Edgar Filing: RITE AID CORP

As Filed with the Securities and Exchange Commission on November 1, 2001.

Registration No. 333-64950
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST EFFECTIVE AMENDMENT NO. 1
ON FORM S-3

to
FORM S-1
REGISTRATION STATEMENT
Under the Securities Act of 1933

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RITE AID CORPORATION
(Exact Name of Registrant as Specified in its Charter)

Delaware 5912 23-1614034
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number)
Identification Number)

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30 Hunter Lane
Camp Hill, Pennsylvania 17011
(717) 761-2633
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)

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Elliot S. Gerson, Esq.
Senior Executive Vice President and General Counsel
Rite Aid Corporation
30 Hunter Lane
Camp Hill, Pennsylvania 17011
(717) 761-2633
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)

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Copy to:
Stacy J. Kanter, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036

(212) 735-3000
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.

If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /

If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered in connection with dividend or reinvestment
plans, check the following box. |X|

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. |_|

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PROSPECTUS

RITE AID CORPORATION
130,516,017 Shares of Common Stock

This prospectus relates to the sale by selling stockholders, including their
respective transferors, donees, pledgees, or successors of up to 130,516,017
shares of our common stock that the selling shareholders acquired from us in
various private placements and debt-for-equity exchanges. We will not receive
any proceeds from the sale of any of the shares.

The shares are being registered to permit the selling stockholders to sell
the shares from time to time in the public market. The selling stockholders
may sell the shares through ordinary brokerage transactions or through any
other means described in the section "Plan of Distribution". We do not know
when or in what amounts a selling stockholder may offer shares for sale. The
selling stockholders may sell any, all or none of the shares offered by this
prospectus.

Our common stock is listed on the NYSE and the Pacific Stock Exchange under
the symbol "RAD". The last reported sale price of our common stock on the NYSE
on October 31, 2001, was $5.52.

See "Risk Factors" beginning on page 8 for a discussion of risks you should
consider before investing in our securities.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy of this prospectus. Any representation to the contrary is a criminal
offense.

The date of this prospectus is November 1, 2001

TABLE OF CONTENTS

Page
--------

Cautionary Note Regarding Forward Looking Statements ............... 3
Where You Can Find More Information ................................ 4
Incorporation by Reference.......................................... 4
Prospectus Summary ................................................. 5
Risk Factors ....................................................... 8
Use of Proceeds .................................................... 13
Selling Stockholders ............................................... 13
Plan of Distribution ............................................... 21
Legal Matters ...................................................... 23
Experts ............................................................ 23

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

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

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

o our high level of indebtedness;

o our ability to make interest and principal payments on our debt and
satisfy the other covenants contained in our credit facilities and other
debt agreements;

o our ability to improve the operating performance of our existing stores,
and, in particular, our new and relocated stores in accordance with our
management's long term strategy;

o the outcomes of pending lawsuits and governmental investigations, both
civil and criminal, involving our financial reporting and other matters;

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

o third party prescription reimbursement levels and regulatory changes
governing pharmacy practices;

o general economic conditions, inflation and interest rate movements;

o merchandise supply constraints or disruptions;

o access to capital; and

o our ability to further develop, implement and maintain reliable and
adequate internal accounting systems and controls.

We undertake no obligation to revise the forward-looking statements included
in this prospectus to reflect any future events or circumstances. Our actual
results, performance or achievements could differ materially from the results
expressed in, or implied by, these forward-looking statements. Factors that
could cause or contribute to such differences are discussed in this prospectus
in the section titled "Risk Factors".

WHERE YOU CAN FIND MORE INFORMATION

We are subject to the informational requirements of the Securities Exchange
Act of 1934. Accordingly, we file annual, quarterly and current reports, proxy
statements and other information with the SEC. We also furnish to our
stockholders annual reports, which include financial statements audited by our
independent certified public accountants and other reports which the law
requires us to send to our stockholders. The public may read and copy any
reports, proxy statements or other information that we file at the SEC's
public reference room at Judiciary Plaza, 450 Fifth Street N.W., Washington,
D.C. 20549 and at the SEC's regional office at 505 West Madison Street, Suite
1400, Chicago, Illinois 60661. The public may obtain information on the public
reference room by calling the SEC at 1-800-SEC-0330. Our SEC filings are also
available to the public from commercial document retrieval services and at the
web site maintained by the SEC at "http://www.sec.gov."

Our common stock is listed on the New York Stock Exchange and the Pacific
Stock Exchange under the symbol "RAD". You can inspect and copy reports, proxy
statements and other information about us at the NYSE's offices at 20 Broad
Street, New York, New York 10005 and at the offices of the Pacific Stock
Exchange, 301 Pine Street, San Francisco, California 94104 and 618 South
Spring Street, Los Angeles, California 90014.

This is a post-effective amendment to Form S-1 to a registration statement on
Form S-3 under the Securities Act covering shares of our common stock offered by
this prospectus. This prospectus does not contain all of the information in the
registration statement. You will find more information about us and our common
stock in the registration statement. In addition, certain information in the
registration statement has been omitted from the prospectus in accordance with
the rules of the SEC. Any statements made in this prospectus concerning the
provisions of legal documents are not necessarily complete and you should read
the documents which are filed as exhibits to the registration statement or
otherwise filed with the SEC.

INCORPORATION BY REFERENCE

The SEC allows us to incorporate by reference the information in documents we
file with the SEC, which means that we can disclose important information to you
by referring to those documents. The information incorporated by reference is
considered to be a part of this prospectus, and information that we file later
with the SEC will automatically update and supersede the information in this
prospectus. We incorporate by reference the documents listed below and any
future filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act until the Selling Stockholders sell all of the shares offered
by this prospectus:

o Our Annual Report on Form 10-K, for the fiscal year ended March 3, 2001
filed on May 21, 2001;

o Our Quarterly Report on Form 10-Q for the fiscal quarter ended June 2,
2001 filed on July 16, 2001;

o Our Quarterly Report on Form 10-Q for the fiscal quarter ended
September 1, 2001 filed on October 12, 2001;

o Our Current Reports on Form 8-K filed with the SEC on June 21, 2001 and
June 28, 2001;

o Our Definitive Proxy Statement filed with the SEC on May 31, 2001; and

o The description of our common stock contained in our Registration
Statement on Form 8-A filed under the Securities Exchange Act of 1934.

You may request a copy of any of these filings, at no cost, by writing or
telephoning us at the following address:

Rite Aid Corporation
30 Hunter Lane
Camp Hill, Pennsylvania 17011
Attention: General Counsel
Phone: (717) 761-2633

PROSPECTUS SUMMARY

The following information summarizes the detailed information and financial
statements included elsewhere or incorporated by reference in this prospectus.
We encourage you to read this entire prospectus carefully. Unless otherwise
indicated or the context otherwise requires, dates in this prospectus that refer
to a particular fiscal year (e.g. fiscal 2001) refer to the fiscal year ended on
the Saturday closest to February 28 of that year. The fiscal year ended March 3,
2001 included 53 weeks. The fiscal years ended February 26, 2000, February 27,
1999 and February 28, 1998 included 52 weeks.

Rite Aid Corporation

Our Business

We are the second largest retail drugstore chain in the United States, based
on number of stores, and the third largest based on revenues. As of September 1,
2001, we operated 3,594 drugstores in 29 states across the country and in the
District of Columbia. We have a first or second place market position, based on
revenues, in 34 of the 65 major U.S. metropolitan markets in which we operate.
During fiscal 2001, we generated $14.5 billion in revenues and we generated $7.4
billion in revenues in our first half of fiscal 2002. Since the beginning of
fiscal 1997, we have purchased 1,554 stores, relocated 952 stores, opened 469
new stores and remodeled 435 stores. As a result, we believe we have one of the
most modern store bases in the industry.

In our stores, we sell prescription drugs and a wide assortment of other
merchandise, which we call "front-end" products. In fiscal 2001, our pharmacists
filled more than 204 million prescriptions, which accounted for 59.5% of our
total sales. In the first half of fiscal 2002, pharmacy sales accounted for
61.3% of our total sales. We believe that our pharmacy operations will continue
to represent a significant part of our business due to favorable industry
trends, including an aging population, increased life expectancy and the
discovery of new and better drug therapies. We offer approximately 24,600
front-end products, including over-the-counter medications, health and beauty
aids, personal care items, cosmetics, household items, beverages, convenience
foods, greeting cards, photo processing, seasonal merchandise and numerous other
everyday and convenience products, which accounted for the remaining 40.5% of
our total sales in fiscal 2001. We distinguish our stores from other national
chain drugstores, in part, through our private label brands and our strategic
alliance with General Nutrition Companies, Inc. ("GNC"), a leading retailer of
vitamin and mineral supplements. We offer over 1,500 products under the Rite Aid
private label brand, which contributed approximately 10% of our front-end sales
in fiscal 2001.

