<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 July 31, 1999
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 0-8858
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, New York 13221-4737
(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 ninety (90) days.
YES /X/ NO / /
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES /X/ NO / /
Common stock, par value $.01 per share: 20,106,955 shares
outstanding as of September 14, 1999
Page 1 of 30
<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)
<TABLE>
<CAPTION>
SUCCESSOR
COMPANY PREDECESSOR COMPANY
--------- ----------------------------
5 WEEKS 8 WEEKS 13 WEEKS
ENDED ENDED ENDED
JULY 31, JUNE 26, AUGUST 1,
1999 1999 1998
--------- --------- ---------
<S> <C> <C> <C>
Total Revenues $ 240,966 $ 391,759 $ 730,223
COSTS AND OPERATING EXPENSES:
Cost of sales (including
buying and occupancy
costs) (Note 4) 184,761 303,037 568,629
Selling and administrative
expenses 50,450 87,881 154,080
Amortization of excess
reorganization value 10,982
Unusual items (Note 5) (968)
--------- --------- ---------
OPERATING (LOSS) INCOME (5,227) 1,809 7,514
Interest expense (contractual
interest estimated at $22,656
for the eight week period
ended June 26, 1999) (Note 6) 3,520 5,254 37,258
Reorganization items (Note 7) 160,171
--------- --------- ---------
(LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY ITEMS (8,747) (163,616) (29,744)
Provision (benefit) for
income taxes (Note 8) 15 22 (6,246)
--------- --------- ---------
(LOSS) BEFORE EXTRAORDINARY ITEMS (8,762) (163,638) (23,498)
Extraordinary items (Note 9) (656,435)
--------- --------- ---------
NET (LOSS) INCOME $ (8,762) $ 492,797 $ (23,498)
========= ========= =========
PER SHARE DATA (BASIC
AND DILUTED):
Net (loss) (Note 10) $ (0.44)
=========
</TABLE>
See Notes to Interim Consolidated Financial Statements. Per share data is not
presented for periods prior to June 26, 1999 due to the general lack of
comparability as a result of the revised capital structure of the Company.
- 2 -
<PAGE>
THE PENN TRAFFIC COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
UNAUDITED
(All dollar amounts in thousands,
except per share data)
<TABLE>
<CAPTION>
SUCCESSOR
COMPANY PREDECESSOR COMPANY
--------- -------------------------------
5 WEEKS 21 WEEKS 26 WEEKS
ENDED ENDED ENDED
JULY 31, JUNE 26, AUGUST 1,
1999 1999 1998
--------- ----------- -----------
<S> <C> <C> <C>
Total Revenues $ 240,966 $ 1,006,804 $ 1,447,022
COSTS AND OPERATING EXPENSES:
Cost of sales (including
buying and occupancy
costs) (Note 4) 184,761 781,342 1,128,019
Selling and administrative
expenses 50,450 226,430 302,035
Amortization of excess
reorganization value 10,982
Unusual items (Note 5) (4,631)
--------- ----------- -----------
OPERATING (LOSS) INCOME (5,227) 3,663 16,968
Interest expense (contractual
interest estimated at $58,772
for the twenty-one week period
ended June 26, 1999) (Note 6) 3,520 21,794 74,120
Reorganization items (Note 7) 167,031
--------- ----------- -----------
(LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY ITEMS (8,747) (185,162) (57,152)
Provision (benefit) for
income taxes (Note 8) 15 60 (16,596)
--------- ----------- -----------
(LOSS) BEFORE EXTRAORDINARY ITEMS (8,762) (185,222) (40,556)
Extraordinary items (Note 9) (654,928)
--------- ----------- -----------
NET (LOSS) INCOME $ (8,762) $ 469,706 $ (40,556)
========= =========== ===========
PER SHARE DATA (BASIC
AND DILUTED):
Net (loss) (Note 10) $ (0.44)
=========
</TABLE>
See Notes to Interim Consolidated Financial Statements. Per share data is not
presented for periods prior to June 26, 1999 due to the general lack of
comparability as a result of the revised capital structure of the Company.
- 3 -
<PAGE>
THE PENN TRAFFIC COMPANY
CONSOLIDATED BALANCE SHEET
(All dollar amounts in thousands)
<TABLE>
<CAPTION>
UNAUDITED
JULY 31, 1999 JANUARY 30, 1999
------------- ----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and short-term investments $ 77,180 $ 43,474
Accounts and notes receivable
(less allowance for doubtful accounts
of $8,991 and $5,731, respectively) 44,096 62,420
Inventories (Note 12) 255,740 283,631
Prepaid expenses and other current assets 10,786 14,619
----------- -----------
Total Current Assets 387,802 404,144
NONCURRENT ASSETS:
Capital leases - net 65,041 90,932
Property, plant and equipment - net (Note 13) 222,487 380,143
Beneficial leases - net 60,603 14,785
Goodwill - net 269,894
Excess reorganization value - net 331,646
Other assets and deferred charges - net 20,631 68,163
----------- -----------
Total Assets $ 1,088,210 $ 1,228,061
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current portion of obligations
under capital leases $ 9,903 $ 11,516
Current maturities of long-term
debt (Note 14) 282 1,267,813
Trade accounts and drafts payable 130,811 134,432
Payroll and other accrued liabilities 91,329 81,867
Accrued interest expense 2,309 42,783
Payroll taxes and other taxes payable 13,479 15,420
----------- -----------
Total Current Liabilities 248,113 1,553,831
NONCURRENT LIABILITIES:
Obligations under capital leases 87,562 98,029
Long-term debt (Note 14) 227,828
Deferred taxes 81,203
Other noncurrent liabilities 28,609 45,907
----------- -----------
Total Liabilities 673,315 1,697,767
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT) (NOTE 15):
Preferred stock (Successor Company) -
authorized 1,000,000 shares,
$.01 par value; none issued
Common Stock (Successor Company) authorized 30,000,000 shares, $.01 par value;
20,106,955 shares issued and outstanding 201
Common Stock (Predecessor Company) -
authorized 30,000,000 shares, $1.25 par value;
10,824,591 shares issued and outstanding 13,425
Capital in excess of par value 416,207 179,882
Stock warrants 7,249
Retained deficit (8,762) (658,820)
Minimum pension liability adjustment (3,470)
Unearned compensation (98)
Treasury stock, at cost (625)
----------- -----------
Total Stockholders' Equity (Deficit) 414,895 (469,706)
----------- -----------
Total Liabilities and
Stockholders' Equity (Deficit) $ 1,088,210 $ 1,228,061
=========== ===========
</TABLE>
See Notes to Interim Consolidated Financial Statements.
- 4 -
<PAGE>
THE PENN TRAFFIC COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
UNAUDITED
(All dollar amounts
in thousands)
<TABLE>
<CAPTION>
SUCCESSOR
COMPANY PREDECESSOR COMPANY
----------- --------------------------
5 WEEKS 21 WEEKS 26 WEEKS
ENDED ENDED ENDED
JULY 31, JUNE 26, AUGUST 1,
1999 1999 1998
----------- ---------- ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income $ (8,762) $ 469,706 $ (40,556)
Adjustments to reconcile
net (loss) income to net cash
provided by (used in)
operating activities:
Depreciation and amortization 4,615 25,832 39,942
Amortization of Excess
reorganization value 10,982
Gain on sold / closed stores (2,921)
Reorganization Items:
Gain from rejected leases (12,830)
Write-off of unamortized
deferred financing fees 16,591
Fresh-start adjustments 151,161
Extraordinary items (654,928)
Other - net 120
NET CHANGE IN ASSETS AND LIABILITIES:
Accounts receivable and prepaid
expenses 5,753 15,437 4,729
Inventories 1,387 22,321 16,916
Payables and accrued expenses (4,045) 13,800 (13,009)
Deferred taxes (16,671)
Deferred charges and
other assets (12) 1,464 (1,447)
Other noncurrent liabilities (207) (4,797) (1,746)
--------- --------- ---------
NET CASH PROVIDED BY (USED IN )
OPERATING ACTIVITIES 9,711 40,956 (11,842)
--------- --------- ---------
INVESTING ACTIVITIES:
Capital expenditures (3,296) (6,279) (8,028)
Proceeds from sale of assets 17,273 3,368
--------- --------- ---------
NET CASH (USED IN) PROVIDED BY
INVESTING ACTIVITIES (3,296) 10,994 (4,660)
--------- --------- ---------
FINANCING ACTIVITIES:
Payments to settle
long-term debt (22) (9,598) (3,085)
Borrowing of pre-petition
revolver debt 31,100 70,800
Repayment of pre-petition
revolver debt (144,000) (48,483)
Borrowing of DIP revolver debt 166,751
Repayment of DIP revolver debt (166,751)
Borrowing of new term loan 115,000
Reduction of capital lease
obligations (746) (8,487) (6,406)
Payment of debt issuance costs (7,906)
--------- --------- ---------
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES (768) (23,891) 12,826
--------- --------- ---------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 5,647 28,059 (3,676)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 71,533 43,474 49,095
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 77,180 $ 71,533 $ 45,419
========= ========= =========
</TABLE>
See Notes to Interim Consolidated Financial Statements.
- 5 -
<PAGE>
THE PENN TRAFFIC COMPANY
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
NOTE 1 - REORGANIZATION
On March 1, 1999 (the "Petition Date"), the Penn Traffic Company (the
"Company") and certain of its subsidiaries filed petitions for relief (the
"Bankruptcy Cases") under Chapter 11 of the United States Bankruptcy Code (the
"Bankruptcy Code") in the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court"). On May 27, 1999, the Bankruptcy Court
confirmed the Company's chapter 11 plan of reorganization (the "Plan") and on
June 29, 1999 (the "Effective Date"), the Plan became effective in accordance
with its terms.
Consummation of the Plan has resulted in (a) the former $732.2 million
principal amount of senior notes being exchanged for $100 million of new senior
notes (the "New Senior Notes") and 19,000,000 shares of new common stock (the
"New Common Stock"), (b) the former $400 million principal amount of senior
subordinated notes being exchanged for 1,000,000 shares of New Common Stock and
six-year warrants to purchase 1,000,000 shares of New Common Stock having an
exercise price of $18.30 per share, (c) holders of Penn Traffic's formerly
issued common stock receiving one share of New Common Stock for each 100 shares
of common stock held immediately prior to the Petition Date, for a total of
106,955 new shares. As part of the Plan, the Company also authorized for
issuance to officers and key employees options to purchase up to 2,297,000
shares of New Common Stock. The Company's New Common Stock and warrants to
purchase common stock are currently trading on the OTC Bulletin Board under the
symbols "PETR" and "PETRW," respectively. The Company's application to list the
New Common Stock and warrants on the Nasdaq National Market has been approved.
Trading of the New Common Stock and warrants under the symbols "PNFT" and
"PNFTW," respectively, is expected to commence on or about September 15, 1999.
The Company's Plan also provides for the payment in full of all of the
Company's obligations to its other creditors.
On the Effective Date, in connection with the consummation of the Plan,
the Company entered into a new $320 million secured credit facility (the "New
Credit Facility"). The New Credit Facility includes (a) a $205 million revolving
credit facility (the "New Revolving Credit Facility") and (b) a $115 million
term loan (the "Term Loan"). The lenders under the New Credit Facility have a
first priority perfected security interest in substantially all of the Company's
assets. Proceeds from the New Credit Facility were used to satisfy the Company's
obligations under its debtor-in-possession financing (the "DIP Facility"), pay
certain costs of the reorganization process and are available to satisfy the
Company's ongoing working capital and capital expenditure requirements.
NOTE 2 - 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.
- 6 -
<PAGE>
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, except for fresh-start adjustments (see Note 3). These unaudited
interim financial statements should be read in conjunction with the consolidated
financial statements and related notes contained in the Company's Annual Report
on Form 10-K for the fiscal year ended January 30, 1999 and the Company's
Quarterly Report on Form 10-Q for the thirteen weeks ended May 1, 1999. However,
as a result of the implementation of fresh-start reporting, the financial
statements of the Company after consummation of the Plan are not comparable to
the Company's financial statements for prior periods.
All significant intercompany transactions and accounts have been
eliminated in consolidation.
Certain amounts in the January 30, 1999 Consolidated Balance Sheet
and the Consolidated Statement of Cash Flows for the 21-week period ended
June 26, 1999 and the 26-week period ended August 1, 1998 have been
reclassified for comparative purposes.
NOTE 3 - FRESH-START REPORTING
As of the Effective Date of the Plan, the Company adopted fresh-start
reporting pursuant to the guidance provided by the American Institute of
Certified Public Accountant's Statement of Position 90-7 "Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7"). In
connection with the adoption of fresh-start reporting, a new entity has been
created for financial reporting purposes. The Effective Date of the Company's
emergence from bankruptcy is considered to be the close of business on June 26,
1999 for financial reporting purposes. The periods presented prior to June 26,
1999 have been designated "Predecessor Company" and the period subsequent to
June 26, 1999 has been designated "Successor Company". In accordance with
fresh-start reporting, all assets and liabilities are recorded at their
respective fair market values. The fair value of the Company's long-lived assets
were determined, in part, using information provided by third-party appraisers.
The reorganization value of the Company is now reflected as the debt
and equity value of the new company. To facilitate the calculation of the
reorganization value, the Company developed a set of financial projections.
Based on these financial projections, the reorganization value was determined by
the Company, with the assistance of a financial advisor, using various valuation
methods, including, (i) a comparison of the Company and its projected
performance to how the market values comparable companies, (ii) a calculation of
the present value of the free cash flows under the projections, including an
assumption for a terminal value, and (iii) negotiations with an informal
committee of the Company's noteholders. The estimated enterprise value is highly
dependent upon achieving the future financial results set forth in the
projections as well as the realization of certain other assumptions which are
not guaranteed.
- 7 -
<PAGE>
The total reorganization value as of the Effective Date was
approximately $750 million, which was approximately $342.6 million in excess of
the aggregate fair value of the Company's tangible and identifiable intangible
assets less non-interest bearing liabilities. Such excess is classified as
"Excess reorganization value" in the accompanying Consolidated Balance Sheet and
is being amortized on a straight-line basis over a three-year period.
The total outstanding indebtedness (including capital leases) as of the
Effective Date was approximately $326.3 million. The Stockholders' Equity on the
Effective Date of approximately $423.7 million was established by deducting such
total outstanding indebtedness of $326.3 million from the reorganization value
of $750 million. Stockholders' Equity includes $7.2 million representing the
fair value of the warrants distributed in conjunction with consummation of the
Plan.
- 8 -
<PAGE>
The reorganization and the adoption of fresh-start reporting resulted
in the following adjustments to the Company's Consolidated Balance Sheet as of
June 26, 1999 (in thousands):
<TABLE>
<CAPTION>
Predecessor Reorganized
Balance Sheet Reorganization Fresh-Start Balance Sheet
June 26, 1999 Adjustments Adjustments June 26, 1999
------------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and short-term
investments $ 40,776 $ 30,757 (a) $ 71,533
Accounts and notes
receivable - net 50,266 50,266
Inventories 261,310 $ (4,183)(i) 257,127
Prepaid expenses and
other current assets 10,369 10,369
---------- ---------- ---------- ----------
Total Current Assets 362,721 30,757 (4,183) 389,295
NONCURRENT ASSETS:
Capital leases - net 82,055 (16,127)(i) 65,928
Property, plant
and equipment - net 359,556 (137,232)(i) 222,324
Beneficial leases - net 14,610 46,588 (i) 61,198
Goodwill - net 266,434 (266,434)(j)
Excess reorganization
value - net 342,628 (k) 342,628
Other assets and
deferred charges - net 52,127 2,201 (b) (33,710)(i) 20,618
---------- ---------- ---------- ----------
Total Assets $1,137,503 $ 32,958 $ (68,470) $1,101,991
========== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES:
Current portion of
obligations under
capital leases $ 9,598 $ 9,598
Current maturities
of long-term debt 493 $ (214)(c) 279
Trade accounts and
drafts payable 134,033 134,033
Payroll and other
accrued liabilities 78,721 13,878 (d) $ 1,578 (l) 94,177
Accrued interest
expense 1,135 (766)(e) 369
Payroll taxes and
other taxes payable 12,531 863 (m) 13,394
---------- ---------- ---------- ----------
Total Current Liabilities 236,511 12,898 2,441 251,850
NONCURRENT LIABILITIES:
Obligations under
capital leases 88,613 88,613
Long-term debt 93,019 134,834 (f) 227,853
Deferred taxes 81,203 (m) 81,203
Other noncurrent liabilities 29,768 (953)(l) 28,815
---------- ---------- ---------- ----------
Total liabilities not
subject to compromise 447,911 147,732 82,691 678,334
LIABILITIES SUBJECT
TO COMPROMISE 1,194,888 (1,194,888)(g)
---------- ---------- ---------- ----------
Total Liabilities 1,642,799 (1,047,156) 82,691 678,334
---------- ---------- ---------- ----------
TOTAL STOCKHOLDERS'
(DEFICIT) EQUITY (505,296) 1,080,114 (h) (151,161)(n) 423,657
---------- ---------- ---------- ----------
Total Liabilities
and Stockholders'
(Deficit) Equity $1,137,503 $ 32,958 $ (68,470) $1,101,991
========== ========== ========== ==========
</TABLE>
- 9 -
<PAGE>
The explanation of the reorganization and fresh-start adjustment columns of the
Consolidated Balance Sheet are as follows:
(a) Reflects the proceeds of the New Credit Facility net of (1) the
repayment of the Company's obligations under the DIP Facility, (2)
certain mortgages repaid in connection with the reorganization and (3)
the deferred financing costs of the New Credit Facility.
(b) Reflects (1) the establishment of deferred financing costs for the New
Credit Facility and (2) the elimination of unamortized deferred
financing costs related to the DIP Facility and certain mortgages
repaid in connection with the reorganization.
(c) Reflects the repayment of certain mortgages in connection with the
reorganization.
(d) Reflects (1) the reclassification of a liability for rejected leases
(which was included in Liabilities Subject to Compromise prior to the
effectiveness of the Plan) to Payroll and other accrued liabilities and
(2) the accrual of certain deferred financing costs of the New Credit
Facility not paid as of the Effective Date.
(e) Reflects the payment of the accrued interest on the DIP Facility and
certain mortgages repaid in connection with the reorganization.
(f) Reflects (1) the issuance of the New Senior Notes ($100 million) (2)
borrowings under the New Credit Facility on the Effective Date ($115
million Term Loan) and (3) the repayment of the DIP Facility and
certain mortgages.
(g) Reflects (1) the conversion of all the Company's obligations under its
pre-petition senior and senior subordinated notes into $100 million of
New Senior Notes, approximately 99.5% of the shares of the New Common
Stock of reorganized Penn Traffic and warrants to purchase additional
shares of New Common Stock and (2) the reclassification of a liability
for rejected leases to Payroll and other accrued liabilities.
(h) Reflects the adjustment to Stockholders' (Deficit) Equity in connection
with the consummation of the Plan.
(i) Reflects the adjustment of Inventories, Capital leases, Property
plant and equipment, Beneficial leases and Other assets and deferred
charges to fair value. The adjustment includes a provision for a
change in the method of accounting for inventories. Inventory
values in the Successor Company have been reduced for certain
related periodic vendor promotional discounts whereas the
Predecessor Company recorded inventories without reducing the value
for such promotional discounts.
(j) Reflects the elimination of Goodwill.
(k) Reflects the establishment of excess reorganization value (the
reorganization value ($750 million) in excess of the aggregate fair
value of the Company's tangible and identifiable intangible assets less
non-interest bearing liabilities).
(l) Reflects (1) the elimination of a pension liability in connection with
the adjustment of pension assets and liabilities to fair value and (2)
a revaluation of the Company's workmens compensation liabilities.
(m) Reflects the recording of deferred tax liabilities associated with the
difference between the book and tax base of the Company's assets and
liabilities.
(n) Reflects the net effect on Stockholders' (Deficit) Equity of
fresh-start adjustments to the Company's assets and liabilities.
- 10 -
<PAGE>
NOTE 4 - SPECIAL CHARGES
During the 8-week period ended June 26, 1999, the Company decided to
commence a process to refine the scope of the nonfood merchandise carried in its
15 Big Bear Plus combination stores to a smaller number of categories with a
greater depth of variety in these categories. Accordingly, during the 8-week
period ended June 26, 1999, the Company recorded a special charge of $3.9
million associated with this repositioning of these 15 Big Bear Plus combination
stores. This charge, which consists of estimated inventory markdowns for
discontinued product lines, is included in cost of sales.
During the third and fourth quarters of Fiscal 1999, the Company
recorded special charges of $69.3 million related to its store rationalization
program (net of a $12.7 million gain on the sale of assets in connection with
the store rationalization program). In connection with the implementation of
this program, the Company has sold or closed 50 stores. At July 31, 1999 and
January 30, 1999, the accrued liability related to these charges was $18.5
million and $37.4 million, respectively.
NOTE 5 - UNUSUAL ITEMS
During the 8-week period ended June 26, 1999, the Company recorded
unusual items (income) of $1.0 million related to (1) a reduction of closed
store reserves previously accrued in connection with the Company's store
rationalization program, (2) a gain on the disposition of certain assets sold in
connection with the Company's store rationalization program and (3) an
adjustment to a gain on the disposition of certain assets sold in connection
with the Company's store rationalization program previously recorded in the
13-week period ended May 1, 1999.
During the 21-week period June 26, 1999, the Company recorded unusual
items (income) of $4.6 million related to (1) a reduction of closed store
reserves previously accrued in connection with the Company's store
rationalization program and (2) a gain on the disposition of certain assets sold
in connection with the Company's store rationalization program.
NOTE 6 - INTEREST EXPENSE
As a result of the Bankruptcy Cases, on and after the Petition Date no
principal or interest payments were made on the $1.132 billion of the Company's
former senior and senior subordinated notes. Accordingly, no interest expense
for these obligations has been accrued on or after the Petition Date. Had such
interest been accrued, interest expense for the 8-week and 21-week periods ended
June 26, 1999 would have been approximately $22.7 million and $58.8 million,
respectively.
- 11 -
<PAGE>
NOTE 7 - REORGANIZATION ITEMS
Reorganization items (expense) included in the accompanying
Consolidated Statements of Operations consist of the following items (in
thousands):
PREDECESSOR COMPANY
------------------------------
8 WEEKS ENDED 21 WEEKS ENDED
JUNE 26, 1999 JUNE 26, 1999
------------- --------------
Fresh-start adjustments $ 151,161 $ 151,161
Gain from rejected leases (12,830)
Write-off of unamortized
deferred financing fees 16,591
Professional fees 9,010 12,109
--------- ---------
Total Expense $ 160,171 $ 167,031
========= =========
The gain from rejected leases listed above is the difference between
the estimated allowed claims for rejected leases and liabilities previously
recorded for such leases. The professional fees listed above include
accounting, legal, consulting and other miscellaneous services associated
with the implementation of the Plan.
NOTE 8 - TAX PROVISION
The tax provisions for the 8-week and 21-week periods ended June 26,
1999 are not recorded at statutory rates due to (a) differences between the
income calculations for financial reporting and tax reporting purposes and (b)
the recording of a valuation allowance. A valuation allowance is required when
it is more likely than not the recorded value of a deferred tax asset will not
be realized.
The effective tax rate associated with the tax provision for the 5-week
period ended July 31, 1999 varies from statutory rates due to differences
between income for financial reporting and tax reporting purposes that result
primarily from the amortization of nondeductible excess reorganization value and
the fact that the Company is able to utilize its net operating loss
carryforwards to offset taxable income generated during the fiscal year ending
January 29, 2000.
At January 30, 1999, Penn Traffic had approximately $300 million of
federal net operating loss carryforwards and various tax credits. As a result of
the gain on debt discharge, during the fiscal year ending January 29, 2000 the
Company will use the entire amount of such net operating loss carryforwards and
tax credits. In addition, after January 29, 2000, the Company will lose the vast
majority of the tax basis of its long-term assets. This will reduce the amount
of tax depreciation and amortization that the Company will be able to utilize on
its tax returns, starting in the fiscal year ending January 28, 2001.
In connection with the implementation of fresh-start reporting the
Company recorded approximately $82 million of net deferred tax liabilities on
the Effective Date.
- 12 -
<PAGE>
NOTE 9 - EXTRAORDINARY ITEMS
As a result of the consummation of the Plan, the Company recognized an
extraordinary gain on debt discharge during the 8-week period ended June 26,
1999 as follows (in millions):
Elimination of the former senior and senior
subordinated notes including accrued interest $1,182.2
Write-off of unamortized deferred financing fees
for debt repaid in connection with the Plan (2.1)
Issuance of New Senior Notes (100.0)
Issuance of New Common Stock and warrants (423.7)
--------
Extraordinary gain on debt discharge $ 656.4
========
The extraordinary items recorded for the 21-week period ended June 26,
1999 of $654.9 million are comprised of the extraordinary gain on debt discharge
recognized in the 8-week period ended June 26, 1999 and the write-off of
unamortized deferred financing fees associated with the early retirement of the
Company's revolving credit facility prior to the Petition Date (the
"Pre-petition Revolving Credit Facility") ($1.5 million) which was recorded
during the 13-week period ended May 1, 1999. No corresponding tax benefit has
been recorded.
NOTE 10 - NET (LOSS) PER SHARE
Net (loss) per share is computed based on the requirements of Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128").
This standard requires presentation of basic earnings per share ("EPS"),
computed based on the weighted average number of common shares outstanding for
the period, and diluted EPS, which gives effect to all dilutive potential shares
outstanding (i.e., options and warrants) during the period. Shares used in the
calculation of basic and diluted EPS were 20,106,955 for the 5-week period ended
July 31, 1999. There were no incremental dilutive potential securities for the
5-week period ended July 31, 1999 as the exercise price for outstanding warrants
(1,000,000 shares) and options (1,837,500 shares) was greater than the average
market price of the New Common Stock.
