Attached files
| file | filename |
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| EX-2.2 - ASSET PURCHASE AGREEMENT - PENN TRAFFIC CO | v168416_ex2-2.htm |
| EX-2.1 - COMPREHENSIVE AGENCY AGREEMENT - PENN TRAFFIC CO | v168416_ex2-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date
of report (Date of earliest event reported): December 1, 2009
THE
PENN TRAFFIC COMPANY
(Exact
Name of Registrant as Specified in its Charter)
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Delaware
(State
or Other Jurisdiction
of
Incorporation)
|
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0-8858
(Commission
File Number)
|
|
25-0716800
(IRS
Employer
Identification
No.)
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1200
State Fair Boulevard
Syracuse,
New York 13221-4737
(Address
of Principal Executive Offices) (Zip Code)
(315)
453-7284
(Registrant’s
telephone number, including area code)
Not
Applicable
(Former
Name or Former Address, if Changed Since Last Report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2 below):
|
¨
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|
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¨
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
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¨
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR240.14d-2(b))
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¨
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item
1.01.
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Entry into a Material
Definitive Agreement.
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As
previously disclosed, on November 18, 2009, The Penn Traffic Company, and each
of its direct and indirect subsidiaries, including Penny Curtiss Baking Company,
Inc. (“PCBC”)
and Big M Supermarkets, Inc. (together with the Company and PCBC, the “Debtors”) filed
voluntary petitions (the “Chapter 11
Petitions”) for relief under Chapter 11 of the United States Bankruptcy
Code (the “Bankruptcy
Code”) in the United States Bankruptcy Court for the District of Delaware
(the “Bankruptcy
Court”). The Debtors are continuing to manage their properties
and operate their businesses as “debtors-in-possession” under the jurisdiction
of the Bankruptcy Court and no trustee or examiner has been appointed in the
Company’s case.
Comprehensive Agency
Agreement
On
December 4, 2009, the Debtors entered into a Comprehensive Agency Agreement (the
“Agency
Agreement”) with a joint venture comprised of KROC Capital Services, LLC,
Gordon Brothers Group, LLC, The Nassi Group, LLC, SB Capital Group, LLC and DJM
Realty Services, LLC (such joint venture, the “Agent”) pursuant to
which the Debtors appointed the Agent and the Agent agreed to serve as the
Debtors’ exclusive agent for the purpose of the sale or other disposition of all
the Debtors’ assets other than 4 specified retail stores (the “PC Stores”), the
Debtors’ intellectual property, and information technology located in the
Debtors’ distribution centers (the “Comprehensive Sale”),
including by conducting a going-out-of-business or similar sale at each of the
Debtors’ other retail stores (the “Store Closing Sale”)
beginning on the first business day following approval of the Agency Agreement
and the Comprehensive Sale, among other things, by the Bankruptcy Court (the
“Order”), and
in any case, no later than January 15, 2010, and ending no later than March 12,
2010 (the “Sale
Termination Date”). In exchange for this arrangement, the
Agency Agreement provides the Debtors will receive a minimum of $36.5 million of
sale proceeds, subject to certain adjustments, with $29.2 million payable within
2 business days of the entry of the Order, and $7.3 million, adjusted upwards or
downwards based on levels of certain of the Debtors’ assets, payable after the
Store Closing Sale. The Agreement further provides that the Agent
will receive $6.5 million as compensation for its services to the Debtors as
Agent (the “Agent’s
Fee”), and will generally be responsible for all expenses of the
Comprehensive Sale (the “Expenses”), and that
if the proceeds from the Comprehensive Sale, among other things, exceeds the sum
of $36.5 million, the Expenses and the Agent’s Fee, the Debtors and the Agent
will each receive 50% of such excess. The Agent will assume ownership
of any unsold merchandise on the Sale Termination Date, and all real property
and other assets of the Debtors, if the Agent so elects, no later than 180 days
from the Sale Termination Date.
