Document:

Exhibit 4.33

 

EXECUTION COPY

 

SENIOR SUBSIDIARY GUARANTEE AGREEMENT dated as of June 27,
2001, as amended and restated as of May 28, 2003 (as amended, supplemented
or otherwise modified from time to time, this “Agreement”),
among each of the subsidiaries listed on Schedule I hereto (each
such subsidiary individually, a “Subsidiary
Guarantor”, and collectively, the “Subsidiary
Guarantors”) of RITE AID CORPORATION, a Delaware corporation (the “Borrower”), CITICORP NORTH AMERICA, INC.,
a Delaware corporation (“CNAJ”), as senior collateral processing co-agent and
JPMORGAN CHASE BANK, a New York banking corporation (“JPMCB”), as senior collateral processing co-agent (each,
individually, a “Senior Collateral Agent,” and
collectively, the “Senior Collateral Agents”)
for the Senior Secured Parties.

 

Reference
is made to the Senior Credit Agreement dated as of June 27, 2001, as
amended and restated as of May 28, 2003 (as amended, supplemented or
otherwise modified from time to time, the “Senior
Credit Agreement”), among the
Borrower, the lenders from time to time party thereto (the “Senior Lenders”),
CNAI, as administrative agent for the Senior Lenders, and JPMCB, as
syndication agent for the Senior Lenders. Reference is also made to the Senior
Subsidiary Guarantee Agreement dated as of June 27, 2001 (as amended,
supplemented or otherwise modified from time to time prior to the Restatement
Effective Date, the “Original Senior
Subsidiary Guarantee Agreement”) among the Subsidiary Guarantors
listed on Schedule I thereto and the subsidiaries of the Borrower that became
parties thereto as provided in Section 21 thereof (collectively, the “Original Subsidiary Guarantors”) and
Citicorp USA, Inc., a Delaware corporation, as senior collateral agent (in
such capacity, the “Original Senior
Collateral Agent”), pursuant to which the Original Subsidiary
Guarantors agreed to guarantee the payment of the Senior Obligations (as
defined in the Original Senior Subsidiary Guarantee Agreement). The Original
Subsidiary Guarantors and the Original Senior Collateral Agent now wish to
amend and restate the Original Senior Subsidiary Guarantee Agreement in its
entirety as set forth herein to guarantee the obligations of the Borrower under
the Senior Credit Agreement. Capitalized terms used herein and not defined
herein shall have the meanings assigned to such terms in the Definitions Annex
attached as Annex 2 hereto (as amended, supplemented or otherwise modified from
time to time), and if not defined therein, as defined in the Senior Credit Agreement.

 

The
Senior Lenders have agreed to make Loans to the Borrower, and the Issuing Banks
have agreed to issue Letters of Credit for the account of the Borrower,
pursuant to, and upon the terms and subject to the conditions specified in, the
Senior Credit Agreement. Each of the Subsidiary Guarantors is a wholly owned
subsidiary of the Borrower and acknowledges that it will derive substantial
benefit from the making of the Loans by the Senior Lenders and the issuance of
the Letters of Credit by the Issuing Banks. The obligations of the Senior
Lenders to make Loans and of the Issuing Banks to issue Letters of Credit are
conditioned on, among other things, the execution and delivery by the
Subsidiary Guarantors of a Senior Subsidiary Guarantee Agreement in the form
hereof. As consideration therefor and in order to induce the

 

 

Senior
Lenders to make Loans and the Issuing Banks to issue Letters of Credit, the
Subsidiary Guarantors are willing to execute this Agreement.

 

Accordingly,
the parties hereto agree as follows:

 

SECTION 1.
Guarantee. Each
Subsidiary Guarantor unconditionally guarantees, jointly with the other
Subsidiary Guarantors and severally, as a primary obligor and not merely as a
surety, the due and punctual payment of, and the due and punctual performance
of, the Senior Obligations. Each Subsidiary Guarantor agrees that the Senior
Obligations may be extended or renewed, in whole or in part, without notice to
or further assent from it, and that it will remain bound upon its guarantee
under this Agreement notwithstanding any extension or renewal of any Senior
Obligation.

 

Anything
contained in this Agreement to the contrary notwithstanding, the obligations of
each Subsidiary Guarantor hereunder shall be limited to a maximum aggregate
amount equal to the greater of:

 

(a)     the direct or indirect benefit to any
Subsidiary Guarantor from the Loans and other extensions of credit under the
Senior Loan Documents, and

 

(b)     the greatest amount that would not render
such Subsidiary Guarantor’s obligations hereunder subject to avoidance under Section 548
of Title 11 of the United States Code or any comparable provisions of any
applicable state law, after giving effect to all other liabilities of such
Subsidiary Guarantor, contingent or otherwise, that are relevant under such
laws (specifically excluding, however, any liabilities of such Subsidiary
Guarantor (x) in respect of intercompany Indebtedness and other
obligations of the Borrower or Affiliates of the Borrower to the extent that
such Indebtedness or other obligations would be discharged in an amount equal
to the amount paid by such Subsidiary Guarantor hereunder and (y) under
any guarantee of the Second Priority Debt Obligations) and after giving effect
as assets to the value of any rights to subrogation, contribution,
reimbursement, indemnity or similar rights of such Subsidiary Guarantor
pursuant to (i) applicable law or (ii) any agreement providing for an
equitable allocation among such Subsidiary Guarantor and other Affiliates of
the Borrower of obligations arising under guarantees by such parties (including
the Senior Indemnity, Subrogation and Contribution Agreement).

 

SECTION 2.
Obligations Not Waived. To
the fullest extent permitted by applicable law, each Subsidiary Guarantor
waives presentment to, demand of payment from and protest to the Borrower of
any of the Senior Obligations, and also waives notice of acceptance of its
guarantee under this Agreement and notice of protest for nonpayment. To the
fullest extent permitted by applicable law, the obligations of each Subsidiary
Guarantor hereunder shall not be affected by (a) the failure of either
Senior Collateral Agent or any other Senior Secured Party to assert any claim
or demand or to enforce or exercise any right or remedy against the Borrower or
any other Subsidiary Guarantor under the provisions of the Senior Credit
Agreement, any other Senior Loan Document or otherwise, (b) any
rescission, waiver, amendment or modification of, or any release from any of
the terms or provisions of this Agreement, any other Senior Loan Document, any
guarantee or any other agreement, including with respect to any other
Subsidiary

 

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Guarantor
under this Agreement or (c) the failure to perfect any security interest
in, or the release of, any of the security held by or on behalf of the Senior
Collateral Agents or any other Senior Secured Party.

 

SECTION 3.
Security. Each of the Subsidiary Guarantors
authorizes each of the Senior Collateral Agents and each of the other Senior
Secured Parties to (a) take and hold security for the payment of its
guarantee under this Agreement and the Senior Obligations and exchange,
enforce, waive and release any such security, (b) apply such security and
direct the order or manner of sale thereof as they in their sole discretion may
determine and (c) release or substitute any one or more endorsees, other
Subsidiary Guarantors or other Obligors.

 

SECTION 4.
Guarantee of  Payment. Each
Subsidiary Guarantor agrees that its guarantee under this Agreement constitutes
a guarantee of payment when due and not of collection, and waives any right to
require that any resort be had by either Senior Collateral Agent or any other
Senior Secured Party to any of the security held for payment of the Senior Obligations
or to any balance of any deposit account or credit on the books of either
Senior Collateral Agent or any other Senior Secured Party in favor of the
Borrower, any other Obligor or any other Person.

 

SECTION 5.
No Discharge or
Diminishment of Guarantee. The obligations of each Subsidiary
Guarantor hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason (other than the indefeasible payment
in full in cash of the Senior Obligations), including any claim of waiver,
release, surrender, alteration or compromise of any of the Senior Obligations,
and shall not be subject to any defense or setoff, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality or
unenforceability of the Senior Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of each Subsidiary Guarantor
hereunder shall not be discharged or impaired or otherwise affected by the
failure of either Senior Collateral Agent or any other Senior Secured Party to
assert any claim or demand or to enforce any remedy under the Senior Credit
Agreement, any other Senior Loan Document or any other agreement, by any waiver
or modification of any provision of any thereof, by any default, failure or
delay, wilful or otherwise, in the performance of any of the Senior
Obligations, or by any other act or omission that may or might in any manner or
to any extent vary the risk of any Subsidiary Guarantor or that would otherwise
operate as a discharge of each Subsidiary Guarantor as a matter of law or
equity (other than the indefeasible payment in full in cash of all the Senior
Obligations).

 

SECTION 6.
Defenses of Borrower
Waived. To the fullest extent permitted by applicable law, each
of the Subsidiary Guarantors waives any defense based on or arising out of any
defense of the Borrower or the unenforceability of the Senior Obligations or
any part thereof from any cause, or the cessation from any cause of the
liability of the Borrower, other than the final and indefeasible payment in
full in cash of the Senior Obligations. Each Senior Collateral Agent and any
other Senior Secured Party may, at its election, foreclose on any security held
by one or more of them by one or more judicial or nonjudicial sales, accept an
assignment of any such security in lieu of foreclosure, compromise or adjust
any part of the Senior Obligations, make any other accommodation with the
Borrower, any other Subsidiary Guarantor or any other guarantor or exercise any
other right or remedy available to them against the Borrower, any other
Subsidiary Guarantor or any other guarantor, without affecting or impairing in
any way the

 

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liability
of any Subsidiary Guarantor hereunder except to the extent the Senior
Obligations have been fully, finally and indefeasibly paid in cash. Pursuant to
applicable law, each of the Subsidiary Guarantors waives any defense arising
out of any such election even though such election operates, pursuant to applicable
law, to impair or to extinguish any right of reimbursement or subrogation or
other right or remedy of such Subsidiary Guarantor against the Borrower or any
other Subsidiary Guarantor or guarantor, as the case may be, or any security.

 

SECTION 7.
Agreement to Pay;
Subordination. In furtherance of the foregoing and not in
limitation of any other right that either Senior Collateral Agent or any other
Senior Secured Party has at law or in equity against any Subsidiary Guarantor
by virtue hereof, upon the failure of the Borrower or any other Obligor to pay
any Senior Obligation when and as the same shall become due, whether at
maturity, by acceleration, after notice of prepayment or otherwise, each
Subsidiary Guarantor hereby promises to and will forthwith pay, or cause to be
paid, to the Senior Collateral Agents or such other Senior Secured Party as
designated thereby in cash the amount of such unpaid Senior Obligations. Upon
payment by any Subsidiary Guarantor of any sums to the Senior Collateral Agents
or any other Senior Secured Party as provided above, all rights of such
Subsidiary Guarantor against the Borrower arising as a result thereof by way of
right of subrogation, contribution, reimbursement, indemnity or otherwise,
including pursuant to the Senior Indemnity, Subrogation and Contribution
Agreement, shall in all respects be subordinate and junior in right of payment
to the prior indefeasible payment in full in cash of all the Senior
Obligations. In addition, any Indebtedness and other obligations of the
Borrower now or hereafter held by any Subsidiary Guarantor are hereby
subordinated in right of payment to the prior payment in full of the Senior
Obligations. If any amount shall erroneously be paid to any Subsidiary
Guarantor on account of (i) such subrogation, contribution, reimbursement,
indemnity or similar right or (ii) any such Indebtedness or other
obligations of the Borrower, such amount shall be held in trust for the benefit
of the Senior Secured Parties and shall forthwith be paid to the Senior
Collateral Agents to be credited against the payment of the Senior Obligations,
whether matured or unmatured, in accordance with the terms of the Senior Loan
Documents.

 

SECTION 8. Cash
Collateralization of Letter of Credit Obligations. If any
Event of Default shall occur and be continuing, each Subsidiary Guarantor
agrees, jointly and severally, and in addition to its obligations under Section 1,
on the Business Day on which the Borrower receives notice from the
Administrative Agent or Revolving Lenders holding more than 50% of the
aggregate Revolving Credit Exposures (or, if the maturity of the Loans has been
accelerated, Revolving Lenders holding participations in outstanding Letters of
Credit representing greater than 50% of the aggregate undrawn amount of all
outstanding Letters of Credit), deposit in an account maintained by the
Administrative Agent, for the benefit of the Revolving Lenders, an amount in
cash equal to the aggregate LC Exposure as of such date in the manner set forth
in Section 2.05(j) of the Senior Credit Agreement. Such deposits
shall be held by the Administrative Agent as collateral for the payment and
performance of the Senior Obligations. The Senior Collateral Agents shall have
exclusive dominion and control, including the exclusive right of withdrawal,
over such account. Such deposits shall be invested in Permitted Investments, to
be selected by the Senior Collateral Agents in their sole discretion, and
interest earned on such deposits shall be deposited in such account as additional
collateral for the payment and performance of the Senior Obligations. Interest
or profits, if any, on such investments shall accumulate in such account.
Moneys in such account shall (i) automatically

 

4

 

be
applied by the Administrative Agent to reimburse the applicable Issuing Bank
for LC Disbursements for which it has not been reimbursed, (ii) be held
for the satisfaction of the reimbursement obligations of the Borrower for the
LC Exposure at such time and (iii) if the maturity of the Loans has been
accelerated, be applied to satisfy other Senior Obligations. If a Subsidiary
Guarantor is required to provide an amount of cash collateral hereunder as a
result of the occurrence of an Event of Default, such amount (to the extent not
applied as aforesaid) shall be returned to such Subsidiary Guarantor within
three Business Days after all Events of Default have been cured or waived (or,
during a Cash Sweep Period, paid into the Citibank Concentration Account).

 

SECTION 9.
Information. Each
of the Subsidiary Guarantors assumes all responsibility for being and keeping
itself informed of the Borrower’s financial condition and assets, and of all
other circumstances bearing upon the risk of nonpayment of the Senior Obligations
and the nature, scope and extent of the risks that such Subsidiary Guarantor
assumes and incurs hereunder, and agrees that none of the Senior Collateral
Agents or the other Senior Secured Parties will have any duty to advise any of
the Subsidiary Guarantors of information known to it or any of them regarding
such circumstances or risks.

 

SECTION 10.
Representations and
Warranties. Each of the Subsidiary Guarantors represents and
warrants as to itself that all representations and warranties relating to it
contained in the Senior Credit Agreement are true and correct.

 

SECTION 11.
Termination. The
guarantees made hereunder (a) shall terminate on the Senior Obligation
Payment Date and (b) shall continue to be effective or be reinstated, as
the case may be, if at any time payment, or any part thereof, of any Senior
Obligations is rescinded or must otherwise be restored by any Senior Secured
Party or any Subsidiary Guarantor upon the bankruptcy or reorganization of the
Borrower, any Subsidiary Guarantor or otherwise.

 

SECTION 12.
Binding Effect; Several
Agreement; Assignments. Whenever in this Agreement any of the
parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party; and all covenants, promises and
agreements by or on behalf of the Subsidiary Guarantors that are contained in
this Agreement shall bind and inure to the benefit of each party hereto and
their respective successors and assigns. This Agreement shall become effective
as to any Subsidiary Guarantor when a counterpart hereof executed on behalf of
such Subsidiary Guarantor shall have been delivered to the Senior Collateral
Agents, and a counterpart hereof shall have been executed on behalf of the
Senior Collateral Agents, and thereafter shall be binding upon such Subsidiary
Guarantor and the Senior Collateral Agents and their respective successors and
assigns, and shall inure to the benefit of such Subsidiary Guarantor, the
Senior Collateral Agents and the other Senior Secured Parties, and their
respective successors and assigns, except that no Subsidiary Guarantor shall
have the right to assign its rights or obligations hereunder or any interest
herein (and any such attempted assignment shall be void). If all of the Equity
Interests in a Subsidiary Guarantor are sold, transferred or otherwise disposed
of pursuant to a transaction permitted by Section 6.05 of the Senior
Credit Agreement, such Subsidiary Guarantor shall be released from its
obligations under this Agreement without further action. This Agreement shall
be construed as a separate agreement with respect to each Subsidiary Guarantor
and may be amended, modified,

 

5

 

supplemented,
waived or released with respect to any Subsidiary Guarantor without the
approval of any other Subsidiary Guarantor and without affecting the
obligations of any other Subsidiary Guarantor hereunder.

 

SECTION 13.
Waivers; Amendment. (a) No
failure or delay of either Senior Collateral Agent in exercising any power or
right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The
rights and remedies of the Senior Collateral Agents hereunder and of the other
Senior Secured Parties under the other Senior Loan Documents are cumulative and
are not exclusive of any rights or remedies that they would otherwise have. No
waiver of any provision of this Agreement or consent to any departure by any
Subsidiary Guarantor therefrom shall in any event be effective unless the same
shall be permitted by clause (b), and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice or demand on any Subsidiary Guarantor in any case shall entitle such
Subsidiary Guarantor to any other or further notice or demand in similar or
other circumstances.

 

(b) Neither
this Agreement nor any provision hereof may be waived, amended or modified
except pursuant to a written agreement entered into between the Subsidiary
Guarantors with respect to which such waiver, amendment or modification relates
and the Senior Collateral Agents, with the prior written consent of the
Required Lenders, except as otherwise provided in the Senior Credit Agreement
or the Collateral Trust and Intercreditor Agreement.

 

SECTION 14. Governing
Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

SECTION 15.
Notices. All communications and
notices hereunder shall be in writing and given as provided in Section 9.01
of the Senior Credit Agreement. All communications and notices hereunder to
each Subsidiary Guarantor shall be given to it in care of the Borrower, at the
address of the Borrower specified in Section 9.01 of the Senior Credit
Agreement.

 

SECTION 16.
Survival of Agreement;
Severability. (a) All
covenants, agreements, representations and warranties made by the Subsidiary
Guarantors herein and in the certificates or other instruments prepared or
delivered in connection with or pursuant to this Agreement or any other Senior
Loan Document shall be considered to have been relied upon by the Senior
Collateral Agents and the other Senior Secured Parties and shall survive the
making by the Senior Lenders of the Loans and the issuance of the Letters of
Credit by the Issuing Banks regardless of any investigation made by any Senior
Secured Party or on its behalf, and shall continue in full force and effect as
long as the principal of or any accrued interest on any Loan or any other fee
or amount payable under this Agreement or any other Senior Loan Document is
outstanding and unpaid or the LC Exposure does not equal zero and as long as
the Commitments have not been terminated.

 

6

 

(b) In
the event any one or more of the provisions contained in this Agreement or in
any other Senior Loan Document should be held invalid, illegal or unenforceable
in any respect, the validity, legality and enforceability of the remaining
provisions contained herein and therein shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.

 

SECTION 17.
Counterparts. This
Agreement may be executed in counterparts, each of which shall constitute an
original, but all of which when taken together shall constitute a single
contract, and shall become effective as provided in Section 12. Delivery
of an executed signature page to this Agreement by facsimile transmission
shall be as effective as delivery of a manually executed counterpart of this
Agreement.

 

SECTION 18. Rules of Interpretation. The
rules of interpretation specified in Section 1.03 of the Senior
Credit Agreement shall be applicable to this Agreement.

