<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) SEPTEMBER 30, 1994
------------------
THE PENN TRAFFIC COMPANY
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
DELAWARE 1-9930 25-0716800
- - --------------------------------------------------------------------------------
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
1200 STATE FAIR BOULEVARD, SYRACUSE, NEW YORK 13209
- - --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (315) 453-7284
--------------
- - --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
1
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ITEM 2 ACQUISITION OR DISPOSITION OF ASSETS
On September 30, 1994, the Company entered into an agreement with American
Stores Company's subsidiaries, Acme Markets, Inc., American Stores Properties,
Inc. and American Stores Realty Corporation to acquire 45 supermarkets
("Acquired Supermarkets") currently operating under the Acme trade name in
north central and northeastern Pennsylvania and south central New York. The
purchase price for the stores is approximately $75 million plus the cost of
inventory (estimated to be approximately $19 million).
The 45 stores had aggregate revenues of approximately $358 million for the
year ended January 29, 1994. After an initial transition period, the
integration of a majority of these stores into the Company is expected to add
approximately 700,000 to 800,000 retail square feet to Penn Traffic's existing
operations and to generate annual revenues of approximately $260 million. During
the next 24 to 30 months, Penn Traffic plans to renovate or enlarge most of the
acquired stores at a total cost of $50 million.
The Company expects the acquisition, which is subject to various customary
conditions, to close by calendar year end.
2
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The following financial statements, pro forma financial information and
exhibits are filed as part of this report.
ITEM 7 FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
The following financial information for the Acme Markets, Inc. supermarkets
to be acquired by The Penn Traffic Company is included in this report as
follows:
-Report of Independent Auditors
-Statements of Assets and Liabilities (January 29, 1994 and January 30,
1993)
-Statements of Operating Revenue and Expenses (for the years ended
January 29, 1994 and January 30, 1993)
-Notes to Financial Statements
-Statements of Assets and Liabilities (Unaudited)
(July 30, 1994 and July 31, 1993)
-Statements of Operating Revenue and Expenses (Unaudited)
(for the 26 weeks ended July 30, 1994 and July 31, 1993)
-Notes to Financial Statements (Unaudited)
Combined unaudited pro forma financial information for The Penn Traffic
Company is included in this report as follows:
-Introduction
-Pro Forma Condensed Consolidated Balance Sheet - Unaudited (July 30, 1994)
-Pro Forma Consolidated Statement of Operations - Unaudited (for the
26 weeks ended July 31, 1993)
-Pro Forma Consolidated Statement of Operations - Unaudited (for the
26 weeks ended July 30, 1994)
-Pro Forma Consolidated Statement of Operations - Unaudited (for the
52 weeks ended January 29, 1994)
-Notes to the Pro Forma Condensed Consolidated Balance Sheet
-Notes to the Pro Forma Consolidated Statements of Operations
3
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ITEM 7(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
Financial Statements
Acme Markets, Inc.
Supermarkets to be Acquired by
The Penn Traffic Company
YEARS ENDED JANUARY 29, 1994 AND
JANUARY 30, 1993
WITH REPORT OF INDEPENDENT AUDITORS
4
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Acme Markets, Inc.
Supermarkets to be Acquired by
The Penn Traffic Company
Financial Statements
Years ended January 29, 1994 and January 30, 1993
Contents
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . 1
Audited Financial Statements
Statements of Assets and Liabilities . . . . . . . . . . . . . . . . . . . 2
Statements of Operating Revenue and Expenses . . . . . . . . . . . . . . . 3
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 4
5
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Report of Independent Auditors
Board of Directors
Acme Markets, Inc.
We have audited the accompanying statements of assets and liabilities of Acme
Markets, Inc. Supermarkets to be Acquired by The Penn Traffic Company (the
"Acquired Supermarkets") as of January 29, 1994 and January 30, 1993, and the
related statements of operating revenue and expenses for each of the two fiscal
years then ended. These financial statements are the responsibility of the
management of Acme Markets, Inc. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The accompanying statements of assets and liabilities and operating revenue and
expenses were prepared in connection with the Asset Purchase Agreement by and
between Acme Markets, Inc. and The Penn Traffic Company described in the Notes
to Financial Statements, and are not intended to be complete representations of
the operating revenue and expenses or the assets and liabilities of the Acquired
Supermarkets.
In our opinion, the financial statements referred to above present fairly the
assets and liabilities of the Acquired Supermarkets at January 29, 1994 and
January 30, 1993, and their operating revenue and expenses for each of the two
fiscal years then ended, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Salt Lake City, Utah
October 7, 1994
6
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Acme Markets, Inc. Supermarkets to be
Acquired by The Penn Traffic Company
Statements of Assets and Liabilities
<TABLE>
<CAPTION>
January 29, January 30,
1994 1993
-------------------------
(IN THOUSANDS)
<S> <C> <C>
Assets
Cash $ 651 $ 527
Inventories 18,743 21,013
Prepaid expenses 175 178
Property, plant and equipment:
Land 156 156
Buildings 2,124 2,124
Equipment, fixtures and leasehold improvements 49,998 42,499
-----------------------
52,278 44,779
Less accumulated depreciation and amortization 36,716 33,410
-----------------------
Net property, plant and equipment 15,562 11,369
Property under capital leases, less accumulated
amortization of $3,710 at January 29, 1994
and $3,476 at January 30, 1993 1,031 1,266
-----------------------
36,162 34,353
Liabilities
Obligations under capital leases 1,979 2,325
-----------------------
Net assets $ 34,183 $ 32,028
-----------------------
-----------------------
</TABLE>
SEE ACCOMPANYING NOTES.
7
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Acme Markets, Inc. Supermarkets to be
Acquired by The Penn Traffic Company
Statements of Operating Revenue and Expenses
<TABLE>
<CAPTION>
Year ended
January 29, January 30,
1994 1993
-------------------------
(IN THOUSANDS)
<S> <C> <C>
Sales $ 357,641 $ 361,186
Cost of merchandise sold, including warehousing
and transportation expenses 280,972 282,123
-----------------------
Gross profit 76,669 79,063
Operating expenses:
Salaries, employee benefits and other 60,531 58,417
Depreciation and amortization 3,538 2,577
Interest on capital leases 244 281
-----------------------
Total operating expenses 64,313 61,275
-----------------------
Store operating income $ 12,356 $ 17,788
-----------------------
-----------------------
</TABLE>
SEE ACCOMPANYING NOTES.
8
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Acme Markets, Inc. Supermarkets to be
Acquired by The Penn Traffic Company
Notes to Financial Statements
January 29, 1994
1. Basis of Presentation
On September 30, 1994, Acme Markets, Inc. and related entities entered into an
agreement (Asset Purchase Agreement) with The Penn Traffic Company to sell 45
grocery stores located in northeastern Pennsylvania and southern upstate New
York hereinafter referred to as the Acquired Supermarkets. Acme Markets, Inc.
is an indirectly wholly-owned subsidiary of American Stores Company. Acme
Markets, Inc. operated supermarkets in certain buildings which, in addition to
the related land, were owned or leased by related entities. For purposes of
these statements, cost, accumulated depreciation and depreciation expense or
rent expense related to these properties, as recorded by the related entities,
have been reflected as if the property were owned or leased by the Acquired
Supermarkets. The fiscal year of the Acquired Supermarkets ends on the Saturday
nearest to January 31.
The statements of operating revenue and expenses presented herein differ from a
complete statement of operations in that certain allocations of indirect
charges, including, but not limited to, income tax expense, interest expense and
overhead costs incurred by the American Stores Company and Acme Markets, Inc.
have been excluded (see unaudited Note 5). Accordingly, the statements of
operating revenue and expenses do not include any overhead expenses related to
corporate, region and district offices.
Certain amounts reflected in the accompanying statements, including, but not
limited to, cost of merchandise sold, advertising, occupancy, operations and
other store expenses include allocated charges from related entities which are
based on sales, usage, and/or wages. These allocated charges amounted to
$6,341,000 in fiscal 1993 and $5,311,000 in fiscal 1992. Such allocated costs
included in the accompanying statements are not representative of the actual
results that would have resulted had the Acquired Supermarkets been operated as
a stand-alone entity. The Statements of Assets and Liabilities differ from a
complete balance sheet in that only those assets to be acquired and liabilities
assumed in connection with the Asset Purchase Agreement are included.
9
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Acme Markets, Inc. Supermarkets to be
Acquired by The Penn Traffic Company
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies
Inventories
Inventories are stated at the lower of cost or market. The FIFO (first-in,
first-out) or average cost methods are used to determine the cost of the
inventories.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation and amortization
charged to operations for financial statement purposes, including amortization
of property under capital leases, are computed using the straight-line method
over the estimated useful life of the asset, or over the remaining lease term if
shorter.
3. Leases
Certain stores are leased from unrelated third parties. Remaining initial lease
terms range from one to five years not including renewal options, and may
provide for contingent rent based on sales volume in excess of specified levels.
These additional rentals amounted to $256,000 in fiscal 1993 and $247,000 in
fiscal 1992.
The summary below shows the aggregate future minimum rent commitments as of
January 29, 1994 for both operating and capital leases.
<TABLE>
<CAPTION>
Operating Capital
Fiscal Year Leases Leases
-------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
1994 $ 1,292 $ 608
1995 1,060 574
1996 831 567
1997 648 460
1998 287 311
Thereafter 111 205
-----------------------
Total minimum rental commitments $ 4,229 2,725
---------
---------
Less amount representing interest 598
Less executory costs (such as taxes,
insurance, and maintenance) 148
---------
Obligations under capital leases $ 1,979
---------
---------
</TABLE>
10
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Acme Markets, Inc. Supermarkets to be
Acquired by The Penn Traffic Company
Notes to Financial Statements (continued)
3. Leases (continued)
Rent expense was $1,686,000 for fiscal 1993 and $1,646,000 for fiscal 1992.
4. Pensions
Substantially all employees of the Acquired Supermarkets are covered under
union-sponsored defined benefit multiemployer plans, contributions to which are
made in accordance with negotiated labor contracts. The passage of the
Multiemployer Pension Plan Amendments Act of 1980 (the "Act") may, under certain
circumstances, cause the Acquired Supermarkets to become subject to liabilities
in excess of contributions made under collective bargaining agreements.
Generally, liabilities are contingent upon the termination, withdrawal, or
partial withdrawal from the plans. Acme Markets, Inc. has not undertaken to
terminate, withdraw, or partially withdraw from any of these plans that could
result in a significant liability. Under the Act, liabilities would be based
upon employers' proportional share of each plan's unfunded vested benefits. The
Acquired Supermarkets contributed approximately $1,380,000 in 1993 and
$1,379,000 in 1992 to these plans.
5. Corporate, Region and District Overhead Allocations (Unaudited)
Various administrative and operational services to the Acquired Supermarkets are
provided directly by Acme Markets, Inc. or related entities. These
administrative services represent non-store functions including, but not limited
to, operational supervision, legal assistance, employee benefit administration,
human resources, treasury, accounting, audit, tax, real estate, buying,
information systems and management training. The costs are allocated based on
usage, wages, and/or sales, and are not necessarily indicative of costs that
would be incurred to run a stand-alone company. The allocations to the Acquired
Supermarkets for fiscal 1993 and 1992 were $6,279,000 and $6,860,000,
respectively. As discussed in the Basis of Presentation footnote above, none of
these costs are included in the statements of operating revenue and expenses.
11
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Unaudited Financial Statements
Acme Markets, Inc.
Supermarkets to be Acquired by
The Penn Traffic Company
TWENTY-SIX WEEKS ENDED JULY 30, 1994
AND JULY 31, 1993
12
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Acme Markets, Inc. Supermarkets to be
Acquired by The Penn Traffic Company
Unaudited Financial Statements
Twenty-six weeks ended July 30, 1994 and July 31, 1993
Contents
Statements of Assets and Liabilities (Unaudited) . . . . . . . . . . . . .1
Statements of Operating Revenue and Expenses (Unaudited) . . . . . . . . .2
Notes to Financial Statements (Unaudited). . . . . . . . . . . . . . . . .3
13
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Acme Markets, Inc. Supermarkets to be
Acquired by The Penn Traffic Company
Statements of Assets and Liabilities (Unaudited)
<TABLE>
<CAPTION>
July 30, July 31,
1994 1993
-----------------------
(IN THOUSANDS)
<S> <C> <C>
Assets
Cash $ 638 $ 632
Inventories 18,588 19,230
Prepaid expenses 230 367
Property, plant and equipment:
Land 156 156
Buildings 2,124 2,123
Equipment, fixtures and leasehold improvements 51,302 45,764
-----------------------
53,582 48,043
Less accumulated depreciation and amortization 38,111 34,917
-----------------------
Net property, plant and equipment 15,471 13,126
Property under capital leases, less accumulated
amortization of $3,826 at July 30, 1994
and $3,593 at July 31, 1993 915 1,148
-----------------------
35,842 34,503
Liabilities
Obligations under capital leases 1,791 2,157
-----------------------
Net assets $ 34,051 $ 32,346
-----------------------
-----------------------
</TABLE>
SEE ACCOMPANYING NOTES.
14
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Acme Markets, Inc. Supermarkets to be
Acquired by The Penn Traffic Company
Statements of Operating Revenue and Expenses (Unaudited)
<TABLE>
<CAPTION>
Twenty-six weeks ended
July 30, July 31,
1994 1993
-----------------------
(IN THOUSANDS)
<S> <C> <C>
Sales $ 183,396 $ 184,206
Cost of merchandise sold, including warehousing
and transportation expenses 143,387 145,876
-----------------------
Gross profit 40,009 38,330
Operating expenses:
Salaries, employee benefits and other 32,029 31,203
Depreciation and amortization 1,858 1,655
Interest on capital leases 107 128
-----------------------
Total operating expenses 33,994 32,986
-----------------------
Store operating income $ 6,015 $ 5,344
-----------------------
-----------------------
</TABLE>
SEE ACCOMPANYING NOTES.
15
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Acme Markets, Inc. Supermarkets to be
Acquired by The Penn Traffic Company
Notes to Financial Statements (Unaudited)
July 30, 1994
1. General
The accompanying unaudited statements of assets and liabilities and operating
revenue and expenses have been prepared by Acme Markets, Inc. (Acme) and, in the
opinion of the management of Acme, include all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation of net assets and store
operations (also see "Basis of Presentation" below). The statements of
operating revenue and expenses are not necessarily indicative of the results to
be expected for the full year. These financial statements should be read in
conjunction with the January 29, 1994 audited financial statements and notes
thereto included elsewhere in this filing.
2. Basis of Presentation
On September 30, 1994, Acme Markets, Inc. and related entities entered into an
agreement (Asset Purchase Agreement) with The Penn Traffic Company to sell 45
grocery stores located in northeastern Pennsylvania and southern upstate New
York hereinafter referred to as the Acquired Supermarkets. Acme Markets, Inc.
is an indirectly wholly-owned subsidiary of American Stores Company. Acme
Markets, Inc. operated supermarkets in certain buildings which, in addition to
the related land, were owned or leased by related entities. For purposes of
these statements, cost, accumulated depreciation, and depreciation expense or
rent expense related to these properties, as recorded by the related entities,
have been reflected as if the property were owned or leased by the Acquired
Supermarkets.
The accompanying financial statements relate solely to the assets to be acquired
by The Penn Traffic Company and are not intended to represent the complete
financial position and results of operations of the Acquired Supermarkets.
The statements of operating revenue and expenses presented herein differ from a
complete statement of operations in that certain allocations of indirect
charges, including, but not limited to, income tax expense, interest expense and
overhead costs incurred by American Stores Company and Acme Markets, Inc. have
been excluded. Accordingly, the statements of operating revenue and expenses do
not include any expenses for, but not limited to, corporate,
16
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Acme Markets, Inc. Supermarkets to be
Acquired by The Penn Traffic Company
Notes to Financial Statements (Unaudited) (continued)
2. Basis of Presentation (continued)
region and district offices. The statements of operating revenue and expenses
contain the results of those stores that are to be acquired. Certain amounts,
including, but not limited to, cost of merchandise sold, advertising, occupancy,
operations and other store expenses include allocated charges which are based on
sales, usage, and/or wages. These allocated charges amounted to $4,743,000 and
$3,713,000 for the twenty-six weeks ended July 30, 1994 and July 31, 1993,
respectively. The allocated costs included in the accompanying statements are
not representative of the actual results that would have resulted had the
Acquired Supermarkets been operated as a stand-alone entity. The statements of
assets and liabilities differ from a complete balance sheet in that only those
assets to be acquired and liabilities assumed in connection with the Asset
Purchase Agreement are included.
17
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ITEM 7 (B) PRO FORMA FINANCIAL INFORMATION FOR PURCHASE OF ACQUIRED SUPERMARKETS
THE PENN TRAFFIC COMPANY
PRO FORMA FINANCIAL INFORMATION
Introduction
The following unaudited pro forma condensed consolidated balance sheet and
unaudited pro forma consolidated statements of operations for The Penn Traffic
Company and subsidiaries ("Penn Traffic") gives effect to the following events
as though they had occurred at July 30, 1994, in the case of the unaudited pro
forma condensed consolidated balance sheet, and as of the beginning of the
applicable period, in the case of the unaudited pro forma consolidated
statements of operations:
a) The acquisition ("Acquisition") of 45 supermarkets expected to be
purchased from Acme Markets, Inc. and related entities ("Acme") for
$75 million plus inventory;
b) The issuance of $100 million in principal amount of Senior Notes at an
assumed interest rate of 10.5%;
c) The payment of expenses related to the foregoing; and
d) In the case of the unaudited pro forma consolidated statements of
operations for the year ended January 29, 1994 and the 26 weeks ended
July 31, 1993, the acquisition ("Insalaco Acquisition") of 12
supermarkets purchased from Insalaco Markets, Inc. ("Insalaco") in
September 1993.
The unaudited pro forma condensed consolidated balance sheet and unaudited
pro forma consolidated statements of operations are based on certain assumptions
that may not prove to be accurate and are not necessarily indicative of the
actual financial position or results of operations which would have existed or
been realized if the foregoing events had taken place at the dates indicated
above or which may exist or be realized in the future. For each 1/8 of 1%
change in assumed interest rate on the Senior Notes, pro forma interest expense
and pro forma net income would change by $125,000 and $75,000 per year or
$62,500 and $37,500 per twenty-six week period, respectively.
Under purchase accounting, tangible and identifiable intangible assets
acquired will be recorded at their respective fair values. Complete information
regarding the fair values of assets to be acquired is not available. As such,
the allocation of the excess of purchase cost over net assets acquired has been
estimated for purposes of this pro forma presentation. The valuations and other
studies which will provide the basis for such an allocation have not progressed
to a stage where there is sufficient information to make a final allocation in
the unaudited pro forma consolidated financial information presented.
Accordingly, the purchase accounting adjustments made in connection with the
development of the unaudited pro forma consolidated financial information are
preliminary and have been made solely for purposes of developing the unaudited
pro forma consolidated financial information.
18
<PAGE>
These statements should be read in conjunction with the audited financial
statements of Penn Traffic filed with the Securities and Exchange Commission in
its Form 10-K for the fiscal year ended January 29, 1994, the unaudited
financial statements of Penn Traffic filed with the Securities and Exchange
Commission on Form 10-Q for the fiscal quarters ended April 30, 1994 and
July 30, 1994, respectively, the audited financial statements of the Acquired
Supermarkets, for the fiscal years ended January 29, 1994 and January 30, 1993,
respectively, and the unaudited financial statements of the Acquired Super-
markets, for the 26 weeks ended July 30, 1994 and July 31, 1993, respectively,
and which are included herein under Item 7 (a).
19
<PAGE>
THE PENN TRAFFIC COMPANY
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET - UNAUDITED
JULY 30, 1994
IN THOUSANDS OF DOLLARS
<TABLE>
<CAPTION>
PRO CONSOLIDATED
PENN ACQUIRED FORMA PRO
TRAFFIC SUPERMARKETS ADJUSTMENTS FORMA
---------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
ASSETS
Cash and short-term $ 41,304 $ 638 $ (638)(1) $ 44,486
investments 3,182 (2)
Receivables and prepaid
expenses - net 76,796 230 77,026
Inventories 348,854 18,588 367,442
---------- ---------- ---------- ----------
Total Current Assets 466,954 19,456 2,544 488,954
Capital leases - net 131,145 915 (915)(3) 131,145
Property, plant and
equipment - net 543,698 15,471 (5,833)(4) 553,336
Other assets - net 459,009 76,362 (4) 535,371
---------- ---------- ---------- ----------
TOTAL ASSETS $1,600,806 $ 35,842 $ 72,158 $1,708,806
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current maturities of
long-term debt $ 4,128 $ $ $ 4,128
Current portion of
obligations under
capital leases 9,302 9,302
Payables and accruals 341,794 8,000 (5) 349,794
---------- ---------- ---------- ----------
Total Current
Liabilities 355,224 8,000 363,224
Long-term debt 984,445 100,000 (6) 1,084,445
Obligations under
capital leases 129,616 1,791 (1,791)(3) 129,616
Other non-current
liabilities 116,045 116,045
Net assets 34,051 (34,051)(7)
Shareholders' equity 15,476 15,476
---------- ---------- ---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,600,806 $ 35,842 $ 72,158 $1,708,806
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
Refer to Notes to Pro Forma Condensed Consolidated Balance Sheet.
20
<PAGE>
THE PENN TRAFFIC COMPANY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS - UNAUDITED
FOR THE TWENTY-SIX WEEKS ENDED JULY 31, 1993
IN THOUSANDS OF DOLLARS (EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO CONSOLIDATED
PENN ACQUIRED FORMA PRO
TRAFFIC (1) SUPERMARKETS ADJUSTMENTS FORMA
--------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
TOTAL REVENUES $1,619,289 $ 184,206 $ (49,624)(2)$1,753,871
COST AND OPERATING EXPENSES:
Cost of sales (including
buying and occupancy 1,263,328 145,876 (39,765)(2) 1,373,322
costs) 3,883 (3)
Selling and administrative
expenses 284,443 32,858 (8,837)(2) 304,891
(3,883)(3)
310 (5)
Unusual item 6,400 6,400
---------- ---------- ---------- ----------
OPERATING INCOME 65,118 5,472 (1,332) 69,258
Interest expense 61,953 128 5,247 (6) 67,328
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM 3,165 5,344 (6,579) 1,930
Provision for income taxes 1,641 (494)(7) 1,147
---------- ---------- ---------- ----------
INCOME BEFORE EXTRAORDINARY
ITEM $ 1,524 $ 5,344 $ (6,085) $ 783
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
PER SHARE DATA:
Income before
extraordinary item
(after preferred
dividends) $ .14 $ .06
---------- ----------
---------- ----------
Average Number of Common
Shares Outstanding 9,956,722 9,956,722
---------- ----------
---------- ----------
</TABLE>
Refer to Notes to Pro Forma Consolidated Statements of Operations.
