<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
<TABLE>
<S> <C>
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 Section240.14a-12
</TABLE>
THE PENN TRAFFIC COMPANY
-------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
----------------------------------------------------------
(2) Aggregate number of securities to which transaction
applies:
----------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
----------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------
</TABLE>
<PAGE>
[LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JULY 12, 2000
The Annual Meeting of Stockholders of The Penn Traffic Company (the
"Company") will be held on Wednesday, July 12, 2000, at 1:00 p.m., local time,
at the Wyndham Hotel, 6301 Route 298, East Syracuse, New York, 13057, for the
following purposes:
1. To elect nine directors for terms expiring at the 2001 Annual Meeting
of Stockholders;
2. To consider and take action upon a proposal to ratify the selection of
PricewaterhouseCoopers LLP, independent certified public accountants,
as the Company's auditors for the fiscal year ending February 3, 2001;
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 May 19, 2000 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
FRANCIS D. PRICE, JR.
Secretary
May 26, 2000
Syracuse, New York
IMPORTANT
Whether or not you expect to attend the meeting in person, please
complete, date and sign the enclosed form of proxy and return it without
delay in the enclosed envelope. Your proxy can be revoked at any time prior
to its being voted by giving written notice of revocation to the Secretary of
the Company, by giving a later dated proxy, or by voting at the meeting in
person.
<PAGE>
T H E P E N N T R A F F I C C O M P A N Y
1200 State Fair Boulevard
Syracuse, New York 13221-4737
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JULY 12, 2000
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, July 12, 2000, at 1:00 p.m., local time,
at the Wyndham Hotel, 6301 Route 298, East Syracuse, New York 13057. The
approximate date on which this Proxy Statement is first being mailed to
stockholders is May 26, 2000.
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 May 19, 2000 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 20,106,955 shares
of common stock, par value $.01 per share (the "Common Stock"), the holders of
which are entitled to one vote per share.
<PAGE>
1. ELECTION OF DIRECTORS
Pursuant to the Company's certificate of incorporation and by-laws, the
terms of office of each director shall expire at the next Annual Meeting
following the director's election. The Company's certificate of incorporation
and by-laws fix the total number of members of the Company's Board of Directors
at no less than two or more than ten. Currently, the Board of Directors
consists of nine members. Mr. Gary D. Hirsch resigned as a director effective
as of January 31, 2000 and Mr. Thomas Harberts passed away on February 20,
2000. Mr. David B. Jenkins was elected to the Board of Directors on May 10,
2000. The Board of Directors has decided that, it will nominate the nine
current directors for election at the Annual Meeting. Your proxy cannot be
voted at the Annual Meeting for a greater number of nominees.
The following individuals have been nominated by the Board of Directors
for election as directors at the 2000 Annual Meeting, each to serve for a term
of one year, until the 2001 Annual Meeting of Stockholders and until his
successor is duly elected and qualified:
<TABLE>
<S> <C>
Byron E. Allumbaugh Gabriel S. Nechamkin
Kevin P. Collins Lief D. Rosenblatt
Joseph V. Fisher Mark D. Sonnino
Martin A. Fox Peter L. Zurkow
David B. Jenkins
</TABLE>
Proxies in the enclosed form received from holders of Common Stock will be
voted for the election of the nine nominees named above as directors of the
Company unless stockholders indicate otherwise. If any of the foregoing
nominees is unable to serve for any reason (which event is not anticipated), the
shares represented by the enclosed proxy may be voted for such other person or
persons as determined by the holders of such proxy, unless stockholders indicate
otherwise. 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 Annual Meeting. Thus, those nominees who receive the
nine highest numbers of votes for their election as directors will be elected,
regardless of the 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 or broker non-votes 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" THE ELECTION OF
ITS NINE NOMINEES AS DIRECTORS OF THE COMPANY.
2
<PAGE>
The following information includes the age, the year in which first
elected as a director of the Company, the principal occupation, and other
directorships of each of the nominees named for election as directors.
<TABLE>
<S> <C>
Byron E. Allumbaugh Mr. Allumbaugh was the Chairman and Chief Executive
Age: 68 Officer of the former Ralphs Grocery Company from 1976
Director since 1999 until he retired in 1997. Mr. Allumbaugh serves as a
Director of CKE Restaurants, Inc. (food service
company), El Paso Energy Company (natural gas and
energy company), and Ultramar Diamond Shamrock
Incorporated (oil refining company).
Kevin P. Collins Mr. Collins has been a member and a Principal of The
Age: 49 Old Hill Company LLC (financial advisory services
Director since 1999 company) since 1997. Mr. Collins was a Principal of
JHP Enterprises, Ltd. (financial advisory services)
from 1991 to 1997. Mr. Collins serves as a Director
of London Fog Industries, Inc. (apparel company),
Avanti Petroleum, Inc. (convenience store chain), Key
Energy Services, Inc. (provider of technology services
to the petroleum industry) and Metretek Technologies,
Inc. (provider of information services to the energy
industry).