 

SECTION 19.
Jurisdiction; Consent to
Service of Process. (a) Each Subsidiary Guarantor hereby
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of any New York State court or Federal court of the
United States of America sitting in New York County, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to
this Agreement or any other Senior Loan Document, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may
be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Nothing in this Agreement shall affect any right that
either Senior Collateral Agent or any other Senior Secured Party may otherwise
have to bring any action or proceeding relating to this Agreement or any other
Senior Loan Document against any Subsidiary Guarantor or its properties in the
courts of any jurisdiction.

 

(b)      Each Subsidiary Guarantor hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection that it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement or
any other Senior Loan Document in any New York State or Federal court. Each of
the parties hereto hereby irrevocably waives, to the fullest extent permitted
by law, the defense of an inconvenient forum to the maintenance of such action
or proceeding in any such court.

 

(c)      Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 15. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.

 

7

 

SECTION 20. Waiver
of Jury Trial. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION, ACTION OR OTHER PROCEEDING DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER SENIOR LOAN DOCUMENT. EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY
LITIGATION, ACTION OR OTHER PROCEEDING,
SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND
THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE
OTHER SENIOR LOAN DOCUMENTS, AS APPLICABLE,
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 20.

 

SECTION 21.
Additional Subsidiary
Guarantors. Pursuant to Section 5.11 of the Senior Credit
Agreement, certain wholly-owned Domestic Subsidiaries of the Borrower that were
not in existence on the Restatement Effective Date are required to enter into
this Agreement as a Subsidiary Guarantor upon becoming a wholly owned Domestic
Subsidiary. Upon execution and delivery after the Restatement Effective Date
hereof by the Senior Collateral Agents and such a Subsidiary of an instrument
in the form of Annex 1, such Subsidiary shall become a Subsidiary Guarantor
hereunder with the same force and effect as if originally named as a Subsidiary
Guarantor herein. The execution and delivery of any instrument adding an
additional Subsidiary Guarantor as a party to this Agreement shall not require
the consent of any other Subsidiary Guarantor hereunder. The rights and
obligations of each Subsidiary Guarantor hereunder shall remain in full force
and effect notwithstanding the addition of any new Subsidiary Guarantor as a
party to this Agreement. Notwithstanding any other provision of this Agreement
or any other Senior Loan Document, (i) no Domestic Subsidiary listed on
Schedule 5.11 to the Senior Credit Agreement shall be required to become a
Subsidiary Guarantor and (ii) no Domestic Subsidiary shall be required to
become a Subsidiary Guarantor unless and until such time as such Subsidiary has
assets in excess of $1,000,000 or has revenue in excess of $500,000 per annum.

 

SECTION 22.
Right of Setoff. If an Event of Default shall have
occurred and be continuing, each Senior Secured Party is hereby authorized at
any time and from time to time, to the fullest extent permitted by law, to set
off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other Indebtedness at any time owing
by such Senior Secured Party to or for the credit or the account of any
Subsidiary Guarantor against any or all the obligations of such Subsidiary
Guarantor now or hereafter existing under this Agreement and the other Senior
Loan Documents held by such Senior Secured Party, irrespective of whether or
not such Senior Secured Party shall have made any demand under this Agreement
or any other Senior Loan Document and although such obligations may be
unmatured and regardless of the adequacy of any Collateral. The rights of each
Senior Secured Party under this Section 22 are in addition to other rights
and remedies (including other rights of setoff) which such Senior Secured Party
may have.

 

8

 

SECTION 23.
Collateral Trust and
Intercreditor Agreement. Each of the parties to this Agreement
acknowledges and agrees, for the benefit of each other party to the Collateral
Trust and Intercreditor Agreement, that notwithstanding anything herein to the
contrary, the terms of this Agreement, and the rights and remedies of the parties
hereto, are subject to the Collateral Trust and Intercreditor Agreement.

 

9

 

IN
WITNESS WHEREOF, the parties hereto have duly executed this Senior Subsidiary
Guarantee Agreement as of the day and year first above written.

 

	
   

  	
  EACH
  OF THE SUBSIDIARIES LISTED ON SCHEDULE I HERETO, as Subsidiary Guarantors

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/
  Robert B. Sari

  
	
   

  	
  Name:
  

  	
  Robert
  B. Sari

  
	
   

  	
  Title:
  

  	
  Vice
  President

  
	
   

  	
   

  
	
   

  	
  CITICORP
  NORTH AMERICA, INC., as Senior Collateral Agent,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/
  Jeffrey Nitz

  
	
   

  	
  Name:

  	
  Jeffrey
  Nitz

  
	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  
	
   

  	
  JPMORGAN
  CHASE BANK, as Senior Collateral Agent,

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

10

 

Annex 1 to the

Senior Subsidiary Guarantee Agreement

 

SUPPLEMENT NO. dated as of                                        ,
to the Senior Subsidiary Guarantee Agreement dated as of June 27, 2001, as
amended and restated as of May 28, 2003 (as amended, supplemented or
otherwise modified from time to time, the “Senior
Subsidiary Guarantee Agreement”), among each of the subsidiaries
listed on Schedule I thereto (each such subsidiary individually, a “Subsidiary Guarantor” and collectively,
the “Subsidiary Guarantors”)
of RITE AID CORPORATION, a Delaware corporation (the “Borrower”), and CITICORP NORTH AMERICA,
INC., a Delaware corporation (“CNAI” ), as
senior collateral processing co-agent and JPMORGAN CHASE BANK (“JPMCB”), a New York banking corporation,
as senior collateral co-agent (each, individually, a “Senior Collateral Agent”, and collectively, the “Senior Collateral Agents”) for the Senior
Secured Parties.

 

A.                Reference is made to the
Senior Credit Agreement dated as of June 27, 2001, as amended and restated
as of May 28, 2003 (as amended, supplemented or otherwise modified from
time to time, the “Senior Credit Agreement”),
among the Borrower, the lenders from time to time party thereto (the
“Senior Lenders”), CNAI, as
administrative agent for the Senior Lenders and JPMCB, as syndication agent for
the Senior Lenders.

 

B.                  Capitalized terms used
herein and not otherwise defined herein shall have the meanings assigned to
such terms in the Senior Subsidiary Guarantee Agreement, including the
Definitions Annex (as may be amended, supplemented or otherwise modified from
time to time), and the Senior Credit Agreement.

 

C.                  The Subsidiary Guarantors
have entered into the Senior Subsidiary Guarantee Agreement in order to induce
the Senior Lenders to make Loans and the Issuing Banks to issue Letters of
Credit. Pursuant to Section 5.11 of the Senior Credit Agreement, certain
Domestic Subsidiaries of the Borrower that were not in existence or not a
Domestic Subsidiary on the Restatement Effective Date are required to enter
into the Senior Subsidiary Guarantee Agreement as a Subsidiary Guarantor upon
becoming a wholly-owned Domestic Subsidiary. Section 21 of the Senior
Subsidiary Guarantee Agreement provides that additional Subsidiaries of the
Borrower may become Subsidiary Guarantors under the Senior Subsidiary Guarantee
Agreement by execution and delivery of an instrument in the form of this
Supplement. The undersigned Subsidiary of the Borrower (the “New Subsidiary Guarantor”) is executing
this Supplement in accordance with the requirements of the Senior Credit
Agreement to become a Subsidiary Guarantor under the Senior Subsidiary
Guarantee Agreement in order to induce the Senior Lenders to make additional
Loans and the Issuing Banks to issue additional Letters of Credit and as
consideration for Loans previously made and Letters of Credit previously
issued.

 

 

Accordingly,
the Senior Collateral Agents and the New Subsidiary Guarantor agree as follows:

 

SECTION 1.
In accordance with Section 21 of the Senior Subsidiary Guarantee
Agreement, the New Subsidiary Guarantor by its signature below becomes a
Subsidiary Guarantor under the Senior Subsidiary Guarantee Agreement with the
same force and effect as if originally named therein as a Subsidiary Guarantor
and the New Subsidiary Guarantor hereby (a) agrees to all the terms and
provisions of the Senior Subsidiary Guarantee Agreement applicable to it as a
Subsidiary Guarantor thereunder and (b) represents and warrants that the
representations and warranties made by it as a Subsidiary Guarantor thereunder
are true and correct on and as of the Restatement Effective Date. Each
reference to a “Subsidiary Guarantor” in the Senior Subsidiary Guarantee
Agreement shall be deemed to include the New Subsidiary Guarantor. The Senior
Subsidiary Guarantee Agreement is hereby incorporated herein by reference.

 

SECTION 2.
The New Subsidiary Guarantor represents and warrants to the Senior Collateral
Agents and the other Senior Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.

 

SECTION 3.
This Supplement may be executed in counterparts, each of which shall constitute
an original, but all of which when taken together shall constitute a single
contract. This Supplement shall become effective when the Senior Collateral
Agents shall have received counterparts of this Supplement that, when taken
together, bear the signatures of the New Subsidiary Guarantor and the Senior
Collateral Agents. Delivery of an executed signature page to this
Supplement by facsimile transmission shall be as effective as delivery of a
manually executed counterpart of this Supplement.

 

SECTION 4.
Except as expressly supplemented hereby, the Senior Subsidiary Guarantee
Agreement shall remain in full force and effect.

 

SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

SECTION 6.
In case any one or more of the provisions contained in this Supplement should
be held invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein and in
the Senior Subsidiary Guarantee Agreement shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision hereof in a particular jurisdiction shall not in and of itself affect
the validity of such provision in any other jurisdiction). The parties hereto
shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.

 

SECTION 7.
All communications and notices hereunder shall be in writing and given as
provided in Section 15 of the Senior Subsidiary Guarantee Agreement. All 

 

2

 

communications
and notices hereunder to the New Subsidiary Guarantor shall be given to it at
the address set forth under its signature below, with a copy to the Borrower.

 

SECTION 8.
The New Subsidiary Guarantor agrees to reimburse the Senior Collateral Agents
for their out-of-pocket expenses in connection with this Supplement, including
the fees, disbursements and other charges of counsel for the Senior Collateral
Agents.

 

3

 

IN
WITNESS WHEREOF, the New Subsidiary Guarantor and the Senior Collateral Agents
have duly executed this Supplement to the Senior Subsidiary Guarantee Agreement
as of the day and year first above written.

 

	
   

  	
  [NAME
  OF NEW SUBSIDIARY GUARANTOR],

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  CITICORP
  NORTH AMERICA, INC., as Senior Collateral Agent,

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Name:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  JPMORGAN
  CHASE BANK, as Senior Collateral Agent,

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

4Exhibit 4.34

 

EXECUTION COPY

 

SENIOR SUBSIDIARY SECURITY AGREEMENT

 

SENIOR SUBSIDIARY SECURITY AGREEMENT, dated
as of June 27, 2001, as amended and restated as of September 22, 2004
(as amended, supplemented or otherwise modified from time to time, this “Agreement”), made by the SUBSIDIARY
GUARANTORS identified on the signature pages hereto and any other Person
that becomes a Subsidiary Guarantor pursuant to the Senior Credit Agreement (as
such term is defined below) (collectively, the “Grantors”),
in favor of CITICORP NORTH AMERICA, INC., a Delaware corporation (“CNAI”),
as senior collateral processing co-agent, and JPMORGAN CHASE BANK, a New York
banking corporation (“JPMCB”), as
senior collateral processing co-agent (each, individually in such capacity, a “Senior Collateral Agent”, and
collectively, the “Senior Collateral Agents”)
for the Senior Secured Parties.

 

Reference is made to the Senior Credit
Agreement, dated as of June 27, 2001, as amended and restated as of August 4,
2003, as further amended and restated as of September 22, 2004 (as
amended, supplemented or otherwise modified from time to time, the “Senior Credit Agreement”), among Rite Aid
Corporation, a Delaware corporation (the “Borrower”),
the lenders from time to time party thereto (the “Senior Lenders”), CNAI, as administrative agent for the
Senior Lenders, and JPMCB, as syndication agent for the Senior Lenders.
Reference is also made to the Senior Subsidiary Security Agreement dated as of June 27,
2001 (as amended, supplemented or otherwise modified from time to time prior to
the Restatement Effective Date, the “Original
Senior Subsidiary Security Agreement”) among the Subsidiary
Guarantors identified on the signature pages thereto and each other Person
that became a Subsidiary Guarantor pursuant
to the Senior Credit Agreement
prior to the Restatement Effective Date
(collectively, the “Original Grantors”)
and Citicorp USA, Inc.,
a Delaware corporation, as
senior collateral agent (in such capacity, the “Original Senior
Collateral Agent”), pursuant
to which the Original Grantors agreed to secure the Senior Obligations
(as defined in the Original Senior Subsidiary Security Agreement). The Original
Grantors and the Original Senior Collateral Agent now wish to amend and restate
the Original Senior Subsidiary Security Agreement in its entirety as set forth
herein to secure the obligations of the Borrower under the Senior Credit
Agreement.

 

The Senior Lenders have agreed to make Loans to the Borrower,
and the Issuing Banks have
agreed to issue Letters of Credit for the account of the Borrower, pursuant to,
and upon the terms and subject to the conditions specified in, the Senior
Credit Agreement. Each of the Subsidiary Guarantors has agreed to guarantee,
among other things, all the obligations of the Borrower under the Senior Credit
Agreement. In order to induce the Senior Lenders to make the Loans and the
Issuing Banks to issue Letters of Credit, the Grantors have agreed to guarantee
the due and punctual payment of the Senior Obligations pursuant to the terms of
the senior subsidiary guarantee agreement dated as of June 27, 2001, as
amended and restated as of

 

 

May 28, 2003 (as amended, supplemented or otherwise modified from
time to time, the “Senior Subsidiary
Guarantee Agreement”) among the Borrower, the Subsidiary Guarantors
and the Senior Collateral Agents for the benefit of the Senior Secured Parties.

 

Accordingly, the Grantors and the Senior Collateral Agents, on behalf
of themselves and each Senior Secured Party (and each of their respective successors
and assigns), hereby agree as follows:

 

SECTION 1. Defined Terms.

 

SECTION 1.01. Definitions. (a) Unless
otherwise defined herein capitalized terms used herein shall have the meanings
given in the Definitions Annex attached as Annex 2 hereto (as amended,
supplemented or otherwise modified from time to time), or if not defined
therein, as defined in the Senior Credit Agreement. All terms defined in the
New York UCC (as defined herein) and not defined in this Agreement shall have
the meanings specified therein.

 

(b) The following terms shall have the following meanings:

 

“Accounts Receivable” means,
with respect to each Grantor, all right, title and interest of such Grantor to
Accounts and all of its right, title and interest in any returned goods, together
with all rights, titles, securities and guaranties with respect thereto,
including any rights to stoppage in transit, replevin, reclamation and
resales, and all related security interests, liens and pledges, whether voluntary or involuntary in each case
whether due or become due, whether now or hereafter arising in the future.

 

“Blocked
Account’ means each of the accounts established by the applicable Grantors listed in Section 4
of Schedule 3 to this Agreement and maintained with a Blocked Account Bank
pursuant to a Blocked Account Agreement.

 

“Blocked Account Agreement’ means any Blocked
Account Agreement between the Senior Collateral Agents and a Blocked Account
Bank substantially in the form of Schedule 4 to this Agreement.

 

“Blocked
Account Bank” means
any bank or financial institution that is satisfactory to the Senior Collateral
Agents that executes and delivers to the Senior Collateral Agents a Blocked
Account Agreement.

 

“Blocked
Account Cash Sweep Notice” means a notice in the form attached as Exhibit A to the Blocked
Account Agreement.

 

“Cash Management
Accounts” mean, collectively, (a) the Blocked Accounts, (b) the Deposit
Accounts, (c) the Concentration Account and (d) the Citibank
Concentration Accounts.

 

“Cash Management System” means
the system of cash management described
in Schedule 3 to this Agreement.

 

2

 

“Cash Sweep Cash Collateral Account” means
the collateral account established as part of the Cash Management System at
Citibank, N.A. and under the sole dominion and control of the Senior Collateral
Agents, Account No. 30429836.

 

“Cash Sweep Notice” means
(a) any Blocked Account Cash Sweep Notice and (b) the Concentration
Account Cash Sweep Notice.

 

“Cash Sweep Period” means
any period in which funds are transferred from (a) any Blocked Account to
the Concentration Account or any Citibank Concentration Account, as applicable,
pursuant to a Blocked Account Cash Sweep Notice or (b) the Concentration
Account to any Citibank Concentration Account pursuant to a Concentration
Account Cash Sweep Notice.

 

“Citibank Concentration Account’ means the account
established at Citibank and under sole dominion and control of the Senior
Collateral Agents, CNAI FAO Rite Aid Concentration Account No. 30582785,
together with any similar account established at Citibank, N.A. for the purpose of collecting funds during a Cash Sweep Period.

 

“Concentration
Account’ means the cash collateral account established
at JPMorgan Chase Bank and
maintained with the Concentration Account Bank pursuant to a Concentration Account Agreement, Account No. 9102750222.

 

“Concentration Account
Agreement” means a Concentration Account Agreement between any
Subsidiary Guarantor, the Senior Collateral Agents and a bank or financial institution
satisfactory to the Senior Collateral Agents substantially in the form of
Schedule 7 to this Agreement.

 

“Concentration
Account Bank” means a bank or financial institution
that is satisfactory to the Senior Collateral Agents that executes and delivers
to the Senior Collateral Agents a Concentration Account Agreement.

 

“Concentration
Account Cash Sweep Notice” means a notice in the form attached as Exhibit A to the
Concentration Account Agreement.

 

“Contracts” means, with respect to each Grantor, all
rights of such Grantor under all contracts and agreements to which such Grantor
is a party or under which such Grantor has any right, title or interest or to
which such Grantor or any property of such Grantor is subject, as the same may
from time to time be amended, supplemented or otherwise modified, including,
without limitation, (a) all rights of such Grantor to receive moneys due
and to become due to it thereunder or in connection therewith, (b) all
rights of such Grantor to damages arising out of, or for, breach or default in
respect thereof and (c) all rights of such Grantor to exercise all
remedies thereunder.

 

“Copyright
License” means
any written agreement, now or hereafter in effect, granting any right to any
third party under any copyright now or hereafter owned by any Grantor or that
such Grantor otherwise has the right to license, or granting any right to any
Grantor under any copyright now or hereafter owned by any third party, and all
rights of such Grantor under any such agreement.

 

3

 

“Copyrights” means
all of the following now owned or hereafter acquired by any Grantor: (a) all
copyright rights in any work subject to the copyright laws of the United States
or any other country, whether as author, assignee, transferee or otherwise, and
(b) all registrations and applications for registration of any such
copyright in the United States or any other country, including registrations,
recordings, supplemental registrations and pending applications for
registration in the United States Copyright Office.

 

“Deposit Account” means,
collectively, (a) the Lockbox Account and (b) the Government Lockbox
Account, as well as any demand, time, savings, passbook, or similar account
maintained with a bank or other financial institution. The term “Deposit
Account” shall not include investment property or accounts evidenced by an
instrument.

 

“Event of
Default” means
an “Event of Default” as defined in the Senior Credit Agreement.

 

“Government
Lockbox Account” means the deposit account and corresponding lockbox established and
maintained at Mellon Bank, N.A., Account No. 1037294 or another Government
Lockbox Account Bank.

