement (as contemplated by Section 2 hereof) from such
Initial Purchaser, in exchange for such Securities, a like principal amount of
Exchange Securities. The Company shall use its best efforts to cause the CUSIP
Service Bureau to issue the same CUSIP number for such Exchange Securities as
for Exchange Securities issued pursuant to the Registered Exchange Offer.

                  2. Shelf Registration. If (i) because of any change in law or
applicable interpretations thereof by the Commission's staff the Company is not
permitted to effect the Registered Exchange Offer as contemplated by Section 1
hereof, (ii) the Exchange Offer Registration Statement is not declared effective
within 180 days after the original issuance of the Securities or the Registered
Exchange Offer is not consummated within 210 days after the original issuance of
the Securities, (iii) a Holder (including an Initial Purchaser) of Securities
notifies the Company following the completion of the Registered Exchange Offer
that the Securities held by such Holder are not eligible to be exchanged for
Exchange Securities in the Registered Exchange Offer, (iv) certain Holders
(other



than the Initial Purchasers) of the Securities are prohibited by law or the
policy of the Commission from participating in the Registered Exchange Offer or
the Exchange Securities may not be freely transferable by such Holders other
than by reason of such Holder being an affiliate of the Company (it being
understood that the requirement that a participating Broker-Dealer deliver the
prospectus contained in the Exchange Offer Registration Statement in connection
with sales of Exchange Securities shall not result in such Exchange Securities
being not "freely transferable"), or (v) in the case of any Initial Purchaser
that participates in the Registered Exchange Offer or acquires Exchange
Securities pursuant to Section 1(d) hereof, such Initial Purchaser does not
receive freely tradeable Exchange Securities in exchange for Securities
constituting any portion of an unsold allotment (it being understood that (x)
the requirement that an Initial Purchaser deliver a prospectus containing the
information required by Item 507 or 508 of Regulation S-K under the Securities
Act in connection with sales of Exchange Securities acquired in exchange for
such Securities shall not result in such Exchange Securities not being "freely
transferable" and (y) the requirement that an Exchanging Dealer deliver a
prospectus in connection with sales of Exchange Securities acquired in the
Registered Exchange Offer in exchange for Securities acquired as a result of
market-making activities or other trading activities shall not result in such
Exchange Securities being not "freely transferable"), then the following
provisions shall apply:

                  (a) The Company shall promptly file (but in no event more than
30 days after so required or requested pursuant to this Section 2) with the
Commission, and thereafter shall use its reasonable best efforts to cause to be
declared effective, a shelf registration statement on an appropriate form under
the Securities Act relating to the offer and sale of the Transfer Restricted
Securities (as defined herein) by the Holders thereof from time to time in
accordance with the methods of distribution set forth in such registration
statement (hereafter, a "Shelf Registration Statement" and, together with any
Exchange Offer Registration Statement, a "Registration Statement").

                  (b) Subject to any Suspension Periods provided for in Section
1, the Company shall keep the Shelf Registration Statement continuously
effective, supplemented and amended, or shall file additional registration
statements, as required by the Securities Act, in order to permit the prospectus
forming part thereof to be used by Holders of Transfer Restricted Securities for
a period ending on the earlier of (i) two years from the effective date of the
Shelf Registration Statement or such shorter period that will terminate when all
the Transfer Restricted Securities covered by the Shelf Registration Statement
have been sold pursuant thereto, (ii) the date the Transfer Restricted
Securities cease to be outstanding, and (iii) the date on which the Securities
become eligible for resale without volume restrictions pursuant to Rule 144
under the Securities Act (in any such case, such period being called the "Shelf
Registration Period"). The Company shall be deemed not to have complied with
this paragraph (b) if it voluntarily takes any action that would result in
Holders of Transfer Restricted Securities covered thereby not being able to
offer and sell such Transfer Restricted Securities during that period, unless
such action is required by applicable law.

                  (c) Notwithstanding any other provisions hereof, the Company
shall ensure that (i) any Shelf Registration Statement and any amendment thereto
and any



prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations of the
Commission thereunder, (ii) any Shelf Registration Statement and any amendment
thereto (in either case, other than with respect to information included therein
in reliance upon or in conformity with written information furnished to the
Company by or on behalf of any Holder specifically for use therein (the
"Holders' Information")) does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(iii) any prospectus forming part of any Shelf Registration Statement, and any
supplement to such prospectus (in either case, other than with respect to
Holders' Information), does not include an untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.

