<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended May 4, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to
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Commission file number 1-9930
THE PENN TRAFFIC COMPANY
(Exact name of registrant as specified in its charter)
Delaware 25-0716800
(State of incorporation) (IRS Employer Identification No.)
1200 State Fair Blvd., Syracuse, NY 13209
(Address of principal executive offices) (Zip Code)
(315) 453-7284
(Telephone number)
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 90 days.
YES X . NO .
--- ---
Common stock, par value $1.25 per share: 10,869,941 shares
outstanding as of May 30, 1996
Page 1 of 13
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
THE PENN TRAFFIC COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
UNAUDITED
(All dollar amounts in thousands,
except per share data)
THIRTEEN WEEKS ENDED THIRTEEN WEEKS ENDED
MAY 4, 1996 APRIL 29, 1995
-------------------- --------------------
TOTAL REVENUES $827,658 $860,028
COST AND OPERATING EXPENSES:
Cost of sales (including
buying and occupancy
costs) 635,996 662,449
Selling and administrative
expenses 170,845 164,222
-------- --------
OPERATING INCOME 20,817 33,357
Interest expense 34,560 33,034
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(LOSS) INCOME BEFORE INCOME TAXES (13,743) 323
Benefit (provision) for
income taxes 4,714 (194)
-------- --------
NET (LOSS) INCOME $ (9,029) $ 129
-------- --------
-------- --------
PER SHARE DATA:
Net (loss) income $ (.83) $ .01
-------- --------
-------- --------
Average number of common
shares outstanding 10,896,286 11,149,486
See Notes to Interim Consolidated Financial Statements.
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<PAGE>
THE PENN TRAFFIC COMPANY
CONSOLIDATED BALANCE SHEET
(All dollar amounts in thousands)
<TABLE>
<CAPTION>
UNAUDITED
MAY 4, 1996 FEBRUARY 3, 1996
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<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and short-term investments $ 58,707 $ 58,585
Accounts and notes receivable
(less allowance for doubtful accounts
of $1,851 and $1,483, respectively) 83,724 83,519
Inventories (Note 3) 353,943 356,309
Prepaid expenses and other current assets 18,318 15,717
---------- ----------
Total Current Assets 514,692 514,130
NONCURRENT ASSETS:
Capital leases - net 128,325 122,529
Property, plant and equipment - net 595,904 602,440
Intangible assets - net 428,753 431,394
Other assets and deferred charges - net 92,286 89,653
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$1,759,960 $1,760,146
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 2,658 $ 2,728
Current portion of obligations
under capital leases 12,041 11,735
Trade accounts and drafts payable 192,884 208,880
Payroll and other accrued liabilities 81,000 82,154
Accrued interest expense 15,918 33,812
Payroll taxes and other taxes payable 14,957 16,880
Deferred income taxes 30,385 30,385
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Total Current Liabilities 349,843 386,574
NONCURRENT LIABILITIES:
Long-term debt 1,243,031 1,200,997
Obligations under capital leases 132,177 126,197
Deferred income taxes 38,789 38,789
Other noncurrent liabilities 58,374 60,860
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Total Liabilities 1,822,214 1,813,417
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SHAREHOLDERS' EQUITY:
Preferred Stock - authorized 10,000,000
shares at $1.00 par value; none issued
Common Stock - authorized 30,000,000
shares at $1.25 par value; 10,867,941
shares and 10,840,849 shares
issued, respectively 13,611 13,606
Capital in excess of par value 180,069 180,029
Retained deficit (244,771) (235,223)
Minimum pension liability adjustment (6,606) (6,606)
Unearned compensation (3,932) (4,452)
Treasury stock, at cost (625) (625)
---------- ----------
Total Shareholders' Equity (62,254) (53,271)
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$1,759,960 $1,760,146
---------- ----------
---------- ----------
</TABLE>
See Notes to Interim Consolidated Financial Statements.
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<PAGE>
THE PENN TRAFFIC COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
UNAUDITED
(All dollar amounts in thousands)
THIRTEEN THIRTEEN
WEEKS ENDED WEEKS ENDED
MAY 4, 1996 APRIL 29, 1995
----------- --------------
OPERATING ACTIVITIES:
Net (loss) income $ (9,029) $ 129
Adjustments to reconcile
net (loss) income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 18,745 18,892
Amortization of intangibles 4,077 4,253
Other - net (2,305) (1,037)
Net change in assets and liabilities:
Accounts receivable and prepaid expenses (2,598) 3,300
Inventories 2,366 (7,193)
Accounts payable and accrued expenses (36,967) (6,855)
Deferred charges and other assets (1,152) 358
--------- ---------
NET CASH (USED IN) PROVIDED BY OPERATING
ACTIVITIES (26,863) 11,847
--------- ---------
INVESTING ACTIVITIES:
Capital expenditures (20,143) (22,467)
Other - net 1,148 2
--------- ---------
NET CASH (USED IN) INVESTING ACTIVITIES (18,995) (22,465)
--------- ---------
FINANCING ACTIVITIES:
Increase in long-term debt 104,840
Payments to settle long-term debt (876) (839)
Borrowings of revolver debt 143,000 173,600
Payment of revolver debt (205,000) (159,400)
Proceeds from sale-and-leaseback
transactions 9,087
Reduction of capital lease obligations (2,801) (2,254)
Payment of debt issuance costs (2,315)
Other - net 45 100
--------- ---------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 45,980 11,207
--------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS 122 589
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 58,585 46,519
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 58,707 $ 47,108
--------- ---------
--------- ---------
See Notes to Interim Consolidated Financial Statements.
