-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QPd6yjcO+03JjpTRsVISS4NN6TZqGLCis3khSIOdFYUj+D+t7svfHkZMgAdu9xvd nyIfK4W7D7T4K9OGaGrP/w== 0000950142-98-000881.txt : 19981216 0000950142-98-000881.hdr.sgml : 19981216 ACCESSION NUMBER: 0000950142-98-000881 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19981031 FILED AS OF DATE: 19981215 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PENN TRAFFIC CO CENTRAL INDEX KEY: 0000077155 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 250716800 STATE OF INCORPORATION: PA FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09930 FILM NUMBER: 98770124 BUSINESS ADDRESS: STREET 1: 1200 STATE FAIR BLVD CITY: SRYACUSE STATE: NY ZIP: 13221-4737 BUSINESS PHONE: 8145369900 MAIL ADDRESS: STREET 1: 1200 STATE FAIR BLVD CITY: SYRACUSE STATE: NY ZIP: 13221-4737 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended October 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from __________ to __________ Commission file number 1-9930 THE PENN TRAFFIC COMPANY (Exact name of registrant as specified in its charter) Delaware 25-0716800 (State of incorporation) (IRS Employer Identification No.) 1200 State Fair Blvd., Syracuse, NY 13221-4737 (Address of principal executive offices) (Zip Code) (315) 453-7284 (Telephone number) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety (90) days. YES [X] NO [ ] Common stock, par value $1.25 per share: 10,695,491 shares outstanding as of December 11, 1998 1 of 21 PART I. FINANCIAL INFORMATION - ------------------------------ ITEM 1. FINANCIAL STATEMENTS THE PENN TRAFFIC COMPANY CONSOLIDATED STATEMENT OF OPERATIONS UNAUDITED (All dollar amounts in thousands, except per share data) THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED OCTOBER 31, NOVEMBER 1, OCTOBER 31, NOVEMBER 1, 1998 1997 1998 1997 ---------- ---------- ---------- ---------- TOTAL REVENUES $ 690,591 $ 726,180 $2,137,613 $2,259,458 COSTS AND OPERATING EXPENSES: Cost of sales (including buying and occupancy costs) (Note 3) 548,534 561,799 1,676,553 1,735,448 Selling and administrative expenses (Note 3) 151,173 148,161 453,208 478,262 Restructuring charges (Note 3) 10,704 Unusual items (Note 3) 45,160 45,160 Write-down of long lived assets (Note 4) 91,512 91,512 ---------- ---------- ---------- ---------- OPERATING (LOSS) INCOME (145,788) 16,220 (128,820) 35,044 Interest expense 37,132 37,548 111,252 112,208 ---------- ---------- ---------- ---------- (LOSS) BEFORE INCOME TAXES (182,920) (21,328) (240,072) (77,164) Provision (benefit) for income taxes (Note 5) 38 (7,801) (16,558) (28,888) ---------- ---------- ---------- ---------- NET (LOSS) $ (182,958) $ (13,527) $ (223,514) $ (48,276) ========== ========== ========== ========== PER SHARE DATA (BASIC AND DILUTED): Net (loss) (Note 6) $ (17.31) $ (1.28) $ (21.15) $ (4.57) ========== ========== ========== ========== See Notes to Interim Consolidated Financial Statements. - 2 - THE PENN TRAFFIC COMPANY CONSOLIDATED BALANCE SHEET (All dollar amounts in thousands) UNAUDITED OCTOBER 31, 1998 JANUARY 31, 1998 ---------------- ---------------- ASSETS CURRENT ASSETS: Cash and short-term investments $ 47,887 $ 49,095 Accounts and notes receivable (less allowance for doubtful accounts of $5,122 and $3,597 respectively) 60,196 68,454 Inventories (Note 8) 315,345 327,389 Prepaid expenses and other current assets 15,356 16,032 ---------- ---------- Total Current Assets 438,784 460,970 NONCURRENT ASSETS: Capital leases - net 97,512 115,581 Property, plant and equipment - net 422,457 496,501 Goodwill - net 300,542 401,829 Other assets and deferred charges - net 87,744 88,705 ---------- ---------- $1,347,039 $1,563,586 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of obligations under capital leases $ 11,546 $ 13,518 Current maturities of long-term debt (Note 9) 135,838 4,429 Trade accounts and drafts payable 156,573 149,389 Payroll and other accrued liabilities 71,625 79,763 Accrued interest expense 20,051 35,335 Payroll taxes and other taxes payable 15,326 19,208 Deferred income taxes 16,671 ---------- ---------- Total Current Liabilities 410,959 318,313 NONCURRENT LIABILITIES: Obligations under capital leases 107,542 121,436 Long-term debt (Note 9) 1,145,429 1,234,224 Other noncurrent liabilities 66,431 49,422 ---------- ---------- Total Liabilities 1,730,361 1,723,395 ---------- ---------- STOCKHOLDERS' EQUITY: Preferred Stock - authorized 10,000,000 shares at $1.00 par value; none issued Common Stock - authorized 30,000,000 shares at $1.25 par value; 10,695,491 shares and 10,824,591 shares issued and outstanding, respectively 13,426 13,586 Capital in excess of par value 179,881 180,060 Retained deficit (565,204) (340,470) Minimum pension liability adjustment (10,667) (10,667) Unearned compensation (133) (1,693) Treasury stock, at cost (625) (625) ---------- ---------- Total Shareholders' Equity (383,322) (159,809) ---------- ---------- $1,347,039 $1,563,586 ========== ========== See Notes to Interim Consolidated Financial Statements. - 3 - THE PENN TRAFFIC COMPANY CONSOLIDATED STATEMENT OF CASH FLOWS UNAUDITED (All dollar amounts in thousands) THIRTY-NINE THIRTY-NINE WEEKS ENDED WEEKS ENDED OCTOBER 31, 1998 NOVEMBER 1, 1997 ---------------- ---------------- OPERATING ACTIVITIES: Net (loss) $(223,514) $ (48,276) Adjustments to reconcile net (loss) to net cash (used in) by operating activities: Depreciation and amortization 48,139 56,078 Amortization of intangibles 11,163 11,987 Other - net 136,186 (5,024) NET CHANGE IN ASSETS AND LIABILITIES: Accounts receivable and prepaid expenses 8,934 718 Inventories 12,044 (5,855) Payables and accrued expenses (20,120) (12,052) Deferred taxes (16,671) (29,000) Deferred charges and other assets (1,013) 194 -------- -------- NET CASH (USED IN) OPERATING ACTIVITIES (44,852) (31,230) -------- -------- INVESTING ACTIVITIES: Capital expenditures (11,331) (15,723) Proceeds from sale of assets 28,227 3,770 Other - net 1,652 -------- -------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 16,896 (10,301) -------- -------- FINANCING ACTIVITIES: Payments to settle long-term debt (5,503) (1,699) Borrowing of revolver debt 101,600 332,300 Repayment of revolver debt (53,483) (285,000) Reduction of capital lease obligations (15,866) (9,929) Other - net 8 -------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES 26,748 35,680 -------- -------- (DECREASE) IN CASH AND CASH EQUIVALENTS (1,208) (5,851) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 49,095 53,240 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 47,887 $ 47,389 ======== ======== See Notes to Interim Consolidated Financial Statements. - 4 - THE PENN TRAFFIC COMPANY NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The results of operations for the interim periods are not necessarily an indication of results to be expected for the year. In the opinion of management, all adjustments necessary for a fair presentation of the results are included for the interim periods, and all such adjustments are normal and recurring. These unaudited interim financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Annual Report on Form 10-K for the fiscal year ended January 31, 1998. All significant intercompany transactions and accounts have been eliminated in consolidation. Certain prior year amounts have been reclassified on the Consolidated Statement of Cash Flows for comparative purposes. NOTE 2 - ASSET DISPOSITION PROCESS On June 4, 1998, the Company announced that it had engaged Goldman Sachs & Company to undertake a process for realizing value from certain of the Company's Bi-Lo stores and related wholesale/franchise operations located in Pennsylvania. To date, the Company has completed the sale of 3 stores in Pennsylvania and certain other real estate and is currently engaged in negotiations with potential buyers for certain other Bi-Lo stores. The Company has determined to continue with the process of selling 22 Bi-Lo stores which, together with the 3 stores previously sold, generated revenues of $49.5 million and $155.8 million for the 13-week and 39-week periods ended October 31, 1998, respectively. The net proceeds from the sale of these stores will be used by the Company to satisfy its short-term capital needs. In addition, the Company has decided to close 21 Bi-Lo stores (9 of which were closed in the third quarter). These 21 Bi-Lo stores generated revenues of $20.4 million and $74.6 million for the 13-week and 39-week periods ended October 31, 1998, respectively (these amounts reflect the fact that the 9 stores closed during the third quarter did not have revenues for the entire periods described). The Company intends to retain and operate its 32 remaining Bi-Lo stores and its existing wholesale/franchise operations in Pennsylvania. No assurance can be given that any of the transactions described above will be completed nor is it possible to predict the net proceeds to the Company of any such transaction or the timing of such a transaction. - 5 - NOTE 3 - SPECIAL CHARGES During the 13-week period ended October 31, 1998, the Company recorded a special charge of $50.4 million primarily related to (1) the decision to close 24 stores (including the 21 Bi-Lo stores referred to in Note 2 above) primarily in connection with the process of realizing value from the Company's Bi-Lo operations and (2) a gain related to the sale of 4 stores (including the 3 Bi-Lo stores referred to in Note 2 above) and certain other real estate. The components of this charge are described below. During the 13-week period ended October 31, 1998, the Company recorded a charge of $60.0 million in connection with a decision to close 24 of its stores (11 of which were closed during the third quarter). This charge is comprised of a write-down of fixed assets ($15.3 million), a write-off of goodwill ($16.4 million), net present value of future lease costs ($20.4 million), inventory markdowns ($5.3 million), employee severance costs and other miscellaneous expenses ($2.6 million). All of these costs are included in the unusual item account except for inventory markdowns which are included in cost of sales. In addition, during the 13- week period ended October 31, 1998 the Company sold 4 of its stores and certain other real estate and recorded a net gain of $9.6 million. This gain is included in the unusual item account. For the 39-week period ended November 1, 1997 the Company recorded a charge totaling $12.7 million associated with a management reorganization and related corporate actions ($10.7 million of this charge is included in a restructuring charge and $1.9 million is included in selling and administrative expenses). In addition, during the 39-week period ended November 1, 1997 the Company recorded a charge of $5.6 million associated with the retention of certain corporate executives, which is included in selling