 

“Government
Lockbox Account Agreement” means any Government
Lockbox Account Agreement between the Senior Collateral Agents and a Government
Lockbox Account Bank substantially in the form of Schedule 6 to this Agreement.

 

“Government
Lockbox Account Bank” means any bank or financial institution that is satisfactory to the
Senior Collateral Agents that executes and delivers to the Senior Collateral
Agents a Government Lockbox Account Agreement.

 

“Indemnitee” means
the Senior Secured Parties and their respective officers, directors, trustees,
affiliates and controlling Persons.

 

“Intellectual Property” means
all inventions, designs, Patents, Copyrights, Licenses, Trademarks, trade
secrets, confidential or proprietary technical and business information,
know-how, show-how or other data or information, software and databases and all
embodiments or fixations thereof and related documentation, registrations and
franchises, and all additions, improvements and accessions to, and books and
records describing or used in connection with, any of the foregoing.

 

“Intercompany
Advances” means
any advances or open accounts owing by the Borrower or any Subsidiary to any
Grantor.

 

“License” means any
Patent License, Trademark License, Copyright License or other license or
sublicense agreement to which any Grantor
is a party.

 

“Lockbox Account” means the deposit account and
corresponding lockbox established at Mellon Bank, N.A. and maintained with the Lockbox Account Bank pursuant to a Lockbox
Account Agreement, Account No. 0693636.

 

4

 

“Lockbox Account Agreement’ means
any Lockbox Account Agreement between the Senior Collateral Agents and a
Lockbox Account Bank substantially in the form of Schedule 5 to this Agreement.

 

“Lockbox Account Bank” means
any bank or financial institution that is satisfactory to the Senior Collateral
Agents that executes and delivers
to the Senior Collateral Agents a Lockbox Account Agreement.

 

“New York UCC’ means
the Uniform Commercial Code as in effect from time to time in the State of New
York.

 

“Patent License” means
any written agreement, now or hereafter in effect, granting to any third party
any right to make, use or sell any invention on which a patent, now or
hereafter owned by any Grantor or that any
Grantor otherwise has the right to
license, is in existence, or granting to any Grantor any right to make, use or
sell any invention on which a patent, now or hereafter owned by any third
party, is in existence, and all rights of any Grantor under any such agreement.

 

“Patents” means all
of the following now owned or hereafter acquired by any Grantor: (a) all
letters patent of the United States or any other country, all registrations and
recordings thereof, and all applications for letters patent of the United
States or the equivalent thereof in any other country, including registrations,
recordings and pending applications in the United States Patent and Trademark
Office or the equivalent thereof
in any similar offices in any other country, and (b) all reissues,
continuations, divisions, continuations-in-part, renewals or extensions
thereof, and the inventions disclosed or claimed therein, including the right
to make, use and/or sell the inventions disclosed or claimed therein.

 

“Prescription Files” means,
as to any Grantor, all right, title and interest of such Grantor in and to all
prescription files maintained by it or on its behalf, including without
limitation all patient profiles, customer lists, customer information and other
records of prescriptions filled by it, in whatever form and wherever maintained
by it or on its behalf, and all goodwill and other intangible assets arising
from the maintenance of such records and the possession of information contained therein.

 

“Proceeds” has the
meaning specified in Section 9-102 of the New York UCC, and shall include (a) all cash and negotiable instruments received by or held on behalf of
the Senior Collateral Agents, (b) any claim of any Grantor against any third party for (and the right to sue and recover for and the rights to damages or
profits due or accrued arising out of or in connection with) (i) past,
present or future infringements of any Patent now or hereafter owned by any Grantor, or licensed under a
Patent License, (ii) past, present or future infringement or dilution of
any Trademark now or hereafter owned by any Grantor or licensed under a
Trademark License or injury to the goodwill associated with or symbolized by
any Trademark now or hereafter owned by any Grantor, (iii) past, present
or future breach of any License and (iv) past, present or future
infringement of any Copyright now or hereafter owned by any Grantor or licensed under a Copyright License and (c) any and all other amounts from time
to time paid or payable under or in connection
with any of the Senior Collateral.

 

5

 

“Senior Collateral” is defined
in Section 2 of this Agreement.

 

“Senior Collateral Account” means
any collateral account established by the Senior Collateral Agents as provided
in Section 5.03 or Section 7.02.

 

“Trademark License” means
any written agreement, now or hereafter in effect, granting to any third party
any right to use any trademark now or hereafter owned by any Grantor or that
any Grantor otherwise has the right to license, or granting to any Grantor any
right to use any trademark now or hereafter owned by any third party, and all
rights of any Grantor under any such agreement.

 

“Trademarks” means
all of the following now owned or hereafter acquired by any Grantor: (a) all
trademarks, service marks, trade names, corporate names, company names,
business names, fictitious business names, trade styles, trade dress, logos,
other source or business identifiers, designs and general intangibles of like
nature, now existing or hereafter adopted or acquired, all registrations and
recordings thereof, and all registration and recording applications filed in
connection therewith, including registrations and registration applications in
the United States Patent and Trademark Office or any similar offices in any
State of the United States or any other country or any political subdivision
thereof, and all extensions or renewals thereof, (b) all goodwill
associated therewith or symbolized thereby and (c) all other assets,
rights and interests that uniquely reflect or embody such goodwill.

 

SECTION 1.02. Other
Definitional Provisions. (a) The words “hereof,” “herein” and “hereunder”
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
Section references are to this Agreement unless otherwise specified. The
words “include”, “includes” and “including” shall be deemed to be followed by
the phrase “without limitation”.

 

(b) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.

 

SECTION 2. Grant of Security
Interest. As security for the payment or performance, as the case
may be, in full of the obligations under the Senior Subsidiary Guarantee Agreement, each Grantor hereby assigns and pledges to the Senior Collateral Agents, jointly, their successors and assigns, for the ratable benefit of the Senior Secured Parties, and hereby
grants to the Senior Collateral Agents, jointly, their successors and
assigns, for the ratable benefit of the Senior Secured Parties, a security
interest in all right, title or interest now owned or at any time hereafter
acquired by such Grantor or in which such Grantor now has or at any time in the
future may acquire any right, title or interest (collectively, the “Senior Collateral”):

 

(a)              all
Accounts Receivable and Chattel Paper,

 

(b)             all
Deposit Accounts;

 

(c)              the
Cash Management Accounts and the funds on deposit therein;

 

(d)             all
Contracts;

 

6

 

(e)               all
Documents;

 

(f)                 all
General Intangibles;

 

(g)              all
Instruments;

 

(h)              all
Intellectual Property,

 

(i)                  all
Inventory;

 

(j)                  all
Prescription Files;

 

(k)               all
books and records pertaining to any and all of the foregoing; and

 

(1) to the extent not otherwise
included, all Proceeds and products of any and all of the foregoing.

 

Nothing contained in this Section 2 is intended to limit any
Grantor’s rights to create Permitted Liens (as defined
below), [ Notwithstanding anything else contained in this Section 2 to the
contrary, Senior Collateral shall not include any Equity Interests of any
Subsidiary Senior Collateral shall not include any property specified in Section 2(h) above
if the granting of a security interest therein would jeopardize the Grantor’s
rights in any pending intent-to-use applications for Federal Trademark
registration. Furthermore, notwithstanding anything herein to the contrary, in
no event shall the security interest granted under this Section 2 attach
to any lease, license, contract, property rights or agreement to which each Grantor
is a party or any of its rights or interests thereunder if and for so long as
the grant of such security interest shall constitute or result in (i) the
abandonment, invalidation or unenforceability of any right, title or interest
of any Grantor therein or (ii) in a breach or termination pursuant to the
terms of, or a default under, any such lease, license, contract, property
rights or agreement (other than to the extent that any such term would be
rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the
Uniform Commercial Code (or any successor provision or provisions) of any
relevant jurisdiction or any other applicable law or principles of equity); provided
however that such security interest shall attach immediately at such time as
the condition causing such abandonment, invalidation
or unenforceability shall
be remedied and, to the extent severable, shall attach immediately to any portion of such lease, license,
contract, property rights or agreement that does not result in any of the consequences specified in clause (i) or
(ii) of this sentence.

 

Each Grantor hereby irrevocably authorizes the Senior Collateral Agents
at any time and from time to time to file in any Uniform Commercial Code
jurisdiction any initial financing statements (including fixture filings) and
amendments thereto without the signature of such Grantor in such form and in
such filing offices as the Senior Collateral Agents reasonably determine, that
contain the information required by Article 9 of the Uniform Commercial
Code of each applicable jurisdiction for
the filing of any financing statement or amendment, including (a) whether
the Grantor is an organization, the type of organization and any organizational
identification number issued to the Grantor and (b) in the case of a
financing statement filed as a fixture filing, a sufficient description of the real property to
which such Collateral relates. The Grantor agrees to provide such information to the Senior Collateral Agents promptly
upon request. In addition, each Grantor hereby authorizes and agrees
that such financing statements
may

 

7

 

describe the Senior Collateral in the same manner as described herein
or may contain an indication or description of collateral that describes such
property in any other manner as the Senior Collateral Agents may determine, in
their sole discretion, is necessary, advisable or prudent to ensure the
perfection of the security interest in the Collateral granted to the Senior Collateral
Agents herein, including, without limitation, describing such property as “all
assets now owned or hereafter acquired” or “all personal property now owned or
hereafter acquired.”

 

Each Grantor also ratifies its authorization for the Senior Collateral
Agents to file in any Uniform Commercial Code jurisdiction any initial
financing statements or amendments thereto if filed prior to the Restatement
Effective Date.

 

The Senior Collateral Agents are further authorized to file filings
with the United States Patent and Trademark Office or United States Copyright
Office (or any successor office or any similar office in any other country) or
other documents for the purpose of perfecting, confirming, continuing,
enforcing or protecting the security interest in the Senior Collateral granted
by each Grantor hereunder, without the signature of any Grantor, and naming any
Grantor or the Grantors as debtors and the Senior Collateral Agents as secured
parties.

 

Such security interests are granted as security only and shall not
subject the Senior Collateral Agents nor any Senior Secured Party to, or in any
way alter or modify, any obligation or liability of any Grantor with respect to
or arising out of the Senior Collateral.

 

SECTION 3. Representations and Warranties. Each Grantor hereby represents and warrants, as to
itself and the Senior Collateral in which the security interest is created
hereunder, that:

 

SECTION 3.01. Title; No Other
Liens. Except for the security interest granted to the Senior
Collateral Agents for the ratable benefit of the Senior Secured Parties
pursuant to this Agreement and the other Liens (including the Second Priority
Liens) permitted to exist pursuant to the Senior Credit Agreement (the “Permitted Liens”), each Grantor owns each
item of the Senior Collateral free and clear of any and all Liens or claims of
others (or arrangements reasonably satisfactory to the Senior Collateral Agents
have been made for the timely release or discharge of such Liens). No security
agreement, financing statement or other public notice with respect to all or
any part of such Senior Collateral is on file or of record in any public office, except such as have
been filed or will be filed, pursuant to this Agreement, in favor of the Senior
Collateral Agents, for the ratable benefit of the Senior Secured Parties, or in
respect of Permitted Liens (or arrangements reasonably satisfactory to the
Senior Collateral Agents have been made for the timely termination of such
agreement or financing statement). Further, no Grantor has intentionally
entered into any contract, lease or license in anticipation of this Agreement,
which by its terms, validly prohibits the granting of a security interest in
the Senior Collateral herein.

 

SECTION 3.02. Enforceable Obligation; Perfected, First Priority Security Interests. This Agreement constitutes a legal, valid
and binding obligation of
each Grantor, enforceable against such
Grantor in accordance with its
terms, except as enforceability may
be limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting creditors’ rights
generally and except as enforceability may be limited by general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law),

 

8

 

and the security interests granted pursuant to this Agreement (a) upon
completion of the filings and other actions contemplated by or specified in
this Agreement (or in the case of Instruments, delivery to the Senior
Collateral Agents or their designees) shall constitute fully perfected security
interests in the Senior Collateral in favor of the Senior Collateral Agents for
the ratable benefit of the Senior Secured Parties, and (b) are prior and
superior in right to all other Liens (other than Permitted Liens, to the extent
that such Permitted Liens are expressly permitted by the Senior Loan Documents
to have priority) on the Senior Collateral in existence on the Restatement
Effective Date.

 

SECTION 3.03. Chief Executive
Office; Jurisdiction of Incorporation. As of the
Restatement Effective Date, each Grantor’s chief executive office, principal
place of business and jurisdiction of incorporation is located at the locations
listed in Schedule 8 hereto.

 

SECTION 3.04. Farm Products. None of the Senior Collateral constitutes, or
is the Proceeds of, Farm Products (as such term is defined in the Uniform
Commercial Code).

 

SECTION 3.05. Intellectual Property. (a) Schedule 2 lists all
Intellectual Property owned (and registered with the U.S. Copyright Office or
the U.S. Patent and Trademark Office) or licensed by such Grantor in its own
name on the Restatement Effective Date.

 

(b)     On the date hereof, based on information
known, or reasonably available to such Grantor, all Intellectual Property
material to the conduct of such Grantor’s business is valid, subsisting, unexpired and enforceable, has not
been abandoned and does not
infringe the intellectual property rights of any other Person.

 

(c)     Except as set forth in Schedule 2, on the
Restatement Effective Date, none of the Intellectual Property is the subject of
any licensing or franchise agreement pursuant to which such Grantor is the
licensor or franchisor.

 

(d)     On the Restatement
Effective Date, based on information known, or reasonably available to such
Grantor, no holding decision or judgment has been rendered by any Governmental
Authority which would materially limit, cancel or question the validity of, or
such Grantor’s rights in, any Intellectual Property in any respect that could
reasonably be expected to have a Material Adverse Effect.

 

(e)     Except as set forth on Schedule 2, on the
Restatement Effective Date, no action or proceeding is pending, or, to the knowledge of such Grantor, threatened (i) seeking
to materially limit, cancel or question the validity of any Intellectual Property material to the conduct of such Grantor’s
business or such Grantor’s ownership interest therein, or (ii) which, if
adversely determined, would have a material adverse effect on the value of any
Intellectual Property.

 

SECTION 4. Covenants. Each Grantor covenants and agrees with the Senior
Secured Parties that, from and after the Restatement Effective Date until this
Agreement is terminated and the security interests created hereby are released:

 

SECTION 4.01. Delivery of Instruments. If an Intercompany Advance owned by
such Grantor shall be or become evidenced by any promissory note, or other
Instrument, upon the request of the Senior Collateral Agents, such promissory
note, or other Instrument shall be

 

9

 

immediately delivered to the Senior Collateral Agents, duly indorsed in
a manner reasonably satisfactory to the Senior Collateral Agents, to be held as
Senior Collateral pursuant to this Agreement.

 

SECTION 4.02. Maintenance of
Insurance. Each Grantor shall maintain insurance policies in
accordance with the requirements of Section 5.07 of the Senior Credit
Agreement.

 

SECTION 4.03. Maintenance of
Perfected Security Interest; Further Documentation. (a) Each
Grantor shall maintain the security interests created by this Agreement as
first priority perfected security interests subject only to Permitted Liens, to
the extent such Permitted Liens are expressly permitted by the Senior Loan
Documents to have priority, and shall defend such security interests against
all claims and demands of all Persons whomsoever (other than those pursuant to
Permitted Liens).

 

(b)     At
any time and from time to time, upon the written request of the Senior
Collateral Agents, and at the sole expense of a Grantor, such Grantor shall
promptly and duly execute and deliver such further instruments and documents
and take such further action as the Senior Collateral Agents may reasonably
request for the purpose of obtaining or preserving the full benefits of this
Agreement and of the rights and powers herein granted, including, without
limitation, the filing of any financing or continuation statements under the
Uniform Commercial Code in effect in any jurisdiction with respect to the
security interests created hereby.

 

(c)     No
Grantor shall intentionally enter into any contract, lease or license which by
its terms would validly prohibit the grant of a security interest in the Senior
Collateral under this Agreement.

 

SECTION 4.04. Further Identification of Senior Collateral. Each Grantor shall
furnish to the Senior Collateral Agents from time to time statements and
schedules further identifying and describing the Senior Collateral and such
other reports in connection with such Senior Collateral as the Senior
Collateral Agents may reasonably request, all in reasonable detail.

 

SECTION 4.05. Senior Collateral Agents’ Liabilities and Expenses; Indemnification. (a) Notwithstanding anything to the contrary provided herein, neither the Senior Collateral Agents nor
any other Senior Secured Party assumes any
liabilities with respect to any
claims regarding each Grantor’s ownership (or purported ownership) of, or rights or obligations (or purported
rights or obligations) arising from, the Senior Collateral or any use (or
actual or alleged misuse) whether arising out of any past, current or future
event, circumstance, act or omission or otherwise, or any claim, suit, loss,
damage, expense or liability of any kind or nature arising out of or in connection
with the Senior Collateral or the production, marketing, delivery, sale or
provision of goods or services under or in connection with any of the Senior
Collateral. All of such liabilities shall, as between the Senior Collateral
Agents, the Senior Secured Parties and the Grantors, be borne exclusively by
the Grantors unless such liability arises from the gross negligence or willful
misconduct of the Senior Collateral Agents or any Senior Secured Party.

 

(b) Each Grantor hereby agrees
to pay all reasonable expenses of
the Senior Collateral Agents and the
other Senior Secured Parties and to indemnify the Senior Collateral Agents and the other Senior Secured Parties with respect to any and all losses, claims, damages,
liabilities

 

10

 

and related expenses in respect of this Agreement or the Senior
Collateral, in each case to the extent and under the circumstances the Borrower
is required to do so pursuant to Section 9.03 of the Senior Credit
Agreement.

 

(c) Any amounts payable as provided hereunder shall be additional
Senior Obligations secured hereby and by the other Senior Collateral Documents.
Without prejudice to the survival of any other agreements contained herein, all
indemnification and reimbursement obligations contained herein shall survive
the Senior Obligation Payment Date and the termination of this Agreement.

 

SECTION 4.06. Intellectual
Property. (a) Each relevant Grantor (either itself or through
licensees) will (i) continue to use each Trademark material to the conduct
of such Grantor’s business, to the extent that such Grantor’s business
operations continue as to the said goods and/or services (subject to such
Grantor’s reasonable business judgment), sufficient to avoid unintentional
abandonment of any rights in such Trademarks, (ii) maintain as in the past
the quality of products and services offered under such Trademark, (iii) use
such Trademark with the appropriate notice of registration and all other
notices and legends required by applicable law, (iv) not knowingly adopt
or use any mark which is confusingly similar or a colorable imitation of such
Trademark unless the Senior Collateral Agents, for the ratable benefit of the
Senior Secured Parties, shall obtain a perfected security interest in such mark
pursuant to this Agreement, and (v) not knowingly (and not permit any
licensee or sublicensee thereof to) do any act or knowingly omit to do any act
whereby such Trademark material to the conduct of Grantor’s business may become
invalidated or impaired in any way.

 

(b)      Such
Grantor (either itself or through licensees) will not do any act, or omit to do
any act, whereby any Patent
material to the conduct of Grantor’s business may become forfeited, abandoned
or dedicated to the public.

