EXHIBIT 10.1
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GLOBAL SETTLEMENT AGREEMENT AND MUTUAL RELEASE
THIS GLOBAL SETTLEMENT AGREEMENT AND MUTUAL RELEASE ("Global Settlement
Agreement"), dated as of February 4, 2005 is entered into by and between The
Pension Benefit Guaranty Corporation ("PBGC"), the Official Committee of
Unsecured Creditors (the "Committee") and The Penn Traffic Company ("Penn
Traffic") and its affiliated Debtors (collectively, the "Debtors").1 PBGC, the
Committee, and the Debtors are collectively referred to herein as the "Parties,"
or, as to each a "Party."
R E C I T A L S :
This Global Settlement Agreement is made with respect to the following
facts, which are true and correct, and are incorporated into and made a
substantive part of this Global Settlement Agreement.
WHEREAS, on May 30, 2003 (the "Petition Date"), the Debtors filed
voluntary petitions under chapter 11, title 11 of the United States Code (the
"Bankruptcy Code") in the United States Bankruptcy Court for the Southern
District of New York (the "Bankruptcy Court");
WHEREAS, the Debtors' bankruptcy cases (the "Bankruptcy Cases") are
being jointly administered;
WHEREAS, as of the Petition Date, Penn Traffic was plan sponsor and
plan administrator of (i) The Penn Traffic Company Cash Balance Pension Plan
(the "Cash Balance Plan"); (ii) Pension Plan for Bargaining Employees of Eastern
Pennsylvania (the "Eastern PA Plan"); (iii) the Riverside Division of Penn
Traffic Company Bargaining Employees Pension Plan (the "Riverside Plan"); (iv)
Big Bear Stores Hourly Paid Food Warehouse Employees' Pension Plan (the "Big
Bear Hourly Plan"); and (v) Big Bear Stores Hourly Paid General Merchandise
Warehouse Employees' Pension Plan (the "Big Bear Warehouse Plan," and together
with the Eastern PA Plan, the Riverside Plan, the Big Bear Hourly Plan and the
Big Bear Warehouse Plan, the "Remaining Pension Plans");
WHEREAS, on November 25, 2003, Penn Traffic caused a Notice of Intent
to Terminate the Cash Balance Plan to be filed with PBGC, and previously
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(1) The Debtors are the following entities: The Penn Traffic Company, Dairy
Dell, Inc., ▇▇▇▇▇ ▇▇▇▇▇▇▇ Baking Company, Inc., Big M Supermarkets, Inc.,
Sunrise Properties, Inc., Pennway Express, Inc., Big Bear Distribution
Company, Bradford Supermarkets, Inc., P&C Food Markets, Inc. of Vermont,
▇▇▇▇▇▇ Realty Corporation, Commander Foods, Inc., P.T. Development LLC, and
PT Fayetteville/Utica LLC.
distributed such notice to Cash Balance Plan participants, proposing January 21,
2004, as the termination date of the Cash Balance Plan;
WHEREAS, on May 20, 2004, the Debtors filed a distress termination
application with PBGC pursuant to section 4041(c)(2)(B)(iii) of the Employee
Retirement Income Security Act of 1974, as amended, 29 U.S.C. ▇▇.▇▇. 1301-1461
(2000) to terminate the Cash Balance Plan (the "Cash Balance Plan Distress
Termination Application");
WHEREAS, PBGC has timely filed fifteen (15) proofs of claim numbered
02103 - 02117 relating to all five sponsored pension plans in the Bankruptcy
Cases alleging (i) unfunded benefit liabilities on plan termination pursuant to
29 U.S.C. ▇▇.▇▇. 1362, 1368, (ii) unpaid minimum funding contributions pursuant
to section 412 of the Internal Revenue Code, 26 U.S.C. ss. 412(c)(11), and
section 302 of ERISA, 29 U.S.C. ss. 1082(c)(11), and (iii) unpaid PBGC premium
payments pursuant to 29 U.S.C. ss. 1307, (collectively, the "PBGC Claims"), all
of which are dated October 9, 2003;