and administrative expenses. NOTE 4 - ACCOUNTING FOR CERTAIN LONG-LIVED ASSETS As of the beginning of the fourth quarter of Fiscal 1996, the Company adopted Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets to Be Disposed Of" ("SFAS 121"). During June 1998, the Company announced its plans for realizing value from certain of its Pennsylvania Bi-Lo stores and related wholesale operations. The Company expects to complete this process during calendar year 1999. For the 13-week period ended October 31, 1998, the Company recorded a noncash charge of $91.5 million to write down the carrying amounts of 22 stores held for sale (including allocable goodwill) to estimated realizable value. NOTE 5 - TAX BENEFITS The tax provision for the 13-week period and the tax benefit for the 39-week period ended October 31, 1998 are not recorded at statutory rates due to (a) differences between the income calculations for financial reporting and tax reporting purposes and (b) the recording of a valuation allowance. A valuation allowance is required when it is more likely than not the recorded value of a deferred tax asset will not be realized. - 6 - NOTE 6 - NET (LOSS) PER SHARE In the fourth quarter of Fiscal 1998, the Company adopted Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"). The previously presented EPS amount for the quarter ended November 1, 1997 has been restated to reflect the method of computation required by SFAS 128. Shares used in the calculation of basic EPS (weighted average shares outstanding) were 10,570,491 for the quarter ended October 31, 1998 and 10,569,641 for the quarter ended November 1, 1997. The calculations of diluted EPS exclude the effect of incremental dilutive potential securities aggregating 281,202 shares for the quarter ended November 1, 1997, since they would have been antidilutive given the net loss for the quarter. There were no incremental dilutive potential securities for the quarter ended October 31, 1998. NOTE 7 - SUPPLEMENTAL FINANCIAL INFORMATION (In thousands of dollars) Third Quarter Thirty-nine Weeks ------------- ----------------- Fiscal 1999 - ----------- Operating (Loss) $(145,788) $(128,820) Operating (Loss) Income before special charges (3,848) 13,120 Depreciation and Amortization 19,360 59,302 LIFO Provision 625 1,875 Cash Interest Expense 35,890 107,569 Fiscal 1998 - ----------- Operating Income $ 16,220 $ 35,044 Operating Income before special charges 16,220 53,236 Depreciation and Amortization 22,145 67,571 LIFO Provision 750 2,000 Cash Interest Expense 36,338 108,601 - 7 - NOTE 8 - INVENTORIES If the first-in, first-out (FIFO) method had been used by the Company, inventories would have been $24,441,000 and $22,566,000 higher than reported at October 31, 1998 and January 31, 1998, respectively. NOTE 9 - LONG-TERM DEBT AND PROPOSED RESTRUCTURING The Company and the lenders ("Bank Lenders") that are parties to the Company's revolving credit facility ("Revolving Credit Facility") entered into an amendment dated as of August 31, 1998 to the Revolving Credit Facility that provides that the financial covenants contained in the Revolving Credit Facility would not be applicable to the Company for the period from August 1, 1998 until April 1, 1999. The Company does not believe, based upon its current operating performance, that it will be in compliance with the financial covenants set forth in the Revolving Credit Facility after April 1, 1999. Accordingly, the amount outstanding under the Revolving Credit Facility as of October 31, 1998 ($125.7 million) and the amount outstanding under a secured term loan ($9.5 million) which contains the same financial covenants as the Revolving Credit Facility have been classified as Current Maturities of Long-Term Debt. In addition, the Bank Lenders have agreed to (i) amend the Revolving Credit Facility so that the failure by the Company to make the interest payment on its 85/8% Senior Notes described below will not constitute the failure of a condition precedent to borrowing by the Company under the Revolving Credit Facility and (ii) waive the occurrence of an event of default under the Revolving Credit Facility until April 1, 1999 resulting from the failure by the Company to make such interest payment past the applicable grace period provided for in the indenture for the 85/8% Senior Notes. In order to address its long-term capital and debt service requirements, on December 10, 1998, the Company announced that it had begun working with an informal committee comprised of more than 40% of the principal amount of its outstanding senior notes and more than 50% of the principal amount of its outstanding subordinated notes for the purpose of negotiating a consensual restructuring of its outstanding securities, including the outstanding notes. As of October 31, 1998, the Company had approximately $1.13 billion of senior and subordinated notes outstanding. The Company also announced that it had engaged The Blackstone Group as its financial advisor in connection with its restructuring efforts. - 8 - The Company intends that any such restructuring plan will convert a substantial portion of its senior and subordinated notes to equity. In addition, the Company has advised the informal committee of noteholders that any restructuring proposal made by the Company will provide for payment in full of all obligations to the Company's trade creditors that continue to support the Company with customary trade credit. The informal committee of noteholders has informed the Company that it will support the full repayment of the Company's trade creditors in connection with a restructuring proposal which is otherwise acceptable to such noteholders. In addition, Fleet Bank, the agent bank for the Company's $250 million Revolving Credit Facility, has advised the Company that it is supporting the Company's efforts to restructure its outstanding securities. The Company anticipates that any such consensual restructuring would be implemented through a voluntary filing for relief under Chapter 11 of the U.S. Bankruptcy Code. In light of the proposed restructuring, the Company has elected to take advantage of the 15-day grace period provided for in the Indenture for its 85/8% Senior Note due December 15, 2003 (the "85/8% Indenture")for the payment of interest and not pay $8.6 million of interest on $200 million of its 85/8% Senior Notes that would otherwise be due on December 15, 1998. The failure to make this payment constitutes a default under the 85/8% Indenture and following a lapse of the 15-day grace period, the Trustee, on its own or as directed by at least 25% of the noteholders, may cause the acceleration of $200 million of the Company's 85/8% Senior Notes. The acceleration of such indebtedness would result in the occurrence of an event of default under substantially all of the Company's other indebtedness. Further, the failure to make the aforementioned interest payment on the Company's 85/8% Senior Note due December 15, 2003 causes the failure by the Company to satisfy a condition precedent to borrowing by the Company under the Revolving Credit Facility and the continued failure to make the $8.6 million interest payment past the 15-day grace period provided for in the 85/8% Indenture would constitute event of default under the Company's Revolving Credit Facility, enabling the Company's bank lenders to accelerate the entire principal amount of such loans. As noted above, on December 15, 1998, the Company and the Bank Lenders entered into an amendment to the Revolving Credit Facility which (i) waived the failure by the Company to satisfy a condition precedent to borrowing resulting from the failure by the Company to make the interest payment on the 85/8% Senior Notes on December 15, 1998 and (ii) waived the occurrence of an event of default under the Revolving Credit Facility resulting from the failure, past the 15-day grace period, to pay interest on the 85/8% Senior Notes. If the Company does not accomplish the consensual restructuring plan on terms satisfactory to it or at all, Penn Traffic may seek or be required to file for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code without such a prearranged consensual plan and attempt to restructure its long-term debt and other obligations through such process. There can be no assurance that the Company will accomplish a consensual restructuring with its noteholders on acceptable terms or at all or that the recoveries received by holders of the Company's securities and other creditors in a non-bankruptcy filing will not be materially less than those that would be received in a consensual plan. - 9 - ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain statements included in this Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this Quarterly Report on Form 10-Q which are not statements of historical fact are intended to be, and are hereby identified as, "forward-looking statements" as defined in the Securities Exchange Act of 1934, as amended, and involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward- looking statements. Such factors include, among other things, the following: general economic and business conditions; competition; the success or failure of the Company in implementing its current business and operational strategies; the ability of the Company to successfully negotiate a consensual restructuring with its noteholders, its bank lenders and other creditors on satisfactory terms or at all and the timing of any such restructuring; changes in the Company's business or operational strategies; availability, location and terms of sites for store development; the availability and amount of proceeds generated from sale of assets; the ability of the Company to successfully renegotiate the terms of the Revolving Credit Facility; availability, terms and access to capital and customary trade credit; labor relations and labor costs. - 10 - RESULTS OF OPERATIONS Thirteen Weeks ("Third Quarter Fiscal 1999") and Thirty-nine Weeks Ended October 31, 1998 Compared to Thirteen Weeks ("Third Quarter Fiscal 1998") and Thirty-nine Weeks Ended November 1, 1997 The following table sets forth Statement of Operations components expressed as a percentage of total revenues for Third Quarter Fiscal 1999 and Third Quarter Fiscal 1998, and for the thirty-nine weeks ended October 31, 1998 and November 1, 1997, respectively:
Third Quarter Ended Thirty-nine Weeks Ended October 31, November 1, October 31, November 1, 1998 1997 1998 1997 ---------- ---------- ---------- ---------- Total revenues 100.0% 100.0% 100.0% 100.0% Gross profit (1) 20.6 22.6 21.6 23.2 Gross profit excluding special charges (2) 21.3 22.6 21.8 23.2 Selling and administrative expenses 21.9 20.4 21.2 21.2 Selling and administrative expenses excluding special charges (3) 21.9 20.4 21.2 20.8 Restructuring charges 0.5 Unusual items 6.5 2.1 Write-down of long-lived assets 13.3 4.3 Operating (loss) income (21.1) 2.2 (6.0) 1.6 Operating (loss) income excluding special charges (4) (0.6) 2.2 0.6 2.4 Interest expense 5.4 5.2 5.2 5.0 (Loss) before income taxes (26.5) (2.9) (11.2) (3.4) (Loss) before income taxes excluding special charges (5.9) (2.9) (4.6) (2.6) Net (Loss) (26.5) (1.9) (10.5) (2.1) Net (Loss) excluding special charges (5.9) (1.9) (3.8) (1.7) (See notes on next page)
