ASSETPURCHASE AGREEMENT Byand Between C&SWholesale Grocers, Inc. (Purchaser) and ThePenn Traffic Company and Big M Supermarkets, Inc. (together,the SellerCompanies) December17, 2008

 

a)

Assumed Contracts.  All Assumed Contracts, if any, set forth on Schedule 1.2(a) attached hereto.

 

b)

Equipment.  All tangible personal property or other equipment set forth on Schedule 1.2(b) attached hereto (the “Equipment”), including but not limited to, desks, chairs and other furnishings, computers, telxon units at the Wholesale Stores, cell phones and titled vehicles.

 

c)

Files and Records.  At the Employee Closing, all files and personnel records for the Hired Wholesale Employees, and at the Closing, all other documents, papers, computer files, data, customer and supplier lists (including the Wholesale Customer List), cost and pricing information, business plans, quality control records and manuals, blueprints, research and development files, and books and business records of the Seller Companies in any media exclusively or primarily relating to the Acquired Assets, the Wholesale Customers or the Wholesale Business, other than the Retained Information (the “Files and Records”).

 

d)

Warranties.  All manufacturers’ warranties relating to the Equipment and all claims under such warranties arising after the Closing (the “Warranties”).

 

e)

Goodwill.  All goodwill in or arising from the Acquired Assets and the operations of the Wholesale Business (the “Goodwill”).

 

f)

Intellectual Property.  All Intellectual Property, including, but not limited to, the Intellectual Property set forth on Schedule 1.2(f) attached hereto.

 

g)

Agreements with Wholesale Customers.  The Customer Agreements, including, but not limited to, (i) the Customer Supply Agreements, (ii) the Customer License Agreements, (iii) the Customer Security Agreements, (iv) the Customer UCC Filings, (v) the Customer Guarantees, (vi) the Customer Notes, and (vii) the Customer ROFR Agreements, and any documents and files relating to the Wholesale Customers, other than the Retained Information.

 

h)

Accounts Receivable.  All Accounts Receivable with regard to the Wholesale Business as of the Closing; an interim outstanding balance of the Accounts Receivable, calculated using the agreed-upon discounting methodology, is set forth on Schedule 1.2(h) attached hereto (the “Interim AR Balance”).

 

i)

Other Seller Assets.  All other tangible and intangible assets of Seller that are specifically enumerated as Acquired Assets on Schedule 1.2(i) attached hereto.

 

a)

Retail Business.   All tangible and intangible assets of the Seller Companies relating to the Retail Business, including, but not limited to, the Corporate Stores.

 

b)

The Facilities.  All tangible and intangible assets the Seller Companies relating to the Facilities, including, but not limited to, any leaseholds and/or leasehold improvements related thereto.

 

c)

Seller’s Leases and Subleases.  All leases, subleases, licenses and all other real estate interests held by the Seller Companies relating to or used in connection with its Wholesale Customers, including, but not limited to, those leasehold and real estate interests set forth on Schedule 1.3(c) attached hereto (the “Customer Sandwich Leases”).

 

d)

Cash.  All Cash.

 

e)

Bank Accounts, Insurance Policies.  All bank accounts and insurance policies of the Seller Companies.

 

f)

Employee Benefit Plans.  Each and every employee benefit plan and any and all assets and related trusts thereof.

 

g)

Seller’s Corporate Records. The corporate seal, minute books, charter documents, and corporate stock record books of the Seller Companies, and such other books and records as pertain to the organization, existence, or share capitalization of the Seller Companies, the Retained Information, and duplicate copies of such records included in the Acquired Assets as are necessary to enable the Seller Companies to file their tax returns and reports or as are otherwise required to be retained by the Seller Companies under applicable law.

 

h)

Rights under this Agreement and the Related Agreements.  The Seller Companies’ rights arising out of or relating to this Agreement, the Related Agreements, or the transactions contemplated hereby and thereby.

 

i)

Excluded Warranties and Other Claims.  All causes of action, claims, demands, rights and privileges against third parties or portions thereof that arose on or prior to the Closing, including but not limited to, all warranties other than the Warranties and excluding the Accounts Receivable included in the Final AR Balance.

 

j)

Certain Tax Refunds and Credits.  Any refund or credit of Taxes of the Seller Companies for any Tax periods.  For the avoidance of doubt, a refund or credit of real property taxes, personal property taxes, similar ad valorem taxes, or other taxes of a similar nature attributable to the Acquired Assets arising with respect to a period beginning after the Closing Date (or, on a proportional basis, with respect to a period that begins before the Closing Date but ends after the Closing Date) shall be an Acquired Asset.

 

k)

Other Excluded Assets.  Any other asset of the Seller Companies that is not an Acquired Asset, including but not limited to, assets of the Retail Business, the assets used in providing the Transition Services and services to be provided by the Seller Companies under the 3PL Agreement, and those assets specifically enumerated as Excluded Assets on Schedule 1.3(k) attached hereto.

 

a)

Assumed Contracts.  All of the Seller Companies’ Liabilities under each of the Assumed Contracts arising or relating to events that occur on or after the Closing Date.

 

b)

Customer Agreements. All of Seller Companies’ Liabilities under each of the Customer Agreements arising or relating to events that occur on or after the Closing Date.

 

c)

Operating Liabilities.  All Liabilities with respect to the operation or ownership of an Acquired Asset arising or relating to events that occur on or after the Closing Date.

 

d)

Assumed Credits.  Any Liabilities associated with any credits due from the Wholesale Business to Wholesale Customers, or otherwise allocable to the operations of the Wholesale Business, resulting from the period or relating to events that occur on or after the Closing Date.

 

e)

Prepaid Trip Expense.  All Liabilities associated with any and all sums collected by the Seller Companies from its Wholesale Customers prior to Closing designated as a private label surcharge or otherwise collected as monies to be used for the Trip (the “Trip Expense”), as set forth on Section 4.17 of the Seller Disclosure Schedule attached hereto. The dollar amount of the Trip Expense set forth on Section 4.17 of the Seller Disclosure Schedule will be updated as of the Closing Date.

 

f)

Money Order Deposits.  All Liabilities associated with any and all money order deposits held by the Seller Companies prior to Closing from its Wholesale Customers unrelated to the Customer Sandwich Leases (the “Money Order Deposits”), as set forth on Schedule 2.1(f) attached hereto. The dollar amount of the Money Order Deposits set forth on Schedule 2.1(f) will be updated as of the Closing Date.

 

g)

Purchase Rebates.  All Liabilities associated with any and all annual purchase rebates accrued by the Seller Companies as earned by Wholesale Customers under Customer Agreements for the period prior to Closing (the “Purchase Rebates”), as set forth on Schedule 2.1(g) attached hereto. The dollar amount of the Purchase Rebates set forth on Schedule 2.1(g) will be updated as of the Closing Date.

 

h)

Other Assumed Liabilities.  All other Liabilities of the Seller Companies that are  specifically enumerated as Assumed Liabilities on Schedule 2.1(h) attached hereto.

 

a)

Assumed Contracts.  All of the Seller Companies’ Liabilities under each of the Assumed Contracts arising or relating to events that occur prior to the Closing Date.

 

b)

Customer Agreements. All of the Seller Companies’ Liabilities under each of the Customer Agreements arising or relating to events that occur prior to the Closing Date.

 

c)

Excluded Assets.  All Liabilities of the Seller Companies relating to the Excluded Assets, including, but not limited to, the Retail Business, the Corporate Stores, the Customer Sandwich Leases and the Facilities.

 

d)

Taxes.  All Liabilities of the Seller Companies for Taxes for any tax periods, except as provided in Section 8.5 hereof.

 

e)

Employment Matters.  Any and all matters relating to (i) the Hired Wholesale Employees for the period or relating to events that occurred prior to the Employee Closing (including, but not limited to, the Employee Liabilities set forth in Section 9.3 herein), and (ii) the Penn Traffic Employees for any period prior to or following the Closing Date (including, but not limited to, the Employee Liabilities set forth in Section 9.3 herein).

 

f)

Retained Credits.  Any credits due from the Seller Companies to Wholesale Customers, or otherwise allocable to the operations of the Wholesale Business, for the period or relating to events that occurred prior to the Closing Date.

 

g)

Operating Liabilities.  All Liabilities with respect to the operation of an Acquired Asset or the Wholesale Business arising or relating to events that occurred prior to the Closing Date, including any Liabilities associated with Permitted Liens arising prior to the Closing Date.

 

h)

Bulk Sales.  Any Liability for the failure to comply with the Bulk Sales Laws, except any such Liability arising out of the failure of the Purchaser to pay any of the Assumed Liabilities.

 

i)

Other Excluded Liabilities.  All other Liabilities of the Seller Companies that are specifically enumerated as Excluded Liabilities on Schedule 2.2(i) attached hereto.