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<PAGE>
THE PENN TRAFFIC COMPANY
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
The results of operations for the interim periods are not necessarily an
indication of results to be expected for the year. In the opinion of
management, all adjustments necessary for a fair presentation of the results are
included for the interim periods, and all such adjustments are normal and
recurring. These unaudited interim financial statements should be read in
conjunction with the consolidated financial statements and related notes
contained in the Annual Report on Form 10-K for the fiscal year ended February
3, 1996.
Net (loss) income per share of common stock is based on the average number
of shares and equivalents, as applicable, of common stock outstanding during
each period. Fully diluted (loss) income per share is not presented for each of
the periods since conversion of the Company's shares under option would be anti-
dilutive or the reduction from primary (loss) income per share is less than
three percent.
- 5 -
<PAGE>
NOTE 2 - SUPPLEMENTAL FINANCIAL INFORMATION
(In thousands of dollars)
FIRST QUARTER, FISCAL 1997
Operating Income $20,817
Depreciation and Amortization 22,822
LIFO Provision 1,000
Cash Interest Expense 33,485
FIRST QUARTER, FISCAL 1996
Operating Income $33,357
Depreciation and Amortization 23,145
LIFO Provision 0
Cash Interest Expense 31,964
NOTE 3 - INVENTORIES
If the first-in, first-out (FIFO) method had been used by the Company,
inventories would have been $18,848,000 and $17,848,000 higher than reported at
May 4, 1996 and February 3, 1996, respectively.
NOTE 4 - DEBT OFFERING
In April 1996, the Company issued $100,000,000 of 11.50% Senior Notes due
April 15, 2006 (the "11.50% Senior Notes") in an underwritten public offering.
During First Quarter Fiscal 1997, proceeds of the issuance of the 11.50% Senior
Notes were applied to the repayment of indebtedness outstanding under the
Company's revolving credit facility.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THIRTEEN WEEKS ENDED MAY 4, 1996 ("FIRST QUARTER FISCAL 1997") COMPARED TO
THIRTEEN WEEKS ENDED APRIL 29, 1995 ("FIRST QUARTER FISCAL 1996")
The following table sets forth statement of operations components expressed
as a percentage of total revenues for First Quarter Fiscal 1997 and First
Quarter Fiscal 1996:
First Quarter Ended
May 4, April 29,
1996 1995
Total revenues 100.0% 100.0%
Gross profit (1) 23.2 23.0
Selling and administrative
expenses 20.7 19.1
Operating income 2.5 3.9
Interest expense 4.2 3.8
(Loss) income before
income taxes (1.7) 0.1
Net (loss) income (1.1) 0.0
(1) Total revenues less cost of sales.
Total revenues for First Quarter Fiscal 1997 decreased to $827.7 million
from $860.0 million in First Quarter Fiscal 1996. First Quarter Fiscal 1996
revenues include $19.4 million generated by 11 of the Company's former general
merchandise stores (Harts) and five former Acme stores, all of which were closed
after First Quarter Fiscal 1996. Excluding these closed stores, revenues for
First Quarter Fiscal 1997 decreased by 1.5%. Wholesale supermarket sales were
$101.7 million in First Quarter Fiscal 1997 and $101.4 million in First Quarter
Fiscal 1996. Same store sales for First Quarter Fiscal 1997 declined 1.0%.
- 7 -
<PAGE>
RESULTS OF OPERATIONS (CONTINUED)
In First Quarter Fiscal 1997, gross profit was $191.7 million compared to
First Quarter Fiscal 1996 gross profit of $197.6 million, representing 23.2% and
23.0% of total revenues, respectively. The increase in gross profit as a
percentage of total revenues for First Quarter Fiscal 1997 resulted from the
classification of certain expenses approximating $1.8 million as selling and
administrative expenses in First Quarter Fiscal 1997 which had been recorded in
cost of sales in First Quarter Fiscal 1996.
Selling and administrative expenses for First Quarter Fiscal 1997 were
$170.8 million compared with $164.2 million in First Quarter Fiscal 1996
representing 20.7% and 19.1% of total revenues, respectively. The increase in
selling and administrative expenses as a percentage of total revenues for First
Quarter Fiscal 1997 primarily resulted from (1) increased payroll and
promotional expenses related to the Company's repositioning program which
emphasizes increased levels of customer service and enhanced perishables
departments in its stores, (2) an increase in fixed and semi-fixed expenses as a
percentage of total revenues during a period of low price inflation and a
decline in same store sales, and (3) the classification of certain expenses
approximating $1.8 million as selling and administrative expenses in First
Quarter Fiscal 1997 which had been recorded in cost of sales in First Quarter
Fiscal 1996.
