-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, oRkawcVmHuQ8EWd8aC8C06rjHg/kGdxJTN9YRgqYZo3p67OhNcstPiN6K5tQUm4X u9y1Wu+qFX04cOsza5qJnA== 0000912057-95-002964.txt : 19950502 0000912057-95-002964.hdr.sgml : 19950502 ACCESSION NUMBER: 0000912057-95-002964 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950607 FILED AS OF DATE: 19950501 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PENN TRAFFIC CO CENTRAL INDEX KEY: 0000077155 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 250716800 STATE OF INCORPORATION: PA FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 001-09930 FILM NUMBER: 95533187 BUSINESS ADDRESS: STREET 1: 319 WASHINGTON STREET CITY: JOHNSTOWN STATE: PA ZIP: 15901 BUSINESS PHONE: 8145369900 MAIL ADDRESS: STREET 1: 1200 STATE FAIR BLVD CITY: SYRACUSE STATE: NY ZIP: 13221-4737 DEF 14A 1 DEF 14A SCHEDULE 14A INFORMATION PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. ) Filed by the Registrant /X/ Filed by a Party other than the Registrant / / Check the appropriate box: / / Preliminary Proxy Statement / / Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) /X/ Definitive Proxy Statement / / Definitive Additional Materials / / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12 THE PENN TRAFFIC COMPANY ---------------------------------------------------------------------- (Name of Registrant as Specified in Its Charter) ----------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement if other than the Registrant) Payment of filing fee (Check the appropriate box): /X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item 22(a)(2) of Schedule 14A. / / $500 per each party to the controversy pursuant to Exchange Act Rule 14a-6(i)(3). / / Fee computed on table below per Exchange Act Rules 14a-(6)(i)(4) and 0-11. (1) Title of each class of securities to which transaction applies: - -------------------------------------------------------------------------------- (2) Aggregate number of securities to which transaction applies: - -------------------------------------------------------------------------------- (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): - -------------------------------------------------------------------------------- (4) Proposed maximum aggregate value of transaction: - -------------------------------------------------------------------------------- (5) Total fee paid: - -------------------------------------------------------------------------------- / / Fee paid previously with preliminary materials. / / Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: - -------------------------------------------------------------------------------- (2) Form, Schedule or Registration Statement no.: - -------------------------------------------------------------------------------- (3) Filing Party: - -------------------------------------------------------------------------------- (4) Date Filed: - -------------------------------------------------------------------------------- THE PENN TRAFFIC COMPANY NOTICE OF ANNUAL MEETING OF STOCKHOLDERS JUNE 7, 1995 The Annual Meeting of Stockholders of The Penn Traffic Company (the "Company") will be held on Wednesday, June 7, 1995, at 1:30 p.m., Columbus time, at the Hyatt Capitol Square, 75 East State Street, Columbus, Ohio, 43215 for the following purposes: 1. To elect three directors for terms expiring in 1998; 2. To consider and take action upon a proposal to ratify the selection of Price Waterhouse LLP, independent certified public accountants, as the Company's auditors for the fiscal year ending January 27, 1996; and 3. To transact such other business as may properly come before the meeting or any adjournment thereof. Holders of Common Stock of the Company are entitled to vote for the election of directors and on each of the other matters set forth above. The stock transfer books of the Company will not be closed. The Board of Directors has fixed the close of business on April 17, 1995 as the record date for determining stockholders entitled to notice of and to vote at the meeting. You are cordially invited to attend the meeting in person. A report will be made to you on the status of the Company's affairs. We will also provide you with an opportunity for questions and comments. By Order of the Board of Directors EUGENE R. SUNDERHAFT Senior Vice President - Finance and Secretary May 1, 1995 Syracuse, New York - -------------------------------------------------------------------------------- IMPORTANT Whether or not you expect to attend the meeting in person, please complete, date and sign the enclosed form of proxy and return it without delay in the enclosed envelope. Your proxy can be revoked at any time prior to its being voted by giving written notice of revocation to the Secretary of the Company, by giving a later dated proxy, or by voting at the meeting in person. - -------------------------------------------------------------------------------- THE PENN TRAFFIC COMPANY 1200 STATE FAIR BOULEVARD SYRACUSE, NEW YORK 13221-4737 PROXY STATEMENT Annual Meeting of Stockholders June 7, 1995 This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of The Penn Traffic Company, a Delaware corporation (the "Company" or "Penn Traffic"), for use at the Annual Meeting of Stockholders to be held on Wednesday, June 7, 1995, at 1:30 p.m., Columbus time, at the Hyatt Capitol Square, 75 East State Street, Columbus, Ohio 43215. The approximate date on which this Proxy Statement is first being mailed to stockholders is May 1, 1995. You are requested to complete, date and sign the accompanying proxy card and return it promptly to the Company in the envelope provided. Proxies duly executed and received in time for the meeting will be voted in accordance with the instructions thereon. Any stockholder who has given a proxy may revoke it at any time prior to its being voted by giving written notice of revocation to the Secretary of the Company, by giving a later dated proxy, or by voting at the meeting in person. The Board of Directors has fixed the close of business on April 17, 1995 as the record date for the determination of stockholders who are entitled to notice of and to vote at the meeting. The stock transfer books of the Company will not be closed. As of the record date, the Company had outstanding 10,879,201 shares of common stock, par value $1.25 per share (the "Common Stock"), the holders of which are entitled to one vote per share. The total amount of outstanding shares includes 285,600 shares of restricted stock awarded to certain employees under the Company's 1993 Long-Term Incentive Plan (the "1993 Plan"). Vesting of the shares of restricted stock granted pursuant to such awards is contingent upon the attainment of specified performance goals. -1- 1. ELECTION OF DIRECTORS Pursuant to the Company's certificate of incorporation and by-laws, the Board of Directors is divided into three separate classes of directors, which are required to be as nearly equal as practicable. At each annual meeting of stockholders, one class of directors is elected to a term of three years. On December 8, 1994, the Board of Directors, pursuant to the Company's certificate of incorporation and by-laws, approved an increase in the total number of directors from nine to ten, and elected John T. Dixon a director of the Company for a term expiring in 1995. Guido Malacarne, whose term expires this year, is retiring from the Board of Directors at the age of 70, and is not a nominee for election for an additional term. Pursuant to the Company's certificate of incorporation and by- laws, the Board of Directors has determined that, effective upon the accession to office of directors elected at the 1995 Annual Meeting, the total number of directors shall be reduced to nine. John T. Dixon, Gary D. Hirsch and Richard D. Segal have been nominated by the Board of Directors for election as directors at the 1995 Annual Meeting, each to serve for a term of three years, until the 1998 Annual Meeting of Stockholders and until his successor is duly elected and qualified. The persons named in the accompanying proxy card have advised that, unless a contrary direction is indicated on the proxy card, they intend to vote for the election of the nominees proposed by the Board of Directors. If no directions are indicated, such shares will be voted as recommended by the Board of Directors. They have also advised that in the event any nominee is unable or unwilling to serve for any reason not presently known, they will vote for such substitute nominee as the Board of Directors may propose. Each nominee has consented to be named as a nominee and has agreed to serve if elected. Directors will be elected by an affirmative vote of a plurality of the shares of Common Stock present in person or represented by proxy and entitled to vote at the 1995 Annual Meeting. Thus, those nominees who receive the highest, second-highest and third-highest numbers of votes for their election as directors will be elected, regardless of the -2- number of shares that are not voted for the election of such nominees. Shares with respect to which authority to vote for any nominee or nominees is withheld will not be counted in the total number of shares voted for such nominee or nominees. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" ELECTION OF JOHN T. DIXON, GARY D. HIRSCH AND RICHARD D. SEGAL AS DIRECTORS OF THE COMPANY. The following information includes the age, the year in which first elected as a director of the Company and the principal occupation and other directorships of each of the nominees named for election as directors, and of the other current directors of the Company whose terms will not expire until 1996 or 1997. Nominee for Election: Mr. Dixon has been President and Chief Executive John T. Dixon Officer of the Company since January 29, 1995. Mr. Age: 55 Dixon was President of the P & C Foods Division of Director since December the Company from August 1993 until January 1995 and 1994 was a Vice President of the Company from April 1993 until January 1995. From February 1992 until September 1993, Mr. Dixon was President and a Director of Quality Markets, Inc. (formerly a subsidiary of the Company and currently a division). Mr. Dixon joined Big Bear Stores Company, Inc. (formerly a subsidiary of the Company and currently a division) in 1957 and served as Director of Store Operations from 1990 until 1992. Nominee for Election: Mr. Hirsch has been Chairman of the Company since Gary D. Hirsch 1987. Mr. Hirsch has been a general partner of the Age: 45 managing partner of Miller Tabak Hirsch + Co. Director and Chairman ("MTH") (broker-dealer) since March 1982 and a since 1987 Managing Director of MTH Holdings, Inc. ("MTH Holdings") since November 1983. He is Chairman, President and a Director of RAC Partners, Inc. ("RAC Partners"), the sole general partner of Riverside Acquisition Company, Limited Partnership ("RAC"). Mr. Hirsch has been Director and Chairman of Grand Union Holdings (food distribution holding company) since July 1989. Mr. Hirsch became Chairman and a Director of Grand Union Capital Corporation ("Grand Union Capital") in May 1992 and Chairman and a Director of The Grand Union Company ("Grand Union") (food distribution) in July 1992. -3- Nominee for Election: Mr. Segal has been Chairman and/or Chief Executive Richard D. Segal Officer of Seavest, Inc. (investment banking) since Age: 41 1981, Chairman of Encore Company, Inc. (investment Director since 1988 banking) since 1983 and managing general partner of Seavest Partners (investment portfolio management) since 1980. Eugene A. DePalma Since April 1994, Mr. DePalma has been the Chief Age: 59 Executive Officer of Sausage Acquisition Company Director since 1987 (food processing). From October 1991 until April Term Expires 1997 1994, Mr. DePalma was engaged in the management of private affairs. Mr. DePalma was the Vice President, Sales for Teledyne Continental Motors from January 1991 until October 1991. From April 1990 until January 1991, Mr. DePalma was engaged in the management of private affairs. Mr. DePalma was the Chairman and Chief Executive Officer of Van Dusen Airport Services Company, Limited Partnership ("VDAS") (aviation services) from December 1986 to April 1990. Mr. DePalma became President and Chief Operating Officer of Van Dusen Air Incorporated ("VDAI") (aviation services) in 1983 and held other executive officer positions with VDAI from 1974 to 1983. Susan E. Engel Since September 1994 Ms. Engel has been President Age: 48 and Chief Operating Officer of Department 56, Inc. Director since 1993 (collectibles and giftware). Ms. Engel has been a Term Expires 1997 director of Hills Stores Co. (discount department stores) since October 1993 and a director of