Background

Under prior management, we were engaged in an aggressive expansion program
from 1997 until 1999. During that period, we purchased 1,554 stores, relocated
866 stores, opened 445 new stores, remodeled 308 stores and acquired PCS
Health Systems, Inc. These activities had a significant negative impact on our
operating results and financial condition, severely strained our liquidity and
increased our indebtedness to $6.6 billion as of February 26, 2000, which
contributed to our inability to access the financial markets. A resulting
decrease in revenue due to inventory shortages, reduction in advertising and
uncompetitive prices on front-end products led to a decline in customer
traffic, which had a negative impact on our store operations. In October 1999,
we announced that we had identified accounting irregularities and our former
chairman and chief executive officer resigned. In November 1999, our former
auditors resigned and withdrew their previously issued opinions on our
financial statements for fiscal 1998 and fiscal 1999. We needed to restate our
financial statements and develop accounting systems and controls that would
allow us to manage our business and accurately report the results of our
operations.

In December 1999, a new management team was hired, and since that time we
have been addressing our business, operational and financial challenges. In
response to our situation, new management has:

o Reduced our indebtedness from $6.6 billion as of February 26, 2000 to
$3.7 billion as of September 1, 2001, after giving effect to the
Refinancing (described below);

o Improved front-end same store sales growth from a negative 2.2% in fiscal
2000 to a positive 6.5% in fiscal 2001 by improving store conditions and
product pricing and launching a competitive marketing program;

o Improved same store sales growth from 8.0% in the first half of fiscal
2001 to 9.1% in the first half of fiscal 2002 and front-end same
store sales growth from 4.8% in the first half of fiscal 2001 to 5.0%
in the first half of fiscal 2002;

o Restated our financial statements for fiscal 1998 and fiscal 1999, as
well as engaged Deloitte & Touche LLP as our new auditors to audit our
fiscal years beginning with fiscal 1998;

o Continued developing and implementing a comprehensive plan, which is
ongoing, to address problems with our accounting systems and controls,
and also resumed normal financial reporting;

o Significantly reduced the amount of our indebtedness maturing prior to
March 2005; and

o Addressed out-of-stock inventory levels and strengthened our vendor
relationships.

Refinancing Transactions

On June 27, 2001, we completed a comprehensive $3.2 billion refinancing
package (the "Refinancing") that includes a new $1.9 billion senior secured
credit facility underwritten by Citicorp North America, Inc., The Chase
Manhattan Bank, Credit Suisse First Boston and Fleet Retail Finance, Inc. As a
result of the Refinancing, we have significantly reduced our debt and the
amount of our debt maturing prior to March 2005.

Simultaneously with or prior to the closing of the new credit facility, we
completed the following transactions, which also form part of the Refinancing:

o $552.0 million in private placements of our common stock.

o An exchange with a financial institution of $152.025 million of our 10.5%
senior secured notes due 2002 for $152.025 million of new 12.5% senior
secured notes due 2006. The 12.5% senior secured notes due 2006 are
secured by a second lien on the collateral securing the new credit
facility.

o Private exchanges of common stock for $303.5 million of our bank debt and
10.5% senior secured notes due 2002.

o A synthetic lease transaction with respect to two of our distribution
centers in the amount of approximately $106.9 million.

o $150 million in a private placement of new 11.25% senior notes due 2008.

o The reclassification of $850.8 million of capital leases as operating
leases.

o An operating lease that we entered into with respect to our aircraft for
approximately $25.6 million.

o A tender offer whereby we accepted for payment $174.5 million of our
10.5% senior secured notes due 2002 at 103.25% of their principal amount.

With the proceeds of the Refinancing, we repaid our previous senior secured
credit facility, our PCS and RCF credit facilities and our secured exchange
debt. As a result of the Refinancing, our remaining debt due before March 2005
consists of $152.0 million of our 5.25% convertible subordinated notes due 2002,
$107.8 million of our 6.00% dealer remarketable securities due 2003, $21.9
million of our 10.5% senior secured notes due 2002 and amortization of the new
credit facility. We expect to

use internally generated funds to retire both the 5.25% notes and the dealer
remarketable securities at maturity and to meet the amortization payments
under the new credit facility.

Risk Factors

Prospective purchasers of our common stock should carefully consider the
information set forth under the heading "Risk Factors", together with all other
information in this prospectus including the information we are incorporating by
reference, before making an investment in the common stock offered by this
prospectus.

Our headquarters are located at 30 Hunter Lane, Camp Hill, Pennsylvania
17011, and our telephone number is (717) 761-2633. The address of our Web site
is www.riteaid.com. The information on our Web site is not part of this
prospectus. Our common stock is listed on the New York Stock Exchange and the
Pacific Stock Exchange under the trading symbol "RAD". We were incorporated in
1968 and are a Delaware corporation.

The Offering

Common stock offered by selling
stockholders ....................... 130,516,017 shares
Use of proceeds..................... We will not receive any proceeds from the
sale of shares by selling stockholders
New York Stock Exchange/
Pacific Stock Exchange Symbol ...... RAD

RISK FACTORS

You should carefully consider the following factors, in addition to the other
information in this prospectus and the information incorporated by reference,
before investing in our common stock.

Risks Related to an Investment in our Common Stock

We are highly leveraged. Our substantial indebtedness will severely limit cash
flow available for our operations and could adversely affect our ability to
service debt or obtain additional financing if necessary.

After giving effect to the Refinancing, we had, as of September 1, 2001 $3.7
billion of outstanding indebtedness (including current maturities but excluding
letters of credit) and stockholders' equity of $453.2 million. We also have
additional borrowing capacity under our revolving credit facility of $423.9
million. Our debt obligations will continue to adversely affect our operations
in a number of ways and our cash flow is insufficient to service our debt, which
may require us to borrow additional funds for that purpose, restructure or
otherwise refinance that debt. Our earnings were insufficient to cover our fixed
charges for fiscal 2001 by $1.2 billion. After giving effect to the Refinancing
on a pro forma basis, we estimate that our earnings would have been insufficient
to cover our fixed charges for fiscal 2001.

Our high level of indebtedness will continue to restrict our operations.
Among other things, our indebtedness will:

o limit our ability to obtain additional financing;

o limit our flexibility in planning for, or reacting to, changes in the
markets in which we compete;

o place us at a competitive disadvantage relative to our competitors with
less indebtedness;

o render us more vulnerable to general adverse economic and industry
conditions; and

o require us to dedicate substantially all of our cash flow to service our
debt.

In fiscal 2000 we experienced operational and financial difficulties,
resulting in disputes with suppliers and vendors. These disputes were based
primarily on our level of indebtedness and led to more restrictive vendor
contract terms. Although we believe that our prior disputes with suppliers and
vendors have been largely resolved, any future material deterioration in our
operational or our financial situation could again impact vendors' and
suppliers' willingness to do business with us. Our ability to make payments on
our debt, depends upon our ability to substantially improve our future
operating performance, which is subject to general economic and competitive
conditions and to financial, business and other factors, many of which we
cannot control. If our cash flow from our operating activities is
insufficient, we may take certain actions, including delaying or reducing
capital or other expenditures, attempting to restructure or refinance our
debt, selling assets or operations or seeking additional equity capital. We
may be unable to take any of these actions on satisfactory terms or in a
timely manner. Further, any of these actions may not be sufficient to allow us
to service our debt obligations or may have an adverse impact on our business.
Our existing debt agreements, limit our ability to take certain of these
actions. Our failure to earn enough to pay our debts or to successfully
undertake any of these actions could have a material adverse effect on us.

Some of our debt, including borrowings under our new senior secured credit
facility, is based upon variable rates of interest, which could result in higher
interest expense in the event of increases in interest rates.

Approximately $378.5 million of our outstanding indebtedness as of September
1, 2001, following the Refinancing, bears an interest rate that varies depending
upon LIBOR and is not covered by interest rate swap contracts that expire in
2002. If we borrow additional amounts under our senior secured facility, the
interest rate on those borrowings will vary depending upon LIBOR. If LIBOR
rises, the interest rates on this outstanding debt will also increase. Therefore
an increase in LIBOR would increase our interest payment obligations under these
outstanding loans and have a negative effect on our cash flow and financial
condition.