- 11 - RESULTS OF OPERATIONS (continued) (1) Total revenues less cost of sales. (2) Gross profit excluding pre-tax special charges for the Third Quarter Fiscal 1999 and 39-week period ended October 31, 1998 of $5.3 million for inventory markdowns associated with the asset disposition process (see Note 2 and Note 3). (3) Selling and administrative expenses excluding pre-tax special charges for the 39-week period ended November 1, 1997 of (1)$5.6 million associated with the retention of certain corporate executives and (2) $1.9 million of other costs associated with a management reorganization and related corporate actions (see Note 3). (4) Operating income for the Third Quarter Fiscal 1999 and 39-week period ended October 31, 1998, excluding pre-tax special charges of (1) $50.4 million associated with the asset disposition process (see Note 2 and Note 3) and (2) $91.5 million associated with the accounting for certain long-lived assets (see Note 4). Operating income for the 39-week period ended November 1, 1997 excluding pre-tax special charges of $18.2 million (see Note 3). Total revenues for Third Quarter Fiscal 1999 decreased to $690.6 million from $726.2 million in Third Quarter Fiscal 1998. Total revenues for the 39-week period ended October 31, 1998 decreased to $2.14 billion from $2.26 billion for the 39-week period ended November 1, 1997. The decrease in revenues for the Third Quarter and the 39- week period ended October 31, 1998 is primarily attributable to a decline in same store sales, a reduction in the number of stores the Company operated in such periods from the prior year (see Note 3) and a decline in wholesale revenues. Same store sales for Third Quarter Fiscal 1999 and the 39-week period ended October 31, 1998 declined 3.7% and 4.1%, respectively. Wholesale supermarket revenues were $85.5 million in Third Quarter Fiscal 1999 compared to $87.9 million in Third Quarter Fiscal 1998. Wholesale supermarket revenues were $256.9 million for the 39-weeks ended October 31, 1998 compared to $271.6 million for the 39-weeks ended November 1, 1997. Gross profit in Third Quarter Fiscal 1999 was $142.1 million or 20.6% of revenues compared to $164.4 million or 22.6% of revenues in Third Quarter Fiscal 1998. In Third Quarter Fiscal 1999, gross profit, excluding pre-tax special charges of $5.3 million (see Note 3), were $147.3 million or 21.3% of revenues. Gross profit as a percentage of total revenues decreased to 21.6% for the 39-week period ended October 31, 1998 from 23.2% for the 39-week period ended November 1, 1997. For the 39-week period ended October 31, 1998 gross profits as a percent of revenues, excluding pre-tax special charges of $5.3 million (see Note 3), were 21.8%. The decrease in gross profit, excluding special charges, as a percentage of revenues, in Third Quarter Fiscal 1999 resulted primarily from an increase in inventory shrink expense and a reduction in allowance income. The decrease in gross profit, excluding special charges, as a percentage of revenues for the 39-week period ended October 31, 1998 resulted from investments in gross margins associated with the Company's marketing program (initiated in September 1997), an increase in inventory shrink expense and a reduction in allowance income. - 12 - RESULTS OF OPERATIONS (continued) Selling and administrative expenses excluding special charges were $151.2 million or 21.9% of revenues in Third Quarter Fiscal 1999 compared to $148.2 million or 20.4% of revenues in Third Quarter Fiscal 1998. Selling and administrative expenses for the 39-week period ended October 31, 1998 were $453.2 million or 21.2% of revenues compared to $478.3 million or 21.2% of revenues for the 39-week period ended November 1, 1997. For the 39-week period ended November 1, 1997, selling and administrative expenses, excluding pre-tax special charges of $7.5 million (see Note 3), were $470.8 million or 20.8% of revenues. The increase in selling and administrative expenses excluding special charges as a percentage of revenues in Third Quarter Fiscal 1999 and the 39-week period ended October 31, 1998 was primarily due to increased promotional expenses associated with the Company's marketing program (Penn Traffic accounts for certain promotional expenses in the selling and administrative expenses line of the Consolidated Statement of Operations) and an increase in bad check expense. For the 39-week period ended October 31, 1998 these additional costs were partially offset by a decrease in costs associated with the implementation of the Company's cost reduction programs. During the Third Quarter Fiscal 1999 the Company recorded a special charge of $50.4 million (see Note 3) and a write-down of long-lived assets of $91.5 million (see Note 4). During the 39-week period ended November 1, 1997, the Company recorded special charges of $18.2 million in connection with the management reorganization and related corporate actions, and the retention of certain corporate executives(see Note 3). Depreciation and amortization expense was $19.4 million in Third Quarter Fiscal 1999 and $22.1 million in Third Quarter Fiscal 1998, representing 2.8% and 3.0% of total revenues, respectively. Depreciation and amortization expense was $59.3 million for the 39- week period ended October 31, 1998 and $67.6 million for the 39-week period ended November 1, 1997, representing 2.8% and 3.0% of total revenues, respectively. Operating loss for Third Quarter Fiscal 1999 was $145.8 million or 21.1% of total revenues compared to operating income of $16.2 million or 2.2% of total revenues in Third Quarter Fiscal 1998. In the Third Quarter Fiscal 1999, operating loss, excluding pre-tax special charges of $141.9 million, was $3.8 million or 0.6% of total revenues. Operating loss for the 39-week period ended October 31, 1998 was $128.8 million or 6.0% of total revenues compared to operating income of $35.0 million or 1.6% of total revenues for the 39-week period ended November 1, 1997. Operating income for the 39- week period ended October 31, 1998, excluding pre-tax special charges of $141.9 million, was $13.1 million or 0.6% of total revenues compared to operating income of $53.2 million, excluding pre-tax special charges of $18.2 million, or 2.4% of total revenues for the 39-week period ended November 1, 1997. Operating (loss) income excluding special charges declined as a percentage of revenues for Third Quarter Fiscal 1999 and the 39-week period ended October 31, 1998 due to a decrease in gross profit excluding special charges as a percentage of revenues and an increase in selling and administrative expenses excluding special charges as a percentage of revenues. - 13 - RESULTS OF OPERATIONS (continued) Interest expense for Third Quarter Fiscal 1999 and Third Quarter Fiscal 1998 was $37.1 million and $37.5 million, respectively. Interest expense for the 39-week period ended October 31, 1998 and November 1, 1997 was $111.3 million and $112.2 million, respectively. Loss before income taxes was $182.9 million for Third Quarter Fiscal 1999 compared to a loss of $21.3 million for Third Quarter Fiscal 1998. The loss before income taxes, excluding the effect of pre-tax special charges of $141.9 million, was $41.0 million for Third Quarter Fiscal 1999. The loss before income taxes was $240.1 million for the 39-week period ended October 31, 1998 compared to a loss of $77.2 million for the 39-week period ended November 1, 1997. The loss before income taxes, excluding the effect of pre-tax special charges of $141.9 million, was $98.1 million for the 39-week period ended October 31, 1998 compared to a $59.0 million loss before income taxes, excluding the effect of pre-tax special charges of $18.2 million, for the 39-week period ended November 1, 1997. The reason for the increase in the loss before income taxes is the decrease in operating income for Third Quarter Fiscal 1999 and 39-week period ended October 31, 1998. The income tax provision for Third Quarter Fiscal 1999 was $0.0 million compared to a benefit of $7.8 million for Third Quarter Fiscal 1998. The income tax benefit for the 39-week period ended October 31, 1998 was $16.6 million compared to a benefit of $28.9 million for the 39-week period ended November 1, 1997. The effective tax rates for the Third Quarter and 39-week period ended October 31, 1998 vary from the statutory rates due to differences between income for financial reporting and tax reporting purposes, primarily related to goodwill amortization resulting from acquisitions and the recording of a valuation allowance. A valuation allowance is required when it is more likely than not that the recorded value of a deferred tax asset will not be realized. Management presently believes that a valuation allowance will be required for the deferred tax assets related to net operating losses and tax credit carryforwards arising in the future. As a result, management expects the Company will be unable to accrue a benefit for income taxes for the remainder of Fiscal 1999 and for indefinite future periods. Net loss for Third Quarter Fiscal 1999 was $182.9 million compared to a net loss of $13.5 million for Third Quarter Fiscal 1998. Net loss, excluding the impact of special charges, was $41.0 million for Third Quarter Fiscal 1998. The net loss for the 39-week period ended October 31, 1998 was $223.5 million compared to a net loss of $48.3 million for the 39-week period ended October 31, 1997. The net loss, excluding the impact of special charges, was $81.6 million for the 39-week period ended October 31, 1998 compared to a $37.5 million net loss, excluding the impact of special charges, for the 39-week period ended November 1, 1997. - 14 - LIQUIDITY AND CAPITAL RESOURCES Amounts of the Company's debt (excluding capital leases) maturing in the next five fiscal years are outlined on the following table: AMOUNT MATURING FISCAL YEAR ($ in millions) ----------- --------------- 1999 0.7 * 2000 135.3 ** 2001 0.4 2002 107.6 2003 125.3 * Amount due for the remainder of Fiscal 1999. ** Amount includes $125.7 million outstanding as of October 31, 1998, under the Company's revolving credit facility and $9.5 million outstanding under a secured term loan. The Company has a revolving credit facility (the "Revolving Credit Facility") which provides for borrowings of up to $250 million, subject to a borrowing base limitation measured by eligible inventory and