<PAGE>
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 29, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to __________
Commission file number 1-9930
------
THE PENN TRAFFIC COMPANY
------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 25-0716800
------------------------------- --------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1200 State Fair Boulevard, Syracuse, New York 13221-4737
------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (315) 453-7284
--------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
-------------------------------------- -----------------------
Common Stock, $1.25 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past ninety (90) days.
YES X NO
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of the
Registrant was $330,080,800 as of April 18, 1994.
Common Stock $1.25 par value-Shares outstanding-10,845,451 as of April 18, 1994
- -------------------------------------------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement dated May 2, 1994 provided to Registrant's
stockholders in connection with the annual meeting of stockholders scheduled for
June 7, 1994 are incorporated by reference in Part III of this Form 10-K.
<PAGE>
FORM 10-K INDEX
- --------------------------------------------------------------------------------
PART I PAGE
- --------------------------------------------------------------------------------
Item 1. Business 3
Item 2. Properties 14
Item 3. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Supplemental Item. Executive Officers of Registrant 15
- --------------------------------------------------------------------------------
PART II
- --------------------------------------------------------------------------------
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 17
Item 6. Selected Financial Data 17
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 17
Item 8. Financial Statements and Supplementary Data 17
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 18
- --------------------------------------------------------------------------------
PART III
- --------------------------------------------------------------------------------
Item 10. Directors and Executive Officers of the Registrant 56
Item 11. Executive Compensation 56
Item 12. Security Ownership of Certain Beneficial Owners
and Management 56
Item 13. Certain Relationships and Related Transactions 56
- --------------------------------------------------------------------------------
PART IV
- --------------------------------------------------------------------------------
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K 57
- --------------------------------------------------------------------------------
-2-
<PAGE>
PART I
ITEM 1. BUSINESS (AS OF JANUARY 29, 1994 UNLESS OTHERWISE NOTED)
GENERAL
The Penn Traffic Company ("Penn Traffic" or the "Company") is one of the leading
food retailers in the eastern United States. Penn Traffic operates 232
supermarkets in Pennsylvania, upstate New York, Ohio and northern West Virginia
under the names "Riverside Markets" (13 stores), "Bi-Lo Foods" (23 stores),
"Insalaco's" (13 stores), "Quality Markets" (45 stores), "P&C Foods" (61
stores), and "Big Bear" and "Big Bear Plus" (77 stores).
Penn Traffic also operates a wholesale food distribution business which serves
133 licensed franchisees and 119 independent operators and a discount general
merchandise business with 15 stores. Total consolidated revenues in the fiscal
year ended January 29, 1994 aggregated approximately $3.2 billion.
Approximately 72% of Penn Traffic's supermarket sales are in smaller communities
where Penn Traffic believes it virtually always holds the number one or number
two market position. The balance of Penn Traffic's sales is in Columbus, Ohio
and Buffalo and Syracuse, New York. Penn Traffic believes it has the leading
market share in each of these communities except Buffalo, New York.
Penn Traffic's retail and wholesale operations stretch from Ohio to upstate New
York. The Company operates in communities with diverse economies based on
manufacturing, natural resources, retailing, health care services, education and
government services. No supermarket company competes against stores
representing more than 20% of Penn Traffic's revenues, with the exception of
Kroger, which competes against Big Bear stores representing approximately 30% of
Penn Traffic's revenues.
In addition, Penn Traffic operates a full-service dairy business in Johnstown,
Pennsylvania under the name "Sani-Dairy" and bakery businesses in Syracuse, New
York and Columbus, Ohio under the names "Penny Curtiss" and "Big Bear Bakeries"
respectively.
Penn Traffic pursues an aggressive capital program that seeks to match store
size and format to local demographics and competitive conditions. During the
five fiscal years ended January 29, 1994, Penn Traffic has opened or remodeled
73% of its retail supermarket square footage. These larger, more modern
facilities strengthen Penn Traffic's competitive position and enable it to offer
its customers a broader variety of specialty departments, including pharmacies,
bakeries, delicatessens, floral products, greeting cards and other general
merchandise.
Over the next five fiscal years (including the fiscal year ending January 28,
1995), Penn Traffic expects to spend approximately $650 million on capital
expenditures (including capital leases), equivalent to approximately 3.5% to
4.0% of planned retail sales over this period. These expenditures are expected
to be made within or contiguous to Penn Traffic's current marketing areas,
primarily to support Penn Traffic's retail supermarket business. Penn Traffic
believes that it will be able to fund its capital plan through internally
generated funds, borrowing under its revolving credit facility and capital
leases.
-3-
<PAGE>
Penn Traffic also expects to derive long-term benefits in operational
performance and cost savings from its continuing investment in and
implementation of technology. Examples of recent in-store projects include
coupon scanning to improve customer service and reduce misredemption, automated
scale management to improve price accuracy and expedite customer checkout, and a
paperless direct store delivery system to speed receipt of merchandise and
eliminate payment errors.
Penn Traffic holds an indirect ownership interest representing on a fully
diluted basis approximately 17.8% of the common stock of Grand Union Holdings
Corporation ("Grand Union Holdings"), the indirect corporate parent of The Grand
Union Company ("Grand Union"). Penn Traffic's ownership interest in Grand Union
Holdings was acquired in July 1989.
The principal executive offices of Penn Traffic are located at 1200 State Fair
Boulevard, Syracuse, New York 13221-4737. The Company's telephone number is
(315) 453-7284.
RETAIL FOOD DISTRIBUTION BUSINESS
Penn Traffic is one of the leading supermarket retailers in its primary
operating areas in New York, Pennsylvania and Ohio. Penn Traffic's supermarkets
are primarily located in towns and small cities. In many of these communities,
Penn Traffic operates or licenses one or more of a small number of supermarkets
or the only supermarket in town.
Penn Traffic's store sizes and formats vary widely, depending upon the
demographic and competitive conditions in each location. For example,
"conventional" store formats are generally more appropriate in areas of low
population density, while larger or more affluent areas are better served by
full service supermarkets of up to 64,000 square feet, which contain numerous
specialty service departments such as bakeries, delicatessens, floral
departments and fresh seafood departments. Penn Traffic's "Plus" format has
store sizes ranging from 70,000 to 140,000 square feet. These full service
supermarkets carry an expanded variety of non-food merchandise.
Penn Traffic's supermarkets offer a broad selection of grocery, meat, poultry,
seafood, dairy, fresh fruit, vegetable and frozen food products. The stores
also offer non-food products and services such as health and beauty products,
housewares, general merchandise, floral items, video rental departments and
banking services provided by local bank automated teller machines. In general,
Penn Traffic's larger stores carry broader selections of merchandise and feature
a larger variety of service departments. Approximately 35% of Penn Traffic's
stores are open 24 hours a day at least five days per week. Most of the
supermarkets are located in shopping centers.
Penn Traffic believes that its data processing and automated systems are
sophisticated and up-to-date. Approximately 91% of Penn Traffic's stores use
product scanning systems and proprietary software to provide inventory and
shrinkage controls at both delivery and checkout points. Penn Traffic stores
utilize a "Time and Attendance" system where employees use computer-coded badges
which are inserted in a computer scanner at various times during a work shift to
ensure that employees work only during authorized periods. Penn Traffic stores
also use direct store delivery receiving systems to increase security and
accountability for outside vendor product deliveries to retail locations.
-4-
<PAGE>
In Fiscal 1993, Penn Traffic consolidated its three separate data centers into
its headquarters in Syracuse, New York. In Fiscal 1994, standard general ledger
and store financial statements were implemented at each business unit in order
to standardize performance measurements and reduce administrative cost. The
Company expects to complete the process of consolidating most of its accounting
functions, which previously had been performed at the division level, into its
Syracuse headquarters by Fiscal 1996.
-5-
<PAGE>
SELECTED STATISTICS ON PENN TRAFFIC'S RETAIL FOOD STORES ARE PRESENTED BELOW.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
- --------------------------------------------------------------------------------
JANUARY 29, JANUARY 30, FEBRUARY 1, FEBRUARY 2, FEBRUARY 3,
1994 1993 1992 1991 1990
(53 Weeks)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Average annual
sales per store $11,816,000 $11,433,000 $11,420,000 $10,821,000 $10,306,000
Total store area
in square feet 8,803,297 7,868,411 6,347,453 5,877,321 5,995,984
Total store
selling area in
square feet 6,333,023 5,684,179 4,561,199 4,199,008 4,266,557
Average total
square feet per
store 37,945 36,260 33,584 30,933 28,283
Average square
feet of selling
area per store 27,298 26,194 24,133 22,100 20,125
Annual sales per
square foot of
selling area $442.23 $452.66 $485.39 $512.15 $514.93
Number of stores:
Remodels/expansions
(over $100,000) 39 12 18 9 10
New stores opened 12 10 6 7 8
Stores acquired 19(1) 29(1) 1 4 66
Stores closed 16 11 8 33(2) 16
Size of stores (total store area):
Up to 19,999
square feet 29 33 33 37 55
20,000 - 29,999
square feet 60 63 65 71 81
30,000 - 45,000
square feet 86 73 61 59 57
Greater than
45,000 square
feet 57 48 30 23 19
Total stores open
at fiscal year end 232 217 189 190 212
<FN>
(1) Includes the addition of 12 Insalaco's stores acquired by the Company on
September 27, 1993 and the addition of 23 stores acquired from the Peter J.
Schmitt Co., Inc. ("Schmitt") on January 5, 1993 which the Company
initially operated.
(2) Includes divestiture of 26 P&C New England Division stores. See
"Divestiture of P&C New England Division" on Page 12 of this Form 10-K.
</TABLE>
-6-
<PAGE>
WHOLESALE FOOD DISTRIBUTION BUSINESS
Penn Traffic licenses the use of its "Riverside Markets," "Bi-Lo Foods" and
"Big M" names to 133 independently owned supermarkets that are required to
maintain certain quality and other standards and 119 independent operators.
Substantially all of these independent operators use Penn Traffic as their
primary wholesaler and also receive advertising, accounting, merchandising,
consulting and retail counseling services from Penn Traffic. Penn Traffic
receives rent from 73 of the licensed independent operators which lease or
sublease the supermarket buildings and much of the equipment used in the
supermarkets from Penn Traffic.
In Fiscal 1994, Penn Traffic's wholesale operations accounted for $462 million
or 14.5% of total revenues. The incremental volume provided by wholesale
operations enhances Penn Traffic's purchasing power and enables it to improve
the efficiency of its distribution system.
At January 29, 1994, Penn Traffic had guaranteed obligations of $3.5 million of
indebtedness of certain of such licensed independent operators. Riverside
receives an initial fee but no annual fee for the license of its Riverside and
Bi-Lo names. P&C receives neither an initial fee nor an annual fee for the use
of the Big M name.
FOOD PROCESSING OPERATIONS
Sani-Dairy owns and operates a dairy processing plant in Johnstown,
Pennsylvania, which is one of the largest dairies in Pennsylvania. This plant
produces over 900 dairy and dairy-related products which are distributed
directly from the plant or through two Penn Traffic-owned distribution
facilities in Pennsylvania and one distribution facility in northwestern
Maryland. The Sani-Dairy Division sells its products to certain Penn Traffic-
owned and licensed supermarkets and to other retail outlets located in
Pennsylvania and adjoining states.
Penn Traffic owns and operates Penny Curtiss Bakery, a bakery processing plant
in Syracuse, New York. This operation primarily supplies P&C's stores and its
affiliated accounts with private label fresh and frozen bakery products. In
addition, Riverside, Quality Markets and Grand Union procure certain fresh and
frozen bakery products from Penny Curtiss.
Penn Traffic also owns and operates Big Bear Bakeries, a bakery in Columbus,
Ohio. This operation primarily supplies Big Bear stores with private label
fresh and frozen bakery products.
MASS MERCHANDISING BUSINESS
Fourteen of the fifteen Harts stores are located in central and southern Ohio,
and one is located in northern West Virginia. Harts discount general
merchandise stores (other than two small variety stores) range in size from
approximately 39,000 square feet to approximately 86,000 square feet. The
average store (excluding the variety stores) has approximately 66,000 square
feet.
-7-
<PAGE>
Harts stores sell a wide variety of products, including health and beauty care
items, hardware, housewares, sporting goods, electronics and apparel. Ten of
the Harts stores have pharmacies. Harts has achieved a reputation for variety
and quality of its merchandise. The lines of products carried by each store
vary to some extent to meet different patterns of local demand.
The profitability of the Company's general merchandise operations is much more
sensitive to the Ohio economy than its supermarket operations and can be
expected to be adversely impacted by a decline in economic conditions.
PURCHASING AND DISTRIBUTION
Penn Traffic is a large volume purchaser of products. Penn Traffic's purchases
are of sufficient volume to qualify for minimum price brackets for most items.
Penn Traffic purchases brand name grocery merchandise directly from national
manufacturers. The Company purchases private label and generic items from TOPCO
Associates, Inc., a national purchasing cooperative comprising 46 regional
supermarket chains. In Fiscal 1994, purchases from TOPCO Associates accounted
for approximately 13% of product purchases.
Penn Traffic's principal Pennsylvania distribution facility is a Company-owned
390,000-square foot distribution center in DuBois, Pennsylvania. Penn Traffic
also has a 196,000-square foot perishables distribution center in DuBois,
Pennsylvania. This facility was expanded by 58,000 square feet in Fiscal 1994
and distributes frozen foods, ice cream, dairy products, fresh meats, fresh
produce and delicatessen items to Penn Traffic's stores, its licensees and other
wholesale accounts. In addition, Penn Traffic leases a 70,000-square foot
warehouse in New Bethlehem, Pennsylvania, which Penn Traffic uses to supplement
its forward buy program, under which Penn Traffic purchases and stores for later
sale certain products which from time to time are available for purchase at
reduced prices. Penn Traffic also leases a 37,000-square foot warehouse in
Punxsutawney, Pennsylvania, which houses certain store supplies and aerosol
products and a 45,000-square foot warehouse in Dubois, Pennsylvania, which
houses high-bulk grocery products.
The principal New York distribution facility is a highly automated, Company-
owned 498,000-square foot distribution center in Syracuse, New York which
services P&C's stores and wholesale customers. In June 1993, the Company opened
a new 217,000-square foot distribution center for perishable products in
Syracuse, New York. This new distribution center consolidated a number of
Company-owned and leased facilities and has enabled P&C to internalize ice cream
distribution. Penn Traffic also owns a 267,000-square foot distribution center
in Jamestown, New York, which was expanded by 82,000 square feet in Fiscal 1994.
This distribution center supplies groceries, fresh produce, packaged dairy
products and delicatessen items to the Quality Market stores.
The primary Ohio distribution center is a leased 484,000-square foot dry grocery
facility in Columbus, Ohio, opened during Fiscal 1991. Penn Traffic also owns a
208,000-square foot distribution facility for perishable goods in Columbus,
Ohio. This facility was completed in January 1992 and permits Big Bear to
centralize distribution of frozen foods, substantially decrease Big Bear's
utilization of higher-priced jobbers for the delivery of frozen foods, and
expand the variety of products offered to customers.
-8-
<PAGE>
Big Bear also leases two general merchandise warehouses comprising 399,000
square feet in Columbus, Ohio.
In September 1993, Penn Traffic entered into a program to consolidate the
purchasing and distribution of health and beauty care products and general
merchandise with Grand Union. Under this program, Grand Union procures health
and beauty care products for both Grand Union and Penn Traffic, and Penn
Traffic, through its Big Bear division, procures general merchandise for both
Penn Traffic and Grand Union. Grand Union's general merchandise warehouse in
Montgomery, New York is used to distribute general merchandise and health and
beauty care products to Riverside Markets, Quality Markets and Insalaco's
stores and is scheduled to begin servicing P&C stores by the end of the first
quarter of Fiscal 1995. This warehouse also supplies the majority of Penn
Traffic's wholesale customers, as well as Grand Union stores. Under the
arrangement, the cost of operating the Montgomery warehouse is shared by Penn
Traffic in an amount proportionate to Penn Traffic's usage of the facility. Penn
Traffic owns the general merchandise and health and beauty care products
inventory located at the Montgomery, New York warehouse. Penn Traffic expects
that this program will improve the variety of general merchandise products
offered to the consumer in certain of the Company's stores and will reduce
product procurement costs for general merchandise and health and beauty care
products.
Approximately 80% of the merchandise offered in Penn Traffic's retail stores is
distributed from one or more of its warehouses by its fleet of 326 tractors, 378
refrigerated trailers and 566 dry trailers. Merchandise not delivered from Penn
Traffic's warehouses or from the Grand Union general merchandise warehouse in
Montgomery, New York, as described above, is delivered directly to the stores by
distributors, vendor drivers and salesmen for such products as beverages, snack
foods and bakery items.
COMPETITION
The food retailing business is highly competitive and may be affected by general
economic conditions. The number of competitors and the degree of competition
experienced by Penn Traffic's supermarkets vary by location. Penn Traffic
competes with several regional and local supermarket chains, convenience stores,
stores owned and operated and otherwise affiliated with large food wholesalers,
and unaffiliated independent food stores. No other supermarket company competes
against Penn Traffic stores representing more than 20% of Penn Traffic's
revenues, with the exception of Kroger, which competes against Big Bear stores,
representing approximately 30% of Penn Traffic's revenues.
EMPLOYEES
Labor costs and their impact on product prices are important competitive factors
in the supermarket industry. Penn Traffic currently competes with certain
independently owned and regional supermarkets whose employees are not union
affiliated, while approximately 53% of Penn Traffic's hourly employees belong to
the United Food and Commercial Workers Union.
-9-
<PAGE>
At January 29, 1994, Penn Traffic had 24,200 hourly employees and 1,600 salaried
employees. Penn Traffic believes its relationships with its employees are good.
GOVERNMENT REGULATION
The United States Department of Agriculture and the Pennsylvania Milk Marketing
Board each regulate and inspect all aspects of fluid milk and dairy product
production, enforcing strict standards of sanitation, product composition,
packaging and labelling, as well as regulating milk and dairy product pricing.
All dairy goods producers and distributors must comply with substantially
similar standards, and compliance by Penn Traffic with these standards has not
had and is not expected to have a significant effect on its earnings or
competitive position.
SEASONALITY, CUSTOMERS AND SUPPLIERS
The supermarket business of Penn Traffic is generally not seasonal in nature.
During the past three fiscal years, no single customer or group of customers
under common control accounted for 10% or more of Penn Traffic's consolidated
revenues. Groceries, general merchandise and raw materials (such as milk and
other ingredients used in the Sani-Dairy Division's operations) are available
from many different sources. During the past three fiscal years, no single
supplier accounted for 10% or more of Penn Traffic's cost of sales except TOPCO
Associates, which accounted for approximately 13% of product purchases in the
fiscal year ended January 29, 1994.
HISTORY
Penn Traffic is the successor to a retail business which can be traced to 1854.
Penn Traffic, a then-publicly held corporation, was acquired in March 1987 by
Riverside Acquisition Company, Limited Partnership ("RAC"), a Delaware limited
partnership and an affiliate of Miller Tabak Hirsch + Co. ("MTH"). At the time
of the acquisition, Penn Traffic was the largest retail and wholesale food
distribution company in its principal operating area, comprising 19 counties in
central and northwestern Pennsylvania and southwestern New York. In 1988, Penn
Traffic again became a publicly held corporation and stated that it intended to
acquire retail and wholesale food distribution companies contiguous to its
operating area.
In August 1988, Penn Traffic acquired P&C Food Markets, Inc. ("P&C") which
operates in a contiguous market to the east of Penn Traffic's historical
marketplace. In October 1991, P&C became a wholly owned subsidiary of the
Company. In April 1993, P&C was merged into the Company. It currently operates
as a division of the Company. P&C is headquartered in Syracuse, New York and
operates 61 "P&C" retail supermarkets, franchises 71 "Big M" stores and provides
wholesaling services to 87 independent supermarkets.
-10-
<PAGE>
In April 1989, Penn Traffic acquired Big Bear Stores Company ("Big Bear"), a
leading food retailer in Columbus and eastern Ohio, which is to the west of Penn
Traffic's traditional market area. In April 1993, Big Bear was merged into the
Company. At the effective date of the merger, holders of Big Bear redeemable
convertible 8% preferred stock and Big Bear common stock received aggregate
merger consideration for the merger equal to 307,836 shares of Penn Traffic
common stock and approximately $10.8 million in cash. Big Bear currently
operates as a division of the Company. Big Bear is headquartered in Columbus,
Ohio and operates 77 retail supermarkets under the names "Big Bear" and "Big
Bear Plus," as well as 15 discount department stores under the "Harts" name.
On January 5, 1993, Penn Traffic acquired certain assets and assumed certain
obligations of 28 supermarkets located in western New York and northwestern
Pennsylvania from Schmitt. Nineteen of the stores are currently being operated
by Penn Traffic and one store has been converted to a franchise store.
On September 27, 1993, Penn Traffic acquired the operating assets of Insalaco
Supermarkets, Inc. ("Insalaco"), which consisted of 12 supermarkets with a total
square footage of approximately 400,000 and two new stores under construction
totalling approximately 90,000 square feet. One of the stores under
construction opened in October 1993.
Penn Traffic holds an indirect ownership interest representing on a fully
diluted basis approximately 17.8% of the common stock of Grand Union Holdings,
the indirect corporate parent of Grand Union. Penn Traffic's ownership interest
in Grand Union Holdings was acquired in July 1989.
INVESTMENT IN GRAND UNION
Penn Traffic holds an indirect ownership interest representing approximately
17.8% of the common stock of Grand Union Holdings, the indirect corporate parent
of Grand Union, on a fully diluted basis. Penn Traffic's ownership interest in
Grand Union Holdings was acquired in July 1989 (Fiscal 1990) and is held through
GAC Holdings, whose other investors include MTH and individuals affiliated with
MTH, certain management employees of Penn Traffic and other investors.
Grand Union has been engaged in the food retailing business for 120 years,
making it one of the oldest major retail food companies in the United States. As
of April 1, 1994, Grand Union operated 254 supermarkets under the "Grand Union"
name in seven northeastern states.
Penn Traffic is accounting for the Grand Union investment under the equity
method. At the time the investment was made in July 1989, it was recorded at a
cost of $18.3 million. As of February 2, 1991, Penn Traffic had recorded losses
which reduced the carrying value of its investment to zero. In accordance with
generally accepted accounting principles, no further equity loss is being
recorded.
Grand Union Holdings is subject to the information requirements of the
Securities Exchange Act of 1934, as amended, and in accordance therewith files
reports and other information with the Securities and Exchange Commission (the
"Commission"). Copies of such materials may be inspected and copied at any of
the offices of the Commission.
-11-
<PAGE>
DIVESTITURE OF P&C NEW ENGLAND DIVISION
On July 14, 1989, Grand Union Holdings, a corporation in which Penn Traffic,
MTH, individuals affiliated with MTH and certain management employees of Penn
Traffic hold indirect ownership interests, acquired Grand Union. Grand Union is
engaged in the food retailing business and, as of April 1, 1994, operated 254
supermarkets under the "Grand Union" name in seven northeastern states. At the
time of the acquisition, Grand Union and P&C, which are under common control,
operated stores in some of the same geographic areas in Vermont and upstate New
York. In connection with the acquisition of Grand Union by Grand Union
Holdings, agreements were entered into with federal and state antitrust
authorities which required the divestiture of 16 Grand Union stores or P&C
stores. The divestitures required by these agreements were completed in July
1990. P&C operated thirteen of the sixteen divested stores and Grand Union
operated three. In connection with the divestiture program, P&C discontinued
its New England wholesaling business in December 1989.
In a related transaction, in July 1990, P&C and Grand Union entered into an
operating agreement (the "Operating Agreement") whereby Grand Union acquired the
right to operate P&C's 13 remaining stores in New England under the Grand Union
name until July 2000. Pursuant to the Operating Agreement, Grand Union agreed
to pay Penn Traffic (as the successor to P&C, which was merged into the Company
in April 1993) a minimum annual fee which will average $10.7 million per year
during the ten-year term and, beginning with the year commencing July 31, 1992,
to pay Penn Traffic additional contingent fees of up to $700,000 per year based
upon sales performance of the stores operated by Grand Union. Penn Traffic
received payment of the maximum contingent fee of $700,000 for the year ended
July 30, 1993 and, based upon current sales levels, Penn Traffic expects to
receive payment of the maximum contingent fee of $700,000 in the year ending
July 30, 1994 and in each year remaining in the term of the Operating Agreement.
Under the terms of the Operating Agreement, the recapitalization of Grand Union
in July 1992 triggered a $15 million prepayment of the operating fee. Such
prepayment will reduce future payments made by Grand Union to Penn Traffic
pursuant to the terms of the Operating Agreement by approximately $3.2 million
per year.
At the expiration of the ten-year term of the Operating Agreement, Grand Union
has the right to extend the term of the Operating Agreement for an additional
five years. In the event of such extension of the lease term, Grand Union will
pay to Penn Traffic an annual fee of $13.6 million in the first year of the
extended term, $14.0 million in the second year, $14.4 million in the third
year, $14.9 million in the fourth year and $15.3 million in the fifth year, plus
contingent fees based upon the sales performance of the stores of up to $700,000
in each year.
Penn Traffic also granted Grand Union an option (the "Purchase Option") to
purchase the stores operated by Grand Union under the Operating Agreement. Grand
Union paid Penn Traffic $7.5 million for the Purchase Option, which provides
that (i) prior to July 30, 1998, Grand Union may purchase the stores operated
under the Operating Agreement from Penn Traffic for a purchase price equal to
$95 million and (ii) from July 30, 1998 and until the expiration of the term (or
the extended term) of the Operating Agreement, Grand Union may purchase the
stores operated under the Operating Agreement from Penn Traffic for a purchase
price equal to the greater of $55 million or the amount produced under a formula
based upon the stores' cash flow, provided that the purchase price shall not
exceed $95 million.
In connection with these transactions, Grand Union transferred to Penn Traffic
two stores located in upstate New York. Grand Union also purchased
-12-
<PAGE>
Penn Traffic's White River Junction, Vermont warehouse for $5.0 million in
April 1992.
If Grand Union does not extend the initial term of the Operating Agreement at
its expiration in July 2000 or does not exercise the Purchase Option prior to
the expiration of the term (or the extended term), the stores operated by Grand
Union pursuant to the Operating Agreement will be returned to operation by Penn
Traffic. Based on current conditions, management does not believe that the
return of operation of the stores to Penn Traffic would have a significant
impact on the financial condition of the Company.
Because of the payments received as consideration for the sale of the divested
stores and the payments received and to be received by Penn Traffic from Grand
Union in respect of the stores being operated by Grand Union, the divestiture of
the P&C New England Division has not had, and is not expected to have, a
significant impact on the Company's financial condition or on the amount of the
Company's reported financial results.
For information concerning Penn Traffic's investment in Grand Union and its
parent companies, see "Investment in Grand Union" above.
-13-
<PAGE>
ITEM 2. PROPERTIES
Penn Traffic follows the general industry practice of leasing the majority of
its retail supermarket locations. Penn Traffic presently owns 27 and leases 205
supermarkets. The owned supermarkets range in size from 4,300 to 123,000 square
feet. The leased supermarkets range in size from 8,000 to 140,000 square feet
and are held under leases expiring from 1994 to 2013, excluding option periods.
Penn Traffic also owns two and leases 73 supermarkets which are leased or
subleased to independent operators.
Penn Traffic owns a five-story building located in Johnstown, Pennsylvania,
which housed the Company's headquarters prior to relocation of the Company's
headquarters to Syracuse, New York in July 1993. The building is leased to
other tenants.
Penn Traffic also owns seven shopping centers, six of which contain one of the
Company-owned or licensed supermarkets. Penn Traffic also operates major
distribution centers in DuBois, Pennsylvania; Syracuse and Jamestown, New York;
and Columbus, Ohio; a dairy plant in Johnstown, Pennsylvania; and bakery plants
in Syracuse, New York and Columbus, Ohio. Penn Traffic also owns a fleet of
trucks and trailers and other miscellaneous real estate and equipment used in
the operation of its businesses.
Penn Traffic believes that all of its properties, fixtures and equipment are
well maintained and in good condition.
ITEM 3. LEGAL PROCEEDINGS
Penn Traffic and its subsidiaries are involved in various legal actions, some of
which involve claims for substantial sums. However, any ultimate liability with
respect to these contingencies is not considered to be material in relation to
the consolidated financial position or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth quarter
of Fiscal 1994.
-14-
<PAGE>
SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF REGISTRANT
Certain information regarding the executive officers of Penn Traffic is set
forth as follows:
<TABLE>
<CAPTION>
Name Age Position with Penn Traffic
- -------------------------- --- -------------------------------------
<S> <C> <C>
Gary D. Hirsch 44 Chairman and Director
Martin A. Fox 40 Director, Vice Chairman - Finance
and Assistant Secretary
Claude J. Incaudo 60 Director, President and Chief
Executive Officer
John T. Dixon 54 Vice President; President of
P&C Foods Division
Glenn L. Goldberg 42 Vice President and Assistant
Secretary
Raymond J. Heath 55 Vice President; President of
Riverside Markets Division
John E. Josephson 46 Vice President; President of
Big Bear Division
Francis D. Price, Jr., Esq. 44 Vice President, General Counsel
and Assistant Secretary
Eugene R. Sunderhaft 46 Vice President - Finance,
Secretary and Treasurer (Chief
Financial Officer)
</TABLE>
Each of the executive officers is a citizen of the United States.
Mr. Hirsch has been a Director and Chairman of Penn Traffic since 1987.
Mr. Hirsch has been Chairman and a Director of Grand Union Holdings (food
distribution holding company) since July 1989. Mr. Hirsch became Chairman and a
Director of Grand Union Capital Corporation ("Grand Union Capital") in May 1992
and Chairman and a Director of Grand Union in July 1992. Mr. Hirsch has been a
general partner of the managing partner of MTH (broker-dealer) since March 1982
and a Managing Director of MTH Holdings, Inc. ("MTH Holdings") since November
1983. He is Chairman, President and a Director of RAC Partners, Inc. ("RAC
Partners"), the sole general partner of Riverside Acquisition Company, Limited
Partnership ("RAC").
Mr. Fox has been Director and Vice Chairman-Finance since February 1993. From
1989 until February 1993, Mr. Fox was a Vice President of the Company. Mr. Fox
has been Assistant Secretary of Penn Traffic since 1989. Mr. Fox became a
Director, Vice President and Secretary of Grand Union Capital in May 1992 and
Treasurer of Grand Union Capital in May 1993. Mr. Fox became Vice President and
Assistant Secretary and a Director of Grand Union and Vice President and
Secretary and a Director of Grand Union Holdings in July 1992 and Treasurer of
Grand Union Holdings in May 1993. Mr. Fox has been Executive Vice President of
MTH since 1988.
-15-
<PAGE>
Mr. Incaudo has been a Director since 1988 and President and Chief Executive
Officer of Penn Traffic since February 1, 1990. Mr. Incaudo was the President
of P&C or its predecessors from 1982 until the merger of P&C into the Company in
April 1993 and a Director of P&C from 1985 until the merger of P&C into the
Company in April 1993. He joined P&C in 1977 as Director of Store Operations
and became Senior Vice President of Store Operations in 1979. Mr. Incaudo
became a Director of Grand Union Holdings in July 1992.
Mr. Dixon has been President of P&C since August 1993. Mr. Dixon was elected
Vice President of Penn Traffic in February 1993. He served as President of
Quality Markets, Inc. from January 1992 until August 1993 and has served in
various other positions at Big Bear since 1957.
Mr. Goldberg has been a Vice President and Assistant Secretary of Penn Traffic
since 1989. Mr. Goldberg became a Vice President, Assistant Secretary and
Assistant Treasurer of each of Grand Union Capital and Grand Union Holdings in
July 1992. Mr. Goldberg has been Executive Vice President of MTH since 1988,
and was Senior Vice President of MTH from 1982 to 1988.
Mr. Heath has been a Vice President of Penn Traffic since 1979 and has also
served as President of the Riverside division since 1979. He had held the
position of Executive Vice President and Assistant General Manager since 1976
and has served in various other positions in the Riverside division since 1967.
Mr. Josephson has been a Vice President of Penn Traffic since 1989 and has also
served as President of Big Bear since 1989. Prior to his appointment as Presi-
dent of Big Bear, Mr. Josephson was Senior Vice President, Finance and Treasurer
of P&C from 1986 to 1989. Mr. Josephson was Vice President, Finance and
Treasurer of P&C from 1983 until 1986.
Mr. Price has been Vice President and General Counsel and Assistant Secretary of
Penn Traffic since February 1993. He was Vice President and General Counsel of
P&C from 1985 until the merger of P&C into the Company in April 1993 and
Secretary of P&C from 1991 until the merger of P&C into the Company in April
1993. Mr. Price has been employed by P&C since 1978.
Mr. Sunderhaft has been Vice President - Finance, Chief Financial Officer,
Treasurer and Secretary of Penn Traffic since May 1993. He has been employed by
P&C since 1972 and he became Vice President - Finance and Chief Financial
Officer of P&C in 1989.
There are no family relationships between executive officers of Penn Traffic.
The term of office of executive officers is for a one-year period beginning on
the date of the annual meeting, which is normally held in June of each year,
except that in February 1992, Mr. Incaudo entered into an employment agreement
with the Company providing for his employment as President and Chief Executive
Officer of the Company until January 28, 1995.
-16-
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Penn Traffic's common stock is listed on the American Stock Exchange and was
held by approximately 276 shareholders of record on January 29, 1994.
Common stock information is provided on Page 18 of this Form 10-K.
ITEM 6. SELECTED FINANCIAL DATA
The comparative summary of selected financial data of Penn Traffic for the five
years ended January 29, 1994 appears on Page 19 of this Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations appears on Pages 21 through 27 of this Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
Page
Report of Independent Accountants 28
Consolidated Financial Statements:
Statement of Operations for each of the three fiscal
years ended January 29, 1994 29
Balance Sheet as of January 29, 1994 and January 30, 1993 30
Statement of Shareholders' Equity for each of the three
fiscal years ended January 29, 1994 32
Statement of Cash Flows for each of the three fiscal
years ended January 29, 1994 33
Notes to Consolidated Financial Statements 35
Financial Statement Schedules for the three years ended
January 29, 1994:
Schedule V - Property, Plant and Equipment 65
- Leased Facilities Under Capital Leases 66
Schedule VI - Reserves for Depreciation of Property,
Plant and Equipment 67
- Reserves for Amortization of Leased
Facilities Under Capital Leases 68
Schedule VIII - Valuation and Qualifying Accounts 69
Schedule X - Supplementary Income Statement Information 70
-17-
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized below are quarterly financial data for the fiscal years ended
January 29, 1994 and January 30, 1993.
<TABLE>
<CAPTION>
Fiscal 1994 Fiscal 1993
------------------------------------------------ -----------------------------------------------
1st 2nd 3rd 4th 1st 2nd 3rd 4th
-------- --------- -------- -------- -------- -------- -------- --------
(In thousands of dollars, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues . . . . . . . $762,040 $780,996 $783,253 $845,311 $684,557 $699,433 $700,975 $747,984
Gross margin . . . . . . . . $168,283 $172,102 $173,008 $193,354 $144,178 $150,004 $146,884 $161,390
Net (loss) income
before extraordinary
item. . . . . . . . . . . . $ 419 $ 634 $ (503) $ 7,626 $ (79) $ (440) $ 130 $ 4,380
Extraordinary item . . . . . (17,602) (4,477) (1,091) (2,673) (6,224) (72) (4,527)
Net (loss) income. . . . . . (17,183) (3,843) (1,594) 4,953 (6,303) (512) (4,397) 4,380
Preferred dividends. . . . . (159) (248) (249) (241) (230)
Net (loss) income
applicable to common
stock . . . . . . . . . . . $(17,342) $ (3,843) $ (1,594) $ 4,953 $ (6,551) $ (761) $ (4,638) $ 4,150
Per share data:
Income (loss)
before extraordinary
item . . . . . . . . . . . $ .03 $ .06 $ (.04) $ .68 $ (.04) $ (.08) $ (.01) $ .50
Extraordinary item. . . . . (2.03) (.41) (.10) (.24) (.75) (.01) (.55)
Net loss (income) . . . . . $ (2.00) $ (.35) $ (.14) $ .44 $ (.79) $ (.09) $ (.56) $ .50
Dividends per preferred
share:
Big Bear. . . . . . . . . $ 0.46 $ 0.46 $ 0.46 $ 0.46 $ 0.46
Market value per common
share:
High. . . . . . . . . . . $ 42 7/8 $ 45 1/2 $ 45 3/4 $ 39 1/8 $ 35 3/4 $ 31 1/2 $ 27 $ 33 1/4
Low . . . . . . . . . . . $ 34 $ 38 1/4 $ 36 3/8 $ 34 7/8 $ 28 1/8 $ 22 1/2 $ 24 3/8 $ 25 3/4
Other data:
Depreciation and
amortization . . . . . . . $ 19,871 $ 20,366 $ 20,894 $ 21,738 $ 17,501 $ 17,627 $ 18,167 $ 19,490
LIFO provision . . . . . . $ 560 $ 430 $ 100 $ (987) $ 400 $ 896 $ 110 $ (927)
</TABLE>
-18-
<PAGE>
Consolidated Five-Year Financial Summary
Set forth below are the selected historical consolidated financial data of Penn
Traffic for the five fiscal years ended January 29, 1994. Due to the equity
investment in Grand Union and the adoption of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109") retroactive to the
beginning of the fiscal year ended February 1, 1992 (footnotes (1) and (2) on
the following page), comparisons of the consolidated financial results among
years are not necessarily meaningful.
The selected historical consolidated financial data for the five fiscal years
ended January 29, 1994 are derived from the consolidated financial statements of
Penn Traffic which have been audited by Price Waterhouse, independent
accountants. The selected historical consolidated financial data should be read
in conjunction with the Penn Traffic consolidated financial statements and
related notes included elsewhere herein.
<TABLE>
<CAPTION>
As of and for the Fiscal Year Ended
(In thousands of dollars, January 29, January 30, February 1, February 2, February 3,
except per share data) 1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS: (53 weeks)
Total revenues. . . . . . . $3,171,600 $2,832,949 $2,772,104 $2,803,781 $2,725,476
Cost of sales . . . . . . . 2,464,853 2,230,493 2,195,773 2,253,619 2,202,754
Selling and administrative
expenses. . . . . . . . . 559,729 475,839 460,684 444,280 432,650
Unusual item. . . . . . . . 6,400
----------- ----------- ----------- ----------- -----------
Operating income. . . . . . 140,618 126,617 115,647 105,882 90,072
Acquisition financing costs
and expenses. . . . . . . 12,345
Interest expense. . . . . . 117,423 115,814 116,782 117,300 106,873
----------- ----------- ----------- ----------- -----------
Income (loss) before income
taxes, equity in net loss
of affiliated company,
extraordinary item and
cumulative effect of
change in accounting
principle . . . . . . . . 23,195 10,803 (1,135) (11,418) (29,146)
Provision (benefit) for
income taxes (1). . . . . 15,019 6,812 4,217 2,427 (7,911)
----------- ----------- ----------- ----------- -----------
Income (loss) before
equity in net loss of
affiliated company,
extraordinary item and
cumulative effect of
change in accounting
principle . . . . . . . . 8,176 3,991 (5,352) (13,845) (21,235)
Equity in net loss of Grand
Union(2). . . . . . . . . (10,334) (7,916)
----------- ----------- ----------- ----------- -----------
Income (loss) before extra-
ordinary item and
cumulative effect of
change in
accounting principle. . . 8,176 3,991 (5,352) (24,179) (29,151)
Extraordinary item (net of
tax benefit)(3) . . . . . (25,843) (10,823) (3,718)
----------- ----------- ----------- ----------- -----------
Net loss before cumulative
effect of change in
accounting principle. . . (17,667) (6,832) (9,070) (24,179) (29,151)
Cumulative effect of
change in accounting
principle . . . . . . . . (58,330)
----------- ----------- ----------- ----------- -----------
Net loss. . . . . . . . . . (17,667) (6,832) (67,400) (24,179) (29,151)
Preferred dividends . . . . (159) (968) (2,768) (3,286) (2,824)
----------- ----------- ----------- ----------- -----------
Net loss applicable to
common stock. . . . . . . $ (17,826) $ (7,800) $ (70,168) $ (27,465) $ (31,975)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
-19-
<PAGE>
PER SHARE DATA:
Income (loss) before extra-
ordinary item and cumulative
effect of change in
accounting principle
(after preferred
dividends)(4). . . . . . . $ 0.76 $ 0.37 $ (1.19) $ (4.94) $ (6.10)
Extraordinary item. . . . . (2.45) (1.31) (0.54)
Cumulative effect of change
in accounting
principle. . . . . . . . . (8.52)
----------- ----------- ----------- ----------- -----------
Net loss (4). . . . . . . . $ (1.69) $ (0.94) $ (10.25) $ (4.94) $ (6.10)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
No dividends on common stock have been paid during the past five fiscal years.
BALANCE SHEET DATA:
Working capital . . . . . . $ 157,645 $ 67,313 $ 55,199 $ 61,569 $ 79,143
Total assets. . . . . . . . 1,632,901 1,417,230 1,291,691 1,165,202 1,208,295
Total funded
indebtedness . . . . . . . 1,166,025 1,005,136 912,070 884,996 882,937
Redeemable preferred
stock. . . . . . . . . . . 11,477 13,846 41,080 41,080
Shareholders' equity. . . . 14,982 (40,488) (31,459) (20,369) 5,863
OTHER DATA:
Depreciation and
amortization . . . . . . . 82,869 72,787 68,581 61,307 53,431
LIFO provision. . . . . . . 103 479 1,617 3,109 5,963
Capital expenditures,
including capital
leases . . . . . . . . . . 182,700 148,650 82,061 74,750 77,044
<FN>
(1) The historical consolidated financial data for fiscal years 1994, 1993
and 1992 includes a provision for income taxes computed in accordance
with SFAS 109. The provision for income taxes for fiscal years 1991
and 1990 was computed in accordance with APB 11.
(2) Penn Traffic is accounting for the Grand Union investment under the
equity method. As of February 2, 1991, Penn Traffic had recorded
losses that reduced the carrying value of its investment to zero.
(3) The extraordinary item (net of income tax benefits) resulted from the
early retirement of debt.
(4) Net income (loss) per share of common stock is based on the average
number of shares of common stock outstanding during each period.
Fully diluted net income per share is not presented since the
reduction from primary net income per share is less than three percent
for each period presented.
</TABLE>
-20-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FISCAL YEAR ENDED JANUARY 29, 1994 ("FISCAL 1994") COMPARED TO FISCAL YEAR
ENDED JANUARY 30, 1993 ("FISCAL 1993")
Net loss was $17.7 million for Fiscal 1994 compared to $6.8 million in
Fiscal 1993. The increase in the net loss was primarily due to a $15.0 million
increase in extraordinary item relating to the early retirement of debt, an
unusual item of $6.4 million ($3.8 million net of tax benefit) and an $8.2
million increase in the tax provision (including a $2.4 million charge related
to the impact on deferred taxes resulting from the increase in the federal tax
rate), partially offset by an $18.8 million increase in income before taxes and
extraordinary item (before unusual item).
The following table sets forth Statement of Operations components expressed
as percentages of total revenues for Fiscal 1994 and Fiscal 1993:
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL REVENUES
FISCAL YEAR ENDED
-----------------------
1994 1993
------ ------
<S> <C> <C>
Total revenues . . . . . . . . . . . . . . 100.0% 100.0%
Gross profit (1) . . . . . . . . . . . . . 22.3 21.3
Selling and administrative
expenses . . . . . . . . . . . . . . . . 17.7 16.8
Unusual item . . . . . . . . . . . . . . . 0.2
Operating income . . . . . . . . . . . . . 4.4 4.5
Interest expense . . . . . . . . . . . . . 3.7 4.1
Income before income taxes
and extraordinary item . . . . . . . . . 0.7 0.4
<FN>
(1) Total revenues less cost of goods sold.
</TABLE>
Total revenues for Fiscal 1994 increased to $3,171.6 million from $2,832.9
million in Fiscal 1993. The increase in total revenues is primarily the result
of the increase in retail supermarket sales resulting from the acquisition of
the former Peter J. Schmitt and the Insalaco's stores. Retail operations,
wholesale operations and the food processing businesses contributed 81.6%, 14.5%
and 3.9%, respectively, to Fiscal 1994 total revenues. Wholesale supermarket
revenues increased in Fiscal 1994 to $461.7 million from $438.7 million in
Fiscal 1993. Sales from retail supermarkets existing in both periods, "same
store sales," for the 52 weeks ended January 29, 1994, increased 1.5%.
In Fiscal 1994, gross profit was $706.7 million compared to Fiscal 1993
gross profit of $602.5 million, representing 22.3% and 21.3% of total revenues,
respectively. The increase in gross profit as a percentage of total revenues
was primarily the result of the reclassification of certain expenses from cost
of goods
-21-
<PAGE>
sold to selling and administration expenses (.7%) and lower product procurement
costs partially offset by increased buying and occupancy costs (.3%). The lower
product procurement costs are partly the result of the Company's continuing
consolidated purchasing initiatives which have led to increased vendor
allowances and other reductions in product procurement costs.
Selling and administrative expenses for Fiscal 1994 were $563.7 million
compared with $475.8 million in Fiscal 1993. Selling and administrative
expenses as a percentage of total revenues increased to 17.7% for Fiscal 1994
from 16.8% in Fiscal 1993. The increase in selling and administrative expenses
as a percentage of total revenues was primarily due to the reclassification of
certain expenses from cost of goods sold to selling and administrative expenses
(.7%) and increases in fixed and semi-variable expenses as a percentage of total
revenues during a period without food price inflation and with changes in
consumer preferences towards lower-priced products (.2%).
During the second quarter of Fiscal 1994, the Company recorded certain
expenses totalling $6.4 million classified as an unusual item. This unusual
item is comprised of $4.0 million related to a voluntary employee separation
program at the Company's P&C division and $2.4 million related to the
realignment of certain operations.
Depreciation and amortization of $82.9 million in Fiscal 1994 and $72.8
million in Fiscal 1993 represented 2.6% of total revenues in both periods,
respectively.
Operating income for Fiscal 1994 increased by $14.0 million to $140.6
million from $126.6 million in Fiscal 1993. Operating income as a percentage of
total revenues was 4.4% and 4.5% in Fiscal 1994 and Fiscal 1993, respectively.
Fiscal 1994 operating income includes an unusual item of $6.4 million, or .2% of
total revenues.
Interest expense for Fiscal 1994 and Fiscal 1993 was $117.4 million and
$115.8 million, respectively.