We are a holding company with no direct operations.

We are a holding company with no direct operations. Our principal assets are
the equity interests that we hold in our operating subsidiaries. As a result,
we are dependent upon dividends and other payments from our

subsidiaries to generate the funds necessary to meet our financial obligations,
including the payment of principal of and interest on our outstanding debt. Our
subsidiaries are legally distinct from us and have no obligation to pay amounts
due with respect to our debt or to make funds available to us for such payment
or for any other reason. As of March 3, 2001, the indebtedness and other
liabilities of our subsidiaries, excluding guarantees of our indebtedness and
lease obligations, was approximately $2.4 billion.

The covenants in our outstanding indebtedness impose restrictions that may
limit our operating and financial flexibility.

The covenants in the instruments governing our outstanding indebtedness,
including our senior secured credit facility and the instruments governing our
11.25% notes and 12.5% notes, restrict our ability to incur liens and debt, pay
dividends, make redemptions and repurchases of capital stock, make loans,
investments and capital expenditures, prepay, redeem or repurchase debt, engage
in mergers, consolidations, asset dispositions, sale-leaseback transactions and
affiliate transactions, change our business, amend certain debt and other
material agreements, issue and sell capital stock of subsidiaries, restrict
distributions from subsidiaries and grant negative pledges to other creditors.

Moreover, if we are unable to meet the terms of the financial covenants or
if we breach any of these covenants, a default could result under one or more
of these agreements. A default, if not waived by our lenders, could result in
the acceleration of our outstanding indebtedness and cause our debt to become
immediately due and payable. If acceleration occurs, we would not be able to
repay our debt and it is unlikely that we would be able to borrow sufficient
additional funds to refinance such debt. Even if new financing is made
available to us, it may not be available on terms acceptable to us.

If we were required to obtain waivers of defaults, we may incur significant
fees and transaction costs. In fiscal 2000, we were required to obtain waivers
of compliance with, and modifications to, certain of the covenants contained
in our senior credit and loan agreements and public indentures. In connection
with obtaining certain of such waivers and modifications, we paid significant
fees and transaction costs.

You may not be able to sell the common stock when you want to and, if you do,
you may not be able to receive the price that you want.

Although our common stock has been actively traded on the New York Stock
Exchange and the Pacific Exchange, we do not know if an active trading market
for the common stock will continue or, if it does, at what prices the common
stock may trade. The shares of our common stock offered by this prospectus will
significantly increase the number of shares of our common stock registered for
sale to the public, and could result in a decline in the market price of our
common stock. Therefore, you may not be able to sell the common stock when you
want and, if you do, you may not receive the price you want. Additionally, in
connection with the settlement of a class action suit brought against us, we
will issue 20 million shares of common stock. If the value of our shares of
common stock is less than $7.75 per share in February 2002, we may deliver a
greater number of shares. We will also issue additional shares of common stock
pursuant to outstanding options granted pursuant to our various stock option
plans. In addition, as described below, the refinancing of our indebtedness may
include additional issuances of equity securities. We cannot predict the extent
to which this dilution, the availability of a large amount of shares for sale,
and the possibility of additional issuances and sales of our common stock will
negatively affect the trading price of our common stock or the liquidity of our
common stock.

Our debt restructuring efforts may be dilutive to your shares.

We may undertake additional transactions to simplify and restructure our
capital structure, which may include, as part of these efforts, additional
issuances of equity securities in exchange for our indebtedness. The issuance
of additional shares of common stock may be dilutive to the holders of our
common stock, including holders who purchase shares of common stock in this
offering.

Risks Related to our Operations

Major lawsuits have been brought against us and certain of our subsidiaries,
and there are currently pending both civil and criminal investigations by the
U.S. Securities and Exchange Commission, the United States Attorney and an
investigation by the United States Department of Labor. In addition to any
fines or damages that we might have to pay, any criminal conviction against us
may result in the loss of licenses and contracts that are material to the
conduct of our business, which would have a negative effect on our results of
operations, financial condition and cash flows.

There are several major ongoing lawsuits and investigations in which we are
involved. These include, in addition to the investigations described below,
several class action lawsuits. While some of these lawsuits have been settled,
we are unable to predict the outcome of any of these matters at this time. If
any of these cases result in a substantial monetary judgment against us or is
settled on unfavorable terms, our results of operations, financial condition and
cash flows could be materially adversely affected.

There are currently pending both civil and criminal governmental
investigations by the SEC and the United States Attorney concerning our
financial reporting and other matters. In addition, an investigation has also
been commenced by the U.S. Department of Labor concerning our employee benefit
plans, including our principal 401(k) plan, which permitted employees to
purchase our common stock. Purchases of our common stock under the plan were
suspended in October 1999. In January 2001, we appointed an independent
trustee to represent the interests of these plans in relation to the company
and to investigate possible claims the plans may have against us. Both the
independent trustee and the Department of Labor have asserted that the plans
may have claims against us. These investigations are ongoing and we cannot
predict their outcomes. If we were convicted of any crime, certain licenses
and government contracts, such as Medicaid plan reimbursement agreements, that
are material to our operations may be revoked, which would have a material
adverse effect on our results of operations and financial condition. In
addition, substantial penalties, damages, or other monetary remedies assessed
against us could also have a material adverse effect on our results of
operations, financial condition and cash flows.

Given the size and nature of our business, we are subject from time to time
to various lawsuits which, depending on their outcome, may have a negative
impact on our results of operations, financial condition and cash flows.

We are substantially dependent on a single supplier of pharmaceutical products
to sell products to us on satisfactory terms. A disruption in this
relationship would have a negative effect on our results of operations,
financial condition and cash flows.

We obtain approximately 93% of our pharmaceutical supplies from a single
supplier, McKesson HBOC, Inc., pursuant to a long-term contract. Pharmacy sales
represented approximately 59.5% of our total sales during fiscal 2001, and,
therefore, our relationship with McKesson HBOC is important to us. Any
significant disruptions in our relationship with McKesson HBOC would make it
difficult for us to continue to operate our business, and would have a material
adverse effect on our results of operations, financial condition and cash flows.

Our auditors have identified numerous "reportable conditions", which relate to
our internal accounting systems and controls, which systems and controls may
be insufficient. Improvements to our internal accounting systems and controls
could require substantial resources.

An audit of our financial statements for fiscal 1998 and fiscal 1999,
following a previous restatement, concluded in July 2000 and resulted in an
additional restatement of fiscal 1998 and fiscal 1999. Following its review of
our books and records, our management concluded that further steps were needed
to establish and maintain the adequacy of our internal accounting systems and
controls. In connection with the above audits of our financial statements,
Deloitte & Touche LLP advised us that it believed there were numerous
"reportable conditions" under the standards established by the American
Institute of Certified Public Accountants which relate to our accounting
systems and controls that could adversely affect our ability to record,
process, summarize and report financial data consistent with the assertions of
management in the financial statements. In order to address the reportable
conditions identified by Deloitte & Touche LLP, we are developing and
implementing comprehensive, adequate and reliable accounting systems and
controls. If, however, we determine that our internal accounting systems and
controls require additional improvements beyond those identified, or if the
changes we are implementing are inadequate, we may need to commit additional
substantial resources, including time from our management team, to implement
new systems and controls, which could affect the timeliness of our financial
or management reporting.

We need to continue to improve our operations in order to improve our
financial condition, but our operations will not improve if we cannot continue
to effectively implement our business strategy or if they are negatively
affected by general economic conditions.

Our operations during fiscal 2000 were adversely affected by a number of
factors, including our financial difficulties, inventory shortages,
allegations of violations of the law, including drug pricing issues, disputes
with suppliers and uncertainties regarding our ability to produce audited
financial statements. To improve operations, new management developed and in
fiscal 2001 began implementing and continues to implement, a business strategy
to improve our stores and enhance our relationships with our customers by
improving the pricing of products, providing more consistent advertising
through weekly circulars, eliminating inventory shortages and out-dated
inventory, resolving issues and disputes with our vendors, and developing
programs intended to provide better customer service and purchasing
prescription files and other means. If we are not successful in implementing
our business strategy, or if our business strategy is not effective, we may
not be able to continue to improve our operations. In addition, any adverse
change in general economic conditions can adversely affect consumer buying
practices and reduce our sales of front-end products, which are our higher
margin products, and cause a proportionately greater decrease in our
profitability. Failure to continue to improve operations or a decline in
general economic conditions would adversely affect our results of operations,
financial condition and cash flows and our ability to make principal or
interest payments on our debt.