accounts receivable of the Company. The Revolving Credit Facility matures in April 2000 and is secured by a pledge of the Company's inventory, accounts receivable and related assets. As of October 31, 1998, additional availability under the Revolving Credit Facility was $45.2 million. The Company and the lenders ("Bank Lenders") that are parties to the Revolving Credit Facility entered into an amendment dated as of August 31, 1998 to the Revolving Credit Facility (the "Amendment") that provides that the financial covenants contained in the Revolving Credit Facility would not be applicable to the Company for the period from August 1, 1998 until April 1, 1999. Without the Amendment, the Company would not have been in compliance with certain financial covenants set forth in the Revolving Credit Facility for the 13-week period ended August 1, 1998 and an Event of Default (as defined in the Revolving Credit Facility) would have occurred. The Company does not believe, based upon its current operating performance, that it will be in compliance with the financial covenants set forth in the Revolving Credit Facility after April 1, 1999. In addition, the Bank Lenders have agreed to (i) amend the Revolving Credit Facility so that the failure by the Company to make the interest payment on its 85/8% Senior Notes described below will not constitute the failure of a condition precedent to borrowing by the Company under the Revolving Credit Facility and (ii) waive the occurrence of an event of default under the Revolving Credit Facility until April 1, 1999 resulting from the failure by the Company to make such interest payment past the applicable grace period provided for in the indenture for the 85/8% Senior Notes. During Third Quarter Fiscal 1999, the Company's internally generated funds from operations, proceeds of asset sales and amounts available under the Revolving Credit Facility provided sufficient liquidity to meet the Company's operating, capital expenditure and debt service needs. - 15 - LIQUIDITY AND CAPITAL RESOURCES (continued) Cash flows to meet the Company's requirements for operating, investing and financing activities in the 39-week period ended October 31, 1998 are reported in the Consolidated Statement of Cash Flows. For the 39-week period ended October 31, 1998, the Company experienced a negative cash flow from operating activities of $44.8 million. Working capital decreased by $114.8 million from January 31, 1998 to October 31, 1998, primarily due to the reclassification of the Revolving Credit Facility and a secured term loan which contains the same financial covenants as the Revolving Credit Facility to Current Maturities of Long-Term Debt as discussed in Note 9 - Long Term Debt and Current Maturities. The Company expects to spend approximately $15-20 million on capital expenditures (including capital leases) during Fiscal 1999. Capital expenditures are principally for new stores, remodeled store facilities and investments in technology. Except as disclosed below with respect to an interest payment in its 85/8% Senior Notes, the Company expects to utilize internally generated funds from operations, amounts available under the Revolving Credit Facility and proceeds of asset sales, if any, to satisfy its operating, capital expenditure and debt service needs for the remainder of Fiscal 1999. On June 4, 1998, the Company announced that it had engaged Goldman Sachs & Company to undertake a process for realizing value from certain of the Company's Bi-Lo stores and related wholesale/franchise operations located in Pennsylvania. To date, the Company has completed the sale of 3 stores and certain other real estate and is currently engaged in negotiations with potential buyers for certain other Bi-Lo stores. The Company has determined to continue with the process of selling 22 Bi-Lo stores which, together with the 3 stores previously sold, generated revenues of $49.5 million and $155.8 million for the 13-week and 39-week periods ended October 31, 1998, respectively. The net proceeds of the sale of these stores will be used by the Company to satisfy its short-term capital needs. In addition, the Company has decided to close 21 Bi-Lo stores (9 of which were closed in the third quarter). These 21 Bi-Lo stores generated revenues of $20.4 million and $74.6 million for the 13-week and 39-week periods ended October 31, 1998, respectively (these amounts reflect the fact that the 9 stores closed during the third quarter did not have revenues for the entire periods described). The Company intends to retain and operate its 32 remaining Bi-Lo stores and its existing wholesale/franchise operations in Pennsylvania. No assurance can be given that any of the transactions described above will be completed nor is it possible to predict the net proceeds to the Company of any such transaction or the timing of such a transaction. - 16 - LIQUIDITY AND CAPITAL RESOURCES (continued) In order to address its long-term capital and debt service requirements, on December 10, 1998, the Company announced that it had begun working with an informal committee comprised of more than 40% of the principal amount of its outstanding senior notes and more than 50% of the principal amount of its outstanding subordinated notes for the purposes of negotiating a consensual restructuring of its outstanding securities, including the outstanding notes. As of October 31, 1998, the Company had approximately $1.13 billion of senior and subordinated notes outstanding. The Company also announced that it had engaged The Blackstone Group as its financial advisor in connection with its restructuring efforts. The Company intends that any such restructuring plan will convert a substantial portion of its senior and subordinated notes to equity. In addition, the Company has advised the informal committee of noteholders that any restructuring proposal made by the Company will provide for payment in full of all obligations to the Company's trade creditors that continue to support the Company with customary trade credit. The informal committee of noteholders has informed the Company that it will support the full repayment of the Company's trade creditors in connection with a restructuring proposal which is otherwise acceptable to such noteholders. In addition, Fleet Bank, the agent bank for the Company's $250 million Revolving Credit Facility, has advised the Company that it is supporting the Company's efforts to restructure its outstanding securities. The Company anticipates that any such consensual restructuring would be implemented through a prearranged, voluntary filing for relief under Chapter 11 of the U.S. Bankruptcy Code. In light of the proposed restructuring, the Company has elected to take advantage of the 15-day grace period provided for in the Indenture for its 85/8% Senior Note due December 15, 2003 (the "85/8% Indenture")for the payment of interest and not pay $8.6 million of interest on $200 million of 85/8% Senior Notes that would otherwise be due on December 15, 1998. The failure to make this payment constitutes a default under the 85/8% Indenture and following a lapse of the 15-day grace period, the Trustee, on its own or as directed by at least 25% of the noteholders, may cause the acceleration of $200 million of the Company's 85/8% Senior Notes. The acceleration of such indebtedness would result in the occurrence of an event of default under substantially all of the Company's other indebtedness. Further, the failure to make the aforementioned interest payment on the Company's 85/8% Senior Note due December 15, 2003 causes the failure by the Company to satisfy a condition precedent to borrowing by the Company under the Revolving Credit Facility and the continued failure to make the $8.6 million interest payment past the 15-day grace period provided for in the 85/8% Indenture would constitute an event of default under the Company's Revolving Credit Facility, enabling the Company's bank lenders to accelerate the entire principal amount of such loans. On December 15, 1998 the Company and the Bank Lenders entered into an amendment to the Revolving Credit Facility which (i) waived the failure by the Company to satisfy a condition precedent to borrowing resulting from the failure by the Company to make the interest payment on the 85/8% Senior Notes on December 15, 1998 and (ii) waived the occurrence of an event of default under the Revolving Credit Facility resulting from the failure, past the 15-day grace period, to pay interest on the 85/8% Senior Notes. - 17 - LIQUIDITY AND CAPITAL RESOURCES (continued) If the Company does not accomplish the consensual restructuring plan on terms satisfactory to it or at all, Penn Traffic may seek or be required to file for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code without such a pre-arranged consensual plan and attempt to restructure its long-term debt and other obligations through such process. There can be no assurance that the Company will accomplish a consensual restructuring with its noteholders on acceptable terms or at all or that the recoveries received by holders of the Company's securities and other creditors in a non-prearranged bankruptcy filing will not be materially less than those that would be received in a consensual plan. - 18 - YEAR 2000 Many of the Company's computer systems and certain other equipment will require modification or replacement over the next two years in order to render these systems compliant with the year 2000. The Company has established processes for evaluating and managing the risks and costs associated with this issue including the assessment of third parties who may be critical to us. The Company expects to have all critical systems compliant. Based on current information, the Company estimates that the cost of Year 2000 compliance during the fiscal years ended January 30, 1999, and January 29, 2000, will be approximately $10 million (including the purchase of certain new hardware and software). The business of the Company could be adversely affected should the Company or other entities with which the Company does business be unsuccessful in completing critical modifications in a timely manner. The Company believes that the contingency plans for non-critical systems which are not year 2000 compliant are adequate at this time. - 19 - PART II. OTHER INFORMATION - -------------------------- All items which are not applicable or to which the answer is negative have been omitted from this report. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit Number Description -------------- ----------- 10.5t Amendment Number 19 to the Revolving Credit Facility, dated as of December 14, 1998 10.21 Employment Agreement dated as of October 30, 1998 between the Company and Joseph V. Fisher 27.1 Financial Data Schedule (b) Reports on Form 8-K No reports on Form 8-K were filed during the fiscal quarter ended October 31, 1998. - 20 - SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE PENN TRAFFIC COMPANY December 14, 1998 /s/ Joseph V. Fisher -------------------- By: Joseph V. Fisher President and Chief Executive Officer December 14, 1998 /s/ Robert J. Davis ------------------- By: Robert J. Davis Senior Vice President and Chief Financial Officer - 21 - EX-10.5T 2 EXHIBIT 10.5T AMENDMENT NO. 19 AND WAIVER TO LOAN AND SECURITY AGREEMENT AMENDMENT NO. 19, dated as of December 14, 1998 (this "Amendment") to that certain Loan and Security Agreement dated as of March 5, 1993, as amended by Amendment Nos. 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, ll, 12, 13, 14, 15, 16, 17 and 18 (collectively, the "Loan Agreement") among THE PENN TRAFFIC COMPANY ("Penn Traffic"), DAIRY DELL, BIG M SUPERMARKETS, INC. and PENNY CURTISS BAKING COMPANY, INC. (individually, each a "Borrower" and collectively, the "Borrowers"), the Lenders listed therein (collectively, the "Lenders") and FLEET BANK, N.A. (as successor to NatWest USA Credit Corp.), as Agent for the Lenders (in such capacity, the "Agent"), is made by, between and among the Borrowers, the Agent, and the Lenders. Capitalized terms used herein, except as otherwise defined herein, shall have the meanings given to such terms in the Loan Agreement. WHEREAS, pursuant to the terms of the Indenture for Penn Traffic's 85/8% Senior Unsecured Notes due December 15, 2003 (the "85/8% Indenture"), interest in the amount of $8,625,000 is due and payable on December 15, 1998 (the "Interest Payment"), and the failure to make the Interest Payment becomes an "Event of Default" under the 85/8% Indenture following a fifteen-day grace period. WHEREAS, the Borrowers have requested that the Agent and the Lenders amend the Loan Agreement to agree as set forth in paragraph 1 below. WHEREAS, the Borrowers, the Agent and the Lenders have agreed to amend the Loan Agreement pursuant to the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements hereinafter set forth, the parties hereto agree as follows: 1. Amendment and Waiver to Loan Agreement. The failure of Penn Traffic to pay the Interest Payment on or after December 15, 1998 (including past the fifteen-day grace period) shall not, until April 1, 1998 (if such failure is then continuing), constitute an Event or an Event of Default under any provision of the Loan Agreement. 2. Representations and Warranties. As an inducement to the Agent and the Lenders to enter into this Amendment, each of the Borrowers hereby represents and warrants to the Agent and the Lenders and agrees with the Agent and the Lenders as follows: (a) It has the power and authority to enter into this Amendment and has taken all corporate action required to authorize its execution, delivery, and performance of this Amendment. This Amendment has been duly executed and delivered by it and constitutes 2 its valid and binding obligation, enforceable against it in accordance with its terms. The execution, delivery, and performance of this Amendment will not violate its certificate of incorporation or by-laws or any agreement or legal requirements binding upon it. (b) As of the date hereof and after giving effect to the terms of this Amendment: (i) the Loan Agreement is in full force and effect and constitutes a binding obligation of the Borrowers, enforceable against the Borrowers and owing in accordance with its terms; (ii) the obligations are due and owing by the Borrowers in accordance with their terms; and (iii) Borrowers have no defense to or setoff, counterclaim, or claim against payment of the Obligations and enforcement of the Loan Documents based upon a fact or circumstance existing or occurring on or prior to the date hereof. (c) The Obligations under the Loan Agreement as amended by this Amendment constitute "Senior Indebtedness" and "Designated Senior Indebtedness" as defined under the indentures relating to the Senior Notes and to the Subordinated Notes. 3. No Implied Amendments or Waivers. Except as expressly provided herein, the Loan Agreement and the other Loan Documents are not amended or otherwise affected in any way by this Amendment. Except for the specific agreement set forth in Section 1, nothing herein shall be or be deemed to be a waiver of any covenant or agreement contained in the Loan Agreement (or any Event or Event of Default other than specified in Section 1 hereof) and each Borrower hereby agrees that all of the covenants and agreements contained in the Loan Agreement are hereby ratified and confirmed in all respects. 4. Entire Agreement; Modifications; Binding Effect. This Amendment constitutes the entire agreement of the parties with respect to its subject matter and supersedes all prior oral or written understandings about such matter. Each of the Borrowers confirms that, in entering into this Amendment, it did not rely upon any agreement, representation, or warranty by the Agent or any Lender except those expressly set forth herein. No modification, rescission, waiver, release, or amendment of any provision of this Amendment may be made except by a written agreement signed by the parties hereto. The provisions of this Amendment are binding upon and inure to the benefit of the representatives, successors, and assigns of the parties hereto; provided, however, that no interest herein or obligation hereunder may be assigned by any Borrower without the prior written consent of the Required Lenders. 5. Effective Date. This Agreement shall become effective upon compliance with the conditions set forth immediately below: 3 (i) Except for the matters specified in this Amendment, no Event or Event of Default shall have occurred and there shall have been no material adverse change in the business or financial condition of any of the Borrowers. (ii) The Borrowers shall deliver to the Agent for the benefit of the Lenders an opinion of Borrowers' counsel in form and substance satisfactory to the Agent and its counsel (which opinion shall cover such matters as the Agent may reasonably request, including a statement that the Obligations under the Loan Agreement as amended by this Amendment constitute "Senior Indebtedness" and "Designated Senior Indebtedness" as defined under the indentures relating to the Senior Notes and to the Subordinated Notes). (iii) The Borrowers shall deliver to the Agent a certificate of the Borrowers' Chief Executive, Vice Chairman-Finance or Chief Financial Officer with respect to Section (i) above and such other instruments and documents as the Agent shall reasonably request. (iv) The Agent shall have received an original counterpart of this Amendment, duly executed and delivered by the Borrowers and the Required Lenders. 6. Counterparts. This Amendment may be executed in any number of counterparts, and by each party in separate counterparts, each of which is an original, but all of which shall together constitute one and the same agreement. 7. Governing Law. This Amendment is deemed to have been made in the State of New York and is governed by and interpreted in accordance with the laws of such state, provided that no doctrine of choice of law (except as may be applicable under the UCC with respect to the Security Interest) shall be used to apply the laws of any other state or jurisdiction. IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date first above written. BORROWERS: THE PENN TRAFFIC COMPANY By:______________________________ Title: 4 DAIRY DELL By:______________________________ Title: BIG M SUPERMARKETS, INC. By:______________________________ Title: PENNY CURTISS BAKING COMPANY, INC. By:______________________________ Title: LENDERS: Commitment: $35,000,000 FLEET BANK, N.A. (as successor to Pro-Rata Share: 14% NatWest USA Credit Corp.) Lending Office: 60 East 42nd Street New York, New York 10017 By:______________________________ Title: Commitment: $20,000,000 NATIONAL BANK OF CANADA Pro-Rata Share: 8% Lending Office: Main Place Tower Suite 2540 350 Main Street Buffalo, New York 14202 By:______________________________ Title: Commitment: $10,000,000 TRANSAMERICA BUSINESS CREDIT Pro-Rata Share: 4% CORP. Lending Office: 555 Theodore Fremd Avenue Suite C301 Rye, New York 10580 By:______________________________ Title: 5 Commitment: $30,000,000 SANWA BUSINESS CREDIT Pro-Rata Share: 12% CORPORATION Lending Office: One South Wacker Drive Suite 2800 Chicago, IL 60606 By:______________________________ Title: Commitment: $45,000,000 BANKAMERICA BUSINESS CREDIT, Pro-Rata Share: 18% INC. Lending Office: 40 East 52nd Street Second Fl. New York, New York 10022 By:______________________________ Title: Commitment: $50,000,000 HELLER FINANCIAL, INC. Pro-Rata Share: 20% Lending Office: 101 Park Avenue, 12th Fl. New York, New York 10178 By:______________________________ Title: Commitment: $10,000,000 LEHMAN COMMERCIAL PAPER, Pro-Rata Share: 4% INC. Lending Office: 3 World Financial Center 10th Fl. New York, New York 10285 By:______________________________ Title: Commitment: $10,000,000 AMSOUTH BANK Pro-Rata Share: 4% Lending Office: 350 Park Avenue New York, New York 10022 By:______________________________ Title: Commitment: $15,000,000 THE CIT GROUP/BUSINESS CREDIT, Pro-Rata Share: 6% INC. Lending Office: 300 South Grand Avenue 3rd Fl. Los Angeles, CA 90071 By:______________________________ Title: Commitment: $25,000,000 COMPAGNIE FINANCIERE DE CIC Pro-Rata Share: 10% ET DE L'UNION EUROPEENNE Lending Office: 520 Madison Avenue 37th Floor New York, New York 10022 By:______________________________ Title: 6 AGENT: FLEET BANK, N.A. (as Successors to NatWest USA Credit Corp.), As Agent By:_______________________________ Title: EX-10.21 3 EXHIBIT 10.21 EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement") is entered into as of this 30th day of October, 1998, by and between The Penn Traffic Company (the "Company") and Joseph V. Fisher ("Executive"). 1. EMPLOYMENT. (a) The Company hereby agrees to engage, hire and employ Executive as an employee as of the Effective Date (as defined) and, during the Term (as defined), as President and Chief Executive Officer of the Company. (b) Executive hereby accepts employment as the President and Chief Executive Officer of the Company and agrees to provide to the Company his full-time services as President and Chief Executive Officer of the Company, performing such duties as shall reasonably be required of a President and Chief Executive Officer and otherwise on the terms and subject to the conditions set forth in this Agreement. In such capacity, Executive will report to, and serve under the direction of, the Chairman of the Company and the Board of Directors of the Company (the "Board"). Throughout the Term (as hereinafter defined), Executive shall devote his full working time and energy exclusively to performing the services and duties of his employment hereunder to the best of his ability and utilizing all of his skills, experience and knowledge. In addition, the Company will use its reasonable efforts to cause Executive to be elected to the Board. Other than services to be rendered in connection with charitable activities and trade association activities which do not interfere with Executive's day-to-day responsibilities to the Company, without limiting the generality of Paragraph 6, Executive shall not, directly or 2 indirectly, engage in or participate in the operation or management of, or render any services to, any other business, enterprise or individual. 