Ryka, Inc. (athletic shoes) since May 1994. From September 1993 until September 1994, Ms. Engel was engaged in the management of private affairs. From July 1991 to September 1993, Ms. Engel served as President and Chief Executive Officer of Champion Products (manufacture and distribution of active wear), a division of Sara Lee Corporation. She was a Vice President and Partner with Booz Allen & Hamilton, Inc. ("Booz Allen") (management consulting) from 1986 to October 1991, where she led the firm's retail consulting practice in the Eastern United States. Ms. Engel held various other positions with Booz Allen from 1977 to 1986. -4- Martin A. Fox Mr. Fox has been Vice Chairman - Finance of the Age: 41 Company since February 1993. From 1989 until Director and Vice February 1993, Mr. Fox was a Vice President of the Chairman since 1993 Company. Mr. Fox has been Assistant Secretary of Term expires 1996 Penn Traffic since 1989. Mr. Fox has been Executive Vice President of MTH since 1988. Mr. Fox became a Director, Vice President and Secretary of Grand Union Capital in May 1992 and Treasurer of Grand Union Capital in May 1993. Mr. Fox became a Vice President and Assistant Secretary and a Director of Grand Union and Vice President and Secretary and a Director of Grand Union Holdings in July 1992 and Treasurer of Grand Union Holdings in May 1993. Claude J. Incaudo Mr. Incaudo was President and Chief Executive Age: 61 Officer of the Company from February 1990 until Director since 1988 retiring on January 28, 1995. Since his retirement Term Expires 1997 from his position as President and Chief Executive Officer of the Company, Mr. Incaudo has been engaged as a consultant to the Company. Mr. Incaudo was the President of P & C Food Markets, Inc. (formerly a subsidiary of the Company and currently a division) ("P & C") (food distribution) or its predecessors from 1982 until the merger of P & C into the Company in April 1993 (the "P & C Merger") and a Director of P & C from 1985 until the P & C Merger. He joined P & C in 1977 as Director of Store Operations and became Senior Vice President of Store Operations in 1979. Mr. Incaudo became a Director of Grand Union Holdings in July 1992. Joseph J. McCaig Mr. McCaig has been Chief Executive Officer of Grand Age: 50 Union since July 1989 and a Director of Grand Union Director since 1992 since 1981. Mr. McCaig served as President and Term expires 1996 Chief Operating Officer of Grand Union between 1981 and July 1989. He has been employed by Grand Union since 1961. Mr. McCaig was appointed President of Grand Union Capital and Grand Union Holdings in May 1993. He became a director of Grand Union Holdings in July 1989 and a Director of Grand Union Capital in July 1992. -5- Harold S. Poster Mr. Poster has been a partner in the law firm of Age: 50 Gilmartin, Poster & Shafto since July 1991. He was Director since 1988 a partner in the law firm of Solomon & Fornari, P.C. Term expires 1996 from January 1990 to July 1991. There are no family relationships among the directors and executive officers of the Company. On January 25, 1995, Grand Union filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code with the United States Bankruptcy Court, District of Delaware (the "Bankruptcy Court"). On February 6, 1995, an involuntary Chapter 11 petition was filed in the Bankruptcy Court against Grand Union Capital. On February 16, 1995, Grand Union Capital commenced a voluntary Chapter 11 case in the Bankruptcy Court by consenting to the entry of an order for relief on the involuntary Chapter 11 petition. Also on February 16, 1995, Grand Union Holdings filed a voluntary Chapter 11 petition in the Bankruptcy Court. Messrs. Fox, Hirsch and McCaig are directors and executive officers of Grand Union, Grand Union Capital and Grand Union Holdings, and Mr. Incaudo is a director of Grand Union Holdings. Messrs. Hirsch, Fox and Incaudo have indicated that they intend to resign from all positions which any of them hold with Grand Union, Grand Union Capital and Grand Union Holdings, such resignation to be effective no later than the date of completion of the pending Bankruptcy Court proceedings. The Board of Directors of the Company held five meetings in the fiscal year ended January 28, 1995 ("Fiscal 1995"). Each incumbent director attended more than 75 percent of the aggregate number of meetings of the Board of Directors of the Company and of the committees of such Board on which he served, except for Mr. Malacarne. Mr. Malacarne was absent from certain meetings of the Board of Directors and of the committees on which he served (each of which committee meetings was held on the same day as a Board meeting) due to international travel. The current members of the Executive Committee are Messrs. Dixon and Hirsch. Mr. Incaudo served on the Executive Committee until his retirement in January 1995. The Executive Committee may exercise certain powers of the -6- Board of Directors regarding the management and direction of the business and affairs of the Company when the Board of Directors is not in session. All action taken by the Executive Committee is reported to and reviewed by the Board of Directors. The current members of the Personnel and Compensation Committee of the Board of Directors (the "Compensation Committee") are Messrs. DePalma, Malacarne, Poster and Segal. Mr. Segal is the Chairman of the Compensation Committee. The Compensation Committee reviews the annual recommendations of the Chief Executive Officer and the Chairman of the Board of Directors concerning the compensation of officers of the Company and of certain of the officers and employees of the Company's divisions, including the compensation plans, retirement plans and fringe benefits in which such persons participate, and makes reports and recommendations with respect to such matters to the Board of Directors of the Company. The Compensation Committee, which held two meetings in Fiscal 1995, also administers the Company's 1993 Plan. The current members of the Audit Committee are Messrs. DePalma and Malacarne. Mr. DePalma is the Chairman of the Audit Committee. Mr. Poster served as a member of the Audit Committee until December 8, 1994. The Audit Committee reviews and makes reports and recommendations to the Board of Directors with respect to the selection of the independent auditors of the Company and its subsidiaries, the arrangements for and the scope of the audits to be performed by them, and the internal audit activities, accounting procedures and controls of the Company and its subsidiaries, and reviews the annual consolidated financial statements of the Company and its subsidiaries. The Audit Committee held three meetings in Fiscal 1995. The Board of Directors does not have a nominating committee. The Board of Directors of the Company will consider nominees proposed by stockholders for election as directors. Stockholder nominations of persons for election as directors are subject to the notice requirements described below under the caption "Stockholder Nominations and Proposals." -7- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information known to Penn Traffic with respect to beneficial ownership of the Common Stock as of April 24, 1995 (unless otherwise indicated) by: (i) each person who beneficially owns 5% or more of the Common Stock; (ii) each of the nominees named for election as director; (iii) each of the other current directors; (iv) each of the executive officers named in the Summary Compensation Table set forth herein; and (v) all directors and executive officers as a group. Except as otherwise indicated, the holders listed below have sole voting and investment power with respect to all shares beneficially owned by them. For purposes of this table, a person or group of persons is deemed to have "beneficial ownership" of any shares which such person or group of persons has the right to acquire within 60 days. For purposes of computing the percentage of outstanding shares held by each person or group of persons named below, any security which such person or persons has the right to acquire within 60 days (including shares which may be acquired upon exercise of vested portions of stock options) is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. -8-
Amount & Nature Name and Address of of Beneficial Percent Beneficial Owner Ownership of Class - --------------------------------------------------------------------------------- Gary D. Hirsch 1,972,017(1)(2) 18.1% 411 Theodore Fremd Avenue Rye, New York 10580 Riverside Acquisition Company, 933,455(2) 8.6% Limited Partnership 331 Madison Avenue New York, New York 10017 Tiger Management Corporation 2,076,200(3) 19.1% 101 Park Avenue New York, New York 10178 Cramer Rosenthal McGlynn, Inc. 584,318(4) 5.4% 707 Westchester Avenue White Plains, New York 10604 John T. Dixon 37,806(5) * Claude J. Incaudo 115,501(6)(7) * Martin A. Fox 62,250(2)(8) * Eugene A. DePalma 11,269(2)(9) * Susan E. Engel 3,000(10) * Joseph J. McCaig 2,000 * Guido Malacarne 46,367(9) * Harold S. Poster 10,972(9)(11) * Richard D. Segal 132,002(2)(9)(12) * Raymond J. Heath 28,601(13) * John E. Josephson 38,064(14) * Eugene R. Sunderhaft 17,506(15) * All Directors and Executive Officers as a Group (21 persons) 2,595,944(16) 23.9% ____________ * Less than 1.0%. -9- (1) Mr. Hirsch is Chairman, President and a Director of RAC Partners, the sole general partner of RAC. Mr. Hirsch is also a limited partner of RAC. Mr. Hirsch is deemed to be an indirect beneficial owner of 933,455 shares of Common Stock owned by RAC and 15,506 shares owned by RAC Partners. Mr. Hirsch is also the Chairman, President and a Director of Air Partners, Inc., the sole general partner of VII Partners. Mr. Hirsch is deemed to be an indirect beneficial owner of 83,376 shares owned by VII Partners. Mr. Hirsch is a general partner of the managing general partner of MTH and is deemed to be an indirect beneficial owner of 328,706 shares owned by MTH and 244,228 shares of Common Stock owned by MTH Funding, L.P. Includes 125,000 shares of restricted stock, which shares are subject to forfeiture under certain circumstances, awarded to Mr. Hirsch pursuant to the Company's 1993 Plan. Includes 2,880 shares owned by Mr. Hirsch's children. Also includes a currently exercisable warrant held by Mr. Hirsch, and warrants held by certain of his relatives, to purchase up to 63,800 and 84,800 shares of Common Stock, respectively, at $14.00 per share. Mr. Hirsch disclaims beneficial ownership of 84,800 of the shares subject to the warrants held by his relatives. (2) The sole general partner of RAC is RAC Partners, a wholly owned subsidiary of MTH Holdings, an affiliate of MTH. Messrs. DePalma, Fox, Hirsch and Segal own limited partnership interests in RAC. (3) According to a Schedule 13G statement filed by Tiger Management Corporation, which statement was most recently amended on February 8, 1995, Tiger Management Corporation and Panther Management Company, L.P., each an investment adviser registered under the Investment Advisers Act of 1940, Panther Partners, L.P., an investment company registered under the Investment Company Act of 1940, and Mr. Julian H. Robertson, Jr., who is the ultimate controlling person of Tiger Management Corporation and Panther Management Company, L.P., have shared voting power and shared power to dispose of or direct the disposition of an aggregate of 2,076,200 shares of Common Stock. (4) According to a Schedule 13G statement filed by Cramer Rosenthal McGlynn, Inc., dated February 24, 1995, Cramer Rosenthal McGlynn, Inc. has shared voting power and -10- shared power to dispose of or direct the disposition of 584,318 shares of Common Stock. (5) Includes 27,500 shares of restricted stock, which shares are subject to forfeiture under certain circumstances, awarded to Mr. Dixon pursuant to the Company's 1993 Plan. Includes currently exercisable options to purchase 1,000 shares of Common Stock at $25.25 per share. Mr. Dixon was granted options to purchase 500 shares of Common Stock at $26.75 per share on September 12, 1991; these options, which are subject to vesting limitations, are currently exercisable for up to 80% of the total number of shares subject to the options, and the remaining 20% will become exercisable in September 1995. Mr. Dixon was granted options to purchase 5,000 shares of Common Stock at $28.125 per share on January 31, 1992; these options, which are subject to vesting limitations, are currently exercisable for up to 80% of the total number of shares subject to the options, and the remaining 20% will become exercisable in January 1996. Includes 488 shares of Common Stock acquired through the Company's employee stock purchase plan and 227 shares of Common Stock owned through the