 

a)

Case Volume.  For each case of groceries or other merchandise in excess of the Seller’s Base Level that Purchaser sells to the Wholesale Customers and any New Customers set forth on Schedule 3.3(a)(i) hereto (the “New Customer Leads”) in the first twelve (12) months following the Closing Date (collectively, the “Excess Cases”), Purchaser shall pay to Seller a dollar amount calculated based upon the formula set forth on Schedule 3.3(a)(ii) attached hereto.  If the total number of cases of groceries and other merchandise that Purchaser sells to the Wholesale Customers in the first twelve (12) months following the Closing is less than the Seller’s Base Level (the difference between the Seller’s Base Level and the total number of cases sold being, collectively, the “Deficit Cases”), Seller shall pay to Purchaser a dollar amount calculated based upon the formula set forth on Schedule 3.3(a)(ii) attached hereto.

 

b)

True-Up Payment.  Purchaser shall submit a certificate to Seller within thirty (30) days following the end of the twelve (12) month period following the Closing Date, indicating the number of cases sold by Purchaser during that period and calculating any payment due under Section 3.3(a).  If a true-up payment is due under Section 3.3(a), the obligated party shall make the required payment within fourteen (14) days of the date of the certificate.

 

c)

Seller’s Base Level.  As used herein, the “Seller’s Base Level” shall mean the number of cases of groceries and other merchandise sold by Seller to the Wholesale Customers during the Seller’s most recently completed fiscal year ending on February 2, 2008, which amount is 10,506,173 cases.  For purposes of determining the number of cases sold by Purchaser during the first twelve (12) months following the Closing, the parties agree that they will employ the same methodology and measurement practices as used in determining Seller’s Base Level.  Further, if there is a material change in ordering or order fulfillment practices on behalf of either party (for example, with respect to the mix of shippers, mods and individual case units) within the first twelve (12) months following the Closing, the parties agree to make any necessary adjustment to the  Seller's Base Level to account for such change.

 

d)

Qualifying Cases.  For purposes of determining the true-up calculation under this Section 3.3, Purchaser’s case volume shall only include (i) Purchaser’s sales to the Wholesale Customers existing on the date of this Agreement (as set forth on Section 4.9(a) of the Seller Disclosure Schedule attached hereto) (ii) for the purpose of calculating any Excess Cases, Purchaser’s sales to any New Customer Leads, and (iii) any case sales by Purchaser to Corporate Stores that Seller converts to independent wholesale business following the date of this Agreement.

 

e)

Service Level.  For purposes of determining the true-up calculation under this Section 3.3, any number of Deficit Cases shall be reduced to the extent that Seller (in accordance with the 3PL Agreement) was unable to fill orders from the Wholesale Customers during the 12-month period immediately following the Closing because Purchaser failed to maintain a Service Level (as defined in the Supply Agreement Amendment) of 94.00%, during any week in such period.  The number of Deficit Cases will be reduced by the number of cases that would have been required to achieve a Service Level of 94.00% in such week with regard to the Wholesale Customers.  In no event shall the number of Deficit Cases be reduced below zero.

 

a)

List of Wholesale Customers.  Section 4.9(a) of the Seller Disclosure Schedule sets forth a true, correct and complete list of all Wholesale Customers that the Seller Companies supply with groceries or other merchandise and/or with services (the “Wholesale Customer List”), which List indicates (i) whether each such Wholesale Customer is supplied with groceries or other merchandise or provided with services (or both), (ii) the types of products supplied to, and/or services provided to, each such Wholesale Customer, (iii) the Seller Company’s pricing and/or fee schedule that is currently applicable to each such Wholesale Customer (and true, correct and complete copies of such pricing and/or fee schedules are attached to Section 4.9(a) of the Seller Disclosure Schedule), and any other pricing terms applicable to such Wholesale Customer, and (iv) any additional material terms or conditions of the supply relationships for those Wholesale Customers under oral or unwritten arrangements with the Seller Companies.  The Wholesale Business consists of supplying groceries or other merchandise, and/or providing services, to the Wholesale Customers listed on  Section 4.9(a) of the Seller Disclosure Schedule and the Seller Companies do not supply, service or maintain wholesale accounts or otherwise do wholesale business with any other retailer, customer or third party (with the exception of the Corporate Stores).

 

b)

List of Supply Agreements.  Section 4.9(b) of the Seller Disclosure Schedule sets forth a true, correct and complete list of all written supply agreements, stand-by agreements or other documents that relate to the Seller Companies’ provision of groceries or other merchandise and/or services to the Wholesale Customers (the “Customer Supply Agreements”), which list includes all month-to-month or expired written agreements with respect to (i) Wholesale Customers that are being supplied or serviced by the Seller Companies as of the date of this Agreement and as of the Closing Date, and/or (ii) Wholesale Customers with outstanding trade debt with the Seller Companies as of the date of this Agreement and as of the Closing Date.

 

c)

List of License Agreements.  Section 4.9(c) of the Seller Disclosure Schedule sets forth a true, correct and complete list of all written license agreements or other documents that relate to the Seller Companies’ licensing of trade names and/or the provision of services to the Wholesale Customers (the “Customer License Agreements”), which list includes all month-to-month or expired written agreements with respect to (i) Wholesale Customers that are being licensed or serviced by the Seller Companies as of the date of this Agreement and as of the Closing Date, and/or (ii) Wholesale Customers with outstanding trade debt with the Seller Companies as of the date of this Agreement and as of the Closing Date.

 

d)

List of Security Agreements and UCC-1 Filings.  Section 4.9(d) of the Seller Disclosure Schedule sets forth a true, correct and complete list of all written security or pledge agreements or other collateral documents that the Seller Companies have entered into with its Wholesale Customers (the “Customer Security Agreements”), together with a true, correct and complete list of all corresponding UCC-1 filings (the “Customer UCC Filings”).

 

e)

List of Customer Guarantees.  Section 4.9(e) of the Seller Disclosure Schedule sets forth a true, correct and complete list of all secured or unsecured written guarantees in favor of the Seller Companies executed by any person or entity in support of the obligations of the Wholesale Customers to the Seller Companies (the “Customer Guarantees”).

 

f)

Absence of Seller Guarantees.  The Seller Companies have not executed any secured or unsecured written guarantees in favor of third parties in support of the obligations of the Wholesale Customers to such third parties, including, but not limited to, rents under real estate leases, utility payments or payments to DSD vendors.

 

g)

List of Customer Notes.  Section 4.9(g) of the Seller Disclosure Schedule sets forth a true, correct and complete list of all promissory or forgiveness notes that have amounts outstanding as of the date of this Agreement executed by Wholesale Customers in favor of the Seller Companies, which list includes the outstanding balances under such notes as of the date of this Agreement (the “Customer Notes”).  The Seller Companies have not reduced the principal amount of or otherwise compromised any Customer Note, except to reflect regularly scheduled payments made in the ordinary course of business consistent with past practice.

 

h)

List of Rights of First Refusal.  Section 4.9(h) of the Seller Disclosure Schedule sets forth a true, correct and complete list of all written agreements executed by Wholesale Customers in favor of the Seller Companies providing either of the Seller Companies a right of first refusal with regard to such customers’ retail operations or real estate interests, except for the Customer Sandwich Leases (the “Customer ROFR Agreements”).

 

i)

Customer Agreements.  For purposes of his Agreement, the “Customer Agreements” shall include (i) the Customer Supply Agreements, (ii) the Customer License Agreements, (iii) the Customer Security Agreements, (iv) the Customer UCC Filings, (v) the Customer Guarantees, (vi) the Customer Notes, (vii) the Customer ROFR Agreements and (viii) any oral agreements or terms and conditions relating to the relationship of any Wholesale Customer with the Seller Companies (to the extent such oral terms or conditions are known by the Seller Companies), as set forth on and more fully described on Section 4.9(a) of the Seller Disclosure Schedule, and shall not include the Customer Sandwich Leases.  Other than the Customer Sandwich Leases set forth on Schedule 1.3(c) attached hereto, there are no other written, and to the knowledge of the Seller Companies, oral, agreements, understandings or courses of dealing, between either Seller Company and the Wholesale Customers.

