<PAGE>
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
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(Name of Registrant as Specified in Its Charter)
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(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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
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
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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.
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<PAGE>
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.
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<PAGE>
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
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<PAGE>
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.
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<PAGE>
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.
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<PAGE>
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-
<PAGE>
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
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<PAGE>
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."
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<PAGE>
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.
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<PAGE>
<TABLE>
<CAPTION>
Amount & Nature
Name and Address of of Beneficial Percent
Beneficial Owner Ownership of Class
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<S> <C> <C>
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%
<FN>
____________
* Less than 1.0%.
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<PAGE>
(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
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<PAGE>
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.
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<PAGE>
(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
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<PAGE>
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.
</TABLE>
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.
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<PAGE>
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-
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
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)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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-
<PAGE>
<FN>
- ----------------------
(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-
<PAGE>
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 $18,884 for Fiscal 1993.
(6) Includes amounts earned in respect of the fiscal year indicated under the
P & C 1987 Executive Incentive Compensation Plan (the "P & C Incentive
Plan"). Payments of such awards under the P & C Incentive Plan are made as
follows: 40% of the amount earned is paid during the year in which the
bonus was earned and 20% of the amount earned is paid in each of the
following three years. See "Executive Compensation - Compensation
Committee Report."
(7) Includes amounts earned in respect of the fiscal year indicated under the
Corporate Incentive Plan. See "Executive Compensation - Compensation
Committee Report."
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<PAGE>
(8) Includes amounts earned in respect of the fiscal year indicated under the
Big Bear Supplemental Incentive Plan. See "Executive Compensation -
Compensation Committee Report."
</TABLE>
OPTIONS
The following table sets forth information concerning the value of
unexercised options as of January 28, 1995 held by the executives named in the
Summary Compensation Table above. No options were exercised by such persons
during Fiscal 1995.
<TABLE>
<CAPTION>
AGGREGATED OPTIONS/SAR EXERCISES
IN LAST FISCAL YEAR, AND FY-END
OPTIONS/SAR VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/SARs
Options/SARs At FY-End (#) At FY-End($)
------------------------------- -----------------------------------
Name Exercisable Unexercisable Exercisable(1) Unexercisable(1)
---- ----------- ------------- -------------- ----------------
<S> <C> <C> <C> <C>
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
<FN>
- ---------------------
(1) Based on the fair market value of $37.375 per share on January 28, 1995.
</TABLE>
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-
<PAGE>
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-
<PAGE>
P & C PENSION PLAN TABLE
<TABLE>
<CAPTION>
Years of Service
-------------------------------------------------------------------------
Remuneration 15 20 25 30 35
- ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$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
</TABLE>
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-
<PAGE>
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.)
<TABLE>
<CAPTION>
Big Bear Stores Employees Pension Plan Table
--------------------------------------------
Years of Service
------------------------------------------------------------------------------------------
Remuneration 15 20 25 30 35 40
- ------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
$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
</TABLE>
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
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<PAGE>
"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.)
<TABLE>
<CAPTION>
Riverside Pension Plan Table
----------------------------
Years of Service
------------------------------------------------------------------------------------------
Remuneration 15 20 25 30 35 40
------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
$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
</TABLE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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
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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
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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
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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,
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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
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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,
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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
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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
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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
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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
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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").
<TABLE>
<CAPTION>
Measurement
Period
(Fiscal Year
Covered) Penn Traffic S&P 500 Index S&P Food Retail Index
- ------------ ------------ ------------- ---------------------
<S> <C> <C> <C>
1990 100 100 100
1991 94 105 123
1992 146 124 117
1993 173 133 147
1994 193 146 137
1995 192 143 149
<FN>
- ----------------
(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.
</TABLE>
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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
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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
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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.
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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
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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
<PAGE>
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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.
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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)
/ / / / / /
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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.)
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