Company's 401(k) plan. (6) Includes currently exercisable options to purchase 10,435 shares of Common Stock at $12.50 per share, 10,000 shares of Common Stock at $18.375 per share and 40,000 shares of Common Stock at $24.25 per share. (7) Includes 1,915 shares owned by Mr. Incaudo's wife and three children. (8) Includes 15,000 shares of restricted stock, which shares are subject to forfeiture under certain circumstances, awarded to Mr. Fox pursuant to the Company's 1993 Plan. Includes a currently exercisable warrant held by Mr. Fox to purchase up to 13,000 shares of Common Stock at $14.00 per share. Also includes currently exercisable options to purchase 2,500 shares of Common Stock at $18.375 per share. (9) Includes currently exercisable options to purchase 1,500 shares of Common Stock at $20.50 per share, 1,500 shares of Common Stock at $18.44 per share, 1,500 shares of Common Stock at $28.69 per share, 1,500 shares of Common Stock at $27.50 per share, 1,500 shares at $42.00 per share and 1,500 shares at $36.06 per share. -11- (10) Includes currently exercisable options to purchase 1,500 shares of Common Stock at $41.88 per share and 1,500 shares at $36.06 per share. (11) Includes 1,972 shares of Common Stock owned by Burrows + Poster Profit Sharing Plan. (12) Includes 20,000 shares of Common Stock owned by Fourth Generation Partners, 87,782 shares of Common Stock owned by Seavest Partners and 1,920 shares of Common Stock acquired through the Company's employee stock purchase plan. (13) Includes 7,500 shares of restricted stock, which shares are subject to forfeiture under certain circumstances, awarded to Mr. Heath pursuant to the Company's 1993 Plan. Includes currently exercisable options to purchase 6,000 shares of Common Stock at $12.50 per share. Mr. Heath was granted options to purchase 500 shares of Common Stock at $26.75 per share on September 12, 1991; these options, which are subject to vesting limitations, are currently exercisable for up to 80% of the total number of shares subject to the options, and the remaining 20% will become exercisable in September 1995. Includes 141 shares of Common Stock acquired through the Company's employee stock purchase plan and 315 shares of Common Stock owned through the Company's 401(k) plan. (14) Includes 7,500 shares of restricted stock, which shares are subject to forfeiture under certain circumstances, awarded to Mr. Josephson pursuant to the Company's 1993 Plan. Includes currently exercisable options to purchase 4,490 shares of Common Stock at $12.50 per share and options to purchase 5,000 shares of Common Stock at $25.25 per share. Mr. Josephson was granted options to purchase 500 shares of Common Stock at $26.75 per share on September 12, 1991; these options, which are subject to vesting limitations, are currently exercisable for up to 80% of the total number of shares subject to the options, and the remaining 20% will become exercisable in September 1995. Includes 179 shares of Common Stock acquired through the Company's employee stock purchase plan and 77 shares of Common Stock owned through the Company's 401(k) plan. (15) Includes 5,000 shares of restricted stock, which shares are subject to forfeiture under certain circumstances, awarded to Mr. Sunderhaft pursuant to the Company's 1993 -12- Plan. Includes currently exercisable options to purchase 1,871 shares of Common Stock at $12.50 per share. Mr. Sunderhaft was granted options to purchase 1,000 shares of Common Stock at $26.75 per share on September 12, 1991; these options, which are subject to vesting limitations, are currently exercisable for up to 80% of the total number of shares subject to the options and the remaining 20% will become exercisable in September 1995. Includes 249 shares of Common Stock owned through the Company's 401(k) plan. (16) Includes shares of Common Stock owned by the immediate family of some directors or officers of Penn Traffic, vested options and warrants and 933,455 shares of Common Stock held by RAC. Includes shares of restricted stock awarded under the Company's 1993 Plan, all of which shares are subject to forfeiture under certain circumstances, as follows: Mr. Hirsch -- 125,000 shares, Mr. Dixon -- 27,500 shares, Mr. Fox -- 15,000 shares, Mr. Josephson -- 7,500 shares, Mr. Heath -- 7,500 shares, Mr. Roy M. Flood -- 7,500 shares, Mr. Sunderhaft -- 5,000 shares, Mr. Glenn L. Goldberg -- 4,000 shares, Mr. Francis D. Price, Jr. -- 3,000 shares, Mr. Randall Sweeney -- 3,000 shares, Mr. Joseph Zoldi-- 2,500 shares, Mr. Ronald Flowers -- 1,500 shares and David A. Adamsen -- 1,000 shares.
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires Penn Traffic's directors and executive officers, and persons who own more than 10% of the Common Stock, to file with the Securities and Exchange Commission (the "Commission") and the New York Stock Exchange initial reports of ownership and reports of changes in ownership of Penn Traffic equity securities. Executive officers, directors and 10% stockholders are also required to furnish Penn Traffic with copies of all Section 16(a) reports they file. To Penn Traffic's knowledge, based solely on a review of such reports furnished to Penn Traffic and written representations that no other reports were required, during Fiscal 1995 all Section 16(a) filing requirements applicable to its executive officers, directors and 10% stockholders were complied with, except as set forth below: Jeffrey Tabak inadvertently failed to report on a timely basis a transaction wherein he purchased one hundred shares of Common Stock as custodian for his daughter. Mr. Tabak corrected the omission by reporting this transaction in his year-end Form 5. -13- EXECUTIVE COMPENSATION See "Certain Transactions" for a description of the agreement pursuant to which MTH provides financial consulting and business management services to the Company. Mr. Hirsch is a general partner of the managing general partner of MTH and Mr. Fox is an executive officer of MTH. The information under this heading relates to the Chief Executive Officer of Penn Traffic and the four other most highly-compensated executive officers of the Company as of the end of the fiscal year ended January 28, 1995. -14- SUMMARY COMPENSATION TABLE
Long-Term Compensation --------------------------------------- Annual Compensation Awards Payouts -------------------------------------- ---------------------------- ---------- Other Restricted Securities Name and Annual Stock Underlying All Other Principal Fiscal Compensation Award(s) Options/ LTIP Compensation Position Year Salary ($) Bonus ($) ($)(3) $(4) SARs(#) payouts($) ($)(5) - ------------------------------------------------------------------------------------------------------------------------------------ Claude J. Incaudo 1995 $382,454 $226,962(7) --- 0 0 0 0 Director and, prior to 1994 371,315 307,370(6)(7) --- 0 0 0 0 January 29, 1995, 1993 360,500 214,972(6)(7) --- 0 0 0 0 President and Chief Executive Officer John T. Dixon(1) 1995 $235,600 $60,785(7) $1,305(3) 0 0 0 0 Director and, since 1994 178,800 73,364(7) 393(3) $281,250 0 0 0 January 29, 1995, 1993 125,000 72,750(7) --- 0 0 0 $18,884(5) President and Chief Executive Officer John E. Josephson(2) 1995 $270,152 $79,019(8) --- 0 0 0 $4,500(5) Senior Vice President 1994 262,446 104,978(8) --- $281,250 0 0 9,434(5) 1993 254,048 101,619(8) --- 0 0 0 2,494(5) Raymond J. Heath(2) 1995 $200,000 $61,200(7) --- 0 0 0 0 Senior Vice President 1994 175,000 73,199(7) --- $281,250 0 0 0 1993 150,900 57,450(7) --- 0 0 0 0 Eugene R. Sunderhaft(2) 1995 $170,000 $53,040(7) --- 0 0 0 0 Senior Vice President- 1994 132,615 66,313(6)(7) --- $199,750 0 0 0 Finance and Secretary 1993 98,904 46,970(6) --- 0 0 0 0 (Chief Financial Officer) -15- - ---------------------- (1) Prior to his appointment as President and Chief Executive Officer of the Company effective January 29, 1995, Mr. Dixon served as Vice President of the Company. (2) Prior to their appointments as Senior Vice Presidents of the Company effective January 29, 1995, Messrs. Josephson, Heath and Sunderhaft each held the position of Vice President of the Company. (3) In the fiscal year ending January 29, 1994 ("Fiscal 1994"), the Company provided Mr. Dixon with a tax loan to fund the payment of taxes arising primarily at the time of the merger of Big Bear into the Company. The loan will mature in six years and is an interest free loan so long as Mr. Dixon remains employed by the Company. Had the loan carried a market interest rate, Mr. Dixon would have paid $1,305 and $393 in interest during Fiscal 1995 and Fiscal 1994, respectively. No other information is provided in the "Other Annual Compensation" column since the aggregate amount of perquisites and other personal benefits in respect of each of Fiscal 1995, Fiscal 1994 and the fiscal year ending January 30, 1993 ("Fiscal 1993") are less than the lower of $50,000 or 10% of the total annual salary and bonus reported for each of the named officers and no other compensation of the type required to be described in the "Other Annual Compensation" column was paid in Fiscal 1995, Fiscal 1994 or Fiscal 1993, respectively. (4) Awards of shares of restricted stock pursuant to the 1993 Plan. Pursuant to Commission rules, these dollar values have been calculated by multiplying the closing market price of the Company's Common Stock on the date of the respective grant by the number of shares awarded on such date. The aggregate number of shares of restricted stock held by each of the named executives in the table and the dollar value of such shares of restricted stock at the end of Fiscal 1995 were as follows: Mr. Dixon -- 7,500 shares, $280,312.50 value; Mr. Josephson -- 7,500 shares, $280,312.50 value; Mr. Heath -- 7,500 shares, $280,312.50 value; Mr. Sunderhaft -- 5,000 shares, $186,875 value. No shares of restricted stock are held by Mr. Incaudo. Vesting of the shares of restricted stock is contingent upon attainment, subsequent to the date of grant, of EBITDA levels (as defined) of $265 million in any four consecutive fiscal quarter period (plus $4 million for each fiscal quarter -16- included in the period subsequent to the acquisition in January 1995 of 45 stores operated under the Acme name from American Stores Company (the "Acme acquisition")), or $500 million in any eight consecutive fiscal quarter period (plus $4 million for each fiscal quarter included in the period subsequent to the Acme acquisition). Such shares will be forfeited if such performance levels are not achieved by the end of the fiscal quarter which ends closest to May 1, 1998. See "Executive Compensation - Compensation Committee Report." Cash dividends will be paid on shares of restricted stock to the same extent as cash dividends are paid on other shares of the Company's Common Stock. Penn Traffic has not declared or paid any cash dividends on Common Stock since 1987 and it is the Company's present policy not to pay dividends on shares of its Common Stock but to retain future earnings for reinvestment in its business or reduction of its indebtedness. In addition, certain debt agreements and the Company's revolving credit facility prohibit the payment of dividends. Stock dividends paid on shares of restricted stock will be retained by the Company and are subject to the same restrictions and conditions (including vesting requirements) as the underlying shares of restricted stock. (5) "All Other Compensation" includes contributions to the Big Bear Stores Company (formerly a subsidiary of the Company and currently a division) ("Big Bear") Profit Sharing Plan for Mr. Josephson and contributions to the Quality Markets Profit Sharing Plan for Mr. Dixon. The amount of the contribution to the Big Bear Stores Profit Sharing Plan for Mr. Josephson was $4,500 for Fiscal 1995, $9,434 for Fiscal 1994 and $2,494 for Fiscal 1993. The amount of the contribution to the Quality Markets Profit Sharing Plan for Mr. Dixon was $18,884 for Fiscal 1993. (6) Includes amounts earned in respect of the fiscal year indicated under the P & C 1987 Executive Incentive Compensation Plan (the "P & C Incentive Plan"). Payments of such awards under the P & C Incentive Plan are made as follows: 40% of the amount earned is paid during the year in which the bonus was earned and 20% of the amount earned is paid in each of the following three years. See "Executive Compensation - Compensation Committee Report." (7) Includes amounts earned in respect of the fiscal year indicated under the Corporate Incentive Plan. See "Executive Compensation - Compensation Committee Report." -17- (8) Includes amounts earned in respect of the fiscal year indicated under the Big Bear Supplemental Incentive Plan. See "Executive Compensation - Compensation Committee Report."