Net (loss) per share data is not presented for periods prior to June
26, 1999 due to the general lack of comparability as a result of the revised
capital structure of the Company.
- 13 -
<PAGE>
NOTE 11 - SUPPLEMENTAL FINANCIAL INFORMATION
(In thousands of dollars)
SUCCESSOR
COMPANY PREDECESSOR COMPANY
---------- --------------------------
5 WEEKS 8 WEEKS 13 WEEKS
ENDED ENDED ENDED
JULY 31, JUNE 26, AUGUST 1,
1999 1999 1998
--------- --------- ----------
EBITDA $10,611 $14,421 $28,033
Cash Interest Expense 3,439 4,777 36,012
5 WEEKS 21 WEEKS 26 WEEKS
ENDED ENDED ENDED
JULY 31, JUNE 26, AUGUST 1,
1999 1999 1998
--------- --------- ----------
EBITDA $10,611 $29,772 $58,161
Cash Interest Expense 3,439 20,393 71,679
EBITDA is earnings before interest, depreciation, amortization,
amortization of excess reorganization value, LIFO provision, special charges,
unusual items, reorganization items, extraordinary items, the cumulative
effect of change in accounting principle and taxes. EBITDA should not be
interpreted as a measure of operating results, cash flow provided by
operating activities, a measure of liquidity, or as an alternative to any
generally accepted accounting principle measure of performance. The Company
is reporting EBITDA because it is a widely used financial measure of the
potential capacity of a company to incur and service debt. Penn Traffic's
reported EBITDA may not be comparable to similarly titled measures used by
other companies.
No interest expense for the Company's $1.132 billion of the Company's
former senior and senior subordinated notes have been accrued on or after the
Petition Date. Had such interest been accrued, cash interest expense for the
8-week and 21-week periods ended June 26, 1999 would have been approximately
$22.2 million and $57.4 million, respectively.
NOTE 12 - INVENTORIES
Inventories are stated at the lower of cost or market using the
last-in, first-out ("LIFO") method of valuation for the vast majority of the
Company's inventories. If the first-in, first-out ("FIFO") method had been used
by the Company, inventories would have been $0.2 million and $23.6 million
higher than reported at July 31, 1999 and January 30, 1999, respectively. In
connection with the implementation of fresh-start reporting the Company adjusted
the value of its LIFO inventories on the Effective Date to be equal to fair
value which approximates the FIFO value of inventories.
- 14 -
<PAGE>
NOTE 13 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment - net consists of the following (in
thousands):
July 31, 1999 January 30, 1999
------------- ----------------
Land $ 41,602 $ 16,525
Buildings 84,420 183,660
Furniture and fixtures 96,628 455,592
Vehicles 2,970 16,792
Leasehold improvements 171,007
--------- ---------
225,620 843,576
Less: Accumulated depreciation (3,133) (463,433)
--------- ---------
Property, plant and equipment-net $ 222,487 $ 380,143
========= =========
In connection with the implementation of fresh-start reporting, the
Company determined the fair value of each of its leases and recorded a
beneficial lease asset of approximately $61.2 million on June 26, 1999.
Accordingly, the Company eliminated the book value of its leasehold
improvements.
NOTE 14 - LONG-TERM DEBT
Prior to the Petition Date, the Company had the Pre-petition Revolving
Credit Facility which provided for borrowings of up to $250 million, subject to
a borrowing base limitation measured by eligible inventory and accounts
receivable of the Company. After the Petition Date, the Bankruptcy Court
approved the DIP Facility. A portion of the proceeds of the DIP Facility were
used to repay, in full, the Company's Pre-petition Revolving Credit Facility and
a mortgage on one of the Company's distribution facilities and to finance its
working capital and capital expenditure requirements. The DIP Facility matured
on June 29, 1999, the Effective Date.
The consummation of the Plan has resulted in the holders of Penn
Traffic's former senior and senior subordinated notes exchanging their notes in
the following manner: (a) the holders of the former outstanding $732.2 million
of senior notes received their pro rata share of $100 million of New Senior
Notes and 19,000,000 shares of New Common Stock, and (b) the holders of the
former outstanding $400 million of senior subordinated notes received their pro
rata share of 1,000,000 shares of New Common Stock and six-year warrants to
purchase 1,000,000 shares of New Common Stock having an exercise price of $18.30
per share.
The New Senior Notes mature on June 29, 2009 and do not contain any
mandatory redemption or sinking fund requirement provisions (other than pursuant
to certain customary exceptions including, without limitation, requiring the
Company to make an offer to repurchase the New Senior Notes upon the occurrence
of a change of control), and are optionally redeemable at prices at 106% of par
beginning in the year 2004 and declining annually thereafter, and at 111% of par
under other specified circumstances as dictated by the Plan. Pursuant to the
terms of the indenture for the New Senior Notes, the Company, at its election,
can choose to pay interest on the New Senior Notes, at the rate of 11% per annum
for the first two years (i.e., the first four interest payments) through the
issuance of additional notes and thereafter, interest on the New Senior Notes
will be payable, at the rate of 11% per annum in cash. Any notes issued in lieu
of interest would also mature on June 29, 2009 and bear interest at 11% per
annum.
- 15 -
<PAGE>
In connection with the consummation of the Plan, the Company entered
into the New Credit Facility. The New Credit Facility includes (a) the $205
million New Revolving Credit Facility and (b) the $115 million Term Loan. The
lenders under the New Credit Facility have a first priority perfected security
interest in substantially all of the Company's assets. Proceeds from the New
Credit Facility were used to satisfy the Company's obligations under its DIP
Facility, pay certain costs of the reorganization process and are available to
satisfy the Company's ongoing working capital and capital expenditure
requirements.
The Term Loan will mature on June 30, 2006. Amounts of the Term Loan
maturing in future fiscal years are outlined on the following table (in
thousands):
Fiscal Year Amount Maturing
----------- ---------------
2001 $ 2,000
2002 4,750
2003 6,750
2004 9,750
2005 12,750
2006 7,750
2007 71,250
--------
$115,000
Availability under the New Revolving Credit Facility is calculated
based on a specified percentage of eligible inventory and accounts receivable of
the Company. The New Revolving Credit Facility will mature on June 30, 2005. As
of July 31, 1999, there were no borrowings under the New Revolving Credit
Facility. Availability under the New Revolving Credit Facility was $130.1
million as of July 31, 1999.
Total debt outstanding on July 31, 1999 was (in thousands):
Current Maturities $ 282
--------
New Term Loan 115,000
Other Secured Debt 12,828
New Senior Notes 100,000
--------
Total Long-Term Debt 227,828
Total Debt $228,110
- 16 -
<PAGE>
NOTE 15 - COMMON STOCK OPTIONS AND WARRANTS OUTSTANDING
Pursuant to the Plan, the Company is authorized to issue 30,000,000
shares of New Common Stock. As of July 31, 1999, 20,106,955 shares of common
stock have been issued.
Pursuant to the Plan, the Company is authorized to issue 1,000,000
shares of preferred stock. No shares have been issued.
Pursuant to the Plan, the 1999 Equity Incentive Plan (the "Equity
Plan") was adopted on the Effective Date. The Equity Plan makes available the
granting of options to acquire an aggregate of 2,297,000 shares of New Common
Stock. All of the Company's officers and employees are eligible to receive
options under the Equity Plan. Options to acquire an aggregate of 1,097,000
shares were issued as of the Effective Date. Options to acquire an additional
600,500 shares were granted during the 5-week period ended July 31, 1999 to
certain officers and employees of the Company. Options to acquire an additional
599,500 shares may be granted by the Board of Directors' Compensation Committee.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), defines a fair value based method of
accounting for an employee stock option by which compensation cost is measured
at the grant date based on the fair value of the award and is recognized over
the service period. A company may elect to adopt SFAS 123 or elect to continue
accounting for its stock option or similar equity awards using the method of
accounting prescribed by Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" ("APB 25"), by which compensation cost is
measured at the date of grant based on the excess of the market value of the
underlying stock over the exercise price. The Company has elected to continue to
account for its stock-based compensation plan under the provisions of APB 25. No
compensation expense has been recognized in the accompanying interim financial
statements relative to the Company's Equity Plan.
During the 5-week period ended July 31, 1999, the Company adopted the
1999 Directors' Stock Option Plan (the "Directors' Plan"). The Directors' Plan
makes available to the Company's directors, who are not officers of the Company,
options to acquire up to 250,000 shares of New Common Stock. During the 5-week
period ended July 31, 1999, the Company granted options to purchase an aggregate
of 140,000 shares to seven of the Company's directors.
Pursuant to the Plan, the Company has also issued six-year warrants to
purchase 1,000,000 shares of New Common Stock at an exercise price of $18.30 per
share.
- 17 -
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain statements included in this Part I, Item 2, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and elsewhere in this
Quarterly Report on Form 10-Q which are not statements of historical fact are
intended to be, and are hereby identified as, "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Without limiting the foregoing, the words "believe," "anticipate," "plan,"
"expect," "estimate," "intend" and other similar expressions are intended to
identify forward-looking statements. The Penn Traffic Company (the "Company")
cautions readers that forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause the actual results,
performance or achievements of the Company to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the following:
the success or failure of the Company in implementing its current business and
operational strategies; availability, terms and access to capital and customary
trade credit; general economic and business conditions; competition; changes in
the Company's business strategy; availability, location and terms of sites for
store development; unexpected costs of year 2000 compliance or failure by the
Company or other entities with which it does business to achieve compliance;
labor relations; the outcome of pending or yet-to-be instituted legal
proceedings; and labor and employee benefit costs.
OVERVIEW
As discussed in Note 1 to the accompanying Consolidated Financial
Statements, Penn Traffic (the "Company") emerged from its Chapter 11 proceedings
effective June 29, 1999 (the "Effective Date"). For financial reporting
purposes, the Company accounted for the consummation of its plan of
reorganization (the "Plan") effective June 26, 1999. In accordance with the
American Institute of Certified Public Accountant's Statement of Position 90-7
"Financial Reporting by Entities in Reorganization Under the Bankruptcy Code"
("SOP 90-7"), the Company has applied fresh-start reporting as of June 26, 1999
which has resulted in significant changes to the valuation of certain of the
Company's assets and liabilities, and to its stockholders' equity. In connection
with the adoption of fresh-start reporting, a new entity has been deemed created
for financial reporting purposes. The periods presented prior to June 26, 1999
have been designated "Predecessor Company" and the period subsequent to June 26,
1999 has been designated "Successor Company". For purposes of the discussion of
Results of Operations for the 13-week and 26-week periods ended July 31, 1999,
the results of the Predecessor Company and Successor Company have been combined
since separate discussions of these periods are not meaningful in terms of their
operating results or comparisons to the prior year.
- 18 -
<PAGE>
RESULTS OF OPERATIONS
THIRTEEN WEEKS ("SECOND QUARTER FISCAL 2000") AND TWENTY-SIX WEEKS ENDED
JULY 31, 1999 COMPARED TO THIRTEEN WEEKS ("SECOND QUARTER FISCAL 1999")
AND TWENTY-SIX WEEKS ENDED AUGUST 1, 1998
The following table sets forth Statement of Operations components
expressed as percentages of total revenues for Second Quarter Fiscal 2000 and
Second Quarter Fiscal 1999, and for the 26-week period ended July 31, 1999 and
August 1, 1998, respectively:
<TABLE>
<CAPTION>
Second Quarter Ended Twenty-six Weeks Ended
------------------------------ ---------------------------
JULY 31, August 1, JULY 31, August 1,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Total revenues 100.0% 100.0% 100.0% 100.0%
Gross profit (1) 22.9 22.1 22.6 22.0
Gross profit excluding
special charge (2) 23.5 22.1 22.9 22.0
Selling and administrative
expenses 21.9 21.1 22.2 20.9
Unusual items (3) (0.2) (0.4)
Amortization of excess
reorganization value 1.7 0.9
Operating (loss) income (0.5) 1.0 (0.1) 1.2
Operating income before
unusual items, special charge
and amortization of excess
reorganization value (4) 1.7 1.0 0.7 1.2
Interest expense 1.4 5.1 2.0 5.1
Reorganization items 25.3 13.4
Net income (loss) 76.5 (3.2) 36.9 (2.8)
Net income (loss) excluding
unusual items, special charge,
amortization of excess
reorganization value,
reorganization items, and
extraordinary items (5) 0.3 (3.2) (1.3) (2.8)
</TABLE>
(1) Total revenues less cost of sales.
(2) Gross profit excluding a special charge of $3.9 million in Second
Quarter Fiscal 2000 (see Note 4).
(3) Unusual items (income) of $1.0 million and $4.6 million for Second
Quarter Fiscal 2000 and the 26-week period ended July 31, 1999,
respectively.
- 19 -
<PAGE>
(4) Operating (loss) for Second Quarter Fiscal 2000 excluding unusual
items (income) of $1.0 million, a special charge of $3.9 million,
and amortization of excess reorganization value of $11.0 million.
Operating (loss) for the 26-week period ended July 31, 1999
excluding a special charge of $3.9 million, unusual items (income)
of $4.6 million, and amortization of excess reorganization value of
$11.0 million (see Note 4 and Note 5).
(5) Net income for Second Quarter Fiscal 2000 excluding unusual items
(income) of $1.0 million, a special charge of $3.9 million,
amortization of excess reorganization value of $11.0 million,
reorganization items (expense) of $160.2 million and extraordinary
items (income) of $656.4 million. Net income for the 26-week period
ended July 31, 1999 excluding unusual items (income) of $4.6
million, a special charge of $3.9 million, amortization of excess
reorganization value of $11.0 million, reorganization items
(expense) of $167.0 million and extraordinary items (income) of
$654.9 million (see Notes 4, 5, 7 and 9).
Total revenues for Second Quarter Fiscal 2000 decreased to $632.7
million from $730.2 million in Second Quarter Fiscal 1999. Total revenues for
the 26-week period ended July 31, 1999 decreased to $1.248 billion from $1.447
billion for the 26-week period ended August 1, 1998. The decrease in revenues is
primarily attributable to a reduction in the number of stores the Company
operated in Second Quarter Fiscal 2000 as compared to Second Quarter Fiscal 1999
resulting from the Company's store rationalization program, a decline in same
store sales and a decline in wholesale revenues. Same store sales for Second
Quarter Fiscal 2000 and the 26-week period ended July 31, 1999 declined 1.1% and
2.8%, respectively, from the comparable prior year period. Wholesale supermarket
revenues were $76.0 million in Second Quarter Fiscal 2000 compared to $84.2
million in Second Quarter Fiscal 1999. Wholesale supermarket revenues were
$151.4 million for the 26-week period ended July 31, 1999 compared to $164.9
million for the 26-week period ended August 1, 1998. The decrease in wholesale
revenues resulted primarily from a reduction in the number of customers of the
Company's wholesale/franchise business.
Gross profit in Second Quarter Fiscal 2000 was 22.9% of revenues
compared to 22.1% of revenues in Second Quarter Fiscal 1999. In Second Quarter
Fiscal 2000, gross profit, excluding a special charge of $3.9 million associated
with the repositioning of the Company's 15 Big Bear Plus Stores (see Note 4),
was 23.5% of revenues. Gross profit in the 26-week period ended July 31, 1999
was 22.6% of revenues compared to 22.0% of revenues for the 26-week period ended
August 1, 1998. For the 26-week period ended July 31, 1999 gross profit,
excluding a special charge of $3.9 million, was 22.9% of revenues. The increase
in gross profit, excluding the special charge of $3.9 million, as a percentage
of revenues in Second Quarter Fiscal 2000 and the 26-week period ended July 31,
1999 was primarily due to (1) the positive effect of re-establishing the
Company's traditional high/low pricing strategy in the second half of the fiscal
year ended January 30, 1999 ("Fiscal 1999") (2) reduced inventory shrink expense
as a percentage of revenues and (3) a reduction in depreciation and amortization
expense (as described below). In addition, during Second Quarter Fiscal 2000
gross profit was positively impacted by the Company's store rationalization
program which has involved the sale or closure of approximately 50 stores which
generally had lower gross margins than the average for the Company. These
improvements in gross profit were partially offset by reduced allowance income
from the Company's vendors in the 26-week period ended July 31, 1999.
- 20 -
<PAGE>
RESULTS OF OPERATIONS (CONTINUED)
Selling and administrative expenses in Second Quarter Fiscal 2000 were
21.9% of revenues compared to 21.1% of revenues in Second Quarter Fiscal 1999.
For the 26-week period ended July 31, 1999 selling and administrative expenses
were 22.2% of revenues compared to 20.9% of revenues for the 26-week period
ended August 1, 1998. The increase in selling and administrative expenses as a
percentage of revenues in Second Quarter Fiscal 2000 and the 26-week period
ended July 31, 1999 was primarily due to (1) the Company's investment in store
labor as part of an effort to improve operations and focus on customer service
(2) the spreading of certain fixed and semi-fixed costs over reduced revenues,
(3) an increase in promotional expenses (the Company accounts for certain
promotional expenses in the selling and administrative expenses line of the
Consolidated Statement of Operations) and (4) an adjustment to allowance for
doubtful accounts as described below. Included in selling and administrative
expenses in Second Quarter Fiscal 2000 is a $1.9 million adjustment to allowance
for doubtful accounts primarily related to certain receivables arising from the
Company's pharmacy operations in prior periods whose collection now appears
doubtful. These increases in selling and administrative expenses as a percentage
of revenues were partially offset by a reduction in goodwill amortization
resulting from (1) the Company's store rationalization program, commenced in the
middle of Fiscal 1999, which involves the sale or closure of certain stores and
(2) the elimination of goodwill on June 26, 1999 in connection with the
implementation of fresh-start reporting (see Note 3).
Depreciation and amortization expense was $13.9 million in Second
Quarter Fiscal 2000 and $19.9 million in Second Quarter Fiscal 1999,
representing 2.2% and 2.7% of revenues, respectively. Depreciation and
amortization expense was $30.4 million for the 26-week period ended July 31,
1999 and $40.0 million for the 26-week period ended August 1, 1998, representing
2.4% and 2.8% of total revenues, respectively. Depreciation and amortization
expense decreased primarily due to (1) a reduction in the Company's capital
expenditure program, (2) the Company's store rationalization program, commenced
in the middle of Fiscal 1999, which involved the sale or closure of certain
stores and (3) the write-down of long-lived assets recorded in Fiscal 1999 in
accordance with Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of" ("SFAS 121"), (4) a reduction in the carrying value of property, plant and
equipment associated with the implementation of fresh-start reporting and (5)
the elimination of goodwill on June 26, 1999 associated with the implementation
of fresh-start reporting.
During the 8-week and 21-week periods ended June 26, 1999, the Company
recorded unusual items (income) of $1.0 million and $4.6 million, respectively,
related to the Company's store rationalization program (see Note 5).
Operating (loss) for Second Quarter Fiscal 2000 was $3.4 million or
(0.5%) of total revenues compared to operating income of $7.5 million or 1.0% of
total revenues in Second Quarter Fiscal 1999. In Second Quarter Fiscal 2000,
operating income before unusual items (income), a special charge and
amortization of excess reorganization value was $10.5 million or 1.7% of
revenues. Operating income decreased as a percentage of revenues in Second
Quarter Fiscal 2000 due to establishment of excess reorganization value in
connection with the implementation of fresh-start reporting and the recording of
a special charge of $3.9 million. Operating income before unusual items, special
charge and amortization of excess reorganization value as a percentage of
revenues increased due to the increase in gross profit excluding a special
charge as a percentage of revenues partially offset by an increase in selling
and administrative expenses as a percentage of revenues.
- 21 -
<PAGE>
RESULTS OF OPERATIONS (CONTINUED)
Operating (loss) for the 26-week period ended July 31, 1999 was ($1.6)
million or (0.1%) of total revenues compared to operating income of $17.0
million or 1.2% of revenues for the 26-week period ended August 1, 1998.
Operating income before unusual items, a special charge and amortization of
excess reorganization value for the 26-week period ended July 31, 1999 was $8.7
million or 0.7% of revenues. Operating income before unusual items, a special
charge and amortization of excess reorganization value as a percentage of
revenues decreased in the 26-week period ended July 31, 1999 due to an increase
in selling and administrative expenses as a percentage of revenues partially
offset by an increase in gross profit excluding special charge as a percentage
of revenues.
Interest expense for Second Quarter Fiscal 2000 and Second Quarter
Fiscal 1999 was $8.8 million and $37.3 million, respectively. Interest expense
for the 26-week period ended July 31, 1999 and August 1, 1998 was $25.3 million
and $74.1 million, respectively. Interest expense declined primarily due to (1)
the fact that on March 1, 1999 (the "Petition Date"), the Company discontinued
the accrual of interest on the Company's former senior and senior subordinated
notes and (2) the implementation of the Plan on June 29, 1999, which has
substantially reduced the Company's debt.
During Second Quarter Fiscal 2000 and the 26-week period ended July 31,
1999, the Company recorded reorganization items (expense) of $160.2 million and
$167.0 million, respectively (see Note 7).
Income tax provision was $0.0 million for Second Quarter Fiscal 2000
compared to a tax benefit of $6.2 million in Second Quarter Fiscal 1999. Income
tax provision for the 26-week period ended July 31, 1999 was $0.0 million
compared to a tax benefit of $16.6 million for the 26-week period ended August
1, 1998. The Company currently has a significant net deferred tax asset
resulting primarily from net operating loss carryforwards and various tax
credits. For accounting periods prior to the implementation of fresh-start
reporting on June 26, 1999 these net deferred tax assets have been completely
offset by a previously recorded valuation allowance. A valuation allowance is
required when it is more likely than not that the recorded value of a deferred
tax asset will not be realized. For the 5-week period ending July 31, 1999, the
Company was able to utilize such net operating loss carryforwards to offset an
income tax provision that the Company would have otherwise recognized in such
period (see Note 8).
During Second Quarter Fiscal 2000 and the 26-week period ended July 31,
1999, the Company recorded an extraordinary gain on debt discharge of $656.4
million and $654.9 million, respectively (see Note 9).
Net income for Second Quarter Fiscal 2000 was $484.0 million compared
to a net (loss) of $23.5 million for Second Quarter Fiscal 1999. Net income
excluding unusual items (income), a special charge, amortization of excess
reorganization value, reorganization items (expense) and extraordinary items
(income) was $1.7 million for Second Quarter Fiscal 2000. Net income for the
26-week period ended July 31, 1999 was $460.9 million compared to a net (loss)
of $40.6 million for the 26-week period ended August 1, 1998. Net (loss)
excluding unusual items (income), a special charge, amortization of excess
reorganization value, reorganization items (expense) and extraordinary items
(income) was $16.7 million for the 26-week period ended July 31, 1999.
- 22 -
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As a result of the consummation of the Plan, the Company substantially
reduced the amount of its overall indebtedness. In connection with the
consummation of the Plan, approximately $1.13 billion of senior notes and senior
subordinated notes were converted into $100 million of newly issued 11% Senior
Notes due 2009 (the "New Senior Notes"), approximately 99.5% of the shares of
the new common stock of reorganized Penn Traffic (the "New Common Stock")
outstanding on the Effective Date of the Plan and warrants to purchase
additional shares of New Common Stock. Upon consummation of the Plan on June 29,
1999, the Company had approximately $326 million of outstanding indebtedness
(including capital leases).
The New Senior Notes mature on June 29, 2009 and do not contain any
mandatory redemption or sinking fund requirement provisions (other than pursuant
to certain customary exceptions including, without limitation, requiring the
Company to make an offer to repurchase the New Senior Notes upon the occurrence
of a change of control), and are optionally redeemable at prices at 106% of par
beginning in the year 2004 and declining annually thereafter, and at 111% of par
under other specified circumstances as dictated by the Plan. Pursuant to the
terms of the indenture for the New Senior Notes, the Company, at its election,
can choose to pay interest on the New Senior Notes, at the rate of 11% per annum
for the first two years (i.e., the first four interest payments) through the
issuance of additional notes and thereafter, interest on the New Senior Notes
will be payable, at the rate of 11% per annum in cash. Any notes issued in lieu
of interest would also mature on June 29, 2009 and bear interest at 11% per
annum.
Prior to the Petition Date, the Company had a revolving credit facility
(the "Pre-petition Revolving Credit Facility") which provided for borrowings of
up to $250 million, subject to a borrowing base limitation measured by eligible
inventory and accounts receivable of the Company. After the Petition Date, the
United States Bankruptcy Court for the District of Delaware (the "Bankruptcy
Court") approved a $300 million debtor-in-possession financing (the "DIP
Facility"). A portion of the proceeds of the DIP Facility were used to repay, in
full, the Company's Pre-petition Revolving Credit Facility and a mortgage on one
of the Company's distribution facilities and to finance its working capital and
capital expenditure requirements. The DIP Facility matured on June 29, 1999, the
Effective Date of the Plan.
On June 29, 1999, in connection with the consummation of the Plan, the
Company entered into a new $320 million secured credit facility (the "New Credit
Facility"). The New Credit Facility includes (a) a $205 million revolving credit
facility (the "New Revolving Credit Facility") and (b) a $115 million term loan
(the "Term Loan"). The lenders under the New Credit Facility have a first
priority perfected security interest in substantially all of the Company's
assets and the New Credit Facility contains a variety of operational and
financial covenants intended to restrict the Company's operations. Proceeds from
the New Credit Facility were used to satisfy the Company's obligations under its
DIP Facility, pay certain costs of the reorganization process and are available
to satisfy the Company's ongoing working capital and capital expenditure
requirements.
- 23 -
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Term Loan will mature on June 30, 2006. Amounts of the Term Loan
maturing in future fiscal years are outlined on the following table (in
thousands):
Fiscal Year Amount Maturing
----------- ---------------
2001 $ 2,000
2002 4,750
2003 6,750
2004 9,750
2005 12,750
2006 7,750
2007 71,250
--------
$115,000
Availability under the New Revolving Credit Facility is calculated
based on a specified percentage of eligible inventory and accounts receivable of
the Company. The New Revolving Credit Facility will mature on June 30, 2005. As
of July 31, 1999, there were no borrowings under the New Revolving Credit
Facility. Availability under the New Revolving Credit Facility was $130.1
million as of July 31, 1999.