Depreciation and amortization expense was $22.8 million in First Quarter
Fiscal 1997 and $23.1 million in First Quarter Fiscal 1996, representing 2.8%
and 2.7% of total revenues, respectively.
Operating income for First Quarter Fiscal 1997 was $20.8 million or 2.5%
of total revenues compared to $33.4 million or 3.9% of total revenues in First
Quarter Fiscal 1996. The decline in operating income as a percentage of total
revenues was the result of increased selling and administrative expenses as a
percentage of total revenues, partially offset by an increase in gross profit as
a percentage of total revenues.
Interest expense for First Quarter Fiscal 1997 and First Quarter Fiscal
1996 was $34.6 million and $33.0 million, respectively. The increase in
interest expense is due to the higher debt levels outstanding during First
Quarter Fiscal 1997.
Loss before income taxes was $13.7 million for First Quarter Fiscal 1997,
compared to income of $0.3 million for First Quarter Fiscal 1996. The reason
for the decline is the decrease in operating income combined with an increase in
interest expense.
The income tax benefit was $4.7 million for First Quarter Fiscal 1997
compared to a provision of $0.2 million in First Quarter Fiscal 1996. The
effective tax rates vary from the statutory rates due to differences between
income for financial reporting and tax reporting purposes, primarily related to
goodwill amortization resulting from prior acquisitions.
Net loss was $9.0 million in First Quarter Fiscal 1997 compared to net
income of $0.1 million in First Quarter Fiscal 1996.
- 8 -
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
During First Quarter Fiscal 1997, operating income decreased to $20.8
million from $33.4 million for First Quarter Fiscal 1996. Interest expense for
First Quarter Fiscal 1997 was $34.6 million as compared to $33.0 million during
First Quarter Fiscal 1996. Net loss for First Quarter Fiscal 1997 was $9.0
million as compared to net income of $0.1 million for First Quarter Fiscal 1996.
Payments of principal and interest on the Company's $1.2 billion of long-
term debt (excluding capital leases) will materially restrict Company funds
available to finance capital expenditures and working capital. Principal
payments of long-term debt of $1.9 million, $2.2 million and $3.3 million are
due during the remainder of Fiscal 1997, Fiscal 1998 and Fiscal 1999,
respectively.
The Company has a revolving credit facility (the "Revolving Credit
Facility") which provides for borrowings of up to $250 million, subject to a
borrowing base limitation measured by eligible inventory and accounts receivable
of the Company. The Revolving Credit Facility matures in April 2000 and is
secured by a pledge of the Company's inventory, accounts receivable and related
assets. As of May 4, 1996, additional availability under the Revolving Credit
Facility was $137.1 million.
During First Quarter Fiscal 1997, the Company's internally generated funds
from operations, amounts available under the Revolving Credit Facility and the
proceeds of sale-and-leaseback and mortgage transactions provided sufficient
liquidity to meet the Company's operating, capital expenditure and debt service
needs. In April 1996, the Company issued $100 million of 11.50% Senior Notes
due April 15, 2006 (the "11.50% Senior Notes") in an underwritten public
offering. During First Quarter Fiscal 1997, proceeds of the issuance of the
11.50% Senior Notes were used to repay indebtedness outstanding under the
Revolving Credit Facility.
The Company has entered into three interest rate swap agreements, each of
which expires within the next three years, that effectively convert $125 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.
In October 1995, Penn Traffic's Board of Directors authorized the
repurchase by the Company of up to 500,000 shares of its outstanding common
stock, of which 45,200 shares have been repurchased. No shares of common stock
were repurchased in First Quarter Fiscal 1997. Penn Traffic's debt agreements
contain limitations on the Company's ability to repurchase its common stock
which currently prohibit it from repurchasing any additional shares of its
common stock.
Cash flows to meet the Company's requirements for operating, investing and
financing activities in First Quarter Fiscal 1997 are reported in the
Consolidated Statement of Cash Flows. For the thirteen week period ended May 4,
1996, the Company experienced a negative cash flow from operating activities of
$26.9 million.
- 9 -
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Working capital increased by $37.3 million from February 3, 1996 to May 4,
1996.
The Company is in compliance with all terms and restrictive covenants of
its long-term debt agreements.
The Company expects to spend approximately $80 million on capital
expenditures, including capital leases, during Fiscal 1997. The Company expects
to finance such capital expenditures through internally generated cash flow,
borrowings under the Revolving Credit Facility, new capital leases and
mortgages. Capital expenditures will be principally for new stores, replacement
stores and remodeled store facilities. In First Quarter Fiscal 1997, the
Company opened a replacement store and completed three expansions.