OPTIONS The following table sets forth information concerning the value of unexercised options as of January 28, 1995 held by the executives named in the Summary Compensation Table above. No options were exercised by such persons during Fiscal 1995.
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR, AND FY-END OPTIONS/SAR VALUES Number of Securities Value of Unexercised Underlying Unexercised In-the-Money Options/SARs Options/SARs At FY-End (#) At FY-End($) ------------------------------- ----------------------------------- Name Exercisable Unexercisable Exercisable(1) Unexercisable(1) ---- ----------- ------------- -------------- ---------------- Claude J. Incaudo 60,435 0 974,570 0 John T. Dixon 5,400 1,100 53,375 10,312 Eugene R. Sunderhaft 2,671 200 55,041 2,125 John E. Josephson 9,890 100 176,564 1,063 Raymond J. Heath 6,400 100 153,500 1,063 - --------------------- (1) Based on the fair market value of $37.375 per share on January 28, 1995.
PENSION PLANS AND OTHER BENEFIT OR ACTUARIAL PLANS P & C PENSION PLAN Messrs. Incaudo, Dixon and Sunderhaft participate in a defined benefit pension plan for all regular full-time employees of P & C, other than participants in another -18- pension plan to which P & C or any of its subsidiaries contributes and other than those employees subject to a collective bargaining agreement (the "P & C Pension Plan"). Messrs. Incaudo, Dixon and Sunderhaft's normal monthly retirement benefit under the P & C Pension Plan would equal (((a) times (b)), plus ((c) times (d))), times (e), where: (a) is .90% of average monthly compensation plus 1.35% of the average monthly compensation in excess of the average social security wage base; (b) is credited service to normal retirement date, not to exceed 35 years; (c) is .40% of average monthly compensation up to $2,500; (d) is credited service to retirement date, not to exceed 20 years; and (e) is the ratio of credited service to date to credited service to retirement date. The projected years of benefit service to age 65 for Messrs. Incaudo, Dixon and Sunderhaft are 21, 12 and 41 years, respectively. Contributions are not credited to individual participants' accounts and the amount contributed on behalf of each individual is not and cannot readily be separately or individually calculated by the P & C Pension Plan's regular actuary. The following table sets forth the amount of annual pension benefit, calculated as a straight life annuity, that would be available to individual retirees retiring at age 65 after the stated number of years of service. The term "average monthly compensation" as used in the calculation above means the monthly average of a participant's highest aggregate compensation during a period of five consecutive years of employment covered by the P & C Pension Plan. ("Remuneration" includes salary or wages and bonuses.) -19- P & C PENSION PLAN TABLE
Years of Service ------------------------------------------------------------------------- Remuneration 15 20 25 30 35 - ------------ -------- -------- -------- -------- -------- $125,000 $25,575 $34,099 $42,024 $49,949 $57,874 150,000 30,636 40,848 50,460 60,072 69,684 175,000 35,698 47,597 58,896 70,195 81,495 200,000 40,762 54,350 67,336 80,324 93,311 225,000 45,824 61,098 75,773 90,447 105,122 250,000 50,885 67,847 84,209 100,570 116,932 300,000 61,011 81,348 101,085 120,822 140,559 400,000 81,260 108,347 134,834 161,320 187,807 450,000 91,386 121,848 151,710 181,572 211,434 500,000 101,512 135,349 168,587 201,824 235,061 550,000 111,635 148,847 185,459 222,070 258,682 600,000 121,761 162,348 202,335 242,322 282,309 650,000 131,887 175,849 219,211 262,574 305,936 700,000 142,010 189,347 236,084 282,820 329,557
NOTE: The amounts shown above are not subject to offset for Social Security benefits payable to participants in the P & C Pension Plan. Additionally, the above table does not recognize statutory limitations imposed by the Internal Revenue Code of 1986, as amended (the "Code") which establish a maximum compensation level (increased by certain cost of living adjustments) for determining the annual benefit amount. BIG BEAR STORES EMPLOYEES PENSION PLAN Mr. Josephson participated in the P & C Pension Plan for six years and currently participates in the Big Bear Employees' Pension Plan and Trust (the "Big Bear Plan"). Generally, participants are entitled to a monthly retirement benefit equal to the greater of (a) 1% of the participant's average monthly compensation including overtime and other extra compensation, but excluding bonuses, during the participant's highest five consecutive calendar years of income during the last ten calendar years of employment prior to attaining 62 years of age, multiplied by the number of years of employment (not to exceed 35 years for purposes of this calculation) in which the participant worked at least 1,000 hours or (b) $25 per month for each year of credited -20- full time service. In general, accrued benefits vest after five years of service. The projected years of service to age 62 for Mr. Josephson is 26 years in the Big Bear Plan. The following table sets forth the estimated annual benefits payable under the Big Bear Plan assuming payments made on a straight-life annuity basis and not under any of the Big Bear Plan's survivor options to a participant upon retirement at age 62 with indicated final average annual compensation and years of service. ("Remuneration" includes salary or wages but does not include bonuses.)
Big Bear Stores Employees Pension Plan Table -------------------------------------------- Years of Service ------------------------------------------------------------------------------------------ Remuneration 15 20 25 30 35 40 - ------------ ------ ------ ------ ------ ------ ------ $125,000 $18,750 $25,000 $31,250 $37,500 $43,750 $43,750 150,000 22,500 30,000 37,500 45,000 52,500 52,500 175,000 26,250 35,000 43,750 52,500 61,250 61,250 200,000 30,000 40,000 50,000 60,000 70,000 70,000 225,000 33,750 45,000 56,250 67,500 78,750 78,750 250,000 37,500 50,000 62,500 75,000 87,500 87,500 300,000 45,000 60,000 75,000 90,000 105,000 105,000 400,000 60,000 80,000 100,000 120,000 140,000 140,000 450,000 67,500 90,000 112,500 135,000 157,500 157,500 500,000 75,000 100,000 125,000 150,000 175,000 175,000 550,000 82,500 110,000 137,500 165,000 192,500 192,500 600,000 90,000 120,000 150,000 180,000 210,000 210,000 650,000 97,500 130,000 162,500 195,000 227,500 227,500 700,000 105,000 140,000 175,000 210,000 245,000 245,000
NOTE: The amounts shown above are not subject to offset for Social Security benefits payable to participants in the Big Bear Plan. Additionally, the above table does not recognize statutory limitations imposed by the Code which establish a maximum compensation level (increased by certain cost of living adjustments) for determining the annual benefit amount. RIVERSIDE PENSION PLAN FOR NON-BARGAINING EMPLOYEES Mr. Heath participates in the Pension Plan for Non-Bargaining Employees of the Riverside Division of The Penn Traffic Company, a defined benefit pension plan for the employees of the Riverside Division of the Company who are not covered by a collective bargaining agreement (the -21- "Riverside Plan"). Under the Riverside Plan, the compensation base is multiplied by 1% for each year of service to determine the annual pension amount. The compensation base as defined by the Riverside Plan is the highest average annual earnings for five consecutive years of the last ten years preceding retirement. The projected years of service to age 65 for Mr. Heath is 36 years. The following table sets forth the estimated annual benefit, calculated as a straight-life annuity, payable upon retirement under the Riverside Plan, assuming the average annual earnings and years of service at retirement set forth therein. ("Remuneration" includes salary or wages, bonuses and any other payments that may be run through Riverside's payroll, such as the value of any personal use of company vehicles, moving expenses, any personal use of other company assets and severance payments.)