Income before income taxes and extraordinary item was $23.2 million for
Fiscal 1994, compared to $10.8 million for Fiscal 1993.
The income tax provision for Fiscal 1994 was $15.0 million compared to $6.8
million in Fiscal 1993. The Fiscal 1994 income tax provision includes a $2.4
million charge relating to an increase in the federal tax rate applicable to
deferred taxes in accordance with the requirements of SFAS No. 109, "Accounting
for Income Taxes" ("SFAS 109"). The effective tax rates vary from the statutory
rates, due to differences between income for financial reporting and tax
reporting purposes that primarily result from the amortization of goodwill. The
income tax provisions for both years reflect the adoption of SFAS 109 (Note 4).
The extraordinary item for Fiscal 1994 was a $25.8 million charge (net of
$17.8 million income tax benefit) compared to a
-22-
<PAGE>
$10.8 million charge (net of $6.9 million income tax benefit) in Fiscal 1993.
These extraordinary items relate to the early retirement of debt.
In November 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits" ("SFAS 112"). This statement will require accrual
accounting for certain postemployment benefits. The effective date for
compliance with this statement is Fiscal 1995. The Company intends to adopt
SFAS 112 effective January 30, 1994. The effect of adoption of SFAS 112 is not
expected to be significant.
FISCAL YEAR ENDED JANUARY 30, 1993 ("FISCAL 1993") COMPARED TO FISCAL YEAR
ENDED FEBRUARY 1, 1992 ("FISCAL 1992")
Net loss before cumulative effect of change in accounting principle was
$6.8 million for Fiscal 1993 compared to $9.1 million in Fiscal 1992. This
improvement was primarily due to an increase in operating income partially
offset by a $7.1 million increase in extraordinary charges related to debt
retirement. Income before extraordinary item was $4.0 million in Fiscal 1993
compared to a loss of $5.4 million in Fiscal 1992. This improvement was
primarily due to an increase in operating income.
The following table sets forth Statement of Operations components expressed
as percentages of total revenues for Fiscal 1993 and Fiscal 1992:
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL REVENUES
FISCAL YEAR ENDED
-----------------------
1993 1992
------ ------
<S> <C> <C>
Total revenues . . . . . . . . . . . . . . 100.0% 100.0%
Gross profit (1) . . . . . . . . . . . . . 21.3 20.8
Selling and administrative
expenses . . . . . . . . . . . . . . . . 16.8 16.6
Operating income . . . . . . . . . . . . . 4.5 4.2
Interest expense . . . . . . . . . . . . . 4.1 4.2
Income (loss) before income taxes,
extraordinary item and
cumulative effect of change in
accounting principle . . . . . . . . . . 0.4 ---
<FN>
(1) Total revenues less cost of goods sold.
</TABLE>
Total revenues for Fiscal 1993 increased to $2,832.9 million from $2,772.1
million in Fiscal 1992. Retail operations, wholesale operations and the food
processing businesses contributed 80.0%, 15.5% and 4.5%, respectively, to Fiscal
1993 total revenues. Wholesale supermarket revenues increased in Fiscal 1993 to
$438.7 million from $409.4 million in Fiscal 1992. Sales from retail
supermarkets existing in both periods, "same store sales," for the 52 weeks
ended January 30, 1993, remained constant with the prior year.
-23-
<PAGE>
In Fiscal 1993, gross profit was $602.5 million compared to Fiscal 1992
gross profit of $576.4 million, representing 21.3% and 20.8% of total revenues,
respectively. The increase in gross profit as a percentage of total revenues is
the result of lower product procurement costs (0.4%) and a decrease in the LIFO
provision (0.1%) which resulted from lower food inflation rates. The lower
procurement costs are a function of increased vendor allowances, forward buy
opportunities and private label volume, combined with the positive impact of the
consolidated purchasing initiatives the Company has recently implemented in
vendor negotiations.
Selling and administrative expenses for Fiscal 1993 were $475.8 million,
compared with $460.7 million in Fiscal 1992. Selling and administrative
expenses as a percentage of total revenues increased to 16.8% for Fiscal 1993
from 16.6% in Fiscal 1992. The increase in selling and administrative expenses
for the period is the result of increases in payroll, healthcare benefit
expenses and other costs during a period of relatively stable sales.
Depreciation and amortization of $72.8 million in Fiscal 1993 and $68.6
million in Fiscal 1992 represented 2.6% and 2.5% of total revenues,
respectively. The increase in this percentage is a function of the Company's
capital expenditure program.
Operating income for Fiscal 1993 increased by $11.0 million to $126.6
million from $115.6 million in Fiscal 1992. Operating income as a percentage of
total revenues increased to 4.5% in Fiscal 1993 from 4.2% in Fiscal 1992. The
increase in operating income as a percentage of total revenues was the result of
the increase in other revenues and the increase in gross profit partially offset
by the increase in selling and administrative expenses.
Interest expense for Fiscal 1993 and Fiscal 1992 was $115.8 million and
$116.8 million, respectively.
Income before income taxes, extraordinary item and cumulative effect of
change in accounting principle was $10.8 million for Fiscal 1993, compared to a
loss of $1.1 million for Fiscal 1992.
The income tax provision for Fiscal 1993 was $6.8 million compared to $4.2
million in Fiscal 1992. The effective tax rates vary from the statutory rates,
due to differences between income for financial reporting and tax reporting
purposes that primarily result from the amortization of goodwill. The income
tax provisions for both years reflect the adoption of SFAS 109 (Note 4).
The extraordinary item for Fiscal 1993 was a $10.8 million charge (net of
$6.9 million income tax benefit) compared to a $3.7 million charge (net of $2.3
million income tax benefit) in Fiscal 1992. These extraordinary items relate to
the early retirement of debt.
-24-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
During Fiscal 1994, operating income increased to $140.6 million from
$126.6 million for Fiscal 1993. Interest expense for Fiscal 1994 was $117.4
million compared to $115.8 million for Fiscal 1993. Income before extraordinary
item for Fiscal 1994 was $8.2 million compared to $4.0 million in Fiscal 1993.
Payments of interest and principal on the Company's $1,026.1 million of
long-term debt (excluding capital leases) will restrict funds available to the
Company to finance capital expenditures and working capital. Principal payments
of long-term debt due during Fiscal 1995, 1996 and 1997 total $4.2 million, $4.1
million and $2.7 million, respectively.
During Fiscal 1994, the Company's internally generated funds from
operations and amounts available under the revolving credit facilities described
below provided sufficient liquidity to meet the Company's operating, capital
expenditure and debt service needs.
In April 1993, the Company entered into a new revolving credit facility
(the "Revolving Credit Facility") providing for borrowings of up to $175
million, subject to a borrowing base limitation measured by eligible inventory
and accounts receivable of the Company. The Revolving Credit Facility became
effective upon the consummation of the mergers of P&C and Big Bear into the
Company and replaced the three separate revolving credit facilities of Penn
Traffic, P&C and Big Bear which had previously been in effect. In August 1993,
the Revolving Credit Facility was amended to increase the maximum borrowing from
$175 million to $200 million and to extend the maturity from April 1998 to April
2000. The Revolving Credit Facility is secured by a pledge of the Company's
inventory, accounts receivable and related assets. As of January 29, 1994,
total availability under the Penn Traffic Revolving Credit Facility was $171.7
million against which there were no outstanding borrowings.
In April 1993, the Company issued 2,000,000 shares of common stock at a
price of $39.25 per share and $400 million aggregate principal amount of 9 5/8%
Senior Subordinated Notes due 2005 in underwritten public offerings (the
"Offerings"). The 9 5/8% Senior Subordinated Notes are unsecured obligations of
the Company which are subordinated to all existing and future senior
indebtedness.
Approximately $10.8 million of the proceeds of the Offerings was used to
provide the cash portion of the consideration paid to holders of Big Bear
redeemable convertible 8% preferred stock and Big Bear common stock in
connection with the merger of Big Bear into the Company. The remaining proceeds
of the Offerings were used to repay or retire $56.0 million of outstanding debt
associated with the three separate revolving credit facilities which were
replaced by the Revolving Credit Facility, $35.0 million in principal amount of
Senior Increasing Rate Notes due 1997, $135.0 million in principal amount of
12 3/4% Senior Notes due 1997, $124.4 million in principal amount of 13 3/4%
Senior Subordinated Notes due 1998, $6.7 million in principal amount of
-25-
<PAGE>
13 1/2% Subordinated Notes due 1998, $46.8 million in principal amount of
13 3/4% Senior Subordinated Notes due 1999 and $10.5 million in principal amount
of 11 1/2% Senior Notes due 2001, and for general corporate purposes.
In September 1993, Penn Traffic acquired the operating assets of Insalaco's
Markets, Inc., which consisted of 12 supermarkets with a total square footage of
approximately 400,000 and two new stores under construction totalling
approximately 90,000 square feet. One of the stores under construction opened
in October 1993. The purchase price for the acquisition was approximately $45
million plus approximately $8 million for the purchase of working capital. The
acquisition was financed through borrowings under the Company's Revolving Credit
Facility.
In September 1993, the Company borrowed $15.0 million under a term loan
(the "Term Loan") secured by the Company's new perishable distribution center
located in Syracuse, New York. Also, during the third quarter of Fiscal 1994,
the Company redeemed $31.6 million principal amount of 13 3/4% Senior
Subordinated Notes due 1998.
In December 1993, the Company issued $200 million aggregate principal
amount of 8 5/8% Senior Notes due 2003. The 8 5/8% Senior Notes due 2003 are
unsecured obligations of the Company which rank pari passu with other unsecured
general obligations of the Company. During Fiscal 1994, the net proceeds of the
offering were used to repay or retire $131.8 million of debt outstanding under
the Revolving Credit Facility, $48.6 million of the 13 3/4% Senior Subordinated
Notes due 1999 and $1.5 million of the 11 1/2% Senior Notes due 2001.
The Company has entered into four interest rate swap agreements, each of
which expires within the next four years, that effectively convert $155 million
of its fixed rate borrowings into variable rate obligations. Under the terms of
these agreements, the Company makes payments at variable rates which are based
on LIBOR and receives payments at fixed interest rates. The net amount paid or
received is included in interest expense.
Cash flows to meet the Company's requirements for operating, investing and
financing activities during Fiscal 1994 are reported in the Consolidated
Statement of Cash Flows. During the fiscal year ended January 29, 1994, the
Company's net cash used in investing activities was $175.4 million and the
Company had an increase in cash of $27.6 million. These amounts were financed
by net cash provided by operating activities of $9.3 million and net cash
provided by financing activities of $193.7 million. During the fiscal year
ended January 30, 1993, the Company's net cash used in investing activities was
$112.8 million and the Company had an increase in cash of $17.7 million. These
amounts were financed by net cash provided by operating activities of $85.0
million and net cash provided by financing activities of $45.6 million. During
the fiscal year ended February 1, 1992, the Company's net cash used in investing
activities was $52.1 million. These amounts were financed by net cash provided
by operating activities of $43.0 million, net cash provided by
-26-
<PAGE>
financing activities of $8.5 million and a decrease in cash of $0.5 million.
Working capital increased by $90.3 million from January 30, 1993 to
January 29, 1994.
The Company is in compliance with all terms and restrictive covenants of
its Revolving Credit Facility and long-term debt agreements for the fiscal year
ended and as of January 29, 1994.
The Company's debt agreements provide restrictive covenants on the payment
of dividends to its shareholders. As of January 29, 1994, no dividend payments
to the Company's shareholders could have been made under the most restrictive of
these limitations.
Over the next five fiscal years (including the fiscal year ending
January 28, 1995), the Company expects to spend approximately $650 million on
capital expenditures (including capital leases), equivalent to approximately
3.5% to 4.0% of planned retail sales over this period. Penn Traffic expects to
finance such capital expenditures (including capital leases) through cash
generated from operations, as well as amounts available under the Revolving
Credit Facility and additional capital lease obligations. The Company
anticipates that these sources of funds will be sufficient to finance its
planned capital expenditures over this period and does not expect to need to
arrange any additional source of financing for such capital expenditures.
Capital expenditures will be principally for new stores, replacement stores
and remodels. During Fiscal 1994, the Company opened 31 stores (including
Insalaco's stores acquired in September 1993) and completed 39 remodels. Capital
expenditures (including capitalized leases) were approximately $183 million for
Fiscal 1994.
-27-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
The Penn Traffic Company
In our opinion, the consolidated financial statements listed in the accom-
panying index appearing under Item 8 present fairly, in all material respects,
the financial position of The Penn Traffic Company and its subsidiaries (the
"Company") at January 29, 1994 and January 30, 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
January 29, 1994, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 4 to the consolidated financial statements, during
Fiscal 1994, retroactive to the year ended February 1, 1992, the Company changed
its method of accounting for income taxes to adopt the provisions of Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes."
/s/ Price Waterhouse
PRICE WATERHOUSE
Pittsburgh, Pennsylvania
March 14, 1994
-28-
<PAGE>
THE PENN TRAFFIC COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
52 Weeks Ended 52 Weeks Ended 52 Weeks Ended
January 29, 1994 January 30, 1993 February 1, 1992
---------------- ---------------- ----------------
(All dollar amounts in thousands, except per share data)
<S> <C> <C> <C>
TOTAL REVENUES $3,171,600 $2,832,949 $2,772,104
COSTS AND OPERATING EXPENSES:
Cost of sales (including
buying and occupancy cost) 2,464,853 2,230,493 2,195,773
Selling and administrative
expenses 559,729 475,839 460,684
Unusual item (Note 6) 6,400
---------- ---------- ----------
OPERATING INCOME 140,618 126,617 115,647
Interest expense 117,423 115,814 116,782
---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES,
EXTRAORDINARY ITEM
AND CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 23,195 10,803 (1,135)
Provision for income taxes
(Note 4) 15,019 6,812 4,217
---------- ---------- ----------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 8,176 3,991 (5,352)
Extraordinary item (net of tax
benefit) (Note 12) (25,843) (10,823) (3,718)
---------- ---------- ----------
LOSS BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING
PRINCIPLE (17,667) (6,832) (9,070)
Cumulative Effect of Change
in Accounting Principle
(Note 4) (58,330)
---------- ---------- ----------
NET LOSS (17,667) (6,832) (67,400)
Preferred dividends (Note 7) (159) (968) (2,768)
---------- ---------- ----------
NET LOSS APPLICABLE TO COMMON STOCK $ (17,826) $ (7,800) $ (70,168)
---------- ---------- ----------
---------- ---------- ----------
PER SHARE DATA:
Income (loss) before extra-
ordinary item and cumulative
effect of change in accounting
principle (after preferred
dividends) $ 0.76 $ 0.37 $ (1.19)
Extraordinary item (2.45) (1.31) (0.54)
Cumulative effect of change in
accounting principle (8.52)
---------- ---------- ----------
Net loss $ (1.69) $ (0.94) $ (10.25)
---------- ---------- ----------
---------- ---------- ----------
DIVIDENDS PER PREFERRED SHARE:
P & C $ $ $ 1.68
---------- ---------- ----------
---------- ---------- ----------
Big Bear $ 0.46 $ 1.84 $ 1.84
---------- ---------- ----------
---------- ---------- ----------
DIVIDENDS PER COMMON SHARE $ $ $
---------- ---------- ----------
---------- ---------- ----------
AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 10,561,256 8,258,113 6,847,201
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
-29-
<PAGE>
THE PENN TRAFFIC COMPANY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
January 29, January 30,
1994 1993
---------- -----------
(In thousands of dollars)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and short-term investments (Note 1). . . . $ 82,467 $ 54,840
Accounts and notes receivable (less allowance
for doubtful accounts of $740 and $661,
respectively) . . . . . . . . . . . . . . . . 60,020 51,881
Inventories (Note 1) . . . . . . . . . . . . . 348,455 282,820
Prepaid expenses and other current assets . . . 9,939 18,433
---------- ----------
500,881 407,974
---------- ----------
FACILITIES UNDER CAPITAL LEASES (NOTE 5):
Capital leases . . . . . . . . . . . . . . . . 173,690 168,234
Less: Accumulated amortization . . . . . . . . (39,589) (29,900)
---------- ----------
134,101 138,334
---------- ----------
FIXED ASSETS (NOTE 1):
Land . . . . . . . . . . . . . . . . . . . . . 20,741 19,154
Buildings . . . . . . . . . . . . . . . . . . . 157,641 129,227
Furniture and fixtures . . . . . . . . . . . . 389,598 314,484
Vehicles . . . . . . . . . . . . . . . . . . . 19,586 16,172
Leaseholds and improvements . . . . . . . . . . 162,725 140,886
---------- ----------
750,291 619,923
Less: Accumulated depreciation and
amortization . . . . . . . . . . . . . . . . (214,563) (161,153)
---------- ----------
535,728 458,770
---------- ----------
OTHER ASSETS:
Intangible assets resulting from acquisitions,
net (Note 1) . . . . . . . . . . . . . . . . . 377,450 336,277
Other assets and deferred charges, net . . . . 84,741 75,875
---------- ----------
462,191 412,152
---------- ----------
TOTAL ASSETS . . . . . . . . . . . . . . $1,632,901 $1,417,230
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
-30-
<PAGE>
THE PENN TRAFFIC COMPANY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
January 29, January 30,
1994 1993
----------- -----------
(In thousands of dollars)
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of obligations under capital
leases (Note 5) . . . . . . . . . . . . . . . . . . $ 8,773 $ 7,984
Current maturities of long-term debt (Note 2). . . . 4,208 3,311
Trade accounts and drafts payable . . . . . . . . . 183,967 192,004
Payroll and other accrued liabilities . . . . . . . 73,579 64,076
Accrued interest expense . . . . . . . . . . . . . . 28,690 25,490
Accrued employee benefit costs (Note 3) . . . . . . 449 3,325
Payroll taxes and other taxes payable . . . . . . . 18,901 17,437
Deferred income taxes -- current (Note 4) . . . . . 24,669 27,034
----------- ----------
343,236 340,661
----------- ----------
NONCURRENT LIABILITIES:
Obligations under capital leases (Note 5). . . . . . 131,148 132,051
Long-term debt (Note 2). . . . . . . . . . . . . . . 1,021,896 861,790
Deferred income taxes (Note 4) . . . . . . . . . . . 72,411 78,112
Other noncurrent liabilities . . . . . . . . . . . . 49,228 33,627
----------- ----------
1,274,683 1,105,580
----------- ----------
TOTAL LIABILITIES. . . . . . . . . . . . . . 1,617,919 1,446,241
----------- ----------
COMMITMENTS AND CONTINGENCIES (NOTES 5 AND 11)
REDEEMABLE CONVERTIBLE 8% PREFERRED STOCK (NOTE 7):
Big Bear Stores Company issue--Par value $.01, 660,000
shares authorized, none and 499,000 shares
issued and outstanding, respectively . . . . . . . . 11,477
----------- ----------
SHAREHOLDERS' EQUITY (NOTE 8):
PREFERRED STOCK--Authorized 10,000,000, $1.00 par
value; none issued . . . . . . . . . . . . . . . . .
COMMON STOCK--Authorized 30,000,000, $1.25 par value;
10,840,151 shares and 8,258,113 shares issued and
outstanding, respectively. . . . . . . . . . . . . . 13,550 10,322
CAPITAL IN EXCESS OF PAR VALUE . . . . . . . . . . . 179,087 94,288
RETAINED DEFICIT . . . . . . . . . . . . . . . . . . (162,924) (145,098)
MINIMUM PENSION LIABILITY ADJUSTMENT (NOTE 3). . . . (4,963)
UNEARNED COMPENSATION (NOTE 8) . . . . . . . . . . . (9,768)
----------- ---------
TOTAL SHAREHOLDERS' EQUITY . . . . . . . . . . . 14,982 (40,488)
----------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY . . . $1,632,901 $1,417,230
----------- ----------
----------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
-31-
<PAGE>
THE PENN TRAFFIC COMPANY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Minimum
Capital in Pension Total
Common Excess of Retained Unearned Liability Shareholders'
Stock Par Value Deficit Compensation Adjustment Equity
------- ----------- -------- ------------ ---------- ---------
(In thousands of dollars)
<S> <C> <C> <C> <C> <C> <C>
FEBRUARY 2, 1991 $ 6,945 $ 38,276 $ (65,590) $(20,369)
Cumulative effect of change
in accounting principle
(Note 4) (58,330) (58,330)
Net loss (9,070) (9,070)
Cash dividends--preferred stock (2,768) (2,768)
Issuance of 1,802,400 shares of
common stock, net (Note 8) 2,253 38,213 40,466
Issuance of 899,980 shares of
common stock, net (Note 8) 1,124 23,643 24,767
Other (4,615) (1,540) (6,155)
------- -------- -------- --------
FEBRUARY 1, 1992 10,322 95,517 (137,298) (31,459)
Net loss (6,832) (6,832)
Cash dividends--preferred stock (968) (968)
Purchase of 112,140 shares of
Big Bear common stock (803) (803)
Purchase of 103,000 shares of
Big Bear redeemable convertible
8% preferred stock (291) (291)
Other (135) (135)
------- -------- -------- --------
JANUARY 30, 1993 10,322 94,288 (145,098) (40,488)
Net loss (17,667) (17,667)
Cash dividends--preferred stock (159) (159)
Issuance of 2,000,000 shares of
common stock, net (Note 8) 2,500 71,888 74,388
Issuance of 307,836 shares of
common stock, net (Note 8) 385 3,276 3,661
Exercise of 11,105 common stock
option shares (Note 8) 14 196 210
Issuance of 263,100 restricted
stock shares (Note 8) 329 9,439 $(9,768)
Minimum pension liability adjustment
(Note 3) $(4,963) (4,963)
------- -------- -------- ------- ------- --------
JANUARY 29, 1994 $13,550 $179,087 $(162,924) $(9,768) $(4,963) $ 14,982
------- -------- -------- ------- ------- --------
------- -------- -------- ------- ------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
-32-
<PAGE>
THE PENN TRAFFIC COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
52 Weeks Ended 52 Weeks Ended 52 Weeks Ended
January 29, 1994 January 30, 1993 February 1,1992
---------------- ---------------- ---------------
(In thousands of dollars)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss . . . . . . . . . . . . . . $ (17,667) $ (6,832) $ (67,400)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Cumulative effect of change in
accounting principle . . . . . . 58,330
Depreciation and amortization . . 68,556 59,977 56,399
Amortization of intangibles . . . 14,313 12,810 12,182
Proceeds from prepayment of
operating fee. . . . . . . . . . 15,000
Other--net. . . . . . . . . . . . (16,391) (10,143) (6,835)
Net change in assets and
liabilities:
Accounts receivable and prepaid
expenses . . . . . . . . . . . . 276 (14,501) (6,532)
Inventories . . . . . . . . . . . (59,002) (20,981) (25,104)
Accounts payable and accrued
expenses . . . . . . . . . . . . 3,054 48,955 15,562
Deferred charges and other
assets . . . . . . . . . . . . . 16,181 678 6,385
--------- --------- ---------
NET CASH PROVIDED BY
OPERATING ACTIVITIES. . . . . . . . . 9,320 84,963 42,987
--------- --------- ---------
INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . (128,103) (80,903) (52,367)
Acquisition of Peter J. Schmitt
stores. . . . . . . . . . . . . . . (38,800)
Acquisition of Insalaco's stores . . (51,651)
Other--net . . . . . . . . . . . . . 4,348 6,856 303
--------- --------- ---------
NET CASH (USED IN) INVESTING
ACTIVITIES . . . . . . . . . . . . . (175,406) (112,847) (52,064)
--------- --------- ---------
</TABLE>
(continued)
-33-
<PAGE>
THE PENN TRAFFIC COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
52 Weeks Ended 52 Weeks Ended 52 Weeks Ended
January 29, 1994 January 30, 1993 February 1, 1992
---------------- ---------------- ----------------
(In thousands of dollars)
<S> <C> <C> <C>
FINANCING ACTIVITIES:
Issuance of Penn Traffic
common stock--net . . . . . . . . 74,388 65,233
Purchase of subsidiary
securities. . . . . . . . . . . . (10,814) (4,636) (45,732)
Increase in long-term debt . . . . 617,145 263,828 151,472
Payments to settle long-term
debt. . . . . . . . . . . . . . . (443,342) (195,799) (123,694)
Borrowing of revolver debt . . . . 587,976 381,014 487,613
Repayment of revolver debt . . . . (600,776) (382,914) (511,613)
Reduction of capital lease
obligations . . . . . . . . . . . (7,727) (7,949) (6,275)
Payment of debt issuance costs . . (23,188) (6,830) (5,564)
Preferred dividends and other--
net . . . . . . . . . . . . . . . 51 (1,111) (2,903)
-------- -------- -------
NET CASH PROVIDED BY
FINANCING ACTIVITIES. . . . . . . . 193,713 45,603 8,537
-------- -------- -------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS. . . . . . . . . . 27,627 17,719 (540)
Cash and cash equivalents at
beginning of year . . . . . . . . 54,840 37,121 37,661
-------- -------- -------
CASH AND CASH EQUIVALENTS AT
END OF YEAR . . . . . . . . . . . . $ 82,467 $ 54,840 $ 37,121
-------- -------- --------
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
-34-
<PAGE>
THE PENN TRAFFIC COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Penn Traffic Company ("Penn Traffic" or the "Company") is primarily
engaged in retail and wholesale food distribution. As of January 29, 1994, the
Company operated 232 supermarkets in Pennsylvania, New York, Ohio and West
Virginia and supplied 133 franchise supermarkets and 119 independent wholesale
accounts. It also operates 15 general merchandise stores. The Company operates
13 modern distribution centers with approximately 2.8 million square feet of
combined space, owns bakery and dairy operations and has approximately 26,000
employees. The Company also has a 17.8% common equity interest in The Grand
Union Company ("Grand Union").
BASIS OF PRESENTATION The acquisition of Penn Traffic in Fiscal 1988 was
accounted for as a purchase and, accordingly, the purchase price was allocated
to the assets and liabilities based on their respective fair values at the date
of the acquisition. Certain prior year amounts have been reclassified on the
Consolidated Balance Sheet and the Consolidated Statement of Cash Flows to
conform to Fiscal 1994 presentation. During Fiscal 1989, the Company acquired
the majority of the outstanding stock of P&C Food Markets, Inc., formerly a
subsidiary of the Company and currently a division ("P&C"). During Fiscal 1990,
the Company acquired the majority of the outstanding stock of Big Bear Stores
Company, formerly a subsidiary of the Company and currently a division ("Big
Bear"), and a common equity interest in Grand Union (Note 9). The Company is
accounting for the Grand Union investment under the equity method.
PRINCIPLES OF CONSOLIDATION AND BUSINESS SEGMENT All significant
intercompany transactions and accounts have been eliminated in consolidation. A
minority-owned affiliate is being accounted for under the equity method. The
Company is principally involved with the distribution and retail sale of food
and related products, which constitutes a single significant business segment.
FISCAL YEAR The fiscal year of the Company ends on the Saturday nearest to
January 31.
CASH AND SHORT-TERM INVESTMENTS Short-term investments are classified as
cash and are stated at cost, which approximates market value. For the purpose
of the Consolidated Statement of Cash Flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to be
cash equivalents.
INVENTORIES Inventories are valued at the lower of cost or market. The
Company's inventories, representing grocery and certain general merchandise and
manufactured inventories, are stated at cost using the last-in, first-out (LIFO)
method of valuation. Inventories stated on the LIFO basis were
-35-
<PAGE>
approximately $14,353,000 and $14,250,000 below replacement cost at January 29,
1994 and January 30, 1993, respectively.
FIXED ASSETS AND CAPITAL LEASES Major renewals and betterments are
capitalized, whereas maintenance and repairs are charged to operations as
incurred. Depreciation and amortization for financial accounting purposes are
provided on the straight-line method. For income tax purposes, the Company
principally uses accelerated methods. For financial accounting purposes,
depreciation and amortization are provided over the following useful lives or
lease term:
Buildings . . . . . . . . . . . . . . . 16 to 50 years
Furniture and fixtures . . . . . . . . . 4 to 15 years
Vehicles . . . . . . . . . . . . . . . . 3 to 8 years
Leaseholds and improvements . . . . . . 5 to 30 years
Capital leases . . . . . . . . . . . . . lease term
INTANGIBLE ASSETS RESULTING FROM ACQUISITIONS The excess of the costs over
the amounts attributed to tangible net assets is primarily being amortized over
40 years using the straight-line method. In addition, certain nonfinancing
costs resulting from acquisitions have been capitalized as other assets and
deferred charges. For Fiscal 1994, 1993 and 1992, amortization of intangibles
was $14,313,000, $12,810,000 and $12,182,000, respectively.
INVESTMENT IN AFFILIATED COMPANY The Company's minority interest
investment in Grand Union is carried on the equity basis. The fiscal year of
Grand Union ends on the Saturday nearest to March 31 (Note 9).
DEFERRED CHARGES Deferred charges consisting of debt issuance costs,
prepaid pension expense and the value of leasehold interests were recorded in
conjunction with the acquisitions. These deferred charges are being amortized
primarily on a straight-line basis over the life of the related debt, the
remaining service lives of employees and the lives of the related leases,
respectively.
STORE PRE-OPENING COSTS Store pre-opening costs are generally charged to
expense as incurred.
INCOME TAXES Income taxes are provided based on the liability method of
accounting pursuant to Statement of Financial Accounting Standards No. 109
("SFAS 109"), "Accounting for Income Taxes." The Company elected to
retroactively adopt SFAS 109 and has reported the cumulative effect of the
change in the method of accounting for income taxes as of the beginning of
Fiscal 1992 in the Consolidated Statement of Operations (Note 4).
Deferred income taxes are recorded to reflect the tax consequences on
future years of temporary differences between the tax basis of assets and
liabilities and their financial reporting amounts at each year end.
-36-
<PAGE>
NET INCOME (LOSS) PER SHARE Net income (loss) per share of common stock is
based on the average number of shares of common stock outstanding during each
period, after giving effect to preferred stock dividends. Fully diluted income
per share is not presented for each of the periods since the reduction from
primary income per share is less than three percent.
-37-
<PAGE>
NOTE 2 -- LONG-TERM DEBT:
The long-term debt of Penn Traffic consists of the obligations described
below.
<TABLE>
<CAPTION>
JANUARY 29, JANUARY 30,
1994 1993
----------- -----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Secured Revolving Credit Facility . . . . . . . . $ 12,800
Senior Increasing Rate Notes due June 30, 1997. . 35,000
12 3/4% Senior Notes due June 15, 1997. . . . . . 134,970
11 1/2% Senior Notes due October 15, 2001 . . . . $ 113,000 125,000
10 1/4% Senior Notes due February 15, 2002. . . . 125,000 125,000
8 5/8% Senior Notes due December 15, 2003. . . . 200,000
10 3/8% Senior Notes due October 1, 2004. . . . . 100,000 100,000
13 3/4% Senior Subordinated Notes due
October 11, 1998. . . . . . . . . . . . . 155,972
13 3/4% Senior Subordinated Notes due
June 15, 1999 . . . . . . . . . . . . . . 52,423 149,825
9 5/8% Senior Subordinated Notes due
April 15, 2005. . . . . . . . . . . . . . 400,000
13 1/2% Subordinated Notes due June 15, 1998. . . 6,650
Mortgage Notes, Secured Industrial
Development Revenue Bonds and other
debt due through 2016 . . . . . . . . . . . . 35,681 21,884
---------- ---------
1,026,104 867,101
Intercompany elimination. . . . . . . . . . . . . . (2,000)
---------- ---------
TOTAL DEBT. . . . . . . . . . . . . . . . . . . 1,026,104 865,101
Less: Amounts due within one year . . . . . . . . . 4,208 3,311
---------- ---------
TOTAL LONG-TERM DEBT. . . . . . . . . . . . . . $1,021,896 $861,790
---------- ---------
---------- ---------
</TABLE>
Amounts maturing within the next five years are: $4,208,000, $4,071,000,
$2,728,000, $2,186,000 and $3,275,000. The Company incurred interest expense of
$117,423,000, $115,814,000 and $116,782,000, including noncash amortization of
deferred financing costs of $4,153,000, $4,336,000 and $4,554,000 for Fiscal
1994, 1993 and 1992, respectively. Interest paid amounted to $116,309,000,
$102,330,000 and $115,242,000 for Fiscal 1994, 1993 and 1992, respectively.
The estimated fair value of the Company's long-term debt, including current
maturities, was $1,068 million at January 29, 1994 and $897 million at
January 30, 1993. The estimated fair value of the Company's long-term debt has
been determined by the Company using market information available to the
Company, consisting of information provided by an investment banking firm as to
the market value of such debt amounts.
In April 1993, Penn Traffic entered into a new revolving credit facility
which replaced three separate existing revolving credit facilities of Penn
Traffic, P&C and Big Bear. The Revolving Credit Facility, as amended in
August 1993, provides for borrowings of up to $200 million, subject to a
borrowing base limitation measured by the Company's eligible inventory and
accounts receivable. The Revolving Credit Facility matures April 30, 2000 and is
secured by a pledge of the Company's inventory, accounts receivable and related
assets.
-38-
<PAGE>
The interest rate for borrowings under the Revolving Credit Facility is
equal to, at the Company's option, the Base Rate (as defined) plus 1% or LIBOR
(as defined) plus 2.5% until such time as the Company has reported an interest
coverage ratio (as defined) of 2:1, at which point the interest rate is equal
to, at the Company's option, the Base Rate plus .75% or LIBOR plus 2.25%. Under
the terms of the Revolving Credit Facility, Penn Traffic is required to maintain
certain financial standards, including a minimum interest coverage ratio,
minimum net worth and minimum cumulative EBITDA. The Revolving Credit Facility
also restricts capital expenditures and prohibits the payment of dividends.
In December 1993, Penn Traffic issued $200 million of 8 5/8% Senior Notes
due 2003. The 8 5/8% Senior Notes due 2003 are unsecured obligations of Penn
Traffic and rank pari passu with other unsecured general obligations of the
Company.
The 11 1/2% Senior Notes due 2001, the 10 1/4% Notes due 2002, the 8 5/8%
Senior Notes due 2003 and the 10 3/8% Senior Notes due 2004 are unsecured
obligations of Penn Traffic which rank pari passu with each other and with
indebtedness under the Revolving Credit Facility. However, indebtedness under
the Revolving Credit Facility is secured by certain assets of the Company.
In April 1993, Penn Traffic issued $400 million of 9 5/8% Senior
Subordinated Notes due 2005. The 9 5/8% Senior Subordinated Notes are unsecured
obligations of the Company which rank pari passu with the 13 3/4% Senior
Subordinated Notes due 1999. The 9 5/8% Senior Subordinated Notes due 2005 and
13 3/4% Senior Subordinated Notes due 1999 are subordinated to all existing and
future senior indebtedness. The 9 5/8% Senior Subordinated Notes were issued at
a price of 99.127% of face value.
The 11 1/2% Senior Notes due 2001, the 10 1/4% Senior Notes due 2002, the
8 5/8% Senior Notes due 2003, the 10 3/8% Senior Notes due 2004, the 13 3/4%
Senior Subordinated Notes due 1999 and the 9 5/8% Senior Subordinated Notes due
2005 contain certain covenants, including restrictions on incurrence of
indebtedness by Penn Traffic and limitations on the payment of dividends to Penn
Traffic's common shareholders. The Company is in compliance with all terms and
covenants of its long-term debt agreements as of and for the fiscal year ended
January 29, 1994.
The Company has entered into four interest rate swap agreements, each of
which expires within the next four years, that effectively convert $155 million
of its fixed rate borrowing into variable rate obligations. Under the terms of
these agreements, the Company makes payments at variable rates which are based
on LIBOR and receives payments at fixed interest rates. The net amount paid or
received is included in interest expense. The estimated fair value of the
Company's interest rate swap agreements at January 29, 1994 was a $6.7 million
asset and a $6.0 million asset at January 30, 1993, neither of which has been
recorded on the books of the Company. The estimated fair value of these
interest rate swaps has been determined by the Company using market information
available to the Company, based on information provided by the counterparty to
each interest rate swap.
-39-
<PAGE>
NOTE 3 -- EMPLOYEE BENEFIT PLANS:
Substantially all of the Company's employees are covered by either defined
benefit plans or defined contribution plans.
The following sets forth the net pension expense recognized for the defined
benefit pension plans and the status of the Company's defined benefit plans:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JANUARY 29, JANUARY 30, FEBRUARY 1,
1994 1993 1992
----------- ----------- ----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Service cost -- benefits earned
during the period . . . . . . . . . . . $ 4,345 $ 3,996 $ 3,857
Interest cost on projected benefit
obligation . . . . . . . . . . . . . . 8,281 7,014 6,860
Actual return on plan assets . . . . . . (11,163) (12,212) (12,553)
Net amortization and deferral . . . . . . 482 1,663 3,808
------- ------- -------
Net pension expense . . . . . . . . . . . $ 1,945 $ 461 $ 1,972
------- ------- -------
------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1994 Fiscal 1993
Plans in Which Plans in Which
----------------------- ------------------------
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
----------- ---------- ----------- ----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Actuarial present value of
vested benefit obligation. . . . . $(60,632) $(48,265) $(63,850) $ (11,509)
-------- -------- -------- ---------
Accumulated benefit obligation. . . $(64,790) $(52,414) $(67,402) $ (12,634)
-------- -------- -------- ---------
Projected benefit obligation. . . . $(79,629) $(52,414) $(79,737) $ (12,634)
Plan assets at fair value . . . . . 89,035 39,265 105,513 11,712
-------- -------- -------- ---------
Plan assets in excess of (less
than) projected benefit
obligation . . . . . . . . . . . 9,406 (13,149) 25,776 (922)
Unrecognized net transition
(asset) liability . . . . . . . (1,894) 130 (1,991) 142
Unrecognized net (gain) loss. . . . (184) 8,469 (16,026) (2,839)
Unrecognized prior service cost . . 4,879 7,420 4,397 4,530
Minimum liability . . . . . . . . . (16,019) (862)
-------- -------- -------- ---------
Net pension asset (liability) . . . $ 12,207 $(13,149) $ 12,156 $ 49
-------- -------- -------- ---------
-------- -------- -------- ---------
</TABLE>
In calculating benefit obligations and plan assets for Fiscal 1994, the
Company assumed a weighted average discount rate of 7.25%, compensation increase
rates ranging from 3.0% to 3.5% and expected long-term rates of return on plan
assets ranging from 8.5% to 9.5%. For Fiscal 1993, the Company assumed weighted
average discount rates ranging from 8.5% to 9.5%, compensation increase rates
ranging from 3.5% to 5.5% and weighted average expected long-term rates of
return on plan assets ranging from 8.5% to 9.5%.
The Company's defined benefit plans generally provide a retirement benefit
to employees based on specified percentages applied to final average
compensation, as defined, coupled with the years of service earned to the date
of retirement. All pension plans comply with the provisions of the Employee
-40-
<PAGE>
Retirement Income Security Act (ERISA). Generally, the Company funds accrued
pension costs as incurred. Penn Traffic's defined benefit plans' assets are
maintained in separate trusts and are managed by independent investment
managers. The assets were principally invested in equity, debt and short-term
cash securities.
Quality Markets, P&C and Big Bear also contribute to multi-employer pension
funds, which cover certain union employees under collective bargaining
agreements. Such contributions aggregated $4,759,000, $4,088,000 and $4,046,000
in Fiscal 1994, 1993 and 1992, respectively. The applicable portion of the
total plan benefits and net assets of these plans is not separately
identifiable.
The Company contributes to a separate profit-sharing retirement plan for
eligible employees of Quality Markets not covered by a union pension fund and a
profit-sharing arrangement for certain Riverside division union employees. The
expense for these profit-sharing plans for Fiscal 1994, 1993 and 1992 was
$1,229,000, $572,000 and $369,000, respectively. Also, Big Bear sponsors a
deferred profit-sharing plan for certain salaried employees. Contributions and
costs totalled $1,053,000, $1,001,000 and $695,000 in Fiscal 1994, 1993 and
1992, respectively.
Pursuant to the provisions of Statement of Financial Accounting Standards
No. 87, "Employers' Accounting for Pensions" ("SFAS 87"), the Company recorded
in other noncurrent liabilities an additional minimum pension liability
adjustment of $16,019,000 as of January 29, 1994, representing the amount by
which the accumulated benefit obligation exceeded the fair value of plan assets
plus accrued amounts previously recorded. The additional liability has been
offset by an intangible asset to the extent of previously unrecognized prior
service cost. The amount in excess of previously unrecognized prior service
cost is recorded as a reduction of shareholders' equity in the amount of
$4,963,000, representing the after-tax impact.
In November 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits" ("SFAS 112"). This statement will require accrual
accounting for certain postemployment benefits. The effective date for
compliance with this statement is Fiscal 1995. The Company intends to adopt
SFAS 112 effective January 30, 1994. The effect of adoption of SFAS 112 is not
expected to be significant.
-41-
<PAGE>
NOTE 4 -- INCOME TAXES:
During the first quarter of Fiscal 1994, the Company adopted SFAS 109. The
cumulative effect of adopting SFAS 109 is being reported as a change in
accounting principle applied retroactively to the beginning of Fiscal 1992.
Retained earnings were reduced at the beginning of Fiscal 1992 by approximately
$58.3 million for the cumulative effect of the adoption, and the income tax
provision for Fiscal 1993 and 1992 was restated to reflect the impact of
adopting this statement.
Taxes on income were provided as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------
JANUARY 29, JANUARY 30, FEBRUARY 1,
1994 1993 1992
----------- ----------- ----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Current Tax Expense:
Federal income. . . . . . . . . . . . . $ 7,728 $11,365 $ 7,125
State income. . . . . . . . . . . . . . 1,690 2,430 701
-------- -------- --------
9,418 13,795 7,826
-------- -------- --------
Deferred Tax Expense (Benefit):
Federal income. . . . . . . . . . . . . 4,454 (5,936) (4,222)
State income. . . . . . . . . . . . . . 1,147 (1,047) 613
-------- -------- --------
5,601 (6,983) (3,609)
-------- -------- --------
Provision for Income Taxes. . . . . . . . . $15,019 $ 6,812 $ 4,217
-------- -------- --------
-------- -------- --------
</TABLE>
The differences between income taxes computed using the statutory federal
income tax rate and those shown in the Consolidated Statement of Operations are
summarized as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------
JANUARY 29, JANUARY 30, FEBRUARY 1,
1994 1993 1992
----------- ----------- -----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Federal tax at statutory rates. . . . . . . . $ 8,118 $ 3,673 $ (386)
State income taxes net of federal
income tax effect . . . . . . . . . . . . . 1,844 1,139 (236)
Nondeductible goodwill
amortization. . . . . . . . . . . . . . . . 3,284 3,189 3,120
Miscellaneous items . . . . . . . . . . . . . (167) (343) (78)
Increase in deferred income taxes due
to change in federal income tax rate. . . . 2,439
Increase in deferred income taxes due
to changes in state income tax rates. . . . 2,059
Tax credits . . . . . . . . . . . . . . . . . (499) (846) (262)
------- ------- -------
Provision for income taxes. . . . . . . . . . $15,019 $ 6,812 $ 4,217
------- ------- -------
------- ------- -------
</TABLE>
-42-
<PAGE>
Components of deferred income taxes at January 29, 1994 and January 30,
1993 were as follows:
<TABLE>
<CAPTION>
JANUARY 29, JANUARY 30,
1994 1993
----------- -----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Deferred Tax Assets:
Nondeductible accruals. . . . . . . . . $ 11,019 $ 7,591
Prepaid operating fee . . . . . . . . . 5,058 5,766
Capital leases. . . . . . . . . . . . . 2,429 2,333
Reserve for discontinued
operations . . . . . . . . . . . . . . 560 1,544
Net operating loss carryforward . . . . 10,077
Capital loss carryforward . . . . . . . 339
Tax credit carryforwards. . . . . . . . 9,008 6,523
-------- --------
$ 38,490 $ 23,757
-------- --------
-------- --------
Deferred Tax Liabilities:
Fixed assets. . . . . . . . . . . . . . $ 98,407 $ 91,527
Inventory . . . . . . . . . . . . . . . 30,557 30,376
Prepaid expenses and other
current assets . . . . . . . . . . . . 530 145
Goodwill amortization . . . . . . . . . 413
Pensions. . . . . . . . . . . . . . . . 1,119 1,060
Deferred charges and other assets . . . 4,544 4,484
Other items . . . . . . . . . . . . . . 1,311
-------- --------
$135,570 $128,903
-------- --------
-------- --------
</TABLE>
At January 29, 1994, Penn Traffic had alternative minimum tax credit
carryforwards of $5,094,000, general business tax credit carryforwards of
$1,927,000, targeted jobs credits of $423,000 and various state tax credits of
$1,564,000 available to offset the Company's regular income tax liability in
future years. The general business tax credit carryforwards begin to expire in
2005, and the alternative minimum tax credit carryforwards have no expiration
date. In addition, the Company has a net operating loss carryforward of
approximately $24,281,000 which will expire in Fiscal 2009.
The effect of adopting SFAS 109 on previously reported results for Fiscal
1993 and 1992 was as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------
JANUARY 30, FEBRUARY 1,
1993 1992
----------- -----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Decrease in income before income taxes,
extraordinary item and
cumulative effect of change
in accounting principle . . . . . . . . . . $ 4,040 $ 5,027
Decrease in provision
for income taxes . . . . . . . . . . . . . 3,835 3,947
------- -------
Increase in net loss before
cumulative effect of change
in accounting principle . . . . . . . . . . 205 1,080
Cumulative effect of change in
accounting principle . . . . . . . . . . . 58,330
------- -------
Increase in net loss . . . . . . . . . . . . $ 205 $59,410
------- -------
------- -------
Increase in net loss per common share . . . . $ .02 $ 8.68
------- -------
------- -------
</TABLE>
-43-
<PAGE>
NOTE 5 -- LEASES:
The following is a schedule by year of future gross minimum rental payments
for all leases with terms greater than one year reconciled to the present value
of net minimum capital lease payments as of January 29, 1994:
<TABLE>
<CAPTION>
FISCAL YEARS ENDING IN TOTAL OPERATING CAPITAL
- ---------------------- ----- --------- -------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
1995 $ 54,704 $ 31,042 $ 23,662
1996 52,626 29,195 23,431
1997 49,695 27,116 22,579
1998 45,109 24,760 20,349
1999 41,645 22,504 19,141
Later years 359,207 179,731 179,476
-------- -------- --------
Total minimum lease payments $602,986 $314,348 288,638
-------- --------
-------- --------
Less: Executory costs (1,830)
--------
Net minimum capital lease payments 286,808
Less: Estimated amount representing
interest (146,887)
--------
Present value of net minimum capital
lease payments 139,921
Less: Current portion (8,773)
--------
Long-term obligations under capital
lease at January 29, 1994 $131,148
--------
--------
</TABLE>
The Company principally operates in leased store facilities with terms of
up to 20 years and renewable options for additional periods. The Company
follows the provisions of SFAS No. 13, "Accounting for Leases," in determining
the criteria for capital leases. Leases that do not meet such criteria are
classified as operating leases, and related rentals are charged to expense in
the year incurred. During Fiscal 1994, 1993 and 1992, the Company incurred
capital lease obligations (including acquired leases) of $7,613,000, $35,515,000
and $29,694,000, respectively, in connection with lease agreements for buildings
and equipment. For Fiscal 1994, 1993 and 1992, capital lease amortization
expense was $11,758,000, $10,149,000 and $8,241,000, respectively.