During Second Quarter Fiscal 2000, the Company's internally generated
funds from operations and amounts available under the DIP Facility and the New
Credit Facility provided sufficient liquidity to meet the Company's operating,
capital expenditure and debt service needs. The Company expects to utilize
internally generated funds from operations and amounts available under the New
Credit Facility to satisfy its operating, capital expenditure and debt service
needs for the remainder of Fiscal 2000.
Cash flows to meet the Company's operating requirements during the
26-week period ended July 31, 1999 are reported in the Consolidated Statement
of Cash Flows. During the 5-week period ended July 31, 1999, the Company's
net cash provided by operating activities was $9.7 million. This amount was
partially offset by net cash used in investing activities and net cash used
in financing activities of $3.3 million and $0.8 million, respectively.
During the 21-week period ended June 26, 1999, the Company's net cash
provided by operating activities and net cash provided by investing
activities were $41.0 million and $11.0 million, respectively. These amounts
were partially offset by net cash used in financing activities of $23.9
million. As of July 31, 1999, the Company had not paid approximately $20
million of expenditures related to its debt restructuring.
During the fiscal year ending January 29, 2000, the Company expects to
invest approximately $45 million in capital expenditures (including capital
leases). The Company expects to finance such capital expenditures through cash
generated from operations and amounts available under the New Credit Facility.
Capital expenditures will be principally for new stores, store remodels and
investments in technology.
- 24 -
<PAGE>
YEAR 2000
Year 2000 exposures arise from the inability of some computer-based
systems and equipment to correctly interpret and process dates after December
31, 1999. The basis for the exposure is that many systems and equipment carry
only the last two digits of the year field. With the year 2000, these systems
and equipment will not be able to distinguish between the year 1900 and 2000.
For those processes and procedures that use the date in calculations,
significant problems can occur.
The Company is dependent on technology including computer hardware and
software and related electronic equipment. This technology supports key business
processes including product procurement, warehousing, product delivery,
inventory control, labor management, retail sales and financial reporting. All
of this technology and electrical equipment may be susceptible to Year 2000
problems.
The calendar year 1999 coincides with eleven months of the Company's
fiscal year 2000. All financial systems have been and currently are functioning
correctly in support of fiscal year 2000.
In 1997, the Company assembled a project team consisting of
representatives across key departments in the organization to assess the state
of readiness and to initiate a plan and timetable to address issues encountered.
This working committee functioned under the control of the Company's Management
Information Systems Steering Committee and provided monthly updates to the
Company's senior management. The Year 2000 readiness plan addresses three major
segments: (a) Information Technology including infrastructure (i.e., mainframe,
server and personal computers and their associated networks), applications,
including all systems and operating software and in-store systems and equipment;
(b) Non-Information Technology, including telephones, time clocks, scales and
security devices and (c) External Entities, including product and service
providers and others with whom the Company interacts or exchanges information.
Each segment of the readiness plan includes data collection, assessment,
prioritization, resolution, testing, implementation, and ongoing monitoring of
compliance.
The table below sets forth the status and expected completion date of
all phases of the readiness plan at August 31, 1999:
Estimated
Information Technology Percent Complete Target Completion Date
- ---------------------- ---------------- ----------------------
Server Computers 100% Complete
Personal Computers 100% Complete
Applications 80% November 1999
Mainframe Computers 100% Complete
Operating Software 100% Complete
In-Store systems/equipment 75% November 1999
Non-Information Technology
- --------------------------
Phone Switches 90% September 1999
Other equipment 70% October 1999
External Entities
- -----------------
Verification of critical
business partner readiness 75% October 1999
Electronic Data Interchange
business partners 60% October 1999
- 25 -
<PAGE>
YEAR 2000 (CONTINUED)
The Year 2000 readiness plan has an overall strategy that combines
system replacement and remediation of existing legacy systems. Legacy financial,
payroll and human resource systems have been replaced. The remaining critical
legacy systems are subject to a three-part remediation effort. The first phase
uses a software tool to survey existing system code to determine where dates are
being used. The second phase is direct examination of date routines to determine
if they are involved in any calculations. The last phase is the actual change of
the code and subsequent test and implementation. The overall application
remediation effort is 80 percent complete with a target completion date of
October 1999. This effort has utilized both in-house staff and outside
consultants.
Delays in receiving standard Year 2000 software upgrades from key
equipment vendors has affected the timing of upgrades of certain of the
Company's point of sale equipment. The Company has now received the necessary
software upgrades. The installation of these upgrades is currently in process
and is expected to be completed by November 1999. After successful pilot store
installations for time and attendance, direct store delivery and pharmacy
systems, rollout of these systems to all stores began in January 1999 and is
scheduled for completion by November 1999.
As part of the Company's Year 2000 readiness plan, the Company
contacted critical business partners (product suppliers, service providers and
those with whom the Company exchanges information) in the second quarter of
1998, requesting information regarding the status of their individual Year 2000
compliance plans and progress. From that survey, the Company began a program to
test electronic communications with its critical business partners. As a result,
the Company currently expects that all critical electronic data interchange
business processes will have been tested and verified by October 1999.
Based on current information, management expects that the Company will
not experience significant disruption to operations due to Year 2000 compliance
issues. Management believes the Company assessment has been thorough and
compliance activities will be completed by November 1999. Notwithstanding the
substantial efforts of the Company and its key business partners, the Company
could experience disruptions to parts of its various activities and operations.
Consequently, the Company is formulating contingency plans for critical
functions and processes in the event of a Year 2000 problem. The plan considers
the potential for disruption in utilities such as power and telecommunications,
banking, state and local government, and transportation industries, and will
address provisioning of inventory and supplying stores and customers in the
weeks leading up to and beyond January 1, 2000, communication with employees and
customers, payment to employees and remittance to suppliers, and other areas.
The contingency plan is expected to be completed in October 1999 and will
continually be reviewed throughout the balance of the calendar year as
additional information becomes available.
- 26 -
<PAGE>
YEAR 2000 (CONTINUED)
Based on current information, the Company estimates the cost of Year
2000 compliance will be approximately $9 million including the purchase of
certain new hardware and software. To date such expenditures have totaled
approximately $7.5 million. The Company has and will continue to fund these
expenditures by utilizing the Company's operating cash flow as well as amounts
available under its New Credit Facility. Separately, improvement in systems
functionality is being obtained from Year 2000 efforts particularly in the
infrastructure area. For example, equipment that will not be supported by the
vendor for Year 2000 is being replaced by more current technology.
Because the Company's Year 2000 compliance is partially dependent upon
key business partners also being Year 2000 compliant on a timely basis, there
can be no guarantee that the Company's overall efforts will prevent a material
adverse impact on its results of operations, financial condition and cash flows.
The possible consequences to the Company of not being fully Year 2000 compliant
include temporary supermarket closings, delays in the delivery of merchandise,
errors in purchase orders and other financial transactions, and the inability to
efficiently process customer purchases. In addition, business disruptions could
result from the loss of power or the loss of communication links between
supermarkets, warehouse and headquarters locations.
- 27 -
<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 1. LEGAL PROCEEDINGS
Reorganization. Reference is made to Note 1 of the Consolidated
Financial Statements in Part I and is incorporated by reference herein.
ITEM 2. CHANGE IN SECURITIES
On June 29, 1999, the Company consummated its plan of
reorganization. In connection with the Plan, the Company canceled its former
notes, preferred stock, common Stock, restricted stock, stock warrants and
stock options. There are 30,000,000 shares of New Common Stock authorized
under the Company's Certificate of Incorporation. Of such authorized shares,
20,106,955 shares, representing 100% of the issued and outstanding shares of
New Common Stock, have been distributed to the holders of the former senior
and senior subordinated notes and common stock. In connection with the Plan,
Penn Traffic also issued the New Senior Notes and six-year warrants to
purchase 1,000,000 shares of New Common Stock, having an exercise price of
$18.30 per share. For further information concerning the issuance of the new
securities, reference is made to Note 1 accompanying the financial statements.
ITEM 5. OTHER INFORMATION
The Company's New Common Stock and new warrants issued are currently
trading on the OTC Bulletin Board under the ticker symbols "PETR" and "PETRW,"
respectively. The Company's application to list the New Common Stock and
warrants on the Nasdaq National Market has been approved. Trading of the New
Common Stock and warrants under the symbols "PNFT" and "PNFTW," respectively, is
expected to commence on or about September 15, 1999.
- 28 -
<PAGE>
PART II. OTHER INFORMATION (CONTINUED)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Number Description
-------------- -----------
10.21A Amendment to Employment Agreement
of Joseph Fisher, dated June 29, 1999
10.22 Employment Agreement of Leslie Knox,
dated August 14, 1999
10.23 Management Agreement of Hirsch & Fox LLC,
dated June 29, 1999
10.24 1999 Equity Incentive Plan
10.25 1999 Directors' Stock Option Plan
10.26 Supplemental Retirement Plan for
Non-Employee Executives
10.27 Registration Rights Agreement,
dated June 29, 1999
27.1 Financial Data Schedule
27.2 Financial Data Schedule
(b) Reports on Form 8-K
On June 11, 1999, the Company filed a report on Form 8-K relating to
the confirmation of the Company's and certain of its subsidiaries Joint Plan of
Reorganization under Chapter 11 of the U.S. Bankruptcy Code.
On July 14, 1999, the Company filed a report on Form 8-K relating to
the consummation of the Company's and certain of its subsidiaries Joint Plan of
Reorganization under Chapter 11 of the U.S. Bankruptcy Code.
- 29 -
<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
September 14, 1999 /s/ Joseph V. Fisher
---------------------------------
By: Joseph V. Fisher
President, Chief Executive
Officer and Director
September 14, 1999 /s/ Martin A. Fox
---------------------------------
By: Martin A. Fox
Vice Chairman of the
Executive Committee and
Chief Financial Officer
- 30 -
<PAGE>
Exhibit 10.21a
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment To Employment Agreement (the "Amendment") is entered
into as of this 29th day of June, 1999 by and between The Penn Traffic Company
(the "Company") and Joseph V. Fisher ("Executive").
WHEREAS, the Executive has been employed by the Company as its
President and Chief Executive Officer pursuant to an Employment Agreement
entered into as of October 30, 1998 (the "Employment Agreement");
WHEREAS, the Company contemplates the reorganization of certain
outstanding indebtedness and liabilities of, and equity interests in, the
Company and certain of its subsidiaries through confirmation of a
"pre-negotiated" plan of reorganization for the Company (the "Plan") under
Chapter 11 of Title 11 of the United States Code, 11 U.S.C.ss. 101 et seq., (the
"Bankruptcy Code"); and
WHEREAS, as part of the Company's reorganization (i) its Board of
Directors (the "Board") will consist of nine members, six of whom will be
selected by the Company's senior and subordinated noteholders and the other
members will be Martin A. Fox, Gary D. Hirsch and the Executive and (ii) an
Executive Committee of the Board, which will consist of Messrs. Hirsch and Fox
and the Executive, will be appointed to manage the business of the Company.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
1. The Executive shall continue to be employed as the President and
Chief Executive Officer of the Company during the Term (as defined in the
Employment Agreement). Further, as of the effective date of the Plan (the
"Effective Date"), the Executive hereby accepts his (i) election as a member of
the Board and (ii) appointment to the Board's Executive Committee, which shall
manage the business of the Company and have all authority customarily delegated
to the most senior executives of a company, subject to oversight by the entire
Board. Executive will report to, and serve under the direction of, (i) the
Chairman of the Executive Committee on all matters under the authority of the
Executive Committee and (ii) the Board on all other matters.
2. Paragraph 4(e) of the Employment Agreement shall be deleted in its
entirety and the following shall be substituted in its place: "Subject to the
terms of the
<PAGE>
2
Company's 1999 Equity Incentive Plan (the "Equity Plan"), Executive shall be
granted as of the Effective Date, fully-vested options, to purchase 280,000
shares of the Common Stock, $.01 par value per share (the "Common Stock"), of
the Company with an exercise price equal to $18.30 per share. Such options shall
be fully vested as of the Effective Date and generally must be exercised on or
before the tenth anniversary of the Effective Date. To the extent permitted by
the Internal Revenue code ("IRC"), such options will qualify as incentive stock
options under the IRC. Further, no later than one year after the Effective Date,
the Board's Compensation and Stock Option Committee (the "Committee") will
review the Executive's performance and based on his performance and the
Company's performance to date, the Committee shall consider and may, at its sole
discretion, grant additional options to the Executive."
3. Paragraph 14 of the Employment Agreement shall be revised only to
add that the Company shall obtain "tail" coverage under its existing director's
and officer's policy covering its current directors and officers for any claims
brought against them, which coverage shall extend for a period of not less than
six (6) years after the Effective Date. The price and terms of such coverage
shall be subject to the reasonable approval of the Informal Committee of holders
of the company's senior and subordinated notes.
4. The Executive hereby acknowledges that the Plan and the issuance of
shares of Common Stock or the reconstitution of the Company's Board of
Directors, in each case pursuant to the Plan shall not constitute a "change in
control" for purposes of the Employment Agreement and/or any employee benefit
plan, policy, arrangement, program or practice sponsored or maintained by the
Company.
5. Other than as amended herein, the Employment Agreement, subject to
Paragraph 6 hereof, shall continue in full force and effect. In the event of a
explicit conflict between the Employment Agreement and this Amendment, the
Amendment will govern.
6. This Amendment shall, subject to the prior approval of the
Bankruptcy Court in the District of Delaware, become effective upon the date
that the Bankruptcy Court in the District of Dealware declares the Plan to be
effective.
7. This Amendment may be executed in counterparts, each of which, when
so executed and delivered, shall be an original, but all of which together shall
constitute one document.
<PAGE>
3
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
THE PENN TRAFFIC COMPANY
/s/ Martin A. Fox /s/ Joseph V. Fisher
- ------------------------------------ ------------------------------------
By: Martin A. Fox Joseph V. Fisher
Title: Vice Chairman--Finance
<PAGE>
EXHIBIT 10.22
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of this 14th
day of August, 1999, by and between The Penn Traffic Company (the "Company") and
Leslie Knox ("Executive").
1. EMPLOYMENT. (a) The Company hereby agrees to engage, hire and employ
Executive as Senior Vice President, Chief Marketing Officer during the Term (as
defined).
(b) Executive hereby accepts employment as Senior Vice President, Chief
Marketing Officer of the Company and agrees to provide to the Company his
full-time services, performing such duties as shall reasonably be required and
otherwise on the terms and subject to the conditions set forth in this
Agreement.
2. TERM. The term of employment of Executive under this Agreement shall
commence effective on May 3, 1999 (the "Effective Date") and will continue until
May 3, 2001 unless earlier terminated in accordance with this Agreement (the
"Term").
3. LOCATION OF EMPLOYMENT. Executive shall render services primarily at
the Company's offices that are located in Syracuse, New York. In an effort to
assist Executive in relocating his primary residence to the Syracuse, New York
area, the Company shall provide Executive with relocation assistance in the
manner set forth on Schedule A attached hereto.
4. COMPENSATION.
(a) Base Salary. The Company shall pay to Executive during the
Term a base salary of not less than $275,000 per annum ("Base Salary"). The Base
Salary shall be paid in accordance with the Company's standard payroll practices
and will be subject to withholding and other applicable taxes.
(b) Target Bonus. Subject to the provisions of this Paragraph
4(b), the Executive shall be entitled to receive an annual cash bonus (the
"Target Bonus") for each fiscal year of the Company (i.e, year ending on or
about January 30 of each year) in an amount up to 40% of Base Salary depending
upon whether the Company meets, exceeds or falls short of its budgeted goals for
the applicable fiscal year ("Target Performance") and based on other personal
criteria established in advance of such fiscal year. Notwithstanding the
preceding sentence, the Target Bonus Executive shall be entitled to receive for
the fiscal year ending January 29, 2000 shall not be less than $55,000. Payments
of Target Bonus for any fiscal year shall be made during the first quarter of
the fiscal year immediately following the year in respect of which the Target
Bonus is payable and will only be paid to Executive if he is employed with the
Company at that time.
<PAGE>
2
(c) Options. Executive shall, on the date the Company emerges
from protection under chapter 11 of the Bankruptcy Code, be granted 10-year
options to purchase 50,000 shares of the Company's common stock, par value $.01
per share (the "Common Stock"), with an exercise price equal to the fair market
value thereof on the date of grant. Such options shall vest in five (5)
substantially equal annual increments on the grant date and on each of the first
four anniversaries of the grant date on which Executive is still employed with
the Company.
(d) 401K. Executive will be entitled to participate in the
Company's 401(K) plan six (6) months after the Effective Date.
(e) Pension. Executive will be entitled to receive pension
benefits from the Company on terms comparable to executives of the stature and
rank of Executive. Executive will become fully vested in his pension benefits on
the fifth anniversary of the Effective Date assuming Executive remains employed
with the Company on that date.
5. FRINGE BENEFITS.
(a) Executive shall, from and after the Effective Date, have
the right to participate in the Company's medical, dental, disability, life and
other insurance plans maintained during the Term by the Company for executives
of the stature and rank of Executive, and any other plans and benefits, if any,
generally maintained by the Company for executives of the stature and rank of
Executive during the Term, in each case in accordance with the terms and
conditions of such plan as from time-to-time in effect (collectively referred to
herein as "Fringe Benefits").
(b) Subject to the requirements of Executive's office,
Executive shall be entitled to four weeks annual vacation to be taken in
accordance with the vacation policy of the Company prorated for the fiscal year
ending January 29, 2000 for the number of days Executive was employed by the
Company in such year (based on 365-day year).
<PAGE>
3
(c) The Company will, upon being provided with reasonable
supporting documentation thereof, promptly reimburse Executive for actual,
ordinary and necessary travel and accommodation cost, entertainment and other
business expenses incurred as a necessary part of discharging Executive's duties
hereunder.
6. NO COMPETITION; CONFIDENTIALITY.
(a) Executive agrees that while this Agreement is in effect
and for a period of 12 months (with respect to the matters referred to in clause
(i) below) and 18 months (with respect to the matters referred to in clauses
(ii) and (iii) below) after the termination of this Agreement (the "Termination
Date"), the Executive will not without the prior written consent of the Company,
as principal, agent, employee, employer, consultant, stockholder (other than as
the holder of shares of capital stock of the Company or of not more than 2% of
the shares of any other corporation), director or co-partner, or in any other
individual or representative capacity whatsoever, directly or indirectly:
(i) engage in any way in any wholesale and/or retail food
business which operates in any state in the United States in which the Company
operates during the Term;
(ii) induce or attempt to induce any person who is in the
employ of the Company or any subsidiary thereof to leave the employ of the
Company or such subsidiary, or employ or attempt to employ any such person or
any person who at any time during the preceding twelve (12) months was in the
employ of the Company or any subsidiary thereof; or
(iii) induce or attempt to induce or assist any other person,
firm or corporation to do any of the actions referred to in (i) or (ii) above
(provided, that this Paragraph 6 shall not be interpreted so as to prohibit the
Executive from providing references for employees of the Company or its
subsidiaries or affiliates who have been solicited by an employee or prospective
employer without violation of (ii) above).
Notwithstanding the foregoing, the provisions of this Section 6(a)
shall not apply if this Agreement is terminated by the Executive for Good
Reason.
<PAGE>
4
(b) Executive agrees that while this Agreement is in effect
and for a period of three years following the end of the Term, he will not at
any time from and after the date hereof, divulge, furnish or make accessible to
any person, or himself make use of other than for the sole benefit of the
Company, any confidential or proprietary information of the Company obtained by
him while in the employ of the Company other than in connection with his
employment with the Company as provided hereunder, including, without
limitation, information with respect to any products, services, improvements,
formulas, designs, styles, processes, research, analyses, suppliers, customers,
methods of distribution or manufacture, contract terms and conditions, pricing,
financial condition, organization, personnel, business activities, budgets,
plans, objectives or strategies of the Company or its proprietary products or of
any subsidiary or affiliate of the Company and that he will, prior to or upon
the termination of his employment with the Company, return to the Company all
such confidential or non-public information, whether in written or other
physical form or stored electronically on computer disks or tapes or any other
storage medium, and all copies thereof, in his possession or custody or under
his control; provided, however, that (x) the restrictions of this paragraph
shall not apply to publicly available information or information known generally
to the public (without any action on the part of the Executive prohibited by the
restrictions of this Paragraph), and (y) the Executive may disclose such
information as may required pursuant to any subpoena or other lawful process
issued pursuant to any applicable law, rule or regulation.
Notwithstanding the foregoing, in the event that Executive
receives a subpoena or other process or order which may require him to disclose
any confidential information, the Executive agrees (i) to notify the Company
promptly of the existence, terms and circumstances surrounding such process or
order, and (ii) to cooperate with the Company, at the Company's request and at
its expense, including, but not limited to, attorneys' fees and expenses, in
taking legally available steps to resist or narrow such process or order and to
obtain an order (or other reliable assurance reasonably satisfactory to the
Company) that confidential treatment will be given to such information as is
required to be disclosed.
(c) In view of the services which the Executive will perform
for the Company and its subsidiaries and affiliates, which are special, unique,
extraordinary and intellectual in character and will place him in a position of
confidence and trust with the customers and employees of the Company and its
subsidiaries and affiliates and will provide him with access to confidential
financial information, trade secrets, "know-how" and other confidential and
proprietary information of the Company and its subsidiaries and affiliates, and
recognizing the substantial sums paid and to be paid to the Executive pursuant
to the terms hereof, the Executive expressly acknowledges that the restrictive
covenants set forth in this Paragraph 6 are necessary in order to protect and
maintain the proprietary interests and other legitimate business interests of
the Company and its subsidiaries and affiliates and that the enforcement of such
restrictive covenants will not prevent Executive from earning a livelihood. The
Executive acknowledges that the remedy at law for any breach or threatened
breach of this Paragraph 6 will be inadequate and, accordingly, that the Company
shall, in addition to all other available remedies (including, without
limitation, seeking damages sustained by reason of such breach), be entitled to
specific performance or injunctive relief without being required to post bond or
other security and without having to prove the inadequacy of the available
remedies at law.
<PAGE>
5
7. GROUNDS FOR TERMINATION BY COMPANY. The Company may terminate this
Agreement and Executive's employment hereunder for "Cause" by written notice to
Executive setting forth the grounds for termination with specificity. "Cause"
shall mean (i) the commission by the Executive of an act of fraud or
embezzlement (including the unauthorized disclosure of confidential or
proprietary information of the Company or any of its subsidiaries that results
in, or that could reasonably be expected to result in, a material injury to the
Company or such subsidiary); (ii) a felony conviction or guilty plea of the
Executive or a conviction or guilty plea of any other crime involving moral
turpitude; (iii) willful misconduct as an employee of the Company that results
in material injury to the Company; (iv) the willful failure of the Executive to
render services to the Company in accordance with his employment, which failure
amounts to a material neglect of his duties to the Company, as determined in
each case by the Board in good faith; and (v) willful and material
insubordination on the part of the Executive.
Any termination for Cause shall be effective upon notice by
the Company to Executive as provided at the beginning of this Paragraph 7.
8. GROUNDS FOR TERMINATION BY EXECUTIVE. Executive may terminate this
Agreement and his employment hereunder for Good Reason (as hereinafter defined)
by written notice to the Company setting forth the grounds for termination with
specificity. "Good Reason" shall mean (a) any material diminution in authority
or title that was made for reasons other than Cause or (b) the failure by the
Company to pay any compensation or other amount due to the
<PAGE>
6
Executive under this Agreement, which failure is not remedied within ten (10)
business days after written notice thereof is delivered to the Company by
Executive. Any termination for Good Reason shall be effective as of the business
day immediately following the date upon which the Company was required to (but
did not) remedy such failure.
9. TERMINATION FOR DEATH OR DISABILITY.
(a) If during the Term, Executive should die, Executive's
employment shall be deemed to have terminated as of the date of death.
(b) If during the Term, Executive should suffer a disability
which, in fact, prevents Executive from substantially performing his duties
hereunder for a period of 180 consecutive days or 230 or more days in the
aggregate, in any period of 12 consecutive months, then and in any such event
the Company may terminate Executive's services hereunder by a written notice to
Executive setting forth the grounds for such termination with specificity, which
termination will take effect 30 days after such notice is given. Executive may
only be terminated for disability if the Company's termination notice is given
within 60 days following the end of the aforementioned 180- or 230-day period,
whichever the Company relies upon. The existence of Executive's disability for
the purposes of this Agreement shall be determined by a physician mutually
selected by the Company and Executive, and Executive agrees to submit to an
examination by such physician for purposes of such determination.
10. EFFECT OF COMPANY'S TERMINATION OTHER THAN UNDER PARAGRAPH 7 OR 9
OR EFFECT OF EXECUTIVE'S TERMINATION UNDER PARAGRAPH 8. If (i) the Company
terminates Executive's employment under this Agreement for any reason other than
Cause, or other than due to his death or disability or (ii) Executive terminates
Executive's employment under this Agreement for Good Reason, then, provided that
the Executive enters into a severance agreement and executes a full release, in
each case in a form reasonably satisfactory to the Company:
(a) The Company shall continue to pay to Executive his Base
Salary then in effect (in the manner in which Base Salary payments have
theretofore been paid) for a period equal to 12 months from the date of
termination.
(b) The Company shall continue to provide to the Executive the
benefits described in Paragraph 5(a) hereof for a period of 12 months from the
date of termination.
<PAGE>
7
11. EFFECT OF COMPANY'S TERMINATION FOR CAUSE, EXECUTIVE'S TERMINATION
WITHOUT GOOD REASON, TERMINATION UPON DEATH OR DISABILITY.