21
<PAGE>
THE PENN TRAFFIC COMPANY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS - UNAUDITED
FOR THE TWENTY-SIX WEEKS ENDED JULY 30, 1994
IN THOUSANDS OF DOLLARS (EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO CONSOLIDATED
PENN ACQUIRED FORMA PRO
TRAFFIC SUPERMARKETS ADJUSTMENTS FORMA
---------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
TOTAL REVENUES $1,645,728 $ 183,396 $ (45,892)(2) $1,783,232
COST AND OPERATING EXPENSES:
Cost of sales (including
buying and occupancy
costs) 1,274,388 143,387 (36,270)(2) 1,385,573
4,068 (3)
Selling and administrative
expenses 295,552 33,887 (8,754)(2) 315,652
(4,068)(3)
(1,120)(4)
155 (5)
Unusual item 1,120 (4) 1,120
---------- ---------- ---------- ----------
OPERATING INCOME 75,788 6,122 (1,023) 80,887
Interest expense 57,791 107 5,268 (6) 63,166
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES,
EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE 17,997 6,015 (6,291) 17,721
Provision for income taxes 8,873 (110)(7) 8,763
---------- ---------- ---------- ----------
INCOME BEFORE EXTRAORDINARY
ITEM AND CUMULATIVE
EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE $ 9,124 $ 6,015 $ (6,181) $ 8,958
---------- ---------- ---------- ---------
---------- ---------- ---------- ---------
PER SHARE DATA:
Income before extraordinary
item and cumulative
effect of change in
accounting principle $ .82 $ .80
---------- ----------
---------- ----------
Average Number of Common
Shares Outstanding 11,165,057 11,165,057
---------- ----------
---------- ----------
</TABLE>
Refer to Notes to Pro Forma Consolidated Statements of Operations.
22
<PAGE>
THE PENN TRAFFIC COMPANY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS - UNAUDITED
FOR THE FIFTY-TWO WEEKS ENDED JANUARY 29, 1994
IN THOUSANDS OF DOLLARS (EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO CONSOLIDATED
PENN ACQUIRED FORMA PRO
TRAFFIC (1) SUPERMARKETS ADJUSTMENTS FORMA
--------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
TOTAL REVENUES $3,271,344 $ 357,641 $(94,275)(2) $3,534,710
COST AND OPERATING EXPENSES:
Cost of sales (including
buying and occupancy
costs) 2,539,410 280,972 (75,002)(2) 2,753,335
7,955 (3)
Selling and administrative
expenses 581,589 64,069 (17,060)(2) 621,084
(7,955)(3)
441 (5)
Unusual item 6,400 6,400
---------- ---------- ---------- ----------
OPERATING INCOME 143,945 12,600 (2,654) 153,891
Interest expense 120,412 244 10,506 (6) 131,162
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM 23,533 12,356 (13,160) 22,729
Provision for income taxes 15,027 (322)(7) 14,705
---------- ---------- ---------- ----------
INCOME BEFORE EXTRAORDINARY
ITEM $ 8,506 $ 12,356 $ (12,838) $ 8,024
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
PER SHARE DATA:
Income before
extraordinary item
(after preferred
dividends) $ .79 $ .74
---------- ----------
---------- ----------
Average Number of Common
Shares Outstanding 10,561,256 10,561,256
---------- ----------
---------- ----------
</TABLE>
Refer to Notes to Pro Forma Consolidated Statements of Operations.
23
<PAGE>
NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
The unaudited pro forma consolidated balance sheet as of July 30, 1994 gives
effect to the following pro forma adjustments:
(1) To eliminate assets not acquired by Penn Traffic.
(2) To record proceeds from debt offering in excess of purchase price for the
Acquired Supermarkets and related acquisition expenses.
(3) To adjust for leases that will be accounted for as operating leases by Penn
Traffic.
(4) To adjust the bases of fixed assets and to record other assets (goodwill
and deferred financing costs) in order to reflect the preliminary
allocation of the purchase price.
(5) To record a reserve for transition and acquisition costs.
(6) To reflect the issuance of $100 million of senior notes.
(7) To eliminate the net assets recorded by the Acquired Supermarkets.
24
<PAGE>
NOTES TO THE PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
The combined statements of operations for the 26 weeks ended July 30, 1994 and
July 31, 1993, and the 52 weeks ended January 29, 1994, adjusted to give effect
to the following pro forma adjustments:
(1) Presents the unaudited statements of operations of The Penn Traffic
Company and consolidated subsidiaries for the 26 weeks ended
July 31, 1993 and the 52 weeks ended January 29, 1994, adjusted to give
effect to the acquisition of the 12 stores acquired from Insalaco by Penn
Traffic in September 1993 as though it had occurred at the beginning of
the applicable period. See Item 7(c) included herein for the combined
unaudited pro forma statement of operations for the 26 weeks ended
July 31, 1993 and the 52 weeks ended January 29, 1994.
(2) To eliminate the operating results of certain of the Acquired Supermarkets
expected to be closed by Penn Traffic.
(3) To reclassify certain of the Acquired Supermarkets expenses to be
consistent with Penn Traffic.
(4) To reclassify a non-recurring item related to a voluntary employee
separation program at the Acquired Supermarkets as an unusual item.
Adjustment made to achieve consistency with Penn Traffic presentation.
(5) To adjust depreciation and amortization expense to be consistent with the
adjusted bases of fixed assets and leases acquired and goodwill recorded.
(6) To record interest expense on the proposed senior debt offering at an
assumed interest rate of 10.5%. For each 1/8 of 1% change in assumed
interest rate on the Senior Notes, pro forma interest expense and pro forma
net income would change by $125,000 and $75,000 per year or $62,500 and
$37,500 per twenty-six week period, respectively.
(7) To adjust the provision for income taxes for the impact of the acquisition.
NOTE: Penn Traffic anticipates that it will incur certain non-store expenses
as a result of the acquisition of these stores. However, the Company
expects these expenses will be more than offset by savings in
distribution and other expenses. Neither the non-store expenses nor
the savings are included in the pro forma adjustments.
The Supplemental Pro Forma Financial Information presented below was derived
from the audited financial statements of the Acquired Supermarkets for the 52
weeks ended January 29, 1994, and from the unaudited financial statements
of the Acquired Supermarkets for the 26 weeks ended July 30, 1994 and July 31,
1993 adjusted to give effect to the pro forma adjustments outlined above.
SUPPLEMENTAL PRO FORMA FINANCIAL INFORMATION
Acquired Supermarkets (as adjusted)
(In thousands of dollars)
<TABLE>
<CAPTION>
26 WEEKS ENDED
-------------- 52 WEEKS
JULY 30, JULY 31, ENDED
1994 1993 JANUARY 29, 1994
-------- -------- ----------------
<S> <C> <C> <C>
Operating income $5,099(A) $4,140 $9,946
Depreciation and
amortization 1,610 1,610 3,220
</TABLE>
(A) Amount stated is after a deduction of an unusual item of $1.1 million
relating to a voluntary employee separation program at the Acquired
Supermarkets for the twenty-six weeks ended July 30, 1994.
25
<PAGE>
ITEM 7(C) - PRO FORMA FINANCIAL INFORMATION FOR INSALACO ACQUISITION AND
EXHIBITS
PRO FORMA FINANCIAL INFORMATION FOR INSALACO ACQUISITION
The following combined unaudited pro forma financial information for The
Penn Traffic Company and the Insalaco Supermarkets Acquired by The Penn Traffic
Company in September 1993 ("Insalaco") is contained in this report.
-Pro Forma Consolidated Statement of Operations - Unaudited (for the
26 weeks ended July 31, 1993)
-Notes to the Pro Forma Consolidated Statement of Operations
-Pro Forma Consolidated Statement of Operations - Unaudited (for the
52 weeks ended January 29, 1994)
-Notes to the Pro Forma Consolidated Statement of Operations
THE PENN TRAFFIC COMPANY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS - UNAUDITED
FOR THE TWENTY-SIX WEEKS ENDED JULY 31, 1993
IN THOUSANDS OF DOLLARS
(EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO CONSOLIDATED
PENN FORMA PRO
TRAFFIC INSALACO ADJUSTMENTS FORMA
---------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Total Revenues $1,543,036 $ 76,253 $ $1,619,289
Cost and Operating Expenses:
Cost of sales (including
buying and occupancy
costs) 1,202,651 56,669 4,008 (1) 1,263,328
Selling and administrative (4,008)(1)
expenses 271,949 16,840 (338)(2) 284,443
Unusual item 6,400 6,400
---------- ---------- ---------- ----------
Operating Income 62,036 2,744 338 65,118
Interest expense 59,656 197 2,100 (3) 61,953
---------- ---------- ---------- ----------
Income Before Income Taxes
And Extraordinary Item 2,380 2,547 (1,762) 3,165
Provision for income taxes 1,327 314 (4) 1,641
---------- ---------- ---------- ----------
Income Before
Extraordinary Item $ 1,053 $ 2,547 $ (2,076) $ 1,524
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Per Share Data (Primary):
Income before
extraordinary item (after
preferred dividends) $ .09 $ .14
---------- ----------
---------- ----------
Average Number of Common Shares
Outstanding 9,956,722 9,956,722
---------- ----------
---------- ----------
</TABLE>
Refer to Notes to Pro Forma Consolidated Statement of Operations.
26
<PAGE>
NOTES TO THE PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (Item 7(c))
Penn Traffic acquired Insalaco on September 27, 1993. The combined statement
of income for the 26 weeks ended July 31, 1993 adjusted to give effect to the
following pro forma adjustments:
(1) To reclassify certain Insalaco expenses to be consistent with Penn Traffic.
(2) To adjust depreciation and amortization expense to be consistent with the
adjusted bases of fixed assets acquired and goodwill recorded.
(3) To record interest expense on the debt incurred to acquire the Insalaco
stores.
(4) To adjust the provision for income taxes for the impact of the acquisition.
27
<PAGE>
THE PENN TRAFFIC COMPANY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS - UNAUDITED
FOR THE FIFTY-TWO WEEKS ENDED JANUARY 29, 1994
IN THOUSANDS OF DOLLARS (EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO CONSOLIDATED
PENN FORMA PRO
TRAFFIC ADJUSTMENTS FORMA
---------- ----------- ------------
<S> <C> <C> <C>
TOTAL REVENUES $3,171,600 $ 99,744(1) $3,271,344
COST AND OPERATING EXPENSES:
Cost of sales (including
buying and occupancy
costs) 2,464,853 74,557(2) 2,539,410
Selling and administrative
expenses 559,729 21,860(3) 581,589
Unusual item 6,400 6,400
---------- ---------- ----------
OPERATING INCOME 140,618 3,327 143,945
Interest expense 117,423 2,989(4) 120,412
---------- ---------- ----------
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM 23,195 338 23,533
Provision for income taxes 15,019 8(5) 15,027
---------- ---------- ----------
INCOME BEFORE EXTRAORDINARY
ITEM $ 8,176 $ 330 $ 8,506
---------- ---------- ----------
---------- ---------- ----------
PER SHARE DATA:
Income before extraordinary
item (after preferred
dividends) $ .76 $ .79
---------- ----------
---------- ----------
Average Number of Common Shares
Outstanding 10,561,256 10,561,256
---------- ----------
---------- ----------
</TABLE>
Refer to Notes to Pro Forma Consolidated Statement of Operations.
28
<PAGE>
NOTES TO THE PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (Item 7(c))
Penn Traffic acquired Insalaco on September 27, 1993. The pro forma
consolidated statement of operations for the 52 weeks ended January 29, 1994
combining the consolidated results of operations of The Penn Traffic Company
with the results of operations of Insalaco for the period January 30, 1993
through September 26, 1993 adjusted to give effect to the following pro forma
adjustments:
(1) Represents total revenues of Insalaco for the period January 30, 1993
through September 26, 1993.
(2) Adjustment is for the period of January 31, 1993 through September 26, 1993
and is based on Insalaco's cost of goods sold as a percentage of total
revenues for the post-acquisition period of September 27, 1993 through
January 29, 1994.
(3) Adjustment is for the period of January 31, 1993 through September 26, 1993
and is based on Insalaco's selling and administrative expense as a
percentage of total revenues for the post-acquisition period of September
27, 1993 through January 29, 1994.
(4) To record interest expense on the debt incurred to acquire the Insalaco
Stores.
(5) To adjust provision for income taxes to reflect impact of the acquisition.
29
<PAGE>
Exhibits
- - --------
2.13 Asset Purchase Agreement by and among Acme Markets, Inc.,
American Stores Properties, Inc., American Stores Realty
Corp. and The Penn Traffic Company, dated as of
September 30, 1994.
10.9H Consent and Amendment to Loan and Security Agreement dated
as of September 29, 1994, by and among The Penn Traffic
Company, Dairy Dell, Big M Supermarkets, Inc., Penny Curtiss
Baking Company, Inc., the lenders party thereto and NatWest
USA Credit Corp., as Agent.
23.1 Consent of Independent Auditors
30
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
undersigned has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE PENN TRAFFIC COMPANY
Dated: October 12, 1994 /s/ Eugene R. Sunderhaft
------------------------------------
Name: Eugene R. Sunderhaft
Title: Vice President -
Finance, Chief Financial
Officer
31
<PAGE>
EXECUTION COPY
ASSET PURCHASE AGREEMENT
by and among
ACME MARKETS, INC.,
AMERICAN STORES PROPERTIES, INC.
AMERICAN STORES REALTY CORP.
and
THE PENN TRAFFIC COMPANY
dated as of
September 30, 1994
---------------------------------------------
<PAGE>
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
PAGE
NUMBER
------
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . 1
Section 1.1 CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . . 1
Section 1.2 ADDITIONAL DEFINED TERMS. . . . . . . . . . . . . . . 6
ARTICLE II
CLOSING; PURCHASE AND SALE. . . . . . . . . . . . . 7
Section 2.1 TIME AND PLACE OF CLOSING . . . . . . . . . . . . . . 7
Section 2.2 PURCHASE AND SALE OF THE ASSETS AND ASSUMPTION
OF LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.3 PURCHASE PRICE. . . . . . . . . . . . . . . . . . . .14
Section 2.4 DELIVERIES. . . . . . . . . . . . . . . . . . . . . .15
Section 2.5 ENCUMBRANCES; LEASES. . . . . . . . . . . . . . . . .16
Section 2.6 INVENTORIES; COMPUTATION OF THE INVENTORY
PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . . . . . .18
Section 2.7 MERCHANDISE AND SUPPLIES IN TRANSIT . . . . . . . . .20
Section 2.8 PRORATIONS. . . . . . . . . . . . . . . . . . . . . .20
Section 2.9 CONDEMNATION; DAMAGE OR DESTRUCTION . . . . . . . . .22
Section 2.10 STORE CASH; PREPAID EXPENSES. . . . . . . . . . . . .24
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . .25
Section 3.1 INCORPORATION; GOOD STANDING. . . . . . . . . . . . .25
Section 3.2 AUTHORIZATION . . . . . . . . . . . . . . . . . . . .25
Section 3.3 TITLE . . . . . . . . . . . . . . . . . . . . . . . .26
Section 3.4 CONTRACTS . . . . . . . . . . . . . . . . . . . . . .27
Section 3.5 LITIGATION. . . . . . . . . . . . . . . . . . . . . .27
Section 3.6 LABOR UNIONS. . . . . . . . . . . . . . . . . . . . .28
Section 3.7 STORAGE TANKS AND HAZARDOUS MATERIALS . . . . . . . .28
Section 3.8 SCHEDULES AND EXHIBITS. . . . . . . . . . . . . . . .28
Section 3.9 SALES AND PAYROLL INFORMATION . . . . . . . . . . . .29
Section 3.10 ERISA . . . . . . . . . . . . . . . . . . . . . . . .29
Section 3.11 LIMITATIONS ON SELLER'S REPRESENTATIONS . . . . . . .29
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . .30
- i -
<PAGE>
Section 4.1 INCORPORATION; GOOD STANDING. . . . . . . . . . . . .30
Section 4.2 AUTHORIZATION . . . . . . . . . . . . . . . . . . . .30
Section 4.3 LITIGATION. . . . . . . . . . . . . . . . . . . . . .31
Section 4.4 APPROVALS, CONSENTS, ETC. . . . . . . . . . . . . . .31
Section 4.5 FINANCING; INFORMATION REGARDING BUYER. . . . . . . .31
ARTICLE V
COVENANTS OF SELLER AND BUYER. . . . . . . . . . . .31
Section 5.1 ACCESS TO EMPLOYEES; NOTIFICATION OF
BREACHES. . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Section 5.2 REASONABLE EFFORTS; OBTAINING CONSENTS. . . . . . . .33
Section 5.3 REGULATORY MATTERS. . . . . . . . . . . . . . . . . .34
Section 5.5 CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . .36
Section 5.6 PUBLIC ANNOUNCEMENTS. . . . . . . . . . . . . . . . .38
Section 5.7 GUARANTIES. . . . . . . . . . . . . . . . . . . . . .38
Section 5.8 BULK TRANSFER LAWS. . . . . . . . . . . . . . . . . .39
Section 5.9 ACCOUNTS RECEIVABLE; CONTRACTS. . . . . . . . . . . .39
Section 5.10 USE OF NAMES. . . . . . . . . . . . . . . . . . . . .39
Section 5.11 ENVIRONMENTAL INSPECTIONS . . . . . . . . . . . . . .40
Section 5.12 GIFT CERTIFICATES . . . . . . . . . . . . . . . . . .41
Section 5.13 INSURANCE REQUIRED AFTER CLOSING. . . . . . . . . . .41
Section 5.14. PUBLIC FILINGS. . . . . . . . . . . . . . . . . . . .42
Section 5.15 COVENANT NOT TO COMPETE . . . . . . . . . . . . . . .42
Section 5.16 SELLER'S REPRESENTATIONS, WARRANTIES AND
COVENANTS.. . . . . . . . . . . . . . . . . . . . . . . . . . .43
ARTICLE VI
EMPLOYEES. . . . . . . . . . . . . . . . .43
Section 6.1 EMPLOYEES; BENEFIT PLANS; MULTIEMPLOYER PLANS . . . .43
Section 6.2 WARN ACT. . . . . . . . . . . . . . . . . . . . . . .46
ARTICLE VII
TAX MATTERS . . . . . . . . . . . . . . . .46
Section 7.1 TRANSFER TAXES. . . . . . . . . . . . . . . . . . . .46
Section 7.2 TAX RESPONSIBILITY. . . . . . . . . . . . . . . . . .47
Section 7.3 TAX COOPERATION . . . . . . . . . . . . . . . . . . .47
Section 7.4 NOTIFICATION OF PROCEEDINGS; CONTROL; REFUNDS . . . .48
Section 7.5 ALLOCATION. . . . . . . . . . . . . . . . . . . . . .48
Section 7.6 TAX EFFECT OF PAYMENTS. . . . . . . . . . . . . . . .48
Section 7.7 WITHHOLDING . . . . . . . . . . . . . . . . . . . . .48
Section 7.8 CERTIORARI. . . . . . . . . . . . . . . . . . . . . .49
ARTICLE VIII
- ii -
<PAGE>
CONDITIONS OF BUYER'S OBLIGATION TO CLOSE. . . . . . . . .49
Section 8.1 REPRESENTATIONS, WARRANTIES AND COVENANTS
OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . .49
Section 8.2 HSR ACT WAITING PERIOD; GOVERNMENTAL CONSENTS . . . .49
Section 8.3 NO INJUNCTION OR GOVERNMENT ACTION. . . . . . . . . .49
Section 8.4 EXCEPTED PROPERTIES . . . . . . . . . . . . . . . . .50
Section 8.5 LEGAL OPINION . . . . . . . . . . . . . . . . . . . .50
Section 8.6 REQUIRED CONSENTS . . . . . . . . . . . . . . . . . .50
ARTICLE IX
CONDITIONS TO SELLER'S OBLIGATION TO CLOSE. . . . . . . . .50
Section 9.1 REPRESENTATIONS, WARRANTIES AND COVENANTS
OF BUYER. . . . . . . . . . . . . . . . . . . . . . . . . . . .51
Section 9.2 WAITING PERIODS; GOVERNMENTAL CONSENTS. . . . . . . .51
Section 9.3 NO INJUNCTION OR GOVERNMENT ACTION. . . . . . . . . .51
Section 9.4 EXCEPTED PROPERTIES . . . . . . . . . . . . . . . . .51
Section 9.5 PURCHASE PRICE REDUCTIONS . . . . . . . . . . . . . .51
Section 9.6 LEGAL OPINION . . . . . . . . . . . . . . . . . . . .51
Section 9.7 REQUIRED CONSENTS . . . . . . . . . . . . . . . . . .52
ARTICLE X
TERMINATION . . . . . . . . . . . . . . . .52
Section 10.1 TERMINATION . . . . . . . . . . . . . . . . . . . . .52
Section 10.2 PROCEDURE AND EFFECT OF TERMINATION . . . . . . . . .52
ARTICLE XI
SURVIVAL; INDEMNIFICATION. . . . . . . . . . . . .53
Section 11.1 SURVIVAL. . . . . . . . . . . . . . . . . . . . . . .53
Section 11.2 INDEMNIFICATION BY BUYER OR SELLER. . . . . . . . . .54
ARTICLE XII
MISCELLANEOUS. . . . . . . . . . . . . . . .56
Section 12.1 BROKERS . . . . . . . . . . . . . . . . . . . . . . .56
Section 12.2 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . .57
Section 12.3 GOVERNING LAW . . . . . . . . . . . . . . . . . . . .57
Section 12.4 ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . .57
Section 12.5 EXPENSES. . . . . . . . . . . . . . . . . . . . . . .57
Section 12.6 NOTICES . . . . . . . . . . . . . . . . . . . . . . .57
Section 12.8 HEADINGS; DEFINITIONS . . . . . . . . . . . . . . . .58
Section 12.9 AMENDMENTS AND WAIVERS. . . . . . . . . . . . . . . .59
Section 12.10 INTERPRETATION. . . . . . . . . . . . . . . . . . . .59
Section 12.11 SEVERABILITY. . . . . . . . . . . . . . . . . . . . .59
Section 12.12 ASC GUARANTY. . . . . . . . . . . . . . . . . . . . .59
- iii -
<PAGE>
Exhibits
2.4A Conveyance Documents
2.4B Letter Agreement Regarding Conveyancing Documents
2.5 Form of Sublease
12.12 Guaranty
Schedules
1.1A 1993 Sales
1.1B Excluded Employees
1.1C Stores
2.2A Owned Property
2.2B Leases
2.2C Contracts/Excluded Contracts
2.2D Purchased Software
2.2E Excluded Computer Hardware
2.2F Consignors
2.2G Excluded Assets
3.2 Required Consents
3.3 Title
3.4 Contracts
3.5 Litigation
3.6 Labor Unions
3.7 Environmental Matters
5.3 Regulatory Matters
5.7 Guaranties
5.15 Covenant Not to Compete
6.1 Employee Benefits
7.8 Certiorari
- iv -
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of
September 30, 1994, is by and between Acme Markets, Inc., a Pennsylvania
corporation ("Acme"), American Stores Properties, Inc., a Delaware corporation
("ASP"), American Stores Realty Corp., a Pennsylvania corporation ("ASRC" and
together with ASP "Owner"), and The Penn Traffic Company, a Delaware corporation
("Buyer").