2. TERM. The term of employment of Executive under this Agreement shall commence effective on November 23, 1998 (the "Effective Date") and will continue until the earlier of (i) February 1, 2002 or (ii) the date that Executive or the Company terminates this Agreement pursuant to Paragraph 7, 8 or 9 (the "Term"). Notwithstanding the foregoing, Executive acknowledges and agrees that the Company may contact certain professional references provided by Executive (following an opportunity by Executive to first contact such references) following the date hereof, but prior to the Effective Date. If as a result of such reference checks, the Company determines in its good faith reasonable discretion as a result of such reference checks that Executive has misrepresented any matter to the Company or the Company determines in its good faith reasonable discretion as a result of such contacts that the Executive's experience and performance are inconsistent with the requirements of the position of President and Chief Executive Officer of the Company, it may terminate this Agreement by delivery of written notice to the Executive and (i) if the Executive is not employed by the Prior Employer (as defined below) within 3 months of the date of such notice, the Company shall engage the Executive as a consultant for a period equal to the shorter of (x) one year or (y) the date Executive obtains employment, at a rate of $41,667 per month and (ii) this Agreement shall terminate, be void and of no further force and effect without liability to either party. 3. LOCATION OF EMPLOYMENT. Executive shall render services primarily at the Company's offices that are located in Syracuse, New York. Notwithstanding the foregoing, Executive acknowledges and agrees that Executive's duties hereunder will include travel outside the Syracuse, New York area, including frequent travel to such geographic locations where the 3 Company owns or operates supermarkets or retail grocery stores, as well as other locations within and outside the United States, to attend meetings and other functions as the performance of Executive's duties hereunder may require. In an effort to assist Executive in relocating his primary residence to the Syracuse, New York area, the Company shall provide Executive with relocation assistance in the manner set forth on Schedule A attached hereto. 4. COMPENSATION. (a) Base Salary. The Company shall pay to Executive a base salary of not less than $500,000 per annum ("Base Salary") for the period commencing on the Effective Date and ending on the date this Agreement is terminated in accordance with Paragraph 2. Executive's Base Salary will be reviewed periodically by the Board and may be increased at such times if the Board, in its sole discretion, determines that an increase is warranted. The Base Salary shall be paid in accordance with the Company's standard payroll practices and will be subject to withholding and other applicable taxes. (b) Target Bonus. Subject to the provisions of this Paragraph 4(b), the Executive shall be entitled to receive an annual cash bonus (the "Target Bonus") for each fiscal year of the Company (i.e, year ending on or about January 30 of each year). The Target Bonus shall range from 0% to 100% of Base Salary depending upon whether the Company meets, exceeds or falls short of the Board-approved budgeted goals for the applicable fiscal year ("Target Performance") and based on criteria established in advance of such fiscal year. Notwithstanding the preceding sentence, the Target Bonus Executive shall be entitled to receive for each of the fiscal years ending January 30, 1999 and January 29, 2000 shall not be less than 50% of Base Salary as in effect during the subject fiscal year; provided, that Executive's Target Bonus for the fiscal year ending January 30, 1999 shall be pro rated (calculated on the basis of 4 a 365 day year) for the number of days Executive is employed by the Company in such year. Payments of Target Bonus for any fiscal year shall be made during the first quarter of the fiscal year immediately following the year in respect of which the Target Bonus is payable. (c) Signing Bonus. In addition to the Target Bonus, Executive shall receive on November 6, 1998 a one-time payment of $1,000,000 (subject to adjustment as described below) in respect of a signing bonus (the "Signing Bonus"); provided, that Executive shall be required to return such amount to the Company in the event Executive fails to report to work on the Effective Date. If Executive after the date hereof receives payments from Big V Holding Corp. (or any of its subsidiaries or affiliates) (collectively, the "Prior Employer") pursuant to the Prior Employer's Annual Incentive Bonus Plan and Long Term Incentive Plan (collectively, the "Plans"), the Signing Bonus shall then be reduced by an amount equal to 25% of the aggregate amount of such payments (the "Reduction Amount"). Such reduction shall occur in the following manner: (i) in the event such payments are received by Executive prior to Executive's receipt of the Signing Bonus, the Signing Bonus Executive receives shall be reduced by the Reduction Amount; (ii) in the event such payments are received by the Executive after Executive has received the Signing Bonus in full, Executive shall pay to the Company within five days after his receipt of such payments an amount equal to the Reduction Amount; and (iii) if Executive receives such payments both before and after the date Executive receives the Signing Bonus, clauses (i) and (ii) shall apply as appropriate. (d) Loan. In addition to the other amounts payable under this Paragraph 4, the Company shall, on the Effective Date, provide the Executive with a loan in the amount of $1,000,000 (subject to adjustment as described below) (the "Loan"). The Loan shall be evidenced by a non-negotiable full recourse 6% promissory note (the "Note") in a form 5 attached hereto as Exhibit A. In the event Executive receives payments from the Prior Employer pursuant to the Plans, (i) the outstanding principal amount of the Loan shall be reduced by an amount equal to the Reduction Amount if such payments are received before the Effective Date or (ii) the Executive shall pay to the Company within five days after receipt of such payments an amount equal to the Reduction Amount and such payment shall reduce the outstanding principal amount of the Loan and pro rata the principal amount to be forgiven pursuant to the next succeeding paragraph. On each quarterly anniversary of the Effective Date on which Executive remains employed by the Company, the Loan shall be forgiven in the amount of one-twelfth (1/12) of the principal amount of the Note (as adjusted by the Reduction Amount if received after the Effective Date) plus all accrued and unpaid interest to such date until the principal amount thereof is reduced to zero. If at any time prior to the principal amount of the Note being reduced to zero, Executive (i) has been terminated by the Company other than (A) for Cause (as defined), or (B) due to Executive's death or disability, or (ii) terminates his employment (A) with Good Reason (as defined) or, (B) within six months after the occurrence of a Change of Control (as defined), the entire outstanding principal amount of the Note, plus all accrued and unpaid interest to date shall at that time be forgiven in full and the Company shall have no continuing claim in respect thereof. In the event that Executive (i) is terminated for Cause, (ii) terminates his employment other than for Good Reason or (iii) is terminated from employment with the Company due to his death or disability, then, in addition to any other rights and remedies the Company may have against the Executive, in any such case, the entire outstanding principal amount of the Note, plus all accrued and unpaid interest to date, shall become immediately due and payable by Executive. 6 (e) Options. Executive shall be granted on the Effective Date ten-year options to purchase 500,000 shares of the Company's common stock, par value $1.25 per share (the "Common Stock"), with an exercise price equal to the "Fair Market Value" thereof (as defined under the Company's 1993 Long Term Incentive Plan or Performance Incentive Plan (the "Incentive Plans"). Such options may be granted, at the Company's election, under the Incentive Plans and shall vest in five (5) substantially equal annual increments on the Effective Date and on each of the first four anniversaries of the Effective Date on which Executive is still employed as President and Chief Executive Officer. To the extent lawful, the Company shall grant options which will qualify as incentive stock options under the Internal Revenue Code. Should Executive for any reason discontinue to serve as President (or in another comparable position) of the Company prior to 100% vesting of the options, Executive shall forever forfeit the unvested portion of the options. In the event of a "change of control," (as defined in the governing documents of the Incentive Plans), all options that remain unvested at such date shall thereupon become immediately vested in full. As soon as practicable, Executive and the Company will enter into option agreements, in the form contemplated under the Incentive Plans, with respect to the award of options referred to in this Paragraph 4(e). 5. FRINGE BENEFITS. (a) Executive shall, from and after the Effective Date, have the right to participate in the Company's medical, dental, disability, life and other insurance plans maintained during the Term by the Company for executives of the stature and rank of Executive, and any other plans and benefits, if any, generally maintained by the Company for executives of the stature and rank of Executive during the Term, in each case in accordance with the terms 7 and conditions of such plan as from time-to-time in effect (collectively referred to herein as "Fringe Benefits"). (b) Subject to the requirements of Executive's office, Executive shall be entitled to four weeks annual vacation to be taken in accordance with the vacation policy of the Company. (c) The Company will, upon being provided with reasonable supporting documentation thereof, promptly reimburse Executive for actual, ordinary and necessary travel and accommodation cost, entertainment and other business expenses incurred as a necessary part of discharging Executive's duties hereunder, including, without limitation, allowance for one-time initiation fees and annual dues for a membership in a country club of Executive's choice. (d) The Company will, upon being provided with reasonable supporting invoices and documentation thereof, promptly pay or reimburse the fees and expenses of Pollack & Kaminsky incurred by Executive in connection with the negotiation and execution of this Agreement up to a maximum amount of $12,500. 