SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM T-3
FOR APPLICATIONS FOR QUALIFICATION OF INDENTURES UNDER THE
TRUST INDENTURE ACT OF 1939
THE PENN TRAFFIC COMPANY
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(Name of applicant)
1200 STATE FAIR BOULEVARD, SYRACUSE, NEW YORK 13221
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(Address of principal executive offices)
SECURITIES TO BE ISSUED UNDER THE INDENTURE TO BE QUALIFIED
TITLE OF CLASS AMOUNT
-------------- ------
11% Senior Notes due 2009 $100,000,000
Approximate date of issuance: June 1, 1999
Name and address of agent for service: Francis D. Price, Esq.
The Penn Traffic Company.
1200 State Fair Boulevard
Syracuse, New York 13221
(315) 453-7284
With a copy to:
Douglas A. Cifu, Esq.
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
(212) 373-3000
The applicant hereby amends this application for qualification on such
date or dates as may be necessary to delay its effectiveness until (i) the 20th
day after the filing of a further amendment which specifically states that it
shall supersede this amendment, or (ii) such date as the Commission, acting
pursuant to Section 307(c) of the Trust Indenture Act of 1939, as amended (the
"Act"), may determine upon the written request of the applicant.
GENERAL
1. GENERAL INFORMATION. Furnish the following as to the applicant:
(a) Form or organization.
A corporation.
(b) State or other sovereign power under the laws of which organized.
Delaware.
<PAGE>
2. SECURITIES ACT EXEMPTION APPLICABLE. State briefly the facts relied
upon by the applicant as a basis for the claim that registration of the
indenture securities under the Securities Act of 1933 is not required.
The Penn Traffic Company, a Delaware corporation (the "Company"),
proposes to issue, as part of the Joint Plan of Reorganization of the Company
and certain of its subsidiaries, dated March 1, 1999 (the "Plan of
Reorganization"), its 11% Senior Notes due _________ __, 2009 (the "Senior
Notes"). Pursuant to the Plan of Reorganization, the Company's (i) 11-1/2%
Senior Notes due 2001, (ii) 10-1/4% Senior Notes due 2002, (iii) 8-5/8% Senior
Notes due 2003, (iv) 10-3/8 Senior Notes due 2004, (v) 10.65% Senior Notes due
2004, and (vi) 11-1/2% Senior Notes due 2006 (collectively "Old Senior Notes")
and 9-5/8% Senior Subordinated Debentures due 2005 ("Old Subordinated Notes"),
will be exchanged in their entirety for the Senior Notes, common stock of the
Company and warrants to purchase the Company's common stock in the amounts
specified in the Plan of Reorganization. On April 5, 1999 the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") approved
the Company's Disclosure Statement accompanying the Plan of Reorganization (the
"Disclosure Statement") as containing "adequate information" for the purpose of
soliciting votes of holders of claims (including holders of Old Senior Notes and
Old Subordinated Notes) or stock interests in the Company for acceptance or
rejection of the Plan of Reorganization (Case No. 99-462 (PJW)). A copy of the
Disclosure Statement, with the Plan of Reorganization annexed thereto as an
exhibit, is attached hereto as Exhibit T3E. The Senior Notes are to be issued
under an indenture (the "Senior Note Indenture") between the Company and IBJ
Whitehall Bank and Trust Company, a form of which is attached hereto as Exhibit
T3C.
The Company believes that the issuance of the Senior Notes is exempt
from the registration requirements of the Securities Act of 1933 (the
"Securities Act") pursuant to Section 1145(a)(1) of the United States Bankruptcy
Code (the "Bankruptcy Code"). Generally, Section 1145(a)(1) of the Bankruptcy
Code exempts the issuance of securities from the registration requirements of
the Securities Act and equivalent state securities and "blue sky" laws if the
following conditions are satisfied: (i) the securities are issued by a debtor,
an affiliate participating in a joint plan of reorganization with the debtor, or
a successor of the debtor under a plan of reorganization, (ii) the recipients of
the securities hold a claim against, an interest in, or a claim for an
administrative expense against, the debtor, and (iii) the securities are issued
entirely in exchange for the recipient's claim against or interest in the
debtor, or are issued "principally" in such exchange and "partly" for cash or
property. The Company believes that the issuance of securities contemplated by
the Plan of Reorganization will satisfy the aforementioned requirements.
AFFILIATIONS
3. AFFILIATES. Furnish a list or diagram of all affiliates of the
applicant and indicate the respective percentages of voting securities or other
bases of control.
The following diagram sets forth the relationship among the Company and all of
its affiliates, including their respective percentages of voting securities, as
of March 1, 1999.
1. Owners of Company %
----------------- -
a. Officers and Directors as a group...............26.9
b. Riverside Acquisition Company 1/.................8.6
c. Gary D. Hirsch..................................19.4
2. Subsidiaries of Company..................All 100% owned
-----------------------
a. Dairy Dell
b. Sunrise Properties, Inc.
c. Pennway Express, Inc.
d. Abbott Realty Corporation
e. Big M Supermarkets, Inc.
f. Bradford Super Market, Inc.
g. Commander Foods, Inc.
h. P&C Food Markets, Inc. of Vermont
i. Penny Curtiss Baking Company, Inc.
j. Big Bear Distribution Company
k. St. Mary's Foods, Inc.
l. Seneca Falls Foods, Inc.
m. Chili Paul Foods, Inc.
n. 12th & Powell Foods, Inc.
o. Corry Foods, Inc.
p. Dunkirk Foods, Inc.
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1/ RAC Partners is the sole general partner of Riverside Acquisition Company
and MTH Holdings owns 100% of the stock of RAC Partners.
2
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q. Jamestown Foods, Inc.
r. Fredonia Foods, Inc.
s. Lakewood Foods, Inc.
t. East 6th Street Foods, Inc.
u. Grandview Foods, Inc.
v. 26th & Legion Foods, Inc.
w. Eastway Foods, Inc.
The following diagram sets forth the relationship among the Company and
all of its affiliates, including their respective percentages of voting
securities, upon the effectiveness of the Plan of Reorganization (the "Effective
Date").
1. Owners of Company %
----------------- -
a. Quota Fund NV....................................5.6
b. Quantum Partners LDC............................37.2
c. Officers and Directors as a group2/..............5.5
2. Subsidiaries of Company..................All 100% owned
-----------------------
a. Dairy Dell
b. Sunrise Properties, Inc.
c. Pennway Express, Inc.
d. Abbott Realty Corporation
e. Big M Supermarkets, Inc.
f. Bradford Super Market, Inc.
g. Commander Foods, Inc.
h. P&C Food Markets, Inc. of Vermont
i. Penny Curtiss Baking Company, Inc.
j. Big Bear Distribution Company
k. St. Mary's Foods, Inc.
l. Seneca Falls Foods, Inc.
m. Chili Paul Foods, Inc.
n. 12th & Powell Foods, Inc.
o. Corry Foods, Inc.
p. Dunkirk Foods, Inc.
q. Jamestown Foods, Inc.
r. Fredonia Foods, Inc.
s. Lakewood Foods, Inc.
t. East 6th Street Foods, Inc.
u. Grandview Foods, Inc.
v. 26th & Legion Foods, Inc.
w. Eastway Foods, Inc.
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2/ Includes options to acquire shares of common stock that will be exercisable
within 60 days of the Effective Date.
3
<PAGE>
MANAGEMENT AND CONTROL
4. DIRECTORS AND EXECUTIVE OFFICERS. List the names and complete
mailing addresses of all directors and executive officers of the applicant and
all persons chosen to become directors or executive officers. Indicate all
offices with the applicant held or to be held by each person named.
Except as otherwise noted below, the address for each director and
executive officer listed below is 1200 State Fair Boulevard, Syracuse, New York
13221.
NAME OFFICE
Gary D. Hirsch Chairman and Director 1/
Joseph V. Fisher Director, President and Chief Executive Officer
Martin A. Fox Director, Vice Chairman - Finance 2/
Susan E. Engel Director 3/
James A. Lash Director 4/
Richard D. Segal Director 5/
Harold S. Poster Director 6/
Claude J. Incaudo Director
Eugene A. DePalma Director 7/
Nick Campbell Senior Vice President - Marketing
Robert J. Davis Senior Vice President, Chief Financial Officer
and Assistant Secretary
Francis D. Price, Jr. Vice President, General Counsel and Secretary
Randy P. Martin Vice President - Finance and Chief Accounting
Officer
Charles G. Bostwick Vice President - Chief Information Officer
Robert Chapman Vice President - Wholesale/Franchise
Judith Crowley Vice President - Service Deli
Steve Erdley Vice President - Meat
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1/ 411 Theodore Fremd Ave., Rye, New York 10580
2/ 411 Theodore Fremd Ave., Rye, New York 10580
3/ Department 56, Inc., One Village Place, 6436 City, West Parkway, Eden
Prairie, Minnesota 55344
4/ 411 Theodore Fremd Ave., Rye, New York 10580
5/ The Encore Company, 707 Westchester Avenue, White Plains, New York 10604
6/ One William Street, New York, New York 10004
7/ P.O. Box 1939, Burnsville, Minnesota 55337
4
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Linda Jones Vice President - Sales
Brian Kaler Vice President - Operations Support
Frederic Kopp Vice President - Advertising
Stephen Lail Vice President - Service Bakery
Russell Long Vice President & General Manager of
Pennsylvania
David Norcross Vice President - Real Estate
Bernadette Randall-Barber Vice President - Human Resources
Michael Smith Vice President - Produce
Phil Williams Vice President - Construction & Engineering
Gregory Young Vice President - Grocery Merchandising
5. PRINCIPAL OWNERS OF VOTING SECURITIES. Furnish the following
information as to each person owning 10 percent or more of the voting securities
of the applicant.
As of March 31, 1999 (Insert date within 31 days)
<TABLE>
<CAPTION>
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NAME AND COMPLETE TITLE OF CLASS AMOUNT OWNED PERCENTAGE OF
MAILING ADDRESS OWNED VOTING SECURITIES
OWNED
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gary D. Hirsch Common 2,102,868 19.4%
411 Theodore Fremd Ave.
Rye, New York 10580
Upon the effectiveness of the Plan of Reorganization, the Company will have the following principal owners:
Quantum Partners LDC Common 7,479,787 37.2%
888 Seventh Avenue
33rd Floor
New York, New York 10106
Quota Fund NV Common 1,125,989 5.6%
888 Seventh Avenue
33rd Floor
New York, New York 10106
</TABLE>
UNDERWRITERS
6. UNDERWRITERS. Give the name and complete mailing address of (a) each
person who, within three years prior to the date of filing the application,
acted as an underwriter of any securities of the obligor which were outstanding
on the date of filing the application, and (b) each proposed principal
underwriter of the securities proposed to be offered. As to each person
specified in (a), give the title of each class of securities underwritten.
(a) None.
(b) None.
5
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CAPITAL SECURITIES
7. CAPITALIZATION. (a) Furnish the following information as to each
authorized class of securities of the applicant.
<TABLE>
<CAPTION>
As of March 31, 1999 (Insert date within 31 days)
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TITLE OF CLASS AMOUNT AUTHORIZED AMOUNT OUTSTANDING
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, par value $1.25 per share 30,000,000 shares 10,984,600 shares
Preferred Stock, par value $1.00 per share 10,000,000 shares None
Old Senior Notes $750,000,000 $732,240,000
Old Subordinated Debentures $400,000,000 $400,000,000
As of the Effective Date of the Plan of Reorganization
- -----------------------------------------------------------------------------------------------------------------------
TITLE OF CLASS AMOUNT AUTHORIZED AMOUNT OUTSTANDING
- -----------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.01 per share 30,000,000 shares 21,106,955 shares
Preferred Stock, par value $.01 per share 1,000,000 shares None
Senior Notes due 2009 $100,000,000 $100,000,000
</TABLE>
(b) Give a brief outline of the voting rights of each class of voting
securities referred to in paragraph (a) above.
Each outstanding share of the Company's existing Common Stock and new
Common Stock has or will have, as applicable, one vote with respect to all
matters subject to common stockholder vote.
Holders of the Old Senior Notes, Old Subordinated Debentures and the
Senior Notes do not have any voting rights by reason of ownership of those
securities.
INDENTURE SECURITIES
8. ANALYSIS OF INDENTURE PROVISIONS. Insert at this point the analysis
of indenture provisions required under Section 305(a)(2) of the Act.8/
(A) Events of Default and Notice of Default.
The following are Events of Default under the Indenture:
(1) the Company defaults in the payment of interest on any
Security of that series when the same becomes due and payable and the
Default continues for a period of 30 days after such interest becomes
due and payable;
(2) the Company defaults in the payment of the principal of or
any premium on any Security of that series when the same becomes due
and payable at maturity, upon redemption, or upon repurchase pursuant
to Section 5.01 of the Indenture or otherwise;
(3) the Company fails to comply with any of its other
agreements or covenants in or provisions of this Indenture (other than
an agreement or covenant a default in whose performance is elsewhere in
this Section of the Indenture specifically dealt with or which has
expressly been included in this Indenture solely for the benefit of
series of Securities other than that series), and the Default continues
for 30 days after the Company has been given notice of the Default by
the Trustee or the holders of 25% in principal amount of the
Outstanding Securities of that series;
(4) a default on other Indebtedness of the Company or any
Subsidiary (including a default on Securities other than Securities of
such series), which Indebtedness has an outstanding principal amount of
- ---------------
8/ All capitalized terms used in this Item 8 shall have the same meaning,
unless otherwise defined, as that provided in the Senior Note Indenture.
6
<PAGE>
more than $ 1,000,000 individually or in the aggregate if such Indebtedness
has attained final maturity or if the holders of such Indebtedness have
accelerated payment thereof under the terms of the instrument under which
such Indebtedness is or may be outstanding and, in each case, it remains
unpaid;
(5) one or more judgments or decrees entered against the
Company or any Subsidiary involving a liability (not paid by insurance)
of $1,000,000 or more in the case of any one such judgment or decree or
$1,000,000 or more in the aggregate for all such judgments and decrees
for the Company and all its Subsidiaries and all such judgments or
decrees have not been vacated, discharged or stayed or bonded pending
appeal within 60 days from the entry thereof;
(6) the Company or any Subsidiary pursuant to or within the
meaning of Title 11 of the United States Code or any similar Federal or
state law for the relief of debtors (collectively, "Bankruptcy Law"):
(i) commences a voluntary case in bankruptcy or any
other action or proceeding for any other relief under any law
affecting creditors' rights that is similar to a Bankruptcy
Law;
(ii) consents by answer or otherwise to the
commencement against it of an involuntary case;
(iii) seeks or consents to the appointment of a
receiver, trustee, assignee, liquidator, custodian or similar
official (collectively, a "Custodian") of it or for all or
substantially all of its Property;
(iv) makes a general assignment for the benefit of
its creditors; or
(v) generally is unable to pay its debts as the same
become due; or
(7) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(i) is for relief against the Company or any
Subsidiary in an involuntary case proceeding;
(ii) appoints a Custodian of the Company or any
Subsidiary or for all or substantially all of its Property; or
(iii) orders the liquidation of the Company or any
Subsidiary,
and in each case the order or decree remains unstayed and in effect for 60 days,
or any dismissal, stay, rescission or termination ceases to remain in effect; or
(8) any other Event of Default provided with respect to
Securities of that series.
(B) Authentication and Delivery of the Notes and the Application of
Proceeds Thereof.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities of any series executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with the Company Order shall authenticate and deliver such Securities. If the
form or terms of the Securities of the series have been established by or
pursuant to one or more Board Resolutions or supplemental indentures as
permitted by Sections 2.01 and 3.01 of the Indenture, in authenticating such
Securities, and accepting the additional responsibilities under this Indenture
in relation to such Securities, the Trustee shall be entitled to receive, and
(subject to Section 7.01 of the Indenture) shall be fully protected in relying
upon, an Opinion of Counsel stating,
(1) if the form of such Securities has been established by or
pursuant to Board Resolution or supplemental indenture, as the case may
be, as permitted by Section 2. 01 of the Indenture, that such form has
been established in conformity with the provisions of this Indenture;
(2) if the terms of such Securities have been established by
or pursuant to Board Resolution or supplemental indenture, as the case
may be, as permitted by Section 3.01 of the Indenture, that such terms
have been established in conformity with the provisions of this
Indenture; and
(3) that such Securities, when authenticated and delivered by
the Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute valid
and legally binding obligations of the Company enforceable in
accordance with their terms, subject to
7
<PAGE>
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
If such form or terms have been so established, the Trustee shall not
be required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee. The Trustee shall also be
entitled to receive an Officers' Certificate stating that immediately after the
authentication and delivery of such Securities, (a) the aggregate principal
amount of Securities Outstanding will not exceed the maximum aggregate principal
amount permitted to be Outstanding pursuant to authorization by the Board of
Directors and (b) the Company will not be in Default and no Event of Default
will have occurred. In addition, if the form and/or terms of such Securities
have been established pursuant to a supplemental indenture, the Trustee shall be
entitled to receive the Opinion of Counsel referred to in Section 9.06 of the
Indenture hereof.
Notwithstanding the provisions of Section 3.01 of the Indenture and of
the preceding paragraph, if all Securities of a series are not to be originally
issued at one time, it shall not be necessary to deliver the Officers'
Certificate otherwise required pursuant to Section 3. 01 of the Indenture or the
Opinion of Counsel otherwise required pursuant to such preceding paragraph at or
prior to the authentication of each Security of such series if such documents
are delivered at or prior to the authentication upon original issuance of the
first Security of such series to be issued.
Each Security shall be dated the date of its authentication.
A Security shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Security has been authenticated under this Indenture.
Notwithstanding the foregoing, if any Security shall have been
authenticated and delivered hereunder but never issued and sold by the Company,
and the Company shall deliver such Security to the Trustee for cancellation as
provided in Section 3.10 of the Indenture, for all purposes of this Indenture
such Security shall be deemed never to have been authenticated and delivered
hereunder and shall never be entitled to the benefits of this Indenture.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. An authenticating agent may authenticate
Securities whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company or
an Affiliate.
(C) Release of Property Subject to the Lien of the Indenture.
The Company's obligations under the securities issued under the Senior
Note Indenture are not secured by any liens or security interests on any assets
of the Company. Accordingly, the Senior Note Indenture does not contain any
provisions with respect to the release or the release and substitution of any
property subject to such a lien.
(D) Satisfaction and Discharge of Indenture.
The Company may terminate its obligations under this Indenture at any
time by delivering all outstanding Securities of every series to the Trustee for
each such series for cancellation. The Company, at its option, may elect with
respect to any series of Securities issued hereunder, upon compliance with the
conditions set forth in this Article 8, (i) to be Discharged (as defined herein)
from any and all obligations with respect to such series of Securities (except
for certain obligations of the Company to register the transfer or exchange of
the Securities, replace stolen, lost or mutilated Securities, maintain paying
agencies, hold moneys for payment in trust and compensate and indemnify the
Trustee as provided in Section 7.07 of the Indenture) or (ii) to be released
from its obligation to comply with the restrictive covenants in Sections 4.02,
4.03, 4.04, 4.05, 4.06, 4.07, 4.09, 4.10, 4.11, 4.12, 4.14, 4.15 and 5.01 of the
Indenture, in each case if the Company deposits with the Trustee for such series
of Securities, in trust, money or U.S. Government Obligations which, through the
payment of interest thereon and principal thereof in accordance with their
terms, will provide money in an amount sufficient to pay all the principal of
and interest on the Securities of such series on the dates such payments are due
in accordance with the terms of the Securities of such series. To exercise any
such option, the Company shall deliver to the Trustee for such series of
Securities (a) an Opinion of Counsel to the effect that the deposit and related
defeasance would not cause the holders of the Securities of such series to
recognize income, gain or loss for federal income tax purposes and, in the case
of a Discharge pursuant to clause (i) above, accompanied by a ruling to such
effect received from or published by the United States Internal Revenue Service
and (b) an Officers' Certificate and an Opinion of Counsel to the effect that
the Company has complied with all conditions precedent to the defeasance.
8
<PAGE>
"Discharged" means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by, and obligations under, the
Securities of such series and to have satisfied all the obligations under this
Indenture relating to the Securities of such series (and the Trustee for such
series of Securities, at the request and the expense of the Company, shall
execute proper instruments acknowledging the same), except (A) the rights of the
Holders of Securities of such series to receive, from the trust fund described
above, payment of the principal of and the interest on the Securities of such
series when such payments are due, (B) the Company's obligations with respect to
the Securities under Sections 3.04, 3.05, 3.06, 3.07, 3.08, 4.17, 7.07, 7.08 and
8.04 of the Indenture and (C) the rights, powers, trusts, duties and immunities
of the Trustee with respect to such series of Securities hereunder.
"U.S. Government Obligations" means direct obligations of, and
obligations guaranteed by, the United States of America for the payment of which
the full faith and credit of the United States of America is pledged.
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Section 8.01 of the Indenture with respect to any
series of Securities. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal and interest on the Securities of such
series.
The Trustee and the Paying Agent shall promptly pay to the Company upon
written request any excess money or securities held by them at any time.
The Trustee and the Paying Agent shall pay to the Company upon written
request any money held by them for the payment of principal or interest that
remains unclaimed for two years after the date upon which such payment shall
have come due; provided, however, that the Trustee or such Paying Agent, shall,
upon the written request and at the expense of the Company, cause to be
published once in a newspaper of general circulation in The City of New York or
mailed to each such Holder, notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such publication or mailing, any unclaimed balance of such money then
remaining will be repaid to the Company. After payment to the Company, Holders
entitled to the money must look to the Company for payment as general creditors
unless an applicable abandoned property law designates another Person.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations deposited with respect to the Securities of any series in
accordance with Sections 8.01 and 8.02 of the Indenture by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's obligations under this Indenture and the Securities of such series
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.01 of the Indenture until such time as the Trustee or Paying Agent is
permitted to apply such money or U.S. Government Obligations in accordance with
Section 8.01 of the Indenture; provided, however, that if the Company has made
any payment of interest on or principal of any such Securities because of the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Securities to receive such payment from the money or U.S.
Government Obligations held by the Trustee or Paying Agent.
(E) Evidence as to Compliance with Conditions and Covenants.
The Company shall deliver to the Trustee for each series of Securities
issued hereunder, within 120 days after the end of each fiscal year of the
Company, an Officers' Certificate, complying with Section 314(a)(4) of the TIA,
stating that a review of the activities of the Company and its Subsidiaries
during the preceding fiscal year has been made under the supervision of the
signing Officers with a view to determining whether the Company has kept,
observed, performed and fulfilled its obligations under this Indenture and such
series of Securities, and further stating, as to each such Officer signing such
certificate, that to the best of his knowledge the Company has kept, observed,
performed and fulfilled each and every covenant contained in this Indenture and
such series of Securities and is not in default in the performance or observance
of any of the terms, provisions and conditions hereof or thereof (or, if a
Default or Event of Default shall have occurred, describing all such Defaults or
Events of Defaults of which he may have knowledge, the status of such Default or
Event of Default and what action the Company is taking or proposes to take with
respect thereto).
The Company will, so long as any of the Securities of any series are
outstanding, deliver to the Trustee for each series of Securities issued
hereunder, forthwith upon becoming aware of any Default, Event of Default or
default in the performance of any covenant, agreement or condition contained in
this Indenture or such series of Securities, an Officers' Certificate specifying
such Default or Event of Default the status of such Default or Event of Default
and what action the Company is taking or proposes to take with respect thereto.
9
<PAGE>
9. OTHER OBLIGORS. Give the name and complete mailing address of any
person, other than the applicant, who is an obligor upon the indenture
securities.
None
CONTENTS OF APPLICATION FOR QUALIFICATION. This application for
qualification comprises--
(a) Pages numbered 1 to 11, consecutively.
(b) The statement of eligibility and qualification of each trustee
under the indenture to be qualified.
(c) The following exhibits in addition to those filed as a part of the
statement of eligibility and qualification of each trustee.
Exhibit T3A. Certificate of Incorporation of the Company. The Certificate of
Incorporation will be amended and restated in connection with the
Plan of Reorganization. The form of Amended and Restated
Certificate of Incorporation of the Company is attached as well.
Exhibit T3B. By-Laws of the Company. The By-Laws will be amended and restated in
connection with the Plan of Reorganization. The form of Restated
By-Laws of the Company is attached as well.
Exhibit T3C. Form of the Senior Note Indenture between the Company and IBJ
Whitehall Bank & Trust Company.
Exhibit T3D. Not applicable.
Exhibit T3E. A copy of the Amended Disclosure Statement regarding the Amended
Joint Plan of Reorganization, with certain exhibits thereto.
Exhibit T3F. A cross reference sheet showing the location in the Senior Note
Indenture of the provisions inserted therein pursuant to Sections
310 through 318(a), inclusive, of the Trust Indenture Act of 1939,
included in Exhibit T3C.
Exhibit 99.1 Statement of Eligibility on Form T-1.
10
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SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
applicant, The Penn Traffic Company, a corporation organized and existing under
the laws of Delaware, has duly caused this application to be signed on its
behalf by the undersigned, thereunto duly authorized, and its seal to be
hereunto affixed and attested, all in the city of Syracuse, and State of New
York, on the 20th day of April, 1999.
THE PENN TRAFFIC COMPANY
Attest: /s/ Francis D. Price, Jr. By: /s/ Joseph V. Fisher
------------------------- --------------------
Francis D. Price, Jr. Joseph V. Fisher
Vice President, General President and Chief Officer
Counsel & Secretary
11
CERTIFICATE OF INCORPORATION
OF
PENN TRAFFIC MERGER COMPANY, INCORPORATED
ARTICLE I
The name of the Corporation is Penn Traffic Merger Company,
Incorporated.
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of the Corporation's registered agent
at such address is The Corporation Trust Company.
ARTICLE III
The purpose of the Corporation shall be to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
ARTICLE IV
Section 1. CAPITAL STOCK. The total number of shares of all classes of
capital stock which the Corporation shall have authority to issue is 40,000,000,
of which 10,000,000 shares shall be Preferred Stock of the par value of $1.00
per share and 30,000,000 shares shall be Common Stock of the par value of $1.25
per share.
Section 2. PREFERRED STOCK. The Board of Directors is expressly
authorized, by resolution or resolutions, to provide for the issue of all or any
shares of the Preferred Stock, in one or more series, and to fix for each such
series such voting powers, full or limited, or no voting powers, and such
designations, preferences and relative, participating, optional or other special
rights and such qualifications, limitations or restrictions thereon, as shall be
stated and expressed in the resolution or resolutions adopted by the Board of
Directors providing for the issue of such series (a "Preferred Stock
Designation") and as may be permitted by the General Corporation Law of the
State of Delaware. The number of authorized shares of Preferred Stock may be
increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of a majority of the holders of the voting
power
<PAGE>
2
of all of the then outstanding shares of the capital stock of the Corporation
entitled to vote generally in the election of directors (the "Voting Stock")
voting together as a single class, without a separate vote of the holders of the
Preferred Stock, or any series thereof, unless a vote of any such holders is
required pursuant to any Preferred Stock Designation.
Section 3. COMMON STOCK. Except as otherwise provided by law or as
otherwise provided in any Preferred Stock Designation, the holders of the Common
Stock shall exclusively possess all voting power and each share of Common Stock
shall have one vote.
ARTICLE V
Section 1. NUMBER, ELECTION AND TERMS OF DIRECTORS. Subject to the
rights of the holders of any series of Preferred Stock to elect additional
directors under specified circumstances, the number of directors shall be fixed
from time to time exclusively by the Board of Directors pursuant to a resolution
adopted by a majority of the number of directors that the Corporation would have
if there were no vacancies (the "Whole Board"). The directors, other than those
who may be elected by the holders of any series of Preferred Stock under
specified circumstances, shall be classified, with respect to the time for which
they severally hold office, into three classes as nearly as equal in number as
possible, as shall be provided for in the By-laws of the Corporation, with the
term of office of the first class to expire at the 1993 annual meeting of
stockholders, the term of office of the second class to expire at the 1994
annual meeting of stockholders and the term of office of the third class to
expire at the 1995 annual meeting of stockholders, with each director to hold
office until his or her successor shall have been duly elected and qualified. At
each annual meeting of stockholders of the Corporation, the date of which shall
be fixed by or pursuant to the By-laws of the Corporation, the successors of the
class of directors whose term expires at that meeting shall be elected to hold
office for a term expiring at the annual meeting of stockholders held in the
third year following the year of their election.
Section 2. STOCKHOLDER NOMINATION OF DIRECTOR CANDIDATES. Advance
notice of stockholder nominations for the election of directors and of business
to be brought by stockholders before any meeting of the stockholders of the
Corporation shall be given in the manner provided in the By-laws of the
Corporation.
Section 3. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Subject to the
rights of the holders of any series of Preferred Stock, and unless the Board of
Directors otherwise determines, newly created directorships resulting from any
increase in the authorized number of directors or any vacancies in the Board of
Directors resulting from death, resignation, retirement, disqualification,
removal from office or other cause may be filled only by the affirmative vote of
a majority of the remaining
<PAGE>
3
directors then in office, although less than a quorum, or by a sole remaining
director, and any director so chosen shall hold office for a term expiring at
the annual meeting of stockholders at which the term of office of the class to
which such director has been elected expires and until such director's successor
shall have been duly elected and qualified. No decrease in the number of
authorized directors constituting the entire Board of Directors shall shorten
the term of any incumbent director.
Section 4. REMOVAL. Subject to the rights of the holders of any series
of Preferred Stock, any director, or the entire Board of Directors, may be
removed from office at any time, but only for cause and only by the affirmative
vote of the holders of a majority of the voting power of the then outstanding
shares of the Voting Stock voting together as a single class.
ARTICLE VI
Subject to the rights of the holders of any series of Preferred Stock,
any action required or permitted to be taken by the stockholders of the
Corporation must be effected at a duly called annual or special meeting of
stockholders of the Corporation and may not be effected by any consent in
writing by such stockholders. Special meetings of stockholders of the
Corporation may be called only by the Board of Directors pursuant to a
resolution approved by a majority of the Whole Board or as otherwise provided in
the By-laws of the Corporation.
ARTICLE VII
In furtherance and not in limitation of the powers conferred upon it by
law, the Board of Directors is expressly authorized to adopt, repeal, alter or
amend the By-laws of the Corporation by the vote of a majority of the Whole
Board (as defined in Article VI). In addition to any requirements of law and any
other provision of this Certificate of Incorporation or any resolution or
resolutions of the Board of Directors adopted pursuant to Article IV of this
Certificate of Incorporation (and notwithstanding the fact that a lesser
percentage may be specified by law, this Certificate of Incorporation or any
such resolution or resolutions), the affirmative vote of the holders of a
majority of the combined voting power of the then outstanding shares of Voting
Stock, voting together as a single class, shall be required to adopt, amend,
alter or repeal any provision of the By-laws.
<PAGE>
4
ARTICLE VIII
Section 1. A director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the General Corporation Law
of the State of Delaware, or (iv) for any transaction from which the director
derived an improper personal benefit. If the General Corporation Law of the
State of Delaware is amended to authorize corporate action further eliminating
or limiting the personal liability of directors, then the liability of a
director of the Corporation shall be eliminated or limited to the fullest extent
permitted by the General Corporation Law of the State of Delaware, as so
amended. Any repeal or modification of this Article VIII by the stockholders of
the Corporation shall not adversely affect any right or protection of a director
of the Corporation existing at the time of such repeal or modification.
Section 2. A. Each person who was or is made a party or is threatened
to be made a party to or is involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a "proceeding"),
by reason of the fact that he or she or a person of whom he or she is the legal
representa tive is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director, officer or employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the General Corporation Law
of the State of Delaware as the same exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment), against all
expenses, liability and loss (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however; that except as provided in
paragraph B of this Section 2 with respect to proceedings seeking to enforce
rights to indemnification, the Corporation shall indemnify any such person
seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this Section 2 shall be a contract right and shall
include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that if the General
<PAGE>
5
Corporation Law of the State of Delaware requires, the payment of such expenses
incurred by a director or officer in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such person while a director or officer, including, without limitation, service
to an employee benefit plan) in advance of the final disposition of a
proceeding, shall be made only upon delivery to the Corporation of an
undertaking by or on behalf of such director or officer, to repay all amounts so
advanced if it shall ultimately be determined that such director or officer is
not entitled to be indemnified under this Section 2 or otherwise.
B. If a claim under paragraph A of this Section 2 is not paid in full
by the Corporation within thirty days after a written claim has been received by
the Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any, is required, has been tendered to the Corpora tion) that the claimant
has not met the standards of conduct which make it permissible under the General
Corporation Law of the State of Delaware for the Corporation to indemnify the
claimant for the amount claimed, but the burden of proving such defense shall be
on the Corporation. Neither the failure of the Corporation (including its Board
of Directors, independent legal counsel or stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the General Corporation law of the
State of Delaware, nor an actual determination by the Corporation (including its
Board of Directors, independent legal counsel or stockholders) that the claimant
has not met such applicable standard of conduct, shall be a defense to the
action or create a presumption that the claimant has not met the applicable
standard of conduct.
C. The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Section 2 shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, By-law, agreement, vote of stockholders or disinterested
directors or otherwise.
D. The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the General Corporation Law of the State of Delaware.
E. The Corporation may, to the extent authorized from time to time by
the Board of Directors, grant rights to indemnification, and rights to be paid
by the
<PAGE>
6
Corporation the expenses incurred in defending any proceeding in advance of its
final disposition, to any employee or agent of the Corporation to the fullest
extent of the provisions of this Section 2 with respect to the indemnification
and advancement of expenses of directors and officers of the Corporation.
ARTICLE IX
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, and any other
provisions authorized by the laws of the State of Delaware at the time in force
may be added or inserted, in the manner now or hereafter provided herein or by
statute, and all rights, preferences and privileges of whatsoever nature
conferred upon stockholders, directors or any other persons whomsoever by and
pursuant to this Certificate of Incorporation in its present form or as amended
are granted subject to the rights reserved in this Article.
ARTICLE X
The Corporation shall be governed by Section 203 of the General
Corporation Law of the State of Delaware as it may be amended from time to time.
ARTICLE XI
The name and mailing address of the Incorporator is Barry M. Funt,
Esq., in care of Donovan Leisure Newton & Irvine, 30 Rockefeller Plaza, New
York, New York 10112.
IN WITNESS WHEREOF, this Certificate of Incorporation has been executed
on this 22nd day of April, 1992.
PENN TRAFFIC MERGER COMPANY,
INCORPORATED
By: /s/ Barry M. Funt
-----------------
Barry M. Funt
Incorporator
<PAGE>
CERTIFICATE OF MERGER
OF
THE PENN TRAFFIC COMPANY
INTO
PENN TRAFFIC MERGER COMPANY, INCORPORATED
The undersigned corporation
DOES HEREBY CERTIFY:
FIRST: That the names and state of incorporation of each of the
constituent corporations of the merger are as follows:
NAME STATE OF INCORPORATION
---- ----------------------
The Penn Traffic Company Pennsylvania
Penn Traffic Merger Company, Delaware
Incorporated
SECOND: That an Agreement of Merger between the parties to the merger
has been approved, adopted, certified, executed and acknowledged by each of the
constituent corporations in accordance with the requirements of Section 252 of
the General Corporation Law of Delaware.
THIRD: That the name of the surviving corporation of the merger is Penn
Traffic Merger Company, Incorporated, which shall herewith be changed to The
Penn Traffic Company, a Delaware corporation.
<PAGE>
2
FOURTH: That as a result of the merger, the Certificate of
Incorporation of Penn Traffic Merger Company, Incorporated, the surviving
corporation, will be amended as follows:
ARTICLE I. The name of the Corporation is The Penn Traffic
Company.
FIFTH: That the executed Agreement of Merger is on file at the
principal place of business of the surviving corporation, the address of which
is 319 Washington Street, Johnstown, PA 15901.
SIXTH: That a copy of the Agreement of Merger will be furnished, on
request and without cost, to any stockholder of any constituent corporation.
SEVENTH: That The Penn Traffic Company, a Pennsylvania corporation, has
authorized capital stock as follows:
10,000,000 shares of Common Stock, par value $1.25 per share;
2,000,000 shares of Preferred Stock, par value $1.00 per
share.
<PAGE>
3
EIGHT: That this Certificate of Merger shall be effective upon its
filing with the Secretary of State of the State of Delaware. Dated: September
18, 1992
PENN TRAFFIC MERGER COMPANY,
INCORPORATED
By: /s/ Chairman of the Board of Directors
--------------------------------------
Chairman of the Board of Directors
ATTEST:
By: /s/ Secretary
-------------
Secretary
<PAGE>
CERTIFICATE OF OWNERSHIP AND MERGER
OF
PENN TRAFFIC ACQUISITION CORPORATION
INTO
THE PENN TRAFFIC COMPANY
UNDER SECTION 253 OF THE GENERAL CORPORATION
LAW OF THE STATE OF DELAWARE
Pursuant to Section 253(a) of the General Corporation Law of the State
of Delaware, The Penn Traffic Company, a Delaware corporation, hereby certifies
the following information relating to the merger of Penn Traffic Acquisition
Corporation, a Delaware corporation and a wholly owned subsidiary of The Penn
Traffic Company, with and into The Penn Traffic Company.
1. The Penn Traffic Company owns 100% of the issued and outstanding
shares of common stock of Penn Traffic Acquisition Corporation, a Delaware
corporation, which common stock is the only class of capital stock of Penn
Traffic Acquisition Corporation outstanding.
2. Attached as Annex I hereto is a copy of the resolutions of the Board
of Directors of The Penn Traffic Company, adopted as of February 22, 1993,
approving the merger of Penn Traffic Acquisition Corporation with and into The
Penn Traffic Company (the "Merger").
3. The surviving corporation of the Merger is The Penn Traffic Company.
IN WITNESS WHEREOF, this Certificate of Ownership and Merger has been
executed on this 14th day of April, 1993.
THE PENN TRAFFIC COMPANY
By: /s/ Martin A. Fox
-----------------
Name: Martin A. Fox
Title: Vice Chairman
Attest:
By: /s/ Robert M. Hart
------------------
Name: Robert M. Hart
Title: Assistant Secretary
<PAGE>
THE PENN TRAFFIC COMPANY
BOARD OF DIRECTOR RESOLUTIONS
AUTHORIZING MERGER OF PENN TRAFFIC ACQUISITION CORPORATION
INTO THE PENN TRAFFIC COMPANY
ADOPTED FEBRUARY 22, 1993
Approval of the Mergers and Merger Agreements
- ---------------------------------------------
BE IT RESOLVED, that the Board of Directors hereby declares
that the proposed merger of Big Bear Stores Company, a Delaware
corporation ("Big Bear") and a subsidiary of the Corporation, into Penn
Traffic Acquisition Corporation, a Delaware corporation ("PTAC") and a
wholly owned subsidiary of the Corporation (the "Big Bear Merger"), on
substantially the terms and conditions set forth in the form of
Agreement and Plan of Merger attached hereto as Exhibit A (the "Big
Bear Merger Agreement"), is advisable and is hereby approved; and be it
further
RESOLVED, that the Board of Directors hereby declares that the
proposed merger of PTAC into the Corporation immediately following
consummation of the Big Bear Merger (the "Subsequent Merger"), is
advisable and is hereby approved; and be it further
RESOLVED, that the Board of Directors hereby declares that the
proposed merger of P & C Food Markets, Inc., a New York corporation ("P
& C") and a wholly owned subsidiary of the Corporation, into the
Corporation immediately following consummation of the Big Bear Merger
(the "P & C Merger"), is advisable and is hereby approved; and be it
further
RESOLVED, that the "Exchange Value" of one share of common
stock, par value $1.25 per share, of the Corporation (the "Common
Stock") for purposes of the Big Bear Merger Agreement shall be the
closing price of the Common Stock on the American Stock Exchange on the
trading day prior to the execution of the Big Bear Merger Agreement;
and be it further
RESOLVED, that the Board of Directors hereby authorizes each
of the officers of the Corporation to execute, attest and deliver on
behalf of the Corporation agreements, certificates or other documents
(the "Merger Documents") providing for the Big Bear Merger, the
Subsequent Merger and the P & C Merger, on terms and conditions set
forth in the foregoing resolutions, such Merger Documents to contain
such provisions as such officers may determine necessary or
appropriate, the execution, attestation and delivery of the Merger
Documents by any such officers to constitute conclusive proof of said
determination by said officer or officers; and be it further
<PAGE>
2
RESOLVED, that the officers of the Corporation be, and each
hereby is, authorized to vote the shares of common stock, par value
$0.01 per share, of Big Bear held by the Corporation or PTAC in favor
of the adoption of the Big Bear Merger and the Big Bear Merger
Agreement.
Ratification
- ------------
BE IT RESOLVED, that the officers of the Corporation be, and
they hereby are, authorized to take all such further action and to
execute and deliver all such instruments and documents, and to do or
cause to be done all such acts and things (including the payment of all
necessary fees and expenses), in the name of and on behalf of the
Corporation and under its corporate seal or otherwise, as they are any
of them may deem necessary or desirable to carry out the purposes and
intent of the foregoing resolutions; and be it further
RESOLVED, that any action authorized by any of the foregoing
resolutions which has been taken prior to the date hereof be, and the
same hereby is, ratified and confirmed in all respects.
<PAGE>
CERTIFICATE OF OWNERSHIP AND MERGER
OF
P & C FOOD MARKETS, INC.
INTO
THE PENN TRAFFIC COMPANY
UNDER SECTION 253 OF THE GENERAL CORPORATION
LAW OF THE STATE OF DELAWARE
Pursuant to Section 253(a) of the General Corporation Law of the State
of Delaware, The Penn Traffic Company, a Delaware corporation, hereby certifies
the following information relating to the merger of P & C Food Markets, Inc., a
New York corporation and a wholly owned subsidiary of The Penn Traffic Company,
with and into The Penn Traffic Company.
1. The Penn Traffic Company owns 100% of the issued and outstanding
shares of common stock of P & C Food Markets, Inc., a New York corporation,
which common stock is the only class of capital stock of P & C Food Markets,
Inc. outstanding.
2. Attached as Annex I hereto is a copy of the resolutions of the Board
of Directors of The Penn Traffic Company, adopted as of February 22, 1993,
approving the merger of P & C Food Markets, Inc. with and into The Penn Traffic
Company (the "Merger").
3. The surviving corporation of the Merger is The Penn Traffic Company.
IN WITNESS WHEREOF, this Certificate of Ownership and Merger has been
executed on this 14th day of April, 1993.
THE PENN TRAFFIC COMPANY
By: /s/ Martin A. Fox
-----------------
Name: Martin A. Fox
Title: Vice Chairman
Attest: /s/ Robert M. Hart
------------------
Name: Robert M. Hart
Title: Assistant Secretary
<PAGE>
THE PENN TRAFFIC COMPANY
BOARD OF DIRECTOR RESOLUTIONS
AUTHORIZING MERGER OF P & C FOOD MARKETS, INC.
INTO THE PENN TRAFFIC COMPANY
ADOPTED FEBRUARY 22, 1993
Approval of the Mergers and Merger Agreements
- ---------------------------------------------
BE IT RESOLVED, that the Board of Directors hereby declares
that the proposed merger of Big Bear Stores Company, a Delaware
corporation ("Big Bear") and a subsidiary of the Corporation, into Penn
Traffic Acquisition Corporation, a Delaware corporation ("PTAC") and a
wholly owned subsidiary of the Corporation (the "Big Bear Merger"), on
substantially the terms and conditions set forth in the form of
Agreement and Plan of Merger attached hereto as Exhibit A (the "Big
Bear Merger Agreement"), is advisable and is hereby approved; and be it
further
RESOLVED, that the Board of Directors hereby declares that the
proposed merger of PTAC into the Corporation immediately following
consummation of the Big Bear Merger (the "Subsequent Merger"), is
advisable and is hereby approved; and be it further
RESOLVED, that the Board of Directors hereby declares that the
proposed merger of P & C Food Markets, Inc., a New York corporation ("P
& C") and a wholly owned subsidiary of the Corporation, into the
Corporation immediately following consummation of the Big Bear Merger
(the "P & C Merger"), is advisable and is hereby approved; and be it
further
RESOLVED, that the "Exchange Value" of one share of common
stock, par value $1.25 per share, of the Corporation (the "Common
Stock") for purposes of the Big Bear Merger Agreement shall be the
closing price of the Common Stock on the American Stock Exchange on the
trading day prior to the execution of the Big Bear Merger Agreement;
and be it further
RESOLVED, that the Board of Directors hereby authorizes each
of the officers of the Corporation to execute, attest and deliver on
behalf of the Corporation agreements, certificates or other documents
(the "Merger Documents") providing for the Big Bear Merger, the
Subsequent Merger and the P & C Merger, on terms and conditions set
forth in the foregoing resolutions, such Merger Documents to contain
such provisions as such officers may determine necessary or
appropriate, the execution, attestation and delivery of the Merger
Documents by any such officers to constitute conclusive proof of said
determination by said officer or officers; and be it further
<PAGE>
2
RESOLVED, that the officers of the Corporation be, and each
hereby is, authorized to vote the shares of common stock, par value
$0.01 per share, of Big Bear held by the Corporation or PTAC in favor
of the adoption of the Big Bear Merger and the Big Bear Merger
Agreement.
Ratification
- ------------
BE IT RESOLVED, that the officers of the Corporation be, and
they hereby are, authorized to take all such further action and to
execute and deliver all such instruments and documents, and to do or
cause to be done all such acts and things (including the payment of all
necessary fees and expenses), in the name of and on behalf of the
Corporation and under its corporate seal or otherwise, as they or any
of them may deem necessary or desirable to carry out the purposes and
intent of the foregoing resolutions; and be it further
RESOLVED, that any action authorized by any of the foregoing
resolutions which has been taken prior to the date hereof be, and the
same hereby is, ratified and confirmed in all respects.
<PAGE>
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
HART STORES, INC.
INTO
THE PENN TRAFFIC COMPANY
(PURSUANT TO SECTION 253 OF THE GENERAL
CORPORATION LAW OF DELAWARE)
The Penn Traffic Company, a Delaware corporation (the "Corporation"),
does hereby certify:
FIRST: That the Corporation is incorporated pursuant to the General
Corporation Law of the State of Delaware.
SECOND: That the Corporation owns all of the outstanding shares of each
class of the capital stock of Hart Stores, Inc., a Delaware corporation.
THIRD: That the Corporation, by the following resolutions of its Board
of Directors, duly adopted on the 12th day of August, 1993, determined to merge
into itself Hart Stores, Inc. on the conditions set forth in such resolutions:
RESOLVED, that the Corporation merge into itself its subsidiary, Hart
Stores, Inc., and assume all of said subsidiary's liabilities and obligations;
and be it
FURTHER RESOLVED, that the President and the Secretary of the
Corporation be and they hereby are directed to make, execute and acknowledge a
certificate of ownership and merger setting forth a copy of the resolution to
merge said Hart Stores, Inc. into the Corporation and to assume said
subsidiary's liabilities and obligations and the date of adoption thereof and to
file the same in the office of the Secretary of State of Delaware.
<PAGE>
2
IN WITNESS WHEREOF, The Penn Traffic Company has caused its corporate
seal to be affixed and this certificate to be signed by Claude J. Incaudo, its
President, and Eugene R. Sunderhaft, its Secretary, this 27th day of August,
1993.
THE PENN TRAFFIC COMPANY
By: /s/ President
-------------
President
ATTEST:
By: /s/ Secretary
-------------
Secretary
<PAGE>
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
BIG BEAR BAKERIES, INC.
INTO
THE PENN TRAFFIC COMPANY
(PURSUANT TO SECTION 253 OF THE GENERAL
CORPORATION LAW OF DELAWARE)
The Penn Traffic Company, a Delaware corporation (the "Corporation"),
does hereby certify:
FIRST: That the Corporation is incorporated pursuant to the General
Corporation Law of the State of Delaware.
SECOND: That the Corporation owns all of the outstanding shares of each
class of the capital stock of Big Bear Bakeries, Inc., a Delaware corporation.
THIRD: That the Corporation, by the following resolutions of its Board
of Directors, duly adopted on the 12th day of August, 1993, determined to merge
into itself Big Bear Bakeries, Inc. on the conditions set forth in such
resolutions:
RESOLVED, that the Corporation merge into itself its subsidiary, Big
Bear Bakeries, Inc., and assume all of said subsidiary's liabilities and
obligations; and be it
FURTHER RESOLVED, that the President and the Secretary of the
Corporation be and they hereby are directed to make, execute and acknowledge a
certificate of ownership and merger setting forth a copy of the resolution to
merge said Big Bear Bakeries, Inc. into the Corporation and to assume said
subsidiary's liabilities and obligations and the date of adoption thereof and to
file the same in the office of the Secretary of State of Delaware.
<PAGE>
2
IN WITNESS WHEREOF, The Penn Traffic Company has caused its corporate
seal to be affixed and this certificate to be signed by Claude J. Incaudo, its
President, and Eugene R. Sunderhaft, its Secretary, this 27th day of August,
1993.
THE PENN TRAFFIC COMPANY
By: /s/ President
-------------
President
ATTEST:
By: /s/ Secretary
-------------
Secretary
<PAGE>
CERTIFICATE OF OWNERSHIP
MERGING
QUALITY MARKETS, INC.
INTO
THE PENN TRAFFIC COMPANY
(PURSUANT TO SECTION 253 OF THE
GENERAL CORPORATION LAW OF DELAWARE)
The Penn Traffic Company, a Delaware corporation, does hereby certify
that this corporation owns all the capital stock of Quality Markets, Inc., a
corporation incorporated under the laws of the State of New York, and that this
corporation, by a resolution of its board of directors duly adopted by unanimous
written consent on the 12th day of August, 1993, determined to and did merge
into itself said Quality Markets, Inc. which resolution is in the following
words to wit:
WHEREAS the Corporation lawfully owns all of the outstanding stock of
Quality Markets, Inc., a corporation organized and existing under the laws of
New York, and
WHEREAS the Corporation desires to merge into itself said Quality
Markets, Inc. and to be possessed of all the estate, property, rights,
privileges and franchises of said corporation.
NOW, THEREFORE, BE IT RESOLVED, that the Corporation merge into itself,
and it does hereby merge into itself said Quality Markets, Inc. and assumes all
of its liabilities and obligations; and be it
FURTHER RESOLVED, that the president or a vice-president, and the
secretary or treasurer of the Corporation be and they hereby are directed to
make and execute, under the corporate seal of the Corporation, a certificate of
ownership setting forth a copy of the resolution, to merge said Quality Markets,
Inc. and assume its liabilities and obligations, and the date of adoption
thereof, and to file the same in the office of the Secretary of the State of
Delaware; and be it
FURTHER RESOLVED, that the officers of the Corporation be and they
hereby are authorized and directed to do all acts and things whatsoever, whether
within or without the State of Delaware, which may be in anywise necessary or
proper to effect said merger.
<PAGE>
2
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by its president and attested by its secretary, and its corporate seal to
be hereto affixed, the 1st day of October, 1993.
By: /s/ President
-------------
President
ATTEST:
By: /s/ Secretary
-------------
Secretary
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AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
THE PENN TRAFFIC COMPANY
This Amended and Restated Certificate of Incorporation amends and
restates the Certificate of Incorporation of the Corporation originally filed
April 22, 1992, as amended, pursuant to Section 245 of the General Corporation
Law of Delaware.
1. NAME. The name of the corporation is The Penn Traffic Company (the
"Corporation").
2. ADDRESS; REGISTERED OFFICE AND AGENT. The address of the
Corporation's registered office is 1209 Orange Street, City of Wilmington 19801,
County of New Castle; and its registered agent at such address is Corporation
Trust Company.
3. PURPOSE. The purpose of the Corporation is to engage in, carry on
and conduct any lawful act or activity for which corporations may be organized
under the Delaware General Corporation Law (as amended from time to time, the
"DGCL").
4. NUMBER OF SHARES. The total number of shares of stock that the
Corporation shall have authority to issue is One Million (1,000,000) shares of
Preferred Stock of $.01 par value per share (the "Preferred Stock") and Thirty
Million (30,000,000) shares of Common Stock of $.01 par value per share (the
"Common Stock"). Each share of Common Stock, $1.25 par value, per share, issued
and outstanding or held in treasury immediately prior to the effectiveness of
this Amended and Restated Certificate is automatically and without any further
action by the Corporation or the holders thereof converted to 0.01 shares of
Common Stock upon the filing of this Amended and Restated Certificate.
To the extent required by section 1123(a)(6) of the U.S. Bankruptcy
Code (11 U.S.C. ss. 1123(a)(6)), no nonvoting equity securities of the
Corporation shall be issued. This provision shall have no further force and
effect beyond that required by section 1123(a)(6) and is applicable only for so
long as such section is in effect and applicable to the Corporation.
5. PREFERRED STOCK. The Board of Directors is expressly authorized, by
resolution or resolutions, to provide for the issue of all or any shares of the
Preferred Stock, in one or more series, and to fix for each such series such
voting powers, full or limited or no voting powers, and such designations,
preferences and relative, participating, optional or other special rights and
such qualifications, limitations or restrictions thereon, as shall be stated and
expressed in the resolution or resolutions adopted by the Board of Directors
providing for the issue of such series (a "Preferred Stock Designation") and as
may be permitted by the DGCL. The number of authorized shares of Preferred Stock
may be increased or decreased (but not below the number of
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shares thereof then outstanding) by the affirmative vote of a majority of the
holders of the voting power of all of the then outstanding shares of the capital
stock of the Corporation entitled to vote generally in the election of directors
(the "Voting Stock") voting together as a single class, without a separate vote
of the holders of the Preferred Stock, or any series thereof, unless a vote of
any such holders is required pursuant to any Preferred Stock Designation.
6. COMMON STOCK. Except as otherwise provided by law or as otherwise
provided in any Preferred Stock Designation, the holders of the Common Stock
shall exclusively possess all voting power and each share of Common Stock shall
have one vote.
7. PROVISIONS RELATING TO LIMITATION ON STOCKHOLDER RIGHTS PLAN.
Notwithstanding any other powers set forth in this Amended and Restated
Certificate of Incorporation, the Board of Directors shall not adopt a
stockholders "rights plan" (which for this purpose shall mean any arrangement
pursuant to which, directly or indirectly, Common Stock purchase rights may be
distributed to stockholders that provide all stockholders, other than persons
who meet certain criteria specified in the arrangement, the right to purchase
the Common Stock at less than the prevailing market price of the Common Stock),
unless (i) such rights plan is adopted by the affirmative vote of no less than
eighty percent (80%) of the members of the Board of Directors voting on such
Rights Plan at a properly called regular or special meeting; and (ii) by its
terms, such rights plan (and the rights issuable pursuant thereto) expires
within one hundred twenty (120) days from the date of its adoption by the Board
of Directors, unless extended by the affirmative vote of a majority of the votes
cast of the capital stock of the Corporation then outstanding and entitled to
vote at an election of directors and present in person or represented by proxy
at the next meeting (annual or special) of stockholders, in which case such
rights plan (and the rights issuable pursuant thereto) may be extended for a
period of no more than ninety (90) days from the expiration of the one hundred
twenty (120) day period; prior to the expiration of the first ninety (90) day
extension period or any subsequent ninety (90) day extension period, such rights
plan (and the rights issuable pursuant thereto) may be extended for an
additional period of ninety (90) days upon the affirmative vote of a majority of
the votes cast of the capital stock of the Corporation then outstanding and
entitled to vote at an election of directors and present in person or
represented by proxy at the next meeting (annual or special) of stockholders.
8. SECTION 203. Pursuant to section 203(b)(1) of the DGCL, the
Corporation hereby expressly opts not to be governed by section 203 of the DGCL.
9. INDEMNIFICATION.
9.1 To the extent not prohibited by law, the Corporation shall
indemnify any person who is or was made, or threatened to be made, a party to
any threatened, pending or completed action, suit or proceeding (a
"Proceeding"), whether civil, criminal, administrative or investigative,
including, without limitation, an action by or in the right
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of the Corporation to procure a judgment in its favor, by reason of the fact
that such person, or a person of whom such person is the legal representative,
is or was a director or officer of the Corporation, or is or was serving as a
director, officer, manager, member, employee or agent or in any other capacity
at the request of the Corporation, for any other corporation, company,
partnership, joint venture, trust, employee benefit plan or other enterprise (an
"Other Entity") while serving as a director or officer of the Corporation,
against judgments, fines, penalties, excise taxes, amounts paid in settlement
and costs, charges and expenses (including attorneys' fees and disbursements)
actually and reasonably incurred by such person in connection with such
Proceeding, if such person acted in good faith and in a manner such person
believed to be in or not opposed to the best interests of the Corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful. To the extent specified by the Board of
Directors of the Corporation at any time and to the extent not prohibited by
law, the Corporation may indemnify any person who is or was made, or threatened
to be made, a party to any threatened, pending or completed Proceeding, whether
civil, criminal, administrative or investigative, including, without limitation,
an action by or in the right of the Corporation to procure a judgment in its
favor, by reason of the fact that such person is or was an employee or agent of
the Corporation, or is or was serving as a director, officer, manager, member,
employee or agent or in any other capacity at the request of the Corporation,
for any Other Entity, against judgment, fines, penalties, excise taxes, amounts
paid in settlement and costs, charges and expenses (including attorneys' fees
and disbursements) actually and reasonably incurred by such person in connection
with such Proceeding, if such person acted in good faith and in a manner such
person believed to be in or not opposed to the best interests of the Corporation
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his or her conduct was unlawful.
9.2 The Corporation shall, from time to time, reimburse or advance to
any director or officer or other person entitled to indemnification hereunder
the funds necessary for payment of expenses, including attorneys' fees and
disbursements, incurred in connection with any Proceeding, in advance of the
final disposition of such Proceeding; PROVIDED, HOWEVER, that, if required by
the DGCL, such expenses incurred by or on behalf of any director or officer or
other person may be paid in advance of the final disposition of a Proceeding
only upon receipt by the Corporation of an undertaking, by or on behalf of such
director or officer (or other person indemnified hereunder), to repay any such
amount so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right of appeal that such director,
officer or other person is not entitled to be indemnified for such expenses.
9.3 The rights to indemnification and reimbursement or advancement of
expenses provided by, or granted pursuant to, this Section 9 shall not be deemed
exclusive of any other rights to which a person seeking indemnification or
reimbursement or advancement of expenses may have or hereafter be entitled under
any statute, this Amended and Restated Certificate of Incorporation, the Amended
and Restated By-laws of the Corporation (the "By-laws"), any agreement
(including any policy of insurance
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purchased or provided by the Corporation under which directors, officers,
employees and other agents of the Corporation are covered), any vote of
stockholders or disinterested directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding such
office.
9.4 The rights to indemnification and reimbursement or advancement of
expenses provided by, or granted pursuant to, this Section 9 shall continue as
to a person who has ceased to be a director or officer (or other person
indemnified hereunder) and shall inure to the benefit of the executors,
administrators, legatees and distributees of such person.
9.5 The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, member, manager, employee or agent of an Other Entity,
against any liability asserted against such person and incurred by such person
in any such capacity, or arising out of such person's status as such, whether or
not the Corporation would have the power to indemnify such person against such
liability under the provisions of this Section 9, the By-laws or under section
145 of the DGCL or any other provision of law.
9.6 The provisions of this Section 9 shall be a contract between the
Corporation, on the one hand, and each director and officer who serves in such
capacity at any time while this Section 9 is in effect and any other person
indemnified hereunder, on the other hand, pursuant to which the Corporation and
each such director, officer, or other person intend to be legally bound. No
repeal or modification of this Section 9 shall affect any rights or obligations
with respect to any state of facts then or theretofore existing or thereafter
arising or any proceeding theretofore or thereafter brought or threatened based
in whole or in part upon any such state of facts.
9.7 The rights to indemnification and reimbursement or advancement of
expenses provided by, or granted pursuant to, this Section 9 shall be
enforceable by any person entitled to such indemnification or reimbursement or
advancement of expenses in any court of competent jurisdiction. Neither the
failure of the Corporation (including its Board of Directors, its independent
legal counsel and its stockholders) to have made a determination prior to the
commencement of such action that such indemnification or reimbursement or
advancement of expenses is proper in the circumstances nor an actual
determination by the Corporation (including its Board of Directors, its
independent legal counsel and its stockholders) that such person is not entitled
to such indemnification or reimbursement or advancement of expenses shall
constitute a defense to the action or create a presumption that such person is
not so entitled. Such a person shall also be indemnified for any expenses
incurred in connection with successfully establishing his or her right to such
indemnification or reimbursement or advancement of expenses, in whole or in
part, in any such proceeding.
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9.8 Any director or officer of the Corporation serving in any capacity
in (i) another corporation of which a majority of the shares entitled to vote in
the election of its directors is held, directly or indirectly, by the
Corporation or (ii) any employee benefit plan of the Corporation or any
corporation referred to in clause (i) shall be deemed to be doing so at the
request of the Corporation.
9.9 Any person entitled to be indemnified or to reimbursement or
advancement of expenses as a matter of right pursuant to this Section 9 may
elect to have the right to indemnification or reimbursement or advancement of
expenses interpreted on the basis of the applicable law in effect at the time of
the occurrence of the event or events giving rise to the applicable Proceeding,
to the extent permitted by law, or on the basis of the applicable law in effect
at the time such indemnification or reimbursement or advancement of expenses is
sought. Such election shall be made, by a notice in writing to the Corporation,
at the time indemnification or reimbursement or advancement of expenses is
sought; PROVIDED, HOWEVER, that if no such notice is given, the right to
indemnification or reimbursement or advancement of expenses shall be determined
by the law in effect at the time indemnification or reimbursement or advancement
of expenses is sought.
10. COMPROMISE, ARRANGEMENT OR REORGANIZATION. Whenever a compromise or
arrangement is proposed between this Corporation and its creditors or any class
of them and/or between this Corporation and its stockholders, any court of
equitable jurisdiction within the State of Delaware may, on the application in a
summary way of this Corporation or of any creditor or stockholder thereof or on
the application of any receiver or receivers appointed for this Corporation
under the provisions of section 291 of the DGCL or on the application of
trustees in dissolution or of any receiver or receivers appointed for this
Corporation under the provisions of section 279 of the DGCL, order a meeting of
the creditors or class of creditors, and/or of the stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders of this Corporation,
as the case may be, agrees to any compromise or arrangement and to any
reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all
stockholders of this Corporation, as the case may be, and also on this
Corporation.
11. LIMITATION OF LIABILITY. No director of the Corporation shall be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, including breaches resulting from
such director's grossly negligent behavior, except for liability (a) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(b) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (c) under section 174 of the DGCL or
(d) for any transaction from which the director derived any improper
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personal benefits. If the DGCL is hereafter amended to authorize corporate
action further eliminating or limiting the personal liability of directors, then
the liability of a director of the Corporation shall be eliminated or limited to
the fullest extent permitted by the DGCL, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
12. BY-LAWS. The power to make, alter or repeal the By-laws, and to
adopt any new By-law, shall be vested solely in the stockholders. The power to
make, alter or repeal the By-laws, and to adopt any new By-law, shall not be
vested in the Board of Directors.
13. STOCKHOLDER MEETINGS. Any action required or permitted to be taken
by the stockholders of the Corporation may be effected at a duly called annual
or special meeting of such holders and may also be effected by any consent in
writing of such holders in lieu of a meeting. At any annual meeting or special
meeting of stockholders of the Corporation, only such business shall be
conducted as shall have been brought before such meeting in the manner provided
by the By-laws of the Corporation.
IN WITNESS WHEREOF, the Corporation has caused this Amended and
Restated Certificate of Incorporation, which restates and amends the
Corporation's Certificate of Incorporation, after having been duly adopted,
recommended and approved by the Board of Directors and adopted by the
affirmative vote of a majority of the outstanding shares of Common Stock in
accordance with Sections 242 and 245 of the DGCL, to be signed by its duly
authorized officer this _____day of _________, 1999.
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Name:
Title:
6
BY-LAWS
OF
THE PENN TRAFFIC COMPANY
ARTICLE I
STOCKHOLDERS
SECTION 1. ANNUAL MEETING
The annual meeting of stockholders for the election of directors and
for the transaction of any other business that may properly come before the
meeting shall be held not later than the last day of June in each calendar year
on such date at such hour and at such place or places within or without the
State of Delaware as may from time to time be determined by the Board of
Directors. Any previously scheduled annual meeting of the stockholders may be
postponed by action of the Board of Directors taken prior to the time previously
scheduled for such annual meeting.
SECTION 2. SPECIAL MEETINGS
At any time in the interval between regular meetings, special
meetings of stockholders may be called by the Chairman, or by a majority of the
Board of Directors, to be held at such times and at such places within or
without the State of Delaware as may be specified in the notices of such
meetings. The notice of any special meeting shall state the purpose of the
meeting and specify the action to be taken at said meeting and no business shall
be transacted thereat except that specifically named in the notice.
SECTION 3. NOTICE OF MEETING
Notice of the time and place of every meeting of stockholders shall
be delivered personally or mailed at least ten days and not more than sixty days
prior thereto to each stockholder of record entitled to vote at his address as
it appears on the records of the Corporation. Such further notice shall be given
as may be required by law. If mailed, such notice shall be deemed given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at such stockholder's address as it appears on the records of the
Corporation. Business transacted at any special meeting shall be confined to the
purpose or purposes stated in the notice of such special meeting. Meetings may
be held without notice if all stockholders entitled to vote are present or if
notice is waived by those not present. When a meeting is adjourned to another
time or place, notice need not be given of the adjourned meeting if the time and
place are announced at the meeting at which the adjournment is taken, unless the
adjournment is for more than 30 days or, after adjournment, a new record date is
fixed for the adjourned meeting.