 

j)

Customer Disputes.  Neither a Seller Company nor, to the knowledge of such Seller Company, any other party thereto is in material breach or default, and no event has occurred which with notice or lapse of time, or both, would constitute a  material breach or default by a Seller Company or, to the knowledge of such Seller Company, by any such other party thereto, under the Customer Agreements.  Except as set forth on Section 4.9(j) of the Seller Disclosure Schedule, there are no disputes by a Seller Company against any of the Wholesale Customers, and to the knowledge of each Seller Company, by any of the Wholesale Customers against a Seller Company, and each Seller Company has no reason to believe that any relationships with its Wholesale Customers are at risk as of the date of this Agreement and as of the Closing Date.  Except as set forth on Section 4.9(j) of the Seller Disclosure Schedule, none of the Wholesale Customers have given written notice or otherwise indicated in writing (or, to the knowledge of a Seller Company, orally indicated) to a Seller Company that (i) it will or intends to terminate or not renew any Customer Agreement before the scheduled expiration date, (ii) it will otherwise terminate its relationship with a Seller Company (or Purchaser, with regard to the period on or after the Closing Date), or (iii) it may otherwise reduce the volume of business transacted with a Seller Company (or Purchaser, with regard to the period on or after the Closing Date) below historical levels.  True, correct and complete copies of all Customer Agreements have been delivered to Purchaser prior to the date of this Agreement and no such Customer Agreement has been amended or modified since the date such Customer Agreement was so delivered.

 

k)

Purchase Rebates.  The Seller Companies are not accruing annual purchase rebates for any Wholesale Customers under Customer Agreements or otherwise other than as set forth on Schedule 2.1(g) attached hereto, in the stated amounts.  The amounts accrued for the Purchase Rebates are consistent with the Seller Companies’ past practice.

 

a)

Adjusted Wholesale P&L Statement.  The adjusted statement of profit and loss for the Wholesale Business (including the businesses associated with the Customer Sandwich Leases and the Facilities, and the assets used in providing services to be provided under the Transition Services Agreement and the 3PL Agreement for the twelve (12) month period ended February 2, 2008 (the “Adjusted Wholesale P&L Statement”) is set forth in Section 4.19(a) of the Seller Disclosure Schedule.  The Adjusted Wholesale P&L Statement was prepared from the books and records of Seller, kept in the ordinary course of business.  Except as set forth therein, the Adjusted Wholesale P&L Statement was included as part of Seller's audited financial statements for its 2008 fiscal year, which were included in Seller's Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 18, 2008.  As modified by periodic consolidation entries, the Adjusted Wholesale P&L Statement: (i) is true, correct and complete in all material respects and (ii) except as otherwise indicated therein, was prepared in accordance with GAAP and fairly presents the consolidated results of operations of Seller during the periods indicated therein.  A calculation of Seller’s earnings before interest, taxes, depreciation and amortization based on its net income for its 2008 fiscal year (the “Wholesale EBITDA”) and based on an adjusted calculation of its net income for its 2008 fiscal year (the “Adjusted Wholesale EBITDA”) is set forth on the Adjusted Wholesale P&L Statement.

 

b)

Wholesale Financial Data.  The financial items set forth in Section 4.19(b) of the Seller Disclosure Schedule (the “Wholesale Financial Data”) were prepared from the books and records of Seller, kept in the ordinary course of business.  Sub-schedule 2 to Section 4.19(b) of the Seller Disclosure Schedule, entitled “Sales and Cases,” is true, complete and accurate in all material respects with regard to the aggregate case volume set forth therein.

 

a)

All material tax returns required to be filed by the Seller Companies on or prior to the Closing Date with respect to the Acquired Assets and the operation of the Wholesale Business have, within the time and manner prescribed by law, been duly filed with the appropriate tax authorities.  All such tax returns are true, complete and accurate in all material respects and all taxes due and payable with respect to such tax returns have been paid.  The Seller Companies have timely paid or caused to be paid all material taxes required to be paid for the portion of the taxable year or period through and including the Closing Date.

 

b)

There are no Liens for taxes upon any of the Acquired Assets except for statutory liens for taxes not yet due and payable, or if due (A) that are not delinquent or (B) are being contested in good faith by appropriate proceedings and provision for the payment of all such taxes have been made in the Wholesale Financial Data or the Seller Companies’ books and records.

 

c)

To the knowledge of the Seller Companies, there are no unpaid sales and use tax liabilities or any other unpaid taxes of the Seller Companies for which successor liability will apply to Purchaser as a result of acquiring the Acquired Assets relating to the Wholesale Business.

 

a)

Section 4.21(a) of the Seller Disclosure Schedule is a true, correct and complete list, as of the date shown thereon, of all employees of the Seller Companies that are fully dedicated to the operations of the Wholesale Business (the “Wholesale Employees”), including each such employee’s site of employment, position and department, hiring date, salary or hourly rate, and Past Service with the Seller Companies. As of the Employee Closing, none of the Wholesale Employees shall have an unpaid balance of unused vacation, sick leave, personal days or any  other accrued paid time off as reflected in Seller’s personnel records, including time earned to be used during calendar year 2009, all of which shall have been paid or satisfied by the Seller Companies in accordance with its practices and policies prior to the Employee Closing.  Based upon the practices and policies of the Seller Companies in existence on the date of this Agreement, (i) the Wholesale Employees earn paid time off on a calendar year basis during the then current year, and (ii) (except for a portion of the sick time earned by hourly Wholesale Employees), the Wholesale Employees cannot carry forward unused time off into the next calendar year.

 

b)

The expenses associated with the Wholesale Employees for Seller’s 2008 fiscal year ended February 2, 2008, are included within the Adjusted Wholesale P&L Statement and reflected in the Adjusted Wholesale EBITDA.

 

c)

None of the Wholesale Employees are represented by a labor union or labor organization.  Neither Seller Company is subject to or a party to any collective bargaining agreement or other agreement with a labor union or labor organization covering any Wholesale Employee.

 

d)

There are no employment agreements, severance agreements or severance plans or policies with respect to the Wholesale Employees, except for the severance policies and severance agreement described in Section 4.21(d) of the Seller Disclosure Schedule.

 

e)

The Seller Companies are in material compliance with all applicable laws respecting employment practices, terms and conditions of employment, management-labor relations and wages and hours which are in effect as of this Agreement and on the date of the Employee Closing.

 

f)

There is no labor or employment dispute or claim pending or, to the knowledge of the Seller Companies, threatened, by any Wholesale Employee against the Seller Companies.  There is no unfair labor practice, charge or complaint relating to any of the Wholesale Employees against the Seller Companies that is pending or, to the knowledge of the Seller Companies, threatened before any Governmental Authority.

 

g)

There is no labor strike or labor disturbance pending or, to the knowledge of the Seller Companies, threatened, by any Wholesale Employee against either Seller Company or any of their Affiliates, nor is any grievance by any Wholesale Employee currently being asserted.

 

h)

The Wholesale Employees do not include the Seller Companies’ personnel who provided retail accounting services to the Wholesale Business (including the businesses associated with the Customer Sandwich Leases and the Facilities, and the assets used in providing and services to be provided under the Transition Services Agreement and the 3PL Agreement) as of the date hereof (“Retail Accounting Personnel”).  The expenses of the Retail Accounting Personnel (such expenses being referred to in the Adjusted Wholesale P&L Statement as the “Independent Accounting Dept.”) are  included in the Adjusted Wholesale P&L Statement and reflected in the Adjusted Wholesale EBITDA.  The services provided to the Wholesale Business by the Retail Accounting Personnel in the Trailing 12 Months (as defined in the Transition Services Agreement) are set forth in Schedule 5(a) to the Transition Service Agreement.

 

i)

The Wholesale Employees do not include the Seller Companies’ personnel who provided retail, systems, support and administrative services to the Wholesale Business (including the businesses associated with the Customer Sandwich Leases and the Facilities, and the assets used in providing and services to be provided under the Transition Services Agreement and the 3PL Agreement) as of the date hereof (“Corporate Division Personnel”). The expenses of the Corporate Division Personnel (such expenses being referred to in the Adjusted Wholesale P&L Statement as the “Corporate Support Services”) are not reflected in the Adjusted Wholesale EBITDA (other than the $800,000 charge for certain RWS Services (as such term is defined in the Transition Services Agreement) provided by Seller Companies through its “Corporate Division” reflected in the adjustments to the Adjusted Wholesale P&L Statement).  The services provided to the Wholesale Customers and the Wholesale Business by the Corporate Personnel in the Trailing 12 Months (as defined in the Transition Services Agreement) are set forth in Schedule 1(a) to the Transition Service Agreement.

 

j)

The Seller Companies currently operates the Wholesale Business (including the businesses associated with the Customer Sandwich Leases and the Facilities, and the assets used in providing and services to be provided under the Transition Services Agreement and the 3PL Agreement) exclusively through (i) the Wholesale Employees, (ii) the Retail Accounting Personnel (in accordance with the parameters set forth in Schedule 5(a) to the Transition Service Agreement), and (iii) the Corporate Division Personnel (in accordance with the parameters set forth in Schedule 1(a) to the Transition Service Agreement), and through no other employees or independent contractors.