6. NO COMPETITION; CONFIDENTIALITY. (a) Executive agrees that while this Agreement is in effect and for a period of 12 months (with respect to the matters referred to in clause (i) below) and 18 months (with respect to the matters referred to in clauses (ii) and (iii) below) after the termination of this Agreement pursuant to Paragraph 2 (the "Termination Date"), the Executive will not without the prior written consent of the Company, as principal, agent, employee, employer, consultant, stockholder (other than as the holder of shares of capital stock of the Company or of not more than 2% of the shares of any other corporation), director or co-partner, or in any other individual or representative capacity whatsoever, directly or indirectly: 8 (i) engage in any way in any wholesale and/or retail food business which operates in any state in the United States in which the Company operates during the Term; (ii) induce or attempt to induce any person who is in the employ of the Company or any subsidiary thereof to leave the employ of the Company or such subsidiary, or employ or attempt to employ any such person or any person who at any time during the preceding twelve (12) months was in the employ of the Company or any subsidiary thereof; or (iii) induce or attempt to induce or assist any other person, firm or corporation to do any of the actions referred to in (i) or (ii) above (provided, that this Paragraph 6 shall not be interpreted so as to prohibit the Executive from providing references for employees of the Company or its subsidiaries or affiliates who have been solicited by an employee or prospective employer without violation of (ii) above). Notwithstanding the foregoing, the provisions of this Section 6(a) shall not apply if this Agreement is terminated by the Executive for Good Reason. (b) Executive agrees that while this Agreement is in effect and for a period of three years following the Termination Date, he will not at any time from and after the date hereof, divulge, furnish or make accessible to any person, or himself make use of other than for the sole benefit of the Company, any confidential or proprietary information of the Company obtained by him while in the employ of the Company other than in connection with his employment with the Company as provided hereunder, including, without limitation, information with respect to any products, services, improvements, formulas, designs, styles, processes, research, analyses, suppliers, customers, methods of distribution or manufacture, contract terms and conditions, pricing, financial condition, organization, personnel, business 9 activities, budgets, plans, objectives or strategies of the Company or its proprietary products or of any subsidiary or affiliate of the Company and that he will, prior to or upon the termination of his employment with the Company, return to the Company all such confidential or non-public information, whether in written or other physical form or stored electronically on computer disks or tapes or any other storage medium, and all copies thereof, in his possession or custody or under his control; provided, however, that (x) the restrictions of this paragraph shall not apply to publicly available information or information known generally to the public (without any action on the part of the Executive prohibited by the restrictions of this Paragraph), and (y) the Executive may disclose such information as may required pursuant to any subpoena or other lawful process issued pursuant to any applicable law, rule or regulation. Notwithstanding the foregoing, in the event that Executive receives a subpoena or other process or order which may require him to disclose any confidential information, the Executive agrees (i) to notify the Company promptly of the existence, terms and circumstances surrounding such process or order, and (ii) to cooperate with the Company, at the Company's request and at its expense, including, but not limited to, attorneys' fees and expenses, in taking legally available steps to resist or narrow such process or order and to obtain an order (or other reliable assurance reasonably satisfactory to the Company) that confidential treatment will be given to such information as is required to be disclosed. (c) In view of the services which the Executive will perform for the Company and its subsidiaries and affiliates, which are special, unique, extraordinary and intellectual in character and will place him in a position of confidence and trust with the customers and employees of the Company and its subsidiaries and affiliates and will provide him with access to confidential financial information, trade secrets, "know-how" and other 10 confidential and proprietary information of the Company and its subsidiaries and affiliates, and recognizing the substantial sums paid and to be paid to the Executive pursuant to the terms hereof, the Executive expressly acknowledges that the restrictive covenants set forth in this Paragraph 6 are necessary in order to protect and maintain the proprietary interests and other legitimate business interests of the Company and its subsidiaries and affiliates and that the enforcement of such restrictive covenants will not prevent Executive from earning a livelihood. The Executive acknowledges that the remedy at law for any breach or threatened breach of this Paragraph 6 will be inadequate and, accordingly, that the Company shall, in addition to all other available remedies (including, without limitation, seeking damages sustained by reason of such breach), be entitled to specific performance or injunctive relief without being required to post bond or other security and without having to prove the inadequacy of the available remedies at law. 7. GROUNDS FOR TERMINATION BY COMPANY. The Company may terminate this Agreement and Executive's employment hereunder for "Cause" by written notice to Executive setting forth the grounds for termination with specificity, and following, in the case of clauses (iii) - (v) below, a ten (10) business day opportunity by the Executive to remedy any such conduct, which shall include an opportunity by Executive to discuss the matter with the Company's Board of Directors. "Cause" shall mean (i) the commission by the Executive of an act of fraud or embezzlement (including the unauthorized disclosure of confidential or proprietary information of the Company or any of its subsidiaries that results in, or that could reasonably be expected to result in, a material injury to the Company or such subsidiary); (ii) a felony conviction or guilty plea of the Executive or a conviction or guilty plea of any other crime involving moral turpitude; (iii) willful misconduct as an employee of the Company that 11 results in material injury to the Company; (iv) the willful failure of the Executive to render services to the Company in accordance with his employment, which failure amounts to a material neglect of his duties to the Company, as determined in each case by the Board in good faith; and (v) willful and material insubordination on the part of the Executive. Any termination for Cause shall be effective upon notice by the Company to Executive as provided at the beginning of this Paragraph 7. 8. GROUNDS FOR TERMINATION BY EXECUTIVE. Executive may terminate this Agreement and his employment hereunder for Good Reason (as hereinafter defined) by written notice to the Company setting forth the grounds for termination with specificity. "Good Reason" shall mean (a) the failure to elect or appoint the Executive as President and Chief Executive Officer and to the Board of Directors of the Company or (b) the failure by the Company to pay any compensation or other amount due to the Executive under this Agreement, which failure is not remedied within ten (10) business days after written notice thereof is delivered to the Company by Executive. Any termination for Good Reason shall be effective as of the business day immediately following the date upon which the Company was required to (but did not) remedy such failure. 9. TERMINATION FOR DEATH OR DISABILITY. (a) If during the Term, Executive should die, Executive's employment shall be deemed to have terminated as of the date of death. (b) If during the Term, Executive should suffer a disability which, in fact, prevents Executive from substantially performing his duties hereunder for a period of 180 consecutive days or 230 or more days in the aggregate, in any period of 12 consecutive months, then and in any such event the Company may terminate Executive's services hereunder by a 12 written notice to Executive setting forth the grounds for such termination with specificity, which termination will take effect 30 days after such notice is given. Executive may only be terminated for disability if the Company's termination notice is given within 60 days following the end of the aforementioned 180- or 230-day period, whichever the Company relies upon. The existence of Executive's disability for the purposes of this Agreement shall be determined by a physician mutually selected by the Company and Executive, and Executive agrees to submit to an examination by such physician for purposes of such determination. 10. DESIGNATION OF BENEFICIARY OR BENEFICIARIES. As to any payment to be made under this Agreement to a beneficiary designated by Executive, it is agreed that Executive shall designate such beneficiary (or beneficiaries) or change his designation of such beneficiary (or beneficiaries) from time-to-time by written notice to the Company. In the event Executive fails to designate a beneficiary (or beneficiaries) as herein provided, any payments which are to be made to Executive's designated beneficiary (or beneficiaries) under this Agreement shall be made to Executive's widow, if any, during her lifetime, thereafter to his issue, if any, including legally adopted children, and then to Executive's personal representative. 