WHEREAS, Acme and Owner (collectively, "Seller") or their Affiliates
own the Assets (as such terms are hereinafter defined); and
WHEREAS, Buyer desires to purchase the Assets from Seller or Seller's
Affiliates, and Seller desires to sell or to cause the sale of the Assets to
Buyer, upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
promises contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 CERTAIN DEFINITIONS. As used in this Agreement the
following terms shall have the following respective meanings:
"Action" shall mean any action, suit, arbitration, inquiry, proceeding
or investigation by or before any court, arbitrator, governmental or other
regulatory or administrative agency or commission.
"Affiliate" shall mean, with respect to any Person, any other Person
that directly, or indirectly through one or more intermediaries, controls or is
controlled by or under common control with the Person specified.
"Antitrust Laws" shall mean the Sherman Act, as amended, the Clayton
Act, as amended, the HSR Act, the Federal Trade Commission Act, as amended, and
all other federal and state statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines, and other laws that are designed or
intended
- 1 -
<PAGE>
to prohibit, restrict or regulate actions having the purpose or effect of
monopolization or restraint of trade.
"Associate" shall have the meaning set forth in Rule 12b-2 under the
Securities Exchange Act of 1934.
"ASC" shall mean American Stores Company, a Delaware corporation.
"Asset Purchase" shall mean the consummation of the transactions
contemplated by this Agreement at the Closing.
"Cash" shall mean currency and coin change.
"Closing" shall mean the consummation of the transactions contemplated
by Section 2.2.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
any successor thereto and the rules and regulations promulgated thereunder.
"Confidentiality Agreement" shall mean the letter agreement between
ASC and Buyer dated June 1, 1994.
"Consent" shall mean any consent, waiver or approval of a third party
required to take any action contemplated by this Agreement with respect to any
of the Assets.
"Consent Period" shall mean the six month period after the Primary
Closing Date in which Seller may obtain any Consents required with respect to
the assignment of Leases.
"Covered Liabilities" shall mean any and all debts, losses, claims,
damages, costs, demands, fines, judgments, contracts (implied and expressed,
written and unwritten), penalties, obligations, payments, liabilities of every
type and nature (whether known or unknown, fixed or contingent), including,
without limitation, those arising out of any Action, together with any
reasonable costs and expenses (including, without limitation, reasonable
attorneys' fees and out-of-pocket expenses) incurred in connection with any of
the foregoing (including, without limitation, reasonable costs and expenses
incurred in investigating, preparing or defending any pending or threatened
Action).
"Delayed Closing Date" shall mean, with respect to any Excepted
Property, the first date after the Primary Closing Date that such Excepted
Property is conveyed to Buyer by purchase, lease, sublease or otherwise.
- 2 -
<PAGE>
"Environmental Laws" shall mean, collectively, all federal, state and
local laws and regulations relating to pollution of the environment (including,
without limitation, ambient air, surface water, groundwater, land surface or
sub-surface strata), including, without limitation, laws and regulations
relating to emissions, discharges, releases or threatened releases of Hazardous
Materials, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and any successor thereto and the rules and regulations
promulgated thereunder.
"Excepted Property" shall mean any Owned Property or leased Property
the fee or leasehold interest in which is not transferred at the Primary Closing
Date, by reason of Section 2.5 or Section 2.9.
"Hazardous Materials" shall mean all materials defined as "hazardous
substances," "hazardous wastes," "toxic substances," "solid wastes" or bearing
similar or analogous definitions in (i) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. Section Section
9601 ET SEQ., as amended, (ii) the Resource Conservation and Recovery Act, 42
U.S. C. Section Section 6901 ET SEQ., as amended, (iii) the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801 ET SEQ., as amended, or (iv) any
other federal, state or local environmental statute. Notwithstanding anything
to the contrary in this Agreement, the phrase "Hazardous Materials" shall
include petroleum and petroleum products but shall exclude asbestos.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Knowledge" shall mean, with respect to any corporation, the actual
knowledge of the officers of such corporation without independent inquiry, and
with respect to any other Person, the actual knowledge of such Person without
independent inquiry.
"Least Stringent Remediation Standard Acceptable Under All
Environmental Laws" means (i) the least stringent of any directly applicable and
duly promulgated or legally enforceable and routinely applied and generally
accepted cleanup standards or remediation levels under Environmental Laws for
the use of the Properties as of the Closing, and where different governmental
authorities have established different standards or levels, the most stringent
of such standards or levels; or (ii) if no such
- 3 -
<PAGE>
standard or level has been established, the standard or level established, using
recognized risk assessment methodologies, at or below which no unreasonable risk
to human health or the environment is reasonably presented based on the use of
the property as used at Closing.
"Monetary Encumbrances" shall mean, collectively, the mortgages,
security interests and other obligations identified as "Monetary Encumbrances"
in Schedule 3.3 hereto.
"1993 Sales" shall mean for any Store or Stores, the aggregate sales
revenue for such Store or Stores for the calendar year 1993 set forth in
Schedule 1.1A.
"Permitted Exceptions" shall mean, collectively, (i) all statutory or
other liens for real estate taxes or assessments which are not yet due at the
Closing; (ii) all non-monetary liens, covenants, charges, easements,
restrictions and encumbrances contained (or otherwise disclosed or identified in
sufficient detail such that Buyer is put on notice regarding the material facts
of such liens, covenants, charges, easements, restrictions and encumbrances) in
the property and lease files furnished to Buyer by Seller prior to the date
hereof, including, without limitation, (A) all matters, conditions and states of
fact so disclosed or identified in title reports, surveys, correspondence or
other documents located in such files and (B) all leases, subleases, licenses,
concessions or service contracts, common area maintenance, reciprocal easement
agreements, or other operating, maintenance or development agreements contained
(or so disclosed or identified) in such files; (iii) all laws and governmental
rules, regulations, ordinances and restrictions not violated by the Stores,
provided that Permitted Exceptions shall include such violations which would not
have a material adverse effect on (x) the value of any individual Store or (y)
the continued operation of any individual Store as it is currently operated;
(iv) with respect to any asset which consists of a leasehold estate or
possessory interest in real property, all mortgages or deeds of trust to which
the underlying fee estate in such real property is subject provided either (x)
the holder of such mortgage or deed of trust would not be entitled to foreclose
upon or otherwise terminate such leasehold estate or possessory interest in the
event of a foreclosure upon the underlying fee estate, (y) an effective
nondisturbance agreement exists; or (z) Seller shall indemnify Buyer against
such mortgage or deed of trust; (v) all mechanics', carriers', workers',
repairers' and similar liens (provided Seller shall indemnify Buyer against such
liens for improvements or repairs made by or at the direction of Seller); (vi)
all exceptions, objections, claims, defects, easements,
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encroachments, encumbrances, covenants, restrictions, conditions, leases,
tenancies and the like (collectively "Defects") of record; (vii) all Defects
(other than leases or tenancies not included in the property and lease files of
Seller and its Affiliates provided to Buyer prior to the date hereof) that are
or should be apparent from a physical inspection or survey; (viii) any other
non-monetary liens, charges, easements, restrictions, encumbrances and other
matters, if any, which do not materially adversely interfere with the continued
use of the property by Buyer for supermarket purposes as presently conducted by
Seller; and (ix) the matters described in the last sentence of this definition.
Seller shall indemnify Buyer from and against any matters created by reason of
Seller's acts at any Owned Property and first appearing on the public records at
any time during the period September 1, 1994 through Closing provided such
matter has a material adverse effect on the value or use and operation of the
subject Owned Property. Within 15 days after the Primary Closing Date, Buyer
shall notify Seller in writing as to whether its search of the public records
has disclosed any such matter(s). If Buyer advises Seller of the existence of
such matter, Seller shall have the right, but not the obligation, to remove or
caused to be removed such matter from the public records and Buyer shall
cooperate with Seller with respect to such removal. Seller agrees to indemnify
Buyer against (i) any claim that the loading dock at store 5509 (Tamaqua)
encroaches on an easement and (ii) the costs of removing the sign referenced in
the complaint and ejectment No. S-218 of 1988 in the Office of the Prothonotary
of Schuykill County.
"Person" shall mean an individual, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
"Prime Rate" shall mean the publicly announced prime commercial
lending rate of Morgan Guaranty Trust Company of New York in effect from time to
time.
"Private Label Items" shall mean "private label" merchandise bearing a
name or logo identifying, or used exclusively by Seller or any of its
Affiliates, including, without limitation, "Acme", "Osco", "Econo Buy",
"Lancaster", "Fireside", "Skyline" and "Value Wise".
"Seller's Employees" shall mean, collectively, all Store employees of
Seller and its Affiliates on the date immediately prior to the Primary Closing
Date relating to Seller's or its Affiliates' operation of the Stores, including
such employees who are disabled or taking a leave of absence and
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who are listed as such on Schedule 1.1B, but excluding the employees
(collectively, the "Excluded Employees") listed on Schedule 1.1C as excluded
employees and excluding the employees of Seller and its Affiliates not covered
by the Collective Bargaining Agreements set forth on Schedule 3.6 hereto who are
(i) disabled as of the Primary closing Date under the terms of Seller's
disability plan or under any workers' compensation plan (other than by reason of
pregnancy or childbirth for normal disability periods), (ii) taking a leave of
absence other than an authorized leave of absence pursuant to Seller's
authorized leave of absence policy, or (iii) taking a leave of absence pursuant
to Seller's authorized leave of absence policy, which leave of absence is for
(x) disability (other than pregnancy or childbirth for normal disability
periods) or (y) personal leave in excess of 30 days pursuant to Section II.B of
Seller's authorized leave of absence policy. In the case of any Excepted
Properties, "Seller's Employees" shall mean all Store employees of Seller or its
Affiliates located at such Excepted Property immediately prior to any subsequent
conveyance of the fee or leasehold interest therein to Buyer other than Excluded
Employees.
"Stores" shall mean, collectively, the retail stores listed on
Schedule 1.1C.
Section 1.2 ADDITIONAL DEFINED TERMS. The following defined terms
are defined in the Sections set forth opposite such term:
Term Section
---- -------
Assets 2.2(a)
Assumed Liabilities 2.2(c)
Average 1993 Sales Per Divested Store 5.3(c)
Books and Records 2.2(a)(x)
Buyer Indemnified Parties 11.2(b)
Collective Bargaining Agreements 6.1
Continuing Employees 6.1
Contractor 2.9(a)(i)
Contracts 2.2(a)(viii)
Divested Stores 5.3(c)
Equipment 2.2(a)(iii)
Estimate 2.9(a)
Estimated Purchase Price 2.3(a)
Excluded Assets 2.2(b)
Excluded Environmental Liabilities 2.2(c)
Guaranties 5.7
Guaranty Event 12.12
Insurance Proceeds 2.9(a)
Inventory 2.2(a)(iv)
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Inventory Service 2.6(b)
Leases 2.2(a)(ii)
Owned Properties 2.2(a)(i)
Out-of-Date Seasonal 2.6(a)
Permits 2.2(a)(ix)
Phase I Consultant 5.11
Phase I Inspection 5.11
Prepaid Expenses 2.2(a)(vi)
Primary Closing Date 2.1
Private Label Supplies 5.10(a)
Prorated Charges 2.8(a)
Purchase Price 2.3(a)
Purchased Software 2.2(a)(xiii)
Responsible Individuals 3.7
Retail 2.6(a)
Section 1031 Treatment 2.11
Seller Indemnified Parties 11.2(a)
Store Cost 2.6(a)
Supplies 2.2(a)(v)
Survival Period 11.1
Taxes 7.2
Territory 5.15
ARTICLE II
CLOSING; PURCHASE AND SALE
Section 2.1 TIME AND PLACE OF CLOSING. The Closing shall take
place at 10:00 A.M., Eastern Daylight Savings Time, on the day that is thirty
(30) days after the delivery of the financial information contemplated in
Section 5.14, at the offices of Dechert Price & Rhoads, 4000 Bell Atlantic
Tower, 1717 Arch Street, Philadelphia, Pennsylvania 19103 or such other place as
Buyer and Seller shall mutually agree or, if each of the conditions set forth in
Articles VIII and IX shall not have been satisfied or duly waived, the fifth
business day after the date on which such conditions shall be satisfied or duly
waived, or if Seller and Buyer shall mutually agree on a different date, the
date upon which they shall have mutually agreed (such date being referred to
herein as the "Primary Closing Date"); provided, however, the Closing shall not
take place during the week of November 21, 1994. The parties agree to use their
best efforts to effect the Closing by November 3, 1994.
Section 2.2 PURCHASE AND SALE OF THE ASSETS AND ASSUMPTION OF
LIABILITIES. (a) Subject to the satisfaction or
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waiver of all of the conditions set forth herein, on the Primary Closing Date,
Seller shall sell, convey, assign, transfer and deliver to Buyer, and Buyer
shall purchase, acquire, accept, assume and pay for, all of Seller's right,
title and interest at the Primary Closing Date in and to the following assets,
properties and rights (hereinafter collectively referred to as the "Assets")
(PROVIDED, HOWEVER, that if any Affiliate of Seller owns any Owned Property or
holds any Lease or owns or leases any Equipment, Seller shall cause such
Affiliate to convey all of such Affiliate's right, title and interest in such
Owned Property, Lease or Equipment to Buyer pursuant to the terms of this
Agreement):
(i) those parcels of real property owned by Seller or any
of its Affiliates identified on Schedule 2.2A, together with all
buildings, fixtures and improvements located on or attached to such
real property, and all options, rights of first refusal, licenses and
permits (to the extent transferable), leases, subleases, easements and
rights-of-way which are appurtenant to such real property, subject to
the Permitted Exceptions (all of which are collectively referred to as
the "Owned Properties");
(ii) all of the leases and subleases of real property which
are listed on Schedule 2.2B, and the related leasehold interests,
licenses, permits (to the extent transferable), leases, subleases,
easements and rights-of-way which are appurtenant to and subject to
such leasehold interest, subject to the Permitted Exceptions
(collectively, the "Leases");
(iii) except as provided in Section 2.2(b), all of the
machinery, equipment, forklifts, tools, furniture, fixtures, leasehold
improvements, pallets, phones, computer equipment, order entry devices
and other items of personal property which are owned by Seller or any
of its Affiliates on the Primary Closing Date and which are located
upon or affixed to the Stores (collectively, the "Equipment");
(iv) all merchandise inventory owned by Seller or its
Affiliates which is located at the Stores on the Primary Closing Date
or which is in transit to the Stores on the Primary Closing Date and
all Private Label Items in transit from vendors of Seller or its
Affiliates to the Stores (the "Inventory"); PROVIDED, HOWEVER, that
the Inventory does not include (i) any items that under applicable law
cannot be transferred
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to Buyer without appropriate approvals, unless such approvals have
been obtained and (ii) full cases of Private Label Items;
(v) the supplies, containers, labels, packaging material,
maintenance supplies, raw food materials, fuel and other similar items
owned by Seller or its Affiliates which are located at the Stores or
at vendors of Seller and its Affiliates on the Primary Closing Date
(the "Supplies"); PROVIDED, HOWEVER, that the Supplies shall not
include preprinted forms with the names or logos specified in Section
5.10(a), including, without limitation, printed purchase orders,
sales, maintenance and license agreements;
(vi) the amount of transferable deposits, prepaid rent and
prepaid expenses made by Seller or any of its Affiliates for all
Leases, Contracts or Permits or otherwise relating to the Assets
transferred to Buyer (collectively, the "Prepaid Expenses") as
certified by Seller pursuant to Section 2.10;
(vii) the amount of Cash located at the Stores as certified
by Seller pursuant to Section 2.10;
(viii) all contracts and agreements (whether oral or written)
of Seller and its Affiliates relating to the operations of Seller or
its Affiliates at the Stores, including, without limitation, any
purchase orders or supply agreements for Inventory and Supplies
relating to the operation of the Stores to the extent provided herein;
leases of or agreements relating to the maintenance, acquisition or
use of the Stores or any machinery, equipment, forklifts, tools,
furniture, fixtures, phones, computer equipment, pallets, order entry
devices and other items of personal property related thereto and the
contracts listed on Schedule 2.2C (collectively, the "Contracts");
PROVIDED, HOWEVER, that the Contracts shall exclude the contracts
listed as excluded Contracts on Schedule 2.2C and shall also exclude
all contracts and agreements (whether oral or written) of Seller with
or to any of Seller's Affiliates other than purchase orders for
Private Label Items;
(ix) the licenses and permits pertaining to the operations
of Seller at the Stores which are legally transferable and assignable
to Buyer and which Buyer elects to assume by written notice to Seller
at
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least ten days prior to the Primary Closing Date (collectively, the
"Permits");
(x) the following books and records of Seller or its
Affiliates relating solely to the operations of Seller or its
Affiliates at the Stores, to the extent such books and records exist
and are in Seller's or its Affiliates' possession on the Primary
Closing Date, without any representation or warranty regarding the
accuracy, completeness or reliability thereof (collectively, "Books
and Records") (although Seller shall have the right to keep copies of
any such Books and Records):
(A) surveys (boundary and topographical), fixture plans,
building, site and pylon sign drawings, refrigeration drawings,
shop drawings, case connection drawings, structural drawings,
electrical drawings, mechanical drawings, as-built drawings,
warranties and guarantees relating to the condition of the
improvements on the Stores and the Equipment, soil tests and
reports and environmental tests, reports and assessments, but
specifically excluding (x) all policy, compliance and procedure
manuals, (y) internal audit reports and (z) any information,
books, records, files and papers concerning the financial
performance, strategic plans, budgets, forecasts and competitive
or capital spending analyses of the Stores or Seller's or its
Affiliates' operations (or new stores to be operated by Seller);
(B) the job title, job description, rate of pay, hire date,
birth date, eligibility for bonus pursuant to Seller's bonus
plans, job classification (I.E., full-time or part-time), social
security number and year-to-date earnings, relating to Seller's
Employees who are hired by Buyer;
(C) Contracts, Leases and Permits; and
(D) current scan files for retail price data, bad check
files and lists of check cashing customers for each of the
Stores;
(E) weekly sales records for the most recent twelve month
period ending within 7 days prior to the Primary Closing Date for
each of the Stores
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and annual sales records for each of the Stores for the three
fiscal years ending January 29, 1994;
(xi) the computer hardware and the satellite communication
equipment located at the Real Property as of the date hereof subject
to changes in the ordinary course of business;
(xii) copies of insurance certificates that Seller has
provided to third parties pertaining to the Stores (including, without
limitation, the identity of the named insureds and loss payees); and
(xiii) to the extent such software is not proprietary to
Seller and/or its Affiliates and to the extent transferable, the
computer software listed on Schedule 2.2D (the "Purchased Software");
provided, however, that Buyer agrees that such software shall be used
by Buyer exclusively in connection with Buyer's operation of the
Stores after Closing; and provided further that Buyer acknowledges
that Seller shall have no obligation to upgrade, maintain or make any
such Purchased Software compatible with any computer system employed
by Buyer now or in the future.
(b) Assets not described above and the property, assets and
rights described below (collectively, the "Excluded Assets") are expressly
excluded from the Asset Purchase:
(i) Cash or cash equivalents on deposit in banking or
financial institutions or any accounts (savings, checking or
otherwise) or safety deposit boxes;
(ii) Cash, checks, manufacturers' coupons, food-stamps and
WIC coupons located in or at the Stores except as provided in Section
2.10;
(iii) accounts receivable, including, without limitation,
accounts receivable of the Stores, and, except as may be provided to
the contrary in Section 2.9, insurance proceeds, condemnation awards
or other compensation payable upon any sale, destruction, damage,
taking or other disposition of any of the Assets;
(iv) trademarks, trade names, patents, servicemarks,
copyrights, logos, pending applications
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for the foregoing, systems, practices and similar intangibles,
including but not limited to goodwill, it being understood that Buyer
shall remove, destroy and dispose of all signs, stationary, labels and
other materials featuring, containing or comprising such names or
logos of Seller or its Affiliates, other then Private Label Items
(except as such destruction may be required by Section 5.10),
appearing anywhere in, on or about the Stores, at Buyer's expense
within ten (10) days after the Primary Closing Date;
(v) claims, rebates, refunds, prepaid discounts, allowances
or other monies or consideration received by Seller under any
agreement or transaction effected prior to the Primary Closing Date
and other general intangibles arising from the operations of Seller or
its Affiliates at the Stores prior to the Closing, including, without
limitation, any claim that Seller or any of its Affiliates may have,
have had or will have under the Antitrust Laws with respect to any
events or acts occurring prior to the Closing;
(vi) all books and records (except as specifically otherwise
provided in Section 2.2(a)(x));
(vii) computer hardware listed on Schedule 2.2E and all
computer software other than the Purchased Software;
(viii) any assets located at Seller's corporate offices in
Malvern, Pennsylvania, Chicago, Illinois and Salt Lake City, Utah;
(ix) consigned inventory from the consignors listed on
Schedule 2.2F;
(x) accounts receivable from subsidiaries and Affiliates of
Seller, Seller's pension, profit-sharing or other funded employee
benefit plan assets;
(xi) the capital stock owned or held by Seller in any subsidiary
or Affiliate of Seller;
(xii) except as provided in Section 2.2(a), the assets owned
or held by any subsidiary or Affiliate of Seller or any division of
Seller other than Owner;
(xiii) any asset or item that is used in connection with
inventory that is an Excluded Asset;
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(xiv) all bonds and letters of credit including, but not
limited to, those posted to support Seller's workers' compensation
obligations and general liability and other insurance obligations,
policies and premiums;
(xv) the fee, leasehold or possessory interest of Seller and its
Affiliates in the Excepted Properties and the related assets thereon
to the extent not conveyed to Buyer at the Primary Closing Date by
reason of Section 2.5 or Section 2.9;
(xvi) rolling stock;
(xvii) full cases of non-perishable Private Label Items; and
(xviii) all property listed on Schedule 2.2G.
(c) At the Closing, Buyer shall assume and agree to perform or
discharge, and indemnify and hold the Seller Indemnified Parties harmless from
and against, the obligations of Seller and its Affiliates (a) arising under the
Leases, Contracts and Permits from and after the Primary Closing Date, (b)
arising from or relating to environmental liabilities and obligations arising
out of or relating to the ownership, occupancy, operation or use of the Stores
and the real property relating thereto, whether arising before or after the
Closing Date, except to the extent (but only to the extent) that the last
sentence of Section 3.7 of this Agreement is untrue, and except for the Excluded
Environmental Liabilities (as hereinafter defined), (c) subject to Section
6.1, arising under the Collective Bargaining Agreements (as defined in Section
6.1 hereof) and any duties and obligations of Seller and its Affiliates and
Associates arising under the Taft-Hartley Act or otherwise arising under or
relating to such agreements, and (d) the liabilities and obligations of Seller
and its Affiliates under purchase orders for goods and services to be delivered
to the Stores on or after the Primary Closing Date. (Collectively, the "Assumed
Liabilities"). "Excluded Environmental Liabilities" shall mean environmental
obligations and liabilities arising from the activities of Seller, its
contractors or agents in arranging for the offsite disposal of waste or the
offsite disposal of such waste pursuant to such arrangements. Except as
otherwise provided in this Agreement, Buyer does not assume any liabilities of
Seller and its Affiliates.