 

a)

The “Intellectual Property” shall mean all intellectual property owned by either Seller Company and used in the operation of the Wholesale Business (including the businesses associated with the Customer Sandwich Leases and the Facilities, and the assets used in providing and services to be provided under the Transition Services Agreement and the 3PL Agreement) as currently conducted by the Seller Companies, including without limitation, (i) all United States, foreign, international and State registered and unregistered trademarks, fictitious business names, service marks, trade names, logos or designs of the Seller Companies (including, but not limited to, “Bi-Lo,” “Big M,” and “Riverside” and versions thereof as set forth on Schedule 1.2(f) attached hereto), and (ii) all trade secrets, and information of any kind of either of the Seller Companies that is not generally known in Seller’s industry (including without limitation ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals); (iii) all documents, designs, artwork, software and other works of any kind subject to copyright protection; and (iv) all copies and tangible embodiments of all intellectual property of the Seller Companies, in each case, used in the operation of the Wholesale Business (including the businesses associated with the Customer Sandwich Leases and the Facilities, and the assets used in providing the services to be provided under the Transition Services Agreement and the 3PL Agreement).  The “Intellectual Property” shall also include all of both Seller Companies’ rights in the mark “Bi-Lo,” specifically including without limitation rights based on both Seller Companies’ use of “Bi-Lo” outside of the Wholesale Business.  Seller does not own, license or hold the rights to use any patents or patent applications, or any United States copyright registrations or copyright applications, with respect to patentable and copyrightable subject matter, respectively, that are used in connection with the Wholesale Business (including the businesses associated with the Customer Sandwich Leases and the Facilities, and the assets used in providing and services to be provided under the Transition Services Agreement and the 3PL Agreement).

 

b)

There are no pending or, to the knowledge of the Seller Companies, threatened claims against a Seller Company involving the Intellectual Property, (i) alleging infringement by a Seller Company or any Wholesale Customer of intellectual property rights of any person, or (ii) challenging any Seller Company’s ownership or use of, or any Wholesale Customer’s use of, or the validity, enforceability or registrability of any such Intellectual Property.

 

c)

Within the three (3) years prior to the date of this Agreement, a Seller Company has not brought or threatened a claim against any person, (i) alleging infringement of the Intellectual Property, or (ii) challenging any person’s ownership or use of, or the validity, enforceability or registrability of any Intellectual Property.

 

d)

The Seller Companies own all Intellectual Property and have the valid and enforceable right to use all Intellectual Property, free and clear of all Liens, other than Permitted Liens.  No Intellectual Property is used by either Seller Company pursuant to any license agreement, consent, or permission granted by any third party.  Neither Seller Company has (i) granted any third party any express or implied right, license, consent or permission to use any Intellectual Property, (except for rights granted to Wholesale Customers pursuant to written Customer Agreements, copies of which have been provided to Purchaser); or (ii) entered into any express or implied agreement with any third party restricting its right to use or transfer any Intellectual Property.

 

e)

The Intellectual Property is the only intellectual property used in the operation of the Wholesale Business (including the businesses associated with the Customer Sandwich Leases and the Facilities, and the assets used in providing and services to be provided under the Transition Services Agreement and the 3PL Agreement) by the Seller Companies as it is currently conducted by the Seller Companies.  The Intellectual Property  (i) has been duly maintained by the Seller Companies, (ii) is subsisting, in full force and effect, (iii) has not been cancelled, expired or abandoned, and (iv) is valid and enforceable.

 

a)

Representations and Warranties.  All of the representations and warranties of Seller set forth in this Agreement shall be true, correct and complete, in each case as of the date of this Agreement, and as of the Closing Date and, with respect to Section 4.21 herein, as of the Employee Closing (except to the extent a representation or warranty speaks only as of an earlier date, which shall be true and complete as of such date), except where the failure of a representation or warranty to be true, correct and complete would not have a Material Adverse Effect on the Wholesale Business.  In making this determination under subsection (a), no supplements or amendments to the Seller Disclosure Schedule made by Seller pursuant to Section 8.13 herein shall be taken into account.

 

b)

Seller’s Performance of Covenants.  The Seller Companies shall not have failed to perform in any material respect any material obligation, or to comply in any material respect with any agreement or covenant of the Seller Companies to be performed or complied with by them under this Agreement.

 

c)

No Litigation.  No action, suit, or proceeding shall be pending or threatened before any Governmental Authority or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling or charge would (i) prevent consummation of any of the transactions contemplated by this Agreement or (ii) cause any of the transactions contemplated by this Agreement to be rescinded following consummation (and no such injunction, judgment, order, decree, ruling or charge shall be in effect).

 

d)

Title to Acquired Assets.  The Seller Company’s title in and to the Acquired Assets shall be good, valid and marketable and free of all Liens, other than Permitted Liens, and the Seller Companies shall have obtained customary: (i) consents to the transactions contemplated hereby and (ii) releases, discharges and other agreements addressed to and for the benefit of Purchaser with respect to the Acquired Assets in form and substance reasonably satisfactory to Penn Traffic, from its lenders on or prior to the Closing.

 

e)

Restated Supply Agreement.  The Restated Supply Agreement shall be in full force and effect and Seller shall not be in material default thereunder (and no condition shall exist that, with the giving of notice or passage of time, or both, would constitute a material default by Seller thereunder).

 

f)

Third Party Consents.  The Seller Companies shall have obtained all Material Third Party Consents.

 

g)

No Material Adverse Effect.  There shall not have been a Material Adverse Effect on the Wholesale Business since the date of this Agreement.

 

h)

Closing Documents.  The Seller Companies shall have delivered each of the documents, and/or taken each of the actions, set forth in Section 7.2 below.

 

a)

Possession of the Acquired Assets, including, but not limited to, (i) the original copies of all written Assumed Contracts and Customer Agreements, (ii) the Equipment, (iii) the Files and Records (with the exception of the Files and Records relating to the Hired Wholesale Employees, which shall be delivered by Seller at the Employee Closing), (iv) the Warranties, and (v) all documents evidencing the Intellectual Property, including any registration statements or filings.

 

b)

A duly executed bill of sale from the Seller Companies, with regard to the Acquired Assets (including, but not limited to, the Equipment, the Warranties and the Files and Records (with the exception of the Files and Records relating to the Hired Wholesale Employees, which shall be delivered by Seller at the Employee Closing)), in the form attached hereto as Exhibit H (the “Bill of Sale”).

 

c)

A duly executed assignment and assumption agreement from the Seller Companies, with regard to the Assumed Contracts and the Customer Agreements, in the form attached hereto as Exhibit I (the “Assignment and Assumption Agreement”).

 

d)

Duly executed counterparts from the Seller Companies of the Related Agreements, including, but not limited to, the following: (i) Transition Services Agreement, (ii) 3PL Agreement, (iii) GM/HBC Amendment, (iv) IP Assignment, and (v) IP License.

 

e)

Duly executed copies of (i) the consents, waivers and/or approvals which the Seller Companies have been able to obtain prior to the Closing with respect to the Third Party Consents required under any of the Assumed Contracts or Customer Agreements, (ii) the Material Third Party Consents, and (iii) documents from Seller’s lenders in forms sufficient to satisfy Section 7.1(d) above.

 

f)

A duly executed certificate by each Seller Company’s Secretary or Assistant Secretary certifying as to the incumbency, and authenticating the signatures of, officers executing this Agreement and the Exhibits to which such Seller Company is a party and certificates delivered hereunder on behalf of the Seller Company, and certifying as to the adoption and continuing effect of appropriate resolutions authorizing the Seller Company’s execution, delivery and performance of this Agreement and the Exhibits to which such Seller Company is a party.

 

g)

A duly executed officer’s certificate from each Seller Company stating that all representations and warranties set forth in ARTICLE IV remain true and correct in all material respects as of the Closing Date.

 

h)

A duly executed counterpart from the Seller Companies of the closing statement setting forth the calculation of the Purchaser Price payable to Seller at Closing for the Acquired Assets in accordance with Section 3.1 hereof (the “Closing Statement”).

 

i)

A duly executed certificate from an officer of Seller setting forth the Final AR Balance.

 

j)

A legal opinion from counsel to Seller containing the opinions set forth on Exhibit J hereto.

 

l)

A duly executed First Amendment to Amended and Restated Penn Traffic Company Supply Agreement from the Seller Companies, in the form attached hereto as Exhibit K (the “First Amendment”).

 

m)

Such other documents executed by the Seller Companies that are expressly required to be delivered pursuant to this Agreement or required to effect the transactions contemplated hereby, in form and substance reasonably satisfactory to Purchaser.

 

a)

Representations and Warranties.  All of the representations and warranties of Purchaser set forth in this Agreement shall be true and complete in all material respects, in each case as of the date of this Agreement and as of the Closing Date (except to the extent a representation or warranty speaks only as of an earlier date, which shall be true and complete as of such date).

 

b)

Purchaser’s Performance of Covenants.  Purchaser shall not have failed to perform in any material respect any obligation or to comply in any material respect with any agreement or covenant of Purchaser to be performed or complied with by it under this Agreement.