- 10 -
<PAGE>
PART II. OTHER INFORMATION
All items which are not applicable or to which the answer is negative have
been omitted from this report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Penn Traffic's Annual Meeting of Stockholders was held on June 4, 1996. At
the Annual Meeting, the holders of Penn Traffic common stock considered and
voted upon a proposal to approve and adopt the Company's Amended and Restated
Directors' Stock Option Plan (the "Plan"). Approval and adoption of the Plan
required the affirmative vote of a majority of the votes cast. There were
6,950,767 votes cast in favor of the Plan and 2,981,152 votes cast against the
Plan. There were 45,622 abstentions.
At the Annual Meeting, two directors were elected to serve for three-year
terms on the Company's Board of Directors by the following votes:
FOR WITHHELD
Martin A. Fox 7,033,500 2,944,041
Harold S. Poster 7,030,122 2,947,419
At the Annual Meeting, the selection of Price Waterhouse LLP as auditors
for the Company for Fiscal 1997 was ratified by a vote of 9,195,631 shares in
favor and 776,827 shares opposed. There were 5,084 abstentions.
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<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT NUMBER DESCRIPTION
4.8C Officer's Certificate pursuant to the Indenture
filed as Exhibit 4.8, dated April 23, 1996,
establishing the terms of the 11.50% Senior Notes
due April 15, 2006.
10.5N Amendment No. 13, dated as of May 31, 1996, to the
Loan and Security Amendment.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fiscal quarter ended
May 4, 1996.
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<PAGE>
SIGNATURES
Pursuant to the requirements 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
June 07, 1996 /s/- John T. Dixon
----------------------------------
By: John T. Dixon
(President and Chief
Executive Officer, and
Director)
June 07, 1996 /s/- Eugene R. Sunderhaft
----------------------------------
By: Eugene R. Sunderhaft
(Senior Vice President and
Secretary, Principal Financial
Officer and Principal Accounting
Officer)
- 13 -
<PAGE>
THE PENN TRAFFIC COMPANY
Officers' Certificate
Pursuant to Sections 3.01, 3.03 and 11.04
of the Indenture
John T. Dixon, President and Chief Executive Officer of The Penn Traffic
Company, a Delaware corporation (the "Company"), and Eugene R. Sunderhaft,
Senior Vice President - Finance and Secretary of the Company, DO HEREBY CERTIFY:
1. Each of the undersigned (i) has read Sections 2.01, 3.01, 3.03,
3.04, 11.04 and 11.05 of the Indenture dated as of December 15, 1993 (the
"Indenture") between the Company and United States Trust Company of New
York, as Trustee; (ii) has examined such accounts and records of the
Company and made such inquiries of officers, employees and agents of the
Company as he has deemed necessary to express his opinion as contained
herein; and (iii) is of the opinion that such examinations and inquiries
are sufficient to enable him to express an informed opinion as to whether
or not the covenants and conditions precedent which are stated herein to be
complied with have been complied with;
2. Attached hereto as Exhibit A is a true and correct copy of a
specimen of the Company's 11 1/2% Senior Notes due April 15, 2006 (the
"Notes"), the aggregate principal amount of which shall be limited to
$100,000,000 and which shall have the terms set forth in such Exhibit A;
3. The Notes shall be issuable in the form of one or more Global
Securities to be deposited with or on behalf of, The Depositary Trust
Company and the form of the legends for such Global Securities are as set
forth in the attached Exhibit A;
4. After giving effect to the authentication and delivery of the
Notes pursuant to the Company Order dated the date hereof (i) the aggregate
principal amount of Notes Outstanding will not exceed the maximum aggregate
principal amount permitted to be Outstanding pursuant to authorization by
the Company's Board of Directors; and (ii) the Company will not be in
Default and no Event of Default will have occurred; and
5. All conditions precedent provided for in the Indenture relating to
the authentication and delivery of the Notes have been complied with.
<PAGE>
Capitalized terms used herein that are not otherwise defined shall
have the meanings ascribed thereto in the Indenture.
This Certificate may be executed in counterparts, each one of which
shall be deemed an original and which together shall constitute one document.
IN WITNESS WHEREOF, the undersigned have executed this Certificate
this 23rd day of April, 1996.
/s/ John T. Dixon
------------------------
John T. Dixon
President and Chief
Executive Officer
/s/ Eugene R. Sunderhaft
-------------------------
Eugene R. Sunderhaft
Senior Vice President -
Finance and Secretary
-2-
<PAGE>
EXHIBIT A
No.___ $100,000,000.00
CUSIP 707832AG6
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.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
THE PENN TRAFFIC COMPANY
Incorporated under the laws of the
State of Delaware
11 1/2% Senior Notes due April 15, 2006
THE PENN TRAFFIC COMPANY, for value received, hereby promises to pay
to Cede & Co. or registered assigns, the principal sum of $100,000,000.00 on
April 15, 2006 and to pay interest thereon semiannually in arrears at the rate
of 11 1/2% per annum on April 15 and October 15 of each year, commencing October
15, 1996, until the principal hereof is paid or made available for payment.