If the
Debtors choose to pursue an alternative transaction or transactions and as a
result the Comprehensive Sale is not consummated, the Agency Agreement provides
that the Debtors will pay the Agent a break-up fee of $350,000 (the “Break-up Fee”) and
reimburse up to $250,000 of the Agent’s transaction-related expenses (the “Expense
Reimbursement”). Under the Agency Agreement, the Agent cannot
accept any alternative to the Comprehensive Sale unless that alternative
provides value to the Debtors exceeding the value of the Comprehensive Sale by
at least $250,000 (the “Bid
Protection”). The Debtors or the Agent may terminate the
Agency Agreement if the Bankruptcy Court does enter a preliminary order
scheduling an auction of the assets of the Debtors, and granting the Bid
Protection, Break-up Fee and the Expense Reimbursement prior to December 17,
2009, or the Order is not entered by January 14, 2010. The Agent may
also terminate the Agency Agreement upon the occurrence of certain other
events.
The
Debtors and the Agent have also made customary representations, warranties and
covenants in the Agency Agreement, including, among others, a covenant by the
Debtors to conduct their business in the ordinary course during the performance
of the Agency Agreement.
The
foregoing description of the terms of the Agency Agreement is qualified in its
entirety by reference to the Agency Agreement, which is filed herewith as
Exhibit 2.1.
Asset Purchase
Agreement
On December 4, 2009, the Company, as
successor to P & C Food Markets, Inc. entered into an asset purchase
agreement with Price Chopper Operating Co., Inc. (“Price Chopper”)
pursuant to which the Company has agreed to sell Price Chopper substantially all
the assets used in the operation of the PC Stores (the “Purchased Assets”),
in exchange for $12.3 million (the “Purchase Price”) and
the assumption of certain liabilities associated with these operations (the
“Asset Purchase
Agreement”). The Asset Purchase Agreement is subject to
approval by the Bankruptcy Court. Price Chopper entered into the
agreement as a “stalking horse” bidder, and the purchase of the Purchased Assets
are subject to Penn Traffic’s solicitation of higher or otherwise better offers
pursuant to specified bidding procedures and an auction process to be conducted
under the supervision of the Bankruptcy Court. Under the Asset
Purchase Agreement, Price Chopper will make a $250,000 deposit toward the
purchase price, unless a different sum is required by order of the Bankruptcy
Court, within 3 business days of the approval of these bidding procedures for
this auction, which the Company is obliged to prepare and file on or prior to
December 11, 2009. Price Chopper and the Company have made customary
representations, warranties and covenants in the Asset Purchase Agreement,
including, among others, a covenant by the Company to operate the PC Stores
business in the ordinary course during the performance of the Agency
Agreement. Price Chopper may terminate the Asset Purchase Agreement
if the Company enters into a definitive agreement regarding sale of some or all
of the PC Stores in an alternative transaction, and in such case would be
entitled to the return of its deposit, as well as a break-up fee of $369,000
upon the closing of such alternative transaction, subject to the Bankruptcy
Court’s allowance of such fee as an administrative expense. The Asset
Purchase Agreement may also be terminated by either the Company or Price Chopper
upon the occurrence of other specified events.
The
foregoing description of the terms of the Asset Purchase Agreement is qualified
in its entirety by reference to the Asset Purchase Agreement, which is filed
herewith as Exhibit 2.2.
The
Agency Agreement and the Asset Purchase Agreement (collectively, the “Agreements”) have
been included to provide securityholders with information regarding their
terms. This was not intended to provide any other factual information
about the Debtors. The representations, warranties and covenants
contained in each of the Agreements were made only for purposes of such
agreement and as of specific dates, were solely for the benefit of the parties
to such agreement, and may be subject to limitations agreed upon by the
contracting parties, including being qualified by confidential disclosures
exchanged between the parties in connection with the execution of such
agreement. The representations and warranties in each of the
Agreements may have been made for the purposes of allocating contractual risk
between the parties to such agreement instead of establishing these matters as
facts, and may be subject to standards of materiality applicable to the
contracting parties that differ from those applicable to
investors.
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Item
2.04.
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Triggering Events that
Accelerate or Increase a Direct Financial Obligation or
an Obligation under an Off-
Balance Sheet Arrangement.