 

c)

No Litigation.  No action, suit, or proceeding shall be pending or threatened before any Governmental Authority or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling or charge would (i) prevent consummation of any of the transactions contemplated by this Agreement or (ii) cause any of the transactions contemplated by this Agreement to be rescinded following consummation (and no such injunction, judgment, order, decree, ruling or charge shall be in effect).

 

d)

Restated Supply Agreement.  The Restated Supply Agreement shall be in full force and effect and Purchaser shall not be in material default thereunder (and no condition shall exist that, with the giving of notice or passage of time, or both, would constitute a material default thereunder).

 

e)

Closing Documents.  Purchaser shall have delivered each of the documents, and/or taken each of the actions, set forth in Section 7.4 below.

 

a)

One or more wire transfers payable to Seller pursuant to wire transfer instructions delivered or caused to be delivered by Seller to Purchaser prior to or at the Closing in the aggregate amount of the Purchase Price, provided, that, if the Closing occurs on a Saturday or Sunday, the funds shall be wired to Seller on the following Monday by 12:00 p.m., Eastern Standard Time, and all documents conveyed at Closing shall be held in escrow until the Purchase Price is paid to Seller.

 

b)

A duly executed counterpart of the Bill of Sale from Purchaser.

 

c)

A duly executed counterpart of the Assignment and Assumption Agreement from Purchaser.

 

d)

Duly executed counterparts from Purchaser of the Related Agreements, including, but not limited to, the following: (i) Transition Services Agreement, (ii) 3PL Agreement, (iii) GM/HBC Amendment, (iv) IP Assignment, and (v) IP License.

 

e)

A duly executed certificate by Purchaser’s Secretary or Assistant Secretary certifying as to the incumbency, and authenticating the signatures of, officers executing this Agreement and the Exhibits to which Purchaser is a party and certificates delivered hereunder on behalf of Purchaser, and certifying as to the adoption and continuing effect of appropriate resolutions authorizing Purchaser’s execution, delivery and performance of this Agreement and the Exhibits to which Purchaser is a party.

 

f)

A duly executed officer’s certificate from Purchaser stating that all representations and warranties set forth in ARTICLE V remain true and correct in all material respects as of the Closing Date.

 

g)

A “sale for resale exemption certificate” or any sales and use tax forms which are necessary and permissible in order to obtain available exemptions of the transfer of any Acquired Assets pursuant to this Agreement from sales and use taxes, duly and properly executed and completed by Purchaser, if necessary.

 

h)

A duly executed counterpart of the Closing Statement from Purchaser.

 

i)

a legal opinion from counsel to Purchaser containing the opinions set forth on Exhibit L hereto.

 

j)

A duly executed First Amendment from Purchaser.

 

k)

such other documents executed by Purchaser that are expressly required to be delivered pursuant to this Agreement or required to effect the transactions contemplated hereby, in form and substance reasonably satisfactory to Seller.

 

a)

use, preserve and maintain the Acquired Assets on a basis consistent with practices as of the date of this Agreement and all applicable laws and not cause material damage to or destruction or loss of any of the Acquired Assets;

 

b)

continue to maintain the insurance covering the Acquired Assets in effect as of the date of this Agreement;

 

c)

pay all debts and obligations incurred by the Seller Companies in the operation of the Wholesale Business and the Acquired Assets in the ordinary course of business consistent with practices as of the date of this Agreement;

 

d)

comply with all terms and conditions of the Assumed Contracts and Customer Agreements and not commit any act or omit to do any act which may cause a material breach by the Seller Companies of any of the Assumed Contracts or the Customer Agreements (and the Seller Companies shall provide Purchaser prompt notice of any such breach declared by a counterparty to such agreements);

 

e)

maintain its books, accounts and records with respect to such Acquired Assets and the Wholesale Business in the usual manner and on a basis consistent with past practices;

 

f)

not create, assume or permit to exist any Lien, other than Permitted Liens, on any Acquired Asset, except in the ordinary course of business consistent with practices as of the date of this Agreement;

 

g)

not amend or terminate any Assumed Contract or Customer Agreement, except in the ordinary course of business consistent with practices as of the date of this Agreement (provided, that, the Seller Company shall consult with Purchaser in advance of any such amendment or termination);

 

h)

not undertake any plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization that is inconsistent with the transactions contemplated by this Agreement;

 

i)

not take, or agree to or commit to take, any action that would or is reasonably likely to result in any of the Conditions of Closing set forth in ARTICLE VII not being satisfied, or that would materially impair the ability of Purchaser or a Seller Company to consummate the transactions contemplated by this Agreement in accordance with the terms hereof or materially delay such consummation;

 

j)

maintain the operations of the Seller Companies to enable them to satisfy their obligations under the Transition Services Agreement (and all other Related Agreements) after the Closing;

 

k)

not grant any raises or other concessions to Wholesale Employees, or make any organizational changes or other material personnel decisions with respect to any Wholesale Employees, such as hiring, terminating or laying off any Wholesale Employee;

 

l)

not take any action or omit to take any action whereby any Intellectual Property included in the Acquired Assets may lapse, become abandoned, dedicated to the public, or unenforceable;

 

m)

operate the Wholesale Business (including the businesses associated with the Customer Sandwich Leases and the Facilities, and the assets used in providing and services to be provided under the Transition Services Agreement and the 3PL Agreement) in the ordinary course consistent with past practices and use commercially reasonable efforts to preserve intact its goodwill, keep available the services of its employees, and preserve the goodwill and business relationships with its suppliers, Wholesale Customers and others having business relationships with it;

 

n)

comply with all terms and conditions of the Customer Sandwich Leases in all material respects, and not commit any act or omit to do any act, which may cause a material breach of any of the Customer Sandwich Leases (and the Seller Companies shall provide Purchaser prompt notice of any such breach declared by a counterparty to such agreements); and

 

o)

not enter into any contract or agreement, or take any action or omit to take any action, that is inconsistent with any of the foregoing.

 

a)

Notwithstanding any other provision of this Agreement to the contrary, all excise, transfer, gross receipts, litter control, documentary, sales, use, gross receipts, stamp, registration, filing, recordation and other similar taxes, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties incurred in connection with this Agreement or resulting from the transactions contemplated by this Agreement, including, but limited to, the Inventory Agreement (collectively, “Conveyance Taxes”), shall be borne equally by Seller and Purchaser and shall be paid by the responsible party on the Closing Date or as soon thereafter as necessary or required.  The party responsible shall file all necessary tax returns with respect to all such Conveyance Taxes, and, to the extent required by applicable law, the other party will join in the execution of any such returns.

 

b)

All real property taxes, personal property taxes or similar ad valorem taxes levied with respect to the Acquired Assets for any taxable period that includes the day before the Closing and ends on or after the Closing, whether imposed or assessed before or after the Closing, shall be prorated between Seller and Purchaser as of 12:00:01 a.m. on the date of the Closing.

 

c)

Any amounts not determinable as of the Closing or reflected on the Closing Statement will be taken into account at the Closing based on good faith estimates with the actual amount to be calculated by Purchaser and Seller as soon as practicable after the actual amounts are determinable with an appropriate adjustment to be made by the appropriate party within 30 calendar days after determination.

 

d)

Promptly upon execution of this Agreement, the Seller Companies agree to use reasonable efforts to obtain tax clearance certificates from the Commonwealth of Pennsylvania evidencing the payment of all Taxes with regard to each Seller Company (including, but not limited to, from the Pennsylvania Department of Labor and Industry and the Pennsylvania Department of Revenue), and to reasonably cooperate with Purchaser’s filing of  similar requests for tax clearance certificates from the State of New York with regard to each Seller Company (the “Tax Clearances”).

 

a)

The Seller Companies and Purchaser acknowledge that, in connection with the Closing, Purchaser will succeed to the interests of the Seller Companies under the Customer Agreements, including, but not limited to, the Customer Security Agreements, Customer UCC Filings and the Customer Guarantees (which may secure amounts owed to Seller under the Customer Sandwich Leases).  If, following the Closing, Purchaser elects to liquidate any of the collateral secured by these documents or to otherwise pursue its remedies thereunder with regard to a Wholesale Customer with a Customer Sandwich Lease, Purchaser will (to the extent allowed by law) hold in trust for the benefit of, and within thirty (30) days of receipt pay to, the Seller Companies, any liquidation proceeds from such collateral that Purchaser receives that are in excess of the amounts then owed to Purchaser (including any costs of collection and enforcement); provided, that, the proceeds paid to the Seller Companies shall not exceed the amount owed to the Seller Companies by the Wholesale Customer under the Customer Sandwich Leases plus fifty percent (50%) of any proceeds remaining after Purchaser and the Seller Companies have been fully paid.