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SECTION 4. VOTING
At all meetings of stockholders any stockholder entitled to vote may
vote in person or by proxy. Such proxy or any revocation or amendment thereof,
shall be in writing, but need not be sealed, witnessed or acknowledged, and
shall be filed with the Secretary at or before the meeting.
SECTION 5. QUORUM
Unless otherwise required by statute or the Certificate of
Incorporation of the Corporation (the "Certificate of Incorporation"), at any
annual or special meeting of the stockholders, the presence in person or by
proxy of stockholders entitled to cast a majority of all the votes entitled to
be cast at the meeting shall constitute a quorum for the transaction of
business, but if at any meeting of the stockholders there be less than a quorum
present, the stockholders present at such meeting may, without further notice,
adjourn the same from time to time until a quorum shall attend, but no business
shall be transacted at any such adjournment except such as might have been
lawfully transacted had the meeting not been adjourned.
SECTION 6. ACTION AT MEETINGS
Except as otherwise required by law, the Certificate of
Incorporation or these By-laws, a majority of the votes cast at a meeting at
which a quorum is present shall be sufficient to take or authorize action upon
any matter which may properly come before the meeting, and the stockholders
shall not be entitled to cumulate their votes upon the election of directors, or
upon any other matter. Any action required or permitted to be taken by the
stockholders must be effected at an annual or special meeting of stockholders
and may not be effected by any consent in writing by such stockholders.
SECTION 7. PROCEDURE AT MEETINGS
At each meeting of stockholders, the Chairman of the Board or, in
the absence of the Chairman of the Board, such other person as shall be selected
by the Board of Directors shall act as Chairman of the meeting. The Chairman of
the meeting shall determine the order of business and shall establish rules for
the conduct of the meeting.
The Board of Directors may appoint two or more persons to serve as
inspectors of election at any meeting of stockholders. In the absence of such
appointment, the Chairman of the meeting may make such appointment. The
inspectors of election shall receive, examine and tabulate all ballots and
proxies, including proxies filed with the Secretary, shall determine the
presence or absence of
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a quorum and shall report to the Chairman of the meeting the result of all
voting taken at the meeting by ballot.
SECTION 8. BUSINESS OF THE MEETING
At any annual meeting of stockholders, only such business shall be
conducted as shall have been brought before the meeting (i) by or at the
direction of the Board of Directors or (ii) by any stockholder who is entitled
to vote with respect thereto and who complies with the notice procedures set
forth in this Section 8 of Article I. For business to be properly brought before
an annual meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered or mailed to and received at the
principal executive offices of the Corporation not less than thirty (30) days
prior to the date of the annual meeting; PROVIDED, HOWEVER, that in the event
that less than forty (40) days' notice or prior public disclosure of the date of
the meeting is given or made to stockholders, notice by the stockholder to be
timely must be received not later than the close of business on the 10th day
following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure was made. A stockholder's notice to the
Secretary shall set forth in writing as to each matter such stockholder proposes
to bring before the annual meeting (i) a brief description of the business
desired to be brought before the annual meeting and the reasons for conducting
such business at the annual meeting; (ii) the name and address, as they appear
on the Corporation's books, of the stockholder proposing such business and the
beneficial owner, if any, on whose behalf the proposal is made; (iii) a
representation that the stockholder is a holder of record of shares of the
Corporation's capital stock entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to propose such business; (iv) the
class and the number of shares of the Corporation's capital stock that are owned
beneficially and of record by the stockholder proposing such business and by the
beneficial owner, if any, on whose behalf the proposal is made; and (v) any
material interest of such stockholder in such business and any material interest
of the beneficial owner, if any, on whose behalf the proposal is made in such
business. Notwithstanding anything in the By-laws to the contrary, no business
shall be brought before or conducted at the annual meeting except in accordance
with the provisions of this Section 8 of Article I. If the facts so warrant, the
Chairman of the meeting shall determine and declare to the meeting that business
was not properly brought before the meeting in accordance with the provisions of
this Section 8 of Article I and, if he shall so determine, he shall so declare
to the meeting and any such business so determined to be not properly brought
before the meeting shall not be so transacted.
At any special meeting of stockholders, only such business shall be
conducted as shall have been brought before the meeting by or at the direction
of the Board of Directors.
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SECTION 9. NOMINATION OF DIRECTORS
Only persons who are nominated in accordance with the procedures set
forth in these By-laws shall be eligible for election as directors. Nominations
of persons for election to the Board of Directors of the Corporation may be made
at a meeting of stockholders at which directors are to be elected only (i) by or
at the direction of the Board of Directors or (ii) by any stockholder of the
Corporation who is (a) a stockholder of record at the time of giving of the
notice of the nomination, (b) entitled to vote for the election of directors at
the meeting and (c) complies with the notice procedures set forth in this
Section 9 of Article I. Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made by timely notice in writing
to the Secretary of the Corporation. To be timely, a stockholder's notice shall
be delivered or mailed to and received at the principal executive offices of the
Corporation not less than thirty (30) days prior to the date of the meeting;
PROVIDED, HOWEVER, that in the event that less than forty (40) days' notice or
prior disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be so received not later than the
close of business on the 10th day following the date on which such notice of the
date of the meeting was mailed or such public disclosure was made. Such
stockholder's notice shall set forth: (i) the name and address, as they appear
on the Corporation's books, of the stockholder giving the notice and of the
beneficial owner, if any, on whose behalf the nomination is made; (ii) a
representation that the stockholder proposing to make the nomination is a holder
of record of shares of the Corporation's capital stock entitled to vote at such
meeting for the election of directors and intends to appear in person or by
proxy at the meeting to nominate the person or persons specified in the notice;
(iii) the class and number of shares of the Corporation's capital stock that are
owned beneficially and of record by the stockholder giving the notice and by the
beneficial owner, if any, on whose behalf the nomination is made; (iv) a
description of all arrangements or understandings between or among any of the
stockholders giving notice, the beneficial owner on whose behalf the notice is
given, each nominee and any other person or persons (naming such person or
persons) pursuant to which the nomination or nominations are to be made by the
stockholder giving the notice; and (v) as to each person whom such stockholder
proposes to nominate for election as a director, all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (including
such person's written consent to being named in the proxy statement as a nominee
and to serving as a director of the Corporation if elected).
At the request of the Board of Directors, any person nominated by
the Board of Directors for election as a director shall furnish to the Secretary
of the Corporation that information required to be set forth in a stockholder's
notice of nomination which pertains to the nominee. No person shall be eligible
for election as a director of the Corporation unless nominated in accordance
with the provisions of
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this Section 9 of Article I. The Chairman of the meeting shall, if the facts so
warrant, determine and declare to the meeting that a nomination was not made in
accordance with this Section 9 of Article I and, if he shall so determine, he
shall so declare to the meeting and the defective nomination shall be
disregarded.
SECTION 10. ADJOURNMENTS
Any meeting of stockholders may be adjourned from time to time,
whether or not a quorum is present, by the affirmative vote of a majority of the
votes present and entitled to be cast at the meeting, or by the Chairman of the
meeting, or by the Board of Directors.
ARTICLE II
DIRECTORS
SECTION 1. GENERAL POWERS
The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors, which may exercise all such
powers of the Corporation and do all such lawful acts and things as are not by
law or by the Certificate of Incorporation directed or required to be exercised
or done by the stockholders.
SECTION 2. NUMBER, QUALIFICATION AND ELECTION
Directors (other than such directors, if any, as are elected by
holders of a series of Preferred Stock of the Corporation voting as a separate
class) shall be divided into three classes, which shall be as nearly equal in
number as practicable. Unless changed by the Board of Directors pursuant hereto
the number of directors shall be six and each class shall consist of two
directors. The number of directors and the number of which each class is to
consist may be increased or decreased from time to time by a resolution adopted
by at least a majority of the Whole Board (as defined in the Certificate of
Incorporation); provided that the number of directors may not be less than
three; and provided that no decrease in the number of directors shall affect the
tenure of office of any existing director. The term of office of the first class
shall expire at the 1993 annual meeting of stockholders, the term of office of
the second class shall expire at the 1994 annual meeting of stockholders and the
term of office of the third class shall expire at the 1995 annual meeting of
stockholders, with each director to hold office until his or her successor shall
have been duly elected and qualified. At each annual meeting of stockholders,
commencing with the 1993 annual meeting, the successors of the class of
directors whose term expires at the meeting shall be elected to hold office for
a term expiring at the third succeeding annual
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meeting of stockholders after their election, with each director to hold office
until his or her successor shall have been duly elected and qualified.
SECTION 3. VACANCIES
Subject to the rights of the holders of any series of Preferred
Stock, and unless the Board of Directors otherwise determines, newly created
directorships resulting from any increase in the authorized number of directors
or any vacancies in the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause may be filled
only by the affirmative vote of a majority of the remaining directors then in
office, although less than a quorum, or by a sole remaining director, and any
director so chosen shall hold office for a term expiring at the annual meeting
of stockholders at which the term of office of the class to which such director
has been elected expires and until such director's successor shall have been
duly elected and qualified.
SECTION 4. REGULAR MEETINGS
Regular meetings of the Board of Directors shall be held at such
times and places as the Board of Directors may from time to time determine.
SECTION 5. SPECIAL MEETINGS
Special meetings of the Board of Directors may be called at any
time, at any place and for any purpose by the Chairman of the Board or by any
three directors.
SECTION 6. NOTICE OF MEETING
Notice of regular meetings of the Board of Directors need not be
given.
Notice of every special meeting of the Board of Directors shall be
given to each director, by (a) deposit of such notice in the United States mail
at least seventy-two hours before the meeting, or (b) telephone communication
directly with such person, the dispatch of a telegraphic communication to his
address, or actual delivery to his address, at least forty-eight hours before
the meeting. If given to a director by mail, telegraph or actual delivery to his
address, such notice shall be sent or delivered to his business or residential
address as shown on the records of the Secretary or an Assistant Secretary of
the Corporation, or to such other address as shall have been furnished to the
Secretary or an Assistant Secretary of the Corporation by him for the purpose.
Such notice need not include a statement of the business to be transacted at, or
the purpose of, any such meeting.
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SECTION 7. QUORUM; ACTION AT MEETINGS
A majority of the Board of Directors shall constitute a quorum for
the transaction of business, but if, at any meeting of the Board, there be less
than a quorum present, the members at the meeting may, without further notice,
adjourn the same from time to time until a quorum shall attend. Except as
provided herein or in the Certificate of Incorporation or as required by law, a
majority of such quorum shall decide any questions that may come before the
meeting.
SECTION 8. PARTICIPATING IN MEETING BY CONFERENCE TELEPHONE
Members of the Board of Directors, or any committee thereof, may
participate in a meeting of such Board or committee by means of conference
telephone or similar equipment by means of which all persons participating in
the meeting can hear each other at the same time and such participation shall
constitute presence in person at such meeting.
SECTION 9. ACTION WITHOUT MEETING
Any action required or permitted to be taken at any meeting of the
Board of Directors or any committee thereof may be taken without a meeting if
all of the members of the Board of Directors or of any such committee consent
thereto in writing and the writing or writings are filed with the minutes or
proceedings of the Board of Directors or of such committee.
SECTION 10. RESIGNATIONS
Any director of the Corporation may at any time resign by giving
written notice to the Board, the Chairman, the President or the Secretary. Such
resignation shall take effect at the time specified therein or, if the time be
not specified therein, upon receipt thereof; and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
SECTION 11. REMOVAL OF DIRECTORS
Directors may be removed only as provided in Section 4 of Article V
of the Certificate of Incorporation.
<PAGE>
8
ARTICLE III
COMMITTEES OF THE BOARD OF DIRECTORS
SECTION 1. ELECTION
The Board of Directors may appoint an Executive Committee and other
committees composed of two or more of its members, and may appoint one of the
members of each such committee to the office of chairman thereof. Members of the
committees of the Board of Directors shall hold office for a term of one year
and until their successors are appointed and qualify or until they shall cease
to be directors.
SECTION 2. POWERS
Subject to such limitations as may from time to time be established
by resolution of the Board of Directors, the Executive Committee shall have any
and may exercise all of the powers of the Board of Directors when the Board of
Directors is not in session except that it shall have no power to (a) declare
dividends, (b) issue stock of the Corporation, (c) recommend to the stockholders
any action which requires stockholder approval, (d) alter, amend or repeal any
resolution of the Board of Directors relating to the Executive Committee, or (e)
take any other action which legally may be taken only by the Board of Directors.
Other committees of the Board of Directors shall have such powers as shall be
properly delegated to them by the Board of Directors.
SECTION 3. VACANCIES
If the office of any member of any committee becomes vacant by
death, resignation, or otherwise, such vacancy may be filled from the members of
the Board by the Board of Directors.
SECTION 4. SUBSTITUTE MEMBERS
In the event that a member of any committee is absent from a meeting
of the committee, the members of the committee present at the meeting, whether
or not they constitute a quorum, may unanimously appoint another director to act
in place of the absent member.
SECTION 5. MEETINGS AND NOTICE OF MEETINGS
The Executive Committee shall meet from time to time on call of the
Chairman of the Board, or on call of any three or more members of the Executive
Committee, for the transaction of any business.
<PAGE>
9
Notice of every meeting of the Executive Committee shall be given to
each member, by (a) deposit in the mail at least seventy-two hours before the
meeting, or (b) telephonic communication directly with such person, the dispatch
of a telegraphic communication to his address, or actual delivery to his
address, at least forty-eight hours before the meeting. If given to a member by
mail, telegraph or actual delivery to his address, such notice shall be sent or
delivered to his business or residential address as shown on the records of the
Secretary or an Assistant Secretary of the Corporation, or to such other address
as shall have been furnished to the Secretary or an Assistant Secretary of the
Corporation by him for this purpose. Such notice need not include a statement of
the business to be transacted at, or the purpose of, any such meeting.
All other committees of the Board of Directors shall meet at such
times and upon such notice as they may determine.
SECTION 6. QUORUM; ACTION AT MEETINGS
At any meeting of any committee, however called, a majority of the
members shall constitute a quorum for the transaction of business. A majority of
such quorum shall decide any question that may come before the meeting.
ARTICLE IV
OFFICERS
SECTION 1. ELECTION AND NUMBER
The Board of Directors may appoint one of its members as Chairman of
the Board and may also appoint one of its members as Vice Chairman-Finance. The
Board of Directors shall appoint a President from among the directors, and a
Secretary and a Treasurer, who need not be directors. The Board of Directors may
also appoint one or more Senior Vice Presidents and/or Vice Presidents, who need
not be directors. All officers of the Corporation shall hold office at the
pleasure of the Board of Directors. Any two or more offices, except those of
Chairman and Vice Chairman-Finance and those of President and Vice President,
may, at the discretion of the Board of Directors, be held by the same person.
The Board of Directors may from time to time appoint such other officers and
agents with such powers and duties as the Board of Directors may prescribe.
SECTION 2. CHAIRMAN OF THE BOARD
The Chairman of the Board shall preside at all meetings of the Board
of Directors. Subject to the control of the Board of Directors, he shall have
supervisory power and authority over the business and affairs of the Corporation
and over all of
<PAGE>
10
its officers. He shall perform such other duties and exercise such other powers
as may be assigned to him from time to time by the Board of Directors.
If the Chairman of the Board is designated by the Board of Directors
as the Chief Executive Officer of the Corporation, he shall direct the conduct
of the business of the Corporation, subject to the control of the Board of
Directors.
SECTION 3. VICE CHAIRMAN-FINANCE
In the absence of the Chairman of the Board, the Vice Chairman-
Finance shall preside at all meetings of the Board of Directors, and in case no
Chairman of the Board shall have been appointed, the Vice Chairman-Finance shall
assume the duties and have the powers conferred as above upon the Chairman of
the Board. Subject to the control of the Board of Directors, he shall have
supervisory power and authority over the financial business and affairs of the
Corporation. The Vice Chairman-Finance shall perform such other duties and
exercise such other powers as may be assigned to him from time to time by the
Board of Directors.
SECTION 4. PRESIDENT
Subject to the control of the Board of Directors, the President
shall have direct power and authority over the business and affairs of the
Corporation. The President shall perform such other duties and exercise such
other powers as are usually incident to such office and such other duties and
powers as may be assigned to him from time to time by the Board of Directors or
the Chairman of the Board or Vice Chairman-Finance. In the absence of both the
Chairman of the Board and the Vice Chairman-Finance, the President shall preside
at all meetings of the Board of Directors. In case neither a Chairman of the
Board nor a Vice Chairman-Finance shall have been appointed, the President shall
assume the duties and have the powers conferred as above upon the Chairman of
the Board.
If the Board of Directors designates the President as Chief
Executive Officer of the Corporation, he shall direct the conduct of the
business of the Corporation, subject to the control of the Board of Directors.
SECTION 5. SENIOR VICE PRESIDENTS
The Senior Vice President or Senior Vice Presidents shall perform
the duties of the President in his absence or during his disability to act. In
addition, the Senior Vice President or Senior Vice Presidents shall perform the
duties and exercise the powers usually incident to their respective offices
and/or such other duties and powers as may be properly assigned to them from
time to time by the Board of Directors, the Chairman of the Board, the Vice
Chairman-Finance, or the President.
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11
SECTION 6. VICE PRESIDENTS
The Vice President or Vice Presidents shall perform the duties of
the Senior Vice President or Senior Vice Presidents in his or their absence or
disability to act. In addition, the Vice President or Vice Presidents shall
perform the duties and exercise the powers usually incident to their respective
offices and such other duties and powers as may be properly assigned to them
from time to time by the Board of Directors, the Chairman of the Board, the Vice
Chairman-Finance, the President, or any Senior Vice President having supervisory
authority over them.
SECTION 7. SECRETARY
The Secretary shall issue notices of meetings, keep minutes of
meetings of the Board of Directors and its committees, have charge of the
corporate seal, and perform such other duties and exercise such other powers as
are usually incident to such office or are properly assigned thereto by the
Board of Directors, the Chairman of the Board, the Vice Chairman-Finance, the
President or any Senior Vice President or Vice President having supervisory
authority over him.
SECTION 8. TREASURER
The Treasurer shall have charge of all monies and securities of the
Corporation, other than monies and securities of any division of the Corporation
which has a treasurer or financial officer appointed by the Board of Directors,
and shall keep regular books of account. The funds of the Corporation shall be
deposited in the name of the Corporation by the Treasurer with such banks or
trust companies as the Board of Directors or the Executive Committee from time
to time shall designate. He shall sign or countersign such instruments as
require his signature, shall perform all such duties and have all such powers as
are usually incident to such office or are properly assigned to him by the Board
of Directors, the Chairman of the Board, the Vice Chairman-Finance, the
President, or any Senior Vice President or Vice President having supervisory
authority over him, and may be required to give bond for the faithful
performance of his duties in such sum and with such surety as may be required by
the Board of Directors.
SECTION 9. CONTROLLER
The Controller shall be responsible for the accounting policies and
practices of the Corporation, maintain its financial records, collect and
consolidate the financial results of its subsidiaries and other operating units,
prepare its financial reports, determine the amount and source of the funds
required to meet its financial obligations, and perform such other duties and
exercise such other powers as are usually incident to such office or are
properly assigned thereto by the Board of Directors, the Chairman of the Board,
the Vice Chairman-Finance, the President, the
<PAGE>
12
Treasurer, or any Senior Vice President or Vice President having supervisory
authority over him.
SECTION 10. ASSISTANT SECRETARY; ASSISTANT TREASURER
The Board of Directors may appoint one or more assistant secretaries
and one or more assistant treasurers, or one appointee to both such positions,
which officers shall have such powers and shall perform such duties as are
provided in these By-laws to the Secretary or Treasurer, as the case may be, or
as are properly assigned thereto by the Board of Directors, the Chairman of the
Board, the Vice Chairman-Finance, the President, the Secretary or Treasurer, as
the case may be, or any other officer having supervisory authority over them.
ARTICLE V
FISCAL YEAR
The fiscal year of the Corporation shall be a 52 or 53 week year
ending the Saturday nearest January 31, or on such other day as may be fixed
from time to time by the Board of Directors.
ARTICLE VI
SEAL
The Board of Directors shall provide a suitable seal, containing the
full name of the Corporation, which seal shall be in the charge of the Secretary
or an Assistant Secretary. The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or in any other manner reproduced.
ARTICLE VII
STOCK
SECTION 1. CERTIFICATES OF STOCK
Certificates of stock shall be issued in such form as may be
approved by the Board of Directors and shall be signed, by the Chairman of the
Board, Vice Chairman-Finance, President, a Senior Vice President or a Vice
President, and by the Treasurer, Assistant Treasurer, Secretary or Assistant
Secretary, and sealed with the seal of the Corporation or a facsimile thereof.
Any or all such signatures may be facsimiles if countersigned by a transfer
agent or registrar. Although any officer,
<PAGE>
13
transfer agent or registrar whose manual or facsimile signature is affixed to
such a certificate ceases to be such officer, transfer agent or registrar before
such certificate has been issued, it may nevertheless be issued by the
Corporation with the same effect as if such officer, transfer agent or registrar
were still such at the date of its issue.
SECTION 2. TRANSFERS
The Board of Directors shall have power and authority to make all
such rules and regulations as it may deem expedient concerning the issue,
transfer and registration of certificates of stock. The Board of Directors may
appoint transfer agents and registrars thereof.
SECTION 3. RECORD DATE; CLOSING OF TRANSFER BOOKS
The Board of Directors may fix a record date or direct that the
stock transfer books be closed for a stated period for the purpose of making any
proper determination with respect to stockholders, including which stockholders
are entitled to notice of or to vote at a meeting or any adjournment thereof,
receive payment of any dividend or other distribution, or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock. The record date may not be more than sixty (60) nor less
than ten (10) days before the date on which the action requiring the
determination will be taken; the transfer books may not be closed for a period
longer than twenty (20) days; and, in the case of a meeting of stockholders, the
closing of the transfer books shall be at least ten (10) days before the date of
the meeting.
SECTION 4. LOST CERTIFICATES
The Board of Directors may determine the conditions upon which a new
certificate of stock will be issued to replace a certificate which is alleged to
have been lost, stolen, mutilated or destroyed, and the Board of Directors may
delegate to any officer of the Corporation the power to make such determinations
and to cause such replacement certificates to be issued.
SECTION 5. WARRANTS
The foregoing provisions relative to certificates of stock shall
also apply to allotment certificates or other certificates or warrants
representing rights with respect to stock in the Corporation, which certificates
or warrants may be issued from time to time by a vote of the Board of Directors
in such form as they may approve.
SECTION 6. STOCK LEDGER
The Corporation shall maintain a stock ledger which contains the
name and address of each stockholder and the number of shares of stock of each
class
<PAGE>
14
which the stockholder holds. The stock ledger may be in written form or in any
other form which can be converted within a reasonable time into written form for
visual inspection. The original stock ledger shall be kept at the office of the
Corporation's Transfer Agent.
ARTICLE VIII
SIGNATURES
SECTION 1. NEGOTIABLE INSTRUMENTS
All checks, drafts, notes, or other obligations of the Corporation
shall be signed (a) by any two officers of the Corporation of the rank of
Chairman of the Board, Vice Chairman-Finance, President, Senior Vice President
or Vice President, (b) by the Chairman of the Board, Vice Chairman-Finance,
President, any Senior Vice President or any Vice President and by the Treasurer
or Assistant Treasurer or Secretary or Assistant Secretary, or (c) as otherwise
authorized by the Board of Directors or the Executive Committee; PROVIDED,
HOWEVER, that bonds, debentures or notes issued under a mortgage indenture or
trust agreement with a bank or trust company as trustee and coupons attached or
pertaining to any such bonds, debentures or notes may be executed manually or by
facsimile.
SECTION 2. STOCK TRANSFERS
All endorsements, assignments, transfers, stock powers or other
instruments of transfer of securities standing in the name of the Corporation
shall be executed for and in the name of the Corporation (a) by any two officers
of the Corporation of the rank of Chairman of the Board, Vice Chairman-Finance,
President, Senior Vice President or Vice President, or (b) by the Chairman of
the Board, Vice Chairman-Finance, President, any Senior Vice President or any
Vice President, and by the Secretary or an Assistant Secretary, or (c) as
otherwise authorized by the Board of Directors.
ARTICLE IX
WAIVER OF NOTICE OF MEETINGS
SECTION 1. STOCKHOLDERS
Notice of the time, place and/or purpose of any meeting of
stockholders shall not be required to be given to any stockholder who shall
attend such meeting in person or by proxy; and if any stockholder shall, in a
writing filed with the records of
<PAGE>
15
the meeting, either before or after the holding thereof, waive notice of any
stockholders' meeting, notice thereof need not be given to him.
SECTION 2. DIRECTORS
Notice of any meeting of the Board of Directors or of any committee
thereof need not be given to any director if he shall attend such meeting in
person, or shall in a writing filed with the records of the meeting, either
before or after the holding thereof, waive such notice; and any meeting of the
Board of Directors or of any committee thereof shall be a legal meeting without
any notice thereof having been given if all such directors shall be present at
such meeting.
ARTICLE X
VOTING OF STOCKS
Unless otherwise ordered by the Board of Directors, the Chairman of
the Board, the Vice Chairman-Finance, the President, any Senior Vice President
or any Vice President of the Corporation shall have full power and authority, on
behalf of the Corporation, to attend, act and vote at any meeting of the
stockholders of any corporation in which this Corporation may hold stock and at
such meeting may exercise any or all rights and powers incident to the ownership
of such stock and which as owner thereof the Corporation might exercise if
present, and to execute on behalf of the Corporation a proxy or proxies
empowering others to act as aforesaid. The Board of Directors by resolution from
time to time may confer like powers upon any other person or persons.
ARTICLE XI
CHECKS, NOTES, ETC.
All checks on the Corporation's bank accounts and all drafts, bills
of exchange and promissory notes, and all acceptances, obligations and other
instruments for the payment of money, shall be signed by such person or persons
as shall be authorized to do so from time to time by the Board of Directors or
by the committee or officer or officers of the Corporation to whom the Board
shall have delegated the power to authorize such signing; PROVIDED, HOWEVER,
that the signature of any person so authorized on checks and drafts drawn on the
Corporation's dividend and special accounts may be in facsimile if the Board of
Directors or such committee or officer or officers, whichever shall have
authorized such person to sign such checks or drafts, shall have authorized such
person to sign in facsimile, and provided further that in case notes or other
instruments for the payment of money (other than notes, bonds or debentures
issued under a trust instrument of the Corporation) are required
<PAGE>
16
to be signed by two persons, the signature thereon of only one of the persons
signing any such note or other instrument may be in facsimile, and that in the
case of notes, bonds or debentures issued under a trust instrument of the
Corporation and required to be signed by two officers of the Corporation, the
signatures of both such officers may be in facsimile if specifically authorized
and directed by the Board of Directors of the Corporation and if such notes,
bonds or debentures are required to be authenticated by a corporate trustee
which is a party to the trust instrument and provided further that in case any
person or persons who shall have signed any such note or other instrument,
either manually or in facsimile, shall have ceased to be a person or persons so
authorized to sign any such note or other instrument, whether because of death
or by reason of any other fact or circumstance, before such note or other
instrument shall have been delivered by the Corporation, such note or other
instrument may, nevertheless, be adopted by the Corporation and be issued and
delivered as though the person or persons who so signed such note or other
instrument had not ceased to be such a person or persons.
ARTICLE XII
OFFICES
The Corporation may have offices in addition to the registered
office specified in the Certificate of Incorporation within or without the State
of Delaware at such places as shall be determined from time to time by the Board
of Directors.
ARTICLE XIII
AMENDMENTS
Any By-law may be adopted, repealed, altered or amended by the
affirmative vote of a majority of the Whole Board (as defined in the Certificate
of Incorporation) at any meeting thereof. The stockholders of the Corporation
shall also have the power to amend, alter or repeal any provision of these
By-laws but only to the extent and in the manner provided in the Certificate of
Incorporation.
As amended April 2, 1996
<PAGE>
AMENDED AND RESTATED BY-LAWS
OF
THE PENN TRAFFIC COMPANY
(A DELAWARE CORPORATION)
ARTICLE 1
DEFINITIONS
As used in these By-laws, unless the context otherwise requires, the term:
1.1 "Assistant Secretary" means an Assistant Secretary of the
Corporation.
1.2 "Assistant Treasurer" means an Assistant Treasurer of the
Corporation.
1.3 "Audit Committee" means the Audit Committee of the Board.
1.4 "Board" means the Board of Directors of the Corporation.
1.5 "Business Day" means any day which is not a Saturday, a Sunday or a
day on which banks are authorized to close in the City of New York.
1.6 "By-laws" means the amended and restated by-laws of the Corporation,
as amended from time to time.
1.7 "Certificate of Incorporation" means the amended and restated
certificate of incorporation of the Corporation, as amended,
supplemented or restated from time to time.
1.8 "Chairman of the Board" means the Chairman of the Board of Directors
of the Corporation.
1.9 "Chairman of the Executive Committee" means the Chairman of the
Executive Committee of the Board of Directors of the Corporation.
1.10 "Chief Financial Officer" means the Chief Financial Officer of the
Corporation.
1.11 "Compensation and Stock Option Committee" means the Compensation
and Stock Option Committee of the Board.
1.12 "Corporation" means The Penn Traffic Company.
<PAGE>
1.13 "Directors" means directors of the Corporation.
1.14 "Entire Board" means all directors of the Corporation in office,
whether or not present at a meeting of the Board, but disregarding
vacancies.
1.15 "Executive Committee" means the Executive Committee of the Board.
1.16 "General Corporation Law" means the General Corporation Law of the
State of Delaware, as amended from time to time.
1.17 "Office of the Corporation" means the executive office of the
Corporation, anything in Section 131 of the General Corporation Law
to the contrary notwithstanding.
1.18 "President" means the President of the Corporation.
1.19 "Secretary" means the Secretary of the Corporation.
1.20 "Stockholders" means stockholders of the Corporation.
1.21 "Treasurer" means the Treasurer of the Corporation.
1.22 "Vice Chairman of the Board" means the Vice Chairman of the Board of
Directors of the Corporation.
1.23 "Vice Chairman of the Executive Committee" means the Vice Chairman
of the Executive Committee of the Board of Directors of the
Corporation.
1.24 "Vice President" means a Vice President of the Corporation.
ARTICLE 2
STOCKHOLDERS
2.1 PLACE OF MEETINGS. Every meeting of Stockholders shall be held at the
office of the Corporation or at such other place within or without the State of
Delaware as shall be specified or fixed in the notice of such meeting or in the
waiver of notice thereof.
2.2 ANNUAL MEETING. A meeting of Stockholders shall be held annually for
the election of Directors and the transaction of other business at such hour and
on such business day in each year as may be determined by resolution adopted by
affirmative vote of a majority vote of the Entire Board and designated in the
notice of meeting, provided,
2
<PAGE>
however, that each successive annual meeting shall be held on a date within
thirteen months after the date of the preceding annual meeting.
2.3 DEFERRED MEETING FOR ELECTION OF DIRECTORS, ETC. If the annual meeting
of Stockholders for the election of Directors and the transaction of other
business is not held on the date designated therefor or at any adjournment of a
meeting convened on such date, the Board by resolution adopted by affirmative
vote of a majority vote of the Entire Board, shall call a meeting of
Stockholders for the election of Directors and the transaction of other business
as soon thereafter as convenient.
2.4 SPECIAL MEETINGS. A special meeting of Stockholders, unless otherwise
prescribed by statute, may be called at any time by the Board, the Chairman of
the Board or by the President, and shall be called by the President or Secretary
at the request, in writing, of any two or more Directors then serving or of the
Stockholders owning a majority of the shares of capital stock of the Corporation
issued and outstanding and entitled to vote. Any such request shall state the
purpose of the proposed meeting. At any special meeting of Stockholders, no
business may be transacted other than (i) such business stated in the notice
thereof given pursuant to Section 2.6 hereof or in any waiver of notice thereof
given pursuant to Section 2.7 hereof (in a form prepared by the Secretary) or
(ii) such business as is related to the purpose or purposes of such meeting and
which is properly brought before the meeting by or at the direction of the
Board.
2.5 FIXING RECORD DATE. For the purpose of (a) determining the
Stockholders entitled (i) to notice of or to vote at any meeting of Stockholders
or any adjournment thereof or (ii) to receive payment of any dividend or other
distribution or allotment of any rights, or to exercise any rights in respect of
any change, conversion or exchange of stock; or (b) any other lawful action, the
Board may fix a record date, which record date shall not precede the date upon
which the resolution fixing the record date was adopted by the Board and which
record date shall not be (x) in the case of clause (a)(i) above, more than sixty
nor less than ten days before the date of such meeting and (y) in the case of
clause (a)(ii) or (b) above, more than sixty days prior to such action. If no
such record date is fixed:
2.5.1 the record date for determining Stockholders entitled to
notice of or to vote at a meeting of Stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or,
if notice is waived, at the close of business on the day next preceding
the day on which the meeting is held; and
2.5.2 the record date for determining Stockholders for any purpose
other than those specified in Section 2.5.1 shall be at the close of
business on the day on which the Board adopts the resolution relating
thereto.
When a determination of Stockholders entitled to notice of or to vote at
any meeting of Stockholders has been made as provided in this Section 2.5, such
3
<PAGE>
determination shall apply to any adjournment thereof unless the Board fixes a
new record date for the adjourned meeting.
2.6 NOTICE OF MEETINGS OF STOCKHOLDERS. Except as otherwise provided in
Section 2.7 hereof, whenever under the provisions of any statute, the
Certificate of Incorporation or these By-laws, Stockholders are required or
permitted to take any action at a meeting, written notice shall be given stating
the place, date and hour of the meeting and, in the case of a special meeting,
the purpose or purposes for which the meeting is called. Unless otherwise
provided by any statute, the Certificate of Incorporation or these By-laws, a
copy of the notice of any meeting shall be given, personally or by mail, not
less than ten nor more than sixty days before the date of the meeting, to each
Stockholder entitled to notice of or to vote at such meeting. If mailed, such
notice shall be deemed to be given when deposited in the United States mail,
with postage prepaid, directed to the Stockholder at his or her address as it
appears on the records of the Corporation. An affidavit of the Secretary or an
Assistant Secretary or of the transfer agent of the Corporation that the notice
required by this Section 2.6 has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. When a meeting is adjourned to
another time or place, notice need not be given of the adjourned meeting if the
time and place thereof are announced at the meeting at which the adjournment is
taken, and at the adjourned meeting any business may be transacted that might
have been transacted at the meeting as originally called. If, however, the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each Stockholder of record entitled to vote at the
meeting.
2.7 WAIVERS OF NOTICE. Whenever the giving of any notice is required by
statute, the Certificate of Incorporation or these By-laws, a waiver thereof, in
writing, signed by the Stockholder or Stockholders entitled to said notice,
whether before or after the event as to which such notice is required, shall be
deemed equivalent to notice. Attendance by a Stockholder at a meeting shall
constitute a waiver of notice of such meeting except when the Stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business on the ground that the meeting has
not been lawfully called or convened.
2.8 LIST OF STOCKHOLDERS. The Secretary shall prepare and make, or cause
to be prepared and made, at least ten days before every meeting of Stockholders,
a complete list of the Stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each Stockholder and the number
of shares registered in the name of each Stockholder. Such list shall be open to
the examination of any Stockholder, the Stockholder's agent or attorney, at the
Stockholder's expense, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten days prior to the meeting, either
at a place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at the
time and place of the meeting during the whole time thereof, and may be
inspected
4
<PAGE>
by any Stockholder who is present. The Corporation shall maintain the list of
Stockholders in written form or in another form capable of conversion into
written form within a reasonable time. The stock ledger shall be the only
evidence as to who are the Stockholders entitled to examine the stock ledger,
the list of Stockholders or the books of the Corporation, or to vote in person
or by proxy at any meeting of Stockholders.
2.9 QUORUM OF STOCKHOLDERS; ADJOURNMENT. Except as otherwise provided by
any statute, the Certificate of Incorporation or these By-laws, the holders of a
majority of all outstanding shares of stock entitled to vote at any meeting of
Stockholders, present in person or represented by proxy, shall constitute a
quorum for the transaction of any business at such meeting. When a quorum is
once present to organize a meeting of Stockholders, it is not broken by the
subsequent withdrawal of any Stockholders. The holders of a majority of the
shares of stock present in person or represented by proxy at any meeting of
Stockholders, including an adjourned meeting, whether or not a quorum is
present, may adjourn such meeting to another time and place. Shares of its own
stock belonging to the Corporation or to another corporation, if a majority of
the shares entitled to vote in the election of directors of such other
corporation is held, directly or indirectly, by the Corporation, shall neither
be entitled to vote nor be counted for quorum purposes; provided, however, that
the foregoing shall not limit the right of the Corporation to vote stock,
including but not limited to its own stock, held by it in a fiduciary capacity.
2.10 VOTING; PROXIES. Unless otherwise provided in the Certificate of
Incorporation, every Stockholder of record shall be entitled at every meeting of
Stockholders to one vote for each share of capital stock standing in his or her
name on the record of Stockholders determined in accordance with Section 2.5
hereof. If the Certificate of Incorporation provides for more or less than one
vote for any share on any matter, each reference in the By-laws or the General
Corporation Law to a majority or other proportion of stock shall refer to such
majority or other proportion of the votes of such stock. The provisions of
Sections 212 and 217 of the General Corporation Law shall apply in determining
whether any shares of capital stock may be voted and the persons, if any,
entitled to vote such shares; but the Corporation shall be protected in assuming
that the persons in whose names shares of capital stock stand on the stock
ledger of the Corporation are entitled to vote such shares. Holders of
redeemable shares of stock are not entitled to vote after the notice of
redemption is mailed to such holders and a sum sufficient to redeem the stocks
has been deposited with a bank, trust company, or other financial institution
under an irrevocable obligation to pay the holders the redemption price on
surrender of the shares of stock. At any meeting of Stockholders (at which a
quorum was present to organize the meeting), all matters which may be properly
considered at such meeting, except as otherwise provided by statute or by the
Certificate of Incorporation or by these By-laws, shall be decided by a majority
of the votes cast at such meeting by the holders of shares present in person or
represented by proxy and entitled to vote thereon, whether or not a quorum is
present when the vote is taken. Directors may be elected either by written
ballot or by voice vote. In voting on any other question on which a vote by
ballot is required by law or is demanded by any
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Stockholder entitled to vote, the voting shall be by ballot. Each ballot shall
be signed by the Stockholder voting or the Stockholder's proxy and shall state
the number of shares voted. On all other questions, the voting may be by voice
vote. Each Stockholder entitled to vote at a meeting of Stockholders may
authorize another person or persons to act for such Stockholder by proxy. The
validity and enforceability of any proxy shall be determined in accordance with
Section 212 of the General Corporation Law. A Stockholder may revoke any proxy
that is not irrevocable by attending the meeting and voting in person or by
filing an instrument in writing revoking the proxy or by delivering a proxy in
accordance with applicable law bearing a later date to the Secretary.
2.11 VOTING PROCEDURES AND INSPECTORS OF ELECTION AT MEETINGS OF
STOCKHOLDERS. The Board, in advance of any meeting of Stockholders, shall
appoint one or more inspectors to act at the meeting and make a written report
thereof. The Board may designate one or more persons as alternate inspectors to
replace any inspector who fails to act. If no inspector or alternate is able to
act at a meeting, the person presiding at the meeting shall appoint one or more
inspectors to act at the meeting. Each inspector, before entering upon the
discharge of his or her duties, shall take and sign an oath faithfully to
execute the duties of inspector with strict impartiality and according to the
best of his or her ability. The inspectors shall (a) ascertain the number of
shares outstanding and the voting power of each, (b) determine the shares
represented at the meeting and the validity of proxies and ballots, (c) count
all votes and ballots, (d) determine and retain for a reasonable period a record
of the disposition of any challenges made to any determination by the
inspectors, and (e) certify their determination of the number of shares
represented at the meeting and their count of all votes and ballots. The
inspectors may appoint or retain other persons or entities to assist the
inspectors in the performance of their duties. The date and time of the opening
and the closing of the polls for each matter upon which the Stockholders will
vote at a meeting shall be determined by the person presiding at the meeting and
shall be announced at the meeting. No ballot, proxies or votes, or any
revocation thereof or change thereto, shall be accepted by the inspectors after
the closing of the polls unless the Court of Chancery of the State of Delaware
upon application by a Stockholder shall determine otherwise.
2.12 CONDUCT OF MEETINGS. (a) At each meeting of Stockholders, the
Chairman of the Board, or if there is no Chairman of the Board or if there be
one and the Chairman of the Board is absent, the Vice Chairman of the Board, or
if there is no Vice Chairman of the Board or if there be one and the Vice
Chairman of the Board is absent, the Chairman of the Executive Committee, or if
there is no Chairman of the Executive Committee or if there be one and the
Chairman of the Executive Committee is absent, the Vice Chairman of the
Executive Committee, or if there is no Vice Chairman of the Executive Committee
or if there be one and the Vice Chairman of the Executive Committee is absent,
the President, or if there is no President or if there be one and the President
is absent, a Vice President, and in case more than one Vice President shall be
present, that Vice President designated by the Board (or in the absence of any
such designation, the most senior Vice President, based on time served in such
office, present), shall act as chairman of the meeting. The Secretary, or in his
or her absence
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one of the Assistant Secretaries, shall act as secretary of the meeting. In case
none of the officers above designated to act as chairman or secretary of the
meeting, respectively, shall be present, a chairman or a secretary of the
meeting, as the case may be, shall be chosen by a majority of the votes cast at
such meeting by the holders of shares of capital stock present in person or
represented by proxy and entitled to vote at the meeting.
(b) Only persons who are nominated in accordance with the following
procedures shall be eligible for election as Directors. Nominations of persons
for election to the Board may be made (i) by or at the direction of the Board,
(ii) by any nominating committee or person appointed by the Board or (iii) by
any Stockholder of the Corporation entitled to vote for the election of
Directors at the meeting who complies with the provisions of the following
paragraph (persons nominated in accordance with (iii) above are referred to
herein as "Stockholder nominees").
In addition to any other applicable requirements, all nominations of
Stockholder nominees must be made by written notice given by or on behalf of a
Stockholder of record of the Corporation (the "Notice of Nomination"). The
Notice of Nomination must be delivered personally to, or mailed to, and received
at the principal executive offices of the Corporation, addressed to the
attention of the Secretary. To be timely, Notice of Nomination must have been
received by the Secretary of the Corporation (a) in the case of an annual
meeting, not less than 60 nor more than 90 days in advance of the first
anniversary of the previous year's annual meeting; PROVIDED, HOWEVER, that in
the event that the date of the annual meeting is changed by more than 30 days
from such anniversary date, the Notice of Nomination to be timely must have been
received by the Secretary of the Corporation no later than the close of business
on the 10th day following the day on which public announcement of the date of
such meeting is first made; and (b) in the case of a special meeting at which
directors are to be elected, not later than the close of business on the fifth
day following such public announcement. Each such notice shall set forth: (i)
the name and address, as they appear on the Corporation's books, of the
Stockholder who intends to make the nomination and the name(s) and address(es)
of the person or persons to be nominated; (ii) a representation that the
Stockholder is a holder of record of shares of the Corporation and the number
and class so held and will be entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting and nominate the person or persons
specified in the notice; (iii) the class and number of shares of the Corporation
that are beneficially owned by the Stockholder; (iv) a description of all
arrangements or understandings between the Stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the Stockholder; (v) such other
information regarding each nominee proposed by such Stockholder as would be
required to be included in a definitive proxy statement filed pursuant to the
proxy rules of the Securities and Exchange Commission had the nominee been
nominated, or intended to be nominated, by the Board of Directors; and (vi) the
consent of each nominee to serve as a director of the Corporation, if so
elected. In addition, the Stockholder making such nomination shall promptly
provide any other information reasonably requested by the Corporation.
Notwithstanding anything in these
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By-laws to the contrary, no person shall be eligible for election as a director
of the Corporation unless nominated in accordance with the procedures set forth
in this Section 2.12(b). Notwithstanding the foregoing provisions of this
By-law, a Stockholder shall also comply with all applicable requirements of the
Exchange Act (as hereinafter defined) and the rules and regulations thereunder
with respect to the matters set forth in this By-law. Nothing in this By-law
shall be deemed to affect any rights of the holders of any series of Preferred
Stock to elect directors under specified circumstances. Except as otherwise
required by law, the chairman of any meeting of Stockholders shall have the
power and duty (i) to determine whether a nomination was made in accordance with
the requirements set forth in this By-law and (ii) if any proposed nomination
was not made in compliance with this By-law, to declare that such defective
nomination shall be disregarded.
(c) At any meeting of Stockholders, only such business shall be conducted
as shall have been properly brought before the meeting. To be properly brought
before a meeting of Stockholders, (i) business must be specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the
Board, (ii) otherwise properly brought before the meeting by or at the direction
of the Board or (iii) otherwise properly brought before the meeting by a
Stockholder in accordance with the terms of the following paragraph (business
brought before the meeting in accordance with (iii) above is referred to as
"Stockholder business").
In addition to any other applicable requirements, all proposals of
Stockholder business must be made by written notice given by or on behalf of a
Stockholder of record of the Corporation (the "Notice of Business"). To be
timely, a Stockholder's notice must have been received by the Secretary of the
Corporation not less than 60 nor more than 90 days in advance of the first
anniversary of the previous year's annual meeting; provided, however, that in
the event that the date of the annual meeting is changed by more than 30 days
from such anniversary date, notice by the stockholder to be timely must have
been received no later than the close of business on the 10th day following the
day on which public announcement of the date of such meeting is first made. Such
Notice of Business shall set forth (i) the name and record address of the
Stockholder proposing such Stockholder business; (ii) a representation that the
Stockholder is a holder of record of shares of the Corporation and the number
and class so held and will be entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting; (iii) the class and number of
shares of the Corporation that are beneficially owned by the Stockholder; (iv) a
brief description of the Stockholder business desired to be brought before the
annual meeting and the reasons for conducting such Stockholder business at the
annual meeting, and; (v) any material interest of the Stockholder in such
Stockholder business. Notwithstanding anything in these By-laws to the contrary,
no business shall be conducted at the annual meeting of Stockholders except in
accordance with the procedures set forth in this Section 2.12(c), provided,
however, that nothing in this Section 2.12(c) shall be deemed to preclude
discussion by any Stockholder of any business properly brought before the annual
meeting in accordance with said procedure. In addition, the Stockholder making
such proposal shall promptly provide any other
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information reasonably requested by the Corporation. Only such business shall be
conducted at any annual meeting of Stockholders as shall have been brought
before such meeting in accordance with the requirements set forth in this
By-law. Notwithstanding the foregoing provisions of this By-law, a Stockholder
shall also comply with all applicable requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the rules and regulations
thereunder with respect to the matters set forth in this By-law. Nothing in this
By-law shall be deemed to affect any rights of any Stockholder to request
inclusion of a proposal in the Corporation's proxy statement pursuant to Rule
14a-8 under the Exchange Act. Except as otherwise required by law, the chairman
of any annual meeting of Stockholders shall have power and duty (i) to determine
whether any business proposed to be brought before the meeting was brought in
accordance with the requirements set forth in this By-law and (ii) if any
proposed business was not brought in compliance with this By-law to declare that
such defective proposal shall be disregarded. For purposes of this By-law and
the next preceding By-law, "public announcement" shall mean disclosure in a
press release reported by the Dow Jones News Service, the Associated Press or
any comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
2.13 ORDER OF BUSINESS. The order of business at all meetings of
Stockholders shall be as determined by the chairman of the meeting, but the
order of business to be followed at any meeting at which a quorum is present may
be changed by a majority of the votes cast at such meeting by the holders of
shares of capital stock present in person or represented by proxy and entitled
to vote at the meeting.
2.14 ACTION BY STOCKHOLDERS. Any action required or permitted by the
General Corporation Law to be taken at any annual or special meeting of
Stockholders of the Corporation may be taken without a meeting if Stockholders
holding a majority of the voting shares consent thereto in writing, and the
writing or writings are filed with the minutes of meetings of Stockholders.
ARTICLE 3
DIRECTORS
3.1 GENERAL POWERS. Except as otherwise provided in the Certificate of
Incorporation or these By-laws, the business and affairs of the Corporation
shall be managed by or under the direction of the Board. The Board may adopt
such rules and regulations, not inconsistent with the Certificate of
Incorporation or these By-laws or applicable laws, as it may deem proper for the
conduct of its meetings and the management of the Corporation. In addition to
the powers expressly conferred by these By-laws, the Board may exercise all
powers and perform all acts that are not required, by these By-laws or the
Certificate of Incorporation or by statute, to be exercised and performed by the
Stockholders.
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3.2 NUMBER; QUALIFICATION; TERM OF OFFICE. The Board shall consist of not
less than 2 or more than 10 members. Until another number is fixed by Board or
stockholders in accordance with the next following sentence, the Board shall
consist of 10 members. The exact number of Directors within the minimum and
maximum limitations specified in the preceding sentence shall be fixed from time
to time by resolution adopted at any meeting of the stockholders or by a
majority of the entire Board then in office, whether on not present at a
meeting. The term of office of each director shall expire at the first annual
meeting of Stockholders of the Corporation next following the director's
election. The Board shall elect a Chairman of the Board who will serve as a
non-executive Chairman of the Board.
3.3 ELECTION. Directors shall, except as otherwise required by statute or
by the Certificate of Incorporation, be elected by a plurality of the votes cast
at a meeting of Stockholders by the holders of shares present in person or
represented by proxy at the meeting and entitled to vote in the election.
3.4 NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Unless otherwise provided
in the Certificate of Incorporation, newly created Directorships resulting from
any increase in the authorized number of Directors and vacancies occurring in
the Board for any other reason, may be filled by a resolution adopted at any
meeting of the stockholders or by the affirmative votes of a majority of the
entire Board, although less than a quorum, or by a sole remaining Director, and
Directors so chosen shall hold office for a term expiring at the next following
annual meeting of Stockholders, or, in each case until their respective
successors are duly elected and qualified, or until the respective Directors'
earlier death, resignation or removal.
3.5 RESIGNATION. Any Director may resign at any time by written notice to
the Corporation. Such resignation shall take effect at the time therein
specified, and, unless otherwise specified in such resignation, the acceptance
of such resignation shall not be necessary to make it effective.
3.6 REMOVAL. Any one or more or all of the Directors may be removed, at
any time, with or without cause by the Stockholders having at least a majority
in voting power of the then issued and outstanding shares of capital stock of
the Corporation.
3.7 COMPENSATION. Each Director, in consideration of his or her service as
such, shall be entitled to receive from the Corporation such amount per annum or
such fees for attendance at Directors' meetings, or both, as the Board may from
time to time determine, together with reimbursement for the reasonable
out-of-pocket expenses, if any incurred by such Director in connection with the
performance of his or her duties. Each Director who shall serve as a member of
any committee of Directors in consideration of serving as such shall be entitled
to such additional amount per annum or such fees for attendance at committee
meetings, or both, as the Board may from time to time determine, together with
reimbursement for the reasonable out-of-pocket expenses, if any, incurred by
such Director in the performance of his or her duties. Nothing
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contained in this Section 3.7 shall preclude any Director from serving the
Corporation or its subsidiaries in any other capacity and receiving proper
compensation therefor.
3.8 TIMES AND PLACES OF MEETINGS. The Board may hold meetings, both
regular and special, either within or without the State of Delaware. The times
and places for holding meetings of the Board may be fixed from time to time by
resolution of the Board or (unless contrary to a resolution of the Board) in the
notice of the meeting.
3.9 ANNUAL MEETINGS. On the day when and at the place where the annual
meeting of Stockholders for the election of Directors is held, and as soon as
practicable thereafter, the Board may hold its annual meeting, without notice of
such meeting, for the purposes of organization, the election of officers and the
transaction of other business. The annual meeting of the Board may be held at
any other time and place specified in a notice given as provided in Section 3.11
hereof for special meetings of the Board or in a waiver of notice thereof.
3.10 REGULAR MEETINGS. Regular meetings of the Board may be held without
notice at such times and at such places as shall from time to time be determined
by the Board.
3.11 SPECIAL MEETINGS. Special meetings of the Board may be called by the
Chairman of the Board, the Vice Chairman of the Board, the Chairman of the
Executive Committee, the Vice Chairman of the Executive Committee, the President
or the Secretary or by any two or more Directors then serving on at least one
day's notice to each Director given by one of the means specified in Section
3.14 hereof other than by mail, or on at least three business days' notice if
given by mail. Special meetings shall be called by the Chairman of the Board,
President or Secretary in like manner and on like notice on the written request
of any two or more of the Directors then serving.
3.12 TELEPHONE MEETINGS. Directors or members of any committee designated
by the Board may participate in a meeting of the Board or of such committee by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this Section 3.12 shall constitute
presence in person at such meeting.
3.13 ADJOURNED MEETINGS. A majority of the Directors present at any
meeting of the Board, including an adjourned meeting, whether or not a quorum is
present, may adjourn such meeting to another time and place. At least one day's
notice of any adjourned meeting of the Board shall be given to each Director
whether or not present at the time of the adjournment, if such notice shall be
given by one of the means specified in Section 3.14 hereof other than by mail,
or at least three days' notice if by mail. Any business may be transacted at an
adjourned meeting that might have been transacted at the meeting as originally
called.
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3.14 NOTICE PROCEDURE. Subject to Sections 3.11 and 3.15 hereof, whenever,
under the provisions of any statute, the Certificate of Incorporation or these
By-laws, notice is required to be given to any Director, such notice shall be
deemed given effectively if given in person or by telephone, by mail addressed
to such Director at such Director's address as it appears on the records of the
Corporation, with postage thereon prepaid, or by telegram, telex, telecopy or
similar means addressed as aforesaid.
3.15 WAIVER OF NOTICE. Whenever the giving of any notice is required by
statute, the Certificate of Incorporation or these By-laws, a waiver thereof, in
writing, signed by the person or persons entitled to said notice, whether before
or after the event as to which such notice is required, shall be deemed
equivalent to notice. Attendance by a person at a meeting shall constitute a
waiver of notice of such meeting except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business on the ground that the meeting has not been lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the Directors or a committee of Directors
need be specified in any written waiver of notice unless so required by statute,
the Certificate of Incorporation or these By-laws.
3.16 ORGANIZATION. At each meeting of the Board, the Chairman of the
Board, or in the absence of the Chairman of the Board, the Chairman of the
Executive Committee, or in the absence of the Chairman of the Board the
President, or in the absence of the President a chairman chosen by a majority of
the Directors present, shall preside. The Secretary shall act as secretary at
each meeting of the Board. In case the Secretary shall be absent from any
meeting of the Board, an Assistant Secretary shall perform the duties of
secretary at such meeting; and in the absence from any such meeting of the
Secretary and all Assistant Secretaries, the person presiding at the meeting may
appoint any person to act as secretary of the meeting.
3.17 QUORUM OF DIRECTORS. The presence in person of a majority of the
entire Board shall be necessary and sufficient to constitute a quorum for the
transaction of business at any meeting of the Board, but a majority of a smaller
number may adjourn any such meeting to a later date.
3.18 ACTION BY MAJORITY VOTE. Except as otherwise expressly required by
statute, the Certificate of Incorporation or these By-laws, the act of a
majority of the Directors present at a meeting at which a quorum is present
shall be the act of the Board.
3.19 ACTION WITHOUT MEETING. Any action required or permitted to be taken
at any meeting of the Board or of any committee thereof may be taken without a
meeting if all Directors or members of such committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee.
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3.20 The power to make, alter or repeal these By-laws, and to adopt any
new By-law, shall be vested solely in the stockholders. The power to make, alter
or repeal these By-laws, and to adopt any new By-law, shall not be vested in the
Board of Directors.
ARTICLE 4
COMMITTEES OF THE BOARD
4.1 COMMITTEES. The Board may, by resolution passed by a vote of the
entire Board, designate one or more committees of the Board, each committee to
consist of one or more of the Directors of the Corporation and shall designate
the following committees of the Board, each committee to consist of one or more
of the Directors of the Corporation:
(a) EXECUTIVE COMMITTEE. An Executive Committee of the Board to
manage the business of the Company and such Executive Committee shall have all
of the authority customarily delegated to the senior executive officers of a
corporation, subject to oversight of the entire Board. The positions of Chairman
of the Executive Committee and Vice-Chairman of the Executive Committee will be
senior executive officer positions of the Corporation. The Corporation's Chief
Executive Officer will report to the Chairman of the Executive Committee on all
matters under the authority of the Executive Committee. During the term of the
Management Agreement dated as of the date hereof, among the Corporation, Hirsch
& Fox, L.L.C., Gary D. Hirsch and Martin A. Fox, as from time to time
supplemented, amended or modified, the members of the Executive Committee shall
consist of Gary D. Hirsch (Chairman of the Executive Committee), Martin A. Fox
(Vice Chairman of the Executive Committee) and the President of the Corporation.
(b) AUDIT COMMITTEE. An Audit committee to be composed solely of
independent Directors responsible for reviewing the Company's financial
statements and the selection of the Corporation's independent auditors.
(c) COMPENSATION AND STOCK OPTION COMMITTEE. A Compensation and
Stock Option Committee to be composed solely of independent Directors that will
approve all officer compensation arrangements and grants of stock options under
the Company's equity incentive program, taking into account, in each case, the
recommendations of the Executive Committee.
4.2 ALTERNATE COMMITTEE MEMBERS. The Board may designate one or more
Directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of such committee. If a member of a committee
shall be absent from any meeting, or disqualified from voting thereat, the
remaining member or members present and not disqualified from voting, whether or
not such
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member or members constitute a quorum, may, by a unanimous vote, appoint another
member of the Board to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board passed as aforesaid, shall have and may exercise all the
powers and authority of the Board in the management of the business and affairs
of the Corporation, and may authorize the seal of the Corporation to be
impressed on all papers that may require it, but no such committee shall have
the power or authority of the Board in reference to amending the Certificate of
Incorporation, adopting an agreement of merger or consolidation under section
251 or section 252 of the General Corporation Law, recommending to the
Stockholders (a) the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, or (b) a dissolution of the Corporation or a
revocation of a dissolution, or amending the By-laws of the Corporation; and,
unless the resolution designating it expressly so provides, no such committee
shall have the power and authority to declare a dividend, to authorize the
issuance of stock or to adopt a certificate of ownership and merger pursuant to
Section 253 of the General Corporation Law. Unless otherwise specified in the
resolution of the Board designating a committee, at all meetings of such
committee a majority of the total number of members of the committee shall
constitute a quorum for the transaction of business, and the vote of a majority
of the members of the committee present at any meeting at which there is a
quorum shall be the act of the committee. Each committee shall keep regular
minutes of its meetings. Unless the Board otherwise provides, each committee
designated by the Board may make, alter and repeal rules for the conduct of its
business. In the absence of such rules each committee shall conduct its business
in the same manner as the Board conducts its business pursuant to Article 3 of
these By-laws.
4.3 COMMITTEE MINUTES. The committees shall keep regular minutes of their
proceedings and report the same to the Board.
ARTICLE 5
OFFICERS
5.1 POSITIONS. The officers of the Corporation shall be a President, a
Secretary, a Treasurer or a Chief Financial Officer and such other officers as
the Board may appoint, including a Chairman of the Board, Vice Chairman of the
Board, a Chairman of the Executive Committee, a Vice Chairman of the Executive
Committee, one or more Vice Presidents and one or more Assistant Secretaries and
Assistant Treasurers, who shall exercise such powers and perform such duties as
shall be determined from time to time by the Board. The Board may designate one
or more Vice Presidents as Executive Vice Presidents and may use descriptive
words or phrases to designate the standing, seniority or areas of special
competence of the Vice Presidents elected or appointed by it. Any number of
offices may be held by the same person unless the Certificate of Incorporation
or these By-laws otherwise provide.
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5.2 APPOINTMENT. The officers of the Corporation shall be chosen by the
Board at its annual meeting or at such other time or times as the Board shall
determine.
5.3 COMPENSATION. The compensation of all officers of the Corporation
shall be fixed by the Board. No officer shall be prevented from receiving a
salary or other compensation by reason of the fact that the officer is also a
Director.
5.4 TERM OF OFFICE. Each officer of the Corporation shall hold office for
the term for which he or she is elected and until such officer's successor is
chosen and qualifies or until such officer's earlier death, resignation or
removal. Any officer may resign at any time upon written notice to the
Corporation. Such resignation shall take effect at the date of receipt of such
notice or at such later time as is therein specified, and, unless otherwise
specified, the acceptance of such resignation shall not be necessary to make it
effective. The resignation of an officer shall be without prejudice to the
contract rights of the Corporation, if any. Any officer elected or appointed by
the Board may be removed at any time, with or without cause, by vote of a
majority of the entire Board. Any vacancy occurring in any office of the
Corporation shall be filled by the Board. The removal of an officer without
cause shall be without prejudice to the officer's contract rights, if any. The
election or appointment of an officer shall not of itself create contract
rights.
5.5 FIDELITY BONDS. The Corporation may secure the fidelity of any or all
of its officers or agents by bond or otherwise.
5.6 CHAIRMAN OF THE BOARD. The Chairman of the Board, if one shall have
been appointed, shall preside at all meetings of the Board and shall exercise
such powers and perform such other duties as shall be determined from time to
time by the Board. The Chairman of the Board shall not be an executive officer
of the Corporation.
5.7 VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the Board, if one
shall have been appointed, shall, in the absence of the Chairman of the Board,
preside at all meetings of the Board and shall exercise such powers and perform
such other duties as shall be determined from time to time by the Board.
5.8 CHAIRMAN OF THE EXECUTIVE COMMITTEE. The Chairman of the Executive
Committee shall be the most senior executive officer of the Corporation and
shall, together with the other members of the Executive Committee, have general
supervision over the business of the Corporation, subject to the oversight of
the Board only. The Chairman of the Executive Committee shall preside at all
meetings of the Executive Committee. The Chairman of the Executive Committee may
sign and execute in the name of the Corporation deeds, mortgages, bonds,
contracts, and other instruments except in cases in which the signing and
execution thereof shall be expressly delegated by the Board or these By-laws to
some other officer or agent of the Corporation or shall be required by statute
or otherwise to be signed or executed and, in general, the Chairman of the
Executive Committee shall perform all duties that are customarily
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delegated to senior executive officers of a corporation and such other duties as
may from time to time be assigned to the Chairman of the Executive Committee by
the Board that are consistent with his position.
5.9 VICE CHAIRMAN OF THE EXECUTIVE COMMITTEE. The Vice Chairman of the
Executive Committee shall be a member of the Executive Committee and shall,
together with the other members of the Executive Committee have general
supervision over the business of the Corporation, subject to the oversight of
the Chairman of the Executive Committee and the Board. The Vice Chairman of the
Executive Committee shall preside at all meetings of the Executive Committee at
all meetings of the Executive Committee at which the Chairman of the Executive
Committee (if there is one) is not present. The Vice Chairman of the Executive
Committee may sign and execute in the name of the Corporation deeds, mortgages,
bonds, contracts and other instruments except in cases in which the signing and
execution thereof shall be expressly delegated by the Board, the Executive
Committee or these By-laws to some other officer or agent of the Corporation or
shall be required by statute or otherwise to be signed or executed and, in
general, the Vice Chairman of the Executive Committee shall perform all duties
that are customarily delegated to senior executive officers of a corporation and
such other duties as may from time to time be assigned to the Vice Chairman of
the Executive Committee Chairman by the Executive Committee that are consistent
with his position.
5.10 PRESIDENT. The President shall be the Chief Executive Officer of the
Corporation and shall have general supervision over the business of the
Corporation, subject, however, to the control of the Board and the Executive
Committee. The President may sign and execute in the name of the Corporation
deeds, mortgages, bonds, contracts and other instruments except in cases in
which the signing and execution thereof shall be expressly delegated by the
Board or by these By-laws to some other officer or agent of the Corporation or
shall be required by statute otherwise to be signed or executed and, in general,
the President shall perform all duties incident to the office of President of a
corporation and such other duties as may from time to time be assigned to the
President by the Board and the Executive Committee.
5.11 VICE PRESIDENTS. At the request of the President, or, in the
President's absence, at the request of the Board, the Vice Presidents shall (in
such order as may be designated by the Board or, in the absence of any such
designation, in order of seniority based on age) perform all of the duties of
the President and, in so performing, shall have all the powers of, and be
subject to all restrictions upon, the President. Any Vice President may sign and
execute in the name of the Corporation deeds, mortgages, bonds, contracts or
other instruments, except in cases in which the signing and execution thereof
shall be expressly delegated by the Board or by these By-laws to some other
officer or agent of the Corporation, or shall be required by, statute otherwise
to be signed or executed, and each Vice President shall perform such other
duties as from time to time may be assigned to such Vice President by the Board
or by the President.
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5.12 SECRETARY. The Secretary shall attend all meetings of the Board and
of the Stockholders and shall record all the proceedings of the meetings of the
Board and of the Stockholders in a book to be kept for that purpose, and shall
perform like duties for committees of the Board, when required. The Secretary
shall give, or cause to be given, notice of all special meetings of the Board
and of the Stockholders and shall perform such other duties as may be prescribed
by the Board or by the President, under whose supervision the Secretary shall
be. The Secretary shall have custody of the corporate seal of the Corporation,
and the Secretary, or an Assistant Secretary, shall have authority to impress
the same on any instrument requiring it, and when so impressed the seal may be
attested by the signature of the Secretary or by the signature of such Assistant
Secretary. The Board may give general authority to any other officer to impress
the seal of the Corporation and to attest the same by such officer's signature.