If the Company terminates Executive's employment under this
Agreement for Cause or Executive terminates his employment under this Agreement
other than for Good Reason, or if Executive's employment is terminated due to
his death or disability, then the Company shall continue to pay Executive (or
his designated beneficiary) his Base Salary through the effective date of
termination and, in the case of termination due to Executive's death or
disability, Executive shall also be entitled to receive a pro rata portion
(calculated on the basis of a 365 day year) of the Executive's Target Bonus for
the year in which such termination occurs.
12. EXECUTIVE'S REPRESENTATIONS AND WARRANTIES. Executive represents
and warrants to the Company as follows:
(a) Executive has the unfettered right to enter into this
Agreement on the terms and subject to the conditions hereof, and Executive has
not done or permitted to be done anything which may curtail or impair any of the
rights granted to the Company herein.
(b) Neither the execution and delivery of this Agreement by
Executive nor the performance by Executive of any of Executive's obligations
hereunder constitute or will constitute a violation or breach of, or a default
under, any agreement, arrangement or understanding, or any other restriction of
any kind, to which Executive is a party or by which Executive is bound.
13. INDEMNIFICATION, ETC.. The Company agrees to hold harmless and
promptly indemnify Executive to the fullest extent permitted by law against all
damages and/or losses which Executive may suffer as a result of Executive's
services as, and/or for activities engaged in by Executive while Executive is,
an officer and/or employee of the Company or any affiliate thereof, including
either paying or reimbursing Executive, promptly after request, for any
reasonable and documented expenses and all attorneys' fees and costs actually
incurred by Executive in connection with defending, or himself instituting
and/or maintaining, any claim, action, suit or proceeding arising from
circumstances to which the Company's above indemnification relates; provided,
however, that no such indemnification shall be paid for damages or losses
incurred by Executive that result from actions by Executive that Delaware law
explicitly prohibits an employer from indemnifying its directors or employees
against, including, without limitation, to the extent any such damages or losses
arise through the gross negligence, bad faith or misconduct of Executive or the
breach by Executive of any of Executive's obligations under or representations
and warranties made pursuant to this Agreement. This indemnity shall survive the
termination of this Agreement.
<PAGE>
8
14. NOTICES. Any notice, consent, termination or other communication
under this Agreement shall be in writing and shall be considered given on the
date when hand delivered or, if sent by registered or certified mail, on the
fifth day after such notice is mailed or, if sent by overnight courier
guaranteeing overnight delivery, on the day after such notice is so sent, in
each case to the parties at the following addresses (or at such other address as
a party may specify by notice in accordance with the provisions hereof to the
other):
IF TO EXECUTIVE, TO EXECUTIVE AT:
Mr. Lester Knox
59 Timber Wood Drive
Winfield, Pennsylvania 17889
IF TO THE COMPANY:
The Penn Traffic Company
1200 State Fair Boulevard
Syracuse, New York 13221
Attn: Francis D. Price, General Counsel
WITH A COPY TO:
The Penn Traffic Company
411 Theodore Fremd Ave.
Rye, New York 10580
Attn: Martin A. Fox, Vice Chairman - Finance
15. COMPLETE AGREEMENT AND MODIFICATION. This Agreement contains a
complete statement of all the arrangements between the parties with respect to
Executive's employment by the Company, supersedes all existing agreements or
arrangements between them concerning Executive's employment, and can only be
amended or modified by a written instrument signed by the Company and Executive.
<PAGE>
9
16. SEVERABILITY PROVISIONS. If any provision of this Agreement is
declared invalid, illegal or incapable of being enforced by any court of
competent jurisdiction, all of the remaining provisions of this Agreement shall
nevertheless continue in full force and effect and no provisions shall be deemed
dependent upon any other provision unless expressly set forth herein.
17. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements
entered into and performed entirely within such State.
18. WAIVER. The failure of a party to insist upon strict adherence to
any term of this Agreement shall not be considered a waiver or deprive that
party of the right thereafter to insist upon strict adherence to that term or
any other term of this Agreement.
19. HEADING. The headings in this Agreement are solely for the
convenience of reference and shall not affect its interpretation.
20. WITHHOLDING. Any amount payable under this Agreement shall be
reduced by any amount that the Company is obligated by law or regulation to
withhold in respect of any such payment.
21. HEIRS, SUCCESSORS AND ASSIGNS. This Agreement will inure to the
benefit of, and be enforceable by, Executive's heirs and the Company's
successors and assigns. The Company shall have the right to assign this
Agreement or any part hereof or any rights hereunder to any
successor-in-interest to the Company and to any affiliate of the Company;
provided, however, that in the event of any such assignment the assignee shall
expressly agree in writing to assume all of the Company's obligations under this
Agreement, and Company shall remain secondarily liable to Executive for the
performance of all such obligations.
WHEREFORE, the parties hereto have executed this Agreement as of the
day and year first above written.
THE PENN TRAFFIC COMPANY
By: /s/ Joseph V. Fisher /s/ Leslie Knox
------------------------------ ------------------------------
Name: Joseph V. Fisher Leslie Knox
Title: President
<PAGE>
10
SCHEDULE A
RELOCATION ASSISTANCE
[attach from offer letter]
<PAGE>
EXHIBIT 10.23
MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT (the"Agreement"), dated as of June 29, 1999 among
THE PENN TRAFFIC COMPANY, a Delaware corporation, (the "Company"), HIRSCH & FOX,
L.L.C., a Delaware limited liability company ("Manager"), Gary D. Hirsch
("Hirsch") and Martin A. Fox ("Fox"; and collectively with Hirsch, the
"Executives").
WHEREAS, the Company has successfully completed the reorganization of
certain outstanding indebtedness and liabilities of, and equity interests in,
the Company and certain of its subsidiaries through confirmation of a
"pre-negotiated" plan of reorganization for the Company (the "Plan") under
Chapter 11 of Title 11 of the United States Code, 11 U.S.C.ss. 101 et seq., (the
"Bankruptcy Code"); and
WHEREAS, the Company desires for Manager to provide executive
management services to the Company, and Manager is willing to provide such
services subject to the terms and conditions contained herein.
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereto agree as follows:
1. Appointment. The Company hereby engages Manager for the services of
the Executives, and Manager hereby agrees under the terms and conditions set
forth herein, to provide the services of the Executives to the Company as
described in Section 3 herein. Manager agrees to assign to the Executives the
engagement hereunder and Hirsch and Fox agree to accept such assignment to
fulfill the Manager's duties hereunder.
2. Term. The initial term (the "Initial Term") of this Agreement shall
be two years from the date hereof (the "Effective Date"). This Agreement shall
be renewed automatically for one additional two-year term (the "Renewal Term")
thereafter unless the Board of Directors of the Company (the "Board") or Manager
shall give notice in writing to the other within 120 days before the expiration
of the Initial Term of its desire to terminate this Agreement upon expiration of
such Initial Term. Notwithstanding anything to the contrary set forth herein,
Sections 5 and 8 shall survive any termination of this Agreement.
<PAGE>
2
3. Services. From and after the date hereof until the termination of
the Initial Term or the Renewal Term, as the case may be, Manager shall provide
the services of Hirsch and Fox as (i) members of the Board of Directors of the
Company and (ii) Chairman of the Executive Committee of the Board of Directors
of the Company (the "Executive Committee") and Vice Chairman of the Executive
Committee, respectively. These positions shall constitute corporate offices of
the Company and the Company's Amended and Restated By-laws shall so provide. In
these positions, Hirsch and Fox shall (i) report directly and only to the
Company's Board of Directors, (ii) have all authority customarily delegated to
the most senior executive officers of a corporation, subject to the reasonable
oversight of the entire Board and (iii) perform such other duties as may be
requested from time to time by the Board as are consistent with their positions
as Chairman and Vice Chairman of the Executive Committee and senior executive
officers of the Company. Hirsch and Fox agree to perform their duties, as set
forth herein, in a faithful manner and to the best of their abilities. Hirsch
and Fox also agree to devote predominantly all of their full working time and
energy to the business and affairs of the Company and to use their best efforts
and all of their skills, experience and knowledge to promote the interests of
the Company. During the Initial Term and the Renewal Term, if any, the Executive
Committee shall at all times consist of three members, Hirsch, Fox and Mr.
Joseph V. Fisher.
4. Compensation; Early Termination; Change of Control. (a) In
consideration of the services to be provided in accordance with Section 3, the
Company shall pay to the Manager an annual management fee of $1,450,000,
accruing from the date hereof and payable monthly in advance (or such pro rata
amounts for partial months) on the first day of each month, commencing on the
date of this Agreement. Neither the Manager nor the Executives shall be
considered employees of the Company. The Manager and the Executives, as the case
may be, shall bear sole responsibility for payment on behalf of itself and
Executives for any federal, state and/or local income tax withholding, social
security, workers' compensation coverage and unemployment insurance and, other
than as expressly provided herein, employee benefits. To this end, Manager and
the Executives shall provide the Company with reasonable proof demonstrating
compliance with the foregoing at the Company's request. Further, the Manager and
the Executives agree to indemnify and hold harmless the Company from and against
any claims, liabilities, or expenses, including reasonable attorney's fees and
disbursements, relating to such compensation, tax, insurance and/or benefit
matters.
(b) In the event this Agreement is terminated by the Company before the
expiration of the Initial Term or the Renewal Term, as the case may be, for
reasons other than for Cause (as defined), then the Company shall immediately
pay to Manager the entire amount of all remaining unpaid management fees that
would have been payable through the end of such term but for such early
termination. For purposes of this Agreement, "Cause" shall mean a conviction or
guilty plea of a felony or any other crime involving fraud or embezzlement.
<PAGE>
3
The Company may immediately terminate this Agreement in the event both
Hirsch and Fox shall do or cause to be done any act which constitutes Cause. If
only one of Hirsch or Fox does or causes to be done any act which constitutes
Cause (other than any such act that relates to the services to be provided for
herein by Hirsch and Fox) (a "Cause Reduction Event"), then the Agreement may
not be terminated by the Company but the management fee paid to Manager under
Section 4(a) shall be reduced in accordance with Section 8(c); provided,
however, that the Agreement may be terminated if such act constitutes Cause and
relates to the services to be provided for herein by Hirsch and Fox. Should this
Agreement be terminated by the Company for Cause, the Company shall only be
required to pay the Manager the portion of management fee provided for in
Section 4(a) that has accrued to the effective date of such termination and
shall reimburse all expenses incurred by the Manager that are reimbursable
pursuant to Section 5 through such effective date.
(c) If at any time prior to the expiration of the Initial Term or the
Renewal Term, as the case may be, a "Change of Control" (as defined) occurs,
Manager shall have the option, within 12 months from the date of such occurrence
and only in the event that the Executives' duties and responsibilities provided
for herein have significantly reduced, diminished, altered or amended following
such Change of Control, to terminate this Agreement and continue to receive its
management fee in accordance with Section 4(a) for the remainder of such term as
if the Agreement were still in effect.
For purposes of this Agreement, "Change of Control" shall mean the
occurrence of any event where (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934,
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" 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 Board
(together with any new directors whose election by the Board, or whose
nomination for election by the Company's stockholders, was approved by a vote of
at least a majority of the directors then still in 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.
<PAGE>
4
5. Reimbursement. Manager, Hirsch and Fox shall be entitled to
reimbursement of all reasonable out-of-pocket expenses (including travel
expenses) incurred in connection with the performance of this Agreement, which
amounts shall be promptly reimbursed by the Company upon request, provided that
the Manager shall be required to account to the Company for such expenses in the
manner prescribed by the Company.
6. Equity Purchase; Options. (a) Subject to the restrictions and
limitations imposed by federal securities law (including Rule 10b-5 promulgated
under Section 16 of the Securities Exchange Act of 1934, as amended), Hirsch,
within six months from the date hereof, will acquire in a public or private
transaction shares of Common Stock or warrants to acquire such Common Stock that
have an initial acquisition price of at least $500,000 in the aggregate.
(b) Pursuant to the terms of The Penn Traffic Company 1999 Equity
Incentive Plan (the "EIP"), Hirsch and Fox will, on the date hereof, receive
fully-vested options to acquire 360,000 and 130,000 shares of Common Stock,
respectively, at an exercise price equal to $18.30 per share pursuant to Option
Agreements attached hereto as Exhibits A-1 and A-2. In addition, Hirsch and Fox
will, on the date hereof, receive options to purchase 240,000 and 87,000 shares
of Common Stock, respectively, 50% of which will vest on each of the 3rd and 4th
anniversaries of the Effective Date, assuming Messrs. Fox and Hirsch continue to
provide services to the Company on such dates pursuant to the Option Agreements
attached hereto as Exhibits B-1 and B-2. The exercise price for the unvested
options granted to each of Fox and Hirsch under this Section will also be $18.30
per share. The options referred to in this paragraph shall be granted pursuant
to stock option agreements, which shall be in a form identical to those entered
into by other executives of the Company, and shall otherwise be governed by the
terms and conditions of the EIP. To the extent permitted by the Internal Revenue
Code of 1986, as amended ("IRC") all such options granted to Hirsch and Fox will
qualify as incentive stock options under the IRC. The shares of Common Stock
issuable upon exercise of such options shall be registered by the Company
pursuant to a Registration Statement on Form S-8 under the Securities Act of
1933, as amended.
7. Employee Benefits. During the Initial Term or the Renewal Term, as
the case may be, Hirsch and Fox shall have the right to participate in the
Company's medical, dental, disability, life and other insurance plans maintained
during such time by the Company for executives of similar stature and rank, and
any other plans and benefits, if any, generally maintained by the Company for
executives of similar stature and rank, in each case in accordance with the
terms and conditions of such plan as from time-to-time in effect or have the
Company reimburse Hirsch and Fox for such benefits at a annual cost not to
exceed $25,000 per Executive. In connection with the execution of this
Agreement, the Company agrees to provide Fox and Hirsch with pension benefits in
accordance with the terms of The Penn Traffic Supplemental Retirement Plan for
Non-Employee Executives, attached hereto as Exhibit C.
<PAGE>
5
8. Termination of Agreement by Reason of Death or Disability. (a) If
either Hirsch or Fox shall die or become Disabled (as defined below) during
either the Initial Term or the Renewal Term, as the case may be, the Manager's
engagement and this Agreement shall continue, subject to Section 8(c), for the
balance of such term; provided, however, that if Hirsch and Fox both die or
become Disabled during the Initial Term or the Renewal Term, then the Manager's
engagement and this Agreement shall terminate automatically as of the date both
Hirsch and Fox are terminated as a result of their being deceased or the date
that either is terminated in accordance with Section 8(b) due to their
disability, whichever date is later. If both Hirsch and Fox's engagement are
terminated due either to their respective deaths and/or disabilities, then the
Company shall only be obligated to pay the Manager the portion of management fee
provided for in Section 4(a) that has accrued to the effective date of such
termination; provided, however, that upon such termination, their respective
options and other rights that would have vested within one year of such date
shall be deemed vested.
(b) For purposes of this Agreement, the term "Disabled" shall mean that
Hirsch or Fox has suffered a disability which, in fact, prevents him from
substantially performing his duties hereunder for a period of 180 consecutive
days or 230 days in the aggregate, in any period of 12 consecutive months. In
such event, the Company may terminate Hirsch's or Fox's services hereunder only
by a written notice to either, as applicable, setting forth the grounds for such
termination with specificity, which termination will take effect 30 days after
such notice is given. Hirsch or Fox may only be terminated for disability if the
Company's termination notice is given within 60 days following the end of the
aforementioned 180- or 230-day period, whichever the Company relies upon. The
existence of Hirsch's or Fox's disability for the purposes of this Agreement
shall be determined by a physician mutually selected by the Company and Hirsch
or Fox, as the case may be, and Hirsch and Fox agree to submit to an examination
by such physician for purposes of such determination.
(c) If Hirsch's engagement is terminated due to his death or disability
or due to a Cause Reduction Event during either the Initial Term or the Renewal
Term, as the case may be (and Fox's engagement continues), then the management
fee to be paid under Section 4(a) shall be reduced to $500,000 as of the date of
such termination. If Fox's engagement is terminated due to his death or
disability or due to a Cause Reduction Event during either the Initial Term or
the Renewal Term, as the case may be (and Hirsch's engagement continues), then
the management fee to be paid under Section 4(a) shall be reduced to $950,000 as
of the date of termination.
<PAGE>
6
9. No Liability. The Company hereby agrees to indemnify each
Indemnified Party to the fullest extent permitted by law from and against all
losses, liabilities, damages, deficiencies, demands, claims, actions, judgments
or causes of action, assessments, costs or expenses (including, without
limitation, interest, penalties and reasonable fees, expenses and disbursements
of attorneys, experts, personnel and consultants reasonably incurred by the
Indemnified Party in any action or proceeding) based upon, arising out of or
otherwise in respect of each Executive's services as, and/or for activities
engaged in by each Executive while each Executive is, an officer and/or director
of the Company or any affiliate thereof, including either paying or reimbursing
each Executive, promptly after request, for any reasonable and documented
expenses and attorney's fees and costs actually incurred by each Executive in
connection with defending, or himself instituting and/or maintaining, any claim,
action, suit or proceeding arising from circumstances to which the Company's
above indemnification relates (other than any claim, action, suit or proceeding
brought by the former principals of Miller Tabak & Hirsch & Company against the
Manager or the Executives); provided, however, that no such indemnification
shall be paid for damages or losses incurred by each Executive that result from
actions by him that Delaware law explicitly prohibits a corporation from
indemnifying its directors or officers against, including, without limitation,
to the extent any such damages or losses arise through gross negligence, bad
faith or misconduct. This indemnity shall survive the termination of this
Agreement. The Company represents and warrants that it has $15 million dollars
of director's and officer's insurance available on the date hereof and that it
will use its reasonable commercial efforts to maintain such policy throughout
the Term; provided further that the Company shall obtain "tail" coverage under
its existing director's and officer's policy covering its current directors and
officers for any claims brought against them, which coverage shall extend for a
period of not less than six (6) years after the Effective Date.
10. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, sent by
facsimile transmission or sent by certified, registered or express mail, postage
prepaid. Any such notice shall be deemed given when so delivered personally or
sent by facsimile transmission or, if mailed, five days after the date of
deposit in the United States mails, as follows:
<PAGE>
7
(A) IF TO THE COMPANY TO:
The Penn Traffic Company
1200 State Fair Boulevard
Syracuse, New York 13209
Attention: Francis D. Price, Esq.
TELEPHONE: (315) 461-2347
FACSIMILE: (315) 461-2532
(B) IF TO MANAGER OR THE EXECUTIVES TO:
Hirsch & Fox, L.L.C.
411 Theodore Fremd Avenue
Rye, New York 10580
Attention: Gary D. Hirsch
TELEPHONE: (914) 921-3000
FACSIMILE: (914) 921-3031
Any party may by notice given in accordance with this Section to the other
parties designate another address or person for receipt of notices hereunder.
11. Governing Law. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY
AND INTERPRETATION OF THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAW (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF
NEW YORK.
12. Assignment. This Agreement shall not be assignable by either party
hereto without the express written consent of the other party; provided, that,
Manager may assign this Agreement to any other entity that is controlled by the
Manager or Hirsch and Fox and which entity assumes the obligations of Manager
and provides the services of Hirsch and Fox under this Agreement.
13. Confidentiality. (a) During the Initial Term, the Renewal Term and
thereafter, each of the Executives and the Manager agree that they shall not,
directly or indirectly, for their own account or as agent, employee, officer,
director, trustee, consultant or shareholder of any corporation, or any member
of any firm or otherwise, divulge, furnish or make accessible to any person, or
himself or itself make use other than for the sole benefit of the Company, any
material confidential or proprietary information of the Company obtained by him
or it while in the employ or engagement of the Company other than disclosures
made by Executive based on Executive's reasonable belief that such disclosures
were in furtherance of his duties as set forth herein, including, without
limitation, information with respect to any products, services, improvements,
formulas, designs, styles, processes, research, analyses, suppliers, customers,
methods of distribution or manufacture, contract terms and conditions, pricing,
financial condition, organization, personnel, business activities, budgets,
plans, objectives or strategies of the Company or its proprietary products or of
any subsidiary or affiliate of the Company and that he or it will, prior to or
upon the termination of his or its engagement by the Company, return to the
Company all such confidential or non-public information, whether in written or
other physical form or stored electronically on computer disks or tapes or any
other storage medium, and all copies thereof, in his or its possession or
custody or under his or its control; provided, however, that (x) the
restrictions of this Paragraph shall not apply to publicly available information
or information known generally to the public (without any action on the part of
the Executive prohibited by the restrictions of this paragraph), (y) the
Executive may disclose such information known generally to the public (without
any action on the part of the Executive prohibited by the restrictions of this
paragraph), and (z) the Executive may disclose such information as may be
required pursuant to any subpoena or other lawful process issued pursuant to any
applicable law, rule or regulation.
<PAGE>
8
(b) Notwithstanding the foregoing, in the event that Manager and/or
either Executive receives a subpoena or other process or order which may require
it or him to disclose any confidential information, the Manager and Executive
agree (i) to notify the Company promptly of the existence, terms and
circumstances surrounding such process or order, and (ii) to cooperate with the
Company, at the Company's reasonable request and at its expense, including, but
not limited to, attorneys' fees and expenses, in taking legally available steps
to resist or narrow such process or order and to obtain an order (or other
reliable assurance reasonably satisfactory to the Company) that confidential
treatment will be given to such information that is required to be disclosed.
(c) The obligations of the Manager and the Executives under this
Section 13 shall survive any termination of this Agreement.
14. Non-Competition. During the Initial Term and the Renewal Term, if
this Agreement is extended pursuant to Section 2, each of the Executives and
Manager agree that they will not, directly or indirectly, for their own account
or as agent, employee, officer, director, trustee consultant or shareholder of
any corporation or a member of any firm or otherwise: (i) engage in any way in
any wholesale and/or retail food business which operates within 30 miles of any
retail store operated by the Company at the time during the Initial Term or the
Renewal Term, as the case may be, that the Executives or the Manager wish to so
engage; (ii) induce or attempt to induce any person with an annual salary in
excess of $75,000 who is in the employ of the Company or any subsidiary or
affiliate thereof to leave the employ of the Company or such subsidiary or
affiliate; or (iii) induce or attempt to induce or assist any other person, firm
or corporation to do any of the actions referred to in (i) or (ii) above
(provided, that this Section 14 shall not prohibit (A) Executive from owning
less than 5% of the equity of any entity that engages in the actions described
in (i), (ii) or (iii) above and (B) the Executives from providing references for
employees of the Company or its subsidiaries or affiliates who have been
solicited by a prospective employer without violation of (ii) above); provided,
however, that in the event the Company terminates the Agreement prior to the end
of the Initial Term or the Renewal Term, if this Agreement is extended pursuant
to Section 2, for reasons other than Cause and fails to provide the Executives
with the payments required by Section 4(b) and in the manner provided therein,
the provisions of this Section shall not survive such termination.
<PAGE>
9
15. Equitable Remedies. The Executives acknowledge that the remedy at
law for any breach or threatened breach of Sections 13 or 14 will be inadequate
and, accordingly, that the Company shall, in addition to all other available
remedies (including, without limitation, seeking damages sustained by reason of
such breach), be entitled to specific performance or injunctive relief without
being required to post bond or other security and without having to prove the
inadequacy of the available remedies at law. In addition, the Executives
acknowledge and agree that in the event the time limitation or geographic scope
of the restriction set forth in Section 14 is found to be unreasonable by a
court of competent jurisdiction, such time limitation and geographic scope shall
be deemed to be reduced to the broadest area or period as the court may
determine to be reasonable.
16. Integration. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior negotiations, understandings and writings, whether oral or
written between the parties hereto relating to the subject matter hereof.
17. Counterparts. This Agreement may be executed in counterparts, each
of which, when so executed and delivered, shall be an original, but all of which
together constitute one document.
<PAGE>
10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
THE PENN TRAFFIC COMPANY
By: /s/ Francis D. Price, Jr.
--------------------------------------
Name: Francis D. Price, Jr.
Title: General Counsel
HIRSCH & FOX, LLC
By: /s/ Gary D. Hirsch
--------------------------------------
Name:
Title:
/s/ Gary D. Hirsch
--------------------------------------
Gary D. Hirsch
/s/ Martin A. Fox
--------------------------------------
Martin A. Fox
<PAGE>
EXHIBIT 10.24
PENN TRAFFIC COMPANY
1999 EQUITY INCENTIVE PLAN
SECTION 1. Purpose. The purposes of this Penn Traffic Company 1999
Equity Incentive Plan are to promote the interests of The Penn Traffic Company
and its shareholders by (i) attracting and retaining officers and key employees
of the Company and its Affiliates and (ii) enabling such individuals to
participate in the long-term growth and financial success of the Company.
SECTION 2. Definitions. As used in the Plan, the following terms shall
have the meanings set forth below:
"Affiliate" shall mean (i) any entity that, directly or indirectly, is
controlled by, controls or is under common control with, the Company and (ii)
any entity in which the Company has a significant equity interest, in either
case as determined by the Committee.
"Award Agreement" shall mean any written agreement, contract, or other
instrument or document evidencing any Option, which may, but need not, be
executed or acknowledged by a Participant.
"Board" shall mean the Board of Directors of the Company.
"Change of Control" shall mean the occurrence of any event where (i)
any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange
Act) is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5
under the Securities Exchange Act of 1934, 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 Affiliates (which wholly
owned Affiliates are United States corporations), with the effect that any
"person" 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
<PAGE>
2
constituted the Board (together with any new directors whose election by the
Board, or whose nomination for election by the Company's stockholders, was
approved by a vote of at least a majority of the directors then still in 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.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Committee" shall mean the Compensation and Stock Option Committee of
the Board, or such other committee of the Board as may be designated by the
Board to administer the Plan; provided, however, that any such committee shall
consist solely of two or more "outside directors" within the meaning of Section
162(m) of the Code.