All payments of principal, premium, if any, and interest shall be made in
immediately available funds and 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.
<PAGE>
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 a Vice President and attested by its Secretary or
an Assistant Secretary.
Dated: April 23, 1996
THE PENN TRAFFIC COMPANY
By____________________________
Eugene R. Sunderhaft
Vice President - Finance
and Secretary
Attest:____________________
Francis D. Price, Jr.
Vice President and
Assistant Secretary
[SEAL]
A-4
<PAGE>
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
Dated: April 23, 1996
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-5
<PAGE>
(BACK OF SECURITY)
THE PENN TRAFFIC COMPANY
11 1/2% Senior Notes due April 15, 2006.
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 April 15 and October 15 of each year, commencing October 15, 1996.
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 April 23, 1996.
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 April 1 and October 1, 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. All payments of principal, premium, if any, and interest on the
Securities will be made by the Paying Agent by wire transfer of immediately
available funds to a separate account of DTC or its nominee, provided that, the
Company may pay principal, premium, if any, and interest to Holders other than
the DTC or its nominee by check in immediately available funds. The Company may
mail an interest check to such 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.
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 December 15, 1993 (the "Indenture")
between the Company and the Trustee. The terms of the Securities include those
stated in the Indenture and those made
A-6
<PAGE>
part of the Indenture by reference to 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 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 $100,000,000.00 in 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
April 15, 2001. 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 April 15 of the years indicated below:
Year Percentage
---- ----------
2001.................. 104.00%
2002.................. 102.66%
2003.................. 101.33%
2004 and thereafter... 100.00%
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.
A-7
<PAGE>
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 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
A-8
<PAGE>
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
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.
A-9
<PAGE>
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 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-10
<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-11
<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-12
<PAGE>
AMENDMENT NO. 13 TO
LOAN AND SECURITY AGREEMENT
AMENDMENT NO. 13, dated as of May 31, 1996 (this "AMENDMENT") to that
certain Loan and Security Agreement dated as of March 5, 1993, as amended by
Amendment Nos. 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11 and 12 (collectively, the "LOAN
AGREEMENT") among THE PENN TRAFFIC COMPANY ("Penn Traffic"), DAIRY DELL, BIG M
SUPERMARKETS, INC. and PENNY CURTISS BAKING COMPANY, INC. (individually, each a
"BORROWER" and collectively, the "BORROWERS"), the Lenders listed therein
(collectively, the "LENDERS") and FLEET BANK, N.A. (as successor to Natwest USA
Credit Corp.), as Agent for the Lenders (in such capacity, the "AGENT"), is made
by, between and among the Borrowers, the Agent, and the Lenders. Capitalized
terms used herein, except as otherwise defined herein, shall have the meanings
given to such terms in the Loan Agreement.
WHEREAS, the Borrowers have requested that the Agent and the Lenders
amend the Loan Agreement to, among other things, (i) modify the existing
Interest Coverage ratio set forth in Section 10.18 of the Loan Agreement;
(ii) modify the Consolidated EBDAIT covenant set forth in Section 10.20 of the
Loan Agreement; (iii) modify the Net Cash Flow covenant set forth in
Section 10.23 of the Loan Agreement; (iv) modify the provisions of the Loan
Agreement regarding distributions and repurchases of Penn Traffic's capital
stock and debt; and (v) modify the interest rate applicable under the Loan
Agreement in certain circumstances.
WHEREAS, the Borrowers, the Agent and the Lenders have agreed to amend
the Loan Agreement pursuant to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements hereinafter set forth, the parties hereto agree as follows:
1. AMENDMENTS TO LOAN AGREEMENT. The Loan Agreement is hereby
amended as of the effective date hereof as follows:
(i) the definition of "Eurodollar Rate" in Section 1.1 of the
Loan Agreement is hereby amended by deleting such definition in its entirety and
by substituting, in lieu thereof, the following:
<PAGE>
"EURODOLLAR RATE" means, for the Interest Period for a Eurodollar
Revolving Loan, a rate per annum equal to the sum of: (a) two and one-quarter
percent (2 1/4%); and (b) the rate determined pursuant to the following formula:
LIBOR
------------------------------------
1 - Eurocurrency Reserve Requirement
PROVIDED, HOWEVER, that during a Reduction Period the Eurodollar Rate shall mean
a rate per annum of (a) one-quarter of one percent (1/4%) lower than such rate
if the Interest Coverage Ratio was 2.0 to 1 or more, but less than 2.1 to 1 or
(b) one half of one percent (1/2%) lower than such rate if the Interest Coverage
Ratio was 2.1 to 1 or more, and PROVIDED, FURTHER, that during an Increase
Period the Eurodollar Rate shall mean a rate per annum of one-quarter of one
percent (1/4%) higher than such rate;
(ii) the definition of "Prime-Based Rate" in Section 1.1 of the
Loan Agreement is hereby amended by deleting such definition in its entirety and
by substituting, in lieu thereof, the following:
"PRIME-BASED RATE" means the Prime Lending Rate plus one percent
(1%), PROVIDED, HOWEVER, that during a Reduction Period, "Prime-Based Rate"
means the Prime Lending Rate plus three- quarters of one percent ( 3/4%) if
during a Reduction Period the Interest Coverage Ratio was 2.0 to 1 or more but
less than 2.1 to 1 or one half of one percent (1/2%) if the Interest Coverage
Ratio was 2.1 to 1 or more as the case may be; and PROVIDED, FURTHER, that
during an Increase Period the "Prime-Based Rate" means the Prime Lending Rate
plus one and one-quarter percent (1 1/4%).