 

(c)       Such
Grantor (either itself or through licensees) will not knowingly (and will not
permit any licensee or sublicensee thereof to) do any act or knowingly omit to
do any act whereby any portion of the Copyrights
material to the conduct of
Grantor’s business may become invalidated or otherwise impaired or fall into
the public domain.

 

(d)      Such
Grantor (either itself or through licensees) will not do any act that knowingly
uses any material Intellectual Property
to infringe the intellectual property rights of any other Person.

 

(e)       In
a status report provided to the Senior Collateral Agents on a quarterly
basis (“Quarterly Status Report”), such
Grantor will indicate whether any application or registration relating to any
material Intellectual Property has been forfeited, abandoned or dedicated to
the public, or of any such determination or development (including, without
limitation, the institution of, or any such determination or development in,
any proceeding in the United States Patent and Trademark Office, the United
States Copyright Office or any
court or tribunal in any country) regarding such Grantor’s ownership of, or the
validity of, any material Intellectual Property or such Grantor’s right to
register the same or to own and maintain the same.

 

11

 

(f)      In the Quarterly Status Report provided to the
Senior Collateral Agents pursuant to Section 4.06(e), such Grantor will
report whenever such Grantor, either by itself or through any agent, employee,
licensee or designee, has filed an application for the registration of any
Intellectual Property with the United States Patent and Trademark Office, the
United States Copyright Office or any similar office or agency in any other
country or any political subdivision thereof. Upon request of the Senior Collateral
Agents, such Grantor shall execute and deliver, and have recorded, any and all
agreements, instruments, documents and papers as the Senior Collateral Agents
may request to evidence the Senior Collateral Agents’ and Senior Secured
Parties’ security interest in any Copyright, Patent or Trademark and the
goodwill and general intangibles of such Grantor relating thereto or
represented thereby.

 

(g)     Such Grantor will take all reasonable and
necessary steps, including, without limitation, in any proceeding before the
United States Patent and Trademark Office, the United States Copyright Office
or any similar office or agency in any other country or any political
subdivision thereof, to maintain and pursue each application (and to obtain the
relevant registration) and to maintain each registration of the Intellectual
Property material to the conduct of Grantor’s business, including, without
limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability.

 

(h)     In the event that any Intellectual Property
material to the conduct of Grantor’s business is infringed, misappropriated or diluted by a third
party, such Grantor shall (i) take such actions as such Grantor shall
reasonably deem appropriate under the circumstances to protect such
Intellectual Property and (ii) if such Intellectual Property is of
material economic value, promptly notify the Senior Collateral Agents after it
learns thereof and take all reasonable steps to protect its interests, which
may include bringing suit for infringement, misappropriation or dilution, to seek injunctive relief where
appropriate and to recover any and all damages for such infringement,
misappropriation or dilution.

 

SECTION 4.07. Cash Management
System. (a) The Grantors shall at all times maintain, and each
Subsidiary Guarantor shall comply with its obligations under, the Cash
Management System.

 

(b) Each Grantor shall use its commercially reasonable efforts to
cause any applicable third party
to effectuate the Cash Management
System.

 

SECTION 5.
Provisions Relating to Accounts.

 

SECTION 5.01. Grantors Remain Liable under Accounts. Anything herein to the contrary
notwithstanding, a Grantor shall remain liable under each of the Accounts to
observe and perform all the material conditions and material obligations to be
observed and performed by it thereunder, all in accordance with the terms of
any agreement giving rise to each such Account. No Senior Secured Party shall
have any obligation or liability under any Account (or any agreement giving
rise thereto) by reason of or arising out of this Agreement or the receipt by
the Senior Collateral Agents or any Senior Secured Party of any payment
relating to such Account pursuant hereto, nor shall any Senior Secured Party be
obligated in any manner to perform any of the obligations of a Grantor under or
pursuant to any Account (or any agreement giving rise thereto), to make any payment, to make any inquiry as to the nature or the
sufficiency of any 

 

12

 

payment received by it or as to
the sufficiency of any performance by any party under any Account (or any
agreement giving rise thereto), to present or file any claim, to take any
action to enforce any performance or to collect the payment of any amounts
which may have been assigned to it or to which it may be entitled at any time
or times.

 

SECTION 5.02. Analysis of
Accounts. In addition to their rights under the Senior Credit
Agreement, the Senior Collateral Agents shall have the right upon the occurrence
and during the continuance of an Event of Default to make test verifications of
the Accounts in any manner and through any medium that they considers
reasonably advisable, and each Grantor shall furnish all such assistance and
information as the Senior Collateral Agents may reasonably require in
connection with such test verifications. At any time and from time to time upon
the occurrence and during the continuance of an Event of Default, upon the
Senior Collateral Agents’ reasonable request and at the expense of each
Grantor, each Grantor shall immediately request and use commercially reasonable
efforts to cause independent public accountants or others reasonably
satisfactory to the Senior Collateral Agents to furnish to the Senior
Collateral Agents reports showing reconciliations, aging and test verifications
of, and trial balances for, the Accounts. Upon the occurrence and during the
continuance of an Event of Default, the Senior Collateral Agents in their own
names or in the name of others may communicate with Account Debtors on the
Accounts to verify with them to the Senior Collateral Agents’ reasonable
satisfaction the existence, amount and terms of any Accounts and to direct all
payments to the Senior Collateral Agents. To the extent reasonably practicable
the Senior Collateral Agents will seek to take such actions through third parties.

 

SECTION 5.03. Collections on Accounts. (a) The
Senior Collateral Agents hereby authorize each Grantor to collect the Accounts,
and the Senior Collateral Agents may curtail or terminate said authority at any
time after the occurrence and during the continuance of an Event of Default. If
required by the Senior Collateral Agents at any time after the occurrence and
during the continuance of an Event of Default, any payments of Accounts, when
collected by a Grantor during the continuance of such an Event of Default, (i) shall
be forthwith (and, in any event, within two Business Days) deposited by such
Grantor in the exact form received, duly indorsed by such Grantor to the Senior
Collateral Agents if required, in a Senior Collateral Account maintained under
the sole dominion and control of and on terms and conditions reasonably satisfactory to the Senior
Collateral Agents, subject to withdrawal by the Senior Collateral Agents as provided in Section 8.03, and (ii) until so turned over, shall be held by such Grantor
in trust for the Senior Secured Parties, segregated from other funds of such
Grantor.

 

(b) At the Senior Collateral Agents’ request after the occurrence
and during the continuance of an Event of Default, each Grantor shall deliver
to the Senior Collateral Agents all original and other documents evidencing,
and relating to, the agreements and transactions which gave rise to the
Accounts, including, without limitation, all original orders, invoices and
shipping receipts.

 

SECTION 5.04. Representations and Warranties. As of the Restatement
Effective Date, the place where each Grantor keeps its records concerning the
Accounts is at the location listed in Schedule 1 hereto.

 

SECTION 5.05. Covenants. (a) The
amount represented by each Grantor to the Senior Secured Parties from time to
time as owing by each account debtor or by all Account Debtors in 

 

13

 

respect of the Accounts shall at such time be in all material respects
the correct amount actually owing by such Account Debtor or debtors thereunder.

 

(b)      Upon the occurrence and during the continuance of
an Event of Default, a Grantor shall not grant any extension of the time of
payment of any of the Accounts Receivable, compromise, compound or settle the
same for less than the full amount thereof, release, wholly or partly, any
Person liable for the payment thereof, or allow any credit or discount
whatsoever thereon other than extensions, credits, discounts, compromises or
settlements granted or made in the ordinary course of business.

 

(c)       Unless a Grantor shall deliver prior written
notice, identifying the change of location for its books and records, such
Grantor shall not remove its books and records from the location specified in
Schedule 1.

 

SECTION 5.06. Deposit Accounts. For each. deposit account that any Grantor at any time
opens or maintains, such Grantor shall, at the Senior Collateral Agents’
request and option, pursuant to an agreement in form and substance satisfactory
to the Senior Collateral Agents, either (a) cause the depositary bank to
agree to comply at any time with instructions from the Senior Collateral Agents
to such depositary bank directing the disposition of funds from time to time
credited to such deposit account, without further consent of such Grantor, or (b) arrange
for the Senior Collateral Agents to become the customers of the depositary bank
with respect to the deposit account, with the Grantor being permitted, only
with the consent of the Senior Collateral Agents, to exercise rights to
withdraw funds from such deposit account. The provisions of this paragraph
shall not apply to (i) any deposit account for which any Grantor, the
depositary bank and the Senior Collateral Agents have entered into a cash
collateral agreement specially negotiated among such Grantor, the depositary
bank and the Senior Collateral Agents for the specific purpose set forth
therein and (ii) deposit accounts for which the Senior Collateral Agents
are the depositaries.

 

SECTION 6. Provisions Relating to Contracts.

 

SECTION 6.01. Grantors Remain Liable under Contracts. Anything
herein to the contrary notwithstanding, each Grantor shall remain liable under each Contract to observe and perform all
the conditions and obligations to
be observed and performed by it thereunder, all in accordance with and pursuant
to the terms and provisions of such Contract. No Senior Secured Party shall
have any obligation or liability under any Contract by reason of or arising out
of this Agreement or the receipt by any such Senior Secured Party of any
payment relating to such Contract pursuant hereto, nor shall any Senior Secured
Party be obligated in any manner
to perform any of the obligations of a Grantor under or pursuant to any
Contract, to make any payment, to make any inquiry as to the nature or the
sufficiency of any payment received by it or as to the sufficiency of any
performance by any party under any Contract, to present or file any claim, to
take any action to enforce any performance or to collect the payment of any
amounts which may have been
assigned to it or to which it may be entitled at any time or times.

 

SECTION 6.02. Communication
With Contracting Parties. Upon the occurrence and during the
continuance of an Event of Default, the Senior Collateral Agents their own
names or in the name of their nominees may communicate with parties to the
Contracts to verify with them to 

 

14

 

the Senior Collateral Agents’
reasonable satisfaction the existence, amount and terms of any Contracts. To
the extent reasonably practicable the Senior Collateral Agents will seek to
take such actions through third parties.

 

SECTION 7. Remedies.

 

SECTION 7.01. Notice to Account Debtors
and Contract Parties. Upon the request of the Senior Collateral
Agents at any time after the occurrence and during the continuance of an Event
of Default, a Grantor shall notify Account Debtors on the Accounts and parties
to the Contracts that the Accounts and the Contracts have been assigned to the
Senior Collateral Agents for the ratable benefit of the Senior Secured Parties
and that payments in respect thereof during the continuance of such an Event of
Default shall be made directly to the Senior Collateral Agents.

 

SECTION 7.02. Proceeds to be
Turned Over To Senior Collateral Agents. In addition to the rights
of the Senior Collateral Agents and the Senior Secured Parties specified in Section 5.03
with respect to payments of Accounts, if an Event of Default shall occur and be
continuing all Proceeds received by a Grantor consisting of cash, checks and
other near-cash items shall upon the Senior Collateral Agents’ request be held
by such Grantor in trust for the Senior Secured Parties, segregated from other
funds of such Grantor, and shall, upon the
Senior Collateral Agents’ request (it being understood that the exercise of
remedies by the Senior Secured Parties in connection with an Event of Default
under clauses (h) and (i) of Article VII of the Senior Credit
Agreement shall be deemed to constitute a request by the Senior Collateral
Agents for the purposes of this sentence) forthwith upon receipt by such
Grantor, be turned over to the Senior Collateral Agents in the exact form received
by such Grantor (duly indorsed by such Grantor to the Senior Collateral Agents,
if required) and held by the Senior Collateral Agents in a Senior Collateral
Account maintained under the sole dominion and control of the Senior Collateral
Agents and on terms and conditions reasonably satisfactory to the Senior
Collateral Agents. All Proceeds while held by the Senior Collateral Agents in a
Senior Collateral Account (or by such Grantor in trust for the Senior
Collateral Agents and the Senior Secured Parties) shall subject to Section 7.03
continue to be held as collateral security for all the Senior Obligations and
shall not constitute payment thereof until applied as provided in Section 7.03.

 

SECTION 7.03. Application of
Proceeds. (a) So long as the Collateral Trust and Intercreditor
Agreement is in effect, following a Triggering Event (as defined therein), the
proceeds of any sale or other realization upon any Collateral will be applied
as set forth in the Collateral Trust and Intercreditor Agreement.

 

(b) At all times when the Collateral Trust and Intercreditor
Agreement is not in effect, the proceeds of any
sale or other realization upon any Collateral following an Event of
Default will be applied as soon as practicable after receipt as follows:

 

FIRST: to the Senior Collateral Agents in an
amount equal to the fees and expenses of the Senior Collateral Agents pursuant to this Agreement and the Senior
Credit Agreement that are unpaid as of the applicable date of receipt of such
proceeds, and to any Senior Secured Party which has theretofore advanced or
paid any such fees and expenses of the Senior Collateral Agents in an amount
equal to 

 

15

 

the amount thereof so advanced or paid by such Senior Secured Party pro
rata based on the amount of such fees and expenses (or such advances or
payment);

 

SECOND: to the Senior Collateral Agents to
reimburse any amounts owing to the Senior Collateral Agents pursuant to Section 8.03;

 

THIRD: to the Senior Collateral Agents, for
distribution to the Senior Secured Parties to be applied to the payment of the
Senior Obligations then due and owing, pro rata based on the amount of Senior
Obligations then due and owing (after giving effect to any payments previously
made under this Section), until all of the Senior Obligations then due and
owing have been paid in full; and

 

FOURTH: after payment in full of all Senior
Obligations, to Rite Aid and the Grantors or their successors or assigns, as
their interests may appear, or to whosoever may be lawfully entitled to receive
the same or as a court of competent jurisdiction may direct.

 

SECTION 7.04. Uniform
Commercial Code Remedies. If an Event of Default shall have occurred
and be continuing, the Senior Collateral Agents, on behalf of the Senior
Secured Parties may exercise, in addition to all other rights and remedies
granted to them in this Agreement and in any other instrument or agreement
securing, evidencing or relating to the Senior Obligations, all rights and
remedies of a senior secured party under the Uniform Commercial Code. Without
limiting the generality of the foregoing, the Senior Collateral Agents, without
demand of performance or other demand, presentment, protest, advertisement or
notice of any kind (except any notice required by law referred to below) to or
upon a Grantor or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
forthwith collect, receive, appropriate and realize upon the Senior Collateral,
or any part thereof, and/or may forthwith sell, lease, assign, give option or
options to purchase, or otherwise dispose of and deliver the Senior Collateral
or any part thereof (or contract to do any of the foregoing), in one or more
parcels at public or private sale or sales, at any exchange, broker’s board or
office of any Senior Secured Party or elsewhere upon such terms and conditions
as the Senior Collateral Agents may deem advisable and at such prices as they
may deem best, for cash or on credit or for future delivery without assumption
of any credit risk. Any Senior Secured Party shall have the right upon any such
public sale or sales, and, to the extent permitted by law, upon any such
private sale or sales, to purchase the whole or any part of the Senior
Collateral so sold, free of (to the extent permitted by law) any right or
equity of redemption in a Grantor, which right or equity is hereby, to the
extent permitted by law, waived or released. Each Grantor further agrees, at
the Senior Collateral Agents’ request, to assemble the Senior Collateral and
make it available to the Senior Collateral Agents at places which the Senior
Collateral Agents shall reasonably select, whether at such Grantor’s premises
or elsewhere. The Senior Collateral Agents shall apply the net proceeds of any
such collection, recovery, receipt, appropriation, realization or sale, after
deducting all reasonable costs and expenses incurred therein or incidental to
the care or safekeeping of any of such Senior Collateral or reasonably relating
to such Senior Collateral or the rights of the Senior Collateral Agents and the
Senior Secured Parties hereunder, including, without limitation, reasonable
attorneys’ fees and disbursements, to the payment in whole or in part of the Senior
Obligations, in accordance with Section 7.03, and only after such
application and after the payment by the Senior Collateral Agents of any other
amount required by any provision of law, 

 

16

 

including, without limitation, Section 9-615(a)(3) of the
Uniform Commercial Code, need the Senior Collateral Agents account for the
surplus, if any, to such Grantor. If any notice of a proposed sale or other
disposition of such Senior Collateral shall be required by law, such notice
shall be in writing and deemed reasonable and proper if given at least 10 days
before such sale or other disposition.

 

The Senior Collateral Agents shall have
absolute discretion as to the time of application of any such proceeds, moneys
or balances in accordance with this Agreement. Upon any sale of the Senior
Collateral by the Senior Collateral Agents (including pursuant to a power of
sale granted by statute or under a judicial proceeding), the receipt of the
Senior Collateral Agents or of the officer making the sale shall be a
sufficient discharge to the purchaser or purchasers of the Senior Collateral so
sold and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Senior
Collateral Agents or such officer or be answerable in any way for the
misapplication thereof.

 

SECTION 7.05. Grant of License to Use Intellectual Property. For
the purpose of enabling the Senior Collateral Agents to exercise rights and
remedies under this Article at such time as the Senior Collateral Agents
shall be lawfully entitled to exercise such rights and remedies, each Grantor
hereby grants to the Senior Collateral Agents an irrevocable, non-exclusive
license (exercisable without payment of royalty or other compensation to the
Grantors) to use, license or sub-license any of the Senior Collateral
consisting of Intellectual Property now owned or hereafter acquired by such
Grantor, and wherever the same may be located, and including in such license
reasonable access to all media in which any of the licensed items may be
recorded or stored and to all computer software and programs used for the
compilation or printout thereof. The use of such license by the Senior
Collateral Agents shall be exercised, at the option of the Senior
Collateral Agents, solely upon the
occurrence and during the continuation of
an Event of Default; provided that any license, sub-license or other transaction
entered into by the Senior Collateral Agents in accordance herewith shall
be binding upon the Grantors notwithstanding any subsequent cure of an Event of
Default.

 

SECTION 7.06. Waiver; Deficiency. Each Grantor shall remain liable for any
deficiency if the proceeds of any sale or other disposition of the Senior Collateral
are insufficient to pay the Senior Obligations and the reasonable fees and
disbursements of any attorneys employed by any Senior Secured Party to collect
such deficiency.

 

SECTION 7.07. Cash Sweep Remedies. The Senior Collateral Agents, on behalf
of the Senior Secured Parties are entitled to exercise all rights
and remedies granted to them in respect of the Cash Management Accounts in accordance with
Schedule 3 of this Agreement.

 

SECTION 8. Senior Collateral
Agents ‘ Appointment as Attorneys-in-Fact; Senior Collateral Agents’
Performance of Grantors’ Obligations.