Future minimum rentals have not been reduced by minimum sublease rentals of
$32,442,000 due in the future under noncancelable subleases. In addition to
minimum rentals, some leases provide for the Company to pay real estate taxes
and other expenses and, in many cases, contingent rentals based on sales.
Minimum rental payments and related executory costs for operating leases
were as follows. Contingent rentals and sublease payments include arrangements
on primary leases classified as both capital and operating leases:
-44-
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------
JANUARY 29, JANUARY 30, FEBRUARY 1,
1994 1993 1992
----------- ----------- -----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Minimum rentals and executory costs $ 30,393 $ 24,079 $ 24,415
Contingent rentals 1,437 2,352 2,698
Less: Sublease payments (8,226) (6,904) (6,933)
-------- -------- --------
Net rental payments 23,604 19,527 20,180
Less: Grand Union sublease payments
(Note 10) (11,156) (11,186) (10,749)
-------- -------- --------
Net rental payments after Grand Union
payments $ 12,448 $ 8,341 $ 9,431
-------- -------- --------
-------- -------- --------
</TABLE>
NOTE 6 -- UNUSUAL ITEM:
During the second quarter of Fiscal 1994, the Company recorded certain
expenses totalling $6.4 million classified as an unusual item. This unusual
item is comprised of $4.0 million related to a voluntary employee separation
program at the Company's P&C division and $2.4 million related to the
realignment of certain operations.
NOTE 7 -- REDEEMABLE CONVERTIBLE PREFERRED STOCK:
In connection with the Big Bear acquisition in Fiscal 1990, Big Bear issued
660,000 shares of redeemable convertible 8% preferred stock having a liquidation
value of $23.00 per share. Holders of such shares were entitled to quarterly
dividends. Under certain circumstances, holders of these shares were entitled
to convert their stock at a ratio of one share of preferred stock to one share
of Big Bear common stock, par value $.01.
In April 1993, Big Bear was merged into Penn Traffic. At the effective
date of the merger, holders of Big Bear redeemable convertible 8% preferred
stock and Big Bear common stock received aggregate merger consideration for the
merger equal to 307,836 shares of Penn Traffic common stock and approximately
$10.8 million in cash. As a result of the merger, the Big Bear redeemable
convertible 8% preferred stock was retired.
-45-
<PAGE>
NOTE 8 -- SHAREHOLDERS' EQUITY:
At January 29, 1994, certain persons affiliated with Miller Tabak Hirsch +
Co. ("MTH") held options to purchase 289,000 shares at $14.00 per share. The
Company has a Long-Term Incentive Plan (the "1993 Plan") which provides for
long-term incentives based upon objective, quantifiable measures of the
Company's performance over time through the payment of incentive compensation of
the types commonly known as stock options, restricted stock, performance shares,
other forms of stock-based incentives such as phantom stock and cash awards. A
maximum of 350,000 shares of common stock may be paid to participants under the
1993 Plan and/or purchased pursuant to stock options granted under the 1993
Plan, subject to antidilution and other adjustments specified in the 1993 Plan.
The 1993 Plan was adopted in Fiscal 1994 as the successor to the Company's
1988 Stock Option Plan (the "1988 Plan"). The Company also has a Stock Option
Plan for directors (the "Directors' Plan") pursuant to which each director of
the Company who is not an employee of the Company receives as of the date of
appointment to the Board of Directors, and thereafter annually, as of the first
business day after the conclusion of each Annual Meeting of Shareholders of the
Company, an option to purchase 1,500 shares of common stock (subject to
antidilution adjustments) at a price equal to the fair market value (as defined
in the Directors' Plan) of such shares on the date of grant.
As of January 29, 1994, a total of 262,100 shares of restricted stock have
been awarded under the Company's 1993 Plan to 67 officers and employees of Penn
Traffic (including one independent contractor). At January 29, 1994, an
additional 87,900 shares of common stock were reserved for future grants under
the 1993 Plan. Vesting of the shares of restricted stock granted pursuant to
such awards is contingent upon attainment, subsequent to the date of grant, of
EBITDA (as defined) levels of $265 million in any four consecutive fiscal
quarters or $500 million in any eight consecutive fiscal quarters, and such
shares will be forfeited if such levels are not achieved by the fifth
anniversary of the date of grant. To encourage retention of such shares by the
participants, upon vesting of the restricted stock, the Company will make a cash
payment to each participant equal to the amount of income tax payable by such
participant in respect of the award and the cash payment, if such participant
agrees not to sell his shares for at least two years beyond vesting and to
refund the payment if he resigns within such two-year period. As of January 29,
1994, common stock and capital in excess of par value were increased by
$9,768,000 and unearned compensation was recorded at the same amount to reflect
the issuance of the restricted shares. Unearned compensation, which is shown as
a separate component of shareholders' equity, will be expensed as the
compensation is earned.
As of January 29, 1994, options for 252,252 shares and 31,500 shares have
been granted under the 1988 Plan and the Directors' Plan, respectively. An
additional 18,500 shares of common stock are reserved for issuance under the
Directors' Plan
-46-
<PAGE>
at January 29, 1994. Under the terms of the Directors' Plan, option prices are
100% of the "fair market value" of the shares on the date granted. The 1988
Plan options generally vest 20% on the date of grant and 20% on each of the next
four anniversary dates. The Directors' Plan options are immediately
exercisable. Under both plans, options expire ten years after the date of
grant. Changes during the three years ended January 29, 1994 in options
outstanding under the 1988 Plan and the Directors' Plan are as follows:
PENN TRAFFIC STOCK OPTIONS
<TABLE>
<CAPTION>
OPTION PRICE SHARES
PER SHARE UNDER OPTION
------------ ------------
<S> <C> <C>
1988 PLAN
Balance, February 2, 1991. . . . . . . . . . $12.50 - 25.25 190,233
Granted . . . . . . . . . . . . . . . . . . $24.25 - 26.75 77,400
Canceled . . . . . . . . . . . . . . . . . . $12.87 - 25.25 (3,770)
-------
Balance, February 1, 1992 . . . . . . . . . $12.50 - 26.75 263,863
Granted . . . . . . . . . . . . . . . . . . $28.13 5,000
Canceled . . . . . . . . . . . . . . . . . . $12.87 - 26.75 (3,676)
-------
Balance, January 30, 1993 . . . . . . . . . $12.50 - 28.13 265,187
Granted . . . . . . . . . . . . . . . . . . 0
Canceled . . . . . . . . . . . . . . . . . . $12.50 - 26.75 (12,935)
-------
Balance, January 29, 1994. . . . . . . . . . $12.50 - 28.13 252,252
-------
-------
DIRECTORS' PLAN
Granted and outstanding at January 29, 1994 $18.44 - 42.00 31,500
-------
-------
</TABLE>
At January 29, 1994, 218,910 of the 1988 Plan options were exercisable.
In April 1993, the Company issued 2,000,000 shares of common stock at a
price of $39.25 per share and concurrently offered $400 million of the 9 5/8%
Senior Subordinated Notes due 2005 in underwritten public offerings (the
"Offerings").
Approximately $10.8 million of the proceeds of the Offerings was used to
provide the cash portion of consideration paid to holders of Big Bear
convertible preferred stock and holders of Big Bear common stock other than Penn
Traffic in connection with the merger of Big Bear into the Company (Note 7).
Holders of Big Bear convertible preferred stock and holders of Big Bear common
stock other than Penn Traffic also received 307,836 shares of Penn Traffic
common stock as consideration for the merger. At the effective time of the
merger, the outstanding shares of Big Bear common stock owned by Penn Traffic
were canceled. The remaining proceeds of the Offerings were used to pay or
retire certain outstanding indebtedness of the Company (as described in Note 2)
and for general corporate purposes.
In Fiscal 1992, the Company issued 1,802,400 shares of common stock at a
price of $24.00 per share. Net proceeds of approximately $40.5 million were
used to retire a portion of the Company's outstanding indebtedness, including
$16.9 million in principal amount of 12 3/4% Subordinated Notes due 1997, $12.5
million in principal amount of 13 1/2% Subordinated Notes due
-47-
<PAGE>
1998 and $5.3 million in principal amount of 13 3/4% Senior Subordinated Notes
due 1998.
In addition, in Fiscal 1992, P&C Food Markets, Inc. ("Old P&C") was merged
into a wholly owned subsidiary of Penn Traffic, which thereupon changed its name
to P&C Food Markets, Inc. ("P&C"). Prior to the merger (the "P&C Merger"), Penn
Traffic owned approximately 90.1% of the outstanding shares of Old P&C's common
stock, certain members of Old P&C's management owned approximately 5.3% of such
shares and Salomon Brothers Holding Company Inc ("SBHC") owned approximately
4.6% of such shares. Also outstanding prior to the P&C Merger were 925,000
shares of Old P&C convertible preferred stock. At the effective time of the P&C
Merger, the outstanding shares of Old P&C common stock owned by Penn Traffic
were canceled. Holders of Old P&C common stock other than Penn Traffic and
holders of Old P&C convertible preferred stock received aggregate consideration
for the P&C Merger equal to 899,980 shares of Penn Traffic common stock and
approximately $18.8 million in cash. As a result of the P&C Merger, P&C became
a wholly owned subsidiary of Penn Traffic. In April 1993, P&C was merged into
the Company.
-48-
<PAGE>
NOTE 9 -- EQUITY INVESTMENT:
In July 1989, Penn Traffic, through its limited partnership investment in
Grand Acquisition Company, L.P. ("GAC, L.P."), acquired an indirect ownership
interest in approximately 24.3% of the currently outstanding common stock of
Grand Union Holdings Corporation (formerly named GND Holdings Corporation)
("Holdings"), the corporate parent of The Grand Union Company ("Grand Union").
GAC, L.P., whose other partners include MTH and individuals affiliated with MTH,
as well as certain management employees of Penn Traffic, and its affiliates,
currently own approximately 39% of the currently outstanding common equity of
Holdings on a fully diluted basis; 48% is owned by various institutional
investors and 13% by members of Grand Union's management. Penn Traffic's
indirect ownership interest is 17.8% on a fully diluted basis. As of April 1,
1994, Grand Union operated 254 supermarkets under the "Grand Union" name in
seven northeastern states.
The Company is accounting for its investment in Grand Union under the
equity method. The investment was recorded originally at a cost of $18,250,000.
The carrying value of the investment was totally written off as of February 2,
1991. The most recent Form 10-K filed by Grand Union was for the fiscal year
ended April 3, 1993 and the most recent Form 10-Q filed by Grand Union was for
the fiscal quarter ended January 8, 1994. As of January 29, 1994, Penn
Traffic's cumulative unrecognized equity in the loss of Grand Union is
$110,742,000.
See Note 10 - Related Parties for a description of certain arrangements
between Penn Traffic and Grand Union.
-49-
<PAGE>
Condensed financial information follows:
GRAND UNION HOLDINGS CORPORATION
CONDENSED BALANCE SHEET
(DOLLARS IN MILLIONS) (UNAUDITED)
<TABLE>
<CAPTION>
JANUARY 8, JANUARY 2,
1994(1) 1993
---------- ----------
<S> <C> <C>
Current assets . . . . . . . . . . . . . . . $ 295 $ 315
Other assets . . . . . . . . . . . . . . . . 1,086 1,238
------ ------
Total assets . . . . . . . . . . . . . . . $1,381 $1,553
------ ------
------ ------
Current liabilities . . . . . . . . . . . . . $ 247 $ 246
Other liabilities and redeemable stock . . . 1,749 1,590
Other shareholders' equity . . . . . . . . . (615) (283)
------ ------
Total liabilities and equity . . . . . . . $1,381 $1,553
------ ------
------ ------
</TABLE>
GRAND UNION HOLDINGS CORPORATION
CONDENSED STATEMENT OF OPERATIONS
(DOLLARS IN MILLIONS) (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE 52 WEEKS ENDED
JANUARY 8, JANUARY 2,
1994 (1) 1993
----------- ----------
<S> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . $2,508 $2,888
Cost of sales . . . . . . . . . . . . . . . . 1,785 2,072
------ ------
Gross profit . . . . . . . . . . . . . . . . 723 816
Operating and other expenses . . . . . . . . 1,001 867
------ ------
Loss before income taxes . . . . . . . . . . (278) (51)
Income tax provision . . . . . . . . . . . . 7
Extraordinary charge (2) . . . . . . . . . . (7) (44)
Accrued preferred dividends . . . . . . . . . (16) (14)
Cumulative effect of accounting change (3) . (30)
------ ------
Net loss applicable to common stock . . . . . $ (331) $ (116)
------ ------
------ ------
<FN>
- -------------------------
(1) Includes the disposition of Grand Union's Southern Region which occurred on
March 29, 1993. That disposition resulted in a $198 million loss, which is
included in operating and other expenses.
(2) Extraordinary charges and expenses related to the recapitalization of Grand
Union.
(3) Adopted Statement of Financial Accounting Standards No. 106 ("Employers'
Accounting for Postretirement Benefits Other Than Pensions") ("SFAS 106").
</TABLE>
-50-
<PAGE>
NOTE 10 -- RELATED PARTIES:
During Fiscal 1994, the Company had an agreement for financial consulting
and business management services to be provided by MTH. Under this agreement,
the Company paid MTH an annual fee of $1,324,000. For Fiscal 1995, the Company
will pay MTH an annual fee of $1,357,000.
During Fiscal 1994, the Company paid MTH additional fees for its services
in connection with the debt and equity offerings, the mergers of P&C and Big
Bear into the Company and an additional debt offering totaling $1.5 million. In
Fiscal 1993, the Company paid MTH additional fees related to debt offerings and
the acquisition of 28 stores from Peter J. Schmitt totaling $1,150,000. MTH
received $750,000 of fees during Fiscal 1992 for services related to the
arrangement of the Company's prior secured term loan, the merger of P&C into a
wholly owned subsidiary of the Company and the issuance of debt securities by
P&C.
At the time of the acquisition of Grand Union by Holdings, Grand Union and
P&C operated stores in some of the same geographic areas in Vermont and upstate
New York. In connection with such acquisition, agreements were entered into
with federal and state antitrust authorities that required the divestiture of 16
Grand Union stores or P&C stores. The divestitures required by these agreements
were completed on July 30, 1990. P&C operated 13 of the 16 divested stores and
Grand Union operated three. In connection with the divestiture program, P&C
discontinued its New England wholesaling business in December 1989.
In a related transaction, on July 30, 1990, P&C and Grand Union entered
into an agreement (the "Operating Agreement") whereby Grand Union acquired the
right to operate P&C's 13 remaining stores in New England under the Grand Union
name until July 2000. Pursuant to the Operating Agreement, Grand Union agreed
to pay Penn Traffic (as the successor of P&C, which was merged into the Company
in April 1993) a minimum annual fee that will average $10.7 million per year
during the 10-year term and, beginning with the year commencing July 31, 1992,
to pay Penn Traffic additional contingent fees of up to $700,000 per year based
on sales performance of the stores operated by Grand Union. The Total Revenues
line of the Consolidated Statement of Operations includes pretax operating fees
of $11.2 million for the 52 weeks ended January 29, 1994, $11.2 million for the
52 weeks ended January 30, 1993 and $10.7 million for the 52 weeks ended
February 1, 1992. Based on current sales levels, Penn Traffic expects to
receive payment of the maximum contingent fee of $700,000 in each year remaining
in the term of the Operating Agreement. As a result of the recapitalization of
Grand Union in July 1992, Penn Traffic received a $15 million prepayment of an
operating fee from Grand Union pursuant to the terms of the Operating Agreement.
Such prepayment will reduce future payments made by Grand Union to Penn Traffic
pursuant to the terms of the Operating Agreement by approximately $3.2 million
per year.
At the expiration of the 10-year term of the Operating Agreement, Grand
Union has the right to extend the term of the Operating Agreement for an
additional five years. In the event of such extension of the lease term, Grand
Union will pay to Penn Traffic an annual fee of $13.6 million in the first year
of the extended term, $14.0 million in the second year, $14.4 million in the
third year, $14.9 million in the
-51-
<PAGE>
fourth year and $15.3 million in the fifth year, plus contingent fees based on
the sales performance of the stores of up to $700,000 each year.
Penn Traffic also granted Grand Union an option (the "Purchase Option") to
purchase the stores operated by Grand Union under the Operating Agreement.
Grand Union paid Penn Traffic $7.5 million for the Purchase Option.
If Grand Union does not extend the initial term of the Operating Agreement
at its expiration in July 2000 or does not exercise the Purchase Option prior to
the expiration of the term (or the extended term), the stores operated by Grand
Union pursuant to the Operating Agreement will be returned to operation by Penn
Traffic. Based on current conditions, management does not believe that the
return of operation of the stores to Penn Traffic would have a significant
impact on the financial condition of the Company.
Grand Union purchases bakery products from Penn Traffic's Penny Curtiss
bakery, and Penn Traffic purchases products from Grand Union's commissary. All
of such purchases are made in the ordinary course of business. The amount of
bakery products purchased by Grand Union from Penny Curtiss was approximately
$3.1 million in Fiscal 1994, $3.1 million in Fiscal 1993 and $2.6 million in
Fiscal 1992. The amount of commissary product purchased by Penn Traffic from
Grand Union was approximately $0.4 million in Fiscal 1994, $0.5 million in
Fiscal 1993 and $0.8 million in Fiscal 1992.
In September 1993, Penn Traffic entered into a program to consolidate the
purchasing and distribution of health and beauty care products and general
merchandise with Grand Union. Under this program, Grand Union procures health
and beauty care products for both Grand Union and Penn Traffic, and Penn
Traffic, through its Big Bear division, procures general merchandise for both
Penn Traffic and Grand Union. Grand Union's general merchandise warehouse in
Montgomery, New York is used to distribute general merchandise and health and
beauty care products to Riverside Markets, Quality Markets and Insalaco's
stores. This warehouse also supplies Penn Traffic's wholesale customers, as
well as Grand Union stores. Under this arrangement, the cost of operating the
Montgomery warehouse is shared by Penn Traffic in an amount proportionate to
Penn Traffic's usage of the facility. Penn Traffic owns the general merchandise
and health and beauty care products inventory located at the Montgomery, New
York warehouse. In Fiscal 1994, the amount of product sold by Penn Traffic to
Grand Union was $35.5 million. At January 29, 1994, the Company had recorded
net accounts payable to Grand Union of $4.8 million.
NOTE 11 -- COMMITMENTS AND CONTINGENCIES:
The Company enters into various purchase commitments in the normal course
of business. No losses are expected to result from these purchase commitments.
At January 29, 1994, Penn Traffic had guaranteed obligations of $3.5
million of indebtedness of certain of licensed independent operators.
-52-
<PAGE>
The Company, its subsidiaries and divisions also are involved in various
legal actions, some of which involve claims for substantial sums. However, any
ultimate liability with respect to these contingencies is not considered to be
material in relation to the consolidated financial position or results of
operations of the Company.
NOTE 12 -- EXTRAORDINARY ITEM:
During Fiscal 1994, Fiscal 1993 and Fiscal 1992, the Company had
extraordinary items of $25,843,000 (net of $17,848,000 income tax benefit),
$10,823,000 (net of $6,946,000 income tax benefit) and $3,718,000 (net of
$2,341,000 income tax benefit), respectively, relating to the early retirement
of debt.
-53-
<PAGE>
NOTE 13 -- ACQUISITIONS:
On September 27, 1993, the Company acquired 12 food stores from Insalaco's
Markets, Inc. The stores are located in northeastern Pennsylvania.
The acquisition cost of $51,651,000 was attributed to major categories of
assets obtained and obligations assumed as follows: inventories $6,633,000;
property, plant and equipment $9,947,000; other assets (goodwill) $37,071,000
and other noncurrent liabilities $2,000,000.
On January 5, 1993, the Company acquired 28 food stores formerly operated
by Peter J. Schmitt Co., Inc. The stores are located in northwestern
Pennsylvania and western New York and the Company is currently operating 19 of
these stores as retail stores. One is a franchise account and eight have been
closed.
The original acquisition cost of $38,800,000, including $2,100,000 of
deferred financing costs, was attributed to major categories of assets obtained
and obligations assumed as follows: cash, accounts receivable and other assets
$3,900,000; inventories $10,500,000; property, plant and equipment $32,200,000;
accounts payable and other current liabilities $9,100,000; and other noncurrent
liabilities $800,000.
The unaudited consolidated results of operations on a pro forma basis as
though the Insalaco's and Peter J. Schmitt stores had been acquired on
February 2, 1992 are as follows:
<TABLE>
<CAPTION>
FOR THE 52 WEEKS ENDED
----------------------
JANUARY 29, JANUARY 30,
1994 1993
----------- -----------
(UNAUDITED)
(IN THOUSANDS OF DOLLARS,
EXCEPT PER SHARE AND
AVERAGE NUMBER OF SHARES)
<S> <C> <C>
Total revenues . . . . . . . . . . . . . . . . $ 3,271,344 $ 3,282,905
Net loss applicable to common stock . . . . . . $ (17,496) $ (4,532)
Net loss per common share . . . . . . . . . . . $ (1.66) $ (.55)
Average number of common shares outstanding . . 10,561,256 8,258,113
</TABLE>
The pro forma financial information is not necessarily indicative of the
results of operations that would have occurred had the purchase been made at the
beginning of the period or of the future results of operation of the combined
operations.
-54-
<PAGE>
REPORT OF MANAGEMENT
Penn Traffic's management has prepared the financial statements presented in
this annual report and is responsible for the integrity of all information
contained herein. The financial statements presented in this report have been
audited by the independent accountants appointed by the Board of Directors on
the recommendation of its Audit Committee and management. The Company maintains
an effective system of internal accounting controls. The independent
accountants obtain and maintain an understanding of the Company's internal
accounting controls and conduct such tests and related procedures as they deem
necessary to express an opinion on the fairness of the presentation of the
financial statements. The Audit Committee, composed solely of outside
directors, meets periodically with management, internal auditors and independent
accountants to review auditing and financial reporting matters and to ensure
that each group is properly discharging its responsibilities. We rely on our
internal and external auditors to assist us in fulfilling our responsibility for
the fairness of the Company's financial reporting and monitoring the
effectiveness of our system of internal accounting controls.
-55-
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
As permitted by General Instruction G(3), information concerning the executive
officers of Penn Traffic is set forth as a supplemental item included in Part I
of the Form 10-K Report under the caption "Executive Officers of Registrant."
Information concerning the directors of Penn Traffic is incorporated by
reference from pages 3 through 8 of the Proxy Statement dated May 2, 1994 filed
or to be filed in connection with the Company's Annual Meeting of Stockholders
to be held on June 7, 1994. Information concerning compliance with Section
16(a) of the Securities Exchange Act of 1934 is incorporated by reference from
pages 13 through 14 of the Proxy Statement dated May 2, 1994 filed or to be
filed in connection with the Company's Annual Meeting of Stockholders to be held
on June 7, 1994.
ITEM 11. EXECUTIVE COMPENSATION
The remuneration of directors and officers appearing on pages 14 through 27 of
the Company's Proxy Statement dated May 2, 1994 filed or to be filed in
connection with the Company's Annual Meeting of Stockholders to be held on
June 7, 1994 is incorporated herein by reference. The information set forth
after the second full paragraph on page 27 through page 36 of the Company's
Proxy Statement dated May 2, 1994, filed or to be filed in connection with the
Company's Annual Meeting of Stockholders to be held on June 7, 1994, is not
"filed" as a part hereof.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The security ownership of certain shareholders appearing on pages 8 through
13 of the Company's Proxy Statement dated May 2, 1994 filed or to be filed in
connection with the Company's Annual Meeting of Stockholders to be held on
June 7, 1994 is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTION
The information concerning certain relationships and related transactions
appearing on pages 37 through 39 of the Company's Proxy Statement dated
May 2, 1994 filed or to be filed in connection with the Company's Annual Meeting
of Stockholders to be held on June 7, 1994 is incorporated herein by reference.
-56-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The index for Financial Statements and Supplementary Data is on Page 17 under
Item 8 of this Form 10-K.
EXHIBITS:
The following are filed as Exhibits to this Report:
Exhibit No. Description
- ----------- -----------
2.1 Agreement and Plan of Merger dated January 25, 1987 among PTC
Holdings, Inc., PTC Acquisition Corp. and The Penn Traffic Company
("Penn Traffic") (filed as Annex "A" to Penn Traffic's Proxy
Statement filed with the Securities and Exchange Commission (the
"SEC") March 20, 1987 and incorporated herein by reference).
2.2 Agreement and Plan of Merger dated as of April 29, 1987 among
Riverside Acquisition Company, Limited Partnership, PTC Holdings,
Inc. and Penn Traffic (incorporated by reference to Exhibit No. 2.2
to Penn Traffic's Registration Statement on Form S-1 (Reg. No. 33-
12926) filed on March 27, 1987 with the SEC and referred to herein
as the "1987 Registration Statement").
2.3 Agreement and Plan of Merger between Penn Traffic and Penn Traffic
Merger Company, Incorporated dated as of June 4, 1993 (incorporated
by reference to Exhibit No. 2.3 to Penn Traffic's Registration
Statement on Form S-3 (Reg. No. 33-51824) filed on October 2, 1992
with the SEC and referred to herein as the "October 1992
Registration Statement").
2.4 Certificate of Merger for merger of Penn Traffic into Penn Traffic
Merger Company, Incorporated dated September 18, 1992 (incorporated
by reference to Exhibit No. 2.4 to the October 1992 Registration
Statement).
2.5 Certificate of Merger for merger of Penn Traffic Acquisition
Corporation into Penn Traffic dated April 14, 1993 (incorporated by
reference to Exhibit No. 2.5 to Penn Traffic's Registration
Statement on Form S-3 (Reg. No. 33-51213) filed on December 8, 1993
with the SEC and referred to herein as the "December 1993
Registration Statement").
2.6 Plan of Merger dated as of February 25, 1993 for the merger of P&C
Food Markets, Inc. ("P&C") into Penn Traffic (incorporated by
reference to Exhibit No. 2.6 to Penn Traffic's Registration
Statement on Form S-3 (Reg. No. 33-58918) filed on April 7, 1993
with the SEC and referred to herein as the "April 1993 Registration
Statement").
2.7 Certificates of Merger for merger of P&C into Penn Traffic dated
April 14, 1993 (incorporated by reference to Exhibit No. 2.7 to the
December 1993 Registration Statement).
-57-
<PAGE>
EXHIBITS (CONTINUED):
Exhibit No. Description
- ----------- -----------
2.8 Agreement and Plan of Merger dated as of February 25, 1993 by and
among Penn Traffic, Penn Traffic Acquisition Corporation and Big
Bear Stores Company ("Big Bear") (incorporated by reference to
Exhibit No. 2.8 to the April 1993 Registration Statement).
2.9 Certificate of Merger for merger of Big Bear into Penn Traffic
Acquisition Corporation dated April 14, 1993 (incorporated by
reference to Exhibit No. 2.9 to the December 1993 Registration
Statement).
2.10 Asset Purchase Agreement dated as of December 9, 1992 between Penn
Traffic and Peter J. Schmitt Co., Inc. (the "December 9, 1992 Asset
Purchase Agreement") (incorporated by reference to Exhibit No. 2.1
to Penn Traffic's Current Report on Form 8-K filed on January 18,
1993 with the SEC and referred to herein as the "Penn Traffic 1993
8-K").
2.10A Letter Agreement dated December 31, 1992 with respect to the
December 9, 1992 Asset Purchase Agreement (incorporated by
reference to Exhibit No. 2.1A to the Penn Traffic 1993 8-K).
2.11 Asset Purchase Agreement dated as of December 29, 1992 between Penn
Traffic and Peter J. Schmitt Co., Inc. (the "December 29, 1992
Asset Purchase Agreement") (incorporated by reference to Exhibit
No. 2.2 to the Penn Traffic 1993 8-K).
2.11A Letter Agreement dated December 30, 1992 with respect to the
December 29, 1992 Asset Purchase Agreement (incorporated by
reference to Exhibit No. 2.2A to the Penn Traffic 1993 8-K).
2.12 Agreement of Purchase and Sale, dated as of August 27, 1993, by and
between Insalaco Markets, Inc., Insalaco's Old Forge, Inc.,
Insalaco's Clarks Green, Inc., Insalaco's Supermarkets Warehouse,
Insalaco Enterprises, Insalaco's Real Estate, Insalaco's Foodliner,
Eagle Valley Realty, Tannersville Realty Company and Penn Traffic
(incorporated by reference to Exhibit No. 10.23 to Penn Traffic's
Quarterly Report on Form 10-Q for the fiscal quarter ended July 31,
1993 and referred to herein as the "Penn Traffic July 1993 10-Q").
3.1 Certificate of Incorporation of Penn Traffic (incorporated by
reference to Exhibit No. 3.1 to the October 1992 Registration
Statement).
3.2 Amended and Restated By-Laws of Penn Traffic (incorporated by
reference to Exhibit No. 3.2 to the December 1993 Registration
Statement).
4.1 Certificate of Incorporation of Penn Traffic (filed as Exhibit
No. 3.1).
-58-
<PAGE>
EXHIBITS (CONTINUED):
Exhibit No. Description
- ----------- -----------
4.2 Amended and Restated By-Laws of Penn Traffic (filed as Exhibit
No. 3.2).
4.3 Indenture, including form of 13 3/4% Senior Subordinated Note Due
1999 of Big Bear, dated as of June 29, 1989 between Big Bear and
Bankers Trust Company ("Bankers Trust"), as Trustee (incorporated
by reference to Exhibit No. 4.2 to the Transition Report on
Form 10-K filed by Big Bear on July 28, 1989 for the period ended
April 1, 1989 and referred to herein as the "Big Bear Transition
Report").
4.3A First Supplemental Indenture dated as of April 15, 1993 between
Penn Traffic and Bankers Trust, as Trustee relating to the 13 3/4%
Senior Subordinated Notes Due 1999 (incorporated by reference to
Exhibit No. 4.5A to Penn Traffic's Quarterly Report on Form 10-Q
for the fiscal quarter ended May 1, 1993 and referred to herein as
the "Penn Traffic May 1993 10-Q").
4.4 Form of Common Stock Certificate (incorporated by reference to
Exhibit No. 4.4 to the 1987 Registration Statement).
4.5 Indenture, including form of 11 1/2% Senior Note Due 2001, dated
as of October 16, 1991 between P&C and Bankers Trust, as Trustee
(incorporated by reference to Exhibit No. 10.25 to P&C's quarterly
report on Form 10-Q for the fiscal quarter ended November 2, 1991
and referred to herein as the "P&C November 1991 10-Q").
4.5A First Supplemental Indenture dated as of April 15, 1993 between the
Company and Bankers Trust, as Trustee, relating to the 11 1/2%
Senior Notes Due 2001 (incorporated by reference to Exhibit
No. 4.10A to the Penn Traffic May 1993 10-Q).
4.6 Indenture, including form of 10 1/4% Senior Note Due February 15,
2002, dated as of February 18, 1992 between Penn Traffic and Marine
Midland Bank, N.A., Trustee (incorporated by reference to Exhibit
No. 4.13 to Penn Traffic's Annual Report on Form 10-K for the
fiscal year ended February 1, 1992 and referred to herein as the
"Penn Traffic 1992 10-K").
4.6A First Supplemental Indenture dated as of June 10, 1992 to the
Indenture dated as of February 18, 1992, relating to the
10 1/4% Senior Notes Due 2002, between Penn Traffic and Marine
Midland Bank, N.A., as Trustee (incorporated by reference to
Exhibit 4.15A to the October 1992 Registration Statement).
4.6B Second Supplemental Indenture dated as of September 18, 1992 to the
Indenture dated as of February 18, 1992, relating to the 10 1/4%
Senior Notes Due 2002, between Penn Traffic and Marine Midland
Bank, N.A., as Trustee (incorporated by reference to Exhibit 4.15B
to the October 1992 Registration Statement).
-59-
<PAGE>
EXHIBITS (CONTINUED):
Exhibit No. Description
- ----------- -----------
4.7 Indenture, including form of 10 3/8% Senior Note Due October 1,
2004, dated as of October 1, 1992, between Penn Traffic and United
States Trust Company of New York, as Trustee (incorporated by
reference to Exhibit No. 4.16 to Penn Traffic's Quarterly Report on
Form 10-Q for the fiscal quarter ended October 31, 1992).
4.8 Indenture, including form of 9 5/8% Senior Subordinated Note Due
April 15, 2005, dated as of April 15, 1993, between Penn Traffic
and First Trust of California, National Association, as Trustee
(incorporated by reference to Exhibit No. 4.14 to the Penn Traffic
May 1993 10-Q).
4.9 Indenture, including form of 8 5/8% Senior Note Due December 15,
2003, dated as of December 15, 1993, between Penn Traffic and
United States Trust Company of New York, as Trustee.
10.1 Membership and Licensing Agreement dated April 18, 1982 among TOPCO
Associates, Inc. (Cooperative), Kingston Marketing Co. and Penn
Traffic (incorporated by reference to Exhibit No. 10.2 to the 1987
Registration Statement).
*10.2 The Penn Traffic Company Incentive Compensation Plan (incorporated
by reference to Exhibit No. 10.3 to the 1987 Registration
Statement).
*10.3 The Penn Traffic Company Severance Pay Plan (incorporated by
reference to Exhibit No. 10.5 to the 1987 Registration Statement).
*10.4 Riverside Division of The Penn Traffic Company Bargaining Employees
Pension Plan (incorporated by reference to Exhibit No. 10.6 to the
1987 Registration Statement).
*10.5 Pension Plan for Non-Bargaining Employees of Riverside Division of
The Penn Traffic Company (incorporated by reference to Exhibit
No. 10.7 to the 1987 Registration Statement).
*10.6 Johnstown Sanitary Dairy Pension Plan for Bargaining Employees
(incorporated by reference to Exhibit No. 10.8 to the 1987
Registration Statement).
*10.7 Johnstown Sanitary Dairy Salaried Personnel Pension Plan
(incorporated by reference to Exhibit No. 10.9 to the 1987
Registration Statement).
*10.8 Quality Markets, Inc. ("Quality") Profit Sharing Plan (incorporated
by reference to Exhibit No. 10.11 to the 1987 Registration
Statement).
- -------------------------
* Management contract, compensatory plan or arrangement.
-60-
<PAGE>
EXHIBITS (CONTINUED):
Exhibit No. Description
- ----------- -----------
10.9 Loan and Security Agreement (the "Loan and Security Agreement")
among Penn Traffic, Quality, Dairy Dell, Big M Supermarkets, Inc.
("Big M") , Penny Curtiss Baking Company Inc. ("Penny Curtiss"),
and Hart Stores, Inc. ("Hart"), the lenders party thereto and
NatWest USA Credit Corp., as Agent, dated March 5, 1993
(incorporated by reference to Exhibit No. 10.2 to the April 1993
Registration Statement).
10.9A Amendment No. 1, dated March 12, 1993, to the Loan and Security
Agreement (incorporated by reference to Exhibit No. 10.2A to the
April 1993 Registration Statement).
10.9B Amendment No. 2, dated as of March 24, 1993, to the Loan and
Security Agreement (incorporated by reference to Exhibit No. 10.2B
to the April 1993 Registration Statement).
10.9C Waiver Letter dated as of April 14, 1993, among the lenders under
the Loan and Security Agreement, Penn Traffic, Quality, Dairy Dell,
Big M, Penny Curtiss and Hart (incorporated by reference to Exhibit
No. 10.22C to the Penn Traffic May 1993 10-Q).
10.9D Amendment No. 3, dated as of April 15, 1993, to the Loan and
Security Agreement (incorporated by reference to Exhibit No. 10.22D
to the Penn Traffic May 1993 10-Q).
10.9E Amendment No.4, dated as of August 20, 1993, to the Loan and
Security Agreement (incorporated by reference to Exhibit No. 10.22E
to the Penn Traffic July 1993 10-Q).
10.10 Engagement Letter dated as of January 30, 1994 by and among Penn
Traffic and Miller Tabak Hirsch + Co.
*10.11 U-Save Foods, Inc. Employees' Retirement Plan (incorporated by
reference to Exhibit No. 10.17 to Penn Traffic's Annual Report on
Form 10-K for the fiscal year ended January 30, 1988).
10.12 Form of Tax Payment Agreement dated as of August 6, 1988 by and
between Penn Traffic and P&C (incorporated by reference to Exhibit
No. 10.19 to P & C's Registration Statement on Form S-1 (No. 33-
23769) filed on August 15, 1988 with the SEC).
10.13 Tax Payment Agreement dated as of April 1, 1989 by and between Penn
Traffic and Big Bear (incorporated by reference to Exhibit
No. 10.39 to the Big Bear Transition Report).
- -------------------------
* Management contract, compensatory plan or arrangement.
-61-
<PAGE>
EXHIBITS (CONTINUED):
Exhibit No. Description
- ----------- -----------
*10.14 The Penn Traffic Company 1988 Stock Option Plan (incorporated by
reference to Exhibit No. 10.19 to Penn Traffic's Annual Report on
Form 10-K for the fiscal year ended February 3, 1990 and referred
to herein as the "Penn Traffic 1990 10-K").
*10.15 The Penn Traffic Company Directors' Stock Option Plan (incorporated
by reference to Exhibit No. 10.20 to the Penn Traffic 1990 10-K).
10.16 Form of Management Subscription Agreement entered into by and
between Riverside Acquisition Company, Limited Partnership and
certain members of management of Penn Traffic (incorporated by
reference to Exhibit No. 10.21 to the Penn Traffic 1990 10-K).
10.17 Lease dated as of April 27, 1990, between P&C and C&S Wholesale
Grocers, Inc. (incorporated by reference to Exhibit No. 10.23 to
Penn Traffic's Quarterly Report on Form 10-Q for the fiscal quarter
ended August 4, 1990 and referred to herein as the "Penn Traffic
August 1990 10-Q").
10.18 Agreement and Master Sublease dated as of July 30, 1990, by and
between The Grand Union Company and P&C (incorporated by reference
to Exhibit No. 10.24 to the Penn Traffic August 1990 10-Q).
10.19 Interest Rate and Currency Exchange Agreement dated as of
October 16, 1991 between Salomon Brothers Holding Company, Inc.
("SBHC") and P&C (incorporated by reference to Exhibit No. 10.27 to
the P&C November 1991 10-Q).
10.19A Letter Agreement dated October 16, 1991 from SBHC to P&C, setting
forth the terms and conditions of the swap transaction and interest
rate transaction entered into between SBHC and P&C on October 16,
1991 (incorporated by reference to Exhibit No. 10.27A to the P&C
November 1991 10-Q).
10.20 Interest Rate and Currency Exchange Agreement dated as of
October 16, 1991 between SBHC and Big Bear (incorporated by
reference to Exhibit No. 10.22 to Big Bear's Quarterly Report on
Form 10-Q for the quarterly period ended November 2, 1991 (the "Big
Bear third quarter 1991 10-Q")).
10.20A Letter Agreement dated October 16, 1991 from SBHC to Big Bear
setting forth the terms and conditions of the swap transaction and
interest (incorporated by reference to Exhibit No. 10.22A for the
Big Bear 1991 third quarter 10-Q).
*10.21 Employment Agreement, dated as of February 2, 1992, among Penn
Traffic, P & C and Claude J. Incaudo (incorporated by reference to
Exhibit No. 10.37 to the Penn Traffic 1992 10-K).
- -------------------------
* Management contract, compensatory plan or arrangement.
-62-
<PAGE>
EXHIBITS (CONTINUED):
Exhibit No. Description
- ----------- -----------
*10.22 The Penn Traffic Company's 1993 Long Term Incentive Plan (filed as
Exhibit "A" to Penn Traffic's Proxy Statement filed with the SEC on
May 1, 1993 and incorporated herein by reference).
10.23 First Mortgage, Security Agreement, Financing Statement and
Assignment of Leases and Rents dated as of October 25, 1993 by and
among Penn Traffic and Onondaga County Industrial Development
Agency, as mortgagor and NatWest USA Credit Corp., as mortgagee
(incorporated by reference to Exhibit No. 10.24 to Penn Traffic's
Quarterly Report on Form 10-Q for the fiscal quarter ended
October 31, 1993).
10.24 Underwriting Agreement relating to Debt Securities, dated
December 14, 1993, between Penn Traffic and Goldman, Sachs & Co. and
BT Securities Corporation.
21.1 Subsidiaries of Penn Traffic.
23.1 Consent of Price Waterhouse.
- --------------------------------------------------------------------------------
Copies of the above exhibits will be furnished without charge to any shareholder
by writing to Treasurer, The Penn Traffic Company, 1200 State Fair Boulevard,
Syracuse, New York 13221.
REPORTS ON FORM 8-K
On October 8, 1993, the Company filed a report on Form 8-K relating to the
acquisition of 12 stores formerly operated by Insalaco Markets, Inc. Amendment
No. 1 to this Form 8-K was filed on Form 8-K/A on November 24, 1993, pursuant to
Item 7 Financial Statements of Business Acquired, Pro Forma Financial
Information and Exhibits. Amendment No. 2 to this Form 8-K was filed on Form
8-K/A on December 13, 1993, pursuant to Item 7 Financial Statements of Business
Acquired, Pro Forma Financial Information and Exhibits.
-63-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
THE PENN TRAFFIC COMPANY
April 29, 1994 By: /s/ Claude J. Incaudo
-------------- ----------------------------
DATE Claude J. Incaudo, President,
Chief Executive Officer and
Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
/s/ Gary D. Hirsch /s/ Eugene R. Sunderhaft
- ------------------------------------- -----------------------------
Gary D. Hirsch, Chairman of the Board Eugene R. Sunderhaft,
and Director Vice President, Secretary
and Treasurer
April 29, 1994 (Principal Financial Officer)
--------------
DATE
April 29, 1994
--------------
DATE
/s/ Susan E. Engel /s/ Eugene A. DePalma
- ------------------------------------- -----------------------------
Susan E. Engel, Director Eugene A. DePalma, Director
April 29, 1994 April 29, 1994
-------------- --------------
DATE DATE
/s/ Martin A. Fox /s/ Joseph J. McCaig
- ------------------------------------- -----------------------------
Martin A. Fox, Director Joseph J. McCaig, Director
April 29, 1994 April 29, 1994
-------------- --------------
DATE DATE
/s/ Guido Malacarne /s/ Harold S. Poster
- ------------------------------------- -----------------------------
Guido Malacarne, Director Harold S. Poster, Director
April 29, 1994 April 29, 1994
-------------- --------------
DATE DATE
/s/ Richard D. Segal
- -------------------------------------
Richard D. Segal, Director
April 29, 1994
--------------
DATE
-64-
<PAGE>
THE PENN TRAFFIC COMPANY
SCHEDULE V
PROPERTY, PLANT AND EQUIPMENT
(000'S OMITTED)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -------- -------- -------- -------- --------- --------
BALANCE AT OTHER BALANCE
BEGINNING ADDITIONS RETIRE- CHANGES AT END
CLASSIFICATION OF PERIOD AT COST MENTS ADD/(DEDUCT) OF PERIOD
- -------------- --------- --------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C>
FOR THE 52 WEEKS ENDED
JANUARY 29, 1994
Land. . . . . . . . . . . . . $ 19,154 $ 1,814 $ 227 $ $ 20,741
Buildings . . . . . . . . . . 129,227 26,554 1,860 157,641
Furniture and fixtures. . . . 314,484 79,477 5,719 1,356 389,598
Vehicles . . . . . . . . . . 16,172 5,028 1,550 (64) 19,586
Leaseholds and improvements . 140,886 23,464 2,200 575 162,725
-------- -------- -------- -------- --------
$619,923 $136,337 $ 9,696 $ 3,727 $750,291
-------- -------- -------- --------- --------
-------- -------- -------- --------- --------
FOR THE 52 WEEKS ENDED
JANUARY 30, 1993
Land . . . . . . . . . . . . $ 17,861 $ 1,410 $ 117 $ $ 19,154
Buildings . . . . . . . . . . 124,442 10,405 5,620 129,227
Furniture and fixtures. . . . 258,770 65,967 9,218 (1,035) 314,484
Vehicles . . . . . . . . . . 15,076 2,287 1,191 16,172
Leaseholds and improvements . 116,253 33,066 1,553 (6,880) 140,886
-------- -------- -------- --------- --------
$532,402 $113,135 $ 17,699 $ (7,915) $619,923
-------- -------- -------- --------- --------
-------- -------- -------- --------- --------
FOR THE 52 WEEKS ENDED
FEBRUARY 1, 1992
Land . . . . . . . . . . . . $ 13,715 $ 912 $ $ 3,234 $ 17,861
Buildings . . . . . . . . . . 101,687 9,268 13,487 124,442
Furniture and fixtures. . . . 224,563 26,571 7,646 15,282 258,770
Vehicles . . . . . . . . . . 14,510 1,964 1,867 469 15,076
Leaseholds and improvements . 115,069 13,652 1,120 (11,348) 116,253
-------- -------- -------- -------- --------
$469,544 $ 52,367 $ 10,633 $ 21,124(A) $532,402
-------- -------- -------- --------- --------
-------- -------- -------- --------- --------
<FN>
(A) Partially represents the fixed asset basis adjustment recorded in
connection with the retroactive adoption of SFAS 109, as follows:
Land $ 3,234
Buildings 13,609
Furniture and fixtures 11,925
Vehicles 174
Leaseholds and improvements 16,017
-------
$44,959
-------
-------
</TABLE>
-65-
<PAGE>
THE PENN TRAFFIC COMPANY
SCHEDULE V
LEASED FACILITIES UNDER CAPITAL LEASES
(000'S OMITTED)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -------- -------- -------- -------- -------- --------
BALANCE AT OTHER BALANCE
BEGINNING ADDITIONS RETIRE- CHANGES AT END
CLASSIFICATION OF PERIOD AT COST MENTS ADD(DEDUCT) OF PERIOD
- -------------- --------- --------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C>
For the 52 Weeks Ended
January 29, 1994 . . . . . $168,234 $ 7,613 $ 2,157 $ $173,690
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
For the 52 Weeks Ended
January 30, 1993 . . . . . $135,161 $ 35,515 $ 2,443 $ 1 $168,234
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
For the 52 Weeks Ended
January 1, 1992. . . . . . $101,457 $ 29,694 $ 1,392 $ 5,402(A) $135,161
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
<FN>
(A) Primarily represents the fixed asset basis adjustment recorded in
connection with the retroactive adoption of SFAS 109.