(d) Except as herein provided, to the extent that any Lease,
Contract or other Asset cannot be sold, assigned or
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conveyed without the Consent of any Person, or if such sale, assignment or
conveyance or attempted sale, assignment or conveyance would constitute a breach
thereof or a violation of any law, decree, order, regulation or other
governmental edict, this Agreement shall not constitute a sale, assignment or
conveyance thereof, or an attempted sale, assignment or conveyance thereof
(unless and until such Consent is obtained). Except as expressly provided
herein, Seller shall not be obligated to sell, assign or convey to Buyer any of
Seller's rights and obligations in and to any of the Assets without first
obtaining all Consents necessary to effect such sale, assignment or conveyance.
Section 2.3 PURCHASE PRICE. (a) The purchase price for the Assets
(the "Purchase Price") shall be equal to the sum of (i) Seventy Five Million,
Five Hundred Thousand Dollars ($75,500,000), plus (ii) the purchase price of the
Inventory and the Supplies, as determined in accordance with Section 2.6, plus
(iii) the total amount of Cash and Prepaid Expenses set forth in the certificate
delivered by Seller pursuant to Section 2.10. Ten business days prior to the
Primary Closing Date, Seller shall provide Buyer with a schedule setting forth
the aggregate book value of the Inventory and the Supplies as of the most recent
monthly closing period, which, together with the amount set forth in the
certificate referred to in clause (iii) of the preceding sentence, shall be used
in calculating the estimated purchase price (the "Estimated Purchase Price") to
be paid at the Closing.
(b) As promptly as practicable, but in any event within 15 days
after the Primary Closing Date, Seller and Buyer shall agree in good faith upon
the valuation of the Inventory and Supplies determined pursuant to Section 2.6.
If the value of the Inventory and the Supplies so determined pursuant to Section
2.6 is greater than the value of the Inventory and Supplies used to calculate
the Estimated Purchase Price, Buyer shall pay Seller an amount in cash equal to
such excess. If the value of the Inventory and the Supplies so determined
pursuant to Section 2.6 is less than the value of the Inventory and Supplies
used to calculate the Estimated Purchase Price, Seller shall pay Buyer an amount
in cash equal to such deficit. Any such payments pursuant to this Section
2.3(b) shall be made in immediately available funds within five business days of
the determination of the value of the Inventory and Supplies pursuant to Section
2.6 and shall include interest thereon from the Primary Closing Date to the date
of payment at the Prime Rate in effect from time to time. No other post-Closing
adjustment to the Estimated Purchase Price shall be made except as expressly
provided in this Agreement with respect to Excepted Properties.
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Section 2.4 DELIVERIES. (a) At the Closing, Seller shall deliver
the following to Buyer:
(i) special warranty deeds (or quitclaim or other form of deed
without covenant or warranty as Seller may elect, provided that such deed
is insurable by Buyer's title insurance company at Closing at ordinary and
customary title insurance rates payable by Buyer), bills of sale,
endorsements, assignments, leases, subleases and other instruments of
transfer and conveyance of the Assets (including a general assignment of
all warranties and guarantees (to the extent assignable) other than
warranties regarding title held by Seller or its Affiliates, if any, for
the Assets transferred), in form reasonably acceptable to Buyer and Seller;
PROVIDED, however, that any such instruments shall be without
representation or warranty by, or recourse to, Seller or any of its
Affiliates, except as otherwise specifically provided herein;
(ii) all Books and Records in the possession of Seller or its
Affiliates which are not located on the Stores;
(iii) a certificate of Seller (signed on behalf of Seller by its
President or a Vice President) that the condition set forth in Section 8.1
has been satisfied (except as waived by Buyer);
(iv) the opinion of counsel described in Section 8.5;
(v) incumbency certificates with respect to the officers of
Seller who execute this Agreement and any other agreements, certificates or
other documents in connection with the Asset Purchase;
(vi) a list of the Equipment; provided however, that such list
shall be without representation or warranty regarding accuracy,
completeness or reliability by, or recourse to, Seller or any of its
Affiliates; and
(vii) good standing certificates issued by the Secretary of State
of the jurisdiction of incorporation for each of Acme, ASP and ASRC and
copies of resolutions of the board of directors of each of Acme, ASP and
ASRC authorizing the transactions contemplated hereby.
(b) At the Closing, Buyer shall deliver the following to Seller:
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(i) cash in the amount of the Estimated Purchase Price, by wire
transfer of immediately available funds in such amount to the bank account
or accounts designated by Seller (or by such other means as are agreed upon
by Buyer and Seller);
(ii) assumption agreements, leases or subleases with respect to
the Contracts and Leases substantially in the form attached hereto as
Exhibit 2.4A or in such other form (including indemnities consistent with
this Agreement) as shall be reasonably acceptable to Buyer and Seller;
(iii) a certificate of Buyer (signed on behalf of Buyer by its
President or a Vice President) that the condition set forth in Section 9.1
has been satisfied (except as waived by Seller);
(iv) the opinion of counsel described in Section 9.6;
(v) incumbency certificates with respect to the officers of
Buyer who execute this Agreement and any other agreements, certificates or
other documents in connection with the Asset Purchase;
(vi) the insurance certificates required by Section 5.13; and
(vii) the agreement attached as Exhibit 2.4B hereto.
Section 2.5 ENCUMBRANCES; LEASES. (a) If any party whose
consent is required to assign the Leases to Buyer refuses or fails to give its
written consent to an assignment of any Lease, or conditions its consent on
terms unacceptable to Seller or Buyer, then in lieu of assigning such Lease to
Buyer, and with no adjustment in the Purchase Price, Seller and Buyer shall, to
the extent permitted under such Lease, enter into a sublease of the premises
demised pursuant to such Lease on the Primary Closing Date on a fully-net basis
and on such terms as will generally confer and impose upon Buyer, as sublessee,
during the term of such sublease (including all renewal periods available under
the Lease), all of Seller's rights and obligations with respect to such premises
(exclusive of Seller's leasehold estate therein) on the terms set forth in
Exhibit 2.5. If either (i) any party whose consent is required to sublease to
Buyer the premises demised pursuant to such Lease as contemplated by the
preceding sentence refuses or fails to give its written consent to such
sublease, or conditions its consent on terms
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unacceptable to Seller or Buyer, or (ii) immediately prior to the consummation
of the Asset Purchase there exists a default (or an event which, with the giving
of notice or lapse of time, would become a default) on Seller's part under such
Lease which permits the landlord to terminate such Lease prior to the scheduled
expiration of its term (which default has not been cured or permanently waived)
and Seller does not agree to indemnify Buyer against early termination of such
Lease up to the product of .21 multiplied by the 1993 Sales for such property,
then, subject to Sections 8.4 and 9.4, the absence of any such required consent
or the existence of such default or potential default shall not be a basis for
failing to consummate the Asset Purchase on the Primary Closing Date and, at
Buyer's option, either (i) Buyer shall accept the assignment of such Lease (or
sublease such Property) notwithstanding the absence of such consent or the
existence of such default or (ii) Buyer shall, by written notice to Seller not
less than 5 business days prior to the Primary Closing Date, designate such
Property as an Excepted Property and the Purchase Price shall be reduced by an
amount equal to the sum of (i) the product of (x) .21 multiplied by (y) the 1993
Sales for such Excepted Property and (ii) to the extent Seller has not exercised
its rights pursuant to the first sentence of Section 2.5(b), the purchase price
for the related Inventory, Supplies and Prepaid Expenses calculated in
accordance with Section 2.3 with respect to such Excepted Property and the
related Assets thereon. In the event Buyer accepts the assignment of the Lease
(or sublease such Property) notwithstanding the absence of any such required
consent or the existence of any such default or potential default, Buyer shall
indemnify the Seller Indemnified Parties against any Covered Liabilities
relating to the absence of such consent or the existence of such default. In
the event such Property becomes an Excepted Property, and at any time during the
Consent Period, Seller obtains any required consent to assignment or sublease,
or cures, or obtains a waiver to, any such default, Seller shall so notify Buyer
in writing and, as promptly as practicable and in any event within 30 days after
Buyer has received such notice from Seller, Buyer shall assume such Lease (or
enter into such sublease, as the case may be) and purchase the related Assets
thereon at the purchase price equal to the sum of (i) the product of (x) .21
multiplied by (y) the 1993 Sales for such Excepted Property and (ii) to the
extent Seller has not exercised its rights pursuant to the first sentence of
Section 2.5(b), the purchase price for the related Inventory, Supplies and
Prepaid Expenses calculated pursuant to Section 2.3 as of the Delayed Closing
Date.
(b) Notwithstanding anything in this Section 2.5 to the
contrary, with respect to any Stores that become Excepted Properties under this
Agreement, Seller shall have the right to
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close such Stores and sell the Inventory and the Supplies located thereon to
Buyer on the Primary Closing Date at the purchase price therefor calculated in
accordance with Section 2.3 less all reasonable costs incurred by Buyer in
transferring such Inventory and Supplies to its stores and warehouses in
Pennsylvania. Seller shall be entitled, if during the Consent Period it shall
cure such defect as shall have caused any such Stores to become an Excepted
Property as provided in this Agreement, to convey or lease (as the case may be)
such closed Stores to Buyer, and Buyer shall pay a purchase price for such
Property equal to the sum of (i) the product of (x) .21 multiplied by (y) the
1993 Sales for such Excepted Property and (ii) to the extent Seller has not
exercised its rights pursuant to the first sentence of Section 2.5(b), the
purchase price for the related Inventory, Supplies and Prepaid Expenses
calculated pursuant to Section 2.3 as of the Delayed Closing Date. If Seller
elects to continue to operate any Stores that become Excepted Properties, at
Seller's request, Buyer shall enter into a commercially reasonable supply
agreement to supply to such Excepted Properties at the invoice cost Buyer
charges to its own stores (including freight) the same merchandise supplied to
Buyer's own stores for a period not exceeding the Consent Period.
Section 2.6 INVENTORIES; COMPUTATION OF THE INVENTORY PURCHASE
PRICE. (a) The purchase price for the Inventory and the Supplies in the Stores
shall be determined as follows:
Percentage of Retail
or Store Cost
--------------------
*General Merchandise 59.52%
*Grocery 71.49%
*Cigarettes 59.52%
Seafood Store Cost
Floral Store Cost
Meat Store Cost
Produce Store Cost
Bakery Store Cost
Deli Store Cost
Pre-Pack Store Cost
Supplies Store Cost
Pharmacy Store Cost
*Liquor 59.52%
Out-of-Date Seasonal 50%
________________
* Denotes departments to be inventoried by Inventory Service. Categories
that are not marked with * will be inventoried by Seller's employees in the
presence of a representative of Buyer and in accordance with instructions
consistent with
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Seller's standard inventory policy (or, in the case of Supplies, according
to a procedure reasonably acceptable to Buyer and Seller).
"Store Cost" shall mean the delivered cost of an item being
inventoried from the vendor to the Stores directly or to Seller's or its
Affiliates' distribution centers (inclusive of vendor freight and delivery
costs imposed on Seller and its Affiliates), net of warehousing costs and
net of transportation costs from Seller's or its Affiliates' distribution
centers to the Stores.
"Retail" shall mean the price for an item defined in Seller's standard
inventory policy.
"Out-of-Date Seasonal" means items that are sold only at a time of the
year relating to a specific holiday or season (other than Thanksgiving and
Christmas, the items relating to which shall be valued at the same
percentage of Retail Cost reduction factor as general merchandise).
(b) A physical count of the Inventory and the Supplies shall be
made by Seller (with Buyer's representatives present) and, to the extent set
forth below, Washington Inventory Service, or to the extent Washington Inventory
Service is not able to perform such functions at all locations, an inventory
counting service jointly selected by Seller and Buyer (collectively, the
"Inventory Service"). The Inventory Service will inventory the general
merchandise, grocery, cigarettes and liquor at the Stores. A physical count of
the Inventory located at the Stores will be made beginning 2 days prior to the
Primary Closing Date, on the Primary Closing Date and ending 1 day after the
Primary Closing Date in accordance with a schedule mutually agreeable to Buyer
and Seller, in each case in accordance with instructions consistent with
Seller's standard inventory policy (or, in the case of Supplies, according to a
procedure reasonably acceptable to Buyer and Seller); PROVIDED, HOWEVER, that no
items shall be deemed "unsaleable" and no reduction shall be made in the amounts
specified in paragraph (a) above based upon the condition or salability of such
merchandise, except that date-coded merchandise which is out of date on the day
such inventory is counted and damaged and spoiled merchandise (which is not
returnable to the supplier for credit) shall not be counted or valued.
Consigned inventory shall be counted but not valued for purposes of calculating
the purchase price for the Inventory pursuant to this Section 2.6. Seller shall
have the right to sell Inventory at a discount prior to the Primary Closing
Date. Supplies in broken units shall be inventoried with the value provided in
paragraph (a) provided the inventory representatives
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reasonably believe such Supplies have some value. In connection with the
inventory of the Stores, a reconciliation shall be conducted that will reflect
the Inventory delivered to the Stores, or sold by the Stores, before or after
the Primary Closing Date and prior to or after such inventory counting, as the
case may be. Buyer assumes all liability and risk with respect to the sale, use
or non-use of the Inventory and the Supplies after Closing, and hereby reaffirms
that Seller is making no representation or warranty of any kind regarding the
condition, usefulness or fitness for any purpose of the Inventory or the
Supplies. Both parties shall have representatives present during the inventory
who shall ensure that all items have been inventoried and who shall approve in
writing all computations prior to leaving the premises. The parties agree to be
cooperative and reasonable in connection therewith. Buyer and Seller shall each
pay one-half of the cost of the Inventory Service.
Section 2.7 MERCHANDISE AND SUPPLIES IN TRANSIT. Merchandise and
Supplies ordered in the ordinary course of business, delivery of which is not
received on or prior to the Primary Closing Date by Seller, shall become the
property of Buyer. Buyer shall pay the vendor for the merchandise and supplies
in accordance with the invoice terms and conditions including any applicable
transportation charges, and Buyer shall not be entitled to reimbursement of all
or any portion of such payment from Seller. Seller shall reasonably cooperate
with Buyer with respect to Seller's orders for seasonal merchandise or other
orders which would be delivered to the Stores after the Primary Closing Date.
If Seller reasonably believes that all conditions to the Closing will be
satisfied, one week prior to the Primary Closing Date, Buyer shall have the
right at Buyer's expense to inspect all open order files for the Stores and
shall have the right at Buyer's expense to cancel orders for merchandise and
Supplies which would be delivered to the Stores after the Primary Closing Date,
if such orders can be cancelled without charge to Seller or if Buyer pays such
cancellation charge.
Section 2.8 PRORATIONS. (a) All rent (excluding percentage rent),
common area charges, utility charges (including, without limitation, those
related to Permits or Contracts), and other obligations, under the Contracts and
Leases assigned to Buyer hereunder shall be prorated on a daily basis as of
11:59 p.m on the day immediately preceding the Primary Closing Date
(collectively, the "Prorated Charges"). The Prorated Charges relating to the
period prior to the Primary Closing Date shall be allocated to and be the
obligation of Seller. The Prorated Charges relating to the period including and
subsequent
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to the Primary Closing Date shall be allocated to and be the obligation of
Buyer. On the Primary Closing Date, such prorations shall be based on actual,
current payments by Seller wherever possible and, to the extent such actual
amounts are not available, such prorations shall be estimated as of the Primary
Closing Date based on actual amounts for the most recent comparable billing
period; and Buyer and Seller shall settle and pay all amounts owing to each
other based thereon at the Closing. When the actual amounts become known, such
prorations shall be recalculated promptly thereafter by Buyer and Seller, and
Buyer and Seller shall make any additional payment or refund, as the case may
be, so that the corrected prorated amount shall have been paid by each of Buyer
or Seller, as the case may be, promptly, but in no event later than five
business days after calculation. For Excepted Properties conveyed to Buyer
after the Primary Closing Date, the Prorated Charges with respect to such
Excepted Property shall be prorated as of the Delayed Closing Date for such
Excepted Property.
(b) With respect to each of the Leases assigned to Buyer at the
Closing, Seller shall pay to Buyer, not later than ten days prior to the date
Buyer is obligated to pay percentage rent (if any) under such Lease, Seller's
prorated share of any percentage rent due for the lease year in which the
Primary Closing Date occurs. Seller's prorated share of percentage rent for any
Store shall be calculated by multiplying (i) a fraction, the numerator of which
is the amount of the relevant gross sales (or other relevant criterion) at such
Store from the first day of such lease year to but not including the Primary
Closing Date, and the denominator of which is the sum of Buyer's and Seller's
relevant gross sales (or other relevant criterion) at such Stores for the entire
lease year, by (ii) the amount of percentage rent due under the Lease for such
Store. Seller shall, not later than forty-five days prior to the date Buyer is
obligated to pay percentage rent for any Store, provide such information as
Buyer shall be required to submit to landlords under the Leases in connection
with the payment of percentage rent. Buyer shall promptly provide Seller with
copies of all percentage rent computations made pursuant to this Section, but in
no event shall such computation be provided to Seller later than ten days prior
to the date Seller is obligated to pay Buyer for its portion of such percentage
rent. For Excepted Properties conveyed to Buyer after the Primary Closing Date,
the prorated shares of any percentage rent with respect to such Excepted
Property shall be prorated as of the Delayed Closing Date for such Excepted
Property.
(c) Personal property taxes and real estate taxes and
assessments on the Assets for the tax year in which the
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Primary Closing Date falls (excluding any interest and penalties on, in lieu of
or for non-collection of or additions to any such taxes or assessments) shall be
prorated as of 11:59 p.m. on the day immediately preceding the Primary Closing
Date and Seller shall bear the portion thereof allocable to the portion of such
tax year ending at 11:59 p.m. on the day immediately preceding the Primary
Closing Date and Buyer shall bear the remainder. Any interest and penalties on,
in lieu of or for non-collection of or additions to any such taxes or
assessments shall be paid by the Person holding such Asset at the time such
interest or penalty accrues. If the tax statement for such tax year is in the
possession of the parties on the Primary Closing Date, payment of the prorated
Taxes shall be accomplished on such date. If the tax statement for the
applicable tax year is not in the possession of the parties on the Primary
Closing Date, the tax proration payment shall be based on the prior year's
Taxes. When the applicable tax statement is received, such prorations shall be
recalculated promptly thereafter by Buyer and Seller, and Buyer and Seller shall
make any additional payment or refund, as the case may be, so that the corrected
prorated amount shall have been paid by each of Buyer and Seller, as the case
may be, promptly, but in no event later than five business days after such
calculation. If the Seller or its Affiliates receive any tax bills relating to
the Assets after the Primary Closing Date, such tax bills shall be forwarded to
the Buyer within 20 days of receipt. For Excepted Properties conveyed to Buyer
after the Primary Closing Date, prorations with respect to any payments to be
made pursuant to this Section 2.8(c) with respect to such Excepted Property
shall be prorated as of the Delayed Closing Date for such Excepted Property.
Section 2.9 CONDEMNATION; DAMAGE OR DESTRUCTION. (a) In the event
of a loss, damage or destruction of any of the Stores or any of the other Assets
by fire or other casualty, Seller shall promptly notify Buyer of such loss,
damage or destruction (the repair or replacement of which has not been completed
prior to Closing), this Agreement shall not be terminated, and the Closing shall
proceed as herein provided (with no reduction in the Purchase Price with respect
to such loss, damage or destruction except as provided below). If the loss,
damage or destruction can be repaired or replaced, Seller shall have the option
either to (i) pay Buyer at Closing an amount equal to the good faith estimate by
a qualified contractor selected by Seller (subject to the consent of Buyer,
which consent shall not be unreasonably withheld) (the "Contractor") of the cost
of repair or replacement of such loss, damage or destruction (the "Estimate"),
and in such event Seller shall retain all insurance proceeds relating to such
casualty; or (ii) assign or pay to Buyer at Closing insurance proceeds payable
in
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respect of such loss, damage or destruction (including the amount of any
deductible or self-insurance) (the "Insurance Proceeds") equal to the Estimate,
or, if not equal to the Estimate, all Insurance Proceeds together with an amount
equal to (x) the Estimate MINUS (b) the Insurance Proceeds. If the loss, damage
or destruction cannot be repaired or replaced, such Property shall become an
Excepted Property.
(b) Seller shall promptly inform Buyer of a taking (or the
receipt of written notice regarding a threatened taking) of any of the Stores or
other Assets by condemnation or transfer in lieu thereof prior to the Primary
Closing Date. With respect to any condemnation proceedings pertaining to any of
the Stores, Seller shall assign Seller's claim under such condemnation
proceeding to Buyer if the condemnation award has not yet been made at the
Closing, and, if the condemnation award has been made to Seller after the date
of this Agreement, either (A) pay such "net award" to Buyer or (B) reduce the
purchase price payable for such Property by an amount equal to the "net award".
Seller agrees to keep Buyer informed of the existence and nature of any such
condemnation proceedings, and Seller shall not take any action materially
affecting the status of the same (including, without limitation, the amount of
the award) without the prior consent of Buyer, which consent shall not be
unreasonably withheld or delayed. As used in this paragraph (b), the phrase
"net award" shall mean all amounts paid by the condemning authority to Seller
after the date of this Agreement in connection with any condemnation proceeding
affecting a Property, less (A) the expense incurred by Seller in collecting such
amounts to the extent such amounts are not reimbursed by the condemning
authority, (B) that portion of any such award attributable to Seller's business
damages (as opposed to the value of such Property) incurred prior to the Primary
Closing Date and (C) that portion of any such award attributable to a temporary
taking which occurs prior to the Primary Closing Date. Notwithstanding anything
to the contrary contained in this paragraph (b) in the event Seller is obligated
to pay any portion of any such condemnation award to any third party pursuant to
any Monetary Encumbrances (or any agreement related thereto), Buyer shall not
receive such portion of such condemnation award, but the purchase price for the
applicable Property shall be reduced by an amount equal to the "net award" paid
by Seller to such third party pursuant to a Monetary Encumbrance in connection
with condemnation and, with respect to any remaining portion of such "net
award", Seller shall either (A) pay such portion of the "net award" to Buyer or
(B) reduce the purchase price payable for such Property by an amount equal to
such remaining portion of the "net award".
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Section 2.10 STORE CASH; PREPAID EXPENSES. Not less than five
business days prior to the Primary Closing Date, Buyer shall deliver to Seller a
written notice specifying the aggregate amount of Cash that Buyer requests be
retained at the Primary Closing Date at the Stores, and Seller shall use its
reasonable efforts to cause such amounts to be so retained. Not less than
fifteen days prior to the Primary Closing Date, Seller shall deliver to Buyer a
schedule of Prepaid Expenses relating to the Assets, in reasonable detail as is
available to Seller, showing the amortized amount of such Prepaid Expenses as of
the Primary Closing Date. On the Primary Closing Date, Seller shall deliver to
Buyer a certificate setting forth the aggregate amount of (i) the Cash at all of
the Stores, which amount shall be based upon a counting of such Cash performed
by Seller as of the close of business on the date prior to the Primary Closing
Date (with Buyer having the right to be present), and (ii) the Prepaid Expenses
relating to the Assets.