 

SECTION 8.01. Powers. Each
Grantor hereby irrevocably constitutes and appoints the Senior Collateral
Agents and any officer or agent thereof, with full power of substitution,
during the continuance of an Event of Default, as its true and lawful
attorneys-in-fact, with full irrevocable power and authority in the place and
stead of such Grantor and in the name of such Grantor or in their own name from
time to time in the Senior Collateral Agents’ discretion, for the 

 

17

 

purpose of carrying out the
terms of this Agreement, to take any and all appropriate action and to execute
any and all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Agreement, and, without limiting the generality
of the foregoing, such Grantor hereby gives the Senior Collateral Agents the
power and right, on behalf of such Grantor, without notice to or assent by such
Grantor, to do the following upon the occurrence and during the continuance of
an Event of Default:

 

(a)     in the name of such Grantor
or their own names, or otherwise, to take possession of and indorse and collect
any checks, drafts, notes, acceptances or other instruments for the payment of
moneys due under any Account, Instrument, General Intangible or Contract or
with respect to any other Senior Collateral and to file any claim or to take
any other action or proceeding in any court of law or equity or otherwise deemed
appropriate by the Senior Collateral Agents for the purpose of collecting any
and all such moneys due under any Account, Instrument, General Intangible or
Contract or with respect to any other Senior Collateral whenever payable;

 

(b)     in the case of any Intellectual
Property, execute and deliver, and have recorded, any and all agreements,
instruments, documents and papers as the Senior Collateral Agents may request
to evidence the Senior Collateral Agents’ and the Senior Secured Parties’
security interest in such Intellectual Property and the goodwill and general
intangibles of such Grantor relating thereto or represented thereby;

 

(c)     to pay or discharge taxes and Liens levied or
placed on or threatened against the Senior Collateral (other than Permitted Liens),
to effect any repairs or any insurance called for by the terms of this
Agreement and to pay all or any part of the premiums therefor and the costs thereof;

 

(d)     to execute, in connection with any sale provided for in Section 7.04 hereof, any endorsements,
assignments or other instruments of conveyance or transfer with respect to the
Senior Collateral;

 

(e)     (i) to direct any party liable for any payment under
any of the Senior Collateral to make payment of any and all moneys due or to
become due thereunder directly to the Senior Collateral Agents or as the Senior
Collateral Agents shall direct; (ii) to ask or demand for, collect,
receive payment of and receipt for, any and all moneys, claims and other
amounts due or to become due at any time in respect of or arising out of any
Senior Collateral; (iii) to sign and
indorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications, notices and other documents in connection
with any of the Senior Collateral; (iv) to commence and prosecute any
suits, actions or proceedings at law or in equity in any court of competent
jurisdiction to collect the Senior Collateral or any thereof and to enforce any
other right in respect of any Senior Collateral; (v) to defend any suit,
action or proceeding brought against any Grantor with respect to any Senior
Collateral; (vi) to settle, compromise or adjust any such suit, action or
proceeding and, in connection therewith, to give such discharges or releases as
the Senior Collateral Agents may deem appropriate; (vii) to the extent
permitted by applicable law, assign any Copyright, Patent or Trademark (along
with the goodwill of the business to which any such Copyright, Patent or
Trademark pertains); and (viii) 

 

18

 

generally, to use, sell, transfer, pledge and
make any agreement with respect to or otherwise deal with any of the Senior
Collateral as fully and completely as though the Senior Collateral Agents were
the absolute owners thereof for all purposes, and to do, at the Senior
Collateral Agents’ option and at the expense of such Grantor, at any time, or
from time to time, all acts and things which the Senior Collateral Agents
reasonably deem necessary to protect, preserve or realize upon such Senior
Collateral and the Senior Collateral Agents’ and the Senior Secured Parties’
security interests therein and to effect the intent of this Agreement, all as
fully and effectively as such Grantor might do; and

 

(f) to file any Uniform Commercial Code
financing statement, or to take such other steps, required to perfect or
confirm the perfection of any security interest described herein.

 

SECTION 8.02. Performance by
Senior Collateral Agents of Grantor’s
Obligations. If any Grantor fails to perform or comply with
any of its agreements contained herein, the Senior Collateral Agents, at their
option, but without any obligation so to do, may perform or comply, or
otherwise cause performance or compliance, with such agreement.

 

SECTION 8.03. Grantor’s Reimbursement Obligation. The expenses of the Senior Collateral Agents and any
other Senior Secured Party, as applicable, reasonably incurred in connection
with actions undertaken as provided in this Section 8, together with
interest thereon at a rate per annum equal to the Default Rate, from the date
payment is demanded by the Senior Collateral Agents to the date reimbursed by
such Grantor, shall be payable by the Borrower to the Senior Collateral Agents
on demand.

 

SECTION 8.04. Ratification; Power Coupled
With An Interest. Each
Grantor hereby ratifies all that
said attorneys shall lawfully do or cause to be done by virtue hereof. All
powers, authorizations and agencies contained in this Agreement are coupled
with an interest and are irrevocable until this Agreement is terminated and the
security interests created hereby are released.

 

SECTION 9. Duty of Senior Collateral
Agents. The
Senior Collateral Agents’ sole
duty with respect to the custody, safekeeping and physical preservation of the Senior
Collateral in its possession, under Section 9-207 of the Uniform Commercial Code or otherwise, shall be
to deal with it in the same manner as the Senior Collateral Agents deal with
similar property for their own accounts. No Senior Secured Party nor any of its respective directors,
officers, employees or agents shall be liable for failure to demand, collect or
realize upon any of the Senior Collateral or for any delay in doing so or shall
be under any obligation to sell or otherwise dispose of any Senior Collateral upon the request
of a Grantor or any other Person or to take any other action whatsoever with
regard to the Senior Collateral or any part thereof. The powers conferred on
the Senior Secured Parties hereunder are solely to protect the Senior Secured
Parties’ interests in the Senior Collateral and shall not impose any duty upon
any Senior Secured Party to exercise any such powers. The Senior Secured
Parties shall be accountable only for amounts that they actually receive as a
result of the exercise of such powers, and neither they nor any of their
officers, directors, employees or agents shall be responsible to any Grantor
for any act or failure to act hereunder, except for their own gross negligence
or wilful misconduct.

 

19

 

SECTION 10. Authority of Senior Collateral Agents. Each Grantor
acknowledges that the rights and responsibilities of the Senior Collateral
Agents under this Agreement with respect to any action taken by the Senior
Collateral Agents or the exercise or non-exercise by the Senior Collateral
Agents of any option, voting right, request, judgment or other right or remedy
provided for herein or resulting or arising out of this Agreement shall, as
between the Senior Collateral Agents and the other Senior Secured Parties, be
governed by the Senior Credit Agreement and by such other agreements with
respect thereto as may exist from time to time among them but, as between the
Senior Collateral Agents and the Grantors, the Senior Collateral Agents shall
be conclusively presumed to be acting as co-agents for the other Senior Secured
Parties with full and valid authority so to act or refrain from acting.

 

SECTION 11. Notices. All
notices, requests and demands to or upon the Senior Secured Parties or the
Grantors under this Agreement shall be given or made in accordance with Section 9.01
of the Senior Credit Agreement and addressed as follows:

 

(a)     if to the Senior Collateral
Agents, in accordance with Section 9.01 of the Senior Credit Agreement;

 

(b)     if to any Grantor, c% the
Borrower in accordance with Section 9.01 of the Senior Credit Agreement.

 

SECTION 12. Security Interest
Absolute. All rights of the Senior Collateral Agents hereunder, the
security interest and all obligations of the Grantors hereunder shall be
absolute and unconditional.

 

SECTION 13. Survival of
Agreement. All covenants, agreements, representations and warranties
made by any Grantor herein and in the certificates or other instruments
prepared or delivered in connection with or pursuant to this Agreement or any
other Senior Loan Document shall be
considered to have been relied upon
by the Senior Secured Parties and shall survive the making by the Senior
Lenders of the Loans, the execution and delivery to the Senior Lenders of the
Senior Loan Documents and the issuance of any Letters of Credit, regardless of
any investigation made by the Senior Secured Parties or on their behalf, and
shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or LC Disbursement, or any other Senior Obligation
is outstanding and unpaid and so long as any Letter of Credit is outstanding
and so long as the Commitments have not been terminated.

 

SECTION 14. WAIVER OF JURY
TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION, ACTION OR OTHER PROCEEDING DIRECTLY OR INDIRECTLY
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER
SENIOR LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY LITIGATION,
ACTION OR OTHER PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT AND THE OTHER SENIOR 

 

20

 

LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 14.

 

SECTION 15. Jurisdiction; Consent to Service of Process. (a) Each
Grantor hereby irrevocably and unconditionally
submits, for itself and its property,
to the nonexclusive jurisdiction of any New York State court or Federal
court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Senior Loan Documents, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State
or, to the extent permitted by law, in such Federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions
by suit on the judgment or in any other manner provided by law. Nothing
in this Agreement shall affect any right that any Obligor or any Senior Secured
Party may otherwise have to bring any action or proceeding relating to this
Agreement or the other Senior Loan Documents against any Grantor or any Senior
Secured Party or its properties in the courts of any jurisdiction.

 

(b)     Each Grantor and each Senior
Secured Party hereby irrevocably and unconditionally waives, to the fullest
extent it may legally and effectively
do so, any objection that it may now or hereafter have to the laying of venue
of any suit, action or
proceeding arising out of or relating to this Agreement or the other Senior
Loan Documents in any New York
State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

 

(c)     Each party to this Agreement
irrevocably consents to service of process in the manner provided for notices
in Section 11. Nothing in this Agreement will affect the right of any
party to this Agreement to serve process in any other manner permitted by law.

 

SECTION 16. Release. (a) This
Agreement and the security interest created hereunder shall terminate when all Senior
Obligations have been fully and indefeasibly paid and
when the Senior Secured Parties have no further
Commitments under the Senior
Credit Agreement and no Letters of Credit are outstanding (except pursuant to cash collateral arrangements
satisfactory to the Senior Collateral Agents), at which time the Senior
Collateral Agents shall execute and deliver to each Grantor, or to such Person
or Persons as such Grantor shall reasonably designate, all Uniform Commercial Code termination statements and similar documents
prepared by such Grantor at its expense which such Grantor shall reasonably request to evidence such termination. 
Any execution and delivery of termination statements or documents
pursuant to this Section 16(a) shall be without recourse to or warranty
by the Senior Collateral Agents.

 

(b) All Senior Collateral used, sold, transferred or otherwise
disposed of in accordance with the terms of the Senior Credit Agreement and the
Collateral Trust and Intercreditor Agreement (including pursuant to a waiver or
amendment of the terms thereof) shall be used, sold, transferred or otherwise
disposed of free and clear of the Lien and the security interest created
hereunder. In connection with the foregoing, (i) the Senior Collateral
Agents shall execute and deliver to each Grantor, or to such Person or Persons
as such Grantor shall 

 

21

 

reasonably designate, all
Uniform Commercial Code termination statements and similar documents prepared
by such Grantor at its expense which such Grantor shall reasonably request to
evidence the release of the Lien and security interest created hereunder with
respect to such Senior Collateral and (ii) any representation, warranty or
covenant contained herein relating to such Senior Collateral shall no longer be
deemed to be made with respect to such used, sold, transferred or otherwise
disposed Senior Collateral.

 

SECTION 17. Severability. Any
provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. The parties hereunder shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions, the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.

 

SECTION 18. Amendments in Writing;
No Waiver. (a) None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except by
a written instrument executed by the Grantors and the Senior Collateral Agents,
provided that any provision of
this Agreement may be waived by the Majority Senior Parties pursuant to a
letter or agreement executed by the Senior Collateral Agents or by telecopy
transmission from the Senior Collateral Agents.

 

(b) No Senior Secured Party shall by any act (except by a written instrument
pursuant to Section 18(a) hereof) or delay be deemed to have waived any right or remedy hereunder or to
have acquiesced in any Default or Event of Default or in any breach of any of
the terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of any Senior
Secured Party, any right, power or privilege hereunder shall operate as a
waiver thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by any Senior Secured Party of
any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy which such Senior Secured Party would otherwise have
on any future occasion.

 

SECTION 19. Remedies Cumulative. The rights and remedies herein provided
are cumulative, may be exercised singly or concurrently and are not exclusive
of any other rights or remedies provided by law.

 

SECTION 20. Section Headings.
The section headings used in this Agreement are for convenience of
reference only and are not to affect the construction hereof or be taken into
consideration in the interpretation hereof.

 

SECTION 21. Successors and
Assigns. This Agreement shall be binding upon the successors and
assigns of each Grantor and shall inure to the benefit of each Grantor and the
Senior Secured Parties and their successors and assigns, provided that this
Agreement may not be assigned by any Grantor without the prior written consent
of the Senior Collateral Agents.

 

22

 

SECTION 22. GOVERNING
LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

 

SECTION 23. Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall constitute an original but all of which when taken together shall
constitute but one contract. Delivery of an executed counterpart of a signature
page of this Agreement by telecopy shall be effective as delivery of a
manually executed counterpart of this Agreement.

 

SECTION 24.
Additional Grantors. Pursuant to Section 5.11
of the Senior Credit Agreement, certain wholly owned Domestic Subsidiaries that
were not in existence or not a Domestic Subsidiary on the Restatement Effective
Date are required to enter into this Agreement as a Grantor upon becoming a
Domestic Subsidiary. Upon execution and delivery, after the Restatement
Effective Date, by the Senior Collateral Agents and such a Domestic Subsidiary
of an instrument in the form of Annex 1, such Domestic Subsidiary shall become
a Grantor hereunder with the same force and effect as if originally named as a
Grantor hereunder. The execution and delivery of any such instrument shall not
require the consent of any Grantor hereunder. The rights and obligations of
each Grantor hereunder shall remain in full force and effect notwithstanding
the addition of any new Grantor as a party to this Agreement.

 

SECTION 25.
Patient Confidentiality. The
Senior Collateral Agents hereby agree on behalf of themselves and each Senior
Secured Party and any of their designees and assigns to, and shall take all reasonable steps
to, comply with all applicable state or federal laws or administrative
regulations regarding the confidentiality of patient records and patient medical information it
receives in connection with the transactions described in this Agreement.

 

SECTION 26.
Collateral Trust and Intercreditor Agreement. Notwithstanding anything herein to the contrary, the terms of this
Agreement and the rights of the Senior Collateral Agents and the Senior Secured
Parties hereunder, are subject to the Collateral Trust and Intercreditor
Agreement.

 

23

 

IN WITNESS WHEREOF, the undersigned has caused this
Senior Subsidiary Security Agreement to be duly executed and delivered as of
the date first above written.

 

	
   

  	
  EACH OF THE SUBSIDIARIES LISTED ON SCHEDULE
  HERETO, as Grantors,

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Robert B. Sari

  
	
   

  	
  Name:

  	
  Robert B. Sari

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
  THRIFTY PAYLESS, INC., as Grantor,

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ I. Lawrence Gelman

  
	
   

  	
  Name:

  	
  I. Lawrence Gelman

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
  CITICORP NORTH AMERICA, INC., as Senior Collateral
  Agent,

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Jeffrey Nitz

  
	
   

  	
  Name:

  	
  Jeffrey Nitz

  
	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  
	
   

  	
  JPMORGAN CHASE BANK, as Senior Collateral Agent,

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
				

 

 

Schedules:

 

	
  Annex
  1

  	
   

  	
  Supplement

  
	
  Annex
  2

  	
   

  	
  Definitions
  Annex

  
	
  Schedule
  A

  	
   

  	
  Subsidiary
  Guarantors

  
	
  Schedule
  1

  	
   

  	
  Records
  of Accounts

  
	
  Schedule
  2

  	
   

  	
  Copyrights
  and Copyright Licenses; Patents and Patent Licenses; and Trademarks and
  Trademark Licenses

  
	
  Schedule
  3

  	
   

  	
  Cash
  Management System

  
	
  Schedule
  4

  	
   

  	
  Form of
  Blocked Account Agreement

  
	
  Schedule
  5

  	
   

  	
  Form of
  Lockbox Account Agreement

  
	
  Schedule
  6

  	
   

  	
  Form of
  Government Lockbox Account Agreement

  
	
  Schedule
  7

  	
   

  	
  Form of
  Concentration Agreement

  
	
  Schedule
  8

  	
   

  	
  Perfection
  Certificate

  

 

 

	
   

  	
  Annex 1

  
	
   

  	
  to the Senior Subsidiary

  
	
   

  	
  Security Agreement

  

 

SUPPLEMENT NO. dated as of
[                     ]
(this “Supplement”) to the Senior
Subsidiary Security Agreement dated as of June 27, 2001 and amended and
restated as of September 22, 2004 (as amended, supplemented or otherwise
modified from time to time, the “Senior
Subsidiary Security Agreement”), between the SUBSIDIARIES GUARANTORS
identified on the signature pages thereto and any other Person that becomes
a Subsidiary Guarantor (collectively, the “Grantors”),
in favor of CITICORP NORTH AMERICA, INC., a Delaware banking
corporation (“CNAI”), as senior collateral processing co-agent and JPMORGAN
CHASE BANK, a New York banking corporation (“JPMCB”),
as senior collateral processing co-agent (each, individually, a “Senior Collateral Agent”, and
collectively, the “Senior
Collateral Agents” for the Senior Secured Parties.

 

A.     Reference is made to the (a) Senior
Credit Agreement, dated as of June 27, 2001, as amended and restated as of
August 4, 2003, as further amended and restated as of September 22,
2004 (as amended, supplemented or otherwise modified from time to time, the “Senior Credit Agreement”), among Rite Aid
Corporation, a Delaware corporation (the
`Borrower”), the lenders from time to time party thereto (the “Senior Lenders”),
CNAI, as administrative agent for the Senior Lenders, and JPMCB, as syndication agent for the
Senior Lenders and (b) the Senior Subsidiary Security Agreement.

 

B.      Capitalized terms used
herein and not otherwise defined shall have the meanings assigned to such terms
in the Senior Subsidiary Security Agreement, including the Definitions Annex
(as may be amended, supplemented or otherwise modified from time to time) and
the Senior Credit Agreement.

 

C.      The
Grantors have entered into the Senior Subsidiary Security Agreement in order to
induce the Senior Lenders to make Loans and induce the Issuing Banks to issue
Letters of Credit pursuant to, and upon the terms and subject to the conditions
specified in, the Senior Credit Agreement. Pursuant to Section 5.11 of the
Senior Credit Agreement, certain wholly owned Domestic Subsidiaries that were
not in existence or not a Domestic Subsidiary on the date thereof are required
to enter into the Senior Subsidiary Security Agreement as a Grantor upon
becoming a Domestic Subsidiary. Section 24 of the Senior Subsidiary
Security Agreement provides that additional Domestic Subsidiaries may become
Grantors under the Senior Subsidiary Security Agreement by execution and
delivery of an instrument in the form of this Supplement. The undersigned (the “New Grantor”) is a wholly-owned Domestic
Subsidiary and is executing this Supplement in accordance with the requirements
of the Senior Credit Agreement to become a Grantor under the Senior Subsidiary
Security Agreement in order to induce the Senior Lenders to make additional
Loans and the Issuing Banks to issue additional Letters of Credit and as consideration for Loans previously
made and Letters of Credit previously issued.

 

 

Accordingly,
the Senior Collateral Agents and the New Grantor agree as follows:

 

SECTION 1.
In accordance with Section 24 of the Senior Subsidiary Security Agreement,
the New Grantor by its signature below becomes a Grantor under the Senior
Subsidiary Security Agreement with the same force and effect as if originally
named therein as a Grantor and the New Grantor hereby agrees to all the terms
and provisions of the Senior Subsidiary Security Agreement applicable to it as
a Grantor thereunder. Each reference to a “Grantor” in the Senior Subsidiary
Security Agreement shall be deemed to include the New Grantor. The Senior
Subsidiary Security Agreement is hereby incorporated herein by reference.