</TABLE>
-66-
<PAGE>
THE PENN TRAFFIC COMPANY
SCHEDULE VI
RESERVES FOR DEPRECIATION OF
PROPERTY, PLANT AND EQUIPMENT
(000'S OMITTED)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -------- -------- -------- -------- --------- --------
BALANCE AT OTHER BALANCE
BEGINNING ADDITIONS RETIRE- CHANGES AT END
CLASSIFICATION OF PERIOD AT COST MENTS ADD(DEDUCT) OF PERIOD
- -------------- --------- --------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
For the 52 Weeks Ended
January 29, 1994
Buildings . . . . . . . . . $ 17,330 $ 4,835 $ $ 1,265 $ 23,430
Furniture and fixtures 96,362 37,068 3,314 3,100 133,216
Vehicles . . . . . . . . . 8,841 3,019 1,524 160 10,496
Leaseholds and improvements 38,620 11,876 1,775 (1,300) 47,421
-------- -------- -------- -------- --------
$161,153 $ 56,798 $ 6,613 $ 3,225 $214,563
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
For the 52 Weeks Ended
January 30, 1993
Buildings . . . . . . . . . $ 14,595 $ 4,101 $ 1,366 $ $ 17,330
Furniture and fixtures. . . 75,607 31,006 7,525 (2,726) 96,362
Vehicles . . . . . . . . . 7,457 2,784 1,101 (299) 8,841
Leaseholds and improvements 28,311 11,554 1,019 (226) 38,620
-------- -------- -------- --------- --------
$125,970 $ 49,445 $ 11,011 $ (3,251) $161,153
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
For the 52 Weeks Ended
February 1, 1992
Buildings . . . . . . . . . $ 10,778 $ 3,817 $ $ $ 14,595
Furniture and fixtures. . . 50,028 29,615 7,053 3,017 75,607
Vehicles . . . . . . . . . 6,277 2,665 1,816 331 7,457
Leaseholds and improvements 21,831 11,554 979 (4,188) 28,311
-------- -------- -------- -------- --------
$ 88,914 $ 49,445 $ 9,848 $ (840) $125,970
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
-67-
<PAGE>
THE PENN TRAFFIC COMPANY
SCHEDULE VI
RESERVES FOR AMORTIZATION OF LEASED FACILITIES
UNDER CAPITAL LEASES
(000'S OMITTED)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -------- -------- -------- -------- -------- --------
BALANCE AT OTHER BALANCE
BEGINNING ADDITIONS RETIRE- CHANGES AT END
CLASSIFICATION OF PERIOD AT COST MENTS ADD(DEDUCT) OF PERIOD
- -------------- --------- --------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C>
For the 52 Weeks Ended
January 29, 1994 . . . . . . $29,900 $11,758 $ 2,069 $ $39,589
------- ------- ------- ------- -------
------- ------- ------- ------- -------
For the 52 Weeks Ended
January 30, 1993 . . . . . . $20,482 $10,532 $ 1,114 $ $29,900
------- ------- ------- ------- -------
------- ------- ------- ------- -------
For the 52 Weeks Ended
January 1, 1992. . . . . . . $12,329 $ 8,655 $ 502 $ $20,482
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
-68-
<PAGE>
THE PENN TRAFFIC COMPANY
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
(000'S OMITTED)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------- -------- -------- -------- --------
ADDITIONS
BALANCE CHARGED DEDUCTIONS BALANCE
AT BEGINNING TO COSTS FROM AT END
DESCRIPTION OF PERIOD AND EXPENSES ACCOUNTS OF PERIOD
- ----------- --------- ------------ -------- ---------
<S> <C> <C> <C> <C>
Reserve deducted from asset
to which it applies:
For the 52 Weeks Ended
January 29, 1994
Provision for doubtful
accounts. . . . . . . . . . $ 661 $ 1,806 $ 1,727(a) $ 740
------- ------- ------- -------
------- ------- ------- -------
For the 52 Weeks Ended
January 30, 1993
Provision for doubtful
accounts. . . . . . . . . . $ 643 $ 1,196 $ 1,178(a) $ 661
------- ------- ------- -------
------- ------- ------- -------
For the 52 Weeks Ended
February 1, 1992
Provision for doubtful
accounts . . . . . . . . . $ 595 $ 1,987 $ 1,939(a) $ 643
------- ------- ------- -------
------- ------- ------- -------
<FN>
(a) Uncollectible receivables written off net of recoveries.
</TABLE>
-69-
<PAGE>
THE PENN TRAFFIC COMPANY
SCHEDULE X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
(000's omitted)
<TABLE>
<CAPTION>
COLUMN A COLUMN B
- -------- --------
CHARGED TO COSTS AND EXPENSES
--------------------------------------------------------
FOR THE FOR THE FOR THE
52 WEEKS ENDED 52 WEEKS ENDED 52 WEEKS ENDED
JANUARY 29, 1994 JANUARY 30, 1993 FEBRUARY 1, 1992
---------------- ---------------- ----------------
ITEM
- ----
<S> <C> <C> <C>
Advertising . . . . . . . . . . . $ 34,882 $ 35,014 $ 35,128
-------- -------- --------
-------- -------- --------
</TABLE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (THE "ACT") BY REGISTRANTS WHICH
HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT.
NONE
-70-
<PAGE>
THE PENN TRAFFIC COMPANY
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
2.1 Agreement and Plan of Merger dated January 25, 1987 among
PTC Holdings, Inc., PTC Acquisition Corp. and The Penn
Traffic Company ("Penn Traffic") (filed as Annex "A" to
Penn Traffic's Proxy Statement filed with the Securities
and Exchange Commission (the "SEC") March 20, 1987 and
incorporated herein by reference).
2.2 Agreement and Plan of Merger dated as of April 29, 1987
among Riverside Acquisition Company, Limited Partnership,
PTC Holdings, Inc. and Penn Traffic (incorporated by
reference to Exhibit No. 2.2 to Penn Traffic's Registration
Statement on Form S-1 (Reg. No. 33-12926) filed on
March 27, 1987 with the SEC and referred to herein as the
"1987 Registration Statement").
2.3 Agreement and Plan of Merger between Penn Traffic and Penn
Traffic Merger Company, Incorporated dated as of June 4,
1993 (incorporated by reference to Exhibit No. 2.3 to Penn
Traffic's Registration Statement on Form S-3 (Reg. No. 33-
51824) filed on October 2, 1992 with the SEC and referred
to herein as the "October 1992 Registration Statement").
2.4 Certificate of Merger for merger of Penn Traffic into Penn
Traffic Merger Company, Incorporated dated September 18,
1992 (incorporated by reference to Exhibit No. 2.4 to the
October 1992 Registration Statement).
2.5 Certificate of Merger for merger of Penn Traffic
Acquisition Corporation into Penn Traffic dated April 14,
1993 (incorporated by reference to Exhibit No. 2.5 to Penn
Traffic's Registration Statement on Form S-3 (Reg. No. 33-
51213) filed on December 8, 1993 with the SEC and referred
to herein as the "December 1993 Registration Statement").
2.6 Plan of Merger dated as of February 25, 1993 for the merger
of P&C Food Markets, Inc. ("P&C") into Penn Traffic
(incorporated by reference to Exhibit No. 2.6 to Penn
Traffic's Registration Statement on Form S-3 (Reg. No. 33-
58918) filed on April 7, 1993 with the SEC and referred to
herein as the "April 1993 Registration Statement").
2.7 Certificates of Merger for merger of P&C into Penn Traffic
dated April 14, 1993 (incorporated by reference to Exhibit
No. 2.7 to the December 1993 Registration Statement).
2.8 Agreement and Plan of Merger dated as of February 25, 1993
by and among Penn Traffic, Penn Traffic Acquisition
Corporation and Big Bear Stores Company ("Big Bear")
(incorporated by reference to Exhibit No. 2.8 to the April
1993 Registration Statement).
-71-
<PAGE>
EXHIBITS (CONTINUED):
Exhibit No. Description
- ----------- -----------
2.9 Certificate of Merger for merger of Big Bear into Penn
Traffic Acquisition Corporation dated April 14, 1993
(incorporated by reference to Exhibit No. 2.9 to the
December 1993 Registration Statement).
2.10 Asset Purchase Agreement dated as of December 9, 1992
between Penn Traffic and Peter J. Schmitt Co., Inc. (the
"December 9, 1992 Asset Purchase Agreement") (incorporated
by reference to Exhibit No. 2.1 to Penn Traffic's Current
Report on Form 8-K filed on January 18, 1993 with the SEC
and referred to herein as the "Penn Traffic 1993 8-K").
2.10A Letter Agreement dated December 31, 1992 with respect to
the December 9, 1992 Asset Purchase Agreement (incorporated
by reference to Exhibit No. 2.1A to the Penn Traffic 1993
8-K).
2.11 Asset Purchase Agreement dated as of December 29, 1992
between Penn Traffic and Peter J. Schmitt Co., Inc. (the
"December 29, 1992 Asset Purchase Agreement") (incorporated
by reference to Exhibit No. 2.2 to the Penn Traffic 1993
8-K).
2.11A Letter Agreement dated December 30, 1992 with respect to
the December 29, 1992 Asset Purchase Agreement
(incorporated by reference to Exhibit No. 2.2A to the Penn
Traffic 1993 8-K).
2.12 Agreement of Purchase and Sale, dated as of August 27,
1993, by and between Insalaco Markets, Inc., Insalaco's Old
Forge, Inc., Insalaco's Clarks Green, Inc., Insalaco's
Supermarkets Warehouse, Insalaco Enterprises, Insalaco's
Real Estate, Insalaco's Foodliner, Eagle Valley Realty,
Tannersville Realty Company and Penn Traffic (incorporated
by reference to Exhibit No. 10.23 to Penn Traffic's
Quarterly Report on Form 10-Q for the fiscal quarter ended
July 31, 1993 and referred to herein as the "Penn Traffic
July 1993 10-Q").
3.1 Certificate of Incorporation of Penn Traffic (incorporated
by reference to Exhibit No. 3.1 to the October 1992
Registration Statement).
3.2 Amended and Restated By-Laws of Penn Traffic (incorporated
by reference to Exhibit No. 3.2 to the December 1993
Registration Statement).
4.1 Certificate of Incorporation of Penn Traffic (filed as
Exhibit No. 3.1).
4.2 Amended and Restated By-Laws of Penn Traffic (filed as
Exhibit No. 3.2).
4.3 Indenture, including form of 13 3/4% Senior Subordinated
Note Due 1999 of Big Bear, dated as of June 29, 1989
between Big Bear and Bankers Trust Company ("Bankers
Trust"), as Trustee (incorporated by reference to Exhibit
No. 4.2 to the Transition Report on Form 10-K filed by Big
Bear on July 28, 1989 for the period ended April 1, 1989
and referred to herein as the "Big Bear Transition
Report").
-72-
<PAGE>
EXHIBITS (CONTINUED):
Exhibit No. Description
- ----------- -----------
4.3A First Supplemental Indenture dated as of April 15, 1993
between Penn Traffic and Bankers Trust, as Trustee relating
to the 13 3/4% Senior Subordinated Notes Due 1999
(incorporated by reference to Exhibit No. 4.5A to Penn
Traffic's Quarterly Report on Form 10-Q for the fiscal
quarter ended May 1, 1993 and referred to herein as the
"Penn Traffic May 1993 10-Q").
4.4 Form of Common Stock Certificate (incorporated by reference
to Exhibit No. 4.4 to the 1987 Registration Statement).
4.5 Indenture, including form of 11 1/2% Senior Note Due 2001,
dated as of October 16, 1991 between P&C and Bankers Trust,
as Trustee (incorporated by reference to Exhibit No. 10.25
to P&C's quarterly report on Form 10-Q for the fiscal
quarter ended November 2, 1991 and referred to herein as
the "P&C November 1991 10-Q").
4.5A First Supplemental Indenture dated as of April 15, 1993
between the Company and Bankers Trust, as Trustee, relating
to the 11 1/2% Senior Notes Due 2001 (incorporated by
reference to Exhibit No. 4.10A to the Penn Traffic May 1993
10-Q).
4.6 Indenture, including form of 10 1/4% Senior Note Due
February 15, 2002, dated as of February 18, 1992 between
Penn Traffic and Marine Midland Bank, N.A., Trustee
(incorporated by reference to Exhibit No. 4.13 to Penn
Traffic's Annual Report on Form 10-K for the fiscal year
ended February 1, 1992 and referred to herein as the "Penn
Traffic 1992 10-K").
4.6A First Supplemental Indenture dated as of June 10, 1992 to
the Indenture dated as of February 18, 1992, relating to
the 10 1/4% Senior Notes Due 2002, between Penn Traffic and
Marine Midland Bank, N.A., as Trustee (incorporated by
reference to Exhibit 4.15A to the October 1992 Registration
Statement).
4.6B Second Supplemental Indenture dated as of September 18,
1992 to the Indenture dated as of February 18, 1992,
relating to the 10 1/4% Senior Notes Due 2002, between Penn
Traffic and Marine Midland Bank, N.A., as Trustee
(incorporated by reference to Exhibit 4.15B to the October
1992 Registration Statement).
4.7 Indenture, including form of 10 3/8% Senior Note Due
October 1, 2004, dated as of October 1, 1992, between Penn
Traffic and United States Trust Company of New York, as
Trustee (incorporated by reference to Exhibit No. 4.16 to
Penn Traffic's Quarterly Report on Form 10-Q for the fiscal
quarter ended October 31, 1992).
4.8 Indenture, including form of 9 5/8% Senior Subordinated
Note Due April 15, 2005, dated as of April 15, 1993,
between Penn Traffic and First Trust of California,
National Association, as Trustee (incorporated by reference
to Exhibit No. 4.14 to the Penn Traffic May 1993 10-Q).
-73-
<PAGE>
EXHIBITS (CONTINUED):
Exhibit No. Description
- ----------- -----------
+4.9 Indenture, including form of 8 5/8% Senior Note Due
December 15, 2003, dated as of December 15, 1993, between
Penn Traffic and United States Trust Company of New York,
as Trustee.
10.1 Membership and Licensing Agreement dated April 18, 1982
among TOPCO Associates, Inc. (Cooperative), Kingston
Marketing Co. and Penn Traffic (incorporated by reference
to Exhibit No. 10.2 to the 1987 Registration Statement).
*10.2 The Penn Traffic Company Incentive Compensation Plan
(incorporated by reference to Exhibit No. 10.3 to the 1987
Registration Statement).
*10.3 The Penn Traffic Company Severance Pay Plan (incorporated
by reference to Exhibit No. 10.5 to the 1987 Registration
Statement).
*10.4 Riverside Division of The Penn Traffic Company Bargaining
Employees Pension Plan (incorporated by reference to
Exhibit No. 10.6 to the 1987 Registration Statement).
*10.5 Pension Plan for Non-Bargaining Employees of Riverside
Division of The Penn Traffic Company (incorporated by
reference to Exhibit No. 10.7 to the 1987 Registration
Statement).
*10.6 Johnstown Sanitary Dairy Pension Plan for Bargaining
Employees (incorporated by reference to Exhibit No. 10.8 to
the 1987 Registration Statement).
*10.7 Johnstown Sanitary Dairy Salaried Personnel Pension Plan
(incorporated by reference to Exhibit No. 10.9 to the 1987
Registration Statement).
*10.8 Quality Markets, Inc. ("Quality") Profit Sharing Plan
(incorporated by reference to Exhibit No. 10.11 to the 1987
Registration Statement).
10.9 Loan and Security Agreement (the "Loan and Security
Agreement") among Penn Traffic, Quality, Dairy Dell, Big M
Supermarkets, Inc. ("Big M") , Penny Curtiss Baking Company
Inc. ("Penny Curtiss"), and Hart Stores, Inc. ("Hart"), the
lenders party thereto and NatWest USA Credit Corp., as
Agent, dated March 5, 1993 (incorporated by reference to
Exhibit No. 10.2 to the April 1993 Registration Statement).
- ----------------------
* Management contract, compensatory plan or arrangement.
+ Filed herein.
-74-
<PAGE>
EXHIBITS (CONTINUED):
Exhibit No. Description
- ----------- -----------
10.9A Amendment No. 1, dated March 12, 1993, to the Loan and
Security Agreement (incorporated by reference to Exhibit
No. 10.2A to the April 1993 Registration Statement).
10.9B Amendment No. 2, dated as of March 24, 1993, to the Loan
and Security Agreement (incorporated by reference to
Exhibit No. 10.2B to the April 1993 Registration
Statement).
10.9C Waiver Letter dated as of April 14, 1993, among the lenders
under the Loan and Security Agreement, Penn Traffic,
Quality, Dairy Dell, Big M, Penny Curtiss and Hart
(incorporated by reference to Exhibit No. 10.22C to the
Penn Traffic May 1993 10-Q).
10.9D Amendment No. 3, dated as of April 15, 1993, to the Loan
and Security Agreement (incorporated by reference to
Exhibit No. 10.22D to the Penn Traffic May 1993 10-Q).
10.9E Amendment No.4, dated as of August 20, 1993, to the Loan
and Security Agreement (incorporated by reference to
Exhibit No. 10.22E to the Penn Traffic July 1993 10-Q).
+10.10 Engagement Letter dated as of January 30, 1994 by and among
Penn Traffic and Miller Tabak Hirsch + Co.
*10.11 U-Save Foods, Inc. Employees' Retirement Plan (incorporated
by reference to Exhibit No. 10.17 to Penn Traffic's Annual
Report on Form 10-K for the fiscal year ended January 30,
1988).
10.12 Form of Tax Payment Agreement dated as of August 6, 1988 by
and between Penn Traffic and P&C (incorporated by reference
to Exhibit No. 10.19 to P & C's Registration Statement on
Form S-1 (No. 33-23769) filed on August 15, 1988 with the
SEC).
10.13 Tax Payment Agreement dated as of April 1, 1989 by and
between Penn Traffic and Big Bear (incorporated by
reference to Exhibit No. 10.39 to the Big Bear Transition
Report).
*10.14 The Penn Traffic Company 1988 Stock Option Plan
(incorporated by reference to Exhibit No. 10.19 to Penn
Traffic's Annual Report on Form 10-K for the fiscal year
ended February 3, 1990 and referred to herein as the "Penn
Traffic 1990 10-K").
- ----------------------
* Management contract, compensatory plan or arrangement.
+ Filed herein.
-75-
<PAGE>
EXHIBITS (CONTINUED):
Exhibit No. Description
- ----------- -----------
*10.15 The Penn Traffic Company Directors' Stock Option Plan (incorporated
by reference to Exhibit No. 10.20 to the Penn Traffic 1990 10-K).
10.16 Form of Management Subscription Agreement entered into by and
between Riverside Acquisition Company, Limited Partnership and
certain members of management of Penn Traffic (incorporated by
reference to Exhibit No. 10.21 to the Penn Traffic 1990 10-K).
10.17 Lease dated as of April 27, 1990, between P&C and C&S Wholesale
Grocers, Inc. (incorporated by reference to Exhibit No. 10.23 to
Penn Traffic's Quarterly Report on Form 10-Q for the fiscal quarter
ended August 4, 1990 and referred to herein as the "Penn Traffic
August 1990 10-Q").
10.18 Agreement and Master Sublease dated as of July 30, 1990, by and
between The Grand Union Company and P&C (incorporated by reference
to Exhibit No. 10.24 to the Penn Traffic August 1990 10-Q).
10.19 Interest Rate and Currency Exchange Agreement dated as of
October 16, 1991 between Salomon Brothers Holding Company, Inc.
("SBHC") and P&C (incorporated by reference to Exhibit No. 10.27 to
the P&C November 1991 10-Q).
10.19A Letter Agreement dated October 16, 1991 from SBHC to P&C, setting
forth the terms and conditions of the swap transaction and interest
rate transaction entered into between SBHC and P&C on October 16,
1991 (incorporated by reference to Exhibit No. 10.27A to the P&C
November 1991 10-Q).
10.20 Interest Rate and Currency Exchange Agreement dated as of
October 16, 1991 between SBHC and Big Bear (incorporated by
reference to Exhibit No. 10.22 to Big Bear's Quarterly Report on
Form 10-Q for the quarterly period ended November 2, 1991 (the "Big
Bear third quarter 1991 10-Q")).
10.20A Letter Agreement dated October 16, 1991 from SBHC to Big Bear
setting forth the terms and conditions of the swap transaction and
interest (incorporated by reference to Exhibit No. 10.22A for the
Big Bear 1991 third quarter 10-Q).
*10.21 Employment Agreement, dated as of February 2, 1992, among Penn
Traffic, P & C and Claude J. Incaudo (incorporated by reference to
Exhibit No. 10.37 to the Penn Traffic 1992 10-K).
- ----------------------
* Management contract, compensatory plan or arrangement.
-76-
<PAGE>
EXHIBITS (CONTINUED):
Exhibit No. Description
- ----------- -----------
*10.22 The Penn Traffic Company's 1993 Long Term Incentive Plan (filed as
Exhibit "A" to Penn Traffic's Proxy Statement filed with the SEC on
May 1, 1993 and incorporated herein by reference).
10.23 First Mortgage, Security Agreement, Financing Statement and
Assignment of Leases and Rents dated as of October 25, 1993 by and
among Penn Traffic and Onondaga County Industrial Development
Agency, as mortgagor and NatWest USA Credit Corp., as mortgagee
(incorporated by reference to Exhibit No. 10.24 to Penn Traffic's
Quarterly Report on Form 10-Q for the fiscal quarter ended
October 31, 1993).
+10.24 Underwriting Agreement relating to Debt Securities, dated
December 14, 1993, between Penn Traffic and Goldman, Sachs & Co. and
BT Securities Corporation.
+21.1 Subsidiaries of Penn Traffic.
+23.1 Consent of Price Waterhouse.
+ Filed herein.
-77-
<PAGE>
Exhibit 4.9
THE PENN TRAFFIC COMPANY
SENIOR DEBT SECURITIES
____________________________________________________________
INDENTURE
Dated as of December 15, 1993
____________________________________________________________
UNITED STATES TRUST COMPANY OF NEW YORK
Trustee
<PAGE>
CROSS REFERENCE TABLE(1)
Trust Indenture Reference
Act Section Section
- --------------- ---------
310(a)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3). . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4). . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5). . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.06
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.03
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.03
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06, 11.02
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.08, 4.18
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . 11.04
(c)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . 11.04
(c)(3). . . . . . . . . . . . . . . . . . . . . . . . . . . 11.04
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.05
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01(b)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.05, 11.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01(a)
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01(c)
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . 6.05
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . 6.04
(a)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.04(b)
317(a)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . 6.08
(a)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . 6.09
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.05
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
N.A. means not applicable
____________________
(1) This Cross-Reference Table is not part of the Indenture.
-i-
<PAGE>
TABLE OF CONTENTS
Page
----
RECITALS OF THE COMPANY. . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01 Definitions . . . . . . . . . . . . . . . . . . . . 1
Section 1.02 Other Definitions . . . . . . . . . . . . . . . . . 19
Section 1.03 Incorporation by Reference
of Trust Indenture Act. . . . . . . . . . . . . . 19
Section 1.04 Rules of Construction . . . . . . . . . . . . . . . 20
ARTICLE 2
FORM OF THE SECURITIES
Section 2.01 Form. . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.02 Form of Legend for Global Securities. . . . . . . . 21
Section 2.03 Form of Trustee's Certificate of
Authentication. . . . . . . . . . . . . . . . . . 21
ARTICLE 3
THE SECURITIES
Section 3.01 Amount Unlimited; Issuable in Series. . . . . . . . 22
Section 3.02 Denominations . . . . . . . . . . . . . . . . . . . 25
Section 3.03 Execution, Authentication, Delivery
and Dating. . . . . . . . . . . . . . . . . . . . 25
Section 3.04 Registrar and Paying Agent. . . . . . . . . . . . . 27
Section 3.05 Paying Agent to Hold Money in Trust . . . . . . . . 28
Section 3.06 Holder Lists. . . . . . . . . . . . . . . . . . . . 28
Section 3.07 Transfer and Exchange . . . . . . . . . . . . . . . 29
Section 3.08 Replacement Securities. . . . . . . . . . . . . . . 30
Section 3.09 Temporary Securities. . . . . . . . . . . . . . . . 31
Section 3.10 Cancellation. . . . . . . . . . . . . . . . . . . . 31
Section 3.11 Defaulted Interest. . . . . . . . . . . . . . . . . 31
Section 3.12 Persons Deemed Owners . . . . . . . . . . . . . . . 32
Section 3.13 Computation of Interest . . . . . . . . . . . . . . 32
-ii-
<PAGE>
Page
----
ARTICLE 4
COVENANTS
Section 4.01 Payment of Securities . . . . . . . . . . . . . . . 32
Section 4.02 Limitation on Restricted Payments . . . . . . . . . 33
Section 4.03 Limitation on Indebtedness. . . . . . . . . . . . . 34
Section 4.04 Limitation on Liens . . . . . . . . . . . . . . . . 39
Section 4.05 Limitation on Sale and Leaseback
Transactions. . . . . . . . . . . . . . . . . . . 42
Section 4.06 Limitation on Asset Sales . . . . . . . . . . . . . 43
Section 4.07 Limitation on Investments . . . . . . . . . . . . . 44
Section 4.08 SEC Reports . . . . . . . . . . . . . . . . . . . . 44
Section 4.09 Limitation on Payment Restrictions
Affecting Subsidiaries. . . . . . . . . . . . . . 45
Section 4.10 Limitation on Issuance of Indebtedness
and Preferred Stock by Subsidiaries . . . . . . . 46
Section 4.11 Transactions with Affiliates. . . . . . . . . . . . 47
Section 4.12 Restrictions on Becoming
an Investment Company . . . . . . . . . . . . . . 47
Section 4.13 Continued Existence and Rights. . . . . . . . . . . 47
Section 4.14 Maintenance of Properties and
Other Matters . . . . . . . . . . . . . . . . . . 47
Section 4.15 Taxes and Claims. . . . . . . . . . . . . . . . . . 49
Section 4.16 Usury Laws. . . . . . . . . . . . . . . . . . . . . 49
Section 4.17 Money for Security Payments to
be Held in Trust. . . . . . . . . . . . . . . . . 49
Section 4.18 Compliance Certificate. . . . . . . . . . . . . . . 50
ARTICLE 5
SUCCESSORS; CHANGE OF CONTROL; OPTIONAL PREPAYMENT
Section 5.01 When Company May Merge, etc.; Change
of Control; Holders' Right of Optional
Prepayment. . . . . . . . . . . . . . . . . . . . 51
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01 Events of Default . . . . . . . . . . . . . . . . . 54
Section 6.02 Acceleration. . . . . . . . . . . . . . . . . . . . 56
Section 6.03 Other Remedies. . . . . . . . . . . . . . . . . . . 57
Section 6.04 Waiver of Defaults. . . . . . . . . . . . . . . . . 57
Section 6.05 Control by Majority . . . . . . . . . . . . . . . . 58
-iii-
<PAGE>
Page
----
Section 6.06 Limitation on Suits . . . . . . . . . . . . . . . . 58
Section 6.07 Rights of Holders to Receive Payment. . . . . . . . 59
Section 6.08 Collection Suit by Trustee. . . . . . . . . . . . . 59
Section 6.09 Trustee May File Proofs of Claim. . . . . . . . . . 59
Section 6.10 Priorities. . . . . . . . . . . . . . . . . . . . . 60
Section 6.11 Undertaking for Costs . . . . . . . . . . . . . . . 60
ARTICLE 7
TRUSTEE
Section 7.01 Duties of Trustee . . . . . . . . . . . . . . . . . 61
Section 7.02 Rights of Trustee . . . . . . . . . . . . . . . . . 62
Section 7.03 Individual Rights of Trustee. . . . . . . . . . . . 63
Section 7.04 Trustee's Disclaimer. . . . . . . . . . . . . . . . 63
Section 7.05 Notice of Defaults. . . . . . . . . . . . . . . . . 63
Section 7.06 Reports by Trustee to Holders . . . . . . . . . . . 63
Section 7.07 Compensation and Indemnity. . . . . . . . . . . . . 64
Section 7.08 Replacement of Trustee. . . . . . . . . . . . . . . 64
Section 7.09 Successor Trustee by Merger, etc. . . . . . . . . . 67
Section 7.10 Eligibility; Disqualification . . . . . . . . . . . 67
Section 7.11 Preferential Collection of
Claims Against Company. . . . . . . . . . . . . . 68
Section 7.12 Authenticating Agent. . . . . . . . . . . . . . . . 68
ARTICLE 8
DISCHARGE OF INDENTURE
Section 8.01 Termination of Company's Obligations. . . . . . . . 70
Section 8.02 Application of Trust Money. . . . . . . . . . . . . 71
Section 8.03 Repayment to Company. . . . . . . . . . . . . . . . 71
Section 8.04 Reinstatement . . . . . . . . . . . . . . . . . . . 72
ARTICLE 9
AMENDMENTS
Section 9.01 Without Consent of Holders. . . . . . . . . . . . . 72
Section 9.02 With Consent of Holders . . . . . . . . . . . . . . 73
Section 9.03 Compliance with Trust Indenture Act . . . . . . . . 74
Section 9.04 Revocation and Effect of Consents . . . . . . . . . 74
Section 9.05 Notation on or Exchange of Securities . . . . . . . 75
Section 9.06 Trustee Protected . . . . . . . . . . . . . . . . . 75
-iv-
<PAGE>
Page
----
ARTICLE 10
REDEMPTIONS
Section 10.01 Election to Redeem; Notice to Trustee . . . . . . . 76
Section 10.02 Selection of the Securities
to be Redeemed. . . . . . . . . . . . . . . . . . 76
Section 10.03 Notice of Redemption. . . . . . . . . . . . . . . . 77
Section 10.04 Effect of Notice of Redemption. . . . . . . . . . . 78
Section 10.05 Deposit of Redemption Price
on Optional Redemption. . . . . . . . . . . . . . 78
Section 10.06 Securities Redeemed in Part . . . . . . . . . . . . 78
ARTICLE 11
MISCELLANEOUS
Section 11.01 Trust Indenture Act Controls. . . . . . . . . . . . 78
Section 11.02 Notices . . . . . . . . . . . . . . . . . . . . . . 78
Section 11.03 Communication by Holders
with Other Holders. . . . . . . . . . . . . . . . 80
Section 11.04 Certificate and Opinion as to
Conditions Precedent. . . . . . . . . . . . . . . 80
Section 11.05 Statements Required in
Certificate or Opinion. . . . . . . . . . . . . . 80
Section 11.06 Rules by Trustee and Agents . . . . . . . . . . . . 81
Section 11.07 Legal Holidays. . . . . . . . . . . . . . . . . . . 81
Section 11.08 No Recourse Against Others. . . . . . . . . . . . . 81
Section 11.09 Duplicate Originals . . . . . . . . . . . . . . . . 81
Section 11.10 Governing Law . . . . . . . . . . . . . . . . . . . 82
Section 11.11 No Adverse Interpretation
of Other Agreements . . . . . . . . . . . . . . . 82
Section 11.12 Successors. . . . . . . . . . . . . . . . . . . . . 82
Section 11.13 Severability. . . . . . . . . . . . . . . . . . . . 82
Section 11.14 Table of Contents, Headings, Etc. . . . . . . . . . 82
Section 11.15 Benefits of Indenture . . . . . . . . . . . . . . . 82
Signatures 83
Exhibit A - Form of Security
-v-
<PAGE>
INDENTURE dated as of December 15, 1993 between THE PENN TRAFFIC
COMPANY, a Delaware corporation (the "Company"), and UNITED STATES TRUST COMPANY
OF NEW YORK, a New York corporation, as Trustee (the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
debentures, notes or other evidences of indebtedness (herein called the
"Securities"), to be issued in one or more series as in this Indenture provided.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities or of series thereof, as
follows:
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS.
"ADDITIONAL ASSETS" means any Property or assets substantially related
to the Company's primary business and, in the case of proceeds received by the
Company from the sale of the Capital Stock of an Unrestricted Subsidiary, shall
also mean Investments in another Unrestricted Subsidiary.
"AFFILIATE" means, with respect to any referenced Person, a Person (i)
which directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such referenced Person, (ii)
which directly or indirectly through one or more intermediaries beneficially
owns or holds 5% or more of the combined voting power of the total Voting Stock
of such referenced Person or (iii) of which 5% or more of the combined voting
power of the
<PAGE>
total Voting Stock (or in the case of a Person which is not a corporation, 5% or
more of the equity interest) directly or indirectly through one or more
intermediaries is beneficially owned or held by such referenced Person, or a
Subsidiary or an Unrestricted Subsidiary of such referenced Person. When used
herein without reference to any Person, Affiliate means an Affiliate of the
Company.
"AGENT" means any Registrar, Paying Agent or co-Registrar.
"ASSET SALE" means the sale or other disposition, in a transaction
which is not a Sale and Leaseback Transaction, by the Company or one of its
Subsidiaries to any Person other than the Company or one of its Subsidiaries of
(i) any of the Capital Stock of any of the Subsidiaries or Unrestricted
Subsidiaries of the Company or (ii) any other assets of the Company or any other
assets of its Subsidiaries outside the ordinary course of business of the
Company or such Subsidiary.
"AVERAGE LIFE" means, as of the date of determination, with respect to
any debt security, the quotient obtained by dividing (i) the sum of the products
of the numbers of years from the date of determination to the dates of each
successive scheduled principal payment of such debt security multiplied by the
amount of such principal payment by (ii) the sum of all such principal payments.
"BOARD OF DIRECTORS" means the board of directors of the Company or
any authorized committee of such Board.
"BOARD RESOLUTION" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"BUSINESS DAY" means any day which is not a Legal Holiday.
"CAPITAL STOCK" means, with respect to any Person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such Person's capital stock, and any rights (other than debt securities
convertible into capital stock), warrants or options exchangeable for or
convertible into such capital stock.
-2-
<PAGE>
"CAPITALIZED LEASE OBLIGATION" means, as to any Person, the obligation
of such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real or personal Property which obligation is
required to be classified and accounted for as a capital lease obligation on a
balance sheet of such Person under generally accepted accounting principles and,
for purposes of this Indenture, the amount of such obligation at any date shall
be the outstanding amount thereof at such date, determined in accordance with
generally accepted accounting principles.
"CHANGE OF CONTROL" means, with respect to the Company, an event or
series of events by which (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) (other than Riverside Acquisition Company,
Limited Partnership, Miller Tabak Hirsch + Co. or any Affiliate of either
thereof) is or becomes the "beneficial owner" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act, except that a person shall be deemed to have
"beneficial ownership" of all shares that any such person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of 50% or more of the outstanding shares of
common stock of the Company or securities representing 50% or more of the
combined voting power of the Company's Voting Stock, (ii) the Company
consolidates with or merges into another Person or conveys, transfers, sells or
leases all or substantially all of its assets to any Person, or any Person
consolidates with or merges into the Company, in either event pursuant to a
transaction in which the outstanding Voting Stock of the Company is changed into
or exchanged for cash, securities or other Property, other than any such
transaction between the Company and its Wholly Owned Subsidiaries (which Wholly
Owned Subsidiaries are United States corporations), with the effect that any
"person" (other than Riverside Acquisition Company, Limited Partnership, Miller
Tabak Hirsch + Co. or any Affiliate of either thereof) becomes the "beneficial
owner," directly or indirectly, of 50% or more of the outstanding shares of
common stock of the Company or securities representing 50% or more of the
combined voting power of the Company's Voting Stock or (iii) during any
consecutive two-year period, individuals who at the beginning of such period
constituted the Company's Board of Directors (together with any new directors
whose election by the Company's Board of Directors, or whose nomination for
election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then still in
-3-
<PAGE>
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the directors then in office.
"COMPANY" means the Person designated as the "Company" in the first
paragraph of this instrument until any successor corporation shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean any such successor corporation.
"COMPANY REQUEST" or "COMPANY ORDER" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President or a Vice President, and by its Treasurer,
an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered
to the Trustee.
"CONSOLIDATED INTEREST COVERAGE RATIO" means, with respect to the
Company for any period, the ratio of (i) the aggregate amount of Consolidated
Operating Income of the Company for the four consecutive fiscal quarters for
which financial information in respect thereof is available immediately prior to
the Transaction Date to (ii) the aggregate amount of Consolidated Interest
Expense of the Company for the four consecutive fiscal quarters for which
financial information in respect thereof is available immediately prior to the
Transaction Date; PROVIDED that for purposes of calculating the Consolidated
Interest Coverage Ratio of the Company, (a) Consolidated Operating Income shall
be calculated on the basis of first-in, first-out method of inventory valuation,
as determined in accordance with generally accepted accounting principles, (b)
the Consolidated Operating Income and Consolidated Interest Expense of the
Company shall include the Consolidated Operating Income and Consolidated
Interest Expense of any Person to be acquired by the Company or any of its
Subsidiaries in connection with the transaction giving rise to the need to
calculate the Consolidated Interest Coverage Ratio, on a pro forma basis for the
four consecutive fiscal quarters for which financial information in respect
thereof is available immediately prior to the Transaction Date, and shall also
include the Consolidated Operating Income and Consolidated Interest Expense of
any other Person which has been acquired by the Company or any of its
Subsidiaries during such four consecutive fiscal quarters on a pro forma basis
for such four consecutive fiscal quarters, the Consolidated Operating Income and
Consolidated Interest
-4-
<PAGE>
Expense of any such Person or Persons to be determined on the same basis as
determining such items for the Company and (c) Consolidated Interest Expense
and Redeemable Dividends shall be calculated as if (i) any Indebtedness
incurred or issued since the beginning of the four consecutive fiscal quarters
for which financial information in respect thereof is available immediately
prior to the Transaction Date, or to be incurred or issued at or prior to the
time the transaction giving rise to the need to calculate the Consolidated
Interest Coverage Ratio is effected (the "Transaction Time"), had been incurred
or issued as of the beginning of such four quarter period and (ii) any
Indebtedness repaid since the beginning of such four quarter period, or to be
repaid with the proceeds of Indebtedness or equity incurred or issued or to be
incurred or issued at or prior to the Transaction Time, had been repaid as
of the beginning of such four quarter period. For purposes of determining the
Consolidated Interest Coverage Ratio of the Company for any period, (i) any
Indebtedness incurred or proposed to be incurred or Redeemable Stock issued or
proposed to be issued which for purposes of clause (c) above is deemed to have
been incurred or issued as of the beginning of the four quarter period described
in clause (c) which bears interest at a fluctuating rate will be deemed to have
borne interest during such four quarter period at the rate in effect on the
Transaction Date and (ii) "Subsidiary" shall mean any Subsidiary of the Company
other than any Subsidiary (and Subsidiaries of such Subsidiary) of which the
Company does not own or control, directly or indirectly, a sufficient amount of
Voting Stock in order to cause a merger of such Subsidiary into the Company or
another Subsidiary without the approval of any other holder of Voting Stock of
such Subsidiary.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, without
duplication (A) the sum of (i) the aggregate amount of interest recognized by
the Company and its Subsidiaries during such period in respect of Indebtedness
of the Company and its Subsidiaries (including, without limitation, all interest
capitalized by the Company or any of its Subsidiaries during such period and all
commissions, discounts and other fees and charges owed by the Company and its
Subsidiaries with respect to letters of credit and bankers' acceptance financing
and the net costs associated with Interest Swap Obligations of the Company and
its Subsidiaries), (ii) the aggregate amount of the interest component of
rentals in respect of Capitalized Lease Obligations recognized by the Company
and its Subsidiaries during such period, (iii) to the extent any Indebtedness of
-5-
<PAGE>
any Person is Guaranteed by the Company or any of its Subsidiaries (other than
Guarantees relating to obligations of customers of the franchise or wholesale
business of the Company or any of its Subsidiaries which Guarantees are in the
ordinary course of business and consistent with past practices of the Company or
its Subsidiaries), the aggregate amount of interest paid or accrued by such
Person during such period attributable to any such Indebtedness, and (iv) the
aggregate amount of Redeemable Dividends accrued during such period with respect
to Redeemable Stock of the Company or any of its Subsidiaries, whether or not
declared during such period, less (B) amortization or write-off of deferred
financing costs of the Company and its Subsidiaries during such period and, to
the extent included in (A) above, any charge related to any premium or penalty
paid in connection with redeeming or retiring any Indebtedness prior to its
stated maturity, in the case of both (A) and (B) above, after elimination of
intercompany accounts among the Company and its Subsidiaries and as determined
in accordance with generally accepted accounting principles.
"CONSOLIDATED NET INCOME" means, for any period, the aggregate net
income of the Company and its Subsidiaries for such period on a consolidated
basis, determined in accordance with generally accepted accounting principles,
PROVIDED that there shall be excluded therefrom after giving effect to any
related tax effect (i) gains and losses from Asset Sales or reserves relating
thereto (except gains on Asset Sales relating to an Unrestricted Subsidiary,
including the sale or other disposition of all or a portion of the Capital Stock
of an Unrestricted Subsidiary, to the extent of the amount of cash dividends or
other cash distributions in respect of its Capital Stock relating to the sale of
the Property or Capital Stock of such Unrestricted Subsidiary that are actually
paid to, and received by, the Company during such period out of funds legally
available therefor), (ii) items classified as extraordinary or nonrecurring,
(iii) the income (or loss) of any Unrestricted Subsidiary and any Joint Venture,
except to the extent of the amount of cash dividends or other distributions in
respect of its Capital Stock or interest in the Joint Venture actually paid to,
and received by, the Company or any of its Subsidiaries during such period by
such Unrestricted Subsidiary or Joint Venture out of funds legally available
therefor, (iv) except to the extent includable pursuant to clause (iii), the
income (or loss) of any Person accrued or attributable to any period prior to
the date it becomes a Subsidiary of the Company or is merged into or
consolidated with the Company or any of its
-6-
<PAGE>
Subsidiaries or that Person's assets (or a portion thereof) are acquired by the
Company or any of its Subsidiaries and (v) the cumulative effect of changes in
accounting principles in the year of adoption of such change.
"CONSOLIDATED OPERATING INCOME" means, with respect to the Company for
any period, the Consolidated Net Income of the Company and its Subsidiaries for
such period (A) increased by the sum of (i) Consolidated Interest Expense of the
Company for such period, (ii) income tax expense of the Company and its
Subsidiaries, on a consolidated basis, for such period (after giving effect to
any income tax expense adjustments made in arriving at Consolidated Net Income),
(iii) depreciation expense of the Company and its Subsidiaries, on a
consolidated basis, for such period, (iv) amortization expense of the Company
and its Subsidiaries, on a consolidated basis, for such period, (v) amortization
or write-off of deferred financing costs of the Company and its Subsidiaries, on
a consolidated basis, for such period and (vi) other noncash items, but only to
the extent the items referred to in subclauses (i) through (vi) of this
clause (A) reduced such Consolidated Net Income, and (B) decreased by the sum of
(i) noncash items increasing such Consolidated Net Income and (ii) any revenues
received or accrued by the Company or any of its Subsidiaries from any Person
(other than the Company or any of its Subsidiaries) in respect of any Investment
for such period (other than revenue from any Qualified Investment), but only to
the extent the items referred to in subclauses (i) and (ii) of this clause (B)
increased such Consolidated Net Income, all as determined in accordance with
generally accepted accounting principles.
"CONTROL AFFILIATE" means, with respect to the Company, any Affiliate
that directly or indirectly through one or more intermediaries (i) controls the
Company or (ii) beneficially owns, holds or controls 10% or more of the combined
voting power of the total Voting Stock of the Company.
"DEFAULT" means an event or condition the occurrence of which would,
with the lapse of time or the giving of notice or both, become an Event of
Default as defined in Section 6.01.
"DEPOSITARY" means, with respect to Securities of any series issuable
in whole or in part in the form of one or more Global Securities, a clearing
agency registered under
-7-
<PAGE>
the Exchange Act that is designated to act as Depositary for such Securities as
contemplated by Section 3.01.
"FAIR MARKET VALUE" means, with respect to an Asset Sale involving any
Property or any noncash consideration received by or transferred to any Person,
the fair market value of such Property or such noncash consideration as
determined in good faith (i) in the case of any Asset Sale involving any
Property or any such noncash consideration with a fair market value of less than
$5 million, by the Company as evidenced by an Officers' Certificate and (ii) in
the case of any Asset Sale involving any Property or any such noncash
consideration with a fair market value of more than $5 million, by the Board of
Directors of the Company.
"GLOBAL SECURITY" means a Security that evidences all or part of the
Securities of any series and bears the legend set forth in Section 2.02 (or such
legend as may be specified as contemplated by Section 3.01 for such Securities).
"GUARANTEE" means any direct or indirect obligation, contingent or
otherwise, of a Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other Person in any manner.
"HOLDER" means a Person in whose name a Security is registered.
"INDEBTEDNESS," as applied to any Person, means, without duplication,
(i) any obligation, contingent or otherwise, for borrowed money (whether or not
the recourse of the lender is to the whole of the assets of such Person or only
to a portion thereof), (ii) any obligation owed for all or any part of the
purchase price of Property or other assets or for the cost of Property or other
assets constructed or of improvements thereto (including any obligation under or
in connection with any letter of credit related thereto), other than accounts
payable included in current liabilities incurred in respect of Property and
services purchased in the ordinary course of business, (iii) except to the
extent supporting other Indebtedness of a Person, any obligation of such Person
under or in connection with any letter of credit issued for the account of such
Person, and, without duplication, all drafts drawn, or demands for payment
honored, thereunder, (iv) any obligation, contingent or otherwise, as set forth
in subclauses (i) and (ii) of this definition, secured by any Lien in respect of
Property even
-8-
<PAGE>
though the Person owning the Property has not assumed or become liable for
payment of such obligation, (v) any Capitalized Lease Obligation, (vi) any note
payable or draft accepted representing an extension of credit (other than
extensions of credit for Property and services purchased in the ordinary course
of business), whether or not representing an obligation for borrowed money,
(vii) the maximum fixed repurchase price of any Redeemable Stock, (viii)
obligations in respect of Interest Swap Obligations and (ix) any obligation
which is in economic effect a Guarantee, regardless of its characterization,
with respect to Indebtedness (of a kind otherwise described in this definition)
of another Person. For purposes of the preceding sentence, the maximum fixed
repurchase price of any Redeemable Stock which does not have a fixed repurchase
price shall be calculated in accordance with the terms of such Redeemable Stock
as if such Redeemable Stock were repurchased on any date on which Indebtedness
shall be required to be determined pursuant to this Indenture. The amount of
Indebtedness of any Person at any date shall be the outstanding balance at such
date of all unconditional obligations as described above and the maximum
liability of any such contingent obligations at such date.