The Secretary or an Assistant Secretary may also attest all instruments signed
by the President or any Vice President. The Secretary shall have charge of all
the books, records and papers of the Corporation relating to its organization
and management, shall see that the reports, statements and other documents
required by statute are properly kept and filed and, in general, shall perform
all duties incident to the office of Secretary of a corporation and such other
duties as may from time to time be assigned to the Secretary by the Board or by
the President.
5.13 TREASURER OR CHIEF FINANCIAL OFFICER. The Treasurer or Chief
Financial Officer shall have charge and custody of, and be responsible for, all
funds, securities and notes of the Corporation; receive and give receipts for
moneys due and payable to the Corporation from any sources whatsoever; deposit
all such moneys and valuable effects in the name and to the credit of the
Corporation in such depositories as may be designated by the Board; against
proper vouchers, cause such funds to be disbursed by checks or drafts on the
authorized depositories of the Corporation signed in such manner as shall be
determined by the Board and be responsible for the accuracy of the amounts of
all moneys so disbursed; regularly enter or cause to be entered in books or
other records maintained for the purpose full and adequate account of all moneys
received or paid for the account of the Corporation; have the right to require
from time to time reports or statements giving such information as the Treasurer
or Chief Financial Officer may desire with respect to any and all financial
transactions of the Corporation from the officers or agents transacting the
same; render to the President or the Board, whenever the President or the Board
shall require the Treasurer or Chief Financial Officer so to do, an account of
the financial condition of the Corporation and of all financial transactions of
the Corporation; exhibit at all reasonable times the records and books of
account to any of the Directors upon application at the office of the
Corporation where such records and books are kept; disburse the funds of the
Corporation as ordered by the Board; and, in general, perform all duties
incident to the office of Treasurer or Chief Financial Officer of a corporation
and such other duties as may from time to time be assigned to the Treasurer or
Chief Financial Officer by the Board or the President.
5.14 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. Assistant Secretaries
and Assistant Treasurers shall perform such duties as shall be assigned to them
by the
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Secretary or by the Treasurer or Chief Financial Officer, respectively, or by
the Board or by the President.
ARTICLE 6
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
6.1 EXECUTION OF CONTRACTS. The Board, except as otherwise provided in
these By-laws, may prospectively or retroactively authorize any officer or
officers, employee or employees or agent or agents, in the name and on behalf of
the Corporation, to enter into any contract or execute and deliver any
instrument, and any such authority may be general or confined to specific
instances, or otherwise limited.
6.2 LOANS. The Board may prospectively or retroactively authorize the
President or any other officer, employee or agent of the Corporation to effect
loans and advances at any time for the Corporation from any bank, trust company
or other institution, or from any firm, corporation or individual, and for such
loans and advances the person so authorized may make, execute and deliver
promissory notes, bonds or other certificates or evidences of indebtedness of
the Corporation, and, when authorized by the Board so to do, may pledge and
hypothecate or transfer any securities or other property of the Corporation as
security for any such loans or advances. Such authority conferred by the Board
may be general or confined to specific instances, or otherwise limited.
6.3 CHECKS, DRAFTS, ETC. All checks, drafts and other orders for the
payment of money out of the funds of the Corporation and all evidences of
indebtedness of the Corporation shall be signed on behalf of the Corporation in
such manner as shall from time to time be determined by resolution of the Board.
6.4 DEPOSITS. The funds of the Corporation not otherwise employed shall be
deposited from time to time to the order of the Corporation with such banks,
trust companies, investment banking firms, financial institutions or other
depositories as the Board may select or as may be selected by an officer,
employee or agent of the Corporation to whom such power to select may from time
to time be delegated by the Board.
ARTICLE 7
STOCK AND DIVIDENDS
7.1 CERTIFICATES REPRESENTING SHARES. The shares of capital stock of the
Corporation shall be represented by certificates in such form (consistent with
the provisions of Section 158 of the General Corporation Law) as shall be
approved by the Board. Such certificates shall be signed by the Chairman of the
Board, the President or
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a Vice President and by the Secretary or an Assistant Secretary or the Treasurer
or Chief Financial Officer or an Assistant Treasurer, and may be impressed with
the seal of the Corporation or a facsimile thereof. The signatures of the
officers upon a certificate may be facsimiles, if the certificate is
countersigned by a transfer agent or registrar other than the Corporation itself
or its employee. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon any certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, such certificate may, unless otherwise ordered by the Board, be
issued by the Corporation with the same effect as if such person were such
officer, transfer agent or registrar at the date of issue.
7.2 TRANSFER OF SHARES. Transfers of shares of capital stock of the
Corporation shall be made only on the books of the Corporation by the holder
thereof or by the holder's duly authorized attorney appointed by a power of
attorney duly executed and filed with the Secretary or a transfer agent of the
Corporation, and on surrender of the certificate or certificates representing
such shares of capital stock properly endorsed for transfer and upon payment of
all necessary transfer taxes. Every certificate exchanged, returned or
surrendered to the Corporation shall be marked "Cancelled," with the date of
cancellation, by the Secretary or an Assistant Secretary or the transfer agent
of the Corporation. A person in whose name shares of capital stock shall stand
on the books of the Corporation shall be deemed the owner thereof to receive
dividends, to vote as such owner and for all other purposes as respects the
Corporation. No transfer of shares of capital stock shall be valid as against
the Corporation, its Stockholders and creditors for any purpose, except to
render the transferee liable for the debts of the Corporation to the extent
provided by law, until such transfer shall have been entered on the books of the
Corporation by an entry showing from and to whom transferred.
7.3 TRANSFER AND REGISTRY AGENTS. The Corporation may from time to time
maintain one or more transfer offices or agents and registry offices or agents
at such place or places as may be determined from time to time by the Board.
7.4 LOST, DESTROYED STOLEN AND MUTILATED CERTIFICATES. The holder of any
shares of capital stock of the Corporation shall immediately notify the
Corporation of any loss, destruction, theft or mutilation of the certificate
representing such shares, and the Corporation may issue a new certificate to
replace the certificate alleged to have been lost, destroyed, stolen or
mutilated. The Board may, in its discretion, as a condition to the issue of any
such new certificate, require the owner of the lost, destroyed, stolen or
mutilated certificate, or his or her legal representatives, to make proof
satisfactory to the Board of such loss, destruction, theft or mutilation and to
advertise such fact in such manner as the Board may require, and to give the
Corporation and its transfer agents and registrars, or such of them as the Board
may require, a bond in such form, in such sums and with such surety or sureties
as the Board may direct, to indemnify the Corporation and its transfer agents
and registrars against any claim that may be made against any of them on account
of the continued existence of any such certificate so alleged to have been lost,
destroyed, stolen or mutilated and against any expense in connection with such
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claim.
7.5 RULES AND REGULATIONS. The Board may make such rules and regulations
as it may deem expedient, not inconsistent with these By-laws or with the
Certificate of Incorporation, concerning the issue, transfer and registration of
certificates representing shares of its capital stock.
7.6 RESTRICTION ON TRANSFER OF STOCK. A written restriction on the
transfer or registration of transfer of capital stock of the Corporation, if
permitted by Section 202 of the General Corporation Law and noted conspicuously
on the certificate representing such capital stock, may be enforced against the
holder of the restricted capital stock or any successor or transferee of the
holder, including an executor, administrator, trustee, guardian or other
fiduciary entrusted with like responsibility for the person or estate of the
holder. Unless noted conspicuously on the certificate representing such capital
stock, a restriction, even though permitted by Section 202 of the General
Corporation Law, shall be ineffective except against a person with actual
knowledge of the restriction. A restriction on the transfer or registration of
transfer of capital stock of the Corporation may be imposed either by the
Certificate of Incorporation or by an agreement among any number of Stockholders
or among such Stockholders and the Corporation. No restriction so imposed shall
be binding with respect to capital stock issued prior to the adoption of the
restriction unless the holders of such capital stock are parties to an agreement
or voted in favor of the restriction.
7.7 DIVIDENDS, SURPLUS, ETC. Subject to the provisions of the Certificate
of Incorporation and of law, the Board:
7.7.1 may declare and pay dividends or make other distributions on
the outstanding shares of capital stock in such amounts and at such time
or times as it, in its discretion, shall deem advisable giving due
consideration to the condition of the affairs of the Corporation;
7.7.2 may use and apply, in its discretion, any of the surplus of
the Corporation in purchasing or acquiring any shares of capital stock of
the Corporation, or purchase warrants therefor, in accordance with law, or
any of its bonds, debentures, notes, scrip or other securities or
evidences of indebtedness; and
7.7.3 may set aside from time to time out of such surplus or net
profits such sum or sums as, in its discretion, it may think proper, as a
reserve fund to meet contingencies, or for equalizing dividends or for the
purpose of maintaining or increasing the property or business of the
Corporation, or for any purpose it may think conducive to the best
interests of the Corporation.
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ARTICLE 8
INDEMNIFICATION
8.1 INDEMNITY UNDERTAKING. To the extent not prohibited by law, the
Corporation shall indemnify any person who is or was made, or threatened to be
made, a party to any threatened, pending or completed action, suit or proceeding
(a "Proceeding"), whether civil, criminal, administrative or investigative,
including, without limitation, an action by or in the right of the Corporation
to procure a judgment in its favor, by reason of the fact that such person, or a
person of whom such person is the legal representative, is or was a Director or
officer of the Corporation, or is or was serving as a director, officer,
employee or agent or in any other capacity at the request of the Corporation for
any other corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise (an "Other Entity") while serving as a Director or officer
of the Corporation, against judgments, fines, penalties, excise taxes, amounts
paid in settlement and costs, charges and expenses (including attorneys' fees
and disbursements) actually and reasonably incurred by such person in connection
with such Proceeding if such person acted in good faith and in a manner such
person believed to be in or not opposed to the best interests of the Corporation
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his or her conduct was unlawful. To the extent specified by the Board
at any time and to the extent not prohibited by law, the Corporation may
indemnify any person who is or was made, or threatened to be made, a party to
any threatened, pending or completed Proceeding, whether civil, criminal,
administrative or investigative, including, without limitation, an action by or
in the right of the Corporation to procure a judgment in its favor, by reason of
the fact that such person is or was an employee or agent of the Corporation, or
is or was serving as a director, officer, employee or agent or in any other
capacity at the request of the Corporation for any Other Entity, against
judgments, fines, penalties, excise taxes, amounts paid in settlement and costs,
charges and expenses (including attorneys' fees and disbursements) actually and
reasonably incurred by such person in connection with such Proceeding if such
person acted in good faith and in a manner such person believed to be in or not
opposed to the best interests of the Corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful.
8.2 ADVANCEMENT OF EXPENSES. The Corporation shall, from time to time,
reimburse or advance to any Director or officer or other person entitled to
indemnification hereunder the funds necessary for payment of expenses, including
attorneys' fees and disbursements, incurred in connection with any Proceeding,
in advance of the final disposition of such Proceeding; provided, however, that,
if required by the General Corporation Law, such expenses incurred by or on
behalf of any Director or officer or other person may be paid in advance of the
final disposition of a Proceeding only upon receipt by the Corporation of an
undertaking, by or on behalf of such Director or officer (or other person
indemnified hereunder), to repay any such amount so advanced if it shall
ultimately be determined by final judicial decision from which there
21
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is no further right of appeal that such Director, officer or other person is not
entitled to be indemnified for such expenses.
8.3 RIGHTS NOT EXCLUSIVE. The rights to indemnification and reimbursement
or advancement of expenses provided by, or granted pursuant to, this Article 8
shall not be deemed exclusive of any other rights to which a person seeking
indemnification or reimbursement or advancement of expenses may have or
hereafter be entitled under any statute, the Certificate of Incorporation, these
By-laws, any agreement (including any policy of insurance purchased or provided
by the Corporation under which directors, officers, employees and other agents
of the Corporation are covered), any vote of Stockholders or disinterested
Directors or otherwise, both as to action in his or her official capacity and as
to action in another capacity while holding such office.
8.4 CONTINUATION OF BENEFITS. The rights to indemnification and
reimbursement or advancement of expenses provided by, or granted pursuant to,
this Article 8 shall continue as to a person who has ceased to be a Director or
officer (or other person indemnified hereunder) and shall inure to the benefit
of the executors, administrators, legatees and distributees of such person.
8.5 INSURANCE. The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of an Other Entity, against any
liability asserted against such person and incurred by such person in any such
capacity, or arising out of such person's status as such, whether or not the
Corporation would have the power to indemnify such person against such liability
under the provisions of this Article 8, the Certificate of Incorporation or
under section 145 of the General Corporation Law or any other provision of law.
8.6 BINDING EFFECT. The provisions of this Article 8 shall be a contract
between the Corporation, on the one hand, and each Director and officer who
serves in such capacity at any time while this Article 8 is in effect and any
other person entitled to indemnification hereunder, on the other hand, pursuant
to which the Corporation and each such Director, officer or other person intend
to be, and shall be legally bound. No repeal or modification of this Article 8
shall affect any rights or obligations with respect to any state of facts then
or theretofore existing or thereafter arising or any proceeding theretofore or
thereafter brought or threatened based in whole or in part upon any such state
of facts.
8.7 PROCEDURAL RIGHTS. The rights to indemnification and reimbursement or
advancement of expenses provided by, or granted pursuant to, this Article 8
shall be enforceable by any person entitled to such indemnification or
reimbursement or advancement of expenses in any court of competent jurisdiction.
Neither the failure of the Corporation (including its Board, its independent
legal counsel and its Stockholders) to have made a determination prior to the
commencement of such action that such
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indemnification or reimbursement or advancement of expenses is proper in the
circumstances nor an actual determination by the Corporation (including its
Board, its independent legal counsel and its Stockholders) that such person is
not entitled to such indemnification or reimbursement or advancement of expenses
shall constitute a defense to the action or create a presumption that such
person is not so entitled. Such a person shall also be indemnified for any
expenses incurred in connection with successfully establishing his or her right
to such indemnification or reimbursement or advancement of expenses, in whole or
in part, in any such proceeding.
8.8 SERVICE DEEMED AT CORPORATION'S REQUEST. Any Director or officer of
the Corporation serving in any capacity in (a) another corporation of which a
majority of the shares entitled to vote in the election of its directors is
held, directly or indirectly, by the Corporation or (b) any employee benefit
plan of the Corporation or any corporation referred to in clause (a) shall be
deemed to be doing so at the request of the Corporation.
8.9 ELECTION OF APPLICABLE LAW. Any person entitled to be indemnified or
to reimbursement or advancement of expenses as a matter of right pursuant to
this Article 8 may elect to have the right to indemnification or reimbursement
or advancement of expenses interpreted on the basis of the applicable law in
effect at the time of the occurrence of the event or events giving rise to the
applicable Proceeding, to the extent permitted by law, or on the basis of the
applicable law in effect at the time such indemnification or reimbursement or
advancement of expenses is sought. Such election shall be made, by a notice in
writing to the Corporation, at the time indemnification or reimbursement or
advancement of expenses is sought; PROVIDED, HOWEVER, that if no such notice is
given, the right to indemnification or reimbursement or advancement of expenses
shall be determined by the law in effect at the time indemnification or
reimbursement or advancement of expenses is sought.
ARTICLE 9
BOOKS AND RECORDS
9.1 BOOKS AND RECORDS. There shall be kept at the principal office of the
Corporation correct and complete records and books of account recording the
financial transactions of the Corporation and minutes of the proceedings of the
Stockholders, the Board and any committee of the Board. The Corporation shall
keep at its principal office, or at the office of the transfer agent or
registrar of the Corporation, a record containing the names and addresses of all
Stockholders, the number and class of shares held by each and the dates when
they respectively became the owners of record thereof.
9.2 FORM OF RECORDS. Any records maintained by the Corporation in the
regular course of its business, including its stock ledger, books of account,
and minute books, may be kept on, or be in the form of, punch cards, magnetic
tape, photographs, microphotographs, or any other information storage device,
provided that the records so
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kept can be converted into clearly legible written form within a reasonable
time. The Corporation shall so convert any records so kept upon the request of
any person entitled to inspect the same.
9.3 INSPECTION OF BOOKS AND RECORDS. Except as otherwise provided by law,
the Board shall determine from time to time whether, and, if allowed, when and
under what conditions and regulations, the accounts, books, minutes and other
records of the Corporation, or any of them, shall be open to the Stockholders
for inspection.
ARTICLE 10
SEAL
The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
ARTICLE 11
FISCAL YEAR
The fiscal year of the Corporation shall end on the Saturday closest to
January 31 of each year, and may be changed by resolution of the Board.
ARTICLE 12
PROXIES AND CONSENTS
Unless otherwise directed by the Board, the Chairman of the Board, the
President, any Vice President, the Secretary or the Treasurer or Chief Financial
Officer, or any one of them, may execute and deliver on behalf of the
Corporation proxies respecting any and all shares or other ownership interests
of any Other Entity owned by the Corporation. Any such officer may appoint such
person or persons as the officer shall deem proper to (a) represent and vote the
shares or other ownership interests so owned by the Corporation at any and all
meetings of holders of shares or other ownership interests of such Other Entity,
whether general or special, and (b) execute and deliver consents respecting such
shares or other ownership interests. Any such officer may also attend any
meeting of the holders of shares or other ownership interests of such Other
Entity and thereat vote or exercise any or all other powers of the Corporation
as the holder of such shares or other ownership interests.
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ARTICLE 13
EMERGENCY BY-LAWS
Unless the Certificate of Incorporation provides otherwise, the following
provisions of this Article 13 shall be effective during an emergency, which is
defined as when a quorum of the Corporation's Directors cannot be readily
assembled because of some catastrophic event. During such emergency:
13.1 NOTICE TO BOARD MEMBERS. Any one member of the Board or any one of
the following officers: Chairman of the Board, President, any Vice President,
Secretary, or Treasurer or Chief Financial Officer, may call a meeting of the
Board. Notice of such meeting need be given only to those Directors whom it is
practicable to reach, and may be given in any practical manner, including by
publication and radio. Such notice shall be given at least six hours prior to
commencement of the meeting.
13.2 TEMPORARY DIRECTORS AND QUORUM. One or more officers of the
Corporation present at the emergency Board meeting, as is necessary to achieve a
quorum, shall be considered to be Directors for the meeting, and shall so serve
in order of rank, and within the same rank, in order of seniority. In the event
that less than a quorum of the Directors are present (including any officers who
are to serve as Directors for the meeting), those Directors present (including
the officers serving as Directors) shall constitute a quorum.
13.3 ACTIONS PERMITTED TO BE TAKEN. The Board as constituted in Section
13.2, and after notice as set forth in Section 13.1 may:
13.3.1 prescribe emergency powers to any officer of the Corporation;
13.3.2 delegate to any officer or Director, any of the powers of the
Board;
13.3.3 designate lines of succession of officers and agents, in the
event that any of them are unable to discharge their duties;
13.3.4 relocate the principal place of business, or designate
successive or simultaneous principal places of business; and
13.3.5 take any other convenient, helpful or necessary action to
carry on the business of the Corporation.
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ARTICLE 14
AMENDMENTS
Any By-laws may be adopted, amended or repealed by a vote of the
Stockholders having at least a majority in voting power of the then issued and
outstanding shares of capital stock of the Corporation.
Amended and Restated as of _________ __, 1999.
26
THE PENN TRAFFIC COMPANY
SENIOR DEBT SECURITIES
INDENTURE
Dated as of _______________ _____, 1999
IBJ WHITEHALL BANK & TRUST COMPANY
Trustee
<PAGE>
CROSS REFERENCE TABLE 1/
Trust Indenture Reference
Act Section Section
- --------------- ---------
310(a)(l) 7.10
(a)(2) 7.10
(a)(3) N.A.
(a)(4) N.A.
(a)(5) 7.10
(b) 7.10
(c) N.A.
311(a) 7.11
(b) 7.11
(c) N.A.
312(a) 3.06
(b) 11.03
(c) 11.03
313(a) 7.06
(b)(1) N.A.
(b)(2) 7.06
(c) 7.06, 11.02
(d) 7.06
314(a) 4.08, 4.18
(b) N.A.
(c)(1) 11.04
(c)(2) 11.04
(c)(3) 11.04
(d) N.A.
(e) 11.05
315(a) 7.01(b)
(b) 7.05, 11.02
(c) 7.01(a)
(d) 7.01(c)
(e) 6.11
316(a) N.A.
(a)(1)(A) 6.05
(a)(1)(B) 6.04
(a)(2) N.A.
(b) 6.07
(c) 9.04(b)
317(a)(1) 6.08
- --------
1/ This Cross-Reference Table is not part of the Indenture.
<PAGE>
(a)(2) 6.09
(b) 3.05
318(a) 11.01
N.A. means not applicable
<PAGE>
TABLE OF CONTENTS
Page
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RECITALS OF THE COMPANY.................................................1
ARTICLE 1 DEFINITIONS AND INCORPORATION
BY REFERENCE.............................................1
SECTION 1.01 Definitions..........................................1
SECTION 1.02 Other Definitions...................................15
SECTION 1.03 Incorporation by Reference of Trust Indenture Act...16
SECTION 1.04 Rules of Construction...............................16
ARTICLE 2 FORM OF THE SECURITIES..................................17
SECTION 2.01 Form................................................17
SECTION 2.02 Form of Legend for Global Securities................17
SECTION 2.03 Form of Trustee's Certificate of Authentication.....18
ARTICLE 3 THE SECURITIES..........................................18
SECTION 3.01 Amount Unlimited; Issuable in Series................18
SECTION 3.02 Denominations.......................................21
SECTION 3.03 Execution, Authentication, Delivery and Dating......21
SECTION 3.04 Registrar and Paying Agent..........................23
SECTION 3.05 Paying Agent to Hold Money in Trust.................23
SECTION 3.06 Holder Lists........................................24
SECTION 3.07 Transfer and Exchange...............................24
SECTION 3.08 Replacement Securities..............................25
SECTION 3.09 Temporary Securities................................26
SECTION 3.10 Cancellation........................................26
SECTION 3.11 Defaulted Interest..................................26
SECTION 3.12 Persons Deemed Owners...............................26
SECTION 3.13 Computation of Interest.............................27
ARTICLE 4 COVENANTS...............................................27
SECTION 4.01 Payment of Securities...............................27
SECTION 4.02 Limitation on Restricted Payments...................28
SECTION 4.03 Limitation on Indebtedness..........................29
SECTION 4.04 Limitation on Liens.................................32
SECTION 4.05 Limitation on Sale and Leaseback Transactions.......35
SECTION 4.06 Limitation on Asset Sales...........................35
SECTION 4.07 Limitation on Investments...........................36
SECTION 4.08 SEC Reports.........................................37
SECTION 4.09 Limitation on Payment Restrictions Affecting
Subsidiaries........................................37
SECTION 4.10 Limitation on Issuance of Indebtedness and
Preferred Stock by Subsidiaries.....................38
i
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SECTION 4.11 Transactions with Affiliates........................38
SECTION 4.12 Restrictions on Becoming an Investment Company......39
SECTION 4.13 Continued Existence and Rights......................39
SECTION 4.14 Maintenance of Properties and Other Matters.........39
SECTION 4.15 Taxes and Claims....................................40
SECTION 4.16 Usury Laws..........................................40
SECTION 4.17 Money for Security Payments to be Held in Trust.....41
SECTION 4.18 Compliance Certificate..............................41
ARTICLE 5 SUCCESSORS; CHANGE OF CONTROL; OPTIONAL
PREPAYMENT..............................................42
SECTION 5.01 When Company May Merge, etc.; Change of
Control; Holders' Right of Optional Prepayment......42
ARTICLE 6 DEFAULTS AND REMEDIES...................................44
SECTION 6.01 Events of Default...................................44
SECTION 6.02 Acceleration........................................46
SECTION 6.03 Other Remedies......................................47
SECTION 6.04 Waiver of Defaults..................................47
SECTION 6.05 Control by Majority.................................47
SECTION 6.06 Limitation on Suits.................................48
SECTION 6.07 Rights of Holders to Receive Payment................48
SECTION 6.08 Collection Suit by Trustee..........................48
SECTION 6.09 Trustee May File Proofs of Claim....................49
SECTION 6.10 Priorities..........................................49
SECTION 6.11 Undertaking for Costs...............................49
ARTICLE 7 TRUSTEE.................................................50
SECTION 7.01 Duties of Trustee...................................50
SECTION 7.02 Rights of Trustee...................................51
SECTION 7.03 Individual Rights of Trustee........................52
SECTION 7.04 Trustee's Disclaimer................................52
SECTION 7.05 Notice of Defaults..................................52
SECTION 7.06 Reports by Trustee to Holders.......................52
SECTION 7.07 Compensation and Indemnity..........................53
SECTION 7.08 Replacement of Trustee..............................53
SECTION 7.09 Successor Trustee by Merger, etc....................55
SECTION 7.10 Eligibility; Disqualification.......................56
SECTION 7.11 Preferential Collection of Claims Against
Company.............................................56
SECTION 7.12 Authenticating Agent................................56
ARTICLE 8 DISCHARGE OF INDENTURE..................................57
SECTION 8.01 Termination of Company's Obligations................57
SECTION 8.02 Application of Trust Money..........................58
ii
<PAGE>
SECTION 8.03 Repayment to Company................................59
SECTION 8.04 Reinstatement.......................................59
ARTICLE 9 AMENDMENTS..............................................59
SECTION 9.01 Without Consent of Holders..........................59
SECTION 9.02 With Consent of Holders.............................60
SECTION 9.03 Compliance with Trust Indenture Act.................61
SECTION 9.04 Revocation and Effect of Consents...................61
SECTION 9.05 Notation on or Exchange of Securities...............62
SECTION 9.06 Trustee Protected...................................62
ARTICLE 10 REDEMPTIONS.............................................63
SECTION 10.01 Election to Redeem; Notice to Trustee..............63
SECTION 10.02 Selection of the Securities to be Redeemed.........63
SECTION 10.03 Notice of Redemption...............................63
SECTION 10.04 Effect of Notice of Redemption.....................64
SECTION 10.05 Deposit of Redemption Price on Optional
Redemption.........................................64
SECTION 10.06 Securities Redeemed in Part........................64
ARTICLE 11 MISCELLANEOUS...........................................65
SECTION 11.01 Trust Indenture Act Controls.......................65
SECTION 11.02 Notices............................................65
SECTION 11.03 Communication by Holders with Other Holders........66
SECTION 11.04 Certificate and Opinion as to Conditions Precedent.66
SECTION 11.05 Statements Required in Certificate or Opinion......66
SECTION 11.06 Rules by Trustee and Agents........................67
SECTION 11.07 Legal Holidays.....................................67
SECTION 11.08 No Recourse Against Others.........................67
SECTION 11.09 Duplicate Originals................................67
SECTION 11.10 Governing Law......................................67
SECTION 11.11 No Adverse Interpretation of Other Agreements......67
SECTION 11.12 Successors.........................................68
SECTION 11.13 Severability.......................................68
SECTION 11.14 Table of Contents, Headings, etc...................68
SECTION 11.15 Benefits of Indenture..............................68
iii
<PAGE>
INDENTURE dated as of _____________________________, 1999 between
THE PENN TRAFFIC COMPANY, a Delaware corporation (the "Company"), and IBJ
WHITEHALL BANK & TRUST COMPANY, a New York banking corporation, as Trustee (the
"Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
debentures, notes or other evidences of indebtedness (herein called the
"Securities"), to be issued in one or more series as in this Indenture provided.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities or of series thereof, as
follows:
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01 Definitions.
"Additional Assets" means any Property or assets substantially
related to the Company's primary business and, in the case of proceeds received
by the Company from the sale of the Capital Stock of an Unrestricted Subsidiary,
shall also mean Investments in another Unrestricted Subsidiary.
"Affiliate" means, with respect to any referenced Person, a Person
(i) which directly or indirectly through one or more intermediaries controls, or
is controlled by, or is under common control with, such referenced Person, (ii)
which directly or indirectly through one or more intermediaries beneficially
owns or holds 5% or more of the combined voting power of the total Voting Stock
of such referenced Person or (iii) of which 5% or more of the combined voting
power of the total Voting Stock (or in the case of a Person which is not a
corporation, 5% or more of the equity interest) directly or indirectly through
one or more intermediaries is beneficially owned or held by such referenced
Person, or a Subsidiary or an Unrestricted Subsidiary of such referenced Person.
When used herein without reference to any Person, Affiliate means an Affiliate
of the Company.
<PAGE>
2
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Asset Sale" means the sale or other disposition, in a transaction
which is not a Sale and Leaseback Transaction, by the Company or one of its
Subsidiaries to any Person other than the Company or one of its Subsidiaries of
(i) any of the Capital Stock of any of the Subsidiaries or Unrestricted
Subsidiaries of the Company or (ii) any other assets of the Company or any other
assets of its Subsidiaries outside the ordinary course of business of the
Company or such Subsidiary.
"Average Life" means, as of the date of determination, with respect
to any debt security, the quotient obtained by dividing (i) the sum of the
products of the numbers of years from the date of determination to the dates of
each successive scheduled principal payment of such debt security multiplied by
the amount of such principal payment by (ii) the sum of all such principal
payments.
"Board of Directors" means the board of directors of the Company or
any authorized committee of such Board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means any day which is not a Legal Holiday.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations, rights in or other equivalents (however
designated) of such Person's capital stock, and any rights (other than debt
securities convertible into capital stock), warrants or options exchangeable for
or convertible into such capital stock.
"Capitalized Lease Obligation" means, as to any Person, the
obligation of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) real or personal Property which
obligation is required to be classified and accounted for as a capital lease
obligation on a balance sheet of such Person under generally accepted accounting
principles and, for purposes of this Indenture, the amount of such obligation at
any date shall be the outstanding amount thereof at such date, determined in
accordance with generally accepted accounting principles.
"Change of Control" means, with respect to the Company, an event or
series of events by which (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rules 13d3 and 13d5 under the Exchange Act, except that a person
shall be deemed to have "beneficial ownership" of all shares that any such
person has the right to
<PAGE>
3
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 from and after the date of
this Indenture, individuals who at the beginning of such period constituted the
Company's Board of Directors (together with any new directors whose election by
the Company's Board of Directors, or whose nomination for election by the
Company's shareholders, was approved by a vote of at least a majority of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the directors then in
office.
"Company" means the Person designated as the "Company" in the first
paragraph of this instrument until any successor corporation shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean any such successor corporation.
"Company Request" or "Company Order" means a written request or
order signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its Chairman of the Executive Committee, its Vice
Chairman of the Executive Committee, its President or a Vice President, and by
its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary,
and delivered to the Trustee.
"Consolidated Interest Coverage Ratio" means, with respect to the
Company for any period, the ratio of (i) the aggregate amount of Consolidated
Operating Income of the Company for the four consecutive fiscal quarters for
which financial information in respect thereof is available immediately prior to
the Transaction Date to (ii) the aggregate amount of Consolidated Interest
Expense of the Company for the four consecutive fiscal quarters for which
financial information in respect thereof is available immediately prior to the
Transaction Date; provided that for purposes of calculating the Consolidated
Interest Coverage Ratio of the Company, (a) Consolidated Operating Income shall
be calculated on the basis of first-in, first-out method of inventory valuation,
as determined in accordance with generally accepted accounting principles, (b)
the Consolidated Operating Income and Consolidated
<PAGE>
4
Interest Expense of the Company shall include the Consolidated Operating Income
and Consolidated Interest Expense of any Person to be acquired by the Company or
any of its Subsidiaries in connection with the transaction giving rise to the
need to calculate the Consolidated Interest Coverage Ratio, on a pro forma basis
for the four consecutive fiscal quarters for which financial information in
respect thereof is available immediately prior to the Transaction Date, and
shall also include the Consolidated Operating Income and Consolidated Interest
Expense of any other Person which has been acquired by the Company or any of its
Subsidiaries during such four consecutive fiscal quarters on a pro forma basis
for such four consecutive fiscal quarters, the Consolidated Operating Income and
Consolidated Interest Expense of any such Person or Persons to be determined on
the same basis as determining such items for the Company and (c) Consolidated
Interest Expense and Redeemable Dividends shall be calculated as if (i) any
Indebtedness incurred or issued since the beginning of the four consecutive
fiscal quarters for which financial information in respect thereof is available
immediately prior to the Transaction Date, or to be incurred or issued at or
prior to the time the transaction giving rise to the need to calculate the
Consolidated Interest Coverage Ratio is effected (the "Transaction Time"), had
been incurred or issued as of the beginning of such four quarter period and (ii)
any Indebtedness repaid since the beginning of such four quarter period, or to
be repaid with the proceeds of Indebtedness or equity incurred or issued or to
be incurred or issued at or prior to the Transaction Time, had been repaid as of
the beginning of such four quarter period. For purposes of determining the
Consolidated Interest Coverage Ratio of the Company for any period, (i) any
Indebtedness incurred or proposed to be incurred or Redeemable Stock issued or
proposed to be issued which for purposes of clause (c) above is deemed to have
been incurred or issued as of the beginning of the four quarter period described
in clause (c) which bears interest at a fluctuating rate will be deemed to have
borne interest during such four quarter period at the rate in effect on the
Transaction Date and (ii) "Subsidiary" shall mean any Subsidiary of the Company
other than any Subsidiary (and Subsidiaries of such Subsidiary) of which the
Company does not own or control, directly or indirectly, a sufficient amount of
Voting Stock in order to cause a merger of such Subsidiary into the Company or
another Subsidiary without the approval of any other holder of Voting Stock of
such Subsidiary.
"Consolidated Interest Expense" means, for any period, without
duplication (A) the sum of (i) the aggregate amount of interest recognized by
the Company and its Subsidiaries during such period in respect of Indebtedness
of the Company and its Subsidiaries (including, without limitation, all interest
capitalized by the Company or any of its Subsidiaries during such period and all
commissions, discounts and other fees and charges owed by the Company and its
Subsidiaries with respect to letters of credit and bankers' acceptance financing
and the net costs associated with Interest Swap Obligations of the Company and
its Subsidiaries), (ii) the aggregate amount of the interest component of
rentals in respect of Capitalized Lease Obligations recognized by the Company
and its Subsidiaries during such period, (iii) to the extent any Indebtedness of
any Person is Guaranteed by the
<PAGE>
5
Company or any of its Subsidiaries (other than Guarantees relating to
obligations of customers of the franchise or wholesale business of the Company
or any of its Subsidiaries which Guarantees are in the ordinary course of
business and consistent with past practices of the Company or its Subsidiaries),
the aggregate amount of interest paid or accrued by such Person during such
period attributable to any such Indebtedness, and (iv) the aggregate amount of
Redeemable Dividends accrued during such period with respect to Redeemable Stock
of the Company or any of its Subsidiaries, whether or not declared during such
period, less (B) amortization or writeoff of deferred financing costs of the
Company and its Subsidiaries during such period and, to the extent included in
(A) above, any charge related to any premium or penalty paid in connection with
redeeming or retiring any Indebtedness prior to its stated maturity, in the case
of both (A) and (B) above, after elimination of intercompany accounts among the
Company and its Subsidiaries and as determined in accordance with generally
accepted accounting principles.
"Consolidated Net Income" means, for any period, the aggregate net
income of the Company and its Subsidiaries for such period on a consolidated
basis, determined in accordance with generally accepted accounting principles,
provided that there shall be excluded therefrom after giving effect to any
related tax effect (i) gains and losses from Asset Sales or reserves relating
thereto (except gains on Asset Sales relating to an Unrestricted Subsidiary,
including the sale or other disposition of all or a portion of the Capital Stock
of an Unrestricted Subsidiary, to the extent of the amount of cash dividends or
other cash distributions in respect of its Capital Stock relating to the sale of
the Property or Capital Stock of such Unrestricted Subsidiary that are actually
paid to, and received by, the Company during such period out of funds legally
available therefor), (ii) items classified as extraordinary or nonrecurring,
(iii) the income (or loss) of any Unrestricted Subsidiary and any Joint Venture,
except to the extent of the amount of cash dividends or other distributions in
respect of its Capital Stock or interest in the Joint Venture actually paid to,
and received by, the Company or any of its Subsidiaries during such period by
such Unrestricted Subsidiary or Joint Venture out of funds legally available
therefor, (iv) except to the extent includable pursuant to clause (iii), the
income (or loss) of any Person accrued or attributable to any period prior to
the date it becomes a Subsidiary of the Company or is merged into or
consolidated with the Company or any of its Subsidiaries or that Person's assets
(or a portion thereof) are acquired by the Company or any of its Subsidiaries,
(v) the cumulative effect of changes in accounting principles in the year of
adoption of such change, and (vi) the effect of the amortization of excess
reorganization value.
"Consolidated Operating Income" means, with respect to the Company
for any period, the Consolidated Net Income of the Company and its Subsidiaries
for such period (A) increased by the sum of (i) Consolidated Interest Expense of
the Company for such period, (ii) income tax expense of the Company and its
Subsidiaries, on a consolidated basis, for such period (after giving effect to
any income tax expense adjustments made in arriving at Consolidated Net Income),
<PAGE>
6
(iii) depreciation expense of the Company and its Subsidiaries, on a
consolidated basis, for such period, (iv) amortization expense of the Company
and its Subsidiaries, on a consolidated basis, for such period, (v) amortization
or writeoff of deferred financing costs of the Company and its Subsidiaries, on
a consolidated basis, for such period and (vi) other noncash items, but only to
the extent the items referred to in subclauses (i) through (vi) of this clause
(A) reduced such Consolidated Net Income, and (B) decreased by the sum of (i)
noncash items increasing such Consolidated Net Income and (ii) any revenues
received or accrued by the Company or any of its Subsidiaries from any Person
(other than the Company or any of its Subsidiaries) in respect of any Investment
for such period (other than revenue from any Qualified Investment), but only to
the extent the items referred to in subclauses (i) and (ii) of this clause (B)
increased such Consolidated Net Income, all as determined in accordance with
generally accepted accounting principles.
"Consolidated Revenue" means, with respect to the Company and its
Subsidiaries, for any period the total revenues of the Company and its
Subsidiaries as determined in accordance with generally accepted accounting
principles for such period on a consolidated basis.
"Control Affiliate" means, with respect to the Company, any
Affiliate that directly or indirectly through one or more intermediaries (i)
controls the Company or (ii) beneficially owns, holds or controls 10% or more of
the combined voting power of the total Voting Stock of the Company.
"Default" means an event or condition the occurrence of which would,
with the lapse of time or the giving of notice or both, become an Event of
Default as defined in Section 6.01.
"Depositary" means, with respect to Securities of any series
issuable in whole or in part in the form of one or more Global Securities, a
clearing agency registered under the Exchange Act that is designated to act as
Depositary for such Securities as contemplated by Section 3.01.
"Fair Market Value" means, with respect to an Asset Sale involving
any Property or any noncash consideration received by or transferred to any
Person, the fair market value of such Property or such noncash consideration as
determined in good faith (i) in the case of any Asset Sale involving any
Property or any such noncash consideration with a fair market value of less than
$5 million, by the Company as evidenced by an Officers' Certificate and (ii) in
the case of any Asset Sale involving any Property or any such noncash
consideration with a fair market value of more than $5 million, by the Board of
Directors of the Company.
"Global Security" means a Security that evidences all or part of the
Securities of any series and bears the legend set forth in Section 2.02 (or such
legend as may be specified as contemplated by Section 3.01 for such Securities).
<PAGE>
7
"Guarantee" means any direct or indirect obligation, contingent or
otherwise, of a Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other Person in any manner.
"Holder" means a Person in whose name a Security is registered.
"Indebtedness," as applied to any Person, means, without
duplication, (i) any obligation, contingent or otherwise, for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof), (ii) any obligation owed for all or any
part of the purchase price of Property or other assets or for the cost of
Property or other assets constructed or of improvements thereto (including any
obligation under or in connection with any letter of credit related thereto),
other than accounts payable included in current liabilities incurred in respect
of Property and services purchased in the ordinary course of business, (iii)
except to the extent supporting other Indebtedness of a Person, any obligation
of such Person under or in connection with any letter of credit issued for the
account of such Person, and, without duplication, all drafts drawn, or demands
for payment honored, thereunder, (iv) any obligation, contingent or otherwise,
as set forth in subclauses (i) and (ii) of this definition, secured by any Lien
in respect of Property even though the Person owning the Property has not
assumed or become liable for payment of such obligation, (v) any Capitalized
Lease Obligation, (vi) any note payable or draft accepted representing an
extension of credit (other than extensions of credit for Property and services
purchased in the ordinary course of business), whether or not representing an
obligation for borrowed money, (vii) the maximum fixed repurchase price of any
Redeemable Stock, (viii) obligations in respect of Interest Swap Obligations and
(ix) any obligation which is in economic effect a Guarantee, regardless of its
characterization, with respect to Indebtedness (of a kind otherwise described in
this definition) of another Person. For purposes of the preceding sentence, the
maximum fixed repurchase price of any Redeemable Stock which does not have a
fixed repurchase price shall be calculated in accordance with the terms of such
Redeemable Stock as if such Redeemable Stock were repurchased on any date on
which Indebtedness shall be required to be determined pursuant to this
Indenture. The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and the maximum liability of any such contingent obligations at such date.
"Indenture" means this Indenture, as amended, modified or
supplemented from time to time, together with any exhibits, schedules or other
attachments hereto. The term "Indenture" shall also include the terms of
particular series of Securities established as contemplated by Section 3.01.
"Interest Swap Obligations" means the obligations of any Person
pursuant to any interest rate swap agreement, interest rate cap, collar or floor
agreement or other similar agreement or arrangement.
<PAGE>
8
"Investment" means, with respect to any Person (such Person being
referred to in this definition as the "Investor"), (i) any amount paid by the
Investor, directly or indirectly, or any transfer of Property by the Investor,
directly or indirectly (such amount to be the Fair Market Value of such Property
at the time of transfer by the Investor), to any other Person for Capital Stock
of, or as a capital contribution to, any other Person and (ii) any direct or
indirect loan or advance by the Investor to any other Person (other than
accounts receivable of such Investor arising in the ordinary course of
business).
"Joint Venture" means any Person (other than a Subsidiary of the
Company) in which any Person other than the Company or any of its Subsidiaries
has a joint or shared equity interest with the Company or any of its
Subsidiaries.
"Lien" means any mortgage, lien (statutory or other), charge,
pledge, hypothecation, conditional sales agreement, adverse claim, title
retention agreement or other security interest, encumbrance or title defect in
or on, or any interest or title of any vendor, lessor, lender or other secured
party to or of such Person under any conditional sale, trust receipt or other
title retention agreement with respect to, any Property or asset of such Person.
"Management Agreement" means, the Management Agreement dated as of
the date hereof, among the Company, Hirsch & Fox, L.L.C., Gary D. Hirsch and
Martin A. Fox, as the same may be modified, amended or supplemented from time to
time.
"Material Acquisition" means any merger, consolidation, acquisition
or lease of assets, acquisition of securities or other business combination or
acquisition, or any two or more such transactions if part of a common plan to
acquire a business or group of businesses, if the assets thus acquired in the
aggregate would have constituted a Material Subsidiary if they had been acquired
by a Subsidiary, based upon the consolidated financial statements of the Company
and its Subsidiaries for the most recent fiscal year for which financial
statements are available.
"Material Subsidiary" means, with respect to the Company at any
time, each existing Subsidiary and each Subsidiary hereafter acquired or formed
which (i) for the most recent fiscal year of the Company for which financial
statements are available accounted for more than 10% of the consolidated
revenues of the Company and its Subsidiaries or (ii) as at the end of such
fiscal year, was the owner (beneficial or otherwise) of more than 10% of the
consolidated assets of the Company and its Subsidiaries, all as shown on the
consolidated financial statements of the Company and its Subsidiaries for such
fiscal year.
"Maturity," when used with respect to any Security, means the date
on which the principal of such Security or an installment of principal becomes
due and
<PAGE>
9
payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
"Net Proceeds" means, with respect to an Asset Sale by the Company
or any of its Subsidiaries, (i) the gross proceeds received by the Company or
its Subsidiary in connection with such Asset Sale (the amount of any noncash
consideration received as proceeds to be the Fair Market Value of such
consideration, provided that liabilities assumed by the buyer shall not be
deemed proceeds received by the Company or its Subsidiary), less (ii) the sum of
(a) reasonable fees and expenses incurred by the Company or such Subsidiary in
connection with such Asset Sale, (b) taxes payable by the Company or such
Subsidiary as a result of and in connection with such Asset Sale, including any
tax on income resulting from the gain realized from such Asset Sale, (c)
payments made with respect to liabilities associated with the assets which are
the subject of the Asset Sale, including, without limitation, trade payables and
other accrued liabilities, and payments made to retire Indebtedness where the
assets disposed of in such Asset Sale constituted security for or had been
pledged to secure such Indebtedness and payment of such Indebtedness is required
in connection with such Asset Sale and (d) appropriate amounts to be provided by
the Company or any Subsidiary thereof, as the case may be, as a reserve, in
accordance with generally accepted accounting principles, against any
liabilities associated with such assets and retained by the Company or any
Subsidiary thereof, as the case may be, after such Asset Sale, including,
without limitation, liabilities under any indemnification obligations and
severance and other employee termination costs associated with such Asset Sale.
"Officer" means the Chairman of the Board of Directors, the Vice
Chairman of the Board of Directors, Chairman of the Executive Committee of the
Board of Directors, Vice Chairman of the Executive Committee of the Board of
Directors, the President, any Vice President, the Treasurer, the Secretary, any
Assistant Treasurer or any Assistant Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers
of the Company, one of whom must be the Chairman of the Board of Directors, the
Vice Chairman of the Board of Directors, Chairman of the Executive Committee of
the Board of Directors, Vice Chairman of the Executive Committee of the Board of
Directors, the President, any Vice President or the Treasurer of the Company.
"Opinion of Counsel" means a written opinion from legal counsel who
is acceptable to the Trustee. The counsel may be an employee of or counsel to
the Company or the Trustee.
"Other Senior Indebtedness" means, at any date, outstanding
Indebtedness of the Company, other than the Securities, that is pari passu in
any respect in right of payment with the Securities, including, without
limitation, Indebtedness outstanding under the Secured Credit Facility.
<PAGE>
10
"Outstanding," when used with respect to Securities, means, as of
the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
(a) Securities theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(b) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or any Paying
Agent (other than the Company) in trust or set aside and segregated in trust by
the Company (if the Company shall act as its own Paying Agent) for the Holders
of such Securities; provided that, if such Securities are to be redeemed, notice
of such redemption has been duly given pursuant to this Indenture or provision
therefor satisfactory to the Trustee has been made;
(c) Securities as to which the Company's obligations have been
discharged as provided in Article 8 hereof; and
(d) Securities in exchange for or in lieu of which other Securities
have been authenticated and delivered pursuant to this Indenture, other than any
such Securities in respect of which there shall have been presented to the
Trustee proof satisfactory to it that such Securities are held by a bona fide
purchaser in whose hands such Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given, made or taken any
request, demand, authorization, direction, notice, consent, waiver or other
action hereunder as of any date, Securities owned by the Company or any
Affiliate shall be disregarded and deemed not to be Outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent, waiver or other
action, only Securities which the Trustee knows to be so owned shall be so
disregarded. Securities so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Company or any Affiliate of the Company.
"Person" means any individual, partnership, corporation, venture,
joint venture, unincorporated organization, or a government or agency or
political subdivision thereof.
"Principal" or "principal" of a debt security means the principal
amount of a debt security plus the premium, if any, on such debt security.
"Property" means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
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"Qualified Equity Offering" means an issuance and offering for cash
by the Company of shares of its Capital Stock, other than Redeemable Stock.
"Qualified Investment" means the following kinds of instruments if,
on the date of purchase or other acquisition of any such instrument by the
Company or any Subsidiary the remaining term to maturity thereof is not more
than one year: (i) obligations issued or unconditionally guaranteed as to
principal and interest by the United States of America or by any agency or
authority controlled or supervised by and acting as an instrumentality of the
United States of America; (ii) obligations (including, but not limited to,
demand or time deposits, bankers' acceptances and certificates of deposit)
issued by (a) a depository institution or trust company incorporated under the
laws of the United States of America, any state thereof or the District of
Columbia, (b) a United States branch office or agency of any foreign depository
institution or (c) wholly owned Subsidiaries of any U.S. depository institution
guaranteed by such U.S. bank or depository, provided that such U.S. bank, trust
company or United States branch office or agency has, at the time of the
Company's or any Subsidiary's investment therein or contractual commitment
providing for such investment, capital, surplus or undivided profits (as of the
date of such institution's most recently published financial statements) in
excess of $100 million and the long-term unsecured debt obligations (other than
such obligations rated on the basis of the credit of a person or entity other
than such institution) of such institution, at the time of the Company's or any
Subsidiary's investment therein or contractual commitment providing for such
investment, is rated at least A by Standard & Poor's Ratings Service or A3 by
Moody's Investors Service, Inc.; and (iii) debt obligations (including, but not
limited to, commercial paper and medium term notes) issued or unconditionally
guaranteed as to principal and interest by any corporation, state or municipal
government or agency or instrumentality thereof, or foreign sovereignty if the
commercial paper of such corporation, state or municipal government or foreign
sovereignty has, at the time of the Company's or any Subsidiary's investment
therein or contractual commitment providing for such investment, credit ratings
of A1 by Standard & Poor's Ratings Service or P1 by Moody's Investors Service,
Inc., or the debt obligations of such corporation, state or municipal government
or foreign sovereignty, at the time of the Company's or any Subsidiary's
investment therein or contractual commitment providing for such investment, have
credit ratings of at least A by Standard & Poor's Ratings Service or A3 by
Moody's Investors Service, Inc.
"Redeemable Dividend" means, for any dividend payable with regard to
Redeemable Stock, the quotient of the dividend divided by the difference between
one and the maximum statutory federal income tax rate (expressed as a decimal
number between 1 and 0) then applicable to the issuer of such Redeemable Stock.
"Redeemable Stock" means, with respect to any Person, any equity
security that by its terms or otherwise is required to be redeemed or is
redeemable at the option of the holder at any time prior to the maturity of the
Securities.
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12
"Redemption Date" means, when used with respect to any Security to
be redeemed, the date fixed for such redemption pursuant to this Indenture.
"Redemption Price" means, when used with respect to any Security to
be redeemed, the price fixed for such redemption pursuant to this Indenture and
the Securities as set forth in Article 10 of this Indenture.
"Representative" means the indenture trustee or other trustee, agent
or representative for an issue of Senior Debt.
"Restricted Payment" means (i) a dividend or other distribution
declared and paid on the Capital Stock of the Company or any of its
Subsidiaries, other than dividends or distributions consisting of shares of the
Capital Stock of such entity (or rights or warrants to subscribe for or purchase
shares of such Capital Stock) and other than dividends or distributions declared
and paid by any Subsidiary to the Company or to any other direct or indirect
Wholly Owned Subsidiary of the Company, (ii) a payment made by the Company, any
Subsidiary or any Unrestricted Subsidiary (other than to the Company or any
Subsidiary) to purchase, redeem, acquire or retire any Capital Stock of the
Company (or rights or warrants to subscribe for or purchase shares of such
Capital Stock) or (iii) a payment made by the Company, any Subsidiary or any
Unrestricted Subsidiary (other than to the Company or any Subsidiary) to
acquire, retire or redeem any debt of or equity interest in or otherwise to make
any Investment in any Control Affiliate of the Company (other than a Subsidiary
of the Company).
"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which such Person is a party, providing for
the leasing to the Company or a Subsidiary of any Property, whether owned at the
date of issuance of a particular series of Securities pursuant to this Indenture
or thereafter acquired, which has been or is to be sold or transferred by the
Company or such Subsidiary to such Person, or to any other Person to whom funds
have been or are to be advanced by such Person, on the security of such
Property.
"SEC" means the Securities and Exchange Commission.
"Secured Credit Amount" means as of any date an amount equal to the
greater of (i) $350.0 million or (ii) 15% of the Company's Consolidated Revenue
for the four quarters ended as of the last fiscal quarter immediately preceding
such date for which financial results are available.
"Secured Credit Facility" means (i) the Loan and Security Agreement
dated ____________, 1999 between the Company, its Subsidiaries and the lenders
named therein, and Fleet Bank, as agent, as the same may be amended, modified,
renewed, refunded, replaced or refinanced from time to time with the same or
different lenders or Subsidiaries, including, without limitation, any security
<PAGE>
13
agreements, pledge agreements, notes, letters of credit, guarantees, collateral
documents, instruments and agreements executed in connection therewith, in each
case as such agreements may be amended, restated, replaced, renewed, refunded,
refinanced, supplemented or otherwise modified from time to time; and (ii) any
senior secured or unsecured notes issued by the Company to refund, replace or
refinance all or a portion of the foregoing or any Indebtedness that refinances,
refunds, replaces or renews any such refinancing Indebtedness.
"Securities" has the meaning set forth in the first recital of this
Indenture and more particularly means any Securities authenticated and delivered
under this Indenture.
"Senior Indebtedness" means, at any date, any outstanding
Indebtedness of the Company that is pari passu in any respect in right of
payment with the Securities.
"Stated Maturity," when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date specified
in such Security as the fixed date on which the principal of such Security or
such installment of principal or interest is due and payable.
"Subordinated Debt" means, at any date, any Indebtedness of the
Company that is subordinated in any respect in right of payment to the
Securities or any Other Senior Indebtedness including, without limitation,
principal, premium, interest, fees, indemnities and amounts in respect of claims
and rights of rescission.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which securities representing more than
50% of the combined voting power of the total Voting Stock (or, in the case of
an association or other business entity which is not a corporation, more than
50% of the equity interest) is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, provided that an Unrestricted Subsidiary shall
not be deemed to be a Subsidiary for purposes of this Indenture. When used
herein without reference to any Person, Subsidiary means a Subsidiary of the
Company.
"Surviving Corporation" means the corporation formed by or surviving
any consolidation or merger involving the Company or to which a transfer, sale
or lease of all or substantially all of the Company's Property is made.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa77bbbb), as amended by the Trust Indenture Reform Act of 1990, as in effect
on the date of execution of this Indenture, except as provided in Section 9.03.
<PAGE>
14
"Transaction Date" means the date of the transaction giving rise to
the need to calculate the Consolidated Interest Coverage Ratio, provided that if
such transaction is related to or in connection with any acquisition of any
Person, the Transaction Date shall be the earlier of (i) the date on which the
Company or any of its Subsidiaries enters into an agreement with such Person to
effect such acquisition, (ii) the date on which the Company or any of its
Subsidiaries first makes a public announcement of such acquisition or any offer
or proposal to effect such acquisition, (iii) the date on which the Company or
any of its Subsidiaries first makes a filing with the SEC or the Federal Trade
Commission in connection with any proposed acquisition and (iv) the date such
acquisition is consummated, provided, however, that if subsequent to the
occurrence of an event described in clause (i), (ii) or (iii) above or clause
(A), (B) or (C) below the Company or any of its Subsidiaries shall amend the
terms of such acquisition with respect to the consideration payable by the
Company or any of its Subsidiaries in connection with such acquisition, the
Transaction Date shall be the earlier of (A) the date on which the Company or
any of its Subsidiaries enters into a binding written agreement with such Person
to effect such acquisition on such amended terms, (B) the date on which the
Company or any of its Subsidiaries makes a public announcement of any offer or
proposal to effect such acquisition on such amended terms and (C) the date on
which the Company or any of its Subsidiaries first makes a filing disclosing
such amended terms with the SEC or the Federal Trade Commission in connection
with any proposed acquisition. The second proviso above shall not be applicable
if, as of the initial Transaction Date with respect to any acquisition, the
Company could incur at least $1.00 of additional Indebtedness under Section
4.03(a) hereof when the Consolidated Interest Coverage Ratio of the Company is
calculated on the basis of the amended terms of such acquisition and the
Indebtedness to be incurred by the Company and its Subsidiaries in connection
therewith.
"Trustee" means the party named as such in the first paragraph of
this instrument above unless and until a successor replaces it in accordance
with the terms of this Indenture and thereafter, "Trustee" shall mean or include
each Person who is then a Trustee hereunder, and if at any time there is more
than one such Person, "Trustee" as used with respect to the Securities of any
series shall mean the Trustee with respect to Securities of that series.
"Trust Officer," when used with respect to the Trustee, means any
officer within the Corporate Trust Department (or any successor group) of the
Trustee, including without limitation any Vice President, Assistant Vice
President, any Assistant Secretary or any other officer of the Trustee
customarily performing functions similar to those performed by any of the
above-designated officers and also means, with respect to a particular corporate
trust matter, any other officer of the Trustee to whom corporate trust matters
are referred because of his knowledge of and familiarity with the particular
subject.
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15
"Unrestricted Subsidiary" means (i) any corporation, association or
other business entity which would be a Subsidiary but for its designation as an
Unrestricted Subsidiary by the Board of Directors of the Company at or before
the time of determination as provided below, and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary
(including any newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary unless such Subsidiary owns any Capital Stock of or owns or holds any
Lien on any Property of the Company or any other Subsidiary of the Company which
is not a Subsidiary of the Subsidiary to be so designated, provided that either
(x) the Subsidiary to be so designated has total assets of $1,000 or less or (y)
immediately after giving pro forma effect to such designation (1) the
Consolidated Interest Coverage Ratio would be greater than 2.0 to 1 and (2)
there would not exist any Default under this Indenture. The Board of Directors
of the Company may designate any Unrestricted Subsidiary to be a Subsidiary,
provided that, immediately after giving pro forma effect to such designation,
(1) the Consolidated Interest Coverage Ratio would be greater than 2.0 to 1 and
(2) there would not exist any Default under this Indenture.
"Voting Stock" means any class of Capital Stock of any Person then
outstanding normally entitled to vote in elections of directors, managers or
trustees of any such Person (irrespective of whether or not at the time stock of
any class or classes will have or might have voting power by reason of the
happening of any contingency).
"Wholly Owned Subsidiary" means any Subsidiary of which 100% of the
total Voting Stock is at the time owned by the Company or by a Wholly Owned
Subsidiary of the Company.
SECTION 1.02 Other Definitions.
Term Defined in Section
---- ------------------
"Authenticating Agent" 7.12
"Bankruptcy Law" 6.01
"Change of Control Date" 5.01
"Custodian" 6.01
"Discharged" 8.01
"Event of Default" 6.01
"Exchange Act" 4.08
"Legal Holiday" 11.07
"Paying Agent" 3.04
"Registrar" 3.04
"U.S. Government Obligations" 8.01
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16
SECTION 1.03 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Securities;
"indenture security holder" means a Holder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Securities means the Company.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings assigned to them thereby.
SECTION 1.04 Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting principles in
effect on the date of the construction of such term;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and in the plural
include the singular; and
(e) provisions apply to successive events and transactions.
<PAGE>
17
ARTICLE 2
FORM OF THE SECURITIES
SECTION 2.01 Form.
The Securities of each series shall be substantially in the form of
Exhibit A, which is part of this Indenture or in such other form as shall be
established by or pursuant to a Board Resolution or in one or more indentures
supplemental hereto, in each case with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture, and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may be required to comply
with the rules of any securities exchange or Depositary therefor or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution thereof. If determined to be necessary by the
Company or its counsel, the Company may require that a legend be placed on the
Securities of any series relating to original issue discount or other applicable
tax matters. The Company shall furnish any such legends or endorsements to the
Trustee in writing. If the form of Securities of any series is established by
action taken pursuant to a Board Resolution, a copy of an appropriate record of
such action shall be certified by the Secretary or an Assistant Secretary of the
Company and delivered to the Trustee at or prior to the delivery of the Company
Order contemplated by Section 3.03 for the authentication and delivery of such
Securities.
SECTION 2.02 Form of Legend for Global Securities.
Unless otherwise specified as contemplated by Section 3.01 for the
Securities evidenced thereby, every Global Security authenticated and delivered
hereunder shall bear a legend in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY. THIS GLOBAL SECURITY IS EXCHANGEABLE FOR SECURITIES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE ONLY
IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS
SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITORY TO
A NOMINEE OF THE DEPOSITOR OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY
OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN SUCH LIMITED
CIRCUMSTANCES. EVERY SECURITY DELIVERED UPON REGISTRATION OF TRANSFER OF, OR IN
EXCHANGE FOR, OR IN LIEU OF THIS GLOBAL SECURITY SHALL BE A GLOBAL SECURITY
SUBJECT TO THE FOREGOING, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED ABOVE.
<PAGE>
18
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS TO BE MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
SECTION 2.03 Form of Trustee's Certificate of Authentication.
The Trustee's certificates of authentication shall be in
substantially the following form:
"This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
IBJ WHITEHALL BANK & TRUST COMPANY,
As Trustee
By_________________________________
Authorized Signatory"
ARTICLE 3
THE SECURITIES
SECTION 3.01 Amount Unlimited; Issuable in Series.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution and, subject to Section 3.03,
set forth, or determined in the manner provided, in an Officers' Certificate, or
established in one or more indentures supplemental hereto, prior to the issuance
of Securities of any series:
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19
(a) the title of the Securities of the series (which shall
distinguish the Securities of the series from Securities of any other series);
(b) any limit upon the aggregate principal amount of the Securities
of the series which may be authenticated and delivered under this Indenture
(except for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities of the series pursuant
to Section 3.07, 3.08 or 3.09 and except for any Securities which, pursuant to
Section 3.03, are deemed never to have been authenticated and delivered
hereunder);
(c) the Person to whom any interest on a Security of the series
shall be payable, if other than the Person in whose name that Security (or one
or more predecessor Securities) is registered at the close of business on the
regular record date for such interest;
(d) the date or dates on which the principal of any Securities of
the series is payable;
(e) the rate or rates (which may be fixed or variable) per annum, or
the method for determining such rate or rates, at which any Securities of the
series shall bear interest, if any, the date or dates from which any such
interest shall accrue, the date on which each installment of any such interest
shall be payable and the record date for any such payment of interest, and the
method for the payment of interest on any Securities, whether in cash or through
the issuance of additional Securities;
(f) the place or places, if other than as set forth in the
Indenture, where the principal of and any premium and interest on any Securities
of the series shall be payable;
(g) the period or periods within which, the price or prices at which
and the terms and conditions upon which any Securities of the series may be
redeemed in whole or in part at the option of the Company and, if other than by
a Board Resolution, the manner in which any election by the Company to redeem
the Securities shall be evidenced;
(h) the obligation, if any, of the Company to redeem or purchase any
Securities of the series pursuant to any sinking fund or analogous provisions or
at the option of the Holder thereof and the period or periods within which, the
price or prices at which and the terms and conditions upon which any Securities
of the series shall be redeemed or purchased in whole or in part pursuant to
such obligation;
(i) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which any Securities of the series shall be
issuable;
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20
(j) if the amount of principal of or any premium or interest on any
Securities of the series may be determined with reference to an index or
pursuant to a formula, the manner in which such amounts shall be determined;
(k) if other than the entire principal amount thereof, the portion
of the principal amount of any Securities of the series which shall be payable
upon declaration of acceleration of the Maturity thereof pursuant to Section
6.02;
(l) if the principal amount payable at the Stated Maturity of any
Securities of the series will not be determinable as of any one or more dates
prior to the Stated Maturity, the amount which shall be deemed to be the
principal amount of such Securities as of any such date for any purpose
thereunder or hereunder, including the principal amount thereof which shall be
due and payable upon any Maturity other than the Stated Maturity or which shall
be deemed to be Outstanding as of any date prior to the Stated Maturity (or, in
any such case, the manner in which such amount deemed to be the principal amount
shall be determined);
(m) if applicable, that any Securities of the series shall be
issuable in whole or in part in the form of one or more Global Securities and,
in such case, the respective Depositaries for such Global Securities, the form
of any legend or legends which shall be borne by any such Global Security in
addition to or in lieu of that set forth in Section 2.02 and any circumstances
in addition to or in lieu of those set forth in Clause (2) of the last paragraph
of Section 3.07 in which any such Global Security may be exchanged in whole or
in part for Securities registered, and any transfer of such Global Security in
whole or in part may be registered, in the name or names of Persons other than
the Depositary for such Global Security or a nominee thereof;
(n) any addition to or change in the Events of Default which applies
to any Securities of the series and any change in the right of the Trustee or
the requisite Holders of such Securities to declare the principal amount thereof
due and payable pursuant to Section 6.02;
(o) any addition to or change in the covenants set forth in Article
4 which applies to Securities of the series; and
(p) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture, except as permitted by
Section 9.01(6)).
All Securities of any one series shall be substantially identical
except as to denomination and except as may otherwise be provided in or pursuant
to the Board Resolution referred to above and (subject to Section 3.03) set
forth, or determined in the manner provided, in the Officers' Certificate
referred to above or in any such indenture supplemental hereto.
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21
If any of the terms of the series are established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such action
shall be certified by the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth the terms of the series.
The Securities shall rank pari passu with Other Senior Indebtedness
and senior to Subordinated Debt.
SECTION 3.02 Denominations.
The Securities of each series shall be issuable only in registered
form without coupons and only in such denominations as shall be specified as
contemplated by Section 3.01. In the absence of any such specified denomination
with respect to the Securities of any series, the Securities of such series
shall be issuable in denominations of $1,000 and any integral multiple thereof.
SECTION 3.03 Execution, Authentication, Delivery and Dating.