We cannot assure you that management will be able to successfully manage our
business or successfully implement our strategic plan. This could have a
material adverse effect on our business and the results of our operations,
financial condition and cash flows.

In December 1999, we hired a new management team to address our business,
operational financial and accounting challenges. Our management team has
considerable experience in the retail industry. Nonetheless, we cannot assure
you that our management will be able successfully to manage our business or
successfully implement our strategic business plan. This could have a material
adverse effect on our results of operations, financial condition and cash
flows.

We are dependent on our management team, and the loss of their services could
have a material adverse effect on our business and the results of our
operations or financial condition.

The success of our business is materially dependent upon the continued
services of our chairman and chief executive officer, Robert G. Miller, and
the other members of our management team. The loss of Mr. Miller or other key
personnel could have a material adverse effect on the results of our
operations, financial condition and cash flows. Additionally, we cannot assure
you that we will be able to attract or retain other skilled personnel in the
future.

Risks Related to our Industry

The markets in which we operate are very competitive and further increases in
competition could adversely affect us.

We face intense competition with local, regional and national companies,
including other drugstore chains, independently owned drugstores,
supermarkets, mass merchandisers, discount stores and mail order pharmacies.
We may not be able to effectively compete against them because our existing or
potential competitors may have financial and other resources that are superior
to ours. In addition, we may be at a competitive disadvantage because we are
more highly leveraged than our competitors. Because many of our stores are
new, their ability to achieve profitability depends on their ability to
achieve a critical mass of customers. While customer growth is often achieved
through purchases of prescription files from existing pharmacies, our ability
to achieve this critical mass through purchases of prescription files could be
confined by liquidity constraints. Although in the recent past, our
competitiveness has been adversely affected by problems with inventory
shortages, uncompetitive pricing and customer service, we have taken steps to
address these issues. We believe that the continued consolidation of the
drugstore industry will further increase competitive pressures in the
industry. As competition increases, a significant increase in general pricing
pressures could occur which would require us to increase our sales volume and
to sell higher margin products and services in order to remain competitive. We
cannot assure you that we will be able to continue effectively to compete in
our markets or increase our sales volume in response to further increased
competition.

Changes in third-party reimbursement levels for prescription drugs could
reduce our margins and have a material adverse effect on our business.

Sales of prescription drugs, as a percentage of sales, and the percentage of
prescription sales reimbursed by third parties, have been increasing and we
expect them to continue to increase. In fiscal 2001, sales of prescription drugs
represented 59.5% of our sales and we were reimbursed by third-party payors for
approximately 90.3% of all of the prescription drugs that we sold. In the first
half of fiscal 2002, sales of prescription drugs represented 61.3% of our sales
and we were reimbursed by third-party payors for approximately 91.9% of all of
the prescription drugs that we sold. During fiscal 2001, the top five
third-party payors accounted for approximately 26.4% of our total sales. Any
significant loss of third-party provider business could have a material adverse
effect on our business and results of operations. Also, these third-party payors
could reduce the levels at which they will reimburse us for the prescription
drugs that we provide to their members. Furthermore, if Medicare is reformed to
include prescription benefits, we may be reimbursed for some prescription drugs
at prices lower than our current retail prices. If third-party payors reduce
their reimbursement levels or if Medicare covers prescription drugs at
reimbursement levels lower than our current retail prices, our margins on these
sales would be reduced, and the profitability of our business and our results of
operations, financial condition and cash flows could be adversely affected.

We are subject to governmental regulations, procedures and requirements; our
noncompliance or a significant regulatory change could adversely affect our
business, the results of our operations or our financial condition.

Our pharmacy business is subject to federal, state, and local regulation.
These include local registrations of pharmacies in the states where our
pharmacies are located, applicable Medicare and Medicaid regulations, and
prohibitions against paid referrals of patients. Failure to properly adhere to
these and other applicable regulations could result in the imposition of civil
and criminal penalties and could adversely affect the continued operation of
our business. Furthermore, our pharmacies could be affected by federal and
state reform programs, such as healthcare reform initiatives which could, in
turn, negatively affect our business. The passing of these initiatives or any
new federal or state programs could adversely affect our results of
operations, financial condition and cash flows.

Certain risks are inherent in the provision of pharmacy services; our
insurance may not be adequate to cover any claims against us.

Pharmacies are exposed to risks inherent in the packaging and distribution
of pharmaceuticals and other healthcare products, such as with respect to
improper filling of prescriptions, labeling of prescriptions and adequacy of
warnings. Although we maintain professional liability and errors and omissions
liability insurance from time to time, claims result in the payment of
significant amounts, some portions of which are not funded by insurance. We
cannot assure you that the coverage limits under our insurance programs will
be adequate to protect us against future claims, or that we will maintain this
insurance on acceptable terms in the future. Our results of operations,
financial condition or cash flows may be adversely affected if in the future
our insurance coverage proves to be inadequate or unavailable or there is an
increase in liability for which we self insure or we suffer reputational harm
as a result of an error or omission.

We will not be able to compete effectively if we are unable to attract, hire
and retain qualified pharmacists.

There is a nationwide shortage of qualified pharmacists. In response, we
have implemented improved benefits and training programs in order to attract,
hire and retain qualified pharmacists. However, we may not be able to attract,
hire and retain enough qualified pharmacists. This could adversely affect our
operations.

USE OF PROCEEDS

We will not receive any of the proceeds of sales by the selling
stockholders.

SELLING STOCKHOLDERS

The following table sets forth information regarding each selling
stockholder and the amount of our common stock that it may offer under this
prospectus. When we refer to the "selling stockholders" in this prospectus, we
mean those persons listed in the table below, as well as the pledgees, donees,
assignees, transferees, successors and others who hold any of the selling
securityholders' interest. The shares of our common stock offered by this
prospectus were originally sold by us in a number of private placements and
privately negotiated debt for equity exchanges.

Since the date that we received the information from the selling
stockholders, one or more selling stockholders identified below may have sold,
transferred or otherwise disposed of all or a substantial portion of the
shares of our common stock held by it in one or a series of transactions
exempt from the Securities Act. Information regarding the selling stockholders
may change from time to time and any changed information will be set forth in
a prospectus supplement to the extent required. Unless set forth below, to the
best of our knowledge, none of the selling stockholders has, or within the
past three years has had, any material relationship with us, any of our
predecessors or affiliates, or beneficially owns in excess of 1% of our
outstanding common stock.

J.P. Morgan Securities Inc. is an affiliate of JPMorganChase, a beneficial
owner of more than 5% of our common stock and the parent of the Chase
Manhattan Bank, one of our lenders.

A selling stockholder may from time to time offer and sell any or all of its
securities under this prospectus. Because a selling stockholder is not
obligated to sell the shares of our common stock held by it, we cannot
estimate the number of shares of our common stock that a selling stockholder
will beneficially own after this offering. Beneficial ownership is based upon
516,162,253 shares of common stock outstanding as of October 26, 2001.
*Represents less than one per cent of our outstanding common stock.

Numbers of shares
Number of shares of of common stock
common stock owned Percentage of covered by this
Name prior to this offering outstanding shares prospectus
---- ---------------------- ------------------ -----------------

Allmerica Investment Trust Select Growth Fund.................. 149,200 * 149,200
American Century Mutual Funds, Inc............................ 5,025,000 1.0 3,000,000
American Century World Mutual Funds, Inc....................... 947,500 * 400,000
Asset Allocation............................................... 269,900 * 269,900
AUSA Life Insurance Co.-TIM.................................... 1,256,209 * 1,256,209
Balanced Investment Growth Fund................................ 85,000 * 85,000
Bank of America N.A............................................ 1,766,877 * 1,766,877
Bessent Global Equity Master Fund.............................. 2,563,821 * 2,310,000
Broadsword Limited............................................. 16,100 * 16,100
Canadian Balanced Fund......................................... 706,625 * 706,625
Canadian Balanced GIF.......................................... 11,400 * 11,400
Canadian Equity Fund........................................... 549,800 * 549,800
Canadian Equity GIF............................................ 6,500 * 6,500
Chesapeake Partners International Ltd.......................... 1,925,000(1) * 704,515
Chesapeake Partners Institutional Fund Limited Partnership..... 1,925,000(2) * 31,762
Chesapeake Partners Limited Partnership........................ 1,925,000(3) * 1,188,723
Cisalpina/Putnam Global Balanced Fund.......................... 14,300 * 14,300
Cisalpina/Putnam Global Value.................................. 389,400 * 389,400
Cisalpina/Putnam USA Equity Fund............................... 89,400 * 89,400