                  3. Additional Interest. (a) If (i) neither the Exchange Offer
Registration Statement nor the Shelf Registration Statement, as the case may be,
is filed with the Commission on or prior to the date which is 90 days following
the date of the original issuance of the Securities, (ii) the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case may be,
is not declared effective within 180 days after the original issuance of the
Securities, (iii) the Exchange Offer Registration Statement is declared
effective and the Registered Exchange Offer is not consummated on or prior to
210 days after the date of the original issuance of Securities, (iv) the Company
is required to file the Shelf Registration Statement in accordance with Section
2 and the Company does not so file the Shelf Registration Statement on or prior
to the 30th day after the Company's obligation to file such Shelf Registration
Statement arises, (v) the applicable Registration Statement is filed and
declared effective but shall thereafter cease to be effective (at any time that
the Company is obligated to maintain the effectiveness thereof) without being
again effective within 30 days or being succeeded within 30 days by an
additional Registration Statement filed and declared effective, provided that
such 30-day period shall toll during a Suspension Period, or (vi) any Suspension
Periods exceed, in the aggregate, 75 days during any 365-day period (each such
event referred to in clauses (i) through (vi), a "Registration Default"), the
Company shall be obligated to pay additional interest ("Additional Interest") to
each Holder of Transfer Restricted Securities, during the period of one or more
such Registration Defaults, at a rate of 0.25% per annum on the applicable
principal amount of Transfer Restricted Securities held by such Holder for the
first 90-day period immediately following the occurrence of a Registration
Default, and such rate will increase by an additional 0.25% with respect to each
subsequent 90-day period until all Registration Defaults have been cured,
provided that the maximum additional rate may in no event exceed 0.50% per
annum. Such obligation to pay Additional Interest shall survive until (i) the
applicable Registration Statement is filed, (ii) the Exchange Offer Registration
Statement is declared effective and the Registered Exchange Offer is consummated
with respect to all properly tendered Securities, (iii) the Shelf Registration
Statement is declared effective or (iv) the Shelf Registration Statement again
becomes effective (or is superseded by another effective Shelf Registration
Statement), as the case may be. Following the cure of all Registration Defaults,
the accrual of Additional Interest will cease.




                  As used herein, the term "Transfer Restricted Securities"
means (i) each Security until the date on which such Security has been exchanged
for a freely transferable Exchange Security in the Registered Exchange Offer,
(ii) each Security until the date on which it has been effectively registered
under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (iii) each Security until the date on which it is
distributed to the public pursuant to Rule 144 under the Securities Act or is
saleable pursuant to Rule 144(k) under the Securities Act. Notwithstanding
anything to the contrary in this Section 3(a), the Company shall not be required
to pay Additional Interest to a Holder of Transfer Restricted Securities if such
Holder failed to comply with its obligations to make the representations set
forth in the third to last paragraph of Section 1 or failed to provide the
information required to be provided by it, if any, pursuant to Section 4(n).

                  (b) The Company shall notify the Trustee and the paying agent
under the Indenture immediately upon the happening of each and every
Registration Default. The Company shall pay the Additional Interest due on the
Transfer Restricted Securities by depositing with the paying agent (which may
not be the Company for these purposes), in trust, for the benefit of the Holders
thereof, prior to 10:00 a.m., New York City time, on the next applicable
interest payment date specified by the Indenture and the Securities, sums
sufficient to pay the Additional Interest then due. The Additional Interest due
shall be payable on each applicable interest payment date specified by the
Indenture and the Securities to the record holder entitled to receive the
interest payment to be made on such date. Each obligation to pay Additional
Interest shall be deemed to accrue from and include the date of the applicable
Registration Default.

                  (c) The parties hereto agree that the Additional Interest
provided for in this Section 3 constitutes a reasonable estimate of and is
intended to constitute the sole damages that will be suffered by Holders of
Transfer Restricted Securities by reason of the failure of (i) the Shelf
Registration Statement or the Exchange Offer Registration Statement to be filed,
(ii) the Shelf Registration Statement to remain effective or (iii) the Exchange
Offer Registration Statement to be declared effective and the Registered
Exchange Offer to be consummated, in each case to the extent required by this
Agreement.

                  4. Registration Procedures. In connection with any
Registration Statement, the following provisions shall apply:

                  (a) The Company shall (i) furnish to each of the
Representatives for the Initial Purchasers a copy of the Registration Statement
and each amendment thereof and each supplement, if any, to the prospectus
included therein and shall use its reasonable best efforts to reflect in each
such document, when so filed with the Commission, such comments as any Initial
Purchaser or any Holder may reasonably propose; (ii) include the information set
forth (A) in Annex A hereto on the cover of such prospectus, (B) in Annex B
hereto in the "Exchange Offer Procedures" section and the "Purpose of the
Exchange Offer" section of such prospectus, (C) in Annex C hereto in the "Plan
of Distribution" section of the prospectus forming a part of the Exchange Offer
Registration Statement and (D) in Annex D hereto in any Letter of Transmittal
delivered



pursuant to the Registered Exchange Offer, in each case subject to any changes,
additions, deletions or moving of such disclosure required by the SEC; and (iii)
if requested by an Initial Purchaser, include the information required by Items
507 or 508 of Regulation S-K, as applicable, in the prospectus forming part of
the Exchange Offer Registration Statement.

