Item 1.01. Entry Into a Material Definitive Agreement.
Receivable Purchase Agreement
On January 24, 2022, Elixir Insurance Company (the "Seller"), a wholly-owned
indirect subsidiary of Rite Aid Corporation (the "Company"), entered into a
receivable purchase agreement (the "Receivable Purchase Agreement") with Part D
Receivable Trust 2020-1 (Series E) (the "Series E Purchaser"), a Delaware
statutory trust beneficially owned, directly or indirectly, by Bank of America,
N.A. ("BOA"), and, solely for the purposes set forth therein, Part D Receivable
Trust 2020-1 (Series D) (the "Series D Purchaser"), a Delaware statutory trust
beneficially owned, directly or indirectly, by BOA.
As previously announced, on August 12, 2021, Series D Purchaser purchased from
Seller all of Seller's right, title and interest in the outstanding amount, as
of June 30, 2021, of the 2020 Medicare Part D final reconciliation payment which
is anticipated to be paid by the Centers for Medicare & Medicaid Services, an
agency within the U.S. Department of Health and Human Services ("CMS"), to
Seller on or about November 1, 2022 (the "Receivable"). Pursuant to the terms
and conditions set forth in the Receivable Purchase Agreement, Series E
Purchaser purchased from Seller all of Seller's right, title and interest in the
balance of the Receivable not previously sold to Series D Purchaser (the
"Receivable Balance"). As of December 31, 2021, the book value of the Receivable
Balance was $400.7 million. The Receivable is to be paid by CMS pursuant to a
contract, last signature dated as of September 16, 2020, by and between CMS and
Seller (the "Contract"). On the closing date, the Company realized net cash
proceeds of $359.4 million, which it intends to use to repay borrowings under
its revolving credit facility (without a reduction in commitment). Under certain
circumstances, as set forth in the Receivable Purchase Agreement, Seller has a
right to a purchase price adjustment of up to $27.6 million (the "Deferred
Purchase Price") payable thirty (30) days following remittance to Series E
Purchaser of the final payment made by CMS in respect of the Receivable. The
book value of the Receivable Balance of $400.7 million less the sum of the
Deferred Purchase Price of $27.6 million and the net cash proceeds of $359.4
million resulted in a non-operating loss of $13.7 million that the Company
recognized on the sale of the Receivable Balance, which is equivalent to
approximately 3.4% of the book value of the Receivable Balance.
The parties to the Receivable Purchase Agreement have each made customary
representations and warranties. Seller agreed to various covenants and
agreements, including, among others, Seller's agreement to perform in all
material respects all terms, covenants and other provisions required to be
performed by it under the Contract and to service the Receivable Balance. The
Receivable Purchase Agreement contains specified repurchase rights that would
require Seller to repurchase the Receivable Balance upon Series D Purchaser's
request if certain events occur in respect of the Receivable Balance prior to
the termination of the Receivable Purchase Agreement.
Indemnity Agreement
On January 24, 2022, to induce Series E Purchaser to enter the Receivable
Purchase Agreement, the Company entered into an indemnity agreement (the
"Indemnity Agreement") with Series E Purchaser. Pursuant to the terms set forth
in the Indemnity Agreement, the Company has agreed to indemnify, reimburse and
hold Series E Purchaser harmless from certain liabilities and expenses actually
suffered or incurred by Series E Purchaser resulting from the occurrence of
certain events in respect of the Receivable Balance, as specified therein. The
Company's liability under the Indemnity Agreement is capped at Seller's
liability under the Receivable Purchase Agreement plus certain costs and
expenses.
The foregoing description of the Receivable Purchase Agreement, the Indemnity
Agreement and the transactions contemplated thereby does not purport to be
complete and is qualified in its entirety by reference to the Receivable
Purchase Agreement, a copy of which is filed as Exhibit 2.1 hereto, and the
Indemnity Agreement, a copy of which is filed as Exhibit 2.2 hereto, each of
which is incorporated herein by reference. It is not intended to provide any
factual information about the Company, Seller or their respective subsidiaries
and affiliates. Each of the Receivable Purchase Agreement and the Indemnity
Agreement contains representations and warranties by the contracting parties,
which were made only for purposes of those agreements and as of specified dates.
The representations, warranties and covenants in each of the Receivable Purchase
Agreement and the Indemnity Agreement were made solely for the benefit of the
contracting parties; are subject to limitations agreed upon by the contracting
parties; may have been made for the purposes of allocating contractual risk
between the contracting parties instead of establishing these matters as facts;
and are subject to standards of materiality applicable to the contracting
parties that may differ from those applicable to investors. Investors should not
rely on the representations, warranties and covenants or any descriptions
thereof as characterizations of the actual state of facts or condition of the
Company, Seller or any of their respective subsidiaries or affiliates. Moreover,
information concerning the subject matter of the representations, warranties and
covenants may change after the date of the Receivable Purchase Agreement and the
Indemnity Agreement, which subsequent information may or may not be fully
reflected in the Company's public disclosures.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
2.1* Receivable Purchase Agreement, dated as of January 24, 2022, by and
between Seller and Series E Purchaser.
2.2 Indemnity Agreement, dated as of January 24, 2022, by and between the
Company and Series E Purchaser (included as Exhibit B to Exhibit 2.1).
104 Cover Page Interactive Data File (formatted as inline XBRL).
* Certain information has been omitted pursuant to Item 601(b)(2) of Regulation
S-K. The Company hereby undertakes to furnish supplemental copies of any of the
omitted information to the Securities and Exchange Commission upon request.
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