"INDENTURE" means this Indenture, as amended, modified or supplemented
from time to time, together with any exhibits, schedules or other attachments
hereto. The term "Indenture" shall also include the terms of particular series
of Securities established as contemplated by Section 3.01.
"INTEREST SWAP OBLIGATIONS" means the obligations of any Person
pursuant to any interest rate swap agreement, interest rate cap, collar or floor
agreement or other similar agreement or arrangement.
"INVESTMENT" means, with respect to any Person (such Person being
referred to in this definition as the "Investor"), (i) any amount paid by the
Investor, directly or indirectly, or any transfer of Property by the Investor,
directly or indirectly (such amount to be the Fair Market Value of such Property
at the time of transfer by the Investor), to any other Person for Capital Stock
of, or as a capital contribution to, any other Person and (ii) any direct or
indirect loan or advance by the Investor to any other Person (other than
accounts receivable of such Investor arising in the ordinary course of
business).
-9-
<PAGE>
"JOINT VENTURE" means any Person (other than a Subsidiary of the
Company) in which any Person other than the Company or any of its Subsidiaries
has a joint or shared equity interest with the Company or any of its
Subsidiaries.
"LIEN" means any mortgage, lien (statutory or other), charge, pledge,
hypothecation, conditional sales agreement, adverse claim, title retention
agreement or other security interest, encumbrance or title defect in or on, or
any interest or title of any vendor, lessor, lender or other secured party to or
of such Person under any conditional sale, trust receipt or other title
retention agreement with respect to, any Property or asset of such Person.
"MATERIAL ACQUISITION" means any merger, consolidation, acquisition or
lease of assets, acquisition of securities or other business combination or
acquisition, or any two or more such transactions if part of a common plan to
acquire a business or group of businesses, if the assets thus acquired in the
aggregate would have constituted a Material Subsidiary if they had been acquired
by a Subsidiary, based upon the consolidated financial statements of the Company
and its Subsidiaries for the most recent fiscal year for which financial
statements are available.
"MATERIAL SUBSIDIARY" means, with respect to the Company at any time,
each existing Subsidiary and each Subsidiary hereafter acquired or formed which
(i) for the most recent fiscal year of the Company for which financial
statements are available accounted for more than 10% of the consolidated
revenues of the Company and its Subsidiaries or (ii) as at the end of such
fiscal year, was the owner (beneficial or otherwise) of more than 10% of the
consolidated assets of the Company and its Subsidiaries, all as shown on the
consolidated financial statements of the Company and its Subsidiaries for such
fiscal year.
"MATURITY," when used with respect to any Security, means the date on
which the principal of such Security or an installment of principal becomes due
and payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
"NET PROCEEDS" means, with respect to an Asset Sale by the Company or
any of its Subsidiaries, (i) the gross proceeds received by the Company or its
Subsidiary in connection with such Asset Sale (the amount of any noncash
-10-
<PAGE>
consideration received as proceeds to be the Fair Market Value of such
consideration, PROVIDED that liabilities assumed by the buyer shall not be
deemed proceeds received by the Company or its Subsidiary), less (ii) the sum of
(a) reasonable fees and expenses incurred by the Company or such Subsidiary in
connection with such Asset Sale, (b) taxes payable by the Company or such
Subsidiary as a result of and in connection with such Asset Sale, including any
tax on income resulting from the gain realized from such Asset Sale, (c)
payments made with respect to liabilities associated with the assets which are
the subject of the Asset Sale, including, without limitation, trade payables and
other accrued liabilities, and payments made to retire Indebtedness where the
assets disposed of in such Asset Sale constituted security for or had been
pledged to secure such Indebtedness and payment of such Indebtedness is required
in connection with such Asset Sale and (d) appropriate amounts to be provided by
the Company or any Subsidiary thereof, as the case may be, as a reserve, in
accordance with generally accepted accounting principles, against any
liabilities associated with such assets and retained by the Company or any
Subsidiary thereof, as the case may be, after such Asset Sale, including,
without limitation, liabilities under any indemnification obligations and
severance and other employee termination costs associated with such Asset Sale.
"OFFICER" means the Chairman of the Board of Directors, the Vice
Chairman, the President, any Vice President, the Treasurer, the Secretary, any
Assistant Treasurer or any Assistant Secretary of the Company.
"OFFICERS' CERTIFICATE" means a certificate signed by two Officers of
the Company, one of whom must be the Chairman of the Board of Directors, the
Vice Chairman, the President, any Vice President or the Treasurer of the
Company.
"OPINION OF COUNSEL" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.
"OTHER SENIOR INDEBTEDNESS" means, at any date, outstanding
Indebtedness of the Company, other than the Securities, that is PARI PASSU in
any respect in right of payment with the Securities, including, without
limitation, the 10 1/4% Senior Notes due 2002, the 10 3/8% Senior Notes
-11-
<PAGE>
due 2004, the 11 1/2% Senior Notes due 2001 and Indebtedness outstanding under
the Revolving Credit Facility.
"OUTSTANDING," when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, EXCEPT:
(1) Securities theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(2) Securities for whose payment or redemption money in the necessary
amount has been theretofore deposited with the Trustee or any Paying Agent
(other than the Company) in trust or set aside and segregated in trust by
the Company (if the Company shall act as its own Paying Agent) for the
Holders of such Securities; PROVIDED that, if such Securities are to be
redeemed, notice of such redemption has been duly given pursuant to this
Indenture or provision therefor satisfactory to the Trustee has been made;
(3) Securities as to which the Company's obligations have been
discharged as provided in Article 8 hereof; and
(4) Securities in exchange for or in lieu of which other Securities
have been authenticated and delivered pursuant to this Indenture, other
than any such Securities in respect of which there shall have been
presented to the Trustee proof satisfactory to it that such Securities are
held by a bona fide purchaser in whose hands such Securities are valid
obligations of the Company;
PROVIDED, HOWEVER, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given, made or taken any
request, demand, authorization, direction, notice, consent, waiver or other
action hereunder as of any date, Securities owned by the Company or any
Affiliate shall be disregarded and deemed not to be Outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent, waiver or other
action, only Securities which the Trustee knows to be so owned shall be so
disregarded. Securities so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of
-12-
<PAGE>
the Trustee the pledgee's right so to act with respect to such Securities and
that the pledgee is not the Company or any Affiliate of the Company.
"PERSON" means any individual, partnership, corporation, venture,
joint venture, unincorporated organization, or a government or agency or
political subdivision thereof.
"PRINCIPAL" or "PRINCIPAL" of a debt security means the principal
amount of a debt security plus the premium, if any, on such debt security.
"PROPERTY" means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"QUALIFIED INVESTMENT" means the following kinds of instruments if, on
the date of purchase or other acquisition of any such instrument by the Company
or any Subsidiary the remaining term to maturity thereof is not more than one
year: (i) obligations issued or unconditionally guaranteed as to principal and
interest by the United States of America or by any agency or authority
controlled or supervised by and acting as an instrumentality of the United
States of America; (ii) obligations (including, but not limited to, demand or
time deposits, bankers' acceptances and certificates of deposit) issued by (a) a
depository institution or trust company incorporated under the laws of the
United States of America, any state thereof or the District of Columbia, (b) a
United States branch office or agency of any foreign depository institution or
(c) wholly owned Subsidiaries of any U.S. depository institution guaranteed by
such U.S. bank or depository, PROVIDED that such U.S. bank, trust company or
United States branch office or agency has, at the time of the Company's or any
Subsidiary's investment therein or contractual commitment providing for such
investment, capital, surplus or undivided profits (as of the date of such
institution's most recently published financial statements) in excess of $100
million and the long-term unsecured debt obligations (other than such
obligations rated on the basis of the credit of a person or entity other than
such institution) of such institution, at the time of the Company's or any
Subsidiary's investment therein or contractual commitment providing for such
investment, is rated at least A by Standard & Poor's Corporation or A3 by
Moody's Investors Service, Inc.; and (iii) debt obligations (including, but not
limited to, commercial paper and medium
-13-
<PAGE>
term notes) issued or unconditionally guaranteed as to principal and interest by
any corporation, state or municipal government or agency or instrumentality
thereof, or foreign sovereignty if the commercial paper of such corporation,
state or municipal government or foreign sovereignty has, at the time of the
Company's or any Subsidiary's investment therein or contractual commitment
providing for such investment, credit ratings of A-1 by Standard & Poor's
Corporation or P-1 by Moody's Investors Service, Inc., or the debt obligations
of such corporation, state or municipal government or foreign sovereignty, at
the time of the Company's or any Subsidiary's investment therein or contractual
commitment providing for such investment, have credit ratings of at least A by
Standard & Poor's Corporation or A3 by Moody's Investors Service, Inc.
"REDEEMABLE DIVIDEND" means, for any dividend payable with regard to
Redeemable Stock, the quotient of the dividend divided by the difference between
one and the maximum statutory federal income tax rate (expressed as a decimal
number between 1 and 0) then applicable to the issuer of such Redeemable Stock.
"REDEEMABLE STOCK" means, with respect to any Person, any equity
security that by its terms or otherwise is required to be redeemed or is
redeemable at the option of the holder at any time prior to the maturity of the
Securities.
"REDEMPTION DATE" means, when used with respect to any Security to be
redeemed, the date fixed for such redemption pursuant to this Indenture.
"REDEMPTION PRICE" means, when used with respect to any Security to be
redeemed, the price fixed for such redemption pursuant to this Indenture and the
Securities as set forth in Article 10 of this Indenture.
"REPRESENTATIVE" means the indenture trustee or other trustee, agent
or representative for an issue of Senior Debt.
"RESTRICTED PAYMENT" means (i) a dividend or other distribution
declared and paid on the Capital Stock of the Company or any of its
Subsidiaries, other than dividends or distributions consisting of shares of the
Capital Stock of such entity (or rights or warrants to subscribe for or purchase
shares of such Capital Stock) and other than dividends or distributions declared
and paid by any
-14-
<PAGE>
Subsidiary to the Company or to any other direct or indirect Wholly Owned
Subsidiary of the Company, (ii) a payment made by the Company, any Subsidiary or
any Unrestricted Subsidiary (other than to the Company or any Subsidiary) to
purchase, redeem, acquire or retire any Capital Stock of the Company (or rights
or warrants to subscribe for or purchase shares of such Capital Stock) or
(iii) a payment made by the Company, any Subsidiary or any Unrestricted
Subsidiary (other than to the Company or any Subsidiary) to acquire, retire or
redeem any debt of or equity interest in or otherwise to make any Investment in
any Control Affiliate of the Company (other than a Subsidiary of the Company).
"REVOLVING CREDIT FACILITY" means the Loan and Security Agreement
dated March 5, 1993, among the Company, Quality Markets, Inc., Dairy Dell, Big M
Supermarkets, Inc., Penny Curtiss Baking Company Inc., Hart Stores, Inc., the
lenders party thereto and NatWest USA Credit Corp., as Agent, and any credit
facility that replaces such Loan and Security Agreement in whole or in part, or
any credit facility secured by accounts receivable, inventory, franchise
agreements and related assets, together with documents related thereto,
including, without limitation, any security agreements and pledge agreements, in
each case as such agreements may be amended, restated, supplemented or otherwise
modified from time to time.
"SALE AND LEASEBACK TRANSACTION" means any direct or indirect
arrangement with any Person or to which such Person is a party, providing for
the leasing to the Company or a Subsidiary of any Property, whether owned at the
date of issuance of a particular series of Securities pursuant to this Indenture
or thereafter acquired, which has been or is to be sold or transferred by the
Company or such Subsidiary to such Person, or to any other Person to whom funds
have been or are to be advanced by such Person, on the security of such
Property.
"SEC" means the Securities and Exchange Commission.
"SECURITIES" has the meaning set forth in the first recital of this
Indenture and more particularly means any Securities authenticated and delivered
under this Indenture.
"SENIOR INDEBTEDNESS" means, at any date, any outstanding Indebtedness
of the Company that is PARI PASSU in any respect in right of payment with the
Securities.
-15-
<PAGE>
"STATED MATURITY," when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date specified
in such Security as the fixed date on which the principal of such Security or
such installment of principal or interest is due and payable.
"SUBORDINATED DEBT" means, at any date, (i) outstanding Indebtedness
under the 13 3/4% Senior Subordinated Notes due 1999 and the 9 5/8% Senior
Subordinated Notes due 2005 and (ii) any other Indebtedness of the Company that
is subordinated in any respect in right of payment to the Securities or any
Other Senior Indebtedness including, without limitation, principal, premium,
interest, fees, indemnities and amounts in respect of claims and rights of
rescission.
"SUBSIDIARY" means, with respect to any Person, any corporation,
association or other business entity of which securities representing more than
50% of the combined voting power of the total Voting Stock (or, in the case of
an association or other business entity which is not a corporation, more than
50% of the equity interest) is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, PROVIDED that an Unrestricted Subsidiary shall
not be deemed to be a Subsidiary for purposes of this Indenture. When used
herein without reference to any Person, Subsidiary means a Subsidiary of the
Company.
"SURVIVING CORPORATION" means the corporation formed by or surviving
any consolidation or merger involving the Company or to which a transfer, sale
or lease of all or substantially all of the Company's Property is made.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. SECTIONS
77aaa-77bbbb), as amended by the Trust Indenture Reform Act of 1990, as in
effect on the date of execution of this Indenture, except as provided in Section
9.03.
"TRANSACTION DATE" means the date of the transaction giving rise to
the need to calculate the Consolidated Interest Coverage Ratio, PROVIDED that if
such transaction is related to or in connection with any acquisition of any
Person, the Transaction Date shall be the earlier of (i) the date on which the
Company or any of its Subsidiaries enters into an agreement with such Person to
effect such acquisition, (ii) the date on which the Company or any of its
Subsidiaries first makes a public announcement
-16-
<PAGE>
of such acquisition or any offer or proposal to effect such acquisition, (iii)
the date on which the Company or any of its Subsidiaries first makes a filing
with the SEC or the Federal Trade Commission in connection with any proposed
acquisition and (iv) the date such acquisition is consummated, PROVIDED,
HOWEVER, that if subsequent to the occurrence of an event described in clause
(i), (ii) or (iii) above or clause (A), (B) or (C) below the Company or any of
its Subsidiaries shall amend the terms of such acquisition with respect to the
consideration payable by the Company or any of its Subsidiaries in connection
with such acquisition, the Transaction Date shall be the earlier of (A) the date
on which the Company or any of its Subsidiaries enters into a binding written
agreement with such Person to effect such acquisition on such amended terms, (B)
the date on which the Company or any of its Subsidiaries makes a public
announcement of any offer or proposal to effect such acquisition on such amended
terms and (C) the date on which the Company or any of its Subsidiaries first
makes a filing disclosing such amended terms with the SEC or the Federal Trade
Commission in connection with any proposed acquisition. The second proviso
above shall not be applicable if, as of the initial Transaction Date with
respect to any acquisition, the Company could incur at least $1.00 of additional
Indebtedness under Section 4.03(a) hereof when the Consolidated Interest
Coverage Ratio of the Company is calculated on the basis of the amended terms of
such acquisition and the Indebtedness to be incurred by the Company and its
Subsidiaries in connection therewith.
"TRUSTEE" means the party named as such in the first paragraph of this
instrument above unless and until a successor replaces it in accordance with the
terms of this Indenture and thereafter, "Trustee" shall mean or include each
Person who is then a Trustee hereunder, and if at any time there is more than
one such Person, "Trustee" as used with respect to the Securities of any series
shall mean the Trustee with respect to Securities of that series.
"TRUST OFFICER," when used with respect to the Trustee, means any
officer within the Corporate Trust and Agency Group (or any successor group) of
the Trustee, including without limitation any Vice President, Assistant Vice
President, any Assistant Secretary or any other officer of the Trustee
customarily performing functions similar to those performed by any of the
above-designated officers and also means, with respect to a particular corporate
trust matter, any other officer of the Trustee to whom corporate
-17-
<PAGE>
trust matters are referred because of his knowledge of and familiarity with the
particular subject.
"UNRESTRICTED SUBSIDIARY" means (i) any corporation, association or
other business entity which would be a Subsidiary but for its designation as an
Unrestricted Subsidiary by the Board of Directors of the Company at or before
the time of determination as provided below, and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary
(including any newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary unless such Subsidiary owns any Capital Stock of or owns or holds any
Lien on any Property of the Company or any other Subsidiary of the Company which
is not a Subsidiary of the Subsidiary to be so designated, PROVIDED that either
(x) the Subsidiary to be so designated has total assets of $1,000 or less or (y)
immediately after giving pro forma effect to such designation (1) the
Consolidated Interest Coverage Ratio would be greater than 1.7 to 1 and (2)
there would not exist any Default under this Indenture. The Board of Directors
of the Company may designate any Unrestricted Subsidiary to be a Subsidiary,
PROVIDED that, immediately after giving pro forma effect to such designation,
(1) the Consolidated Interest Coverage Ratio would be greater than 1.7 to 1 and
(2) there would not exist any Default under this Indenture.
"VOTING STOCK" means any class of Capital Stock of any Person then
outstanding normally entitled to vote in elections of directors, managers or
trustees of any such Person (irrespective of whether or not at the time stock of
any class or classes will have or might have voting power by reason of the
happening of any contingency).
"WHOLLY OWNED SUBSIDIARY" means any Subsidiary of which 100% of the
total Voting Stock is at the time owned by the Company or by a Wholly Owned
Subsidiary of the Company.
"10 1/4% SENIOR NOTES DUE 2002" means the Company's 10 1/4% Senior
Notes due February 15, 2002.
"10 3/8% SENIOR NOTES DUE 2004" means the outstanding 10 3/8% Senior
Notes due October 1, 2004 of the Company.
"11 1/2% SENIOR NOTES DUE 2001" means the outstanding 11 1/2% Senior
Notes due October 15, 2001 of the Company.
-18-
<PAGE>
"13 3/4% SENIOR SUBORDINATED NOTES DUE 1999" means the outstanding
13 3/4% Senior Subordinated Notes due June 15, 1999 of the Company.
"9 5/8% SENIOR SUBORDINATED NOTES DUE 2005" means the outstanding
9 5/8% Senior Subordinated Notes due April 15, 2005 of the Company.
SECTION 1.02. OTHER DEFINITIONS.
Term Defined in Section
"Authenticating Agent" 7.12
"Bankruptcy Law" 6.01
"Change of Control Date" 5.01
"Custodian" 6.01
"Discharged" 8.01
"Event of Default" 6.01
"Exchange Act" 4.08
"Legal Holiday" 11.07
"Paying Agent" 3.04
"Registrar" 3.04
"U.S. Government Obligations" 8.01
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Securities;
"indenture security holder" means a Holder;
-19-
<PAGE>
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Securities means the Company.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings assigned to them thereby.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles in effect
on the date of the construction of such term;
(3) "OR" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular; and
(5) provisions apply to successive events and transactions.
ARTICLE 2
FORM OF THE SECURITIES
SECTION 2.01. FORM.
The Securities of each series shall be substantially in the form of
Exhibit A, which is part of this Indenture or in such other form as shall be
established by or pursuant to a Board Resolution or in one or more indentures
supplemental hereto, in each case with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture, and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may be
-20-
<PAGE>
required to comply with the rules of any securities exchange or Depositary
therefor or as may, consistently herewith, be determined by the officers
executing such Securities, as evidenced by their execution thereof. If
determined to be necessary by the Company or its counsel, the Company may
require that a legend be placed on the Securities of any series relating to
original issue discount or other applicable tax matters. The Company shall
furnish any such legends or endorsements to the Trustee in writing. If the form
of Securities of any series is established by action taken pursuant to a Board
Resolution, a copy of an appropriate record of such action shall be certified by
the Secretary or an Assistant Secretary of the Company and delivered to the
Trustee at or prior to the delivery of the Company Order contemplated by Section
3.03 for the authentication and delivery of such Securities.
SECTION 2.02. FORM OF LEGEND FOR GLOBAL SECURITIES.
Unless otherwise specified as contemplated by Section 3.01 for the
Securities evidenced thereby, every Global Security authenticated and delivered
hereunder shall bear a legend in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A
SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE
REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE
THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
SECTION 2.03. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
The Trustee's certificates of authentication shall be in substantially
the following form:
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
UNITED STATES TRUST COMPANY
OF NEW YORK, As Trustee
By_____________________________
Authorized Signatory
-21-
<PAGE>
ARTICLE 3
THE SECURITIES
SECTION 3.01. AMOUNT UNLIMITED; ISSUABLE IN SERIES.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution and, subject to Section 3.03,
set forth, or determined in the manner provided, in an Officers' Certificate, or
established in one or more indentures supplemental hereto, prior to the issuance
of Securities of any series:
(1) the title of the Securities of the series (which shall distinguish
the Securities of the series from Securities of any other series);
(2) any limit upon the aggregate principal amount of the Securities of
the series which may be authenticated and delivered under this Indenture
(except for Securities authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Securities of the
series pursuant to Section 3.07, 3.08 or 3.09 and except for any Securities
which, pursuant to Section 3.03, are deemed never to have been
authenticated and delivered hereunder);
(3) the Person to whom any interest on a Security of the series shall
be payable, if other than the Person in whose name that Security (or one or
more predecessor Securities) is registered at the close of business on the
regular record date for such interest;
(4) the date or dates on which the principal of any Securities of the
series is payable;
(5) the rate or rates (which may be fixed or variable) per annum, or
the method for determining such rate or rates, at which any Securities of
the series shall bear interest, if any, the date or dates from which any
such interest shall accrue, the date on which
-22-
<PAGE>
each installment of any such interest shall be payable and the record date
for any such payment of interest;
(6) the place or places, if other than as set forth in the Indenture,
where the principal of and any premium and interest on any Securities of
the series shall be payable;
(7) the period or periods within which, the price or prices at which
and the terms and conditions upon which any Securities of the series may be
redeemed in whole or in part at the option of the Company and, if other
than by a Board Resolution, the manner in which any election by the Company
to redeem the Securities shall be evidenced;
(8) the obligation, if any, of the Company to redeem or purchase any
Securities of the series pursuant to any sinking fund or analogous
provisions or at the option of the Holder thereof and the period or periods
within which, the price or prices at which and the terms and conditions
upon which any Securities of the series shall be redeemed or purchased in
whole or in part pursuant to such obligation;
(9) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which any Securities of the series shall be
issuable;
(10) if the amount of principal of or any premium or interest on any
Securities of the series may be determined with reference to an index or
pursuant to a formula, the manner in which such amounts shall be
determined;
(11) if other than the entire principal amount thereof, the portion of
the principal amount of any Securities of the series which shall be payable
upon declaration of acceleration of the Maturity thereof pursuant to
Section 6.02;
(12) if the principal amount payable at the Stated Maturity of any
Securities of the series will not be determinable as of any one or more
dates prior to the Stated Maturity, the amount which shall be deemed to be
the principal amount of such Securities as of any such date for any purpose
thereunder or hereunder, including the principal amount thereof which shall
be due and
-23-
<PAGE>
payable upon any Maturity other than the Stated Maturity or which shall be
deemed to be Outstanding as of any date prior to the Stated Maturity (or,
in any such case, the manner in which such amount deemed to be the
principal amount shall be determined);
(13) if applicable, that any Securities of the series shall be
issuable in whole or in part in the form of one or more Global Securities
and, in such case, the respective Depositaries for such Global Securities,
the form of any legend or legends which shall be borne by any such Global
Security in addition to or in lieu of that set forth in Section 2.02 and
any circumstances in addition to or in lieu of those set forth in
Clause (2) of the last paragraph of Section 3.07 in which any such Global
Security may be exchanged in whole or in part for Securities registered,
and any transfer of such Global Security in whole or in part may be
registered, in the name or names of Persons other than the Depositary for
such Global Security or a nominee thereof;
(14) any addition to or change in the Events of Default which applies
to any Securities of the series and any change in the right of the Trustee
or the requisite Holders of such Securities to declare the principal amount
thereof due and payable pursuant to Section 6.02;
(15) any addition to or change in the covenants set forth in Article 4
which applies to Securities of the series; and
(16) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture, except as permitted by
Section 9.01(6)).
All Securities of any one series shall be substantially identical
except as to denomination and except as may otherwise be provided in or pursuant
to the Board Resolution referred to above and (subject to Section 3.03) set
forth, or determined in the manner provided, in the Officers' Certificate
referred to above or in any such indenture supplemental hereto.
If any of the terms of the series are established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such action
shall be certified by the Secretary or an Assistant Secretary of the Company and
-24-
<PAGE>
delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth the terms of the series.
The Securities shall rank PARI PASSU with Other Senior Indebtedness.
SECTION 3.02. DENOMINATIONS.
The Securities of each series shall be issuable only in registered
form without coupons and only in such denominations as shall be specified as
contemplated by Section 3.01. In the absence of any such specified denomination
with respect to the Securities of any series, the Securities of such series
shall be issuable in denominations of $1,000 and any integral multiple thereof.
SECTION 3.03. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
The Securities shall be signed for the Company by the Company's
President or any Vice Chairman or Vice President and shall be attested by the
Company's Secretary or an Assistant Secretary, in each case by manual or
facsimile signature. The Company's seal shall be reproduced on the Securities.
If an Officer whose signature is on a Security no longer holds that
office at the time the Security is authenticated, the Security shall
nevertheless be valid.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities of any series executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with the Company Order shall authenticate and deliver such Securities. If the
form or terms of the Securities of the series have been established by or
pursuant to one or more Board Resolutions or supplemental indentures as
permitted by Sections 2.01 and 3.01, in authenticating such Securities, and
accepting the additional responsibilities under this Indenture in relation to
such Securities, the Trustee shall be entitled to receive, and (subject to
Section 7.01) shall be fully protected in relying upon, an Opinion of Counsel
stating,
(1) if the form of such Securities has been established by or pursuant
to Board Resolution or supplemental indenture, as the case may be, as
permitted
-25-
<PAGE>
by Section 2.01, that such form has been established in conformity with the
provisions of this Indenture;
(2) if the terms of such Securities have been established by or
pursuant to Board Resolution or supplemental indenture, as the case may be,
as permitted by Section 3.01, that such terms have been established in
conformity with the provisions of this Indenture; and
(3) that such Securities, when authenticated and delivered by the
Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute valid and
legally binding obligations of the Company enforceable in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee. The Trustee shall also be
entitled to receive an Officers' Certificate stating that immediately after the
authentication and delivery of such Securities, (a) the aggregate principal
amount of Securities Outstanding will not exceed the maximum aggregate principal
amount permitted to be Outstanding pursuant to authorization by the Board of
Directors and (b) the Company will not be in Default and no Event of Default
will have occurred. In addition, if the form and/or terms of such Securities
have been established pursuant to a supplemental indenture, the Trustee shall be
entitled to receive the Opinion of Counsel referred to in Section 9.06 hereof.
Notwithstanding the provisions of Section 3.01 and of the preceding
paragraph, if all Securities of a series are not to be originally issued at one
time, it shall not be necessary to deliver the Officers' Certificate otherwise
required pursuant to Section 3.01 or the Company Order and Opinion of Counsel
otherwise required pursuant to such preceding paragraph at or prior to the
authentication of each Security of such series if such documents are delivered
at or
-26-
<PAGE>
prior to the authentication upon original issuance of the first Security of such
series to be issued.
Each Security shall be dated the date of its authentication.
A Security shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Security has been authenticated under this Indenture.
Notwithstanding the foregoing, if any Security shall have been
authenticated and delivered hereunder but never issued and sold by the Company,
and the Company shall deliver such Security to the Trustee for cancellation as
provided in Section 3.10, for all purposes of this Indenture such Security shall
be deemed never to have been authenticated and delivered hereunder and shall
never be entitled to the benefits of this Indenture.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. An authenticating agent may authenticate
Securities whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company or
an Affiliate. The Trustee initially appoints Bankers Trust Company, a New York
banking corporation, as authenticating agent.
SECTION 3.04 REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Securities may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Securities may be presented for payment ("Paying Agent").
The Registrar shall keep a register of the Securities and of their transfer and
exchange. The Company may appoint one or more co-Registrars and one or more
additional Paying Agents. The term Paying Agent includes any additional Paying
Agent. The Company or any of its subsidiaries may act as Paying Agent,
Registrar or co-Registrar.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture that shall implement the provisions of this
Indenture that relate to such Agent. The Company shall give prompt written
notice
-27-
<PAGE>
to the Trustee of the name and address of any such Agent and any change in the
address of such Agent. If the Company fails to maintain a Registrar or Paying
Agent, the Trustee shall act as such. The Company initially appoints Bankers
Trust Company, a New York banking corporation, as Paying Agent and Registrar.
SECTION 3.05. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree that such Paying Agent will:
(a) hold all sums held by it for the payment of the principal of or
interest on the Securities in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed
of as herein provided;
(b) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities) in the making of any payment of
principal or interest; and
(c) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
Upon such payment over to the Trustee, the Paying Agent shall have no further
liability for such money.
SECTION 3.06. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders. If the Trustee is not the Registrar, the Company shall furnish or
cause to be furnished to the Trustee not less than ten days before each interest
payment date and at such other times as the Trustee may request in writing all
information in the possession or control of the Company or any Paying Agent as
to the names and addresses of the Holders, in such form and as of such date as
the Trustee may reasonably require.
-28-
<PAGE>
SECTION 3.07. TRANSFER AND EXCHANGE.
When Securities of any series are presented to the Registrar or a
co-Registrar with a request to register the transfer of, or to exchange them for
an equal principal amount of Securities of such series of other denominations,
the Registrar shall register the transfer or make the exchange if its
requirements for such transactions are met. To permit registrations of transfer
and exchanges of Securities of any series, the Company shall issue and the
Trustee shall authenticate Securities of such series at the Registrar's request.
No service charge shall be made for any registration of transfer or
exchange of Securities of any series, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration of transfer or exchange.
The Company shall not be required (i) to issue, register the transfer
of or exchange Securities of any series during a period beginning at the opening
of business 15 days before the day of any selection of Securities of such series
for redemption under Section 10.02 and ending at the close of business on the
day of such day of selection or (ii) to register the transfer of or exchange any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any such Security being redeemed in part.
The provisions of Clauses (1), (2), (3) and (4) below shall apply only
to Global Securities:
(1) Each Global Security authenticated under this Indenture shall be
registered in the name of the Depositary designated for such Global
Security or a nominee thereof and delivered to such Depositary or a nominee
thereof or custodian therefor, and each such Global Security shall
constitute a single Security for all purposes of this Indenture.
(2) Notwithstanding any other provision in this Indenture, no Global
Security may be exchanged in whole or in part for Securities registered,
and no transfer of a Global Security in whole or in part may be registered,
in the name of any Person other than the Depositary for such Global
Security or a nominee thereof unless (A) such Depositary (i) has notified
the Company that it
-29-
<PAGE>
is unwilling or unable to continue as Depositary for such Global Security
or (ii) has ceased to be a clearing agency registered under the Exchange
Act, (B) there shall have occurred and be continuing an Event of Default
with respect to the Securities represented by such Global Security or
(C) there shall exist such circumstances, if any, in addition to or in lieu
of the foregoing as have been specified for this purpose as contemplated by
Section 3.01.
(3) Subject to Clause (2) above, any exchange of a Global Security for
other Securities may be made in whole or in part, and all Securities issued
in exchange for a Global Security or any portion thereof shall be
registered in such names as the Depositary for such Global Security shall
direct.
(4) Every Security authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Security or any
portion thereof, whether pursuant to this Section, Section 3.08 or 3.09 or
otherwise, shall be authenticated and delivered in the form of, and shall
be, a Global Security, unless such Security is registered in the name of a
Person other than the Depositary for such Global Security or a nominee
thereof.
SECTION 3.08. REPLACEMENT SECURITIES.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
If the Holder of a Security of any series claims that the Security has
been lost, destroyed or wrongfully taken, the Company shall issue and the
Trustee shall authenticate a replacement Security of the same series if the
Trustee's requirements are met. If required by the Trustee or the Company, such
Holder shall provide an indemnity bond sufficient in the judgment of both the
Company and the Trustee to protect the Company, the Trustee, any Agent or any
authenticating agent from any loss which any of them may suffer if a Security is
replaced. The Company may charge the Holder for its expenses in replacing a
Security.
-30-
<PAGE>
Every replacement Security of any series issued pursuant to the
provisions of this Section 3.08 by virtue of the fact that any Security of such
series is destroyed, lost or stolen shall constitute an additional contractual
obligation of the Company, whether or not the destroyed, lost or stolen Security
shall be found at any time, and shall be entitled to all the benefits of this
Indenture equally and proportionally with any and all other Securities of such
series duly issued hereunder.
SECTION 3.09. TEMPORARY SECURITIES.
Until definitive Securities of any series are ready for delivery, the
Company may prepare and the Trustee shall authenticate temporary Securities of
such series. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. If temporary Securities of any series are
issued, without unreasonable delay, the Company shall prepare and deliver to the
Trustee, and the Trustee shall authenticate, definitive Securities of that
series in exchange for such temporary Securities.
SECTION 3.10. CANCELLATION.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for registration of transfer, exchange or
payment. The Trustee shall cancel all Securities surrendered for registration
of transfer, exchange, payment, replacement or cancellation and shall destroy
cancelled Securities and deliver a certificate of such destruction to the
Company. Subject to Section 3.08, the Company may not issue new Securities to
replace Securities that it has paid or that have been delivered to the Trustee
for cancellation.
SECTION 3.11. DEFAULTED INTEREST.
If the Company fails to make a payment of interest on the Securities
of any series on the date that payment of such interest is due, it shall pay
such interest thereafter in any lawful manner. It may pay such interest, plus
any interest payable on it, to the Persons who are Holders on a subsequent
special record date. The Company shall fix such special record date and payment
date. At least 5 days before such record date, the Company shall mail to
Holders a notice
-31-
<PAGE>
that states the record date, payment date, and amount of such interest to be
paid.
SECTION 3.12. PERSONS DEEMED OWNERS.
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee (including,
without limitation, the Registrar and the Paying Agent) may treat the Person in
whose name such Security is registered as the owner of such Security for the
purpose of receiving payment of principal of and any premium and any interest on
such Security and for all other purposes whatsoever, whether or not such
Security be overdue, and neither the Company, the Trustee nor any agent of the
Company or the Trustee (including, without limitation, the Registrar and the
Paying Agent) shall be affected by notice to the contrary.
SECTION 3.13. COMPUTATION OF INTEREST.
Except as otherwise specified as contemplated by Section 3.01 for
Securities of any series, interest on the Securities of each series shall be
computed on the basis of a 360-day year of twelve 30-day months.
ARTICLE 4
COVENANTS
The Company covenants and agrees, with respect to each series of
Securities issued hereunder, that it will comply with the covenants set forth in
this Article 4, as such covenants may be changed or supplemented with respect to
such series of Securities as contemplated by Section 3.01 hereof.
SECTION 4.01. PAYMENT OF SECURITIES.
The Company covenants and agrees for the benefit of each series of
Securities that it will duly and punctually pay the principal of and any premium
and interest on the Securities of that series in accordance with the terms of
the Securities and this Indenture. Principal, premium and interest shall be
considered paid on the date due if the Paying Agent holds on that date money
designated for and sufficient to pay all principal, premium and interest then
due.
-32-
<PAGE>
The Company shall pay interest on overdue principal of any series of
Securities at the rate borne by such series of Securities; it shall pay interest
on overdue installments of interest on any series of Securities at the same rate
to the extent permitted by law.
SECTION 4.02. LIMITATION ON RESTRICTED PAYMENTS.
(a) The Company shall not, nor will it permit any of its Subsidiaries
or Unrestricted Subsidiaries to, make any Restricted Payment if, after giving
effect thereto, with respect to any particular series of Securities issued
hereunder, (i) any Default shall have occurred and be continuing or (ii) the
Company could not incur at least $1.00 of additional Indebtedness under Section
4.03(a) hereof or (iii) the aggregate of such payments made by the Company and
its Subsidiaries and Unrestricted Subsidiaries subsequent to the date of
issuance of such series of Securities would exceed the sum of (x) 50% (or minus
100% in the event of a deficit) of aggregate Consolidated Net Income of the
Company for the period commencing on the date established by Board Resolution
for this purpose as permitted by Section 3.01 and ending on the last day of the
fiscal quarter immediately preceding the date of such Restricted Payment, and
(y) the aggregate Net Proceeds, including cash and the Fair Market Value of
Property other than cash, received by the Company subsequent to the date of
issuance of such series of Securities from capital contributions from any of its
stockholders or from the issuance or sale (other than to a Subsidiary or
Unrestricted Subsidiary) subsequent to the date of issuance of such series of
Securities of shares of its Capital Stock of any class, other than Redeemable
Stock (or rights or warrants to subscribe for or purchase shares of such Capital
Stock, other than Redeemable Stock) or of any convertible securities or debt
obligations which have been converted into, exchanged for or satisfied by the
issuance of shares of Capital Stock of any class, other than Redeemable Stock.
For purposes of computing the amount in clause (iii) above, the determination of
Consolidated Net Income of the Company for any fiscal period ending prior to the
date established by Board Resolution for this purpose as permitted by Section
3.01 shall exclude the deduction of an amount equal to the aggregate charges
(net of applicable tax) incurred by the Company related to the repurchase or
retirement of Indebtedness prior to its stated maturity.
-33-
<PAGE>
(b) The provisions of this Section 4.02 shall not prevent the Company
from paying a dividend on Capital Stock of any class within 60 days after the
declaration thereof if, on the date of declaration, the Company could have paid
such dividend in compliance with the other provisions of this Section 4.02.
With respect to any particular series of Securities issued hereunder, the
aggregate amount of dividends paid by the Company pursuant to this subsection
subsequent to the date of issuance of such series of Securities shall be
included in all subsequent computations under this Section 4.02.
(c) The provisions of this Section 4.02 shall also not prevent the
Company from redeeming or repurchasing shares of its Capital Stock (1) solely in
exchange for other shares of Capital Stock (other than Redeemable Stock), (2) to
eliminate fractional shares, (3) in connection with repurchase provisions under
employee stock option or stock purchase agreements or other agreements to
compensate management employees of the Company or (4) pursuant to a court order.
With respect to any particular series of Securities issued hereunder, the
aggregate amount of consideration paid by the Company pursuant to this
subsection subsequent to the date of issuance of such series of Securities shall
be included in all subsequent computations under this Section 4.02. The
aggregate consideration paid pursuant to subclause (2) shall not exceed $250,000
in any fiscal year.
SECTION 4.03. LIMITATION ON INDEBTEDNESS.
(a) The Company shall not, nor will it permit any of its Subsidiaries
to, create, incur, assume, Guarantee or otherwise become liable with respect to,
or become responsible for the payment of, any Indebtedness unless, after giving
effect thereto, the Consolidated Interest Coverage Ratio of the Company is
greater than 1.7 to 1.
(b) Notwithstanding the foregoing, the Company and its Subsidiaries
may incur, create, assume, or Guarantee or otherwise become liable with respect
to, any or all of the following:
(i) with respect to any particular series of Securities issued
hereunder, Indebtedness evidenced by securities issued at or prior to the
issuance of such series of Securities pursuant to this Indenture or
pursuant to the indenture between the Company and First
-34-
<PAGE>
Trust of California, National Association, as Trustee, or such other
trustee as may be selected by the Company, relating to senior subordinated
debt securities of the Company and filed as an exhibit to the Company's
Registration Statement on Form S-3 (Registration No. 33-51213) declared
effective on December 8, 1993, as amended or modified from time to time
(the "Senior Subordinated Indenture");
(ii) Indebtedness evidenced by the 10 1/4% Senior Notes due 2002,
Indebtedness evidenced by the 10 3/8% Senior Notes due 2004, Indebtedness
evidenced by the 11 1/2% Senior Notes due 2001, Indebtedness evidenced by
the 13 3/4% Senior Subordinated Notes due 1999 and Indebtedness represented
by the 9 5/8% Senior Subordinated Notes due 2005;
(iii) Indebtedness in an aggregate amount not to exceed the sum of
65% of the total inventory of the Company and its Subsidiaries (calculated
on a "first-in, first-out" basis) and 85% of the aggregate of the total
accounts receivable of the Company and its Subsidiaries, in each case
determined in accordance with generally accepted accounting principles;
(iv) Indebtedness the proceeds of which are used to refinance (w) all
or a portion of the Securities of any series issued pursuant to this
Indenture, (x) all or a portion of the 10 1/4% Senior Notes due 2002, the
10 3/8% Senior Notes due 2004 or the 11 1/2% Senior Notes due 2001, (y) any
Indebtedness of its Subsidiaries and any other Indebtedness of the Company
that is PARI PASSU with the Securities (other than Indebtedness incurred,
created, assumed or Guaranteed under clause (iii) above) or (z) successor
or replacement Indebtedness, in each case in a principal amount not to
exceed the principal amount so refinanced (or, if such Indebtedness
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration of the maturity thereof, in an
amount not greater than such lesser amount) plus any prepayment penalties
and premiums (including the contractual premiums and any premium reasonably
determined by the Company as necessary to accomplish such refinancing by
means of a tender offer or privately negotiated repurchases), accrued and
unpaid interest on the Indebtedness so refinanced, plus customary fees,
expenses and costs related to the incurrence of such refinancing
Indebtedness, PROVIDED that, in the case of
-35-
<PAGE>
this clause (iv), (1) with respect to any particular series of Securities
issued hereunder, if the Securities of such series are refinanced in part,
such new Indebtedness is expressly made PARI PASSU or subordinate in right
of payment to the remaining Securities of such series, and (2) if the
Indebtedness to be refinanced is PARI PASSU in right of payment to the
Securities issued pursuant to this Indenture, such new Indebtedness is
expressly made PARI PASSU or subordinate in right of payment to the
Securities issued pursuant to this Indenture;
(v) Indebtedness the proceeds of which are used to refinance
Subordinated Debt or to refinance any Indebtedness evidenced by securities
issued pursuant to the Senior Subordinated Indenture, in each case in a
principal amount not to exceed the principal amount so refinanced (or, if
such Indebtedness provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration of the
maturity thereof, in an amount not greater than such lesser amount) plus
any prepayment penalties and premiums (including the contractual premiums
and any premium reasonably determined by the Company as necessary to
accomplish such refinancing by means of a tender offer or privately
negotiated repurchases), accrued and unpaid interest on the Indebtedness so
refinanced, plus customary fees, expenses and costs related to the
incurrence of such refinancing Indebtedness, PROVIDED that such new
Indebtedness (A) is expressly made subordinate in right of payment to the
Securities at least to the extent that the Indebtedness to be refinanced is
subordinate in right of payment to the Securities, (B) with respect to any
particular series of Securities issued hereunder, does not mature prior to
the final scheduled maturity date of such series of Securities and (C) with
respect to any particular series of Securities issued hereunder, has an
Average Life equal to or greater than the remaining Average Life of such
series of Securities;
(vi) with respect to any particular series of Securities issued
hereunder, Indebtedness of the Company and its Subsidiaries remaining
outstanding immediately after the date of issuance of such series of
Securities;
(vii) Indebtedness of the Company to a Subsidiary of the Company or
Indebtedness of a Subsidiary of the
-36-
<PAGE>
Company to the Company or to another Subsidiary of the Company;
(viii) Indebtedness incurred in connection with the refurbishment,
improvement, construction or acquisition (whether by acquisition of stock,
assets or otherwise) of any Property or Properties of the Company or a
Subsidiary of the Company that constitute a part of the then present
business of the Company or any Subsidiary of the Company (or incurred
within twelve months of any such acquisition or the completion of such
refurbishment, improvement or construction), PROVIDED that (a)(1) such
Indebtedness, together with any other Indebtedness incurred during the
preceding twelve-month period in reliance upon the exception of this clause
(viii), does not exceed, in the aggregate, 3% of net sales and service fees
of the Company and its Subsidiaries during the preceding twelve-month
period on a consolidated basis and (2) such Indebtedness, together with all
then outstanding Indebtedness incurred in reliance upon the exception of
this clause (viii), does not exceed, in the aggregate, 3% of the aggregate
net sales and service fees of the Company and its Subsidiaries during the
preceding thirty-six months on a consolidated basis, in each case as such
amounts may be adjusted as set forth below, or (b) such Indebtedness does
not exceed the amount of proceeds received by the Company or any of its
Subsidiaries from insurance policies maintained by the Company or any
Subsidiary in respect of such Property or Properties;
(ix) Indebtedness consisting of Guarantees by the Company or a
Subsidiary of the Company of (A) other Indebtedness of the Company or any
such Subsidiary, PROVIDED that such other Indebtedness is otherwise
permitted under this Section 4.03 and (B) obligations of customers of the
franchise or wholesale business of the Company or a Subsidiary of the
Company which Guarantees are in the ordinary course of business consistent
with the past practice of the Company or its Subsidiaries;
(x) Indebtedness created by a Lien to which Property owned or held by
the Company or a Subsidiary of the Company is subject, PROVIDED that the
Indebtedness secured is Indebtedness of the Company or a Subsidiary of the
Company which is otherwise permitted under this Section 4.03;
-37-
<PAGE>
(xi) Indebtedness incurred in connection with a repurchase of the
Securities of any series issued pursuant to this Indenture as provided in
Section 5.01 hereof and in connection with the repurchase of any notes of
the Company which require the Company to repurchase such notes in the event
of certain merger, consolidation or change of control transactions, in an
aggregate principal amount not to exceed the aggregate repayment price
(equal to the repurchase price paid, including premium and accrued interest
thereon through the date of repurchase) of such Securities and such other
notes of the Company plus the amount of fees and expenses associated with
the incurrence of such Indebtedness, PROVIDED that to the extent any such
notes of the Company which are required to be so repurchased constitute
Subordinated Debt, any new Indebtedness incurred in connection with the
repurchase of such notes (a) is expressly made subordinate to the
Securities issued hereunder at least to the extent that such notes are
subordinate to the Securities issued hereunder, (b) with respect to any
particular series of Securities issued hereunder, does not mature prior to
the final scheduled maturity date of such series of Securities and (c) with
respect to any particular series of Securities issued hereunder, has an
Average Life equal to or greater than the remaining Average Life of such
series of Securities;
(xii) Indebtedness under Interest Swap Obligations, PROVIDED that
such Interest Swap Obligations are related to payment obligations on
Indebtedness otherwise permitted under this Section 4.03 and, in the
aggregate, do not relate to a principal amount of Indebtedness in excess of
the Indebtedness permitted under this Section 4.03;
(xiii) commercial letters of credit and standby letters of credit
incurred in the ordinary course of business by the Company or its
Subsidiaries;
(xiv) Indebtedness represented by industrial revenue or development
bonds, PROVIDED that the aggregate amount of Indebtedness incurred in
reliance upon the exception of this clause (xiv) shall not exceed at any
one time an aggregate principal amount outstanding of $25 million;
-38-
<PAGE>
(xv) Capitalized Lease Obligations relating to Property used in the
business of the Company or its Subsidiaries;
(xvi) Indebtedness incurred in respect of performance bonds and
Guarantees and completion Guarantees incurred in the ordinary course of
business and refinancings thereof; and
(xvii) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business, PROVIDED that such Indebtedness
is extinguished within five business days of its incurrence.