Riverside Pension Plan Table ---------------------------- Years of Service ------------------------------------------------------------------------------------------ Remuneration 15 20 25 30 35 40 ------------ ------ ------ ------ ------ ------ ------ $125,000 $18,750 $25,000 $31,250 $37,500 $43,750 $50,000 150,000 22,500 30,000 37,500 45,000 52,500 60,000 175,000 26,250 35,000 43,750 52,500 61,250 70,000 200,000 30,000 40,000 50,000 60,000 70,000 80,000 225,000 33,750 45,000 56,250 67,500 78,750 90,000 250,000 37,500 50,000 62,500 75,000 87,500 100,000 300,000 45,000 60,000 75,000 90,000 105,000 120,000 400,000 60,000 80,000 100,000 120,000 140,000 160,000 450,000 67,500 90,000 112,500 135,000 157,500 180,000 500,000 75,000 100,000 125,000 150,000 175,000 200,000 550,000 82,500 110,000 137,500 165,000 192,500 220,000 600,000 90,000 120,000 150,000 180,000 210,000 240,000 650,000 97,500 130,000 162,500 195,000 227,500 260,000 700,000 105,000 140,000 175,000 210,000 245,000 280,000
NOTE: The amounts shown above are not subject to offset for Social Security benefits payable to participants in the Riverside Plan. Additionally, the above table does not recognize statutory limitations imposed by the Code which establish a maximum compensation level (increased by certain cost of living adjustments) for determining the annual benefit amount. -22- Mr. Dixon, who currently participates in the P & C Pension Plan, participated in a profit sharing plan maintained by Quality Markets (formerly a subsidiary of the Company and currently a division) ("Quality Markets") in Fiscal 1993. During Fiscal 1993, Mr. Dixon was eligible for a supplemental benefit from Quality Markets in consideration of his future performance of services for Quality Markets pursuant to a plan "which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees" under Section 301(2) of ERISA. The purpose of the supplemental benefit was to supplement retirement benefits provided for Mr. Dixon by Quality Markets so that the aggregate benefit earned during the period of time that Mr. Dixon was employed by Quality Markets was no less than the retirement benefit that would have been earned during such period under the Big Bear Plan. Mr. Dixon participated in the Big Bear Plan for 34 years prior to joining Quality Markets. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN In March 1995, the Board of Directors of the Company approved and authorized the establishment of a Supplemental Executive Retirement Plan (the "Supplemental Plan") pursuant to which employees of the Company whose benefits under the Company's retirement plans described above are limited by Internal Revenue Service regulations (including Messrs. Incaudo, Dixon, Josephson, Heath and Sunderhaft) will earn an additional pension benefit. The Supplemental Plan is expected to be implemented shortly and to provide an annual pension benefit for an eligible employee with at least 30 years of credited service equal to 40% of the yearly average of the highest aggregate compensation received by the employee during a period of five consecutive years of employment, less offsets for benefits paid under the Company's other retirement plans described above and for Social Security benefits. The annual pension benefit payable under the Supplemental Plan will be proportionately reduced for employees who retire with fewer than 30 years of credited service. COMPENSATION OF DIRECTORS In Fiscal 1995, directors who were not regularly employed by the Company received an annual fee of $10,000. Each such director was also paid a fee of $1,000 for attendance at each Board meeting or committee meeting he attended and a fee of $500 for each committee meeting held in -23- conjunction with a Board meeting he attended. Directors were also paid $1,000 for each full day and $500 for each half day on which they performed duties on behalf of the Board at the request of the Chief Executive Officer if such duties required them to be away from their principal place of occupation. Directors who are officers of the Company do not receive fees for attending meetings of the Board of Directors or its committees. During Fiscal 1995, the Company had an agreement for financial consulting and business management services to be provided by MTH. Under this agreement, Penn Traffic paid MTH an annual fee of $1,357,100. The annual fee payable to MTH for the fiscal year ending January 27, 1996 ("Fiscal 1996") will increase to $1,395,100 as a result of an adjustment to such fee based upon the increase in the consumer price index. Mr. Hirsch is a general partner of the managing general partner of MTH, and Mr. Fox is Executive Vice President of MTH. Certain of the Company's directors have been awarded shares of restricted stock under the 1993 Plan, which was approved by the vote of a majority of the stockholders of Penn Traffic at the 1993 Annual Meeting of Stockholders. At the beginning of Fiscal 1996, 20,000 shares of restricted stock were awarded to Mr. Dixon under the 1993 Plan in connection with his appointment as President and Chief Executive Officer of the Company. These shares were valued at $782,500 on the date of grant. During Fiscal 1994, 125,000 shares of restricted stock were awarded to Mr. Hirsch, 15,000 shares of restricted stock were awarded to Mr. Fox and 7,500 shares of restricted stock were awarded to Mr. Dixon. These shares were valued at $4,687,500, $562,000 and $281,250, respectively, on the date of grant. Vesting of the shares of restricted stock granted pursuant to such awards is contingent upon attainment, subsequent to the date of grant, of EBITDA levels of $265 million in any four consecutive fiscal quarter period (plus $4 million for each fiscal quarter included in the period subsequent to the Acme acquisition) or $500 million in any eight consecutive fiscal quarter period (plus $4 million for each fiscal quarter included in the period subsequent to the Acme acquisition). Such shares will be forfeited if such levels are not achieved by the end of the fiscal quarter which ends closest to May 1, 1998. Vesting of shares of restricted stock awarded subsequent to the end of Fiscal 1995 is also conditioned upon the recipient's remaining in the employ of the Company for an additional two years following the last fiscal quarter in which the required EBITDA performance level was attained. To encourage retention of shares by the participants, upon -24- vesting of the restricted stock, the Company will make a cash payment to each participant equal to the amount of income tax payable by such participant in respect of the award and the cash payment, if such participant agrees not to sell his shares for at least two years beyond vesting and to refund the payment if he resigns within such two-year period. No other directors have received awards of restricted stock under the 1993 Plan. See "Executive Compensation - Compensation Committee Report." Pursuant to The Penn Traffic Company Directors' Stock Option Plan (the "Directors' Plan"), each director of the Company who is not an employee of the Company receives as of the date of appointment to the Board of Directors, and thereafter annually, as of the first business day after the conclusion of each Annual Meeting of Stockholders of the Company, an option to purchase 1,500 shares of Common Stock (subject to antidilution adjustments) at a price equal to the fair market value (as defined in the Directors' Plan) of such shares on the date of grant. On June 8, 1994, each of Messrs. DePalma, Malacarne, Poster and Segal and Ms. Engel received an option to purchase 1,500 shares of Common Stock at a price of $36.06 per share. EMPLOYMENT CONTRACTS AND TERMINATION AGREEMENTS In connection with Mr. Dixon's appointment as President and Chief Executive Officer of the Company upon Mr. Incaudo's retirement from those positions in January 1995, the Company and Mr. Dixon entered into an employment agreement. This agreement provides for the employment of Mr. Dixon as President and Chief Executive Officer of the Company until January 27, 1996. Pursuant to this agreement, Mr. Dixon will receive an annual base salary of $400,000. The agreement also provides that Mr. Dixon will be eligible to receive, at the sole discretion of the Board of Directors, an annual cash bonus award under the Corporate Incentive Plan of up to 50% of his base salary. The agreement provides that if the employment of Mr. Dixon is terminated without cause following a change in control or if Mr. Dixon resigns for good reason following a change in control, the Company will be required to make certain payments to Mr. Dixon, including a lump-sum severance payment equal to (x) an amount equal to his base salary for the year in which such termination or resignation for good reason occurs plus (y) an amount equal to the maximum cash bonus which he would be entitled to receive in respect of the year in which such termination or resignation -25- for good reason occurs (I.E., an amount equal to 50% of his base salary). A resignation is deemed to be for good reason if it results from, among other things, substantial change in Mr. Dixon's duties or responsibilities, the material breach of the employment agreement by the Company, the taking of any action that would adversely affect Mr. Dixon's compensation or benefits, or the requirement that Mr. Dixon be based more than 25 miles from his current location. The agreement provides for reduction of the payments in the event any of the total payments or benefits to be received by Mr. Dixon are not deductible by the Company for federal income tax purposes by reason of Section 280G of the Code. Generally, Section 280G disallows deductions for compensation payments made to certain individuals which are both contingent upon a change in control and have an aggregate present value equal to or greater than three times the executive's average taxable compensation received during the five most recent taxable years preceding the year of the change in control. Mr. Incaudo, who retired from his position as President and Chief Executive Officer of the Company on January 28, 1995, entered into a three-year employment agreement with the Company effective February 2, 1992. This agreement also provides for the continued services of Mr. Incaudo as a consultant to the Company during the two-year period following the date of his retirement. Mr. Incaudo will provide advisory services concerning the business, affairs and management of the Company, for which he will receive a consulting fee in an amount equal to $150,000 per annum. The agreement also provides that Mr. Incaudo will receive the entire consulting fee for the two-year consulting period in the event that his consultancy is terminated without cause following a change in control or if Mr. Incaudo resigns for good reason following a change in control. On June 12, 1989, Mr. Josephson entered into an employment agreement with Big Bear, which agreement was assumed by the Company in connection with the merger of Big Bear into the Company in April 1993. Pursuant to its terms, the agreement expires on September 1 of each year and is thereupon automatically renewed for one year. The Company may terminate the agreement without cause upon 60 days' written notice to Mr. Josephson. In such event, he would be entitled to receive (x) payment of the salary provided in the agreement for the period remaining in the term at the time of such termination, but in no event less than one year from the date of notice of such termination and (y) any and all -26- non-salary benefits provided by the agreement and earned during the period prior to such termination. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The following directors are currently members of the Compensation Committee: Messrs. DePalma, Malacarne, Poster and Segal. Mr. Malacarne was President and Chief Executive Officer of the Company from 1979 until his retirement on January 31, 1990. Mr. Hirsch, Chairman of the Board of Directors of Penn Traffic, is also Chairman of the Board of Directors of each of Grand Union, Grand Union Capital and Grand Union Holdings, none of which has a separate compensation committee. Compensation decisions of Grand Union are considered by the entire Board of Directors of Grand Union, subject to final approval by the Board of Directors of Grand Union Holdings. Messrs. Fox and McCaig, both of whom are executive officers of Grand Union, Grand Union Capital and Grand Union Holdings, are directors of Penn Traffic. Mr. Fox is Vice Chairman - Finance of Penn Traffic and a director of each of Grand Union, Grand Union Capital and Grand Union Holdings. Mr. Hirsch, Chairman of the Board of Directors of each of Grand Union, Grand Union Capital and Grand Union Holdings, is Chairman of the Board of Directors of Penn Traffic. Mr. McCaig, an executive officer of each of Grand Union, Grand Union Capital and Grand Union Holdings, is a director of Penn Traffic. Mr. Incaudo, a director and formerly an executive officer of Penn Traffic, is a director of Grand Union Holdings. Mr. Hirsch, Chairman of the Board of Directors of Grand Union Holdings, is Chairman of the Board of Directors of Penn Traffic, and Messrs. Fox and McCaig, both of whom are executive officers of Grand Union Holdings, are directors of Penn Traffic. On January 25, 1995, Grand Union filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code with the Bankruptcy Court. On February 6, 1995, an involuntary Chapter 11 petition was filed in the Bankruptcy Court against Grand Union Capital. On February 16, 1995, Grand Union Capital commenced a voluntary Chapter 11 case in the Bankruptcy Court by consenting to the entry of an order for relief on the -27- involuntary Chapter 11 petition. Also on February 16, 1995, Grand Union Holdings filed a voluntary Chapter 11 petition in the Bankruptcy Court. Messrs. Hirsch, Fox and Incaudo have indicated that they intend to resign from all positions which any of them hold with Grand Union, Grand Union Capital and Grand Union Holdings, such resignation to be effective no later than the date of completion of the pending Bankruptcy Court proceedings. Messrs. Hirsch and Fox do not receive salaries from Penn Traffic and do not participate in cash bonus plans. Messrs. Hirsch and Fox have received awards of restricted stock under the 1993 Plan. See "Compensation of Directors." Messrs. Hirsch and Fox receive no compensation in their capacities as executive officers of Grand Union, Grand Union Capital and Grand Union Holdings. As described below, Messrs. Hirsch and Fox receive compensation from MTH; MTH has been engaged as a financial adviser and investment banker to Grand Union. Mr. McCaig receives no compensation in his capacity as an executive officer of Grand Union Capital and Grand Union Holdings; Mr. McCaig does receive compensation in his capacity as an executive officer of Grand Union. Mr. Incaudo receives no compensation in his capacity as a director of Grand Union Holdings. Messrs. Hirsch and Fox receive compensation from MTH. Mr. Hirsch is a general partner of the managing partner of MTH, and Mr. Fox is Executive Vice President of MTH. As described below, MTH was engaged by Penn Traffic to provide financial consulting and business management services for Fiscal 1995 and MTH will continue to provide such services during Fiscal 1996. In addition, it is anticipated that MTH will periodically provide investment banking services to Penn Traffic in connection with acquisitions and other transactions, for which MTH will receive reasonable and customary fees. Such fees received by MTH during Fiscal 1995 are described below. Penn Traffic engaged MTH to provide financial consulting and business management services for Fiscal 1995, for which services MTH received an annual fee of $1,357,100, which fee was paid in twelve equal monthly installments. The annual fee payable to MTH for Fiscal 1996 will increase to $1,395,100 as a result of an adjustment to such fee based upon the increase in the consumer price index. During Fiscal 1995, MTH received a fee of $500,000 for its services in connection with assisting the Company with -28- the Acme acquisition and the public offering of $100 million in principal amount of Penn Traffic 10.65% Senior Notes due 2004. Penn Traffic is being represented by the law firm of Gilmartin, Poster & Shafto in connection with the reorganizations under Chapter 11 of Grand Union, Grand Union Capital and Grand Union Holdings. During Fiscal 1995, Penn Traffic was represented by Gilmartin, Poster & Shafto in connection with the Acme acquisition. Mr. Poster, a member of the Compensation Committee, has been a partner in the firm of Gilmartin, Poster & Shafto since July 1991. COMPENSATION COMMITTEE REPORT The Compensation Committee of the Board of Directors is currently composed of Messrs. Segal (Chairman), DePalma, Malacarne and Poster. An important objective of the Compensation Committee is to ensure that the compensation practices of the Company are competitive and effectively designed to attract, retain and motivate executive officers whose contributions are critical to the long-term success of the Company. The Company uses a total compensation program that consists of annual compensation paid in the form of salary and cash bonuses under short-term incentive plans, and compensation paid under long-term incentive plans. ANNUAL COMPENSATION SALARY Salary adjustments for executive officers are generally made annually, and are based on salary for the prior year, executive salary movement nationally within the food distribution industry, individual performance, length of service and internal comparability considerations. Pursuant to the employment agreement dated as of February 2, 1992 among the Company, P & C (then a subsidiary and presently a division of the Company) and Mr. Incaudo, Mr. Incaudo was entitled to a base salary of not less than $382,454 for Fiscal 1995, the third year of a three-year employment period, and Mr. Incaudo will be entitled to a consulting fee equal to $150,000 for Fiscal 1996. Pursuant to the -29- employment agreement entered into by the Company and Mr. Dixon in connection with Mr. Dixon's appointment as President and Chief Executive Officer of the Company, Mr. Dixon will receive a base salary of $400,000 for Fiscal 1996. CASH BONUS PLANS Annual cash bonuses are paid to executive officers under the Company's Corporate Incentive Compensation Plan and Supplemental Incentive Plan, the P & C Incentive Plan and the Big Bear Supplemental Incentive Plan. Most of the cash bonuses paid under these short-term incentive plans are based upon the financial performance of the Company or its operating divisions. During Fiscal 1995, Messrs. Incaudo, Dixon, Heath and Sunderhaft participated in the Company's Corporate Incentive Compensation Plan (the "Corporate Incentive Plan"). Participants in the Corporate Incentive Plan are determined by the Board of Directors upon recommendation of the Compensation Committee. Under the Corporate Incentive Plan, bonuses are based on achievement of previously established financial results for the Company or one of its divisions, and on achievement of individual objectives. Bonus opportunities under the plan are generally adjusted from year to year in proportion to changes in salaries. Target annual bonus opportunity established for Fiscal 1995, measured as a percentage of salaries established for that year, was 82% of salary in the case of Mr. Incaudo. Target annual bonus opportunities established for Fiscal 1995, measured as a percentage of salaries established for that year, ranged from 33% to 40% of salary in the case of other executive officers. Maximum bonus opportunities for Mr. Incaudo and other executive officers for exceeding established objectives were 125% of target bonus. In the case of Mr. Incaudo, target bonus was allocated equally to financial objectives and personal objectives. With respect to target bonus allocated to financial objectives, 100% of the target bonus was to be earned if the Company achieved its plan EBITDA (earnings before interest expense, income taxes, depreciation, amortization and LIFO provision) for the fiscal year, the maximum bonus of 125% of the target bonus was to be earned if EBITDA was 125% of plan, and no bonus was to be earned if EBITDA was less than 75% of plan. Financial objectives for other executive officers reflected a variety -30- of financial objectives, including annual budgets, sales, EBITDA and return on managed assets, of the Company and its divisions. For individual achievement, Mr. Incaudo and other executive officers could earn up to 125% of target bonus allocated to individual objectives for outstanding performance. Achievement of individual objectives by Mr. Incaudo was assessed by the Board of Directors upon the recommendation of the Compensation Committee, which received the recommendation of the Chairman of the Board with respect to the attainment of such individual objectives. Achievement of individual objectives by other executive officers was assessed by the Board of Directors upon the recommendation of the Compensation Committee, which received the recommendation of Mr. Incaudo with respect to the attainment of such individual objectives. For Fiscal 1995, Messrs. Incaudo, Dixon, Heath and Sunderhaft were awarded $226,962, $60,785, $61,200 and $53,040, respectively, under the Corporate Incentive Plan. For Fiscal 1994, Messrs. Incaudo, Dixon, Heath and Sunderhaft were awarded $68,670, $73,346, $73,199 and $45,602, respectively, under the Corporate Incentive Plan. For Fiscal 1993, Mr. Incaudo received $65,003, Mr. Dixon received $55,253 and Mr. Heath received $52,520 under the Corporate Incentive Plan. These amounts do not include bonuses received by Messrs. Incaudo (Fiscal 1994 and Fiscal 1993) and Sunderhaft (Fiscal 1994) under the P & C Incentive Plan, which are described below. For Fiscal 1993, Mr. Sunderhaft participated in the P & C Incentive Plan (described below) and did not participate in the Corporate Incentive Plan. Mr. Josephson, who participated in the Big Bear Supplemental Incentive Plan (described below), did not participate in the Corporate Incentive Plan during Fiscal 1995, Fiscal 1994 or Fiscal 1993. Messrs. Dixon, Josephson, Heath and Sunderhaft will be eligible to participate in the Corporate Incentive Plan in Fiscal 1996. Messrs. Incaudo, Dixon, Heath and Sunderhaft and other officers who participated in the Corporate Incentive Plan were eligible to receive bonuses based on performance during Fiscal 1995 under the Company's Supplemental Incentive Plan. This plan provides incentives based on exceeding previously established objectives for working capital management and cash flow on a Company and divisional basis. The Chairman of the Board, upon authority delegated by the Board of Directors, determines the goals against which performance will be measured. No awards were made to Messrs. Incaudo, -31- Dixon, Heath or Sunderhaft under this plan for Fiscal 1995 or Fiscal 1994. For Fiscal 1993, Messrs. Incaudo, Dixon and Heath were awarded $3,225, $17,452 and $4,930, respectively, under this plan. Messrs. Dixon, Josephson, Heath and Sunderhaft will be eligible to participate in the Company's Supplemental Incentive Plan in Fiscal 1996. Prior to their transfers to Penn Traffic, Mr. Incaudo and Mr. Sunderhaft (whose employment was deemed to be transferred from the P & C division to the Company at the end of April 1993) participated in the P & C Incentive Plan. Under this plan, bonuses are awarded to selected employees of the P & C division based upon the achievement by P & C of certain objectives relating to P & C's return on net assets. The Executive Committee of the Board of Directors of Penn Traffic determines the participants in the plan each year and the goals against which performance will be measured and the amount of the awards. This information is made available to the Compensation Committee, but the Compensation Committee does not make any determination in respect of such awards. No awards were made to Messrs. Incaudo or Sunderhaft under the P & C Incentive Plan in Fiscal 1995. For Fiscal 1994, Messrs. Incaudo and Sunderhaft were awarded $238,700 and $20,711, respectively, under this plan. For Fiscal 1993, Messrs. Incaudo and Sunderhaft were awarded $146,744 and $46,970 under the P & C Incentive Plan. Neither Mr. Incaudo nor Mr. Sunderhaft will participate in the P & C Incentive Plan in Fiscal 1996. During Fiscal 1995, Mr. Josephson participated in the Big Bear Supplemental Incentive Plan. Under this plan, incentive