Joseph V. Fisher Mr. Fisher has been a Director and the President and
Age: 58 Chief Executive Officer of the Company since November
Director since 1998 1998. From 1992 to November 1998 Mr. Fisher held
senior management positions with Big V Supermarkets
Inc. ("Big V"), a regional supermarket company
operating primarily under the ShopRite name, including
President and Chief Executive Officer (from 1995 to
1998), Executive Vice President - Marketing and
Operations and Chief Operating Officer (from 1994 to
1995), Senior Vice President - Marketing and
Operations (from 1993 to 1994) and Vice President -
Store Operations (from 1992 to 1993). He also served
as a Director of Big V from 1993 to 1998. Prior to
joining Big V, Mr. Fisher was employed by Purity
Supreme, Inc. (supermarket company) from 1973 to 1991
in various management positions including Senior Vice
President - Supermarkets from 1985 to 1991.
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
Martin A. Fox Mr. Fox has been Executive Vice President of the
Age: 47 Company since February 2000 and Chief Financial
Director since 1993 Officer since June 1999. Mr. Fox was also Vice
Chairman of the Executive Committee from June 29, 1999
until January 31, 2000 and Vice Chairman - Finance of
the Company from 1993 until June 29, 1999. Mr. Fox
was a Vice President of the Company from 1989 until
1993. Mr. Fox was a Vice President of Grand Union
Holdings between 1989 and 1996, a Director of Grand
Union Holdings between 1992 and 1996 and a Director
and Vice President of certain of Grand Union Holdings'
subsidiaries for certain periods between 1989 and
1996.
David B. Jenkins Mr. Jenkins is a business consultant. Mr. Jenkins was
Age: 69 President and Chief Executive Officer of Shaw's
Director since 2000 Supermarkets, Inc., from 1982 until his retirement as
President and CEO in 1993, and was Chairman of the
Board until 1995. Mr. Jenkins served as a Director
of J. Sainsbury International (parent company of
Shaw's and a British supermarket company) from 1994 to
1995. Mr. Jenkins serves as a Director of Nabisco
Holdings Corp. and Nabisco Group Holdings Corp. (food
manufacturing company), Citizens Capital Incorporated,
(venture capital company), Aai.Foster Grant (jewelry
and eyeglass company), The Foreside Company (home
furnishings company) and KaBloom, Ltd. (flower
distribution company).
Gabriel S. Nechamkin Mr. Nechamkin is a Principal of Satellite Asset
Age: 42 Management, L.P. He was previously employed at Soros
Director since 1999 Fund Management LLC from 1988 through 1999, most
recently as Managing Director and Head of Trading for
the Arbitrage, High Yield and Distressed Securities
Department.
Lief D. Rosenblatt Mr. Rosenblatt is a Principal of Satellite Asset
Age: 46 Management, L.P. He was previously employed at Soros
Director since 1999 Fund Management LLC from 1988 through 1999, most
recently as Managing Director and Head of the
Arbitrage, High Yield and Distressed Securities
Department.
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Mark D. Sonnino Mr. Sonnino is a Principal of Satellite Asset
Age: 39 Management, L.P. He was previously employed at Soros
Director since 1999 Fund Management LLC from 1988 through 1999, most
recently as Managing Director and Head of Research for
the Arbitrage, High Yield and Distressed Securities
Department.
Peter L. Zurkow Mr. Zurkow has been Chairman of the Board of the
Age: 46 Company since June 29, 1999. From 1992 to the
Director since 1999 present, Mr. Zurkow has been a Managing Director of
PaineWebber Inc. He has served as a Director of E-Art
Group.com (online art dealer) since 1999. He served
as a Director of Streamline, Inc. (online grocery
company) from 1997 to 1998 and
Kash N' Karry Supermarkets from 1994 to 1996.
</TABLE>
There are no family relationships among the directors and executive
officers of the Company.
On March 1, 1999 (the "Petition Date"), Penn Traffic and certain of its
subsidiaries filed petitions for relief (the "Bankruptcy Cases") under Chapter
11 of the United States Bankruptcy Code (the "Bankruptcy Code") in the United
States Bankruptcy Court for the District of Delaware (the "Bankruptcy
Court"). On May 27, 1999 the Bankruptcy Court confirmed the Company's Chapter
11 plan of reorganization (the "Plan") and on June 29, 1999 (the "Effective
Date"), the Plan became effective. The Bankruptcy Cases were commenced in order
to implement a prenegotiated financial restructuring. On June 29, 1999, the
Company's then-existing Board of Directors' (other than Messrs. Hirsch, Fox and
Fisher) term of office expired and a newly constituted Board of Directors was
appointed. Messrs. Fisher and Fox served as executive officers and directors of
Penn Traffic on the Petition Date.