 

b)

Set forth on Schedule 8.8(b) attached hereto is a list of each Wholesale Customer whose indebtedness is included in Seller’s bad debt reserve as of the Closing (together with any other Wholesale Customers as mutually agreed to, the “Bad Debt Customers”) with the dollar amount of the different types of collateral securing such indebtedness (the total collateral amount for such Bad Debt Customer, the “Collateral Amount”, and all such amounts collectively, the “Total Collateral Amount”) set across from its name.  Such schedule shall be updated by the Seller Companies within two weeks of Closing.

 

c)

Upon a Bad Debt Customer becoming one week past due at any time after the Closing and prior to the later of (i) the last day of the term of the 3PL Agreement, or (ii) February 15, 2011 (the “Collection Deadline”), Purchaser shall take (or, in accordance with the Transition Services Agreement, shall cause the Seller Companies to take) the actions set forth on Schedule 8.8(c) hereto, in the order in which they are listed from top to bottom, that are reasonably necessary, in Purchaser’s good faith judgment, to collect the maximum amount from such Bad Debt Customer.  Upon any peaceful surrender of the collateral of such Bad Debt Customer prior to the Collection Deadline, Purchaser shall take the following actions as soon as reasonably practicable subsequent to such surrender, as applicable, in order to attempt to collect the maximum amount from such Bad Debt Customer:

 

(i)  liquidate, sell, or otherwise dispose of any inventory held by such Bad Debt Customer, and the Seller Companies shall, upon Purchaser’s request, purchase any such inventory from Purchaser at a purchase price to be negotiated in good faith subsequent to such request;

 

(ii)  liquidate, sell, or otherwise dispose of any equipment held by such Bad Debt Customer;

 

(iii)  among other things, attempt to stop payment to DSD vendors or return product to such vendors; or

 

(iv)  among other things, apply any credits, deposits, rebates, pre-paid receivables or other amounts then owed to or otherwise held by Purchaser (including, but not limited to, amounts relating to M.O. deposits/Mfg. Cpn Rec./Annual Purchase Rebate).

 

The “Cumulative Shortage Amount” shall initially be zero.  In the event that Purchaser takes each of the applicable actions described above prior to the Collection Deadline with respect to the collateral of a Bad Debt Customer: (A) the Cumulative Shortage Amount shall increase by the extent that the dollar amounts collected by Purchaser from such Bad Debt Customer prior to the Collection Deadline are less than such Bad Debt Customer’s Collateral Amount, and (B) the Cumulative Shortage Amount shall decrease by the extent that the dollar amounts collected by Purchaser from such Bad Debt Customer are more than such Bad Debt Customer’s Collateral Amount.  C&S shall notify the Seller Companies of the amount it has collected from such Bad Debt Customer within twenty (20) days of completing their liquidation.

 

Notwithstanding any other provision to the contrary herein, any amounts payable by the Seller Companies or the Purchaser pursuant to this Section 8.8 shall not be subject to Article XI hereof or any of the limitations therein.

 

a)

From and after the Closing until the fifth anniversary of the Closing Date, to protect and preserve the value of the Acquired Assets and the Wholesale Business, the Seller Companies (and their Affiliates) shall not, without the prior written approval of Purchaser, directly or indirectly, solicit, encourage, entice or induce any Wholesale Customer, New Customer or other prospective wholesale customer within the same geographic area as the Wholesale Business ("Prospective Customer") to enter into a supply agreement or any other arrangement to supply product or services to such customer for the account of a Seller Company (or an Affiliate); or enter into with any Wholesale Customer, New Customer or Prospective Customer a supply agreement or any other arrangement to supply  product or services to such customer for the account of a Seller Company (or an Affiliate).  Further, from and after the date hereof until February 15, 2011, to protect and preserve the value of the Acquired Assets and the Wholesale Business, the Seller Companies (and their Affiliates) shall not, without the prior written approval of Purchaser, open any new Corporate Stores through the construction or development of a new supermarket building or the re-development of an existing non-supermarket building in the same geographic area as the Wholesale Customers.  Notwithstanding the foregoing, the Seller Companies (and their Affiliates) shall have no obligation to refrain from: (i) providing the Additional Services, as defined in the Transition Services Agreement, to the Wholesale Customers, and (ii) providing any of the services to be provided under the Transition Services Agreement or the 3PL Agreement.

 

b)

Each of the Seller Companies and Purchaser acknowledges that the covenants contained in this Section 8.9 were a material and necessary inducement for Purchaser to agree to the transactions contemplated hereby, and that violation of any covenants contained in this Section 8.9 will cause irreparable and continuing damage to Purchaser, that Purchaser shall be entitled to injunctive or other equitable relief from any court of competent jurisdiction restraining any further violation of such covenants and that such injunctive relief shall be cumulative and in addition to any other rights or remedies to which Purchaser may be entitled.

 

c)

If it is ever held by any court of competent jurisdiction that the restrictions placed on a Seller Company under this Section 8.9 are too onerous and are not necessary for the protection of Purchaser, each party to this Agreement agrees that any court of competent jurisdiction may impose lesser restrictions which such court may consider to be necessary or appropriate to properly protect the other party or parties hereto.

 

a)

By mutual written consent of Seller and Purchaser;

 

b)

At the written election of Seller or Purchaser, if the other party to this Agreement shall have materially breached or violated any representation, warranty or obligation contained herein that is within such party’s respective control to perform, and such breach or violation shall not have been cured within ten (10) days (or such longer period as may be necessary to cure the same with due diligence) after written notice thereof has been given to such party in breach; or

 

c)

By either Seller or Purchaser in the event that the Closing has not taken place by December 22, 2008 (unless the party seeking to terminate this Agreement is in material breach of its obligations hereunder and such breach caused or resulted in the failure of the Closing to occur on or before such date).

 

a)

any breach by Purchaser of any of Purchaser’s representations or warranties contained in this Agreement, in any certificate or other instrument delivered to Seller required by this Agreement, or in the Transition Services Agreement;

 

b)

any breach by Purchaser of any of Purchaser’s covenants or other agreements contained in this Agreement, in any certificate or other instrument delivered to Seller required by this Agreement, or in the Transition Services Agreement;

 

c)

the ownership, use, operation, maintenance or management of the Acquired Assets or the Wholesale Business from and after the Closing (provided, that, such Losses do not arise or result from a breach of a representation or warranty hereunder by a Seller Company); and

 

d)

the Assumed Liabilities.

 

a)

any breach by the Seller Companies of any of the Seller Companies’ representations or warranties contained in this Agreement, in any certificate or other instrument delivered to Purchaser required by this Agreement, or in the Transition Services Agreement;

 

b)

any breach by the Seller Companies of any of the Seller Companies’ covenants or other agreements contained in this Agreement, in any certificate or other instrument delivered to Purchaser required by this Agreement, or in the Transition Services Agreement;

 

c)

the ownership, use, operation, maintenance or management of the Acquired Assets or the Wholesale Business prior to the Closing (provided, that, such Losses do not arise or result from a breach of a representation or warranty hereunder by Purchaser);

 

d)

any matters set forth in Section 4.14 of the Seller Disclosure Schedule (or any update thereto); and

 

e)

the Excluded Liabilities.

 

a)

Notice.  Whenever any indemnified party shall have received notice that a claim has been asserted or threatened against such indemnified party, which, if valid, would subject the indemnifying party to an indemnity obligation under this Agreement, the indemnified party shall promptly notify the indemnifying party of such claim; provided, however, that failure to so notify the indemnifying party shall not relieve the indemnifying party of its indemnification obligations hereunder, except to the extent the indemnifying party is actually prejudiced thereby.  Any such notice must be made to the indemnifying party not later than (i) the expiration of the applicable survival period specified in Section 13.10 below with regard to indemnification claims under Section 11.1(a) or Section 11.2(a) above, (ii) the expiration of the applicable survival period specified in Section 13.11 below with regard to indemnification claims under Section 11.1(b) or Section 11.2(b) above, or (iii) the expiration of the applicable statutes of limitation with regard to indemnification claims under Sections 11.1(c) or 11.1(d) or Sections 11.2(c), 11.2(d) or11.2(e) above.

 

b)

Defense of a Third Party Claim.  If any third party shall notify any party (the “Indemnified Party”) with respect to any matter (a “Third Party Claim”) that may give rise to a claim for indemnification against any other party (the “Indemnifying Party”) under this Article XI, the Indemnifying Party will have the right, but not the obligation, to assume the defense of the Third Party Claim with counsel of its choice reasonably satisfactory to the Indemnified Party at any time within 30 days after the Indemnified Party has given notice of the Third Party Claim, so long as the Indemnifying Party conducts the defense of the Third Party Claim actively and diligently.  Notwithstanding the foregoing, the Indemnifying Party shall not be entitled to assume the defense of any Third Party Claim (and shall be liable for the reasonable fees and expenses of counsel incurred by the Indemnified Party in defending such Third Party Claim) if the Third Party Claim seeks an order, injunction or other equitable relief or relief for other than money damages against the Indemnified Party that the Indemnified Party reasonable determines, after conferring with its outside counsel and the Indemnifying Party’s outside counsel, cannot be separated from any related claim for money damages.  If such equitable relief or other relief portion of the Third Party Claim can be so separated from that portion for money damages, the Indemnifying Party shall be entitled to assume the defense of the portion relating to money damages.