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On November 19, 2009, the Bankruptcy
Court issued an interim order (the “Interim Order”)
authorizing the previously disclosed arrangement under which the Debtors’ senior
secured lenders consented to the Debtors using their cash collateral to a
limited extent in order to fund and obtain letters of credit for ongoing
operations. The Interim Order authorized the Debtors’ use of their
cash collateral solely for purposes identified in a budget approved by the
Debtors’ senior secured lenders (the “Budget”).
On December 1, 2009 the Company
received a letter, dated November 30, 2009, from the agent (the “First Lien Agent”)
for the lenders (the “First Lien Lenders”)
under the Debtors’ senior revolving credit agreement (the “Revolving Loan
Agreement”) notifying the Company that events terminating authorization
of the Debtors’ use of their cash collateral (“Termination Events”)
had occurred under the Order, namely: (1) the Debtors had failed to comply with
the Interim Order by using approximately $1.8 million of funds advanced pursuant
to the Interim Order for deposits to vendors, which deposits were not authorized
by the Budget (the “Vendor Deposits”),
and (2) the Debtors had failed to deliver a fully executed stalking horse
agreement providing for the sale of all or substantially all of the Debtors’
assets, in form and substance acceptable to the First Lien Agent (a “Stalking Horse
Agreement”), by November 25, 2009.
The First Lien Agent further stated
that they, along with the First Lien Lenders, were extending the deadline for
the Debtors to file a motion with the Bankruptcy Court to approve the sale and
bidding procedures of substantially all of Debtors’ assets (the “Comprehensive Sale
Motion”) from December 1, 2009 to December 3, 2009, and that the First
Lien Agent would take no action with respect to the specified Termination Events
if the Comprehensive Sale Motion was filed by December 3, 2009 and attached a
Stalking Horse Agreement. The First Lien Agent and First Lien Lenders
reserved all their rights under the Interim Order in respect of these specified
Termination Events or any other Termination Events, which would include
preventing the Debtors from using their cash collateral to fund operations or
for any other purpose, which would require them to immediately cease all or part
of their operations. The occurrence of any Termination Event may also
result in the termination of the automatic stay under the Bankruptcy Code of any
rights of the Debtors’ senior secured lenders to enforce the Debtors’ payment
obligations under the Revolving Loan Agreement and Supplemental Loan Agreement,
subject only to the First Lien Agent or Second Lien Agent providing certain
written notices (a “Remedies
Notice”).
On
December 1, 2009, the agent (the “Second Lien Agent”)
for the lenders (the “Second Lien Lenders”)
under the Debtors’ supplemental real estate credit agreement (the “Supplemental Loan
Agreement”) similarly notified the Company that a Termination Event had
occurred due to the Vendor Deposits. The Second Lien Agent and Second
Lien Lenders also reserved all their rights under the Interim Order in respect
of this specified Termination Event or any other Termination
Events.
On
December 4, 2009, the First Lien Agent notified the Company that the prior
Termination Events referenced in its November 30, 2009 letter were continuing,
and that additional Termination Events under the Interim Order had occurred and
were continuing as a result of: (1) the Debtors’ failure to maintain certain
eligible inventory in the amount of $40.5 million from November 28, 2009 to
date, and (2) the Debtors’ failure to file a Comprehensive Sale Motion with a
Stalking Horse Agreement attached by the amended deadline of December 3,
2009. The First Lien Agent and First Lien Lenders also reserved
all their rights under the Interim Order in respect of the various Termination
Events of which it they had notified the Company or any future Termination
Events, including, without limitation, terminating continued us of Cash
Collateral or not agreeing to extend the use of Cash Collateral after December
8, 2009.
On
December 7, 2009, the Debtors filed a Comprehensive Sale Motion with the Agency
Agreement attached.
Reference is made to the disclosures at
Item 1.01 hereof.
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Item
9.01
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Financial Statements and
Exhibits.
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Exhibit No.
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Exhibit
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2.1
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Comprehensive
Agency Agreement
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2.2
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Asset
Purchase Agreement
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SIGNATURE
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 hereunto
duly authorized.
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THE
PENN TRAFFIC COMPANY
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(Registrant)
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By:
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/s/ Daniel J. Mahoney
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Name:
Daniel J. Mahoney
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Title: SVP,
General Counsel
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Date:
December 7, 2009