The Securities shall be signed for the Company by the Company's
President or any Vice Chairman or Vice President and shall be attested by the
Company's Secretary or an Assistant Secretary, in each case by manual or
facsimile signature. The Company's seal shall be reproduced on the Securities.
If an Officer whose signature is on a Security no longer holds that
office at the time the Security is authenticated, the Security shall
nevertheless be valid.
At any time and from time to time after the execution and delivery
of this Indenture, the Company may deliver Securities of any series executed by
the Company to the Trustee for authentication, together with a Company Order for
the authentication and delivery of such Securities, and the Trustee in
accordance with the Company Order shall authenticate and deliver such
Securities. If the form or terms of the Securities of the series have been
established by or pursuant to one or more Board Resolutions or supplemental
indentures as permitted by Sections 2.01 and 3.01, in authenticating such
Securities, and accepting the additional responsibilities under this Indenture
in relation to such Securities, the Trustee shall be entitled to receive, and
(subject to Section 7.01) shall be fully protected in relying upon, an Opinion
of Counsel stating,
(a) if the form of such Securities has been established by or
pursuant to Board Resolution or supplemental indenture, as the case may be, as
permitted by Section 2.01, that such form has been established in conformity
with the provisions of this Indenture;
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22
(b) if the terms of such Securities have been established by or
pursuant to Board Resolution or supplemental indenture, as the case may be, as
permitted by Section 3.01, that such terms have been established in conformity
with the provisions of this Indenture; and
(c) that such Securities, when authenticated and delivered by the
Trustee and issued by the Company in the manner and subject to any conditions
specified in such Opinion of Counsel, will constitute valid and legally binding
obligations of the Company enforceable in accordance with their terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee. The Trustee shall also be
entitled to receive an Officers' Certificate stating that immediately after the
authentication and delivery of such Securities, (a) the aggregate principal
amount of Securities Outstanding will not exceed the maximum aggregate principal
amount permitted to be Outstanding pursuant to authorization by the Board of
Directors and (b) the Company will not be in Default and no Event of Default
will have occurred. In addition, if the form and/or terms of such Securities
have been established pursuant to a supplemental indenture, the Trustee shall be
entitled to receive the Opinion of Counsel referred to in Section 9.06 hereof.
Notwithstanding the provisions of Section 3.01 and of the preceding
paragraph, if all Securities of a series are not to be originally issued at one
time, it shall not be necessary to deliver the Officers' Certificate otherwise
required pursuant to Section 3.01 or the Opinion of Counsel otherwise required
pursuant to such preceding paragraph at or prior to the authentication of each
Security of such series if such documents are delivered at or prior to the
authentication upon original issuance of the first Security of such series to be
issued.
Each Security shall be dated the date of its authentication.
A Security shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Security has been authenticated under this Indenture.
Notwithstanding the foregoing, if any Security shall have been
authenticated and delivered hereunder but never issued and sold by the Company,
and the Company shall deliver such Security to the Trustee for cancellation as
provided in Section 3.10, for all purposes of this Indenture such Security shall
be deemed never to
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23
have been authenticated and delivered hereunder and shall never be entitled to
the benefits of this Indenture.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. An authenticating agent may authenticate
Securities whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company or
an Affiliate.
SECTION 3.04 Registrar and Paying Agent.
The Company shall maintain an office or agency where Securities may
be presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Securities may be presented for payment ("Paying Agent").
The Registrar shall keep a register of the Securities and of their transfer and
exchange. The Company may appoint one or more co-Registrars and one or more
additional Paying Agents. The term Paying Agent includes any additional Paying
Agent. The Company or any of its subsidiaries may act as Paying Agent, Registrar
or co-Registrar.
The Company shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture that shall implement the provisions of
this Indenture that relate to such Agent. The Company shall give prompt written
notice to the Trustee of the name and address of any such Agent and any change
in the address of such Agent. If the Company fails to maintain a Registrar or
Paying Agent, the Trustee shall act as such. The Company initially appoints the
Trustee, as Paying Agent and Registrar.
SECTION 3.05 Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee
to execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree that such Paying Agent will:
(a) hold all sums held by it for the payment of the principal of or
interest on the Securities in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed of
as herein provided;
(b) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities) in the making of any payment of principal or
interest; and
(c) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so held in
trust by such Paying Agent.
<PAGE>
24
Upon such payment over to the Trustee, the Paying Agent shall have no further
liability for such money.
SECTION 3.06 Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders. If the Trustee is not the Registrar, the Company shall furnish or cause
to be furnished to the Trustee not less than ten days before each interest
payment date and at such other times as the Trustee may request in writing all
information in the possession or control of the Company or any Paying Agent as
to the names and addresses of the Holders, in such form and as of such date as
the Trustee may reasonably require.
SECTION 3.07 Transfer and Exchange.
When Securities of any series are presented to the Registrar or a
co-Registrar with a request to register the transfer of, or to exchange them for
an equal principal amount of Securities of such series of other denominations,
the Registrar shall register the transfer or make the exchange if its
requirements for such transactions are met. To permit registrations of transfer
and exchanges of Securities of any series, the Company shall issue and the
Trustee shall authenticate Securities of such series at the Registrar's request.
No service charge shall be made for any registration of transfer or
exchange of Securities of any series, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration of transfer or exchange.
The Company shall not be required (i) to issue, register the
transfer of or exchange Securities of any series during a period beginning at
the opening of business 15 days before the day of any selection of Securities of
such series for redemption under Section 10.02 and ending at the close of
business on the day of such day of selection or (ii) to register the transfer of
or exchange any Security so selected for redemption in whole or in part, except
the unredeemed portion of any such Security being redeemed in part.
The provisions of Clauses (1), (2), (3) and (4) below shall apply
only to Global Securities:
(a) Each Global Security authenticated under this Indenture shall be
registered in the name of the Depositary designated for such Global Security or
a nominee thereof and delivered to such Depositary or a nominee thereof or
custodian therefor, and each such Global Security shall constitute a single
Security for all purposes of this Indenture.
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25
(b) Notwithstanding any other provision in this Indenture, no Global
Security may be exchanged in whole or in part for Securities registered, and no
transfer of a Global Security in whole or in part may be registered, in the name
of any Person other than the Depositary for such Global Security or a nominee
thereof unless (A) such Depositary (i) has notified the Company that it is
unwilling or unable to continue as Depositary for such Global Security or (ii)
has ceased to be a clearing agency registered under the Exchange Act, (B) there
shall have occurred and be continuing an Event of Default with respect to the
Securities represented by such Global Security or (C) there shall exist such
circumstances, if any, in addition to or in lieu of the foregoing as have been
specified for this purpose as contemplated by Section 3.01.
(c) Subject to Clause (2) above, any exchange of a Global Security
for other Securities may be made in whole or in part, and all Securities issued
in exchange for a Global Security or any portion thereof shall be registered in
such names as the Depositary for such Global Security shall direct.
(d) Every Security authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Security or any portion
thereof, whether pursuant to this Section, Section 3.08 or 3.09 or otherwise,
shall be authenticated and delivered in the form of, and shall be, a Global
Security, unless such Security is registered in the name of a Person other than
the Depositary for such Global Security or a nominee thereof.
SECTION 3.08 Replacement Securities.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
If the Holder of a Security of any series claims that the Security
has been lost, destroyed or wrongfully taken, the Company shall issue and the
Trustee shall authenticate a replacement Security of the same series if
Trustee's requirements are met. If required by the Trustee or the Company, such
Holder shall provide an indemnity bond sufficient in the judgment of both the
Company and the Trustee to protect the Company, the Trustee, any Agent or any
authenticating agent from any loss which any of them may suffer if a Security is
replaced. The Company may charge the Holder for its expenses in replacing a
Security.
Every replacement Security of any series issued pursuant to the
provisions of this Section 3.08 by virtue of the fact that any Security of such
series is destroyed, lost or stolen shall constitute an additional contractual
obligation of the Company, whether or not the destroyed, lost or stolen Security
shall be found at any
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26
time, and shall be entitled to all the benefits of this Indenture equally and
proportionally with any and all other Securities of such series duly issued
hereunder.
SECTION 3.09 Temporary Securities.
Until definitive Securities of any series are ready for delivery,
the Company may prepare and the Trustee shall authenticate temporary Securities
of such series. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. If temporary Securities of any series are
issued, without unreasonable delay, the Company shall prepare and deliver to the
Trustee, and the Trustee shall authenticate, definitive Securities of that
series in exchange for such temporary Securities.
SECTION 3.10 Cancellation.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for registration of transfer, exchange or
payment. The Trustee shall cancel all Securities surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
cancelled Securities and deliver a certificate of such destruction to the
Company. Subject to Section 3.08, the Company may not issue new Securities to
replace Securities that it has paid or that have been delivered to the Trustee
for cancellation.
SECTION 3.11 Defaulted Interest.
If the Company fails to make a payment of interest on the Securities
of any series on the date that payment of such interest is due, it shall pay
such interest thereafter in any lawful manner. It may pay such interest, plus
any interest payable on it, to the Persons who are Holders on a subsequent
special record date. The Company shall fix such special record date and payment
date. At least 5 days before such record date, the Company shall mail to
Holders, the Trustee and any paying agents a notice that states the record date,
payment date, and amount of such interest to be paid.
SECTION 3.12 Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee (including,
without limitation, the Registrar and the Paying Agent) may treat the Person in
whose name such Security is registered as the owner of such Security for the
purpose of receiving payment of principal of and any premium and any interest on
such Security and for all other purposes whatsoever, whether or not such
Security be overdue, and neither the Company, the Trustee nor any agent of the
Company or the Trustee
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27
(including, without limitation, the Registrar and the Paying Agent) shall be
affected by notice to the contrary.
SECTION 3.13 Computation of Interest.
Except as otherwise specified as contemplated by Section 3.01 for
Securities of any series, interest on the Securities of each series shall be
computed on the basis of a 360-day year of twelve 30-day months.
ARTICLE 4
COVENANTS
The Company covenants and agrees, with respect to each series of
Securities issued hereunder, that it will comply with the covenants set forth in
this Article 4, as such covenants may be changed or supplemented with respect to
such series of Securities as contemplated by Section 3.01 hereof.
SECTION 4.01 Payment of Securities.
The Company covenants and agrees for the benefit of each series of
Securities that it will duly and punctually pay the principal of and any premium
and interest on the Securities of that series in accordance with the terms of
the Securities and this Indenture. Principal, premium and interest shall be
considered paid on the date due if the Paying Agent holds on that date money (or
other consideration permitted to be paid by the terms of such series of
Securities) designated for and sufficient to pay all principal, premium and
interest then due.
With respect to any series of Securities permitted by its terms to
pay interest thereon by the issuance of additional Securities of such series,
the Company shall notify the Trustee in writing of its election to pay interest
on such Securities through the issuance of additional Securities of such series
and the aggregate amount of such additional Securities of such series to be
issued not less than 10 nor more than 45 days prior to the record date for the
interest payment date on which additional Securities of such series will be
issued. On each such interest payment date, the Trustee shall authenticate
additional Securities of such series for original issuance to each Holder on the
relevant record date in the aggregate principal amount required to pay such
interest. Each such additional Security of such series is an additional
obligation of the Company and shall be governed by, and entitled to the benefits
of, this Indenture and shall be subject to the terms of this Indenture and shall
rank pari passu with and be subject to the same terms (including the rate of
interest from time to time payable thereon) as the Securities (except, as the
case may be, with respect to the issuance date and aggregate principal amount).
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28
The Company shall pay interest on overdue principal of any series of
Securities at the rate borne by such series of Securities; it shall pay interest
on overdue installments of interest on any series of Securities at the same rate
to the extent permitted by law.
SECTION 4.02 Limitation on Restricted Payments.
(a) The Company shall not, nor will it permit any of its
Subsidiaries or Unrestricted Subsidiaries to, make any Restricted Payment if,
after giving effect thereto, with respect to any particular series of Securities
issued hereunder, (i) any Default shall have occurred and be continuing or (ii)
the Company could not incur at least $1.00 of additional Indebtedness under
Section 4.03(a) hereof or (iii) the aggregate of such payments made by the
Company and its Subsidiaries and Unrestricted Subsidiaries subsequent to the
date of issuance of such series of Securities would exceed the sum of (x) 50%
(or minus 100% in the event of a deficit) of aggregate Consolidated Net Income
of the Company for the period commencing on the date established by Board
Resolution for this purpose as permitted by Section 3.01 and ending on the last
day of the fiscal quarter immediately preceding the date of such Restricted
Payment, and (y) the aggregate Net Proceeds, including cash and the Fair Market
Value of Property other than cash, received by the Company subsequent to the
date of issuance of such series of Securities from capital contributions from
any of its stockholders or from the issuance or sale (other than to a Subsidiary
or Unrestricted Subsidiary) subsequent to the date of issuance of such series of
Securities of shares of its Capital Stock of any class, other than Redeemable
Stock (or rights or warrants to subscribe for or purchase shares of such Capital
Stock, other than Redeemable Stock) or of any convertible securities or debt
obligations which have been converted into, exchanged for or satisfied by the
issuance of shares of Capital Stock of any class, other than Redeemable Stock.
For purposes of computing the amount in clause (iii) above, the determination of
Consolidated Net Income of the Company for any fiscal period ending prior to the
date established by Board Resolution for this purpose as permitted by Section
3.01 shall exclude the deduction of an amount equal to the aggregate charges
(net of applicable tax) incurred by the Company related to the repurchase or
retirement of Indebtedness prior to its stated maturity.
(b) The provisions of this Section 4.02 shall not prevent the
Company from paying a dividend on Capital Stock of any class within 60 days
after the declaration thereof if, on the date of declaration, the Company could
have paid such dividend in compliance with the other provisions of this Section
4.02. With respect to any particular series of Securities issued hereunder, the
aggregate amount of dividends paid by the Company pursuant to this subsection
subsequent to the date of issuance of such series of Securities shall be
included in all subsequent computations under this Section 4.02.
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29
(c) The provisions of this Section 4.02 shall also not prevent the
Company from redeeming or repurchasing shares of its Capital Stock (1) solely in
exchange for other shares of Capital Stock (other than Redeemable Stock), (2) to
eliminate fractional shares, (3) in connection with repurchase provisions under
employee stock option or stock purchase agreements or other agreements to
compensate management employees of the Company or (4) pursuant to a court order.
With respect to any particular series of Securities issued hereunder, the
aggregate amount of consideration paid by the Company pursuant to this
subsection subsequent to the date of issuance of such series of Securities shall
be included in all subsequent computations under this Section 4.02. The
aggregate consideration paid pursuant to subclause (2) shall not exceed $250,000
in any fiscal year.
SECTION 4.03 Limitation on Indebtedness.
(a) The Company shall not, nor will it permit any of its
Subsidiaries to, create, incur, assume, Guarantee or otherwise become liable
with respect to, or become responsible for the payment of, any Indebtedness
unless, after giving effect thereto, the Consolidated Interest Coverage Ratio of
the Company is greater than 2.0 to 1.
(b) Notwithstanding the foregoing, the Company and its Subsidiaries
may incur, create, assume, or Guarantee or otherwise become liable with respect
to, any or all of the following:
(i) with respect to any particular series of Securities issued
hereunder, Indebtedness evidenced by securities issued at or prior to the
issuance of such series of Securities pursuant to this Indenture;
(ii) Intentionally Omitted.
(iii) Indebtedness under the Secured Credit Facility in an
aggregate amount not to exceed the Secured Credit Amount;
(iv) Indebtedness the proceeds of which are used to refinance
(x) all or a portion of the Securities of any series issued pursuant to
this Indenture, (y) any Indebtedness of its Subsidiaries and any other
Indebtedness of the Company that is pari passu with the Securities (other
than Indebtedness incurred, created, assumed or Guaranteed under clause
(iii) above) or (z) successor or replacement Indebtedness, in each case in
a principal amount not to exceed the principal amount so refinanced (or,
if such Indebtedness provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration of the
maturity thereof, in an amount not greater than such lesser amount) plus
any prepayment penalties and premiums (including the contractual premiums
and any premium reasonably determined by the Company as necessary to
accomplish such refinancing by
<PAGE>
30
means of a tender offer or privately negotiated repurchases), accrued and
unpaid interest on the Indebtedness so refinanced, plus customary fees,
expenses and costs related to the incurrence of such refinancing
Indebtedness, provided that, in the case of this clause (iv), (1) with
respect to any particular series of Securities issued hereunder, if the
Securities of such series are refinanced in part, such new Indebtedness is
expressly made pari passu or subordinate in right of payment to the
remaining Securities of such series, and (2) if the Indebtedness to be
refinanced is pari passu in right of payment to the Securities issued
pursuant to this Indenture, such new Indebtedness is expressly made pari
passu or subordinate in right of payment to the Securities issued pursuant
to this Indenture;
(v) Intentionally Omitted.
(vi) with respect to any particular series of Securities
issued hereunder, Indebtedness of the Company and its Subsidiaries
remaining outstanding immediately after the date of issuance of such
series of Securities;
(vii) Indebtedness of the Company to a Subsidiary of the
Company or Indebtedness of a Subsidiary of the Company to the Company or
to another Subsidiary of the Company;
(viii) Indebtedness incurred in connection with the
refurbishment, improvement, construction or acquisition (whether by
acquisition of stock, assets or otherwise) of any Property or Properties
of the Company or a Subsidiary of the Company that constitute a part of
the then present business of the Company or any Subsidiary of the Company
(or incurred within twelve months of any such acquisition or the
completion of such refurbishment, improvement or construction), provided
that (a)(1) such Indebtedness, together with any other Indebtedness
incurred during the preceding twelvemonth period in reliance upon the
exception of this clause (viii), does not exceed, in the aggregate, 3% of
net sales and service fees of the Company and its Subsidiaries during the
preceding twelvemonth period on a consolidated basis and (2) such
Indebtedness, together with all then outstanding Indebtedness incurred in
reliance upon the exception of this clause (viii), does not exceed, in the
aggregate, 3% of the aggregate net sales and service fees of the Company
and its Subsidiaries during the preceding thirty-six months on a
consolidated basis, in each case as such amounts may be adjusted as set
forth below, or (b) such Indebtedness does not exceed the amount of
proceeds received by the Company or any of its Subsidiaries from insurance
policies maintained by the Company or any Subsidiary in respect of such
Property or Properties;
(ix) Indebtedness consisting of Guarantees by the Company or a
Subsidiary of the Company of (A) other Indebtedness of the Company or
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31
any such Subsidiary, provided that such other Indebtedness is otherwise
permitted under this Section 4.03 and (B) obligations of customers of the
franchise or wholesale business of the Company or a Subsidiary of the
Company which Guarantees are in the ordinary course of business consistent
with the past practice of the Company or its Subsidiaries;
(x) Indebtedness created by a Lien to which Property owned or
held by the Company or a Subsidiary of the Company is subject, provided
that the Indebtedness secured is Indebtedness of the Company or a
Subsidiary of the Company which is otherwise permitted under this Section
4.03;
(xi) Indebtedness incurred in connection with a repurchase of
the Securities of any series issued pursuant to this Indenture as provided
in Section 5.01 hereof and in connection with the repurchase of any notes
of the Company which require the Company to repurchase such notes in the
event of certain merger, consolidation or change of control transactions,
in an aggregate principal amount not to exceed the aggregate repayment
price (equal to the repurchase price paid, including premium and accrued
interest thereon through the date of repurchase) of such Securities and
such other notes of the Company plus the amount of fees and expenses
associated with the incurrence of such Indebtedness, provided that to the
extent any such notes of the Company which are required to be so
repurchased constitute Subordinated Debt, any new Indebtedness incurred in
connection with the repurchase of such notes (a) is expressly made
subordinate to the Securities issued hereunder at least to the extent that
such notes are subordinate to the Securities issued hereunder, (b) with
respect to any particular series of Securities issued hereunder, does not
mature prior to the final scheduled maturity date of such series of
Securities and (c) with respect to any particular series of Securities
issued hereunder, has an Average Life equal to or greater than the
remaining Average Life of such series of Securities;
(xii) Indebtedness under Interest Swap obligations, provided
that such Interest Swap Obligations are related to payment obligations on
Indebtedness otherwise permitted under this Section 4.03 and, in the
aggregate, do not relate to a principal amount of Indebtedness in excess
of the Indebtedness permitted under this Section 4.03;
(xiii) commercial letters of credit and standby letters of
credit incurred in the ordinary course of business by the Company or its
Subsidiaries;
(xiv) Indebtedness represented by industrial revenue or
development bonds, provided that the aggregate amount of Indebtedness
incurred in reliance upon the exception of this clause (xiv) shall not
exceed at any one time an aggregate principal amount outstanding of $25
million;
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32
(xv) Capitalized Lease Obligations relating to Property used
in the business of the Company or its Subsidiaries;
(xvi) Indebtedness incurred in respect of performance bonds
and Guarantees and completion Guarantees incurred in the ordinary course
of business and refinancings thereof;
(xvii)Indebtedness arising from the honoring by a bank or
other financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business, provided that such
Indebtedness is extinguished within five business days of its incurrence;
and
(xviii) other Indebtedness (which may be secured or unsecured)
which, together with any obligations in respect of Sale and Leaseback
Transactions (other than Sale and Leaseback Transactions permitted under
Section 4.05(i) through (iv)) does not exceed $50 million in the
aggregate.
The aggregate amounts of Indebtedness that the Company is permitted to incur
pursuant to clause (viii) above shall be reduced by the difference between (1)
the aggregate principal amount of any mortgages that the Company is deemed to
have entered into in connection with any Sale and Leaseback Transaction that the
Company is permitted to enter into under clause (i) of Section 4.05 and (2) the
aggregate principal amount of any Senior Indebtedness that is repaid with the
Net Proceeds of any Sale and Leaseback Transactions that are entered into within
twelve months of the acquisition, or completion of construction or
refurbishment, of the Property that is the subject of any such transaction.
SECTION 4.04 Limitation on Liens.
(a) The Company shall not, nor will it permit any of its
Subsidiaries to, create, incur, assume or permit to exist any Lien on or with
respect to any Property or assets of the Company or any such Subsidiary or any
interest therein or any income or profits therefrom.
(b) Notwithstanding the foregoing, the Company and its Subsidiaries
may create, incur, assume or permit to exist the following Liens:
(i) with respect to any particular series of Securities issued
hereunder, any Lien existing as of the date of issuance of such series of
Securities;
(ii) any Lien on all of the Company's or a Subsidiary's
properties and assets, including without limitation, accounts receivable,
inventories, franchise agreements, property, equipment, trademarks,
<PAGE>
33
proprietary rights, leasehold interests, cash and all other assets and the
proceeds thereof securing the Company's obligations under the Secured
Credit Facility, as to which the Holders agree that if any such Lien is
invalidated, avoided or otherwise deemed unenforceable with respect to any
collateral securing such obligations, any payment that would be made to
the Holders from or attributable to the proceeds of such collateral (but
not any other payments) shall nevertheless be paid to the lenders under
the Secured Credit Facility instead of to the Holders until all
indebtedness under the Secured Credit Facility is paid in full;
(iii) any Lien arising in the ordinary course of business,
other than in connection with Indebtedness for borrowed money, such as (A)
Liens to secure payments of workers' compensation, unemployment insurance,
old age pensions or other social security or retirement benefits, or to
secure the performance of bids, tenders, contracts (other than for the
payment of money) or to secure public or statutory obligations of the
Company, or any Subsidiary, or to secure surety bonds to which the Company
or any Subsidiary is a party and (B) materialmen's, mechanics', workmen's,
repairmen's, warehousemen's, landlords', vendors' or carriers' Liens
created by law, or deposits or pledges arising and continuing in the
ordinary course of business to obtain the release of any such Liens;
(iv) any Lien on the Company's or a Subsidiary's accounts
receivable, inventories, franchise agreements, proprietary rights and
related assets and proceeds of any of the foregoing, or deposit accounts,
credits, balances with, and money and securities in transit to, any
financial institution or any books and records relating to any of the
foregoing incurred to secure Indebtedness permitted under Section
4.03(b)(iii);
(v) with respect to any particular series of Securities issued
hereunder, any Lien on Property acquired by the Company or any Subsidiary
after the date of issuance of such series of Securities created solely to
secure Indebtedness incurred to finance such acquisition or assumed in
connection with such acquisition, whether by acquisition of stock, assets
or otherwise (or any Lien entered into in connection with Indebtedness
that is permitted under Section 4.03(b)(viii)), provided that in each case
such acquisition does not constitute a Material Acquisition;
(vi) any Lien on Property acquired by the Company or any
Subsidiary which constitutes a Material Acquisition created solely to
secure Indebtedness incurred to finance such Material Acquisition or
assumed in connection with such Material Acquisition, provided that after
giving effect to such Indebtedness the Consolidated Interest Coverage
Ratio is greater than 2.0 to 1;
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34
(vii) any Lien on any asset of the Company or any Subsidiary
created solely to secure Indebtedness incurred to finance the
refurbishment, improvement, construction or acquisition (whether by
acquisition of stock, assets or otherwise) of such asset (or incurred
within twelve months of any such acquisition or the completion of such
refurbishment, improvement or construction) or relating to Indebtedness
assumed in connection with such acquisition, provided that such Lien
secures Indebtedness permitted under Section 4.03(b)(viii) ;
(viii) any Lien created in connection with a Capitalized Lease
Obligation that the Company or a Subsidiary is permitted to enter into
under the terms of this Indenture, provided that such Capitalized Lease
Obligation relates to Property used in the business of the Company or a
Subsidiary;
(ix) any Lien arising out of judgments or awards against the
Company or any Subsidiary with respect to which the Company or such
Subsidiary shall in good faith be prosecuting an appeal or proceedings for
review or Liens incurred by the Company or a Subsidiary for the purpose of
obtaining a stay or discharge in the course of any legal proceeding to
which the Company or such Subsidiary is a party;
(x) any Lien for taxes not yet subject to penalties for
nonpayment or contested in good faith in accordance with Section 4.15 or
minor survey exceptions, or minor encumbrances, easements or reservations
of, or rights of others for, rights of way, sewers, electric lines,
telegraph and telephone lines and other similar purposes, or zoning or
other restrictions as to the use of real properties, which encumbrances,
easements, reservations, rights and restrictions do not, in the aggregate,
have a material negative economic effect on the Company or any Subsidiary
or materially impair the ability of the Company or any Subsidiary to
conduct its operations;
(xi) any Lien extending, renewing or replacing any Lien
permitted by clause (i), (ii), (iv), (v), (vi), (vii), (viii) or (xii) of
this Section 4.04; and
(xii) any other Lien securing up to $50.0 million of
Indebtedness permitted by Section 4.03(b)(xviii).
In the case of Liens permitted under clauses (i), (iv), (v), (vi), (vii), (viii)
and (xi), with respect to any particular series of Securities issued hereunder,
such Liens may relate solely to the Property (including any improvements
thereon) subject thereto as of the date of issuance of such series of Securities
or the date such Lien was incurred, as the case may be, and may secure the
payment only of the Indebtedness so secured as of such date.
<PAGE>
35
SECTION 4.05 Limitation on Sale and Leaseback Transactions.
The Company shall not, and shall not permit any Subsidiary to, enter
into, assume, Guarantee or otherwise become liable with respect to any Sale and
Leaseback Transaction, provided that this Section 4.05 shall not prohibit: (i) a
Sale and Leaseback Transaction that, had such Sale and Leaseback Transaction
been structured as a mortgage rather than as a Sale and Leaseback Transaction,
the Company would have been permitted to enter into such transaction under
Sections 4.03 and 4.04(b)(vii), (ii) with respect to any particular series of
Securities issued hereunder, a Sale and Leaseback Transaction entered into prior
to the date of issuance of such series of Securities, (iii) a Sale and Leaseback
Transaction the proceeds of which are applied to repayment of Other Senior
Indebtedness, (iv) a Sale and Leaseback Transaction if within 90 days of
entering into such arrangement, the Company makes a pro rata offer or pro rata
offers to all Holders of any one or more series of Securities issued hereunder
as may be selected by the Company to repurchase such Securities at 100% of their
principal amount, plus accrued and unpaid interest through the date of
repurchase and in an aggregate amount equal to (x) the greater of the Net
Proceeds of the sale of the Property leased pursuant to such Sale and Leaseback
Transaction or the Fair Market Value of the Property so leased at the time of
entering into such Sale and Leaseback Transaction less (y) the amount of Net
Proceeds which are applied to repayment of Other Senior Indebtedness; and (v)
any other Sale and Leaseback Transaction of which the cash proceeds to the
Company do not exceed the difference between (x) $50.0 million and (y) the
amount of Indebtedness incurred pursuant to Section 4.03(b)(xviii).
SECTION 4.06 Limitation on Asset Sales.
(a) The Company shall not, and shall not permit any Subsidiary to,
consummate any Asset Sale unless (A) such sale is for Fair Market Value and (B)
at least 75% of the Net Proceeds thereof received by the Company or such
Subsidiary is in the form of cash; provided, that for purposes of this Section
4.06, securities received by the Company or any Subsidiary from such transferee
that are promptly converted by the Company or such Subsidiary into cash shall be
deemed to be cash; and provided further, that notwithstanding any other
provision in this paragraph, (a) the Company or any Subsidiary may consummate
Asset Sales for which it receives aggregate Net Proceeds from the applicable
purchaser or purchasers in an amount not to exceed $25,000,000 in connection
with any and all such Assets Sales without regard to the foregoing limitation on
receiving a specified percentage of the Net Proceeds in cash and (b) to the
extent that the Company has not reinvested such Net Proceeds in Additional
Assets or used such Net Proceeds to repay Other Senior Indebtedness within
twelve months following the consummation of the Asset Sale (or in the case of
Net Proceeds in the form of securities rather than cash, within twelve months
after such securities become cash), the Company shall either apply such Net
Proceeds (or any portion thereof) to the repayment of Other Senior Indebtedness
or apply such Net Proceeds (or the remaining portion thereof) in accordance with
the
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36
following sentence. If no Other Senior Indebtedness is outstanding at such time
or the Company does not apply any or applies only a portion of such Net Proceeds
to the repayment of Other Senior Indebtedness or the application of such Net
Proceeds results in the payment of all outstanding Other Senior Indebtedness,
then such Net Proceeds or any remaining portion thereof, in each case not so
applied to the repayment of Other Senior Indebtedness, shall be applied to a pro
rata offer or pro rata offers to all Holders of any one or more series of
Securities issued hereunder as may be selected by the Company to repurchase such
Securities at 100% of their principal amount, plus accrued and unpaid interest
through the date of repurchase.
Notwithstanding the foregoing, in the event the Net Proceeds
resulting from any Asset Sale, after giving effect to any related repayment of
Other Senior Indebtedness, are less than $10,000,000, the application of such
Net Proceeds to a pro rata offer or pro rata offers to all Holders of any one or
more series of Securities issued hereunder as may be selected by the Company to
repurchase such Securities at 100% of their principal amount, plus accrued and
unpaid interest, may be deferred until such time as such Net Proceeds, plus the
aggregate amount of Net Proceeds resulting from any subsequent Asset Sale or
Asset Sales not otherwise reinvested in Additional Assets or applied to repay
Other Senior Indebtedness as required are at least equal to $10,000,000, at
which time the Company shall apply all such Net Proceeds to a pro rata offer or
pro rata offers to all Holders of any one or more series of Securities issued
hereunder as may be selected by the Company to repurchase such Securities at
100% of their principal amount, plus accrued and unpaid interest through the
date of repurchase.
(b) Pending application thereof in accordance with Section 4.06(a),
the Company shall either apply the Net Proceeds of any Asset Sale to repay
temporarily Other Senior Indebtedness or invest such Net Proceeds in Qualified
Investments.
SECTION 4.07 Limitation on Investments.
The Company shall not, and shall not permit any of its Subsidiaries
to, make any Investment in (i) any Unrestricted Subsidiary or (ii) an Affiliate
(other than a Wholly Owned Subsidiary) that is not a Control Affiliate unless,
as determined at the date such Investment is made and after giving effect
thereto, (a) the Company could incur at least $1.00 of additional Indebtedness
under Section 4.03(a), and (b) there would not exist any Default. The Company
may not, and may not permit any Subsidiary or Unrestricted Subsidiary to, make
any Investment in any Control Affiliate other than in compliance with Section
4.02. The determination of whether the Company or any of its Subsidiaries may
make an Investment under this Section shall be made at the earliest of the date
such Investment is made, the date such Investment is committed to be made by the
Company or any of its Subsidiaries or, if such Investment is in respect of an
acquisition, the Transaction Date for such acquisition.
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SECTION 4.08 SEC Reports.
(a) The Company shall file with the Trustee within 15 days after it
files them with the SEC copies of the annual reports and of the information,
documents and other reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) which the Company files with
the SEC pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"). The Company shall continue to file with the SEC
and the Trustee on the same timely basis such reports, information and other
documents as the Company would be required to file with the SEC as if the
Company were subject to the requirements of such Section 13 or 15(d) of the
Exchange Act notwithstanding that the Company may no longer be subject to
Section 13 or 15(d) of the Exchange Act and that the Company would be entitled
not to file such reports, information and other documents with the SEC. The
Company also shall comply with the other provisions of TIA ss. 314(a).
(b) So long as any of the Securities of any series remain
outstanding, the Company shall cause any annual report to stockholders and any
quarterly or other financial reports furnished by it to stockholders, excluding
internal management reports and distributions to stockholders in their capacity
as directors or officers of the Company, to be filed with the Trustee and mailed
to the Holders at their addresses appearing in the register of Securities of
each series maintained by the Registrar. If the Company is not required to
furnish annual or quarterly reports to its stockholders pursuant to the Exchange
Act, the Company shall cause its consolidated financial statements, including
any notes thereto, and a "Management's Discussion and Analysis of Financial
Condition and Results of Operations", comparable to that which would have been
required to appear in annual or quarterly reports filed under Section 13 or
15(d) of the Exchange Act to be so filed with the Trustee and mailed to the
Holders at their addresses appearing in the register of Securities of each
series maintained by the Registrar within 90 days after the end of each fiscal
year and within 60 days after the end of each of the Company's first three
fiscal quarters in each fiscal year.
SECTION 4.09 Limitation on Payment Restrictions Affecting Subsidiaries.
The Company shall not, and shall not permit any Subsidiary to,
create or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction which encumbrance or restriction by its terms
expressly restricts the ability of such Subsidiary to (i) pay dividends or make
any other distributions on such Subsidiary's Capital Stock or pay any
Indebtedness owed to the Company or any Subsidiary, (ii) make any loans or
advances to the Company or any Subsidiary or (iii) transfer any of its Property
to the Company or any Subsidiary, other than, with respect to clauses (ii) and
(iii), encumbrances or restrictions contained in any agreement or instrument (a)
with respect to any particular series of Securities issued
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38
hereunder, relating to any Indebtedness of the Company or any Subsidiary
existing on the date of issuance of such series of Securities; (b) with respect
to any particular series of Securities issued hereunder, relating to any
Property acquired by the Company or any of its Subsidiaries after the date of
issuance of such series of Securities, provided that such encumbrance or
restriction relates only to the Property which is acquired and, in the case of
any encumbrance or restriction that constitutes a Lien, the Company would be
permitted to incur the Lien under Section 4.04; (c) relating to (x) any
industrial revenue or development bonds, (y) any obligation of the Company or
any Subsidiary incurred in the ordinary course of business to pay the purchase
price of Property acquired by the Company or such Subsidiary, and (z) any lease
of Property by the Company or such Subsidiary in the ordinary course of
business, provided that such encumbrance or restriction relates only to the
Property which is the subject of such industrial revenue or development bond,
such Property purchased or such Property leased and any such lease, as the case
may be; (d) relating to any Indebtedness of any Subsidiary at the date of
acquisition of such Subsidiary by the Company or any Subsidiary of the Company,
provided that such Indebtedness was not incurred in connection with or in
anticipation of such acquisition, and provided further that the Company would be
permitted to incur any Lien securing such Indebtedness under Section 4.04; and
(e) replacing or refinancing agreements or instruments referred to in clauses
(a), (b) and (c), provided that the provisions relating to such encumbrance or
restriction contained in any such replacement or refinancing agreement or
instrument are no more restrictive than the provisions relating to such
encumbrance or restriction contained in such original agreement or instrument.
SECTION 4.10 Limitation on Issuance of Indebtedness and Preferred Stock by
Subsidiaries.
The Company shall not permit any Subsidiary to create, incur, assume
or Guarantee any Indebtedness or issue any preferred or preference stock, except
for (i) with respect to any particular series of Securities issued hereunder,
preferred stock outstanding on the date of issuance of such series of
Securities, (ii) Indebtedness permitted under Section 4.03, (iii) preferred
stock issued to and held by the Company or a Wholly Owned Subsidiary (but only
so long as held or owned by the Company or a Wholly Owned Subsidiary) and (iv)
preferred stock issued by a Person prior to the time (A) such Person becomes a
Subsidiary, (B) such Person merges with or into a Subsidiary or (C) a Subsidiary
merges with or into such Person, provided that such preferred stock was not
issued or incurred by such Person in anticipation of the type of transaction
contemplated by subclauses (A), (B) or (C).
SECTION 4.11 Transactions with Affiliates.
With respect to any particular series of Securities issued
hereunder, the Company shall not, and shall not permit any Subsidiary to,
following the date of issuance of such series of Securities, except for the
Management Agreement, enter into any transaction (including, without limitation,
the purchase, sale or exchange of
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39
Property, the making of any Investment, the giving of any Guarantee or the
rendering of any service) with any Affiliate (other than the Company or a
Subsidiary) unless (i) the Board of Directors determines, in its reasonable good
faith judgment, that such transaction is in the best interests of the Company or
such Subsidiary based on full disclosure of all relevant facts and circumstances
and (ii) such transaction is on terms no less favorable to the Company or such
Subsidiary than those that could be obtained in a comparable arms'-length
transaction with an entity that is not an Affiliate.
SECTION 4.12 Restrictions on Becoming an Investment Company.
The Company shall not become an investment company within the
meaning of the Investment Company Act of 1940 as such statute and the
regulations thereunder and any successor statute or regulations thereto may from
time to time be in effect.
SECTION 4.13 Continued Existence and Rights.
Subject to Article 5, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence as
a corporation, and its rights and franchises.
SECTION 4.14 Maintenance of Properties and Other Matters.
The Company shall, and shall cause each of its Subsidiaries to,
maintain its Properties in good working order and condition and make all
necessary repairs, renewals, replacements, additions, betterments and
improvements thereto; provided, however, that nothing in this Section 4.14 shall
prevent the Company or any of its Subsidiaries from discontinuing the operation
and maintenance of any of its Properties, if such discontinuance is, in the
judgment of the Company or the Subsidiary, as the case may be, desirable in the
conduct of its respective business and not disadvantageous in any material
respect to the Holders.
The Company will insure and keep insured, and will cause each
Subsidiary to insure and keep insured, with financially sound and reputable
insurers, so much of their respective Properties and in such amounts as is
usually and customarily insured by companies engaged in a similar business with
respect to Properties of a similar character against loss by fire and the
extended coverage perils. None of the Company or any of its Subsidiaries will
maintain a system of self insurance in lieu of or in combination with the
foregoing, provided that deductibles under the insurance policy or policies of
the Company and its Subsidiaries shall not be considered to be self insurance as
long as such deductibles accord with financially sound and approved practices of
companies owning or operating Properties of a similar character and maintaining
similar insurance coverage. The Trustee shall not be required to see that such
insurance is effected or maintained.
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40
The Company will keep, and will cause each Subsidiary to keep,
proper books of record and account in which full and correct entries will be
made of all its business transactions, and will reflect in its financial
statements adequate accruals and appropriations to reserves. The Company shall
cause its books of record and account and those of each of its Subsidiaries to
be examined, either on a consolidated or individual basis, by one or more firms
of independent public accountants not less frequently than annually and shall
not make any change in the accounting principles applied to its financial
statements not concurred in by such firm or firms. The Company shall prepare its
financial statements in accordance with generally accepted accounting
principles.
The Company shall, and shall cause each of its Subsidiaries to,
comply with all statutes, laws, ordinances, or government rules and regulations
to which it is subject and to obtain any licenses, permits, franchises or other
governmental authorizations necessary to the ownership or operation of its
Properties or to the conduct of its business, if noncompliance or failure to
obtain materially adversely affects or, so far as the Company can at the time
foresee, is reasonably likely to materially adversely affect the business,
earnings, Properties or condition, financial or other, of the Company and its
Subsidiaries taken as a whole.
SECTION 4.15 Taxes and Claims.
The Company shall, and shall cause each of its Subsidiaries to, pay
(or, if appropriate, withhold and pay over) prior to delinquency:
(a) all taxes, assessments and governmental charges or levies
imposed upon it or its Property (or required by it to withhold and pay over),
and
(b) all claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like Persons which if unpaid might result in
the creation of a Lien upon its Properties;
provided that items of the foregoing description need not be paid while being
contested in good faith (and by appropriate proceedings in the opinion of the
Company's independent counsel in any case involving more than $500,000); and
provided further that adequate book reserves (in the opinion of the Company's
independent accountants) have been established with respect thereto; and
provided further that the owning company's title to, and its right to use, its
Property is not materially adversely affected thereby.
SECTION 4.16 Usury Laws.
The Company will not voluntarily claim and will actively resist any
attempts to claim the benefit of any usury laws against the Holders of the
Securities of any series issued pursuant to this Indenture.
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41
SECTION 4.17 Money for Security Payments to be Held in Trust.
If the Company shall at any time act as its own Paying Agent with
respect to any series of Securities, it will, on or before each due date of the
principal of or interest on the Securities of that series, segregate and hold in
trust for the benefit of the Persons entitled thereto a sum sufficient to pay
the principal or interest so becoming due until such sum shall be paid to such
Persons or otherwise disposed of as herein provided, and will promptly notify
the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents with
respect to any series of Securities, it will, on or prior to each date for the
payment of the principal of or interest on any Securities of that series,
deposit with a Paying Agent a sum sufficient to pay the principal or interest so
becoming due, such sum to be held in trust for the benefit of the Persons
entitled to such payments; and, unless such Paying Agent is the Trustee, the
Company will promptly notify the Trustee of its action or failure so to act.
For the purpose of obtaining the satisfaction and discharge of this
Indenture or for any other purpose, the Company may at any time pay, or direct
any Paying Agent to pay, to the Trustee all sums held in trust by the Company or
such Paying Agent, such sums to be held by the Trustee upon the same trusts as
those upon which such sums were held by the Company or such Paying Agent; and,
upon such payment by the Company or any Paying Agent to the Trustee, the Company
or such Paying Agent, as the case may be, shall be released from all further
liability with respect to such money.
SECTION 4.18 Compliance Certificate.
The Company shall deliver to the Trustee for each series of
Securities issued hereunder, within 120 days after the end of each fiscal year
of the Company, an Officers' Certificate, complying with Section 314(a)(4) of
the TIA, stating that a review of the activities of the Company and its
Subsidiaries during the preceding fiscal year has been made under the
supervision of the signing Officers with a view to determining whether the
Company has kept, observed, performed and fulfilled its obligations under this
Indenture and such series of Securities, and further stating, as to each such
Officer signing such certificate, that to the best of his knowledge the Company
has kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and such series of Securities and is not in default in the
performance or observance of any of the terms, provisions and conditions hereof
or thereof (or, if a Default or Event of Default shall have occurred, describing
all such Defaults or Events of Defaults of which he may have knowledge, the
status of such Default or Event of Default and what action the Company is taking
or proposes to take with respect thereto).
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42
The Company will, so long as any of the Securities of any series are
outstanding, deliver to the Trustee for each series of Securities issued
hereunder, forthwith upon becoming aware of any Default, Event of Default or
default in the performance of any covenant, agreement or condition contained in
this Indenture or such series of Securities, an Officers' Certificate specifying
such Default or Event of Default the status of such Default or Event of Default
and what action the Company is taking or proposes to take with respect thereto.
ARTICLE 5
SUCCESSORS; CHANGE OF CONTROL; OPTIONAL PREPAYMENT
SECTION 5.01 When Company May Merge, etc.; Change of Control; Holders' Right of
Optional Prepayment.
(a) The Company shall not consolidate or merge with or into, or
transfer, sell or lease all or substantially all of its Property to, any Person
(except a Wholly Owned Subsidiary of the Company which is a United States
corporation with a positive consolidated net worth, provided that following and
after giving effect to such consolidation, merger, transfer, sale or lease there
exists no Default or Event of Default and such Wholly Owned Subsidiary
unconditionally assumes by supplemental indenture all the Company's obligations
under this Indenture) unless:
(i) (A) the Company is the Surviving Corporation in the case
of a consolidation or merger and its Voting Stock is not changed into or
exchanged for cash, securities or other Property of another corporation or
(B) the corporation formed by such consolidation or merger or to which
such transfer, sale or lease occurs is a United States corporation and
such corporation unconditionally assumes by supplemental indenture all of
the obligations of the Company under this Indenture, and
(ii) immediately after giving effect to such transaction no
Default or Event of Default exists.
If immediately after and giving effect to any such consolidation, merger,
transfer, sale or lease permitted under the foregoing provision (other than a
consolidation or merger of the Company with, or a transfer, sale or lease by the
Company of all or substantially all of its Property to, a Wholly Owned
Subsidiary of the Company which is a United States corporation with a positive
consolidated net worth, as permitted under Section 5.01(a) above) and any
financings or other transactions in connection therewith the Consolidated
Interest Coverage Ratio of the Surviving Corporation is less than 2.0 to 1, each
Holder of any series of Securities issued pursuant to this Indenture shall have
the right, pursuant to the procedures of Section 5.01(c), to require the
Surviving Corporation to repurchase any Securities held by such Holder,
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43
in whole but not in part, at a purchase price in cash equal to 101% of its
principal amount plus accrued interest, promptly following the consummation of
any such merger, consolidation, transfer, sale or lease and the Indebtedness of
the Surviving Corporation, after giving effect to such transaction and any
financing or other transactions in connection therewith, shall not be deemed to
have been incurred in violation of any covenant of this Indenture.
(b) Upon the occurrence of a Change of Control (the "Change of
Control Date") with respect to the Company, each Holder of any series of
Securities issued pursuant to this Indenture shall have the right, pursuant to
the procedures of Section 5.01(c), to require the Company to repurchase any
Securities held by such Holder at a purchase price in cash equal to 101% of the
principal amount of such Securities plus accrued interest through the date of
repurchase.
(c) Not less than 20 nor more than 60 business days prior to the
consummation of a merger consolidation, transfer, sale or lease that would
require the Company to repurchase the Securities of any series issued pursuant
to this Indenture pursuant to Section 5.01(a) and not more than 45 business days
following the occurrence of any other event constituting a Change of Control,
the Company shall give Holders notice of such right of repurchase, mailed by
first-class mail to the Holders' last addresses as they appear upon the
register. Such notice shall state: (i) that Holders are entitled to have their
Securities repurchased in whole but not in part at 101% of their principal
amount plus accrued interest through the date of repurchase pursuant to this
Section 5.01; (ii) in the case of Section 5.01(b), that a Change of Control has
occurred, or in the case of Section 5.01(a), the proposed date of the
consummation of the merger, consolidation, transfer, sale or lease; (iii) that
Holders will be entitled to tender their Securities for repurchase, specifying
the purchase price and the date of repurchase (the "Repurchase Date") (which, in
the case of Section 5.01(a), shall not be later than the consummation date of
the merger, consolidation, transfer, sale or lease and, in the case of Section
5.01(b) shall be no earlier than 30 days and no later than 60 days after the
date such notice is mailed) and that Holders will be entitled to tender their
Securities for repurchase until five business days prior to the Repurchase Date,
(iv) the name and address of the Paying Agent, (v) that the Securities must be
tendered to the Paying Agent by five business days prior to the Repurchase Date
to collect the principal and accrued interest thereon, (vi) that any Security
not tendered by five business days prior to the Repurchase Date will continue to
accrue interest at the applicable rate borne by the Security, (vii) that any
Security accepted for repurchase will cease to accrue interest after the
Repurchase Date, (viii) that Holders electing to have a Security repurchased
will be required to surrender the Security, with the form entitled "Option of
Holder to Elect Repurchase" on the reverse of the Security completed, to the
Paying Agent at the address specified in the notice on or prior to the close of
business on the fifth business day preceding the Repurchase Date, (ix) that
Holders will be entitled to withdraw their election if the Paying Agent
receives, not later than the close of business on the fifth business day
preceding the Repayment Date, a telegram, telex,
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44
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of Securities the Holder delivered for repurchase, the
certificate number(s) of the Securities the Holder delivered for repurchase and
a statement that such Holder is withdrawing his election to have such Securities
repurchased, (i) that Holders electing to have their Securities repurchased must
tender all Securities which they hold and (xi) any other information necessary
to enable Holder to tender Securities and have such Securities repurchased
pursuant to this Section. Notwithstanding that the Company shall have given any
such notice pursuant to this Section 5.01(c), the Company shall have no
obligation to consummate a merger, consolidation, transfer, sale or lease that
is the subject of any such notice, provided that the Company will mail a notice
to Holders, stating that the proposed merger, consolidation, transfer, sale or
lease was not consummated and that Holders will not have the right to require
the Company to prepay their Securities, not later than two business days after
the Company determines that any proposed merger, consolidation, transfer, sale
or lease will not be consummated, and the Company will promptly return any
Securities tendered for repurchase to their respective Holders.
The Company shall deliver to the Trustee, contemporaneously with the
mailing of the notice specified in the preceding paragraph informing Holders of
their right to tender their Securities for repurchase, (i) an Officers'
Certificate to the foregoing effect stating that the Holders are entitled to
have their Securities repurchased and (ii) an Opinion of Counsel stating that
the proposed transaction complies with this Indenture and that all conditions
precedent to the consummation of the transaction under this Indenture have been
met. The Company shall also deliver to the Trustee an Officers' Certificate and
an Opinion of Counsel in connection with any Supplemental Indenture upon the
execution thereof, as specified in Section 9.06.
The Surviving Corporation shall be the successor Company, but the
predecessor Company in the case of a transfer, sale or lease shall not be
released from the obligation to pay the principal of and interest on the
Securities.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01 Events of Default.
"Event of Default," whenever used herein with respect to Securities
of any series, means any one of the following events:
(a) the Company defaults in the payment of interest on any Security
of that series when the same becomes due and payable and the Default continues
for a period of 30 days after such interest becomes due and payable;
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45
(b) the Company defaults in the payment of the principal of or any
premium on any Security of that series when the same becomes due and payable at
maturity, upon redemption, or upon repurchase pursuant to Section 5.01 or
otherwise;
(c) the Company fails to comply with any of its other agreements or
covenants in or provisions of this Indenture (other than an agreement or
covenant a default in whose performance is elsewhere in this Section
specifically dealt with or which has expressly been included in this Indenture
solely for the benefit of series of Securities other than that series), and the
Default continues for 30 days after the Company has been given notice of the
Default by the Trustee or the holders of 25% in principal amount of the
Outstanding Securities of that series;
(d) a default on other Indebtedness of the Company or any Subsidiary
(including a default on Securities other than Securities of such series), which
Indebtedness has an outstanding principal amount of more than $1,000,000
individually or in the aggregate if such Indebtedness has attained final
maturity or if the holders of such Indebtedness have accelerated payment thereof
under the terms of the instrument under which such Indebtedness is or may be
outstanding and, in each case, it remains unpaid;
(e) one or more judgments or decrees entered against the Company or
any Subsidiary involving a liability (not paid by insurance) of $1,000,000 or
more in the case of any one such judgment or decree or $1,000,000 or more in the
aggregate for all such judgments and decrees for the Company and all its
Subsidiaries and all such judgments or decrees have not been vacated, discharged
or stayed or bonded pending appeal within 60 days from the entry thereof;
(f) the Company or any Subsidiary pursuant to or within the meaning
of Title 11 of the United States Code or any similar Federal or state law for
the relief of debtors (collectively, "Bankruptcy Law"):
(i) commences a voluntary case in bankruptcy or any other
action or proceeding for any other relief under any law affecting
creditors' rights that is similar to a Bankruptcy Law;
(ii) consents by answer or otherwise to the commencement
against it of an involuntary case;
(iii) seeks or consents to the appointment of a receiver,
trustee, assignee, liquidator, custodian or similar official
(collectively, a "Custodian") of it or for all or substantially all of its
Property; .
(iv) makes a general assignment for the benefit of its
creditors; or
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46
(v) generally is unable to pay its debts as the same become
due; or
(g) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(i) is for relief against the Company or any Subsidiary in an
involuntary case proceeding;
(ii) appoints a Custodian of the Company or any Subsidiary or
for all or substantially all of its Property; or
(iii) orders the liquidation of the Company or any Subsidiary,
and in each case the order or decree remains unstayed and in effect for 60 days,
or any dismissal, stay, rescission or termination ceases to remain in effect; or
(h) any other Event of Default provided with respect to Securities
of that series.
SECTION 6.02 Acceleration.
If an Event of Default (other than an Event of Default specified in
clauses (6) and (7) of Section 6.01) with respect to Securities of any series at
the time Outstanding occurs and is continuing, the Trustee by notice in writing
to the Company, or the Holders of at least 25% in principal amount of the
Outstanding Securities of that series by notice in writing to the Company and
the Trustee, may declare the principal of and accrued interest on all the
Securities of that series to be due and payable. Upon such declaration, the
principal and interest shall be due and payable immediately without any
presentment, demand, protest or notice to the Company, all of which the Company
expressly waives. If an Event of Default specified in clauses (6) or (7) of
Section 6.01 occurs, the principal of and accrued interest on all the Securities
shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder.
At any time after such a declaration of acceleration with respect to
Securities of any or all series has been made and before a judgment or decree
for payment of the money due has been obtained by the Trustee as hereinafter in
this Article provided, the Holders of a majority in principal amount of the
Outstanding Securities of that series by notice to the Trustee may rescind an
acceleration and its consequences (i) if the rescission would not conflict with
any judgment or decree, (ii) if all existing Events of Default have been cured
or waived except nonpayment of principal or interest that has become due solely
because of the acceleration, (iii) to the extent the payment of such interest is
lawful, interest on overdue installments of interest and overdue principal,
which has become due otherwise than by such
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47
declaration of acceleration, has been paid, and (iv) in the event of the cure or
waiver of a Default under clause (4) of Section 6.01, the Trustee shall have
received an Officers' Certificate and an Opinion of Counsel that such Default
has been cured or waived.
SECTION 6.03 Other Remedies.
If an Event of Default with respect to Securities of any series
occurs and is continuing, the Trustee may pursue any available remedy by an
action at law, suit in equity or other appropriate proceeding to collect the
payment of principal of or interest on such series of Securities or to enforce
the performance of any provision of this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Securities of such series or does not produce any of them in the
proceeding. A delay or omission by the Trustee or any Holder in exercising any
right or remedy accruing upon an Event of Default or a Default shall not impair
the right or remedy or constitute a waiver of or acquiescence in such Event of
Default or a Default. All remedies are cumulative to the extent permitted by
law.
SECTION 6.04 Waiver of Defaults.
Subject to Section 6.07, the Holders of at least a majority in
principal amount of the Outstanding Securities of any series by notice to the
Trustee may waive any existing Default or Event of Default with respect to such
series and its consequences except a continuing Default or Event of Default in
the payment of the principal of or interest on any Security of that series.
SECTION 6.05 Control by Majority.
The Holders of a majority in principal amount of the Outstanding
Securities of any series may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it. However, the Trustee may refuse to follow any direction
that conflicts with law or this Indenture, is unduly prejudicial to the rights
of other Holders of Outstanding Securities of that series or would subject the
Trustee to personal liability. The Company may, but shall not be obligated to,
pursuant to the procedures of Section 9.04(b), fix a record date for the purpose
of determining the Holders of Outstanding Securities of any series entitled to
vote on the direction of any such proceeding.
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SECTION 6.06 Limitation on Suits.
No Holder of any Security of any series shall have any right to
institute a proceeding, judicial or otherwise, with respect to this Indenture,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless:
(a) the Holder gives to the Trustee written notice of a continuing
Event of Default with respect to the Securities of that series;
(b) the Holders of at least 25% in principal amount of the
Outstanding Securities of that series make a written request to the Trustee to
pursue the remedy;
(c) such Holder or Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days
after the receipt of the request and the offer of indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the Outstanding Securities of that series do not give the Trustee a
direction inconsistent with the request;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all of such
Holders.
SECTION 6.07 Rights of Holders to Receive Payment.
Subject to the provisions of Section 6.02, notwithstanding any other
provision of this Indenture, the right of any Holder of any Security to receive
payment of principal of and interest on such Security on or after the respective
due dates expressed in such Security, or to bring suit for the enforcement of
any such payment on or after such respective dates, shall not be impaired or
affected without the consent of the Holder.
SECTION 6.08 Collection Suit by Trustee.
If an Event of Default with respect to Securities of any series
specified in Section 6.01(l) or (2) occurs and is continuing, the Trustee may
recover, in any proceeding that it deems, in its sole discretion, most effective
to protect the interests of the Holders of the Securities of such series,
judgment in its own name and as
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49
trustee of an express trust against the Company for the whole amount of
principal and interest remaining unpaid on such Securities.
SECTION 6.09 Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee and the Holders allowed in any judicial proceedings relative to the
Company, its creditors or its Property.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 6.10 Priorities.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money or property in the following order:
First: To the Trustee for amounts due under Section 7.07;
Second: To the payment of the amounts then due and unpaid for
principal of and any premium and interest on the Securities in respect of which
or for the benefit of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts due and payable on
such Securities for principal and interest, respectively; and
Third: to the Company.
The Trustee may fix a record date and payment date for any payment
to Holders under this Section.
SECTION 6.11 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted to
be taken by it as a Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees and disbursements, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.06, or a
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50
suit by Holders of more than 10% in principal amount of the Outstanding
Securities of any series.
ARTICLE 7
TRUSTEE
SECTION 7.01 Duties of Trustee.
(a) If an Event of Default with respect to Securities of any series
at the time Outstanding has occurred and is continuing, the Trustee shall
exercise such of the rights and powers vested in it by this Indenture, and use
the same degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee need perform only those duties that are
specifically set forth in this Indenture and no others and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(ii) the Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, in the
absence of bad faith on its part, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture. The
Trustee, however, shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture but need
not verify the accuracy of the contents thereof.
(c) The Trustee may not be relieved from liability for its own gross
negligent action, its own grossly negligent failure to act, or its own willful
misconduct, except that:
(d) this paragraph does not limit the effect of paragraph (b) of
this Section;
(i) the Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(ii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05.
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(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(f) The Trustee may refuse to perform any duty or exercise any right
or power unless it receives indemnity satisfactory to it against any loss,
liability or expense.
(g) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree with the Company. Money held in
trust by the Trustee need not be segregated from other funds, except to the
extent required by law.
(h) No provision of this Indenture shall require the Trustee to
expend or risk any of its own funds or incur any liability.
(i) The permissive right of the Trustee to act hereunder shall not
be construed as a duty.
SECTION 7.02 Rights of Trustee.
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper Person. The Trustee
need not investigate any fact or matter stated in the document. The Trustee may
conclusively rely as to the identity and addresses of Holders and other matters
contained therein on the register of the Securities maintained by the Registrar
pursuant to Section 3.04 and shall not be affected by notice to the contrary.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate and an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such Certificate or opinion or both. The Trustee may consult with counsel,
including counsel employed by the Trustee, and the oral or written advice of
such counsel or any opinion of counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted to be taken
by it hereunder in good faith and reliance thereon.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or gross negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers.
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52
SECTION 7.03 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or any
Affiliate with the same rights it would have as if it were not Trustee. Any
Agent may do the same with like rights. The Trustee, however, is subject to
Sections 7.10 and 7.11.
SECTION 7.04 Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy
of this Indenture or the Securities, it shall not be accountable for the
Company's use of the proceeds from the Securities, or any money paid to the
Company or upon the Company's direction under any provision hereof, it shall not
be responsible for the use or application of any money received by any Paying
Agent other than the Trustee, and it shall not be responsible for any statement
in the Securities other than its authentication or for any statement of the
Company in the Indenture.
SECTION 7.05 Notice of Defaults.
If a Default or Event of Default occurs and is continuing hereunder
with respect to Securities of any series, and if such Default or Event of
Default is known to a Trust Officer of the Trustee, the Trustee shall mail the
Holders of Securities of such series a notice of the Default or Event of Default
within 90 days after it occurs. Except in the case of a Default or Event of
Default in payment on any Security of any series, the Trustee may withhold
notice if and so long as a trust committee of Trust Officers of the Trustee in
good faith determines that withholding the notice is in the interest of Holders
of Securities of such series.
SECTION 7.06 Reports by Trustee to Holders.
Within 60 days after each May 15, commencing May 15, 2000, following
the date of this Indenture, the Trustee shall mail to Holders and the Company a
brief report dated as of such May 15 that complies with TIA ss. 313(a). The
Trustee shall also comply with TIA ss. 313(b)(2) and transmit all reports in
accordance with TIA ss. 313(c).
A copy of each such report shall be filed, at the time of its
mailing to Holders, with the SEC and each stock exchange, if any, on which any
Securities are listed. The Company shall notify the Trustee when any Securities
are listed on any stock exchange.
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53
SECTION 7.07 Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services as agreed to in writing. The Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Company shall reimburse the Trustee upon request for all
reasonable out-of-pocket expenses incurred by it. Such expenses shall include
the reasonable compensation and out-of-pocket expenses of the Trustee's agents
and counsel.
The Company shall defend and indemnify the Trustee against any loss,
liability or expense incurred by it in connection with its services hereunder,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers or
duties hereunder, except as set forth in the next paragraph. The Trustee shall
notify the Company promptly of any claim for which it may seek indemnity.
The Company need not reimburse any expense or indemnify against any
loss, liability or expense incurred by the Trustee through gross negligence, bad
faith or willful misconduct.
The Trustee may have separate counsel, and the Company shall pay the
reasonable fees and expenses of such counsel.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or Property held
or collected by the Trustee, except that held in trust to pay principal and
interest on particular Securities. Such lien shall survive the satisfaction and
discharge of this Indenture or any other termination under any Bankruptcy Law.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(6) or (7) occurs, such expenses and the
compensation for such services are intended to constitute expenses of
administration under any Bankruptcy Law.
SECTION 7.08 Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the Outstanding Securities of any series may
remove the Trustee with respect to the Securities of such series by so notifying
the Trustee and the Company. The Company may remove the Trustee with respect to
all Securities if:
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54
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
Property; or
(d) the Trustee becomes incapable of acting.
If the Trustee with respect to the Securities of one or more or all
such series resigns or is removed or if a vacancy exists in the office of
Trustee for any reason, the Company shall promptly appoint a successor Trustee
with respect to the Securities of such series. Within one year after the
successor Trustee takes office (it being understood that any such successor
Trustee may be appointed with respect to the Securities of one or more or all of
such series and that at any time there shall be only one Trustee with respect to
the Securities of any particular series), the Holders of a majority in principal
amount of the Outstanding Securities of such series may appoint a successor
Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee with respect to the Securities of any series
does not take office within 60 days after the retiring Trustee resigns or is
removed, the retiring Trustee, the Company or the Holders of at least 10% in
principal amount of the Outstanding Securities of such series may petition any
court of competent jurisdiction for the appointment of a successor Trustee with
respect to the Securities of such series.
If the Trustee with respect to the Securities of any series fails to
comply with Section 7.10, any Holder of Securities of such series may petition
any court of competent jurisdiction for the removal of such Trustee and the
appointment of a successor Trustee with respect to the Securities of such
series.
In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee. Upon the written
request of the Company or the successor Trustee, such retiring Trustee shall,
upon payment of its charges, execute and deliver an instrument transferring to
such successor Trustee all the rights, powers and trusts of the retiring Trustee
and shall duly assign, transfer and deliver to such successor Trustee all
property and money held by such retiring Trustee hereunder. The successor
Trustee shall mail a notice of its succession to Holders of all Securities.
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55
In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (2)
if the retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Trustee with
respect to the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring Trustee, and
(3) shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such Trustees co-trustees of the
same trust and that each such Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Trustee; and upon the execution and delivery of such supplemental
indenture the resignation or removal of the retiring Trustee shall become
effective to the extent provided therein and each such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of such successor
Trustee relates. Upon the written request of the Company or any successor
Trustee, such retiring Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Trustee all the rights,
powers and duties of the retiring Trustee with respect to the Securities of that
or those series and shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder with
respect to the Securities of that or those series to which the appointment of
such successor Trustee relates. The successor Trustee shall mail a notice of its
succession to Holders of those series of Securities in respect of which it acts
as Trustee.
Notwithstanding the replacement of the Trustee with respect to the
Securities of one or more series pursuant to this Section 7.08, the Company's
obligations under Section 7.07 hereof shall continue for the benefit of the
retiring Trustee in connection with the rights and duties hereunder prior to
such replacement.
SECTION 7.09 Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
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56
SECTION 7.10 Eligibility; Disqualification.
There shall at all times be one (and only one) Trustee hereunder
with respect to the Securities of each series, which may be a Trustee hereunder
for Securities of one or more other series. Each Trustee shall be a Person that
satisfies the requirements of TIA ss. 310(a), and has a combined capital and
surplus of at least $50,000,000 as set forth in its most recent published annual
report of condition. Neither the Company nor any Person directly or indirectly
controlling, controlled by, or under common control with the Company shall serve
as trustee. The Trustee is subject to TIA ss. 310(b).
SECTION 7.11 Preferential Collection of Claims Against Company.
The Trustee is subject to TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
SECTION 7.12 Authenticating Agent.