 

SECTION 2.
The New Grantor represents and warrants to the Senior Secured Parties that this
Supplement has been duly authorized, executed and delivered by it and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms, subject to the effects of applicable bankruptcy,
insolvency or similar laws affecting creditors’ rights generally and equitable principles of general
applicability.

 

SECTION 3.
This Supplement may be executed in two or more counterparts, each of which
shall constitute an original, but all of which, when taken together, shall
constitute but one instrument. This Supplement shall become effective when the
Senior Collateral Agents shall have received counterparts of this Supplement
that, when taken together, bear the signatures of the New Grantor and the
Senior Collateral Agents.

 

SECTION 4.
Except as expressly supplemented hereby, the Senior Subsidiary Security
Agreement shall remain in full force and effect.

 

SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

SECTION 6.
In case any one or more of the provisions contained in this Supplement should
be held invalid, illegal or unenforceable in any respect, neither party hereto
shall be required to comply with such provision for so long as such
provision is held to be invalid, illegal or unenforceable, but the validity, legality and enforceability of the remaining provisions contained herein and in the
Senior Subsidiary Security
Agreement shall not in any way be affected or impaired. The parties hereto
shall endeavor in good-faith negotiations
to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as
close as possible to that of the invalid, illegal or unenforceable provisions.

 

SECTION 7. All communications and notices
hereunder shall be in writing and given as provided in the Senior Credit
Agreement. All communications and notices hereunder to the New Grantor shall be
given to it c/o the Borrower as set forth in Section 9.01 of the Senior
Credit Agreement.

 

2

 

	
   

  	
  Annex 1

  
	
   

  	
  to the Senior Subsidiary

  
	
   

  	
  Security Agreement

  

 

IN
WITNESS WHEREOF, the New Grantor and the Senior Collateral Agents have duly
executed this Supplement to the Senior Subsidiary Security Agreement as of the
day and year first above written.

 

	
   

  	
  [NAME
  OF NEW GRANTOR],

  
	
   

  	
   

  
	
   

  	
  by

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  CITICORP
  NORTH AMERICA, INC., as Senior Collateral Agent,

  
	
   

  	
   

  
	
   

  	
  by

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  JPMORGAN
  CHASE BANK, as Senior Collateral Agent,

  
	
   

  	
   

  
	
   

  	
  by

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
				

 

 

Schedule 3

to the Senior Subsidiary

Security Agreement

 

CASH MANAGEMENT SYSTEM

 

SECTION 1.
Accounts. (a)(i) Unless
such agreements are in full force and effect as of the Restatement Effective
Date, no later than 30 days after the Restatement Effective Date (or such later
date as may be agreed by the Senior Collateral Agents), each Grantor shall,
upon the request of the Senior Collateral Agents, cause:

 

(A)   each Blocked Account Bank to execute and deliver an updated
Blocked Account Agreement in respect of each Blocked Account; and

 

(B)    each Concentration Account Bank to execute and deliver an updated
Concentration Account Agreement in respect of the Concentration Account.

 

(ii) In addition, no
later than 30 days after the termination of any Securitization or Factoring
Transaction (or such later date as may be agreed by the Senior Collateral
Agents), each Grantor shall, upon the
request of the Senior Collateral Agents, cause:

 

(A)   each Lockbox Account Bank to execute and deliver a new Lockbox Account Agreement in respect of each
Lockbox Account; and

 

(B)    each Government Lockbox Account Bank to execute and deliver a new Government Lockbox Account
Agreement in respect of each Government Lockbox Account.

 

(b)    On each Business Day, each Grantor will transfer, directly or
indirectly substantially all of the funds credited to each of its depositary
accounts in same day funds, to a Blocked Account (including during a Cash Sweep
Period) in accordance with its customary business practice.

 

(c)     After the termination of any
Securitization or Factoring Transaction, each Grantor shall cause all payments
in the Government Lockbox Account to be deposited into the Lockbox Account as
promptly as possible and in any event no later than the Business Day on which such payments become available in the Government Lockbox Account (including during
a Cash Sweep Period).

 

(d)    Except as provided in
the Senior Credit Agreement with respect to Deposit Accounts relating to a
Securitization or Factoring Transaction, each Cash Management Account is, and
shall remain, under the sole dominion and control of the Senior Collateral
Agents. Each Grantor acknowledges and agrees that:

 

(i) during a Cash Sweep Period such Grantor has
no right of withdrawal from any Cash
Management Account except that:

 

 

(A)     the relevant Grantors shall be permitted to instruct any Blocked
Account Bank to transfer all amounts deposited in or credited to any Blocked
Account to the Concentration Account in accordance with the applicable Blocked
Account Agreement, and

 

(B)      the relevant Grantor shall be permitted to instruct the
Concentration Account Bank to transfer all amounts deposited in or credited to
the Concentration Account in accordance with the Concentration Account
Agreement;

 

(ii) the funds on deposit in the Cash Management
Accounts shall continue to be collateral security for all of the Senior
Obligations.

 

(e) Prior to the delivery of a Cash Sweep
Notice, the Grantor is free to withdraw funds on deposit in or credited to the
Blocked Accounts and the Concentration Account in such amounts and with such frequency as the Grantor may
from time to time determine, without notice to or consent from the Senior
Collateral Agents.

 

SECTION 2.
Cash Sweep. (a) The Senior
Collateral Agents shall immediately be entitled to deliver Cash Sweep Notices
upon the conditions specified in Section 9.15(a) in the Senior Credit
Agreement.

 

(b) Upon
delivery of:

 

(i)      a Blocked Account Cash Sweep Notice from the Senior Collateral
Agents, the balance of each Blocked Account shall be forwarded to the
Concentration Account, each Business Day or the next Business Day (as permitted
by the applicable Blocked Account Agreement), in same day funds, for so
long as such Blocked Account Cash Sweep Notice shall be in effect; and

 

(ii)     a Concentration Account Cash Sweep Notice from the Senior
Collateral Agents, the balance of the Concentration Account shall be forwarded
to a Citibank Concentration Account, each Business Day (or the next Business
Day (as permitted by the Concentration Account Agreement)), in same day funds,
for so long as such Concentration Account Cash Sweep
Notice shall be in effect.

 

(c) On each Business Day during a Cash Sweep
Period, the Senior Collateral Agents shall use funds on deposit in any Citibank
Concentration Account as follows:

 

(i)      after the occurrence of a Triggering
Event, in accordance with the provisions of Section 4.01(a) of the
Collateral Trust and Intercreditor Agreement, as applicable; and

 

(ii)     at any other time, first, to
repay the Revolving Borrowings (without any Reduction of the Commitments) and second, to
be deposited into the Cash Sweep Cash Collateral Account for the benefit of the
Senior Secured Parties, as collateral for the payment and performance of the
Senior Obligations. The Senior Collateral Agents shall have exclusive dominion
and control, including the exclusive right of withdrawal, over the Cash Sweep
Cash Collateral Account. Deposits in the Cash Sweep Cash Collateral 

 

2

 

Account shall be invested in Permitted Investments,
to be selected by the Senior Collateral Agents in their sole discretion, and
interest earned on such deposits shall be deposited in such account as
additional collateral for the payment and performance of the Senior
Obligations. Interest or profits, if any, on such investments shall accumulate
in such account. Upon termination of any Cash Sweep Period, funds in the Cash
Sweep Cash Collateral Account shall be released to the Concentration Account
within three Business Days after the end of such Cash Sweep Period.

 

(d)     The Senior Collateral
Agents shall be required to automatically rescind any Cash Sweep Notice upon
the conditions specified in Section 9.15(b) of the Senior Credit
Agreement.

 

(e)     The Senior Collateral
Agents reserve the right to send as many Cash Sweep Notices to the extent that
they are entitled to do so under paragraph (a) of this Section 2.

 

SECTION 3.
Collections. (a) Each
Grantor agrees to notify and direct promptly

 

(i)    subject to paragraph (ii) below,
each Account Debtor and every other Person obligated to make payments to any
Blocked Account or Deposit Account, as
applicable, to make all such
payments to such Blocked Account
or Deposit Account, as applicable; provided that, prior to the termination of
any Securitization or Factoring Transaction, only Account Debtors making
payment in respect of Securitization Assets or Factoring Assets shall be
notified to make payments to Deposit Account number 0693636. Each Grantor shall
use all commercially reasonable efforts to cause each Account Debtor and every
other Person identified in the preceding sentence to make all payments owing to
any Grantor to a Blocked Account or Deposit Account, as applicable; and

 

(ii)   each Account Debtor which is a Governmental Authority (and only such
Account Debtors) to make all payments owing to any Grantor to the Government
Lockbox Account.

 

(b) In the event that any Grantor directly
receives any remittances or payments on Accounts Receivable or any other
obligation, notwithstanding the arrangements for payment directly into the
Blocked Accounts or the Deposit Accounts, such remittances and payments shall
be held in trust for the benefit of the Senior Collateral Agents and the other
Senior Secured Parties and shall be segregated from other funds of such
Grantor, subject to the Lien granted by the Senior Subsidiary Security
Agreement, and such Grantor shall cause such remittances and payments to be
deposited into the applicable Blocked Account or Deposit Account as soon as
practicable after such Grantor’s receipt thereof. The foregoing provisions of
this paragraph shall not apply to any Securitization Assets or Factoring Assets
that have been transferred pursuant to a Securitization or Factoring
Transaction permitted by the terms of the Senior Credit Agreement.

 

SECTION 4. Accounts. (a) The
following are the Blocked Accounts:

 

	
  Blocked Account Bank

  	
   

  	
  Account Numbers

  	
   

  
	
  Bank of America

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  PNC Bank

  	
   

  	
   

  	
   

  

 

3

 

	
  US Bank

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Fleet Bank

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Union Bank of CA

  	
   

  	
   

  	
   

  

 

(b) The
following are the initial Deposit Accounts:

 

	
  Account Holder

  	
   

  	
  Account Details

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Mellon Bank, N.A.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Mellon Bank, N.A.

  	
   

  	
   

  	
   

  

 

(c) The
following is the Concentration Account:

 

	
  Account Holder

  	
   

  	
  Account Details

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  JPMorgan Chase Bank

  	
   

  	
   

  	
   

  

 

4

 

Schedule 4

to the Senior Subsidiary

Security Agreement

 

[FORM OF]

 

BLOCKED ACCOUNT AGREEMENT

 

[Date]

 

[Blocked
Account Bank]

[address]

 

Ladies
and Gentlemen:

 

Reference is made to (a) account no. [          ]
maintained with you (the “Blocked Account
Bank”) by [     ] (the “Grantor”) into which funds are deposited
from time to time (the “Blocked Account”) and
(b) the Senior Subsidiary Security Agreement dated as of June 27,
2001 and amended and restated as of September 22, 2004 (as amended,
supplemented or otherwise modified from time to time, the “Senior Subsidiary Security Agreement”), among
the Subsidiary Guarantors (such term and each other capitalized term used but
not defined herein having the meaning assigned to such term in the Senior
Subsidiary Security Agreement, including the Definitions Annex, and the Senior
Credit Agreement) and the Senior Collateral Agents.

 

Pursuant to the Senior Subsidiary Security
Agreement, the Grantor has granted to the Senior Collateral Agents, for the
benefit of the Senior Secured Parties, a perfected security interest in certain
property of the Grantor, including, the Blocked Account.

 

The Grantor hereby transfers to the Senior
Collateral Agents exclusive ownership and control of, and all of its right,
title and interest in and to, the Blocked Account and all funds and other
property on deposit therein. By executing this Blocked Account Agreement, the
Blocked Account Bank acknowledges that the Senior Collateral Agents now have
exclusive ownership and control of the Blocked Account, that all funds in the
Blocked Account shall be transferred to the Senior Collateral Agents as
provided herein, that the Blocked Account is being maintained by the Blocked
Account Bank for the benefit of the Senior Collateral Agents and that all
amounts and other property therein are held by the Blocked Account Bank as
custodian for the Senior Collateral Agents.

 

Except as provided in paragraphs (e), (f) and (1) below,
the Blocked Account shall not be subject to deduction, setoff, banker’s lien,
counterclaim, defense, recoupment or any other right in favor of any Person or
entity other than the Senior Collateral Agents. By executing this Blocked
Account Agreement the Blocked Account Bank also acknowledges that, as of the
date hereof, the Blocked Account Bank has received no notice of any other
pledge or assignment of the Blocked Account and the Blocked Account Bank agrees
with the Senior Collateral Agents as follows:

 

(a)   Notwithstanding anything to
the contrary or any other agreement relating to the Blocked Account, the
Blocked Account is and will be maintained for the benefit of the Senior 

 

 

Collateral
Agents, will be entitled “Citicorp North
America, inc. and JPMorgan Chase Bank as Senior Collateral Agents under the
Senior Subsidiary Security Agreement dated as of June 27, 2001 and amended and restated as of September 22,
2004 Account” and
will be subject to written instructions only from an authorized officer of the
Senior Collateral Agents (except as expressly provided otherwise herein).

 

(b)   The Blocked Account Bank agrees to give the Senior Collateral
Agents prompt notice if the Blocked Account shall become subject to any writ,
judgment, warrant of attachment, execution or similar process.

 

(c)   [A post office box (the “Lockbox”) has been rented in the name of
the Grantor at the [              post
office and the address to be used for such Lockbox is:

 

[Insert address]

 

The
Blocked Account Bank’s authorized representatives will have access to the
Lockbox under the authority given by the Grantor to the post office and will
make regular pick-ups from the Lockbox timed to gain maximum benefit of early
presentation and availability of
funds. The Blocked Account Bank will endorse and process all
checks received in the Lockbox and
deposit such checks (to the extent
eligible) in the Blocked Account in accordance with the procedures set forth below .]

 

(d)   The Blocked Account Bank
will follow its operating procedures for the handling of any [checks received from the Lockbox] or other remittance
received in the Blocked Account that contains restrictive endorsements,
irregularities (such as a variance between the written and numerical amounts),
undated or postdated items, missing signatures, incorrect payees and the like.

 

(e)   The Blocked Account Bank will endorse and
process all eligible checks and other remittance items not covered by paragraph
(d) and deposit such checks and remittance items in the Blocked Account.

 

(f)    The Blocked Account Bank will mail all
checks returned unpaid because of uncollected or insufficient funds under
appropriate advice to the Grantor (with a copy of the notification of return to
the Senior Collateral Agents). The Blocked Account Bank may charge the Blocked
Account for the amounts of any returned check that has been previously credited
to the Blocked Account. To the extent insufficient funds remain in the Blocked
Account to cover any such returned check, the Grantor shall indemnify the
Blocked Account Bank for the uncollected amount of such returned check upon
your demand.

 

(g)   The Blocked Account Bank
will maintain a record of all checks and other remittance items received in the
Blocked Account on a daily basis and, in addition to providing the
Grantor with photostatic copies thereof, vouchers, enclosures and the like of
such checks and remittance items, furnish to the Senior Collateral Agents a
monthly statement setting forth the amounts deposited in and withdrawn from the
Blocked Account and shall furnish such other information relating to the
Blocked Account at such times as shall be reasonably requested by the Senior
Collateral Agents to: Citicorp North America, Inc., as Senior 

 

2

 

Collateral Agent, [      ], Attention: [    ]
and JPMorgan Chase Bank, as Senior Collateral Agent, [              ],
Attention: [          ], with
a copy to the Grantor.

 

(h)     Prior to the delivery of a
written notice from the Senior Collateral Agents in the form of Exhibit A
hereto (the `Blocked Account Cash Sweep
Notice”), the Grantor is free to withdraw funds from the Blocked
Account in such amounts and with such
frequency as the Grantor
may from time to time determine, without notice to or consent from the Senior
Collateral Agents.

 

(i)      From
and after delivery to the Blocked Account Bank of a Blocked Account Cash Sweep
Notice and until the Blocked Account Bank is notified in writing by the Senior
Collateral Agents that the Blocked Account Cash Sweep Notice is no longer in
effect (a “Blocked Account Cash Sweep Period”),
the Grantor will have no control over the use of, or any right to
withdraw any amount from, to draw upon, or to otherwise exercise any power with
respect to the Blocked Account, except that the Grantor shall be permitted to
instruct the Blocked Account Bank only with respect to the transfer of funds
from the Blocked Account to the Concentration Account (as defined below) in
accordance with paragraph (k) below.

 

(j)      During
a Blocked Account Cash Sweep Period, the Blocked Account Bank shall transfer,
in same day funds, on each Business Day, all funds, if any on deposit in, or
otherwise to the credit of, the Blocked Account to the account listed below
(the “Concentration Account”) in
accordance with paragraph (k) below, provided
that funds on deposit that are subject to collection may be
transmitted promptly upon collection:

 

ABA Number:

[name and address of Grantor’s bank]

 

Account Name:

Concentration Account

 

Account Number: 

Reference: 

Attn:

 

or to such other account as the Senior Collateral
Agents may from time to time, or at any
time, designate in writing.

 

(k)     During a Blocked Account Cash Sweep Period, (i) the Grantor shall
provide written instructions to the Blocked Account Bank on each Business Day to
transfer all funds on deposit in, or otherwise credited to, the Blocked Account
to the Concentration Account; (ii) to the extent there are any available
balances in the Blocked Account at the end of any
Business Day which have not been transferred pursuant to clause (i) of
this paragraph, the Grantor
shall provide, on the next Business Day, written instructions for the transfer
of such available balances from the Blocked Account to the Concentration
Account; and (iii) if the Grantor does not provide the written
instructions pursuant to clause (ii) of this paragraph, the Blocked
Account Bank shall automatically initiate such transfer described in clause (ii) of
this paragraph and all other transfers from the Blocked Account to the
Concentration Bank without further direction from the Grantor until otherwise
notified by the Senior
Collateral Agents.

 

3

 

(l)    All customary service
charges and fees with respect to the Blocked Account shall be debited to the Blocked
Account. In the event insufficient
funds remain in the Blocked
Account to cover such
customary service charges and fees, the Grantor shall pay and indemnify the
Blocked Account Bank for the amounts of such customary service charges and
fees. Neither the Senior Collateral Agents nor the Senior Secured Parties shall
have any liability for the payment of any such fees in respect of the Blocked
Account.

 

This
letter agreement shall be binding upon and shall inure to the benefit of the
Blocked Account Bank, the Grantor, the Senior Collateral Agents, the Senior
Secured Parties referred to in the Senior Subsidiary Security Agreement and
their respective successors, transferees and assigns of any of the foregoing.
This letter agreement may not be modified or terminated except upon the mutual consent of the Senior Collateral Agents, the Grantor
and the Blocked Account Bank. The Blocked Account Bank may terminate the letter
agreement only upon 45 days’ prior written notice to the Grantor and the Senior
Collateral Agents. The Senior Collateral Agents may terminate this letter
agreement at any time. So long as any Senior Obligations remain outstanding and
the Commitments are still outstanding,
upon such termination the
Blocked Account Bank shall close the Blocked Account and transfer all funds in
the Blocked Account to the Senior Collateral Agents at the Concentration
Account or as otherwise directed
by the Senior Collateral Agents.
After any such termination, the Blocked Account Bank shall nonetheless remain obligated promptly to transfer to the Concentration Account or as the Senior
Collateral Agents may otherwise direct all funds and other property received in respect of the Blocked Account.