                  (b) The Company shall advise each of the Representatives for
the Initial Purchasers, each Exchanging Dealer and the Holders (if applicable)
and, if requested by any such person, confirm such advice in writing (which
advice pursuant to clauses (ii)-(v) hereof shall be accompanied by an
instruction to suspend the use of the prospectus until the requisite changes
have been made):

                  (i) when any Registration Statement and any amendment thereto
         has been filed with the Commission and when such Registration Statement
         or any post-effective amendment thereto has become effective;

                  (ii) of any request by the Commission for amendments or
         supplements to any Registration Statement or the prospectus included
         therein or for additional information;

                  (iii) if known by the Company, of the issuance by the
         Commission of any stop order suspending the effectiveness of any
         Registration Statement or the initiation of any proceedings for that
         purpose;

                  (iv) of the receipt by the Company of any notification with
         respect to the suspension of the qualification of the Securities or the
         Exchange Securities for sale in any jurisdiction or the initiation or
         threatening of any proceeding for such purpose; and

                  (v) of the happening of any event that requires the making of
         any changes in any Registration Statement or the prospectus included
         therein in order that the statements therein are not misleading and do
         not omit to state a material fact required to be stated therein or
         necessary to make the statements therein not misleading.

                  (c) The Company shall make every reasonable effort to obtain
the withdrawal at the earliest possible time of any order suspending the
effectiveness of any Registration Statement or qualifying the Securities therein
for sale in any jurisdiction.

                  (d) The Company shall furnish to each Holder of Transfer
Restricted Securities included within the coverage of any Shelf Registration
Statement, without charge, upon the written request of such Holder, at least one
conformed copy of such Shelf Registration Statement and any post-effective
amendment thereto, including all material incorporated therein by reference,
including financial statements and schedules and, if any such Holder so requests
in writing, all exhibits thereto (including those, if any, incorporated by
reference).




                  (e) The Company shall, during the Shelf Registration Period,
promptly deliver to each Holder of Transfer Restricted Securities included
within the coverage of any Shelf Registration Statement, without charge, as many
copies of the prospectus (including each preliminary prospectus) included in
such Shelf Registration Statement and any amendment or supplement thereto as
such Holder may reasonably request; and the Company consents to the use of such
prospectus or any amendment or supplement thereto by each of the selling Holders
of Transfer Restricted Securities in connection with the offer and sale of the
Transfer Restricted Securities covered by such prospectus or any amendment or
supplement thereto.

                  (f) The Company shall furnish to each Exchanging Dealer who so
requests in writing, without charge, at least one conformed copy of the Exchange
Offer Registration Statement and any post-effective amendment thereto, including
financial statements and schedules and, if any Exchanging Dealer so requests in
writing, all exhibits thereto (including those, if any, incorporated by
reference).

                  (g) The Company shall, during the Exchange Offer Registration
Period or the Shelf Registration Period, as applicable, promptly deliver to each
Initial Purchaser, each Exchanging Dealer and such other persons that are
required to deliver a prospectus following the Registered Exchange Offer,
without charge, as many copies of the final prospectus included in the Exchange
Offer Registration Statement or the Shelf Registration Statement and any
amendment or supplement thereto as such Initial Purchaser, Exchanging Dealer or
other persons may reasonably request; and the Company consents to the use of
such prospectus or any amendment or supplement thereto by any such Initial
Purchaser, Exchanging Dealer or other persons, as applicable, as aforesaid.

                  (h) Prior to the effective date of any Registration Statement,
the Company shall use its reasonable best efforts to register or qualify, or
cooperate with the Holders of Securities or Exchange Securities included therein
and their respective counsel in connection with the registration or
qualification of, such Securities or Exchange Securities for offer and sale
under the securities or blue sky laws of such jurisdictions as any such Holder
reasonably requests in writing and do any and all other acts or things necessary
or advisable to enable the offer and sale in such jurisdictions of the
Securities or Exchange Securities covered by such Registration Statement,
provided that the Company shall not be required to qualify generally to do
business in any jurisdiction where it is not then so qualified or to take any
action which would subject it to general service of process or to taxation in
any such jurisdiction where it is not then so subject.

                  (i) The Company shall cooperate with the Holders of Securities
or Exchange Securities to facilitate the timely preparation and delivery of
certificates representing Securities or Exchange Securities to be sold pursuant
to any Registration Statement free of any restrictive legends and in such
denominations and registered in such names as the Holders thereof may request in
writing at least one business day prior to sales of Securities or Exchange
Securities pursuant to such Registration Statement.




                  (j) If any event contemplated by Section 4(b)(ii) through (v)
occurs during the period for which the Company is required to maintain an
effective Registration Statement, the Company shall promptly prepare and file
with the Commission a post-effective amendment to the Registration Statement or
an amendment or a supplement to the related prospectus or file any other
required document so that, as thereafter delivered to purchasers of the
Securities or Exchange Securities from a Holder, the prospectus will not include
an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. In such circumstances,
the period of effectiveness of the Exchange Offer Registration Statement
provided for in Section 1 and the Shelf Registration Statement provided for in
Section 2(b) shall each be extended by the number of days from and including the
date of the giving of a notice of suspension pursuant to Section 4(b) to and
including the date when the Initial Purchasers, the Holders of the Securities
and any known Exchanging Dealer shall have received such amended or supplemented
prospectus pursuant to this Section.