WHEREAS, by order of the Bankruptcy Court dated October 3, 2003, the
PBGC Claims were consolidated claims, deemed filed jointly and severally against
each and every one of the Debtors;
WHEREAS, three of the consolidated PBGC Claims for unfunded benefit
liabilities, unpaid minimum funding contributions, and unpaid PBGC premiums were
filed with regard to the Cash Balance Plan, specifically PBGC's proofs of claim
numbers 02113, 02107, and 02105 (collectively, the "Cash Balance Plan Claims");
WHEREAS, the Debtors dispute the amounts and/or priority of the PBGC
Claims;
WHEREAS, PBGC asserts that the Cash Balance Plan Claims should be paid
in the amounts and priorities asserted;
WHEREAS, the Debtors have filed their First Amended Disclosure
Statement Pursuant to Section 1125 of the Bankruptcy Code (the "Disclosure
Statement") With Respect to the First Amended Joint Plan of Reorganization (the
"First Amended Plan") of The Penn Traffic Company and Its Affiliated Debtors and
Debtors In Possession Under Chapter 11 of the Bankruptcy Code dated December 23,
2004;
WHEREAS, the Debtors, the Committee, and PBGC now desire to effect
between themselves a full, complete and final settlement and global release of
any and all claims, counterclaims and other differences (except as provided
herein) that do, could or may hereafter exist between them, or could be brought
on their behalf;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the sufficiency of which is acknowledged and intended to be binding, the
Parties agree as follows:
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ARTICLE I
KEY DEFINITIONS
The following definitions shall have the following meanings. Other
definitions are as set forth in this Global Settlement Agreement. Capitalized
terms not defined herein shall have the meaning ascribed to them under the Plan
or the Bankruptcy Code.
Section 1.1 "Agreement Effective Date" shall mean February 4, 2005.
Section 1.2 "Plan" shall mean the First Amended Plan or any
subsequent plan of reorganization proposed by the Debtors in their current
bankruptcy proceedings.
Section 1.3 "Plan Effective Date" shall have the same meaning
ascribed to the term "Effective Date" in the First Amended Plan.
Section 1.4 "Reorganized Penn Traffic" shall have the same meaning
ascribed to the term "Reorganized Penn Traffic" in the First Amended Plan.
Section 1.5 "Post-Effective Date Trade Lien" and "Post-Effective
Date Trade Lien Program" shall have, respectively, the same meanings ascribed to
these terms in the First Amended Plan.
ARTICLE II
CONSIDERATION AND PERFORMANCE
Section 2.1 CONSIDERATION.
(a) This Global Settlement Agreement is in anticipation of
the termination and PBGC trusteeship of the Cash Balance Plan by means of a
separate trusteeship agreement ("PBGC Trusteeship Agreement") between Penn
Traffic and PBGC. If no such termination occurs by February 28, 2005 or if no
PBGC Trusteeship Agreement is entered into on or before February 28, 2005, this
Global Settlement Agreement and any action taken by any Party pursuant to this
Global Settlement Agreement shall be null and void AB INITIO; PROVIDED, HOWEVER,
that the Debtors may waive, in consultation with the Committee, any failure of
either or both of these requirements.
(b) In partial settlement of the Cash Balance Plan Claims,
PBGC shall have an Allowed Administrative Claim under the Plan on the Plan
Effective Date in the amount of $155,378, to be paid in full and in cash on the
earlier of (i) the Initial Distribution Date (as defined in the First Amended
Plan) or (ii) twenty (20) days after the Plan Effective Date.