"Company" shall mean The Penn Traffic Company, together with any
successor thereto.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" shall mean, (A) with respect to any property other
than Shares, the fair market value of such property determined by such methods
or procedures as shall be established from time to time by the Committee and (B)
with respect to the Shares, as of any date, (i) the mean between the high and
low sales prices of the Shares as reported on the composite tape for securities
traded on the New York Stock Exchange for such date (or if not then trading on
the New York Stock Exchange, the mean between the high and low sales price of
the Shares on the stock exchange or over-the-counter market on which the Shares
are principally trading on such date) or, if there were no sales on such date,
on the closest preceding date on which there were sales of Shares or (ii) in the
event there shall be no public market for the Shares on such date, the fair
market value of the Shares as determined in good faith by the Committee.
"Incentive Stock Option" shall mean a right to purchase Shares from the
Company that is granted under Section 6 of the Plan and that is intended to
meet, and that meets, the requirements of Section 422 of the Code or any
successor provision thereto.
"Management Agreement" shall mean the agreement dated as of June 29,
1999 among the Company, Hirsch & Fox, L.L.C., Gary D. Hirsch and Martin A. Fox.
<PAGE>
3
"Non-Qualified Stock Option" shall mean a right to purchase Shares from
the Company that is granted under Section 6 of the Plan and that is not intended
to be an Incentive Stock Option.
"Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option.
"Participant" shall mean any officer or key employee of the Company or
its Affiliates eligible for an Option under Section 5 of the Plan and selected
by the Committee to receive an Option under the Plan.
"Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, government
or political subdivision thereof or other entity.
"Plan" shall mean this Penn Traffic Company 1999 Equity Incentive Plan.
"Reorganization Plan" shall mean the Joint Plan of Reorganization of
the Company and certain of its Affiliates under chapter 11 of the Bankruptcy
Code.
"Rule 16b-3" shall mean Rule 16b-3 as promulgated and interpreted by
the SEC under the Exchange Act, or any successor rule or regulation thereto as
in effect from time to time.
"SEC" shall mean the Securities and Exchange Commission or any
successor thereto and shall include the Staff thereof.
"Shares" shall mean the common shares of Penn Traffic Company, $.01 par
value, or such other securities of the Company (i) into which such common shares
shall be changed by reason of a recapitalization, merger, consolidation,
split-up, combination, exchange of shares or other similar transaction or (ii)
as may be determined by the Committee pursuant to Section 4(b).
"Substitute Options" shall have the meaning specified in Section 4(c).
SECTION 3. Administration. (a) The Plan shall be administered by the
Committee. Subject to the terms of the Plan and applicable law, and in addition
to other express powers and authorizations conferred on the Committee by the
Plan, the Committee shall have full power and authority to: (i) designate
Participants; (ii) determine the type or types of Options to be granted to a
Participant; (iii) determine the number of Shares to be covered by Options; (iv)
determine the terms and conditions of any Option; (v) determine whether, to what
extent, and under what circumstances Options may be settled or exercised in cash
or Shares, or canceled, forfeited, or suspended and the method or methods by
which Options may be settled, exercised, canceled, forfeited, or suspended; (vi)
determine whether, to what extent,
<PAGE>
4
and under what circumstances cash, Shares, other securities, other Options,
other property, and other amounts payable with respect to an Option shall be
deferred either automatically or at the election of the holder thereof or of the
Committee; (vii) interpret, administer reconcile any inconsistency, correct any
default and/or supply any omission in the Plan and any instrument or agreement
relating to, or Option made under, the Plan; (viii) establish, amend, suspend,
or waive such rules and regulations and appoint such agents as it shall deem
appropriate for the proper administration of the Plan; and (ix) make any other
determination and take any other action that the Committee deems necessary or
desirable for the administration of the Plan.
(b) Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations, and other decisions under or with respect to
the Plan or any Option shall be within the sole discretion of the Committee, may
be made at any time and shall be final, conclusive, and binding upon all
Persons, including the Company, any Affiliate, any Participant, any holder or
beneficiary of any Option, and any shareholder.
(c) No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Option
hereunder.
SECTION 4. Shares Available for Options.
(a) Shares Available. Subject to adjustment as provided in Section
4(b), the aggregate number of Shares with respect to which Options may be
granted under the Plan shall be 2,297,000. If, after the effective date of the
Plan, an Option has expired, terminated or been canceled for any reason
whatsoever (other than by reason of exercise or vesting), then the Shares
covered by such Option shall again be, or shall become, Shares with respect to
which Options may be granted hereunder.
(b) Adjustments. In the event of any dividend or other distribution
(whether in the form of cash, Shares, other securities, or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, or exchange of
Shares or other securities of the Company, issuance of warrants or other rights
to purchase Shares or other securities of the Company, or other similar
corporate transaction or event affecting the Shares, then the Committee shall,
in order to prevent dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan, in such manner as it may
deem appropriate, equitably adjust any or all of (i) the number of Shares or
other securities of the Company (or number and kind of other securities or
property) with respect to which Options may be granted, (ii) the number of
Shares or other securities of the Company (or number and kind of other
securities or property) subject to outstanding Options, and (iii) the exercise
price with respect to any Option or, if deemed appropriate, make provision for a
cash payment to the holder of an outstanding Option in consideration for the
cancellation of such Option in an amount
<PAGE>
5
equal to the excess, if any, of the Fair Market Value of the Shares subject to
the Options over the aggregate exercise price of such Option.
(c) Substitute Options. Options may, in the discretion of the
Committee, be made under the Plan in assumption of, or in substitution for,
outstanding awards previously granted by the Company or its Affiliates or a
company acquired by the Company or with which the Company combines ("Substitute
Options"). The number of Shares underlying any Substitute Options shall be
counted against the aggregate number of Shares available for Options under the
Plan.
(d) Sources of Shares Deliverable Under Options. Any Shares delivered
pursuant to an Option may consist, in whole or in part, of authorized and
unissued Shares or of treasury Shares.
SECTION 5. Eligibility. Any officer or key employee of the Company or
any of its Affiliates (including any prospective officer or key employee) shall
be eligible to be designated a Participant.
SECTION 6. Stock Options.
(a) Grant. Subject to the provisions of the Plan, the Committee shall
have sole and complete authority to determine the Participants to whom Options
shall be granted, the number of Shares to be covered by each Option, the
exercise price therefor and the conditions and limitations applicable to the
exercise of the Option. The Committee shall have the authority to grant
Incentive Stock Options, or to grant Non-Qualified Stock Options, or to grant
both types of Options. In the case of Incentive Stock Options, the terms and
conditions of such grants shall be subject to and comply with Section 422 of the
Code, as from time to time amended, and any rules and regulations implementing
such statute. All Options when granted under the Plan are intended to be
Non-Qualified Stock Options, unless the applicable Award Agreement expressly
states that the Option is intended to be an Incentive Stock Option. If an Option
is intended to be an Incentive Stock Option, and if for any reason such Option
(or any portion thereof) shall not qualify as an Incentive Stock Option, then,
to the extent of such nonqualification, such Option (or portion thereof) shall
be regarded as a Non-Qualified Stock Option appropriately granted under the
Plan; provided that such Option (or portion thereof) otherwise complies with the
Plan's requirements relating to Non-Qualified Stock Options.
(b) Exercise Price. The Committee shall establish the exercise price at
the time each Option is granted, which exercise price shall be set forth in the
applicable Award Agreement; provided, however, that, in the case of Incentive
Stock Options, the exercise price shall not be (i) less than 100% of Fair Market
Value on the date of grant or (ii) less than 110% of Fair Market Value on the
date of grant, if the Participant owns stock representing 10% or more of the
voting power of the Company.
<PAGE>
6
(c) Exercise. Each Option shall be exercisable at such times and
subject to such terms and conditions as the Committee may, in its sole
discretion, specify in the applicable Award Agreement or thereafter. The
Committee may impose such conditions with respect to the exercise of Options,
including without limitation, any relating to the application of federal or
state securities laws, as it may deem necessary or advisable.
(d) Payment.
(i) No Shares shall be delivered pursuant to any exercise of
an Option until payment in full of the aggregate exercise price therefor is
received by the Company. Such payment may be made in cash, or its equivalent, or
(x) by exchanging Shares owned by the optionee (which are not the subject of any
pledge or other security interest and which have been owned by such optionee for
at least 6 months), (y) if there shall be a public market for the Shares at such
time, subject to such rules as may be established by the Committee, through
delivery of irrevocable instructions to a broker to sell the Shares otherwise
deliverable upon the exercise of the Option and to deliver promptly to the
Company an amount equal to the aggregate exercise price, or (z) with the consent
of the Committee in its sole discretion, by the promissory note and agreement of
a Participant providing for the payment with interest of the unpaid balance
accruing at a rate not less than needed to avoid the imputation of income under
Code section 7872 and upon such terms and conditions (including the furnishing
of security, if any therefor) as the Committee may determine, or by a
combination of the foregoing; provided that the combined value of all cash and
cash equivalents and the Fair Market Value of any such Shares so tendered to the
Company as of the date of such tender is at least equal to such aggregate
exercise price.
(ii) Wherever in this Plan or any Award Agreement a
Participant is permitted to pay the exercise price of an Option or taxes
relating to the exercise of an Option by delivering Shares, the Participant may,
subject to procedures satisfactory to the Committee, satisfy such delivery
requirement by presenting proof of beneficial ownership of such Shares, in which
case the Company shall treat the Option as exercised without further payment and
shall withhold such number of Shares from the Shares acquired by the exercise of
the Option.
(e) Maximum Term; Maximum Grant. No Option granted under this Plan
shall be exercisable (i) on or after the tenth anniversary of the date of grant
or (ii) in the case of an Incentive Stock Option held by a Participants who owns
stock representing 10% or more of the voting power of the Company on the date of
grant of such Option, on or after the fifth anniversary of the date of grant.
The maximum number of Shares with respect to which Options may be granted to any
Participant under this Plan in any calendar year shall be 1,000,000.
<PAGE>
7
SECTION 7. Amendment and Termination.
(a) Amendments to the Plan. The Board may amend, alter, suspend,
discontinue, or terminate the Plan or any portion thereof at any time; provided
that no such amendment, alteration, suspension, discontinuation or termination
shall be made without shareholder approval if such approval is necessary to
comply with any tax or regulatory requirement applicable to the Plan; and
provided further that any such amendment, alteration, suspension, discontinuance
or termination that would impair the rights of any Participant or any holder or
beneficiary of any Option theretofore granted shall not to that extent be
effective without the consent of the affected Participant, holder or
beneficiary.
(b) Amendments to Options. The Committee may waive any conditions or
rights under, amend any terms of, or alter, suspend, discontinue, cancel or
terminate, any Option theretofore granted, prospectively or retroactively;
provided that any such waiver, amendment, alteration, suspension,
discontinuance, cancellation or termination that would impair the rights of any
Participant or any holder or beneficiary of any Option theretofore granted shall
not to that extent be effective without the consent of the affected Participant,
holder or beneficiary.
(c) Adjustment of Options Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee is hereby authorized to make adjustments in
the terms and conditions of, and the criteria included in, Options in
recognition of unusual or nonrecurring events (including, without limitation,
the events described in Section 4(b) hereof) affecting the Company, any
Affiliate, or the financial statements of the Company or any Affiliate, or of
changes in applicable laws, regulations, or accounting principles, whenever the
Committee determines that such adjustments are appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan.
SECTION 8. Change of Control. Unless otherwise provided in an
applicable Award Agreement, in the event of a Change of Control after the date
of the adoption of this Plan, any outstanding Options then held by Participants,
which are unexercisable or otherwise unvested, shall automatically be deemed
exercisable or otherwise vested, as the case may be, as of immediately prior to
such Change of Control.
<PAGE>
8
SECTION 9. General Provisions.
(a) Nontransferability.
(i) Each Option shall be exercisable only by the Participant during the
Participant's lifetime, or, if permissible under applicable law, by the
Participant's legal guardian or representative. No Option may be assigned,
alienated, pledged, attached, sold or otherwise transferred or encumbered by a
Participant otherwise than by will or by the laws of descent and distribution
and any such purported assignment, alienation, pledge, attachment, sale,
transfer or encumbrance shall be void and unenforceable against the Company or
any Affiliate; provided that the designation of a beneficiary shall not
constitute an assignment, alienation, pledge, attachment, sale, transfer or
encumbrance.
(ii) Notwithstanding the foregoing, the Committee may in the applicable
Award Agreement evidencing an Option granted under the Plan, or at any time
thereafter in an amendment to an Award Agreement applicable to a previously
granted Option provide that Options granted hereunder which are not intended to
qualify as Incentive Stock Options may be transferred by the Participant to whom
such Option was granted (the "Grantee") without consideration, subject to such
rules as the Committee may adopt to preserve the purposes of the Plan, to:
(A) any or all of the Grantee's spouse, children or grandchildren
(including adopted and stepchildren and grandchildren) (collectively,
the "Immediate Family");
(B) a trust solely for the benefit of the Grantee and/or his or her
Immediate Family (a "Family Trust"); or
(C) a partnership or limited liability company whose only partners or
shareholders are the Grantee and/or his or her Immediate Family and/or
a Family Trust;
(each transferee described in clauses (A), (B) and (C) above is
hereinafter referred to as a "Permitted Transferee"); provided that the
Grantee gives the Committee advance written notice describing the terms
and conditions of the proposed transfer and the Committee notifies the
Grantee in writing that such a transfer would comply with the requirements
of the Plan and any applicable Award Agreement evidencing the Option.
The terms of any Option transferred in accordance with the
immediately preceding sentence shall apply to the Permitted Transferee and
any reference in the Plan or in an Award Agreement to an optionee, Grantee
or Participant shall be deemed to refer to the Permitted Transferee,
except that (a) Permitted Transferees shall not be entitled to transfer
any Options, other than by will or the laws of descent and distribution;
(b) Permitted Transferees shall not be entitled to exercise any
transferred Options unless there shall be in effect a registration
statement on an appropriate form covering the shares to be acquired
pursuant to the exercise of such Option if the Committee determines that
such registration statement is necessary or appropriate, (c) the Committee
or the Company shall not be required to provide any notice to a Permitted
Transferee, whether or not such notice is or would otherwise have been
required to be given to the Grantee under the Plan or otherwise and (d)
the consequences of termination of the Grantee's employment by, or
services to, the Company under the terms of the Plan and the applicable
Award Agreement
<PAGE>
9
shall continue to be applied with respect to the Grantee, following which
the Option shall be exercisable by the Permitted Transferee only to the
extent, and for the periods, specified in the Plan and the applicable
Award Agreement.
(b) No Rights to Options. No Participant or other Person shall have any
claim to be granted any Option, and there is no obligation for uniformity of
treatment of Participants, or holders or beneficiaries of Options. The terms and
conditions of Options and the Committee's determinations and interpretations
with respect thereto need not be the same with respect to each Participant
(whether or not such Participants are similarly situated).
(c) Share Certificates. All certificates for Shares or other securities
of the Company or any Affiliate delivered under the Plan pursuant to any Option
or the exercise thereof shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the Plan or the rules,
regulations, and other requirements of the SEC, any stock exchange upon which
such Shares or other securities are then listed, and any applicable Federal or
state laws, and the Committee may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.
(d) Withholding.
(i) A Participant may be required to pay to the Company or any
Affiliate and the Company or any Affiliate shall have the right and is hereby
authorized to withhold from any Shares or other property deliverable under any
Option or from any compensation or other amount owing to a Participant or under
the Management Agreement the amount (in cash, Shares or other property) of any
applicable withholding taxes in respect of an Option, its exercise, or any
payment or transfer under an Option or under the Plan and to take such other
action as may be necessary in the opinion of the Company to satisfy all
obligations for the payment of such taxes.
(ii) Without limiting the generality of clause (i) above, a
Participant may satisfy, in whole or in part, the foregoing withholding
liability by delivery of Shares owned by the Participant (which are not subject
to any pledge or other security interest and which have been owned by the
Participant for at least 6 months) with a Fair Market Value equal to such
withholding liability or by having the Company withhold from the number of
Shares otherwise issuable pursuant to the exercise of the Option a number of
Shares with a Fair Market Value equal to such withholding liability.
<PAGE>
10
(iii) The Company may, as a condition of Option exercise,
require that satisfactory arrangements have been made in advance to satisfy all
tax withholding obligations.
(e) Award Agreements. Each Option hereunder shall be evidenced by an
Award Agreement, which shall be delivered to the Participant and shall specify
the terms and conditions of the Option and any rules applicable thereto,
including but not limited to the effect on such Option of the death, disability
or termination of employment or service of a Participant, and the effect, if
any, of such other events as may be determined by the Committee.
(f) No Limit on Other Compensation Arrangements. Nothing contained in
the Plan shall prevent the Company or any Affiliate from adopting or continuing
in effect other compensation arrangements, which may, but need not, provide for
the grant of options (subject to shareholder approval if such approval is
required), and such arrangements may be either generally applicable or
applicable only in specific cases.
(g) No Right to Employment. The grant of an Option shall not be
construed as (i) giving a Participant the right to be retained in the employ of,
or in any consulting relationship to, the Company or any Affiliate or (ii) in
any way affecting the rights of the parties under the Management Agreement.
Further, the Company or an Affiliate may at any time dismiss a Participant from
employment or discontinue any consulting relationship, free from any liability
or any claim under the Plan, unless otherwise expressly provided in the Plan or
in any Award Agreement.
(h) No Rights as Shareholder. Subject to the provisions of the
applicable Option, no Participant or holder or beneficiary of any Option shall
have any rights as a shareholder with respect to any Shares to be distributed
under the Plan until he or she has become the holder of such Shares.
(i) Governing Law. The validity, construction, and effect of the Plan
and any rules and regulations relating to the Plan and any Award Agreement shall
be determined in accordance with the laws of the State of Delaware.
(j) Severability. If any provision of the Plan or any Option is or
becomes or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction or as to any Person or Option, or would disqualify the Plan or any
Option under any law deemed applicable by the Committee, such provision shall be
construed or deemed amended to conform to the applicable laws, or if it cannot
be construed or deemed amended without, in the determination of the Committee,
materially altering the intent of the Plan or the Option, such provision shall
be stricken as to such jurisdiction, Person or Option and the remainder of the
Plan and any such Option shall remain in full force and effect.
<PAGE>
11
(k) Other Laws. The Committee may refuse to issue or transfer any
Shares or other consideration under an Option if, acting in its sole discretion,
it determines that the issuance or transfer of such Shares or such other
consideration might violate any applicable law or regulation or entitle the
Company to recover the same under Section 16(b) of the Exchange Act, and any
payment tendered to the Company by a Participant, other holder or beneficiary in
connection with the exercise of such Option shall be promptly refunded to the
relevant Participant, holder or beneficiary. Without limiting the generality of
the foregoing, no Option granted hereunder shall be construed as an offer to
sell securities of the Company, and no such offer shall be outstanding, unless
and until the Committee in its sole discretion has determined that any such
offer, if made, would be in compliance with all applicable requirements of the
U.S. federal and any other applicable securities laws.
(l) No Trust or Fund Created. Neither the Plan nor any Option shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Affiliate and a Participant or
any other Person. To the extent that any Person acquires a right to receive
payments from the Company or any Affiliate pursuant to an Option, such right
shall be no greater than the right of any unsecured general creditor of the
Company or any Affiliate.
(m) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Option, and the Committee shall determine
whether cash, other securities, or other property shall be paid or transferred
in lieu of any fractional Shares or whether such fractional Shares or any rights
thereto shall be canceled, terminated, or otherwise eliminated.
(n) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
SECTION 10. Term of the Plan.
(a) Effective Date. The Plan shall be effective as of June 29, 1999.
<PAGE>
12
(b) Expiration Date. No Option shall be granted under the Plan after
June 29, 2009. Unless otherwise expressly provided in the Plan or in an
applicable Award Agreement, any Option granted hereunder may, and the authority
of the Board or the Committee to amend, alter, adjust, suspend, discontinue, or
terminate any such Option or to waive any conditions or rights under any such
Option shall, continue after June 29, 2009.
<PAGE>
EXHIBIT 10.25
The Penn Traffic Company Non-Employee
Directors' Stock Option Plan
1. Purpose. The Penn Traffic Company, a Delaware corporation (the
"Company"), hereby adopts this Penn Traffic Company Non-Employee Directors'
Stock Option Plan (the "Plan") to provide for the granting of options to
purchase ordinary stock of the Company, par value $.01 per share ("Common
Shares") in order to promote the long-term growth and financial success of the
Company by attracting and retaining non-employee directors of outstanding
ability and assisting the Company in promoting a greater identity of interest
between the Company 's non-employee directors and its stockholders.
2. Administration.
(a) The Plan shall be administered by the Board of Directors
of the Company (the "Board").
(b) The Board shall have the authority (i) to exercise all of
the powers granted to it under the Plan, (ii) to construe, interpret and
implement the Plan and all documents executed pursuant to the Plan (including
all election forms), (iii) to prescribe, amend and rescind rules relating to the
Plan, (iv) to make any determination necessary or advisable in administering the
Plan and (v) to correct any defect, supply any omission and reconcile any
inconsistency in the Plan.
(c) The determination of the Board on all matters relating to
the Plan or any document executed pursuant to the Plan shall be conclusive.
(d) No member of the Board shall be liable for any action or
determination made in good faith with respect to the Plan.
3. Eligibility. Only directors of the Company who are not full-time
employees of the Company or any of its subsidiaries ("Eligible Directors") shall
be eligible to participate in the Plan.
4. Shares Subject to the Plan.
(a) Subject to the adjustment provisions of Section 6
<PAGE>
2
below, a maximum of 250,000 Common Shares shall be issuable under the Plan. If,
and to the extent that, options granted under the Plan shall terminate, expire
or be canceled for any reason without having been exercised or payment made in
consideration of such termination, expiration or cancellation, new awards may be
granted in respect of the Common Shares covered by such terminated, expired or
canceled options. In addition, in the event that Common Shares are delivered in
payment of the exercise price of an option (or withholding obligation) such
Common Shares shall become available for subsequent grants, including Reload
Options (as defined in Section 5(a)(4) below). The granting and terms of such
new awards shall comply in all respects with the provisions of the Plan.
Common Shares sold upon the exercise of any option granted under the
Plan pursuant to Section 5 may be authorized and unissued Common Shares, issued
Common Shares held in the Company's treasury or shares purchased by, or on
behalf of the Company in open-market or private transactions or both. There
shall be reserved at all times for awards under the Plan a number of Common
Shares, of either authorized and unissued Common Shares or Common Shares held in
the Company's treasury, or both, equal to the maximum number of Common Shares
that may be issued under the Plan.
5. Options.
(a) Grant of Options
(1) Initial Awards. Each person who is an Eligible
Director as of the Effective Date or becomes an Eligible Director within one
year of the Effective Date shall receive an option to purchase 20,000 on the
date on which such Eligible Director first becomes an Eligible Director
("Initial Options").
(2) Subsequent Awards. Each year during the term of
the Plan, each person who is an Eligible Director on the date of the Company's
annual shareholders meeting and, except with respect to the first annual meeting
following the Effective Date, who has been an Eligible Director for the entire
year preceding such annual meeting will automatically receive an option to
purchase up to 20,000 Common Shares (or such other amount as the Board
determines) for service as a director of the Company (an "Option"). Each
Eligible Director who is an Eligible Director on the date of the Company's
annual
<PAGE>
3
shareholders meeting but has not been an Eligible Director for the entire
year preceding such annual meeting shall receive an option to purchase a portion
of such 20,000 Common Shares (or such other amount) equal to the results
obtained by multiplying 20,000 (or such other amount) by a fraction, the
numerator of which shall be the number of full months such Eligible Director has
served as an Eligible Director and the denominator of which shall be 12 ("Annual
Options") provided however, that Eligible Directors who are Eligible Directors
on the first annual meeting following the Effective Date shall receive an option
to purchase 20,000 Common Shares (or such other amount) without regard to the
number of months such Eligible Director has served as an Eligible Director. A
director receiving an option pursuant to the Plan may hereinafter be referred to
as an "Optionee".
(3) Discretionary Options. The Board shall also have
discretionary authority to award additional options to the Chairman of the Board
and members of the Executive Committee, the Deputy Chairman of the Board, the
Committee Chairmen and members of the Board of Directors or the Supervisory
Board of any of the Company's subsidiaries, subject to the terms and conditions
set forth below.
(4) Reload Options. Options may, in the discretion of
the Board, be granted under the Plan to permit an Optionee to reacquire any
Common Shares such Optionee delivered to the Company as payment of the exercise
price in connection with the exercise of an Option hereunder or to reacquire any
Common Shares retained by the Company to satisfy the Optionee's withholding
obligation in connection with the exercise of an Option hereunder (a "Reload
Option"). The terms of such Option shall be identical in all material respects
to the terms of the Option for which such Reload Option was granted and the term
of the Reload Option shall expire at the same time that the term of the Option
for which such Reload Option was granted was scheduled to expire; provided,
however, that the option price for each Common Share granted under the Reload
Option shall be the Fair Market Value of a Common Share at the time such Reload
Option is granted.
(b) Price.
(i) Price. The option price of each share of Common
Shares purchasable under any Option granted pursuant to the Plan
<PAGE>
4
shall be the Fair Market Value thereof at the time the Option is granted.
(ii) Fair Market Value. For purposes of the Plan,
"Fair Market Value" of a Common Share shall mean as of any date:
(1) the average of the closing bid prices
for the past ten consecutive trading days of the Common Shares on the Nasdaq
National Market if Common Shares are approved for quotation on such system, or,
if not so approved, the mean between the closing sales prices for the past ten
consecutive trading days of the Common Shares on such other national exchange or
over-the-counter market on which the Common Shares are principally trading on
such dates, or if, there were no sales on such dates; or
(2) in the event there shall be no public
market for the Common Shares, the fair market value of the Common Shares as
determined in good faith by the Board of Directors.