11. EFFECT OF COMPANY'S TERMINATION OTHER THAN UNDER PARAGRAPH 7 OR 9 OR EFFECT OF EXECUTIVE'S TERMINATION UNDER PARAGRAPH 8. If (i) the Company terminates Executive's employment under this Agreement for any reason other than Cause, or other than due to his death or disability or (ii) Executive terminates Executive's employment under this Agreement for Good Reason, then: (a) The Company shall continue to pay to Executive his Base Salary then in effect (in the manner in which Base Salary payments have theretofore been paid) for a period equal to the lesser of (x) 24 months from the date of termination and (y) the number of 13 months remaining from the effective date of termination until February 1, 2002; provided, that if such termination occurs between February 1, 2001 and February 1, 2002, such Base Salary payments shall continue for 12 months from the date of termination. (b) The Company shall continue to provide to the Executive the benefits described in Paragraph 5(a) hereof for a period of 12 months from the date of termination. If during Executive's employment hereunder a Change of Control (as defined) occurs, and following such Change of Control, Executive resigns from his position with the Company or, is terminated from employment within the Company within six months from the date of such Change of Control, Executive shall be entitled to enter into a consulting agreement with the Company providing for the Executive to receive a lump sum payment in an amount equal to 24 months of Base Salary. For purposes of this Agreement "Change of Control" shall mean any series of events by which (i) any "person" (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")) (other than Riverside Acquisition Company, Limited Partnership ("RAC"), Miller Tabak Hirsch & Co. ("MTH") or any affiliate of either thereof) is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), 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 securities, (ii) the Company consolidates with or merges into another corporation or conveys, transfers or leases all or substantially all of its assets to any person, or any corporation consolidates with or merges into the Company, in each case pursuant to a transaction (other than a transaction between the Company and its subsidiaries) (A) after giving effect to which persons who were members of the Board immediately prior to the transaction do not constitute a majority of the Board of Directors of the successor or survivor 14 entity and (B) in which the outstanding voting securities of the Company are changed into or exchanged for cash, securities or other property, with the effect that all or substantially all of the individuals and entities who were the respective beneficial owners of the common stock and voting securities of the Company immediately prior to such reorganization, merger or consolidation do not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than 50% of the then outstanding shares of common stock and of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the Company resulting from such reorganization, merger or consolidation, or (iii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Company's Board (together with any new or replacement directors whose election by the Board, 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. 12. EFFECT OF COMPANY'S TERMINATION FOR CAUSE, EXECUTIVE'S TERMINATION WITHOUT GOOD REASON, TERMINATION UPON DEATH OR DISABILITY. (a) If the Company terminates Executive's employment under this Agreement for Cause or Executive terminates his employment under this Agreement other than for Good Reason, or if Executive's employment is terminated due to his death or disability, then the Company shall continue to pay Executive (or his designated beneficiary) his Base Salary through the effective date of termination and, in the case of termination due to Executive's death or disability, Executive shall also be entitled to receive a pro rata portion (calculated on the basis 15 of a 365 day year) of the Executive's Target Bonus for the year in which such termination occurs. 13. EXECUTIVE'S REPRESENTATIONS AND WARRANTIES. Executive represents and warrants to the Company as follows: (a) Executive has the unfettered right to enter into this Agreement on the terms and subject to the conditions hereof, and Executive has not done or permitted to be done anything which may curtail or impair any of the rights granted to the Company herein. (b) Neither the execution and delivery of this Agreement by Executive nor the performance by Executive of any of Executive's obligations hereunder constitute or will constitute a violation or breach of, or a default under, any agreement, arrangement or understanding, or any other restriction of any kind, to which Executive is a party or by which Executive is bound. 14. INDEMNIFICATION, ETC.. The Company agrees to hold harmless and promptly indemnify Executive to the fullest extent permitted by law against all damages and/or losses which Executive may suffer as a result of Executive's services as, and/or for activities engaged in by Executive while Executive is, an officer and/or employee of the Company or any affiliate thereof, including either paying or reimbursing Executive, promptly after request, for any reasonable and documented expenses and all attorneys' fees and costs actually incurred by Executive in connection with defending, or himself instituting and/or maintaining, any claim, action, suit or proceeding arising from circumstances to which the Company's above indemnification relates; provided, however, that no such indemnification shall be paid for damages or losses incurred by Executive that result from actions by Executive that Delaware law explicitly prohibits an employer from indemnifying its directors or employees against, including, 16 without limitation, to the extent any such damages or losses arise through the gross negligence, bad faith or misconduct of Executive or the breach by Executive of any of Executive's obligations under or representations and warranties made pursuant to this Agreement. This indemnity shall survive the termination of this Agreement. The Company represents and warrants that it has $15 million of director's and officer's insurance available on that date hereof and that it will use its reasonable commercial efforts to maintain such policy throughout the Term. 15. NOTICES. Any notice, consent, termination or other communication under this Agreement shall be in writing and shall be considered given on the date when hand delivered or, if sent by registered or certified mail, on the fifth day after such notice is mailed or, if sent by overnight courier guaranteeing overnight delivery, on the day after such notice is so sent, in each case to the parties at the following addresses (or at such other address as a party may specify by notice in accordance with the provisions hereof to the other): IF TO EXECUTIVE, TO EXECUTIVE AT: Mr. Joseph V. Fischer 227 Sheridan Avenue Ho-Ho-Kus, New Jersey 07423 IF TO THE COMPANY: The Penn Traffic Company 1200 State Fair Boulevard Syracuse, New York 13221 Attn: Francis D. Price, General Counsel WITH A COPY TO: The Penn Traffic Company 411 Theodore Fremd Ave. Rye, New York 10580 Attn: Martin A. Fox, Vice Chairman - Finance 17 16. COMPLETE AGREEMENT AND MODIFICATION. This Agreement contains a complete statement of all the arrangements between the parties with respect to Executive's employment by the Company, supersedes all existing agreements or arrangements between them concerning Executive's employment, and can only be amended or modified by a written instrument signed by the Company and Executive. 17. SEVERABILITY PROVISIONS. If any provision of this Agreement is declared invalid, illegal or incapable of being enforced by any court of competent jurisdiction, all of the remaining provisions of this Agreement shall nevertheless continue in full force and effect and no provisions shall be deemed dependent upon any other provision unless expressly set forth herein. 18. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements entered into and performed entirely within such State. 19. WAIVER. The failure of a party to insist upon strict adherence to any term of this Agreement shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. 20. HEADING. The headings in this Agreement are solely for the convenience of reference and shall not affect its interpretation. 21. WITHHOLDING. Any amount payable under this Agreement shall be reduced by any amount that the Company is obligated by law or regulation to withhold in respect of any such payment. 22. HEIRS, SUCCESSORS AND ASSIGNS. This Agreement will inure to the benefit of, and be enforceable by, Executive's heirs and the Company's successors and assigns. The 18 Company shall have the right to assign this Agreement or any part hereof or any rights hereunder to any successor-in-interest to the Company and to any affiliate of the Company; provided, however, that in the event of any such assignment the assignee shall expressly agree in writing to assume all of the Company's obligations under this Agreement, and Company shall remain secondarily liable to Executive for the performance of all such obligations. 19 WHEREFORE, the parties hereto have executed this Agreement as of the day and year first above written. THE PENN TRAFFIC COMPANY By:_________________________ _____________________________ Name: Joseph V. Fisher Title: 20 SCHEDULE A RELOCATION ASSISTANCE The Company will pay, or reimburse Executive for, the following costs upon presentation of invoices or other satisfactory evidence thereof. (i) The cost of packing, moving and unpacking (together with the cost of temporary storage, if required) of the household possessions of Executive and his family. (ii) Executive's closing costs relating to the sale of Executive's present home at 227 Sheridan Avenue, Ho-Ho-Kus, NJ 07423 including a selling broker's commission equal to not more than 6% of the sale price. (iii) Executive's closing costs relating to the purchase of a new home in the Syracuse area, including reimbursement of a loan origination fee or "points" equal to not more than 1% of the amount of any first mortgage loan obtained by Executive. (iv) The cost for Executive and his family to make a reasonable number of trips of reasonable and appropriate duration to the Syracuse, New York area to make arrangements for permanent housing. (v) The cost of suitable temporary living quarters for Executive and his family, as needed, until September 1, 1999. (vi) If Executive closes the purchase of a new home in Syracuse before closing the sale of his present home, the interest cost and property taxes on his present home for a period not to exceed 12 months from September 1, 1999. 21 EXHIBIT A EX-27.1 4 FINANCIAL DATA SCHEDULE
5 0000077155 The Penn Traffic Company 1,000 3-MOS JAN-30-1999 AUG-02-1998 OCT-31-1998 47,887 0 65,318 5,122 315,345 438,784 861,042 438,585 1,347,039 408,911 1,255,019 0 0 13,426 (396,748) 1,347,039 2,098,683 2,137,613 1,676,553 1,676,553 589,880 0 111,252 (240,072) 16,558 (223,514) 0 0 0 (223,514) (21.15) 0
-----END PRIVACY-ENHANCED MESSAGE-----