 

So long as the Indemnifying Party is conducting the defense of the Third Party Claim in accordance with the first paragraph of this Section 11.3(b), the Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third Party Claim; provided that the Indemnifying Party shall control such defense.  Whether or not the Indemnifying Party is conducting the defense of the Third Party Claim (i) the Indemnified Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnifying Party (not to be withheld, delayed or conditioned unreasonably), and (ii) the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnified Party (not to be withheld, delayed or conditioned unreasonably).

 

In the event the Indemnifying Party fails to assume the defense of a Third Party Claim, or the Indemnifying Party is subject to bankruptcy, insolvency, receivership or similar proceedings, or the condition in the first paragraph of this Section 11.3(b) is or becomes unsatisfied after written notice has been provided to the Indemnifying Party and the Indemnifying Party fails to cure the matter unsatisfied (such cure period to be no more than ten days or such lesser period if after such ten day period the Indemnified Party would be prejudiced in the defense of such Third Party Claim) then, (i) the Indemnified Party may, at the cost and expense of the Indemnifying Party, assume control of the defense of such Third Party Claim (and the Indemnified Party need not consult with any Indemnifying Party in connection therewith) and consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim in any manner it reasonably may deem appropriate (subject to the Indemnifying Party’s consent (not to be withheld, delayed or conditioned unreasonably)), and (ii) the Indemnifying Party will reimburse the Indemnified Party promptly and periodically for the reasonable costs of defending against the Third Party Claim (including reasonable attorneys’ fees and expenses).  Regardless of the party who defends against such Third Party Claim, the other party agrees to cooperate in good faith with the defending party.

 

c)

Non-Third Party Claims.  If a party obtains knowledge that it has sustained any Losses not involving a Third Party Claim which such party reasonably believes may give rise to a claim for indemnification from another party hereunder, such Indemnified Party shall deliver notice of such claim to the Indemnifying Party, together with a brief description of the facts and data which support the claim for indemnification; provided, however, that failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party of its indemnification obligations hereunder, except to the extent that the Indemnifying Party is actually prejudiced thereby.  Any such notice must be made to the Indemnifying Party not later than (i) the expiration of the applicable survival period specified in Section 13.10 below with regard to indemnification claims under Section 11.1(a) or Section 11.2(a) above, (ii) the expiration of the applicable survival period specified in Section 13.11 below with regard to indemnification claims under Section 11.1(b) or Section 11.2(b) above, or (iii) the expiration of the applicable statutes of limitation with regard to indemnification claims under Sections 11.1(c) or 11.1(d) or Sections 11.2(c), 11.2(d) or 11.2(e) above.

 

a)

“Accounts Receivable” shall mean (i) all trade accounts receivable and other rights to payment from Wholesale Customers and the full benefit of all security for such accounts or rights to payment, including without limitation, all trade accounts receivable representing amounts receivable in respect of goods shipped or products sold or services rendered to the Wholesale Customers, including receivables associated with payments made to DSD vendors and third parties by Seller Companies on behalf of Wholesale Customers, and (ii) all other accounts or notes receivable of Seller Companies and the full benefit of all security for such accounts or notes.

 

b)

“Acquired Assets” shall have the meaning set forth in Section 1.2 of this Agreement.

 

c)

“Adjusted Purchase Price” shall have the meaning set forth in Section 3.4 of this Agreement.

 

d)

“Adjusted Wholesale EBITDA” shall have the meaning set forth in Section 4.19(a) of this Agreement.

 

e)

“Adjusted Wholesale P&L Statement” shall have the meaning set forth in Section 4.19(a) of this Agreement.

 

f)

“Affiliate” shall mean, with respect to any person, each other person that is controlled by, or is under common ownership with such person.  For the purpose of this definition, “control” of a person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, by contract or otherwise.

 

g)

“Agreement” shall have the meaning set forth in the first paragraph of this Asset Purchase Agreement.

 

h)

“Applicable Law” shall have the meaning set forth in Section 4.16 of this Agreement.

 

i)

“Assignment and Assumption Agreement” shall have the meaning set forth in Section 7.2(c) of this Agreement.

 

j)

“Assumed Contracts” shall mean the contracts exclusively or materially relating to the Acquired Assets, the Wholesale Customers or the Wholesale Business.

 

k)

“Assumed Liabilities” shall have the meaning set forth in Section 2.1 of this Agreement.

 

l)

“Bad Debt Customers” shall have the meaning set forth in Section 8.8(b) of this Agreement.

 

m)

“Bill of Sale” shall have the meaning set forth in Section 7.2(b) of this Agreement.

 

n)

“Big M” shall have the meaning set forth in the first paragraph of this Agreement.

 

o)

“Bulk Sales Law” shall have the meaning set forth in Section 2.4 of this Agreement.

 

p)

“Cash” shall mean all cash or cash equivalents held by or under the control of the Seller Companies relating to the Wholesale Business, including without limitation, (i) cash or cash equivalents kept at the Facilities, (ii) cash or cash equivalents in till, kept in registers and safes, or physically in transit to or from the Facilities, and (iii) cash or cash equivalents in a bank account or other deposit arrangements belonging to the Seller Companies.

 

q)

“Closing” shall have the meaning set forth in Section 6.1 of this Agreement.

 

r)

“Closing Date” shall have the meaning set forth in Section 6.1 of this Agreement.

 

s)

“Closing Statement” shall have the meaning set forth in Section 7.2(h) of this Agreement.

 

t)

“Code” means the Internal Revenue Code of 1986, as amended;

 

u)

“Collateral Amount” shall have the meaning set forth in Section 8.8(b) of this Agreement.

 

v)

“Collection Deadline” shall have the meaning set forth in Section 8.8(c) of this Agreement.

 

w)

“Conditions of Closing” shall have the meaning set forth in ARTICLE VII of this Agreement.

 

x)

“Confidentiality Agreement” shall have the meaning set forth in Section 8.10 of this Agreement.

 

y)

“Conveyance Taxes” shall have the meaning set forth in Section 8.5 of this Agreement.

 

z)

“Corporate Division Personnel” shall have the meaning set forth in Section 4.21(i) of this Agreement.

 

aa)

“Corporate Stores” shall have the meaning set forth in the recitals to this Agreement.

 

bb)

“Cumulative Shortage Amount” shall have the meaning set forth in Section 8.8(c) of this Agreement.

 

cc)

“Customer Agreements” shall have the meaning set forth in Section 4.9(i) of this Agreement.

 

dd)

“Customer Guarantees” shall have the meaning set forth in Section 4.9(e) of this Agreement.

 

ee)

“Customer License Agreements” shall have the meaning set forth in Section 4.9(c) of this Agreement.

 

ff)

“Customer Notes” shall have the meaning set forth in Section 4.9(g) of this Agreement.

 

gg)

“Customer ROFR Agreements” shall have the meaning set forth in Section 4.9(h) of this Agreement.

 

hh)

“Customer Sandwich Leases” shall have the meaning set forth in Section 1.3(c) of this Agreement.

 

ii)

“Customer Security Agreements” shall have the meaning set forth in Section 4.9(d) of this Agreement.

 

jj)

“Customer Supply Agreements” shall have the meaning set forth in Section 4.9(b) of this Agreement.

 

kk)

“Customer UCC Filings” shall have the meaning set forth in Section 4.9(d) of this Agreement.

 

ll)

“Deficit Cases” shall have the meaning set forth in Section 3.3(a) of this Agreement.

 

oo)

“Equipment” shall have the meaning set forth in Section 1.2(b) of this Agreement.

 

pp)

“Excess Cases” shall have the meaning set forth in Section 3.3(a) of this Agreement.

 

qq)

“Excluded Assets” shall have the meaning set forth in Section 1.3 of this Agreement.

 

rr)

“Excluded Liabilities” shall have the meaning set forth in Section 2.2 of this Agreement.

 

ss)

“Facilities” shall have the meaning set forth in the recitals to this Agreement.

 

tt)

“Files and Records” shall have the meaning set forth in Section 1.2(c) of this Agreement.

 

uu)

“Final AR Balance” shall have the meaning set forth in Section 3.2 of this Agreement.

 

vv)

“GAAP” shall mean generally accepted accounting principles used in the United States of America, consistently applied.

 

ww)

“GM/HBC” shall have the meaning set forth in the recitals to this Agreement.