(c) Vesting and Exercisability.
(i) Vesting of Options. Each Option granted to an
Optionee hereunder shall vest and become exercisable in accordance with the
option agreements or grant letters pursuant to which such options are issued.
(ii) Duration of Options. Notwithstanding any
provision of the Plan to the contrary, the unexercised portion of any Option
granted under the Plan shall automatically and without notice terminate and
become null and void at the time of the earliest to occur of the following:
(a) The expiration of ten years from the
date on which such Option was granted; or
(b) Such earlier date after such Optionee no
longer is an Eligible Director as the Board may reasonably determine.
(d) Exercise of Options.
(i) An Option granted under the Plan shall be
<PAGE>
5
deemed exercised when the person entitled to exercise the Option:
(1) delivers written notice to the Company
at its principal business office, directed to the attention of Chairman of the
Board, of the decision to exercise; and
(2) concurrently tenders to the Company full
payment for the Common Shares to be purchased pursuant to such exercise in U.S.
dollars.
(ii) Payment for Common Shares with respect to which
an Option is exercised may be made in cash or its equivalent, or (x) by
exchanging shares of Common Stock owned by the Optionee (which are not the
subject of any pledge or other security interest and which have been owned by
the Optionee for at least 6 months), (y) subject to such rules as may be
established by the Board of Directors, through delivery of irrevocable
instructions to a broker to sell the shares otherwise deliverable upon the
exercise of the Option and to deliver promptly to the Company an amount equal to
the aggregate exercise price, or (z) with the consent of the Board of Directors
in its sole discretion, by the promissory note and agreement of the Optionee
providing for the payment with interest of the unpaid balance accruing at a rate
not less than needed to avoid the imputation of income under Code section 7872
and upon such terms and conditions (including the security, if any therefor) as
the Board of Directors may determine, or by a combination of the foregoing,
provided that the combined value of all cash and cash equivalents and the Fair
Market Value of any such shares of Common Stock so tendered to the Company as of
the date of such tender is at least equal to such aggregate exercise price.
(e) Transferability of Options.
(1) Subject to subsection 2 below, each Option shall
be exercisable only by the Optionee during the Optionee's lifetime, or, if
permissible under applicable law, by the Optionee's legal guardian or
representative. No Option may be assigned, alienated, pledged, attached, sold or
otherwise transferred or encumbered by an Optionee otherwise than by will or by
the laws of descent and distribution or, if inapplicable, transmission on death
in accordance with the By-Laws of the Company and any such purported assignment,
alienation, pledge, attachment, sale, transfer or encumbrance shall
<PAGE>
6
be void and unenforceable against the Company; provided that the designation of
a beneficiary shall not constitute an assignment, alienation, pledge,
attachment, sale, transfer or encumbrance.
(2) Notwithstanding the foregoing, the Board may in
the applicable Award Agreement evidencing an Option granted under the Plan or at
any time thereafter in an amendment to an Award Agreement provide that Options
granted hereunder may be transferred by the Optionee without consideration,
subject to such rules as the Board may adopt to preserve the purposes of the
Plan, to:
(A) any or all of the Optionee's spouse, children or
grandchildren (including adopted and stepchildren
and grandchildren) (collectively, the "Immediate
Family");
(B) a trust solely for the benefit of the Optionee
and/or his or her Immediate Family (a "Family
Trust"); or
(C) a partnership or limited liability company whose
only partners, shareholders or members are the
Optionee and/or his or her Immediate Family
members and/or a Family Trust;
(each transferee described in clauses (A), (B) and (C) above
is hereinafter referred to as a "Permitted Transferee");
provided that the Optionee gives the Board advance written
notice describing the terms and conditions of the proposed
transfer and the Board notifies the grantee in writing that
such a transfer would comply with the requirements of the Plan
and any applicable Award Agreement evidencing the Option.
The terms of any Option transferred in accordance with the
immediately preceding sentence shall apply to the Permitted
Transferee and any reference in the Plan or in an Award
Agreement to an Optionee shall be deemed to refer to the
Permitted Transferee, except that (a) Permitted Transferees
shall
<PAGE>
7
not be entitled to transfer any Options, other than by will or
the laws of descent and distribution; (b) Permitted
Transferees shall not be entitled to exercise any transferred
Options unless there shall be in effect a registration
statement on an appropriate form covering the Common Shares to
be acquired pursuant to the exercise of such Option if the
Board determines that such a registration statement is
necessary or appropriate, (c) the Board or the Company shall
not be required to provide any notice to a Permitted
Transferee, whether or not such notice is or would otherwise
have been required to be given to the Optionee under the Plan
or otherwise and (d) the consequences of termination of the
Optionee's employment by, or services to, the Company under
the terms of the Plan and the applicable Award Agreement shall
continue to be applied with respect to the Optionee, following
which the Options shall be exercisable by the Permitted
Transferee only to the extent, and for the periods, specified
in the Plan and the applicable Award Agreement.
(f) Rights of Optionee. Neither the Optionee nor the
Optionee's executor or administrator shall have any of the rights of a
stockholder of the Company with respect to the Common Shares subject to an
option until certificates for such Common Shares shall actually have been issued
upon the due exercise of such option. Unless the Board of Directors otherwise
determines in accordance with Section 6 below, no adjustment shall be made for
any regular cash dividend for which the record date is prior to the date of such
due exercise and full payment for such Common Shares has been made therefor.
(g) Form of Agreements with Optionees. Each Option granted
pursuant to the Plan shall be evidenced by an individual agreement ("Award
Agreement") in writing and shall have such form, terms and provisions, not
inconsistent with the provisions of the Plan, as the Board of Directors shall
provide for such Option. In the event that any provisions of an Award Agreement
differ from the terms of the Plan, the Plan provisions shall govern.
(h) Purchase for Investment. Whether or not the Options and
Common Shares covered by the Plan have been registered under the United States
Securities Act of 1933, as amended, each person exercising an Option under the
Plan may be required by the Company to give a representation
<PAGE>
8
in writing that such person is acquiring such Common Shares for investment and
not with a view to, or in connection with, the sale, transfer or distribution of
any part thereof. The Company will endorse any necessary legend referring to the
foregoing restriction upon the certificate or certificates representing any
Common Shares issued or transferred to the Optionee upon the exercise of any
Option granted under the Plan.
6. Adjustment Upon Changes in Capitalization, Etc. In the event that
the Board of Directors determines that any dividend or other distribution
(whether in the form of cash, Common Shares, other securities, or other
property), recapitalization, stock split, reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase, or exchange
of Common Shares or other securities of the Company, issuance of warrants or
other rights to purchase Common Shares or other securities of the Company, or
other similar corporate transaction or event affects the Common Shares such that
an adjustment is determined by the Board of Directors in its discretion to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the Board
of Directors shall, in such manner as it may deem equitable, adjust any or all
of (i) the number of Common Shares of the Company available for issuance under
the Plan with respect to which Options may be granted, (ii) the number of Common
Shares subject to outstanding Options, and (iii) the grant or exercise price
with respect to any Option or, if deemed appropriate, make provision for a cash
payment to the holder of an outstanding Option in consideration for the
cancellation of such Option.
7. No Limit on Other Compensation Arrangements. Nothing contained in
the Plan shall prevent the Company from adopting or continuing in effect other
compensation arrangements, which may, but need not, provide for the grant of
options, restricted stock, shares of Common Stock and other types of
compensatory awards (subject to shareholder approval if such approval is
required), and such arrangements may be either generally applicable or
applicable only in specific cases.
8. No Right to Continued Director Status. The grant of an Option shall
not be construed as giving an Optionee the right to continue to serve as an
Eligible Director or otherwise be retained in the employ of, or in any
consulting relationship to, the Company or any of its affiliates. Further, the
<PAGE>
9
Company or its affiliates may at any time dismiss an Optionee from such director
status or employment or discontinue any consulting relationship, free from any
liability or any claim under the Plan, unless otherwise expressly provided in
the Plan or in any Option Agreement.
9. No Rights as Stockholder. Subject to the provisions of the
applicable Option Agreement, no Optionee or holder or beneficiary of any Option
shall have any rights as a stockholder with respect to any shares of Common
Stock or other securities to be distributed under the Plan until he or she has
become the holder of such shares or other securities.
10. Governing Law. The validity, construction, and effect of the Plan
and any rules and regulations relating to the Plan and any Option Agreement
shall be determined in accordance with the laws of the State of Delaware.
11. Severability. If any provision of the Plan or any Option is or
becomes or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction or as to any person, entity or Option, or would disqualify the Plan
or any Option under any law deemed applicable by the Board of Directors, such
provision shall be construed or deemed amended to conform the applicable laws,
or if it cannot be construed or deemed amended without, in the determination of
the Board of Directors, materially altering the intent of the Plan or the
Option, such provision shall be stricken as to such jurisdiction, person, entity
or Option and the remainder of the Plan and any such Option shall remain in full
force and effect.
12. Other Laws. The Board of Directors may refuse to issue or transfer
any shares of Common Stock or other consideration under an Option if, acting in
its sole discretion, it determines that the issuance or transfer of such shares
of Common Stock or such other consideration might violate any applicable law or
regulation or entitle the Company to recover the same under Section 16(b) of the
Securities Exchange Act of 1934, and any payment tendered to the Company by an
Optionee, other holder or beneficiary in connection with the exercise of such
Option shall be promptly refunded to the relevant Optionee, holder or
beneficiary. Without limiting the generality of the foregoing, no Option granted
hereunder shall be construed as an offer to sell securities of the Company, and
no such offer shall be outstanding, unless and until the Board of Directors in
its sole discretion has determined that any such
<PAGE>
10
offer, if made, would be in compliance with all applicable requirements of the
U.S. federal securities laws.
13. No Trust or Fund Created. Neither the Plan nor any Option shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any of its affiliates and an
Optionee or any other person or entity. To the extent that any person acquires a
right to receive payments from the Company or any of its affiliates pursuant to
an Option, such right shall be no greater than the right of any unsecured
general creditor of the Company or any of its affiliates.
14. No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Option, and the Board of Directors shall
determine whether cash, other securities, or other property shall be paid or
transferred in lieu of any fractional shares of Common Stock or whether such
fractional shares of Common Stock or any rights thereto shall be canceled,
terminated, or otherwise eliminated.
15. Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
16. Amendment/Termination. The Plan may be terminated or amended at any
time by the Board of Directors; provided, however, that (i) any such amendment
shall comply with all applicable laws and applicable stock exchange listing
requirements and (ii) no such termination or amendment shall be made without
shareholder approval if such approval is necessary to comply with any tax or
regulatory requirement applicable to the Plan and provided that no termination
or amendment of the Plan, without the consent of the Optionee, may adversely
affect the rights of such person with respect to any Option previously granted
under the Plan.
17. Withholding.
(i) An Optionee may be required to pay to the Company and the
Company shall have the right and is hereby authorized to withhold from the
settlement of any Option granted hereunder or from any compensation or other
<PAGE>
11
amount owing to an Optionee the amount (in cash, shares of Common Stock, other
securities, or other property) of any applicable withholding taxes in respect of
an Option, its exercise or any payment or transfer under an Option or under the
Plan, and to take such other action as may be necessary in the opinion of the
Company to satisfy all obligations for the payment of such taxes.
(ii) Without limiting the generality of clause (i) above, an
Optionee may satisfy, in whole or in part, the foregoing withholding liability
by delivery of Shares owned by the Optionee (which are not subject to any pledge
or other security interest and which have been owned by the Optionee for at
least 6 months) with a Fair Market Value equal to such withholding liability or
by having the Company withhold from the number of Shares otherwise issuable
pursuant to the exercise of the Option a number of Shares with a Fair Market
Value equal to such withholding liability.
(iii) The Company may, as a condition of Option exercise,
require that satisfactory arrangements have been made in advance to satisfy all
tax withholding obligations.
18. Term of the Plan.
(a) Effective Date. The Plan shall be effective as of June 29,
1999.
(b) Expiration Date. No Option shall be granted under the Plan
after ten years from the Effective Date. Unless otherwise expressly provided in
the Plan or in an applicable Option Agreement, any Option granted hereunder may,
and the authority of the Board of Directors to amend, alter, adjust, suspend,
discontinue, or terminate any such Option or to waive any conditions or rights
under any such Option shall, continue after ten years from the Effective Date.
<PAGE>
Exhibit 10.26
THE PENN TRAFFIC COMPANY
SUPPLEMENTAL RETIREMENT PLAN
FOR
NON-EMPLOYEE EXECUTIVES
<PAGE>
TABLE OF CONTENTS
Article I Establishment, Purpose and Effective Date of Plan....................1
1.1 Establishment........................................................1
1.2 Purpose..............................................................1
1.3 Effective Date.......................................................1
Article II Definitions.........................................................1
2.1 Definitions..........................................................1
2.2 Other Defined Terms..................................................4
2.3 Gender and Number....................................................4
Article III Vesting............................................................4
3.1 Vesting..............................................................4
Article IV Accounts and Credits To Accounts....................................4
4.1 Accounts.............................................................4
4.2 Basic Pay-Based Credits..............................................4
4.3 Interest Credits.....................................................5
4.4 Opening Account Balance..............................................5
Article V Retirement Benefits..................................................6
5.1 Normal Retirement Benefit............................................6
5.2 Late Retirement Benefit..............................................6
5.3 Early Retirement Benefit.............................................6
5.4 Disability Benefit...................................................7
5.5 Form of Benefit......................................................7
5.6 Payment of Normal Retirement Benefit.................................8
5.7 Termination Prior to Normal Retirement...............................8
5.8 Limitation on Annual Benefits.......................................10
Article VI Claims Procedure...................................................11
6.1 Written Request.....................................................11
6.2 Notice of Denial....................................................11
6.3 Content of Notice...................................................11
6.4 Review Procedures...................................................12
6.5 Decision on Review..................................................12
Article VII General Provisions................................................13
7.1 Administration......................................................13
7.2 Funding.............................................................13
7.3 No Employment Contract..............................................13
7.4 Spendthrift Provision...............................................14
7.5 Binding Effect......................................................14
i
<PAGE>
7.6 Applicable Law......................................................14
7.7 Administrative Discretion...........................................14
7.8 Withholding.........................................................14
7.9 Severability........................................................15
7.10 Amendment and Termination...........................................15
7.11 Titles and Headings Not to Control..................................16
7.12 Small Benefits......................................................16
EXHIBIT A Actuarial Equivalence Factors
EXHIBIT B Beneficiary Designations
FORM I Beneficiary Designation
FORM II Beneficiary Designation for 50% or 100% Joint and Survivor Annuity
FORM III Beneficiary Designation for 10 Year Certain Life Annuity
ii
<PAGE>
THE PENN TRAFFIC COMPANY
SUPPLEMENTAL RETIREMENT PLAN
FOR
NON-EMPLOYEE EXECUTIVES
ARTICLE I
ESTABLISHMENT, PURPOSE AND EFFECTIVE DATE OF PLAN
1.1 ESTABLISHMENT. The Penn Traffic Company ("Company"), a Delaware
corporation, hereby establishes a supplemental retirement program for
certain non-employee executives, which shall be known as The Penn
Traffic Company Supplemental Retirement Plan For Non-Employee
Executives ("Plan").
1.2 PURPOSE. The purpose of the Plan is to provide to the Executives named
in Exhibit "A", as amended from time to time, retirement income.
Payment of the retirement benefits under this Plan shall be made from
the general assets of the Company, or by such other method as is
consistent with Section 7.2 of this Plan and which is agreed to by the
Executives and the Company.
1.3 EFFECTIVE DATE. The Plan shall be effective as of June 29, 1999.
ARTICLE II
DEFINITIONS
2.1 DEFINITIONS. Whenever used herein, the following terms shall have their
respective meanings set forth below:
(A) "Account" means the bookkeeping account established and
maintained with respect to an Executive pursuant to Section
4.1.
<PAGE>
(B) "Accrued Benefit" means, with respect to an Executive, the
monthly benefit determined in accordance with Section 5.1,
payable in the form of a single life annuity commencing at
Normal Retirement Date, or, if later, actual Termination Date.
(C) "Actuarial Equivalent", means with respect to a specified
annuity or benefit, another annuity or benefit commencing at a
different date and/or payable in a different form, but which
has the same present value when computed using the applicable
mortality and interest rate assumptions set forth in Exhibit
A, attached hereto.
(D) "Beneficiary" means the person(s) properly designated to
receive, under provisions of the Plan, benefits payable in the
event of the Executive's death.
(E) "Board" means the Board of Directors of the Company.
(F) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any regulations relating thereto.
(G) "Committee" means the Compensation and Stock Option Committee
of the Board.
(H) "Company" means The Penn Traffic Company, a Delaware
corporation.
(I) "Compensation" means (i) with respect to Gary D. Hirsch,
$950,000 per annum and (ii) with respect to Martin A. Fox,
$500,000 per annum, prorated by days for the short year in
which their Termination Date occurs.
(J) "Corporate Plan" means The Penn Traffic Company Cash Balance
Pension Plan.
2
<PAGE>
(K) "Disability" means being Disabled under Section 8(b) of the
Management Agreement.
(L) "Effective Date" means June 29, 1999.
(M) "Executive" means Gary D. Hirsch ("Hirsch") and Martin A. Fox
("Fox").
(N) "Interest Credits" means additions to an Executive's Account
determined pursuant to Section 4.3. Interest Credits shall be
earned each Plan Year based on the "Applicable Interest Rate"
as defined in Exhibit A, attached hereto.
(O) "Management Agreement" means the management agreement between
the Company and Hirsch & Fox, L.L.C. dated June 29, 1999 and
any extension or renewal thereof, or successor agreement
thereto.
(P) "Normal Retirement Date" means the first day of the month
coinciding with or next following the date the Executive
attains age 65.
(Q) "Opening Account Balance" means the initial bookkeeping
account established pursuant to Section 4.4 of the Plan.
(R) "Pay-Based Credit" means additions to an Executive's Account
determined pursuant to Section 4.2.
(S) "Plan" means The Penn Traffic Company Supplemental Retirement
Plan for Non-Employee Executives, as amended from time to
time.
(T) "Plan Year" means the period June 29, 1999 through December
31, 1999 and each subsequent twelve-month period from January
1st through December 31st for which this Plan is in effect.
3
<PAGE>
(U) "Retirement Benefit" means the benefit payable to the
Executive on or after his Termination Date, but prior to his
death, pursuant to Article V of the Plan.
(V) "Surviving Spouse" means a person who is married to the
Executive at the date of his death, provided the Executive was
married to that person throughout the one-year period ending
on the date of his death.
(W) "Termination Date" means the date on which the Executive
ceases to provide services to the Company under the Management
Agreement for any reason.
2.2 OTHER DEFINED TERMS. Any capitalized terms that are used in the Plan,
which are not defined in this Article, shall have the meaning stated in
the Corporate Plan.
2.3 GENDER AND NUMBER. Except when otherwise indicated by the context,
words in the masculine gender when used in the Plan shall include the
feminine gender, the singular shall include the plural, and the plural
shall include the singular.
ARTICLE III
VESTING
3.1 VESTING. All benefits under this Plan shall be fully vested and
nonforfeitable at all times.
ARTICLE IV
ACCOUNTS AND CREDITS TO ACCOUNTS
4.1 Accounts.
(B) When an Account is initially established for an Executive, the
Account shall be credited with an Opening Account Balance in accordance
with Section 4.4
4.2 BASIC PAY-BASED CREDITS. An Executive shall accrue a Pay-Based Credit
under this Section 4.2 for each Plan Year. The amount of the Pay-Based
Credit for an Executive shall be three percent (3%) of the Executive's
Compensation for such Plan Year. The
4
<PAGE>
determination of the amount creditable hereunder for a Plan Year shall
be made as of the last day of the Plan Year.
4.3 INTEREST CREDITS. Each Plan Year each Executive's Account shall be
automatically increased as of the last day of such Plan Year by
crediting the balance in such Account as of the last day of the
previous Plan Year (or, in the case of the first Plan Year, as of the
Effective Date), with an Interest Credit equal to said Account balance
multiplied by 5%. Such Interest Credits shall continue after the
Executive's Termination Date, provided, however, that no Interest
Credits shall be made to an Executive's Account for any Plan Year
beginning on or after the date on which payment of his benefit
commences. For the Plan Year in which the Executive's benefit
commencement date occurs, an Interest Credit shall be made on a pro
rata basis through the end of the month prior to the month in which the
date of benefit commencement occurs.
4.4 OPENING ACCOUNT BALANCE. Fox shall have an Opening Account Balance as
of the Effective Date which shall be reflected in an initial
bookkeeping account established on his behalf. Fox's Opening Account
Balance shall be $175,000.
5
<PAGE>
ARTICLE V
RETIREMENT BENEFITS
5.1 NORMAL RETIREMENT BENEFIT. An Executive whose Termination Date is on or
after his Normal Retirement Date shall be entitled to receive a "Normal
Retirement Benefit" commencing on his Normal Retirement Date. An
Executive's Normal Retirement Benefit shall be the monthly benefit
payable as a single life annuity which is the Actuarial Equivalent of
the Executive's Account value as of the Executive's Normal Retirement
Date. An Executive's Accrued Benefit as of any date prior to the
Executive's Normal Retirement Date shall be the monthly benefit payable
as a single life annuity which is the Actuarial Equivalent of the
Executive's Account value at the date of determination projected to the
value it would have at the Executive's Normal Retirement Date assuming
additional Interest Credits continue to be made to the Account through
the Executive's Normal Retirement Date.
5.2 LATE RETIREMENT BENEFIT. If an Executive remains employed beyond his
Normal Retirement Date, he shall be entitled to receive a retirement
benefit equal to the greater of (i) the monthly benefit payable as a
single life annuity that is the Actuarial Equivalent of the value of
his Account as of his actual retirement date, considering all Pay-Based
Credits and Interest Credits thereto after his Normal Retirement Date,
or (ii) the Actuarial Equivalent of his Normal Retirement Benefit
computed at Normal Retirement Date, but based on payment commencing at
the time of actual retirement.
5.3 EARLY RETIREMENT BENEFIT. An Executive who has attained age 55 may
elect to retire prior to his Normal Retirement Date. Such an Executive
shall receive a retirement benefit commencing at Normal Retirement Date
equal to his Normal Retirement Benefit.
6
<PAGE>
5.4 DISABILITY BENEFIT. An Executive who incurs a Disability prior to his
Termination Date has a right to a Retirement Benefit. Such a Disabled
Executive, or an Executive who, subsequent to his Termination Date
becomes Disabled, shall be entitled to receive a Retirement Benefit
payable as of the first day of any month subsequent to the
determination of Disability under the Management Agreement. The amount
of the disability benefit shall be the Actuarial Equivalent of the
Normal Retirement Benefit.
5.5 FORM OF BENEFIT. At least six months prior to the Executive's
Termination Date, or, subject to the consent of the Committee, at any
time prior to the Executive's Termination Date, the Executive may elect
to receive his Retirement Benefit in one of the following forms:
(B) a 50% joint and survivor annuity, payable monthly,
(D) a single life annuity, payable monthly, with 10 years
certain; or Each of the optional forms of benefit under Sections 5.5(B)
through (E) above, shall be the Actuarial Equivalent of the Executive's
Retirement Benefit. Unless the Executive shall have otherwise elected
as described above, the Executive's Retirement Benefit shall be paid in
a single lump sum, notwithstanding any other provision of the Plan. For
the joint and survivor options in Section 5.5(B) and (C) above, the
Executive shall designate a single Beneficiary before the commencement
date described in Section 5.6 ("commencement date"). The designation
may be changed up to the commencement date, but not thereafter. Thus,
no survivor benefits shall be payable if the Beneficiary predeceases
the Executive after the commencement date. For purposes of any benefit
payable upon the Executive's death prior to the commencement of his
benefit payments
7
<PAGE>
and for purposes of the 10-year certain option in Section 5.5(D), (i)
the Executive may designate one or more primary Beneficiaries and one
or more secondary Beneficiaries; (ii) the designation may be changed up
to the Executive's date of death; and (iii) if no designated
Beneficiary survives the Executive, any payments due as the result of
the Executive's death prior to the commencement of payments or due for
the remainder of the10-year period shall be paid to the Executive's
estate. Sample Beneficiary designations are attached at Exhibit B.
5.6 PAYMENT OF NORMAL RETIREMENT BENEFIT. Once the Executive has reached
the Executive's Normal Retirement Date, payment of the Retirement
Benefit shall commence on the first day of the month following the
month in which the Termination Date occurs. Other than in the case of a
lump sum payment, payment of the Retirement Benefit shall cease as of
the first day of the month following the death of the Executive or the
Executive's Beneficiary, as the case may be, except when paid in the
form of a single life annuity with 10 years certain and the Executive
dies prior to the receipt of 120 monthly payments, in which case
payments shall cease upon payment of the 120th monthly payment.
5.7 TERMINATION PRIOR TO NORMAL RETIREMENT. In the event the Executive's
Termination Date is prior to the Executive's Normal Retirement Date,
the Executive shall be entitled to be paid his Retirement Benefit
pursuant to this Article V as follows:
(A) EARLY RETIREMENT. In the event the Executive's Termination
Date is after he has attained at least age fifty-five (55),
the Executive shall be entitled to receive his Retirement
Benefit. The Retirement Benefit shall be determined by: (i)
applying
8
<PAGE>
the formula in Section 4.1 as of the date benefits commence
("early retirement date"); and (ii) reducing the resulting
amount by one-third of one percent (1/3%) for each month by
which the early retirement date precedes the Executive's
sixty-fifth (65th) birthday. In the event the Executive's
Termination Date is before January 1, 2003 and before he has
attained age 55, the Executive shall be entitled to receive,
upon reaching age 55, the reduced Retirement Benefit described
in the preceding sentence.
(B) EARLY PAYMENT. In lieu of a Retirement Benefit commencing at
Normal Retirement Date or an Early Retirement Benefit,
described in Subsection (A), above, an Executive may elect
early payment of the Actuarial Equivalent of his Normal
Retirement Benefit in a lump sum or annuity form of payment.