Section 2.11 LIKE-KIND EXCHANGE. The parties hereto agree that, no
later than two days prior to the Closing Date, Seller may elect, for the purpose
of treating all or part of the sale of Assets hereunder as a like-kind exchange
of property ("Section 1031 Treatment") under Section 1031 of the Internal
Revenue Code of 1986, as amended (the "Code"), that all or part of the cash
consideration payable to Seller hereunder shall be paid, in lieu thereof, by
Buyer to one or more qualified intermediaries, as defined in Treasury
Regulations Section 1.1031(k)-1(g)(4), to enable such qualified intermediary or
intermediaries designated by Seller to acquire property that is identified by
Seller on or before the day that is 45 days following the Closing Date and that
is transferred to Seller or an Affiliate on or before the day that is 180 days
following the Closing Date. Upon such election by Seller, Buyer agrees to
reasonably cooperate with Seller in taking such further actions that Seller
shall determine are reasonable and necessary in securing Section 1031 Treatment
for all or part of the Assets, including the further amendment to this
Agreement. Seller agrees to indemnify Buyer and hold Buyer harmless from any
cost, expense or liability arising from its cooperation. Seller and its
Affiliates shall be permitted to assign all or part of their rights under this
Agreement to one or more qualified intermediaries for the purpose of securing
Section 1031 Treatment hereunder, provided that such assignment shall in no way
release Seller from any of its agreements, representations, warranties and
indemnifications under this Agreement. The allocation agreed to by Buyer and
Seller pursuant to Section 7.5 hereof shall include a good faith estimate of the
fair market value of the Assets consisting of real property fee interests and
leasehold interests in reasonable detail, allocated among the Seller and its
Affiliates in
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accordance with their ownership of such interests. Seller's allocation of the
consideration pursuant to Section 1060 of the Code shall be appropriately
adjusted, in accordance with Treasury Regulations Section 1.1060-1T(b)(4), to
reflect Section 1031 Treatment available to Seller hereunder. In no event shall
the use of a qualified intermediary hereunder delay the Closing of the sale of
Assets under this Agreement, and in the event Seller does not arrange for the
use of a qualified intermediary, the Closing shall occur pursuant to the terms
of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
Section 3.1 INCORPORATION; GOOD STANDING. Acme is duly
incorporated and validly existing under the laws of Pennsylvania and has all
requisite corporate power and authority to own its properties and assets and to
carry on its business as it is now being conducted. Acme is in good standing
under the laws of Pennsylvania and is duly qualified to transact business in New
York and Pennsylvania. ASP is duly incorporated and validly existing under the
laws of Delaware and has all requisite corporate power and authority to own its
properties and assets and to carry on its business as it is now being conducted.
ASP is in good standing under the laws of Delaware and is duly qualified to
transact business in New York and Pennsylvania. ASRC is duly incorporated and
validly existing under the laws of Pennsylvania and has all requisite corporate
power and authority to own its properties and assets and to carry on its
business as it is now being conducted. ASRC is in good standing under the laws
of Pennsylvania and is duly qualified to transact business in New York and
Pennsylvania.
Section 3.2 AUTHORIZATION. All requisite corporate action has been
taken by Seller and its Affiliates to authorize the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby by
Seller. This Agreement has been duly executed and delivered by Seller and
constitutes the valid and binding obligation of Seller (assuming this Agreement
is a valid and binding obligation of Buyer), enforceable in accordance with its
terms, subject to bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights and general equitable principles (whether
enforcement is sought in equity or at law). Except for consents required to
assign the Leases or as disclosed in Schedule 3.2, neither the execution and
delivery of this Agreement by Seller
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nor the consummation by Seller or any of its Affiliates of the transactions
contemplated by this Agreement will (i) violate any provision of the articles or
certificate of incorporation or by-laws of Seller or any of its Affiliates, (ii)
to Seller's knowledge, conflict with or result in a breach of any terms and
provisions of, or constitute a default under, any indenture, mortgage, contract
or other agreement to which Seller or its Affiliates is a party or by which
Seller or any of its Affiliates are bound that would materially interfere with
the consummation of the Asset Purchase or (iii) violate the terms of any option
to purchase, right of first refusal or other similar contractual right to
purchase any or all of the Stores in favor of any third party (other than an
Affiliate of ASC or Seller).
Section 3.3 TITLE. Subject only to the Permitted Exceptions and
the Monetary Encumbrances, Seller or one or more of its Affiliates have, or will
on the Primary Closing Date have, fee simple title to, or valid leasehold
interests in, as the case may be, all of the Stores, free and clear of all
mortgages, pledges, liens, encumbrances or security interests. Except as set
forth on Schedule 3.3 or in Seller's property and lease files, to the knowledge
of Seller neither Seller, nor any of its Affiliates, nor the landlord, is in
material default in the performance of any of its obligations under the Leases
or the Monetary Encumbrances nor has Seller received any notice of such default;
PROVIDED, however, that this representation shall not survive the Primary
Closing Date with respect to any Lease if Seller shall have delivered to Buyer
on the Primary Closing Date an estoppel certificate from the landlord that no
defaults exist with respect to such lease. To the knowledge of the officer of
Seller or any of its Affiliates responsible for the maintenance of such
corporation's property files, (i) Seller has delivered to Buyer, or otherwise
made available, originals or true copies of all deeds, leases and subleases
relating to the Stores and (ii) subject to Section 2.9, except as shown on
Schedule 3.3, there are no pending or threatened condemnation proceedings
relating to any Stores. As of the date of this Agreement, there are no
amendments to any lease of a Property to which Seller or its Affiliates is a
party that are binding on Seller or its Affiliates and that are not included in
the property and lease files made available to Buyer or listed on Schedule 2.2B,
and as of the Primary Closing Date there will be no such amendments that are not
included in such files, of public record or in Buyer's title reports, except in
each case for any amendments which would not materially adversely affect Buyer
as lessee or as to which Seller has agreed to indemnify Buyer; PROVIDED,
however, that this representation shall not survive the Primary Closing Date (or
such later date the certificate hereinafter described is delivered to Buyer)
with respect to any lease if Seller shall
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have delivered to Buyer on the Primary Closing Date (or such later date the
certificate hereinafter described is delivered to Buyer) certificate from the
landlord for such Property identifying all amendments to such lease and all such
amendments identified with respect to such lease correspond with the amendments
provided to Buyer in Seller's property and lease files pursuant to this Section
3.3 except for such amendments that do not materially adversely affect Buyer as
lessee or as to which Seller has agreed to indemnify Buyer. If on or prior to
the Primary Closing Date, Buyer or Seller shall discover an amendment to any
lease of a Property to which Seller or its Affiliates is a party that (i) is not
a Permitted Exception and (ii) would materially adversely affect Buyer as lessee
thereunder, such Property shall not be designated an Excepted Property, but
Seller shall indemnify Buyer against the direct costs of such previously
undisclosed amendment, subject to the provisions of Article XI hereof. Each
party hereto shall give written notice to the other party promptly after the
discovery of any such amendment. One or more of Seller and Seller's Affiliates
have good title to the Inventory, the Supplies, and the Equipment to be
transferred hereunder on the Primary Closing Date free and clear of all liens
and encumbrances except for property taxes not yet due and payable. For Stores
5410 (Elmira), 5524 (Ashland) and 5531 (Berwick), Seller will in each case
either (i) provide evidence that the lease's terms have been duly renewed,
(ii) obtain an acknowledgement from Seller's landlord, in form reasonably
satisfactory to Buyer, that the subject lease term has been renewed, or
(iii) indemnify Buyer against any failure to renew.
Section 3.4 CONTRACTS. Except for the Monetary Encumbrances, the
Leases, the Collective Bargaining Agreements, purchase orders or similar
agreements for merchandise, or Contracts that Seller agrees to remove prior to
the Primary Closing Date or agrees to indemnify Buyer against any Covered
Liabilities with respect thereto, or as disclosed in Schedule 3.4, and except
for any Contracts entered into after the date hereof with Buyer's consent, there
are no Contracts to which Seller is a party with respect to the Stores that (i)
involve payments in excess of $50,000 in any one year that cannot be terminated
prior to an expenditure of $50,000 or less, (ii) that cannot be terminated
without penalty prior to December 31, 1994, or (iii) are continuity agreements
or consignment agreements, in each case which apply to more than one Store. To
Seller's knowledge, Seller has provided Buyer true and complete copies of all
written Contracts reflected on Schedule 3.4, except for any such items (i) the
failure to so provide would not materially change the contract to the detriment
of Buyer, (ii) as to which Seller cures or removes the obligation prior to
Closing, or (iii) as to which Seller agrees to indemnify Buyer.
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Section 3.5 LITIGATION. To Seller's knowledge, except as set forth
in Schedule 3.5, there are no actions, suits or proceedings pending, and Seller
has not received written notice of any threatened actions, suits or proceedings,
which could reasonably be expected to materially adversely affect Seller's or
Seller's Affiliates' ownership or title to the Assets, result in any material
adverse change in the condition or value of the Assets taken as a whole or
prevent the Closing.
Section 3.6 LABOR UNIONS. Except as is set forth on Schedule 3.6,
no labor union has been certified or designated by the National Labor Relations
Board as bargaining agent for any of the employees of Seller at any of the
Stores. Seller has delivered to Buyer true, correct and complete copies of the
collective bargaining agreements (together with any and all amendments thereto)
set forth on Schedule 3.6 as in effect on the date hereof.
Section 3.7 STORAGE TANKS AND HAZARDOUS MATERIALS. Except as set
forth in Schedule 3.7 or as disclosed in the Phase I Inspection conducted by
Buyer pursuant to Section 5.11, to the knowledge of the President and Controller
of Acme, Barbara Russell and Phil Pichulo (collectively, the "Responsible
Individuals"), there are no underground storage tanks (exclusive of septic tanks
and drainage retention tanks) beneath any of the Stores. To the knowledge of
the Responsible Individuals as of the date of this Agreement, except as set
forth in Schedule 3.7, (A) there is no contamination from Hazardous Materials
located upon any of the Stores that requires remediation based on the Least
Stringent Remediation Standard under all Environmental Laws; and (B) neither
Seller nor its Affiliates have received any written notice of violation of
Environmental Laws from any governmental authority with respect to any violation
at any of the Stores that has not been fully complied with. Except as set forth
on Schedule 3.7, there are no liabilities and obligations under Environmental
Laws actually caused prior to the Primary Closing Date by Seller, its employees,
agents, licensees operating in the Stores, contractors or subcontractors for
releases of Hazardous Materials at the Stores (other than the Owned Properties).
Section 3.8 SCHEDULES AND EXHIBITS. Disclosure of any fact or item
in any Schedule or Exhibit or Seller's property and lease files furnished to
Buyer hereto referenced by a particular paragraph or section in this Agreement
shall, should the existence of the fact or item or its contents be relevant to
any other paragraph or section, be deemed to be disclosed with respect to that
other paragraph or section whether or not an explicit cross-reference appears.
Matters reflected in the
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schedules and exhibits hereto are not necessarily limited to matters required by
the Agreement to be disclosed herein or therein. Such additional matters are
provided for information purposes only.
Section 3.9 SALES AND PAYROLL INFORMATION. The 1993 Sales figures
for each Store attached as Schedule 1.1A and the historical payroll information
for selected Stores provided to Buyer by letters of Messrs. Walt Rubel and Greg
Spencer, respectively, were compiled by Seller in the ordinary course of
business for internal use consistent with Seller's past practice. The 1993
sales figures for each Store attached as Schedule 1.1A are accurate in all
material respects (which, for purposes of this representation only, means a
margin of error of plus or minus 5% per Store). Since March 31, 1994, except in
the ordinary course of Seller's business, there has not been any increase in the
salaries, wages or benefits paid or payable under Seller's employee benefit
plans, policies and programs to those Seller's Employees not covered by the
Collective Bargaining Agreements.
Section 3.10 ERISA.
(a) ABSENCE OF LIENS. No asset of the Seller or any Affiliate,
which is to be acquired by Buyer pursuant to this Agreement, is now or will, as
of the Closing Date, be subject to any lien or security interest under Code
Section 401(a)(29), ERISA Section 302(f) or Code Section 412(n), Code Section
412(f), ERISA Section 4068 or arising out of any action filed under ERISA
Section 4301(b).
(b) MULTIEMPLOYER PLAN WITHDRAWAL LIABILITIES. Based solely on
the most recent actuarial reports furnished to Seller by any multiemployer plan,
within the meaning of ERISA Section 4001(a)(3), covering any of Seller's
Employees employed at, or with respect to, the Stores, no withdrawal liability
under ERISA Section 4201 would result from the transactions contemplated by this
Agreement if the transactions had occurred between October 1, 1993 and September
30, 1994.
Section 3.11 LIMITATIONS ON SELLER'S REPRESENTATIONS. Buyer hereby
affirms and acknowledges that it has completed to its complete satisfaction its
due diligence investigation and review of the Assets. All of the Assets are
purchased by Buyer and sold by Seller and its Affiliates in an "AS IS"
CONDITION, "WITH ALL FAULTS, INCLUDING BUT NOT LIMITED TO BOTH LATENT AND PATENT
DEFECTS". EXCEPT AS EXPRESSLY SET FORTH TO THE CONTRARY IN THIS AGREEMENT, NO
WARRANTIES, EXPRESS OR IMPLIED, ARE MADE BY SELLER OR ANY OF ITS AFFILIATES
CONCERNING SUCH ITEMS, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR
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A PARTICULAR PURPOSE. Buyer hereby affirms that Seller, its Affiliates, and the
agents, employees and/or attorneys of each thereof have not made, nor has Buyer
relied upon, any representation, warranty or promise with respect to the Assets
or any other subject matter of this Agreement except as expressly set forth in
this Agreement. Without limitation, Buyer acknowledges that, except as
expressly set forth to the contrary in this Agreement, no warranties or
representations, expressed or implied, have been made by Seller, its Affiliates,
and the agents, employees and/or attorneys of each thereof, or will be relied
upon, and Buyer agrees to release Seller for any claims with respect to the
general plan designation, zoning, value, use, tax status or physical condition
of the Assets, or any part thereof, including, without limitation, the flood
elevations, drainage patterns and soil and subsoils composition and compaction
level, existence of Hazardous Materials, asbestos and other conditions at the
Stores, or with respect to the accuracy of any boundary survey or other survey,
title report or commitment, soil report or any other plans or reports.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
Section 4.1 INCORPORATION; GOOD STANDING. Buyer is a corporation
duly incorporated, validly existing and in good standing under the laws of
Delaware and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted. On
the Primary Closing Date, Buyer will be duly qualified to transact business in
New York and Pennsylvania.
Section 4.2 AUTHORIZATION. All requisite corporate action has been
taken by Buyer to authorize the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby by Buyer. This Agreement
has been duly executed and delivered by Buyer and constitutes the valid and
binding obligation of Buyer (assuming this Agreement is a valid and binding
obligation of Seller), enforceable in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights and general equitable principles (whether enforcement is
sought in equity or at law). Neither the execution nor delivery of this
Agreement by Buyer nor the consummation by Buyer of the transactions
contemplated by this Agreement will (i) violate any
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provision of Buyer's Certificate of Incorporation or By-Laws or (ii) to Buyer's
knowledge, conflict with or result in a breach of any terms and provisions of,
or constitute a default under, any indenture, mortgage, contract or other
agreement to which Buyer or any of its Affiliates is a party or by which Buyer
or any of its Affiliates are bound that could materially interfere with the
consummation of the Asset Purchase.
Section 4.3 LITIGATION. To Buyer's knowledge, there is no action,
suit or proceeding pending, and Buyer has not received written notice of any
threatened actions, suits or proceedings, which could reasonably be expected to
result in any material adverse change in the condition of Buyer or prevent the
Closing.
Section 4.4 APPROVALS, CONSENTS, ETC. Except for filings under the
HSR Act, no consent, authorization, waiver by or filing with any governmental
agency is required in connection with the execution or performance of this
Agreement by Buyer or the consummation by Buyer of the transactions contemplated
hereby.
Section 4.5 FINANCING; INFORMATION REGARDING BUYER. Buyer
acknowledges and agrees that its obligations to consummate the transactions
contemplated by this Agreement are not subject to or conditioned upon obtaining
financing. Buyer represents and warrants that no material adverse change in its
financial condition, results of operations or properties taken as a whole has
occurred since January 29, 1994.
ARTICLE V
COVENANTS OF SELLER AND BUYER
Section 5.1 ACCESS TO EMPLOYEES; NOTIFICATION OF BREACHES. (a) It
is understood and agreed that neither Buyer nor its representatives shall
contact any of the officers or employees of Seller or its Affiliates in
connection with the transactions contemplated by this Agreement, whether in
person or by telephone, mail or other means of communication, without the
specific prior authorization of such representatives of Seller as Seller may
designate in writing, which authorization shall not be unreasonably withheld.
If, as of the date hereof or at any time hereafter, Buyer is aware of or
discovers any breach of any representation or warranty contained in this
Agreement or any circumstance or condition that upon Closing could constitute
such a breach, Buyer covenants that it will promptly so inform Seller in
writing.
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(b) Buyer acknowledges that the covenants of Seller set forth in
this Section 5.1(b) are intended only to assist Buyer with an orderly transition
of the operation of the Stores. Within ten (10) days after execution of the
Agreement, Seller shall deliver to Buyer an SKU list of all items sold in each
Store in material amounts; provided, however, that such list shall not include
cost or retail price data. At least seven (7) days prior to the Primary Closing
Date, Seller shall deliver to Buyer a current SKU list of all items sold in each
Store in material amounts, which list shall include retail price per item data.
As soon as practicable after signing of this Agreement, and in any event within
five (5) business days after the signing of this Agreement, at times and
locations (which Seller may require to be a location other than the Stores)
mutually agreed upon by Seller and Buyer, Seller will cause its appropriate
management information systems representatives to meet with the appropriate
management information systems representatives of Buyer to discuss the software
portfolio of Seller's point-of-sale and other Store equipment; provided,
however, that, for purposes of such discussions, Seller shall either (i) provide
a representative(s) to demonstrate to Buyer the point-of-sale systems in the
Stores or (ii) make other comparable arrangements to demonstrate to Buyer the
point-of-sale systems in the Stores. Seller also agrees to arrange, at times
mutually convenient to Buyer and Seller, meetings with Seller's Employees who
may become Continuing Employees where representatives of Seller and Buyer may
jointly communicate the transactions contemplated by this Agreement. As soon as
practicable after the execution of this Agreement, Seller shall use reasonable
efforts to make its merchandising/marketing personnel available to Buyer for
purposes of discussing transition arrangements with respect to continuity
agreements and items of inventory covered by purchase orders relating to the
Stores and other stores of Seller.
(c) Subject to the provisions of Section 5.6, the existence of
this Agreement, Buyer's interest in purchasing the Assets and any information
provided to Buyer or its representatives or developed pursuant to this Agreement
shall be held by Buyer and its representatives in accordance with, and shall be
subject to the terms of, the Confidentiality Agreement, which is hereby
incorporated in this Agreement as though fully set forth herein and in
accordance with such other terms and conditions as may otherwise be agreed upon
by the parties; PROVIDED, HOWEVER, that the provisions of this Section 5.1(c)
shall expire following the Closing except with respect to Information (as such
term is defined in the Confidentiality Agreement) relating to the Excluded
Assets and as provided in Section 5.11.
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(d) Buyer shall hold all of the Books and Records existing on
the Primary Closing Date in accordance with Buyer's normal record retention
policy from time to time in effect (copies of which will be provided to Seller),
and Buyer shall not destroy or dispose of any thereof except in accordance with
such policy and then only after having given Seller ten (10) days advance notice
and the opportunity to take possession of such Books and Records. Following the
Primary Closing Date, Buyer shall afford ASC, Seller, their accountants, counsel
and other representatives, during normal business hours, upon at least 48 hours'
notice, full access to the Books and Records (including the right to copy such
materials at Seller's expense) and to the Buyer's employees to the extent that
such access may be requested (without unreasonably disrupting Buyer's personnel
and operations) for any legitimate purpose without charge to ASC or Seller
(other than for Buyer's reasonable out-of-pocket expenses); PROVIDED, HOWEVER,
that nothing herein shall limit or waive any of ASC's or Seller's rights of
discovery.
Section 5.2 REASONABLE EFFORTS; OBTAINING CONSENTS. (a) Subject to
the terms and conditions herein provided, each of Seller and Buyer agrees to use
all reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective as promptly as practicable the transactions contemplated by this
Agreement and to cooperate with the others in connection with the foregoing,
including using all reasonable efforts (i) to obtain all necessary Consents and
the estoppel certificates requested by Seller (provided that neither Seller nor
Buyer shall be obligated to pay any consideration therefor or assume any
liability in connection therewith except as expressly provided in this
Agreement), (ii) to obtain all Consents that are required to be obtained under
any federal, state or local law or regulation, (iii) to lift or rescind any
injunction or restraining order or other order adversely affecting the ability
of the parties hereto to consummate the transactions contemplated hereby, (iv)
to effect all necessary registrations and filings including, but not limited to,
filings under the HSR Act and submissions of information requested by
governmental authorities, and (v) to fulfill all conditions to this Agreement.
Each of Seller and Buyer further covenants and agrees to use all reasonable
efforts to prevent the entry, enactment or promulgation of any threatened or
pending preliminary or permanent injunction or other order, decree or ruling or
statute, rule, regulation or executive order that would adversely affect the
ability of the parties hereto to consummate the transactions contemplated
hereby. Except as otherwise specified herein, and except for the New York Real
Property Transfer Gains Tax Buyer shall pay all registration, filing, license,
permit or similar
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fees and charges in connection with the transactions contemplated by this
Agreement (other than those related to Monetary Encumbrances) and the cost of
all title insurance, title reports, engineering and building inspections and
property surveys and other tests or reports obtained by Buyer.
(b) Subject to Section 2.2(a)(ix), each of Buyer and Seller
agrees to use its reasonable efforts to bring about the transfer to Buyer of all
Permits so that such transfer may be accomplished on or before the Primary
Closing Date. Buyer shall use its reasonable efforts to file all necessary
documentation with the appropriate authorities as soon as practicable to obtain,
prior to the Closing, all permits, licenses, authorizations and approvals
required by all governmental agencies with respect to the Assets and necessary
to conduct the operation of the Stores without any guaranty or liability of
Seller or any of its Affiliates with respect thereto. In the event that said
licenses and permits shall not have been issued by Closing, Seller agrees to
permit, to the extent permitted and allowed by law, Buyer to operate at each of
the Stores under those permits of Seller for a period of up to thirty days from
the Primary Closing Date until the licenses and/or permits for which Buyer has
applied are issued (which period shall be extended up to ninety days by Seller
at the request of Buyer so long as Buyer is diligently pursuing the issuances of
such licenses and permits); PROVIDED, HOWEVER, that Buyer agrees to indemnify
and hold Seller harmless from and against any and all Covered Liabilities
arising out of or resulting from Buyer's use of the applicable permits of
Seller; and PROVIDED, FURTHER, that Buyer agrees to use only qualified and
licensed personnel as may be required by federal, state and local laws or as may
be required by the relevant licensing agency.