Each authenticating agent appointed by the Trustee with respect to
one or more series of Securities pursuant to Section 3.03 (an "Authenticating
Agent") shall at all times be a corporation organized and doing business under
the laws of the United States, any State thereof or the District of Columbia,
authorized under such laws to act as Authenticating Agent, having a combined
capital and surplus of not less than $5,000,000 and subject to supervision or
examination by federal or state authority. If such Authenticating Agent
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section, the combined capital and surplus of such Authenticating Agent
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time an Authenticating Agent
shall cease to be eligible in accordance with the provisions of this Section,
such Authenticating Agent shall resign immediately in the manner and with the
effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Company, the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
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57
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 7.12, the Trustee may appoint a successor
Authenticating Agent which shall be acceptable to the Company and shall mail
written notice of such appointment to all Holders of the Securities with respect
to which such Authenticating Agent will serve. Any successor Authenticating
Agent, upon acceptance of its appointment hereunder, shall become vested with
all the rights, powers and duties of its predecessor hereunder, with like effect
as if originally named as an Authenticating Agent. No successor Authenticating
Agent shall be appointed unless eligible under the provisions of this Section.
The Company agrees to pay each Authenticating Agent from time to
time reasonable compensation for its services under Section 3.03 and this
Section 7.12 and the Trustee shall be entitled to be reimbursed for any such
payments made by it.
If an appointment with respect to one or more series is made
pursuant to Section 3.03 or this Section 7.12, the Securities of such series may
have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternate certificate of authentication in the following
form:
"This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
Dated: ______________ IBJ WHITEHALL BANK & TRUST COMPANY,
as Trustee
By: [_____________________________________], as
Authenticating Agent
By: _____________________________________
Authorized Signatory"
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.01 Termination of Company's Obligations.
The Company may terminate its obligations under this Indenture at
any time by delivering all outstanding Securities of every series to the Trustee
for each such series for cancellation. The Company, at its option, may elect
with respect to any series of Securities issued hereunder, upon compliance with
the conditions set
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58
forth in this Article 8, (i) to be Discharged (as defined herein) from any and
all obligations with respect to such series of Securities (except for certain
obligations of the Company to register the transfer or exchange of the
Securities, replace stolen, lost or mutilated Securities, maintain paying
agencies, hold moneys for payment in trust and compensate and indemnify the
Trustee as provided in Section 7.07 of this Indenture) or (ii) to be released
from its obligation to comply with the restrictive covenants in Sections 4.02,
4.03, 4.04, 4.05, 4.06, 4.07, 4.09, 4.10, 4.11, 4.12, 4.14, 4.15 and 5.01 of
this Indenture, in each case if the Company deposits with the Trustee for such
series of Securities, in trust, money or U.S. Government Obligations which,
through the payment of interest thereon and principal thereof in accordance with
their terms, will provide money in an amount sufficient to pay all the principal
of and interest on the Securities of such series on the dates such payments are
due in accordance with the terms of the Securities of such series. To exercise
any such option, the Company shall deliver to the Trustee for such series of
Securities (a) an Opinion of Counsel to the effect that the deposit and related
defeasance would not cause the holders of the Securities of such series to
recognize income, gain or loss for federal income tax purposes and, in the case
of a Discharge pursuant to clause (i) above, accompanied by a ruling to such
effect received from or published by the United States Internal Revenue Service
and (b) an Officers' Certificate and an Opinion of Counsel to the effect that
the Company has complied with all conditions precedent to the defeasance.
"Discharged" means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by, and obligations under, the
Securities of such series and to have satisfied all the obligations under this
Indenture relating to the Securities of such series (and the Trustee for such
series of Securities, at the request and the expense of the Company, shall
execute proper instruments acknowledging the same), except (A) the rights of the
Holders of Securities of such series to receive, from the trust fund described
above, payment of the principal of and the interest on the Securities of such
series when such payments are due, (B) the Company's obligations with respect to
the Securities under Sections 3.04, 3.05, 3.06, 3.07, 3.08, 4.17, 7.07, 7.08 and
8.04 and (C) the rights, powers, trusts, duties and immunities of the Trustee
with respect to such series of Securities hereunder.
"U.S. Government Obligations" means direct obligations of, and
obligations guaranteed by, the United States of America for the payment of which
the full faith and credit of the United States of America is pledged.
SECTION 8.02 Application of Trust Money.
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Section 8.01 with respect to any series of
Securities. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal and interest on the Securities of such
series.
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SECTION 8.03 Repayment to Company.
The Trustee and the Paying Agent shall promptly pay to the Company
upon written request any excess money or securities held by them at any time.
The Trustee and the Paying Agent shall pay to the Company upon
written request any money held by them for the payment of principal or interest
that remains unclaimed for two years after the date upon which such payment
shall have come due; provided, however, that the Trustee or such Paying Agent,
shall, upon the written request and at the expense of the Company, cause to be
published once in a newspaper of general circulation in The City of New York or
mailed to each such Holder, notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such publication or mailing, any unclaimed balance of such money then
remaining will be repaid to the Company. After payment to the Company, Holders
entitled to the money must look to the Company for payment as general creditors
unless an applicable abandoned property law designates another Person.
SECTION 8.04 Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations deposited with respect to the Securities of any series in
accordance with Sections 8.01 and 8.02 by reason of any legal proceeding or by
reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, the Company's
obligations under this Indenture and the Securities of such series shall be
revived and reinstated as though no deposit had occurred pursuant to Section
8.01 until such time as the Trustee or Paying Agent is permitted to apply such
money or U.S. Government Obligations in accordance with Section 8.01; provided,
however, that if the Company has made any payment of interest on or principal of
any such Securities because of the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such Securities to receive
such payment from the money or U.S. Government Obligations held by the Trustee
or Paying Agent.
ARTICLE 9
AMENDMENTS
SECTION 9.01 Without Consent of Holders.
The Company, when duly authorized by resolution of its Board of
Directors, and the Trustee may amend this Indenture or the Securities without
the consent of any Holder:
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(a) to cure any ambiguity, defect or inconsistency with any other
provision herein;
(b) to comply with Section 5.01;
(c) to make any change that does not adversely affect the legal
rights hereunder of any Holder;
(d) to comply with the requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA, as contemplated by
Section 11.01 or otherwise;
(e) to add to or change any of the provisions of this Indenture to
such extent as shall be necessary to permit or facilitate the issuance of
Securities in bearer form, registrable or not registrable as to principal, and
with or without interest coupons, or to permit or facilitate the issuance of
Securities in uncertificated form;
(f) to add to, change or eliminate any of the provisions of this
Indenture in respect of one or more series of Securities, provided that any such
addition, change or elimination (A) shall neither (i) apply to any Security of
any series created prior to the execution of such supplemental indenture and
entitled to the benefit of such provision nor (ii) modify the rights of the
Holder of any such Security with respect to such provision or (B) shall become
effective only when there is no such Security Outstanding;
(g) to provide for the appointment of a successor Trustee with
respect to the Securities of one or more (but not all) series of Securities
issued hereunder, as provided in Section 7.08 hereof; or
(h) to establish the form or terms of Securities of any series as
permitted by Sections 2.01 and 3.01.
After an amendment under this Section becomes effective, the Company
shall mail to Holders of all series of Securities affected by such amendment a
notice briefly describing the amendment.
SECTION 9.02 With Consent of Holders.
The Company, when duly authorized by resolution of its Board of
Directors, and the Trustee may amend this Indenture with the written consent of
the Holders of at least a majority in principal amount of the Outstanding
Securities of each series affected by such amendment. However, without the
consent of the Holder of each Outstanding Security affected thereby, an
amendment under this Section may not:
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(a) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for any such
amendment;
(b) reduce the rate of or change the time for payment of interest,
including defaulted interest, on any Security;
(c) reduce the principal of or change the fixed maturity of any
Security, or change the date on which any Security may be subject to redemption
or reduce Redemption Price therefor;
(d) make any Security payable in currency other than that stated in
the Security;
(e) make any change in Section 6.04 or 6.07 or this Section 9.02;
(f) make any change in the ranking of the Securities with respect to
any other obligation of the Company in a way that adversely affects the rights
of any Holder; or
(g) waive a Default in the payment of the principal of, and interest
on, any Security.
After an amendment under this Section becomes effective, the Company
shall mail to Holders of all series of Securities affected by such amendment a
notice briefly describing the amendment.
SECTION 9.03 Compliance with Trust Indenture Act.
Every amendment to this Indenture shall be set forth in a
supplemental indenture that complies with the TIA as then in effect.
SECTION 9.04 Revocation and Effect of Consents.
(a) Until an amendment or waiver becomes effective, a consent to it
by a Holder of a Security is a continuing consent by the Holder and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security, even if notation of the consent is not
made on any Security. However, any such Holder or subsequent Holder may revoke
the consent as to his Security or portion of a Security if the Trustee receives
written notice of revocation before the date on which the Trustee receives an
Officers' Certificate certifying that the Holders of the requisite principal
amount of each series of Outstanding Securities affected by such amendment or
waiver have consented to such amendment or waiver. An amendment or waiver
becomes effective upon receipt by the Trustee of such Officers' Certificate and
the written consents from the Holders of
<PAGE>
62
the requisite percentage in principal amount of each series of Outstanding
Securities affected by such amendment or waiver.
(b) The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders of each series of Securities
entitled to consent to any amendment or waiver, which record date shall be at
least 5 business days prior to the first solicitation of such consent. If a
record date is fixed, then notwithstanding the second and third sentence of
paragraph (a) of this Section 9.04, those persons who were Holders at such
record date (or their duly designated proxies), and only those persons, shall be
entitled to consent to such amendment or waiver or to revoke any consent
previously given, whether or not such persons continue to be Holders after such
record date. No such consent shall be valid or effective for more than 120 days
after such record date.
(c) After an amendment or waiver becomes effective, it shall bind
every Holder.
SECTION 9.05 Notation on or Exchange of Securities.
Upon the Company's request, the Trustee shall place an appropriate
notation (to be provided by the Company and in form and substance satisfactory
to the Trustee) about an amendment or waiver on any Security affected by such
amendment or waiver thereafter authenticated. The Company in exchange for all
Securities affected by such amendment or waiver may issue and the Trustee shall
authenticate new Securities that reflect the amendment or waiver.
SECTION 9.06 Trustee Protected.
The Trustee shall sign all supplemental indentures, except that the
Trustee need not sign any supplemental indenture that adversely affects its
rights. In signing or refusing to sign such amendment or Supplemental Indenture,
the Trustee shall be entitled to receive and, subject to Section 7.01, shall be
fully protected in relying upon, an Officers' Certificate and an Opinion of
Counsel as conclusive evidence that such amendment or Supplemental Indenture is
authorized or permitted by this Indenture, that it is not inconsistent herewith,
that all conditions precedent to the execution thereof have been met, that it
will be valid and binding upon the Company in accordance with its terms and
that, after the execution thereof, the Company will not be in Default and no
Event of Default will have occurred and be continuing with respect to any series
of Securities affected by such amendment or supplemental indenture.
<PAGE>
63
ARTICLE 10
REDEMPTIONS
SECTION 10.01 Election to Redeem; Notice to Trustee.
Securities of any series which are redeemable before their Stated
Maturity shall be redeemable, in whole at any time or in part from time to time,
in accordance with their terms and (except as otherwise specified for such
Securities as contemplated by Section 3.01) in accordance with this Article. In
order to effect any such redemption, the Company shall notify the Trustee of the
Redemption Date and the principal amount of Securities to be redeemed and it
shall deliver to the Trustee an Officers' Certificate certifying resolutions of
the Board of Directors authorizing the redemption and an Opinion of Counsel with
respect to the due authorization of such redemption and that such redemption is
being made in accordance with this Indenture and the Securities.
The Company shall give such notice provided for in this Section at
least 30 days but not more than 45 days before the Redemption Date or at such
other date as shall be satisfactory to the Trustee.
SECTION 10.02 Selection of the Securities to be Redeemed.
If less than all the Securities of any series are to be redeemed,
the Trustee or the Registrar for the Securities, pro rata or by lot, or by any
manner that is acceptable to the Trustee or Registrar, as the case may be, shall
select, subject to the remainder of this Section, the particular Securities to
be redeemed. The Trustee shall make the selection not more than 60 days and not
less than 30 days before each Redemption Date from Outstanding Securities of
such series not previously called for redemption. The Trustee may select for
redemption portions of the principal of Securities of such series that have
denominations larger than $1,000. Securities and portions of them it selects
shall be in amounts of $100 or integral multiples of $100. Provisions of this
Indenture that apply to Securities called for redemption shall also apply to
portions of Securities called for redemption. The Trustee shall notify the
Company promptly of the Securities or portions of Securities to be called for
redemption.
SECTION 10.03 Notice of Redemption.
At least 15 but not more than 45 days before a Redemption Date, the
Company shall mail a notice of redemption by first-class mail to each Holder
whose securities are to be redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
<PAGE>
64
(a) the Redemption Date;
(b) the Redemption Price and the amount of accrued interest to be
paid;
(c) the name and address of the Paying Agent;
(d) that the Securities called for redemption must be surrendered to
the Paying Agent to collect the Redemption Price and accrued interest, if any;
(e) that, unless the Company defaults in making the redemption
payment, interest on the Securities called for redemption ceases to accrue on
and after the specified Redemption Date; and
(f) if any Security is being redeemed in part, the portion of the
principal amount (equal to $100 or any integral multiple thereof) of such
Security to be redeemed and that, on or after the Redemption Date, upon
surrender of such Security, a new Security or Securities in principal amount
equal to the unredeemed portion thereof will be issued.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense.
SECTION 10.04 Effect of Notice of Redemption.
Once notice of redemption is mailed, the Securities called for
redemption become due and payable on the specified Redemption Date at the
Redemption Price.
SECTION 10.05 Deposit of Redemption Price on Optional Redemption.
On or before each Redemption Date the Company shall deposit with the
Paying Agent money (which shall be immediately available funds if deposited on
the Redemption Date and which must be received by such Paying Agent prior to
10:00 a.m. New York City time) sufficient to pay the Redemption Price of and
accrued interest on all Securities to be redeemed on that date. The Paying Agent
shall return to the Company any money not required for that purpose.
SECTION 10.06 Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the Company
shall issue and the Trustee shall authenticate a new Security equal in principal
amount to the unredeemed portion of the Security surrendered.
<PAGE>
65
ARTICLE 11
MISCELLANEOUS
SECTION 11.01 Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies, or conflicts
with another provision which is required to be included in this Indenture by the
TIA, the required provision shall control.
SECTION 11.02 Notices.
Any notice or communication to the Company or the Trustee is duly
given if in writing and (i) delivered in Person, (ii) mailed by first-class mail
or (iii) transmitted by facsimile transmission (confirmed by guaranteed
overnight courier) to the following addresses:
The Company's address is:
1200 State Fair Boulevard
Syracuse, New York 13221
Attention: [Robert J. Davis]
[Telephone number: (315) 4579460
Facsimile number: (315) 4530353]
With a copy to:
The Penn Traffic Company
411 Theodore Fremd Avenue
Rye, New York 10580
Attention: Martin A. Fox
Telephone number: (914) 9213000
Facsimile number: (914) 9213031
The Trustee's address is:
One State Street
New York, New York 1000
Telephone number: (212) 8582000
Facsimile number: (212) 852-2952
Attention: Corporate Trust Division
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
<PAGE>
66
Any notice or communication to a Holder shall be mailed by
first-class mail to his address shown on the register kept by the Registrar;
provided, that items required under the TIA to be sent to Holders in compliance
with TIA ss. 313(c) shall be mailed to Holders in compliance with such section.
Failure to mail a notice or a communication to a Holder or any defect in it
shall not affect its sufficiency with respect to other Holders.
If a notice or communication is delivered, mailed or transmitted in
the manner provided above within the time prescribed, it is duly given, whether
or not the addressee receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
SECTION 11.03 Communication by Holders with Other Holders.
Holders may communicate pursuant to TIA ss. 312(b) with other
Holders with respect to their rights under this Indenture or the Securities. The
Trustee shall comply with the provisions of TIA ss. 312(b). The Company, the
Trustee, the Registrar and any agent of any of them shall have the protection of
TIA ss. 312(c).
SECTION 11.04 Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(b) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 11.05 Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
<PAGE>
67
(c) a statement that, in the opinion of such Person, he has made
Such examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been complied with.
SECTION 11.06 Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 11.07 Legal Holidays.
A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions in the State of New York are not required to be open. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that place
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period.
SECTION 11.08 No Recourse Against Others.
The Securities and the obligations of the Company under this
Indenture are solely obligations of the Company and no officer, director,
employee or stockholder, as such, of the Company shall be liable for any failure
by the Company to pay any amounts on the Securities when due or perform any such
obligation.
SECTION 11.09 Duplicate Originals.
The parties may sign any number of copies of this Indenture. One
signed copy is enough to prove this Indenture.
SECTION 11.10 Governing Law.
THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS INDENTURE AND
THE SECURITIES.
SECTION 11.11 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan
or debt agreement of the Company or a Subsidiary. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
<PAGE>
68
SECTION 11.12 Successors.
All agreements of the Company in this Indenture and the Securities
shall bind its successor. All agreements of the Trustee in this Indenture shall
bind its successor.
SECTION 11.13 Severability.
In case any provision in this Indenture or in the Securities shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 11.14 Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table, and headings of the
Articles and Sections of this Indenture have been inserted for the convenience
of reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
SECTION 11.15 Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder and the Holders, any benefit or any legal or equitable right, remedy
or claim under this Indenture.
<PAGE>
69
SIGNATURES
Dated: ________________, 1999 THE PENN TRAFFIC COMPANY
By:__________________________
Name:
Title:
Attest:
____________________________ (SEAL)
Name: Francis D. Price, Jr.
Title: Vice President and
Assistant Secretary
Dated: ________________, 1999 IBJ WHITEHALL BANK & TRUST
COMPANY, Trustee
By:__________________________
Name:
Title:
Attest:
____________________________ (SEAL)
Name:
Title:
<PAGE>
Exhibit A
[FORM OF SECURITY]
No.
$__________
THE PENN TRAFFIC COMPANY
Incorporated under the laws of the
State of Delaware
_______%; Senior Notes due _______________________
THE PENN TRAFFIC COMPANY, for value received, hereby promises to pay
to _________________________or registered assigns, the principal sum
of_____________ Dollars on _________________ and to pay interest thereon
semiannually in arrears at the rate of ____% per annum on _________________ and
_________ of each year commencing _____ __, ____until the principal hereof is
paid or made available for payment. Payment of principal, premium, if any, and
interest shall be made in the manner and subject to the terms set forth in
provisions appearing on the reverse hereof, which provisions, in their entirety,
shall for all purposes have the same effect as if set forth at this place.
IN WITNESS WHEREOF, THE PENN TRAFFIC COMPANY has caused this
instrument to be executed in its corporate name by the manual or facsimile
signature of its President or any Vice Chairman or Vice President and attested
by its Secretary or an Assistant Secretary.
THE PENN TRAFFIC COMPANY
By:__________________________
Title:
Attest:____________________________
Title:
[SEAL]
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
Dated:
IBJ WHITEHALL BANK & TRUST
COMPANY, Trustee
By: _______________________
Authorized Signatory
<PAGE>
(Back of Security)
THE PENN TRAFFIC COMPANY
_______________% Senior Notes due __________________
1. Interest. THE PENN TRAFFIC COMPANY (the "Company"), a Delaware
corporation, promises to pay interest on the principal amount of this Security
at the rate per annum shown above. The Company will pay interest semiannually in
arrears on __________________ and ______________________ of each year. Interest
on the Securities will accrue from the most recent date on which interest has
been paid or, if no interest has been paid, from ___________________. Interest
will be computed on the basis of a 360-day year of twelve 30-day months.
2. Method of Payment. The Company will pay interest on the
Securities (except defaulted interest) to the Persons who are registered Holders
of Securities at the close of business on the regular record date, which shall
be the __________________ and ____________________, as the case may be, next
preceding the interest payment date even though Securities are cancelled after
the record date and on or before the interest payment date. Any such interest
not so punctually paid or duly provided for, and any interest payable on such
defaulted interest (to the extent lawful), will forthwith cease to be payable to
the Holder on such regular record date and shall be payable to the Person in
whose name this Security is registered at the close of business on a special
record date for the payment of such defaulted interest to be fixed by the
Company, notice of which shall be given to Holders not less than 5 days prior to
such special record date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in money
of the United States that at the time of payment is legal tender for payment of
public and private debts. However, the Company may pay principal, premium, if
any, and interest by check payable in such money. It may mail an interest check
to a Holder's registered address.
3. Paying Agent and Registrar. The Trustee will act as Paying Agent
and Registrar. The Company may change any Paying Agent, Registrar or co-
Registrar without notice to any Holder. The Company may act in any such
capacity.
4. Indenture. This Security is one of a duly authorized issue of
securities of the Company (herein called the "Securities"), issued and to be
issued under an Indenture dated as of ______________, 1999 (the "Indenture")
between the Company and the Trustee. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa77bbbb), as amended by the
Trust Indenture Reform Act of 1990, as in effect on the date of the Indenture
("TIA"). The Securities are subject to all such terms, and Holders are referred
to the Indenture and such Act for a statement of such terms. This Security is
one of the series designated on the
<PAGE>
face hereof limited to $___________in an aggregate principal amount. The
Securities are unsecured general obligations of the Company. Unless otherwise
defined herein, all capitalized terms shall have the meanings assigned to them
in the Indenture.
5. Denominations. Transfer. Exchange. The Securities are in
registered form without coupons in denominations of $1,000 and integral
multiples thereof unless issued in lieu of an interest payment. The transfer of
Securities may be registered and Securities may be exchanged as provided in the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar need not exchange
or register the transfer of any Security or portion of a Security selected for
redemption. Also, it need not exchange or register the transfer of any
Securities for a period of 15 days before a selection of Securities to be
redeemed.
6. Optional Redemption. The Securities may not be redeemed prior to
__________________. On or after such date, the Securities may be redeemed at the
election of the Company as a whole at any time or in part from time to time at
the Redemption Prices (expressed in percentages of principal amount) set forth
below plus accrued interest to the Redemption Date, if redeemed during the
12-month period beginning __________________ of the years indicated below:
Year Percentage
_____ _____%
_____ _____%
_____ _____%
_____ and thereafter 100.00%
Notice of redemption will be mailed at least 30 days but not more
than 60 days before the Redemption Date to each Holder of Securities to be
redeemed, at his registered address. Securities in denominations larger than
$1,000 may be redeemed in part but only in whole multiples of $1,000. On and
after the Redemption Date interest ceases to accrue on Securities or portions of
them called for redemption.
These Securities shall not have the benefit of any sinking fund
obligations.
1. Persons Deemed Owners. The registered Holder of a Security may be
treated as its owner for all purposes.
<PAGE>
2. Amendments and Waivers. Subject to certain exceptions, the
Indenture and the rights of the Holder of the Securities of each series to be
affected under the Indenture may be amended at any time by the Company and the
Trustee with the consent of the Holders of at least a majority in principal
amount of the Securities at the time Outstanding of each series to be affected.
The Indenture also contains provisions permitting the Holders of specified
percentages in principal amount of the Securities of each series at the time
Outstanding, on behalf of the Holders of all Securities of such series, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Without the consent of
any Holder, the Indenture or the Securities may be amended to cure any
ambiguity, defect or inconsistency; to comply with Section 5.01 of the
Indenture; to make any change that does not adversely affect the legal rights of
any Holder; to comply with the requirements of the SEC to maintain qualification
of the Indenture under the TIA; to add to or change the provisions of the
Indenture to such extent as shall be necessary to permit or facilitate the
issuance of Securities in bearer form, registrable or not registrable as to
principal, and with or without interest coupons, or to permit or facilitate the
issuance of Securities in uncertificated form; or to provide for the appointment
of a successor Trustee with respect to one or more (but not all) series of
Securities issued pursuant to the Indenture, as provided in Section 7.08 of the
Indenture.
3. Remedies. As provided in and subject to the provisions of the
Indenture, the Holder of this Security shall not have the right to institute any
proceeding with respect to the Indenture or for the appointment of a receiver or
trustee of for any other remedy thereunder, unless such Holder shall have
previously given the Trustee written notice of a continuing Event of Default
with respect to the Securities of this series, the Holders of not less than 25%
in principal amount of the Securities of this series at the time Outstanding
shall have made written request to the Trustee to institute proceedings in
respect of such Event of Default as Trustee and offered the Trustee reasonable
indemnity, and the Trustee shall not have received from the Holders of a
majority in principal amount of Securities of this series at the time
Outstanding a direction inconsistent with such request, and shall have failed to
institute any such proceeding, for 60 days after receipt of such notice, request
and offer of indemnity. The foregoing shall not apply to any suit instituted by
the Holder of this Security for the enforcement of any payment of principal
hereof or any premium or interest hereon on or after the respective due dates
expressed herein.
4. Prepayment at Holder's Option Upon Certain Merger and Change of
Control Events. In the event of a Change of Control or in the event of a merger
where, immediately after giving effect to the merger, the surviving corporation
does not meet the Consolidated Interest Coverage Ratio set forth in the
Indenture, the Company shall be obligated to make an offer to purchase this
Security at a purchase price in cash equal to 101% of its principal amount plus
accrued interest, after the occurrence of such Change in Control or merger.
Holders of Securities which are the subject of such an offer to repurchase shall
receive an offer
<PAGE>
to repurchase and may elect to have such Securities repurchased in accordance
with the provisions of the Indenture pursuant to and in accordance with the
terms of the Indenture. The Company shall give the Holder of this Security
notice of such right of repurchase not less than 20 nor more than 60 business
days prior to the consummation of a merger, consolidation, transfer, sale or
lease that would require the Company to offer to repurchase the Securities and
not more than 45 business days following any other event constituting a Change
of Control, mailed by first-class mail to the Holder's last address as it
appears upon the register. The Holder shall have the right to have this Security
repurchased if, among other things, the Security is tendered for repurchase no
later than five business days prior to the applicable repurchase date. The
Company shall have no obligation to consummate any merger, consolidation,
transfer, sale or lease that is the subject of any such notice, and if any such
merger, consolidation, transfer, sale or lease that was the subject of any
notice described above is not consummated, the Holder will not be entitled to
have this Security prepaid, and any Securities tendered for prepayment will be
returned.
5. Trustee Dealings with the Company. IBJ WHITEHALL BANK & TRUST
COMPANY, the Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company or any Affiliate with the same rights it would have as if it
were not the Trustee.
6. No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Holder by accepting a Security waives and releases all such
liability. This waiver and release are part of the consideration for the issue
of the Securities.
7. Unclaimed Money. If money for the payment of principal of or
interest on any Security remains unclaimed for two years after the date on which
such payment shall have come due, the Trustee or Paying Agent will pay the money
back to the Company at the Company's written request. After that, Holders
entitled to this money must look to the Company for payment, unless a law
governing abandoned property designates another Person.
8. Discharge Upon Redemption or Maturity. Subject to the terms of
the Indenture, the Indenture will be discharged and cancelled with respect to
Securities of any series upon the payment of all Securities of such series. The
Indenture contains provisions for defeasance at any time of certain restrictive
covenants with respect to this Security (in each case upon compliance with
certain conditions set forth therein).
9. Authentication. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
<PAGE>
10. GOVERNING LAW. THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN
THIS SECURITY AND THE INDENTURE.
11. Abbreviations. Customary abbreviations may be used in the name
of a Holder or an assignee, such as TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and UNIF GIFT MIN ACT (=
Uniform Gifts to Minors Act).
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture, which has in it the text of this
Security in larger type. Requests may be made to The Penn Traffic Company, 1200
State Fair Boulevard, Syracuse, New York 13221, Attention: ____________________.
<PAGE>
OPTION OF HOLDER TO ELECT REPURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 5.01 of the Indenture, check the box:
(
Dated: _________________ Your signature:
________________________
_________________________________
(Sign exactly as name appears on
the other side of this Security)
Signature Guarantee:________________________
Signature must be guaranteed by an eligible guarantor institution within the
meaning of Securities and Exchange Commission Rule 17Ad-15 (including banks,
stock brokers, savings and loan associations, national securities exchanges,
registered securities associations, clearing agencies and credit unions) with
membership or participation in an approved signature guarantee medallion program
if this Security is to be delivered other than to and in the name of the
registered holder.
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below: I or we assign and transfer
this Security to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ____________________________________________ agent to
transfer this Security on the books of the Company. The agent may substitute
another to act for him.
- --------------------------------------------------------------------------------
Dated:_________________ Your signature:_____________________________
____________________________________________
(Sign exactly as your name appears on the
other side of this Security)
Signature Guarantee:___________________________
Signature must be guaranteed by an eligible guarantor institution within the
meaning of Securities and Exchange Commission Rule 17Ad-15 (including banks,
stock brokers, savings and loan associations, national securities exchanges,
registered securities associations, clearing agencies and credit unions) with
membership or participation in an approved signature guarantee medallion program
if this Security is to be delivered other than to and in the name of the
registered holder.
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
In re: ) Chapter 11
)
THE PENN TRAFFIC COMPANY, et al., ) Case No. 99-462 (PJW)
)
Debtors. ) Jointly Administered
AMENDED DISCLOSURE STATEMENT ACCOMPANYING AMENDED 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 BANKRUPTCY CODE
PAUL, WEISS, RIFKIND, WHARTON & YOUNG CONAWAY STARGATT &
GARRISON TAYLOR, LLP
Alan W. Kornberg James L. Patton, Jr.
Jeffrey D. Saferstein 1110 N. Market Street
Brian S. Hermann P.O. Box 391
1285 Avenue of the Americas Rodney Square North, 11th Floor
New York, New York 10019-6064 Wilmington, Delaware 19801
(212) 373-3000 (302) 571-6600
Dated: March 1, 1999,
as amended
April 2, 1999
<PAGE>
ALL CREDITORS ARE ADVISED AND ENCOURAGED TO READ THIS DISCLOSURE STATEMENT
AND THE PLAN IN THEIR ENTIRETY BEFORE VOTING TO ACCEPT OR REJECT THE PLAN. PLAN
SUMMARIES AND STATEMENTS MADE IN THIS DISCLOSURE STATEMENT, INCLUDING THE
FOLLOWING SUMMARY, ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE PLAN,
OTHER EXHIBITS ANNEXED TO THE PLAN, THE PLAN SUPPLEMENT, AND THIS DISCLOSURE
STATEMENT. THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT ARE MADE ONLY
AS OF THE DATE HEREOF UNLESS OTHERWISE SPECIFIED, AND THERE CAN BE NO ASSURANCE
THAT THE STATEMENTS CONTAINED HEREIN WILL BE CORRECT AT ANY TIME AFTER SUCH
DATE. ALL CREDITORS AND EQUITY INTEREST HOLDERS SHOULD READ CAREFULLY THE "RISK
FACTORS" SECTION HEREOF BEFORE VOTING FOR OR AGAINST THE PLAN. SEE "CERTAIN RISK
FACTORS" SECTION IX.
THIS DISCLOSURE STATEMENT HAS BEEN PREPARED IN ACCORDANCE WITH SECTION
1125 OF THE BANKRUPTCY CODE AND RULE 3016 OF THE FEDERAL RULES OF BANKRUPTCY
PROCEDURE AND NOT NECESSARILY IN ACCORDANCE WITH FEDERAL OR STATE SECURITIES
LAWS OR OTHER APPLICABLE LAW. THIS DISCLOSURE STATEMENT HAS NEITHER BEEN
APPROVED NOR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC")
NOR HAS THE SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED
HEREIN. PERSONS OR ENTITIES TRADING IN OR OTHERWISE PURCHASING, SELLING, OR
TRANSFERRING SECURITIES OF THE DEBTORS SHOULD EVALUATE THIS DISCLOSURE STATEMENT
AND THE PLAN IN LIGHT OF THE PURPOSES FOR WHICH THEY WERE PREPARED.
CERTAIN STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT, INCLUDING
PROJECTED FINANCIAL INFORMATION AND OTHER FORWARD-LOOKING STATEMENTS, ARE BASED
ON ESTIMATES AND ASSUMPTIONS. THERE CAN BE NO ASSURANCE THAT SUCH STATEMENTS
WILL REFLECT ACTUAL OUTCOMES.
THE INFORMATION IN THIS DISCLOSURE STATEMENT IS BEING PROVIDED SOLELY FOR
PURPOSES OF VOTING TO ACCEPT OR REJECT THE PLAN. NOTHING IN THIS DISCLOSURE
STATEMENT MAY BE USED BY ANY ENTITY FOR ANY OTHER PURPOSE. THE FACTUAL
INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT, INCLUDING THE DESCRIPTION OF
THE DEBTORS, THEIR BUSINESSES, AND EVENTS LEADING TO THE COMMENCEMENT OF THE
CHAPTER 11 CASES, HAS BEEN OBTAINED FROM VARIOUS DOCUMENTS, AGREEMENTS, AND
OTHER WRITINGS RELATING TO THE DEBTORS. NEITHER THE DEBTORS NOR ANY OTHER PARTY
MAKES ANY REPRESENTATION OR WARRANTY REGARDING SUCH INFORMATION.
(i)
<PAGE>
THE TERMS OF THE PLAN GOVERN IN THE EVENT OF ANY INCONSISTENCY WITH THE
SUMMARIES IN THIS DISCLOSURE STATEMENT. ALL EXHIBITS TO THE DISCLOSURE STATEMENT
ARE INCORPORATED INTO AND ARE A PART OF THIS DISCLOSURE STATEMENT AS IF SET
FORTH IN FULL HEREIN. THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT ARE
MADE AS OF THE DATE HEREOF UNLESS OTHERWISE SPECIFIED.
AS TO CONTESTED MATTERS, EXISTING LITIGATION INVOLVING THE DEBTORS,
ADVERSARY PROCEEDINGS, AND OTHER ACTIONS OR THREATENED ACTIONS, THIS DISCLOSURE
STATEMENT SHALL NOT CONSTITUTE OR BE CONSTRUED AS AN ADMISSION OF ANY FACT OR
LIABILITY, STIPULATION, OR WAIVER, BUT RATHER AS A STATEMENT MADE WITHOUT
PREJUDICE SOLELY FOR SETTLEMENT PURPOSES, WITH FULL RESERVATION OF RIGHTS, AND
IS NOT TO BE USED FOR ANY LITIGATION PURPOSE WHATSOEVER. AS SUCH, THIS
DISCLOSURE STATEMENT SHALL NOT BE ADMISSIBLE IN ANY NONBANKRUPTCY PROCEEDING
INVOLVING THE DEBTORS, OR ANY OTHER PARTY IN INTEREST, NOR SHALL IT BE CONSTRUED
TO BE CONCLUSIVE ADVICE ON THE TAX, SECURITIES, FINANCIAL OR OTHER EFFECTS OF
THE REORGANIZATION AS TO HOLDERS OF CLAIMS AGAINST OR EQUITY INTERESTS IN THE
DEBTORS.
(ii)
<PAGE>
TABLE OF CONTENTS
Page
I. INTRODUCTION.....................................................1
A. HOLDERS OF CLAIMS AND EQUITY INTERESTS ENTITLED
TO VOTE....................................................3
B. VOTING PROCEDURES..........................................4
C. CONFIRMATION HEARING.......................................5
II. OVERVIEW OF THE PLAN.............................................5
III. OVERVIEW OF CHAPTER 11...........................................8
IV. DESCRIPTION OF THE DEBTORS' BUSINESS.............................9
A. General....................................................9
B. Retail Food Distribution Business..........................9
C. Wholesale Food Distribution Business......................10
D. Food Processing Operations................................11
E. Purchasing and Distribution...............................11
F. Competition...............................................12
G. Employees.................................................12
H. Government Regulation.....................................12
I. History...................................................12
J. Properties................................................13
K. The Prepetition Loan Documents............................14
V. KEY EVENTS LEADING TO COMMENCEMENT OF
THE CHAPTER 11 CASES............................................15
A. Decrease in Overall Store Performance and Operating
Results...................................................15
B. Defaults under Indentures and Credit Agreement............16
C. Discussions with Financial Advisors, Regulatory Authorities
and Informal Committee....................................17
D. Steps Taken to Strengthen The Debtors' Operations and
Financial Performance.....................................18
VI. THE CHAPTER 11 CASES............................................20
A. Disclosure Statement/Plan Confirmation Hearings...........20
B. Significant "First Day" Motions During the Chapter 11
Cases.....................................................20
C. DIP Credit Facility.......................................20
D. Last Date to File Proofs of Claim.........................22
E. Assumption/Rejection of Leases Executory Contracts........22
F. The Official Committee of Unsecured Creditors.............22
VII. SUMMARY OF THE PLAN OF REORGANIZATION...........................23
A. Introduction..............................................23
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<PAGE>
B. Classification and Treatment of Administrative Claims,
Claims and Equity Interests Under the Plan................23
1 Unclassified -- Administrative Claims...............25
2 Unclassified -- Professional Compensation and
Reimbursement Claims................................26
3 Unclassified -- Priority Tax Claims.................27
4 Class 1 -- Other Priority Claims....................28
5 Class 2 -- Other Secured Claim......................28
6 Class 3 -- DIP Financing Claims.....................29
7 Class 4 -- Trade Claims.............................29
8 Class 5 -- General Unsecured Claims.................30
9 Class 6 -- Senior Note Claims.......................30
10 Class 7 -- Senior Subordinated Note Claims..........31
11 Class 8 -- Equity Interests.........................32
C. Substantive Consolidation.................................33
D. Provisions Regarding Corporate Governance and Management
of the Reorganized Debtors................................34
1 Directors and Officers of Reorganized Penn Traffic..34
(a) The Initial Board of Directors................34
(b) Management of Reorganized Penn Traffic........34
(c) Other Committees of the Board of Directors....35
2 Directors and Officers of Dairy Dell, Big M and
Penny Curtiss.......................................35
3 Corporate Action....................................35
(a) Amended Penn Traffic Certificate of
Incorporation and Amended Penn Traffic
By-Laws.......................................35
(b) Amended Other Debtor Certificate of
Incorporation and Amended Other Debtor
By-Laws.......................................36
4 Securities to Be Issued Pursuant to the Plan........36
(a) New Common Stock..............................36
(b) New Senior Notes..............................37
(c) The New Warrants..............................39
E. Securities Laws Matters...................................40
F. Equity Incentive Plan.....................................40
1 Penn Traffic Company 1999 Equity Incentive Plan.....40
2 Description of 1999 Penn Traffic Company Equity
Incentive Plan......................................40
G. New Management Agreement and Amendment to Joseph Fisher's
Employment Agreement......................................42
H. Distributions Under the Plan..............................43
1 Method of Distribution Under the Plan...............43
(a) Date and Delivery of Distributions............43
(b) Distribution of Cash..........................44
(c) Distribution of Unclaimed Property............44
(d) Saturdays, Sundays, or Legal Holidays.........44
ii
<PAGE>
(e) Fractional Dollars and Fractional Shares and
Warrants......................................44
(f) Distributions to Holders as of the Record
Date..........................................45
2 Disputed Trade Claims and General Unsecured Claims..45
(a) Distributions Withheld For Disputed Trade
Claims........................................45
(b) Distributions Withheld for Disputed General
Unsecured Claims..............................46
I. Objections To And Resolution Of Administrative Claims and
Claims; Administrative and Priority Claims Reserve........46
1 Objections To And Resolution of Administrative
Claims and Claims...................................46
2 Administrative and Priority Claims Reserve..........47
(a) Establishment of Administrative Claims
Reserve.......................................47
(b) Cash Held in Administrative and Priority
Claims Reserve................................47
J. Allocation of Consideration...............................47
K. Cancellation and Surrender of Existing Securities and
Agreements................................................48
L. Indenture Trustee Fees....................................48
M. Implementation of the Plan................................50
1 Registration Rights Agreement, New Notes Indenture,
the Amended Penn Traffic Certificate of
Incorporation, the Amended Penn Traffic By-Laws, the
Amended Subsidiaries Certificates of Incorporation,
the Amended Subsidiaries By- Laws, the New
Management Agreement, the Equity Incentive Plan, the
Warrant Agreement, the Supplemental Retirement Plan,
the Amendment to Joseph V. Fisher's Employment
Agreement and Other Implementation
Documents...........................................50
2 The Debtors' Release................................50
3 Waiver of Claims; Covenant Not To Sue...............51
N. Effect of Confirmation of the Plan........................51
1 Continued Corporate Existence and Vesting of Assets
in the Reorganized Debtors..........................51
2 Termination of Subordination Rights.................52
3 Discharge of the Debtors............................52
4 Injunction..........................................53
5 Preservation of Rights..............................53
6 Votes Solicited in Good Faith.......................54
7 Administrative Claims Incurred after the
Confirmation Date...................................54
8 Exculpation and Release of Released Parties;
Injunction..........................................54
9 Preservation of Insurance...........................55
10 Term of Bankruptcy Injunction or Stays..............55
11 Officers' and Directors' Indemnification Rights and
Insurance...........................................55
12 Limitation of Governmental Release..................55
O. Retention of Jurisdiction.................................56
P. Miscellaneous Provisions..................................56
1 Payment of Statutory Fees...........................56
iii
<PAGE>
2 Dissolution of Creditors Committee..................57
3 Modification of the Plan............................57
4 Governing Law.......................................57
5 Filing or Execution of Additional Documents.........57
6 Withholding and Reporting Requirements..............57
7 Exemption From Transfer Taxes.......................57
8 Section 1145 Exemption..............................58
9 Waiver of Federal Rule of Civil Procedure 62(a).....58
10 Plan Supplement.....................................58
Q. Executory Contracts and Unexpired Leases..................58
R. Benefit Plans.............................................59
S. Pension Plans.............................................60
VIII. PROJECTIONS AND VALUATION ANALYSIS..............................61
A. Projections...............................................61
B. Valuation.................................................63
IX. CERTAIN RISK FACTORS TO BE CONSIDERED...........................64
1 Projected Financial Information.....................65
2 Ability to Refinance Certain Indebtedness and
Restrictions Imposed by Indebtedness................65
3 Competitive Conditions and Need to Fund Future
Capital Requirements................................66
4 Significant Holders.................................66
5 Lack of Established Market for New Common Stock and
Warrants............................................66
6 Lack of Trading Market for New Notes................67
7 Dividend Policies...................................67
8 Certain Bankruptcy Law Considerations...............67
(a) Risk of Non-Confirmation of the Plan..........67
(b) Risk of Non-Occurrence of the Effective Date..68
9 Certain Tax Matters.................................68
X. CONFIRMATION PROCEDURE..........................................68
A. Solicitation of Votes.....................................68
B. The Confirmation Hearing..................................69
C. Confirmation..............................................70
1 Acceptance..........................................70
2 Unfair Discrimination and Fair and Equitable Tests..70
(a) Secured Creditors.............................70
(b) Unsecured Creditors...........................70
(c) Equity Interests..............................71
3 Feasibility.........................................71
4 Best Interests Test.................................72
iv
<PAGE>
XI. EFFECTIVENESS OF THE PLAN.......................................74
A. Conditions Precedent to Effectiveness.....................74
B. Waiver of Conditions......................................74
C. Effect of Failure of Conditions...........................74
D. Vacatur of Confirmation Order.............................75
XII. SECURITIES LAWS MATTERS.........................................75
A. Bankruptcy Code Exemptions from Registration Requirements.75
1 Initial Offer and Sale of Plan Securities...........75
2 Subsequent Transfers of Plan Securities.............76
3 Certain Transactions by Stockbrokers................78
B. Registration Rights.......................................79
XIII. FINANCIAL INFORMATION...........................................79
A. Financial Statements......................................79
B. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................80
C. Recent Performance........................................80
XIV. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF
THE PLAN........................................................80
A. Liquidation Under Chapter 7...............................80
B. Alternative Plan of Reorganization........................81
XV. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN.............81
A. Consequences to Creditors.................................82
1 Tax Securities......................................82
2 Claims and Consideration Constituting Tax
Securities..........................................83
3 Claims or Consideration Not Constituting Tax
Securities..........................................83
4 Application of OID Rules............................85
B. Consequences to the Debtors...............................86
1 Cancellation of Debt................................86
2 Applicable High-Yield Discount Obligations..........86
3 Alternative Minimum Tax.............................87
C. Additional Tax Considerations for All Claim Holders.......87
1 Distributions in Discharge of Accrued Interest......87
2 Subsequent Sale of New Senior Notes, New Common
Stock, or New Warrants..............................88
3 Market Discount.....................................88
4 Withholding ........................................89
XVI. CONCLUSION......................................................90
v
<PAGE>
I.
INTRODUCTION
On March 1, 1999 (the "Petition Date"), The Penn Traffic Company
("Penn Traffic" or the "Company"), Dairy Dell, Inc. ("Dairy Dell"), Big M
Supermarkets, Inc. ("Big M") and Penny Curtis Baking Company, Inc. ("Penny
Curtis", together with Penn Traffic, Dairy Dell and Big M, the "Debtors") filed
petitions for relief under chapter 11 of the Bankruptcy Code with the United
States Bankruptcy Court for the District of Delaware. On the same day, the
Debtors also filed their proposed plan of reorganization, dated March 1, 1999
(as it may be amended, modified, or supplemented, the "Plan") which sets forth
the manner in which Claims against and Equity Interests in the Debtors will be
treated. This Disclosure Statement describes certain aspects of the Plan, the
Debtors' businesses and related matters. Unless otherwise defined herein, all
capitalized terms contained herein have the meanings ascribed to them in the
Plan.
After a long and careful review of the Debtors' businesses and the
Debtors' prospects as going concerns, the Debtors, in consultation with their
legal and financial advisors and an informal committee of certain major holders
of Penn Traffic's debt securities that was formed prior to the Petition Date
(the "Informal Committee") and the Informal Committee's legal and financial
advisors, concluded that recoveries to creditors and equity holders would be
maximized by the Debtors' continued operation as a going concern under the terms
of the Plan. In other words, the Debtors are worth more to their creditors and
equity holders as a going concern than they would be upon liquidation. To
achieve that higher value, the Plan (if approved by all impaired Classes)
contemplates (i) paying the Claims of all general unsecured creditors in full,
(ii) distributing $100 million of new senior notes and 19,000,000 shares of New
Common Stock to holders of Penn Traffic's Senior Notes, (iii) distributing
1,000,000 shares of New Common Stock and 6-year warrants to purchase an
additional 1,000,000 shares of New Common Stock, having an exercise price of
$18.30 per share, to the holders of Penn Traffic's Senior Subordinated Notes,
and (iv) converting each 100 shares of Penn Traffic's common stock outstanding
on the Petition Date into 1 share of New Common Stock.
This Disclosure Statement is submitted pursuant to section 1125 of
the Bankruptcy Code to holders of Claims against and Equity Interests in the
Debtors in connection with (i) the solicitation of acceptances of the Debtors'
Plan and (ii) the hearing to consider confirmation of the Plan (the
"Confirmation Hearing") scheduled for May 27, 1999, at 9:30 a.m., Eastern Time.
1
<PAGE>
Attached as Exhibits to this Disclosure Statement are copies of the
following:
o The Plan (Exhibit A);
o An Order of the Court dated April 5, 1999 (the "Disclosure Statement
Order"), among other things, approving the Disclosure Statement and
establishing certain procedures with respect to the solicitation and
tabulation of votes to accept or reject the Plan (Exhibit B);
o The Penn Traffic Company, et al. 1998 Form 10-K and Annual Report
(Exhibit C);
o The Penn Traffic Company, et al. Projected Financial Information
(Exhibit D);
o The Penn Traffic Company, et al. Liquidation Analysis (Exhibit E);
o The Penn Traffic Company, et al. Organizational Chart (Exhibit F);
and
o The Penn Traffic Company, et al. October 31, 1998 Form 10-Q
(Exhibit G).
o The Penn Traffic Company, et al. Recovery Analysis (Exhibit H).
o The Penn Traffic Company, et al. Fourth Quarter Fiscal 1999 Earnings
Press Release dated April 1, 1999 (Exhibit I).
In addition, a Ballot for the acceptance or rejection of the Plan is
enclosed with the Disclosure Statement submitted to the holders of Claims and
Equity Interests that the Debtors believe are entitled to vote to accept or
reject the Plan.
On April 5, 1999, after notice and a hearing, the Bankruptcy Court
signed the Disclosure Statement Order approving this Disclosure Statement as
containing adequate information of a kind and in sufficient detail to enable
hypothetical, reasonable investors typical of the Debtors' creditors and equity
interest holders to make an informed judgment whether to accept or reject the
Plan. APPROVAL OF THIS DISCLOSURE STATEMENT DOES NOT, HOWEVER, CONSTITUTE A
DETERMINATION BY THE COURT AS TO THE FAIRNESS OR MERITS OF THE PLAN.
2
<PAGE>
The Disclosure Statement Order, a copy of which is annexed hereto as
Exhibit B, sets forth in detail the deadlines, procedures and instructions for
voting to accept or reject the Plan and for filing objections to confirmation of
the Plan, the record date for voting purposes, and the applicable standards for
tabulating Ballots. In addition, detailed voting instructions accompany each
Ballot. Each holder of a Claim or an Equity Interest entitled to vote on the
Plan should read in their entirety the Disclosure Statement, the Plan, the
Disclosure Statement Order and the instructions accompanying the Ballots before
voting on the Plan. These documents contain, among other things, important
information concerning the classification of Claims and Equity Interests for
voting purposes and the tabulation of votes. No solicitation of votes to accept
the Plan may be made except pursuant to section 1125 of the Bankruptcy Code.
A. HOLDERS OF CLAIMS AND EQUITY INTERESTS ENTITLED TO VOTE.
Pursuant to the provisions of the Bankruptcy Code, only holders of
allowed claims or equity interests in classes of claims or equity interests that
are impaired are entitled to vote to accept or reject a proposed chapter 11
plan. Classes of claims or equity interests in which the holders of claims or
equity interests are unimpaired under a chapter 11 plan are deemed to have
accepted the plan and are not entitled to vote to accept or reject the plan.
Classes 5 (General Unsecured Claims), 6 (Senior Note Claims), 7
(Senior Subordinated Note Claims) and 8 (Equity Interests) of the Plan are
impaired. To the extent Claims and Equity Interests in such Classes are Allowed
Claims and Allowed Equity Interests, the holders of such Claims and Equity
Interests are entitled to vote to accept or reject the Plan. Classes 1, 2, 3 and
4 of the Plan are unimpaired. Holders of Claims in Classes 1, 2, 3 and 4 are
conclusively deemed to have accepted the Plan. Therefore, the Debtors are
soliciting acceptances only from holders of Allowed Claims and Allowed Equity
Interests in Classes 5, 6, 7 and 8.
The Bankruptcy Code defines "acceptance" of a plan by a class of
claims as acceptance by creditors in that class that hold at least two-thirds in
dollar amount and more than one-half in number of the claims that cast ballots
for acceptance or rejection of the plan. Acceptance of a plan by a class of
equity interests requires acceptance by at least two-thirds of the number of
shares in such class that cast ballots for acceptance or rejection of the plan.
For a more detailed description of the requirements for confirmation of the
Plan, see Section X. "Confirmation Procedure."
If one or more of the Classes of Claims or Equity Interests entitled
to vote on the Plan votes to reject the Plan, the Debtors intend to request
confirmation of the Plan pursuant to section 1129(b) of the Bankruptcy Code.
Section 1129(b) permits the confirmation of a plan of reorganization
notwithstanding the
3
<PAGE>
nonacceptance of a plan by one or more impaired classes of claims or equity
interests. Under that section, a plan may be confirmed by a bankruptcy court if
it does not "discriminate unfairly" and is "fair and equitable" with respect to
each nonaccepting class. The determination as to whether to seek confirmation of
the Plan under such circumstances will be announced before or at the
Confirmation Hearing. For a more detailed description of the requirements for
confirmation of a nonconsensual plan, see Section X.C "Confirmation Procedure"
and "Unfair Discrimination and Fair and Equitable Tests."
B. VOTING PROCEDURES.
If you are entitled to vote to accept or reject the Plan, a Ballot
is enclosed for the purpose of voting on the Plan. If you hold Claims in more
than one class, or Claims and Equity Interests, and you are entitled to vote
Claims in more than one Class, you will receive separate Ballots which must be
used for each separate Class of Claims or Equity Interests. Please vote and
return your Ballot(s) to:
Donlin, Recano & Co., Inc.
P.O. Box 2034
Murray Hill Station
New York, New York 10156-0701
Attn: The Penn Traffic Company
Ballot Tabulation
DO NOT RETURN YOUR NOTES OR SECURITIES WITH YOUR BALLOT.
TO BE COUNTED, YOUR BALLOT INDICATING ACCEPTANCE OR REJECTION OF THE
PLAN MUST BE RECEIVED NO LATER THAN 5:00 P.M., EASTERN STANDARD TIME, ON May 21,
1999. ANY EXECUTED BALLOT RECEIVED THAT DOES NOT INDICATE EITHER AN ACCEPTANCE
OR REJECTION OF THE PLAN SHALL BE DEEMED TO CONSTITUTE AN ACCEPTANCE OF THE
PLAN.
Any Claim or Equity Interest in an impaired Class as to which an
objection or request for estimation is pending or which is scheduled by the
Debtors as unliquidated, disputed or contingent is not entitled to vote unless
the holder of such Claim or Equity Interest has obtained an order of the Court
temporarily allowing such Claim or Equity Interest for the purpose of voting on
the Plan.
Pursuant to the Disclosure Statement Order, the Court set April 5,
1999 as the record date for voting on the Plan. Accordingly, only holders of
record as of April 5, 1999 that are otherwise entitled to vote under the Plan
will receive a Ballot and may vote on the Plan.
4
<PAGE>
If you are a holder of a Claim or Equity Interest entitled to vote
on the Plan and did not receive a Ballot, received a damaged Ballot or lost your
Ballot, or if you have any questions concerning the Disclosure Statement, the
Plan or the procedures for voting on the Plan, please call Donlin, Recano & Co.,
Inc. at (212) 481-1411 from 10:00 a.m. to 4:00 p.m. Monday through Friday.
C. CONFIRMATION HEARING.
Pursuant to section 1128 of the Bankruptcy Code, the Confirmation
Hearing will be held on May 27, 1999 at 9:30 a.m., Eastern Time, before the
Honorable Peter J. Walsh, United States Bankruptcy Court, 824 North Market
Street, Wilmington, Delaware. The Court has directed that objections, if any, to
confirmation of the Plan be served and filed so that they are received on or
before May 21, 1999 at 4:00 p.m., Eastern Time, in the manner described below in
Section X.B "The Confirmation Hearing." The Confirmation Hearing may be
adjourned from time to time by the Court without further notice except for the
announcement of the adjournment date made at the Confirmation Hearing or at any
subsequent adjourned Confirmation Hearing.
THE DEBTORS BELIEVE THAT THE PLAN WILL ENABLE THEM TO SUCCESSFULLY
REORGANIZE AND TO ACCOMPLISH THE OBJECTIVES OF CHAPTER 11 AND THAT ACCEPTANCE OF
THE PLAN IS IN THE BEST INTERESTS OF THE DEBTORS AND THEIR CREDITORS AND EQUITY
INTEREST HOLDERS. THE DEBTORS URGE CREDITORS AND EQUITY INTEREST HOLDERS TO VOTE
TO ACCEPT THE PLAN.
AS DESCRIBED IN THE ENCLOSED LETTER, THE OFFICIAL COMMITTEE OF
UNSECURED CREDITORS APPOINTED IN THE DEBTORS' CHAPTER 11 CASES SUPPORTS THE PLAN
AND RECOMMENDS THAT UNSECURED CREDITORS VOTE TO ACCEPT THE PLAN.
II.
OVERVIEW OF THE PLAN
The following table briefly summarizes the classification and
treatment of Claims and Equity Interests under the Plan.
5
<PAGE>
SUMMARY OF CLASSIFICATION AND TREATMENT
OF CLAIMS AND EQUITY INTERESTS UNDER THE PLAN 1/
<TABLE>
<CAPTION>
Type of Claim or Estimated Estimated
Class Equity Interest Treatment Claim Amount Recovery
- ----- ---------------- --------- ------------ ---------
<S> <C> <C> <C> <C>
- -- Administrative Unimpaired; paid in full, in Cash, or $9mm 2/ 100%
Claims in accordance with the terms and
conditions of transactions or
agreements relating to obligations
incurred in the ordinary course of
business during the pendency of the
Chapter 11 Cases or assumed by the
Debtors in Possession.
- -- Priority Tax Claims Unimpaired; at the option of the $0.00 100%
Debtors either (i) paid in full, in Cash,
or (ii) paid over a six-year period
from the date of assessment as
provided in section 1129(a)(9)(C) of
the Bankruptcy Code with interest
payable at the rate of 8 1/4% per
annum.
1 Other Priority Unimpaired; paid in full, in Cash. $0.00 100%
Claims
</TABLE>
- --------
1/ This table is only a summary of the classification and treatment of Claims
and Equity Interests under the Plan. All amounts set forth in this table
are in millions of dollars. Reference should be made to the entire
Disclosure Statement and the Plan for a complete description of the
classification and treatment of Claims and Equity Interests.
2/ This amount excludes claims of entities against the Debtors for (i) goods
provided after the Petition Date by such entities to the Debtors for
resale to the general public in the ordinary course of business, and (ii)
goods (not resold to the general public) and services provided to the
Debtors in the ordinary course of the Debtors' businesses. These claims
are being paid in the ordinary course of business.
6
<PAGE>
<TABLE>
<CAPTION>
Type of Claim or Estimated Estimated
Class Equity Interest Treatment Claim Amount Recovery
- ----- ---------------- --------- ------------ ---------
<S> <C> <C> <C> <C>
2 Other Secured Claims Unimpaired; at the option of the $30mm 100%
Debtors either (i) reinstated by curing
all outstanding defaults with all
legal, equitable and contractual rights
remaining unaltered, (ii) paid in full,
in Cash, plus any interest required to
be paid pursuant to section 506(b) of
the Bankruptcy Code, or (iii) fully and
completely satisfied by delivery or
retention of the collateral securing
the Other Secured Claim and payment of
any interest required to be paid
pursuant to section 506(b) of the
Bankruptcy Code.
3 DIP Financing Unimpaired; paid in full, in Cash. $183mm 100%
Claims
4 Trade Claims 3/ Unimpaired; to the extent not paid in N/A 100%
the ordinary course of business, all
legal, equitable and contractual rights
will remain unaltered by the Plan.
5 General Unsecured Impaired; at the option of the Debtors $20mm 100%
Claims either (i) paid in full in Cash, or
(ii) reinstated by curing all
outstanding defaults with all legal,
equitable and contractual rights
remaining unaltered.
6 Senior Note Claims Impaired; distribution of $100 million $768.5mm 59% 4/
of New Senior Notes and 19,000,000
shares of Reorganized Penn Traffic's
New Common Stock.
</TABLE>
- --------
3/ A Claim of an entity against the Debtors for (i) goods provided prior to
the Petition Date by such entity to the Debtors for resale to the general
public in the ordinary course of business; provided, however, that such
entity has continued to provide goods to the Debtors before and after the
Petition Date on customary terms and credit, or as otherwise acceptable to
the Debtors and (ii) goods (not resold to the general public) and services
provided to the Debtors in the ordinary course of the Debtors' businesses.
4/ For an analysis of the estimated recovery, see Recovery Analysis attached
as Exhibit H.
7
<PAGE>
<TABLE>
<CAPTION>
Type of Claim or Estimated Estimated
Class Equity Interest Treatment Claim Amount Recovery
- ----- ---------------- --------- ------------ ---------
<S> <C> <C> <C> <C>
7 Senior Subordinated Impaired; distribution of 1,000,000 $414.4mm 6% 5/
Claim shares of Reorganized Penn
Traffic's New Common Stock and 6-year
warrants to purchase 1,000,000 shares of
New Common Stock, having an exercise
price of $18.30 per share.
8 Equity Interests Impaired; distribution of 1 share of N/A $2mm 5/
Reorganized Penn Traffic's New Common
Stock for each 100 shares of Penn
Traffic common stock held on the Record
Date.
</TABLE>
III.
OVERVIEW OF CHAPTER 11
Chapter 11 is the principal business reorganization chapter of the
Bankruptcy Code. Under chapter 11, a debtor is authorized to reorganize its
business for the benefit of itself, its creditors and equity interest holders.
In addition to permitting rehabilitation of a debtor, another goal of chapter 11
is to promote equality of treatment for similarly situated creditors and equity
interest holders with respect to the distribution of a debtor's assets.
The commencement of a chapter 11 case creates an estate that is
comprised of all of the legal and equitable interests of the debtor as of the
filing date. The Bankruptcy Code provides that the debtor may continue to
operate its business and remain in possession of its property as a "debtor in
possession."
The consummation of a plan of reorganization is the principal
objective of a chapter 11 reorganization case. A plan of reorganization sets
forth the means for satisfying claims against and interests in the debtor.
Confirmation of a plan of reorganization by the bankruptcy court makes the plan
binding upon a debtor, any issuer of securities under the plan, any person
acquiring property under the plan and any creditor or equity interest holder of
a debtor. Subject to certain limited
- --------
5/ For an analysis of the estimated recovery, see Recovery Analysis attached
as Exhibit H.
8
<PAGE>
exceptions, the confirmation order discharges a debtor from any debt that arose
prior to the date of confirmation of the plan and substitutes therefor the
obligations specified under the confirmed plan.
After a plan of reorganization has been filed, the holders of claims
against or interests in a debtor are permitted to vote to accept or reject the
plan. Before soliciting acceptances of the proposed plan, however, section 1125
of the Bankruptcy Code requires a debtor to prepare a disclosure statement
containing adequate information of a kind, and in sufficient detail, to enable a
hypothetical reasonable investor to make an informed judgment about the plan.
The Debtors are submitting this Disclosure Statement to holders of Claims
against and Equity Interests in the Debtors to satisfy the requirements of
section 1125 of the Bankruptcy Code.
IV.
DESCRIPTION OF THE DEBTORS' BUSINESSES
A. GENERAL
Penn Traffic is one of the leading food retailers in the eastern
United States. As of April 1, 1999, Penn Traffic operated 216 supermarkets in
upstate New York, Pennsylvania, Ohio and northern West Virginia under the "Big
Bear" and "Big Bear Plus" (74 stores), "Bi-Lo Foods" (43 stores), "P&C Foods"
(63 stores) and "Quality Markets" (36 stores) trade names. Penn Traffic also
operates wholesale food distribution businesses serving, as of April 1, 1999, 95
licensed franchisees and 81 independent operators.
As of the Petition Date, the majority of Penn Traffic's retail
supermarket revenues were generated in smaller communities where Penn Traffic
believes it virtually always holds the number one or number two market position.
The balance of Penn Traffic's retail supermarket revenues are derived from
Columbus, Ohio and Buffalo and Syracuse, New York.
Penn Traffic's retail and wholesale operations stretch from Ohio to
upstate New York. The Company operates in communities with diverse economies
based primarily on manufacturing and distribution, natural resources, retailing,
health care services, education and government services.
B. RETAIL FOOD DISTRIBUTION BUSINESS
Penn Traffic is one of the leading supermarket retailers in its
primary operating areas which include New York, Ohio and western Pennsylvania.
To strengthen Penn Traffic financially, since the middle of last year the
Company has undertaken a program to divest itself of certain marketing areas,
principally in northeastern Pennsylvania where performance and market position
were the weakest
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relative to Penn Traffic's other retail stores, and to close other
underperforming stores. This rationalization process has allowed management to
focus the Company's market and distribution resources on a less geographically
diverse store base located in upstate New York, Ohio, western Pennsylvania and
northern West Virginia.
Penn Traffic's store sizes and formats vary widely, depending upon
the demographic and competitive conditions in each location. For example,
"conventional" store formats are generally more appropriate in areas of low
population density, while larger areas are better served by full-service
supermarkets of up to 75,000 square feet, which contain numerous specialty
service departments such as bakeries, delicatessens, floral departments and
fresh seafood departments. Penn Traffic's "Plus" format stores range in size
from 75,000 to 140,000 square feet. These full service supermarkets carry an
expanded variety of nonfood merchandise. Penn Traffic has recently commenced a
process to refine the scope of this nonfood merchandise to a smaller number of
categories with a greater depth of variety in these categories.
Penn Traffic's supermarkets offer a broad selection of grocery,
meat, poultry, seafood, dairy, fresh produce, delicatessen, bakery and frozen
food products. The stores also offer nonfood products and services such as
health and beauty products, housewares, general merchandise, floral items and
banking services. In general, Penn Traffic's larger stores carry broader
selections of merchandise and feature a larger variety of service departments.
Most of the Company's supermarkets are located in shopping centers. The Company
believes that its existing store base is generally modern and provides an
attractive shopping experience for Penn Traffic customers.
C. WHOLESALE FOOD DISTRIBUTION BUSINESS
As of April 1, 1999, Penn Traffic licensed, royalty-free, the use of
its "Riverside," "Bi-Lo Foods" and "Big M" names to 95 independently-owned
supermarkets that are required to maintain certain quality and other standards.
The majority of these independent stores use Penn Traffic as their primary
wholesaler and also receive advertising, accounting, merchandising, consulting
and retail counseling services from Penn Traffic. In addition, as of April 1,
1999, Penn Traffic received rent from 47 of the licensed independent operators
which lease or sublease their supermarkets from Penn Traffic. The Company also
acts as a food distributor to 81 other independent supermarkets. Penn Traffic
believes that it is able to leverage its existing food supply and distribution
systems by supplying these retail stores owned and operated by third parties
that are geographically proximate to its own existing store base. Penn Traffic
intends to assume substantially all of the executory contracts and leases with
respect to its wholesale food distribution business. Penn Traffic does not
believe that there will be any cure amounts owed upon the assumption of such
contracts and leases.