From February 1, 1999 until June 29, 1999, the Board of Directors held two
meetings. From June 29, 1999 until January 29, 2000, the Board of Directors
held 11 meetings. Each director in office between February 1, 1999 and
June 29, 1999, and between June 29, 1999 and January 29, 2000, attended at least
75% of the total number of meetings held during these periods of the Board of
Directors of the Company and of the committees of such Board on which he served,
except for Mr. Rosenblatt.
From February 1, 1999 until June 29, 1999 the members of the Executive
Committee were Messrs. Hirsch and Fisher with Mr. Hirsch acting as
Chairman. From June 29, 1999 until January 31, 2000, the members of the
Executive Committee were Messrs. Hirsch, Fisher and Fox with Mr. Hirsch acting
as Chairman. Since February 1, 2000, the members of the Executive Committee
have been Messrs. Fisher and Fox. The Executive Committee did not hold any
formal meetings during the 52-week period ended January 29, 2000 ("Fiscal 2000")
but did act by its written consent. The Executive Committee may exercise
certain powers of the Board of Directors regarding the management and direction
of the business and affairs of the Company when the Board of
5
<PAGE>
Directors is not in session. All action taken by the Executive Committee is
reported to and reviewed by the Board of Directors.
From February 1, 1999 until June 29, 1999, the members of the Compensation
Committee of the Board of Directors were Messrs. Eugene DePalma and Richard
Segal with Mr. Segal acting as Chairman. From June 29, 1999 until February 20,
2000, the members of the Compensation Committee were Messrs. Allumbaugh,
Harberts, Nechamkin and Zurkow. From February 20, 2000 until May 9, 2000, the
members of the Compensation Committee were Messrs. Allumbaugh, Nechamkin and
Zurkow. Since May 10, 2000, the members of the Compensation Committee have been
Messrs. Allumbaugh, Jenkins, Nechamkin and Zurkow. Mr. Zurkow has been Chairman
of the Compensation Committee since June 29, 1999. The Compensation Committee
reviews the annual recommendations of the Chief Executive Officer concerning the
compensation of officers and of certain of the employees of the Company,
including the compensation plans, retirement plans and fringe benefit plans 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 three meetings during Fiscal 2000, also
administers the Company's 1999 Equity Incentive Plan and 1999 Directors' Stock
Option Plan.
From February 1, 1999 until June 29, 1999, the members of the Audit
Committee were Ms. Susan Engel and Mr. DePalma with Mr. DePalma acting as
Chairman. From June 29, 1999 until February 20, 2000, the members of the Audit
Committee were Messrs. Collins, Harberts, Sonnino and Zurkow. From
February 20, 2000 until May 9, 2000, the members of the Audit Committee were
Messrs. Collins, Sonnino and Zurkow. Since May 10, 2000, the members of the
Audit Committee have been Messrs. Collins, Jenkins, Sonnino and
Zurkow. Mr. Collins has been Chairman of the Audit Committee since June 29,
1999. The Audit Committee held one meeting in Fiscal 2000.
From February 1, 1999 until June 29, 1999, the Board of Directors did not
have a nominating committee. After the consummation of the Plan, the Board of
Directors created a nominating committee comprised of Messrs. Allumbaugh, Hirsch
and Rosenblatt. Since February 1, 2000, the members of the nominating committee
have been Messrs. Allumbaugh and Rosenblatt. Stockholder nominations of persons
for election as directors are subject to the notice requirements described below
under the caption "Stockholder Nominations and Proposals."
6
<PAGE>
EXECUTIVE OFFICERS
Set forth below are the names, ages and positions with the Company of the
Executive Officers of the Company as of the date hereof.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH PENN TRAFFIC
- ---------------------- -------- ---------------------------------------------------------
<S> <C> <C>
Joseph V. Fisher 58 President and Chief Executive Officer
Martin A. Fox 47 Executive Vice President and Chief Financial Officer
Roy M. Flood 59 Senior Vice President and General Manager of Big Bear
Leslie H. Knox 53 Senior Vice President and Chief Marketing Officer
Randy P. Martin 44 Vice President - Finance and Chief Accounting Officer
Francis D. Price, Jr. 51 Vice President, General Counsel and Secretary
</TABLE>
Mr. Fisher has been a Director and the President and Chief Executive
Officer of the Company since November 1998. From 1992 to November 1998
Mr. Fisher held senior management positions with Big V Supermarkets Inc. ("Big
V"), a regional supermarket company operating primarily under the ShopRite name,
including President and Chief Executive Officer (from 1995 to 1998), Executive
Vice President - Marketing and Operations and Chief Operating Officer (from 1994
to 1995), Senior Vice President - Marketing and Operations (from 1993 to 1994)
and Vice President - Store Operations (from 1992 to 1993). He also served as a
Director of Big V from 1993 to 1998. Prior to joining Big V, Mr. Fisher was
employed by Purity Supreme, Inc. (supermarkets) from 1973 to 1991 in various
management positions including Senior Vice President - Supermarkets from 1985 to
1991.
