Rite Aid 2011 Annual Report Download - page 13

• restrict distributions from subsidiaries; and
• grant negative pledges to other creditors.
The senior secured credit facility contains covenants which place restrictions on the incurrence of
debt beyond the restrictions described above, the payment of dividends, sale of assets, mergers and
acquisitions and the granting of liens. The Company’s credit facility has a financial covenant which
requires us to maintain a minimum fixed charge coverage ratio. The covenant requires that, if
availability on the revolving credit facility is less than $150.0 million, the Company maintain a minimum
fixed charge coverage ratio of 1.00 to 1.00 which increases to 1.05 to 1.00 at the end of the fourth
quarter of fiscal 2012. As of February 26, 2011, we had availability under its revolving credit facility of
approximately $1.0 billion and was in compliance with the senior secured credit facility’s financial
covenant.
Our stockholders will experience dilution if we issue additional common stock.
Subject to any required approval under the Stockholder Agreement (as defined below), we are
generally not restricted from issuing additional shares of our common shares or preferred stock,
including, subject to the terms of our outstanding debt instruments, any securities that are convertible
into or exchangeable for, or that represent the right to receive, common shares or preferred stock or
any substantially similar securities, whether for cash, as part of incentive compensation or in refinancing
transactions. Any additional future issuances of common stock will reduce the percentage of our
common stock owned by investors who do not participate in such issuances. In most circumstances,
stockholders will not be entitled to vote on whether or not we issue additional shares of common stock.
The market price of our common stock could decline as a result of issuances of a large number of
shares of our common stock or the perception that such issuances could occur.
Subject to certain limitations, Jean Coutu Group may sell Rite Aid common stock at any time, which could
cause our stock price to decrease.
The shares of Rite Aid common stock that the Jean Coutu Group currently holds are generally
restricted, but Jean Coutu Group may sell these shares under certain circumstances, including pursuant
to a registered underwritten public offering under the Securities Act or in accordance with Rule 144
under the Securities Act. We have entered into a registration rights agreement with Jean Coutu Group,
which will give Jean Coutu Group the right to require us to register all or a portion of its shares at any
time (subject to certain exceptions). The sale of a substantial number of our shares by Jean Coutu
Group or our other stockholders within a short period of time could cause our stock price to decrease,
make it more difficult for us to raise funds through future offerings of Rite Aid common stock or
acquire other businesses using Rite Aid common stock as consideration.
We are in compliance with all New York Stock Exchange continued listing requirements. However, if we do not
continue to maintain compliance with such requirements, our common stock may be delisted.
On March 1, 2011, we were notified by the NYSE that, as of March 1, 2011, we regained
compliance with the NYSE minimum share price listing requirement. We are now in compliance with
all NYSE listing rules, have actively been taking steps to maintain our listing and expect our efforts to
maintain our NYSE listing will be successful. However, there can be no assurance that we will maintain
compliance with the NYSE minimum share price rule or other continued listing requirements. In the
event of a delisting, all holders of our $64 million of outstanding 8.5% Convertible Notes due May
2015 (‘‘Convertible Notes’’) would be entitled to require us to repurchase their Convertible Notes. Our
senior secured credit facility permits us to make such a repurchase of the Convertible Notes; provided
that, before and after such transaction, no default or event of default shall have occurred and be
continuing under the senior secured credit facility and we have at least $100.0 million of availability
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