                  (k) Not later than the effective date of the applicable
Registration Statement, the Company shall obtain a CUSIP number for the
Securities and the Exchange Securities and provide the applicable trustee with
printed certificates for the Securities or the Exchange Securities as the case
may be, in a form eligible for deposit with The Depository Trust Company.

                  (l) The Company shall comply with all applicable rules and
regulations of the Commission and make generally available to the Company's
security holders as soon as reasonably practicable after the effective date of
the applicable Registration Statement an earning statement satisfying the
provisions of Section 11(a) of the Securities Act, provided that in no event
shall such earning statement be delivered later than 45 days after the end of a
12-month period (or 90 days, if such period is a fiscal year) beginning with the
first month of the Company's first fiscal quarter commencing after the effective
date of the applicable Registration Statement, which statement shall cover such
12-month period.

                  (m) The Company shall cause the Indenture to be qualified
under the Trust Indenture Act as required by applicable law in a timely manner.

                  (n) The Company may require each Holder of Transfer Restricted
Securities to be registered pursuant to any Shelf Registration Statement to
furnish to the Company such information concerning the Holder and the
distribution of such Transfer Restricted Securities as the Company may from time
to time reasonably require for inclusion in such Shelf Registration Statement,
and the Company may exclude from such registration the Transfer Restricted
Securities of any Holder that fails to furnish such information within a
reasonable time after receiving such request.

                  (o) In the case of a Shelf Registration Statement, each Holder
of Transfer Restricted Securities to be registered pursuant thereto agrees by
acquisition of such Transfer Restricted Securities that, upon receipt of any
notice from the Company pursuant to Section 4(b)(ii) through (v), such Holder
will discontinue disposition of such



Transfer Restricted Securities until such Holder's receipt of copies of the
supplemental or amended prospectus contemplated by Section 4(j) or until advised
in writing (the "Advice") by the Company that the use of the applicable
prospectus may be resumed. If the Company shall give any notice under Section
4(b)(ii) through (v) during the period that the Company is required to maintain
an effective Registration Statement (the "Effectiveness Period"), such
Effectiveness Period shall be extended by the number of days during such period
from and including the date of the giving of such notice to and including the
date when each seller of Transfer Restricted Securities covered by such
Registration Statement shall have received (x) the copies of the supplemental or
amended prospectus contemplated by Section 4(j) (if an amended or supplemental
prospectus is required) or (y) the Advice (if no amended or supplemental
prospectus is required).

                  (p) In the case of a Shelf Registration Statement, the Company
shall enter into such customary agreements (including, if requested, an
underwriting agreement in customary form) and take all such other action, if
any, as Holders of a majority in aggregate principal amount of the Securities or
Exchange Securities being sold or the managing underwriters, if any, shall
reasonably request in order to facilitate any disposition of Securities or
Exchange Securities pursuant to such Shelf Registration Statement.

                  (q) In the case of any Shelf Registration Statement, the
Company shall:

                  (i) make reasonably available for inspection by the Holders
         of, representatives and counsel to, a majority in aggregate principal
         amount of the Securities to be registered thereunder, any underwriter
         participating in any disposition pursuant to such Registration
         Statement and any attorney, accountant or other agent retained by such
         Holders or any such underwriter all relevant financial and other
         records, pertinent corporate documents and properties of the Company
         and its subsidiaries;

                  (ii) cause the Company's officers, directors and employees to
         supply all relevant information reasonably requested by the Holders or
         any such underwriter, attorney, accountant or agent in connection with
         any such Shelf Registration Statement as is customary for similar due
         diligence examinations; provided, however, that the foregoing
         inspection and information gathering shall be coordinated on behalf of
         the Initial Purchasers by Citigroup Global Markets Inc. in connection
         with any underwritten Shelf Registration Statement to which it is a
         party, and on behalf of the Holders by one counsel designated by the
         Holders of a majority in aggregate principal amount of the Securities
         to be included in such Shelf Registration Statement; provided, further,
         that any information provided pursuant to Section 4(q)(i) and (ii) that
         is designated in writing by the Company, in good faith, as confidential
         at the time of delivery of such information shall be kept confidential
         by the Holders or any such underwriter, attorney, accountant or agent,
         and shall be used only in connection with such Shelf Registration and
         the transactions contemplated thereby unless such disclosure is made in
         connection with a court proceeding or required by law, or



         such information becomes available to the public generally or through a
         third party without an accompanying obligation of confidentiality;

                  (iii) make such representations and warranties to the
         underwriters, if any, in form, substance and scope as are customarily
         made by issuers to underwriters in primary underwritten offerings and
         covering matters including, but not limited to, those set forth in the
         Purchase Agreement;

                  (iv) obtain opinions of its counsel and updates thereof (which
         counsel and opinions (in form, scope and substance) shall be reasonably
         satisfactory to the underwriters, if any) addressed to each selling
         Holder and the underwriters, if any, covering such matters as are
         customarily covered in opinions requested in underwritten offerings and
         such other matters as may be reasonably requested by such Holders and
         underwriters;