The aggregate amounts of Indebtedness that the Company is permitted to incur
pursuant to clause (viii) above shall be reduced by the difference between (1)
the aggregate principal amount of any mortgages that the Company is deemed to
have entered into in connection with any Sale and Leaseback Transaction that the
Company is permitted to enter into under clause (i) of Section 4.05 and (2) the
aggregate principal amount of any Senior Indebtedness that is repaid with the
Net Proceeds of any Sale and Leaseback Transactions that are entered into within
twelve months of the acquisition, or completion of construction or
refurbishment, of the Property that is the subject of any such transaction.
SECTION 4.04. LIMITATION ON LIENS.
(a) The Company shall not, nor will it permit any of its Subsidiaries
to, create, incur, assume or permit to exist any Lien on or with respect to any
Property or assets of the Company or any such Subsidiary or any interest therein
or any income or profits therefrom.
(b) Notwithstanding the foregoing, the Company and its Subsidiaries
may create, incur, assume or permit to exist the following Liens:
(i) with respect to any particular series of Securities issued
hereunder, any Lien existing as of the date of issuance of such series of
Securities;
(ii) any Lien on the Company's or a Subsidiary's accounts receivable,
inventories, franchise agreements,
-39-
<PAGE>
proprietary rights and related assets securing the Company's obligations
under the Revolving Credit Facility, as to which the Holders agree that if
any such Lien is invalidated, avoided or otherwise deemed unenforceable
with respect to any collateral securing such obligations, any payment that
would be made to the Holders from or attributable to the proceeds of such
collateral (but not any other payments) shall nevertheless be paid to the
lenders under the Revolving Credit Facility instead of to the Holders until
all indebtedness under the Revolving Credit Facility is paid in full;
(iii) any Lien arising in the ordinary course of business, other than
in connection with Indebtedness for borrowed money, such as (A) Liens to
secure payments of workers' compensation, unemployment insurance, old age
pensions or other social security or retirement benefits, or to secure the
performance of bids, tenders, contracts (other than for the payment of
money) or to secure public or statutory obligations of the Company, or any
Subsidiary, or to secure surety bonds to which the Company or any
Subsidiary is a party and (B) materialmen's, mechanics', workmen's,
repairmen's, warehousemen's, landlords', vendors' or carriers' Liens
created by law, or deposits or pledges arising and continuing in the
ordinary course of business to obtain the release of any such Liens;
(iv) any Lien on the Company's or a Subsidiary's accounts receivable,
inventories, franchise agreements, proprietary rights and related assets
and proceeds of any of the foregoing, or deposit accounts, credits,
balances with, and money and securities in transit to, any financial
institution or any books and records relating to any of the foregoing
incurred to secure Indebtedness permitted under Section 4.03(b)(iii);
(v) with respect to any particular series of Securities issued
hereunder, any Lien on Property acquired by the Company or any Subsidiary
after the date of issuance of such series of Securities created solely to
secure Indebtedness incurred to finance such acquisition or assumed in
connection with such acquisition, whether by acquisition of stock, assets
or otherwise (or any Lien entered into in connection with Indebtedness that
is permitted under Section
-40-
<PAGE>
4.03(b)(viii)), PROVIDED that in each case such acquisition does not
constitute a Material Acquisition;
(vi) any Lien on Property acquired by the Company or any Subsidiary
which constitutes a Material Acquisition created solely to secure
Indebtedness incurred to finance such Material Acquisition or assumed in
connection with such Material Acquisition, PROVIDED that after giving
effect to such Indebtedness the Consolidated Interest Coverage Ratio is
greater than 1.7 to 1;
(vii) any Lien on any asset of the Company or any Subsidiary created
solely to secure Indebtedness incurred to finance the refurbishment,
improvement, construction or acquisition (whether by acquisition of stock,
assets or otherwise) of such asset (or incurred within twelve months of any
such acquisition or the completion of such refurbishment, improvement or
construction) or relating to Indebtedness assumed in connection with such
acquisition, PROVIDED that such Lien secures Indebtedness permitted under
Section 4.03(b)(viii);
(viii) any Lien created in connection with a Capitalized Lease
Obligation that the Company or a Subsidiary is permitted to enter into
under the terms of this Indenture, PROVIDED that such Capitalized Lease
Obligation relates to Property used in the business of the Company or a
Subsidiary;
(ix) any Lien arising out of judgments or awards against the Company
or any Subsidiary with respect to which the Company or such Subsidiary
shall in good faith be prosecuting an appeal or proceedings for review or
Liens incurred by the Company or a Subsidiary for the purpose of obtaining
a stay or discharge in the course of any legal proceeding to which the
Company or such Subsidiary is a party;
(x) any Lien for taxes not yet subject to penalties for non-payment
or contested in good faith in accordance with Section 4.15 or minor survey
exceptions, or minor encumbrances, easements or reservations of, or rights
of others for, rights of way, sewers, electric lines, telegraph and
telephone lines and other similar purposes, or zoning or other restrictions
as to the use of real properties, which encumbrances, easements,
reservations, rights and restrictions do not, in the
-41-
<PAGE>
aggregate, have a material negative economic effect on the Company or any
Subsidiary or materially impair the ability of the Company or any
Subsidiary to conduct its operations; and
(xi) any Lien extending, renewing or replacing any Lien permitted by
clause (i), (ii), (iv), (v), (vi), (vii) or (viii) of this Section 4.04.
In the case of Liens permitted under clauses (i), (iv), (v), (vi), (vii), (viii)
and (xi), with respect to any particular series of Securities issued hereunder,
such Liens may relate solely to the Property (including any improvements
thereon) subject thereto as of the date of issuance of such series of Securities
or the date such Lien was incurred, as the case may be, and may secure the
payment only of the Indebtedness so secured as of such date.
SECTION 4.05. LIMITATION ON SALE AND LEASEBACK TRANSACTIONS.
The Company shall not, and shall not permit any Subsidiary to, enter
into, assume, Guarantee or otherwise become liable with respect to any Sale and
Leaseback Transaction, PROVIDED that this Section 4.05 shall not prohibit: (i) a
Sale and Leaseback Transaction that, had such Sale and Leaseback Transaction
been structured as a mortgage rather than as a Sale and Leaseback Transaction,
the Company would have been permitted to enter into such transaction under
Sections 4.03 and 4.04(b)(viii), (ii) with respect to any particular series of
Securities issued hereunder, a Sale and Leaseback Transaction entered into prior
to the date of issuance of such series of Securities, (iii) a Sale and Leaseback
Transaction the proceeds of which are applied to repayment of Other Senior
Indebtedness, and (iv) a Sale and Leaseback Transaction if within 90 days of
entering into such arrangement, the Company makes a PRO RATA offer or PRO RATA
offers to all Holders of any one or more series of Securities issued hereunder
as may be selected by the Company to repurchase such Securities at 100% of their
principal amount, plus accrued and unpaid interest through the date of
repurchase and in an aggregate amount equal to (x) the greater of the Net
Proceeds of the sale of the Property leased pursuant to such Sale and Leaseback
Transaction or the Fair Market Value of the Property so leased at the time of
entering into such Sale and Leaseback Transaction less (y) the amount of Net
Proceeds which are applied to repayment of Other Senior Indebtedness.
-42-
<PAGE>
SECTION 4.06. LIMITATION ON ASSET SALES.
(a) The Company shall not, and shall not permit any Subsidiary to,
consummate any Asset Sale unless (A) such sale is for Fair Market Value and (B)
at least 75% of the Net Proceeds thereof received by the Company or such
Subsidiary is in the form of cash; PROVIDED, that for purposes of this Section
4.06, securities received by the Company or any Subsidiary from such transferee
that are promptly converted by the Company or such Subsidiary into cash shall be
deemed to be cash; and PROVIDED FURTHER, that notwithstanding any other
provision in this paragraph, (a) the Company or any Subsidiary may consummate
Asset Sales for which it receives aggregate Net Proceeds from the applicable
purchaser or purchasers in an amount not to exceed $25,000,000 in connection
with any and all such Assets Sales without regard to the foregoing limitation on
receiving a specified percentage of the Net Proceeds in cash and (b) to the
extent that the Company has not reinvested such Net Proceeds in Additional
Assets or used such Net Proceeds to repay Other Senior Indebtedness within
twelve months following the consummation of the Asset Sale (or in the case of
Net Proceeds in the form of securities rather than cash, within twelve months
after such securities become cash), the Company shall either apply such Net
Proceeds (or any portion thereof) to the repayment of Other Senior Indebtedness
or apply such Net Proceeds (or the remaining portion thereof) in accordance with
the following sentence. If no Other Senior Indebtedness is outstanding at such
time or the Company does not apply any or applies only a portion of such Net
Proceeds to the repayment of Other Senior Indebtedness or the application of
such Net Proceeds results in the payment of all outstanding Other Senior
Indebtedness, then such Net Proceeds or any remaining portion thereof, in each
case not so applied to the repayment of Other Senior Indebtedness, shall be
applied to a PRO RATA offer or PRO RATA offers to all Holders of any one or more
series of Securities issued hereunder as may be selected by the Company to
repurchase such Securities at 100% of their principal amount, plus accrued and
unpaid interest through the date of repurchase.
Notwithstanding the foregoing, in the event the Net Proceeds resulting
from any Asset Sale, after giving effect to any related repayment of Other
Senior Indebtedness, are less than $10,000,000, the application of such Net
Proceeds to a PRO RATA offer or PRO RATA offers to all Holders of any one or
more series of Securities issued hereunder as may be selected by the Company to
repurchase such Securities at 100%
-43-
<PAGE>
of their principal amount, plus accrued and unpaid interest, may be deferred
until such time as such Net Proceeds, plus the aggregate amount of Net Proceeds
resulting from any subsequent Asset Sale or Asset Sales not otherwise reinvested
in Additional Assets or applied to repay Other Senior Indebtedness as required
are at least equal to $10,000,000, at which time the Company shall apply all
such Net Proceeds to a PRO RATA offer or PRO RATA offers to all Holders of any
one or more series of Securities issued hereunder as may be selected by the
Company to repurchase such Securities at 100% of their principal amount, plus
accrued and unpaid interest through the date of repurchase.
(b) Pending application thereof in accordance with Section 4.06(a),
the Company shall either apply the Net Proceeds of any Asset Sale to repay
temporarily Other Senior Indebtedness or invest such Net Proceeds in Qualified
Investments.
SECTION 4.07. LIMITATION ON INVESTMENTS.
The Company shall not, and shall not permit any of its Subsidiaries
to, make any Investment in (i) any Unrestricted Subsidiary or (ii) an Affiliate
(other than a Wholly Owned Subsidiary) that is not a Control Affiliate unless,
as determined at the date such Investment is made and after giving effect
thereto, (a) the Company could incur at least $1.00 of additional Indebtedness
under Section 4.03(a), and (b) there would not exist any Default. The Company
may not, and may not permit any Subsidiary or Unrestricted Subsidiary to, make
any Investment in any Control Affiliate other than in compliance with Section
4.02. The determination of whether the Company or any of its Subsidiaries may
make an Investment under this Section shall be made at the earliest of the date
such Investment is made, the date such Investment is committed to be made by the
Company or any of its Subsidiaries or, if such Investment is in respect of an
acquisition, the Transaction Date for such acquisition.
SECTION 4.08. SEC REPORTS.
(a) The Company shall file with the Trustee within 5 days after it
files them with the SEC copies of the annual reports and of the information,
documents and other reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) which the Company files with
the SEC pursuant to Section 13 or 15(d) of the
-44-
<PAGE>
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company
shall continue to file with the SEC and the Trustee on the same timely basis
such reports, information and other documents as the Company would be required
to file with the SEC as if the Company were subject to the requirements of such
Section 13 or 15(d) of the Exchange Act notwithstanding that the Company may no
longer be subject to Section 13 or 15(d) of the Exchange Act and that the
Company would be entitled not to file such reports, information and other
documents with the SEC. The Company also shall comply with the other provisions
of TIA SECTION 314(a).
(b) So long as any of the Securities of any series remain
outstanding, the Company shall cause any annual report to stockholders and any
quarterly or other financial reports furnished by it to stockholders, excluding
internal management reports and distributions to stockholders in their capacity
as directors or officers of the Company, to be filed with the Trustee and mailed
to the Holders at their addresses appearing in the register of Securities of
each series maintained by the Registrar. If the Company is not required to
furnish annual or quarterly reports to its stockholders pursuant to the Exchange
Act, the Company shall cause its consolidated financial statements, including
any notes thereto, and a "Management's Discussion and Analysis of Financial
Condition and Results of Operations", comparable to that which would have been
required to appear in annual or quarterly reports filed under Section 13 or
15(d) of the Exchange Act to be so filed with the Trustee and mailed to the
Holders at their addresses appearing in the register of Securities of each
series maintained by the Registrar within 100 days after the end of each fiscal
year and within 60 days after the end of each of the Company's first three
fiscal quarters in each fiscal year.
SECTION 4.09. LIMITATION ON PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any Subsidiary to, create
or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction which encumbrance or restriction by its terms
expressly restricts the ability of such Subsidiary to (i) pay dividends or make
any other distributions on such Subsidiary's Capital Stock or pay any
Indebtedness owed to the Company or any Subsidiary, (ii) make any loans or
advances to the Company or any Subsidiary or (iii) transfer any of its Property
to the Company or any Subsidiary, other than, with respect to
-45-
<PAGE>
clauses (ii) and (iii), encumbrances or restrictions contained in any agreement
or instrument (a) with respect to any particular series of Securities issued
hereunder, relating to any Indebtedness of the Company or any Subsidiary
existing on the date of issuance of such series of Securities; (b) with respect
to any particular series of Securities issued hereunder, relating to any
Property acquired by the Company or any of its Subsidiaries after the date of
issuance of such series of Securities, PROVIDED that such encumbrance or
restriction relates only to the Property which is acquired and, in the case of
any encumbrance or restriction that constitutes a Lien, the Company would be
permitted to incur the Lien under Section 4.04; (c) relating to (x) any
industrial revenue or development bonds, (y) any obligation of the Company or
any Subsidiary incurred in the ordinary course of business to pay the purchase
price of Property acquired by the Company or such Subsidiary, and (z) any lease
of Property by the Company or such Subsidiary in the ordinary course of
business, PROVIDED that such encumbrance or restriction relates only to the
Property which is the subject of such industrial revenue or development bond,
such Property purchased or such Property leased and any such lease, as the case
may be; (d) relating to any Indebtedness of any Subsidiary at the date of
acquisition of such Subsidiary by the Company or any Subsidiary of the Company,
PROVIDED that such Indebtedness was not incurred in connection with or in
anticipation of such acquisition, and PROVIDED FURTHER that the Company would be
permitted to incur any Lien securing such Indebtedness under Section 4.04; and
(e) replacing or refinancing agreements or instruments referred to in clauses
(a), (b) and (c), PROVIDED that the provisions relating to such encumbrance or
restriction contained in any such replacement or refinancing agreement or
instrument are no more restrictive than the provisions relating to such
encumbrance or restriction contained in such original agreement or instrument.
SECTION 4.10. LIMITATION ON ISSUANCE OF INDEBTEDNESS AND PREFERRED STOCK BY
SUBSIDIARIES.
The Company shall not permit any Subsidiary to create, incur, assume
or Guarantee any Indebtedness or issue any preferred or preference stock, except
for (i) with respect to any particular series of Securities issued hereunder,
preferred stock outstanding on the date of issuance of such series of
Securities, (ii) Indebtedness permitted under Section 4.03, (iii) preferred
stock issued to and held by the Company or a Wholly Owned Subsidiary (but
-46-
<PAGE>
only so long as held or owned by the Company or a Wholly Owned Subsidiary) and
(iv) preferred stock issued by a Person prior to the time (A) such Person
becomes a Subsidiary, (B) such Person merges with or into a Subsidiary or (C) a
Subsidiary merges with or into such Person, PROVIDED that such preferred stock
was not issued or incurred by such Person in anticipation of the type of
transaction contemplated by subclauses (A), (B) or (C).
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
With respect to any particular series of Securities issued hereunder,
the Company shall not, and shall not permit any Subsidiary to, following the
date of issuance of such series of Securities, enter into any transaction
(including, without limitation, the purchase, sale or exchange of Property, the
making of any Investment, the giving of any Guarantee or the rendering of any
service) with any Affiliate (other than the Company or a Subsidiary) unless (i)
the Board of Directors determines, in its reasonable good faith judgment, that
such transaction is in the best interests of the Company or such Subsidiary
based on full disclosure of all relevant facts and circumstances and (ii) such
transaction is on terms no less favorable to the Company or such Subsidiary than
those that could be obtained in a comparable arms' length transaction with an
entity that is not an Affiliate.
SECTION 4.12. RESTRICTIONS ON BECOMING AN INVESTMENT COMPANY.
The Company shall not become an investment company within the meaning
of the Investment Company Act of 1940 as such statute and the regulations
thereunder and any successor statute or regulations thereto may from time to
time be in effect.
SECTION 4.13. CONTINUED EXISTENCE AND RIGHTS.
Subject to Article 5, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence as
a corporation, and its rights and franchises.
SECTION 4.14. MAINTENANCE OF PROPERTIES AND OTHER MATTERS.
The Company shall, and shall cause each of its Subsidiaries to,
maintain its Properties in good working
-47-
<PAGE>
order and condition and make all necessary repairs, renewals, replacements,
additions, betterments and improvements thereto; PROVIDED, HOWEVER, that nothing
in this Section 4.14 shall prevent the Company or any of its Subsidiaries from
discontinuing the operation and maintenance of any of its Properties, if such
discontinuance is, in the judgment of the Company or the Subsidiary, as the case
may be, desirable in the conduct of its respective business and not
disadvantageous in any material respect to the Holders.
The Company will insure and keep insured, and will cause each
Subsidiary to insure and keep insured, with financially sound and reputable
insurers, so much of their respective Properties and in such amounts as is
usually and customarily insured by companies engaged in a similar business with
respect to Properties of a similar character against loss by fire and the
extended coverage perils. None of the Company or any of its Subsidiaries will
maintain a system of self insurance in lieu of or in combination with the
foregoing, PROVIDED that deductibles under the insurance policy or policies of
the Company and its Subsidiaries shall not be considered to be self insurance as
long as such deductibles accord with financially sound and approved practices of
companies owning or operating Properties of a similar character and maintaining
similar insurance coverage. The Trustee shall not be required to see that such
insurance is effected or maintained.
The Company will keep, and will cause each Subsidiary to keep, proper
books of record and account in which full and correct entries will be made of
all its business transactions, and will reflect in its financial statements
adequate accruals and appropriations to reserves. The Company shall cause its
books of record and account and those of each of its Subsidiaries to be
examined, either on a consolidated or individual basis, by one or more firms of
independent public accountants not less frequently than annually and shall not
make any change in the accounting principles applied to its financial statements
not concurred in by such firm or firms. The Company shall prepare its financial
statements in accordance with generally accepted accounting principles.
The Company shall, and shall cause each of its Subsidiaries to, comply
with all statutes, laws, ordinances, or government rules and regulations to
which it is subject and to obtain any licenses, permits, franchises or other
governmental authorizations necessary to the ownership or
-48-
<PAGE>
operation of its Properties or to the conduct of its business, if non-compliance
or failure to obtain materially adversely affects or, so far as the Company can
at the time foresee, is reasonably likely to materially adversely affect the
business, earnings, Properties or condition, financial or other, of the Company
and its Subsidiaries taken as a whole.
SECTION 4.15. TAXES AND CLAIMS.
The Company shall, and shall cause each of its Subsidiaries to, pay
(or, if appropriate, withhold and pay over) prior to delinquency:
(i) all taxes, assessments and governmental charges or levies imposed
upon it or its Property (or required by it to withhold and pay over), and
(ii) all claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like Persons which if unpaid might result
in the creation of a Lien upon its Properties;
PROVIDED that items of the foregoing description need not be paid while being
contested in good faith (and by appropriate proceedings in the opinion of the
Company's independent counsel in any case involving more than $500,000); and
PROVIDED FURTHER that adequate book reserves (in the opinion of the Company's
independent accountants) have been established with respect thereto; and
PROVIDED FURTHER that the owning company's title to, and its right to use, its
Property is not materially adversely affected thereby.
SECTION 4.16. USURY LAWS.
The Company will not voluntarily claim and will actively resist any
attempts to claim the benefit of any usury laws against the Holders of the
Securities of any series issued pursuant to this Indenture.
SECTION 4.17. MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST.
If the Company shall at any time act as its own Paying Agent with
respect to any series of Securities, it will, on or before each due date of the
principal of or interest on the Securities of that series, segregate and hold in
trust for the benefit of the Persons entitled thereto a sum sufficient to pay
the principal or interest so becoming
-49-
<PAGE>
due until such sum shall be paid to such Persons or otherwise disposed of as
herein provided, and will promptly notify the Trustee of its action or failure
so to act.
Whenever the Company shall have one or more Paying Agents with respect
to any series of Securities, it will, on or prior to each date for the payment
of the principal of or interest on any Securities of that series, deposit with a
Paying Agent a sum sufficient to pay the principal or interest so becoming due,
such sum to be held in trust for the benefit of the Persons entitled to such
payments; and, unless such Paying Agent is the Trustee, the Company will
promptly notify the Trustee of its action or failure so to act.
For the purpose of obtaining the satisfaction and discharge of this
Indenture or for any other purpose, the Company may at any time pay, or direct
any Paying Agent to pay, to the Trustee all sums held in trust by the Company or
such Paying Agent, such sums to be held by the Trustee upon the same trusts as
those upon which such sums were held by the Company or such Paying Agent; and,
upon such payment by the Company or any Paying Agent to the Trustee, the Company
or such Paying Agent, as the case may be, shall be released from all further
liability with respect to such money.
SECTION 4.18. COMPLIANCE CERTIFICATE.
The Company shall deliver to the Trustee for each series of Securities
issued hereunder, within 120 days after the end of each fiscal year of the
Company, an Officers' Certificate, complying with Section 314(a)(4) of the TIA,
stating that a review of the activities of the Company and its Subsidiaries
during the preceding fiscal year has been made under the supervision of the
signing Officers with a view to determining whether the Company has kept,
observed, performed and fulfilled its obligations under this Indenture and such
series of Securities, and further stating, as to each such Officer signing such
certificate, that to the best of his knowledge the Company has kept, observed,
performed and fulfilled each and every covenant contained in this Indenture and
such series of Securities and is not in default in the performance or observance
of any of the terms, provisions and conditions hereof or thereof (or, if a
Default or Event of Default shall have occurred, describing all such Defaults or
Events of Defaults of which he may have knowledge).
-50-
<PAGE>
The Company will, so long as any of the Securities of any series are
Outstanding, deliver to the Trustee for each series of Securities issued
hereunder, forthwith upon becoming aware of any Default, Event of Default or
default in the performance of any covenant, agreement or condition contained in
this Indenture or such series of Securities, an Officers' Certificate specifying
such Default or Event of Default.
ARTICLE 5
SUCCESSORS; CHANGE OF CONTROL; OPTIONAL PREPAYMENT
SECTION 5.01. WHEN COMPANY MAY MERGE, ETC.; CHANGE OF CONTROL; HOLDERS'
RIGHT OF OPTIONAL PREPAYMENT.
(a) The Company shall not consolidate or merge with or into, or
transfer, sell or lease all or substantially all of its Property to, any Person
(except a Wholly Owned Subsidiary of the Company which is a United States
corporation with a positive consolidated net worth, PROVIDED that following and
after giving effect to such consolidation, merger, transfer, sale or lease there
exists no Default or Event of Default and such Wholly Owned Subsidiary
unconditionally assumes by supplemental indenture all the Company's obligations
under this Indenture) unless:
(i) (A) the Company is the Surviving Corporation in the case of a
consolidation or merger and its Voting Stock is not changed into or
exchanged for cash, securities or other Property of another corporation or
(B) the corporation formed by such consolidation or merger or to which such
transfer, sale or lease occurs is a United States corporation and such
corporation unconditionally assumes by supplemental indenture all of the
obligations of the Company under this Indenture, and
(ii) immediately after giving effect to such transaction no Default
or Event of Default exists.
If immediately after and giving effect to any such consolidation, merger,
transfer, sale or lease permitted under the foregoing provision (other than a
consolidation or merger of the Company with, or a transfer, sale or lease by the
Company of all or substantially all of its Property to, a Wholly Owned
Subsidiary of the Company which is a United
-51-
<PAGE>
States corporation with a positive consolidated net worth, as permitted under
Section 5.01(a) above) and any financings or other transactions in connection
therewith the Consolidated Interest Coverage Ratio of the Surviving Corporation
is less than 1.7 to 1, each Holder of any series of Securities issued pursuant
to this Indenture shall have the right, pursuant to the procedures of Section
5.01(c), to require the Surviving Corporation to repurchase any Securities held
by such Holder, in whole but not in part, at a purchase price in cash equal to
101% of its principal amount plus accrued interest, promptly following the
consummation of any such merger, consolidation, transfer, sale or lease and the
Indebtedness of the Surviving Corporation, after giving effect to such
transaction and any financing or other transactions in connection therewith,
shall not be deemed to have been incurred in violation of any covenant of this
Indenture.
(b) Upon the occurrence of a Change of Control (the "Change of
Control Date") with respect to the Company, each Holder of any series of
Securities issued pursuant to this Indenture shall have the right, pursuant to
the procedures of Section 5.01(c), to require the Company to repurchase any
Securities held by such Holder at a purchase price in cash equal to 101% of the
principal amount of such Securities plus accrued interest through the date of
repurchase.
(c) Not less than 20 nor more than 60 business days prior to the
consummation of a merger, consolidation, transfer, sale or lease that would
require the Company to repurchase the Securities of any series issued pursuant
to this Indenture pursuant to Section 5.01(a) and not more than 45 business days
following the occurrence of any other event constituting a Change of Control,
the Company shall give Holders notice of such right of repurchase, mailed by
first-class mail to the Holders' last addresses as they appear upon the
register. Such notice shall state: (i) that Holders are entitled to have their
Securities repurchased in whole but not in part at 101% of their principal
amount plus accrued interest through the date of repurchase pursuant to this
Section 5.01; (ii) in the case of Section 5.01(b), that a Change of Control has
occurred, or in the case of Section 5.01(a), the proposed date of the
consummation of the merger, consolidation, transfer, sale or lease; (iii) that
Holders will be entitled to tender their Securities for repurchase, specifying
the purchase price and the date of repurchase (the "Repurchase Date") (which, in
the case of Section 5.01(a), shall not be later than the consummation date of
the merger,
-52-
<PAGE>
consolidation, transfer, sale or lease and, in the case of Section 5.01(b) shall
be no earlier than 30 days and no later than 60 days after the date such notice
is mailed) and that Holders will be entitled to tender their Securities for
repurchase until five business days prior to the Repurchase Date, (iv) the name
and address of the Paying Agent, (v) that the Securities must be tendered to the
Paying Agent by five business days prior to the Repurchase Date to collect the
principal and accrued interest thereon, (vi) that any Security not tendered by
five business days prior to the Repurchase Date will continue to accrue interest
at the applicable rate borne by the Security, (vii) that any Security accepted
for repurchase will cease to accrue interest after the Repurchase Date, (viii)
that Holders electing to have a Security repurchased will be required to
surrender the Security, with the form entitled "Option of Holder to Elect
Repurchase" on the reverse of the Security completed, to the Paying Agent at the
address specified in the notice on or prior to the close of business on the
fifth business day preceding the Repurchase Date, (ix) that Holders will be
entitled to withdraw their election if the Paying Agent receives, not later than
the close of business on the fifth business day preceding the Repayment Date, a
telegram, telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of Securities the Holder delivered for repurchase,
the certificate number(s) of the Securities the Holder delivered for repurchase
and a statement that such Holder is withdrawing his election to have such
Securities repurchased, (x) that Holders electing to have their Securities
repurchased must tender all Securities which they hold and (xi) any other
information necessary to enable Holder to tender Securities and have such
Securities repurchased pursuant to this Section. Notwithstanding that the
Company shall have given any such notice pursuant to this Section 5.01(c), the
Company shall have no obligation to consummate a merger, consolidation,
transfer, sale or lease that is the subject of any such notice, PROVIDED that
the Company will mail a notice to Holders, stating that the proposed merger,
consolidation, transfer, sale or lease was not consummated and that Holders will
not have the right to require the Company to prepay their Securities, not later
than two business days after the Company determines that any proposed merger,
consolidation, transfer, sale or lease will not be consummated, and the Company
will promptly return any Securities tendered for repurchase to their respective
Holders.
-53-
<PAGE>
The Company shall deliver to the Trustee, contemporaneously with the
mailing of the notice specified in the preceding paragraph informing Holders of
their right to tender their Securities for repurchase, (i) an Officers'
Certificate to the foregoing effect stating that the Holders are entitled to
have their Securities repurchased and (ii) an Opinion of Counsel stating that
the proposed transaction complies with this Indenture and that all conditions
precedent to the consummation of the transaction under this Indenture have been
met. The Company shall also deliver to the Trustee an Officers' Certificate and
an Opinion of Counsel in connection with any Supplemental Indenture upon the
execution thereof, as specified in Section 9.06.
The Surviving Corporation shall be the successor Company, but the
predecessor Company in the case of a transfer, sale or lease shall not be
released from the obligation to pay the principal of and interest on the
Securities.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
"Event of Default," whenever used herein with respect to Securities of
any series, means any one of the following events:
(1) the Company defaults in the payment of interest on any Security
of that series when the same becomes due and payable and the Default
continues for a period of 15 days after such interest becomes due and
payable;
(2) the Company defaults in the payment of the principal of or any
premium on any Security of that series when the same becomes due and
payable at maturity, upon redemption, repurchase pursuant to Section 5.01
or otherwise;
(3) the Company fails to comply with any of its other agreements or
covenants in or provisions of this Indenture (other than an agreement or
covenant a default in whose performance is elsewhere in this Section
specifically dealt with or which has expressly been
-54-
<PAGE>
included in this Indenture solely for the benefit of series of Securities
other than that series), and the Default continues for 30 days after the
Company has been given notice of the Default by the Trustee or the holders
of 25% in principal amount of the Outstanding Securities of that series;
(4) a default on other Indebtedness of the Company or any Subsidiary
(including a default on Securities other than Securities of such series),
which Indebtedness has an outstanding principal amount of more than
$1,000,000 individually or in the aggregate if such Indebtedness has
attained final maturity or if the holders of such Indebtedness have
accelerated payment thereof under the terms of the instrument under which
such Indebtedness is or may be outstanding and, in each case, it remains
unpaid;
(5) one or more judgments or decrees entered against the Company or
any Subsidiary involving a liability (not paid by insurance) of $1,000,000
or more in the case of any one such judgment or decree or $1,000,000 or
more in the aggregate for all such judgments and decrees for the Company
and all its Subsidiaries and all such judgments or decrees have not been
vacated, discharged or stayed or bonded pending appeal within 60 days from
the entry thereof;
(6) the Company or any Subsidiary pursuant to or within the meaning
of Title 11 of the United States Code or any similar Federal or state law
for the relief of debtors (collectively, "Bankruptcy Law"):
(i) commences a voluntary case in bankruptcy or any other action
or proceeding for any other relief under any law affecting creditors'
rights that is similar to a Bankruptcy Law;
(ii) consents by answer or otherwise to the commencement against
it of an involuntary case;
(iii) seeks or consents to the appointment of a receiver,
trustee, assignee, liquidator, custodian or similar official
(collectively, a "Custodian") of it or for all or substantially all of
its Property;
-55
<PAGE>
(iv) makes a general assignment for the benefit of its
creditors; or
(v) generally is unable to pay its debts as the same become due;
or
(7) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company or any Subsidiary in an
involuntary case proceeding;
(ii) appoints a Custodian of the Company or any Subsidiary or
for all or substantially all of its Property; or
(iii) orders the liquidation of the Company or any Subsidiary,
and in each case the order or decree remains unstayed and in effect for 60
days, or any dismissal, stay, rescission or termination ceases to remain in
effect; or
(8) any other Event of Default provided with respect to Securities of
that series.
SECTION 6.02. ACCELERATION.
If an Event of Default (other than an Event of Default specified in
clauses (6) and (7) of Section 6.01) with respect to Securities of any series at
the time Outstanding occurs and is continuing, the Trustee by notice in writing
to the Company, or the Holders of at least 25% in principal amount of the
Outstanding Securities of that series by notice in writing to the Company and
the Trustee, may declare the principal of and accrued interest on all the
Securities of that series to be due and payable. Upon such declaration, the
principal and interest shall be due and payable immediately without any
presentment, demand, protest or notice to the Company, all of which the Company
expressly waives. If an Event of Default specified in clauses (6) or (7) of
Section 6.01 occurs, the principal of and accrued interest on all the Securities
shall IPSO FACTO become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder.
-56-
<PAGE>
At any time after such a declaration of acceleration with respect to
Securities of any or all series has been made and before a judgment or decree
for payment of the money due has been obtained by the Trustee as hereinafter in
this Article provided, the Holders of a majority in principal amount of the
Outstanding Securities of that series by notice to the Trustee may rescind an
acceleration and its consequences (i) if the rescission would not conflict with
any judgment or decree, (ii) if all existing Events of Default have been cured
or waived except nonpayment of principal or interest that has become due solely
because of the acceleration, (iii) to the extent the payment of such interest is
lawful, interest on overdue installments of interest and overdue principal,
which has become due otherwise than by such declaration of acceleration, has
been paid, and (iv) in the event of the cure or waiver of a Default under clause
(4) of Section 6.01, the Trustee shall have received an Officers' Certificate
and an Opinion of Counsel that such Default has been cured or waived.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default with respect to Securities of any series occurs
and is continuing, the Trustee may pursue any available remedy by an action at
law, suit in equity or other appropriate proceeding to collect the payment of
principal of or interest on such series of Securities or to enforce the
performance of any provision of this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities of such series or does not produce any of them in the
proceeding. A delay or omission by the Trustee or any Holder in exercising any
right or remedy accruing upon an Event of Default or a Default shall not impair
the right or remedy or constitute a waiver of or acquiescence in such Event of
Default or a Default. All remedies are cumulative to the extent permitted by
law.
SECTION 6.04. WAIVER OF DEFAULTS.
Subject to Section 6.07, the Holders of at least a majority in
principal amount of the Outstanding Securities of any series by notice to the
Trustee may waive any existing Default or Event of Default with respect to such
series and its consequences except a continuing Default or Event of Default in
the payment of the principal of or interest on any Security of that series.
-57-
<PAGE>
SECTION 6.05. CONTROL BY MAJORITY.
The Holders of a majority in principal amount of the Outstanding
Securities of any series may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it. However, the Trustee may refuse to follow any direction
that conflicts with law or this Indenture, is unduly prejudicial to the rights
of other Holders of Outstanding Securities of that series or would subject the
Trustee to personal liability. The Company may, but shall not be obligated to,
pursuant to the procedures of Section 9.04(b), fix a record date for the purpose
of determining the Holders of Outstanding Securities of any series entitled to
vote on the direction of any such proceeding.
SECTION 6.06. LIMITATION ON SUITS.
No Holder of any Security of any series shall have any right to
institute a proceeding, judicial or otherwise, with respect to this Indenture,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default with respect to the Securities of that series;
(2) the Holders of at least 25% in principal amount of the
Outstanding Securities of that series make a written request to the Trustee
to pursue the remedy;
(3) such Holder or Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after
the receipt of the request and the offer of indemnity; and
(5) during such 60-day period the Holders of a majority in principal
amount of the Outstanding Securities of that series do not give the Trustee
a direction inconsistent with the request;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue
-58-
<PAGE>
of, or by availing of, any provision of this Indenture to affect, disturb or
prejudice the rights of any other of such Holders, or to obtain or to seek to
obtain priority or preference over any other of such Holders or to enforce any
right under this Indenture, except in the manner herein provided and for the
equal and ratable benefit of all of such Holders.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Subject to the provisions of Section 6.02, notwithstanding any other
provision of this Indenture, the right of any Holder of any Security to receive
payment of principal of and interest on such Security on or after the respective
due dates expressed in such Security, or to bring suit for the enforcement of
any such payment on or after such respective dates, shall not be impaired or
affected without the consent of the Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default with respect to Securities of any series
specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may
recover, in any proceeding that it deems, in its sole discretion, most effective
to protect the interests of the Holders of the Securities of such series,
judgment in its own name and as trustee of an express trust against the Company
for the whole amount of principal and interest remaining unpaid on such
Securities.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the Trustee and the
Holders allowed in any judicial proceedings relative to the Company, its
creditors or its Property.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
-59-
<PAGE>
SECTION 6.10 PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall pay
out the money or property in the following order:
First: To the Trustee for amounts due under Section 7.07;
Second: To the payment of the amounts then due and unpaid for
principal of and any premium and interest on the Securities
in respect of which or for the benefit of which such money
has been collected, ratably, without preference or priority
of any kind, according to the amounts due and payable on
such Securities for principal and interest, respectively;
and
Third: to the Company.
The Trustee may fix a record date and payment date for any payment to
Holders under this Section.
SECTION 6.11 UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted to be taken
by it as a Trustee, a court in its discretion may require the filing by any
party litigant in the suit of an undertaking to pay the costs of the suit, and
the court in its discretion may assess reasonable costs, including reasonable
attorneys' fees and disbursements, against any party litigant in the suit,
having due regard to the merits and good faith of the claims or defenses made by
the party litigant. This Section does not apply to a suit by the Trustee, a
suit by a Holder pursuant to Section 6.06, or a suit by Holders of more than 10%
in principal amount of the Outstanding Securities of any series.
-60-
<PAGE>
ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default with respect to Securities of any series
at the time Outstanding has occurred and is continuing, the Trustee shall
exercise such of the rights and powers vested in it by this Indenture, and use
the same degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee need perform only those duties that are specifically
set forth in this Indenture and no others and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
(2) the Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, in the
absence of bad faith on its part, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture. The
Trustee, however, shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture but need
not verify the accuracy of the contents thereof.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own wilful
misconduct, except that:
(1) this paragraph does not limit the effect of paragraph (b) of this
Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
-61-
<PAGE>
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee may refuse to perform any duty or exercise any right
or power unless it receives indemnity satisfactory to it against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree with the Company. Money held in
trust by the Trustee need not be segregated from other funds, except to the
extent required by law.
(g) No provision of this Indenture shall require the Trustee to
expend or risk any of its own funds or incur any liability.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document. The Trustee may
conclusively rely as to the identity and addresses of Holders and other matters
contained therein on the register of the Securities maintained by the Registrar
pursuant to Section 3.04 and shall not be affected by notice to the contrary.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate and an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such Certificate or Opinion or both. The Trustee may consult with counsel, and
the written advice of such counsel or any opinion of counsel shall be full and
complete authorization and protection in respect of any action taken, suffered
or omitted to be taken by it hereunder in good faith and reliance thereon.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers.
-62-
<PAGE>
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or any
Affiliate with the same rights it would have as if it were not Trustee. Any
Agent may do the same with like rights. The Trustee, however, is subject to
Sections 7.10 and 7.11.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, or any money paid to the Company or
upon the Company's direction under any provision hereof, it shall not be
responsible for the use or application of any money received by any Paying Agent
other than the Trustee, and it shall not be responsible for any statement in the
Securities other than its authentication or for any statement of the Company in
the Indenture.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing hereunder
with respect to Securities of any series, and if such Default or Event of
Default is known to a Trust Officer of the Trustee, the Trustee shall mail the
Holders of Securities of such series a notice of the Default or Event of Default
within 90 days after it occurs. Except in the case of a Default or Event of
Default in payment on any Security of any series, the Trustee may withhold
notice if and so long as a trust committee of Trust Officers of the Trustee in
good faith determines that withholding the notice is in the interest of Holders
of Securities of such series.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each October 1 following the date of this
Indenture, the Trustee shall mail to Holders and the Company a brief report
dated as of such October 1 that complies with TIA SECTION 313(a). The Trustee
shall also comply with TIA SECTION 313(b)(2) and transmit all reports in
accordance with TIA SECTION 313(c).
A copy of each such report shall be filed, at the time of its mailing
to Holders, with the SEC and each stock
-63-
<PAGE>
exchange, if any, on which any Securities are listed. The Company shall notify
the Trustee when any Securities are listed on any stock exchange.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable out-of-pocket expenses
incurred by it. Such expenses shall include the reasonable compensation and
out-of-pocket expenses of the Trustee's agents and counsel.
The Company shall defend and indemnify the Trustee against any loss or
liability incurred by it in connection with its services hereunder except as set
forth in the next paragraph. The Trustee shall notify the Company promptly of
any claim for which it may seek indemnity.
The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee through negligence, bad faith or
wilful misconduct.
The Trustee may have separate counsel, and the Company shall pay the
reasonable fees and expenses of such counsel.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or Property held
or collected by the Trustee, except that held in trust to pay principal and
interest on particular Securities. Such lien shall survive the satisfaction and
discharge of this Indenture or any other termination under any Bankruptcy Law.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(6) or (7) occurs, such expenses and the
compensation for such services are intended to constitute expenses of
administration under any Bankruptcy Law.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective
-64-
<PAGE>
only upon the successor Trustee's acceptance of appointment as provided in this
Section.
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the Outstanding Securities of any series may
remove the Trustee with respect to the Securities of such series by so notifying
the Trustee and the Company. The Company may remove the Trustee with respect to
all Securities if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(3) a Custodian or public officer takes charge of the Trustee or its
Property; or
(4) the Trustee becomes incapable of acting.
If the Trustee with respect to the Securities of one or more or all
such series resigns or is removed or if a vacancy exists in the office of
Trustee for any reason, the Company shall promptly appoint a successor Trustee
with respect to the Securities of such series. Within one year after the
successor Trustee takes office (it being understood that any such successor
Trustee may be appointed with respect to the Securities of one or more or all of
such series and that at any time there shall be only one Trustee with respect to
the Securities of any particular series), the Holders of a majority in principal
amount of the Outstanding Securities of such series may appoint a successor
Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee with respect to the Securities of any series
does not take office within 60 days after the retiring Trustee resigns or is
removed, the retiring Trustee, the Company or the Holders of at least 10% in
principal amount of the Outstanding Securities of such series may petition any
court of competent jurisdiction for the appointment of a successor Trustee with
respect to the Securities of such series.
If the Trustee with respect to the Securities of any series fails to
comply with Section 7.10, any Holder of Securities of such series may petition
any court of competent jurisdiction for the removal of such Trustee and the
-65-
<PAGE>
appointment of a successor Trustee with respect to the Securities of such
series.
In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee. Upon the written
request of the Company or the successor Trustee, such retiring Trustee shall,
upon payment of its charges, execute and deliver an instrument transferring to
such successor Trustee all the rights, powers and trusts of the retiring Trustee
and shall duly assign, transfer and deliver to such successor Trustee all
property and money held by such retiring Trustee hereunder. The successor
Trustee shall mail a notice of its succession to Holders of all Securities.
In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates,
(2) if the retiring Trustee is not retiring with respect to all Securities,
shall contain such provisions as shall be deemed necessary or desirable to
confirm that all the rights, powers, trusts and duties of the retiring Trustee
with respect to the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring Trustee, and
(3) shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such Trustees co-trustees of the
same trust and that each such Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Trustee;
-66-
<PAGE>
and upon the execution and delivery of such supplemental indenture the
resignation or removal of the retiring Trustee shall become effective to the
extent provided therein and each such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee with respect to the Securities of that or
those series to which the appointment of such successor Trustee relates. Upon
the written request of the Company or any successor Trustee, such retiring
Trustee shall, upon payment of its charges, execute and deliver an instrument
transferring to such successor Trustee all the rights, powers and duties of the
retiring Trustee with respect to the Securities of that or those series and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder with respect to the Securities
of that or those series to which the appointment of such successor Trustee
relates. The successor Trustee shall mail a notice of its succession to Holders
of those series of Securities in respect of which it acts as Trustee.
Notwithstanding the replacement of the Trustee with respect to the
Securities of one or more series pursuant to this Section 7.08, the Company's
obligations under Section 7.07 hereof shall continue for the benefit of the
retiring Trustee in connection with the rights and duties hereunder prior to
such replacement.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be one (and only one) Trustee hereunder with
respect to the Securities of each series, which may be a Trustee hereunder for
Securities of one or more other series. Each Trustee shall be a Person that
satisfies the requirements of TIA SECTION 310(a), and has a combined capital
and surplus of at least $50,000,000 as set forth in its most recent published
annual report of condition. Neither the Company nor any Person directly or
indirectly controlling, controlled by, or under common
-67-
<PAGE>
control with the Company shall serve as trustee. The Trustee is subject to TIA
SECTION 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA SECTION 311(a), excluding any creditor
relationship listed in TIA SECTION 311(b). A Trustee who has resigned or been
removed shall be subject to TIA SECTION 311(a) to the extent indicated therein.
SECTION 7.12. AUTHENTICATING AGENT.
Each authenticating agent appointed by the Trustee with respect to one
or more series of Securities pursuant to Section 3.03 (an "Authenticating
Agent") shall at all times be a corporation organized and doing business under
the laws of the United States, any State thereof or the District of Columbia,
authorized under such laws to act as Authenticating Agent, having a combined
capital and surplus of not less than $5,000,000 and subject to supervision or
examination by federal or state authority. If such Authenticating Agent
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section, the combined capital and surplus of such Authenticating Agent
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time an Authenticating Agent
shall cease to be eligible in accordance with the provisions of this Section,
such Authenticating Agent shall resign immediately in the manner and with the
effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Company, the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of
-68-
<PAGE>
an Authenticating Agent by giving written notice thereof to such Authenticating
Agent and to the Company. Upon receiving such a notice of resignation or upon
such a termination, or in case at any time such Authenticating Agent shall cease
to be eligible in accordance with the provisions of this Section 7.12, the
Trustee may appoint a successor Authenticating Agent which shall be acceptable
to the Company and shall mail written notice of such appointment to all Holders
of the Securities with respect to which such Authenticating Agent will serve.