Mr. Fox has been Executive Vice President of the Company since February 1,
2000 and Chief Financial Officer since June 29, 1999. Mr. Fox was also Vice
Chairman of the Executive Committee from June 29, 1999 until January 31, 2000
and Vice Chairman - Finance of the Company from February 1993 until June 29,
1999. Mr. Fox was a Vice President of the Company from 1989 until
February 1993. Mr. Fox was a Vice President of Grand Union Holdings between
1989 and 1996, a Director of Grand Union Holdings between 1992 and 1996 and a
Director and Vice President of certain of Grand Union Holdings' subsidiaries for
certain periods between 1989 and 1996.
7
<PAGE>
Mr. Flood has been Senior Vice President and General Manager of Big Bear
since June 1999. Mr. Flood was a business consultant to the Company from
August 1998 until June 1999. From May 1997 until August 1998, Mr. Flood was
engaged in the management of private affairs. Mr. Flood was Senior Vice
President of the Company and President of the Company's P&C and Quality
divisions from 1995 until May 1997. Mr. Flood was Executive Vice President of
Merchandising of the Company's Big Bear division from 1990 until 1995. From
1977 to 1990, Mr. Flood served in various management positions in the Company's
P&C division.
Mr. Knox has been Senior Vice President and Chief Marketing Officer since
May 1999. From 1995 until May 1999, Mr. Knox held the position of Vice
President - Merchandising with Weis Markets Inc. From 1984 until 1995,
Mr. Knox held various management positions with ABCO Markets Inc., including
Senior Vice President of Sales and Marketing from 1988 to 1995. From 1969 to
1984, Mr. Knox was employed by Alpha Beta Company, a division of American Stores
Company, in various management positions.
Mr. Martin has been Vice President - Finance and Chief Accounting Officer
of Penn Traffic since January 1999. From 1997 until January 1999, he served as
the Company's Vice President of Strategic Planning and Treasurer. From 1993 to
1997, Mr. Martin served as the Company's Director of Taxes. From 1984 to 1993,
Mr. Martin was employed at Price Waterhouse, in various positions including
Senior Tax Manager from 1991 to 1993.
Mr. Price has been Vice President and General Counsel since 1993 and
became Secretary in 1997. Mr. Price was Vice President and General Counsel of
the Company's P&C division from 1985 until 1993. From 1978 to 1985, Mr. Price
served in various other management positions at P&C.
8
<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 28, 2000
(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 persons named in the Summary Compensation Table set
forth herein; and (iv) all Directors and Executive Officers as a group. The
information set forth below for 5% stockholders was derived from publicly
available reports made by the persons listed below on Forms 13G and 13D. The
Company has not attempted to verify any of this information. 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 warrants or 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. On April 28, 2000, there were 20,106,955 shares of Common Stock
outstanding.
9
<PAGE>
<TABLE>
<CAPTION>
AMOUNT & NATURE OF
NAME AND ADDRESS OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER OWNERSHIP CLASS
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
Soros Fund Management LLC 9,013,980 (1) 44.8%
888 Seventh Avenue, 33rd Floor
New York, NY 10106
Satellite Asset Management, L.P. 9,013,980 (2) 44.8%
10 East 50th Street, 21st Floor
New York, NY 10022
DDJ Capital Management, LLC 3,085,376 (3) 15.3%
141 Linden Street, Suite 4
Wellesley, MA 02482-7910
B III Capital Partners, L.P. 1,999,000 (3) 9.9%
141 Linden Street, Suite 4
Wellesley, MA 02482-7910
DDJ Capital III, LLC 1,999,000 (3) 9.9%
141 Linden Street, Suite 4
Wellesley, MA 02482-7910
Northeast Investors Trust 1,906,164 (4) 9.5%
50 Congress Street
Boston, MA 02109-4096
Oaktree Capital Management, LLC 1,724,305 (5) 8.6%
333 South Grand Ave, 28th Floor
Los Angeles, CA 90071
Byron E. Allumbaugh 20,000 (6) *
Kevin P. Collins 20,000 (6) *
Joseph V. Fisher 311,500 (7) 1.5%
Martin A. Fox 131,678 (8) *
David B. Jenkins -- (9) *
Gabriel S. Nechamkin 9,033,980 (10) 44.9%
Lief D. Rosenblatt 9,033,980 (10) 44.9%
Mark D. Sonnino 9,033,980 (10) 44.9%
Peter L. Zurkow 25,000 (11) *
Gary D. Hirsch 145,286 (12) *
Leslie B. Knox 10,000 (13) *
Roy M. Flood 5,000 (14) *
All Directors and Executive Officers as a Group (13
persons) 9,604,389 46.4%
</TABLE>
- --------------------------------------------------------------------------------
* Less than 1.0%.
10
<PAGE>
(1) Soros Fund Management LLC ("Soros") serves as the principal investment
manager of Quantum Partners LDC ("Quantum") and Quota Fund N.V.