                  (v) if requested in writing by Holders of a majority in
         aggregate principal amount of the Securities to be registered
         thereunder or by any underwriter participating in any disposition
         pursuant to such Shelf Registration Statement, to use its reasonable
         best efforts to obtain "cold comfort" letters and updates thereof from
         the independent certified public accountants of the Company, addressed
         to each selling Holder of Securities registered thereunder and the
         underwriters, if any, in customary form and covering matters of the
         type customarily covered in "cold comfort" letters in connection with
         primary underwritten offerings; and

                  (vi) deliver such documents and certificates as may be
         reasonably requested by the Holders of a majority in aggregate
         principal amount of the Securities and the Exchange Securities being
         sold and the underwriters, if any, and with any customary conditions
         contained in the underwriting agreement or other agreement entered into
         by the Company.

The actions set forth in clauses (iii), (iv) and (v) of this subsection shall be
performed at (A) the effectiveness of such Registration Statement and, if
applicable, each post-effective amendment thereto; and (B) each closing under
any underwriting or similar agreement as and to the extent required thereunder.

                  (r) If a Registered Exchange Offer is to be consummated, upon
delivery of the Securities by Holders to the Company (or to such other person as
directed by the Company) in exchange for the Exchange Securities, the Company
shall mark, or cause to be marked, on the Securities so exchanged that such
Securities are being canceled in exchange for the Exchange Securities. In no
event shall the Securities be marked as paid or otherwise satisfied.

                  (s) The Company will use its reasonable best efforts to cause
the Securities covered by a Registration Statement to be rated with at least one
nationally recognized statistical rating agency, if so requested by Holders of a
majority in aggregate



principal amount of the Securities and the Exchange Securities being sold with
respect to the related Registration Statement or by any underwriters.

                  (t) In the event that any Broker-Dealer shall underwrite any
Securities or participate as a member of an underwriting syndicate or selling
group or "assist in the distribution" (within the meaning of the Rules of Fair
Practice and the By-Laws of the National Association of Securities Dealers,
Inc.) thereof, whether as a Holder of such Securities or as an underwriter, a
placement or sales agent or a broker or dealer in respect thereof, or otherwise,
the Company shall assist such Broker-Dealer in complying with the requirements
of such Rules and By-Laws, including, without limitation, by:

                  (i) if such Rules or By-Laws shall so require, engaging a
         "qualified independent underwriter" (as defined in such Rules) to
         participate in the preparation of the Registration Statement, to
         exercise usual standards of due diligence with respect thereto and, if
         any portion of the offering contemplated by such Registration Statement
         is an underwritten offering or is made through a placement or sales
         agent, to recommend the yield of such Securities;

                  (ii) indemnifying any such qualified independent underwriter
         to the extent of the indemnification of underwriters provided in
         Section 6 hereof; and

                  (iii) providing such information to such Broker-Dealer as may
         be required in order for such Broker-Dealer to comply with the
         requirements of such Rules.

                  5. Registration Expenses. The Company shall bear all expenses
incurred in connection with the performance of its obligations under Sections 1,
2, 3 and 4 and, in the case of a Shelf Registration Statement, the Company shall
reimburse the Holders for the reasonable fees and disbursements of one firm of
attorneys (in addition to any local counsel) chosen by the Holders of a majority
in aggregate principal amount of the Securities and the Exchange Securities to
be sold pursuant to each Registration Statement acting for the Holders and the
Initial Purchasers in connection therewith and, in the case of any Exchange
Offer Registration Statement, will reimburse the Initial Purchasers for the
reasonable fees and disbursements of counsel acting in connection therewith.

                  6. Indemnification. (a) In the event of a Shelf Registration
Statement or in connection with any prospectus delivery pursuant to an Exchange
Offer Registration Statement by an Exchanging Dealer, the Company shall
indemnify and hold harmless each Holder (including, without limitation, each
Initial Purchaser and any such Exchanging Dealer), their affiliates, their
respective officers, directors, employees, representatives and agents, and each
person, if any, who controls such Holder within the meaning of the Securities
Act or the Exchange Act (collectively referred to for purposes of this Section 6
and Section 7 as a Holder), from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof (including,
without limitation, any loss, claim, damage, liability or action relating to
purchases and sales of Securities or Exchange Securities), to which that Holder
may become subject, whether commenced or



threatened, under the Securities Act, the Exchange Act, any other federal or
state statutory law or regulation, at common law or otherwise, insofar as such
loss, claim, damage, liability or action arises out of, or is based upon, (i)
any untrue statement or alleged untrue statement of a material fact contained in
any such Registration Statement or any prospectus forming part thereof or in any
amendment or supplement thereto or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, and shall reimburse each indemnified party
promptly upon demand for any legal or other expenses reasonably incurred by that
indemnified party in connection with investigating or defending or preparing to
defend against or appearing as a third party witness in connection with any such
loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or action arises out of, or
is based upon, an untrue statement or alleged untrue statement in or omission or
alleged omission from any of such documents in reliance upon and in conformity
with any Holders' Information; and provided further, however, that with respect
to any such untrue statement in or omission from any related preliminary
prospectus, the indemnity agreement contained in this Section 6(a) shall not
inure to the benefit of any Holder from whom the person asserting any such loss,
claim, damage, liability or action received Securities or Exchange Securities to
the extent that such loss, claim, damage, liability or action of or with respect
to such Holder results from the fact that both (A) a copy of the final
prospectus was not sent or given to such person at or prior to the written
confirmation of the sale of such Securities or Exchange Securities to such
person and (B) the untrue statement in or omission from the related preliminary
prospectus was corrected in the final prospectus unless, in either case, such
failure to deliver the final prospectus was a result of non-compliance by the
Company with Section 4(d), 4(e), 4(f) or 4(g).