Such benefit may commence at the later of January 1, 2003 or
the first day of the month following his Termination Date.
(C) DEATH. If the Executive dies prior to the commencement of any
benefit payments under this Plan whether before or after his
Termination Date, the Executive's Beneficiary shall be
entitled to commence payment of a death benefit as of the
first day of any month after the Executive's death. Unless the
Beneficiary elects a form of benefit payment listed under
Section 5.5(A) through (D), the death benefit shall be payable
in a single lump sum in an amount which is the Actuarial
Equivalent of the Executive's Account value at the date of his
death increased by any Interest Credits made under the Plan
prior to the date on which distribution of the benefit is made
or commences. The foregoing rules regarding the payment of
9
<PAGE>
death benefits under the Plan also shall apply if the
Executive's Termination Date is after his Normal Retirement
Date and the Executive dies before the payment of benefits
commences under the Plan.
(D) DEATH AFTER BENEFIT PAYMENTS Commence. If the Executive dies
after the commencement of benefit payments under this Plan,
benefits shall continue to the extent called for under the
optional form of benefit which had previously commenced.
5.8 LIMITATION ON ANNUAL BENEFITS. Notwithstanding anything to the contrary
set forth herein, the annual "pension expense" of the Company with
respect to this Plan for any Plan Year with respect to the Executives
as of the Effective Date shall not exceed $100,000 (or, for any Plan
Year consisting of less than twelve (12) months, the product of (A)
$100,000 and (B) a fraction, the numerator of which is the number of
full months in such short Plan Year, and the denominator of which is
twelve) ("Annual Limit"). For purposes of this Section 5.8, the term
"pension expense" shall mean the annual pension expense of the Company
as determined pursuant to Financial Accounting Standard #87, as
calculated by the Company's regular independent accounting firm. In the
event the Company's annual pension expense, determined in the absence
of this Section 5.8, would exceed the Annual Limit (the "Excess Pension
Expense"), the benefit of the Executives accrued for such Plan Year
shall be reduced in the following manner:
(i) by reducing the Interest Credits under Section 4.1 by
50% of the Excess Pension Expense and allocating the
reduction in proportion to the amount
10
<PAGE>
of such Interest Credits attributable to each
Executive prior to the reduction mandated by this
Section 5.8; and
(ii) by reducing the Pay-Based Credits under Section 4.2
by 50% of the Excess Pension Expense and allocating
the reduction in proportion to the Pay-Based Credit
for each Executive prior to the application of the
reduction mandated by this Section 5.8.
ARTICLE VI
CLAIMS PROCEDURE
6.1 WRITTEN REQUEST. Any claim for benefits by the Executive or his
Beneficiaries shall be made in writing to the Committee. In this
Article VI, the Executive and his Beneficiaries are referred to
collectively as claimants.
6.2 NOTICE OF DENIAL. If the Committee denies a claim in whole or in part,
it shall send the claimant a written notice of the denial within 90
days after the date if receives a claim, unless it needs additional
time to make its decision. In that case, the Committee may authorize an
extension of up to an additional 90 days, if it notifies the claimant
of the extension within the initial 90-day period. The extension notice
shall state the reasons for the extension and the expected decision
date.
6.3 CONTENT OF NOTICE. A denial notice shall be written in a manner
calculated to be understood by the claimant and shall contain:
(A) the specific reason or reasons for the denial of the claim;
(B) specific reference to pertinent Plan provisions upon which the
denial is based ;
(C) a description of any additional material or information
necessary to perfect the claim, with an explanation of why the
material or information is necessary; and
11
<PAGE>
(D) an explanation of the review procedures provided below.
6.4 REVIEW PROCEDURES.
(A) Within 60 days after the claimant receives a denial notice,
the claimant may file a request for review with the Committee.
Any such request must b made in writing.
(B) A Claimant who timely requests a review shall have the right
to review pertinent documents, to submit additional
information or written comments, and to be represented.
6.5 DECISION ON REVIEW.
(a) The Committee shall send the claimant a written decision on
any request for review within 60 days after the date it
receives a request for review, unless an extension of time is
needed, due to special circumstances. In that case, the
Committee may authorize an extension of up to an additional 60
days, provided it notifies the claimant of the extension
within the initial 60-day period.
(b) The review decision shall be written in a manner calculated to
be understood by the claimant and shall contain:
(i) the specific reason or reasons for the decision; and
(ii) specific reference to the pertinent Plan provisions
upon which the decision is based.
(c) If the Committee does not send the claimant a review decision
within the applicable time period, the claim shall be deemed
denied on review.
(d) The review decision (including a deemed decision) shall be the
Committee's final decision.
12
<PAGE>
ARTICLE VII
GENERAL PROVISIONS
7.1 ADMINISTRATION. The Committee shall be responsible for the general
operation and administration of the Plan and for carrying out the
provisions hereof. The Committee shall be entitled to rely conclusively
upon all tables, valuations certificates, opinions and reports
furnished by any actuary, accountant, controller, counsel or other
person employed or engaged by the Company with respect to the Plan.
7.2 FUNDING. The Board, in its sole discretion, may elect to fund the
benefits payable under the Plan, through various investments. However,
any such investment shall remain the property of the Company and be
subject to the claims of general creditors of the Company. The
Executive shall have only the rights of a general unsecured creditor of
the Company with respect to any rights under this Plan. The Executive
may not pledge as collateral any investments purchased to fund benefits
under the Plan. Nothing contained in the Plan shall constitute a
guaranty by the Company or any other entity or person that assets of
the Company will be sufficient to pay any benefit hereunder. It is the
intention of the parties that this Plan will be an unfunded deferred
compensation plan solely for the benefit of non-employee executives and
thus would not be subject to the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"). However, if the Plan is interpreted
to be subject to ERISA, it is the intention of the parties that this
Plan be an unfunded deferred compensation plan solely for the benefit
of management and highly compensated employees for tax purposes and for
purposes of Title I of ERISA.
7.3 NO EMPLOYMENT CONTRACT. Nothing contained in this Plan shall be
construed as a contract of employment between the Company and the
Executive or as a limitation on the right of
13
<PAGE>
the Company to terminate, discontinue , or fail to renew or extend the
Management Agreement, subject to the terms and conditions thereof, and
without regard to the effect that such discontinuity may have upon the
Executive's rights or potential rights, if any, under this Plan.
7.4 SPENDTHRIFT PROVISION. No interest of any person or entity in, or right
to receive a benefit under, the Plan shall be subject in any manner to
sale, transfer, assignment, pledge, attachment, garnishment, or other
alienation or encumbrance of any kind; nor may such interest or right
to receive a benefit be taken, either voluntarily or involuntarily, for
the satisfaction of the debts of or other obligations or claims
against, such person or entity, including claims for alimony, support,
separate maintenance and claims in bankruptcy proceedings.
7.5 BINDING EFFECT. This Plan shall be binding upon and inure to the
benefit of the Executives, their Surviving Spouses and Beneficiaries,
the Company and any successor to the Company, whether by merger,
consolidation, purchase, or otherwise.
7.6 APPLICABLE LAW. The Plan shall be governed by and construed in
accordance with the laws of the State of New York, except to the extent
preempted by ERISA, if it is determined that the Plan is subject to
ERISA.
7.7 ADMINISTRATIVE DISCRETION. The Plan shall be administered by the
Committee.
7.8 WITHHOLDING. Any payment made pursuant to this Plan shall be reduced by
federal and state income, FICA or other employee payroll, withholding
or other similar taxes that the Executive's employer may be required to
withhold. In addition, as the Retirement Benefit accrues during the
period of time that the Executive provides services to the Company
14
<PAGE>
under the Management Agreement, the regular payments that the Company
makes to Hirsch & Fox LLC with respect to the Executive's services to
the Company shall be subject to FICA or other employee payroll,
withholding or other similar taxes which the Company may be required to
withhold on the accrual of benefits. The Company and Hirsch & Fox LLC
shall make such arrangements as are necessary and appropriate, in the
judgment of the Committee, to assure that the proper amount of federal
and state income, FICA or other employee payment, withholding or
similar tax has been withheld and reported to the appropriate
governmental authority or authorities without duplication.
7.9 SEVERABILITY. If one or more provisions of this Plan, or any part
thereof, shall be determined by a court of competent jurisdiction to be
invalid or unenforceable, then the Plan shall be administered as if
such invalid or unenforceable provision had not been contained in the
Plan. The invalidity or unenforceability of any Plan provision, or any
part thereof, shall not effect the validity and enforceability of any
other Plan provision or any part thereof.
7.10 AMENDMENT AND TERMINATION. The Company intends to maintain this Plan
until all benefit payments are made pursuant to the Plan. However,
except as otherwise required by the Management Agreement, the Company
reserves the right, in its sole discretion, to amend, suspend, or
terminate the Plan at any time or from time to time, in whole or in
part. Any such amendment, suspension or termination shall be made
pursuant to resolutions of the Board. No amendment, suspension, or
termination of the Plan shall affect directly or indirectly the rights
of an Executive who has become vested in his Plan benefits prior to the
effective date of the resolution amending, suspending, or terminating
15
<PAGE>
the Plan. (However, if the Plan is terminated, an Executive's benefit
shall be based on Compensation and Years of Service as of the
termination date.) Further, the Company, in the sole discretion of the
Board, may pay such Executive, in a lump sum, the actuarial equivalent
of the benefit provided by the Plan in complete satisfaction of its
obligations under the Plan. Notwithstanding any other provision in the
Plan to the contrary, the Plan shall terminate automatically upon the
final payment of all amounts payable hereunder.
7.11 TITLES AND HEADINGS NOT TO CONTROL. The titles to the Articles and the
headings of Sections in the Plan are placed herein for convenience of
reference only, and in case of any conflict, the text of this
instrument, rather that such titles or headings, shall control.
7.12 SMALL BENEFITS. If any monthly benefit that shall be payable to any
person under the Plan shall be less than $400, then, if the Committee
shall so direct, the aggregate of the amounts which shall be payable to
such person in any year shall be paid in quarterly, semiannual or
annual installments. If the present value of the accrued benefit of any
Executive whose Termination Date is prior to age 55 is less than
$3,500, then the Committee may at any time direct that the actuarial
equivalent of such benefits (determined using the assumptions under
Section 7.10 hereof) shall be paid to his in a lump sum in lieu of any
benefits to which he may be entitled under this Plan.
THE PENN TRAFFIC COMPANY
By:
------------------------------------
Francis D. Price, Jr.
Vice President and Assistant Secretary
16
<PAGE>
EXHIBIT A
ACTUARIAL EQUIVALENCE FACTORS
The interest rate, mortality table and other factors, if any, applicable for
purposes of determining an Actuarial Equivalent benefit under Plan shall be
determined in accordance with the applicable section of this Exhibit A as set
forth below.
For purposes of this Exhibit A, "APPLICABLE MORTALITY TABLE" means the mortality
table prescribed by the Internal Revenue Service, which shall be based on the
prevailing commissioner's standard table (described in ss.807(d)(5)(A) of the
Code) used to determine reserves for group annuity contracts issued on the date
as of which a present value is determined (without regard to any other
subparagraph of ss.807(d)(5) of the Code) as specified by the Internal Revenue
Service.
Also for purposes of this Exhibit A, "APPLICABLE INTEREST RATE" means, for a
Plan Year, the annual rate of interest on 30-year Treasury securities as
specified by the Internal Revenue Service for August of the preceding Plan Year,
in revenue rulings, notices or other guidance published in the Internal Revenue
Bulletin.
LUMP SUM VALUE OF ACCRUED BENEFIT - For purposes of determining the Actuarially
Equivalent lump sum value as of any determination date of a Participant's
Accrued Benefit under the Plan, Actuarial Equivalence will be based upon
the following:
MORTALITY: Applicable Mortality Table
INTEREST RATE: Applicable Interest Rate
CONVERSION OF ACCOUNT TO SINGLE-LIFE ANNUITY - For purposes of determining the
Actuarially Equivalent single life annuity value of a Participant's Account
under the Plan, Actuarial Equivalence will be based upon the following:
MORTALITY: Applicable Mortality Table
INTEREST RATE: Applicable Interest Rate
OPTIONAL FORMS - For purposes of converting a single life annuity to an
Actuarially Equivalent optional form of payment under the Plan, other than
a lump sum, Actuarial Equivalence will be based upon the following:
MORTALITY: 1983 GAM (Unisex Table)
INTEREST RATE: 7%
REDUCTION FOR EARLY RETIREMENT BENEFIT PAYMENTS PRIOR TO NORMAL RETIREMENT AGE -
A Participant's Accrued Benefit shall be reduced by 5% for each year (or
5/12% for each full month) prior to Normal Retirement Date that such
benefit is paid.
<PAGE>
OTHER ACTUARIAL EQUIVALENCE DETERMINATIONS. The Applicable Interest Rate and
the Applicable Mortality Table shall be used for all other actuarial
equivalence determinations.
2
<PAGE>
EXHIBIT B
Beneficiary Designations
1. Sample Beneficiary Form I is to be used for the Executive to designate
one or more Beneficiaries to receive his benefit under the Plan if he
dies prior to commencement of his benefit payments.
2. Sample Beneficiary Form II is to be used if the Executive's benefits
will be paid as a 50% or 100% joint and survivor annuity.
3. Sample Beneficiary Form III is to be used if the Executive's benefits
will be paid as a single life annuity with 10 years certain life
annuity.
3
<PAGE>
FORM I
THE PENN TRAFFIC COMPANY
EXECUTIVES' RETIREMENT PLAN
BENEFICIARY DESIGNATION
Executive:_____________________ Social Security Number:_______________
Primary Beneficiary:__________________________________________
Social Security Number:_______________________________________
Relationship:___________________________________________________________________
Address:________________________________________________________________________
INSTRUCTION: USE THE FOLLOWING SPACE TO PROVIDE THIS SAME INFORMATION ABOUT
ADDITIONAL PRIMARY BENEFICIARIES, IF YOU WISH TO NAME MORE THAN ON PRIMARY
BENEFICIARY. FOLLOWING THIS SAME INSTRUCTION BELOW, IF YOU WISH TO NAME MORE
THAN ONE CONTINGENT BENEFICIARY.
Contingent Beneficiary:_______________________________________
Social Security Number:_______________________________________
Relationship:___________________________________________________________________
Address:________________________________________________________________________
Date:___________________ ____________________________________
<PAGE>
FORM II
THE PENN TRAFFIC COMPANY
EXECUTIVES' RETIREMENT PLAN
BENEFICIARY DESIGNATION FOR 50% OR 100% JOINT AND SURVIVOR ANNUITY
Executive:_____________________________________
Social Security Number:________________________
Beneficiary:___________________________________
Social Security Number:________________________
Relationship:___________________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________________
Date:___________________ ___________________________________
<PAGE>
FORM III
THE PENN TRAFFIC COMPANY
EXECUTIVES' RETIREMENT PLAN
BENEFICIARY DESIGNATION FOR 10 YEAR CERTAIN LIFE ANNUITY
Executive:________________ Social Security Number:_______________
Primary Beneficiary:__________________________________________
Social Security Number:_______________________________________
Relationship:___________________________________________________________________
Address:________________________________________________________________________
INSTRUCTION: USE THE FOLLOWING SPACE TO PROVIDE THIS SAME INFORMATION ABOUT
ADDITIONAL PRIMARY BENEFICIARIES, IF YOU WISH TO NAME MORE THAN ON PRIMARY
BENEFICIARY. FOLLOWING THIS SAME INSTRUCTION BELOW, IF YOU WISH TO NAME MORE
THAN ONE CONTINGENT BENEFICIARY.
Contingent Beneficiary:__________________________________
Social Security Number:__________________________________
Relationship:___________________________________________________________________
Address:________________________________________________________________________
Date:___________________ ________________________________
<PAGE>
EXHIBIT 10.27
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated as of June 29, 1999 (this
"Agreement"), by and among THE PENN TRAFFIC COMPANY, a Delaware corporation (the
"Company"), and the Holders (as hereinafter defined) of Registrable Securities
(as hereinafter defined) who are parties to this Agreement.
This Agreement is being entered into in accordance with the Plan (as
hereinafter defined) in connection with the acquisition of Securities (as
hereinafter defined) by certain holders named on the signature page to this
Agreement (the "Original Holders") pursuant to the Plan. Each Original Holder
owns the aggregate amounts of Securities specified with respect to such Original
Holder in Schedule A hereto as such Schedule A may be amended from time to time.
To induce the holders of Registrable Securites (as hereinafter defined)
to vote in favor of the Plan, the Company has undertaken to register the
Registrable Securities under the Securities Act (as hereinafter defined) and to
take certain other actions with respect to the Registrable Securities. This
Agreement sets forth the terms and conditions of such undertaking.
In consideration of the premises and the mutual agreements set forth
herein, the parties hereto hereby agree as follows:
1. Definitions. Unless otherwise defined herein, capitalized terms used
herein and in the recitals above shall have the following meanings:
"Affiliate" of a Person means any Person that controls, is under common
control with, or is controlled by, such other Person. For purposes of this
definition, "control" means the ability of one Person to direct the management
and policies of another Person.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to be
closed.
"Commission" means the United States Securities and Exchange
Commission, or any successor agency.
"Common Stock" means the Common Stock, $0.01 par value, of the Company,
to
1
<PAGE>
be issued pursuant to the Plan, and includes any securities of the Company
issued or issuable with respect to such securities by way of a stock split,
recapitalization, merger, consolidation or other reorganization or otherwise.
"Effective Date" means the effective date of the Plan pursuant to the
terms thereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder, or any similar or successor statute.
"Expenses" means all expenses incident to the Company's performance of
or compliance with its obligations under this Agreement, including, without
limitation, all registration, filing, listing, securities exchange and NASD
fees, all fees and expenses of complying with state securities or blue sky laws
(including fees, disbursements and other charges of counsel for the underwriters
in connection with blue sky filings), all word processing, duplicating and
printing expenses, messenger and delivery expenses, all rating agency fees, the
fees, disbursements and other charges of counsel for the Company and of its
independent public accountants, including the expenses incurred in connection
with "comfort" letters required by or incident to such performance and
compliance, any fees and disbursements of underwriters customarily paid by
issuers and sellers of securities and the reasonable fees and disbursements of
one firm of counsel (per registration prepared) chosen by the Holders of a
majority of the outstanding Registrable Securities included in such Registration
Statement with respect to disclosure matters, but excluding underwriting
discounts and commissions and applicable transfer taxes, if any, which
discounts, commissions and transfer taxes shall be borne by the seller or
sellers of Registrable Securities in all cases.
"Holders" means (i) the Original Holders and (ii) any transferees of
the Registrable Securities whose Securities continue to be Registrable
Securities, each of whom will be bound by the terms of this Agreement.
"Initial Shelf Registration" has the meaning set forth in Section 2
hereof.
"NASD" means the National Association of Securities Dealers, Inc.
"Person" means any individual, corporation, partnership, limited
liability company, firm, joint venture, association, joint stock company, trust,
unincorporated organization, governmental or regulatory body or subdivision
thereof or other entity.
"Plan" means the Joint Plan of Reorganization of The Penn Traffic
Company, Dairy Dell, Inc., Big M Supermarkets, Inc. and Penny Curtiss Baking
Company, Inc. under Chapter 11 of the United States Bankruptcy Code filed with
the United States Bankruptcy Court for the District of Delaware and confirmed by
such court on May 27, 1999, as the same may be
2
<PAGE>
amended, modified or supplemented from time to time in accordance with the terms
thereof.
"Public Offering" means a public offering and sale of securities
pursuant to an effective registration statement under the Securities Act.
"Registrable Securities" means the Securities held by the Original
Holders (and Transferees of such Securities which are "Holders" hereunder);
provided, however , that Registrable Securities shall cease to be Registrable
Securities (i) upon any sale or distribution thereof pursuant to a registration
statement; (ii) if the Holder thereof is permitted to sell such securities
without volume restriction under the Securities Act and any state securities
laws; or (iii) upon the receipt by a Holder of Securities of an opinion,
reasonably satisfactory in form and substance to such Holder, by legal counsel
reasonably acceptable to such Holder, to the effect that the public sale of such
Securities without restriction under the Securities Act and any state securities
laws does not require the registration of such Securities under the Securities
Act and any state securities laws.
"Registration Statement" means a registration statement filed with the
Commission under the Securities Act.
"Securities" means each of the following: (1) a class comprising shares
of Common Stock held as of the date hereof by the stockholders party hereto; (2)
a class comprising (a) Senior Notes held as of the date hereof by the
noteholders party hereto and (b) securities issued or issuable in respect of the
Senior Notes issued, issuable or held pursuant to clause (2)(a) above by way of
interest payments or otherwise; and (3) a class comprising (a) Warrants held as
of the date hereof by the warrantholders party hereto and (b) securities issued
or issuable in respect of the Warrants issued, issuable or held pursuant to
clause (3)(a) above by way of exercise or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization or
otherwise.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder, or any similar or successor statute.
"Senior Notes" means the 11% Senior Notes due June 29, 2009 of the
Company.
"Subsequent Shelf Registration" has the meaning set forth in Section 2
hereof.
"Transfer" means any transfer, sale, assignment, pledge, hypothecation
or other disposition of any interest. "Transferor" and "Transferee" have
correlative meanings.
"Warrants" means the Warrants of the Company with an exercise price of
$18.30 per share of Common Stock issued pursuant to the Warrant Agreement dated
as of the date
3
<PAGE>
hereof between the Company and Harris Trust and Savings Bank, as warrant agent.
2. Registration Under the Securities Act.
(a) Initial Shelf Registration. The Company shall (i) cause to
be filed as soon as practicable, but not later than 45 days after the
Effective Date (or such longer time up to 90 days after the Effective
Date as may be required for the Company to prepare the necessary
financial statements), a Registration Statement for an offering to be
made on a continuous basis pursuant to Rule 415 under the Securities
Act (the "Initial Shelf Registration") covering all of the Registrable
Securities and providing for the sale of the Registrable Securities by
the Holders thereof and (ii) use its commercially reasonable best
efforts to have such Initial Shelf Registration declared effective by
the Commission as promptly as practicable thereafter.
(b) Subsequent Shelf Registrations. If the Company determines
to terminate the effectiveness of the Initial Shelf Registration prior
to the end of the Effectiveness Period (as defined in Section 2(d)
hereof), then, subject to the provisions of this Agreement, prior to
such termination the Company shall file, and shall use its commercially
reasonable best efforts to cause the Commission to declare effective, a
subsequent Registration Statement for an offering to be made on a
continuous basis pursuant to Rule 415 under the Securities Act (a
"Subsequent Shelf Registration") covering all of the Registrable
Securities which then remain outstanding. The Subsequent Shelf
Registration shall be filed by the Company at such time, subject to the
provisions of this Agreement, prior to the termination of the
effectiveness of the Initial Shelf Registration which is reasonably
calculated to cause the Subsequent Shelf Registration to become
effective on or before the date on which the effectiveness of the
Initial Shelf Registration terminates.
(c) Amendments to Initial Shelf Registration or Subsequent
Shelf Registrations. If the Initial Shelf Registration (except as
provided in Section 2(b)) or any Subsequent Shelf Registration ceases
to be effective for any reason at any time during the Effectiveness
Period (as defined in Section 2(d) hereof) for any reason (other than
because of the sale of all of the Registrable Securities covered
thereby or all of such Securities no longer constituting Registrable
Securities), the Company shall use its commercially reasonable best
efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof or take such other actions as may be necessary to
reinstate the effectiveness thereof, and in any event shall, within 60
days of such cessation of effectiveness, either (i) amend such Initial
Shelf Registration or Subsequent Shelf Registration in a manner
reasonably calculated to obtain the withdrawal of the order suspending
the effectiveness thereof, or (ii) file a Subsequent Shelf Registration
covering all Registrable Securities which remain unsold. (Each of the
Initial Shelf Registration
4
<PAGE>
and any Subsequent Shelf Registration filed pursuant to paragraph 2(b)
or this paragraph 2(c) are referred to individually herein as a "Shelf
Registration" and collectively as the "Shelf Registrations").
(d) Effectiveness Period. Subject to Section 3 hereof, the
Company shall use its best efforts to keep the Shelf Registration
(including the Initial Shelf Registration and/or any Subsequent Shelf
Registration) continuously effective under the Securities Act for a
period of five (5) years following the date on which the Initial Shelf
Registration became effective (the "Effectiveness Period"), or such
shorter period ending when all Registrable Securities covered by the
Initial Shelf Registration have been sold; provided, however , that the
Effectiveness Period shall be extended by any period during which a
Shelf Registration is not in effect or during which sales have been
suspended, whether pursuant to Section 3, Section 5(g) hereof or
otherwise. If a Subsequent Shelf Registration is filed, pursuant to
Section 2(b) or 2(c) hereof, the Company shall use its commercially
reasonable best efforts to cause the Subsequent Shelf Registration to
be declared effective as soon as practicable after such filing and to
keep such Registration Statement continuously effective for a period
after such effectiveness equal to the Effectiveness Period, less the
aggregate number of days during which the Initial Shelf Registration or
any Subsequent Shelf Registration was previously in effect. The intent
of this provision is that the Shelf Registration (including the Initial
Shelf Registration and/or any Subsequent Shelf Registration) shall be
in effect for a number of days, in aggregate, equal to five (5) years;
provided, however, that a Shelf Registration shall not be required to
be maintained in effect after none of the Securities eligible to be
included in a Shelf Registration are Registrable Securities.
(e) Supplements and Amendments. The Company shall supplement
or amend the Shelf Registration if (i) required by the rules,
regulations or instructions applicable to the registration form used
for such Shelf Registration, (ii) otherwise required by the Commission,
or (iii) requested to do so in writing by any Holder of Registrable
Securities to the extent necessary to list such Holder as a selling
securityholder in such registration statement.