("Quota"). Soros on behalf of each of Quantum and Quota, granted
investment discretion over the shares of Common Stock owned by such
entities to Satellite Asset Management, L.P. ("Satellite L.P.") pursuant
to an investment advisory contract between Quantum and Satellite L.P. (the
"Quantum - Satellite Contract") and between Quota and Satellite L.P. (the
"Quota - Satellite Contract"). As a consequence of Soros' ability to
terminate the Quantum - Satellite Contract and the Quota - Satellite
Contract with respect to the shares within 60 days, Soros may be deemed to
have voting and dispositive power over the shares held for the accounts of
Quantum and Quota at Satellite L.P.
(2) Satellite L.P. holds the 9,013,980 shares of Common Stock for the accounts
of the following entities: (i) 7,835,244 shares held for the account of
Quantum and (ii) 1,178,736 Shares held for the account of
Quota. Satellite L.P. has been granted investment discretion over the
shares of Common Stock held for the accounts of Quantum and Quota pursuant
to the Quantum - Satellite Contract and the Quota - Satellite Contract,
respectively.
(3) According to the Schedule 13D filed by DDJ Capital Management, LLC
("DDJ"), dated April 13, 2000, B III Capital Partners, L.P. (the "Fund")
owns, and DDJ Capital III, LLC and DDJ beneficially own, as general
partner and investment manager of the Fund, respectively, 1,999,000 shares
of Common Stock or approximately 9.9% of the outstanding shares of Common
Stock. B III-A Capital Partners, L.P. ("B III-A") owns, and GP III-A, LLC
and DDJ, beneficially own, as general partner and investment manager of
B III-A, respectively, 49,903 shares of Common Stock, or approximately
0.2% of the outstanding shares of Common Stock. The October Fund, Limited
Partnership ("October"), and October G.P., LLC and DDJ beneficially own,
as general partner and investment manager of October respectively, 19,000
shares of Common Stock, or approximately 0.1% of the outstanding shares of
the Common Stock. DDJ, as investment manager to the Fund, B III-A,
October and an institutional investor, and as investment advisor to DDJ
Canadian High Yield Fund may be deemed to beneficially own 3,085,376
shares, or approximately 15.3% of the outstanding shares of Common Stock.
(4) According to the Schedule 13G filed by Northeast Investors Trust, dated
February 11, 2000.
(5) According to the Schedule 13G filed by Oaktree Capital Management, LLC
dated February 10, 2000, Oaktree Capital Management LLC is the general
partner of OCM Opportunities Fund, L.P. (the "Oaktree Fund") and the
investment manager of a third-party managed account (the "Oaktree
Account"). The Oaktree Fund and the Oaktree Account together beneficially
own 1,724,305 shares of Common Stock.
(6) Mr. Allumbaugh and Mr. Collins are deemed to each beneficially own 20,000
shares of Common Stock by virtue of currently exercisable options granted
on July 7, 1999 to purchase 20,000 shares of Common Stock at $12.13 per
share.
(7) Mr. Fisher beneficially owns 3,000 shares of Common Stock and is also
deemed to beneficially own (a) 280,000 fully vested options granted on
July 7, 1999, with an exercise price of $18.30, (b) 28,000 options, which
represent the vested portion of the 140,000 options granted to Mr. Fisher
on September 22, 1999, with an exercise price of $8.75 per share and
(c) 500 shares owned by Mr. Fisher's wife.
(8) 1,290 shares of Common Stock were obtained by virtue of Mr. Fox's exchange
of $50,000 principal amount of the former 11 1/2% senior notes due 2006 as
part of the Joint Plan of Reorganization of The Penn Traffic Company and
certain of its subsidiaries (the "Plan"). In addition, the Plan also
resulted in a 100-to-1 reverse stock split such that the
11
<PAGE>
37,850 shares of the Company's former common stock Mr. Fox owned prior to
consummation of the Plan became 379 shares of the post-reorganization
Common Stock. Additionally, Mr. Fox is deemed to beneficially own 130,000
shares of Common Stock by virtue of fully vested options granted on
June 29, 1999, with an exercise price of $18.30 per share.
(9) Mr. Jenkins was not a member of the Board of Directors on April 28, 2000
and did not beneficially own any shares of Common Stock at that
time. Mr. Jenkins was appointed to the Board of Directors on May 10, 2000
and, as of that date, is deemed to beneficially own 20,000 shares of
Common Stock by virtue of currently exercisable options granted on
May 10, 2000, with an exercise price of $5.89 per share.
(10) 9,013,980 shares of Common Stock are held for the accounts of the
following entities: (i) 7,835,244 shares are held for the account of
Quantum and (ii) 1,178,736 shares are held for the account of
Quota. Satellite L.P. has been granted investment discretion over the
shares held for the accounts of Quantum and Quota pursuant to the
Quantum - Satellite Contract and the Quota - Satellite
Contract. Satellite Fund Management LLC ("Satellite LLC") is the general
partner of Satellite L.P. Messrs. Nechamkin, Rosenblatt and Sonnino are
managing members of Satellite LLC and in such capacity may be deemed to
have voting and dispositive power over the shares of Common Stock held
for the accounts of Quantum and Quota. In addition, each of Messrs.