(iii) Section 1.1 shall be amended by adding the following
definition of "INCREASE PERIOD" in proper alphabetical order:
"INCREASE PERIOD" means each period (x) commencing on the first
day of the Fiscal Quarter immediately following a Fiscal Quarter in which the
Agent receives a certificate under Section 8.2(e) showing that, for the Coverage
Period ending on the last day of the Fiscal Year or Fiscal Quarter to which such
certificate relates, the Interest Coverage Ratio was less than the Interest
Coverage Requirement for such Coverage Period and (y) continuing until the last
day of the first Fiscal Quarter thereafter in which the Agent receives a
certificate under Section 8.2(e) showing that, for the Coverage Period ending on
the last day of the Fiscal Year or Fiscal Quarter to which such certificate
relates, the Interest Coverage Ratio was equal to or
2
<PAGE>
greater than the Interest Coverage Requirement for such Coverage Period. As
used herein, the term "Interest Coverage Requirement" shall mean for any
Coverage Period ending (i) in the Fiscal Year of the Borrower ending on or about
January 31, 1997, 1.6 to 1; (ii) in the Fiscal Year of the Borrower ending on or
about January 31, 1998, 1.6 to 1; (iii) in the Fiscal Year of the Borrower
ending on or about January 31, 1999, 1.65 to 1; (iv) in the Fiscal Year of the
Borrower ending on or about January 31, 2000, 1.75 to 1; and (v) in the Fiscal
Year of the Borrower ending on or about January 31, 2001, 1.80 to 1.
(iv) Section 10.6 of the Loan Agreement is hereby amended by
deleting such Section in its entirety and by substituting, in lieu thereof, the
following:
"10.6 DISTRIBUTIONS. None of the Borrowers or any of the PT
Stores Group Subsidiaries shall directly or indirectly declare or make, or incur
any liability to make, any Distribution, except a PT Stores Group Subsidiary
wholly owned by a Borrower may make Distributions to such Borrower.
Notwithstanding the foregoing, if no Event of Default has occurred and is
continuing, a Borrower may repurchase its capital stock, or options or rights
therefor, from an employee in connection with the termination of such employee's
employment, so long as the aggregate cumulative amount of all such repurchases
by all Borrowers does not exceed $1,000,000 in any Fiscal Year or $4,000,000
from the date hereof through the Commitment Expiration Date. In addition, if no
Event or Event of Default has occurred and is continuing, Penn Traffic may
repurchase its capital stock on the open market for a fair market value;
PROVIDED, HOWEVER, that the aggregate purchase price for all such repurchases
during the term of this Agreement shall not exceed $10,000,000; and PROVIDED,
FURTHER, that Penn Traffic shall give the Agent written notice within one (1)
Business Day of any such repurchase if the purchase price for such repurchase
plus the aggregate purchase price for all prior repurchases of the capital stock
of Penn Traffic not previously reported shall exceed an aggregate of $1,000,000;
and PROVIDED, FURTHER, that no such repurchase may be made in the event that
such repurchase would not be permitted under the indentures and other agreements
executed in connection with the Senior Notes and the Subordinated Notes; and
PROVIDED, FURTHER, that no such repurchase may be made unless, both before and
after giving effect to such repurchase under this Section 10.6 and any payments
on account of Debt made or to be made on the same day as permitted under
Section 10.9 hereof, Availability shall be at least $75,000,000."