                  (b) In the event of a Shelf Registration Statement, each
Holder severally and not jointly shall indemnify and hold harmless the Company,
its affiliates, its respective officers, directors, employees, representatives
and agents, and each person, if any, who controls the Company, within the
meaning of the Securities Act or the Exchange Act (collectively referred to for
purposes of this Section 6(b) and Section 7 as the Company), from and against
any loss, claim, damage or liability, joint or several, or any action in respect
thereof, to which the Company may become subject, whether commenced or
threatened, under the Securities Act, the Exchange Act, any other federal or
state statutory law or regulation, at common law or otherwise, insofar as such
loss, claim, damage, liability or action arises out of, or is based upon, (i)
any untrue statement or alleged untrue statement of a material fact contained in
any such Registration Statement or any prospectus forming a part thereof or in
any amendment or supplement thereto or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, but in each case only to the extent that the
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with any Holders' Information furnished
to the Company by such Holder, and shall reimburse the Company, for any legal or
other expenses reasonably incurred by the Company, in connection with


investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that no such Holder
shall be liable for any indemnity claims hereunder in excess of the amount of
net proceeds received by such Holder from the sale of Securities or Exchange
Securities pursuant to such Shelf Registration Statement.

                  (c) Promptly after receipt by an indemnified party under this
Section 6 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 6(a) or 6(b), notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
however, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have under this Section 6 except to the extent
that it has been materially prejudiced (through the forfeiture of substantive
rights or defenses) by such failure; and provided further, however, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under this Section 6.
If any such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. After notice from
the indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than the reasonable costs of investigation; provided, however,
that an indemnified party shall have the right to employ its own counsel in any
such action, but the fees, expenses and other charges of such counsel for the
indemnified party will be at the expense of such indemnified party unless (1)
the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded that there may be legal defenses available to it or other indemnified
parties that are different from or in addition to those available to the
indemnifying party, (3) a conflict or potential conflict exists (based upon
advice of counsel to the indemnified party) between the indemnified party and
the indemnifying party (in which case the indemnifying party will not have the
right to direct the defense of such action on behalf of the indemnified party)
or (4) the indemnifying party has not in fact employed counsel reasonably
satisfactory to the indemnified party to assume the defense of such action
within a reasonable time after receiving notice of the commencement of the
action, in each of which cases the reasonable fees, disbursements and other
charges of such counsel will be at the expense of the indemnifying party or
parties. It is understood that the indemnifying party or parties shall not, in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the reasonable fees, disbursements and other charges of more than
one separate firm of attorneys (in addition to any local counsel) at any one
time for all such indemnified party or parties. Each indemnified party, as a
condition of the indemnity agreements contained in Sections 6(a) and 6(b), shall
use all reasonable efforts to cooperate with the indemnifying party in the
defense of any such action or claim. No



indemnifying party shall be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a final
judgment for the plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any loss or
liability by reason of such settlement or judgment. No indemnifying party shall,
without the prior written consent of the indemnified party (which consent shall
not be unreasonably withheld), effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability or claims that were raised or could have
been raised by such plaintiff in such proceeding.

                  7. Contribution. If the indemnification provided for in
Section 6 is unavailable or insufficient to hold harmless an indemnified party
under Section 6(a) or 6(b), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the indemnified party, on the one
hand, and the indemnifying party, on the other hand, from the Initial Placement
and the Registration Statement which resulted in such loss, claim, damage or
liability, or action in respect thereof, or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and such
Holder, on the other, with respect to the statements or omissions that resulted
in such loss, claim, damage or liability, or action in respect thereof, as well
as any other relevant equitable considerations. Benefits received by the Company
shall be deemed to be equal to the total net proceeds from the Initial Placement
(before deducting expenses) received by the Company, and benefits received by
the Initial Purchasers shall be deemed to be equal to the total purchase
discounts and commissions in each case set forth in the Purchase Agreement.
Benefits received by any other Holders shall be deemed to be equal to the value
of receiving Securities or Exchange Securities, as applicable, registered under
the Securities Act. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to the
Company or information supplied by the Company on the one hand or to any
Holders' Information supplied by such Holder on the other, the intent of the
parties and their relative knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The parties hereto agree
that it would not be just and equitable if contributions pursuant to this
Section 7 were to be determined by pro rata allocation or by any other method of
allocation that does not take into account the equitable considerations referred
to herein. The amount paid or payable by an indemnified party as a result of the
loss, claim, damage or liability, or action in respect thereof, referred to
above in this Section 7 shall be deemed to include, for purposes of this Section
7, any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending or preparing to defend any such
action or claim. Notwithstanding the provisions of this Section 7, an
indemnifying party that is a