3. Blackout Periods. With respect to a Shelf Registration filed or to
be filed pursuant to Section 2 hereof, if a majority of the Board of Directors
of the Company shall determine, in its good faith reasonable judgment, that to
maintain the continued effectiveness of such Shelf Registration or to permit
such Shelf Registration to become effective (or if a Subsequent Shelf
Registration is otherwise required to be filed, to file such Shelf Registration)
would be significantly disadvantageous to the Company's financial condition,
business, operations or prospects (a "Disadvantageous Condition") in light of
the existence, or in anticipation, of (i) any acquisition or financing activity
involving the Company, or any subsidiary of the Company, including a proposed
public offering of debt or equity securities, (ii) an
5
<PAGE>
undisclosed material event, the public disclosure of which would have a material
adverse effect on the Company, (iii) a proposed material transaction involving
the Company or a substantial amount of its assets, or (iv) any other
circumstance or condition the disclosure of which would materially disadvantage
the Company, and the existence of which renders a Subsequent Shelf Registration
to be filed, or any Shelf Registration then filed or effective, inadequate as
failing to include material information, then the Company may, until such
Disadvantageous Condition no longer exists (but not with respect to more than
four occasions nor for more than 180 days in the aggregate nor involving more
than 60 days in the aggregate during any continuous 12-month period) cause such
Shelf Registration to be withdrawn and/or cause the right of Holders to make
dispositions of Registrable Securities pursuant to such Shelf Registration to be
suspended, or, in the case of a Subsequent Shelf Registration that has not yet
been filed, elect not to file such Subsequent Shelf Registration; provided,
however, that the Company may not take any such action until the elapse of 120
days following the commencement of the Effectiveness Period; and provided,
further, that the Company may not take any such action unless it simultaneously
takes similar action with respect to any other Registration Statements of the
Company that are then effective or that are contemplated or required to be
filed. If the Company determines to take any action pursuant to the preceding
sentence, the Company shall deliver a notice to each Holder of Registrable
Securities covered or to be covered under such Shelf Registration, which
indicates that the Shelf Registration is no longer effective or usable or will
not be filed. Upon the receipt of any such notice, such Persons shall forthwith
discontinue any sale of Registrable Securities pursuant to such Shelf
Registration and any use of the prospectus contained in such Shelf Registration.
If any Disadvantageous Condition shall cease to exist, the Company shall
promptly notify any Holders who shall have ceased selling Registrable Securities
pursuant to an effective Shelf Registration as a result of such Disadvantageous
Condition, indicating such cessation and disclosing in reasonable detail the
nature and outcome of such Disadvantageous Condition. The Company shall, if any
Shelf Registration required to be filed or maintained under this Agreement has
been withdrawn or not filed, file promptly, at such time as it in good faith
deems the earliest practicable time, a new Shelf Registration covering the
Registrable Securities that were covered by such withdrawn Shelf Registration or
to be covered by such unfiled Shelf Registration.
4. Expenses. The Company shall promptly pay all Expenses in connection
with any registration initiated pursuant to Section 2 or Section 3 hereof,
whether or not such registration becomes effective.
5. Registration Procedures. If and whenever the Company is required to
effect any registration under the Securities Act as provided in Section 2
hereof, the Company shall, as expeditiously as possible (subject to Section 3
hereof):
(a) promptly prepare and file with the Commission the
requisite registration statement to effect such registration and,
subject to the provisions of this Agreement, thereafter use its
commercially reasonable best efforts to cause such registration
statement
6
<PAGE>
to become effective; provided, however, that the Company may
discontinue any registration of its securities that are not Registrable
Securities at any time prior to the effective date of the registration
statement relating thereto;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities
Act with respect to the offering of all Registrable Securities covered
by such registration statement until the end of the Effectiveness
Period, subject to the provisions of this Agreement, or, if earlier,
such time as all of such Registrable Securities have been disposed of
in accordance with the method of disposition set forth in such
registration statement;
(c) furnish to each seller of Registrable Securities covered
by such registration statement such number of copies of such
registration statement and of each amendment and supplement thereto (in
each case including all exhibits and any documents incorporated by
reference), such number of copies of the prospectus contained in such
registration statement (including each preliminary prospectus, each
final prospectus and any supplement to any prospectus) and any other
prospectus filed under Rule 424 under the Securities Act, in conformity
with the requirements of the Securities Act, and such other documents,
as such seller may reasonably request in writing;
(d) use its commercially reasonable best efforts (i) to
register or qualify all Registrable Securities and other securities
covered by such registration statement under such other securities or
blue sky laws of such states or other jurisdictions of the United
States of America as the Holders of a majority of the Registrable
Securities covered by such registration statement shall reasonably
request in writing, (ii) to keep such registration or qualification in
effect for so long as such registration statement remains in effect and
(iii) to take any other action that may be reasonably necessary or
advisable to enable the sellers of Registrable Securities to consummate
the disposition in such jurisdictions of the securities to be sold by
such sellers, except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation
in any jurisdiction wherein it would not but for the requirements of
this subsection (d) be obligated to be so qualified, to subject itself
to taxation in such jurisdiction or to consent to general service of
process in any such jurisdiction;
(e) use its commercially reasonable best efforts to cause all
Registrable Securities covered by such registration statement to be
registered with or approved by such other federal or state governmental
agencies or authorities as may be necessary in the opinion of counsel
to the Company and counsel to the sellers of Registrable Securities to
enable such sellers to consummate the offering of such Registrable
Securities;
7
<PAGE>
(f) use its good faith efforts to obtain and, if obtained,
furnish a copy to each seller of Registrable Securities of
(i) an opinion of counsel for the Company,
dated the effective date of such registration statement,
reasonably satisfactory in form and substance to counsel to
the Holders chosen by Holders of a majority of the Registrable
Securities being registered, and
(ii) a "comfort" letter, dated the effective
date of such registration statement, signed by the independent
public accountants who have certified the Company's financial
statements included or incorporated by reference in such
registration statement, reasonably satisfactory in form and
substance to counsel to the Holders chosen by Holders of a
majority of the Registrable Securities being registered,
in each case, covering substantially the same matters with respect to
such registration statement (and the prospectus included therein) and,
in the case of the accountants' comfort letter, with respect to events
subsequent to the date of such financial statements and matters
contained in such registration statement, as are customarily covered in
opinions of issuer's counsel and in accountants' comfort letters
delivered to selling securityholders in connection with the sale of
securities pursuant to "shelf" registration statements;
(g) notify the sellers of Registrable Securities under the
Shelf Registration (providing, if requested by any such Persons,
confirmation in writing) as soon as practicable after becoming aware
of: (A) the filing of any prospectus or prospectus supplement or the
filing or effectiveness (or anticipated date of effectiveness) of such
registration statement or any post-effective amendment thereto; (B) any
request by the Commission for amendments or supplements to such
registration statement or the related prospectus or for additional
information; (C) the issuance by the Commission of any stop order
suspending the effectiveness of such registration statement or the
initiation of any proceedings for the purpose; (D) the receipt by the
Company of any notification with respect to the suspension of the
qualification or registration (or exemption therefrom) of any
Registrable Securities for sale in any jurisdiction in the United
States or the initiation or threatening of any proceeding for such
purposes; or (E) the happening of any event that makes any statement
made in such registration statement or in any related prospectus,
prospectus supplement, amendment or document incorporated therein by
reference untrue in any material respect or that requires the making of
any changes in such registration statement or in any such prospectus,
supplement, amendment or other such document so that it will not
contain any untrue statement of a material fact or omit to state any
8
<PAGE>
material fact required to be stated therein or necessary to make the
statements therein (in the case of any prospectus in the light of the
circumstances under which they were made) not misleading;
(h) otherwise comply with all applicable rules and regulations
of the Commission and any other governmental agency or authority having
jurisdiction over the offering, and make available to its security
holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, but not more than
eighteen months, beginning with the first full calendar month after the
effective date of such registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act and
Rule 158 promulgated thereunder;
(i) enter into customary agreements and take all such other
reasonable actions in connection therewith in order to expedite or
facilitate the disposition of the Registrable Securities included in
such registration statement;
(j) make every reasonable effort to obtain the withdrawal of
any order or other action suspending the effectiveness of any such
registration statement or suspending the qualification or registration
(or exemption therefrom) of the Registrable Securities for sale in any
jurisdiction;
(k) if any event described in subsection (g) hereof occurs,
use its best efforts (subject to Section 3 hereof) to cooperate with
the Commission to prepare, as soon as practicable, any amendment or
supplement to such registration statement or such related prospectus in
order that such registration statement and prospectus, as so amended or
supplemented, shall not include any 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, in light of the circumstances
under which they were made, not misleading, or to take other action
that may have been requested by the Commission; and
(l) use its commercially reasonable best efforts to cause all
such Registrable Securities covered by such registration statement to
be listed on any national securities exchange or included in any
automated quotation system on which securities of the same class issued
by the Company are then listed or included (if the listing or inclusion
of such Registrable Securities is then permitted under the rules of
such exchange or interdealer quotation system).
It shall be a condition precedent to the obligations of the Company to
take action pursuant to this Agreement that the selling Holders shall furnish to
the Company in writing such information regarding themselves and the Registrable
Securities held by them, and the intended method of disposition of such
securities, as shall be required to effect the registration of their Registrable
Securities.
9
<PAGE>
Following a registration pursuant to Section 2 hereof, each Holder
agrees that as of the date that a final prospectus is made available to it for
distribution to prospective purchasers of Registrable Securities it shall cease
to distribute copies of any preliminary prospectus prepared in connection with
the offer and sale of such Registrable Securities. Each Holder further agrees
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in subsection (g) of this Section 5, such Holder shall
forthwith discontinue such Holder's disposition of Registrable Securities
pursuant to the registration statement relating to such Registrable Securities
until such Holder's receipt of the copies of the supplemented or amended
prospectus contemplated by subsection (k) of this Section 5 and, if so directed
by the Company, shall deliver to the Company (at the Company's expense) all
copies, other than permanent file copies, then in such Holder's possession of
the prospectus relating to such Registrable Securities current at the time of
receipt of such notice.
6. Preparation; Reasonable Investigation.
(a) Registration Statements. In connection with the
preparation and filing of each registration statement under the
Securities Act pursuant to this Agreement, the Company shall give a
representative designated by Holders of a majority of the Registrable
Securities registered under such registration statement (the
"Representative"), the underwriters, if any, and its respective counsel
and accountants the reasonable opportunity to participate in the
preparation of such registration statement, each prospectus included
therein or filed with the Commission, and each amendment thereof or
supplement thereto, and shall give each of them such reasonable access
to its books and records and such reasonable opportunities to discuss
the business of the Company with its officers and the independent
public accountants who have certified its financial statements as shall
be necessary, in the reasonable opinion of any such Representative's
and such underwriters' respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act.
(b) Confidentiality. Each Holder of Registrable Securities
shall maintain the confidentiality of any confidential information
received from or otherwise made available by the Company to such Holder
of Registrable Securities pursuant to this Agreement and identified in
writing by the Company as confidential and shall enter into such
confidentiality agreements as the Company shall reasonably request.
Information that (i) is or becomes available to a Holder of Registrable
Securities from a public source, (ii) is disclosed to a Holder of
Registrable Securities by a third-party source whom the Holder of
Registrable Securities reasonably believes has the right to disclose
such information or (iii) is or becomes required to be disclosed by a
Holder of Registrable Securities by law, including, but not limited to,
administrative or court orders, shall not be deemed to be confidential
10
<PAGE>
information for purposes of this Agreement; provided, however, that to
the extent sufficient time is available prior to such disclosure being
required to be made pursuant to clause (iii) hereof, the Holders of
Registrable Securities shall (to the extent not legally prohibited from
doing so) promptly notify the Company of any request for disclosure and
any proposed disclosure pursuant to such clause (iii). The Holders of
Registrable Securities shall not grant access, and the Company shall
not be required to grant access, to information under this Section 6 to
any Person who will not agree to maintain the confidentiality (to the
same extent a Holder is required to maintain the confidentiality) of
any confidential information received from or otherwise made available
to it by the Company or the holders of Registrable Securities under
this Agreement and identified in writing by the Company as
confidential.
7. Indemnification.
(a) Indemnification by the Company. In connection with any
registration statement filed by the Company pursuant to Section 2
hereof, the Company shall, and hereby agrees to, indemnify and hold
harmless, each Holder and seller of any Registrable Securities covered
by such registration statement and each other Person, if any, who
controls such Holder or seller for purposes of the Securities Act or
the Exchange Act, and their respective directors, officers, partners,
agents and Affiliates (each, a "Company Indemnitee" for purposes of
this Section 7(a)), against any losses, claims, damages, liabilities
(or actions or proceedings, whether commenced or threatened, in respect
thereof and whether or not such Company Indemnitee is a party thereto),
joint or several, and expenses, including, without limitation, the
reasonable fees, disbursements and other charges of legal counsel and
reasonable out-of-pocket costs of investigation, to which such Company
Indemnitee may become subject under the Securities Act or otherwise
(collectively, a "Loss" or "Losses"), insofar as such Losses arise out
of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any registration statement under
which Registrable Securities were registered pursuant to this
Agreement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto,
including any documents incorporated by reference in any of the
foregoing (collectively, "Offering Documents"), or any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein in the light of the
circumstances in which they were made not misleading; provided,
however, that the Company shall not be liable in any such case to the
extent that any such Loss arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission
made in such Offering Documents in reliance upon and in conformity with
written information furnished to the Company in writing by or on behalf
of such Company
11
<PAGE>
Indemnitee specifically stating that it is expressly for use therein.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Company Indemnitee and shall
survive the transfer of such securities by such Company Indemnitee. The
Company shall also indemnify any underwriters of the Registrable
Securities, their officers, directors and employees, and each Person
who controls any such underwriter (within the meaning of the Securities
Act and the Exchange Act) to the same extent as provided above with
respect to the indemnification of the Holders of Registrable
Securities.
(b) Indemnification by the Sellers. In connection with any
registration statement filed by the Company pursuant to Section 2
hereof in which a Holder has registered for sale Registrable
Securities, each such Holder or seller of Registrable Securities,
severally and not jointly, shall, and hereby agrees to, indemnify and
hold harmless the Company and each of its directors, officers,
employees and agents, each other Person who participates as an
underwriter in the offering or sale of such securities, each other
Person, if any, who controls the Company, any such underwriter and each
other seller (within the meaning of the Securities Act) and such
underwriter's or other seller's directors, officers, stockholders,
partners, employees, agents and affiliates (each a "Holder Indemnitee"
for purposes of this Section 7(b)), against all Losses insofar as such
Losses arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in any Offering Documents
or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein in the light of circumstances in which they were made not
misleading, if such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by or on
behalf of such Holder or seller of Registrable Securities specifically
stating that it is expressly for use therein; provided, however, that
the liability of such indemnifying party under this Section 7(b) shall
be limited to the amount of the net proceeds received by such
indemnifying party in the offering giving rise to such liability. Such
indemnity shall remain in full force and effect, regardless of any
investigation made by or on behalf of the Holder Indemnitee and shall
survive the transfer of such securities by such Holder.
(c) Notices of Losses, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or
proceeding involving a Loss referred to in the preceding subsections of
this Section 7, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party, give written
notice to the latter of the commencement of such action; provided,
however, that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its
obligations under the preceding subsections of this Section 7, except
to the extent that the indemnifying party is actually prejudiced by
such failure to give notice. In case any such action is brought against
an indemnified party, the indemnifying party shall be entitled to
participate in and, unless in such indemnified party's counsel's
12
<PAGE>
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such Loss, to assume and
control the defense thereof, in each case at its own expense, jointly
with any other indemnifying party similarly notified, to the extent
that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from such indemnifying party of its
assumption of the defense thereof, the indemnifying party shall not be
liable to such indemnified party for any legal or other expenses
subsequently incurred by the latter in connection with the defense
thereof other than reasonable costs of investigation. No indemnifying
party shall be liable for any settlement of any such action or
proceeding effected without its written consent, which shall not be
unreasonably withheld, delayed or conditioned. No indemnifying party
shall, without the consent of the indemnified party, consent to entry
of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect of
such Loss or which requires action on the part of such indemnified
party or otherwise subjects the indemnified party to any obligation or
restriction to which it would not otherwise be subject.
(d) Contribution. If the indemnification provided for in this
Section 7 shall for any reason be unavailable to an indemnified party
under subsection (a) or (b) of this Section 7 in respect of any Loss,
then, in lieu of the amount paid or payable under subsection (a) or (b)
of this Section 7, the indemnified party and the indemnifying party
under subsection (a) or (b) of this Section 7 shall contribute to the
aggregate Losses (including legal or other expenses reasonably incurred
in connection with investigating the same) in such proportion as is
appropriate to reflect the relative fault of the Company and the
sellers of Registrable Securities covered by the registration statement
which resulted in such Loss or action in respect thereof, with respect
to the statements, omissions or action which resulted in such Loss or
action in respect thereof, as well as any other relevant equitable
considerations. The relative fault shall be determined 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 indemnifying party or the
indemnified party and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such untrue
statement or omission. The parties hereto agree that it would not be
just and equitable if contributions were to be determined by any method
of allocation which does not take account of the equitable
considerations referred to in this paragraph. The amount paid by an
indemnified party as a result of the Losses referred to in the first
sentence of this paragraph shall be deemed to include any legal and
other expenses reasonably incurred by such indemnified party in
connection with investigation or defending any Loss which is the
subject of this paragraph. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who
was not guilty of such fraudulent
13
<PAGE>
misrepresentation. In addition, no Person shall be obligated to
contribute hereunder any amounts in payment for any settlement of any
action or Loss effected without such Person's consent.
(e) Indemnification Payments. The indemnification and
contribution required by this Section 7 shall be made by periodic
payments of the amount thereof during the course of any investigation
or defense, as and when bills are received or any Loss is incurred.
8. Registration Rights to Others. If the Company shall at any time
hereafter provide to any holder of any securities of the Company rights with
respect to the registration of such securities under the Securities Act or the
Exchange Act, such rights shall not be in conflict with or adversely affect any
of the rights provided in this Agreement to the holders of Registrable
Securities.
9. Adjustments Affecting Registrable Securities.
The Company shall not effect or permit to occur any combination,
subdivision or reclassification of Registrable Securities that would materially
adversely affect the ability of the Holders to include such Registrable
Securities in any registration of its securities under the Securities Act
contemplated by this Agreement or the marketability of such Registrable
Securities under any such registration or other offering.
10. Rule 144 and Rule 144A. Prior to the expiration of the
Effectiveness Period, the Company shall take all actions reasonably necessary to
enable Holders to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by (a) Rule 144
under the Securities Act, as such Rule may be amended from time to time, (b)
Rule 144A under the Securities Act, as such Rule may be amended from time to
time, or (c) any similar rules or regulations hereafter adopted by the
Commission, including, without limiting the generality of the foregoing, filing
on a timely basis all reports required to be filed under the Exchange Act. Upon
the request of any Holder, the Company shall deliver to such Holder a written
statement as to whether it has complied with such requirements. This paragraph
is in addition to and not in derogation of any rights the Holders may have under
any other agreement.
11. Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the Company shall have obtained the prior written consent of the Holders
of at least a majority of the Registrable Securities affected by such amendment,
modification or waiver.
14
<PAGE>
12. Nominees for Beneficial Owners. In the event that any Registrable
Security is held by a nominee for the beneficial owner thereof, the beneficial
owner thereof may, at its election in writing delivered to the Company, be
treated as the Holder of such Registrable Security for purposes of any request
or other action by any Holder or Holders pursuant to this Agreement or any
determination of the number or percentage of Registrable Securities held by any
Holder or Holders contemplated by this Agreement. If the beneficial owner of any
Registrable Securities so elects, the Company may require assurances reasonably
satisfactory to it of such owner's beneficial ownership of such Registrable
Securities.
13. Assignment. The provisions of this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
successors and assigns including any successor by merger to the Company. Any
Holder may assign to any permitted Transferee of its Registrable Securities
holding Registrable Securities its rights and obligations under this Agreement,
provided that such Transferee shall deliver to the Company prior to such
assignment a written instrument in which such Transferee agrees to be bound by
this Agreement as if it were an original party hereto, whereupon such Transferee
shall for all purposes be deemed to be a Holder under this Agreement.
14. Calculation of Percentage of Outstanding Registrable Securities.
For purposes of this Agreement, all references to an aggregate number of
Registrable Securities or a percentage thereof shall be calculated based upon
the aggregate number of Registrable Securities of such class outstanding at the
time such calculation is made and shall exclude any Registrable Securities or
shares of Common Stock, as the case may be, owned by the Company or any
subsidiary of the Company.
15. Miscellaneous.
(a) Further Assurances. Each of the parties hereto shall
execute such documents and other papers and perform such further acts
as may be reasonably required or desirable to carry out the provisions
of this Agreement and the transactions contemplated hereby.
(b) Headings. The headings in this Agreement are for
convenience of reference only and shall not control or affect the
meaning or construction of any provisions hereof.
(c) Remedies. Each Holder, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will
be entitled to specific performance of its rights under this Agreement.
The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the
provisions of this Agreement and the Company hereby agrees to waive the
defense in any
15
<PAGE>
action for specific performance that a remedy at law would be adequate.
(d) Entire Agreement. This Agreement constitutes the entire
agreement and understanding of the parties hereto in respect of the
subject matter contained herein, and there are no restrictions,
promises, representations, warranties, covenants, or undertakings with
respect to the subject matter hereof, other than those expressly set
forth or referred to herein. This Agreement supersedes all prior
agreements and understandings between the parties hereto with respect
to the subject matter hereof.
(e) Notices. Any notices or other communications to be given
hereunder by any party to another party shall be in writing, shall be
delivered personally, by telecopy, by certified or registered mail,
postage prepaid, return receipt requested, or by Federal Express or
other comparable delivery service, to the address of the party set
forth on Schedule B hereto or to such other address as the party to
whom notice is to be given may provide in a written notice to the other
parties hereto, a copy of which shall be on file with the Secretary of
the Company. Notice shall be effective when delivered if given
personally, when receipt is acknowledged if telecopied, three days
after mailing if given by registered or certified mail as described
above, and one business day after deposit if given by Federal Express
or comparable overnight delivery service.
(f) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE TO BE PERFORMED ENTIRELY IN SUCH STATE,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE COMPANY AND THE
PARTIES EACH HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY NEW
YORK STATE COURT SITTING IN THE CITY OF NEW YORK OR ANY FEDERAL COURT
SITTING IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND EACH
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS, IN EACH CASE SOLELY IN RESPECT OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. NOTHING HEREIN
SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE PROCESS IN ANY MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST THE COMPANY IN ANY OTHER JURISDICTION.
(g) Severability. If one or more of the provisions contained
herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable in any
16
<PAGE>
respect, for any reason, the validity, legality and enforceability of
the remaining provisions contained herein shall not be in any way
affected or impaired thereby, and the provision held to be invalid,
illegal or unenforceable shall be reformed to the minimum extent
necessary, and in a manner as consistent with the purposes thereof as
is practicable, so as to render it valid, legal and enforceable, it
being intended that all rights and obligations of the parties hereunder
shall be enforceable to the fullest extent permitted by law.
(h) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
THE PENN TRAFFIC COMPANY
By: /s/ Martin A. Fox
-----------------
Name:
Title:
HOLDERS:
QUANTUM PARTNERS LDC
By: /s/ Mark Sonnino
----------------
Name:
Title:
QUOTA FUND NV
By: /s/ Mark Sonnino
----------------
Name:
Title:
17
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
Number of
Shares of Principal Amount Number of
Name Common Stock of Senior Notes Warrants
- ---- ------------ --------------- --------
<S> <C> <C> <C>
Quantum Partners LDC 7,854,032 41,335,109 0
Quota Fund NV 1,178,736 6,203,607 0
</TABLE>
18
<PAGE>
SCHEDULE B
----------
To the Company:
The Penn Traffic Company
1200 State Fair Boulevard
Syracuse, NY 13221-4737
Attention: Mr. Francis D. Price, Jr.
Telephone Number: (315) 461-2347
Facsimile Number: (315) 461-2532
To the Holders:
c/o Satellite Fund Management, LLC
888 Seventh Avenue
33rd Floor
New York, New York 10106
Attention : Mr. Mark Sonnino
Telephone Number: (212) 397-5541
Facsimile Number: (212) 586-4537
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
FOR THE 5-WEEKS ENDED JULY 31, 1999
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 1-MO
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-END> JUL-31-1999
<CASH> 77,180
<SECURITIES> 0
<RECEIVABLES> 53,087
<ALLOWANCES> 8,991
<INVENTORY> 255,740
<CURRENT-ASSETS> 387,802
<PP&E> 225,620
<DEPRECIATION> 3,133
<TOTAL-ASSETS> 1,088,210
<CURRENT-LIABILITIES> 248,113
<BONDS> 315,390
0
0
<COMMON> 201
<OTHER-SE> 414,694
<TOTAL-LIABILITY-AND-EQUITY> 1,088,210
<SALES> 236,416
<TOTAL-REVENUES> 240,966
<CGS> 184,761
<TOTAL-COSTS> 184,761
<OTHER-EXPENSES> 61,432
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,520
<INCOME-PRETAX> (8,747)
<INCOME-TAX> (15)
<INCOME-CONTINUING> (8,762)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,762)
<EPS-BASIC> (0.44)
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
FOR THE 21-WEEKS ENDED JUNE 26, 1999
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-END> JUN-26-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 986,876
<TOTAL-REVENUES> 1,006,804
<CGS> 781,342
<TOTAL-COSTS> 781,342
<OTHER-EXPENSES> 388,830
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,794
<INCOME-PRETAX> (185,162)
<INCOME-TAX> (60)
<INCOME-CONTINUING> (185,222)
<DISCONTINUED> 0
<EXTRAORDINARY> (654,928)
<CHANGES> 0
<NET-INCOME> 469,706
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