Section 5.3 REGULATORY MATTERS. (a) Seller and Buyer shall
promptly file or cause to be filed with the Antitrust Division of the United
States Department of Justice and the Federal Trade Commission pursuant to the
HSR Act all requisite documents and notifications in connection with the
transactions contemplated by this Agreement. Buyer shall pay the filing fee
incurred in connection with such filings under the HSR Act. Each of Seller and
Buyer shall promptly inform the other of any material communication from the
Federal Trade Commission, the Department of Justice or any other governmental
authority regarding any of the transactions contemplated hereby. If either
Seller or Buyer or any Affiliate thereof receives a request for additional
information or documentary material from any such government or authority with
respect to the transactions contemplated hereby, then such party will endeavor
in good faith to comply as soon as reasonably practicable and after
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consultation with the other party, with such request. Buyer and Seller will
each promptly advise and consult with the other in advance in respect of any
offers, proposals, understandings, undertakings or agreements (oral or written)
which Buyer or Seller proposes to make or enter into with or has received from,
and Buyer and Seller shall each have the right to accompany the other to any
meetings with any of, the Federal Trade Commission, the Department of Justice or
any other government or governmental authority in connection with the
transactions contemplated hereby.
(b) Buyer shall use its reasonable efforts to resolve such
objections, if any, as may be asserted with respect to the transactions
contemplated hereby under any Antitrust Laws. If any suit is instituted (or
threatened) challenging any of the transactions contemplated hereby as violative
of any Antitrust Law or if Buyer is required or given the opportunity to resolve
objections of any government or governmental authority under the Antitrust Laws,
Buyer shall use its reasonable efforts to take action in order to avoid the
entry of, or to effect the dissolution of, any injunction, temporary restraining
order or other order that has the effect of preventing the consummation of any
of such transactions. "Reasonable efforts" as used in the immediately preceding
sentence shall include (without limitation) (i) Buyer agreeing to acquire the
Stores from Seller and thereafter divest stores owned by Buyer or hold separate
stores owned by Buyer, pending required divestitures, as may be required (A) by
the applicable government or governmental authority (including, without
limitation, the Antitrust Division of the United States Department of Justice,
the Federal Trade Commission and state attorneys general) in order to resolve
objections that such government or authority may have to such transactions under
the Antitrust Laws, or (B) by any court or similar tribunal and (ii) entering
into such other agreements, orders or decrees with such government or
governmental authority ancillary to such divestitures which are acceptable in
Buyer's reasonable judgment. The entry by a court, in any suit brought by a
private party or governmental authority challenging the transactions
contemplated hereby as violative of any Antitrust Law, of an order or decree
permitting the transactions contemplated hereby shall not be deemed a failure to
satisfy the conditions specified in Sections 8.2, 8.3, 9.2 or 9.3.
Notwithstanding anything in this Section 5.3(b) to the contrary, however,
neither Seller nor any of its Affiliates shall be obligated under this Agreement
to divest or hold separate or, except as otherwise provided in this Agreement,
to otherwise take or commit to take any action that limits Seller's or any of
its Affiliates' freedom of action with respect to any of the Assets, or any of
its other assets or businesses. After the Primary Closing Date, Buyer shall
indemnify Seller and
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its Affiliates for any Covered Liabilities arising from any alleged violation of
the Antitrust Laws in connection with Buyer's acquisition of the Assets.
(c) Notwithstanding anything in Section 5.3(b), the Purchase
Price shall not be adjusted for any actions taken by Buyer pursuant to Section
5.3(b) including the divesting of any stores owned by Buyer or Seller (all such
divested stores, the "Divested Stores") unless, to comply with Section 5.3(b)
hereof, Buyer is required to divest five or more Divested Stores. If Buyer is
required to divest five or more Divested Stores, the Purchase Price shall be
reduced as follows: (i) for the first four Divested Stores, by zero ($0); (ii)
for the fifth Divested Store, the product of (x) the Average 1993 Sales Per
Divested Store (as defined below) multiplied by (y) .11; (iii) for each of the
sixth and seventh Divested Stores, the product of (x) the Average 1993 Sales Per
Divested Store multiplied by (y) .21; (iv) for each of the eighth, ninth, tenth
and eleventh Divested Stores, the product of (x) the Average 1993 Sales Per
Divested Store multiplied by (y) .31; and (v) for each Divested Store
thereafter, the product of (x) the Average 1993 Sales Per Divested Store
multiplied by (y) .21. For purposes of this Section 5.3(c), "Average 1993 Sales
Per Divested Store" shall mean the quotient of (a) the aggregate 1993 Sales for
all Divested Stores divided by (b) the total number of Divested Stores.
Examples of how such Purchase Price reduction would operate is set forth on
Schedule 5.3 hereto. For the purposes of this Section 5.3(c), (a) the 1993
Sales for a Divested Store which is owned by the Buyer shall equal the 1993
Sales for the Store owned by Seller (whether or not it is a Divested Store)
which is located closest to the Divested Store owned by Buyer, and (b) in the
event actual 1993 Sales for any individual Divested Store exceeds $12 million,
1993 sales for such Divested Store shall be deemed to equal $12 million.
(d) Buyer shall have the right to retain all proceeds from the
sale of Stores required to be divested.
Section 5.4 FURTHER ASSURANCES. Each of Seller and Buyer agrees
that, from time to time, whether before, at or after the Closing, it shall
execute, deliver and record such further instruments of conveyance and transfer
and take such other action as may be necessary or desirable to carry out the
purposes and intents of this Agreement.
Section 5.5 CONDUCT OF BUSINESS. (a) Buyer acknowledges that the
transaction contemplated hereby is a sale of assets and does not include the
sale of any goodwill. Buyer acknowledges that, in anticipation of the proposed
sale of the
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Stores to Buyer, Seller is not obligated to operate the Stores in its or their
customary fashion, and may make operational changes to its business in the
Stores, including, without limitation, changes in check cashing policies, the
minimization of capital expenditures, the discontinuance of the sale of gift
certificates, the discontinuance of circular and other advertising after October
31, 1994 and the failure to replace equipment. Notwithstanding the foregoing,
Seller agrees (i) to maintain reasonably comparable hours of operation in the
Stores except as a result of security concerns, material changes in sales volume
or as required by law; (ii) to maintain a level of newspaper advertising
pertaining to the Stores reasonably comparable to that maintained by Seller
during the thirty-day period immediately preceding the date of this Agreement;
(iii) to exercise good faith in pricing merchandise between the date of this
Agreement and the Primary Closing Date, including not to increase such prices
other than in Seller's ordinary course of business and consistent with Seller's
normal pricing strategy; (iv) subject to Section 2.7, maintain reasonably
comparable overall levels of Inventory located on the Store shelves; (v) to
perform customary maintenance on Stores and Equipment in accordance with
Seller's past practices; (vi) without the consent of Buyer (which shall not be
unreasonably withheld), not to (A) enter into any material amendment to any of
the Leases or any of the agreements affecting Owned Properties, or (B) enter
into any Contract (excluding the purchase of merchandise in the ordinary course
of business) that provides for payments in excess of $25,000 per obligation,
except such agreements, contracts or commitments as Buyer will have no
obligations with respect to after the Closing; (vii) not to increase the
compensation or benefits payable to Seller's Employees at the Stores except in
the ordinary course of business, consistent with Seller's past practice and
(viii) not to remove or transfer Equipment (it being acknowledged and agreed
that Seller shall not be obligated to replace any Equipment). Notwithstanding
the foregoing, it is understood and agreed that 2 days prior to the Closing,
Seller shall discontinue shipment of Private Label Items to the Stores and 2
days prior to the Primary Closing Date Seller may discontinue all shipments to
the Stores.
(b) In the event Buyer believes Seller is not in compliance with
the terms set forth in this Section 5.5, Buyer shall provide Seller with written
notice of such non-compliance, whereupon Seller shall have ten days from the
date of receipt of such notice to comply. If the Closing shall occur, Buyer
shall be deemed to have waived any and all claims it may have against Seller
pursuant to this Section 5.5, irrespective of whether Buyer shall have given
Seller notice (and whether or not Seller shall have cured) pursuant to the
preceding sentence, and whether
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or not Buyer has actual knowledge of such claims or facts giving rise to such
claims.
(c) Buyer acknowledges that Seller shall not be obligated to
deal with anyone other than Buyer as the Buyer of the Stores in connection with
the sale thereof, including, but not limited to, any operators, subtenants or
assignees of Buyer who might acquire an interest in the Stores from Buyer. In
no event shall Seller be liable to such third parties in connection with any
aspect of the transaction contemplated by this Agreement, nor shall any third
party be or become a beneficiary of such rights, nor shall Buyer act or hold
itself out as, nor is Buyer, Seller's agent, in any activity, including, but not
limited to, dealings with any such third parties.
Section 5.6 PUBLIC ANNOUNCEMENTS. From the date hereof until the
Primary Closing Date, Seller and Buyer shall obtain the prior consent of the
other party before issuing, or permitting any agent or Affiliate to issue, any
press releases or otherwise making or permitting any agent or Affiliate to make,
any public statements with respect to this Agreement and the transactions
contemplated hereby. Notwithstanding the foregoing, (i) either party may issue
a press release or make a public statement required to be issued or made under
applicable law without the prior consent of the other party, provided that such
party shall consult with the other party concerning the contents of such release
or statement prior to issuing any such press release or making any such public
statement and (ii) the foregoing shall not prevent Buyer from having discussions
regarding the transactions contemplated hereby with securities analysts or
representatives of institutional financing sources; provided, however, that in
no event shall Buyer make disclosures pursuant to the foregoing clause (ii) that
expand upon in any material respect or are inconsistent with any statement
required by law to be made in (A) any amendment to the Registration Statement on
Form S-3, Registration Number 33-51213 or (B) the Form 8-K filed in respect of
the transactions contemplated hereby.
Section 5.7 GUARANTIES. Buyer shall cooperate with Seller to cause
Buyer to be substituted in all respects for Seller or any of its Affiliates,
effective as of the Primary Closing Date (or, with respect to any Excepted
Property, the conveyance date for such Excepted Property), in respect of all
obligations of Seller and any such Affiliate under each of the lease guaranties,
equipment leases and other guaranties obtained by Seller or any of such
Affiliates relating to the Assets, which lease guaranties, equipment leases and
other guaranties are set forth in Schedule 5.7 (collectively, the "Guaranties")
and to
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cooperate with Seller (without being required to incur expenses) in seeking
releases from third parties of the obligations of Seller and its Affiliates
under the Leases or other Assets.
Section 5.8 BULK TRANSFER LAWS. Buyer waives the requirements of
any laws with respect to bulk transfers. In consideration thereof, Seller
agrees to and shall indemnify, defend and hold Buyer harmless from any and all
liabilities resulting from the claims of creditors of Seller or its Affiliates
arising out of or connected with Seller's or its Affiliates' failure to comply
with the requirements of any laws relating to bulk transfers.
Section 5.9 ACCOUNTS RECEIVABLE; CONTRACTS. Buyer shall use all
reasonable efforts on behalf of Seller to collect accounts receivable for the
Stores which are owed to Seller or its Affiliates at the Primary Closing Date in
accordance with Buyer's practices and procedures with respect to Buyer's
accounts receivable (without instituting legal proceedings or incurring out-of-
pocket expenses). Seller shall furnish Buyer with information relating to such
accounts receivable that is in Seller's possession after the Primary Closing
Date. Buyer shall promptly forward to Seller within 10 days of receipt any
monies paid to Buyer on all accounts receivables, or claims not constituting
accounts receivable, which are owned by Seller. Buyer shall furnish information
that Seller may reasonably request from time to time with respect to such
accounts or claims. Buyer shall fully and promptly perform all of the
obligations of Seller under the Leases and Contracts relating to the period from
and after the Primary Closing Date (or, with respect to any Excepted Property,
the Delayed Closing Date for such Excepted Property).
Section 5.10 USE OF NAMES. (a) Except as provided in Section
5.10(b) from and after the earlier of (i) six months from the Primary Closing
Date or (ii) exhaustion of supplies thereof existing on the Primary Closing
Date, Buyer shall not, nor shall it permit any of its Affiliates to, use any
name, phrase or logo incorporating "American Stores", "Acme", "Skaggs", "Jewel
Osco", "Osco", "Alpha Beta", "Skaggs Alpha Beta", or the name of any Affiliate
of Seller or any names or logos used exclusively by Seller or any of its
Affiliates (including, without limitation, "Econo Buy", "Skaggs", "Skaggs
Brand", "Skaggs Drug Store" and "Sav-On") in or on any labels on products sold
by it or on any of its shopping bags or other supplies (collectively "Private
Label Supplies"). Buyer agrees that it will not denigrate any of such foregoing
names in a manner that could have an adverse effect on the goodwill associated
with Seller's or its Affiliates' use of such names. Buyer shall not use any
preprinted forms, including,
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without limitation, printed purchase orders and sales, maintenance and license
agreements, containing the foregoing names and shall dispose of such materials
promptly after the Primary Closing Date to the extent not removed by Seller.
(b) Buyer shall have the right to continue to sell Private Label
Items for a period not to exceed six months after the Primary Closing Date.
Seller shall indemnify and hold Buyer harmless from and against any Covered
Liabilities attributable to any alleged trademark infringement with respect to
such Private Label Items. Buyer shall have a nonassignable, limited license
until the date on which all such Private Label Items have been sold to use names
featured on Private Label Items, but only for the purpose of advertising,
displaying and selling such Private Label Items at the Stores. Such Private
Label Items shall be sold only to retail customers at the Stores or to Seller or
its Affiliates (but nothing in this Agreement is intended to impose any
obligation on the part of Seller or its Affiliates to purchase such Private
Label Items), and shall not be sold to any other party, including retailers or
other merchants.
Section 5.11 ENVIRONMENTAL INSPECTIONS. Buyer has heretofore
engaged RUST Environment & Intrastructure, Inc. (the "Phase I Consultant") to
conduct a Phase I Environmental Investigation of the Owned Properties for the
possible presence of Hazardous Materials and friable asbestos (the "Phase I
Inspection"). Seller shall reimburse Buyer for 50% of the fees and costs of the
Phase I Consultant paid by Buyer. Buyer shall cause Seller to have full and
complete access to the Phase I Consultant and all reports, documents, data,
findings, conclusions, recommendations and other information relating to the
Phase I Inspection, whether oral or written, and, in the event Closing shall not
occur under this Agreement for any reason, all such reports, documents, data,
findings, conclusions, recommendations and other information shall become and
remain the sole property of Seller. All information (whether in written or oral
form) in connection with the Phase I Inspection and all documents or reports,
including without limitation, the findings, conclusions or recommendations
contained therein, shall be treated as Information under the terms of the
Confidentiality Agreement. Buyer has determined that no further environmental
investigations (or other environmental due diligence) of the Stores are
necessary.
Section 5.12 GIFT CERTIFICATES. Seller shall reimburse Buyer for
all of Seller's or its Affiliates' gift certificates which are used at the
Stores after the Primary
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Closing Date within 10 days of Seller's receipt of such gift certificates from
Buyer.
Section 5.13 INSURANCE REQUIRED AFTER CLOSING.
(a) Buyer covenants and agrees that, from and after the Closing
Date, and for so long as Seller or any of its Affiliates remain primarily or
contingently liable under any applicable Lease for the repair or restoration of
Real Property after a real property loss or for indemnification to a landlord or
mortgagee for loss suffered as a result of personal injury or property damage
(it being understood that this Section 5.13 shall survive the Closing), for the
duration and term of each such Lease, Buyer shall maintain all such public
liability and property insurance set forth under all such Leases, regardless of
whether such requirement has been waived or modified, in not less than such
amounts and subject to no greater deductibles as are permitted therein, or if
none set forth, then with a "Combined Single Limit" (covering bodily injury
liability and property damage liability) of not less than Five Million Dollars
($5,000,000) for total claims for any one occurrence and not less than Ten
Million Dollars ($10,000,000) for total claims in the aggregate during any one
policy year with regard to liability insurance; and property insurance shall
include fire and extended coverage on a replacement cost basis. Such insurance
policies shall also each:
(i) name Seller, and/or its designee or designees, as
named insured(s);
(ii) be carried by an insurance company or companies which
is, or are, reasonably acceptable to Seller;
(iii) if available, provide that a notice of cancellation of
any such insurance policy shall be given to Seller at least thirty (30) days
prior to cancellation of such policy;
(iv) be evidenced, at Closing, and thereafter annually and
upon request of Seller from time to time, by certificates of insurance coverage
and copies of policies evidencing the existence of the above-described
requirements to the reasonable satisfaction of Seller and its counsel; and
(v) specify that the coverage afforded by such policies
with respect to the perils insured thereunder shall be primary to any other
insurance maintained by Buyer that also covers such perils and shall provide
that the coverage afforded to any insured under the policy shall not be
invalidated or
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reduced by any act or omission or insurance coverage of any other insured.
(b) On the Closing Date, Buyer shall deliver to Seller insurance
certificates (collectively, with the insurance certificates referenced in
Section 5.13(a)(iv), the "Insurance Certificates") evidencing that, in
connection with its operation of the Stores, Buyer (i) maintains workers'
compensation insurance as required by all applicable laws and (ii) maintains
general liability insurance in such amounts with such deductibles and coverages
as is commercially reasonably in light of the business and associated risks of
Buyer's business and the operation of the Stores.
Section 5.14. PUBLIC FILINGS. Seller shall use reasonable efforts to
prepare financial information required by Buyer with respect to a report on Form
8-K relating to Buyer's acquisition of the Assets and, as soon as such
information is available in final form, and in any event, on or before
October 12, 1994, Seller shall furnish such information to Buyer. Buyer shall
pay the fees and expenses of Ernst & Young, Seller's public accountants,
incurred in preparing such information. Seller shall make available members of
its financial staff to discuss the financial information provided pursuant to
this Section 5.14. Buyer affirms and acknowledges to Seller and its Affiliates
that although it has requested the financial information to be provided pursuant
to this Section 5.14, (i) Buyer is not in any manner relying on this information
in its decision to enter into this Agreement, (ii) the substance of such
information shall not affect Buyer's obligations to consummate the transactions
contemplated hereby, and (iii) Seller is not making any representation or
warranty, express or implied, regarding the financial information provided
pursuant to this Section 5.14. By execution of this Agreement, but without
limiting Buyer's rights under any other Section of this Agreement, Buyer hereby
releases the Seller Indemnified Parties from and against any and all liability
(including, without limitation, liability arising under federal and state
securities laws) arising out of, resulting from or relating to the financial
information provided by Seller to Buyer pursuant to this Section 5.14 and, as
evidenced by Buyer closing under the terms of this Agreement, such release shall
be further reaffirmed.
Section 5.15 COVENANT NOT TO COMPETE. Except as set forth in the
next sentence, for a period of 540 days after the Primary Closing Date, Seller
and its Affiliates shall not, directly or indirectly, within a radius of 10
miles circumscribing each of the Stores (collectively, the "Territory"), build
or operate a food supermarket or a
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combination food supermarket and drugstore; provided, however, that in no event
shall the foregoing restrictive covenant apply to the geographic area described
on Schedule 5.15 hereto. This Section 5.15 shall not prohibit either (i) the
acquisition by Seller or any of its Affiliates of any chain of five (5) or more
food supermarkets and/or combination food supermarkets and drugstores, or (ii)
the acquisition of Seller or any of its Affiliates by any other entity.
Section 5.16 SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS.
Concurrent with Buyer's execution of this Agreement and immediately prior to
Closing on the Primary Closing Date, Buyer shall deliver to Seller a schedule
setting forth any misrepresentation by, or breach of any warranty or covenant
of, Seller contained in this Agreement that Buyer is aware of.
ARTICLE VI
EMPLOYEES
Section 6.1 EMPLOYEES; BENEFIT PLANS; MULTIEMPLOYER PLANS.
(a) EMPLOYEES. Buyer agrees to offer to employ all of Seller's
Employees immediately as of the Closing Date, with salaries, wages and other
benefits that are substantially comparable to those existing immediately prior
to the Closing Date, and at a work location within 35 miles of the work location
at which those Seller's Employees were employed immediately before the Closing
Date. Each of Seller's Employees who accepts such an offer of continuing
employment shall be a "Continuing Employee." Set forth on Schedule 6.1 is a
description of the benefits referred to in the first sentence of this paragraph
6.1(a) to which those of Seller's Employees eligible to become Continuing
Employees are entitled under plans maintained by Seller or its Affiliates. To
the extent that any employee listed as an Excluded Employee on Schedule 1.1B
does not accept Seller's offer of employment, such employee shall be deemed to
no longer be an Excluded Employee but shall be deemed a Seller's Employee.
(b) UNION AGREEMENTS. Buyer shall assume all of Seller's or its
Affiliates' right and obligations as "Employer" from and after the Closing Date
under all collective bargaining agreements between Seller or its Affiliates and
any union parties thereto, relating to any of Seller's Employees entitled to
become Continuing Employees (the "Collective Bargaining Agreements"),
specifically including those set forth on Schedule 3.6 hereto.
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(c) BENEFIT PLAN LIABILITIES. Except for such plans maintained or
contributed to pursuant to the collective bargaining agreements referred to in
(b) above, or as specifically set forth herein, Buyer assumes no obligation with
respect to any employee benefit plan, as that term is defined by Section 3(3) of
ERISA, maintained or contributed to by Seller or any Affiliate. Notwithstanding
the foregoing, Buyer agrees that it will:
(i) for a period of no less than six months provide the
Continuing Employees with severance or termination benefits that are comparable
to the severance and termination benefits provided by Seller or its Affiliates
to those Employees immediately before the Closing Date, as set forth on
Schedule 6.1; and
(ii) if Buyer otherwise maintains a qualified (under Code Section
401(a)) defined contribution profit sharing plan (Buyer's Plan"), direct such
plan to accept a direct rollover of the immediately distributable portion of the
account balances under the American Stores Retirement Estates and the Jewel
Companies Retirement Estates (Seller's Plans") attributable to each of those of
the Continuing Employees who (1) remains employed with Buyer for at least 90
days, (2) elects such rollovers and (3) is employed by Buyer at the time his or
her rollover would otherwise be received by Buyer's Plan. Buyer may condition
acceptance of such direct rollovers on delivery to Buyer of evidence reasonably
satisfactory to Buyer that Sellers' Plans are "qualified" under Code section
401(a) at the time of such rollovers and that such rollovers will not otherwise
adversely affect Buyer's Plan in any material respect. Any portion of the
Continuing Employees' account balances in Sellers' Plans that is not immediately
distributable will continue to be held by Seller's Plans, subject to the terms
and conditions of those Plans.
(d) BUYER'S PLANS. Buyer agrees to provide each Continuing Employee
who was eligible for such coverage under any plan maintained by Seller or its
Affiliates immediate coverage under one or more group health plans, including
dental coverage, maintained by Buyer, without any exclusion or limitation with
respect to any preexisting condition of the Continuing Employee or any dependent
of any Continuing Employee. In addition, Buyer agrees that any Continuing
Employee shall be given credit for all service with the Seller which service
would be credited for similar purposes under Seller's plans, programs, policies
and arrangements for purposes of determining eligibility for, and vesting under,
any employee benefit plan, program, policy or arrangement of Buyer, or
maintained pursuant to any collective bargaining agreement assumed or entered
into by Buyer with
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respect to any Continuing Employee. Except as otherwise required under any of
the Collective Bargaining Agreements, such credit shall not, however, extend to
calculation of benefits under any plan, program, policy or arrangement
maintained by Buyer, which shall depend entirely on service with Buyer.