awards are made to employees of the Big Bear division based on the achievement of previously established performance objectives for cash flow. The Executive Committee of the Board of Directors of Penn Traffic determines the participants in the plan each year and the goals against which performance will be measured and the amount of the award. This information is made available to the Compensation Committee, but the Compensation Committee does not make any determination in respect of such awards. The maximum bonus opportunity for Mr. Josephson established for Fiscal 1995 was 40% of his salary. If Big Bear achieved its plan cash flow, Mr. Josephson would earn 100% of his bonus opportunity. Any variance in actual results from plan cash flow results in proportionate adjustment of the award. For Fiscal 1995, Mr. Josephson was awarded $79,019 under this -32- plan. For Fiscal 1994 and Fiscal 1993, Mr. Josephson received $104,978 and $101,619 under the Big Bear Supplemental Incentive Plan. Mr. Josephson, who will be eligible to participate in the Corporate Incentive Plan in Fiscal 1996, will not participate in the Big Bear Supplemental Incentive Plan in Fiscal 1996. LONG-TERM INCENTIVE PLANS In addition to annual compensation, the Company provides to its executive officers and certain key employees long term incentive compensation under the Company's 1993 Long-Term Incentive Plan (the "1993 Plan"). The 1993 Plan was adopted in March 1993 as the successor to the Company's 1988 Stock Option Plan (the "1988 Plan"). No awards have been made under the 1988 Plan since Fiscal 1992, and no further awards will be made under the 1988 Plan. The 1993 Plan was approved by the vote of a majority of the stockholders of the Company at the 1993 Annual Meeting of Stockholders. The 1993 Plan provides for long-term incentives based upon objective, quantifiable measures of the Company's performance over time through the payment of incentive compensation of the types commonly known as stock options, restricted stock, performance shares, other forms of stock-based incentives, such as phantom stock and cash awards. A maximum of 350,000 shares of Common Stock may be paid to participants under the 1993 Plan and/or purchased pursuant to stock options granted under the 1993 Plan, subject to antidilution and other adjustments specified in the 1993 Plan. All awards made under the 1993 Plan to date have been in the form of awards of shares of restricted stock. As of April 17, 1995, 285,600 shares of restricted stock have been awarded under the 1993 Plan. At the beginning of Fiscal 1996, a total of 23,500 shares of restricted stock were awarded to two officers of the Company, including 20,000 shares of restricted stock awarded to Mr. Dixon in connection with his appointment as President and Chief Executive Officer of the Company. No awards were made under the 1993 Plan in Fiscal 1995. For all awards made prior to the end of Fiscal 1995 (an aggregate of 262,100 shares), vesting of the shares of restricted stock granted pursuant to such awards is contingent upon attainment, subsequent to the date of grant, -33- of EBITDA levels of $265 million in any four consecutive fiscal quarter period (plus $4 million for each fiscal quarter included in the period subsequent to the Acme acquisition) or $500 million in any eight consecutive fiscal quarter period (plus $4 million for each fiscal quarter included in the period subsequent to the Acme acquisition). Such shares will be forfeited if such performance levels are not achieved by the end of the fiscal quarter which ends closest to May 1, 1998. Vesting of awards of restricted stock made subsequent to the end of Fiscal 1995 (an aggregate of 23,500 shares) is also conditioned upon the recipient's remaining in the employ of the Company for an additional two years following the last fiscal quarter in which the required EBITDA performance level was attained. To encourage retention of shares by the participants, upon vesting of the restricted stock the Company will make a cash payment to each participant equal to the amount of income tax payable by such participant in respect of the award and the cash payment, if such participant agrees not to sell his shares for at least two years beyond vesting and to refund the payment if he leaves the Company within such two-year period. The Committee considered that the EBITDA vesting condition of the restricted stock awards provides a performance incentive that is related to stockholder value. With respect to awards of restricted stock made prior to the end of Fiscal 1995, the Committee considered the EBITDA target, which was recommended by management, in light of the Company's financial plan. The Committee concluded that achievement of the EBITDA target in three years would reflect outstanding performance by management, achievement of the EBITDA target in four years would reflect above average performance and achievement of the EBITDA target in five years would reflect average performance. The terms of the awards provide that if the EBITDA targets are not achieved by the end of the fiscal quarter which ends closest to May 1, 1998, the awards are forfeited. The Committee considered permitting partial vesting of the shares at the end of the fiscal quarter which ends closest to May 1, 1998, depending upon how close to achieving the EBITDA target the Company had come, but ultimately decided upon forfeiture rather than partial vesting so as not to diminish the incentive to achieve the EBITDA target. With respect to awards of restricted stock made subsequent to the end of Fiscal 1995, the Committee determined that it would be advisable to maintain the same EBITDA target as was used for previous awards, but to require the participant to remain in the employ of the Company for an additional two years following the last fiscal quarter in which the required EBITDA -34- performance level was attained in order for the shares to vest. CHIEF EXECUTIVE OFFICER COMPENSATION Claude J. Incaudo was President and Chief Executive Officer of the Company from the beginning of Fiscal 1992 until his retirement at the end of Fiscal 1995. Mr. Incaudo has served as a consultant to the Company since his retirement. During his term as President and Chief Executive officer, Mr. Incaudo was compensated pursuant to the terms of an employment agreement entered into among him, the Company and P & C on February 1, 1992. The employment agreement provided that Mr. Incaudo was entitled to a base salary of not less than $382,524 for Fiscal 1995, the third year of the three-year employment period. In addition, the employment agreement provided for Mr. Incaudo's participation in the Corporate Incentive Plan and the P & C Incentive Plan, as described under "Annual Compensation - Cash Bonus Plans" above, for each year of the employment period. Mr. Incaudo's employment agreement also provided for the grant pursuant to the Company's 1988 Stock Option Plan of options to purchase 40,000 shares of the Company's Common Stock at a price of $24.25, equal to the fair market value of the Company's common stock on December 12, 1991, the date of authorization of the grant of such options to Mr. Incaudo by the Company's Board of Directors. Under the terms of the employment agreement, such options become exercisable in three equal installments on the last day of each of the Company's fiscal years covered by the employment period. Accordingly, options to purchase all of the 40,000 shares are currently exercisable. The employment agreement also provides for the continued services of Mr. Incaudo as a consultant to the Company during the two-year period following the date of his retirement. Mr. Incaudo will be compensated for consulting services at the rate of $150,000 per annum. See "Employment Contracts and Termination Agreements" above. In connection with Mr. Dixon's appointment as President and Chief Executive Officer, the Company and Mr. Dixon entered into an employment agreement. Pursuant to this agreement, Mr. Dixon will serve as President and Chief Executive Officer of the Company until January 27, 1996 and -35- will receive a base salary of $400,000 for the year. The agreement also provides that Mr. Dixon will be eligible to receive, at the sole discretion of the Board of Directors, a yearly cash bonus award under the Corporate Incentive Plan of up to 50% of his base salary for the year. See "Employment Contracts and Termination Agreements" above. In addition, at the time of his appointment as President and Chief Executive Officer, Mr. Dixon received an award of 20,000 shares of restricted stock under the 1993 Plan. In determining the salary to be paid to Mr. Dixon, the Board of Directors considered Mr. Dixon's current salary, Mr. Incaudo's salary and the salaries paid to chief executive officers at other supermarkets comparable in size to Penn Traffic. The Revenue Reconciliation Act of 1993 added Section 162(m) to the Internal Revenue Code of 1986, as amended (the "Code"). Section 162(m), which became effective for tax years beginning January 1, 1994, disallows a deduction to the Company for any compensation paid to a "covered employee" in excess of $1 million per year, subject to certain exceptions. In general, "covered employees" include the chief executive officer and the four other most highly compensated executive officers of the Company who are in the employ of the Company at the end of the tax year. Among other exceptions, the deduction limit does not apply to compensation that meets the specified requirements for "performance-based" compensation. Those requirements include the establishment of objective performance goals by a committee of the Board of Directors composed of outside directors and stockholder approval of the material terms of the compensation and the criteria upon which the performance goals are based prior to payment of such compensation. Current proposed regulations issued under the Code, which have not yet been finalized, provide transition rules and relief, as applicable, for stockholder approval and other requirements with respect to awards under certain plans previously approved by stockholders, such as the 1993 Plan. The Compensation Committee's policy is to award compensation for covered executives that will be deductible without limitation where design of a formula-based program will further the aims of the Company's executive compensation programs described above. However, the Compensation Committee considers it important to retain flexibility to design compensation programs that recognize a full range of performance criteria important to the Company's success, even where compensation payable under such programs may not be deductible. In future determinations regarding compensation -36- to be paid to executive officers of the Company, the Compensation Committee will consider the requirements of Section 162(m) and will make determinations based upon the best interests of the Company. The Company also provides to its executive officers other compensation, such as retirement income, described elsewhere in this proxy statement. The amounts of these benefits generally are tied directly to salaries, as variously defined in the relevant plans. Such additional benefits are believed to be typical of the benefits provided by other public companies to their executives. Richard D. Segal, Chairman Eugene A. DePalma Guido Malacarne Harold S. Poster -37- PERFORMANCE GRAPH(1) Following is a graph which compares for fiscal years 1991 through 1995 the cumulative total stockholder return on the Common Stock, the cumulative total return on Standard & Poor's 500 Stock Index (the "S&P 500 Index") and the cumulative total return on Standard & Poor's Food Retail Index(2) (the "S&P Food Retail Index").
Measurement Period (Fiscal Year Covered) Penn Traffic S&P 500 Index S&P Food Retail Index - ------------ ------------ ------------- --------------------- 1990 100 100 100 1991 94 105 123 1992 146 124 117 1993 173 133 147 1994 193 146 137 1995 192 143 149 - ---------------- (1) Assumes $100 invested on January 31, 1990 in Penn Traffic Common Stock, S&P 500 Index and S&P Food Retail Index (also assumes reinvestment of dividends). (2) Includes Albertsons, American Stores, Bruno's, Giant Food, Great Atlantic & Pacific, Kroger and Winn Dixie.