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D. FOOD PROCESSING OPERATIONS
Penn Traffic owns and operates Penny Curtiss, a bakery processing
plant in Syracuse, New York. Penny Curtiss manufactures and distributes fresh
and frozen bakery products for distribution to Penn Traffic's stores as well as
to unrelated third parties.
E. PURCHASING AND DISTRIBUTION
Penn Traffic is a large volume purchaser of products. Penn Traffic's
purchases are generally of sufficient volume to qualify for minimum price
brackets for most items. Penn Traffic purchases brand name grocery merchandise
directly from national manufacturers. The Company also purchases private label
products and certain other grocery items from TOPCO Associates, Inc., a national
products purchasing cooperative comprising approximately 30 regional supermarket
chains. Prior to the Petition Date, certain of Penn Traffic's suppliers had
reduced credit limits to Penn Traffic which has reduced Penn Traffic's ability
to supply its stores with a full variety of products or earn promotional
discounts on certain products.
Penn Traffic's principal Pennsylvania distribution facility is a
company-owned 390,000 square foot distribution center in DuBois, Pennsylvania.
Penn Traffic also operates a 196,000 square foot distribution center for
perishable products in DuBois, and Penn Traffic leases a 70,000 square foot
warehouse in DuBois, for grocery products, certain store supplies and aerosol
products.
The principal New York distribution facilities are a company-owned
498,000 square foot distribution center in Syracuse, New York and a
company-owned 267,000 square foot distribution center in Jamestown, New York.
The Company also owns a 217,000 square foot distribution center for perishable
products in Syracuse.
The Company's primary Ohio distribution center is a leased 484,000
square foot dry grocery facility in Columbus, Ohio. Penn Traffic also owns a
208,000 square foot distribution facility for perishable goods in Columbus and
leases two additional warehouses totaling 430,000 square feet, in Columbus for
distribution of general merchandise and health and beauty care items to all Penn
Traffic stores.
Approximately three-quarters of the merchandise offered in Penn
Traffic's retail stores is distributed from its warehouses by its fleet of
tractors, refrigerated trailers and dry trailers. Merchandise not delivered from
Penn Traffic's warehouses is delivered directly to the stores by manufacturers,
distributors, vendor drivers and sales representatives for such products as
beverages, snack foods and bakery items.
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F. COMPETITION
The food retailing business is highly competitive and may be
affected by general economic conditions. The number of competitors and the
degree of competition experienced by Penn Traffic's supermarkets vary by
location. Penn Traffic competes with several multi-regional, regional and local
supermarket chains, convenience stores, stores owned and operated and otherwise
affiliated with large food wholesalers, unaffiliated independent food stores,
warehouse clubs, discount drug store chains, discount general merchandise
chains, "supercenters" (combination supermarket and general merchandise stores)
and other retailers.
G. EMPLOYEES
Labor costs and their impact on product prices are important
competitive factors in the supermarket industry.
As of the Petition Date, approximately 55% of Penn Traffic's hourly
employees belonged to the United Food and Commercial Workers Union. An
additional 7% of Penn Traffic's hourly employees (principally employed in the
distribution function and in the Company's bakery plant) belonged to four other
unions. The Company competes with certain independently-owned and chain-owned
supermarkets, discount drug stores, warehouse clubs, general merchandise stores,
convenience stores, supercenters, and other retailers whose employees are not
union affiliated. Penn Traffic intends to assume its collective bargaining
agreements and does not believe that there will be any cure amounts owed upon
such assumption.
H. GOVERNMENT REGULATION
Penn Traffic's food and drug business requires it to hold various
licenses and to register certain of its facilities with state and federal
health, drug and alcoholic beverage regulatory agencies. By virtue of these
licenses and registration requirements, Penn Traffic is obligated to observe
certain rules and regulations, and a violation of such rules and regulations
could result in a suspension or revocation of licenses or registrations. In
addition, most of Penn Traffic's licenses require periodic renewals. Penn
Traffic has experienced no material difficulties with respect to obtaining,
effecting or retaining its licenses and registrations.
I. HISTORY
Penn Traffic is the successor to a retail business which dates back
to 1854. Penn Traffic, then a publicly-held corporation, was acquired in March
1987 by Riverside Acquisition Company, Limited Partnership ("RAC"), a Delaware
limited partnership. At the time of the acquisition, Penn Traffic was the
largest retail and wholesale food distribution company in its principal
operating area, comprising 19
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counties in central and northwestern Pennsylvania and southwestern New York. In
1988, Penn Traffic again became a publicly held corporation.
In August 1988, Penn Traffic acquired P&C Food Markets, Inc.
("P&C"), which operated a retail and wholesale grocery business in a contiguous
market to the east of Penn Traffic's historical marketplace. In October 1991,
P&C became a wholly-owned subsidiary of the Company, and in April 1993, P&C was
merged into the Company.
In April 1989, Penn Traffic acquired Big Bear Stores Company ("Big
Bear"), a leading food retailer in Ohio and a portion of West Virginia. In
April 1993, Big Bear was merged into the Company.
In January 1993, Penn Traffic acquired a number of supermarkets
located in western New York and northwestern Pennsylvania from Peter J. Schmitt
Co., Inc. certain of which are being operated, as of the Petition Date, by the
Company under the "Quality Markets" trade name.
In September 1993, Penn Traffic acquired certain supermarkets from
Insalaco Supermarkets, Inc. in northeastern Pennsylvania. In addition, in
January 1995, Penn Traffic acquired certain supermarkets owned by American
Stores Company which had operated under the "Acme" trade name. As described in
Section IV.B. above, Penn Traffic has now divested itself or closed most of
these stores. The remaining stores operate under the "Bi-Lo Foods" and "P&C
Foods" trade names.
In January 1998, Penn Traffic sold Sani-Dairy, its dairy
manufacturing operation. Concurrent with the completion of the transaction, the
Company entered into a 10-year supply agreement with the acquirer for the
purchase of products that were supplied by Sani-Diary and two other dairies.
These transactions were arms-length with third parties who were not insiders of
the Company.
J. PROPERTIES
Penn Traffic follows the general industry practice of leasing the
majority of its retail supermarket locations. As of April 1, 1999, Penn Traffic
owned 38 and leased 178 of the supermarkets that it operates. The owned
supermarkets range in size from 4,300 to 123,000 square feet. The leased
supermarkets range in size from 8,100 to 140,000 square feet and are held under
leases expiring from 1999 to 2018, excluding option periods. As of April 1,
1999, Penn Traffic owned or leased 47 supermarkets which are leased or subleased
to independent operators.
As of the Petition Date, Penn Traffic also owned six shopping
centers, five of which contain one of the company-owned or licensed
supermarkets. As of the Petition Date, Penn Traffic also operated distribution
centers in DuBois, Pennsylvania; Syracuse and Jamestown, New York; and Columbus,
Ohio; and a
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bakery plant in Syracuse, New York. As of the Petition Date, Penn Traffic also
owned a fleet of trucks and trailers, fixtures and equipment utilized in its
business and certain miscellaneous real estate.
K. THE PREPETITION LOAN DOCUMENTS
Prior to the Petition Date, the Debtors had entered into a Loan and
Security Agreement dated as of March 5, 1993 (the "Prepetition Loan Agreement")
with the lenders identified therein (the "Prepetition Lenders") and Fleet Bank,
N.A. (as successor to NatWest USA Credit Corp.) ("Fleet"), as agent (the
"Prepetition Agent"), pursuant to which the Prepetition Lenders made available
to the Debtors a secured revolving credit facility in an aggregate amount not to
exceed $250,000,000, with a sublimit for letters of credit in the aggregate
amount of $60,000,000. Credit availability under the Prepetition Loan Agreement
was determined by reference to a specified percentage of eligible receivables
and inventory, less certain reserves, all as set forth in a borrowing base
certificate delivered by the Debtors to the Prepetition Agent on a periodic
basis. The obligations under the Prepetition Loan Agreement were secured by a
pledge of the Company's inventory, accounts receivable and related assets.
As of the Petition Date, the Debtors were indebted to the
Prepetition Lenders and the Prepetition Agent under the Prepetition Loan
Agreement in the aggregate principal amount as of February 26, 1999 of
approximately $116 million, together with all accrued, but unpaid, interest,
fees and expenses, including attorneys' fees, in respect thereof. In addition,
as of the Petition Date, letters of credit having an aggregate face amount equal
to approximately $46 million remained issued and outstanding under the
Prepetition Loan Agreement.
Before the Petition Date, Penn Traffic also executed and delivered
to Fleet a Term Note dated October 25, 1993 (the "Term Note") in the principal
amount of $15,000,000, which Term Note evidences term loans made to Penn Traffic
in like amount. As of the Petition Date, the principal amount of $9,000,000,
together with interest thereon, remained outstanding.
Pursuant to the terms of that certain First Mortgage, Security
Agreement, Financing Statement and Assignment of Leases and Rents (the
"Mortgage") by and among Penn Traffic, as mortgagor, the Onondaga County
Industrial Development Agency (the "Agency;" together with Penn Traffic, the
"Mortgagors"), as co-mortgagor, and Fleet, as mortgagee, Penn Traffic's
Obligations under the Term Note were secured by the Mortgagors' respective
interests in certain real property located in the Town of Van Buren in the State
of New York on which Penn Traffic operates a distribution center.
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V.
KEY EVENTS LEADING TO COMMENCEMENT OF
THE CHAPTER 11 CASES
A. DECREASE IN OVERALL STORE PERFORMANCE AND OPERATING RESULTS
As described above under the caption "Description of the Business,"
over the last ten (10) years Penn Traffic acquired a number of supermarkets and
invested significantly in its store base and distribution facilities. These
acquisitions and investments were financed in part through the issuance of
Senior Notes and Senior Subordinated Notes. As a result, as of the Petition
Date, Penn Traffic had approximately $1.13 billion of Senior Notes and Senior
Subordinated Notes outstanding that required approximately $113 million of debt
service for the fiscal year ending January 29, 2000 ("Fiscal 2000"). The
Company's high degree of leverage and the cash required to satisfy its debt
service obligations and capital expenditure and working capital needs meant Penn
Traffic could not effectively operate and service its debt obligations if its
earnings before interest, taxes, depreciation and amortization, LIFO provision
and unusual and extraordinary items ("EBITDA") declined significantly over an
extended period.
Penn Traffic experienced declines in revenues, EBITDA and operating
income during the fiscal year ended January 31, 1998 ("Fiscal 1998") and
incurred significantly greater declines during the fiscal year ended January 30,
1999 ("Fiscal 1999"). For the nine months ended October 31, 1998, same store
sales declined 4.1% from the comparable period in the preceding year. For the
three and nine months ended October 31,1998, EBITDA declined 58.7% and 39.5%,
respectively. Penn Traffic believes that these significant declines were due
primarily to changes in the Company's merchandising, marketing and service
strategies that were implemented during the second half of the fiscal year ended
January 31, 1998 and continued through the first half of the fiscal year ended
January 30, 1999.
Generally, the changes implemented during Fiscal 1998 involved the
attempted repositioning of the Company's stores from a traditional high/low
format with a reputation for high service and quality to a less promotional,
lower price operation. To offset the reductions in gross margins, the Company
reduced store payrolls and to some extent variety and quality. For example, the
Company had traditionally offered choice beef exclusively in its stores. As part
of the changes the Company began offering lower quality select beef at a lower
price. Similarly, the Company had many service seafood departments that were
closed or whose hours were curtailed in order to save payroll costs. Also, the
Company's ad format was changed from an 8-page broadsheet circular with
extensive presentations of perishable items, to a 4-page tabloid format with
fewer items. These changes were in part implemented to lower advertising costs.
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These operational changes, which began during the third quarter of
calendar 1997, were not well received by Penn Traffic's customers. In particular
sales in the Company's Big Bear (Ohio and West Virginia) and eastern
Pennsylvania Bi-Lo stores, were disproportionately affected due to these stores
historical reputation of high quality and high service.
Ultimately, as of the third quarter of Fiscal 1999, operating
performance was not improving and with interest payments on its Senior Notes
coming due, the Company's liquidity became a concern.
B. DEFAULTS UNDER INDENTURES AND CREDIT AGREEMENT
Penn Traffic's worsening financial performance began to affect its
continuing compliance with its existing Credit Facility and the indentures on
its Senior Notes during the fiscal year ended January 30, 1999. For example, the
Company would not have been in compliance with certain financial covenants set
forth in its existing Credit Facility for the quarter ended August 1, 1998, but
for a Waiver and Amendment given by the lenders under the existing Credit
Facility that waived compliance with such financial covenants through April 1,
1999.
In a move designed to preserve capital and maintain flexibility
while it considered its restructuring alternatives and in light of the
restructuring process which was under way with holders of Senior Notes and
Senior Subordinated Notes, Penn Traffic decided not to make its scheduled debt
service payments on its (i) 85/8% Senior Notes on December 15, 1998 or (ii) 10
1/4% Senior Notes on February 15, 1999. The failure to make the scheduled
interest payments constituted payment defaults under the indentures relating to
such notes which became (due to a lapse of the grace period) an event of default
under the indenture for the 85/8% Senior Notes on December 30, 1998, and would,
but for the filing of these cases, have become an event of default under the
indenture for the 10 1/4% Senior Notes on March 2, 1999. In addition, the
failure to make the December 15 interest payment on December 30 would have
resulted in an event of default under the existing Credit Facility had the
Company not obtained an additional waiver from the lenders under such Facility.
These waivers enabled Penn Traffic to continue borrowing through the Petition
Date. The holders of the 85/8% Senior Notes, but for the Chapter 11 Cases, would
have been able to declare the outstanding principal amount thereof, together
with accrued and unpaid interest thereon, to be due and payable immediately,
which would have triggered a cross-default and acceleration right in respect of
substantially all of the Company's indebtedness. If such indebtedness had been
accelerated, Penn Traffic would not have had the ability to repay such
indebtedness and would have been forced to seek protection from creditors under
chapter 11 of the Bankruptcy Code.
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C. DISCUSSIONS WITH FINANCIAL ADVISORS, REGULATORY AUTHORITIES
AND INFORMAL COMMITTEE
In response to Penn Traffic's liquidity concerns, Penn Traffic
engaged The Blackstone Group L.P. ("Blackstone") in November 1998 to act as its
financial advisor to explore its strategic alternatives and to assist it in
negotiating a consensual restructuring.
Around the same time, institutions holding a substantial amount of
Penn Traffic's Senior Notes and Senior Subordinated Notes (collectively, the
"Notes") formed an Informal Committee to negotiate a consensual restructuring.
As of the Petition Date, the members of the Informal Committee, or certain funds
managed or advised by them, held in the aggregate more than 50% of the
outstanding principal amount of the Notes. The members of the Informal Committee
are:
Satellite Fund Management LLC; Loomis Sayles &
Company, L.P.; DDJ Capital Management, LLC
The Informal Committee engaged Stroock & Stroock & Lavan LLP
("Stroock") as its legal counsel and Houlihan, Lokey, Howard & Zukin, Inc.
("Houlihan Lokey") as its financial advisor.
The Informal Committee then commenced negotiations with Penn Traffic
regarding the terms of a consensual restructuring of its indebtedness. In
February, 1999, these negotiations resulted in an agreement in principle between
Penn Traffic and the Informal Committee on the terms of a restructuring.
Thereafter and through the Petition Date, Penn Traffic and the Informal
Committee continued to negotiate the definitive terms of the Plan and prepared
the documentation necessary to effectuate it.
Prior to the Petition Date, members of the Informal Committee signed
lock-up agreements (collectively, the "Lock-Up Agreements") making certain
undertakings and representations for the benefit of the members of the Informal
Committee and Penn Traffic. Pursuant to these Lock-Up Agreements, members of the
Informal Committee have agreed that (i) when solicited to do so they will vote
in favor of the Plan and (ii) they will not, directly or indirectly, sell or
otherwise transfer any of the Notes held by them or any interest or
participation therein, other than to a person who agrees in writing to be
subject to the terms and undertakings contained in the Lock-Up Agreements.
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D. STEPS TAKEN TO STRENGTHEN THE DEBTORS' OPERATIONS AND FINANCIAL
PERFORMANCE
In response to Penn Traffic's declining operating performance,
management initiated strategic enhancements commencing in the second half of
calendar 1998. These changes are designed to improve sales and financial
performance:
MERCHANDISING MANAGEMENT. Penn Traffic has comprehensively evaluated
its merchandising strategy and implemented or planned significant changes
intended to improve both sales and margins by improving the selection and
presentation of both its perishables and non-perishables departments.
Foremost, these changes are designed to return the Company's stores
to their traditional level of high quality fresh product and strong customer
service. If successful, these steps will result in both greater sales overall
and improved sales of higher margin perishables departments (e.g., produce, meat
and bakery). In addition, increased sales of perishable items further improve
margins by increasing inventory turns and decreasing inventory losses due to
shrink.
Some of the most important enhancements being made to the Company's
perishables' offerings include: improved beef quality, variety and presentation;
reopened seafood shops; broader variety of fresh high quality produce; more
extensive in-store bakery variety and displays. As part of this program, the
Company has added appropriate payroll hours to service these departments. These
changes were initially implemented at certain of the Company's Big Bear stores
during the fall of calendar 1998. Sales and margin trends at these stores have
improved at least as much as planned. Should these positive trends continue,
appropriate aspects of these programs will be extended to all Penn Traffic
stores during calendar 1999.
The Company is also seeking to improve the sales and margins from
its non-perishable products. During calendar 1998, the Company completed the
initial phases of a category management process. This program is designed to
analyze individual product movement and the impact of promotional decisions.
This allows category managers to design category plans that result in improved
store assortments and pricing decisions.
When initially implemented during the fall of calendar 1998 in a few
categories, the Company generally met or exceeded its goals for improved
category sales and/or margins. Plans are underway to complete and implement
category plan for categories comprising approximately 50 percent of the total
sales of grocery, dairy and frozen items during calendar 1999.
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In addition, the Company believes that its gross margins have been
adversely impacted from the reduced availability of certain promotional
allowances during the second half of Fiscal 1999. The completion of the plan of
reorganization will allow the Company to generate increased promotion allowance
income.
DEVELOPMENT OF FIVE YEAR CAPITAL PROGRAM. In calendar 1997 and 1998,
the Company curtailed its capital investment program in response to liquidity
concerns. Given significant investments made in the Company's store base in
prior years, management believes that most of its stores are modern and well
maintained. Nevertheless, the Company has a significant number of locations
where management believes that capital investment will produce increases in
sales and profits or such investment would mitigate the adverse effect of the
entry of a new competitor. Additionally, the Company has opportunities to invest
in new store locations, particularly in the growing central Ohio market.
To take advantage of the investment opportunities, the Company has
developed a capital program for the five years ending January 31, 2004. This
program totals approximately $300 million. It includes extensive investments
during the first two years in remodeling, enlarging or replacing existing
stores. In subsequent years, the plan continues the ongoing process of improving
existing facilities while adding approximately 14 new stores. The completion of
the plan of reorganization is expected to provide Penn Traffic with sufficient
capital resources to complete this program.
IMPLEMENTED DIVESTITURE AND RATIONALIZATION PROGRAM. Penn Traffic
anticipates the sale of approximately 18 stores in Ohio and eastern Pennsylvania
(17 completed as of the Petition Date). Upon completion, these divestitures will
have generated net proceeds of approximately $40 million. In addition, Penn
Traffic has closed or plans to close an additional 38 generally unprofitable
stores. Management estimates that the 56 stores that have been or are expected
to be closed or divested experienced an EBITDA loss of approximately $8 million
in aggregate during the fiscal year ended January 30, 1999.
MANAGEMENT. Penn Traffic retained Joseph Fisher as President and
Chief Executive Officer in November 1998. Mr. Fisher brings approximately 30
years of industry expertise to Penn Traffic, including most recently six years
at Big V Supermarkets, Inc. (operator of supermarkets under the ShopRite name in
the Hudson Valley region of New York, northeastern Pennsylvania and northern New
Jersey) where he served as President and CEO from 1995 until joining Penn
Traffic.
ADMINISTRATIVE COST REDUCTIONS. With a smaller store base, Penn
Traffic will be able to reduce non-store administrative and operational
personnel. Additionally, in the fiscal year ending January 28, 2001, the Company
expects to reduce its level of spending on Management Information Systems as it
completes projects associated with upgrading systems to address Year 2000
issues.
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VI.
THE CHAPTER 11 CASES
A. DISCLOSURE STATEMENT/PLAN CONFIRMATION HEARINGS
Simultaneously with the filing of their chapter 11 petitions, the
Debtors filed a motion seeking an order from the Court scheduling a hearing to
consider the adequacy of this Disclosure Statement. On April 5, 1999, the Court
entered the Disclosure Statement Order. As provided by the Disclosure Statement
Order, hearing on confirmation of the Plan is scheduled for May 27, 1999.
B. SIGNIFICANT "FIRST DAY" MOTIONS DURING THE CHAPTER 11 CASES
On the Petition Date and during the first few weeks of the Chapter
11 Cases, the Bankruptcy Court entered several orders authorizing the Debtors to
pay various prepetition claims. These orders were designed to ease the strain on
the Debtors' relationships with customers and employees as a consequence of the
filings. The Bankruptcy Court entered orders authorizing the Debtors to, among
other things, (i) pay prepetition compensation, benefits and employee
reimbursement to employees and (ii) honor certain prepetition obligations to
customers, including obligations relating to the Debtors' return policy, gift
certificates and coupon programs. The Debtors also obtained an Order from the
Bankruptcy Court authorizing them to pay certain prepetition Claims of trade
creditors and service providers. With respect to trade creditors, the Bankruptcy
Court has authorized payment to such trade creditors, provided such trade
creditors provide the Debtors with customary trade credit and terms or on such
terms that are otherwise acceptable to the Debtors.
In addition, the Debtors filed numerous motions seeking orders from
the Bankruptcy Court authorizing the Debtors to retain professionals.
Specifically, the Debtors filed motions for authorization to retain (i) Paul,
Weiss, Rifkind, Wharton & Garrison ("Paul Weiss") and Young, Conaway, Stargatt &
Taylor ("Young Conaway"), as co-counsel, (ii) Blackstone, as financial advisor,
(iii) certain ordinary course professionals, (iv) PricewaterhouseCoopers, as
accountants, and (v) Donlin, Recano & Co., Inc., as voting, tabulation and
noticing agent. The Debtors also filed motions seeking certain relief from
administrative requirements of the Bankruptcy Code.
C. DIP CREDIT FACILITY
To provide the Debtors with the cash and liquidity necessary to
continue operations and to maintain normal vendor relations, Penn Traffic, Big
M, Dairy Dell and Penny Curtiss (the "Borrowers") have entered into a $300
million debtor-in-possession facility in the form of a Loan and Security
Agreement (the "DIP
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Credit Facility"), dated as of March 2, 1999, among the Borrowers, the lenders
identified therein (the "Lenders"), including Fleet Capital Corporation
("Fleet"), and Fleet, as administrative agent (the "Agent"). On March 2, 1999,
the Bankruptcy Court entered an interim order authorizing the Borrowers to
borrow up to an aggregate amount of $240 million under the DIP Credit Facility.
On April 5, 1999, the Bankruptcy Court entered a final order (the "Order")
approving the DIP Credit Facility. Pursuant to the Order, the Borrowers have
been authorized to borrow up to an aggregate amount of $300 million,
approximately $125 million of which has been utilized by the Borrowers to
satisfy the Debtors' prepetition obligations under (i) the Prepetition Loan
Agreement and (ii) the Term Note (collectively, the "Prepetition Loan
Agreements"). In addition, pursuant to the Order and the DIP Credit Facility,
all letters of credit outstanding on the Petition Date (the "Prepetition Letters
of Credit") under the Prepetition Loan Agreements in the aggregate face amount
of approximately $46 million were deemed to be outstanding letters of credit
under the DIP Credit Facility. The DIP Credit Facility has a $60 million
sublimit for letters of credit.
The balance of amounts available under the DIP Credit Facility will
be utilized by the Debtors for on-going working capital needs. Availability
under the DIP Credit Facility for each Debtor is calculated by reference to a
specified percentage of certain receivables, inventory, equipment and real
property interests of such Debtor, less certain agreed-to reserves, all as set
forth in a borrowing base certificate delivered to the Agent on a periodic
basis. As of March 19, 1999, there were total borrowings outstanding under the
DIP Credit Facility of $104.8 million, outstanding letters of credit in an
aggregate face amount of approximately $46 million and additional availability
in the amount of $89.2 million (these amounts are based on the $240 million
authorized under the interim financing order; based on $300 million, the Debtors
would have had availability of $144.6 million on such date).
The Borrowers' obligations to the Agent and the Lenders under the
DIP Credit Facility (the "DIP Obligations") are secured by a first priority
security interest in certain of the Debtors' real and personal property,
including inventory, accounts receivable, equipment, certain real property
interests and amounts held in certain deposit accounts, subject only to
Permitted Liens (as defined in the DIP Credit Facility) and Carve-Out Expenses
(as defined below). In addition, pursuant to the Order, the DIP Obligations have
been accorded administrative expense status with priority over all other
administrative claims, other than certain agreed-to administrative claims,
including the fees and expenses of professionals retained by the Debtors' and
any official committees appointed in the Chapter 11 Cases (the "Carve- Out
Expenses").
The DIP Credit Facility expires on the earlier of (x) March 3, 2000
and (y) the Commitment Termination Date (as defined in the DIP Credit Facility).
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D. LAST DATE TO FILE PROOFS OF CLAIM
Simultaneously with the filing of their petitions, the Debtors filed
a motion seeking an order (the "Bar Date Order") from the Court requiring any
person or entity holding or asserting a Claim against the Debtors to file a
written proof of claim with the Clerk of the Court, United States Bankruptcy
Court for the District of Delaware, 824 Market Street, Wilmington, DE 19801, on
or before 4:00 p.m. (EST) on April 19, 1999 (the "Bar Date"). Such motion
requested that any person or entity (other than, among others, employees,
individual holders of Senior Notes and Senior Subordinated Notes and the
Indenture Trustees) which fails to timely file a proof of claim will be forever
barred, estopped and enjoined from voting on, or receiving a distribution under,
the Plan and will be forever barred, estopped and enjoined from asserting a
Claim against the Debtors, their estates, the Reorganized Debtors, and any of
their successors or assigns. On March 5, 1999, the Court entered the Bar Date
Order and established April 19, 1999 as the Bar Date.
E. ASSUMPTION/REJECTION OF LEASES EXECUTORY CONTRACTS
Pursuant to the Bankruptcy Code, the Debtors have 60 days after the
entry of the order for relief (which is the Petition Date) to assume or reject
executory contracts or unexpired leases. The Debtors have already sought
Bankruptcy Court approval to reject 26 leases. The Debtors are reviewing their
remaining leases and will decide shortly whether to reject any other leases. The
Debtors, in conjunction with their attorneys, financial advisors and accountants
will also review the Debtors' executory contracts to determine which, if any, of
such contracts should be assumed or rejected. The Debtors will make any
appropriate motions with respect to assumed or rejected leases and existing
contracts within the time period established by the Bankruptcy Code or such
other time as set by the Bankruptcy Court.
F. THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS
On March 22, 1999, the United States Trustee appointed an Official
Committee of Unsecured Creditors (the "Creditors Committee") in the Chapter 11
Cases. The Creditors Committee currently consists of Loomis Sayles & Co., L.P.,
Quantum Partners LDC & Quota Fund N.V., DDJ Capital Management LLC, Topco
Associates, Inc., AmeriSource Corp., Bankers Trust Co., as indenture trustee,
U.S. Bank Trust National Association, as indenture trustee, United States Trust
Company of New York, as indenture trustee and Norwest Bank Minnesota N.A., as
indenture trustee.
The Creditors Committee is seeking the retention of Stroock and
Morris, Nichols, Arsht & Tunnell as co-counsel to the Creditors Committee and
Houlihan Lokey as its financial advisor.
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VII.
SUMMARY OF THE PLAN OF REORGANIZATION
A. INTRODUCTION
The Debtors believe that confirmation of the Plan is critical to
their continued survival and that the Plan provides the best opportunity for
maximum recoveries for its Creditors and Equity Interestholders. The Debtors
believe, and will demonstrate to the Court, that Creditors and Equity
Interestholders will receive at least as much, if not more, in value under the
Plan than they would receive in a liquidation under chapter 7 of the Bankruptcy
Code.
The following is a summary of the Plan, in pertinent part. The Plan
is attached as Exhibit A to this Disclosure Statement. The terms of the Plan
govern in the event of any discrepancies with the following discussion.
B. CLASSIFICATION AND TREATMENT OF ADMINISTRATIVE CLAIMS, CLAIMS AND
EQUITY INTERESTS UNDER THE PLAN
Only administrative expenses, claims and equity interests that are
"allowed" may receive distributions under a chapter 11 plan. An "allowed"
administrative expense, claim or equity interest simply means that the debtor
agrees, or in the event of a dispute, that the court determines, that the
administrative expense, claim or equity interest, including the amount, is in
fact a valid obligation of the debtor. Section 502(a) of the Bankruptcy Code
provides that a timely filed administrative expense, claim or equity interest is
automatically "allowed" unless the debtor or another party in interests objects.
However, section 502(b) of the Bankruptcy Code specifies certain claims that may
not be "allowed" in a bankruptcy case even if a proof of claim is filed. These
include, without limitation, claims that are unenforceable under the governing
agreement or applicable non-bankruptcy law, claims for unmatured interest,
property tax claims in excess of the debtor's equity in the property, claims for
certain services that exceed their reasonable value, lease and employment
contract rejection damage claims in excess of specified amounts, and late-filed
claims. In addition, Bankruptcy Rule 3003(c)(2) prohibits the allowance of any
claim or equity interest that either is not listed on the debtor's schedules or
is listed as disputed, contingent, or unliquidated, if the holder has not filed
a proof of claim or equity interest before the deadline to file proofs of claim
and equity interests.
The Bankruptcy Code also requires that, for purposes of treatment
and voting, a chapter 11 plan divide the different Claims against, and Equity
Interests in, the debtor into separate classes based upon their legal nature.
Claims of a substantially similar legal nature are usually classified together,
as are equity interests of a substantially similar legal nature. Because an
entity may hold multiple Claims and/or Equity Interests which give rise to
different legal rights, the holders of such
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Claims and/or Equity Interests may find themselves members of multiple classes
of Claims and/or Equity Interests. As a result, under the Plan, for example, a
creditor that holds both a Claim based on a Senior Note and Old Common Stock
would have its Claim classified in Class 6 and its Equity Interest classified in
Class 8. To the extent of this holder's Claim, the holder would be entitled to
the voting and treatment rights that the Plan provides with respect to Class 6,
and, to the extent of the holder's Equity Interest, the voting and treatment
rights that the Plan provides with respect to Class 8.
Under a chapter 11 plan, the separate classes of claims and equity
interests must be designated either as "impaired" (altered by the plan in any
way) or "unimpaired" (unaltered by the plan). If a class of claims is
"impaired," the Bankruptcy Code affords certain rights to the holders of such
claims, such as the right to vote on the plan (unless the plan provides for no
distribution to the holder, in which case, the holder is deemed to reject the
plan), and the right to receive an amount under the chapter 11 plan that is not
less than the value that the holder would receive if the debtor were liquidated
under chapter 7. Under section 1124 of the Bankruptcy Code, a class of claims or
interests is "impaired" unless, with respect to each claim or interest of such
class, the plan (i) does not alter the legal, equitable, and contractual rights
of the holders of such claims or interests or (ii) irrespective of the holder's
right to receive accelerated payment of such claims or interests after the
occurrence of a default, cures all defaults (other than those arising from,
among other things, the debtor's insolvency or the commencement of a bankruptcy
case), reinstates the maturity of the claims or interests in the class,
compensates the holders of such claims or interests for any damages incurred as
a result of their reasonable reliance upon any acceleration rights, and does not
otherwise alter their legal, equitable or contractual rights. Typically, this
means that the holder of an unimpaired claim will receive on the later of the
effective date of the plan of reorganization or the date on which amounts owing
are due and payable, payment in full, in cash, with postpetition interest to the
extent permitted and provided under the governing agreement between the parties
(or if there is no agreement, under applicable non-bankruptcy law), and the
remainder of the debtor's obligations, if any, will be performed as they come
due in accordance with their terms. Thus, other than its right to accelerate the
debtor's obligations, the holder of an unimpaired claim will be placed in the
position it would have been in had the debtor's case not been commenced.
Consistent with these requirements, the Plan divides the Claims
against, and Equity Interests in, the Debtors into the following Classes:
Unclassified Administrative Claims Paid in full
Unclassified Priority Tax Claims Unimpaired
Class 1 Other Priority Claims Unimpaired
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Class 2 Other Secured Claims Unimpaired
Class 3 DIP Financing Claims Unimpaired
Class 4 Trade Claims Unimpaired
Class 5 General Unsecured Claims Impaired/
Paid in full
Class 6 Senior Note Claims Impaired
Class 7 Senior Subordinated Note Claims Impaired
Class 8 Equity Interests Impaired
For purposes of computing distributions under the Plan, Allowed
Claims do not include postpetition interest unless otherwise specified in the
Plan.
1 UNCLASSIFIED -- ADMINISTRATIVE CLAIMS
Administrative Claims are Claims constituting a cost or expense of
administration of the Chapter 11 Cases allowed under sections 503(b) and
507(a)(1) of the Bankruptcy Code. Such Claims include any actual and necessary
costs and expenses of preserving the estates of the Debtors, any actual and
necessary costs and expenses of operating the Debtors in Possession's
businesses, any indebtedness or obligations incurred or assumed by the Debtors
in Possession in connection with the conduct of their businesses including,
without limitation, for the acquisition or lease of property or an interest in
property or the rendition of services, all compensation and reimbursement of
expenses to the extent Allowed by the Court under section 330, 331 or 503 of the
Bankruptcy Code, and any fees or charges assessed against the estates of the
Debtors under section 1930 of chapter 123 of title 28 of the United States Code.
Except as provided for below with respect to Professional
Compensation and Reimbursement Claims, pursuant to the Plan, Administrative
Claims will be paid in full, in Cash, on the later of the Effective Date and the
date such Administrative Claim becomes an Allowed Claim, or as soon thereafter
as is practicable. Allowed Administrative Claims representing obligations
incurred in the ordinary course of business by the Debtors in Possession
(including amounts owed to vendors and suppliers that have sold goods or
furnished services to the Debtors in Possession since the Petition Date) will be
assumed and paid by the Reorganized Debtors in accordance with the terms and
conditions of the particular transactions and any agreements relating thereto.
The Debtors anticipate that most Administrative Expenses will be
paid as they come due during the Chapter 11 Cases and that the Administrative
Claims to
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be paid on the Effective Date essentially will comprise the Allowed fees and
expenses incurred by professionals in the Chapter 11 Cases.
2 UNCLASSIFIED -- PROFESSIONAL COMPENSATION AND
REIMBURSEMENT CLAIMS
Compensation and Reimbursement Claims are Administrative Claims for
the compensation of professionals and reimbursement of expenses incurred by such
professionals pursuant to sections 503(b)(2), 503(b)(3), 503(b)(4) and 503(b)(5)
of the Bankruptcy Code (the "Compensation and Reimbursement Claims"). All
payments to professionals for Compensation and Reimbursement Claims will be made
in accordance with the procedures established by the Bankruptcy Code, the
Bankruptcy Rules and the Bankruptcy Court relating to the payment of interim and
final compensation for services rendered and reimbursement of expenses. The
Bankruptcy Court will review and determine all applications for compensation for
services rendered and reimbursement of expenses.
Section 503(b) of the Bankruptcy Code provides for payment of
compensation to creditors, indenture trustees and other entities making a
"substantial contribution" to a reorganization case, and to attorneys for and
other professional advisors to such entities. The amounts, if any, which may be
sought by entities for such compensation are not known by the Debtors at this
time. Requests for compensation must be approved by the Bankruptcy Court after a
hearing on notice at which the Debtors and other parties in interest may
participate and, if appropriate, object to the allowance of any compensation and
reimbursement of expenses; provided, however that barring any disputes between
the Debtors and the Indenture Trustee, the payment of the reasonable fees and
expenses of the Indenture Trustees shall be made on the Effective Date without
application by or on behalf of such Indenture Trustee or their respective
counsel to the Court and any dispute as to fees and expenses shall be resolved
by agreement between the Debtors or the Reorganized Debtors and the respective
Indenture Trustee or by an appropriate State Court.
Pursuant to the Plan, each holder of a Compensation and
Reimbursement Claim (i) shall file its respective final application for
allowance of compensation for services rendered and reimbursement of expenses
incurred through the Confirmation Date by the date that is 30 days after the
Effective Date or such other date as may be fixed by the Bankruptcy Court, and
(ii) if granted such an award by the Court, shall be paid in full in such
amounts as are Allowed by the Bankruptcy Court (a) on the date such Compensation
and Reimbursement Claim becomes an Allowed Administrative Claim, or as soon
thereafter as is practicable, or (b) upon such other terms as may be mutually
agreed upon between such holder of such Compensation and Reimbursement Claim and
the Debtors in Possession or, on and after the Effective Date, the Reorganized
Debtors. The Debtors estimate that Allowed Compensation and Reimbursement Claims
should not exceed $9 million in the aggregate.
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The reasonable fees and expenses incurred after the Petition Date by
the Informal Committee's counsel and financial advisors, including, without
limitation, the success fee payable to Houlihan, Lokey, Howard & Zukin, Inc.
pursuant to its engagement letter with the Debtors dated as of December 15,
1998, (who were retained by agreement with the Debtors prior to the Petition
Date (together with the reasonable fees and expenses of local counsel) with
respect to these Chapter 11 Cases) shall be paid (without application by or on
behalf of any such professionals to the Bankruptcy Court and without notice and
a hearing) by the Reorganized Debtors as an Administrative Claim under the Plan.
If the Reorganized Debtors and any such professional retained by the Informal
Committee cannot agree on the amount of fees and expenses to be paid to such
professional, the amount of any such fees and expenses shall be determined by
the Bankruptcy Court.
3 UNCLASSIFIED -- PRIORITY TAX CLAIMS
A Priority Tax Claim consists of any Claim of a governmental unit of
the kind specified in sections 502(i) and 507(a)(8) of the Bankruptcy Code.
These unsecured Claims are given a statutory priority in right of payment.
Except to the extent that a holder of an Allowed Priority Tax Claim has been
paid by the Debtors prior to the Effective Date or agrees to a different
treatment, each holder of an Allowed Priority Tax Claim will receive, at the
sole option of the Debtors, (a) Cash in an amount equal to such Allowed Priority
Tax Claim on the later of the Effective Date and the date such Priority Tax
Claim becomes an Allowed Priority Tax Claim, or as soon thereafter as is
practicable, or (b) equal annual Cash payments in an aggregate amount equal to
such Allowed Priority Tax Claim, together with interest at the rate of 8 1/4%
per annum over a period through the sixth anniversary of the date of assessment
of such Allowed Priority Tax Claim, commencing on the first anniversary of the
Effective Date, or upon such other terms as may be determined by the Bankruptcy
Court to provide the holder of such Allowed Priority Tax Claim deferred Cash
payments having a value, as of the Effective Date, equal to such Allowed
Priority Tax Claim.
The Debtors are essentially current with respect to all Priority Tax
Claims and estimate that on the Effective Date, the allowed amount of such
Claims will be de minimis, if any.
Under applicable law, the Debtors' tax returns are subject to review
for at least three years after filing. This means that the Debtors' and Penn
Traffic's non-debtor Subsidiaries that file consolidated tax returns may have
contingent tax obligations which have not been determined at the time of the
Petition Date. The Plan provides that each Priority Tax Claim that is not
payable on or before the Effective Date will survive confirmation of the Plan,
remain unaffected thereby, and be paid as and when due, except to the extent any
holder of such a Claim agrees to a different treatment.
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4 CLASS 1 -- OTHER PRIORITY CLAIMS
(UNIMPAIRED; THEREFORE, DEEMED TO HAVE ACCEPTED THE PLAN AND
NOT ENTITLED TO VOTE.)
Other Priority Claims are Claims which are entitled to priority in
accordance with section 507(a) of the Bankruptcy Code (other than Administrative
Claims and Priority Tax Claims). Such Claims include (i) Unsecured Claims for
accrued employee compensation earned within 90 days prior to the commencement of
the Chapter 11 Cases to the extent of $4,300 per employee and (ii) contributions
to employee benefit plans arising from services rendered within 180 days prior
to the commencement of the Chapter 11 Cases, but only for each such plan to the
extent of (a) the number of employees covered by such plan multiplied by $4,300,
less (b) the aggregate amount paid to such employees from the estate for wages,
salaries or commissions. Pursuant to the Plan, holders of Allowed Other Priority
Claims, if any exist, will be paid in full, in Cash on the later of the
Effective Date and the date such Other Priority Claim becomes an Allowed Claim,
or as soon thereafter as is practicable. The legal, equitable and contractual
rights of the holders of Other Priority Claims, if any exist, are not altered by
the Plan. Because the Bankruptcy Court entered an order authorizing the Debtors
to pay, among other things, prepetition compensation and benefits, the Debtors
estimate that the Allowed Claims in Class 1 that are due and payable pursuant to
the Plan on or before the Effective Date will be de minimis, if any.
5 CLASS 2 -- OTHER SECURED CLAIMS
(UNIMPAIRED; THEREFORE, DEEMED TO HAVE ACCEPTED THE PLAN AND
NOT ENTITLED TO VOTE.)
Other Secured Claims include Claims (other than the DIP Financing
Claims), to the extent reflected in the Schedules or a proof of claim as a
Secured Claim which is secured by a Lien on collateral to the extent of the
value of such collateral, as determined in accordance with section 506(a) of the
Bankruptcy Code, or, in the event that such Claim is subject to setoff under
section 553 of the Bankruptcy Code, to the extent of such setoff. The Other
Secured Claims consist mainly of mortgage debt on certain of the Debtors' owned
real estate facilities and equipment capital leases.
Except to the extent that a holder of an Allowed Other Secured Claim
agrees to a different treatment, at the sole option of the Debtors, (i) each
Allowed Other Secured Claim shall be reinstated and rendered unimpaired in
accordance with section 1124(2) of the Bankruptcy Code, notwithstanding any
contractual provision or applicable nonbankruptcy law that entitles the holder
of an Allowed Other Secured Claim to demand or receive payment of such Allowed
Other Secured Claim prior to the stated maturity of such Allowed Other Secured
Claim from and after the occurrence of a default, (ii) each holder of an Allowed
Other Secured Claim shall receive Cash in an amount equal to such Allowed Other
Secured Claim, including any
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interest on such Allowed Other Secured Claim required to be paid pursuant to
section 506(b) of the Bankruptcy Code, on the later of the Effective Date and
the date such Allowed Other Secured Claim becomes an Allowed Other Secured
Claim, or as soon thereafter as is practicable, or (iii) each holder of an
Allowed Other Secured Claim shall receive the collateral securing its Allowed
Other Secured Claim and any interest on such Allowed Secured Claim required to
be paid pursuant to section 506(b) of the Bankruptcy Code, in full and complete
satisfaction of such Allowed Other Secured Claim on the later of the Effective
Date and the date such Allowed Other Secured Claim becomes an Allowed Other
Secured Claim, or as soon thereafter as is practicable.
6 CLASS 3 -- DIP FINANCING CLAIMS
(UNIMPAIRED; THEREFORE, DEEMED TO HAVE ACCEPTED THE PLAN AND
NOT ENTITLED TO VOTE.)
DIP Financing Claims consist of the Claims of the Lenders arising
under the DIP Credit Facility and all agreements and instruments relating
thereto, which claims are secured by a first priority security interest in
certain of the Debtors' real and personal property, including inventory,
accounts receivable, equipment, certain real property interests and amounts held
in certain deposit accounts, subject only to Permitted Liens (as defined in the
DIP Credit Facility).
Each holder of a DIP Financing Claim (which shall be deemed allowed)
shall receive Cash in an amount equal to its Allowed DIP Financing Claim on the
Effective Date.
7 CLASS 4 -- TRADE CLAIMS
(UNIMPAIRED; THEREFORE, DEEMED TO HAVE ACCEPTED THE PLAN AND
NOT ENTITLED TO VOTE.)
Trade Claims consist of Unsecured Claims of entities against the
Debtors for (i) goods provided prior to the Petition Date by such entities to
the Debtors for resale to the general public in the ordinary course of business;
provided, however, that such entities have continued to provide goods to the
Debtors before and after the Petition Date on customary terms and credit or as
otherwise acceptable to the Debtors and (ii) goods (not resold to the general
public) and services provided to the Debtors in the ordinary course of the
Debtors' businesses.
To the extent not satisfied by the Debtors in the ordinary course of
business prior to the Effective Date, in full and final satisfaction of such
Claims, the legal, equitable, and contractual rights to which such Allowed Trade
Claim entitles the holder thereof shall be left unaltered and, accordingly,
shall be satisfied on the latest of (i) the Effective Date, (ii) the date a
Trade Claim becomes an Allowed Claim, (iii) the date an Allowed Trade Claim
becomes due and payable in the ordinary course of business consistent with the
Debtors' ordinary payment practices,
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and (iv) the date on which the Debtors and the holder of such Allowed Trade
Claim agree in writing. In addition, holders of Allowed Trade Claims shall
retain any prepetition security arrangements that were in existence as of the
Petition Date (and extended pursuant to the Order Authorizing Payment of
Prepetition Claims of Certain Trade Creditors and Goods and Service Providers
dated March 2, 1999) to secure post-confirmation obligations and such
prepetition security interests shall continue to the same extent and priority as
they existed as of the Petition Date, without the necessity of any further
actions to continue the perfection of such security interests.
8 CLASS 5 -- GENERAL UNSECURED CLAIMS
(IMPAIRED; THEREFORE, ENTITLED TO VOTE TO ACCEPT OR REJECT THE
PLAN.)
Class 5 includes all Unsecured Claims against the Company other than
Administrative Claims, Priority Tax Claims, Other Priority Claims, Trade Claims,
Senior Note Claims and Senior Subordinated Note Claims. Class 5 shall also
include claims of entities that have not continued to provide goods to the
Debtors on customary terms and credit, or as otherwise acceptable to the
Debtors; in other words, such entities shall not hold "Trade Claims" in Class 4.
The Debtors are not currently aware of any such claims. Notwithstanding that the
Claims in Class 5 are unsecured and in a liquidation might rank pari passu with
the Claims in Classes 6 and 7, the Debtors believe that the separate
classification of these Claims is appropriate and that a reasonable basis exists
for classifying them separately. The Debtors estimate that the Allowed Claims in
Class 5 will be approximately $20 million.
On the Effective Date, or as soon thereafter as practicable, or upon
such later date when the Claim becomes an Allowed Claim, in full and final
satisfaction of such Claim, at the Debtors' sole option (i) each holder will
receive payment in full in Cash of its Allowed General Unsecured Claim, or (ii)
the Company will reinstate such Allowed General Unsecured Claim by curing all
outstanding defaults with all legal, equitable and contractual rights remaining
unaltered.
9 CLASS 6 -- SENIOR NOTE CLAIMS
(IMPAIRED; THEREFORE, ENTITLED TO VOTE TO ACCEPT OR REJECT THE
PLAN.)
Class 6 includes all claims against the Debtors (including principal
and interest accrued at the non-default rate6/ through the Petition Date but
excluding the fees and expenses of the Indenture Trustees) based upon Penn
Traffic's 11 1/2% Senior Notes due October 15, 2001, 10 1/4% Senior Notes due
February 15, 2002, 85/8% Senior Notes due December 15, 2003, 103/8% Senior Notes
due October 1, 2004,
- --------
6/ All claims for default rate interest shall be deemed to be waived and
released.
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10.65% Senior Notes due November 1, 2004, and 11 1/2% Senior Notes due April 15,
2006. The Senior Note Claims shall be Allowed in the following aggregate
amounts: the 11 1/2% 2001 Senior Notes, $111,933,239; the 10 1/4% Senior Notes,
$132,004,878; the 85/8% Senior Notes, $212,423,714; the 103/8% Senior Notes,
$104,322,917; the 10.65% Senior Notes, $103,550,000; and the 11 1/2 2006 Senior
Notes, $104,344,444. The holders of Senior Note Claims and Indenture Trustees
under the Senior Note Indentures shall not be required to file proofs of claim.
The fees and expenses of Indenture Trustees shall be paid in accordance with
Section VII.C.6. of the Plan. See Section VII.L. of this Disclosure Statement
for a description of the treatment of the Indenture Trustee's fees and expenses.
On the Effective Date, or as soon thereafter as practicable, in full
and final satisfaction of such Senior Note Claims, each holder of an Allowed
Senior Note Claim will receive its Pro Rata share of (i) $100 million principal
amount of New Senior Notes, and (ii) 19,000,000 shares of New Common Stock. In
addition, if Class 7 does not vote in favor of the Plan, the holders of Allowed
Senior Note Claims shall receive, on the Effective Date, the New Warrants that
would have been distributed to the holders of Allowed Senior Subordinated Note
Claims if Class 7 voted in favor of the Plan and the New Common Stock that would
have been distributed to the holders of Allowed Equity Interests. The New
Warrants and New Common Stock received by the holders of Allowed Senior Note
Claims pursuant to the preceding sentence shall be distributed to the holders of
Allowed Senior Subordinated Note Claims and Allowed Equity Interests that voted
in favor of the Plan and did not object to the Plan. Any New Warrants and New
Common Stock remaining after distribution of such New Warrants and New Common
Stock to the holders of Allowed Senior Subordinated Note Claims and Equity
Interests shall be canceled.
10 CLASS 7 -- SENIOR SUBORDINATED NOTE CLAIMS (IMPAIRED;
THEREFORE, ENTITLED TO VOTE TO ACCEPT OR REJECT THE PLAN.)
Class 7 includes all claims against the Debtors (including principal
and interest accrued at the non-default rate7/ through the Petition Date, but
excluding the fees and expenses of the Indenture Trustee) based upon Penn
Traffic's 95/8% Senior Subordinated Notes due April 15, 2005. The Senior
Subordinated Note Claims shall be Allowed in the aggregate amount of
$414,437,500 and the holders of Senior Subordinated Note Claims (and their
Indenture Trustee) shall not be required to file proofs of claim. The fees and
expenses of Indenture Trustees shall be paid in accordance with Section VII.C.6.
of the Plan. See Section VII.L. of this Disclosure Statement for a description
of the treatment of the Indenture Trustee's fees and expenses.
- --------
7/ All claims for default rate interest shall be deemed to be waived and
released.
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On the Effective Date, or as soon thereafter as practicable, in full
and final satisfaction of such Senior Subordinated Note Claims, each holder of
an Allowed Senior Subordinated Note Claim will receive its pro rata share of (i)
1,000,000 shares of New Common Stock; and (ii) warrants to purchase 1,000,000
shares of New Common Stock (the "New Warrants"). Notwithstanding anything to the
contrary, it shall be a condition to the receipt by holders of Senior
Subordinated Note Claims of the distribution of Warrants under the Plan that
Class 7 vote in favor of the Plan. If such condition is not satisfied, Class 7
shall receive only the New Common Stock and not warrants and holders of Senior
Note Claims shall receive the New Warrants that would have been distributed to
the holders of the Allowed Senior Subordinated Note Claims if Class 7 voted in
favor of the Plan; provided, however, that any holder of a Senior Subordinated
Note Claim that votes in favor of the Plan (and does not object to the Plan)
shall receive its Pro Rata share of New Warrants from the holders of Allowed
Senior Note Claims as if Class 7 had voted in favor of the Plan. All remaining
New Warrants held by the holders of Allowed Senior Note Claims after
distribution to holders of Allowed Senior Subordinated Note Claims that vote in
favor of the Plan (and do not object to the Plan) shall be canceled. If the
provision of New Warrants is not permitted by the Bankruptcy Court, holders of
Senior Subordinated Note Claims shall only receive New Common Stock.
This treatment represents a compromise of the intercreditor issues
between Class 6 and Class 7 which compromise will only become effective in the
event that the Plan is confirmed and the Effective Date occurs.
11 CLASS 8 -- EQUITY INTERESTS
(IMPAIRED; THEREFORE, ENTITLED TO VOTE TO ACCEPT OR REJECT THE
PLAN.)
Class 8 includes the outstanding common stock of Penn Traffic and
any option, warrant or right, contractual or otherwise, to acquire any such
interest.
On the Effective Date or as soon thereafter as practicable, each 100
shares of Old Common Stock of the Company shall entitle the holder thereof to
receive 1 share of New Common Stock; provided, however, that if Class 7 (Senior
Subordinated Note Claims) or Class 8 votes against the Plan, the holders of
Allowed Equity Interests shall receive no distributions whatsoever and the
holders of Allowed Senior Note Claim shall receive the New Common Stock that
would have been distributed to the holders of Allowed Equity Interests if
Classes 7 and 8 voted in favor of the Plan; provided, however, that if permitted
by the Bankruptcy Court a holder of an Equity Interest that votes in favor of
the Plan (and does not object to the Plan) shall receive its Pro Rata share of
New Common Stock from the holders of Allowed Senior Note Claims as if Classes 7
and 8 had voted in favor of the Plan. All remaining New Common Stock held by the
holders of Allowed Senior Note Claims that would have been distributed to
holders of Equity Interests, had they voted in favor of the Plan, shall be
canceled. All Equity Interests other than Old Common
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Stock shall be canceled on the Effective Date and the holders thereof shall
receive no distributions.
C. SUBSTANTIVE CONSOLIDATION
Substantive consolidation is an equitable remedy that a bankruptcy
court may be asked to apply in chapter 11 cases involving affiliated debtors.
Substantive consolidation involves the pooling and merging of the assets and
liabilities of the affected debtors. All of the debtors in the substantively
consolidated group are treated as if they were a single corporate and economic
entity. Consequently, a creditor of one of the substantively consolidated
debtors is treated as a creditor of the substantively consolidated group of
debtors and issues of individual corporate ownership of property and individual
corporate liability on obligations are ignored.
Substantive consolidation of two or more debtors' estates generally
results in the deemed consolidation of the assets and liabilities of the
debtors, the deemed elimination of intercompany claims, subsidiary equity or
ownership interests, multiple and duplicative creditor claims, joint and several
liability claims and guarantees, and the payment of allowed claims from a common
fund.
At the Confirmation Hearing, the Debtors will seek the substantive
consolidation of the Chapter 11 Cases for all purposes related to the Plan,
including, without limitation, for purposes of voting, confirmation and
distribution. Subject to the occurrence of the Effective Date, (i) all assets
and liabilities of the Subsidiaries shall be deemed merged or treated as though
they were merged into and with the assets and liabilities of Penn Traffic, (ii)
no distributions shall be made under the Plan on account of intercompany Claims
among the Debtors and any such Claims shall be discharged on the Effective Date,
(iii) no distributions under the Plan shall be made on account of Subsidiary
Equity Interests, (iv) all guarantees of the Debtors of the obligations of any
other Debtor shall be deemed eliminated so that any claim against any Debtor and
any guarantee thereof executed by any other Debtor and any joint or several
liability of any of the Debtors shall be deemed to be one obligation of the
consolidated Debtors, and (v) each and every Claim filed or to be filed in the
Chapter 11 Case of any of the Debtors shall be deemed filed against the
consolidated Debtors, and shall be deemed one Claim against and obligation of
the consolidated Debtors. Such substantive consolidation shall not (other than
for purposes related to the Plan) affect (i) the legal and corporate structures
of the Reorganized Debtors, (ii) Subsidiary Equity Interests and (iii) pre- and
post-Petition Date guarantees that are required to be maintained (a) in
connection with executory contracts, unexpired leases or credit facilities that
were entered into during the Chapter 11 Cases or that have been or will be
assumed, or (b) pursuant to the Plan, or (c) in connection with any financing
entered into by the Reorganized Debtors on the Effective Date.
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D. PROVISIONS REGARDING CORPORATE GOVERNANCE AND MANAGEMENT OF
THE REORGANIZED DEBTORS
1 DIRECTORS AND OFFICERS OF REORGANIZED PENN TRAFFIC
(a) The Initial Board of Directors. The initial Board of
Directors of Reorganized Penn Traffic will consist of ten (10) members, seven
(7) of whom will be designated by Satellite Fund Management, LLC, DDJ Capital
Management, LLC and Loomis Sayles & Company LP and whose names shall be
disclosed on or before the date of the Confirmation Hearing; and three (3) of
whom shall be Joseph V. Fisher, Martin A. Fox and Gary D. Hirsch, who currently
serve as Penn Traffic's President and Chief Executive Officer, Vice
Chairman-Finance and Chairman, respectively. The Board of Directors will select
a Chairman of the Board of Directors at their initial meeting who will not
initially serve as an executive officer of Reorganized Penn Traffic.
(b) Management of Reorganized Penn Traffic. Effective as of
the Effective Date, an Executive Committee of the Board of Directors shall
manage the business of Reorganized Penn Traffic and shall have all of the
authority customarily delegated to the most senior executive officers of a
corporation, subject to oversight of the entire Board of Directors. The members
of the Executive Committee will consist of Gary D. Hirsch, Martin A. Fox and
Joseph V. Fisher, with Mr. Hirsch serving as Chairman of the Executive Committee
and Mr. Fox as Vice- Chairman. Mr. Fisher, Penn Traffic's President and Chief
Executive Officer, will report to the Chairman of the Executive Committee on all
matters that fall within such Committee's responsibilities and the Company's
Board of Directors on all other matters. Set forth below is the name, age and
proposed positions with Reorganized Penn Traffic of each of Messrs. Hirsch, Fox
and Fisher.
Name Age Title
- ------------------------ ------- --------------------------------------------
Gary D. Hirsch 49 Chairman of Executive Committee and
Director
Martin A. Fox 45 Vice-Chairman of Executive Committee
and Director
Joseph V. Fisher 56 President, Chief Executive Officer and
Director
(c) Other Committees of the Board of Directors. The Board of
Directors will also establish such other committees it deems appropriate
including an Audit Committee and a Compensation and Stock Option Committee that
will be composed only of independent Directors who do not serve as executive
officers of Penn Traffic. The Audit Committee will be responsible for review and
approval of
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the Company's financial statements and for the selection of the Company's
independent certified public accountants (currently PricewaterhouseCoopers LLP).
The Compensation and Stock Option Committee will, subject to existing
contractual arrangements, approve compensation arrangements for the Company's
executive officers and grant additional stock options under the Company's Equity
Incentive Plan, taking into account, in each case, the recommendations of the
Executive Committee.
2 DIRECTORS AND OFFICERS OF DAIRY DELL, BIG M AND PENNY CURTISS
The initial board of directors of the Reorganized Subsidiaries shall
be Gary D. Hirsch, Martin A. Fox and Joseph V. Fisher. Mr. Hirsch shall be
Chairman.
The officers of the Reorganized Subsidiaries immediately prior to
the Effective Date shall serve as the initial officers of the Reorganized
Subsidiaries on and after the Effective Date. Such officers shall serve in
accordance with any employment agreement with the Reorganized Subsidiaries and
applicable nonbankruptcy law.
3 CORPORATE ACTION
(a) Amended Penn Traffic Certificate of Incorporation and
Amended Penn Traffic By-Laws. The adoption of the Amended Certificate of
Incorporation and Amended By-Laws will be deemed to have occurred and be
effective as of the Effective Date without any further action by the directors
or stockholders of the Debtors. The Amended Certificate of Incorporation will,
among other things, contain appropriate provisions consistent with the Plan (i)
governing the authorization of up to 30,000,000 shares of New Common Stock (up
to 20,106,955 will be issued on the Effective Date) and 1,000,000 shares of
preferred stock, par value of $.01 per share (the "Preferred Stock"), that will
be available for issuance (although no issuance is currently contemplated) and
whose terms and conditions may be established by the Board of Directors, from
time to time, (ii) prohibiting the issuance of nonvoting equity securities as
required by section 1123(a)(6) of the Bankruptcy Code, (iii) establishing the
Executive Committee, an Audit Committee and a Compensation and Stock Option
Committee and defining their roles, and (iv) implementing such other matters as
stockholders and directors of Reorganized Penn Traffic believe are necessary and
appropriate to effectuate the terms and conditions of the Plan. The Amended Penn
Traffic Certificate of Incorporation will not include any "super-majority"
voting provisions. In addition, Reorganized Penn Traffic has opted out of the
provisions of Section 203 of the Delaware General Corporation Law (the "DGCL")
in the Amended Penn Traffic Certificate of Incorporation. The Amended Penn
Traffic Certificate of Incorporation also limits the ability of Reorganized Penn
Traffic's Board of Directors to adopt a stockholders
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rights plan or a "poison pill" unless such plan (x) is adopted by 80% of the
members of Reorganized Penn Traffic's Board of Directors and (y) by its terms,
such rights plan or "poison pill" expires within 120 days of such adoption
unless extended by the Company's stockholders during such period in which case
such rights plan shall be extended for a period of no more than 90 days (such 90
day period and any additional 90 day periods may be extended for additional
periods of 90 days by a vote of a majority of the holders of New Common Stock).
On or prior to the Effective Date, Penn Traffic will file with the
Secretary of State of the State of Delaware, in accordance with Sections 103 and
303 of the DGCL, the Amended Penn Traffic Certificate of Incorporation and such
certificate shall be the certificate of incorporation for Reorganized Penn
Traffic. The Amended Penn Traffic Certificate of Incorporation shall be
substantially in the form contained in the Plan Supplement.
(b) Amended Other Debtor Certificate of Incorporation and
Amended Other Debtor By-Laws.
The adoption of the Amended Subsidiaries Certificate of
Incorporation and Amended Subsidiaries By-Laws will be deemed to have occurred
and be effective as of the Effective Date without any further action by the
directors or stockholders of the Debtors or the Reorganized Debtors. The Amended
Subsidiaries Certificate of Incorporation will, among other things, contain
appropriate provisions (i) prohibiting the issuance of nonvoting equity
securities as required by section 1123(a)(6) of the Bankruptcy Code, and (ii)
implementing such other matters as stockholders and directors of the Reorganized
Subsidiaries believe are necessary and appropriate to effectuate the terms and
conditions of the Plan. The Amended Subsidiaries Certificate of Incorporation
will not include any "super-majority" voting provisions. On or prior to the
Effective Date, the Subsidiaries will file with the Secretary of State of the
State of Delaware, in accordance with Sections 103 and 303 of the DGCL, the
Amended Subsidiaries Certificate of Incorporation and such certificate shall be
the certificate of incorporation for the Reorganized Subsidiaries. The Amended
Subsidiaries Certificate of Incorporation shall be substantially in the form
contained in the Plan Supplement.
4 SECURITIES TO BE ISSUED PURSUANT TO THE PLAN
(a) New Common Stock
On the Effective Date, pursuant to the Plan Penn Traffic will issue
20,106,955 shares of New Common Stock without further act or action under
applicable law, regulation, rule or order. Penn Traffic shall, subject to the
provisions of the Plan, issue and distribute 19,000,000 of such shares to the
holders of Senior Note Claims (Class 6), 1,000,000 of such shares to the holders
of Senior Subordinated Note Claims (Class 7) and 106,955 of such shares to
holders of Equity Interests (Class 8). Each share of New Common Stock will
entitle its holder to one
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vote. Holders of New Common Stock will have the right to participate
proportionately in any dividends distributed by Penn Traffic, subject to the
dividend preference of any shares of Preferred Stock that may be issued after
the Effective Date.
(b) New Senior Notes
The New Senior Notes will be issued by Penn Traffic pursuant to an
indenture (the "New Notes Indenture"), which will be qualified under the Trust
Indenture Act of 1939, as amended. An indenture trustee will be selected prior
to the Confirmation Hearing.
The New Senior Notes will be issued in the aggregate principal
amount of $100,000,000 and distributed to holders of Senior Note Claims. The New
Senior Notes will bear interest at a fixed annual rate of 11%, payable
semi-annually each year commencing approximately six months from the Effective
Date. Interest under the New Senior Notes shall begin accruing on the Effective
Date. Interest shall be payable for the first two (2) years, at the Reorganized
Penn Traffic's option, through the issuance of additional New Senior Notes or in
cash, and for the next eight (8) years only in cash. All of the outstanding
principal amount of the New Senior Notes and any accrued but unpaid interest
will be payable upon the maturity of the New Senior Notes, or approximately ten
(10) years from the Effective Date. The New Senior Notes will be unsecured.