(e) INDEMNIFICATION. Except as otherwise provided in this Section
6.1:
(i) Seller and its Affiliates shall be responsible for, and shall
indemnify and hold Buyer harmless from and against, any claim or liability
relating to (A) compensation and/or benefits earned or accrued under any
benefits plan, policy or arrangement, written or oral, maintained or contributed
to by Seller or any Affiliate, payable on account of any Seller's Employee with
respect to periods before the Closing Date, provided, however, that this
indemnity shall exclude accrued vacation pay, (B) worker's compensation and
disability benefits arising in connection with any injury or other event
entitling any Seller's Employee to workers' compensation and/or disability
benefits, which injury or event occurred before the Closing Date and (C)
contributions, liabilities or obligations to any employee benefit plan, policy,
program or arrangement maintained pursuant to any Collective Bargaining
Agreement ("CBA Plan") which Seller or any Affiliate is obligated to make with
respect to services performed by Seller's Employees before the Closing Date; and
(ii) Seller shall have no obligation to indemnify or hold Buyer
harmless against any claim or liability, whether statutory or contractual,
arising out of Buyer's withdrawal from, or failure to make contributions to, any
CBA Plan on or after the Closing Date; further Buyer and Seller agree that this
Agreement shall not be construed to impose upon Seller any liability or
obligation that Seller would not have but for this Agreement with respect to any
benefits asserted to be payable under any CBA Plan; and
(iii) Buyer shall be responsible for, and shall indemnify and
hold Seller harmless from and against, any claim or liability relating to
compensation and/or benefits earned or accrued under any benefits plan, policy
or arrangement, written or oral maintained or contributed to by Buyer or any
Affiliate, payable on account of any Continuing Employee with respect to periods
on and after the Closing Date.
(f) RIGHT TO REHIRE. Seller agrees that for a period of one year
after the Closing Date, Seller shall not seek to employ any Continuing Employee
who is employed by Buyer. Seller shall, however, be free to hire any such
individual who either
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does not accept Buyer's offer of employment, or to offer employment to any of
such employees who leave the employment of Buyer or its Affiliates. Buyer
agrees that it shall not for a period of one year after the Primary Closing Date
seek to employ any of Seller's or its Affiliates' employees (other than
Continuing Employees) as long as such employees are employed by Seller or its
Affiliates, but in the event that any of such employees shall leave the
employment of Seller or its Affiliates, Buyer shall have the right to offer
employment to such employees.
(g) VACATION PAY. Within a reasonable period, not to exceed 14 days
after the Closing Date, Seller shall deliver to Buyer (i) a schedule showing the
amount of accrued but unpaid vacation days, and the amount of vacation pay
attributable thereto, for each Continuing Employee as of the Closing Date and
(ii) a cash payment in an amount equal to the total of the amounts set forth on
the schedule described in clause (i). Buyer will give those Continuing
Employees the number of days of paid vacation shown on the schedule delivered by
Seller and shall, to the extent of the payment made to Buyer by Seller,
indemnify and hold Seller harmless from any claim or liability with respect to
vacation days or pay to which any Continuing Employee is entitled as of the
Closing Date.
Section 6.2 WARN ACT. The parties acknowledge and agree that
Seller shall have no obligation with respect to obligations under the Workers
Adjustment and Retraining Act with respect to any of the Stores that may be
closed after the Closing Date and that Buyer shall be solely responsible for
complying with such statute if and to the extent applicable to any such
Closings.
ARTICLE VII
TAX MATTERS
Section 7.1 TRANSFER TAXES. Except to the extent otherwise
provided herein, Buyer shall pay, and shall indemnify and hold harmless Seller
and its Affiliates from and against, all sales, use, transfer, real property
transfer, documentary stamp, recording and other similar taxes and fees
(including any interest and penalties on, in lieu of or for non-collection or
additions to any such taxes or fees) except New York Real Property Transfer
Gains Tax arising out of or in connection with the transactions effected
pursuant to this Agreement. Seller and Buyer shall cooperate in filing all
necessary documentation and tax returns with respect to such taxes. Seller
agrees to cooperate with Buyer, at no expense or liability to Seller, to
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minimize such taxes arising out of or in connection with the transactions
contemplated in this Agreement, provided such cooperation does not result in an
adverse change to Seller in the terms of this Agreement or otherwise. Seller
shall pay franchise taxes, if any, that Seller is obligated to pay under the
laws of New York and Pennsylvania.
Section 7.2 TAX RESPONSIBILITY. Unless otherwise provided to the
contrary herein, Buyer shall be solely responsible for Taxes (including sales
and use taxes attributable to Buyer's operation of the Stores) arising out of or
in connection with the Assets or the transactions effected pursuant to this
Agreement and applicable to the period from and after the Primary Closing Date
(or, for any Excepted Property, the date of conveyance of such Excepted
Property) and Seller and its Affiliates shall be solely responsible for Taxes
(including sales and use taxes attributable to Seller's and its Affiliates'
operation of the Stores) arising out of or in connection with the Assets or the
transactions effected pursuant to this Agreement and applicable to the period
prior to the Primary Closing Date (or, for any Excepted Property, the Delayed
Closing Date for such Excepted Property). Seller shall indemnify and hold Buyer
harmless from any liability for such Taxes accruing prior to the Primary Closing
Date (or, for any Excepted Property, the Delayed Closing Date for such Excepted
Property) and Buyer shall indemnify and hold Seller and its Affiliates harmless
from any liability for such Taxes accruing from and after the Primary Closing
Date (or, for any Excepted Property, the Delayed Closing Date for such Excepted
Property). For purposes of this Section 7.2, "Taxes" shall mean, collectively,
any federal, state, county, local, municipal or foreign taxes, charges, fees,
levies, or other assessments, including without limitation all net income, gross
income, sales and use, ad valorem, transfer, gains, profits, excise, franchise,
real and personal property, gross receipt, capital, capital stock, production,
business and occupation, disability, employment, payroll, license, estimated,
stamp, custom duties, severance or withholding taxes or charges imposed by any
governmental entity and any interest and penalties (civil or criminal) on, in
lieu of or for non-collection of or additions to any such taxes.
Section 7.3 TAX COOPERATION. Each party shall cooperate with the
other in connection with any tax investigation, audit or other proceeding.
Buyer and Seller and their subsidiaries shall preserve all information, returns,
books, records and documents relating to any liabilities for Taxes (including
interest and penalties thereon or additions thereto) with respect to a taxable
period until the later of the expiration of all applicable statutes of
limitation and
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extensions thereof, or a final determination with respect to taxes for such
period.
Section 7.4 NOTIFICATION OF PROCEEDINGS; CONTROL; REFUNDS. In the
event that Buyer receives notice, whether orally or in writing, of any pending
or threatened United States federal, state, local, municipal or foreign tax
examinations, claims settlements, proposed adjustments, assessments or
reassessments or related matters with respect to Taxes (including interest and
penalties thereon or additions thereto) that could affect Seller, or if Seller
receives notice of any such matter that could affect Buyer, the party receiving
notice shall notify in writing the potentially affected party within 10 calendar
days thereof. The failure of any party to give the notice required by this
Section 7.4 shall not impair that party's rights under this Agreement except to
the extent that the other party demonstrates that it has been damaged thereby.
Each of Seller and Buyer shall have the right to control any audit or
examination by any taxing authority, initiate any claim for refund, file any
amended return, contest, resolve and defend against any assessment, notice of
deficiency or other adjustment or proposed adjustment relating or with respect
to any Taxes (including interest and penalties thereon or additions thereto),
the ultimate liability for which is the responsibility of that party under
Section 7.2, and each of Seller and Buyer shall be entitled to, and to the
extent either Seller or Buyer shall receive any refund to which the other party
is properly entitled, the receiving party shall promptly remit such refund to
the party entitled thereto.
Section 7.5 ALLOCATION. For federal income tax purposes, the
parties agree that the consideration for the Assets is to be allocated among the
Assets in accordance with the principles to be agreed to by the parties hereto
within 30 days of the date hereof.
Section 7.6 TAX EFFECT OF PAYMENTS. The amount of any payments
required to be made under this Article VII shall be reduced by the amount of any
tax benefit actually received by (including by refund or by reduction of or
offset against Taxes otherwise payable) the recipient by reason of the payment
or incurrence by such recipient of the item for which the indemnity is being
sought (net of any tax costs to the recipient arising from the receipt of such
payments). Each party shall notify the other of such tax benefits and costs.
Section 7.7 WITHHOLDING. For purposes of withholding under Section
1445 of the Code, Seller represents
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that it is not a "foreign person" as defined in Section 1445(f)(3) of the Code.
Seller shall provide to Buyer prior to the Primary Closing Date any certificate
or affidavit necessary to substantiate exemption from such withholding.
Section 7.8 CERTIORARI. Schedule 7.8 sets forth all pending
certiorari proceedings relating to real estate tax appeals respecting the
Stores, including the name, address and telephone number of legal counsel
retained in connection therewith, the status of such proceedings and the legal
fee arrangements in respect thereof.
ARTICLE VIII
CONDITIONS OF BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to consummate the transactions contemplated hereby
shall be subject to the satisfaction on or prior to the Primary Closing Date, or
waiver by Buyer, of all of the following conditions:
Section 8.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER.
The representations and warranties of Seller contained in this Agreement shall
be true and correct on and as of the Primary Closing Date with the same effect
as though such representations and warranties had been made on and as of such
date, except for representations and warranties that speak as of a specific date
or time other than the Primary Closing Date (which need only be true and correct
in all material respects as of such date or time), and the covenants and
agreements of Seller to be performed on or before the Primary Closing Date in
accordance with this Agreement shall have been duly performed in all material
respects.
Section 8.2 HSR ACT WAITING PERIOD; GOVERNMENTAL CONSENTS. All
waiting periods applicable under the HSR Act shall have expired or been
terminated and all governmental filings, approvals and consents shall have been
accomplished, transferred or obtained that are necessary in order that the
transactions contemplated hereby may be accomplished in compliance with law,
other than any such filings, approvals and consents as are not in the aggregate
material.
Section 8.3 NO INJUNCTION OR GOVERNMENT ACTION. Provided Buyer has
complied with Section 5.3(a) and (b), at the Primary Closing Date, no
governmental agency or authority shall have commenced litigation or threatened,
in writing, to commence litigation, seeking any injunction (preliminary or
permanent) of
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or with any court or governmental agency or body of competent jurisdiction, that
restrains or prohibits the consummation of the transactions contemplated by this
Agreement.
Section 8.4 EXCEPTED PROPERTIES. The Stores, if any, which would
become Excepted Properties pursuant to Sections 2.5 or 2.9(a), shall constitute
an aggregate of five or fewer Stores.
Section 8.5 LEGAL OPINION. Buyer shall have been furnished at the
Closing with an opinion of Dechert Price & Rhoads (or such other counsel
reasonably acceptable to Buyer), dated the Primary Closing Date, addressed to
and in form and substance reasonably satisfactory to Buyer, to the effect that:
(a) Each of Acme and ASRC is a corporation duly organized,
validly existing, and in good standing under the laws of the Commonwealth of
Pennsylvania; ASP is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware;
(b) Each of Acme and Owner have full corporate power to carry
out the transactions provided for in this Agreement, and this Agreement and all
other instruments to be executed by each of them in connection herewith has been
duly and validly authorized, executed and delivered by them and constitute valid
and binding obligations of each of them (assuming this Agreement and such other
instruments are valid and binding obligations of Buyer); and
(c) The execution and delivery by each of Acme and Owner of this
Agreement and the documents to be executed and delivered by them in connection
herewith do not violate or conflict with their respective Articles or
Certificates of Incorporation or Bylaws.
Section 8.6 REQUIRED CONSENTS. The consents listed on Schedule 3.2
shall have been obtained.
ARTICLE IX
CONDITIONS TO SELLER'S OBLIGATION TO CLOSE
Seller's obligation to consummate the transactions contemplated by
this Agreement is subject to the satisfaction on or prior to the Primary Closing
Date, or waiver by Seller, of all of the following conditions:
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Section 9.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER.
The representations and warranties of Buyer contained in this Agreement shall be
true and correct in all material respects on and as of the Primary Closing Date
with the same effect as though such representations and warranties had been made
on and as of such date, except for representations and warranties that speak as
of a specific date or time other than the Primary Closing Date (which need only
be true and correct in all material respects as of such date or time), and the
covenants and agreements of Buyer to be performed on or before the Primary
Closing Date in accordance with this Agreement shall have been duly performed in
all material respects.
Section 9.2 WAITING PERIODS; GOVERNMENTAL CONSENTS. All applicable
waiting periods under the HSR Act shall have expired or been terminated and all
governmental filings, approvals and consents shall have been accomplished,
transferred or obtained that are necessary in order that the transactions
contemplated hereby may be accomplished in compliance with law, other than any
such filings, approvals and consents as are not in the aggregate material.
Section 9.3 NO INJUNCTION OR GOVERNMENT ACTION. At the Primary
Closing Date, no governmental agency or authority shall have commenced
litigation or threatened, in writing, to commence litigation, seeking any
injunction (preliminary or permanent) of or with any court or governmental
agency or body of competent jurisdiction, that restrains or prohibits the
consummation of the transactions contemplated by this Agreement (except as
permitted in Section 9.4).
Section 9.4 EXCEPTED PROPERTIES. The Stores, if any, which would
become Excepted Properties pursuant to Sections 2.5 or 2.9(a) shall constitute
an aggregate of five or fewer Stores; PROVIDED, HOWEVER, in the event there
shall be any Excepted Properties, Seller shall have the right to delay the
Closing but not beyond fifteen (15) days after the Primary Closing Date.
Section 9.5 PURCHASE PRICE REDUCTIONS. The aggregate reductions in
the Purchase Price for any reason permitted under this Agreement shall not
exceed $10,000,000.
Section 9.6 LEGAL OPINION. Seller shall have been furnished at the
Closing with an opinion of Gilmartin, Poster & Shafto (or such other counsel
reasonably acceptable to Seller), dated the Primary Closing Date, addressed to
and in form and substance reasonably satisfactory to Seller, to the effect that:
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(a) Buyer is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Delaware;
(b) Buyer has full corporate power to carry out the transactions
provided for in this Agreement, and this Agreement and all other instruments to
be executed by Buyer in connection herewith have been duly and validly
authorized, executed and delivered by Buyer and constitute valid and binding
obligations of Buyer (assuming this Agreement and such other instruments are
valid and binding obligations of Seller); and
(c) The execution and delivery by Buyer of this Agreement and
the documents to be executed and delivered by Buyer in connection herewith do
not violate or conflict with the Certificate of Incorporation or Bylaws of
Buyer.
Section 9.7 REQUIRED CONSENTS. The consents listed on Schedule 3.2
shall have been obtained.
ARTICLE X
TERMINATION
Section 10.1 TERMINATION. This Agreement may be terminated at any
time prior to the Closing by:
(a) the mutual consent of Seller and Buyer as set forth in a
written termination agreement; or
(b) either Seller or Buyer if the Closing has not occurred by
the close of business on or prior to the date that is 75 days after the date of
this Agreement (unless extended by mutual agreement) and if the failure to
consummate the transactions contemplated by this Agreement on or before such
date did not result from the failure by the party seeking termination of this
Agreement to fulfill any covenant provided for herein that is required to be
fulfilled prior to Closing.
Section 10.2 PROCEDURE AND EFFECT OF TERMINATION. In the event of
termination of this Agreement by either or both of Seller and Buyer pursuant to
Section 10.1, written notice thereof shall forthwith be given by the terminating
party to the other party hereto, and this Agreement shall thereupon terminate
and become void and have no effect, the transactions contemplated hereby shall
be abandoned without further action by the parties hereto, and the parties
hereto waive and release any claim or Action with respect thereto, except that
the provisions of
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Section 5.1(b), Section 12.5 and any other provisions relating to the
responsibility for expenses incurred in connection with the transactions
contemplated by this Agreement shall survive the termination of this Agreement;
PROVIDED, HOWEVER, that such termination shall not relieve any party hereto of
any liability for any willful, material breach of Section 5.2 or 5.3 of this
Agreement prior to such termination, which breach was not cured within fifteen
business days following written notice from the other party specifying the
nature of such breach in reasonable detail.
ARTICLE XI
SURVIVAL; INDEMNIFICATION
Section 11.1 SURVIVAL. All representations and warranties of the
parties (which shall be deemed, in all cases, to be made only as of the times
specified in Section 8.1 and Section 9.1 hereof) contained in this Agreement or
in any Schedule hereto shall survive the Primary Closing Date until the second
anniversary of the Closing (the "Survival Period"); PROVIDED, HOWEVER, that the
representations and warranties in the first sentence of Section 3.3 shall not
survive the Primary Closing Date; and PROVIDED FURTHER, that a claim under the
representations and warranties contained in Section 3.7 may be made at any time
after the Primary Closing Date. To the extent that Buyer has breached the
covenant set forth in Section 5.16 hereof and with respect to the specific
matters identified on the schedules required to be delivered by Buyer
thereunder, no Buyer Indemnitee shall be entitled to seek indemnification
pursuant to Article XI for any damages suffered or incurred based upon,
attributable to or resulting from the claims that are the subject of such breach
or the matters identified on such schedules. No action or proceeding (including
any action or proceeding for indemnification under Section 11.2(a)(i) or Section
11.2(b)(i) may be brought with respect to any of the representations and
warranties unless written notice thereof, setting forth in reasonable detail the
claimed misrepresentation or breach of warranty, shall have been delivered to
the party alleged to have breached such representation or warranty prior to the
end of the Survival Period. In calculating any amount of loss payable to Seller
pursuant to Section 11.2(a) or payable to Buyer pursuant to Section 11.2(b), the
indemnifying party shall receive credit for (i) any reduction in the indemnified
party's tax liability as a result of the facts giving rise to the claim for
indemnification (after taking into account the monies received by the
indemnified party) and (ii) any insurance or third party recoveries by the
indemnified party offsetting the amount of
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loss. Amounts payable in respect of the indemnification obligations of Seller
and Buyer under Article XI shall be treated as adjustments to the Purchase
Price. Notwithstanding any provision to the contrary contained in this
Agreement, no party shall make any claim for indemnification (including any
claim for indemnification under Section 11.2(a)(i) and Section 11.2(b)(i)
against any other party or for any breach of representations and warranties
contained in this Agreement or of any covenant under this Agreement until the
dollar amount of all damages or loss to the party seeking such indemnify for
such breaches, after deducting the credits described in the immediately
preceding sentence, shall exceed in the aggregate the amount of $750,000 but, if
such amount is exceeded, the indemnifying party shall be required to pay the
amount of such aggregate damages or loss for all such breaches. Acme and Owner
shall be treated as a single entity for purposes of the preceding sentence. The
covenants contained in this Agreement shall not survive the Closing; PROVIDED,
HOWEVER, the covenants contained in Sections 2.2(a)(iv), 2.2(c), 2.3(b), 2.5,
and 2.6; the first three sentences of Section 2.7; Sections 2.8, 2.11 and 5.1
(other than the first sentence of 5.1(a)), the last sentence of Sections 5.2(a),
and 5.3(b); Sections 5.4, 5.5(b), 5.5(c), 5.7, 5.8, 5.9, 5.10, 5.11, 5.12 and
5.13; Article VI, Article VII, Article XI and Article XII shall survive in
accordance with their terms.
Section 11.2 INDEMNIFICATION BY BUYER OR SELLER. (a) From and after
the Primary Closing Date, Buyer shall indemnify and hold harmless Seller and its
Affiliates, each of their respective directors, officers, employees and agents,
and each of the heirs, executors, successors and assigns of any of the foregoing
(collectively, the "Seller Indemnified Parties") from and against (i) all
Covered Liabilities relating to any breach of any representation or warranty or
any covenant which survives the Closing made by or on behalf of Buyer under this
Agreement; (ii) any Covered Liabilities relating to the use, ownership,
possession, operation or occupancy of the Stores or Assets from and after the
Primary Closing Date (or, in the case of any Excepted Properties, from and after
the Delayed Closing Date for such Excepted Property); (iii) any Covered
Liabilities that Buyer has expressly agreed to assume or with respect to which
Buyer has agreed to indemnify Seller or any Seller Indemnified Party pursuant to
the provisions of this Agreement; (iv) all Covered Liabilities relating to the
Guaranties for which Buyer is substituted for Seller with respect to the use,
possession, operation or occupancy of the Stores or Assets from and after the
Primary Closing Date (or, in the case of Guaranties with respect to Excepted
Properties, from and after the Delayed Closing Date for such Excepted Property);
and (v) any Covered
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Liabilities, including pursuant to Environmental Laws, arising out of or
resulting from the presence, release, remediation or removal of hazardous, toxic
or other polluting substances or wastes (including asbestos and Hazardous
Materials) in, on, under or about the Assets or Stores and violations of
Environmental Laws, whether or not in each case caused by the negligence of
Seller or the Seller Indemnified Parties, and whether relating to events, facts
or circumstances existing or occurring before, on or after the Primary Closing
Date (or, in the case of any Excepted Properties, from and after the Delayed
Closing Date for such Excepted Property), except in all cases for such Covered
Liabilities that Seller has expressly agreed to assume pursuant to this
Agreement.
(b) From and after the Primary Closing Date, Seller shall
indemnify and hold harmless Buyer, Buyer's Affiliates, each of their respective
directors, officers, employees and agents, and each of the heirs, executors,
successors and assigns of any of the foregoing (collectively, the "Buyer
Indemnified Parties") from and against (i) all Covered Liabilities relating to
any breach of any representation or warranty or any covenant which survives the
Closing made by or on behalf of Seller under this Agreement; (ii) any Covered
Liabilities arising from the use, ownership, possession, operation or occupancy
of the Stores or Assets prior to the Primary Closing Date (or, in the case of
any Excepted Properties, prior to the Delayed Closing Date) except to the extent
Buyer has assumed such liability under Section 2.2(c), indemnified Seller under
Section 11.2(a) or that Buyer has expressly agreed to assume or with respect to
which Buyer has agreed to indemnify Seller pursuant to the provisions of this
Agreement; or (iii) any Covered Liabilities that Seller has expressly agreed to
assume or with respect to which Seller has agreed to indemnify Buyer or any
Buyer Indemnified Party pursuant to the provisions of this Agreement.
Section 11.3 THIRD PARTY CLAIMS. If a claim by a third party is
made against an indemnified party (I.E., a Seller Indemnified Party or a Buyer
Indemnified Party), and if such party intends to seek indemnity with respect
thereto under this Article XI, such indemnified party shall promptly notify the
indemnifying party in writing of such claims setting forth such claims in
reasonable detail. The indemnifying party shall have twenty (20) days after
receipt of such notice to undertake, through counsel of its own choosing and at
its own expense, the settlement or defense thereof, and the indemnified party
shall cooperate with it in connection therewith; PROVIDED, HOWEVER, that the
indemnified party may participate in such settlement or defense through counsel
chosen by such indemnified party,
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<PAGE>
provided the fees and expenses of such counsel are borne by such indemnified
party. So long as the indemnifying party is reasonably contesting any such
claim in good faith, the indemnified party shall not pay or settle any such
claim unless it shall waive any right to indemnity therefor by the indemnifying
party. If the indemnifying party does not notify the indemnified party within
twenty (20) days after the receipt of the indemnified party's notice of a claim
of indemnity hereunder that it elects to undertake the defense thereof, the
indemnified party shall have the right to contest, settle or compromise the
claim but shall not thereby waive any right to indemnity therefor pursuant to
this Agreement.