Any successor Authenticating Agent, upon acceptance of its appointment
hereunder, shall become vested with all the rights, powers and duties of its
predecessor hereunder, with like effect as if originally named as an
Authenticating Agent. No successor Authenticating Agent shall be appointed
unless eligible under the provisions of this Section.
The Company agrees to pay each Authenticating Agent from time to time
reasonable compensation for its services under Section 3.03 and this Section
7.12 and the Trustee shall be entitled to be reimbursed for any such payments
made by it.
If an appointment with respect to one or more series is made pursuant
to Section 3.03 or this Section 7.12, the Securities of such series may have
endorsed thereon, in addition to the Trustee's certificate of authentication, an
alternate certificate of authentication in the following form:
"This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
Dated: _____________
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
By: BANKERS TRUST COMPANY, as
Authenticating Agent
By:_______________________
Authorized Signatory
-69-
<PAGE>
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.01. TERMINATION OF COMPANY'S OBLIGATIONS.
The Company may terminate its obligations under this Indenture at any
time by delivering all outstanding Securities of every series to the Trustee for
each such series for cancellation. The Company, at its option, may elect with
respect to any series of Securities issued hereunder, upon compliance with the
conditions set forth in this Article 8, (i) to be Discharged (as defined herein)
from any and all obligations with respect to such series of Securities (except
for certain obligations of the Company to register the transfer or exchange of
the Securities, replace stolen, lost or mutilated Securities, maintain paying
agencies, hold moneys for payment in trust and compensate the Trustee as
provided in Section 7.07 of this Indenture) or (ii) to be released from its
obligation to comply with the restrictive covenants in Sections 4.02, 4.03,
4.04, 4.05, 4.06, 4.07, 4.09, 4.10, 4.11, 4.12, 4.14, 4.15 and 5.01 of this
Indenture, in each case if the Company deposits with the Trustee for such series
of Securities, in trust, money or U.S. Government Obligations which, through the
payment of interest thereon and principal thereof in accordance with their
terms, will provide money in an amount sufficient to pay all the principal of
and interest on the Securities of such series on the dates such payments are due
in accordance with the terms of the Securities of such series. To exercise any
such option, the Company shall deliver to the Trustee for such series of
Securities (a) an Opinion of Counsel to the effect that the deposit and related
defeasance would not cause the holders of the Securities of such series to
recognize income, gain or loss for federal income tax purposes and, in the case
of a Discharge pursuant to clause (i) above, accompanied by a ruling to such
effect received from or published by the United States Internal Revenue Service
and (b) an Officers' Certificate and an Opinion of Counsel to the effect that
the Company has complied with all conditions precedent to the defeasance.
"DISCHARGED" means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by, and obligations under, the
Securities of such series and to have satisfied all the obligations under this
Indenture relating to the Securities of such series (and the Trustee for such
series of Securities, at the request and the
-70-
<PAGE>
expense of the Company, shall execute proper instruments acknowledging the
same), except (A) the rights of the Holders of Securities of such series to
receive, from the trust fund described above, payment of the principal of and
the interest on the Securities of such series when such payments are due, (B)
the Company's obligations with respect to the Securities under Sections 3.04,
3.05, 3.06, 3.07, 3.08, 4.17, 7.07, 7.08 and 8.04 and (C) the rights, powers,
trusts, duties and immunities of the Trustee with respect to such series of
Securities hereunder.
"U.S. GOVERNMENT OBLIGATIONS" means direct obligations of, and
obligations guaranteed by, the United States of America for the payment of which
the full faith and credit of the United States of America is pledged.
SECTION 8.02. APPLICATION OF TRUST MONEY.
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Section 8.01 with respect to any series of
Securities. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal and interest on the Securities of such
series.
SECTION 8.03. REPAYMENT TO COMPANY.
The Trustee and the Paying Agent shall promptly pay to the Company
upon written request any excess money or securities held by them at any time.
The Trustee and the Paying Agent shall pay to the Company upon written
request any money held by them for the payment of principal or interest that
remains unclaimed for two years after the date upon which such payment shall
have come due; PROVIDED, HOWEVER, that the Trustee or such Paying Agent, shall,
upon the written request and at the expense of the Company, cause to be
published once in a newspaper of general circulation in The City of New York or
mailed to each such Holder, notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such publication or mailing, any unclaimed balance of such money then
remaining will be repaid to the Company. After payment to the Company, Holders
entitled to the money must look to the Company for payment as general creditors
unless an applicable abandoned property law designates another Person.
-71-
<PAGE>
SECTION 8.04. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations deposited with respect to the Securities of any series in
accordance with Sections 8.01 and 8.02 by reason of any legal proceeding or by
reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, the Company's
obligations under this Indenture and the Securities of such series shall be
revived and reinstated as though no deposit had occurred pursuant to Section
8.01 until such time as the Trustee or Paying Agent is permitted to apply such
money or U.S. Government Obligations in accordance with Section 8.01; PROVIDED,
HOWEVER, that if the Company has made any payment of interest on or principal of
any such Securities because of the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such Securities to receive
such payment from the money or U.S. Government Obligations held by the Trustee
or Paying Agent.
ARTICLE 9
AMENDMENTS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS.
The Company, when duly authorized by resolution of its Board of
Directors, and the Trustee may amend this Indenture or the Securities without
the consent of any Holder:
(1) to cure any ambiguity, defect or inconsistency with any other
provision herein;
(2) to comply with Section 5.01;
(3) to make any change that does not adversely affect the legal
rights hereunder of any Holder;
(4) to comply with the requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA, as contemplated
by Section 11.01 or otherwise;
-72-
<PAGE>
(5) to add to or change any of the provisions of this Indenture to
such extent as shall be necessary to permit or facilitate the issuance of
Securities in bearer form, registrable or not registrable as to principal,
and with or without interest coupons, or to permit or facilitate the
issuance of Securities in uncertificated form;
(6) to add to, change or eliminate any of the provisions of this
Indenture in respect of one or more series of Securities, PROVIDED that any
such addition, change or elimination (A) shall neither (i) apply to any
Security of any series created prior to the execution of such supplemental
indenture and entitled to the benefit of such provision nor (ii) modify the
rights of the Holder of any such Security with respect to such provision or
(B) shall become effective only when there is no such Security Outstanding;
(7) to provide for the appointment of a successor Trustee with
respect to the Securities of one or more (but not all) series of Securities
issued hereunder, as provided in Section 7.08 hereof; or
(8) to establish the form or terms of Securities of any series as
permitted by Sections 2.01 and 3.01.
After an amendment under this Section becomes effective, the Company
shall mail to Holders of all series of Securities affected by such amendment a
notice briefly describing the amendment.
SECTION 9.02. WITH CONSENT OF HOLDERS.
The Company, when duly authorized by resolution of its Board of
Directors, and the Trustee may amend this Indenture with the written consent of
the Holders of at least a majority in principal amount of the Outstanding
Securities of each series affected by such amendment. However, without the
consent of the Holder of each Outstanding Security affected thereby, an
amendment under this Section may not:
(1) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for any
such amendment;
-73-
<PAGE>
(2) reduce the rate of or change the time for payment of interest,
including defaulted interest, on any Security;
(3) reduce the principal of or change the fixed maturity of any
Security, or change the date on which any Security may be subject to
redemption or reduce the Redemption Price therefor;
(4) make any Security payable in currency other than that stated in
the Security;
(5) make any change in Section 6.04 or 6.07 or this Section 9.02;
(6) make any change in the ranking of the Securities with respect to
any other obligation of the Company in a way that adversely affects the
rights of any Holder; or
(7) waive a Default in the payment of the principal of, and interest
on, any Security.
After an amendment under this Section becomes effective, the Company
shall mail to Holders of all series of Securities affected by such amendment a
notice briefly describing the amendment.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment to this Indenture shall be set forth in a supplemental
indenture that complies with the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
(a) Until an amendment or waiver becomes effective, a consent to it
by a Holder of a Security is a continuing consent by the Holder and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security, even if notation of the consent is not
made on any Security. However, any such Holder or subsequent Holder may revoke
the consent as to his Security or portion of a Security if the Trustee receives
written notice of revocation before the date on which the Trustee receives an
Officers' Certificate certifying that the Holders of the requisite principal
amount of each series of Outstanding Securities affected by such
-74-
<PAGE>
amendment or waiver have consented to such amendment or waiver. An amendment or
waiver becomes effective upon receipt by the Trustee of such Officers'
Certificate and the written consents from the Holders of the requisite
percentage in principal amount of each series of Outstanding Securities affected
by such amendment or waiver.
(b) The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders of each series of Securities entitled
to consent to any amendment or waiver, which record date shall be at least 5
business days prior to the first solicitation of such consent. If a record date
is fixed, then notwithstanding the second and third sentence of paragraph (a) of
this Section 9.04, those persons who were Holders at such record date (or their
duly designated proxies), and only those persons, shall be entitled to consent
to such amendment or waiver or to revoke any consent previously given, whether
or not such persons continue to be Holders after such record date. No such
consent shall be valid or effective for more than 120 days after such record
date.
(c) After an amendment or waiver becomes effective, it shall bind
every Holder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF SECURITIES.
Upon the Company's request, the Trustee shall place an appropriate
notation (to be provided by the Company and in form and substance satisfactory
to the Trustee) about an amendment or waiver on any Security affected by such
amendment or waiver thereafter authenticated. The Company in exchange for all
Securities affected by such amendment or waiver may issue and the Trustee shall
authenticate new Securities that reflect the amendment or waiver.
SECTION 9.06. TRUSTEE PROTECTED.
The Trustee shall sign all supplemental indentures, except that the
Trustee need not sign any supplemental indenture that adversely affects its
rights. In signing or refusing to sign such amendment or Supplemental
Indenture, the Trustee shall be entitled to receive and, subject to Section
7.01, shall be fully protected in relying upon, an Officers' Certificate and an
Opinion of Counsel as conclusive evidence that such amendment or Supplemental
Indenture is authorized or permitted by this Indenture, that it is not
inconsistent herewith, that all conditions precedent to the
-75-
<PAGE>
execution thereof have been met, that it will be valid and binding upon the
Company in accordance with its terms and that, after the execution thereof, the
Company will not be in Default and no Event of Default will have occurred and be
continuing with respect to any series of Securities affected by such amendment
or supplemental indenture.
ARTICLE 10
REDEMPTIONS
SECTION 10.01. ELECTION TO REDEEM; NOTICE TO TRUSTEE.
Securities of any series which are redeemable before their Stated
Maturity shall be redeemable, in whole at any time or in part from time to time,
in accordance with their terms and (except as otherwise specified for such
Securities as contemplated by Section 3.01) in accordance with this Article. In
order to effect any such redemption, the Company shall notify the Trustee of the
Redemption Date and the principal amount of Securities to be redeemed and it
shall deliver to the Trustee an Officers' Certificate certifying resolutions of
the Board of Directors authorizing the redemption and an Opinion of Counsel with
respect to the due authorization of such redemption and that such redemption is
being made in accordance with this Indenture and the Securities.
The Company shall give such notice provided for in this Section at
least 60 days but not more than 90 days before the Redemption Date or at such
other date as shall be satisfactory to the Trustee.
SECTION 10.02. SELECTION OF THE SECURITIES TO BE REDEEMED.
If less than all the Securities of any series are to be redeemed, the
Trustee or the Registrar for the Securities, pro rata or by lot, or by any
manner that is acceptable to the Trustee or Registrar, as the case may be, shall
select, subject to the remainder of this Section, the particular Securities to
be redeemed. The Trustee shall make the selection not more than 60 days and not
less than 30 days before each Redemption Date from Outstanding Securities of
such series not previously called for redemption. The Trustee may select for
redemption portions of the principal of Securities of such series that have
denominations larger than $1,000. Securities and portions of them it selects
-76-
<PAGE>
shall be in amounts of $1,000 or integral multiples of $1,000. Provisions of
this Indenture that apply to Securities called for redemption shall also apply
to portions of Securities called for redemption. The Trustee shall notify the
Company promptly of the Securities or portions of Securities to be called for
redemption.
SECTION 10.03. NOTICE OF REDEMPTION.
At least 30 but not more than 60 days before a Redemption Date, the
Company shall mail a notice of redemption by first-class mail to each Holder
whose Securities are to be redeemed.
The notice shall identify the Securities to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest to be
paid;
(3) the name and address of the Paying Agent;
(4) that the Securities called for redemption must be surrendered to
the Paying Agent to collect the Redemption Price and accrued interest, if
any;
(5) that, unless the Company defaults in making the redemption
payment, interest on the Securities called for redemption ceases to accrue
on and after the specified Redemption Date; and
(6) if any Security is being redeemed in part, the portion of the
principal amount (equal to $1,000 or any integral multiple thereof) of such
Security to be redeemed and that, on or after the Redemption Date, upon
surrender of such Security, a new Security or Securities in principal
amount equal to the unredeemed portion thereof will be issued.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense.
-77-
<PAGE>
SECTION 10.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed, the Securities called for
redemption become due and payable on the specified Redemption Date at the
Redemption Price.
SECTION 10.05. DEPOSIT OF REDEMPTION PRICE ON OPTIONAL REDEMPTION.
On or before each Redemption Date the Company shall deposit with the
Paying Agent money (which shall be immediately available funds if deposited on
the Redemption Date and which must be received by such Paying Agent prior to
10:00 a.m. New York City time) sufficient to pay the Redemption Price of and
accrued interest on all Securities to be redeemed on that date. The Paying
Agent shall return to the Company any money not required for that purpose.
SECTION 10.06. SECURITIES REDEEMED IN PART.
Upon surrender of a Security that is redeemed in part, the Company
shall issue and the Trustee shall authenticate a new Security equal in principal
amount to the unredeemed portion of the Security surrendered.
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies, or conflicts
with another provision which is required to be included in this Indenture by the
TIA, the required provision shall control.
SECTION 11.02. NOTICES.
Any notice or communication to the Company or the Trustee is duly
given if in writing and (i) delivered in Person, (ii) mailed by first-class mail
or (iii) transmitted
-78-
<PAGE>
by facsimile transmission (confirmed by guaranteed overnight courier) to the
following addresses:
The Company's address is:
1200 State Fair Boulevard
Syracuse, New York 13221
Attention: Eugene R. Sunderhaft
Telephone number: (315) 457-9460
Facsimile number: (315) 453-0353
With a copy to:
The Penn Traffic Company
411 Theodore Fremd Avenue
Rye, New York 10580
Attention: Martin A. Fox
Telephone number: (914) 921-3000
Facsimile number: (914) 921-3031
The Trustee's address is:
114 West 47th Street
New York, New York 10036
Telephone number: (212) 852-1000
Facsimile number: (212) 852-1626
Attention: Corporate Trust Division
As of the date of execution hereof, the Paying Agent's, Registrar's
and Authenticating Agent's address is:
Four Albany Street
New York, New York 10006
Attention: Corporate Trust and Agency Group
Telephone number: (212) 250-6569
Facsimile number: (212) 250-6392
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication to a Holder shall be mailed by first-class
mail to his address shown on the register kept by the Registrar; provided, that
items required under the TIA to be sent to Holders in compliance with TIA
SECTION 313(c) shall be mailed to Holders in compliance with such section.
Failure to mail a notice or a communication to a
-79-
<PAGE>
Holder or any defect in it shall not affect its sufficiency with respect to
other Holders.
If a notice or communication is delivered, mailed or transmitted in
the manner provided above within the time prescribed, it is duly given, whether
or not the addressee receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
SECTION 11.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Holders may communicate pursuant to TIA SECTION 312(b) with other
Holders with respect to their rights under this Indenture or the Securities.
The Trustee shall comply with the provisions of TIA SECTION 312(b). The
Company, the Trustee, the Registrar and any agent of any of them shall have the
protection of TIA SECTION 312(c).
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(b) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition;
-80-
<PAGE>
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been complied with.
SECTION 11.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 11.07. LEGAL HOLIDAYS.
A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions in the State of New York are not required to be open. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that place
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period.
SECTION 11.08. NO RECOURSE AGAINST OTHERS.
The Securities and the obligations of the Company under this Indenture
are solely obligations of the Company and no officer, director, employee or
stockholder, as such, of the Company shall be liable for any failure by the
Company to pay any amounts on the Securities when due or perform any such
obligation.
SECTION 11.09. DUPLICATE ORIGINALS.
The parties may sign any number of copies of this Indenture. One
signed copy is enough to prove this Indenture.
-81-
<PAGE>
SECTION 11.10. GOVERNING LAW.
THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS INDENTURE AND THE
SECURITIES.
SECTION 11.11. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or a Subsidiary. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
SECTION 11.12. SUCCESSORS.
All agreements of the Company in this Indenture and the Securities
shall bind its successor. All agreements of the Trustee in this Indenture shall
bind its successor.
SECTION 11.13. SEVERABILITY.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 11.14. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table, and headings of the
Articles and Sections of this Indenture have been inserted for the convenience
of reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
SECTION 11.15. BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder and the Holders, any benefit or any legal or equitable right, remedy
or claim under this Indenture.
-82-
<PAGE>
SIGNATURES
Dated: December 21, 1993 THE PENN TRAFFIC COMPANY
By: /s/ Claude J. Incaudo
----------------------
Name: Claude J. Incaudo
Title: President
Attest:
/s/ Francis D. Price, Jr.
- -------------------------
Name: Francis D. Price, Jr.
Title: Assistant Secretary (SEAL)
Dated: December 21, 1993 UNITED STATES TRUST COMPANY
OF NEW YORK
Trustee
By: /s/ James J. McGinley
----------------------
Name: James J. McGinley
Title: Vice President
Attest:
/s/ Robert Patterson (SEAL)
- --------------------
Name: Robert Patterson
Title: Assistant Vice
President
-83-
<PAGE>
Exhibit A
[FORM OF SECURITY]
No. $________
THE PENN TRAFFIC COMPANY
Incorporated under the laws of the
State of Delaware
______% Senior Notes due __________________
THE PENN TRAFFIC COMPANY, for value received, hereby promises to pay
to ________________ or registered assigns, the principal sum of __________
Dollars on ______________ and to pay interest thereon semiannually in arrears at
the rate of _____% per annum on _______________ and _____________ of each year
until the principal hereof is paid or made available for payment. Payment of
principal, premium, if any, and interest shall be made in the manner and subject
to the terms set forth in provisions appearing on the reverse hereof, which
provisions, in their entirety, shall for all purposes have the same effect as if
set forth at this place.
IN WITNESS WHEREOF, THE PENN TRAFFIC COMPANY has caused this
instrument to be executed in its corporate name by the manual or facsimile
signature of its President or any Vice Chairman or Vice President and attested
by its Secretary or an Assistant Secretary.
THE PENN TRAFFIC COMPANY
By____________________________
Title:
Attest:____________________
Title:
[SEAL]
A-1
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.
Dated:
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
By:_______________________________
Authorized Signatory
or
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
By: BANKERS TRUST COMPANY, as
Authenticating Agent
By:_______________________
Authorized Signatory
A-2
<PAGE>
(Back of Security)
THE PENN TRAFFIC COMPANY
___________% Senior Notes due ______________
1. INTEREST. THE PENN TRAFFIC COMPANY (the "Company"), a Delaware
corporation, promises to pay interest on the principal amount of this Security
at the rate per annum shown above. The Company will pay interest semiannually
in arrears on ______________ and ______________ of each year. Interest on the
Securities will accrue from the most recent date on which interest has been paid
or, if no interest has been paid, from ______________. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the
Securities (except defaulted interest) to the Persons who are registered Holders
of Securities at the close of business on the regular record date, which shall
be the ______________ and ______________, as the case may be, next preceding the
interest payment date even though Securities are cancelled after the record date
and on or before the interest payment date. Any such interest not so punctually
paid or duly provided for, and any interest payable on such defaulted interest
(to the extent lawful), will forthwith cease to be payable to the Holder on such
regular record date and shall be payable to the Person in whose name this
Security is registered at the close of business on a special record date for the
payment of such defaulted interest to be fixed by the Company, notice of which
shall be given to Holders not less than 5 days prior to such special record
date. Holders must surrender Securities to a Paying Agent to collect principal
payments. The Company will pay principal and interest in money of the United
States that at the time of payment is legal tender for payment of public and
private debts. However, the Company may pay principal, premium, if any, and
interest by check payable in such money. It may mail an interest check to a
Holder's registered address.
3. PAYING AGENT AND REGISTRAR. Bankers Trust Company, a New York
banking corporation, will act as Paying Agent and Registrar. The Company may
change any Paying Agent, Registrar or co-Registrar without notice to any Holder.
The Company may act in any such capacity.
A-3
<PAGE>
4. INDENTURE. This Security is one of a duly authorized issue of
securities of the Company (herein called the "Securities"), issued and to be
issued under an Indenture dated as of ______________ (the "Indenture") between
the Company and the Trustee. The terms of the Securities include those stated
in the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. SECTION SECTION 77aaa-77bbbb), as amended by
the Trust Indenture Reform Act of 1990, as in effect on the date of the
Indenture ("TIA"). The Securities are subject to all such terms, and Holders
are referred to the Indenture and such Act for a statement of such terms. This
Security is one of the series designated on the face hereof limited to
$__________ in an aggregate principal amount. The Securities are unsecured
general obligations of the Company. Unless otherwise defined herein, all
capitalized terms shall have the meanings assigned to them in the Indenture.
5. DENOMINATIONS, TRANSFER, EXCHANGE. The Securities are in
registered form without coupons in denominations of $1,000 and integral
multiples thereof. The transfer of Securities may be registered and Securities
may be exchanged as provided in the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not exchange or register the transfer of any
Security or portion of a Security selected for redemption. Also, it need not
exchange or register the transfer of any Securities for a period of 15 days
before a selection of Securities to be redeemed.
6. OPTIONAL REDEMPTION. The Securities may not be redeemed prior to
______________. On or after such date, the Securities may be redeemed at the
election of the Company as a whole at any time or in part from time to time at
the Redemption Prices (expressed in percentages of principal amount) set forth
below plus accrued interest to the Redemption Date, if redeemed during the
12-month period beginning ______________ of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
____.................... __________%
____.................... __________
____.................... __________
____ and thereafter..... 100.00
</TABLE>
A-4
<PAGE>
Notice of redemption will be mailed at least 30 days but not more than 60
days before the Redemption Date to each Holder of Securities to be redeemed, at
his registered address. Securities in denominations larger than $1,000 may be
redeemed in part but only in whole multiples of $1,000. On and after the
Redemption Date interest ceases to accrue on Securities or portions of them
called for redemption.
These Securities shall not have the benefit of any sinking fund
obligations.
7. PERSONS DEEMED OWNERS. The registered Holder of a Security may be
treated as its owner for all purposes.
8. AMENDMENTS AND WAIVERS. Subject to certain exceptions, the Indenture
and the rights of the Holder of the Securities of each series to be affected
under the Indenture may be amended at any time by the Company and the Trustee
with the consent of the Holders of at least a majority in principal amount of
the Securities at the time Outstanding of each series to be affected. The
Indenture also contains provisions permitting the Holders of specified
percentages in principal amount of the Securities of each series at the time
Outstanding, on behalf of the Holders of all Securities of such series, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Without the consent
of any Holder, the Indenture or the Securities may be amended to cure any
ambiguity, defect or inconsistency; to comply with Section 5.01 of the
Indenture; to make any change that does not adversely affect the legal rights of
any Holder; to comply with the requirements of the SEC to maintain qualification
of the Indenture under the TIA; to add to or change the provisions of the
Indenture to such extent as shall be necessary to permit or facilitate the
issuance of Securities in bearer form, registrable or not registrable as to
principal, and with or without interest coupons, or to permit or facilitate the
issuance of Securities in uncertificated form; or to provide for the appointment
of a successor Trustee with respect to one or more (but not all) series of
Securities issued pursuant to the Indenture, as provided in Section 7.08 of the
Indenture.
9. REMEDIES. As provided in and subject to the provisions of the
Indenture, the Holder of this Security shall not have the right to institute any
proceeding with respect to the Indenture or for the appointment of a receiver or
trustee of for any other remedy thereunder, unless such
A-5
<PAGE>
Holder shall have previously given the Trustee written notice of a continuing
Event of Default with respect to the Securities of this series, the Holders of
not less than 25% in principal amount of the Securities of this series at the
time Outstanding shall have made written request to the Trustee to institute
proceedings in respect of such Event of Default as Trustee and offered the
Trustee reasonable indemnity, and the Trustee shall not have received from the
Holders of a majority in principal amount of Securities of this series at the
time Outstanding a direction inconsistent with such request, and shall have
failed to institute any such proceeding, for 60 days after receipt of such
notice, request and offer of indemnity. The foregoing shall not apply to any
suit instituted by the Holder of this Security for the enforcement of any
payment of principal hereof or any premium or interest hereon on or after the
respective due dates expressed herein.
10. PREPAYMENT AT HOLDER'S OPTION UPON CERTAIN MERGER AND CHANGE OF
CONTROL EVENTS. In the event of a Change of Control or in the event of a merger
where, immediately after giving effect to the merger, the surviving corporation
does not meet the Consolidated Interest Coverage Ratio set forth in the
Indenture, the Company shall be obligated to make an offer to purchase this
Security at a purchase price in cash equal to 101% of its principal amount plus
accrued interest, after the occurrence of such Change in Control or merger.
Holders of Securities which are the subject of such an offer to repurchase shall
receive an offer to repurchase and may elect to have such Securities repurchased
in accordance with the provisions of the Indenture pursuant to and in accordance
with the terms of the Indenture. The Company shall give the Holder of this
Security notice of such right of repurchase not less than 20 nor more than 60
business days prior to the consummation of a merger, consolidation, transfer,
sale or lease that would require the Company to offer to repurchase the
Securities and not more than 45 business days following any other event
constituting a Change of Control, mailed by first-class mail to the Holder's
last address as it appears upon the register. The Holder shall have the right
to have this Security repurchased if, among other things, the Security is
tendered for repurchase no later than five business days prior to the applicable
repurchase date. The Company shall have no obligation to consummate any merger,
consolidation, transfer, sale or lease that is the subject of any such notice,
and if any such merger, consolidation, transfer, sale or lease that was the
subject of any notice described above is not consummated, the Holder will not be
A-6
<PAGE>
entitled to have this Security prepaid, and any Securities tendered for
prepayment will be returned.
11. TRUSTEE DEALINGS WITH THE COMPANY. United States Trust Company of New
York, the Trustee under the Indenture, in its individual or any other capacity,
may become the owner or pledgee of Securities and may otherwise deal with the
Company or any Affiliate with the same rights it would have as if it were not
the Trustee.
12. NO RECOURSE AGAINST OTHERS. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Holder by accepting a Security waives and releases all such
liability. This waiver and release are part of the consideration for the issue
of the Securities.
13. UNCLAIMED MONEY. If money for the payment of principal of or interest
on any Security remains unclaimed for two years after the date on which such
payment shall have come due, the Trustee or Paying Agent will pay the money back
to the Company at the Company's written request. After that, Holders entitled
to this money must look to the Company for payment, unless a law governing
abandoned property designates another Person.
14. DISCHARGE UPON REDEMPTION OR MATURITY. Subject to the terms of the
Indenture, the Indenture will be discharged and cancelled with respect to
Securities of any series upon the payment of all Securities of such series. The
Indenture contains provisions for defeasance at any time of certain restrictive
covenants with respect to this Security (in each case upon compliance with
certain conditions set forth therein).
15. AUTHENTICATION. This Security shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
16. GOVERNING LAW. THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS
SECURITY AND THE INDENTURE.
17. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as TEN COM (= tenants in common), TEN ENT (= tenants
by the entireties), JT TEN (= joint tenants with right of survivorship and not
as
A-7
<PAGE>
tenants in common), CUST (= Custodian), and UNIF GIFT MIN ACT (= Uniform Gifts
to Minors Act).
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture, which has in it the text of this Security in
larger type. Requests may be made to The Penn Traffic Company, 1200 State Fair
Boulevard, Syracuse, New York 13221, Attention: Eugene R. Sunderhaft.
A-8
<PAGE>
OPTION OF HOLDER TO ELECT REPURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 5.01 of the Indenture, check the box:
/ /
Dated: ______________ Your signature:__________________
_________________________________
(Sign exactly as name appears
on the other side of this
Security)
Signature Guarantee: ______________________________________
(Signature must be guaranteed by
a member firm of the New York Stock
Exchange or a commercial bank or
trust company)
A-9
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below: I or we assign and transfer
this Security to
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint _______________________________ agent to transfer this
Security on the books of the Company. The agent may substitute another to act
for him.
________________________________________________________________________________
Dated:_____________________ Your signature: ___________________
___________________________________
(Sign exactly as your name
appears on the other side of
this Security)
Signature Guarantee: ____________________________________
(Signature must be guaranteed by a
member firm of the New York Stock
Exchange or a commercial bank or
trust company)
A-10
<PAGE>
Exhibit 10.10
January 30, 1994
The Penn Traffic Company
1200 State Fair Boulevard
Syracuse, New York 13221-4737
Dear Sirs:
This agreement (the "Agreement") is to confirm the engagement of Miller
Tabak Hirsch + Co. ("MTH") to provide financial advisory, strategic planning and
management services to The Penn Traffic Company ("Penn Traffic") for a term
commencing on January 30, 1994 and continuing to and including January 28, 1995
(the "Term").
For services rendered pursuant to this Agreement, MTH will receive from
Penn Traffic an annual fee to $1,357,100. The annual fee shall be paid in twelve
monthly installments on the first business day of each calendar month during the
Term.
In addition to the annual fee provided for above, Penn Traffic will pay, or
reimburse MTH for, all reasonable out-of-pocket expenses incurred by MTH in
performing services pursuant hereto, including fees and disbursements of its
counsel, upon the submission, from time to time, of a bill or bills therefor.
It is expressly understood and agreed that this Agreement and the fee to be
paid hereunder relate to the ongoing services performed by MTH and its employees
for Penn Traffic on a day-to-day basis and that MTH may additionally
<PAGE>
The Penn Traffic Company 2.
be engaged to perform investment banking services relating to specific
transactions, including, without limitation, an acquisition or disposition of
assets or of a business or businesses, the public offering or private placement
of securities or the negotiation or renegotiation of bank or other debt
financing. In the event of such additional engagement of MTH in connection with
a specific transaction, MTH will be entitled to such fees, in addition to those
provided for herein, as Penn Traffic and MTH shall, in each such instance,
agree.
Any financial or other advice rendered by MTH pursuant to this Agreement
may not be disclosed publicly in any manner without MTH's prior written approval
and will be treated by Penn Traffic as confidential. Penn Traffic will provide
MTH with all financial and other information requested by MTH for the purpose of
rendering its services pursuant to this Agreement. All non-public information
given to MTH by Penn Traffic will be treated by MTH as confidential. MTH may
rely, without independent verification, on the accuracy and completeness of all
information that is publicly available or is furnished to it by Penn Traffic.
If, in connection with any services or matters that are the subject of this
Agreement, MTH becomes involved in any capacity in any action or legal
proceedings, Penn Traffic agrees to reimburse MTH for the reasonable legal fees,
disbursements of counsel and other expenses (including the cost of investigation
and preparation) incurred by MTH, upon submission, from time to time, of a bill
or bills therefor. Penn Traffic also agrees to indemnify and hold MTH harmless
against any losses, claims, damages or liabilities, joint or several, to which
MTH may become subject in connection with the services or matters which are the
subject of this Agreement; provided, however, that Penn Traffic shall not be
liable under the foregoing indemnity agreement in respect of any loss, claim,
damage or liability to the extent that a court having jurisdiction shall have
determined by a final judgment that such loss, claim, damage or liability
resulted from MTH's willful misfeasance or gross negligence. In the event that
the foregoing indemnity is unavailable or insufficient to hold MTH harmless,
then Penn Traffic shall contribute to amounts paid or payable by MTH in respect
of such losses, claims, damages and liabilities in such proportion as
approximately reflects the relative benefits received by, and fault of, Penn
Traffic, on the one hand, and MTH, on the other hand, in connection with the
matters as to
<PAGE>
The Penn Traffic Company 3.
which such losses, claims, damages or liabilities relate and other equitable
considerations. The agreements of Penn Traffic in this paragraph shall be in
addition to any liability that Penn Traffic may otherwise have and shall, upon
the same terms and conditions, extend to and inure to the benefit of each person
who may be deemed to control MTH.
It is expressly understood and agreed that MTH provides and will continue
to provide financial, investment and consulting services, similar to those
provided for herein, to others and is compensated by such persons on terms which
may be more or less favorable to MTH than those provided for herein.
Neither MTH nor Penn Traffic shall be permitted to assign their rights or
obligations under this Agreement without the consent of MTH, in the case of a
proposed assignment by Penn Traffic, or the consent of Penn Traffic, in the case
of a proposed assignment by MTH. Any consent to a proposed assignment requested
hereunder shall not be unreasonably withheld by the party from whom such consent
is requested.
If the foregoing is consistent with your understanding of the agreement
among us with respect to the subject of this letter, please so indicate where
indicated below, whereupon this will constitute a binding agreement among us.
Sincerely yours,
MILLER TABAK HIRSCH + CO.
By: /s/ Martin A. Fox
-------------------------
Martin A. Fox
Executive Vice President
Accepted and Agreed as of the
date first written above
THE PENN TRAFFIC COMPANY
By: /s/ Claude J. Incaudo
----------------------------
Claude J. Incaudo
President
<PAGE>
Exhibit 10.24
THE PENN TRAFFIC COMPANY
DEBT SECURITIES
UNDERWRITING AGREEMENT
December 14, 1993
Goldman, Sachs & Co.,
BT Securities Corporation,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Dear Sirs:
From time to time The Penn Traffic Company, a Delaware corporation
(the "Company"), proposes to enter into one or more Pricing Agreements (each a
"Pricing Agreement") in the form of Annex I hereto, with such additions and
deletions as the parties thereto may determine, and subject to the terms and
conditions stated herein and therein, to issue and sell to the firms named in
Schedule I to the applicable Pricing Agreement (such firms constituting the
"Underwriters" with respect to such Pricing Agreement and the securities
specified therein) certain of its debt securities (the "Securities") specified
in Schedule II to such Pricing Agreement (with respect to such Pricing
Agreement, the "Designated Securities"), less the principal amount of Designated
Securities covered by Delayed Delivery Contracts, if any, as provided in
Section 3 hereof and as may be specified in Schedule II to such Pricing Agree-
ment (with respect to such Pricing Agreement, any Designated Securities to be
covered by Delayed Delivery Contracts being herein sometimes referred to as
"Contract Securities" and the Designated Securities to be purchased by the
Underwriters (after giving effect to the deduction, if any, for Contract
Securities) being herein sometimes referred to as "Underwriters' Securities").
The terms and rights of any particular issuance of Designated
Securities shall be as specified in the Pricing Agreement relating thereto and
in or pursuant to the indenture (the "Indenture") identified in such Pricing
Agreement.
1. Particular sales of Designated Securities may be made from time to
time to the Underwriters of such Securities, for whom the firms designated as
representatives of the Underwriters of such Securities in the Pricing Agreement
relating thereto will act as representatives (the "Representatives"). The term
"Representatives" also refers to a single firm acting as sole representative of
the Underwriters and to Underwriters who act without any firm being designated
as their representative. This Underwriting Agreement shall not be construed as
an obligation of the Company to sell any of the Securities or as an obligation
of any of the Underwriters to purchase the Securities. The obligation of the
Company to issue and sell any of the Securities and the obligation of any of the
Underwriters to purchase any of the Securities shall be evidenced by the Pricing
Agreement with respect to the Designated Securities specified therein. Each
Pricing Agreement shall specify the aggregate principal amount of such
Designated Securities, the
<PAGE>
initial public offering price of such Designated Securities, the purchase price
to the Underwriters of such Designated Securities, the names of the Underwriters
of such Designated Securities, the names of the Representatives of such
Underwriters and the principal amount of such Designated Securities to be
purchased by each Underwriter and whether any of such Designated Securities
shall be covered by Delayed Delivery Contracts (as defined in Section 3 hereof)
and shall set forth the date, time and manner of delivery of such Designated
Securities and payment therefor. The Pricing Agreement shall also specify (to
the extent not set forth in the Indenture and the registration statement and
prospectus with respect thereto) the terms of such Designated Securities. A
Pricing Agreement shall be in the form of an executed writing (which may be in
counterparts), and may be evidenced by an exchange of telegraphic communications
or any other rapid transmission device designed to produce a written record of
communications transmitted. The obligations of the Underwriters under this
Agreement and each Pricing Agreement shall be several and not joint.
2. The Company represents and warrants to, and agrees with, each of
the Underwriters that:
(a) A registration statement in respect of the Securities has been
filed with the Securities and Exchange Commission (the "Commission"); such
registration statement and any post-effective amendment thereto, each in
the form heretofore delivered or to be delivered to the Representatives
and, excluding exhibits to such registration statement, but including all
documents incorporated by reference in the prospectus contained therein, to
the Representatives for each of the other Underwriters, have been declared
effective by the Commission in such form; no other document with respect to
such registration statement or document incorporated by reference in the
prospectus contained therein has heretofore been filed or transmitted for
filing with the Commission; and no stop order suspending the effectiveness
of such registration statement has been issued and no proceeding for that
purpose has been initiated or threatened by the Commission (any preliminary
prospectus included in such registration statement or filed with the
Commission pursuant to Rule 424(a) of the rules and regulations of the
Commission under the Securities Act of 1933, as amended (the "Act"), being
hereinafter called a "Preliminary Prospectus"; the various parts of such
registration statement, including all exhibits thereto and the documents
incorporated by reference in the prospectus contained in the registration
statement at the time such part of the registration statement became
effective but excluding Form T-1, each as amended at the time such part of
the registration statement became effective, being hereinafter called the
"Registration Statement"; the prospectus relating to the Securities, in the
form in which it has most recently been filed, or transmitted for filing,
with the Commission on or prior to the date of this Agreement, being
hereinafter called the "Prospectus"; any reference herein to any
Preliminary Prospectus or the Prospectus shall be deemed to refer to and
include the documents incorporated by reference therein pursuant to the
applicable form under the Act, as of the date of such Preliminary
Prospectus or Prospectus, as the case may be; any reference to any
amendment or supplement to any Preliminary Prospectus or the Prospectus
shall be deemed to refer to and include any documents filed after the date
of such Preliminary Prospectus or Prospectus, as the case may be, under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
incorporated by reference in such Preliminary Prospectus or Prospectus, as
the case may be; any reference to any amendment to the Registration State-
ment shall be deemed to refer to and include any annual report of the
Company filed pursuant to Section 13(a) or 15(d) of the Exchange Act after
the effective date of the Registration Statement that is incorporated by
reference in the Registration Statement; and any reference to the
Prospectus as amended or supplemented shall be deemed to refer to the
Prospectus as amended or supplemented in relation to the applicable Desig-
nated Securities in the form in which it is filed with the Commission
pursuant to Rule 424(b) under the Act in accordance with Section 5(a)
hereof, including any documents incorporated by reference therein as of the
date of such filing);
(b) The documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case may
be, conformed in all material respects to the requirements of the Act or
the Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder, and none of such documents contained an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; and any further documents so filed and incorporated by
2
<PAGE>
reference in the Prospectus or any further amendment or supplement thereto,
when such documents become effective or are filed with the Commission, as
the case may be, will conform in all material respects to the requirements
of the Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder and will not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading; provided, however, that this representation and warranty shall
not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter of Designated Securities through the Representatives expressly
for use in the Prospectus as amended or supplemented relating to such
Securities;
(c) The Registration Statement and the Prospectus conform, and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of
the Act and the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act") and the rules and regulations of the Commission thereunder
and do not and will not, as of the applicable effective date as to the
Registration Statement and any amendment thereto and as of the applicable
filing date as to the Prospectus and any amendment or supplement thereto,
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the Company
by an Underwriter of Designated Securities through the Representatives
expressly for use in the Prospectus as amended or supplemented relating to
such Securities;
(d) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus any material loss or inter-
ference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus; and, since the respective dates as of which
information is given in the Registration Statement and the Prospectus,
there has not been any change in the capital stock or long-term debt of the
Company or any of its subsidiaries or any material adverse change, or any
development involving a prospective material adverse change, in or
affecting the general affairs, management, financial position, stock-
holders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the
Prospectus;
(e) The Company and its subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all
personal property owned by them, in each case free and clear of all liens,
encumbrances and defects except for certain liens securing debt and other
obligations described in the Notes to the Consolidated Financial Statements
and debt described under the caption "Terms of Financing Agreements"
contained in the Prospectus or described in the Company's Quarterly Report
on Form 10-Q for the quarter ended October 30, 1993, or such as do not
materially affect the value of such property and do not interfere with the
use made and proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries (taken as a whole);
(f) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware,
with power and authority (corporate and other) to own its properties and
conduct its business as described in the Prospectus, and has been duly
qualified as a foreign corporation for the transaction of business and is
in good standing under the laws of each other jurisdiction in which it owns
or leases properties, or conducts any business, so as to require such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the business of the Company and its subsidiaries
(taken as a whole); and each subsidiary of the Company has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation;
3
<PAGE>
(g) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued and are fully paid and
non-assessable; and all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and issued,
are fully paid and non-assessable and are owned directly or indirectly by
the Company, free and clear of all liens, encumbrances, equities or claims;
(h) The Securities have been duly authorized, and, when Designated
Securities are issued and delivered pursuant to this Agreement and the
Pricing Agreement with respect to such Designated Securities and, in the
case of any Contract Securities, pursuant to Delayed Delivery Contracts (as
defined in Section 3 hereof) with respect to such Contract Securities, such
Designated Securities will have been duly executed, authenticated, issued
and delivered and will constitute valid and legally binding obligations of
the Company entitled to the benefits provided by the Indenture, which will
be substantially in the form filed as an exhibit to the Registration
Statement; the Indenture has been duly authorized and duly qualified under
the Trust Indenture Act and, at the Time of Delivery for such Designated
Securities (as defined in Section 4 hereof), the Indenture will constitute
a valid and legally binding instrument, enforceable in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency, reorgani-
zation and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles; and the Indenture
conforms, and the Designated Securities will conform, to the descriptions
thereof contained in the Prospectus as amended or supplemented with respect
to such Designated Securities;
(i) The issue and sale of the Securities and the compliance by the
Company with all of the provisions of the Securities, the Indenture, each
of the Delayed Delivery Contracts, this Agreement and any Pricing
Agreement, and the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound or to which any of
the property or assets of the Company or any of its subsidiaries is sub-
ject, nor will such action result in any violation of the provisions of the
Certificate of Incorporation or By-laws of the Company or any statute or
any order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or any of its subsidiaries or any of
their properties, except for such breaches or violations which would not,
individually or in the aggregate, have a material adverse effect on the
business of the Company and its subsidiaries (taken as a whole); and no
consent, approval, authorization, order, registration or qualification of
or with any such court or governmental agency or body is required for the
issue and sale of the Securities or the consummation by the Company of the
transactions contemplated by this Agreement or any Pricing Agreement or the
Indenture or any Delayed Delivery Contract, except such as have been, or
will have been prior to the Time of Delivery, obtained under the Act and
the Trust Indenture Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under state securities
or Blue Sky laws in connection with the purchase and distribution of the
Securities by the Underwriters;
(j) Other than as set forth or contemplated in the Prospectus, there
are no legal or governmental proceedings pending to which the Company or
any of its subsidiaries is a party or of which any property of the Company
or any of its subsidiaries is the subject which, if determined adversely to
the Company or any of its subsidiaries, would individually or in the aggre-
gate have a material adverse effect on the consolidated financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries; and, to the best of the Company's knowledge, no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others;
(k) The accountants, who have certified certain financial statements
of the Company and its subsidiaries, are independent public accountants as
required by the Act and the rules and regulations of the Commission
thereunder; and
(l) In the event any of the Securities are purchased pursuant to
Delayed Delivery Contracts, each of such Delayed Delivery Contracts has
been duly authorized by the Company and,
4
<PAGE>
when executed and delivered by the Company and the purchaser named therein,
will constitute a valid and legally binding agreement of the Company
enforceable in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other laws of general appli-
cability relating to or affecting creditors' rights and to general equity
principles; and any Delayed Delivery Contracts conform to the description
thereof in the Prospectus.
3. Upon the execution of the Pricing Agreement applicable to any
Underwriters' Securities and authorization by the Representatives of the release
of such Underwriters' Securities, the several Underwriters propose to offer such
Underwriters' Securities for sale upon the terms and conditions set forth in the
Prospectus as amended or supplemented.
The Company may specify in Schedule II to the Pricing Agreement
applicable to any Designated Securities that the Underwriters are authorized to
solicit offers to purchase Designated Securities from the Company pursuant to
delayed delivery contracts (herein called "Delayed Delivery Contracts"), sub-
stantially in the form of Annex III attached hereto but with such changes
therein as the Representatives and the Company may authorize or approve. If so
specified, the Underwriters will endeavor to make such arrangements, and as
compensation therefor the Company will pay to the Representatives, for the
accounts of the Underwriters, at the Time of Delivery (as defined in Section 4
hereof), such commission, if any, as may be set forth in such Pricing Agreement.
Delayed Delivery Contracts, if any, are to be with investors of the types
described in the Prospectus and subject to other conditions therein set forth.
The Underwriters will not have any responsibility with respect to the validity
or performance of any Delayed Delivery Contracts.
The principal amount of Contract Securities to be deducted from the
principal amount of Designated Securities to be purchased by each Underwriter as
set forth in Schedule I to the Pricing Agreement applicable to such Designated
Securities shall be, in each case, the principal amount of Contract Securities
which the Company has been advised by the Representatives have been attributed
to such Underwriter, provided that, if the Company has not been so advised, the
amount of Contract Securities to be so deducted shall be, in each case, that
proportion of Contract Securities which the principal amount of Designated
Securities to be purchased by such Underwriter under such Pricing Agreement
bears to the total principal amount of the Designated Securities (rounded as the
Representatives may determine). The total principal amount of Underwriters'
Securities to be purchased by all the Underwriters pursuant to such Pricing
Agreement shall be the total principal amount of Designated Securities set forth
in Schedule I to such Pricing Agreement less the principal amount of the
Contract Securities. The Company will deliver to the Representatives not later
than 3:30 p.m., New York City time, on the third business day preceding the Time
of Delivery specified in the applicable Pricing Agreement (or such other time
and date as the Representatives and the Company may agree upon in writing) a
written notice setting forth the principal amount of Contract Securities.