Cisalpina/Putnam USA Value Fund................................ 63,000 * 63,000
Commonwealth of Massachusetts Pension Reserve Investment
Management Board(4).......................................... 35,821 * 35,821
Commonwealth of Puerto Rico State Ins. Corp.................... 7,600 * 7,600
Connecticut General Life Insurance Co.......................... 203,000 * 203,000
Curators Of The University Of Missouri(4)...................... 6,000 * 6,000
Diversified Investment Advisors, Inc........................... 185,100 * 185,100
EQ Advisors Trust-EQ/Putnam Investors Growth Fund.............. 62,500 * 62,500
Equitable Advisors Trust-FI Mid Cap(4)......................... 9,000 * 9,000
Evergreen Masters Fund......................................... 10,100 * 10,100
Fidelity Advisor Series I: Fidelity Advisor Asset Allocation
Fund(5)...................................................... 10,268 * 10,268
Fidelity Advisor Series I: Fidelity Advisor Balanced Fund(5)... 212,000 * 212,000
Fidelity Advisor Series I: Fidelity Advisor Dividend Growth
Fund(5)...................................................... 193,000 * 193,000
Fidelity Advisor Series I: Fidelity Advisor Dynamic Capital
Appreciation Fund(5)......................................... 47,000 * 47,000
Fidelity Advisor Series I: Fidelity Advisor Equity Growth
Fund(5)...................................................... 1,300,000 * 1,300,000
Fidelity Advisor Series I: Fidelity Advisor Growth & Income
Fund(5)...................................................... 240,000 * 240,000
Fidelity Advisor Series I: Fidelity Advisor Growth
Opportunities Fund(5)........................................ 1,143,000 * 1,143,000
Fidelity Advisor Series I: Fidelity Advisor Mid Cap Fund(5).... 249,000 * 249,000
Fidelity Advisor Series II: Fidelity Advisor High Income
Fund(5)...................................................... 3,012 * 3,012
Fidelity Advisor Series II: Fidelity Advisor High Yield Fund(5) 616,472 * 616,472
Fidelity Advisor Series VIII: Fidelity Advisor Global Equity
Fund(5)...................................................... 2,000 * 2,000
Fidelity American Opportunities Fund(5)........................ 5,000 * 5,000
Fidelity Beacon Street Trust: Fidelity Tax Managed Stock
Fund(5)...................................................... 10,000 * 10,000
Fidelity Canadian Asset Allocation Fund(5)..................... 428,000 * 428,000
Fidelity Canadian Balanced Fund(5)............................. 1,109 * 1,109
Fidelity Capital Trust: Fidelity Value Fund(5)................. 452,000 * 452,000

Fidelity Charles Street Trust: Fidelity Asset Manager(5)....... 1,249,574 * 1,249,574
Fidelity Charles Street Trust: Fidelity Asset Manager:
Aggressive(5)................................................ 41,558 * 41,558
Fidelity Charles Street Trust: Fidelity Asset Manager:
Growth(5).................................................... 477,959 * 477,959
Fidelity Charles Street Trust: Fidelity Asset Manager:
Income(5).................................................... 3,821 * 3,821
Fidelity Commonwealth Trust: Fidelity Mid-Cap Stock Fund(5).... 688,000 * 688,000
Fidelity Contrafund(5)......................................... 3,366,000 * 3,366,000
Fidelity Devonshire Trust: Fidelity Equity-Income Fund(5)...... 16,226 * 16,226
Fidelity Financial Trust: Fidelity Independence Fund(5)........ 670,000 * 670,000
Fidelity Fixed-Income Trust: Fidelity High Income Fund(5)...... 68,436 * 68,436
Fidelity Global Asset Allocation Fund(5)....................... 8,019 * 8,019
Fidelity Hastings Street Trust: Fidelity Fund(5)............... 1,339,000 * 1,339,000
Fidelity High Yield Collective Trust(5)........................ 17,619 * 17,619
Fidelity International Portfolio Fund(5)....................... 508,000 * 508,000
Fidelity Investment Trust: Fidelity Worldwide Fund(5).......... 85,000 * 85,000
Fidelity Magellan Fund(5)...................................... 8,621,300 1.7 8,621,300
Fidelity Puritan Trust: Fidelity Balanced Fund(5).............. 6,477 * 6,477
Fidelity Securities Fund: Fidelity Blue Chip Growth Fund(5).... 2,254,000 * 2,254,000
Fidelity Securities Fund: Fidelity Dividend Growth Fund(5)..... 1,404,000 * 1,404,000
Fidelity Summer Street Trust: Fidelity Capital & Income Fund(5) 590,630 * 590,630
Fidelity Trend Fund(5)......................................... 435,000 * 435,000
Fidelity Union Street Trust: Fidelity Export and Multinational
Fund(5)...................................................... 52,000 * 52,000
Fir Tree Institutional Value Fund, L.P......................... 9,459,417 1.8 6,300,260
Fir Tree Recovery Master Fund, L.P............................. 2,021,860 * 1,295,470
Fir Tree Value Fund, L.P....................................... 18,710,291 3.6 12,385,440
Fir Tree Value Partners LDC.................................... 1,825,550 * 1,235,600
Ford Motor Company Master Trust Fund(4)........................ 208,000 * 208,000
Idex Equity Fund............................................... 55,000 * 55,000
I.G. Global Equity Fund-U.S.(4)................................ 2,000 * 2,000
Illinois Wesleyan University................................... 5,700 * 5,700

ING Select Large Cap(4)........................................ 1,000 * 1,000
International Balanced Fund.................................... 100,000 * 100,000
International Investment Fund: Putnam Global Core Equity Fund.. 1,458,667 * 1,113,667
International Investment Funds: Putnam Global Core Equity A
Fund......................................................... 223,100 * 223,100
International Investment Fund-Putnam Global Growth Equity A
Fund......................................................... 63,000 * 6,800
International Investment Funds: Putnam Global Asset Allocation
Fund B-2..................................................... 32,900 * 32,900
International Investment Fund-Putnam US Core Growth Equity Fund 14,200 * 14,200
John Hancock Variable Series I-Health Sciences Fund............ 5,530 * 3,900
JNL Series Trust-JNL/Putnam Growth Series...................... 65,000 * 65,000
J.P. Morgan Securities Inc..................................... 1,148,808 * 1,136,108
LibertyView Funds, L.P......................................... 4,016,211 * 4,016,211
LibertyView Fund, LLC.......................................... 721,606 * 721,606
LibertyView Global Volatility Fund, L.P........................ 1,020,453 * 1,020,453
Lincoln National Global Asset Allocation Funds Inc............. 42,600 * 3,100
Manufacturers Investment Trust - Equity Trust Mid Cap Growth
Sub Portfolio(4)............................................. 59,000 * 59,000
Manufacturers Investment Trust - Equity Trust Mid Cap Value Sub
Portfolio(4)................................................. 71,000 * 71,000
Manufacturers Investment Trust................................. 542,100 * 542,100
Marathon Master Fund Ltd....................................... 1,473,405 * 1,473,405
Marathon Special Opportunity Fund Ltd.......................... 785,000 * 785,000
Marsh & McLennan Companies, Inc. U.S. Retirement Plan.......... 43,500 * 43,500
Mass Mutual Blue Chip Growth Fund(4)........................... 46,000 * 46,000
MCN Energy Group Employee Benefit Plans Master Trust........... 7,800 * 7,800
Michigan BAC Pension Fund...................................... 3,000 * 3,000
Nissay/Putnam Global Equity Fund............................... 20,800 * 20,300