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(c) In further settlement of the Cash Balance Plan Claims,
PBGC shall have an Allowed Administrative Claim under the Plan on the Plan
Effective Date in the amount of $3,500,000, to be paid, without interest, by
Reorganized Penn Traffic in four equal installments bi-annually over a two year
period commencing on the date that is six months following the Plan Effective
Date, and to be secured until fully paid by the Post-Effective Date Trade Lien
for so long as the Post-Effective Date Trade Lien Program is in effect and,
thereafter, by a lien attached to the same collateral and on the same terms and
of the same priority as under the Post-Effective Date Trade Lien Program. As the
Post-Effective Trade Lien Program terms are not expected to have been fully
negotiated as of the Agreement Effective Date, the Parties hereby agree that if
PBGC is not fully satisfied with regard to any term of its Post-Effective Date
Trade Lien on or by the hearing with respect to Plan confirmation, at PBGC's
exclusive discretion, this Global Settlement Agreement and any actions taken by
any Party pursuant to this Global Settlement Agreement shall be void AB INITIO,
except for any prior termination of the Cash Balance Plan and any PBGC
trusteeship of the Cash Balance Plan by means of the PBGC Trusteeship Agreement
between Penn Traffic and PBGC.
(d) In further settlement of the Cash Balance Plan Claims,
PBGC shall have an Allowed Class 3 Unsecured Claim under the Plan on the Plan
Effective Date in the amount of $60,000,000 (the "PBGC Allowed Unsecured
Claim"). For purposes of voting on the Plan, PBGC shall be entitled to vote with
respect only to the PBGC Allowed Unsecured Claim.
(e) In further settlement of the Cash Balance Plan Claims,
the Debtors agree that the Plan will not be confirmed if it fails to provide
that on and after the Plan Effective Date, Reorganized Penn Traffic will
continue to sponsor, administer, and maintain the Remaining Pension Plans in
accordance with their terms, with ERISA and with the Internal Revenue Code,
including meeting the minimum funding standards under ERISA and the Internal
Revenue Code, and paying all PBGC insurance premiums; PROVIDED, HOWEVER, that
the foregoing provision of this sentence shall not apply to confirmation of a
liquidating Chapter 11 plan or a Chapter 7 liquidation. Notwithstanding the
foregoing, Reorganized Penn Traffic reserves its rights, after the Plan
Effective Date, to terminate, amend or freeze any of the Remaining Pension Plans
in accordance with their terms, ERISA, the Internal Revenue Code or other
applicable law.
(f) As sponsor and administrator of the Remaining Pension
Plans, Reorganized Penn Traffic specifically agrees to pay 1) to PBGC, the
amount of unpaid PBGC premiums, if any, owed as of the Plan Effective Date with
regard to the Remaining Pension Plans pursuant to 29 U.S.C. ss. 1307, and 2)
into each of the Remaining Pension Plans, the amount of unpaid minimum funding
contributions, if any, owed as of the Plan Effective Date for each of the
Remaining Pension Plans, pursuant to section 412 of the Internal Revenue Code,
26 U.S.C. ss. 412(c)(11), and section 302 of ERISA, 29 U.S.C. ss. 1082(c)(11).
All PBGC premium and minimum funding obligations owed to PBGC and/or the
Remaining Plans will be paid in cash and in full, on the earlier of (i) the
Initial Distribution Date (as defined in the First Amended Plan) or (ii) twenty
(20) days after the Plan Effective Date. The minimum funding obligations owing
through
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the end of March 2005 with regard to the Remaining Pension Plans are set forth
in Exhibit I to the Disclosure Statement, a copy of which is attached to this
Global Settlement Agreement.
(g) The Debtors and the Committee hereby waive and release
any and all claims arising under Sections 547, 548, or 549 of the Bankruptcy
Code with respect to any and all payments made by or on behalf of the Debtors
with respect to the Cash Balance Plan or the Remaining Pension Plans.
(h) PBGC shall not file an objection to Confirmation of the
Plan, including without limitation, to the substantive consolidation of the
Debtors as contemplated under the Plan.
(i) The Committee shall not file an objection to the PBGC
Settlement Motion, as defined in Section 2.3 hereof, and shall not object on its
own behalf to any of the PBGC Claims.
(j) The Debtors shall amend the Plan and Disclosure
Statement to reflect the terms of this Global Settlement Agreement.
(k) If all terms of this Global Settlement Agreement have
been satisfied as of the Plan Effective Date, and without reduction or other
effect on the Allowed Claims and obligations set forth in this Global Settlement
Agreement, the PBGC Claims shall be deemed withdrawn, with prejudice, upon the
Plan Effective Date.