Holder of Securities or Exchange Securities shall not be required to contribute
any amount in excess of the amount by which (A) with respect to any Holder, the
total price at which the Securities or Exchange Securities sold by such
indemnifying party to any purchaser, (B) with respect to any Initial Purchaser,
the total consideration received by such Initial Purchaser pursuant to the
Purchase Agreement, as the case may be, exceeds the amount of any damages which
such indemnifying party has otherwise paid or become liable to pay by reason of
any untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.

                  8. Rules 144 and 144A. So long as Transfer Restricted
Securities remain outstanding, the Company shall use its reasonable best efforts
to file the reports required to be filed by it under the Securities Act and the
Exchange Act in a timely manner and, if at any time the Company is not required
to file such reports, it will, upon the written request of any Holder of
Transfer Restricted Securities, make publicly available other information so
long as necessary to permit sales of such Holder's securities pursuant to Rules
144 and 144A. So long as Transfer Restricted Securities remain outstanding, the
Company covenants that after May 20, 2003 it will take such further action as
any Holder of Transfer Restricted Securities may reasonably request, all to the
extent required from time to time to enable such Holder to sell Transfer
Restricted Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rules 144 and 144A (including, without
limitation, the requirements of Rule 144A(d)(4)). So long as Transfer Restricted
Securities remain outstanding, upon the written request of any Holder of
Transfer Restricted Securities, the Company shall deliver to such Holder a
written statement as to whether it has complied with such requirements.
Notwithstanding the foregoing, nothing in this Section 8 shall be deemed to
require the Company to register any of its securities pursuant to the Exchange
Act.

                  9. Underwritten Registrations. If any of the Transfer
Restricted Securities covered by any Shelf Registration Statement are to be sold
in an underwritten offering, the investment banker or investment bankers and
manager or managers that will administer the offering will be selected by the
Holders of a majority in aggregate principal amount of such Transfer Restricted
Securities included in such offering, subject to the consent of the Company
(which shall not be unreasonably withheld or delayed), and such Holders shall be
responsible for all underwriting commissions and discounts in connection
therewith.

                  No person may participate in any underwritten registration
hereunder unless such person (i) agrees to sell such person's Transfer
Restricted Securities on the basis reasonably provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.




                  10. Miscellaneous. (a) Amendments and Waivers. The provisions
of this Agreement may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless the
Company has obtained the written consent of Holders of a majority in aggregate
principal amount of the Securities and the Exchange Securities; provided that,
with respect to any matter that directly or indirectly affects the rights of any
Initial Purchaser hereunder, the Company shall obtain the written consent of
each such Initial Purchaser against which such amendment, qualification,
supplement, waiver or consent is to be effective. Notwithstanding the foregoing,
a waiver or consent to depart from the provisions hereof with respect to a
matter that relates exclusively to the rights of Holders whose Securities or
Exchange Securities, as the case may be, are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other Holders may be given by Holders of a majority in aggregate
principal amount of the Securities and the Exchange Securities being sold by
such Holders pursuant to such Registration Statement.

                  (b) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, first-class
mail, telecopier or any courier guaranteeing next-day delivery:

                  (1) if to a Holder, at the most current address given by such
Holder to the Company in accordance with the provisions of this Section 10(b),
which address initially is, with respect to each Holder, the address of such
Holder maintained by the Registrar under the Indenture;

                  (2) if to you, initially at the respective addresses set forth
in the Purchase Agreement; and

                  (3) if to the Company, initially at the address of the Company
set forth in the Purchase Agreement.

                  All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; one business
day after being delivered to a next-day air courier; five business days after
being deposited in the mail; and when receipt is acknowledged by the recipient's
telecopier machine, if sent by telecopier.

                  (c) Successors And Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including, without the need for an express assignment or any consent by
the Company thereto, subsequent Holders of Securities and the Exchange
Securities. The Company hereby agrees to extend the benefits of this Agreement
to any Holder of Securities and the Exchange Securities, and any such Holder may
specifically enforce the provisions of this Agreement as if an original party
hereto.

                  (d) Counterparts. This Agreement may be executed in any number
of counterparts (which may be delivered in original form or by telecopier) and
by the parties



hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together shall constitute one and the
same agreement.

                  (e) Definition of Terms. For purposes of this Agreement, (a)
the term "business day" means any day on which the New York Stock Exchange, Inc.
is open for trading, (b) the term "subsidiary" has the meaning set forth in Rule
405 under the Securities Act, (c) except where otherwise expressly provided, the
term "affiliate" has the meaning set forth in Rule 405 under the Securities Act,
(d) the term "Broker-Dealer" shall mean any broker or dealer registered as such
under the Exchange Act, (e) the term "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the
Commission promulgated thereunder, (f) the term "Securities Act" shall mean the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission promulgated thereunder, (g) the term "Exchange Offer Registration
Period" shall mean the one-year period following the consummation of the
Registered Exchange Offer, exclusive of any period during which any stop order
shall be in effect suspending the effectiveness of the Exchange Offer
Registration Statement, and (h) the term "Shelf Registration" shall mean a
registration effected pursuant to Section 2 hereof.