Oddo Putnam U.S. Core Growth Fund.............................. 15,100 * 15,100
Oregon Community Foundation.................................... 3,400 * 3,400
OZF Credit Opportunities Master Fund, Ltd...................... 1,479,537 * 1,171,353
OZ Master Fund, Ltd............................................ 6,715,716 1.4 6,033,090
Parker-Hannifin Corporation.................................... 14,300 * 14,300
Penn Series Funds Inc Large Cap Value Fund..................... 46,700 * 46,700
Pension Investment Committee of General Motors for General
Motors Employees Domestic Group Pension Trust(4)............. 105,525 * 105,525
Pirelli Tire Corp Master Pension & Retirement Trust............ 4,200 * 4,200
Putnam Advisory Acct #13480.................................... 3,500 * 3,500
Putnam Asset Allocation Funds-Balanced Portfolio............... 415,322 * 88,300
Putnam Asset Allocation Funds-Conservative Portfolio........... 148,482 * 27,100
Putnam Asset Allocation Funds-Growth Portfolio................. 144,600 * 34,100
Putnam Balanced Retirement Fund................................ 58,900 * 58,900
Putnam Canadian Global Trust U.S. Equity Fund.................. 29,400 * 29,400
Putnam Canadian Global Trust Global Core Equity Fund........... 227,600 * 212,400
Putnam Capital Appreciation Fund............................... 1,923,200 * 518,700
Putnam Convertible Income-Growth Trust......................... 1,172,900 * 167,700
Putnam Convertible Opportunities & Income Trust................ 17,128 * 6,500
Putnam Core Growth Equity Fund, LLC............................ 60,400 * 60,400
Putnam Core Growth Trust....................................... 119,800 * 119,800
Putnam Equity Income Fund...................................... 315,100 * 315,100
Putnam Funds Trust-U.S. Core Fund.............................. 20,600 * 18,200
Putnam Global Core Equity Fund, LLC............................ 17,100 * 17,100
Putnam Global Equity Fund...................................... 1,033,800 * 1,033,300
Putnam Health Sciences Trust................................... 1,575,150 * 1,151,400
Putnam Investment Funds-Putnam Capital Opportunities Fund...... 1,649,800 * 455,500
Putnam Investment Funds-Putnam Global Growth And Income Fund... 117,000 * 117,000

Putnam Investors Fund.......................................... 1,956,867 * 1,956,867
Putnam Large Cap Value Trust................................... 7,700 * 7,700
Putnam Tax Smart Funds Trust-Putnam Tax Smart Equity Fund...... 227,000 * 227,000
Putnam Tobacco-Free Core Growth Equity Fund, LLC............... 9,700 * 9,700
Putnam Variable Trust-Putnam VT Capital Appreciation Fund...... 12,361 * 3,400
Putnam Variable Trust-Putnam VT The George Putnam Fund of
Boston....................................................... 25,500 * 25,500
Putnam Variable Trust-Putnam VT Global Asset Allocation Fund... 79,100 * 6,600
Putnam Variable Trust-Putnam VT Investors Fund................. 182,400 * 182,400
Putnam Voyager Fund............................................ 5,678,533 1.1 5,678,533
Putnam Variable Trust-Putnam VT Health Sciences Fund........... 121,750 * 88,700
Putnam Variable Trust-Putnam VT Voyager Fund................... 1,204,900 * 1,204,900
Putnam World Trust-Putnam Global Core Equity Fund.............. 17,600 * 17,600
Putnam World Trust-Putnam Growth Equity Fund................... 19,200 * 19,200
Putnam World Trust II-Putnam Global Small-Cap Core Equity Fund
(Dublin)..................................................... 10,883 * 2,533
Putnam World Trust II-Putnam Global Value Equity Fund (Dublin). 1,900 * 1,900
Putnam World Trust II-Putnam Health Sciences Equity Fund
(Dublin)..................................................... 585 * 400
Putnam World Trust II-Putnam Investors (U.S. Growth Equity)
Fund (Dublin)................................................ 17,400 * 17,400
Putnam World Trust II-The George Putnam (U.S. Equity and Bond)
Fund......................................................... 2,300 * 2,300
Quantum Partners Bessent Global................................ 398,979 * 358,000
Roman Catholic Archbishop of Boston............................ 15,600 * 15,600
Salomon Smith Barney Inc....................................... 4,681,221 * 4,681,221
Satellite Fund I, L.P.......................................... 76,901 * 51,267
Satellite Fund II, L.P......................................... 1,710,826 * 1,140,551
Satellite Overseas Fund, Ltd................................... 2,760,192 * 1,840,128
Satellite Overseas Fund III, Ltd............................... 708,013 * 472,009
Sceptre Investment Counsel Limited-Sceptre Global Equity Fund.. 39,200 * 39,200
Sceptre Investment Counsel Limited-Sceptre Foreign Pool Fund... 687,100 * 687,100
Season Series Trust-Asset Allocation: Diversified Growth
Portfolio.................................................... 10,500 * 10,500
Segregated Fund "1"............................................ 1,400 * 1,400

Segregated Fund "A"............................................ 6,200 * 6,200
Society For The Preservation Of New England Antiquities........ 4,900 * 4,900
Stichting Pensioenfonds Voor De Woningcorporaties.............. 23,600 * 23,600
Strategic Global Fund: Global Asset Allocation (Putnam) Fund... 9,600 * 9,600
SunAmerica Series Trust-Putnam Growth Portfolio................ 111,300 * 111,300
TALIAC-Corporate............................................... 625,668 * 625,668
TALIAC-Separate Account TBAL................................... 1,225,400 * 1,225,400
TALIAC-Separate Account TEF.................................... 7,000,000 1.4 7,000,000
The George Putnam Fund of Boston............................... 295,900 * 295,900
The Robert Wood Foundation..................................... 15,100 * 15,100
TOLIC-Corporate................................................ 3,539,433 * 3,539,433
TOLIC-Separate Account A....................................... 5,500,000 1.1 5,500,000
TOLIC-Separate Account B....................................... 540,000 * 540,000
Transamerica Aggressive Growth Fund............................ 426,000 * 426,000
Transamerica Growsafe US Bal USD............................... 86,800 * 86,800
Transamerica Growsafe US Eq Fd 2............................... 9,354 * 9,354
Transamerica Growsafe US Eq USD................................ 320,000 * 320,000
Transamerica Premier Agg. Growth............................... 720,838 * 720,838
Transamerica Premier Balanced.................................. 494,000 * 494,000
Transamerica Premier Equity.................................... 950,000 * 950,000
Transamerica Premier Value..................................... 112,400 * 112,400
Transamerica Value Fund........................................ 675,500 * 675,500
TVIF-Growth Portfolio.......................................... 1,300,000 * 1,300,000
University of Missouri Retirement, Disability and Death Benefit
Trust Fund(4)................................................ 28,000 * 28,000
US Chamber of Commerce Retirement Income Plan.................. 4,700 * 4,700
Variable Insurance Products Fund: Equity-Income Portfolio(5)... 8,323 * 8,323
Variable Insurance Products Fund: Growth Portfolio(5).......... 1,450,000 * 1,450,000
Variable Insurance Products Fund III: Balanced Portfolio(5).... 30,392 * 30,392
Variable Insurance Products Fund II: Contrafund Portfolio(5)... 849,000 * 849,000

Variable Insurance Products Fund III: Dynamic Capital
Appreciation Portfolio(5).................................... 1,000 * 1,000
Variable Insurance Products Fund III: Growth Opportunities
Portfolio(5)................................................. 108,000 * 108,000
Variable Insurance Products Fund III: Mid Cap Portfolio(5)..... 98,000 * 98,000
Wisconsin Physicians Service Ins Corp.......................... 3,300 * 3,300
Woolworths Group Superannuation Scheme Pty Limited............. 30,300 * 26,700

---------------
(1) Beneficial ownership includes shares held by Chesapeake Partners Limited
Partnership and Chesapeake Partners Institutional Fund Limited Partnership.
(2) Beneficial ownership includes shares held by Chesapeake Partners Limited
Partnership and Chesapeake Partners International Ltd.
(3) Beneficial ownership includes shares held by Cheaspeake Partners
International Limited and Chesapeake Partners Institutional Fund Limited
Partnership.
(4) Shares indicated as owned by such entity are owned directly by various
private investment accounts, primarily employee benefit plans for which
Fidelity Management Trust Company ("FMTC") serves as trustee or managing
agent. FMTC is a wholly-owned subsidiary of FMR (as defined in footnote 5)
and a bank as defined in Section 3(a)(6) of the Securities Exchange Act of
1934, as amended. These holdings are as of July 9, 2001.
(5) The entity is either an investment company or a portfolio of an investment
company registered under Section 8 of the Investment Company Act of 1940,
as amended, or a private investment account advised by Fidelity Management
& Research Company ("FMR Co."). FMR Co. is a Massachusetts corporation and
an investment advisor registered under Section 203 of the Investment
Advisers Act of 1940, as amended, and provides investment advisory services
to each of such Fidelity entities identified above, and to other registered
investment companes and to certain other funds which are generally offered
to a limited group of investors. FMR Co. is a wholly-owned subsidiry of FMR
Corp. ("FMR"), a Massachusetts corporation. These holdings are as of July
9, 2001.