Section 2.2 EFFECTIVE DATE OF AGREEMENT. Subject to the terms of
sections 2.1(a), 2.1(c), and 2.3, this Global Settlement Agreement will become
effective and binding on the Parties upon the Agreement Effective Date.
Section 2.3 As soon as practicable after the Agreement Effective
Date, the Debtors shall, under Federal Rule of Bankruptcy Procedure 9019(a),
cause a motion (the "PBGC Settlement Motion") to be filed with the Bankruptcy
Court to obtain approval of this Global Settlement Agreement. The Debtors shall
give notice of such motion as required by applicable law and rules. If the
Bankruptcy Court denies such motion or the Debtors are unable to confirm the
Plan, as amended to reflect the terms of this Global Settlement Agreement, this
Global Settlement Agreement and any actions taken by any Party pursuant to this
Global Settlement Agreement shall be void AB INITIO, except for any prior
termination of the Cash Balance Plan and any PBGC trusteeship of the Cash
Balance Plan by means of the PBGC Trusteeship Agreement between Penn Traffic and
PBGC.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 Each Party represents and warrants that it has the legal
right and authority to enter into this Global Settlement Agreement and release
the claims being released.
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Section 3.2 The Debtors, the Committee and PBGC covenant and agree
not to bring any action, claim, suit or proceeding against each other, directly
or indirectly, regarding or relating to the PBGC Claims settled herein, except
with respect to claims, if any, against (1) the Debtors or Reorganized Debtors
for current or future liability for breaches of fiduciary duty with respect to
the Cash Balance Plan and the Remaining Pension Plans and (2) against the
Reorganized Debtors for future liability under ERISA with respect to the
Remaining Pension Plans for (a) unfunded benefit liabilities on plan
termination, (b) unpaid minimum funding contributions and (c) unpaid premiums,
and further covenant and agree that this Global Settlement Agreement is a bar to
any such claim, action, suit or proceeding.
ARTICLE IV
MISCELLANEOUS
Section 4.1 NOTICES. All notices, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given: (a)
when personally delivered; (b) upon receipt during normal business hours,
otherwise on the first business day thereafter if transmitted by facsimile with
confirmation of receipt; or (c) when sent by overnight courier; in each case, to
the following addressees, or to such other addressees as a Party may, from time
to time, specify by notice to the other Party given pursuant hereto.
If to the Debtors, to :
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the PBGC to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Pension Benefit Guaranty Corporation
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇)▇▇▇-▇▇▇▇
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If to the Creditors' Committee:
▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Otterbourg, Steindler, Houston & ▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇)▇▇▇-▇▇▇▇
Facsimile: (▇▇▇)▇▇▇-▇▇▇▇
Section 4.2 COOPERATION. The Parties will cooperate fully and will
execute and deliver any and all supplementary papers, documents, instruments and
other assurances, and shall do any and all acts that may be reasonably necessary
or appropriate to give full force and effect to the terms and intent of this
Global Settlement Agreement.
Section 4.3 GOVERNING LAW/JURISDICTION. Except where superceded by
applicable federal law, this Global Settlement Agreement shall be governed by
the laws of the State of New York.
Section 4.4 CONTINUING JURISDICTION OF BANKRUPTCY COURT. This Global
Settlement Agreement is subject to and contingent upon approval by the
Bankruptcy Court. The Bankruptcy Court shall have continuing jurisdiction of any
dispute or controversy with respect to the interpretation or enforcement of this
Global Settlement Agreement.
Section 4.5 INTEGRATION. Except with regard to the PBGC Trusteeship
Agreement described in section 2.1(a) that terminates and trustees the Cash
Balance Plan, this Global Settlement Agreement contains the entire agreement
between the Parties with respect to the PBGC Claims covered by this Global
Settlement Agreement, and no promise or understanding or representation made by
any Party or agent, director, officer, employee or attorney of any Party that is
not expressly contained in this Global Settlement Agreement shall be binding or
valid.