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The New Senior Notes Indenture will also contain the following
material terms and provisions:
o Optional Redemption. The New Notes may be redeemed in whole or in part at
the option of Reorganized Penn Traffic at any time after approximately
five (5) years from the Effective Date in accordance with the following
schedule:
during the sixth year after
the Effective Date 106.0%
during the seventh year after
the Effective Date 104.5%
during the eighth year after
the Effective Date 103.0%
during the ninth year after
the Effective Date 101.5%
during the tenth year after
the Effective Date to Maturity Date 100%
In addition, Reorganized Penn Traffic may redeem (i) at any time on
or before approximately three years from the Effective Date up to 25% of
the original principal amount of the New Senior Notes at a redemption
price of no more than 111% with the net cash proceeds of a qualified
equity offering and (ii) at any time following the occurrence of a Change
of Control all or any portion of the New Senior Notes at a redemption
price of no more than 111%, plus all accrued but unpaid interest on the
Notes to the date of redemption. Except as set forth below upon the
occurrence of a Change in Control, the New Senior Notes are not subject to
any mandatory redemption or other sinking fund provisions.
o Mandatory Redemption Upon Change of Control. Upon a "Change in Control,"
the Company is required to make an offer to purchase the New Senior Notes
at a price equal to 101% of the outstanding principal amount plus all
accrued and unpaid interest to the date of redemption. A "Change of
Control" will be defined under the New Notes Indenture as the occurrence
of any of the following events: (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 New
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Common Stock or securities representing 50% or more of the combined voting
power of the Company's voting stock, (ii) Reorganized Penn Traffic
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 Reorganized Penn Traffic, in
either event pursuant to a transaction in which the outstanding voting
stock of Reorganized Penn Traffic is changed into or exchanged for cash,
securities or other property, other than any such transaction between
Reorganized Penn Traffic and its wholly-owned subsidiaries (which
wholly-owned subsidiaries are domestic 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 New Common Stock
or securities representing 50% or more of the combined voting power of
Reorganized Penn Traffic's voting stock or (iii) during any consecutive
two-year period, individuals who at the beginning of such period
constituted Reorganized Penn Traffic's Board of Directors (together with
any new directors whose election by Reorganized Penn Traffic's Board of
Directors, or whose nomination for election by Reorganized Penn Traffic's
shareholders, 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.
The New Notes Indenture also will contain customary and usual
affirmative covenants as may be mutually agreeable to the Reorganized Debtors
and the Informal Committee, including compliance with laws, payment of taxes and
maintenance of corporate existence, properties and insurance, and negative
covenants, including limitations on (i) the incurrence of new indebtedness and
liens, subject to permitted exceptions, (ii) sale/leaseback transactions,
subject to permitted exceptions, (iii) dispositions of assets, (iv) transactions
with affiliates and (v) restricted payments. events of default for the New
Senior Notes will be usual for indebtedness of this kind, with customary grace
and notice provisions, including non-payment of principal and interest,
violation of covenants, cross-default and cross-acceleration, material judgments
and bankruptcy. A copy of the New Notes Indenture will be included in the Plan
Supplement.
(c) The New Warrants
On the Effective Date, the issuance of Warrants to purchase up to
1,000,000 shares of New Common Stock (without giving effect to any options that
may be issued under the Equity Incentive Plan) will be authorized under the Plan
without further act or action under applicable law, regulation, rule or order.
The Warrants will entitle the holders thereof to purchase New Common Stock, on a
one-for-one basis, at an initial exercise price of $18.30 per share. The
Warrants will be subject to customary anti-dilution provisions and will expire
on the sixth anniversary
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of the Effective Date. The Plan contemplates, subject to certain conditions,
that on the Effective Date, 1,000,000 Warrants will be issued to the Class 7
holders. A copy of a Warrant Agreement will be included in the Plan Supplement.
E. SECURITIES LAWS MATTERS
Pursuant to the Plan, each Holder receiving a distribution of New
Common Stock or New Senior Notes representing more than 10% of the aggregate New
Common Stock issued on the Effective Date shall be entitled to become a party to
the Registration Rights Agreement, which provides that Reorganized Penn Traffic
will file and maintain the effectiveness of a shelf registration right statement
for such Holder of the New Common Stock, the shares of New Common Stock issuable
upon exercise of the New Warrants, the New Warrants and the New Senior Notes,
covering the resale of all such securities. Certificates evidencing shares of
New Common Stock received by an Initial Holder who is deemed to be an affiliate
of the Debtors by reason of its equity holdings or otherwise will bear a legend
stating, in substance, that such shares have not been registered under the
Securities Act or under the securities laws of any state or other jurisdiction
and may not be sold, offered for sale or otherwise transferred unless registered
or qualified under such Act and applicable state securities laws or unless the
Reorganized Debtors receive a certificate executed by a duly authorized officer
of such Initial Holder or an opinion of counsel, as applicable, reasonably
satisfactory to them that such registration or qualification is not required.
The Registration Rights Agreement will be in substantially the form included in
the Plan Supplement.
F. EQUITY INCENTIVE PLAN
1 PENN TRAFFIC COMPANY 1999 EQUITY INCENTIVE PLAN.
If not theretofore adopted by the Debtors, on the Effective Date,
Reorganized Penn Traffic will adopt a stock option plan which permits
Reorganized Penn Traffic to grant to its officers and directors options to
acquire shares of New Common Stock. Such stock option plan shall be in
substantially the form contained in the Plan Supplement. Options granted under
the stock option plan are generally intended to qualify as "incentive stock
options" described in the Internal Revenue Code.
2 DESCRIPTION OF 1999 PENN TRAFFIC COMPANY EQUITY INCENTIVE
PLAN.
The purposes of the Penn Traffic Company 1999 Equity Incentive Plan
(the "Equity Plan") are to promote the interests of Reorganized Penn Traffic and
its shareholders by (i) attracting and retaining exceptional officers, directors
and key employees of Reorganized Penn Traffic and its subsidiaries and (ii)
enabling such individuals to participate in the long-term growth and financial
success of Reorganized
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Penn Traffic. In connection with and pursuant to the Plan, the Equity Plan will
be adopted and certain of the options will be granted to certain persons under
the Equity Plan, effective as of the Effective Date. The Equity Plan makes
available the grant of options to acquire an aggregate 2,297,000 of shares of
New Common Stock and an aggregate of 1,097,000 will be issued as of the
Effective Date. The remaining 1,200,000 options will be issued by the
Reorganized Penn Traffic's Compensation and Stock Option Committee taking into
consideration the recommendations of the Executive Committee. All of Penn
Traffic's directors, officers and employees are eligible to receive options
under the Equity Plan.
The following are further terms respecting the Equity Plan:
% of Issued and
Outstanding
Date of Grants: Issuance Date New Common Stock
-----------------------------------------------------
First 8/ Effective Date 5.5%
Other Determined by the 6%
Compensation and Stock
Option Committee taking
into account the recommendation
of the Executive Committee
Vesting: The majority of options available shall vest in the following
manner: 20% shall vest upon the date of grant with the remaining 80%
vesting in four (4) equal installments on the four (4) immediately
succeeding anniversary dates of the grant date or such other manner
as the Committee shall determine. Certain options shall vest in full
immediately upon grant while certain other options shall vest 50% on
each of the 3rd and 4th anniversaries of the Effective Date.
Term: 10 years from the date of grant and are generally exercisable for a
period of 60 days following an option holder's termination of
employment. Certain executives' options will generally not expire
before the sixth anniversary of the Effective Date.
Exercise
Price: For certain options granted on the Effective Date, the exercise
price will be $18.30 per share. Other options shall have an exercise
price as determined by the Compensation and Stock Option Committee
taking
- --------
8/ These options are being issued to Messrs. Hirsch, Fox and Fisher.
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into account the recommendations of the Executive Committee and
provided in an Award Agreement.
G. NEW MANAGEMENT AGREEMENT AND AMENDMENT TO JOSEPH FISHER'S
EMPLOYMENT AGREEMENT
1. On the Effective Date, Reorganized Penn Traffic will enter into a
management agreement with Hirsch & Fox LLC (the "New Management Agreement"). The
New Management Agreement is included in the Plan Supplement. The following is a
brief summary of the terms of the New Management Agreement.
The initial term (the "Initial Term") of the New Management
Agreement will be two years from the Effective Date with one automatic two-year
renewal period (the "Renewal Term") unless Reorganized Penn Traffic or Hirsch &
Fox LLC provide timely notice that they do not wish to renew the agreement.
Pursuant to the New Management Agreement, Hirsch & Fox LLC will provide the
services of Messrs. Hirsch and Fox as Chairman and Vice Chairman, respectively,
of the Executive Committee of Reorganized Penn Traffic. Messrs. Hirsch and Fox,
together with Mr. Joseph Fisher, the Company's President and Chief Executive
Officer, will have all authority customarily delegated to the senior executive
officers of a corporation, subject to the oversight and direction of the Board.
In return for these services, Hirsch & Fox LLC will continue to receive an
annual management fee in the amount of $1.45 million. In the event, however,
that the New Management Agreement is terminated by the Company before the end of
the Initial Term or the Renewal Term, as the case may be, for reasons other than
"cause" (as such term is defined in the New Management Agreement), the remaining
unpaid portion of the aggregate fee to be received by Hirsch & Fox through the
end of such term will be accelerated and paid immediately by Reorganized Penn
Traffic, but Messrs. Hirsch and Fox would not, however, be able to compete with
Penn Traffic for the remainder of the applicable term in such event within a
specified area near Penn Traffic's stores.
The New Management Agreement will also provide that Mr. Hirsch will
be required within six months from the Effective Date to acquire additional
shares of New Common Stock or New Warrants having an initial acquisition price
of at least $500,000 in the aggregate. Mr. Hirsch will purchase such New Common
Stock or New Warrants in a public or private transaction and not from the
Company. Mr. Hirsch will provide Penn Traffic's Board of Directors with evidence
of his compliance with such requirement. Mr. Fox will receive pension benefits
from Reorganized Penn Traffic for past service performed and both Messrs. Hirsch
and Fox will receive pension benefits for the services to be provided on and
after the Effective Date pursuant to the New Management Agreement. See Exhibit C
to the Plan for a description of such benefits. In addition, on the Effective
Date, Mr. Hirsch and Mr. Fox will receive fully-vested options to purchase
360,000 and 130,000 shares of New Common Stock, respectively, and Messrs. Fox
and Hirsch will also receive on the Effective Date options to purchase an
additional 87,000 and
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240,000 shares of New Common Stock, respectively, which options will vest 50% on
each of the 3rd and 4th anniversaries of the Effective Date. The exercise price
for the options to be granted to Messrs. Hirsch and Fox on the Effective Date
will be $18.30 per share.
2. On October 30, 1998, Penn Traffic entered into an employment agreement
(the "Employment Agreement") with Mr. Joseph V. Fisher for Mr. Fisher to assume
the position of President and Chief Executive Officer of the Company from
November 23, 1998 until February 1, 2002.
Pursuant to the Employment Agreement, Mr. Fisher is entitled to
receive an annual base salary of $500,000, a target bonus ranging from 0-100% of
his base salary depending on performance (provided that Mr. Fisher is guaranteed
to receive at least a 50% target bonus for the fiscal years ended January 30,
1999 and ending January 29, 2000). As an inducement to enter into the Employment
Agreement, Mr. Fisher received (i) a signing bonus of $1,000,000, (ii) a loan
from Penn Traffic in the amount of $1,000,000, which will be forgiven over 12
consecutive quarterly periods (or immediately, in the event Mr. Fisher
terminates his employment for "good reason" or in certain circumstances
following a change of control) provided that Mr. Fisher has not been terminated
for cause or due to his death or disability as of the end of any such period,
and (iii) ten-year options with a four year vesting period to purchase 500,000
shares of Penn Traffic's existing common stock at an exercise price equal to
fair market value at the time of exercise. The Employment Agreement further
provides that upon the occurrence of a "change of control" all unvested options
shall immediately vest.
On the Effective Date, Penn Traffic and Mr. Fisher will enter into
an Amendment to the Employment Agreement in order to (i) appoint Mr. Fisher to
the Board of Directors and the Executive Committee of Reorganized Penn Traffic,
(ii) provide Mr. Fisher with the grant of stock options pursuant to the terms of
the Plan and (iii) provide that Reorganized Penn Traffic will obtain six-year
"tail" coverage on its directors and officers liability insurance. The Plan
provides that, on the Effective Date, Mr. Fisher will receive ten-year,
fully-vested options to purchase 280,000 shares of New Common Stock at an
exercise price of $18.30 per share. The Employment Agreement will otherwise
remain in full force and effect throughout its term.
H. DISTRIBUTIONS UNDER THE PLAN
1 METHOD OF DISTRIBUTION UNDER THE PLAN
(a) Date and Delivery of Distributions. Distributions under
the Plan shall be made by the Reorganized Debtors or their designee to the
holders of Allowed Administrative Claims, Allowed Priority Tax Claims, Allowed
Other Priority Claims, Allowed DIP Financing Claims, Allowed Other Secured
Claims, Allowed
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Trade Claims, Allowed General Unsecured Claims, and Allowed Equity Interests at
the addresses set forth on the Schedules, unless such addresses are superseded
by proofs of claim or transfers of claims filed pursuant to Bankruptcy Rule 3001
(or at the last known addresses of such holders if the Debtors or the
Reorganized Debtors have been notified in writing of a change of address).
Distributions under the Plan to the holders of Allowed Senior Note Claims and
Allowed Senior Subordinated Note Claims shall be made to the New Notes Indenture
Trustee who shall make the distributions to the holders of Allowed Senior Note
Claims and Allowed Senior Subordinated Note Claims. New Senior Notes (including
any interest earned thereon), New Common Stock (including dividends paid on
account thereof) and New Warrants shall be held in trust by the disbursing agent
or the Reorganized Debtors, as applicable, for the benefit of the potential
claimants of such securities and shall not constitute property of the
Reorganized Debtors.
(b) Distribution of Cash. Any payment of Cash by the
Reorganized Debtors pursuant to the Plan shall be made at the option and in the
sole discretion of the Reorganized Debtors, by (i) a check drawn on, or (ii)
wire transfer from, a domestic bank selected by the Reorganized Debtors.
(c) Distribution of Unclaimed Property. Any distribution of
Cash under the Plan which is unclaimed after the later to occur of (a) two years
after distribution and (b) six months after the date on which such claimant's
Claim is Allowed shall be transferred to the Reorganized Debtors notwithstanding
state or other escheat or similar laws to the contrary. Distributions under the
Plan consisting of New Notes, New Common Stock or New Warrants that are
unclaimed for a period of two years after distribution shall be canceled and any
dividends or interest which has been paid with respect to such securities shall
be transferred to the Reorganized Debtors and entitlement by the holder of a
Claim or Equity Interest to such distribution shall be extinguished and forever
barred. The Debtors shall file with the Court a list of holders of unclaimed
distributions of Cash, New Notes, New Common Stock and New Warrants on the first
and second anniversaries of the Effective Date.
(d) Saturdays, Sundays, or Legal Holidays. If any payment or
act under the Plan is required to be made or performed on a date that is not a
Business Day, then the making of such payment or the performance of such act may
be completed on the next succeeding Business Day, and shall be deemed to have
been completed as of the required date.
(e) FRACTIONAL DOLLARS AND FRACTIONAL SHARES AND WARRANTS.
(i) Fractional Dollars. Whenever the issuance of
any New Senior Note would otherwise call for the issuance in an amount for
a fraction of a dollar, the actual issuance of such New Senior Note shall
reflect a rounding of such fraction to the nearest whole dollar (up or
down), with half dollars being rounded down.
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(ii) Fractional Shares and Warrants. Whenever
any distribution of shares of New Common Stock or New Warrant to a holder
would otherwise call for the distribution of a fractional share or
warrant, the Transfer Agent or Warrant Agent shall allocate one whole
share or one whole warrant to holders in order of the fractional portion
of their entitlements, starting with the largest fractional portion until
all remaining shares and warrants have been allocated. Upon the allocation
of a whole share or a whole warrant to a holder in respect of the fraction
portion of its entitlement, such fractional portion shall be canceled. If
two or more holders are entitled to equal fractional entitlements and the
number of holders so entitled exceeds the number of whole shares or whole
warrants, as the case may be, which remain to be allocated, the Transfer
Agent or Warrant Agent shall allocate the remaining whole shares or whole
warrants to such holders by random lot or such other impartial method as
the Transfer Agent or Warrant Agent deems fair, in the Transfer Agent's or
Warrant Agent's sole discretion. Upon the allocation of all of the whole
shares or whole warrants authorized under the Plan, all remaining
fractional portions of the entitlements shall be canceled and shall be of
no further force and effect.
(f) Distributions to Holders as of the Record Date. As at the
close of business on the Record Date, the claims register (for Claims) and
transfer ledger (for Equity Interests) shall be closed, and there shall be no
further changes in the record holders of any Claims or Equity Interests. The
Debtors and the Reorganized Debtors shall have no obligation to recognize any
transfer of any Claims or Equity Interests occurring after the Record Date. The
Debtors and the Reorganized Debtors shall instead be entitled to recognize and
deal for purposes under the Plan (except as to voting to accept or reject the
Plan) with only those record holders stated on the claims register (for Claims)
and transfer ledgers (for Equity Interests) as of the close of business on the
Record Date.
2 DISPUTED TRADE CLAIMS AND GENERAL UNSECURED CLAIMS
(a) Distributions Withheld For Disputed Trade Claims.
(i) Establishment And Maintenance Of Reserve. On the
Effective Date, the Reorganized Debtors shall place into a reserve an
amount of Cash, equal to 100% of the distributions to which holders of
Disputed Trade Claims would be entitled under the Plan as of such date if
such Trade Claims were Allowed Claims (the "Reserve"). Notwithstanding
that the Debtors may dispute such Claims, such disputed Claims, if
Allowed, will be treated under the Plan as Class 4 Trade Claims.
(ii) Property Held in Reserve. Cash held in the Reserve,
if any, shall be deposited in a segregated bank account or accounts in the
name of the Reorganized Debtors and designated as held in trust for the
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benefit of holders of Allowed Trade Claims. Cash held in the Reserve shall
not constitute property of the Reorganized Debtors. The Reorganized
Debtors shall invest the Cash held in the Reserve in a manner consistent
with the investment guidelines set forth in the Plan Supplement. The
Reorganized Debtors shall pay, or cause to be paid, out of the funds held
in the Reserve, any tax imposed on the Reserve by any governmental unit
with respect to income generated by the property held in the Reserve. The
yield earned on such invested Cash (net of applicable taxes) shall be
distributed to the Reorganized Debtors on the last Subsequent Distribution
Date under the Plan.
(iii) Distributions Upon Allowance of Disputed Trade
Claims. The holder of a Disputed Trade Claim that becomes an Allowed Claim
subsequent to the Initial Distribution Date shall receive a distribution
of Cash from the Reserve on the next Subsequent Distribution Date that
follows the Quarter during which such Disputed Trade Claim becomes an
Allowed Claim pursuant to a Final Order. Such distributions shall be made
in accordance with the Plan based upon the distributions that would have
been made to such holder under the Plan if the Disputed Trade Claim had
been an Allowed Claim on or prior to the Effective Date. Any Cash held in
the Reserve after all Trade Claims have been Allowed or disallowed shall
be transferred to and become the property of the Reorganized Debtors.
(b) Distributions Withheld for Disputed General Unsecured
Claims. The holder of a Disputed General Unsecured Claim that becomes an Allowed
Claim subsequent to the Initial Distribution Date shall receive a distribution
of Cash from the Reorganized Debtors on the next Subsequent Distribution Date
that follows the Quarter during which such Disputed General Unsecured Claim
becomes an Allowed Claim pursuant to Final Order. Such distributions shall be
made in accordance with the Plan based on the distributions that would have been
made to such holder under the Plan if the Disputed General Unsecured Claim had
been an Allowed Claim on or prior to the Effective Date.
I. OBJECTIONS TO AND RESOLUTION OF ADMINISTRATIVE CLAIMS AND
CLAIMS; ADMINISTRATIVE AND PRIORITY CLAIMS RESERVE
1 OBJECTIONS TO AND RESOLUTION OF ADMINISTRATIVE CLAIMS AND
CLAIMS
Except as to applications for allowances of compensation and
reimbursement of expenses under sections 330 and 503 of the Bankruptcy Code, the
Debtors and the Reorganized Debtors shall have the exclusive right to make and
file objections to Administrative Claims, Claims and Equity Interests subsequent
to the Confirmation Date. All objections shall be litigated to Final Order;
provided, however, that the Reorganized Debtors shall have the authority to
compromise, settle, otherwise resolve or withdraw any objections, without
approval of the Bankruptcy
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Court. Unless otherwise ordered by the Bankruptcy Court, the Debtors and the
Reorganized Debtors shall file all objections to Administrative Claims, Claims
and Equity Interests that are the subject of proofs of claims or requests for
payment filed with the Bankruptcy Court (other than applications for allowances
of compensation and reimbursement of expenses) or proofs of interest and serve
such objections upon the holder of the Administrative Claim, Claim or Equity
Interest as to which the objection is made as soon as is practicable, but in no
event later than 60 days after the Effective Date or such later date as may be
approved by the Bankruptcy Court.
2 ADMINISTRATIVE AND PRIORITY CLAIMS RESERVE
(a) Establishment of Administrative Claims Reserve. On the
Effective Date, the Reorganized Debtors shall place into reserve an amount of
Cash equal to (i) the sum of the aggregate amount of all Disputed Administrative
Claims, Disputed Priority Tax Claims, and Disputed Other Priority Claims, plus
(ii) an amount to be determined by the Bankruptcy Court to be reserved for any
Disputed Administrative Claims, Disputed Priority Tax Claims and Disputed Other
Priority Claims that are unliquidated (the "Administrative and Priority Claims
Reserve").
(b) Cash Held in Administrative and Priority Claims Reserve.
Cash held in the Administrative and Priority Claims Reserve shall be deposited
in a segregated bank account or accounts in the name of the Reorganized Debtors
and designated as held in trust for the benefit of holders of Allowed
Administrative Claims, Allowed Priority Tax Claims and Allowed Other Priority
Claims. Cash held in the Administrative and Priority Claims Reserve shall not
constitute property of the Reorganized Debtors. The Reorganized Debtors shall
invest the Cash held in the Administrative and Priority Claims Reserve in a
manner consistent with investment guidelines to be included in the Plan
Supplement. The Reorganized Debtors shall pay, or cause to be paid, out of the
funds held in the Administrative and Priority Claims Reserve, any tax imposed on
the Administrative and Priority Claims Reserve by any governmental unit with
respect to income generated by Cash held in the Administrative and Priority
Claims Reserve. Any Cash held in the Administrative and Priority Claims Reserve
after all Administrative and Priority Claims have been Allowed or disallowed
shall be transferred to and become the property of the Reorganized Debtors.
J. ALLOCATION OF CONSIDERATION
The aggregate consideration to be distributed to the holders of
Allowed Claims in each Class under the Plan shall be treated as first satisfying
an amount equal to the stated principal amount of the Allowed Claim for such
holders and any remaining consideration as satisfying accrued, but unpaid,
interest and costs, if any, and attorneys' fees where applicable.
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K. CANCELLATION AND SURRENDER OF EXISTING SECURITIES AND AGREEMENTS
On the Effective Date, the Senior Notes, Senior Subordinated Notes
and Equity Interests shall be deemed canceled and such agreements and
securities, including the Senior Note Indentures and the Senior Subordinated
Note Indenture, together with all instruments issued pursuant thereto, shall
have no further legal effect other than as evidence of any right to receive
distributions, fees and expenses under the Plan. In addition, the Note
Indentures shall be terminated and each of the Indenture Trustee's obligations
shall be discharged.
Notwithstanding any other provision of the Plan, as a condition
precedent to receiving any distribution under the Plan, each holder of a
promissory note, share certificate, or other instrument or security evidencing a
Claim or Equity Interest must surrender such promissory note, share certificate,
or other instrument or security to the Reorganized Debtors or their designee or
must execute and deliver an affidavit of loss and furnish an indemnity or bond
in substance and amount reasonably satisfactory to the Reorganized Debtors or
their designee, as the case may be.
Any holder of a Claim or Equity Interest that fails to surrender
such instrument or security or to provide the affidavit and indemnity or bond,
before the later to occur of (i) the second anniversary of the Effective Date
and (ii) six months following the date such holder's Claim becomes an Allowed
Claim or Equity Interest shall be deemed to have forfeited all rights, Claims,
and/or Equity Interests and may not receive or participate in any distribution
under the Plan.
L. INDENTURE TRUSTEE FEES
On or prior to the Effective Date, each Indenture Trustee shall
furnish to the Debtors a certification stating the aggregate amount of (i) its
previously invoiced but then unpaid fees and unreimbursed expenses (including
the fees and expenses of its counsel), in accordance with and to the extent
provided for in its Note Indenture, whether incurred prior or subsequent to the
Petition Date, and (ii) an estimate of such fees and expenses from the latest
date covered by its last invoice to and including the Effective Date and an
estimate of any post-Effective Date fees and expenses. On the Effective Date, in
full satisfaction of such fees and expenses, each Indenture Trustee shall
receive an amount of Cash equal to the aggregate amount stated in its
aforementioned certification, without application by or on behalf of such
Indenture Trustee or its respective counsel to the Court. In the event the
Debtors deliver written notice to an Indenture Trustee that the Debtors contest
the amount certified to by such Indenture Trustee, the amount not in dispute
shall be paid to such Indenture Trustee on the Effective Date, and the balance
of the amount so certified will be held in trust, in a segregated interest
bearing money market account (the "Segregated Account"), until the final
resolution of the dispute. The respective Indenture Trustee and the Reorganized
Debtors, to the extent to which each is entitled
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to the funds so held in the Segregated Account, shall also be entitled to all
interest and income earned thereon. Distributions made to the holders of Allowed
Claims pursuant to the Plan will not be reduced on account of such payments to
each Indenture Trustee or funds held in the Segregated Account as set forth
above.
The Confirmation order shall provide that each Indenture Trustee
Charging Lien shall attach to all Cash to be distributed under the Plan until
the aggregate amount stated in its certification has been paid in full or, to
the extent contested by the Debtors, paid into the Segregated Account referred
to in the preceding paragraph and the balance paid the Indenture Trustee,
whereupon the respective Indenture Trustee Charging Lien shall be released as to
funds paid to the Indenture Trustee and shall be transferred to the Segregated
Account to the extent of the amount in dispute. The amount by which an Indenture
Trustee's actual fees and expenses which were estimated as referred to in (ii)
above are later determined by the Indenture Trustee to exceed or be less than
its estimate, as well as the amount of any Indenture Trustee's fees and expenses
for services requested by any of the Reorganized Debtors after the Effective
Date, shall be promptly paid by or reimbursed to (as the case may be) the
Reorganized Debtors upon receipt of certification thereof from the Indenture
Trustee or, where appropriate, the amount held in the Segregated Account
adjusted accordingly.
Any dispute between the Debtors or the Reorganized Debtors and any
Indenture Trustee regarding such Indenture Trustee's fees and expenses, unless
resolved by agreement of the Debtors or the Reorganized Debtors and any
Indenture Trustee, shall be determined only in the appropriate state court in
accordance with the provisions of the respective Note Indenture. If no such
action is instituted by the Debtors or the Reorganized Debtors within 90 days
after the Effective Date, the amount in dispute and all interest and income
earned thereon shall be promptly turned over to the respective Indenture
Trustee, free and clear of any interest of the Reorganized Debtors. The
Reorganized Debtors shall bear all reasonable legal fees and expenses of each
Indenture Trustee to the extent incurred in the Indenture Trustee's successful
pursuit of funds held in the aforementioned Segregated Account.
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M. IMPLEMENTATION OF THE PLAN
1 REGISTRATION RIGHTS AGREEMENT, NEW NOTES INDENTURE, THE
AMENDED PENN TRAFFIC CERTIFICATE OF INCORPORATION, THE
AMENDED PENN TRAFFIC BY-LAWS, THE AMENDED SUBSIDIARIES
CERTIFICATES OF INCORPORATION, THE AMENDED SUBSIDIARIES BY-
LAWS, THE NEW MANAGEMENT AGREEMENT, THE EQUITY INCENTIVE
PLAN, THE WARRANT AGREEMENT, THE SUPPLEMENTAL RETIREMENT
PLAN, THE AMENDMENT TO JOSEPH V. FISHER'S EMPLOYMENT
AGREEMENT AND OTHER IMPLEMENTATION DOCUMENTS
On or before the Effective Date, pursuant to the Plan, the
Reorganized Debtors will execute the Registration Rights Agreement, the New
Notes Indenture, the Amended Penn Traffic Certificate of Incorporation, the
Amended Penn Traffic By-Laws, the Amended Subsidiaries Certificates of
Incorporation, the Amended Subsidiaries By-Laws, the New Management Agreement,
the Equity Incentive Plan, the Warrant Agreement, the Supplemental Retirement
Plan, the Amendment to Joseph V. Fisher's Employment Agreement and all other
documents required and necessary to implement the Plan without the requirement
of any further corporate action.
2 THE DEBTORS' RELEASE
On the Effective Date, pursuant to the Plan, the Debtors and the
Reorganized Debtors on behalf of themselves, and their estates, shall be deemed
to release unconditionally all of their respective officers, directors,
employees, advisors, attorneys, financial advisors, accountants, and other
professionals and each of the Indenture Trustees, counsel to each of the
respective Indenture Trustees, the Creditors' Committee members, counsel to the
Creditors' Committee, the Informal Committee members, counsel to the Informal
Committee, financial advisors to the Creditors' Committee and Informal Committee
and each of their representatives and agents (including any professionals
retained by such persons or entities) (the "Released Parties") from any and all
claims, obligations, suits, judgments, damages, rights, Causes of Action and
liabilities whatsoever, whether known or unknown, foreseen or unforeseen,
existing or hereafter arising, in law, equity or otherwise, based in whole or in
part upon actions taken in their respective capacities described above or any
omission, transaction, event or other occurrence taking place on or prior to the
Effective Date in any way relating to the Debtors, the Chapter 11 Cases or the
Plan, except that (i) no individual shall be released from any act or omission
that constitutes gross negligence or willful misconduct and (ii) the Reorganized
Debtors shall not relinquish or waive the right to assert any of the foregoing
as a legal or equitable defense or right of set-off or recoupment against any
Claims of any such persons asserted against the Debtors.
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The Debtors do not believe that they have any claims against any of
their current officers and directors or against the members of the Informal
Committee or their advisors.
3 WAIVER OF CLAIMS; COVENANT NOT TO SUE
The Plan provides that effective as of the Confirmation Date, but
subject to the occurrence of the Effective Date, and except as otherwise
expressly provided in the Plan or the Confirmation Order, the Debtors and
Debtors in Possession (x) shall be deemed to have covenanted with each of the
present officers and directors of the Debtors, to waive and not to (1) sue or
otherwise seek any recovery from such officers and directors or their respective
property, whether for tort, fraud, contract, violations of federal or state
securities laws, or otherwise, based in whole or in part upon any act or
omission, transaction, event, or other occurrence taking place on or before the
Effective Date in any way relating to the Debtors, the Chapter 11 Cases, or the
Plan or (2) assert against any of the Debtor's present officers and directors,
or their respective property, any claim, obligation, right, cause of action, or
liability which the Debtors may be entitled to assert in any case, whether for
tort, fraud, contract, violations of federal or state securities laws, or
otherwise, whether known or unknown, foreseen or unforeseen, existing or
hereafter arising, based in whole or in part upon any act or omission,
transaction, or other occurrence taking place on or before the Effective Date in
any way relating to the Debtors, the Chapter 11 Cases, or the Plan and (y) are
permanently enjoined, on and after the Effective Date, from commencing or
continuing in any manner any action or other proceeding of any kind with respect
to such Claims, obligations, rights, causes of action, or liabilities released
or waived hereunder; except that (i) the foregoing waivers and covenants shall
not apply to any act or omission of any individual that constitutes gross
negligence or willful misconduct and (ii) the Reorganized Debtors shall not
relinquish or waive the right to assert any of such Claims, obligations, rights,
causes of action, or liabilities, as a legal or equitable defense or right of
set-off or recoupment against any Claims of any such persons asserted against
the Debtors. Notwithstanding the above, the Debtors do not believe that any such
claims exist.
N. EFFECT OF CONFIRMATION OF THE PLAN
1 CONTINUED CORPORATE EXISTENCE AND VESTING OF ASSETS IN THE
REORGANIZED DEBTORS
The Debtors, as the Reorganized Debtors, shall continue to exist
after the Effective Date with all powers of a corporation under the laws of
their state of incorporation and without prejudice to any right to alter or
terminate such existence (whether by merger or otherwise) under such applicable
state law. Except as otherwise expressly provided in the Plan, on the Effective
Date, the Reorganized Debtors shall be vested with all of the property of their
estates free and clear of all claims, liens, encumbrances, charges and other
interests of creditors and equity
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security holders, and the Reorganized Debtors may operate their businesses free
of any restrictions imposed by the Bankruptcy Code, the Bankruptcy Rules or by
the Court, subject only to the terms and conditions of the Plan.
2 TERMINATION OF SUBORDINATION RIGHTS
All Claims of the holders of Senior Notes and Senior Subordinated
Notes against the Debtors and all rights and Claims between or among the holders
of Senior Notes and Senior Subordinated Notes relating in any manner whatsoever
to claimed subordination rights, rights to postpetition and default interest, or
similar rights, if any (collectively, "Subordination-Related Rights"), shall be
deemed satisfied by the distributions under, described in, contemplated by,
and/or implemented by, the Plan to holders of such Claims and such rights shall
be deemed waived, released, discharged, and terminated as of the Effective Date,
and all actions related to the enforcement of such Subordination-Related Rights
shall be permanently enjoined. Distributions under, described in, contemplated
by, and/or implemented by, the Plan shall not be subject to levy, garnishment,
attachment, or like legal process by any holder of a Claim, including, but not
limited to, holders of Senior Note Claims, by reason of any claimed
Subordination-Related Rights or otherwise, so that each holder of a Claim shall
have and receive the complete benefit of the distributions in the manner set
forth and described in the Plan.
3 DISCHARGE OF THE DEBTORS
The rights afforded in the Plan and the treatment of all Claims and
Equity Interests in the Plan shall be in exchange for and in complete
satisfaction, discharge, and release of all Claims and Equity Interests of any
nature whatsoever, including any interest accrued on such Claims from and after
the Petition Date, against the Debtors, the Debtors in Possession, or any of
their assets or properties arising prior to the Effective Date. Except as
otherwise expressly specified in the Plan, the Confirmation Order shall act as
of the Effective Date as a discharge of all debts of, Claims against, liens on,
and Equity Interests in the Debtors, their assets and properties, arising at any
time before the entry of the Confirmation Order, regardless of whether a proof
of claim or interest with respect thereto was filed, whether the Claim or Equity
Interest is Allowed, or whether the holder thereof votes to accept the Plan or
is entitled to receive a distribution thereunder. Except as otherwise expressly
specified in the Plan, after the Effective Date, any holder of such discharged
Claim or Equity Interest shall be precluded from asserting against the Debtors,
the Reorganized Debtors, or any of their assets or properties, any other or
further Claim or Equity Interest based on any document, instrument, act,
omission, transaction, or other activity of any kind or nature that occurred
before the entry of the Confirmation Order.
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4 INJUNCTION
Except as otherwise expressly provided in the Plan, the Confirmation
Order, or a separate order of the Court, all entities who have held, hold, or
may hold Claims against or Equity Interests in the Debtors which arose before or
were held as of the Effective Date, are permanently enjoined, on and after the
Effective Date, from (a) commencing or continuing in any manner any action or
other proceeding of any kind against the Debtors with respect to any such Claim
or Equity Interest, (b) the enforcement, attachment, collection, or recovery by
any manner or means of any judgment, award, decree, or order against the Debtors
on account of any such Claim or Equity Interest, (c) creating, perfecting, or
enforcing any encumbrance of any kind against the Debtors or against the
property or interests in property of the Debtors on account of any such Claim or
Equity Interest and (d) asserting any right of setoff, subrogation, or
recoupment of any kind against any obligation due from the Debtors or against
the property or interests in property of the Debtors on account of any such
Claim or Equity Interest. Such injunction shall extend to successors of the
Debtors (including, without limitation, the Reorganized Debtors) and their
respective properties and interests in property.
5 PRESERVATION OF RIGHTS
Pursuant to the Plan and sections 544, 548, 549, 550, 551, 553 and
1123(b)(3)(B) of the Bankruptcy Code, the Debtors and the Reorganized Debtors
shall retain all rights and all Causes of Action accruing to the Debtors, their
estates, or the Reorganized Debtors, including, without limitation, (i) the
avoidance of any transfer of an interest of the Debtors in property or any
obligation incurred by the Debtors; provided, however, that the Debtors waive
any and all claims and Causes of Action related to payments made before the
Petition Date on account of the Senior Notes or the Senior Subordinated Notes,
or (ii) the turnover of any property to the estates, and except as expressly
provided in the Plan or the Confirmation Order, nothing contained in the Plan or
the Confirmation Order shall be deemed to be a waiver or relinquishment of any
such rights or Causes of Action. Nothing contained in the Plan or the
Confirmation Order shall be deemed to be a waiver or relinquishment of any
Claim, Cause of Action, right of setoff, or other legal or equitable defense
which the Debtors had immediately prior to the Petition Date which is not
expressly waived or relinquished pursuant to the Plan or the Confirmation Order.
The Reorganized Debtors shall have, retain, reserve and be entitled to assert
all such Claims, Causes of Action, rights of setoff and other legal or equitable
defenses which the Debtors had immediately prior to the Petition Date as fully
as if the Chapter 11 Cases had not been commenced; and all of the Reorganized
Debtors' legal and equitable rights respecting any Claim which are not expressly
waived or relinquished pursuant to the Plan or the Confirmation Order may be
asserted after the Effective Date to the same extent as if the Chapter 11 Cases
had not been commenced. Notwithstanding the Debtors' preservation of rights, the
Debtors do not believe any such claims or Causes of Action exist.
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6 VOTES SOLICITED IN GOOD FAITH
The Plan provides that pursuant to section 1125(e) of the Bankruptcy
Code, the Debtors have, and upon confirmation of the Plan shall be deemed to
have, solicited acceptances of the Plan in good faith and in compliance with the
applicable provisions of the Bankruptcy Code. The Plan further provides that
pursuant to section 1125(e) of the Bankruptcy Code, the Debtors (and each of
their respective affiliates, agents, directors, officers, employees, advisors,
and attorneys) have participated in good faith and in compliance with the
applicable provisions of the Bankruptcy Code in the offer, issuance, sale, and
purchase of the securities offered and sold under the Plan and therefore are
not, and on account of such offer, issuance, sale, solicitation, and/or purchase
will not be, liable at any time for the violation of any applicable law, rule,
or regulation governing the solicitation of acceptances or rejections of the
Plan or the offer, issuance, sale, or purchase of the securities offered and
sold under the Plan.
7 ADMINISTRATIVE CLAIMS INCURRED AFTER THE CONFIRMATION DATE
Administrative Claims incurred by the Reorganized Debtors after the
date and time of the entry of the Confirmation Order, including (without
limitation) Claims for professionals' fees and expenses incurred after such
date, shall not be subject to application and may be paid by the Reorganized
Debtors in the ordinary course of business and without application for or Court
approval.
8 EXCULPATION AND RELEASE OF RELEASED PARTIES; INJUNCTION
The Plan provides that the Debtors and the Reorganized Debtors and
the Released Parties shall have no liability whatsoever to any holder or
purported holder of an Administrative Claim, Claim, or Equity Interest for any
act or omission in connection with, or arising out of, the negotiation of the
Plan, the negotiation of the other documents included in the Plan Supplement,
the pursuit of approval of the Disclosure Statement or the solicitation of votes
for or confirmation of the Plan, the Chapter 11 Cases, the consummation of the
Plan, the administration of the Plan or the property to be distributed under the
Plan, or the various management, employee and director incentive bonus and stock
option plans, employment contracts, programs and arrangements adopted in
connection with the Plan or the Chapter 11 Cases, except for willful misconduct
or gross negligence as determined by a Final Order, and, in all respects, shall
be entitled to rely upon the advice of counsel with respect to their duties and
responsibilities. This exculpation shall be in addition to, and not in
limitation of, all other releases, indemnities, exculpations and any other
applicable law or rules protecting such Released Parties from liability.
The Plan provides that pursuant to section 105 of the Bankruptcy
Code, no holder or purported holder of an Administrative Claim, Claim or Equity
Interest shall be permitted to commence or continue any action, employment of
process, or an
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act to collect, offset, or recover any claim against a Released Party that
accrued prior to the Effective Date and has been released or waived pursuant to
the Plan.
9 PRESERVATION OF INSURANCE
The Plan provides that the Debtors' discharge and release from all
Claims as provided in the Plan, except as necessary to be consistent with the
Plan, shall not diminish or impair the enforceability of any insurance policy
that may cover Claims against the Debtors, the Reorganized Debtors (including,
without limitation, its officers and directors) or any other person or entity.
10 TERM OF BANKRUPTCY INJUNCTION OR STAYS
The Plan provides that all injunctions or stays provided for in the
Chapter 11 Cases under sections 105 or 362 of the Bankruptcy Code, or otherwise,
and in existence on the Confirmation Date, shall remain in full force and effect
until the Effective Date.
11 OFFICERS' AND DIRECTORS' INDEMNIFICATION RIGHTS AND
INSURANCE
The Plan provides that notwithstanding any other provision of the
Plan, the obligations of the Debtors to indemnify their directors, officers, and
employees against any obligations, liabilities, costs or expenses pursuant to
the articles of incorporation or by-laws of the Debtors, applicable state law,
specific agreement, or any combination of the foregoing, shall survive the
Effective Date. In addition, the Reorganized Debtors shall obtain tail coverage
under their existing directors and officers insurance policy covering their
existing directors and officers for any and all claims brought against them,
which coverage shall extend for a period of not less than 6 years after the
Effective Date, subject to the reasonable approval of price and terms thereof by
Satellite Fund Management, LLC, DDJ Capital Management, LLC and Loomis Sayles &
Company LP. The Debtors are not currently aware of any claims that will give
rise to indemnification of their directors, officers or employees.
12 LIMITATION OF GOVERNMENTAL RELEASE
Notwithstanding Sections VIII.J.1 and 2 of the Plan, the Plan shall
not release, discharge, or exculpate any non-debtor party from any debt owed to
the Government, or from any liability arising under the Internal Revenue Code,
the Employee Retirement Income Security Act of 1974, as amended, or
environmental laws, securities laws or criminal laws of the United States. In
addition, notwithstanding Sections VIII.J.1 and 2 of the Plan, the Plan shall
not enjoin or prevent the Government from collecting any such liability from any
such non-debtor party.
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O. RETENTION OF JURISDICTION
The Court shall have exclusive jurisdiction of all matters arising
out of, and related to, the Chapter 11 Cases and the Plan pursuant to, and for
the purposes of, section 105(a) and section 1142 of the Bankruptcy Code and for,
among other things, the following purposes: (1) to hear and determine
applications for the assumption or rejection of executory contracts or unexpired
leases pending on the date the Plan is confirmed, and the allowance of Claims
resulting therefrom; (2) to determine any other applications, adversary
proceedings, and contested matters pending on the Effective Date; (3) to ensure
that distributions to holders of Allowed Claims and Allowed Equity Interests are
accomplished as provided by the Plan; (4) to resolve disputes as to the
ownership of any Claim or Equity Interest; (5) to hear and determine timely
objections to Administrative Claims and Claims; (6) to enter and implement such
orders as may be appropriate if the Confirmation Order is for any reason stayed,
revoked, modified or vacated; (7) to issue such orders in aid of execution of
the Plan, to the extent authorized by section 1142 of the Bankruptcy Code; (8)
to consider any modifications of the Plan, to cure any defect or omission, or to
reconcile any inconsistency in any order of the Court, including, without
limitation, the Confirmation Order; (9) to hear and determine all applications
for compensation and reimbursement of expenses of professionals under sections
330, 331, and 503(b) of the Bankruptcy Code; (10) to hear and determine disputes
arising in connection with the interpretation, implementation, or enforcement of
the Plan; (11) to hear and determine any issue for which the Plan requires a
Final Order of the Court; (12) to hear and determine matters concerning state,
local, and federal taxes in accordance with sections 346, 505, and 1146 of the
Bankruptcy Code; (13) to hear any other matter not inconsistent with the
Bankruptcy Code; (14) to hear and determine disputes arising in connection with
compensation and reimbursement of expenses of professionals for services
rendered during the period commencing on the Confirmation Date through and
including the Effective Date; and (15) to enter a final decree closing the
Chapter 11 Cases.
P. MISCELLANEOUS PROVISIONS
1 PAYMENT OF STATUTORY FEES
All fees payable on or before the Effective Date (i) pursuant to
section 1930 of title 28 of the United States Code, as determined by the Court
at the Confirmation Hearing, and (ii) to the United States Trustee, shall be
paid by the Debtors on or before the Effective Date and all such fees payable
after the Effective Date shall be paid by the Reorganized Debtors.
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2 DISSOLUTION OF CREDITORS COMMITTEE
The appointment of the Creditors Committee shall terminate on the
Effective Date except that it shall survive for the limited purposes of
reviewing any applications for final allowance of compensation and reimbursement
of expenses of professionals and with respect to any appeals of the Confirmation
Order.
3 MODIFICATION OF THE PLAN
The Debtors reserve the right, in accordance with the Bankruptcy
Code, to amend or to modify the Plan prior to the entry of the Confirmation
Order. After entry of the Confirmation Order, the Reorganized Debtors or the
Debtors may amend or modify the Plan, or remedy any defect or omission or
reconcile any inconsistency in the Plan in such a manner as may be necessary to
carry out the purpose and intent of the Plan. Any material modifications to the
Plan shall be subject to the Creditors Committee's Consent.
4 GOVERNING LAW
Unless a rule of law or procedure is supplied by Federal law
(including the Bankruptcy Code and Bankruptcy Rules) or the Delaware General
Corporation Law or such other corporate laws that may apply to the Subsidiaries,
the laws of the State of New York (without reference to the conflicts of laws
provisions thereof) shall govern the construction and implementation of the Plan
and any agreements, documents, and instruments executed in connection with the
Plan.
5 FILING OR EXECUTION OF ADDITIONAL DOCUMENTS
On or before the Effective Date, the Debtors or the Reorganized
Debtors, shall file with the Court or execute, as appropriate, such agreements
and other documents as may be necessary or appropriate to effectuate and further
evidence the terms and conditions of the Plan.
6 WITHHOLDING AND REPORTING REQUIREMENTS
In connection with the Plan and all instruments issued in connection
therewith and distributions thereon, the Reorganized Debtors shall comply with
all withholding and reporting requirements imposed by any federal, state, local,
or foreign taxing authority and all distributions thereunder shall be subject to
any such withholding and reporting requirements.
7 EXEMPTION FROM TRANSFER TAXES
Pursuant to section 1146(c) of the Bankruptcy Code, the issuance,
transfer or exchange of New Senior Notes, New Common Stock or New Warrants
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under the Plan, the making or assignment of any lease or sublease or the making
or delivery of any other instrument whatsoever, in furtherance of or in
connection with the Plan shall not be subject to any stamp, real estate
transfer, recording or other similar tax.
8 SECTION 1145 EXEMPTION
Pursuant to, in accordance with, and solely to the extent provided
under section 1145 of the Bankruptcy Code, the issuance of the New Senior Notes,
New Common Stock and New Warrants under the Plan is exempt from the registration
requirements of Section 5 of the Securities Act, as amended, and any State or
local law requiring registration for offer or sale of a security or registration
or licensing of an issuer of, underwriter of, or broker or dealer in such New
Senior Notes, New Common Stock or New Warrants and is deemed to be a public
offering of New Senior Notes, New Common Stock and New Warrants.
9 WAIVER OF FEDERAL RULE OF CIVIL PROCEDURE 62(A)
The Debtors may request that the Confirmation Order include (a) a
finding that Fed. R. Civ. P. 62(a) shall not apply to the Confirmation Order and
(b) authorization for the Debtors to consummate the Plan immediately after entry
of the Confirmation Order.
10 PLAN SUPPLEMENT
Forms of the documents relating to the Amended Penn Traffic
Certificate of Incorporation, the Amended Penn Traffic By-laws, the Amended
Subsidiaries Certificates of Incorporation, the Amended Subsidiaries By-laws,
the Warrant Agreement, the New Notes Indent re, the Registration Rights
Agreement, the New Management Agreement, the investment guidelines referred to
in Section VI.C.2.(a)(ii) of the Plan, the Supplemental Retirement Plan, the
Amendment to Joseph V. Fisher's Employment Agreement and the Equity Incentive
Plan shall be contained in the Plan Supplement which has been filed with the
Clerk of the Court. The Plan Supplement may be inspected in the office of the
Clerk of the Court during normal court hours. Holders of Claims or Equity
Interests may obtain a copy of the Plan Supplement upon written request to the
Debtors in accordance with Section X.L. of the Plan.
Q. EXECUTORY CONTRACTS AND UNEXPIRED LEASES
The Bankruptcy Code grants the Debtors the power, subject to the
approval of the Court, to assume or reject executory contracts and unexpired
leases. If an executory contract or unexpired lease is rejected, the other party
to the agreement may file a claim for damages, if any, incurred by reason of the
rejection.
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In the case of rejection of leases of real property and employment agreements,
such damage claims are subject to certain limitations imposed by the Bankruptcy
Code.
Other than (i) executory contacts or unexpired leases which are the
subject of a motion to reject pending on the Confirmation Date and (ii)
employment agreements, if any, terminated prior to or in connection with the
Plan, all of the executory contracts, unexpired leases and employment agreements
that exist between the Debtors and any person, are specifically assumed as of
the Effective Date pursuant to the Plan. All Claims for damages arising from the
rejection of executory contracts or unexpired leases must be filed with the
Court in accordance with the terms of the order authorizing such rejection. Any
Claims not filed within such time will be forever barred from assertion against
the Debtors, their estates and the Reorganized Debtors. All Allowed Claims
arising from the rejection of executory contracts or unexpired leases shall be
treated as Class 5 Claims. The Reorganized Debtors, except as otherwise agreed
by the parties, will cure any and all undisputed defaults within 60 days of the
Effective Date under any executory contract, unexpired lease or employment
agreement assumed pursuant to the Plan in accordance with section 365 of the
Bankruptcy Code. All disputed defaults that are required to be cured shall be
cured either within 30 days of the entry of a Final Order determining the
amount, if any, of the Debtors' or the Reorganized Debtors' liability with
respect thereto, or as may otherwise be agreed to by the parties.
Notwithstanding the above, the Debtors do not currently intend to reject any
executory contracts.
R. BENEFIT PLANS
The Plan provides that all employment and severance agreements and
policies, and all employee compensation and benefit plans, policies, and
programs of the Debtors applicable generally to its employees, including
agreements and programs subject to section 1114 of the Bankruptcy Code, as in
effect on the Effective Date, including, without limitation, all savings plans,
retirement plans, health care plans, disability plans, severance benefit plans,
incentive plans, and life, accidental death, and dismemberment insurance plans,
shall be deemed to be, and shall be treated as though they are, executory
contracts that are assumed under the Plan, but only to the extent that rights
under such agreements and programs are held by the Debtors or individuals who
are the Reorganized Debtors' employees as of and after the Effective Date, and
the Debtors' obligations under such agreements and programs to individuals who
are employees of the Debtors on and after the Effective Date shall survive the
Effective Date of the Plan, without prejudice to the Reorganized Debtors' rights
under applicable non-bankruptcy law to modify, amend, or terminate the foregoing
arrangements, except for (i) such executory contracts or plans specifically
rejected pursuant to the Plan (to the extent such rejection does not violate
section 1114 of the Bankruptcy Code) and (ii) such executory contracts or plans
as have previously been terminated, or rejected, pursuant to a Final Order, or
specifically waived by the beneficiaries of such plans, contracts, or programs.
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S. PENSION PLANS
The Debtors sponsor the P&C Foods Pension Plan for Represented
Employees, the Big Bear General Merchandise Plan, the Big Bear Food Warehouse
Hourly Plan, the Penn Traffic Company Cash Balance Plan, the Riverside Division
of Penn Traffic Company Pension Plan for Bargaining Employees, the Pension Plan
for the Bargaining Employees of Insalco Markets, and any other tax qualified
defined benefit pension plan, insured by the Pension Benefit Guaranty
Corporation (the "PBGC") under Title IV of ERISA and maintained by the Debtors,
as well as any successor plan, (the "Pension Plans"), which are tax qualified
defined benefit pension plans covered by Title IV of the Employee Retirement
Income Security Act of 1975, as amended ("ERISA"). The Debtors have continued to
fund and administer the Pension Plans in compliance with applicable laws.
Under ERISA, the Debtors and the members of their controlled group
are jointly and severally liable to PBGC for unfunded benefit liabilities, as
defined in ERISA ss. 4001(a)(18), 29 U.S.C. ss. 1301(a)(18), if the Pension
Plans terminate. In addition, the Debtors and members of their controlled group
are jointly and severally liable for the contribution amounts necessary to
satisfy ERISA's minimum funding standards. See ERISA ss.ss. 302, 4062(c), 29
U.S.C. ss.ss. 1082 and 1362(c); I.R.C. ss. 412, 26 U.S.C. ss. 412. Also the
Debtors and members of their controlled group are jointly and severally liable
for premiums, interest and penalties imposed by ERISA for plans covered by Title
IV of ERISA. ERISA ss. 4007(a), (b), (c), 29 U.S.C. ss. 1307(a), (b), (e), 29
C.F.R. ss. 4007.12(a).
The Debtors presently intend to continue the Pension Plans, fund the
Pension Plans in accordance with the minimum funding standards under the
Internal Revenue Code and ERISA, pay all required PBGC insurance premiums, and
to continue to administer and operate the Pension Plans in accordance with the
terms of the Pension Plans and the provisions of ERISA. The Chapter 11 Cases,
and in particular, the Plan, shall not, in any way, be construed as discharging,
releasing or relieving the Debtors, the Reorganized Debtors, or any party, in
any capacity, from any liability with respect to the Pension Plans under ERISA
and under Internal Revenue Code Section 412. PBGC and the Pension Plans shall
not be enjoined or precluded from enforcing such liability as a result of any of
the provisions of the Plan or Confirmation.
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VIII.
PROJECTIONS AND VALUATION ANALYSIS
The Debtors and their advisors developed a set of financial
projections (summarized below and in Exhibit D) to assess the value of the
Reorganized Debtors generally, and specifically the value of the New Common
Stock to be distributed to Classes 6, 7 and 8 under the Plan. In addition, the
Debtors and their advisors have developed a recovery analysis (attached as
Exhibit H) describing the estimated recoveries to holders of Claims and Equity
Interests in Classes 6, 7 and 8 under the Plan. The projections and valuations
set forth below and in Exhibit D are based on a number of significant
assumptions including, among other things, the successful reorganization of the
Debtors, an assumed Effective Date of June 26, 1999 and no significant downturn
in the specific markets in which the Debtors operate.
THE PROJECTIONS ARE BASED UPON A NUMBER OF SIGNIFICANT ASSUMPTIONS.
ACTUAL OPERATING RESULTS AND VALUES MAY VARY.
A. PROJECTIONS
As a condition to confirmation of a plan, the Bankruptcy Code
requires, among other things, that the Bankruptcy Court determine that
confirmation is not likely to be followed by the liquidation or the need for
further financial reorganization of the debtor. In connection with the
development of the Plan, and for purposes of determining whether the Plan
satisfies this feasibility standard, Penn Traffic's management has, through the
development of financial projections (the "Projections"), analyzed the ability
of Penn Traffic to meet its obligations under the Plan to maintain sufficient
liquidity and capital resources to conduct its business. The Projections were
also prepared to assist each holder of a Claim or Equity Interest in Classes 5,
6, 7 or 8 in determining whether to accept or reject the Plan.
The Projections should be read in conjunction with the assumptions,
qualifications and footnotes to tables containing the Projections set forth
herein and in Exhibit D, the historical consolidated financial information
(including the notes and schedules thereto) and the other information set forth
in Penn Traffic's Annual Report on Form 10K for the fiscal year ended January
31, 1998, Penn Traffic's Quarterly Report on Form 10Q for the period ended
October 31, 1998 and Penn Traffic's Fourth Quarter Fiscal 1999 Earnings Press
Release, annexed hereto as Exhibits C, G and I, respectively, the full texts of
which are incorporated herein by reference. The Projections were prepared in
good faith based upon assumptions believed to be reasonable. Most of the
assumptions about the operations of the business after the assumed Effective
Date which are utilized in the Projections were prepared in December 1998 and
were based, in part, on economic, competitive, and general business conditions
prevailing at the time. While as of the date of this Disclosure
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Statement such conditions have not materially changed, any future changes in
these conditions may materially impact the ability of Penn Traffic to achieve
the Projections.
THE PROJECTIONS WERE NOT PREPARED WITH A VIEW TOWARDS COMPLYING WITH
THE GUIDELINES FOR PROSPECTIVE FINANCIAL STATEMENTS PUBLISHED BY THE AMERICAN
INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS. PENN TRAFFIC'S INDEPENDENT
ACCOUNTANT, PRICEWATERHOUSECOOPERS LLP, HAS NEITHER COMPILED NOR EXAMINED THE
ACCOMPANYING PROSPECTIVE FINANCIAL INFORMATION TO DETERMINE THE REASONABLENESS
THEREOF AND, ACCORDINGLY, HAS NOT EXPRESSED AN OPINION OR ANY OTHER FORM OF
ASSURANCE WITH RESPECT THERETO.
PENN TRAFFIC DOES NOT, AS A MATTER OF COURSE, PUBLISH PROJECTIONS OF
ITS ANTICIPATED FINANCIAL POSITION, RESULTS OF OPERATIONS OR CASH FLOWS.
ACCORDINGLY, PENN TRAFFIC DOES NOT INTEND TO, AND DISCLAIMS ANY OBLIGATION TO
(A) FURNISH UPDATED PROJECTIONS TO HOLDERS OF CLAIMS OR EQUITY INTERESTS PRIOR
TO THE EFFECTIVE DATE OR TO HOLDERS OF NEW COMMON STOCK OR ANY OTHER PARTY AFTER
THE EFFECTIVE DATE, (B) INCLUDE SUCH UPDATED INFORMATION IN ANY DOCUMENTS THAT
MAY BE REQUIRED TO BE FILED WITH THE SEC, OR (C) OTHERWISE MAKE SUCH UPDATED
INFORMATION PUBLICLY AVAILABLE.
THE PROJECTIONS PROVIDED IN THE DISCLOSURE STATEMENT HAVE BEEN
PREPARED EXCLUSIVELY BY PENN TRAFFIC'S MANAGEMENT. THESE PROJECTIONS, WHILE
PRESENTED WITH NUMERICAL SPECIFICITY, ARE NECESSARILY BASED ON A VARIETY OF
ESTIMATES AND ASSUMPTIONS WHICH, THOUGH CONSIDERED REASONABLE BY MANAGEMENT, MAY
NOT BE REALIZED, AND ARE INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC
AND COMPETITIVE UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND PENN
TRAFFIC'S CONTROL. PENN TRAFFIC CAUTIONS THAT NO REPRESENTATIONS CAN BE MADE AS
TO THE ACCURACY OF THESE FINANCIAL PROJECTIONS OR TO REORGANIZED PENN TRAFFIC'S
ABILITY TO ACHIEVE THE PROJECTED RESULTS. SOME ASSUMPTIONS INEVITABLY WILL NOT
MATERIALIZE. FURTHER, EVENTS AND CIRCUMSTANCES OCCURRING SUBSEQUENT TO THE DATE
ON WHICH THESE PROJECTIONS WERE PREPARED MAY BE DIFFERENT FROM THOSE ASSUMED OR,
ALTERNATIVELY, MAY HAVE BEEN UNANTICIPATED, AND THUS THE OCCURRENCE OF THESE
EVENTS MAY AFFECT FINANCIAL RESULTS IN A MATERIAL AND POSSIBLY ADVERSE MANNER.
THE PROJECTIONS, THEREFORE, MAY NOT BE RELIED UPON AS A
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GUARANTY OR OTHER ASSURANCE OF THE ACTUAL RESULTS THAT WILL OCCUR.
FINALLY, THE PROJECTIONS INCLUDE ASSUMPTIONS AS TO THE ENTERPRISE
VALUE OF REORGANIZED PENN TRAFFIC, THE FAIR VALUE OF ITS ASSETS AND ITS ACTUAL
LIABILITIES AS OF THE EFFECTIVE DATE. REORGANIZED PENN TRAFFIC WILL BE REQUIRED
TO MAKE SUCH ESTIMATIONS AS OF THE EFFECTIVE DATE. SUCH DETERMINATION WILL BE
BASED UPON THE FAIR VALUES AS OF THAT DATE, WHICH COULD BE MATERIALLY GREATER OR
LOWER THAN THE VALUES ASSUMED IN THE FOREGOING ESTIMATES.
B. VALUATION
Two methodologies were used to derive the value of Reorganized Penn
Traffic based on the Projections: (i) a comparison of the company and its
projected performance to how the market values comparable companies, and (ii) a
calculation of the present value of the free cash flows under the Projections,
including an assumption for a terminal value.
The market based approach involves identifying a group of publicly
traded companies whose businesses or product lines are comparable to those of
Penn Traffic as a whole or significant portions of the company's operations, and
then calculating ratios of various financial results to the public market values
of these companies. The ranges of ratios derived are then applied to Penn
Traffic's projected financial results to derive a range of implied values. The
discounted cash flow approach involves deriving the unlevered free cash flows
that Penn Traffic would generate assuming the projections were realized. These
cash flows, and an estimated value of the company at the end of the projected
period (the "Terminal Value"), are discounted to the present at Penn Traffic's
estimated post-restructuring weighted average cost of capital to determine the
company's enterprise value.
ESTIMATES OF VALUE DO NOT PURPORT TO BE APPRAISALS NOR DO THEY
NECESSARILY REFLECT THE VALUES WHICH MAY BE REALIZED IF ASSETS ARE SOLD. THE
ESTIMATES OF VALUE REPRESENT HYPOTHETICAL REORGANIZED ENTERPRISE VALUES ASSUMING
THE IMPLEMENTATION OF MANAGEMENT'S BUSINESS PLAN AS WELL AS OTHER SIGNIFICANT
ASSUMPTIONS. SUCH ESTIMATES WERE DEVELOPED SOLELY FOR PURPOSES OF FORMULATING
AND NEGOTIATING A PLAN OF REORGANIZATION AND ANALYZING THE PROJECTED RECOVERIES
THEREUNDER.
Based upon the methods described above, the estimated enterprise
value for Reorganized Penn Traffic is between $700 million and $800 million,
with a midpoint value of $750 million. After deducting the estimated, long-term
indebtedness
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of Penn Traffic at the Effective Date of approximately $368 million, the
estimated total equity value is between $332 million and $432 million, with a
midpoint value of $382 million. Therefore, assuming 20,106,955 shares of New
Common Stock will be issued on the Effective Date, the midpoint value of New
Common Stock is estimated to be $18.63 per share, after the assumed impact on
the value of the stock from the issuance of the New Warrants. Penn Traffic has
estimated the value of the New Warrants to be $7.2 million, or $7.25 per
warrant, using the Black-Scholes option pricing method; the valuation of the New
Warrants was based upon, among other things, estimates of volatility of the New
Common Stock. See Exhibit H to the Disclosure Statement for a more detailed
analysis of the recoveries to creditors and Equity Interestholders.
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.
THE VALUATIONS SET FORTH HEREIN REPRESENT ESTIMATED REORGANIZATION
VALUES AND DO NOT NECESSARILY REFLECT VALUES THAT COULD BE ATTAINABLE IN PUBLIC
OR PRIVATE MARKETS. THE EQUITY VALUE ASCRIBED IN THE ANALYSIS DOES NOT PURPORT
TO BE AN ESTIMATE OF THE POST-REORGANIZATION MARKET VALUE. SUCH TRADING VALUE,
IF ANY, MAY BE MATERIALLY DIFFERENT FROM THE REORGANIZATION EQUITY VALUE RANGES
ASSOCIATED WITH THE VALUATION ANALYSIS.
IX.
CERTAIN RISK FACTORS TO BE CONSIDERED
HOLDERS OF CLAIMS AGAINST, AND EQUITY INTERESTS IN, THE DEBTORS
SHOULD READ AND CONSIDER CAREFULLY THE FACTORS SET FORTH BELOW AS WELL AS THE
OTHER INFORMATION SET FORTH IN THIS DISCLOSURE STATEMENT (AND THE DOCUMENTS
DELIVERED TOGETHER HEREWITH AND/OR INCORPORATED BY REFERENCE), PRIOR TO VOTING
TO ACCEPT OR REJECT THE PLAN. THESE RISK FACTORS SHOULD NOT, HOWEVER, BE
REGARDED AS CONSTITUTING THE ONLY RISKS INVOLVED IN CONNECTION WITH THE PLAN AND
ITS IMPLEMENTATION.
The ultimate recoveries under the Plan to holders of Claims and
Equity Interests (other than those holders who are paid solely in cash under the
Plan) depend upon the realizable value of the New Notes, New Common Stock and
the Warrants. The securities to be issued pursuant to the Plan are subject to a
number of material
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risks, including, but not limited to, those specified below. The factors
specified below assume that the Plan is approved by the Bankruptcy Court and
that the Effective Date occurs on or about June 26, 1999. Although such risk
factors are based upon a June 26, 1999 Effective Date, Penn Traffic believes
that an actual Effective Date later in the second quarter of Fiscal 1999 would
not have any material effect on the risk factors.
1 PROJECTED FINANCIAL INFORMATION
The financial projections included in this Disclosure Statement are
dependent upon the successful implementation of the business plan and the
validity of the other assumptions contained therein. These projections reflect
numerous assumptions, including confirmation and consummation of the Plan in
accordance with its terms, and anticipated future performance of Penn Traffic,
retail industry performance, certain assumptions with respect to competitors of
Penn Traffic, general business and economic conditions and other matters, many
of which are beyond the control of Penn Traffic. In addition, unanticipated
events and circumstances occurring subsequent to the preparation of the
projections may affect the actual financial results of Penn Traffic. Although
Penn Traffic believes that the projections are reasonably attainable, variations
between the actual financial results and those projected may occur and be
material.