-38- CERTAIN TRANSACTIONS During Fiscal 1996, MTH will provide financial consulting and business management services to Penn Traffic, for which services MTH will receive an annual fee of $1,395,100, payable in twelve equal monthly installments. In addition to such financial consulting and business management services, it is anticipated that MTH will periodically provide investment banking services to the Company in connection with acquisitions and other transactions, for which MTH will receive reasonable and customary fees. During Fiscal 1995, MTH provided financial consulting and business management services to Penn Traffic, for which services MTH received an annual fee of $1,357,100. During Fiscal 1995, MTH also received a fee of $500,000 for its services in connection with assisting the Company with the Acme acquisition and the public offering of $100 million in principal amount of 10.65% Senior Notes due 2004. Until March 1995, the Company held an indirect ownership interest in the common stock of Grand Union Holdings, the indirect corporate parent of Grand Union. At the time of the acquisition of Grand Union by Grand Union Holdings in July 1989, Grand Union and P & C operated stores in some of the same geographic areas in Vermont and upstate New York. In connection with the acquisition, agreements were entered into with federal and state antitrust authorities which required the divestiture of sixteen Grand Union stores or P & C stores. The divestitures required by these agreements were completed on July 30, 1990. P & C operated thirteen of the sixteen divested stores and Grand Union operated three. In a related transaction, in July 1990, P & C and Grand Union entered into an agreement (the "Operating Agreement") whereby Grand Union acquired the right to operate P & C's thirteen remaining stores in New England under the Grand Union name until July 2000, with an option to extend the term of such operation for an additional five years. Penn Traffic also granted Grand Union an option to purchase such stores. In connection with these transactions, Grand Union agreed to pay Penn Traffic a minimum annual fee averaging $10.7 million per year during the ten-year lease term plus, beginning with the year commencing July 31, 1992, additional contingent fees of up to $700,000 per year based upon sales performance of the stores operated by Grand Union. In addition, Grand Union paid Penn Traffic $7.5 million for the option to purchase the stores. Under the terms of the Operating Agreement, the -39- recapitalization of Grand Union in July 1992 triggered a $15 million prepayment of the operating fee. This prepayment reduced the future payments that Grand Union will make to Penn Traffic pursuant to the terms of the Operating Agreement by approximately $3.2 million per year. In the event of a default by Grand Union in the performance of its obligations pursuant to the Operating Agreement, the right to operate the stores will revert to the Company. Grand Union purchases bakery products from Penn Traffic's Penny Curtiss bakery, and Penn Traffic purchases products from Grand Union's commissary. All of such purchases are made in the ordinary course of business. The amount of bakery products purchased by Grand Union from Penny Curtiss was approximately $3.5 million in Fiscal 1995, $3.1 million in Fiscal 1994 and $3.1 million in Fiscal 1993. The amount of commissary product purchased by Penn Traffic from Grand Union was approximately $0.3 million in Fiscal 1995, $0.4 million in Fiscal 1994 and $0.5 million in Fiscal 1993. In September 1993, Penn Traffic entered into a program to consolidate the purchasing and distribution of health and beauty care products and general merchandise with Grand Union. Under this program, Grand Union procures health and beauty care products for both Grand Union and Penn Traffic, and Penn Traffic, through its Big Bear division, procures general merchandise for both Penn Traffic and Grand Union. Grand Union's general merchandise warehouse in Montgomery, New York is used to distribute general merchandise and health and beauty care products to Insalaco's, P & C, Quality Markets and Riverside stores. This warehouse also supplies Penn Traffic's wholesale customers, as well as Grand Union stores. Under this arrangement, the cost of operating the Montgomery warehouse is shared by Penn Traffic in an amount proportionate to Penn Traffic's usage of the facility. Penn Traffic owns the general merchandise and health and beauty care products inventory located at the Montgomery, New York warehouse. In Fiscal 1995, the amount of product sold by Penn Traffic to Grand Union was $87.9 million. As described above, Grand Union filed a voluntary petition for reorganization under the Bankruptcy Code in January 1995. The Company's ongoing relationships with Grand Union are being re-evaluated in connection with the pending Grand Union bankruptcy proceedings. No determination has yet been made as to whether, or on what basis Grand Union's purchase of Penn Traffic's bakery products and Penn Traffic's purchase of Grand Union's commissary products, or the -40- arrangement with regard to consolidated purchasing and distribution of health and beauty care products and of general merchandise, will be continued. Penn Traffic is being represented by the law firm Gilmartin, Poster & Shafto in connection with the reorganizations under Chapter 11 of Grand Union, Grand Union Capital and Grand Union Holdings. During Fiscal 1995, Penn Traffic was represented by Gilmartin, Poster & Shafto in connection with the Acme acquisition, which was completed in January 1995. Mr. Poster, a director of the Company, has been a partner in the firm of Gilmartin, Poster & Shafto since July 1991. 2. RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS The Board of Directors, upon the recommendation of the Company's Audit Committee, has selected Price Waterhouse LLP, independent certified public accountants, as independent auditors for the Company for the fiscal year ending January 27, 1996. A resolution will be submitted to stockholders at the Annual Meeting for ratification of such selection. Although ratification by stockholders is not a prerequisite to the ability of the Board of Directors to select Price Waterhouse LLP as the Company's independent auditors, the Company believes such ratification to be desirable. If the stockholders do not ratify the selection of Price Waterhouse LLP, the selection of independent auditors will be reconsidered by the Board of Directors; however, the Board of Directors may select Price Waterhouse LLP notwithstanding the failure of the stockholders to ratify its selection. Representatives of Price Waterhouse LLP will be present at the Annual Meeting, will have the opportunity to make statements, if they desire to do so, and will be available to respond to appropriate questions. Price Waterhouse LLP has performed the annual examination of the Company's financial statements since 1981. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS RESOLUTION. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY A CONTRARY VOTE. THE RESOLUTION MAY BE ADOPTED BY A MAJORITY OF THE VOTES CAST WITH RESPECT THERETO. -41- 3. ALL OTHER MATTERS THAT MAY COME BEFORE THE MEETING As of the date of this statement, the Board of Directors knows of no business that will be presented for consideration at the meeting other than that referred to above. As to other business, if any, that may come before the meeting, proxies in the enclosed form will be voted in accordance with the judgment of the person or persons voting the proxies. 4. STOCKHOLDER NOMINATIONS AND PROPOSALS The Company's by-laws require that there be furnished to the Company written notice with respect to the nomination of a person for election as a director (other than a person nominated at the direction of the Board of Directors), as well as the submission of a proposal (other than a proposal submitted at the direction of the Board of Directors), at a meeting of stockholders. In order for any such nomination or submission to be proper, the notice must contain certain information concerning the nominating or proposing stockholder, and the nominee or the proposal, as the case may be, and must be furnished to the Company generally not less than 30 days prior to the meeting. A copy of the applicable by-law provisions may be obtained, without charge, upon written request to the Secretary of the Company at its principal executive offices. In accordance with the rules of the Commission, any proposals which stockholders intend to present at the Company's 1996 Annual Meeting of Stockholders must be received by the Secretary of the Company by December 31, 1995 in order for the proposal to be considered for inclusion in the Company's notice of meeting, proxy statement and proxy relating to the 1996 Annual Meeting of Stockholders. 5. ADDITIONAL INFORMATION At any time prior to their being voted, the enclosed proxies are revocable by written notice to the Secretary of the Company, by giving a later dated proxy or by appearance at the meeting and voting in person. Solicitation of proxies will be made by mail, telephone and, to the extent necessary, by telegrams and personal interviews. Expenses in connection with the solicitation of proxies will be borne by the Company. Brokers, custodians and fiduciaries will be requested to transmit proxy material -42- to the beneficial owners of Common Stock held of record by such persons, at the expense of the Company. The Company has retained W.F. Doring to aid in the solicitation of proxies, and for its services the Company expects to pay fees of approximately $2,500 plus expenses. By Order of the Board of Directors EUGENE R. SUNDERHAFT Senior Vice President - Finance and Secretary May 1, 1995 Syracuse, New York - ------------------------------------------------------------------------------ PROXY THE PENN TRAFFIC COMPANY PROXY THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY FOR THE ANNUAL MEETING OF STOCKHOLDERS -- JUNE 7, 1995 The undersigned hereby appoints Francis D. Price, Jr. and Eugene R. Sunderhaft and each of them jointly and severally, attorneys and proxies of the undersigned, with full power of substitution and hereby authorizes them to represent and to vote, as designated below, all the shares of common stock of The Penn Traffic Company, which the undersigned may be entitled to vote at the Annual Meeting of Stockholders to be held at the Hyatt Capitol Square, 75 East State Street, Columbus, Ohio 43215 on Wednesday, June 7, 1995 at 1:30 P.M. Columbus time, and at all adjournments thereof, on all matters coming before said meeting. THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE ON THE REVERSE SIDE, BUT IF NO CHOICES ARE INDICATED, THIS PROXY WILL BE VOTED FOR ALL NOMINEES LISTED ON THE REVERSE SIDE AND FOR PROPOSAL 2. PLEASE MARK, SIGN, DATE AND MAIL THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ THE PENN TRAFFIC COMPANY PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [ ] THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES LISTED IN PROPOSAL 1 AND FOR APPROVAL OF PROPOSAL 2. Unless otherwise specified, this Proxy will be voted FOR all Nominees listed in Proposal 1 and FOR approval of Proposal 2. 1. ELECTION DIRECTORS-- NOMINEES: John T. Dixon, Gary D. Hirsch, and Richard D. Segal. FOR WITHHOLD FOR ALL (Except Nominee(s) Written Below) / / / / / / ------------------------------------------------------------- 2. The proposal to ratify the appointment of Price Waterhouse as the independent accountants for The Penn Traffic Company for the fiscal year ending January 27, 1996. FOR AGAINST ABSTAIN / / / / / / 3. To consider and approve such other matters as may properly come before the meeting. All Proxies to vote at said Meeting or any adjournments thereof heretofore given by the undersigned are hereby revoked. Receipt of Notice of Annual Meeting and Proxy Statement is hereby acknowledged. Dated: ________________________, 1995 Signature(s) ______________________________________________________________ ___________________________________________________________________________ (Please sign as name(s) appears on this proxy card. If joint account, each joint owner should sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If corporation, please sign in full corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized person.) - ------------------------------------------------------------------------------ -----END PRIVACY-ENHANCED MESSAGE-----