Nechamkin, Rosenblatt and Sonnino is deemed to beneficially own 20,000
shares of Common Stock by virtue of currently exercisable options granted
on July 7, 1999 to purchase 20,000 shares of Common Stock at $12.13 per
share.
(11) Mr. Zurkow owns 5,000 shares of Common Stock and he is also deemed to
beneficially own 20,000 shares of Common Stock by virtue of currently
exercisable options granted on July 7, 1999 to purchase 20,000 shares of
Common Stock at $12.13 per share.
(12) 60,564 shares of Common Stock were obtained by virtue of Mr. Hirsch's
exchange of $1.4 million principal amount of the former 10 1/4% senior
notes due 2002 and $0.9 million principal amount of the former 10 3/8%
senior notes due 2004 in connection with the Plan. In addition, the Plan
also resulted in a 100-to-1 reverse stock split such that the 362,791
shares of the Company's former common stock which Mr. Hirsch owned prior
to consummation of the Plan became 3,628 shares of post-reorganization
common stock. 3,289 shares of Common Stock are owned by limited
partnerships of which Mr. Hirsch is a general partner of the Managing
General Partner. 155 shares of Common Stock are owned by a corporation
of which Mr. Hirsch is Chairman, President and Director. 2,963 shares of
Common Stock are owned by limited partnerships which may result in
attribution to Mr. Hirsch. 9,335 shares of Common Stock are owned by
Riverside Acquisition Company, of which shares Mr. Hirsch may be deemed
to be the indirect beneficial owner. 120 shares of Common Stock are
benefically owned by Mr. Hirsch's children.
(13) Mr. Knox is deemed to beneficially own 10,000 shares of Common Stock
which represent the vested portion of the 50,000 options granted to
Mr. Knox on July 7, 1999, with an exercise price of $12.13 per share.
(14) Mr. Flood is deemed to beneficially own 5,000 shares of Common Stock,
which represent the vested portion of 25,000 options granted to
Mr. Flood on July 7, 1999, with an exercise price of $12.13 per share.
12
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company has determined that, other than as described below, no person
who at any time during Fiscal 2000 was a director, officer or beneficial owner
of more than 10% of the Company's Common Stock failed to file on a timely basis
reports required by Section 16(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Such determination is based solely upon the
Company's review of Forms 3, 4 and 5, and written representations that no
Form 5 was required, submitted to it during or with respect to Fiscal 2000.
Soros Fund Management LLC and Satellite Asset Management, L.P. each filed
their Form 3 late, and then each filed an amended Form 3 to correct their
respective original Form 3 filings, which inadvertently misstated the number of
shares beneficially owned by each. Messrs. Nechamkin, Rosenblatt and Sonnino
each inadvertently filed a late Form 3. Each filed a Form 4 to correct his
respective original Form 3 filing, which inadvertently misstated the number of
shares beneficially owned by each. Mr. Segal inadvertently filed two Form 4s
late. Mr. Hirsch inadvertently filed a Form 4 late in respect of one
transaction. Mr. Knox and Mr. Harberts each inadvertently filed their Form 3
late. Mr. Price inadvertently filed his Form 4 late. Mr. Flood inadvertently
did not include certain shares owned by him in his Form 3 filing but corrected
the omission in a subsequent Form 4 filing.
13
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued by the
Company to (a) persons serving as President and Chief Executive Officer of the
Company during Fiscal 2000 and (b) each of the four other most highly
compensated executive officers of the Company (collectively, the "Named
Executive Officers") during Fiscal 2000 for services rendered to the Company in
all capacities during the fiscal year ended January 31, 1998 ("Fiscal 1998"),
the fiscal year ended January 30, 1999 ("Fiscal 1999") and Fiscal 2000.
For Fiscal 1998, Fiscal 1999 and from February 1, 1999 through
February 28, 1999, Penn Traffic engaged Miller Tabak Hirsch + Co. ("MTH") to
provide financial consulting and business management services. Mr. Hirsch was a
general partner of the managing general partner of MTH until February 11, 1999,
and Mr. Fox was an Executive Vice President of MTH until February 28,
1999. During Fiscal 1998 and Fiscal 1999, the Company paid MTH $1,437,000 in
each year for such financial consulting and business management services. From
March 1, 1999 until June 29, 1999 Hirsch & Fox LLC (an entity formed by
Messrs. Hirsch and Fox) provided financial consulting and business management
services to the Company for which Hirsch & Fox LLC received fees of
$483,333. From June 29, 1999 through January 31, 2000, Hirsch & Fox LLC
provided the same services to the Company under a management agreement (the
"Management Agreement") and received fees of $845,833. On January 31, 2000, the
Management Agreement was terminated. As required by the rules of the Securities
and Exchange Commission, the amounts set forth below for Messrs. Hirsch and Fox
represent the Company's best estimate of the allocable portions of such
management fees paid to the entities for the services of such executive officers
to Penn Traffic.