2 ABILITY TO REFINANCE CERTAIN INDEBTEDNESS AND
RESTRICTIONS IMPOSED BY INDEBTEDNESS
Following the Effective Date of the Plan, the Reorganized Debtors'
working capital borrowings and letters of credit requirements are anticipated to
be funded by a new credit facility (the "New Credit Facility"), a portion of the
proceeds of which will be used to repay in full the DIP Financing Facility.
There can be no assurance that the Reorganized Debtors will be able to obtain
such financing or that such financing may be obtained on acceptable terms.
The New Credit Facility and the New Notes Indenture will restrict,
among other things, the Company's ability to incur additional indebtedness, pay
dividends or make certain other restricted payments, consummate certain asset
sales, create liens on assets, enter into transactions with affiliates, make
investments, loans or advances, consolidate or merge with or into any other
person or convey, transfer or lease all or substantially all of its assets or
change the business conducted by Reorganized Penn Traffic. In addition, the New
Credit Facility will contain certain other and more restrictive covenants and
will prohibit Penn Traffic from prepaying certain indebtedness, including the
New Senior Notes. A breach of any of these covenants could result in a default
under the New Credit Facility or the New Notes Indenture. Further, the
restrictions in the New Notes Indenture and the New Credit Facility will
therefore restrict Penn Traffic's ability to obtain additional financing for
working capital, capital expenditures or general corporate purposes.
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Reorganized Penn Traffic's indebtedness will also require
substantial debt service payments which will restrict its ability to use its
operating cash flow for capital expenditures and other working capital
requirements. In addition, substantially all of the assets of Penn Traffic will
be pledged as security under the New Credit Facility. Finally, it is anticipated
that the Subsidiaries will guarantee the New Credit Facility.
3 COMPETITIVE CONDITIONS AND NEED TO FUND FUTURE
CAPITAL REQUIREMENTS
The food retailing business is highly competitive and may be
affected by general economic conditions. The number of competitors and the
degree of competition experienced by Penn Traffic's supermarkets vary by
location. Penn Traffic competes with several multi-regional, regional and local
supermarket chains, convenience stores, stores owned and operated and otherwise
affiliated with large food wholesalers, unaffiliated independent food stores,
warehouse clubs, discount drug store chains, discount general merchandise
chains, "supercenters" (combination supermarket and general merchandise stores)
and other retailers. In addition, in order to continue to remain competitive
over time, Penn Traffic will be required to make substantial capital
expenditures to remodel and replace its existing retail stores. Penn Traffic
anticipates utilizing its operating cash flow and amounts available under the
New Credit Facility to finance these capital expenditure requirements.
4 SIGNIFICANT HOLDERS
If holders of significant numbers of shares of New Common Stock were
to act as a group, such holders could be in a position to control the outcome of
actions requiring stockholder approval, including the election of directors.
This concentration of ownership could also facilitate or hinder a negotiated
change of control of the Reorganized Debtors and, consequently, have an impact
upon the value of the New Common Stock.
Further, the possibility that one or more of the holders of
significant numbers of shares of New Common Stock may determine to sell all or a
large portion of their shares of New Common Stock in a short period of time may
adversely affect the market price of the New Common Stock.
5 LACK OF ESTABLISHED MARKET FOR NEW COMMON STOCK AND
WARRANTS
The Debtors shall use reasonable commercial efforts to cause the New
Common Stock to be listed on a national securities exchange or the Nasdaq
National Market. There can be no assurance that such an application will be
approved.
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The New Common Stock will be issued to holders of pre-Petition Date
Claims, some or all of whom may prefer to liquidate their investment rather than
to hold it on a long-term basis. There currently is no trading market for the
New Common Stock nor is it known whether or when one would develop. Further,
there can be no assurance as to the degree of price volatility in any such
market. While the Plan was developed based on an assumed reorganization value of
$18.63 per share of the New Common Stock (which was calculated based on the
Company's mid-point enterprise valuation), such valuation is not an estimate of
the price at which the New Common Stock may trade in the market. Penn Traffic
has not attempted to make any such estimate in connection with the development
of the Plan. No assurance can be given as to the market prices that will prevail
following the Effective Date.
6 LACK OF TRADING MARKET FOR NEW NOTES
After the issuance of the New Notes pursuant to the Plan, there can
be no assurance that an active trading market will develop therefor. Further,
there can be no assurance as to the degree of price volatility in any such
market. Accordingly, no assurance can be given that any holder of such
securities will be able to sell such securities or as to the price at which any
sale may occur. If such market were to exist, such securities could trade at
prices higher or lower than the value attributed to such securities hereunder,
depending upon many factors, including, without limitation, the prevailing
interest rates, markets for similar securities, industry conditions and the
performance of, and investor expectations for, Penn Traffic on a reorganized
basis.
7 DIVIDEND POLICIES
The Debtors do not anticipate paying any dividends on the New Common
Stock in the foreseeable future. In addition, the covenants in certain debt
instruments to which Reorganized Penn Traffic will be a party (including the New
Credit Facility) may limit the ability of Penn Traffic to pay dividends. Certain
institutional investors may only invest in dividend-paying equity securities or
may operate under other restrictions which may prohibit or limit their ability
to invest in New Common Stock.
8 CERTAIN BANKRUPTCY LAW CONSIDERATIONS
(a) Risk of Non-Confirmation of the Plan
Although Penn Traffic believes that the Plan will satisfy all
requirements necessary for confirmation by the Court, there can be no assurance
that the Bankruptcy Court will reach the same conclusion. Moreover, there can be
no assurance that modifications of the Plan will not be required for
confirmation or that such modifications would not necessitate the resolicitation
of votes.
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(b) Risk of Non-Occurrence of the Effective Date
Although Penn Traffic believes that the Effective Date may occur as
soon as 10 days after the entry of the Confirmation Order, there can be no
assurance as to such timing or that such conditions will ever occur.
9 CERTAIN TAX MATTERS
For a summary of certain federal income tax consequences of the Plan
to holders of Claims and Equity Interests and to Penn Traffic, see Section XV.
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN."
X.
CONFIRMATION PROCEDURE
Under the Bankruptcy Code, the following steps must be taken to
confirm the Plan:
A. SOLICITATION OF VOTES
In accordance with sections 1126 and 1129 of the Bankruptcy Code,
the Claims and Equity Interests in Classes 5, 6, 7 and 8 of the Plan are
impaired and the holders of Allowed Claims and Allowed Equity Interests in each
of such Classes are entitled to vote to accept or reject the Plan. Claims in
Classes 1, 2, 3 and 4 are unimpaired. The holders of Allowed Claims in each of
such Classes are conclusively presumed to have accepted the Plan and the
solicitation of acceptances with respect to such Classes therefore is not
required under section 1126(f) of the Bankruptcy Code.
As to classes of claims entitled to vote on a plan, the Bankruptcy
Code defines acceptance of a plan by a class of creditors as acceptance by
holders of at least two-thirds in dollar amount and more than one-half in number
of the claims of that class that have timely voted to accept or reject a plan.
As to classes of interests entitled to vote on a plan, acceptance is
defined as acceptance by holders of at least two-thirds of the number of shares
in such class that have timely voted to accept or reject a plan.
A vote may be disregarded if the Court determines, after notice and
a hearing, that acceptance or rejection was not solicited or procured in good
faith or in accordance with the provisions of the Code.
Any creditor in an impaired Class (i) whose Claim has been listed by
the Debtors in the Debtors' Schedules filed with the Court (provided that such
Claim
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has not been scheduled as disputed, contingent or unliquidated) or (ii) who
filed a proof of claim on or before April 19, 1999 (or, if not filed by such
date, any proof of claim filed within any other applicable period of limitations
or with leave of the Court), which Claim is not the subject of an objection or
request for estimation, is entitled to vote. Pursuant to the Disclosure
Statement Order, holders of Allowed Equity Interests as of April 5, 1999, are
entitled to vote their Equity Interests.
B. THE CONFIRMATION HEARING
The Bankruptcy Code requires the Court, after notice, to hold a
confirmation hearing. The Confirmation Hearing in respect of the Plan has been
scheduled for May 27, 1999 at 9:30 a.m., Eastern Time, before the Honorable
Peter J. Walsh at the United States Bankruptcy Court for the District of
Delaware, 824 North Market Street, Wilmington, Delaware 19801. The Confirmation
Hearing may be adjourned from time to time by the Court without further notice
except for an announcement of the adjourned date made at the Confirmation
Hearing. Any objection to confirmation must be made in writing and specify in
detail the name and address of the objector, all grounds for the objection and
the amount of the Claim or number of shares of common stock of the Debtors or
other Interests held by the objector. Any such objection must be filed with the
Court and served so that it is received by the Court and the following parties
on or before May 21, 1999 at 4:00 p.m., Eastern Time:
Paul, Weiss, Rifkind, Wharton & Garrison Young Conaway Stargatt & Taylor, LLP
Attorneys for the Debtors Attorneys for the Debtors
1285 Avenue of the Americas 1110 North Market Street
New York, New York 10019-6064 Rodney Square North, 11th Floor
Attn: Alan W. Kornberg, Esq. Wilmington, Delaware 19801
Jeffrey D. Saferstein, Esq. Attn: James L. Patton, Esq.
Stroock & Stroock & Lavan LLP Morris, Nichols, Arsht & Tunnell
Attorneys for the Creditors Attorneys for the Creditors Committee
Committee 1201 North Market Street
180 Maiden Lane P.O. Box 1347
New York, New York 10038 Wilmington, Delaware 19899-1347
Attn: Daniel Golden, Esq. Attn: Robert J. Dehney
Office of the United States Trustee
601 Walnut Street
Curtis Center, Suite 950 West
Philadelphia, Pennsylvania 19106
Attn:
Objections to confirmation of the Plan are governed by Bankruptcy Rule 9014 and
orders of the Bankruptcy Court.
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C. CONFIRMATION
At the Confirmation Hearing, the Court will confirm the Plan only if
all of the requirements of section 1129 of the Bankruptcy Code are met. Among
the requirements for confirmation of a plan are that the plan is (i) accepted by
all impaired classes of claims and equity interests or, if rejected by an
impaired class, that the plan "does not discriminate unfairly" and is "fair and
equitable" as to such class, (ii) feasible and (iii) in the "best interests" of
creditors and stockholders that are impaired under the plan.
1 ACCEPTANCE
Classes 5, 6, 7 and 8 of the Plan are impaired under the Plan and
are entitled to vote to accept or reject the Plan. Classes 1, 2, 3 and 4 of the
Plan are unimpaired and, therefore, are conclusively presumed to have voted to
accept the Plan. The Debtors reserve the right to amend the Plan in accordance
with Section X.C of the Plan or to seek nonconsensual confirmation of the Plan
under section 1129(b) of the Bankruptcy Code, or both, with respect to any Class
of Claims or Equity Interests that is entitled to vote to accept or reject the
Plan, if such Class rejects the Plan.
2 UNFAIR DISCRIMINATION AND FAIR AND EQUITABLE TESTS
To obtain nonconsensual confirmation of the Plan, it must be
demonstrated to the Court that the Plan "does not discriminate unfairly" and is
"fair and equitable" with respect to each impaired, nonaccepting Class. The
Bankruptcy Code provides a non-exclusive definition of the phrase "fair and
equitable." The Bankruptcy Code establishes "cram down" tests for unsecured
creditors and equity holders, as follows:
(a) Secured Creditors. Either (i) each impaired creditor retains its
liens securing its secured claim and receives on account of its secured claim
deferred cash payments having a present value equal to the amount of its allowed
secured claim, (ii) each impaired secured creditor realizes the "indubitable
equivalent" of its allowed secured claim or (iii) the property securing the
claim is sold free and clear of liens with such liens to attach to the proceeds
of the sale and the treatment of such liens on proceeds to be as provided in
clause (i) or (ii) of this subparagraph.
(b) Unsecured Creditors. Either (i) each impaired unsecured creditor
receives or retains under the plan property of a value equal to the amount of
its allowed claim or (ii) the holders of claims and interests that are junior to
the claims of the dissenting class will not receive any property under the plan.
(c) Equity Interests. Either (i) each holder of an equity interest
will receive or retain under the plan property of a value equal to the greatest
of the fixed
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liquidation preference to which such holder is entitled, the fixed redemption
price to which such holder is entitled or the value of its interest or (ii) the
holder of an interest that is junior to the nonaccepting class will not receive
or retain any property under the plan.
3 FEASIBILITY
The Bankruptcy Code permits a plan to be confirmed if it is not
likely to be followed by liquidation or the need for further financial
reorganization. For purposes of determining whether the Plan meets this
requirement, the Debtors have analyzed their ability to meet their obligations
under the Plan. As part of this analysis, the Debtors have prepared projections
of their financial performance for the 31-week period ending January 29, 2000
and each of the four subsequent fiscal years thereafter ending January 31, 2004
(the "Projection Period"). These projections, and the assumptions on which they
are based, are included in the Projected Financial Information, annexed hereto
as Exhibit D. Based upon such projections, the Debtors believe that they will be
able to make all payments required pursuant to the Plan and, therefore, that
confirmation of the Plan is not likely to be followed by liquidation or the need
for further reorganization.
The financial information and projections appended to the Disclosure
Statement include for the Projection Period:
o Pro-forma Reorganized Penn Traffic balance sheet at June 26,
1999, including all reorganization and fresh-start
adjustments.
o Projected balance sheets for fiscal years ending in 2000,
2001, 2002, 2003 and 2004.
o Projected income statements for the 31-week period ending
January 29, 2000 and fiscal years ending in 2001, 2002, 2003
and 2004.
o Projected statements of cash flow for the 31-week period
ending January 29, 2000 and fiscal years ending in 2001, 2002,
2003 and 2004.
The pro forma financial information and the projections are based on
the assumption that the Plan will be confirmed by the Court and, for projection
purposes, that the Effective Date under the Plan will occur on June 26, 1999.
Although the projections and information are based upon a June 26, 1999
Effective Date, the Debtors believe that an actual Effective Date in the second
quarter of Fiscal 2000 (13 week period ending July 31, 1999) would not have any
material effect on the projections.
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The Debtors have prepared these financial projections based upon
certain assumptions that they believe to be reasonable under the circumstances.
Those assumptions considered to be significant are described in the financial
projections, which are annexed hereto as Exhibit D. The financial projections
have not been examined or compiled by independent accountants. The Debtors make
no representation as to the accuracy of the projections or their ability to
achieve the projected results. Many of the assumptions on which the projections
are based are subject to significant uncertainties. Inevitably, some assumptions
will not materialize and unanticipated events and circumstances may affect the
actual financial results. Therefore, the actual results achieved throughout the
Projection Period may vary from the projected results and the variations may be
material. All holders of Claims and Equity Interests that are entitled to vote
to accept or reject the Plan are urged to examine carefully all of the
assumptions on which the financial projections are based in evaluating the Plan.
4 BEST INTERESTS TEST
With respect to each impaired Class of Claims and Equity Interests,
confirmation of the Plan requires that each holder of a Claim or Equity Interest
either (i) accept the Plan or (ii) receive or retain under the Plan property of
a value, as of the Effective Date, that is not less than the value such holder
would receive or retain if the Debtors were liquidated under chapter 7 of the
Bankruptcy Code. To determine what holders of Claims and Equity Interests of
each impaired Class would receive if the Debtors were liquidated under chapter
7, the Bankruptcy Court must determine the dollar amount that would be generated
from the liquidation of the Debtors' assets and properties in the context of a
chapter 7 liquidation case. The Cash amount that would be available for
satisfaction of Unsecured Claims and Equity Interests would consist of the
proceeds resulting from the disposition of the unencumbered assets and
properties of the Debtors, augmented by the unencumbered Cash held by the
Debtors at the time of the commencement of the liquidation case. Such Cash
amount would be reduced by the amount of the costs and expenses of the
liquidation and by such additional administrative and priority claims that might
result from the termination of the Debtors' businesses and the use of chapter 7
for the purposes of liquidation.
The Debtors' costs of liquidation under chapter 7 would include the
fees payable to a chapter 7 trustee, as well as those fees that might be payable
to attorneys and other professionals that such a trustee might engage. In
addition, claims would arise by reason of the breach or rejection of obligations
incurred and leases and executory contracts assumed or entered into by the
Debtors during the pendency of the Chapter 11 Cases. The foregoing types of
claims and other claims that might arise in a liquidation case or result from
the pending Chapter 11 Cases, including any unpaid expenses incurred by the
Debtors and the Creditors' Committee during the Chapter 11 Cases such as
compensation for attorneys, financial advisors and accountants, would be paid in
full from the liquidation proceeds before the
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balance of those proceeds would be made available to pay prepetition Unsecured
Claims.
To determine if the Plan is in the best interests of each impaired
class, the present value of the distributions from the proceeds of a liquidation
of the Debtors' unencumbered assets and properties, after subtracting the
amounts attributable to the foregoing claims, are then compared with the value
of the property offered to such Classes of Claims and Equity Interests under the
Plan.
After considering the effects that a chapter 7 liquidation would
have on the ultimate proceeds available for distribution to creditors in the
Chapter 11 Cases, including (i) the increased costs and expenses of a
liquidation under chapter 7 arising from fees payable to a trustee in bankruptcy
and professional advisors to such trustee, (ii) the erosion in value of assets
in a chapter 7 case in the context of the expeditious liquidation required under
chapter 7 and the "forced sale" atmosphere that would prevail and (iii) the
substantial increases in Claims which would be satisfied on a priority basis or
on parity with creditors in the Chapter 11 Cases, the Debtors have determined
that confirmation of the Plan will provide each holder of an Allowed Claim or
Equity Interest with a recovery that is not less than such holder would receive
pursuant to liquidation of the Debtors under chapter 7.
The Debtors also believe that the value of any distributions to each
class of Allowed Claims in a chapter 7 case, including all Secured Claims, would
be less than the value of distributions under the Plan because such
distributions in a chapter 7 case would not occur for a substantial period of
time. It is likely that distribution of the proceeds of the liquidation could be
delayed for two years after the completion of such liquidation in order to
resolve Claims and prepare for distributions. In the likely event litigation
were necessary to resolve Claims asserted in the chapter 7 case, the delay could
be prolonged.
The Debtors' Liquidation Analysis is attached hereto as Exhibit E.
The information set forth in Exhibit E provides a summary of the liquidation
values of the Debtors' assets, assuming a chapter 7 liquidation in which a
trustee appointed by the Bankruptcy Court would liquidate the assets of the
Debtors' estates. Reference should be made to the Liquidation Analysis for a
complete discussion and presentation of the Liquidation Analysis. The
Liquidation Analysis was prepared by the Debtors with the assistance of
Blackstone.
Underlying the Liquidation Analysis are a number of estimates and
assumptions that, although developed and considered reasonable by management,
are inherently subject to significant economic and competitive uncertainties and
contingencies beyond the control of the Debtors and their management. The
Liquidation Analysis is also based on assumptions with regard to liquidation
decisions that are subject to change. Accordingly, the values reflected might
not be realized if the Debtors were, in fact, to undergo such a liquidation. The
chapter 7 liquidation
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period is assumed to be a period of more than one year, allowing for, among
other things, the (i) discontinuation of operations, (ii) selling of assets and
(iii) collection of receivables.
XI.
EFFECTIVENESS OF THE PLAN
A. CONDITIONS PRECEDENT TO EFFECTIVENESS
The Plan shall not become effective unless and until it has been
confirmed and the following conditions have been satisfied in full or waived
pursuant to Section XIII.B.2 thereof: (1) the Confirmation Order in a form
satisfactory to the Debtors and the Creditors Committee shall have become a
Final Order; (2) the Effective Date shall have occurred within six months
following the Petition Date; (3) the Amended Penn Traffic Certificate of
Incorporation and Amended Subsidiaries Certificates of Incorporation shall have
been properly filed with the Secretary of State in their respective state of
incorporation; (4) all authorizations, consents and regulatory approvals
required (if any) for the Plan's effectiveness shall have been obtained; (5) the
Court shall have ordered the substantive consolidation of the Chapter 11 Cases
as provided in Section VI of the Plan; (6) the aggregate amount of Class 5
Claims does not exceed $50 million; and (7) on the Effective Date, the
Reorganized Debtors have entered into a senior secured credit facility of not
less than $275 million consisting of a term loan and a revolving working capital
facility that will have not less than $50 million of undrawn availability
thereunder in form acceptable to Satellite Fund Management, LLC, DDJ Capital
Management, LLC and Loomis Sayles & Company LP.
B. WAIVER OF CONDITIONS
The Debtors may waive any or all of the other conditions set forth
in Section XIII.B.1 of the Plan, with the prior consent of the Creditors
Committee, without leave of or order of the Court and without any formal action.
C. EFFECT OF FAILURE OF CONDITIONS
In the event that the Effective Date does not occur on or before
sixty (60) days after the Confirmation Date, upon notification submitted by the
Debtors to the Court: (a) the Confirmation Order shall be vacated, (b) no
distributions under the Plan shall be made, (c) the Debtors and all holders of
Claims and Equity Interests shall be restored to the STATUS QUO ANTE as of the
day immediately preceding the Confirmation Date as though the Confirmation Date
had never occurred, and (d) the Debtors' obligations with respect to the Claims
and Equity Interests shall remain unchanged and nothing contained in the Plan
shall constitute or be deemed a waiver
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or release of any Claims or Equity Interests by or against the Debtors or any
other person or to prejudice in any manner the rights of the Debtors or any
person in any further proceedings involving the Debtors.
D. VACATUR OF CONFIRMATION ORDER
If an order denying confirmation of the Plan is entered, then the
Plan shall be null and void in all respects, and nothing contained in the Plan
shall (a) constitute a waiver or release of any Claims against or Equity
Interests in the Debtors; (b) prejudice in any manner the rights of the holder
of any Claim against, or Equity Interest in, the Debtors; (c) prejudice in any
manner any right, remedy or claim of the Debtors; or (d) be deemed an admission
against interest by the Debtors.
XII.
SECURITIES LAWS MATTERS
No registration statement will be filed under the Securities Act of
1933, as amended (the "Securities Act"), or any state securities laws with
respect to the offer and distribution under the Plan of New Common Stock, New
Notes and Warrants (including the New Common Stock issuable upon exercise
thereof) (collectively, the "Plan Securities"). The Debtors believe that the
provisions of section 1145(a)(1) (and, with respect to the New Common Stock
issuable upon exercise of the Warrants, section 1145(a)(2)) exempt the offer and
distribution of the Plan Securities from federal and state securities
registration requirements.
A. BANKRUPTCY CODE EXEMPTIONS FROM REGISTRATION REQUIREMENTS
1 INITIAL OFFER AND SALE OF PLAN SECURITIES
Section 1145(a)(1) of the Bankruptcy Code exempts the offer and sale
of securities under a plan of reorganization from registration under the
Securities Act and state laws if three principal requirements are satisfied: (i)
the securities must be offered and sold under a plan of reorganization and must
be securities of the debtor, of an affiliate participating in a joint plan with
the debtor or of a successor to the debtor under the plan; (ii) the recipients
of the securities must each hold a prepetition or administrative expense claim
against the debtor or an interest in the debtor; and (iii) the securities must
be issued entirely in exchange for the recipient's claim against or interest in
the debtor, or principally in such exchange and partly for cash or property.
Penn Traffic believes that the offer and sale of the Plan Securities under the
Plan satisfy the requirements of section 1145(a)(1) of the Bankruptcy Code and
are, therefore, exempt from registration under the Securities Act and state
securities laws.
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Section 1145(a)(2) of the Bankruptcy Code exempts the offer of a
security through any warrant, option or right to subscribe that was sold in the
manner specified in section 1145(a)(1) of the Bankruptcy Code and the sale of a
security upon the exercise of such a warrant, option or right to subscribe. Penn
Traffic believes that the offer and sale of New Common Stock pursuant to the
Warrants, satisfy the requirements of section 1145(a)(2) of the Bankruptcy Code
and are, therefore, exempt from registration under the Securities Act and state
securities laws.
2 SUBSEQUENT TRANSFERS OF PLAN SECURITIES
In general, all resales and subsequent transactions in (i) the New
Common Stock, New Notes and Warrants distributed under the Plan and (ii) the New
Common Stock issued upon the exercise of Warrants will be exempt from
registration under the Securities Act pursuant to section 4(1) of the Securities
Act, unless the holder thereof is deemed to be an "underwriter" with respect to
such securities, an "affiliate" of the issuer of such securities or a "dealer."
Section 1145(b) of the Bankruptcy Code defines four types of "underwriters":
(i) persons who purchase a claim against, an interest in or a
claim for administrative expense against the debtor with a
view to distributing any security received in exchange for
such a claim or interest ("accumulators");
(ii) persons who offer to sell securities offered under a plan for
the holders of such securities ("distributors");
(iii) persons who offer to buy securities from the holders of such
securities, if the offer to buy is (a) with a view to
distributing such securities and (b) made under a distribution
agreement; and
(iv) a person who is an "issuer" with respect to the securities, as
the term "issuer" is defined in section 2(11) of the
Securities Act.
Under section 2(11) of the Securities Act, an "issuer" includes any "affiliate"
of the issuer, which means any person directly or indirectly through one or more
intermediaries controlling, controlled by or under common control with the
issuer. Under section 2(12) of the Securities Act, a "dealer" is any person who
engages either for all or part of his or her time, directly or indirectly, as
agent, broker or principal, in the business of offering, buying, selling or
otherwise dealing or trading in securities issued by another person. Whether or
not any particular person would be deemed to be an "underwriter" or an
"affiliate" with respect to any Plan Security or to be a "dealer" would depend
upon various facts and circumstances applicable to that person. Accordingly,
Penn Traffic expresses no view as to whether any person would be an
"underwriter" or an "affiliate" with respect to any Plan Security or would be a
"dealer." Because certain holders of large amounts of Senior Notes and
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Senior Subordinated Notes (who will receive New Common Stock under the Plan) may
be considered "affiliates" of Penn Traffic, Penn Traffic has agreed to enter
into a Registration Rights Agreement with such holders to register under the
Securities Act resale of the Plan Securities to be received by such holders. SEE
"Securities Law Matters -- Registration Rights."
The SEC has taken the position that resales by accumulators and
distributors of securities distributed under a plan of reorganization who are
not affiliates of the issuer of such securities are exempt from registration
under the Securities Act if effected in "ordinary trading transactions." The
staff of the SEC has indicated in this context that a transaction by such
non-affiliates may be considered an "ordinary trading transaction" if it is made
on an exchange or in the over-the-counter market and does not involve any of the
following factors:
(i) (a) concerted action by the recipients of securities issued
under a plan in connection with the sale of such securities or
(b) concerted action by distributors on behalf of one or more
such recipients in connection with such sales;
(ii) the use of informational documents concerning the offering of
the securities prepared or used to assist in the resale of
such securities, other than a bankruptcy court-approved
disclosure statement and supplements thereto, and documents
filed with the SEC pursuant to the Exchange Act; or
(iii) the payment of special compensation to brokers and dealers in
connection with the sale of such securities designed as a
special incentive to the resale of such securities (other than
the compensation that would be paid pursuant to arm's-length
negotiations between a seller and a broker or dealer, each
acting unilaterally, not greater than the compensation that
would be paid for a routine similar-sized sale of similar
securities of a similar issuer).
THE VIEWS OF THE SEC ON THE MATTER HAVE NOT, HOWEVER, BEEN SOUGHT BY PENN
TRAFFIC AND, THEREFORE, NO ASSURANCE CAN BE GIVEN REGARDING THE PROPER
APPLICATION OF THE "ORDINARY TRADING TRANSACTION" EXEMPTION DESCRIBED ABOVE. ANY
PERSON INTENDING TO RELY ON SUCH EXEMPTION IS URGED TO CONSULT HIS OR HER
COUNSEL AS TO THE APPLICABILITY THEREOF TO HIS OR HER CIRCUMSTANCES.
Securities Act Rule 144 provides an exemption from registration
under the Securities Act for certain limited public resales of unrestricted
securities by "affiliates" of the issuer of such securities. Rule 144 allows a
holder of unrestricted securities that is an affiliate of the issuer of such
securities to sell, without registration, within any three-month period a number
of shares of such unrestricted
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securities that does not exceed the greater of one percent (1%) of the number of
outstanding securities in question or the average weekly trading volume in the
securities in question during the four calendar weeks preceding the date on
which notice of such sale was filed pursuant to Rule 144, subject to the
satisfaction of certain other requirements of Rule 144 regarding the manner of
sale, notice requirements and the availability of current public information
regarding the issuer. Penn Traffic believes that, pursuant to section 1145(c) of
the Bankruptcy Code, the Plan Securities will be unrestricted for purposes of
Rule 144.
GIVEN THE COMPLEX NATURE OF THE QUESTION OF WHETHER A PARTICULAR
PERSON MAY BE AN UNDERWRITER, THE DEBTORS MAKE NO REPRESENTATIONS CONCERNING THE
RIGHT OF ANY PERSON TO TRADE IN THE PLAN SECURITIES. THE DEBTORS RECOMMEND THAT
HOLDERS OF CLAIMS AND INTERESTS CONSULT THEIR OWN COUNSEL CONCERNING WHETHER
THEY MAY FREELY TRADE SUCH SECURITIES.
State securities laws generally provide registration exemptions for
subsequent transfers by a bona-fide owner for his or her own account and
subsequent transfers to institutional or accredited investors. Such exemptions
are generally expected to be available for subsequent transfers of New Common
Stock, New Notes and Warrants.
3 CERTAIN TRANSACTIONS BY STOCKBROKERS
Under section 1145(a)(4) of the Bankruptcy Code, stockbrokers
effecting transactions in the New Common Stock, New Notes or Warrants prior to
the expiration of 40 days after the Confirmation Date are required to deliver to
the purchaser of such securities a copy of this Disclosure Statement (and
supplements hereto, if any, if ordered by the Court) at or before the time of
delivery of such securities to such purchaser. In connection with prior cases
under the Bankruptcy Code, the staff of the SEC has taken so-called "no-action"
positions with respect to noncompliance by stockbrokers with such requirement in
circumstances in which the debtor was, and the reorganized debtor was to
continue to be, subject to and in compliance with the periodic reporting
requirements of the Exchange Act. Penn Traffic was and will continue to be
subject to the periodic reporting requirements of the Exchange Act. THE VIEWS OF
THE SEC ON THE MATTER HAVE NOT, HOWEVER, BEEN SOUGHT BY PENN TRAFFIC AND,
THEREFORE, NO ASSURANCE CAN BE GIVEN REGARDING THE POSSIBLE CONSEQUENCES OF
NONCOMPLIANCE BY STOCKBROKERS WITH THE DISCLOSURE STATEMENT DELIVERY
REQUIREMENTS OF SECTION 1145(A)(4). STOCKBROKERS ARE URGED TO CONSULT THEIR OWN
COUNSEL WITH RESPECT TO SUCH REQUIREMENTS.
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B. REGISTRATION RIGHTS
Pursuant to the Plan, Penn Traffic will agree to enter into a
Registration Rights Agreement with certain entities (i.e., the Initial Holders)
providing for the registration of the New Common Stock, the shares of New Common
Stock issuable upon exercise of the New Warrants, the New Warrants and the New
Senior Notes under the Plan. Only entities entitled to receive distributions
pursuant to the Plan of New Common Stock representing at least 10% of the
aggregate New Common Stock issuable pursuant to the Plan (collectively,
"Eligible Security Holders") will be entitled to enter into the Registration
Rights Agreement. The Debtors believe that there are only two holders of Senior
Notes who will be Eligible Security Holders and who will be entitled to
registration rights. Under the Registration Rights Agreement, during the period
commencing on the Effective Date and ending on the first date on which there are
no registerable securities, Penn Traffic will be required, subject to certain
black-out periods, to maintain for five years an effective "shelf" registration
statement covering the resale by the Eligible Security Holders under the
Securities Act of the shares of New Common Stock, Warrants or New Senior Notes,
as the case may be received by such Eligible Security Holders under the Plan.
PENN TRAFFIC DOES NOT PRESENTLY INTEND TO SUBMIT ANY NO-ACTION OR
INTERPRETATIVE REQUESTS TO THE COMMISSION WITH RESPECT TO ANY SECURITIES LAWS
MATTERS DISCUSSED HEREIN.
XIII.
FINANCIAL INFORMATION
A. FINANCIAL STATEMENTS
The audited consolidated balance sheets of the Debtors for the
fiscal years ended January 31, 1998 and February 1, 1997 and the related
consolidated statements of operations, cash flows and shareholders' equity
(deficit) for the 3 years ended January 31, 1998, are contained in "Financial
Statements" in the Annual Report on Form 10-K, a copy of which is annexed as
Exhibit C to this Disclosure Statement and the full text of which is
incorporated herein by reference. This financial information is provided to
permit the holders of Claims and Equity Interests to better understand the
Debtors' historical business performance and the impact of the Chapter 11 Cases
on the Debtors' businesses. During the Chapter 11 Cases, the Debtors are
required to file monthly operating reports with the Court. Such financial
information is on file with the Court and available to the public for review.
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B. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
For a detailed discussion by management of the Debtors' financial
condition, most recent results of operations, liquidity, and capital resources,
see Item 7 -- "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the Annual Report on Form 10-K and the Form 10-Q for
the quarter ended on October 31, 1998, annexed as Exhibits C and G,
respectively, to this Disclosure Statement.
C. RECENT PERFORMANCE
See the Annual Report on Form 10-K for the fiscal year ended January
31, 1998, the Form 10-Q for the quarter ended on October 31, 1998 and the Fourth
Quarter Fiscal 1999 Earnings Press Release annexed as Exhibits C, G and I,
respectively, to this Disclosure Statement.
XIV.
ALTERNATIVES TO CONFIRMATION AND
CONSUMMATION OF THE PLAN
If the Plan is not confirmed and consummated, the alternatives to
the Plan include (i) liquidation of the Debtors under chapter 7 of the
Bankruptcy Code and (ii) an alternative plan of reorganization.
A. LIQUIDATION UNDER CHAPTER 7
If no plan is confirmed, the Chapter 11 Cases may be converted to
cases under chapter 7 of the Bankruptcy Code, pursuant to which a trustee would
be elected to liquidate the Debtors' assets for distribution in accordance with
the priorities established by chapter 7. A discussion of the effects that a
chapter 7 liquidation would have on the recoveries of holders of Claims and
Equity Interests and the Debtors' liquidation analysis are set forth herein. The
Debtors believe that liquidation under chapter 7 would result in (i) smaller
distributions being made to creditors than those provided for in the Plan
because of (a) the likelihood that the Debtors' assets would have to be sold or
otherwise disposed of in a less orderly fashion over a shorter period of time,
(b) additional administrative expenses involved in the appointment of a trustee,
and (c) additional expenses and claims, some of which would be entitled to
priority, which would be generated during the liquidation and from the rejection
of leases and other executory contracts in connection with a cessation of the
Debtors' operations, and (ii) no distributions being made to the holders of
Equity Interests.
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B. ALTERNATIVE PLAN OF REORGANIZATION
If the Plan is not confirmed, the Debtors (or if the Debtors'
exclusive period in which to file a plan of reorganization has expired, any
other party in interest) could attempt to formulate a different plan. Such a
plan might involve either a reorganization and continuation of the Debtors'
businesses or an orderly liquidation of their assets. With respect to an
alternative plan, the Debtors have explored various alternatives in connection
with the formulation and development of the Plan. The Debtors believe that the
Plan, as described herein, enables creditors and Equity Interest holders to
realize the most value under the circumstances. In a liquidation under chapter
11, the Debtors' assets would be sold in an orderly fashion over a more extended
period of time than in a liquidation under chapter 7, possibly resulting in
somewhat greater (but indeterminate) recoveries than would be obtained in
chapter 7. Further, if a trustee were not appointed, because such appointment is
not required in a chapter 11 case, the expenses for professional fees would most
likely be lower than those incurred in a chapter 7 case. Although preferable to
a chapter 7 liquidation, the Debtors believe that any alternative liquidation
under chapter 11 is a much less attractive alternative to creditors and Equity
Interest holders than the Plan because of the greater returns provided by the
Plan.
XV.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
The following discussion summarizes certain federal income tax
consequences of the implementation of the Plan to holders of Senior Notes and
Senior Subordinated Notes and to the Debtors. It does not address the federal
income tax consequences to holders whose secured or priority Claims are entitled
to reinstatement or payment in full in cash under the Plan.
The following summary is based on the Internal Revenue Code of 1986,
as amended (the "Tax Code"), Treasury regulations promulgated and proposed
thereunder, judicial decisions, and published administrative rules and
pronouncements of the IRS in effect on the date hereof. Changes in, or new
interpretations of, such rules may have retroactive effect and could
significantly affect the federal income tax consequences described below.
The federal income tax consequences of the Plan are complex and are
subject to uncertainties. The Debtors have not requested a ruling from the IRS
or an opinion of counsel with respect to any of the tax aspects of the Plan.
Thus, no assurance can be given as to the interpretation that the IRS will
adopt. In addition, this summary does not address foreign, state, or local tax
consequences of the Plan, and it does not purport to address the federal income
tax consequences of the Plan to special classes of taxpayer (such as foreign
taxpayers, broker-dealers, banks, mutual
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funds, insurance companies, financial institutions, small business investment
companies, regulated investment companies, tax-exempt organizations, and
investors in pass-through entities).
ACCORDINGLY, THE FOLLOWING SUMMARY OF CERTAIN FEDERAL INCOME TAX
CONSEQUENCES IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT A SUBSTITUTE FOR
CAREFUL TAX PLANNING AND ADVICE BASED UPON THE INDIVIDUAL CIRCUMSTANCES OF A
HOLDER OF A CLAIM OR EQUITY INTEREST. EACH HOLDER OF A CLAIM OR EQUITY INTEREST
IS URGED TO CONSULT ITS OWN TAX ADVISOR FOR THE FEDERAL, STATE, LOCAL, AND OTHER
TAX CONSEQUENCES APPLICABLE UNDER THE PLAN.
A. CONSEQUENCES TO CREDITORS
1 TAX SECURITIES
The federal income tax consequences of the Plan may vary depending
upon, among other things, whether a holder's Claim being exchanged constitutes a
"security" of the Debtors for federal income tax purposes (a "Tax Security").
The term "security" is not defined in the Tax Code but is generally understood
to include stock, rights to purchase stock, and debt instruments with a maturity
more than 10 years from the date of issuance, although the determination whether
a particular claim or debt constitutes a Tax Security depends upon an overall
evaluation of the nature of the claim or debt. An instrument with an original
term of as little as 5 years may qualify. Under these principles, the New Common
Stock and New Warrants will be characterized as Tax Securities, and it is likely
that the Senior Notes, the Senior Subordinated Notes, and the New Senior Notes
will be characterized as Tax Securities. However, each holder should consult its
tax advisor regarding the tax status of its Claim or Claims.
The Tax Security issue arises because the Tax Code's corporate
reorganization provisions generally provide that a holder recognizes no gain or
loss upon exchanging an issuer's Tax Securities for other Tax Securities of such
issuer (except that consideration received for a claim for accrued but unpaid
interest must be included as current income). By contrast, a holder will
recognize gain upon exchanging (i) an issuer's obligations that are not Tax
Securities for Tax Securities of such issuer, or (ii) an issuer's Tax Securities
for obligations of such issuer that are not Tax Securities. See also subsection
A.3 below ("Consequences to Creditors--Claims or Consideration Not Constituting
Tax Securities").
To the extent a Claim holder's receipt of the New Senior Notes, New
Common Stock, or New Warrants is attributable to accrued interest, the
exchanging holder will recognize current income.
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2 CLAIMS AND CONSIDERATION CONSTITUTING TAX SECURITIES
In general, each holder of a Claim that constitutes a Tax Security
will not recognize any gain or loss upon implementation of the Plan, but may
recognize gain (computed as described below in section A.3), to the extent of
any consideration other than Tax Securities issued by the Debtors in
satisfaction of its Claim. The character of any such gain or loss would be
determined in accordance with the principles discussed below in subsection A.3.
See also section C below ("Additional Tax Considerations for All Holders of
Claims").
A holder's tax basis in New Senior Notes, New Common Stock, and New
Warrants received in satisfaction of a Claim represented by a Tax Security of
the Debtors will be such holder's adjusted tax basis in such Claim, decreased by
the sum of the cash and the fair market value of any notes received that are not
Tax Securities, and increased by any gain recognized by such holder on the
exchange. A holder that receives Tax Securities of the Debtor and whose
exchanged Claim constitutes a Tax Security must apportion its adjusted tax basis
in such Claim (decreased by any cash received and the fair market value of any
obligations received that are not Tax Securities, and increased by any gain
recognized) between the New Senior Notes, the New Common Stock, and the New
Warrants it receives in accordance with their relative fair market values.
If a holder of a Claim constituting a Tax Security receives Debtors'
obligations that are Tax Securities, such holder may have a tax basis in the new
obligations that exceeds the stated principal amount of such obligations. In
such case, the excess basis may be the subject of annual deductions to the
holder under the bond premium amortization rules of the Tax Code, or the holder
may be entitled to exclude from income all or a portion of any original issue
discount income on the obligations. See the discussion of the OID rules in
subsection A.4 below ("Consequences to Creditors--Application of OID Rules").
A holder's holding period for New Senior Notes, New Common Stock,
and New Warrants received in exchange for the Debtors' Tax Securities will
include such holder's holding period for the obligations so exchanged, except to
the extent the New Senior Notes, New Common Stock, or New Warrants were issued
in respect of such holder's Claim for accrued interest. A holder's holding
period for New Senior Notes, New Common Stock, or New Warrants issued in respect
of its Claim for accrued interest (or in respect of which the holder is
otherwise required to recognize gain) will begin on the day after their
issuance.
3 CLAIMS OR CONSIDERATION NOT CONSTITUTING TAX SECURITIES
If any of the Senior Notes, the Senior Subordinated Notes, the New
Senior Notes, the New Common Stock, or the New Warrants were not treated as Tax
83
<PAGE>
Securities, all or a portion of the exchange of (i) Senior Notes for New Senior
Notes and New Common Stock, or (ii) Senior Subordinated Notes for New Common
Stock and New Warrants, would constitute a taxable transaction. See also
subsection C.1 below ("Additional Tax Considerations for All Holders of
Claims--Distributions in Discharge of Accrued Interest").
If the Senior Notes and/or the Senior Subordinated Notes were not
treated as Tax Securities, an exchange relating to such notes that were not
treated as Tax Securities would constitute a taxable event in which a holder of
Senior Notes or Senior Subordinated Notes would generally recognize gain or loss
in an amount equal to the difference between (a) the "amount realized," i.e.,
the cash and/or aggregate fair market value of all property received by the
Claim holder in exchange for its Claim (other than a Claim for interest), and
(b) its adjusted basis in the exchanged debt instruments (exclusive of any basis
attributable to accrued interest).
If the Senior Notes were characterized as Tax Securities but the New
Senior Notes were not, a holder of Senior Notes would recognize gain upon
receipt of New Senior Notes equal to the lesser of (a) the fair market value of
such New Senior Notes received in exchange for its Senior Notes, and (b) the
total gain realized in the exchange, which amount would equal the difference
between the Senior Note holder's tax basis in its Senior Note and the aggregate
fair market value of the New Senior Notes and New Common Stock received in the
exchange.
The character of any gain or loss recognized as long-term or
short-term capital gain or loss or as ordinary income or loss will be determined
by a number of factors, including the tax status of the holder, whether the
claim constitutes a capital asset in the hand of the holder, whether the claim
has been held for more than twelve months, whether the claim was purchased at a
discount (in which case the market discount rules of the Tax Code may apply to
recharacterize a portion of any gain as ordinary income), and whether and to
what extent the holder has previously claimed a bad debt deduction in respect of
such Claim. Also in this regard, Tax Code Section 582(c) provides that the sale
or exchange of a bond, debenture, note, certificate, or other evidence of
indebtedness by certain financial institutions will be considered the sale or
exchange of a non-capital asset. Accordingly, any gain or loss recognized by
such financial institutions as a result of the implementation of the Plan will
be ordinary gain or loss, regardless of the nature of their claims. See also
section C below ("Additional Tax Considerations for All Holders of Claims").
A holder's tax basis in any New Senior Notes, New Common Stock, or
New Warrants will be the fair market value thereof included in the holder's
amount realized on the exchange. The holding period for the New Senior Notes,
New Common Stock, or New Warrants so received will begin on the day following
the exchange.
84
<PAGE>
4 APPLICATION OF OID RULES
Under the Tax Code, a holder of a debt instrument that has original
issue discount ("OID") must include a portion of the OID in gross income in each
taxable year or portion thereof in which the holder holds the debt instrument,
even if the holder has not received a cash payment in respect of such OID. In
general, OID is equal to the excess of (i) an instrument's "stated redemption
price at maturity" over (ii) its "issue price."
The "issue price" of a debt instrument issued for property (such as
an outstanding debt instrument) depends upon the circumstances surrounding its
issuance. The issue price of a debt instrument that is publicly traded is
generally the fair market value of the debt instrument when issued. The fair
market value is generally determined from the price at which such debt
instrument trades on the first day after issuance. If the new debt instrument is
not publicly traded and is issued for property (such as an outstanding debt
instrument) that is publicly traded, then the issue price is generally
determined from the price at which such property trades on the issue date.
Although the matter is not free from doubt, the Debtors expect that the
outstanding Senior Notes will constitute publicly traded property for purposes
of applying the foregoing rules. Accordingly, the issue price of the New Senior
Notes is expected to be their fair market value, as described above. Although
the Debtors believe that such fair market value will be the face value of the
New Senior Notes, their fair market value will be determined by the actual
trading prices at the time the New Senior Notes are issued. If the New Senior
Notes are issued at a discount from face value, they would have OID of at least
the amount of such discount.
The "stated redemption price at maturity" of a debt instrument is
the sum of all payments to be made on such instrument, other than certain
interest payments based on a fixed rate payable unconditionally at fixed
periodic intervals of one year or less during the entire term of the instrument.
Under the applicable regulations, payments on the New Senior Notes will not be
treated as such qualified periodic interest payments. Accordingly, in all
events, the New Senior Notes will have OID and each holder will be required to
include a portion thereof in gross income for each taxable year even if the
holder receives no payments during that year or only receives payment in the
form of additional New Senior Notes. However, the precise amount and timing of
inclusions will depend on a number of factors, including whether the New Senior
Notes are treated as issued at a discount or at par and accordingly will not be
determinable until the New Senior Notes are issued. The Debtors will furnish
annually to the Internal Revenue Service (other than with respect to certain
exempt holders) and to holders of New Senior Notes information with respect to
the OID accruing while such New Senior Notes are held by such holders.
Treasury regulations provide that a holder acquiring a debt
instrument in a reorganization exchange may exclude all of the OID on such debt
instrument from such holder's taxable income if it is acquired at a "premium"
(i.e., if the
85
<PAGE>
adjusted tax basis in the acquired debt instrument exceeds the sum of all
payments due on the instrument after the acquisition date, less certain stated
interest) and may exclude a part of the OID on such debt instrument from such
holder's taxable income if it is acquired at an "acquisition premium" (i.e., if
the adjusted tax basis in the acquired debt instrument exceeds its adjusted
issue price).
B. CONSEQUENCES TO THE DEBTORS
The Debtors have reported for federal income tax purposes
substantial consolidated net operating loss ("NOL") carryforwards. In addition,
the Debtors have substantial tax basis in their assets. As discussed below,
certain tax attributes of the Debtors, such as NOLs and tax basis, will be
subject to reduction and limitation as a result of implementing the Plan.
1 CANCELLATION OF DEBT
In general, the Tax Code provides that a debtor in a bankruptcy case
does not include cancellation of debt ("COD") income in its gross income, but
rather must reduce its tax attributes, to the extent it has such attributes to
reduce, by the amount of COD that otherwise would have been recognized. The
amount of COD is the amount by which the indebtedness discharged exceeds the
consideration for which it is exchanged. A debtor's tax attributes are generally
reduced in the following order until COD is exhausted: NOLs, general business
credits, alternative minimum tax credits, capital losses, the tax basis of its
assets, passive activity losses, and credits and foreign tax credits. Losses
(and tax credits) are reduced only after the debtor's tax liability for the
current year is determined (with, in each case, current-year losses being
reduced before any carryforwards from prior years), and tax basis is reduced as
of the first day of the succeeding year. A debtor's tax basis in its assets will
not be reduced below the amount of its liabilities (as defined) outstanding
immediately after the COD is recognized. Any COD remaining after exhausting
available tax attributes is simply forgiven. Any reduction of tax attributes
generally occurs on a separate company basis, even though the Debtors file a
consolidated federal income tax return.
As a result of the reduction of the Debtors' indebtedness pursuant
to the Plan, the Debtors will suffer attribute reduction. The Debtors believe
they will have significant COD. The extent of resulting attribute reduction to
the Debtors will depend, however, primarily upon the amount of its liabilities
outstanding on the Effective Date. The attribute reduction is expected to
eliminate NOL carryforwards that otherwise might be available to the Debtors and
the vast majority of the tax basis of the Debtors' 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, and therefore potentially may increase taxes due in future tax
periods.
86
<PAGE>
2 APPLICABLE HIGH-YIELD DISCOUNT OBLIGATIONS
If the yield to maturity of the New Senior Notes (as determined for
U.S. federal income tax purposes) exceeds the "applicable federal rate" ("AFR")
plus 500 basis points, the New Senior Notes will be subject to the applicable
high-yield discount obligation ("AHYDO") rules of the Code. The AFR will be
determined according to the month in which the New Senior Notes are issued. The
yield to maturity of the New Senior Notes is expected to exceed the appropriate
AFR for the month of issue plus 500 basis points. In such case, under the AHYDO
rules the Debtors' deductions with respect to OID will be suspended until such
amounts are actually paid, and the "disqualified portion" of such OID (defined
as the portion that is attributable to the yield on such New Senior Note in
excess of the AFR plus 600 basis points), if any, will be permanently
nondeductible. The AHYDO rules generally do not affect the amount, timing, or
character of a holder's income. However, domestic corporate holders of New
Senior Notes may be eligible for a dividends-received deduction with respect to
their inclusion in income of the "disqualified portion" if such amount, if paid
with respect to stock, would have constituted a dividend for U.S. federal income
tax purposes. The availability of a dividends-received deduction is subject to a
number of complex limitations.
3 ALTERNATIVE MINIMUM TAX
In general, an alternative minimum tax ("AMT") is imposed on a
corporation's alternative minimum taxable income ("AMTI") at a 20-percent rate
to the extent such tax exceeds the corporation's regular federal income tax. For
purposes of computing AMTI, certain tax deductions and other beneficial
allowances are modified or eliminated. In particular, even though a corporation
otherwise might be able to offset all its taxable income for regular tax
purposes by available NOL carryforwards, only 90 percent of AMTI may be offset
by available NOL carryforwards (as computed for AMT purposes). Any AMT a
corporation pays will generally be allowed as a nonrefundable credit against its
regular federal income tax liability in future taxable years when the
corporation is no longer subject to AMT.
C. ADDITIONAL TAX CONSIDERATIONS FOR ALL CLAIM HOLDERS
1 DISTRIBUTIONS IN DISCHARGE OF ACCRUED INTEREST
A Claim holder that receives stock or other property in discharge of
a Claim for interest accrued during the period the holder owned such Claim and
not previously included in such holder's income will be required to recognize
ordinary income equal to the fair market value of the New Senior Notes, New
Common Stock, and New Warrants, as the case may be, received in respect of such
Claim. A holder generally will recognize a deductible loss (or, possibly, a
write-off against a reserve for bad debts) to the extent any accrued interest
claimed was previously included in
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its gross income and is not paid in full by the Debtors. The tax basis of any
New Senior Notes, New Common Stock, or New Warrants received in exchange for
Claims for accrued interest will be the fair market value of the New Common
Stock and New Warrants on the day of the exchange or the issue price of the New
Senior Notes, as the case may be. The holding period for such New Senior Notes,
New Common Stock, and New Warrants will begin the day after the exchange.
Under the Plan, distributions in respect of Allowed Claims will be
allocated first to the stated principal amount of such Claims, with any excess
allocated to interest. However, there can be no assurance that the IRS or the
courts will respect the Plan allocation for federal income tax purposes.
2 SUBSEQUENT SALE OF NEW SENIOR NOTES, NEW COMMON STOCK,
OR NEW WARRANTS
Any gain recognized by a holder upon a subsequent taxable
disposition of New Senior Notes, New Common Stock, or New Warrants received
pursuant to the Plan in satisfaction of a Claim (or any stock or other property
received for them in a later tax-free exchange) may be treated as ordinary
income to the extent of (i) any bad debt deductions (or additions to a bad debt
reserve) previously claimed with respect to its Claim and any ordinary loss
deduction incurred upon satisfaction of its Claim, less any income (other than
interest income) recognized by the holder upon satisfaction of its Claim, (ii)
with respect to a cash-basis holder, any amounts that would have been included
in its gross income if the holder's Claim had been satisfied in full but were
not included by reason of the cash method of accounting, and (iii) any accrued
market discount that is assigned to the New Senior Notes, New Common Stock, or
New Warrants, as discussed in subsection C.3 below ("Additional Tax
Considerations for All Claim Holders--Market Discount").
3 MARKET DISCOUNT
The Treasury Department is expected to promulgate regulations that
will provide that any accrued "market discount" not treated as ordinary income
upon a tax-free exchange of market-discount bonds (generally, bonds acquired for
less than their issue price) would carry over to any nonrecognition property
received in the exchange. If such regulations are promulgated and applicable to
the Plan, any accrued but unrecognized market discount on an exchanged Claim
that constitutes a Tax Security would carry over to any New Senior Notes, New
Common Stock, or New Warrants received pursuant to the Plan. Any gain recognized
by a holder upon a subsequent disposition of such New Senior Notes, New Common
Stock, or New Warrants also would be treated as ordinary income to the extent of
any accrued market discount not previously included in such holder's income.
Holders are urged to consult their tax advisors as to the application of the
market discount rules.
88
<PAGE>
4 WITHHOLDING
All distributions to holders of Allowed Claims under the Plan are
subject to applicable withholding (including employment tax withholding). Under
federal income tax law, interest, dividends, and other reportable payments may,
under certain circumstances, be subject to "backup withholding" at a 31% rate.
Backup withholding generally applies if the holder (a) fails to furnish its
social security number or other taxpayer identification number ("TIN"), (b)
furnishes an incorrect TIN, (c) fails to report properly interest or dividends,
or (d) under certain circumstances, fails to provide a certified statement,
signed under penalty of perjury, that the TIN provided is its correct number and
that it is not subject to backup withholding. Backup withholding is not an
additional tax, but merely an advance payment that may be refunded to the extent
it results in an overpayment of tax. Certain persons are exempt from backup
withholding.
THE FOREGOING FEDERAL INCOME TAX SUMMARY HAS BEEN PROVIDED FOR
INFORMATIONAL PURPOSES ONLY. ALL CREDITORS AND EQUITY HOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS CONCERNING THE FEDERAL, STATE, LOCAL, AND OTHER
TAX CONSEQUENCES OF THE PLAN.
[INTENTIONALLY LEFT BLANK]
89
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XVI.
CONCLUSION
The Debtors believe the Plan is in the best interests of all
Creditors and Equity Interestholders and urge those entitled to vote to accept
the Plan.
Dated: April 2, 1999
THE PENN TRAFFIC COMPANY
By: ___________________________
Name: Martin A. Fox
Title: Vice President-Finance
DAIRY DELL, INC.
By: ___________________________
Name: Martin A. Fox
Title: Vice President
BIG M SUPERMARKETS, INC.
By: ___________________________
Name: Martin A. Fox
Title: Vice President
PENNY CURTISS BAKING COMPANY, INC.
By: ___________________________
Name: Martin A. Fox
Title: Vice President
90
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EXHIBITS TO THE DISCLOSURE STATEMENT
A PROPOSED PLAN OF REORGANIZATION
B DISCLOSURE STATEMENT ORDER
C ANNUAL REPORT ON FORM 10-K
D FINANCIAL PROJECTIONS
E LIQUIDATION ANALYSIS
F ORGANIZATIONAL CHART
G QUARTERLY REPORT ON FORM 10-Q
H RECOVERY ANALYSIS
I FOURTH QUARTER FISCAL 1999 EARNINGS PRESS RELEASE
91
EXHIBIT T3F
CROSS-REFERENCE TABLE*
Trust Indenture Act Section Indenture Section
- --------------------------- -----------------
310(a)(1).............................................................7.10
(a)(2)............................................................7.10
(a)(3)............................................................N.A.
(a)(4)............................................................N.A.
(a)(5)............................................................7.10
(b)...............................................................7.10
(c)...............................................................N.A.
311(a)................................................................7.11
(b)...............................................................7.11
(c)...............................................................N.A.
312(a)................................................................3.06
(b)..............................................................11.03
(c)..............................................................11.03
313(a)................................................................7.06
(b)(1)............................................................N.A.
(b)(2)............................................................7.06
(c)........................................................7.06, 11.02
(d)...............................................................7.06
314(a)..........................................................4.08, 4.18
(b)...............................................................N.A.
(c)(1)...........................................................11.04
(c)(2)...........................................................11.04
(c)(3)...........................................................11.04
(d)...............................................................N.A.
(e)..............................................................11.05
(f)...............................................................7.01
315(a).........................................................7.05, 11.02
(b)............................................................7.01(a)
(c)............................................................7.01(c)
(d)............................................................7.01(c)
(e)...............................................................6.11
316(a)................................................................N.A.
(a)(1)(A).........................................................6.05
(a)(1)(B).........................................................6.04
(a)(2)............................................................N.A.
(b)...............................................................6.07
(c)............................................................9.04(b)
317(a)(1).............................................................6.08
(a)(2)............................................................6.09
(b)...............................................................3.05
318(a)...............................................................11.01
- ------------------
"N.A." means not applicable.
*This Cross-Reference Table is not part of the Indenture.
12
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
----------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305-(b) (2)
---------
IBJ WHITEHALL BANK & TRUST COMPANY
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
New York 13-5375195
(State of Incorporation (I.R.S. Employer
if not a U.S. national bank) Identification No.)
One State Street, New York, New York 10004
(Address of principal executive offices) (Zip code)
Stephen J. Giurlando, Vice President
IBJ Whitehall Bank & Trust Company
One State Street
New York, New York 10004
(212) 858-2000
(Name, Address and Telephone Number of Agent for Service)
The Penn Traffic Company
(Exact name of each registrant as specified in its charter)
Delaware (I.R.S. Employer
(State or jurisdiction of Identification No.)
incorporation or organization)
13221
1200 State Fair Boulevard (Zip code)
Syracuse, New York 13221
(Address of principal executive office)
11% Senior Notes due 2009
(Title of Indenture Securities)
<PAGE>
2
Item 1. General information
Furnish the following information as to the trustee:
(a) Name and address of each examining or
supervising authority to which it is subject.
New York State Banking
Department, Two Rector Street,
New York, New York
Federal Deposit Insurance
Corporation, Washington, D.C.
Federal Reserve Bank of New York
Second District,
33 Liberty Street, New York, New York
(b) Whether it is authorized to exercise corporate trust powers.
Yes
Item 2. Affiliations with the Obligors.
If the obligors are an affiliate of the trustee, describe each
such affiliation.
The obligors are not an affiliate of the trustee.
<PAGE>
3
Item 13. Defaults by the Obligors.
(a) State whether there is or has been a default with respect to the
securities under this indenture. Explain the nature of any such
default.
None
(b) If the trustee is a trustee under another indenture under which
any other securities, or certificates of interest or
participation in any other securities, of the obligors are
outstanding, or is trustee for more than one outstanding series
of securities under the indenture, state whether there has been a
default under any such indenture or series, identify the
indenture or series affected, and explain the nature of any such
default.
None
Item 16. List of exhibits.
List below all exhibits filed as part of this statement of
eligibility.
*1. A copy of the Charter of IBJ Whitehall Bank & Trust Company as
amended to date. (See Exhibit 1A to Form T-1, Securities and
Exchange Commission File No. 22-18460 & 333-46849).
*2. A copy of the Certificate of Authority of the trustee to Commence
Business (Included in Exhibit 1 above).
*3. A copy of the Authorization of the trustee to exercise corporate
trust powers, as amended to date (See Exhibit 4 to Form T-1,
Securities and Exchange Commission File No. 22-19146).
<PAGE>
4
*4. A copy of the existing By-Laws of the trustee, as amended to date
(See Exhibit 4 to Form T-1, Securities and Exchange Commission
File No. 333-46849).
5. Not Applicable
6. The consent of United States institutional trustee required by
Section 321(b) of the Act.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or
examining authority.
* The Exhibits thus designated are incorporated herein by reference as
exhibits hereto. Following the description of such Exhibits is a reference
to the copy of the Exhibit heretofore filed with the Securities and
Exchange Commission, to which there have been no amendments or changes.
NOTE
In answering any item in this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligors and its directors
or officers, the trustee has relied upon information furnished to it by
the obligors.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
trustee of all facts on which to base responsive answers to Item 2, the
answer to said Item is based on incomplete information.
Item 2, may, however, be considered as correct unless amended by an
amendment to this Form T-1.
Pursuant to General Instruction B, the trustee has responded to Items 1, 2
and 16 of this form since to the best knowledge of the trustee as
indicated in Item 13, the obligors are not in default under any indenture
under which the applicant is trustee.
<PAGE>
5
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, IBJ Whitehall Bank & Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 19th day
of April, 1999.
IBJ WHITEHALL BANK & TRUST COMPANY
By: /s/ Stephen J. Giurlando
------------------------
Stephen J. Giurlando
Vice President
<PAGE>
6
EXHIBIT 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, as amended, in connection with the issue by The Penn Traffic Company,
of it's 11% Senior Notes due 2009, we hereby consent that reports of
examinations by Federal, State, Territorial, or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
IBJ WHITEHALL BANK & TRUST COMPANY
By: /s/ Stephen J. Giurlando
------------------------
Stephen J. Giurlando
Vice President
Dated: April 19, 1999
<PAGE>
7
EXHIBIT 7
CONSOLIDATED REPORT OF CONDITION OF
IBJ SCHRODER BANK & TRUST COMPANY
OF NEW YORK, NEW YORK
AND FOREIGN AND DOMESTIC SUBSIDIARIES
REPORT AS OF DECEMBER 31, 1998
DOLLAR AMOUNTS
IN THOUSANDS
------------
ASSETS
------
1. Cash and balance due from depository institutions:
a. Non-interest-bearing balances and currency and coin....$ 26,852
b. Interest-bearing balances..............................$ 17,489
2. Securities:
a. Held-to-maturity securities............................$ -0-
b. Available-for-sale securities..........................$ 207,069
3. Federal funds sold and securities purchased under agreements to resell in
domestic offices of the bank and of its Edge and Agreement subsidiaries
and in IBFs
Federal Funds sold and Securities purchased under agreements to
resell.......................................................$ 80,389
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income......$ 2,033,599
b. LESS: Allowance for loan and lease losses.....$ 62,853
c. LESS: Allocated transfer risk reserve.........$ -0-
d. Loans and leases, net of unearned income,
allowance, and reserve.................................$ 1,970,746
5. Trading assets held in trading accounts......................$ 848
6. Premises and fixed assets (including capitalized leases).....$ 1,583
7. Other real estate owned......................................$ -0-
8. Investments in unconsolidated subsidiaries and associated
companies....................................................$ -0-
9. Customers' liability to this bank on acceptances
outstanding..................................................$ 340
10. Intangible assets............................................$ 11,840
<PAGE>
8
11. Other assets.................................................$ 66,691
12. TOTAL ASSETS.................................................$ 2,383,847
<PAGE>
9
LIABILITIES
-----------
13. Deposits:
a. In domestic offices....................................$ 804,562
(1) Noninterest-bearing...........................$ 168,822
(2) Interest-bearing..............................$ 635,740
b. In foreign offices, Edge and Agreement subsidiaries, and
IBFs...................................................$ 885,076
(1) Noninterest-bearing...........................$ 16,554
(2) Interest-bearing..............................$ 868,522
14. Federal funds purchased and securities sold under agreements to repurchase
in domestic offices of the bank and of its Edge and Agreement
subsidiaries, and in IBFs:
Federal Funds purchased and Securities sold under agreements to
repurchase...................................................$ 225,000
15. a. Demand notes issued to the U.S. Treasury.................$ 674
b. Trading Liabilities......................................$ 560
16. Other borrowed money:
a. With a remaining maturity of one year or less............$ 38,002
b. With a remaining maturity of more than one year..........$ 1,375
c. With a remaining maturity of more than three years.......$ 1,550
17. Not applicable.
18. Bank's liability on acceptances executed and outstanding.....$ 340
19. Subordinated notes and debentures............................$ 100,000
20. Other liabilities............................................$ 74,502
21. TOTAL LIABILITIES............................................$ 2,131,641
22. Limited-life preferred stock and related surplus............. N/A
<PAGE>
10
EQUITY CAPITAL
--------------
23. Perpetual preferred stock and related surplus................$ -0-
24. Common stock.................................................$ 28,958
25. Surplus (exclude all surplus related to preferred stock).....$ 210,319
26. a. Undivided profits and capital reserves...................$ 11,655
b. Net unrealized gains (losses) on available-for-sale
securities...............................................$ 1,274
27. Cumulative foreign currency translation adjustments..........$ -0-
28. TOTAL EQUITY CAPITAL.........................................$ 252,206
29. TOTAL LIABILITIES AND EQUITY CAPITAL.........................$ 2,383,847