 

xx)

“GM/HBC Agreement” shall have the meaning set forth in the recitals to this Agreement.

 

yy)

“GM/HBC Amendment” shall have the meaning set forth in the recitals to this Agreement.

 

zz)

“Goodwill” shall have the meaning set forth in Section 1.2(e) of this Agreement.

 

aaa)

“Governmental Authority” shall mean any foreign, federal, state, local or other governmental, administrative or regulatory authority, body, agency, court, tribunal or similar entity.

 

bbb)

“GU” shall have the meaning set forth in Section 8.6 of this Agreement.

 

ccc)

“Hired Wholesale Employees” shall have the meaning set forth in Section 9.2 of this Agreement.

 

ddd)

“Indemnified Party” shall have the meaning set forth in Section 11.3(b) of this Agreement.

 

eee)

“Intellectual Property” shall have the meaning set forth in Section 4.22(a) of this Agreement.

 

fff)

“Interim AR Balance” shall have the meaning set forth in Section 1.2(h) of this Agreement.

 

ggg)

“Inventory Agreement” shall have the meaning set forth in the recitals to this Agreement.

 

hhh)

“IP Assignment” shall have the meaning set forth in the recitals to this Agreement.

 

iii)

“IP License” shall have the meaning set forth in the recitals this Agreement.

 

jjj)

any reference herein to (i) the “knowledge” of the Seller or the Seller Companies or matters “known” to the Seller or the Seller Companies shall mean the actual knowledge of or matters known by Greg Young, Tod A. Nestor, David Adamsen, Scott Brown and/or Daniel J. Mahoney, after a diligent review of applicable files and records, and (ii) the “knowledge” of the Purchaser or matters “known” to the Purchaser shall mean the actual knowledge of or matters known by James Weidenheimer and Michael Newbold, after a diligent review of applicable files and records.

 

kkk)

“Law” shall mean any statute, law, regulation, judgment, order or decree of any Governmental Authority.

 

ooo)

“Material Adverse Effect” means, with respect to the Purchaser, a Seller Company, the Seller Companies, or the Wholesale Business, as applicable (the Purchaser, a Seller Company, the Seller Companies, or the Wholesale Business being referred to in this subsection as such person), any change, development, event or effect (individually or in the aggregate) that is, or would be, or could reasonably be expected to be, materially adverse to the business, assets, financial condition or results of operations of such person or that would prevent or materially impair the ability of such party to consummate the transactions contemplated in this Agreement; it being specifically acknowledged that it shall constitute a Material Adverse Effect on the Wholesale Business if any one or more Wholesale Customers cease purchasing or reduce their purchases of products and/or services from the Seller Companies during the period between the date of this Agreement and the Closing Date (or provide notice to a Seller Company of its intention to cease or reduce such purchases on or after the Closing Date) and the projected decline in the Wholesale Business’ sales during the subsequent 12 months resulting from such cessation of or reduction in purchases (assuming identical sales during this 12-month period to those Wholesale Customers who did not cease or reduce their purchases, proportionally reduced sales to any Wholesale Customer that reduced its purchases, and no sales to a Wholesale Customer that ceased its purchases) represents a decline of greater than 5% of the sales of the Wholesale Business during the 12 months prior to the date hereof (a “5% Reduction”).  Notwithstanding the foregoing, none of the following shall be deemed in themselves, either alone or in combination, to constitute, and none of the following shall be taken into account in determining whether there has been, a Material Adverse Effect (including any 5% Reduction): any adverse changes, events, developments or effects (A) arising from or relating to general business or economic conditions and which do not affect such person in a materially disproportionate manner compared to other persons operating in the same industry, (B) arising from or relating to any change in GAAP, (C) attributable to the announcement or pendency of the transactions contemplated hereby and by the Related Agreements (including any cancellations of or delays in customer agreements, any reduction in sales, any disruption in supplier, distributor, partner or similar relationships or any loss of employees) or resulting from or relating to compliance with the terms of, or the taking of any action required by, this Agreement and the Related Agreements, (D) arising from or relating to statutes, laws, ordinances, rules or regulations issued by any Governmental Authority that do not disproportionately affect such person relative to other persons operating in the same industry, and (E) arising from or relating to the occurrence of any event of terrorism or war.  In determining whether there has been a Material Adverse Effect on the Seller, the Seller Companies or the Wholesale Business, internal forecasts or projections and the effect of expenses related to the transactions contemplated hereby and by the Related Agreements shall not be taken into account.

 

ppp)

“Material Third Party Consents” shall be designated on Section 4.5 of the Seller Disclosure Schedule.

 

qqq)

“Money Order Deposits” shall have the meaning set forth in Section 2.1(f) of this Agreement.

 

ttt)

“Past Service” shall have the meaning set forth in Section 9.2 of this Agreement.

 

uuu)

“Penn Traffic Employees” shall have the meaning set forth in Section 9.4 of this Agreement.

 

xxx)

“Produce Agreement” shall have the meaning set forth in the recitals to this Agreement.

 

yyy)

“Prospective Customer” shall have the meaning set forth in Section 8.9(a) of this Agreement.

 

zzz)

“Purchase Price” shall have the meaning set forth in Section 3.1 of this Agreement.

 

ffff)

“Quarterly Collateral Amounts” shall have the meaning set forth in Section 8.8(c). of this Agreement.

gggg)

“Related Agreements” shall have the meaning set forth in the recitals to this Agreement.

hhhh)

“Restated Supply Agreement” shall have the meaning set forth in the recitals to this Agreement.

 

iiii)

“Retail Accounting Personnel” shall have the meaning set forth in Section 4.21(h) of this Agreement.

 

jjjj)

“Retail Business” shall have the meaning set forth in the recitals to this Agreement.

kkkk)

“Retained Information” shall mean (i) any and all Tax records that relate primarily to Taxes that are Excluded Liabilities pursuant to Section 2.2 hereof, and (ii) all files and records relating to Seller employees which cannot be transferred to Purchaser without either of the Seller Companies violating applicable Laws (provided, that, the Seller Companies shall provide such files and records to Purchaser after Closing upon receipt of an appropriate release or consent signed by any such employee in conformance with applicable Laws).

 

llll)

“Seller” shall have the meaning set forth in the first paragraph of this Agreement.

mmmm)

“Seller’s Base Level” shall have the meaning set forth in Section 3.3(c) of this Agreement.

nnnn)

”Seller’s Basket” shall have the meaning set forth in Section 11.2 of this Agreement.

oooo)

“Seller Disclosure Schedule” shall have the meaning set forth in the first paragraph of Article IV of this Agreement.

pppp)

“Seller Indemnified Persons” shall have the meaning set forth in Section 11.1 of this Agreement.

ssss) 

“Tax Clearances” shall have the meaning set forth in Section 8.5 of this Agreement and in conformity with Commonwealth of Pennsylvania and State of New York laws and regulations as applicable.

tttt)

“Taxes” shall mean any foreign, federal, state or local income, gross receipts, franchise, license, severance, occupation, premium, environmental, customs duties, profits, disability, registration, alternative or add-on minimum, estimated, withholding, payroll, employment, unemployment insurance, social security (or similar), excise, sales, use, value-added, occupancy, franchise, real property, personal property, windfall profits, capital stock, stamp, transfer, workmen's compensation, or other tax of any kind whatsoever imposed by a Governmental Authority, including any interest, penalties, additions, assessments or deferred liability with respect thereto, whether disputed or not.

uuuu)

“Third Party Claim” shall have the meaning set forth in Section 11.3(b) of this Agreement.

vvvv) 

“Third Party Consents” shall have the meaning set forth in Section 4.5 of this Agreement.

wwww)

“Total Collateral Amount” shall have the meaning set forth in Section 8.8(b) of this Agreement.

xxxx)

 “3PL Agreement” shall have the meaning set forth in the recitals to this Agreement.

yyyy)

“Transition Services Agreement” shall have the meaning set forth in the recitals to this Agreement.

bbbbb)

“Warranties” shall have the meaning set forth in Section 1.2(d) of this Agreement.

ccccc) 

“Wholesale Business” shall have the meaning set forth in the recitals to this Agreement.

ddddd) 

“Wholesale Customer List” shall have the meaning set forth in Section 4.9(a) of this Agreement.

eeeee) 

“Wholesale Customers” shall have the meaning set forth in the recitals to this Agreement.

fffff)

“Wholesale EBITDA” shall have the meaning set forth in Section 4.19(a) of this Agreement.

ggggg) 

 “Wholesale Employees” shall have the meaning set forth in Section 4.21(a) of this Agreement.

hhhhh)

“Wholesale Financial Data” shall have the meaning set forth in Section 4.19(b) of this Agreement.

 

iiiii)

“Wholesale Stores” shall have the meaning set forth in the recitals to this Agreement.