Section 4.6 WAIVER, MODIFICATION AND AMENDMENT. This Global
Settlement Agreement may not be modified, amended or supplemented by the Parties
except in accordance with further order of the Bankruptcy Court or by a written
agreement that all of the Parties have signed. A waiver of any provision of this
Global Settlement Agreement will not constitute a waiver of any other provision
of this Global Settlement Agreement.
Section 4.7 SEVERABILITY. In case any provision of this Global
Settlement Agreement shall be determined to be invalid, illegal or unenforceable
for any reason, the remaining provisions and portions of this Global Settlement
Agreement shall be unaffected and unimpaired thereby, and shall remain in full
force and effective, to the fullest extent permitted by applicable law.
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Section 4.8 SURVIVAL OF REPRESENTATIONS. All representations,
warranties, agreements, covenants and obligations made by the Parties herein are
material, shall be deemed to have been relied upon by the other Party, and shall
survive the Agreement Effective Date.
Section 4.9 SUCCESSORS AND ASSIGNS. This Global Settlement Agreement
shall be binding upon and inure to the benefit of the Parties hereto and their
respective successors, predecessors, heirs, assigns, officers, directors,
shareholders, employees, agents, estates and attorneys to the extent provided by
law, including without limitation, any subsequently appointed Chapter 11 trustee
or any trustee appointed in a subsequent Chapter 7 case.
Section 4.10 NO THIRD-PARTY BENEFICIARIES. This Global Settlement
Agreement does not constitute a contract for the benefit of any third parties,
any prior creditor or claimants of the Parties, or any non-party.
Section 4.11 NO ADMISSION OF LIABILITY. Nothing herein shall be
construed as an admission by any Party of any liability of any kind.
Section 4.12 ADVICE OF COUNSEL. Each Party acknowledges and agrees
that it has given careful thought to this Global Settlement Agreement, has
reviewed or has had the opportunity to review this Global Settlement Agreement
independently with legal counsel of its choice, and/or has the requisite
experience and sophistication to understand, interpret and agree to the
particular language of the provisions in this Global Settlement Agreement.
Section 4.13 ATTORNEYS' FEES. The Debtors and PBGC shall be
responsible for their respective attorneys' fees, expenses and costs incurred by
them through the date of this Global Settlement Agreement. PBGC shall bear no
responsibility for the Committee's attorneys' fees, expenses and costs incurred
through the date of this Global Settlement Agreement.
Section 4.14 CAPTIONS. The captions of this Global Settlement
Agreement are for convenience only and are not a part of this Global Settlement
Agreement and do not in any way define, limit, extend, describe or amplify the
terms and/or provisions and/or scope of this Global Settlement Agreement and
shall have no effect on its interpretation.
Section 4.15 COUNTERPARTS. The Parties may execute this Global
Settlement Agreement in one or more counterparts, each of which constitutes an
original, and all of which constitute one and the same Global Settlement
Agreement. A facsimile or copy of this Global Settlement Agreement executed by
the Parties, whether complete or in counterparts, will constitute sufficient
evidence of the executed original of this Global Settlement Agreement for all
purposes.
Section 4.16 CONSTRUCTION AND INTERPRETATION. Unless the context
requires otherwise, singular nouns and pronouns used in this Global Settlement
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Agreement shall be deemed to include the plural, and pronouns of one gender
shall be deemed to include the equivalent pronoun of the other gender. In the
event of an ambiguity in, or controversy or claim arising out of, or relating to
the interpretation, application, or enforcement of this Global Settlement
Agreement, the Parties agree that no one will resolve any ambiguity in, or
controversy or claim arising out of, or relating to, interpretation, application
or enforcement of this Global Settlement Agreement by any rule providing for
interpretation against the Party who causes the ambiguity to exist or against
the draftsman.
IN WITNESS WHEREOF, the Parties have signed this Global Settlement
Agreement as of the date first listed above.
THE PENN TRAFFIC COMPANY
and its Affiliated Debtors
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Executive Vice President and
Chief Financial Officer
OFFICIAL COMMITTEE OF UNSECURED CREDITORS
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Counsel to the Official Committee
of Unsecured Creditors
THE PENSION BENEFIT GUARANTY CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Operating Officer
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