PLAN OF DISTRIBUTION

The selling stockholders, or their pledgees, donees, transferees, or any of
their successors in interest selling shares received from a named selling
stockholder as a gift, partnership distribution or other
non-sale-related transfer after the date of this prospectus (all of whom may
be selling stockholders), may sell the shares of common stock from time to
time on any stock exchange or automated interdealer quotation system on which
the common stock is listed, in the over-the-counter market, in privately
negotiated transactions or otherwise, at fixed prices that may be changed, at
market prices prevailing at the time of sale, at prices related to prevailing
market prices or at prices otherwise negotiated. The selling stockholders may
sell the shares of common stock by one or more of the following methods,
without limitation:

(a) block trades in which the broker or dealer so engaged will attempt
to sell the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction;

(b) purchases by a broker or dealer as principal and resale by the
broker or dealer for its own account pursuant to this prospectus;

(d) ordinary brokerage transactions and transactions in which the broker
solicits purchases;

(e) privately negotiated transactions;

(f) short sales;

(g) through the writing of options on the shares, whether or not the
options are listed on an options exchange;

(h) through the distribution of the shares by any selling stockholder to
its partners, members or stockholders;

(i) one or more underwritten offerings on a firm commitment or best
efforts basis; and

(j) any combination of any of these methods of sale.

The selling stockholder may also transfer the shares by gift.

We do not know of any arrangements by the selling stockholders for the sale
of any of the shares.

The selling stockholders may engage brokers and dealers, and any brokers or
dealers may arrange for other brokers or dealers to participate in effecting
sales of the shares. These brokers, dealers or underwriters may act as
principals, or as an agent of a selling stockholder. Broker-dealers may agree
with a selling stockholder to sell a specified number of the shares at a
stipulated price per share. If a broker-dealer is unable to sell shares acting
as agent for a selling stockholder, it may purchase as principal any unsold
shares at the stipulated price. Broker-dealers that acquire shares as
principals may thereafter resell the shares from time to time in transactions
on any stock exchange or automated interdealer quotation system on which the
shares are then listed, at prices and on terms then prevailing at the time of
sale, at prices related to the then-current market price or in negotiated
transactions. Broker-dealers may use block transactions and sales to and
through broker-dealers, including transactions of the nature described above.
The selling stockholders may also sell the shares in accordance with Rule 144
under the Securities Act, rather than pursuant to this prospectus, regardless
of whether the shares are covered by this prospectus.

From time to time, one or more of the selling stockholders may pledge,
hypothecate or grant a security interest in some or all of the shares owned by
them. The pledgees, secured parties or persons to whom the shares have been
hypothecated will, upon foreclosure in the event of default, be deemed to be
selling stockholders. The number of a selling stockholder's shares offered
under this prospectus will decrease as and when it takes such actions. The
plan of distribution for the selling stockholder's shares will otherwise
remain unchanged. In addition, a selling stockholder may, from time to time,
sell the shares short, and, in those instances, this prospectus may be
delivered in connection with the short sales and the shares offered under this
prospectus may be used to cover short sales.

To the extent required under the Securities Act, the aggregate amount of
selling stockholders' shares being offered and the terms of the offering, the
names of any agents, brokers, dealers or underwriters and any applicable
commission with respect to a particular offer will be set forth in an
accompanying prospectus supplement. Any underwriters, dealers, brokers or
agents participating in the distribution of the shares may receive
compensation in the form of underwriting discounts, concessions, commissions
or fees from a selling stockholder and/or purchasers of selling stockholders'
shares of common stock, for whom they may act, which compensation as to a
particular broker-dealer might be in excess of customary commissions.

The selling stockholders and any underwriters, broker, dealers or agents
that participate in the distribution of the shares may be deemed to be
"underwriters" within the meaning of the Securities Act, and any discounts,
concessions, commissions or fees received by them and any profit on the resale
of the shares sold by them may be deemed to be underwriting discounts and
commissions.

A selling stockholder may enter into hedging transactions with broker-
dealers and the broker-dealers may engage in short sales of the shares in the
course of hedging the positions they assume with the selling stockholder,
including, without limitation, in connection with distributions of the shares
by those broker-dealers. A selling stockholder may enter into option or other
transactions with one or more broker-dealers that involve the delivery of the
shares offered hereby to the broker-dealers, who may then resell or otherwise
transfer those shares. A selling stockholder may also loan or pledge the
shares offered hereby to a broker-dealer and the broker-dealer may sell the
shares offered hereby so loaned or upon a default may sell or otherwise
transfer the pledged shares offered hereby.

The selling stockholder and other persons participating in the sale or
distribution of the shares will be subject to applicable provisions on the
Securities Exchange Act, as amended, and the rules and regulations thereunder,
including Regulation M. This regulation may limit the timing of purchases and
sales of any of the shares by the selling stockholders and any other person.
The anti-manipulation rules under the Securities Exchange Act may apply to
sales of shares in the market and to the activities of the selling
stockholders and their affiliates. Furthermore, Regulation M may restrict the
ability of any person engaged in the distribution of the shares to engage in
market-making activities with respect to the particular shares being
distributed for a period of up to five business days before the distribution.
These restrictions may affect the marketability of the shares and the ability
of any person or entity to engage in market-making activities with respect to
the shares.

In order to comply with the securities laws of certain states, if
applicable, the shares must be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
shares may not be sold unless thay have been registered or qualified for sale
in the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.

We have agreed to indemnify in certain circumstances the selling
stockholders and any brokers, dealers and agents who may be deemed to be
underwriters, if any, of the shares covered by the registration statement,
against certain liabilities, including liabilities under the Securities Act.
The selling stockholders have agreed to indemnify us in certain circumstances
against certain liabilities, including liabilities under the Securities Act.

The shares of common stock offered hereby originally issued to the selling
stockholders pursuant to an exemption from the registration requirements of
the Securities Act. We agreed to register the shares under the Securities Act
and to keep the registration statement of which this prospectus is a part
effective until the earlier of the date on which the selling stockholders have
sold all of the shares, the shares covered hereby are no longer outstanding or
the holders are entitled to sell their shares under Rule 144 under the
Securities Act. We have agreed to pay certain expenses in connection with this
offering, including, in certain circumstances, the fees and expenses of
counsel to the selling stockholders, but not including underwriting discounts,
concessions, commissions or fees of the selling stockholders.

We will not receive any proceeds from sales of any shares by the selling
stockholders.

We can not assure you that the selling stockholders will sell all or any
portion of the shares offered hereby.

We may suspend the use of this prospectus by the selling stockholder under
certain circumstances.

Any common stock sold by a selling stockholder pursuant to a prospectus
supplement will be listed on the NYSE, subject to official notice of issuance.

LEGAL MATTERS

Certain legal matters as to the validity of the shares offered by this
prospectus will be passed upon for us by Skadden, Arps, Slate, Meagher & Flom
LLP, New York, New York. Nancy A. Lieberman, a partner of Skadden, Arps,
Slate, Meagher & Flom LLP, is a director and stockholder of Rite Aid.

EXPERTS

The consolidated financial statements and related financial schedule of the
Company and its consolidated subsidiaries, except PCS Holding Corporation and
subsidiaries which has been included in discontinued operations in such
consolidated financial statements, as of March 3, 2001 and February 26, 2000,
and for each of the three years in the period ended March 3, 2001 incorporated
in this prospectus by reference from our Annual Report on Form 10-K for the year
ended March 3, 2001 have been audited by Deloitte & Touche LLP as stated in
their reports, which are incorporated by reference herein. The financial
statements of PCS Holding Corporation and subsidiaries for the year ended
February 26, 2000 and the thirty-six days ended February 27, 1999, not
separately included herein or elsewhere in the registration statement have been
audited by Ernst & Young LLP, as stated in their report, which is incorporated
by reference herein. Such financial statements and related financial statement
schedule of the Company and its consolidated subsidiaries are incorporated by
reference herein in reliance upon the respective reports of such firms given
upon their authority as experts in accounting and auditing. All of the foregoing
firms are independent auditors.

RITE AID CORPORATION

130,516,017 Shares

Common Stock

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, to be paid in connection with the sale
of the common stock being registered, all of which will be paid by the
registrant. All amounts are estimates except the registration fee.

SEC registration fee ......................................... $246,255.39
Accounting fees and expenses ................................ $ 50,000.00
Legal fees and expenses ...................................... $150,000.00
Printing fees ................................................ $ 75,000.00
Miscellaneous ................................................ $ 25,000.00
-----------
Total ........................................................ $546,255.39
===========

Item 15. Indemnification of Directors and Officers.