4. Underwriters' Securities to be purchased by each Underwriter
pursuant to the Pricing Agreement relating thereto, in definitive form to the
extent practicable, and in such authorized denominations and registered in such
names as the Representatives may request upon at least forty-eight hours' prior
notice to the Company, shall be delivered by or on behalf of the Company to the
Representatives for the account of such Underwriter, against payment by such
Underwriter or on its behalf of the purchase price therefor by certified or
official bank check or checks, payable to the order of the Company in the funds
specified in such Pricing Agreement, all at the place and time and date
specified in such Pricing Agreement or at such other place and time and date as
the Representatives and the Company may agree upon in writing, such time and
date being herein called the "Time of Delivery" for such Securities.
Concurrently with the delivery of and payment for the Underwriters'
Securities, the Company will deliver to the Representatives for the accounts of
the Underwriters a check payable to the order of the party designated in the
Pricing Agreement relating to such Securities in the amount of any compensation
payable by the Company to the Underwriters in respect of any Delayed Delivery
Contracts as provided in Section 3 hereof and the Pricing Agreement relating to
such Securities.
5
<PAGE>
5. The Company agrees with each of the Underwriters of any Designated
Securities:
(a) To prepare the Prospectus as amended and supplemented in relation
to the applicable Designated Securities in a form approved by the Repre-
sentatives and to file such Prospectus pursuant to Rule 424(b) under the
Act not later than the Commission's close of business on the second
business day following the execution and delivery of the Pricing Agreement
relating to the applicable Designated Securities or, if applicable, such
earlier time as may be required by Rule 424(b); to make no further
amendment or any supplement to the Registration Statement or Prospectus as
amended or supplemented after the date of the Pricing Agreement relating to
the Designated Securities and prior to the Time of Delivery for the
Designated Securities which shall be disapproved by the Representatives for
the Designated Securities promptly after reasonable notice thereof; to
advise the Representatives promptly of any such amendment or supplement
after such Time of Delivery and furnish the Representatives with copies
thereof; to file promptly all reports and any definitive proxy or
information statements required to be filed by the Company with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act for so long as the delivery of a prospectus is required in connection
with the offering or sale of the Designated Securities, and during such
same period to advise the Representatives, promptly after it receives
notice thereof, of the time when any amendment to the Registration State-
ment has been filed or becomes effective or any supplement to the
Prospectus or any amended Prospectus has been filed with the Commission, of
the issuance by the Commission of any stop order or of any order preventing
or suspending the use of any prospectus relating to the Designated
Securities, of the suspension of the qualification of the Designated
Securities for offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any request by
the Commission for the amending or supplementing of the Registration State-
ment or Prospectus or for additional information; and, in the event of the
issuance of any such stop order or of any such order preventing or
suspending the use of any prospectus relating to the Designated Securities
or suspending any such qualification, to use promptly its best efforts to
obtain its withdrawal;
(b) Promptly from time to time to take such action as the
Representatives may reasonably request to qualify the Designated Securities
for offering and sale under the securities laws of such jurisdictions as
the Representatives may request and to comply with such laws so as to
permit the continuance of sales and dealings therein in such jurisdictions
for as long as may be necessary to complete the distribution of the
Designated Securities, provided that in connection therewith the Company
shall not be required to qualify as a foreign corporation or to file a
general consent to service of process in any jurisdiction;
(c) To furnish the Underwriters with copies of the Prospectus as
amended or supplemented in such quantities as the Representatives may from
time to time reasonably request, and, if the delivery of a prospectus is
required at any time in connection with the offering or sale of the
Designated Securities and if at such time any event shall have occurred as
a result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made when such Prospectus
is delivered, not misleading, or, if for any other reason it shall be
necessary during such same period to amend or supplement the Prospectus or
to file under the Exchange Act any document incorporated by reference in
the Prospectus in order to comply with the Act, the Exchange Act or the
Trust Indenture Act, to notify the Representatives and upon their request
to file such document and to prepare and furnish without charge to each
Underwriter and to any dealer in securities as many copies as the
Representatives may from time to time reasonably request of an amended
Prospectus or a supplement to the Prospectus which will correct such
statement or omission or effect such compliance;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)),
an earning statement of the Company and its subsidiaries (which need not be
audited) complying with Section 11(a) of the Act and the rules and
regulations of the Commission thereunder (including at the option of the
Company Rule 158);
6
<PAGE>
(e) During the period beginning from the date of the Pricing
Agreement for such Designated Securities and continuing to and including
the later of (i) the termination of trading restrictions for such
Designated Securities, as notified to the Company by the Representatives
and (ii) the Time of Delivery for such Designated Securities, not to offer,
sell, contract to sell or otherwise dispose of any debt securities of the
Company which mature more than one year after such Time of Delivery and
which are substantially similar to such Designated Securities, without the
prior written consent of the Representatives;
(f) To furnish to the holders of the Designated Securities as soon as
practicable after the end of each fiscal year an annual report (including a
balance sheet and statements of operations, stockholders' equity and cash
flow of the Company and its consolidated subsidiaries certified by
independent public accountants) and, as soon as practicable after the end
of each of the first three quarters of each fiscal year (beginning with the
fiscal quarter ending after the effective date of the Registration
Statement), consolidated summary financial information of the Company and
its subsidiaries for such quarter in reasonable detail; and to furnish to
the holders of the Designated Securities all other documents specified in
the applicable section or sections of the Indenture, all in the manner so
specified;
(g) During a period of five years from the effective date of the
Registration Statement, to furnish to the Representatives copies of all
reports or other communications (financial or other) furnished to
stockholders, and deliver to the Representatives (i) as soon as they are
available, copies of any reports and financial statements furnished to or
filed with the Commission or any national securities exchange on which the
Designated Securities or any class of securities of the Company is listed
and the documents specified in the applicable section or sections of the
Indenture; and (ii) such additional information concerning the business and
financial condition of the Company as the Representatives may from time to
time reasonably request (such financial statements to be on a consolidated
basis to the extent the accounts of the Company and its subsidiaries are
consolidated in reports furnished to its stockholders generally or to the
Commission); and
(h) To apply the net proceeds from the sale of the Designated
Securities for the purposes set forth in the Prospectus as amended or
supplemented.
6. The Company covenants and agrees with the several Underwriters
that the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in connec-
tion with the registration of the Securities under the Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Agreement among Underwriters, this Agreement, any Pricing Agreement, any
Indenture, any Delayed Delivery Contracts, any Blue Sky and Legal Investment
Memoranda and any other documents in connection with the offering, purchase,
sale and delivery of the Securities; (iii) all expenses in connection with the
qualification of the Securities for offering and sale under state securities
laws as provided in Section 5(b) hereof, including the fees and disbursements of
counsel for the Underwriters in connection with such qualification and in
connection with the Blue Sky and legal investment surveys; (iv) any fees charged
by securities rating services for rating the Securities; (v) any filing fees
incident to any required review by the National Association of Securities
Dealers, Inc. of the terms of the sale of the Securities; (vi) the cost of
preparing the Securities; (vii) the fees and expenses of any Trustee and any
agent of any Trustee and the fees and disbursements of counsel for any Trustee
in connection with any Indenture and the Securities; and (viii) all other costs
and expenses incident to the performance of its obligations hereunder and under
any Delayed Delivery Contracts which are not otherwise specifically provided for
in this Section. It is understood, however, that, except as provided in this
Section, Section 8 and Section 11 hereof, the Underwriters will pay all of their
own costs and expenses, including the fees of their counsel, transfer taxes on
resale of any of the Securities by them, and any advertising expenses connected
with any offers they may make.
7. The obligations of the Underwriters of any Designated Securities
under the Pricing Agreement relating to such Designated Securities shall be
subject, in the discretion of the Representatives,
7
<PAGE>
to the condition that all representations and warranties and other statements of
the Company in or incorporated by reference in the Pricing Agreement relating to
such Designated Securities are, at and as of the Time of Delivery for such
Designated Securities, true and correct, the condition that the Company shall
have performed all of its obligations hereunder theretofore to be performed, and
the following additional conditions:
(a) The Prospectus as amended or supplemented in relation to the
applicable Designated Securities shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed for
such filing by the rules and regulations under the Act and in accordance
with Section 5(a) hereof; no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the
Commission; and all requests for additional information on the part of the
Commission shall have been complied with to the Representatives' reasonable
satisfaction;
(b) Counsel for the Underwriters shall have furnished to the
Representatives such opinion or opinions, dated the Time of Delivery for
such Designated Securities, with respect to the incorporation of the
Company, the validity of the Indenture, the Designated Securities, the
Delayed Delivery Contracts, if any, the Registration Statement, the
Prospectus as amended or supplemented and other related matters as the
Representatives may reasonably request, and such counsel shall have
received such papers and information as they may reasonably request to
enable them to pass upon such matters;
(c) Counsel for the Company satisfactory to the Representatives shall
have furnished to the Representatives their written opinion, dated the Time
of Delivery for such Designated Securities, in form and substance
satisfactory to the Representatives, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus as
amended or supplemented;
(ii) The Company has an authorized capitalization as set forth
in the Prospectus as amended or supplemented and all of the issued
shares of capital stock of the Company have been duly and validly
authorized and issued and are fully paid and non-assessable;
(iii) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases
properties, or conducts any business, so as to require such
qualification, except where the failure to be so qualified would not
have a material adverse effect on the business of the Company and its
subsidiaries (taken as a whole) (such counsel being entitled to rely
in respect of the opinion in this clause upon opinions of local
counsel, provided that such counsel shall state that they believe that
both the Representatives and they are justified in relying upon such
opinions);
(iv) Each subsidiary of the Company has been duly incorporated
and is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation; and all of the issued
shares of capital stock of each such subsidiary have been duly and
validly authorized and issued, are fully paid and non-assessable, and
(except for directors' qualifying shares and except as otherwise set
forth in the Prospectus as amended or supplemented) are owned directly
or indirectly by the Company, free and clear of all liens, encum-
brances, equities or claims (such counsel being entitled to rely in
respect of the opinion in this clause upon opinions of local counsel,
provided that such counsel shall state that they believe that both the
Representatives and they are justified in relying upon such opinions);
(v) To the best of such counsel's knowledge and other than as
set forth in the Prospectus as amended or supplemented, there are no
legal or governmental
8
<PAGE>
proceedings pending to which the Company is a party or of which any
property of the Company is the subject which, if determined adversely
to the Company, would individually or in the aggregate have a material
adverse effect on the consolidated financial position, stockholders'
equity or results of operations of the Company and its subsidiaries
(taken as a whole); and, to the best of such counsel's knowledge, no
such proceedings are threatened or contemplated by governmental
authorities or threatened by others;
(vi) This Agreement and the Pricing Agreement with respect to
the Designated Securities have been duly authorized, executed and
delivered by the Company;
(vii) The Designated Securities have been duly authorized; the
Underwriters' Securities have been duly executed, authenticated,
issued and delivered and constitute valid and legally binding
obligations of the Company entitled to the benefits provided by the
Indenture subject to applicable bankruptcy, insolvency and other
similar laws affecting creditors' rights in general and subject to
general principles of equity (regardless of whether enforcement is
sought in a proceeding in equity or at law); the Contract Securities,
if any, when executed, authenticated, issued and delivered pursuant to
the Indenture and Delayed Delivery Contracts, if any, will constitute
valid and legally binding obligations of the Company entitled to the
benefits provided by the Indenture subject to applicable bankruptcy,
insolvency and other similar laws affecting creditors' rights in
general and subject to general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law);
and the Designated Securities and the Indenture conform to the
descriptions thereof in the Prospectus as amended or supplemented;
(viii) The Indenture has been duly authorized, executed and
delivered by the parties thereto and constitutes a valid and legally
binding instrument, enforceable against the Company in accordance with
its terms, subject to applicable bankruptcy, insolvency and other
similar laws affecting creditors' rights in general and subject to
general equity principles (regardless of whether enforcement is sought
in a proceeding in equity or at law); and the Indenture has been duly
qualified under the Trust Indenture Act;
(ix) The issue and sale of the Designated Securities by the
Company and the compliance by the Company with all of the provisions
of the Designated Securities, the Indenture, each of the Delayed
Delivery Contracts, if any, this Agreement and the Pricing Agreement
with respect to the Designated Securities and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of,
or constitute a default under, the Certificate of Incorporation or the
By-laws of the Company or the terms of any indenture, mortgage, deed
of trust, loan agreement or other material agreement or instrument
known to such counsel to which the Company is a party or by which the
Company is bound or to which any of the property or assets of the
Company is subject, nor will such actions result in any violation of
the provisions of any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over the
Company or any of its properties known to such counsel to be
applicable to the Company or any of its properties;
(x) No consent, approval, authorization, order, registration
or qualification of or with any such court or governmental agency or
body is required for the issue and sale of the Designated Securities
or the consummation by the Company of the transactions contemplated by
this Agreement or such Pricing Agreement or the Indenture or any of
such Delayed Delivery Contracts, except such as have been obtained
under the Act and the Trust Indenture Act and such consents,
approvals, authorizations, registrations or qualifications as may be
required under state securities or Blue Sky laws in connection with
the purchase and distribution of the Designated Securities by the
Underwriters;
(xi) The documents incorporated by reference in the Prospectus
as amended or supplemented (other than the financial statements and
related schedules and other financial and statistical information
contained therein, as to which such counsel need express no opinion),
when they became effective or were filed with the Commission, as the
9
<PAGE>
case may be, complied as to form in all material respects with the
requirements of the Act or the Exchange Act, as applicable, and the
rules and regulations of the Commission thereunder; and nothing has
come to their attention which causes them to believe that any of such
documents (other than the financial statements and related schedules
and other financial and statistical information contained therein),
when they became effective or were so filed, as the case may be,
contained, in the case of a registration statement which became
effective under the Act, an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or, in the
case of other documents which were filed under the Act or the Exchange
Act with the Commission, an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made when such documents were so filed, not misleading;
(xii) The Registration Statement and the Prospectus as amended
or supplemented and any further amendments and supplements thereto
made by the Company prior to the Time of Delivery for the Designated
Securities (other than the financial statements and related schedules
and other financial and statistical information contained therein, as
to which such counsel need express no opinion) comply as to form in
all material respects with the requirements of the Act and the Trust
Indenture Act and the rules and regulations thereunder; nothing has
come to their attention which causes them to believe that, as of its
effective date, the Registration Statement or any further amendment
thereto made by the Company prior to the Time of Delivery (other than
the financial statements and related schedules and other financial and
statistical information contained therein, as to which such counsel
need express no opinion) contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or that, as
of its date, the Prospectus as amended or supplemented or any further
amendment or supplement thereto made by the Company prior to the Time
of Delivery (other than the financial statements and related schedules
and other financial and statistical information contained therein, as
to which such counsel need express no opinion) contained an untrue
statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in light of the circum-
stances in which they were made, not misleading or that, as of the
Time of Delivery, either the Registration Statement or the Prospectus
as amended or supplemented or any further amendment or supplement
thereto made by the Company prior to the Time of Delivery (other than
the financial statements and related schedules therein, as to which
such counsel need express no opinion) contains an untrue statement of
a material fact or omits to state a material fact necessary to make
the statements therein, in light of the circumstances in which they
were made, not misleading; and they do not know of any amendment to
the Registration Statement required to be filed or any contracts or
other documents of a character required to be filed as an exhibit to
the Registration Statement or required to be incorporated by reference
into the Prospectus as amended or supplemented or required to be
described in the Registration Statement or the Prospectus as amended
or supplemented which are not filed or incorporated by reference or
described as required; and
(xiii) In the event any of the Designated Securities are to be
purchased pursuant to Delayed Delivery Contracts, each such Delayed
Delivery Contract has been duly authorized, executed and delivered by
the Company and, assuming such Contract has been duly executed and
delivered by the purchaser named therein, constitutes a valid and
legally binding agreement of the Company enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency and other
similar laws affecting creditors' rights in general and to general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law); and each such Delayed Delivery
Contract conforms to the description thereof in the Prospectus as
amended or supplemented.
In rendering such opinion, to the extent that such counsel express any
opinion as to the laws of any other jurisdiction (other than the laws of New
York, Delaware and the United States), they may
10
<PAGE>
state that they are relying upon opinions of local counsel (copies of which are
attached to their opinion), which local counsel shall be satisfactory to the
Representatives.
(d) On the date of the Pricing Agreement for such Designated
Securities and at the Time of Delivery for such Designated Securities, the
independent accountants of the Company who have certified the financial
statements of the Company and its subsidiaries included or incorporated by
reference in the Registration Statement shall have furnished to the
Representatives a letter, dated the effective date of the Registration
Statement or the date of the most recent report filed with the Commission
containing financial statements and incorporated by reference in the
Registration Statement, if the date of such report is later than such
effective date, and a letter dated such Time of Delivery, respectively, to
the effect set forth in Annex II hereto, and with respect to such letter
dated such Time of Delivery, as to such other matters as the Repre-
sentatives may reasonably request and in form and substance satisfactory to
the Representatives;
(e) (i) The Company has not sustained since the date of the latest
audited financial statements included or incorporated by reference in the
Prospectus as amended or supplemented any material loss or interference
with its business from fire, explosion, flood or other calamity, whether or
not covered by insurance, or from any labor dispute or court or govern-
mental action, order or decree, otherwise than as set forth or contemplated
in the Prospectus as amended or supplemented, and (ii) since the respective
dates as of which information is given in the Prospectus as amended or
supplemented there shall not have been any change in the capital stock or
long-term debt of the Company or any change, or any development involving a
prospective change, in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations of the
Company, otherwise than as set forth or contemplated in the Prospectus as
amended or supplemented, the effect of which, in any such case described in
Clause (i) or (ii), is in the reasonable judgment of the Representatives so
material and adverse as to make it impracticable or inadvisable to proceed
with the public offering or the delivery of the Underwriters' Securities on
the terms and in the manner contemplated in the Prospectus as amended or
supplemented;
(f) On or after the date of the Pricing Agreement relating to the
Designated Securities (i) no downgrading shall have occurred in the rating
accorded the Company's debt securities by any "nationally recognized
statistical rating organization," as that term is defined by the Commission
for purposes of Rule 436(g)(2) under the Act and (ii) no such organization
shall have publicly announced that it has under surveillance or review,
with possible negative implications, its rating of any of the Company's
debt securities;
(g) On or after the date of the Pricing Agreement relating to the
Designated Securities there shall not have occurred any of the following:
(i) a suspension or material limitation in trading in securities generally
on the New York Stock Exchange or the American Stock Exchange; (ii) a
general moratorium on commercial banking activities in New York declared by
either Federal or New York State authorities; or (iii) the outbreak or
escalation of hostilities involving the United States or the declaration by
the United States of a national emergency or war, if the effect of any such
event specified in this clause (iii) in the reasonable judgment of the
Representatives makes it impracticable or inadvisable to proceed with the
public offering or the delivery of the Underwriters' Securities on the
terms and in the manner contemplated by the Prospectus as amended and
supplemented; and
(h) The Company shall have furnished or caused to be furnished to the
Representatives at the Time of Delivery for the Designated Securities a
certificate or certificates of officers of the Company satisfactory to the
Representatives as to the accuracy of the representations and warranties of
the Company herein at and as of such Time of Delivery, as to the
performance by the Company of all of its obligations hereunder to be
performed at or prior to such Time of Delivery, as to the matters set forth
in subsections (a) and (e) of this Section and as to such other matters as
the Representatives may reasonably request.
8. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the
11
<PAGE>
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in any Preliminary
Prospectus, any preliminary prospectus supplement, the Registration Statement,
the Prospectus as amended or supplemented and any other prospectus relating to
the Securities, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse each Underwriter for any legal or other expenses
reasonably incurred by such Underwriter in connection with investigating or
defending any such action or claim as such expenses are incurred; provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in any Preliminary Prospectus, any preliminary prospectus supplement, the
Registration Statement, the Prospectus as amended or supplemented and any other
prospectus relating to the Securities, or any such amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by any Underwriter of Designated Securities through the Representatives
expressly for use in the Prospectus as amended or supplemented relating to such
Securities; and PROVIDED, FURTHER, that the Company shall not be liable to any
Underwriter under the indemnity agreement in this subsection (a) with respect to
any Preliminary Prospectus to the extent that any such loss, claim, damage or
liability of such Underwriter results from the fact that such Underwriter sold
Securities to a person to whom there was not sent or given, at or prior to the
written confirmation of such sale, a copy of the Prospectus (excluding documents
incorporated by reference) or of the Prospectus as then amended or supplemented
(excluding documents incorporated by reference) in any case where such delivery
is required by the Act if the Company has previously furnished copies thereof to
such Underwriter and the loss, claim, damage or liability of such Underwriter
results from an untrue statement or omission of a material fact contained in the
Preliminary Prospectus which was corrected in the Prospectus (or the Prospectus
as amended or supplemented).
(b) Each Underwriter will indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company may
become subject, under the Act or otherwise, insofar as such losses, claims, dam-
ages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, any preliminary prospectus supplement,
the Registration Statement, the Prospectus as amended or supplemented and any
other prospectus relating to the Securities, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, any preliminary
prospectus supplement, the Registration Statement, the Prospectus as amended or
supplemented and any other prospectus relating to the Securities, or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through the Repre-
sentatives expressly for use therein; and will reimburse the Company for any
legal or other expenses reasonably incurred by the Company in connection with
investigating or defending any such action or claim as such expenses are
incurred.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation.
12
<PAGE>
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
of the Designated Securities on the other from the offering of the Designated
Securities to which such loss, claim, damage or liability (or action in respect
thereof) relates. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law or if the indemnified
party failed to give the notice required under subsection (c) above, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand and
the Underwriters of the Designated Securities on the other in connection with
the statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and such Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from such offering (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by such Underwriters. The relative fault shall be deter-
mined by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
such Underwriters on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this subsection (d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this subsection (d). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to above in this
subsection (d) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this subsection (d),
no Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the applicable Designated Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The obliga-
tions of the Underwriters of Underwriters' Securities in this subsection (d) to
contribute are several in proportion to their respective underwriting
obligations with respect to such Securities and not joint.
(e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company and to each
person, if any, who controls the Company within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to
purchase the Underwriters' Securities which it has agreed to purchase under the
Pricing Agreement relating to such Underwriters' Securities, the Representatives
may in their discretion arrange for themselves or another party or other parties
to purchase such Underwriters' Securities on the terms contained herein. If
within thirty-six hours after such default by any Underwriter the
Representatives do not arrange for the purchase of such Underwriters'
Securities, then the Company shall be entitled to a further period of thirty-six
hours within which to procure another party or other parties satisfactory to the
Representatives to purchase such Underwriters' Securities on such terms. In the
event that, within the respective prescribed period, the Representatives notify
the Company that they have so arranged for the purchase of such Underwriters'
Securities, or the Company notifies the Representatives that it has so arranged
for the purchase of such Underwriters' Securities, the Representatives or the
Company shall have the right to postpone the Time of Delivery for such
Underwriters' Securities for a period of not more than seven days, in order to
effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus as
13
<PAGE>
amended or supplemented, or in any other documents or arrangements, and the
Company agrees to file promptly any amendments or supplements to the Regis-
tration Statement or the Prospectus which in the opinion of the Representatives
may thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like effect as if
such person had originally been a party to the Pricing Agreement with respect to
such Underwriters' Securities.
(b) If, after giving effect to any arrangements for the purchase of
the Underwriters' Securities of a defaulting Underwriter or Underwriters by the
Representatives and the Company as provided in subsection (a) above, the
aggregate principal amount of such Underwriters' Securities which remains
unpurchased does not exceed one-eleventh of the aggregate principal amount of
the Underwriters' Securities, then the Company shall have the right to require
each non-defaulting Underwriter to purchase the principal amount of
Underwriters' Securities which such Underwriter agreed to purchase under the
Pricing Agreement relating to such Underwriters' Securities and, in addition, to
require each non-defaulting Underwriter to purchase its pro rata share (based on
the principal amount of Underwriters' Securities which such Underwriter agreed
to purchase under such Pricing Agreement) of the Underwriters' Securities of
such defaulting Underwriter or Underwriters for which such arrangements have not
been made; but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
(c) If, after giving effect to any arrangements for the purchase of
the Underwriters' Securities of a defaulting Underwriter or Underwriters by the
Representatives and the Company as provided in subsection (a) above, the aggre-
gate principal amount of Underwriters' Securities which remains unpurchased
exceeds one-eleventh of the aggregate principal amount of the Underwriters'
Securities, as referred to in subsection (b) above, or if the Company shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Underwriters' Securities of a defaulting Underwriter or
Underwriters, then the Pricing Agreement relating to such Designated Securities
shall thereupon terminate, without liability on the part of any non-defaulting
Underwriter or the Company, except for the expenses to be borne by the Company
and the Underwriters as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations,
warranties and other statements of the Company and the several Underwriters, as
set forth in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement, shall remain in full force and effect, regardless of
any investigation (or any statement as to the results thereof) made by or on
behalf of any Underwriter or any controlling person of any Underwriter, or the
Company, or any officer or director or controlling person of the Company, and
shall survive delivery of and payment for the Securities.
11. If any Pricing Agreement shall be terminated pursuant to
Section 9 hereof, the Company shall not then be under any liability to any
Underwriter with respect to the Designated Securities covered by such Pricing
Agreement except as provided in Section 6 and Section 8 hereof; but, if for any
other reason Underwriters' Securities are not delivered by or on behalf of the
Company as provided herein, the Company will reimburse the Underwriters through
the Representatives for all out-of-pocket expenses approved in writing by the
Representatives, including fees and disbursements of counsel, reasonably
incurred by the Underwriters in making preparations for the purchase, sale and
delivery of such Designated Securities, but the Company shall then be under no
further liability to any Underwriter with respect to such Designated Securities
except as provided in Section 6 and Section 8 hereof.
12. In all dealings hereunder, the Representatives of the
Underwriters of Designated Securities shall act on behalf of each of such
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by such Representatives jointly or by such of the Representatives, if any,
as may be designated for such purpose in the Pricing Agreement.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Representatives as set forth in the
Pricing Agreement; and if to the Company shall be delivered or sent by mail,
telex or facsimile transmission to the address of the Company set forth in the
Registration Statement: Attention: Secretary; provided, however, that any notice
to an Underwriter pursuant to Section 8(c) hereof
14
<PAGE>
shall be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its Underwriters' Questionnaire, or
telex constituting such Questionnaire, which address will be supplied to the
Company by the Representatives upon request. Any such statements, requests,
notices or agreements shall take effect upon receipt thereof.
13. This Agreement and each Pricing Agreement shall be binding upon,
and inure solely to the benefit of, the Underwriters, the Company and, to the
extent provided in Section 8 and Section 10 hereof, the officers and directors
of the Company and each person who controls the Company or any Underwriter, and
their respective heirs, executors, administrators, successors and assigns, and
no other person shall acquire or have any right under or by virtue of this
Agreement or any such Pricing Agreement. No purchaser of any of the Securities
from any Underwriter shall be deemed a successor or assign by reason merely of
such purchase.
14. Time shall be of the essence of each Pricing Agreement. As used
herein, "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. THIS AGREEMENT AND EACH PRICING AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement and each Pricing Agreement may be executed by any
one or more of the parties hereto and thereto in any number of counterparts,
each of which shall be deemed to be an original, but all such respective
counterparts shall together constitute one and the same instrument.
15
<PAGE>
If the foregoing is in accordance with your understanding, please sign
and return to us five counterparts hereof.
Very truly yours,
THE PENN TRAFFIC COMPANY
By: /s/ Martin A. Fox
---------------------------------------------
Name: Martin A. Fox
Title: Vice Chairman - Finance
Accepted as of the date hereof:
Goldman, Sachs & Co.
BT Securities Corporation
By: /s/ Goldman, Sachs & Co.
----------------------------------------
(Goldman, Sachs & Co.)
16
<PAGE>
ANNEX I
PRICING AGREEMENT
Goldman, Sachs & Co.,
BT Securities Corporation,
As Representatives of the several
Underwriters named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
........., 19..
Dear Sirs:
The Penn Traffic Company, a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein and in the
Underwriting Agreement, dated December 14, 1993 (the "Underwriting Agreement"),
between the Company on the one hand and Goldman, Sachs & Co. and BT Securities
Corporation on the other hand, to issue and sell to the Underwriters named in
Schedule I hereto (the "Underwriters") the Securities specified in Schedule II
hereto (the "Designated Securities"). Each of the provisions of the Underwriting
Agreement is incorporated herein by reference in its entirety, and shall be
deemed to be a part of this Agreement to the same extent as if such provisions
had been set forth in full herein; and each of the representations and warran-
ties set forth therein shall be deemed to have been made at and as of the date
of this Pricing Agreement, except that each representation and warranty which
refers to the Prospectus in Section 2 of the Underwriting Agreement shall be
deemed to be a representation or warranty as of the date of the Underwriting
Agreement in relation to the Prospectus (as therein defined), and also a
representation and warranty as of the date of this Pricing Agreement in relation
to the Prospectus as amended or supplemented relating to the Designated
Securities which are the subject of this Pricing Agreement. Each reference to
the Representatives herein and in the provisions of the Underwriting Agreement
so incorporated by reference shall be deemed to refer to you. Unless otherwise
defined herein, terms defined in the Underwriting Agreement are used herein as
therein defined. The Representatives designated to act on behalf of the Repre-
sentatives and on behalf of each of the Underwriters of the Designated
Securities pursuant to Section 12 of the Underwriting Agreement and the address
of the Representatives referred to in such Section 12 are set forth at the end
of Schedule II hereto.
An amendment to the Registration Statement, or a supplement to the
Prospectus, as the case may be, relating to the Designated Securities, in the
form heretofore delivered to you is now proposed to be filed with the
Commission.
Subject to the terms and conditions set forth herein and in the
Underwriting Agreement incorporated herein by reference, the Company agrees to
issue and sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company, at the time and place
and at the purchase price to the Underwriters set forth in Schedule II hereto,
the principal amount of Designated Securities set forth opposite the name of
such Underwriter in Schedule I hereto, less the principal amount of Designated
Securities covered by Delayed Delivery Contracts, if any, as may be specified in
Schedule II.
If the foregoing is in accordance with your understanding, please sign
and return to us five counterparts hereof, and upon acceptance hereof by you, on
behalf of each of the Underwriters, this letter
<PAGE>
and such acceptance hereof, including the provisions of the Underwriting
Agreement incorporated herein by reference, shall constitute a binding agreement
between each of the Underwriters and the Company. It is understood that your
acceptance of this letter on behalf of each of the Underwriters is or will be
pursuant to the authority set forth in a form of Agreement among Underwriters,
the form of which shall be submitted to the Company for examination upon
request, but without warranty on the part of the Representatives as to the
authority of the signers thereof.
Very truly yours,
The Penn Traffic Company
By:_________________________
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
BT Securities Corporation
By:________________________________
(Goldman, Sachs & Co.)
-2-
<PAGE>
SCHEDULE I
PRINCIPAL
AMOUNT OF
DESIGNATED
SECURITIES
TO BE
UNDERWRITER PURCHASED
----------- ---------
Goldman, Sachs & Co. . . . . . . . . . . . . . . . . . . $
BT Securities Corporation . . . . . . . . . . . . . . .
[NAMES OF OTHER UNDERWRITERS] . . . . . . . . . . . . . .
_____________
Total . . . . . . . . . . . . . . . . . . . . . $
_____________
_____________
-3-
<PAGE>
SCHEDULE II
TITLE OF DESIGNATED SECURITIES:
[ %] [Floating Rate] [Zero Coupon] [Senior] [Senior Subordinated] [Notes]
[Debentures] due
AGGREGATE PRINCIPAL AMOUNT:
[$]
PRICE TO PUBLIC:
__% of the principal amount of the Designated
Securities, plus accrued interest from to [and accrued
amortization, if any, from to ]
PURCHASE PRICE BY UNDERWRITERS:
__% of the principal amount of the Designated
Securities, plus accrued interest from to [and accrued
amortization, if any, from to ]
SPECIFIED FUNDS FOR PAYMENT OF PURCHASE PRICE:
[New York] Clearing House funds
INDENTURE:
Indenture dated , 19 , between the Company
and , as Trustee
MATURITY:
INTEREST RATE:
[ %] [Zero Coupon] [See Floating Rate Provisions]
INTEREST PAYMENT DATES:
[months and dates]
REDEMPTION PROVISIONS:
[No provisions for redemption]
[The Designated Securities may be redeemed, otherwise
than through the sinking fund, in whole or in part at the option of the
Company, in the amount of [$] or an integral multiple thereof,
-4-
<PAGE>
[on or after , at the following redemption prices (expressed
in percentages of principal amount). If [redeemed on or before ,
%, and if] redeemed during the 12-month period beginning ,
REDEMPTION
YEAR PRICE
---- ----------
and thereafter at 100% of their principal amount, together in each case with
accrued interest to the redemption date.]
[on any interest payment date falling in or after , , at the
election of the Company, at a redemption price equal to the principal amount
thereof, plus accrued interest to the date of redemption.]
[Other possible redemption provisions, such as mandatory redemption upon
occurrence of certain events or redemption for changes in tax law]
[Restriction on refunding]
SINKING FUND PROVISIONS:
[No sinking fund provisions]
[The Designated Securities are entitled to the benefit of a sinking fund to
retire [$] principal amount of Designated Securities on
in each of the years through at 100% of their principal amount
plus accrued interest][,together with [cumulative] [noncumulative] redemptions
at the option of the Company to retire an additional [$] principal
amount of Designated Securities in the years through at 100% of their
principal amount plus accrued interest].
[IF SECURITIES ARE EXTENDABLE DEBT SECURITIES, INSERT--
EXTENDABLE PROVISIONS:
Securities are repayable on , [insert date and years], at the
option of the holder, at their principal amount with accrued interest. Initial
annual interest rate will be %, and thereafter annual interest rate will
be adjusted on , and to a rate not less than % of
the effective annual interest rate on U.S. Treasury obligations with
-year maturities as of the [insert date 15 days prior to maturity date] prior
to such [insert maturity date].]
[IF SECURITIES ARE FLOATING RATE DEBT SECURITIES, INSERT--
FLOATING RATE PROVISIONS:
Initial annual interest rate will be % through [and thereafter will be
adjusted [monthly] [on each , , ________________
and ] [to an annual rate of % above the average rate for
-year [month] [securities] [certificates of deposit] issued by
and [insert names of banks].] [and the annual interest rate
[thereafter] [from through ] will be the interest
yield equivalent of the weekly average per annum market discount rate for
-month
-5-
<PAGE>
Treasury bills plus % of Interest Differential (the excess, if any, of
(i) then current weekly average per annum secondary market yield for
-month certificates of deposit over (ii) then current interest yield
equivalent of the weekly average per annum market discount rate for -month
Treasury bills); [from and thereafter the rate will be the then
current interest yield equivalent plus % of Interest Differential].]
DEFEASANCE PROVISIONS:
TIME OF DELIVERY:
CLOSING LOCATION:
DELAYED DELIVERY:
[None] [Underwriters' commission shall be ...% of the principal amount of
Designated Securities for which Delayed Delivery Contracts have been entered
into. Such commission shall be payable to the order of ....................]
NAMES AND ADDRESSES OF REPRESENTATIVES:
Designated Representatives:
Address for Notices, etc.:
[OTHER TERMS]*:
- ----------------------------
* A description of particular tax, accounting or other unusual features (such as
the addition of event risk provisions) of the Securities should be set forth,
or referenced to an ATTACHED and ACCOMPANYING description, if necessary to
ensure agreement as to the terms of the Securities to be purchased and sold.
Such a description might appropriately be in the form in which such features
will be described in the Prospectus Supplement for the offering.
-6-
<PAGE>
ANNEX II
Pursuant to Section 7(d) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect to
the Company and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any supplementary
financial information and schedules audited (and, if applicable,
prospective financial statements and/or pro forma financial information
examined) by them and included or incorporated by reference in the
Registration Statement or the Prospectus comply as to form in all material
respects with the applicable accounting requirements of the Act or the
Exchange Act, as applicable, and the related published rules and
regulations thereunder; and, if applicable, they have made a review in
accordance with standards established by the American Institute of
Certified Public Accountants of the consolidated interim financial
statements, selected financial data, pro forma financial information,
prospective financial statements and/or condensed financial statements
derived from audited financial statements of the Company for the periods
specified in such letter, as indicated in their reports thereon, copies of
which have been furnished to the representatives of the Underwriters (the
"Representatives");
(iii) The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the Company
for the five most recent fiscal years included in the Prospectus and
included or incorporated by reference in Item 6 of the Company's Annual
Report on Form 10-K for the most recent fiscal year agrees with the corres-
ponding amounts (after restatement where applicable) in the audited
consolidated financial statements for five such fiscal years which were
included or incorporated by reference in the Company's Annual Reports on
Form 10-K for such fiscal years;
(iv) On the basis of limited procedures, not constituting an audit in
accordance with generally accepted auditing standards, consisting of a
reading of the unaudited financial statements and other information
referred to below, a reading of the latest available interim financial
statements of the Company and its subsidiaries, inspection of the minute
books of the Company and its subsidiaries since the date of the latest
audited financial statements included or incorporated by reference in the
Prospectus, inquiries of officials of the Company and its subsidiaries
responsible for financial and accounting matters and such other inquiries
and procedures as may be specific in such letter, nothing came to their
attention that caused them to believe that:
(A) the unaudited condensed consolidated statements of
operations, consolidated balance sheets and consolidated statements of
cash flows included or incorporated by reference in the Company's
Quarterly Reports on Form 10-Q incorporated by reference in the
Prospectus do not comply as to form in all material respects with the
applicable accounting requirements of the Exchange Act as it applies
to Form 10-Q and the related published rules and regulations
thereunder or are not in conformity with generally accepted accounting
principles applied on a basis substantially consistent with the basis
for the audited consolidated statements of operations, consolidated
balance sheets and consolidated statements of cash flows included or
incorporated by reference in the Company's Annual Report on Form 10-K
for the most recent fiscal year;
(B) any other unaudited statement of operations data and balance
sheet items included in the Prospectus do not agree with the
corresponding items in the unaudited consolidated financial statements
from which such data and items were derived, and any such unaudited
data and items were not determined on a basis substantially consistent
with the basis for the corresponding amounts in the audited
consolidated financial statements included or incorporated by
reference in the Company's Annual Report on Form 10-K for the most
recent fiscal year;
<PAGE>
(C) the unaudited financial statements which were not included
in the Prospectus but from which were derived the unaudited condensed
financial statements referred to in clause (A) and any unaudited
statement of operations data and balance sheet items included in the
Prospectus and referred to in Clause (B) were not determined on a
basis substantially consistent with the basis for the audited
financial statements included or incorporated by reference in the
Company's Annual Report on Form 10-K for the most recent fiscal year;
(D) any unaudited pro forma consolidated condensed financial
statements included or incorporated by reference in the Prospectus do
not comply as to form in all material respects with the applicable
accounting requirements of the Act and the published rules and
regulations thereunder or the pro forma adjustments have not been
properly applied to the historical amounts in the compilation of those
statements;
(E) as of a specified date not more than five days prior to the
date of such letter, there have been any changes in the consolidated
capital stock (other than issuances of capital stock upon exercise of
options and stock appreciation rights, upon earn-outs of performance
shares and upon conversions of convertible securities, in each case
which were outstanding on the date of the latest balance sheet
included or incorporated by reference in the Prospectus) or any
increase in the consolidated long-term debt of the Company and its
subsidiaries, or any decreases in consolidated net current assets or
net assets or other items specified by the Representatives, or any
increases in any items specified by the Representatives, in each case
as compared with amounts shown in the latest balance sheet included or
incorporated by reference in the Prospectus, except in each case for
changes, increases or decreases which the Prospectus discloses have
occurred or may occur or which are described in such letter; and
(F) for the period from the date of the latest financial
statements included or incorporated by reference in the Prospectus to
the specified date referred to in Clause (E) there were any decreases
in consolidated net revenues or operating income or increases in the
total or per share amounts of consolidated net loss or other items
specified by the Representatives, or any increases in any items
specified by the Representatives, in each case as compared with the
comparable period of the preceding year and with any other period of
corresponding length specified by the Representatives, except in each
case for increases or decreases which the Prospectus discloses have
occurred or may occur or which are described in such letter; and
(v) In addition to the audit referred to in their report(s) included
or incorporated by reference in the Prospectus and the limited procedures,
inspection of minute books, inquiries and other procedures referred to in
paragraphs (iii) and (iv) above, they have carried out certain specified
procedures, not constituting an audit in accordance with generally accepted
auditing standards, with respect to certain amounts, percentages and
financial information specified by the Representatives which are derived
from the general accounting records of the Company and its subsidiaries,
which appear in the Prospectus (excluding documents incorporated by
reference), or in Part II of, or in exhibits and schedules to, the
Registration Statement specified by the Representatives or in documents
incorporated by reference in the Prospectus specified by the
Representatives, and have compared certain of such amounts, percentages and
financial information with the accounting records of the Company and its
subsidiaries and have found them to be in agreement.
All references in this Annex II to the Prospectus shall be deemed to refer
to the Prospectus (including the documents incorporated by reference therein) as
defined in the Underwriting Agreement as of the date of the letter delivered on
the date of the Pricing Agreement for purposes of such letter and to the
Prospectus as amended or supplemented (including the documents incorporated by
reference therein)
-2-
<PAGE>
in relation to the applicable Designated Securities for purposes of the letter
delivered at the Time of Delivery for such Designated Securities.
-3-
<PAGE>
ANNEX III
DELAYED DELIVERY CONTRACT
The Penn Traffic Company
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Attention ________________ ________________, 19___
Dear Sirs:
The undersigned hereby agrees to purchase from The Penn Traffic Company
(hereinafter called the "Company"), and the Company agrees to sell to the
undersigned,
$_________
principal amount of the Company's [TITLE OF DESIGNATED SECURITIES] (hereinafter
call the "Designated Securities"), offered by the Company's Prospectus dated
________________, 19___, as amended or supplemented, receipt of a copy of which
is hereby acknowledged, at a purchase price of ___% of the principal amount
thereof, plus accrued interest from the date from which interest accrues as set
froth below, and on the further terms and conditions set forth below, and on the
further terms and conditions set forth in this contract.
The undersigned will purchase the Designated Securities from the Company on
____________, 19___ (the "Delivery Date") and interest on the Designated
Securities so purchased will accrue from ______________, 19___.
The undersigned will purchase the Designated Securities from the Company on
the delivery date or dates and in the principal amount or amounts set forth
below:
Principal Date from Which
Delivery Date Amount Interest Accrues
------------- --------- -----------------
____________, 19___ $____________ ____________, 19___
____________, 19___ $____________ ____________, 19___
Each such date on which Designed Securities are to be purchased hereunder is
hereinafter referred to as a "Delivery Date."
Payment for the Designed Securities which the undersigned has agreed to
purchase on [the] [each] Delivery Date shall be made to the Company or its order
by certified or official bank check in __________________ funds at the office of
__________, _________, ________, or by wire transfer to a bank account specified
by the Company, on [the] [such] Delivery Date upon delivery to the undersigned
of the Designated Securities then to be purchased by the undersigned in
definitive fully registered form and in such denominations and registered in
such names as the undersigned may designate by written, telex or facsimile
communication addressed to the Company not less than five full business days
prior to [the] [such] Delivery Date.
The obligation of the undersigned to take delivery of and make payment for
Designated Securities on [the] [such] Delivery Date shall be subject to the
condition that the purchase of Designated Securities to be made by the
undersigned shall not on [the] [such] Delivery Date be prohibited under the laws
of the jurisdiction to which the undersigned is subject. The obligation of the
undersigned to take delivery of and
<PAGE>
make payment for Designated Securities shall not be affected by the failure of
any purchaser to take delivery of and make payment for Designated Securities
pursuant to other contracts similar to this contract.
[The undersigned understands that Underwriters (the "Underwriters") are
also purchasing Designated Securities from the Company, but that the obligations
of the undersigned hereunder are not contingent on such purchases]. Promptly
after completion of the sale to the Underwriters the Company will mail or
deliver to the undersigned at its address set forth below notice to such effect,
accompanied by a copy of the Opinion of Counsel for the Company delivered to the
Underwriters in connection therewith.
The undersigned represents and warrants that, as of the date of this
contract, the undersigned is not prohibited from purchasing the Designated
Securities hereby agreed to be purchased by it under the laws of the
jurisdiction to which the undersigned is subject.
This contract will inure to the benefit of an be binding upon the parties
hereto and their respective successors, but will not be assignable by either
party hereto without the written consent of the other.
This contract may be executed by either of the parties hereto in any number
of counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same instrument.
It is understood that the acceptance by the Company of any Delayed Delivery
Contract (including this contract) is in the Company's sole discretion and that,
without limiting the foregoing, acceptances of such contracts need not be on a
first-come, first-served basis. If this contract is acceptable to the Company,
it is requested that the Company sign the form of acceptance below and mail or
deliver one of the counterparts hereof to the undersigned at its address set
forth below. This will become a binding contract between the Company and the
undersigned when such counterpart is so mailed or delivered by the Company.
Yours very truly,
______________________________
By: ______________________________
(Authorized Signature)
Name:
Title:
______________________________
(Address)
Accepted: __________________, 19___
The Penn Traffic Company
By: ____________________________________
Name:
Title:
-2-
<PAGE>
Exhibit 21.1
DIRECT AND INDIRECT SUBSIDIARIES OF
THE PENN TRAFFIC COMPANY AS OF
APRIL 15, 1994
Dairy Dell
Sunrise Properties, Inc.
Pennway Express, Inc.
Abbott Realty Corporation
Big M Supermarkets, Inc.
Bradford Super Market, Inc.
Commander Foods, Inc.
P & C Food Markets, Inc. of Vermont
Penny Curtiss Baking Company, Inc.
Big Bear Distribution Company
St. Mary's Foods, Inc.
Seneca Falls Foods, Inc.
Chili Paul Foods, Inc.
12th & Powell Foods, Inc.
Corry Foods, Inc.
Dunkirk Foods, Inc.
Jamestown Foods, Inc.
Fredonia Foods, Inc.
Lakewood Foods, Inc.
East 6th Street Foods, Inc.
Grandview Foods, Inc.
26th & Legion Foods, Inc.
Eastway Foods, Inc.
Liverpool Big M, Inc.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 33-51213)
of The Penn Traffic Company of our report dated March 14, 1994 appearing
on page 28 of this Form 10-K.
/s/ Price Waterhouse
PRICE WATERHOUSE
Pittsburgh, Pennsylvania
April 29, 1994