3
<PAGE>
(v) Section 10.9 of the Loan Agreement is hereby amended by
deleting such Section in its entirety and by substituting, in lieu thereof, the
following:
"10.9 PREPAYMENT. None of the Borrowers or any of their
Subsidiaries shall voluntarily prepay any Debt, except: (a) the Obligations in
accordance with their terms; (b) Debt refinanced with the proceeds of
(i) Permitted Refinancing Debt, (ii) the other Debt permitted by
Section 10.8(1), or (iii) the issuance of any capital stock of a Borrower on or
after the Closing Date; PROVIDED, HOWEVER, that no such prepayment under this
clause (b) may be made unless, both before and after giving effect to such
prepayment and any repurchases of Penn Traffic's capital stock to be made on the
same day as permitted under the third sentence of Section 10.6 hereof,
Availability shall be at least $75,000,000; (c) a purchase or redemption of
Subordinated Notes or Senior Notes, other than with the proceeds of Permitted
Refinancing Debt, the other Debt permitted by Section 10.8(1), or capital stock,
if the following conditions are met: (i) no Event or Event of Default exists at
the time of such purchase or redemption or would exist after giving effect
thereto; (ii) all Subordinated Notes or Senior Notes so purchased or redeemed
are promptly surrendered for cancellation; (iii) the aggregate cumulative
purchase and redemption price paid in connection with all such purchases and
redemptions of Subordinated Notes and Senior Notes after the date hereof
(exclusive of amounts paid in respect of accrued interest) does not exceed
$50,000,000; (iv) a PRO FORMA Interest Coverage Ratio for the Coverage Period
ended most recently prior to such purchase or redemption (determined on a basis
that assumes that such purchase or redemption, and all other purchases and
redemptions during such Coverage Period permitted by any of the provisions of
this Agreement, occurred on the first day of such Coverage Period) is not less
than 1.8 to 1; and (v) a pro forma calculation based on the assumption that such
purchase and redemption, and all other such purchases and redemptions during the
period of 12 months ended on the date of such purchase or redemption, had all
occurred on the first day of such 12-month period, and that all accrued but
unpaid interest at the date of such purchase or redemption was paid in full,
indicates that the pro forma Combined Borrowing Capacity at the end of each week
during such 12-month period would have exceeded the pro forma aggregate
outstanding principal balance of all Revolving Loans at the end of each such
week by at least $30,000,000; (d) the Penn Traffic 13 1/2% Subordinated Notes
due 1998 that are outstanding on the date hereof; (e) the Debt listed on
Exhibit R; and (f) other Debt so long as the aggregate cumulative principal
amount prepaid after the date hereof in reliance on this clause does not exceed
$5,000,000. On or before sixty (60) days after the Closing Date, Penn Traffic
shall have redeemed,
4
<PAGE>
repurchased or otherwise retired at least $50,000,000 in face amount of the P &
C Senior Subordinated Notes, and on or before September 30, 1993, Penn Traffic
shall have redeemed all of the Big Bear Senior Notes that were not tendered
pursuant to the tender offer referred to in Section 6.1(g). On or before
October 31, 1993 Penn Traffic shall have redeemed, repurchased or otherwise
retired all of the P & C Senior Subordinated Notes."
(vi) Section 10.18 of the Loan Agreement shall be amended by
deleting such Section 10.18 in its entirety, and by substituting, in lieu
thereof, the following:
"10.18 INTEREST COVERAGE. For each Coverage Period, the PT
Stores Group will maintain the Interest Coverage Ratio for such Coverage Period
set forth in the following table:
Each Coverage
Period Ending In Ratio
---------------- -----
Fiscal Year 1994 1.55:1
Fiscal Year 1995 1.60:1
Fiscal Year 1996 1.65:1
Fiscal Year 1997 1.45:1
Fiscal Year 1998 1.50:1
Fiscal Year 1999 1.55:1
Fiscal Year 2000 1.65:1
Fiscal Year 2001 1.75:1"
(vii) Section 10.20 of the Loan Agreement shall be amended by
deleting such Section 10.20 in its entirety, and by substituting, in lieu
thereof, the following:
"10.20 CONSOLIDATED EBDAIT. The Borrowers will not permit
Consolidated EBDAIT at the end of each Fiscal Quarter for the four most recent
consecutive Fiscal Quarters of the Borrower ending on or prior to the date of
determination to be less than:
5
<PAGE>
Fiscal Quarter/Fiscal Year Amount
-------------------------- ------
Fourth 1996 $225,000,000
First 1997 $210,000,000
Second 1997 $200,000,000
Third 1997 $202,500,000
Fourth 1997 $205,000,000
First 1998 $207,500,000
Second 1998 $210,000,000
Third 1998 $212,500,000
Fourth 1998 $215,000,000
First 1999 $218,750,000
Second 1999 $222,500,000
Third 1999 $226,250,000
Fourth 1999 $230,000,000
First 2000 $233,750,000
Second 2000 $237,500,000
Third 2000 $241,250,000
Fourth 2000 $245,000,000"
(viii) Section 10.23 of the Loan Agreement shall be amended by
deleting such Section 10.23 in its entirety and by substituting, in lieu
thereof, the following:
"10.23 NET CASH FLOW. The Borrowers will not permit (i) Net
Cash Flow to be less than negative twenty million dollars (-$20,000,000) for the
Fiscal Year ending February 1, 1997 taken as a whole; (ii) Net Cash Flow to be
less than zero (0) for
6
<PAGE>
the entire two Fiscal Quarter period taken as a whole immediately succeeding any
Fiscal Quarter (subsequent to the Fiscal Quarter ended February 1, 1997) during
which Availability at any time is less than $75,000,000; or (iii) Net Cash Flow
to be less than negative five million dollars (-$5,000,000) for either of the
two Fiscal Quarter periods immediately succeeding any Fiscal Quarter (subsequent
to the Fiscal Quarter ended February 1, 1997) during which Availability at any
time is less than $75,000,000."