Section 11.4 SOLE REMEDY. The remedies provided by this Article XI
shall be the parties' sole and exclusive remedies against each other and each
other's Affiliates for the recovery of any Covered Liabilities resulting from or
arising out of (i) any misrepresentation or breach of warranty made under this
Agreement or any certificate, document, deed, schedule, bill of sale,
endorsement, assignment or other instrument delivered in connection with the
transactions contemplated hereby (the "Transaction Documents"), (ii) any
nonfulfillment of any agreement or covenant under this Agreement or the
Transaction Documents (iii) the transactions contemplated by this Agreement. In
furtherance of the foregoing, each of Buyer and Seller hereby waive, to the
fullest extent permitted under applicable law, any and all rights, claims and
causes of action (including rights of contribution, if any), known or unknown,
foreseen or unforeseen, which exist or may arise in the future, that it may have
against the Seller or any of its Affiliates or Buyer and its Affiliates, as the
case may be, arising under or based upon the Environmental Laws except for the
liabilities the other party has expressly agreed to assume or retain herein and
in no event shall this waiver constitute a waiver of Buyer's rights against
Seller with respect to the Excluded Environmental Liabilities.
ARTICLE XII
MISCELLANEOUS
Section 12.1 BROKERS. Except for the retention of Morgan Stanley &
Co. by ASC, each party represents and warrants to the other that it has not
engaged the services of any broker or finder in connection with this Agreement
or the transactions contemplated hereby that would be entitled to a fee or
commission from the other party. Each party agrees to indemnify and hold the
other party harmless from and against any claim for commissions, finder's fees
or any similar payment in connection
- 56 -
<PAGE>
with this Agreement or the transactions contemplated hereby asserted by any
broker or finder claiming to have been employed by or on behalf of the
indemnifying party.
Section 12.2 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
Section 12.3 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without reference
to the choice of law principles thereof.
Section 12.4 ENTIRE AGREEMENT. This Agreement (including agreements
incorporated herein) and the Schedules and Exhibits hereto, together with the
Confidentiality Agreement, contain the entire agreement between the parties with
respect to the subject matter hereof and there are no agreements,
understandings, representations or warranties between the parties other than
those set forth or referred to herein. Except as set forth in Article 11, this
Agreement is not intended to confer upon any person not a party hereto (or a
party's successors and assigns permitted by Section 12.7) any rights or remedies
hereunder.
Section 12.5 EXPENSES. Except as otherwise expressly set forth in
this Agreement, whether or not the Asset Purchase is consummated, all other
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such costs
and expenses.
Section 12.6 NOTICES. All notices and other communications
hereunder shall be sufficiently given for all purposes hereunder if in writing
and delivered personally, sent by documented overnight delivery service or, to
the extent receipt is confirmed, facsimile or other electronic transmission
service to the appropriate address or number as set forth below:
(a) if to Seller, to
c/o American Stores Company
709 East South Temple Street
Salt Lake City, Utah 84012
Attention: J. Greg Spencer
Fax No.: 801-537-7808
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<PAGE>
with a copy to:
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, Pennsylvania 19103
Attention: Thomas E. Doran
Fax No.: 215-994-2222
(b) if to Buyer, to
The Penn Traffic Company
411 Theodore Fremd Avenue
Rye, NY 10580
Attention: Martin A. Fox
Fax No.: 914-921-3031
with a copy to:
Gilmartin, Poster & Shafto
One William Street
New York, NY 10004
Attention: Harold S. Poster
Fax No.: 212-425-3037
or at such other address and to the attention of such other person as a party
may designate by written notice to the other party.
Section 12.7 SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; PROVIDED, HOWEVER, that no party hereto shall be
entitled to assign its rights or delegate its obligations under this Agreement
without the express prior written consent of each other party hereto; PROVIDED
FURTHER, that Seller may assign any of its rights or delegate any of its
obligations under this Agreement to ASC.
Section 12.8 HEADINGS; DEFINITIONS. This section and article
headings contained in this Agreement are inserted for convenience of reference
only and shall not affect the meaning or interpretation of this Agreement. All
references to Sections or Articles contained herein mean Sections or Articles of
this Agreement unless otherwise stated. All capitalized terms defined herein
are equally applicable to both the singular and plural forms of such terms.
- 58 -
<PAGE>
Section 12.9 AMENDMENTS AND WAIVERS. This Agreement may not be
modified or amended except by an instrument or instruments in writing signed by
the party against whom enforcement of any such modification or amendment is
sought. Any party hereto may, only by an instrument in writing, waive
compliance by the other parties hereto with any term or provision of this
Agreement on the part of such other party hereto to be performed or complied
with. The waiver by any party hereto of a breach of any term or provision of
this Agreement shall not be construed as a waiver of any subsequent breach.
Section 12.10 INTERPRETATION. It is understood and agreed that
neither the specification of any dollar amount in the representations and
warranties contained in this Agreement nor the inclusion of any specific item in
the Schedules or Exhibits is intended to imply that such amounts or higher or
lower amounts, or the items so included or other items, are or are not material,
or are required to be included in the Schedules, and neither party shall use the
fact of the setting of such amounts or the fact of the inclusion of any such
item in the Schedules in any dispute or controversy between the parties as to
whether any obligation, item or matter is or is not material or are required to
be included in the Schedules, for purposes of this Agreement.
Section 12.11 SEVERABILITY. Any provision of this Agreement (other
than Sections 2.2, 2.3, 5.3 and Article XI) which is invalid or unenforceable
shall be ineffective to the extent of such invalidity or unenforceability,
without affecting in any way the remaining provisions hereof.
Section 12.12 ASC GUARANTY. If after the date of this Agreement but
prior to the second anniversary of the date of this Agreement, there shall occur
a Guaranty Event (as defined below), ASC shall deliver a guaranty of payment of
Acme's obligations in the form attached as Exhibit 12.12 hereto. For purposes
of this Section 12.12, a Guaranty Event shall mean the occurrence of (i) the
sale by Acme of greater than 50% of its then existing assets (based on book
value) in any one transaction or series of related transactions, or (ii) the
incurrence by Acme of long-term debt in excess of 50% of its then existing
assets (based on book value), or (iii) the transfer of 50% or more of the common
stock of Acme, whether by sale, merger or other corporate transaction, to any
third party (other than an Affiliate of Acme); provided, however, that in no
event shall a Guaranty Event include a stock dividend of the common stock of
Acme to the stockholders of ASC, Acme or their Affiliates.
IN WITNESS WHEREOF, this Agreement, including the attached Schedules
numbered pages 1 through 59, has been signed by or on behalf of each of the
parties as of the day first above written.
ACME MARKETS, INC.
By:/s/ J. GREG SPENCER
---------------------------
Name: J. GREG SPENCER
Title: VICE PRESIDENT
- 59 -
<PAGE>
Witness:
/s/ AMY L. STETT
- - -------------------------
/s/ MICHELLE J. FUJINAMI
- - -------------------------
AMERICAN STORES PROPERTIES,
INC.
By:J. GREG SPENCER
---------------------------
Name: J. GREG SPENCER
Title: SENIOR VICE PRESIDENT
CORPORATE TRANSACTIONS
Witness:
/s/ AMY L. STETT
- - -------------------------
/s/ MICHELLE J. FUJINAMI
- - --------------------------
AMERICAN STORES REALTY
CORP.
By:J. GREG SPENCER
---------------------------
Name: J. GREG SPENCER
Title: VICE PRESIDENT
Witness:
/s/ AMY L. STETT
- - -------------------------
/s/ MICHELLE J. FUJINAMI
- - -------------------------
Solely for the purposes set
forth in Section 12.12 hereof:
AMERICAN STORES COMPANY
By:/s/ J. GREG SPENCER
-------------------------
Name: J. GREG SPENCER
Title: VICE PRESIDENT,
CORPORATE TRANSACTIONS
- 60 -
<PAGE>
Witness:
/s/ AMY L. STETT
- - -------------------------
/s/ MICHELLE J. FUJINAMI
- - -------------------------
THE PENN TRAFFIC COMPANY
By:/s/ MARTIN A. FOX
---------------------------
Name: MARTIN A. FOX
Title: VICE CHAIRMAN
Witness:
/s/ FRANCIS D. PRINCE, JR.
- - --------------------------
ASST. SECT.
- 61 -
<PAGE>
CONSENT AND AMENDMENT TO LOAN AND SECURITY AGREEMENT
Agreement, dated as of September 29, 1994, (this "Agreement") by and among
The Penn Traffic Company ("Penn Traffic"), Diary Dell, Big M Supermarkets, Inc.,
and Penny Curtiss Baking Company, Inc. (individually a "BORROWER" and
collectively the "BORROWERS"), the financial institutions listed on the
signatures pages hereof (collectively the "LENDERS") and NatWest USA Credit
Corp., as Agent for the Lenders (in such capacity, the "Agent").
___________________________
The Borrowers, the Lenders, and the Agent are parties to a Loan and
Security Agreement dated March 5, 1993, as amended by Amendment No. 1 dated
March 12, 1993, Amendment No. 2 dated March 24, 1993, Amendment No. 3 dated
April 15, 1993 and Amendment No. 4 dated August 20, 1993 (as amended by
Amendments Nos. 1, 2, 3, and 4, the "Loan Agreement").
Capitalized terms used herein, except as otherwise defined herein, shall
have the meanings given to such terms in the Loan Agreement.
Penn Traffic has requested that the Agent obtain the consent of the
Required Lenders to: (i) the issuance prior to December 31, 1995 by Penn Traffic
of up to $125,000,000 of not less than seven year senior notes (the "Senior
Notes") (ii) the use of the net proceeds from the issuance of the Senior Notes
(iii) the acquisition by Penn Traffic of up to 45 supermarket stores
<PAGE>
presently owned by the American Stores Company operated under the name "Acme"
supermarkets and located in eastern Pennsylvania and south central New York,
(the "Acme Stores") possibly together with a warehouse used in connection
therewith and located in the Scranton Pennsylvania area (the "Acme Warehouse")
and the acquisition by Penn Traffic of up to an additional 10 supermarket stores
presently owned by the American Stores Company also operated under the name
"Acme" supermarkets and located in the Allentown/Bethlehem Pennsylvania market
and in 5 small towns in eastern Pennsylvania (the "Additional Acme Stores") for
an aggregate purchase price not to exceed $150,000,000. The Acme Stores, the
Acme Warehouse and the Additional Acme Stores are listed and described in
Exhibit A hereto.
The transactions relating to the issuance of the Senior Notes and the use
of the proceeds thereof, and the acquisition of the properties as described
above (the "Acme Acquisition") require the consent of the Required Lenders
pursuant to the Loan Agreement. The Required Lenders are prepared to provide
such consent but only on the terms and conditions of this Agreement.
Now Therefore, the Borrowers, the Lenders and the Agent agree as follows:
1. CONSENT TO THE ISSUANCE OF THE SENIOR NOTES AND TO THE USE OF THE
PROCEEDS THEREOF. To the extent such consent is required under the Loan
Documents (including, without limitation, Section 10.8 and 10.9 of the Loan
Agreement) and provided the Senior Notes are issued on or prior to December 31,
1995, the Required Lenders do hereby: (i) consent to the issuance of up to
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<PAGE>
$125,000,000 of Senior Notes as described in the preamble to this Agreement and
(ii) further approve the use of the net proceeds from the issuance of the Senior
Notes upon issuance thereof, notwithstanding the limitation contained in Section
10.8 and 10.9 of the Loan Agreement, and do further consent to the use of the
net proceeds of the issuance of the Senior Notes for general corporate purposes.
2. CONSENT TO THE ACME ACQUISITION. To the extent that such consent
is required under the Loan Documents (including, without limitation, Section
10.5 of the Loan Agreement) and provided the Acme Acquisition is consummated on
or before December 31, 1995, the Required Lenders do hereby consent to the Acme
Acquisition for the maximum purchase price set forth in the preamble to this
Agreement.
3. AMENDMENTS TO LOAN AGREEMENT. Upon Penn Traffic's consummation
of the Acme Acquisition on or before December 31, 1995, the following amendments
to the Loan Agreement shall become effective:
a. ADDITIONAL DEFINITION. There shall be added to Section 1 of
the Loan Agreement the following definition in the appropriate alphabetical
order.
i. "DEFINITION OF "ACME ACQUISITION" "ACME ACQUISITION" means
the purchase by Penn Traffic of up to 55 supermarket stores and the
contents thereof owned by American Stores Company, each operated under
the name "Acme" and located in eastern Pennsylvania, south central
New York, and the Allentown/Bethlehem area of
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<PAGE>
Pennsylvania, together with the possible acquisition of the warehouse
located in the Scranton Pennsylvania area";
ii. the definition of "Capital Expenditures" is amended by
adding the following at the end of the proviso in subsection (a)
thereof: "and shall not include any expenditures in connection with
the Acme Acquisition".
b. the table set forth in Section 10.17(a) of the Loan
Agreement is amended by deleting under column headings set forth therein the
figures with respect to the Fiscal Years 1996, 1997, 1998, 1999 and 2000 and
substituting the following:
TOTAL
PERMITTED
CASH CAPITAL FINANCED CAPITAL CAPITAL
FISCAL YEAR EXPENDITURES EXPENDITURES EXPENDITURES
----------- ------------ ------------ ------------
1996 $140,000,000 $20,000,000 Total of
plus the Permitted
lesser of: (i) Cash Capital
$40,000,000 or Expenditures
(ii) the and
amount by Permitted
which Financed
Consolidated Capital
EBDAIT exceeds Expenditures
$210,000,000 for the
Fiscal Year
1997 $110,000,000 $20,000,000 Total of
plus the Permitted
lesser of: (i) Cash Capital
$40,000,000 or Expenditures
(ii) the and
amount by Permitted
which Financed
Consolidated Capital
EBDAIT exceeds Expenditures
$210,000,000 for the
Fiscal Year
-4-
<PAGE>
1998 $115,000,000 $20,000,000 Total of
plus the Permitted
lesser of: (i) Cash Capital
$40,000,000 or Expenditures
(ii) the and
amount by Permitted
which Financed
Consolidated Capital
EBDAIT exceeds Expenditures
$210,000,000 for the
Fiscal Year
1999 $120,000,000 $20,000,000 Total of
plus the Permitted
lesser of: (i) Cash Capital
$40,000,000 or Expenditures
(ii) the and
amount by Permitted
which Financed
Consolidated Capital
EBDAIT exceeds Expenditures
$210,000,000 for the
Fiscal Year
2000 $125,000,000 $20,000,000 Total of
plus the Permitted
lesser of: (i) Cash Capital
$40,000,000 or Expenditures
(ii) the and
amount by Permitted
which Financed
Consolidated Capital
EBDAIT exceeds Expenditures
$210,000,000 for the
Fiscal Year
4. CONDITIONS TO THE REQUIRED LENDERS' CONSENT. The Required
Lenders' Consent given in Section 2 hereof shall not be effective until the
following conditions precedent are satisfied:
(a) The Borrowers shall have delivered to the Agent, for
distribution to the Lenders, definitive versions of the instruments, documents
and agreements with respect: (i) to the issuance of the Senior Notes prior to
issuance thereof and (ii) to the Acme Acquisition prior to the consummation of
the Acme Acquisition.
-5-
<PAGE>
(b) An Event of Default shall not have occurred either prior to
the issuance of the Senior Notes or prior to the consummation of the Acme
Acquisition.
(c) Penn Traffic shall have issued at least $75,000,000 of
Senior Notes as described in the preamble to this Agreement, and shall have
received the net proceeds thereof.
The Required Lenders' consent given in Section 2 hereof in respect to
the Acme Acquisition shall not be effective until Penn Traffic shall deliver a
certificate by an officer thereof that the Acme Acquisition is about to be
consummated in accordance with the definitive version of the Acme Acquisition
instruments, documents and agreements delivered pursuant to Section 4(a)(ii).
5. SCOPE OF CONSENT. The Borrowers acknowledge that the Required
Lenders' consent hereunder is being given only as to those matters set forth in
Sections 1 and 2 above that require such consent under the provisions of the
Loan Documents and should not be construed as the Lenders' consent to any other
aspect thereof, nor as the Lenders' endorsement of the issuance by Penn Traffic
of the Senior Notes or the Acme Acquisition described in Sections 1 and 2 above.
Such consent shall not be construed as a consent to any similar or other
transaction or as a waiver of any unrelated Default or Event of Default.
6. REPRESENTATIONS AND WARRANTIES; WAIVER OF DEFENSES. As a further
inducement to the Lenders to enter into this Agreement, the Borrowers hereby
represent and warrant to the
-6-
<PAGE>
Agent and the Lenders and agree with the Agent and the Lenders as follows:
(a) The Borrowers have the power and authority to enter into
this Agreement and each other agreement or instrument to be delivered by them
pursuant hereto. This Agreement has been duly executed and delivered by and
constitutes the Borrowers' valid and binding obligation, enforceable against the
Borrowers in accordance with its terms. The execution, delivery, and
performance of this Agreement will not violate any of the certificates of
incorporation or by-laws or any agreement or legal requirements binding on any
of the Borrowers.
(b) On the date hereof: (i) the Loan Agreement and the other
Loan Documents are in full force and effect and constitute the Borrowers'
binding obligation, enforceable against them in accordance with their respective
terms; (ii) the Obligations are due and owing by them in accordance with the
terms of the Loan Documents to which the Borrowers are a party; (iii) no Event
or Event of Default has occurred and is continuing; and (iv) the Borrowers
hereby waive and release all defenses to and setoffs, counterclaims, and claims
against payment of the Obligations and enforcement of the Loan Documents that
are now existing or occurring on or prior to the date hereof.
7. NO IMPLIED AMENDMENTS. Except as expressly provided herein, the
Loan Agreement and the other Loan Documents are not amended or otherwise
affected in any way by this Agreement.
-7-
<PAGE>
8. ENTIRE AGREEMENT; MODIFICATIONS; BINDING EFFECT. This Agreement
constitutes the entire agreement of the parties with respect to its subject
matter and supersedes all prior oral or written understandings about such
matters. The Borrowers confirm that, in entering into this Agreement, they did
not rely upon any agreement, representation, or warranty by the Agent or any
Lender except those expressly set forth herein. No modification, recision,
waiver, release, or amendment of any provision of this Agreement may be made
except by a written agreement signed by the parties hereto. The provisions of
this Agreement shall be binding upon and inure to the benefit of the
representatives, successors, and assigns of the parties hereto; provided,
however, that no interest herein or obligation hereunder may be assigned by the
Borrowers without the Required Lenders' prior written consent.
9. SEVERABILITY. If any provision of this Agreement shall be
prohibited or invalid, under applicable law, it shall be ineffective only to
such extent, without invalidating the remainder of this Agreement.
10. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and by each party in separate counterparts, each of which is an
original but all of which shall together constitute one and the same agreement.
11. GOVERNING LAW. This Agreement is deemed to have been made in the
State of New York and is governed by and shall be interpreted in accordance with
the laws of such state.
-8-
<PAGE>
12. EFFECTIVE DATE. This Agreement shall become effective when
executed by the Borrowers and those of the Lenders as shall constitute the
number of Required Lenders.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement on the day and year first above written.
BORROWERS:
THE PENN TRAFFIC COMPANY
By: /s/ MARTIN A. FOX
-------------------------------------
Title:
DAIRY DELL
By: /s/ MARTIN A. FOX
-------------------------------------
Title:
BIG M SUPERMARKETS, INC.
By: /s/ MARTIN A. FOX
-------------------------------------
Title:
PENNY CURTISS BAKING
COMPANY, INC.
By: /s/ MARTIN A. FOX
-------------------------------------
Title:
-9-
<PAGE>
LENDERS:
Commitment: $35,000,000 NATWEST USA CREDIT CORP.
Pro-Rata Share: 17.5%
Lending
Office: 175 Water Street
New York, New York 10038 By: /s/
-------------------------------------
Title: VICE PRESIDENT
Commitment: $20,000,000 NATIONAL BANK OF CANADA
Pro-Rata Share: 10%
Lending
Office: Main Place Tower, Suite 1540
350 Main Street
Buffalo, New York 14202 By: /s/
-------------------------------------
Title: VICE PRESIDENT
By: /s/ MICHAEL S. WOODARD
-------------------------------------
Title: ASSISTANT VICE PRESIDENT
Commitment: $20,000,000 FUJI BANK, LTD.
Pro-Rata Share: 10%
Lending
Office: Two World Trade Center
79th Fl.
New York, New York 10048 By: /s/ KATSUMORI NOZAWA
-------------------------------------
KATSUMORI NAZAWA
Title: VICE PRESIDENT & MANAGER
Commitment: $20,000,000 SANWA BUSINESS CREDIT
Pro-Rata Share: 10% CORPORATION
Lending
Office: One South Wacker Drive
Suite 2800
Chicago, IL. 60606 By: /s/
-------------------------------------
Title: VICE PRESIDENT
Commitment: $25,000,000 BANKAMERICA
Pro-Rata Share: 12.5% BUSINESS CREDIT, INC.
Lending
Office: 40 East 52nd Street
Second Fl.
New York, NY 10022 By: /s/
-------------------------------------
Title: VICE PRESIDENT
-10-
<PAGE>
Commitment: $25,000,000 HELLER FINANCIAL, INC.
Pro-Rata Share: 12.5%
Lending
Office: 101 Park Avenue, 12th Fl.
New York, NY 10178 By: /s/
-------------------------------------
Title: VICE PRESIDENT
Commitment: $10,000,000 IBJ SCHRODER
Pro-Rata Share: 5%
Lending
Office: One State Street
9th Fl.
New York, NY 10004 By: /s/
-------------------------------------
Title: VICE PRESIDENT
Commitment: $10,000,000 MIDLANTIC NATIONAL BANK
Pro-Rata Share: 5%
Lending
Office: 499 Thornalle Street
9th Fl.
Edison, NJ 08837 By: /s/
-------------------------------------
Title: VICE PRESIDENT
Commitment: $20,000,000 MITSUBISHI TRUST AND
Pro-Rata Share: 10% BANKING CORPORATION
Lending
Office: 520 Madison Avenue
25th Fl.
New York, NY 10022 By: /s/
-------------------------------------
Title: SENIOR VICE PRESIDENT
Commitment: $15,000,000 CONTINENTAL BANK, fsb
Pro-Rata Share: 7.5%
Lending
Office: 231 South La Salle St.
12th Fl. C
Chicago, IL. 60697 By: /s/
-------------------------------------
Title: VICE PRESIDENT
AGENT
NATWEST USA CREDIT CORP.,
As Agent
By: /s/
-------------------------------------
Title: VICE PRESIDENT
-11-
<PAGE>
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Form S-3, No. 33-51213) and the related Prospectus Supplement of The Penn
Traffic Company for the registration of Senior Notes due 2004 of our
report dated October 7, 1994, with respect to the financial statements of
Acme Markets, Inc., Supermarkets to be Acquired by The Penn Traffic Company,
included in The Penn Traffic Company's Current Report on Form 8-K dated
September 30, 1994, both filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG, LLP
_________________________
ERNST & YOUNG, LLP
Salt Lake City, Utah
October 12, 1994