Under the Section 145 of the Delaware General Corporation Law ("DGCL"), a
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation) by reason of the fact
that he or she is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding (i) if such person acted in good faith and in a manner that person
reasonably believed to be in or not opposed to the best interests of the
corporation and (ii) with respect to any criminal action or proceeding, if he
or she had no reasonable cause to believe such conduct was unlawful. In
actions brought by or in the right of the corporation, a corporation may
indemnify such person against expenses (including attorneys' fees) actually
and reasonably incurred by such person in connection with the defense or
settlement of such action or suit if such person acted in good faith and in a
manner that person reasonable believed to be in or not opposed to the best
interests of the corporation, except that no indemnification may be made in
respect of any claim, issue or matter as to which that person shall have been
adjudged to be liable to the corporation unless and only to the extent that
the Court of Chancery of the State of Delaware or the court in which such
action or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all circumstances of the case, such
person in fairly and reasonable entitled to indemnification for such expenses
which the Court of Chancery or other such court shall deem proper. To the
extent that such person has been successful on the merits or otherwise in
defending any such action, suit or proceeding referred to above or any claim,
issue or matter therein, he or she is entitled to indemnification for expenses
(including attorneys' fees) actually and reasonable incurred by such person in
connection therewith. The indemnification and advancement of expenses provided
for or granted pursuant to Section 145 is not exclusive of any other rights of
indemnification or advancement of expenses to which those seeking
indemnification or advancement of expenses may be entitled, and a corporation
may purchase and maintain insurance against liabilities asserted against any
former or current, director, officer, employee or agent of the corporation, or
a person who is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, whether or not the power to
indemnify is provided by the statute.

Article Tenth of the Company's Certificate of Incorporated and Article VII
of the Company's By-laws provide for the indemnification of its directors and
officers as authorized by Section 145 of the DGCL.

The directors and officers of the Company and its subsidiaries are insured
(subject to certain exceptions and deductions) against liabilities which they
may incur in their capacity as such including liabilities under the Securities
Act, under liability insurance policies carried by the Company.

II-1

Item 16.

Exhibits

Exhibit Incorporation by
Numbers Description Reference to
------- ----------- ------------

4.1 Supplemental Indenture, dated as of February 3, 2000, between Rite Aid Exhibit 4.2 to Form 8-K filed on February 7,
Corporation and Harris Trust and Savings Bank to the Indenture, dated 2000
September 10, 1997, between Rite Aid Corporation and Harris Trust and
Savings Bank

4.2 Supplemental Indenture, dated as of February 3, 2000, between Rite Aid Exhibit 4.3 to Form 8-K filed on February 7,
Corporation and Harris Trust and Savings Bank, to the Indenture, dated 2000
September 22, 1998, between Rite Aid Corporation and Harris Trust and
Savings Bank

4.3 Supplemental Indenture, dated as of February 3, 2000, between Rite Aid Exhibit 4.4 to Form 8-K filed on February 7,
Corporation and Harris Trust and Savings Bank to the Indenture, dated 2000
December 21, 1998, between Rite Aid Corporation and Harris Trust and
Savings Bank

4.4 Indenture, dated as of June 14, 2000, among Rite Aid Corporation, as Exhibit 4.1 to Form 8-K filed on
Issuer, each of the Subsidiary Guarantors named therein and State June 21, 2000
Street Bank and Trust Company, as Trustee

4.5 Exchange and Registration Rights Agreement, dated as of June 14, 2000, Exhibit 4.2 to Form 8-K filed on
by and among Rite Aid Corporation, State Street Bank and Trust Company June 21, 2000
and the Holders of the 10.50% Senior Secured Notes due 2002

4.6 Registration Rights Agreement, dated as of June 14, 2000, by and among Exhibit 4.3 to Form 8-K filed on
Rite Aid Corporation and the Lenders listed therein June 21, 2000

4.7 Indenture, dated as of June 27, 2001, between Rite Aid Corporation, as Exhibit 4.7 to Registration Statement
issuer and State Street Bank and Trust Company, as trustee, related to on Form S-1, File No. 333-64950, filed
the Company's 12.50% Senior Secured Notes due 2006. on July 12, 2001

II-2

Exhibit Incorporation by
Numbers Description Reference to
------- ----------- ------------

4.8 Indenture, dated as of June 27, 2001 between Rite Aid Corporation, as Exhibit 4.8 to Registration Statement on
issuer and BNY Midwest Trust Company, as trustee, related to the Form S-1, File No. 333-64950, filed on
Company's 11 1/4% Senior Notes due 2008. July 12, 2001

4.9 Exchange and Registration Rights Agreement, dated as of June 27, 2001, Exhibit 4.9 to Registration Statement on
between Rite Aid Corporation and Salomon Smith Barney Inc., Credit Form S-1, File No. 333-64950, filed on
Suisse First Boston Corporation, J.P. Morgan Securities Inc. and Fleet July 12, 2001
Securities, Inc., as initial purchasers, for the benefit of the holders
of the Company's 11 1/4% Senior Notes due 2008.

5 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP Exhibit 5 to Registration Statement on
Corporation and Mary F. Sammons, dated as of May 7, 2001 Form S-1, File No. 333-64950, filed on
July 23, 2001

II-3

Exhibit Incorporation by
Numbers Description Reference to
------- ----------- ------------

23.1 Independent Auditors' Consent Filed herewith

23.2 Independent Auditors' Consent Filed herewith

23.3 Consent of Skadden, Arps, Slate, Meagher & Flom LLP Exhibit 5 to Registration Statement
on Form S-1, File No. 333-64950,
filed on July 23, 2001

24 Power of Attorney Signature Pages of Registration Statement
on Form S-1, File No. 333-64950,
filed on July 23, 2001

II-4

Item 17. Undertakings.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.

The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement;

(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.

II-5

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Camp Hill, State of
Pennsylvania, on October 31, 2001.

RITE AID CORPORATION

By: /s/ ELLIOT S. GERSON
----------------------------------------------
Elliot S. Gerson
Senior Executive Vice President
and General Counsel

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.

Signature Title Date
--------- ------------ ----

/s/ ROBERT G. MILLER* Chairman of the Board and October 31, 2001
------------------------------------ Chief Executive Officer
Robert G. Miller

/s/ MARY F. SAMMONS* President, Chief Operating October 31, 2001
------------------------------------ Officer and Director
Mary F. Sammons

/s/ JOHN T. STANDLEY* Chief Financial Officer and Senior October 31, 2001
------------------------------------ Executive Vice President
John T. Standley

/s/ CHRISTOPHER HALL* Executive Vice President, October 31, 2001
------------------------------------ Finance and Accounting
Christopher Hall

II-6

Signature Title Date
--------- ------------ ----

/s/ KEVIN J. TWOMEY* Chief Accounting Officer and October 31, 2001
------------------------------------ Senior Vice President
Kevin J. Twomey

/s/ WILLIAM J. BRATTON* Director October 31, 2001
------------------------------------
William J. Bratton

/s/ ALFRED M. GLEASON* Director October 31, 2001
------------------------------------
Alfred M. Gleason

/s/ LEONARD I. GREEN* Director October 31, 2001
------------------------------------
Leonard I. Green

/s/ NANCY A. LIEBERMAN* Director October 31, 2001
------------------------------------
Nancy A. Lieberman

/s/ STUART M. SLOAN* Director Octoebr 31, 2001
------------------------------------
Stuart M. Sloan

/s/ JONATHAN D. SOKOLOFF* Director October 31, 2001
------------------------------------
Jonathan D. Sokoloff

/s/ LEONARD N. STERN* Director October 31, 2001
------------------------------------
Leonard N. Stern

* /s/ Elliot S. Gerson
-------------------------------------
Elliot S. Gerson
Power of Attorney

II-7

EXHIBIT INDEX

Exhibit Incorporation by
Numbers Description Reference to
------- ----------- ------------

4.6 Registration Rights Agreement, dated as of June 14, 2000, by and among Exhibit 4.3 to Form 8-K filed on
Rite Aid Corporation and the Lenders listed therein June 21, 2000

Exhibit Incorporation by
Numbers Description Reference to
------- ----------- ------------

5 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP Exhibit 5 to Registration Statement on
Form S-1, File No. 333-64950, filed on
July 23, 2001

Exhibit Incorporation by
Numbers Description Reference to
------- ----------- ------------

23.1 Independent Auditors' Consent Filed herewith

23.2 Independent Auditors' Consent Filed herewith

23.3 Consent of Skadden, Arps, Slate, Meagher & Flom LLP Exhibit 5 to Registration Statement
on Form S-1, File No. 333-64950,
filed on July 23, 2001

24 Power of Attorney Signature Pages of Registration Statement
on Form S-1, File No. 333-64950,
filed on July 23, 2001