14
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
SECURITIES ALL
UNDERLYING OTHER
NAME AND PRINCIPAL FISCAL SALARY BONUS OPTIONS/ COMPENSATION
POSITION YEAR ($) ($) SARS(#)(3)(4) ($)
- -------------------------------------------------- ---- -------- -------- ------- ----------
Joseph V. Fisher 2000 $500,000 $250,000 420,000 $1,111,689(5)
President and Chief Executive Officer 1999 96,154(1) 48,072 500,000 1,060,000(6)
Gary D. Hirsch 2000 $870,833(2) 840,000 $3,345,833(7)
Former Chairman of the Executive Committee 1999 941,483(2)
1998 941,483(2)
Martin A. Fox 2000 $458,333(2) $350,000 304,000 $1,204,166(8)
Executive Vice President and Chief Financial 1999 495,517(2)
Officer 1998 495,517(2)
Leslie B. Knox 2000 $206,250(1) $ 55,000 50,000 $ 70,562(9)
Senior Vice President and Chief Marketing
Officer
Roy M. Flood 2000 $211,442 25,000 $ 94,366(10)
Senior Vice President and 1999 71,584 102,981(10)
General Manager of Big Bear 1998 103,846 12,960 221,827(10)
</TABLE>
- ------------------------
(1) Amount shown represents allocable portion of base salary for the subject
year. As the Named Executive Officer did not serve as an executive
officer in prior fiscal years, such fiscal years have been omitted from
the Summary Compensation Table.
(2) Amounts shown represent the Company's best estimate of the allocable
portion of management fees paid to entities that provided services of the
named executive officer for such services rendered to Penn Traffic.
(3) The options granted to Mr. Fisher in Fiscal 1999 were made pursuant to
the Company's former Performance Incentive Plan. On June 29, 1999,
pursuant to the Plan, all pre-existing options and warrants were
canceled.
(4) On June 29, 1999, pursuant to the Plan, the Company adopted the 1999
Equity Incentive Plan (the "Equity Plan"). Pursuant to the Equity Plan:
(i) on June 29, 1999, Mr. Fisher was awarded fully vested options to
purchase 280,000 shares of Common Stock with an exercise price equal to
$18.30 per share; on September 22, 1999, Mr. Fisher was awarded options
to purchase 140,000 shares of Common Stock with an exercise price of
$8.75 per share and a four-year vesting period; (ii) Mr. Hirsch was
awarded, (a) on June 29, 1999, fully vested options to purchase 360,000
shares of Common Stock with an exercise price equal to $18.30 per share,
(b) on June 29, 1999, options to purchase 240,000 shares of Common Stock
with an exercise price of $18.30 per share that vest 50% on each of the
third and fourth anniversaries of the date of the grant and (c) on
September 22, 1999, options to purchase 240,000 shares of Common Stock
with an exercise price of $8.75 per share that vest upon certain
specified changes of control (on January 31, 2000, all of Mr. Hirsch's
options were canceled in connection with the termination of the
Management Agreement described
15
<PAGE>
below); (iii) Mr. Fox was awarded (a) on June 29, 1999, fully vested
options to purchase 130,000 shares of Common Stock with an exercise price
of $18.30 per share (b) on June 29, 1999, options to purchase 87,000
shares of Common Stock with an exercise price of $18.30 per share that
vest 50% on each of the third and fourth anniversaries of the date of
grant and (c) on September 22, 1999, options to purchase 87,000 shares of
Common Stock with an exercise price of $8.75 per share that vest upon
certain specified changes of control; (iv) on July 7, 1999, Mr. Knox was
awarded options to purchase 50,000 shares of Common Stock with an
exercise price of $12.13 per share and a four-year vesting period, and
(v) on July 7, 1999, Mr. Flood was awarded options to purchase 25,000
shares of Common Stock with an exercise price of $12.13 per share and a
four-year vesting period.
(5) The amount for Fiscal 2000 includes (a) $1,002,839 for the complete
forgiveness of all remaining outstanding principal and interest due with
respect to a loan made to Mr. Fisher in connection with the commencement
of his employment with the Company, (b) $108,127 for reimbursement of
certain relocation expenses and (c) $723 for Company sponsored
contributions to the 401(k) Plan.
(6) The amount for Fiscal 1999 includes $1 million in the form of a signing
bonus paid to Mr. Fisher upon the commencement of his employment with the
Company. The amount also includes interest and principal forgiven in
Fiscal 1999 with respect to a $1 million loan made to Mr. Fisher upon the
commencement of his employment with the Company. See "Employment
Contracts - - Employment Agreement with Joseph V. Fisher."