                  (f) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

                  (g) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York.

                  (h) No Inconsistent Agreements. The Company has not entered
into, and shall not, on or after the date of this Agreement, enter into any
agreement that is inconsistent with the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof.

                  (i) Severability. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their reasonable best efforts to find and
employ an alternative means to achieve the same or substantially the same result
as that contemplated by such term, provision, covenant or restriction. It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid, illegal,
void or unenforceable.

                  (j) Securities Held by the Company, etc. Whenever the consent
or approval of Holders of a specified percentage of principal amount of
Securities or Exchange Securities is required hereunder, Securities or Exchange
Securities, as applicable, held by the Company or its Affiliates shall be
disregarded and deemed not to



be outstanding in determining whether such consent or approval was given by the
Holders of such required percentage.







                  Please confirm that the foregoing correctly sets forth the
agreement among the Company and the several Initial Purchasers.

                                                     Very truly yours,

                                                     RITE AID CORPORATION,


                                                     By
                                                       -------------------------
                                                        Name:
                                                        Title:










Accepted:

Citigroup Global Markets Inc.
J.P. Morgan Securities Inc.
Fleet Securities, Inc.

By:  Citigroup Global Markets Inc.


By
  -------------------------------
   Name:
   Title:

For themselves and the other several Initial
Purchasers named in Schedule I to the
Purchase Agreement.






                                                                         ANNEX A

         Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Securities received in exchange for
Securities where such Securities were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Company has agreed
that, starting on the Expiration Date (as defined herein) and ending on the
close of business 180 days after the Expiration Date, it will make this
prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution".






                                                                         ANNEX B






         Each broker-dealer that receives Exchange Securities for its own
account in exchange for Securities, where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities See "Plan of Distribution."






                                                                         ANNEX C






                              PLAN OF DISTRIBUTION

                  Each broker-dealer that receives Exchange Securities for its
own account pursuant to the Registered Exchange Offer must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange
Securities. This prospectus, as it may be amended or supplemented from time to
time, may be used by a broker-dealer in connection with resales of Exchange
Securities received in exchange for Securities where such Securities were
acquired as a result of market-making activities or other trading activities.
The Company has agreed that, starting on the Expiration Date (as defined herein)
and ending on the close of business 180 days after the Expiration Date, it will
make this prospectus, as amended or supplemented, available to any broker-dealer
for use in connection with any such resale. In addition, until _______________,
200__, all dealers effecting transactions in the Exchange Securities may be
required to deliver a prospectus.

                  The Company will not receive any proceeds from any sale of
Exchange Securities by broker-dealers. Exchange Securities received by
broker-dealers for their own account pursuant to the Registered Exchange Offer
may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the Exchange Securities or a combination of such methods of resale,
at market prices prevailing at the time of resale, at prices related to such
prevailing market prices or at negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such Exchange Securities. Any
broker-dealer that resells Exchange Securities that were received by it for its
own account pursuant to the Registered Exchange Offer and any broker or dealer
that participates in a distribution of such Exchange Securities may be deemed to
be an "underwriter" within the meaning of the Securities Act and any profit on
any such resale of Exchange Securities and any commission or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that, by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.

                  For a period of one year after the Expiration Date the Company
will promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Registered Exchange Offer (including the expenses of one counsel
for the Holders of the Securities) other than commissions or concessions of any
broker-dealers and will indemnify the Holders of the Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.






                                                                         ANNEX D






[ ]      CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
         ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
         SUPPLEMENTS THERETO.

         Name:
         Address:


If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Securities that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.

EX-99.1 9 file005.htm CERTIFICATION OF CEO AND CFO




                    CERTIFICATION OF CEO AND CFO PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Rite Aid Corporation(the
"Company") for the quarterly period ended May 31, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), Mary F.
Sammons, as Chief Executive Officer of the Company, and Christopher S. Hall, as
Chief Financial Officer of the Company, each hereby certifies, pursuant to 18
U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of
2002, that to the best of her/his knowledge:

                  (1) The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and

                  (2) The information contained in the Report fairly presents,
in all material respects, the financial condition and results of operations of
the Company.


- ----------------------------------
Name:  Mary F. Sammons
Title: Chief Executive Officer
Date:  July 3, 2003


- ----------------------------------
Name:  Christopher S. Hall
Title: Chief Financial Officer
Date:  July 3, 2003

This certification accompanies the Report pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the
Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of ss. 18
of the Securities Exchange Act of 1934, as amended.

-----END PRIVACY-ENHANCED MESSAGE-----

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

30 Hunter Lane,
Camp Hill, Pennsylvania
(Address of principal executive offices)

17011
(Zip Code)