 

This letter agreement may be
executed in any number of counterparts and
by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
letter agreement by telecopier shall be effective as delivery of a manually
executed counterpart of this letter agreement.

 

This
letter agreement supersedes all prior agreements, oral or written, with respect
to the subject matter hereof and may not be amended, modified or supplemented
except by a writing signed by the
Senior Collateral Agents, the Grantor and the Blocked Account Bank.

 

This
letter agreement shall be governed by, and construed in accordance with, the
law of the State of New York.

 

4

 

Schedule 4

to the Senior Subsidiary

Security Agreement

 

Upon
acceptance of this letter agreement it will be the valid and binding obligation
of the Grantor, the Senior Collateral Agents, and the Blocked Account Bank, in
accordance with its terms.

 

	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  
	
   

  	
  [                                                                         ]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  CITICORP
  NORTH AMERICA, INC, as Senior Collateral Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  JPMORGAN
  CHASE BANK, as Senior Collateral Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  Acknowledged
  and agreed to as of the date first above written:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  	
   

  

 

 

Exhibit A to the

Blocked Account Agreement

 

BLOCKED ACCOUNT CASH SWEEP NOTICE

 

[Blocked
Account Bank]

[Address]

 

Re: Account No. [              ]
(the “Blocked Account”)

 

Ladies
and Gentlemen:

 

Reference
is made to the Blocked Account and that certain Blocked Account Agreement dated
June 27, 2001 and amended and restated as of September 22, 2004 (as
amended, supplemented or otherwise modified from time to time, the “Blocked Account Agreement”) among the
Blocked Account Bank, the Grantor and the Senior Collateral Agents. Capitalized
terms used herein and not otherwise defined herein shall have the meanings
assigned to them in the Blocked Account Agreement.

 

The
Senior Collateral Agents hereby notify you that, in accordance with certain
provisions of the Senior Subsidiary Security Agreement, from and after the date
of this notice, you are hereby directed to transfer (by wire transfer or other
method of transfer mutually acceptable to you and the Senior Collateral Agents)
to the Senior Collateral Agents, in same day funds, on each Business Day, the entire balance in the Blocked
Account to the Concentration Account specified in paragraph (j) of the
Blocked Account Agreement (or to such other account as the Senior Collateral
Agents may from time to time, or at any time, designate in writing) until you
are notified in writing by the Senior Collateral Agents that this Blocked
Account Cash Sweep Notice is no longer effective.

 

	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  
	
   

  	
  CITICORP
  NORTH AMERICA, INC, as Senior Collateral Agent,

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  JPMORGAN
  CHASE BANK, as Senior Collateral Agent,

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

Schedule 5

to the Senior Subsidiary

Security Agreement

 

[FORM OF]

 

LOCKBOX ACCOUNT AGREEMENT

 

[Date]

 

[Mellon Bank, N.A.

Document Control Group Manager 

500 Ross Street

Mellon Client Service Center 

Room 154-1380

Pittsburgh, PA 15262-001]

Ladies and Gentlemen:

 

Reference is made to (a) account
number [   ] and corresponding lockbox and data automation
system maintained with Mellon Bank, N.A. (“you”
or the “Lockbox Account Bank”) by
[                   ]
(the “Grantor”) into which funds
are deposited from time to time (the “Lockbox
Account”) and (b) the Senior Subsidiary Security Agreement
dated as of June 27, 2001 and amended and restated as of September 22,
2004 (as amended, supplemented or otherwise modified from time to time, the “Senior Subsidiary Security Agreement”) among
the Subsidiary Guarantors (such term and each other capitalized term used but
not defined herein having the meaning assigned to such term in the Senior
Subsidiary Security Agreement, including the Definitions Annex and Senior
Credit Agreement referred to therein) and the Senior Collateral Agent.

 

The Grantor hereby confirms its irrevocable
and unconditional instruction to you that, until receipt of a written notice
from the Senior Collateral Agents to the contrary, you shall follow exclusively
the instructions of the Senior Collateral Agents with respect to the Lockbox
Account without further consent by the Grantor or any other Person and that the
Lockbox Account shall be under the sole dominion and control of the Senior
Collateral Agent. Notwithstanding anything to the contrary or any other
agreement relating to the Lockbox Account, the Lockbox Account is and will be
maintained for the benefit of the Senior Collateral Agent, will be entitled “blocked account for the benefit of Citicorp North
America, Inc. and JPMorgan Chase Bank as Senior Collateral Agents under
the Senior Subsidiary Agreement dated as of June 27, 2001 and amended and
restated as of September 22, 2004 Account” and will be subject
to written instructions only from an authorized officer of each Senior
Collateral Agent.

 

The Grantor also hereby notifies you that the
Senior Collateral Agents shall be irrevocably entitled to exercise any and all
rights in respect of, or in connection with, the Lockbox Account, including,
without limitation, the right to specify when payments are to be made out of,
or in connection with, the Lockbox Account. The Senior Collateral Agents hereby
instruct you, until you receive notice from the Senior Collateral Agents
changing this instruction, to transfer, in same day funds, on each Business
Day, all funds, if any on deposit in, or otherwise to the credit
of, the 

 

 

Lockbox Account to the account listed below, provided that funds on deposit in the Lockbox Account that
are subject to collection may be transmitted properly upon collection.

 

	
  BA Number:

  	
   

  
	
  [name and address of Grantor’s bank]

  
	
   

  	
   

  
	
  Account Name:

  	
   

  
	
   

  	
  Concentration Account

  	
   

  
	
   

  	
  for the Rite Aid Senior

  	
   

  
	
   

  	
  Subsidiary Security Agreement

  	
   

  
	
   

  	
   

  
	
  Account Number:

  	
   

  
	
  Reference:

  	
   

  
	
  Attn:

  	
   

  

 

[or to such other account as the Senior
Collateral Agents and the Grantor may designate in writing.]

 

The Grantor also hereby notifies the Lockbox Account Bank that, as
collateral security for the Senior Obligations,
the undersigned Subsidiary Guarantors granted to the Grantor and the
Grantor hereby assigns to the Senior Collateral Agents a continuing security
interest in (i) the Lockbox Account, (ii) all contract rights and
privileges in respect to the Lockbox Account, (iii) all cash, checks,
money orders and other items of value on deposit in the Lockbox Account and (iv) all
proceeds of the foregoing.

 

By executing this Lockbox Account Agreement, and so long as the Grantor
shall have any obligations to the Senior Collateral Agents or their assigns,
you irrevocably agree not to assert, claim or endeavor to exercise, irrevocably
bar and estop yourself from asserting, claiming or exercising, and acknowledge that you have not heretofore received a notice, writ,
order or any form of legal process from any other party asserting, claiming or
exercising, any right of set-off, banker’s lien, control or other purported
form of claim with respect to the Lockbox Account or funds or other items from time to time therein. Except for your
right to debit the Lockbox Account as described herein, you hereby expressly subordinate all your rights to the
Lockbox Account or funds or other items therein, to all rights of the Senior
Collateral Agents.

 

All customary fees, charges and expenses for the maintenance and
provision of services in conjunction with the Lockbox Account are the
responsibility of the Grantor. In the event that the Grantor does not pay such
customary fees, charges and expenses due to the Lockbox Account Bank within ten (10) days after
the due date, the Lockbox Account Bank is authorized to charge the Lockbox
Account for such fees. In addition, any overdrafts with respect to the Lockbox
Account shall be debited, at any time and from time to time, to the Lockbox
Account in such amounts as may be required to pay such overdrafts, without
recourse to the Senior Collateral Agents. The Senior Collateral Agents shall
have no right to the sums so debited by the Lockbox Account Bank. In the event insufficient funds
remain in the Lockbox Account
to cover any overdrafts, the Grantor shall pay and
indemnify the Lockbox Account Bank
for the amounts of any
overdrafts. The Senior Collateral Agents shall not have any liability for the
payment of any fees or 

 

2

 

charges in respect of the Lockbox Account, including customary service
charges and fees and any overdrafts.

 

The Grantor and the Senior Collateral Agents agree that the Lockbox
Account Bank may debit the Lockbox Account for any items (including, but not
limited to, checks, drafts, Automatic Clearinghouse (ACH) credits or wire
transfers or other electronic transfers or credits) deposited or credited to
the Lockbox Account which may be returned or otherwise not collected and,
subject to the preceding paragraph, for all charges, fees, commissions and
expenses incurred by the Lockbox Account Bank in providing services or
otherwise in connection herewith. The Lockbox Account Bank may charge the
Lockbox Account as permitted herein at such times as are in accordance with the
Lockbox Account Bank’s customary practice for the chargeback of returned items
and expenses. In the event the Lockbox Account Bank is unable to obtain
sufficient funds for such charges to cover returned items, or reversed or
returned credits, or any other items not collected and any other charges,
expenses, or commissions incurred by the Lockbox Account Bank in providing the
services (referred to as a “cost” or “costs”), the Grantor shall indemnify the
Lockbox Account Bank for all amounts related to the above described costs incurred
by the Lockbox Account Bank. The Senior Collateral Agents agree that if there
are insufficient funds in the Lockbox Account, the Grantor has not reimbursed
the Lockbox Account Bank for the amounts described in this paragraph and the Lockbox Account Bank has transferred funds to the Senior Collateral Agents, then the Senior Collateral Agents agree to reimburse the Lockbox Account
Bank (for any returned items
described in this paragraph but
not for charges, fees or commissions incurred therewith) within ten (10) business
days after demand by the Lockbox Account Bank. The Senior Collateral Agents’
obligations under this paragraph shall terminate 120 days after the termination
of this Lockbox Account Agreement.

 

Notwithstanding any other provision of this Lockbox Account Agreement,
unless the Lockbox Account Bank is grossly negligent or engages in wilful
misconduct in performance or non-performance in connection with this Lockbox
Account Agreement and the Lockbox Account, the Lockbox Account Bank shall not be liable to any Party
hereto or any other person or
entity for any action or failure to act under or in connection with this
Lockbox Account Agreement. The Grantor agrees to indemnify and hold the Lockbox
Account Bank harmless from any
claims, damages, losses or expenses
incurred by any party in connection herewith; in the event the Lockbox Account
Bank breaches the standard of care set forth herein, the Grantor and the Senior
Collateral Agents each expressly agrees that the Lockbox Account Bank’s liability shall be limited to damages directly caused by such breach and in no event shall the Lockbox Account Bank be
liable for any incidental,
indirect, punitive or consequential damages or attorney’s fees whatsoever.

 

Notwithstanding any other provision
of this Lockbox Account Agreement, the Lockbox Account Bank shall not be
liable for any failure, inability to perform, or delay in performance
hereunder, if such failure, inability, or delay is due to an act of God, war,
civil commotion, governmental action, fire, explosion, strikes, other industrial disturbance, equipment malfunction, action, non-action or
delayed action on the part of the Grantor or the Senior Collateral Agents or of
any other entity or any other causes that are beyond the Lockbox Account Bank’s
reasonable control.

 

3

 

You hereby represent that you have not, prior to the date hereof,
entered into any agreement (which is currently in effect) pursuant to which you
agreed that you would comply with instructions of any person (other than the
Senior Collateral Agents) directing disposition of the funds in the Lockbox
Account.

 

You agree to give the Senior Collateral Agents and the Grantor prompt
notice if the Lockbox Account becomes subject to any writ, judgment, warrant of
attachment, execution or similar process served upon you.

 

This Lockbox Account Agreement may not be modified or terminated by the
Grantor unless, in the case of a modification, the prior written consent of the
Senior Collateral Agents and the Lockbox Account Bank is obtained and, in the
case of termination, the prior written consent of the Senior Collateral Agents
is obtained. The Lockbox Account Bank may terminate this Lockbox Account
Agreement upon thirty (30) days’ prior written notice to the Grantor and the
Senior Collateral Agents. The Senior Collateral Agents may terminate this
Lockbox Account Agreement at any time. Upon any such termination, any collected
and available balances in the Lockbox Account will be transferred in accordance
with the Senior Collateral Agents’ instructions, and incoming mail with respect
to the Lockbox Account received by the Lockbox Account Bank after such
termination shall be forwarded for a period not to exceed ninety (90) days in
accordance with the Senior Collateral Agents’ instructions. The Grantor’s
obligations under this Lockbox Account Agreement to indemnify, hold harmless
and pay amounts owed (and the Grantor’s obligation to reimburse the Lockbox
Account Bank for any returned items) shall survive the termination of this
Lockbox Account Agreement.

 

[This Lockbox Account Agreement shall be governed by the laws of the
State of New York.]

 

The terms and conditions of the services, attached as Exhibit A,
is made part of this Lockbox Account Agreement with respect to matters not
explicitly covered in this Lockbox Account Agreement. To the extent there is a
conflict between this Lockbox Account Agreement and the terms and conditions of
services, this Lockbox Account Agreement shall take precedence.

 

This Lockbox Account Agreement shall become effective immediately upon
its execution by all parties hereto. Any notice permitted or required hereunder
shall be in writing and shall be deemed to have been duly given if sent by
Personal delivery, express or first class mail, or facsimile addressed, in the
case of notice to the Lockbox Account Bank, to:

 

[Mellon Bank, N.A.

Document Control Group Manager 
 Mellon Client Service Center 

500 Ross Street

Room 154-1380

Pittsburgh, PA 15262-0001]

Phone: (412) 234-4172

Fax: (412) 236-7419

and, in the case of notice to the Grantor, to:

 

4

 

30 Hunter Lane

Camp Hill, PA 17011 

Phone: [           ]

Fax:
[             ]

Attn: Rite Aid Funding LLC/ Rite Aid Treasury

 

and, in the case of notice to the Senior Collateral Agents to:

 

[                      ]

Fax: [                

Attn:
[                 ]

 

or to such other address or addresses as the party to receive notice
may provide in writing to the other party in accordance with this paragraph. The Lockbox Account Bank shall have no duty
or obligation to inquire into the authenticity or effectiveness of any
such notice received pursuant to this Lockbox Account Agreement.

 

This Lockbox Account Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which when taken together shall constitute
and are the same agreement. Delivery of an executed counterpart of a signature page to
this Lockbox Account Agreement by telecopier shall be effective as delivery of
a manually executed counterpart of this Lockbox Account Agreement.

 

Please agree to the terms of, and acknowledge receipt of, this Lockbox
Account Agreement by signing in
the space provided below.

 

	
   

  	
   

  	
  Very truly yours,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  [NAME OF SUBSIDIARY GUARANTOR]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  , on behalf

  	
   

  	
   

  	
  By:

  	
   

  	
  , on behalf of

  
	
  of each of the above listed
  companies

  	
   

  	
   

  	
   

  	
  each of the above listed companies

  
	
  Name:

  	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
   

  
	
  Agreed and acknowledged:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [MELLON BANK, N.A.]

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
									

 

5

 

	
  CITICORP NORTH AMERICA, INC., as Senior Collateral Agent,

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
  JPMORGAN CHASE BANK, as Senior Collateral Agent,

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

6

 

Schedule 6

to the Senior Subsidiary

Security Agreement

 

GOVERNMENT LOCKBOX ACCOUNT AGREEMENT

 

[Date]

 

[Mellon Bank, N.A.

Document Control Group Manager 

Mellon Client Service Center 

500 Ross Street

Room 154-1380

Pittsburgh, PA 15262-0001]

Ladies and Gentlemen:

 

Reference is made to (a) account no.
[  ] and corresponding lockbox and data automation system maintained
with Mellon Bank, N.A. (“you” or
the “Government Lockbox Account Bank”) by [           ] (the
“Grantor”) into which funds are
deposited from time to time (the “Government
Lockbox”) and (b) the Senior Subsidiary Security Agreement dated as of June 27, 2001 and amended and
restated as of September 22, 2004 (as amended, supplemented or otherwise
modified from time to time, the “Senior Subsidiary Security Agreement”), among
the Subsidiary Guarantors (such term and each other capitalized term used and
not otherwise defined herein having the meaning assigned to such term in the
Senior Subsidiary Security Agreement including the Definitions Annex and Senior
Credit Agreement referred to therein) and the Senior Collateral Agents.

 

The Grantor hereby provides the following
revocable instruction with respect to the Government Lockbox Account (the “Standing Revocable
Instruction”): the Government Lockbox Account Bank shall transfer
from the Government Lockbox Account daily, via a zero balance service as
described in the terms and conditions of the services, attached as Exhibit A,
all available funds held in the Government Lockbox Account to account no. [           ]
at Mellon Bank, N.A. in the name of the Grantor for Citicorp North America, Inc.
and JPMorgan Chase Bank, as Senior
Collateral Agents (which account is under the sole dominion and control of the
Senior Collateral Agents). This Standing Revocable Instruction is revocable by
the Grantor at any time and for any reason by providing written instructions to the Government Lockbox Account
Bank (with a copy to the Senior Collateral Agents), signed by the undersigned
(which writing may be by facsimile and upon which you may conclusively rely),
whereupon the Government Lockbox Account Bank shall follow, without further
inquiry, such contrary written instruction and not the Standing Revocable
Instruction, provided, however, that revocation of such
Standing Revocable Instruction shall not be effective until the later of (a) three
Business Days after it is given or (b) the date the Grantor provides
identification reasonably acceptable to
the Senior Collateral Agents and the Government Lockbox Account Bank of the collections then in the
Government Lockbox Account with respect to which the Obligor is a Governmental
Entity and with respect to which the Obligor is not a Governmental Entity, in
which latter case the said revocation shall not be effective.

 

 

The Grantor also hereby notifies the Government Lockbox Account Bank
that, as collateral security for the Senior Obligations, the undersigned
Subsidiary Guarantors granted to the Grantor and the Grantor hereby assigns to
the Senior Collateral Agents a continuing security interest in (i) the
Government Lockbox Account, (ii) all contract rights and privileges in
respect to the Government Lockbox Account, (iii) all cash, checks, money
orders and other items of value on deposit in the Government Lockbox Account
and (iv) all proceeds of the foregoing.

 

By executing this Government Lockbox Account Agreement, and so long as
the Grantor shall have any obligations to the Senior Collateral Agents or their
assigns, you irrevocably agree not to assert, claim or endeavor to exercise,
irrevocably bar and estop yourself from asserting, claiming or exercising, and
acknowledge that you have not heretofore received a notice, writ, order or any
form of legal process from any other party asserting, claiming or exercising,
any right of set-off, banker’s lien, control or other purported form of claim
with respect to the Government Lockbox Account or funds or other items from
time to time therein. Except for your right to debit the Government Lockbox
Account as described herein, you hereby expressly subordinate all your rights
to the Government Lockbox Account or funds or other items therein, to all
rights of the Grantor and the Senior Collateral Agents.