3. REPRESENTATIONS AND WARRANTIES. As an inducement to the Agent
and the Lenders to enter into this Amendment, each of the Borrowers hereby
represents and warrants to the Agent and the Lenders and agrees with the Agent
and the Lenders as follows:
(a) It has the power and authority to enter into this Amendment
and has taken all corporate action required to authorize its
execution, delivery, and performance of this Amendment. This
Amendment has been duly executed and delivered by it and constitutes
its valid and binding obligation, enforceable against it in accordance
with its terms. The execution, delivery, and performance of this
Amendment will not violate its certificate of incorporation or by-laws
or any agreement or legal requirements binding upon it.
(b) As of the date hereof and after giving effect to the terms
of this Amendment: (i) the Loan Agreement is in full force and effect
and constitutes a binding obligation of the Borrowers, enforceable
against the Borrowers and owing in accordance with its terms; (ii) the
Obligations are due and owing by the Borrowers in accordance with
their terms; and (iii) Borrowers have no defense to or setoff,
counterclaim, or claim against payment of the Obligations and
enforcement of the Loan Documents based upon a fact or circumstance
existing or occurring on or prior to the date hereof.
(c) The Obligations under the Loan Agreement as amended by this
Amendment constitute "Senior Indebtedness" as defined under the
indentures relating to the Senior Notes and to the Subordinated Notes.
4. NO IMPLIED AMENDMENTS. Except as expressly provided herein, the
Loan Agreement and the other Loan Documents are not amended or otherwise
affected in any way by this Amendment.
7
<PAGE>
5. ENTIRE AGREEMENT; MODIFICATIONS; BINDING EFFECT. This Amendment
constitutes the entire agreement of the parties with respect to its subject
matter and supersedes all prior oral or written understandings about such
matter. Each of the Borrowers confirms that, in entering into this Amendment,
it did not rely upon any agreement, representation, or warranty by the Agent or
any Lender except those expressly set forth herein. No modification,
rescission, waiver, release, or amendment of any provision of this Amendment may
be made except by a written agreement signed by the parties hereto. The
provisions of this Amendment are binding upon and inure to the benefit of the
representatives, successors, and assigns of the parties hereto; provided,
however, that no interest herein or obligation hereunder may be assigned by any
Borrower without the prior written consent of the Required Lenders.
6. EFFECTIVE DATE. This Agreement shall become effective upon
compliance with the conditions set forth immediately below:
(i) No Event or Event of Default shall have occurred and there
shall have been no material adverse change in the business or
financial condition of any of the Borrowers.
(ii) The Borrowers shall deliver to the Agent for the benefit of
the Lenders an opinion of Borrowers' counsel in form and substance
satisfactory to the Agent and its counsel (which opinion shall cover
such matters as the Agent may reasonably request, including a
statement that the Obligations under the Loan Agreement as amended by
this Amendment constitute "Senior Indebtedness" as defined under the
indentures relating to the Senior Notes and to the Subordinated
Notes).
(iii) The Borrowers shall deliver to the Agent a certificate of
the Borrowers' Chief Executive or Chief Financial Officer with respect
to Section (i) above and such other instruments and documents as the
Agent shall reasonably request.
(iv) The Agent shall have received an original counterpart of
this Amendment, duly executed and delivered by the Borrowers and the
Required Lenders.
(v) The Agent shall have received payment of an amendment fee in
the amount of $250,000 for the benefit of the Lenders.
8
<PAGE>
7. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, and by each party in separate counterparts, each of which is an
original, but all of which shall together constitute one and the same agreement.
8. GOVERNING LAW. This Amendment is deemed to have been made in the
State of New York and is governed by and interpreted in accordance with the laws
of such state, provided that no doctrine of choice of law (except as may be
applicable under the UCC with respect to the Security Interest) shall be used to
apply the laws of any other state or jurisdiction.
IN WITNESS WHEREOF, the parties have entered into this Amendment as of
the date first above written.
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> MAY-04-1996
<CASH> 58,707
<SECURITIES> 0
<RECEIVABLES> 83,724
<ALLOWANCES> 1,851
<INVENTORY> 353,943
<CURRENT-ASSETS> 514,692
<PP&E> 921,975
<DEPRECIATION> 326,071
<TOTAL-ASSETS> 1,759,960
<CURRENT-LIABILITIES> 349,843
<BONDS> 1,389,907
0
0
<COMMON> 13,611
<OTHER-SE> (75,865)
<TOTAL-LIABILITY-AND-EQUITY> 1,759,960
<SALES> 814,468
<TOTAL-REVENUES> 827,658
<CGS> 635,996
<TOTAL-COSTS> 635,996
<OTHER-EXPENSES> 170,845
<LOSS-PROVISION> 368
<INTEREST-EXPENSE> 34,560
<INCOME-PRETAX> (13,743)
<INCOME-TAX> 4,714
<INCOME-CONTINUING> (9,029)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,029)
<EPS-PRIMARY> (.83)
<EPS-DILUTED> 0
</TABLE>