 

All customary fees, charges and expenses for the maintenance and
provision of services in conjunction with the Government Lockbox Account are the responsibility of the Grantor. In the event that the Grantor does not pay such customary fees,
charges and expenses due to the Government Lockbox Account Bank
within ten (10) days after the
due date, the Government Lockbox Account
Bank is authorized to charge the
Government Lockbox Account for
such fees. In addition, any overdrafts with
respect to the Government Lockbox
Account shall be debited, at any time and from time to time, to the
Government Lockbox Account in such amounts
as may be required to pay such overdrafts, without recourse to the Senior
Collateral Agents. The Senior Collateral Agents shall have no right to the sums so debited by the Government Lockbox Account Bank. In the event insufficient funds remain in the Lockbox Account to cover any overdrafts, the Grantor shall pay and indemnify the Government Lockbox Account Bank for
the amounts of any overdrafts. The
Senior Collateral Agents shall not
have any liability for the
payment of any fees or charges in respect of the Government Lockbox
Account, including customary service charges and fees and any overdrafts.

 

The Grantor and the Senior Collateral Agents agree that the Government Lockbox
Account Bank may debit the Government Lockbox Account for any items (including,
but not limited to, checks, drafts, Automatic Clearinghouse (ACH) credits or
wire transfers or other electronic transfers or credits) deposited or credited to
the Government Lockbox Account which may be returned or otherwise not collected
and, subject to the preceding paragraph, for all charges, fees, commissions and
expenses incurred by the Government Lockbox Account Bank in providing services
or otherwise in connection herewith. The Government Lockbox Account Bank may
charge the Government Lockbox Account as permitted herein at such times as are
in accordance with the Government Lockbox Account Bank’s customary practice for
the chargeback of returned items and expenses. In the event the Government
Lockbox Account Bank is unable to obtain sufficient funds for such charges to
cover returned items, or reversed or returned credits, or any other items not
collected and any other charges, expenses, or commissions incurred by the
Government Lockbox Account Bank in providing the services (referred to as a “cost”
or “costs”) the Grantor shall indemnify the Government Lockbox Account Bank for
all amounts related to the 

 

2

 

above described costs incurred by the Government Lockbox Account Bank.
The Senior Collateral Agents agree that if the Grantor has not reimbursed the
Government Lockbox Account Bank for the amounts described in this paragraph and
the Government Lockbox Account Bank has transferred funds to the Senior
Collateral Agents, then the Senior Collateral Agents agree to reimburse the
Government Lockbox Account Bank (for any returned items described in this
paragraph but not for charges,
fees or commissions incurred therewith) within ten business days after demand
by the Government Lockbox Account Bank. The Senior Collateral Agents’
obligations under this paragraph shall terminate 120 days after the termination
of this Government Lockbox Account Agreement.

 

Notwithstanding any other provision of this
Government Lockbox Account Agreement, unless the Government Lockbox Account
Bank is grossly negligent or engages in wilful misconduct in performance or non-performance
in connection with this Government Lockbox Account Agreement and. the
Government Lockbox Account, the Lockbox Account Bank shall not be liable to any
Party hereto or any other person
or entity for any action or failure to act under or in connection with this
Lockbox Account Agreement. The Grantor agrees to indemnify and hold the
Government Lockbox Account Bank harmless from any claims, damages, losses or
expenses incurred by any party in connection herewith; in the event the
Government Lockbox Account Bank breaches the standard of care set forth herein,
the Grantor and the Senior Collateral Agents each expressly agrees that the
Government Lockbox Account Bank’s liability shall be limited to damages
directly caused by such breach and in no event shall the Government Lockbox
Account Bank be liable for any incidental, indirect, punitive or consequential
damages or attorney’s fees whatsoever.

 

Notwithstanding any other provision of this
Government Lockbox Account Agreement, the Government Lockbox Account Bank shall
not be liable for any failure, inability to perform, or delay in performance
hereunder, if such failure, inability, or delay is due to an act of God, war,
civil commotion, governmental action, fire, explosion, strikes, other
industrial disturbance, equipment malfunction, action, non-action or delayed
action on the part of the Grantor or the Senior Collateral Agents or of any
other entity or any other causes that are beyond the Government Lockbox Account
Bank’s reasonable control.

 

You hereby represent that you have not, prior
to the date hereof, entered into any agreement (which is currently in effect)
pursuant to which you agreed that you would comply with instructions of any
person (other than the Grantor and the Senior Collateral Agents) directing
disposition of the funds in the Government Lockbox Account.

 

You agree to give the Senior Collateral
Agents and the Grantor prompt notice if the Government Lockbox Account becomes
subject to any writ, judgment, warrant of attachment, execution or similar
process served upon you.

 

This Government Lockbox Account Agreement may not be modified or
terminated by the Grantor unless, in the case of a modification, the prior
written consent of the Senior Collateral Agents and the Government Lockbox
Account Bank is obtained and, in the case of termination, the prior written
consent of the Senior Collateral Agents is obtained. The Government Lockbox
Account Bank may terminate this Government Lockbox Account Agreement upon
thirty (30) days’ prior written notice to the Grantor and the Senior Collateral
Agents. Upon any such 

 

3

 

termination, any collected
and available balances in the Government Lockbox Account will be transferred in
accordance with the Grantor’s instructions, and incoming mail with respect to
the Government Lockbox Account received by the Government Lockbox Account Bank
after such termination shall be forwarded for a period not to exceed ninety
(90) days in accordance with the Senior Collateral Agents’ instructions. The
Senior Collateral Agents may terminate this Government Lockbox Account
Agreement at any time. The Grantor’s obligations under this Government Lockbox
Account Agreement to indemnify, hold harmless and pay amounts owed (and the Senior Collateral Agents’ obligation to reimburse the Government Lockbox Account Bank for any returned items) shall
survive the termination of this Government Lockbox Account Agreement.

 

This Government Lockbox Account Agreement shall be governed by the laws
of the State of New York.

 

The terms and conditions of the services, attached as Exhibit A,
is made part of this Government Lockbox Account Agreement with respect to
matters not explicitly covered in this Government Lockbox Account Agreement. To
the extent there is a conflict between this Government Lockbox Account
Agreement and the terms and
conditions of services, this Government Lockbox Account Agreement shall take
precedence.

 

This Government Lockbox Account Agreement shall become effective
immediately upon its execution by all parties hereto. Any notice permitted or
required hereunder shall be in writing and shall be deemed to have been duly
given if sent by personal delivery, express or first class mail, or facsimile
addressed, in the case of notice to the Government
Lockbox Account Bank, to:

 

[Mellon Bank, N.A.

Document Control Group Manager 

Mellon Client Service Center 
 500 Ross Street
 Room 154-1380
 Pittsburgh, PA 15262-0001
 Phone: (412) 234-4172

Fax: (412) 236-7419]

 

and, in the case of notice to the Grantor, to:

 

30 Hunter Lane

Camp Hill, PA 17011 

Phone: [          ]

Fax:
[              ]

Attn: Rite Aid Funding LLC/ Rite Aid Treasury

 

and, in the case of notice to the Senior Collateral Agents, to:

 

[                                 ]

Fax: [                         ]

Attn:
[                        ]

 

4

 

or to such other address or addresses as the party to receive notice
may provide in writing to the other party in accordance with this paragraph.
The Government Lockbox Account Bank shall have no duty or obligation to inquire
into the authenticity or effectiveness of any such notice received pursuant to
this Government Lockbox Account Agreement.

 

This Government Lockbox Account Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which when taken together shall constitute
and are the same agreement. Delivery of an executed counterpart of a signature page to this Government
Lockbox Account Agreement by telecopier shall be effective as delivery of a
manually executed counterpart of this Government Lockbox Account Agreement.

 

5

 

Please agree to the terms of, and acknowledge receipt of, this
Government Lockbox Account Agreement by signing in the space provided below.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  [NAME OF SUBSIDIARY GUARANTOR]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

	
  By:

  	
   

  	
  , on behalf of

  	
   

  
	
   

  	
  each of the above listed companies

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  , on behalf of

  	
   

  
	
   

  	
  each of the above listed companies

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Agreed and acknowledged: [MELLON BANK, N.A.]

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  CITICORP NORTH AMERICA, INC., as Senior Collateral Agent,

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  JPMORGAN CHASE BANK, as Senior
  Collateral Agent,

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
					

 

6

 

Schedule 7

to the Senior Subsidiary

Security Agreement

 

[FORM OF]

CONCENTRATION ACCOUNT AGREEMENT

 

[Date]

 

[Concentration Account Bank]

[address]

 

Ladies and Gentlemen:

 

Reference is made to (a) account no.
[                    ]
maintained with you (the “Concentration Account Bank”) by [                            ]
(the “Grantor”)
into which funds are deposited from time to time (the “Concentration Account”) and
(b) the Senior Subsidiary Security Agreement dated as of June 27,
2001 and amended and restated as of September 22, 2004 (as amended,
supplemented or otherwise modified from time to time, the Senior Subsidiary Security
Agreement”), among the Subsidiary Guarantors (such term and
each other capitalized term used but not defined herein having the meaning
assigned to such term in the Senior Subsidiary Security Agreement, including
the Definitions Annex and Senior Credit Agreement referred to therein) and the
Senior Collateral Agents.

 

Pursuant to the Senior Subsidiary Security
Agreement, the Grantor has granted to the Senior Collateral Agents, for the
benefit of the Senior Secured Parties, a perfected security interest in certain
property of the Grantor, including the Concentration Account.

 

The Grantor hereby transfers to the Senior
Collateral Agents exclusive ownership and control of, and all of its right,
title and interest in and to, the Concentration Account and all funds and other
property on deposit therein. By executing this Concentration Account Agreement,
the Concentration Account Bank acknowledges that the Senior Collateral Agents
now have exclusive ownership and control of the Concentration Account, that all
funds in the Concentration Account shall be transferred to the Senior
Collateral Agents as provided herein, that the Concentration Account is being
maintained by the Concentration Account Bank for the benefit of the Senior
Collateral Agents and that all amounts and other property therein are held by
the Concentration Account Bank as custodian for the Senior Collateral Agents.

 

Except as provided in paragraphs (e), (f) and
(j) below, the Concentration Account shall not be subject to deduction,
setoff, banker’s lien, counterclaim, defense, recoupment or any other right in
favor of any Person or entity other than the Senior Collateral Agents. By
executing this Concentration Account Agreement, the Concentration Account Bank
also acknowledges that, as of the date hereof, the Concentration Account Bank
has received no notice of any other pledge or assignment of the
Concentration Account and the Concentration Account Bank agrees with the Senior
Collateral Agents as follows:

 

 

(a)  Notwithstanding
anything to the contrary or any other agreement relating to the Concentration
Account, the Concentration Account is and will be maintained for the benefit of
the Senior Collateral Agents, will be entitled “Citicorp
North America, Inc. and JPMorgan Chase Bank as Senior Collateral Agents under the Senior Subsidiary Security Agreement dated as of June 27,
2001 and amended and restated as of September 22, 2004 Account” and
will be subject to written instructions only from authorized officers of the
Senior Collateral Agents (except as expressly provided otherwise herein).

 

(b)  The
Concentration Account Bank agrees to give the Senior Collateral Agents prompt
notice if the Concentration Account shall become subject to any writ, judgment,
warrant of attachment, execution or similar process.

 

(c)  [A post office
box (the “Lockbox”) has been
rented in the name of the Grantor at the
[            post
office and the address to be used for such Lockbox is:

 

[Insert address]

 

The Concentration Account Bank’s authorized representatives will have
access to the Lockbox under the authority given by the Grantor to the post
office and will make regular pick-ups from the Lockbox timed to gain maximum
benefit of early presentation and availability of funds. The Concentration Account Bank will
endorse process all checks received in the Lockbox and deposit such checks (to the extent eligible) in the Concentration
Account in accordance with the procedures
set forth below .]

 

(d)  The
Concentration Account Bank will follow its usual operating procedures for the
handling of any [checks received from the Lockbox] or other remittance received
in the Concentration Account that contains restrictive endorsements,
irregularities (such as a variance between the written and numerical amounts),
undated or postdated items, missing signatures, incorrect payees and the like.

 

(e)  The
Concentration Account Bank will
endorse and process all eligible checks and other remittance items not covered
by paragraph (d) and deposit such checks and remittance items in the
Concentration Account.

 

(f)  The Concentration
Account Bank will mail all checks returned unpaid because of uncollected or
insufficient funds under appropriate advice to the Grantor (with a copy of the
notification of return to the Senior Collateral Agents). The Concentration
Account Bank may charge the Concentration Account for the amounts of any
returned check that has been previously credited to the Concentration Account.
To the extent insufficient funds remain in the Concentration Account to cover
any such returned check, the Grantor shall indemnify the
Concentration Account Bank for the uncollected amount of such returned check
upon your demand.

 

(g)  The
Concentration Account Bank will maintain a record of all checks and other
remittance items received in the Concentration Account on a daily basis and, in
addition to providing the Grantor with photostatic copies thereof, vouchers,
enclosures and the like of such checks and remittance items, furnish to the
Senior Collateral Agents a monthly statement
setting forth the amounts deposited in and withdrawn from the 

 

2

 

Concentration Account and shall furnish such
other information relating to the Concentration Account at such times as shall
be reasonably requested by the Senior Collateral Agents to: Citicorp North
America, Inc., as Senior Collateral Agent, 388 Greenwich Street, New York,
New York 10013, Attention: [           ],
and JPMorgan Chase Bank, as
Senior Collateral Agent, 270 Park Avenue,
New York, New York 10017, Attention:
[        ], with a copy to the Grantor.

 

(h)  Prior to the delivery of a
written notice from the Senior Collateral Agent in the form of Exhibit A hereto (the “Concentration
Account Cash Sweep Notice”), the Grantor is free to withdraw funds from the Concentration Account in such
amounts and with such frequency
as the Grantor may from time to time determine, without notice to or consent
from the Senior Collateral Agents.

 

(i)  From and after delivery to the
Concentration Account Bank of a Concentration Account Cash Sweep Notice and
until the Concentration Account Bank is notified in writing by the Senior
Collateral Agents that the Concentration Account Cash Sweep Notice is no longer
in effect (a “Concentration Account Cash Sweep Period”), the Grantor
will have no control over the use of, or any right to withdraw
any amount from, to draw upon, or to otherwise exercise any power with respect
to the Concentration Account.

 

(j)  During
a Concentration Account Cash Sweep Period, the Concentration Account Bank shall transfer, in same day
funds, on each Business Day, all funds, if any on deposit in, or otherwise
to the credit of, the Concentration Account to the account listed below (the “Citibank
Concentration Account”) or to such other account as the Senior
Collateral Agents may from time to time designate in writing, provided that funds on deposit that are subject to collection may be transmitted promptly upon collection to:

 

ABA Number:
 [Citicorp North America, Inc.

388 Greenwich Street

New York, NY 10013]

Account Name: Citibank Concentration Account

Account Number:

Reference:

Attn:

 

(k)  All customary service charges
and fees with respect to the Concentration Account shall be debited to the
Concentration Account. In the event insufficient funds remain in the
Concentration Account to cover such customary service charges and fees, the
Grantor shall pay and indemnify the Concentration Account Bank for the amounts
of such customary service charges and fees. Neither the Senior Collateral
Agents nor the Senior Secured Parties shall have any liability for the payment
of any fees or charges in respect of the Concentration Account.

 

This letter agreement shall be binding upon and shall inure to the
benefit of the Concentration Account Bank, the Grantor, the Senior Collateral
Agents, the Senior Secured 

 

3

 

Parties referred to in the Senior Subsidiary Security Agreement and
their respective successors, transferees and assigns of any of the foregoing. This letter agreement may not be modified or
terminated except upon the mutual consent of the Senior Collateral Agents, the
Grantor and the Concentration Account Bank. The Concentration Account Bank may
terminate the letter agreement only upon 45 days’ prior written notice to the
Grantor and the Senior Collateral Agents. The Senior Collateral Agents may
terminate this letter agreement at any time. So long as any Senior Obligations
remain outstanding and the Commitments are still outstanding, upon such
termination the Concentration Account Bank shall close the Concentration
Account and transfer all funds in the Concentration Account to the Senior Collateral
Agents at the Citibank Concentration Account or as otherwise directed by the
Senior Collateral Agents. After any such termination, the Concentration Account
Bank shall nonetheless remain obligated promptly to transfer to the
Concentration Account, or as the Senior Collateral Agents may otherwise direct,
all funds and other property received in respect of the Concentration Account.

 

This letter agreement may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which when taken together
shall constitute one and the same agreement. Delivery of an executed
counterpart of a signature page to this letter agreement by telecopier
shall be effective as delivery of a manually executed counterpart of this
letter agreement.

 

This letter agreement supersedes all prior agreements, oral or written,
with respect to the subject matter hereof and may not be amended, modified or supplemented except by a writing
signed by the Senior Collateral Agents, the Grantor and the Concentration Account Bank.

 

This letter agreement shall be governed by, and construed in accordance
with, the law of the State of New York.

 

4

 

Upon acceptance of this letter agreement, it will be the valid and
binding obligation of the Grantor, the Senior Collateral Agents, and the
Concentration Account Bank, in accordance with its terms.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  [       _                          ]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

	
   

  	
  CITICORP NORTH AMERICA, INC, as Senior Collateral Agent,

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

	
   

  	
  JPMORGAN CHASE BANK, as Senior Collateral Agent,

  

 

	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

	
  Acknowledged and agreed to as of the date first above written:

  	
   

  
	
   

  
	
  [                                                     ]

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
			

 

5

 

Exhibit A
to the

Concentration Account Agreement

 

CONCENTRATION ACCOUNT CASH SWEEP NOTICE

 

[Concentration Account Bank]

[Address]

 

Re: Account No. [                ]
(the “Concentration Account”)

 

Ladies and Gentlemen:

 

Reference is made to the Concentration Account and that certain
Concentration Account Agreement dated June 27,
2001 and amended and restated as
of September 22, 2004 (as amended, supplemented or otherwise modified from time to time, the “Concentration Account
Agreement”) among the Concentration Account Bank, the Grantor and
the Senior Collateral Agents. Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to them in the Concentration
Account Agreement.

 

The Senior Collateral Agents hereby notify you that, in accordance with
certain provisions of the Senior Subsidiary Security Agreement, from and after
the date of this notice, you are hereby directed to transfer (by wire transfer
or other method of transfer mutually acceptable to you and the Senior
Collateral Agents) to the Senior Collateral Agents, in same day funds, on each
Business Day, the entire balance in the Concentration Account to the Citibank
Concentration Account specified in paragraph (j) of the Concentration
Account Agreement (or to such other account as the Senior Collateral Agents may
from time to time, or at any time, designate in writing) until you are notified
in writing by the Senior Collateral Agents that this Concentration Account Cash
Sweep Notice is no longer effective.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  CITICORP NORTH AMERICA, INC, as Senior Collateral Agent,

  
	
   

  	
   

  
	
   

  	
   By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  JPMORGAN CHASE BANK, as Senior Collateral Agent,

  
	
   

  	
   

  
	
   

  	
   By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

6

 

Schedule 8

to the Senior Subsidiary

Security Agreement

 

PERFECTION CERTIFICATE

 

7

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