(7) On January 31, 2000 Mr. Hirsch retired as the Chairman of the Executive
Committee and the Management Agreement between Hirsch & Fox LLC and Penn
Traffic was terminated. On January 31, 2000, $4.9 million was paid in a
lump sum to Hirsch & Fox LLC in connection with the termination of the
Management Agreement. $3.35 million of this amount was allocated to
Mr. Hirsch as follows: (i) $1.35 million in respect of management fees
allocable to Mr. Hirsch under the Management Agreement,
(ii) $1.7 million in satisfaction and cancellation of Mr. Hirsch's right
to receive a payment upon a change of control, and (iii) $300,000 in
exchange for the cancellation of vested options to purchase 360,000
shares of Common Stock held by Mr. Hirsch. See "Employment
Contracts - - Termination of Management Agreement with Hirsch & Fox,
LLC."
(8) On January 31, 2000, $4.9 million was paid in a lump sum to Hirsch & Fox
LLC in connection with the termination of the Management
Agreement. $1.55 million of this amount was allocated to Mr. Fox as
follows (i) $1.2 million in respect of management fees allocable to
Mr. Fox under the Management Agreement and (ii) $350,000 in respect of
Mr. Fox's annual bonus for Fiscal 2000. See "Employment Contracts - -
Termination of Management Agreement with Hirsch & Fox, LLC."
(9) Reimbursement of certain relocation expenses.
(10) Mr. Flood was paid $156,346, $100,000 and $90,385 in Fiscal 1998, Fiscal
1999 and Fiscal 2000, respectively, by the Company in connection with the
elimination of his position as President of the Company's P&C and Quality
divisions in Fiscal 1998 as part of a management reorganization of the
Company. The amount for Fiscal 1998 includes $62,500 for reimbursement of
certain relocation expenses.
16
<PAGE>
OPTION/SAR GRANTS IN FISCAL 2000
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
- ------------------------------------------------------------------------------------------------------- -----------------------
(A) (B) (C) (D) (E) (F) (G)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE
OPTIONS/SARS EMPLOYEES OR BASE
GRANTED IN FISCAL PRICE EXPIRATION
NAME (#) YEAR ($/SH) DATE 5% ($) 10% ($)
- ---------------------------------------- ------------- ------------- -------- ------------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Joseph V. Fisher 280,000 12.94% 18.30 June 29, 2009 $3,222,456 $8,166,336
President and Chief Executive Officer 140,000 6.47% 8.75 September 22, 2009 $ 770,396 $1,952,335
Gary D. Hirsch 360,000 16.63% 18.30 Canceled 1/31/00 N/A N/A
Former Chairman of the Executive 240,000 11.09% 18.30 Canceled 1/31/00 N/A N/A
Committee 240,000 11.09% 8.75 Canceled 1/31/00 N/A N/A
Martin A. Fox 130,000 6.01% 18.30 June 29, 2005 $ 657,274 $1,452,403
Executive Vice President and Chief 87,000 4.02% 18.30 June 29, 2009 $1,001,263 $2,537,697
Financial Officer 87,000 4.02% 8.75 (1) $ 478,746 $1,213,236
Leslie B. Knox
Senior Vice President and Chief
Marketing Officer 50,000 2.31% 12.13 July 7, 2009 $ 381,267 $ 966,206
Roy M. Flood
Senior Vice President and
General Manager of Big Bear 25,000 1.16% 12.13 July 7, 2009 $ 190,634 $ 483,103
</TABLE>
- ------------------------
(1) Only exercisable for a 180 day period after certain specified changes of
control (see "Employment Contracts - - Employment Agreement with Martin A.
Fox").
17
<PAGE>
AGGREGATED OPTIONS/SAR EXERCISES
IN LAST FISCAL YEAR, AND FY-END
OPTIONS/SAR VALUES
The following table sets forth information concerning the value of
unexercised options held by each of the persons named in the Summary
Compensation Table, as of January 29, 2000. No options were exercised by such
persons during Fiscal 2000.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT FY-END IN-THE-MONEY OPTIONS/SARS
(#) AT FY-END ($)
--------------------------- ---------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE(1) UNEXERCISABLE(1)
- ---- ----------- ------------- -------------- ----------------
<S> <C> <C> <C> <C>
Joseph V. Fisher 308,000 112,000 N/A N/A
Gary D. Hirsch (2) 360,000 480,000 N/A N/A
Martin A. Fox 130,000 174,000 N/A N/A
Leslie B. Knox 10,000 40,000 N/A N/A
Roy M. Flood 5,000 20,000 N/A N/A
</TABLE>
- ------------------------
(1) Based on the fair market value of $8.25 per share on January 29, 2000.
(2) All of Mr. Hirsch's outstanding options were canceled on January 31, 2000.
18
<PAGE>
PENSION PLANS AND OTHER BENEFIT PLANS
THE PENN TRAFFIC CASH BALANCE PENSION PLAN
Mr. Fisher participated in a tax-qualified, defined benefit pension plan
(the "Cash Balance Plan") for all eligible employees of the Company other than
employees subject to a collective bargaining agreement. The Cash Balance Plan
took effect on June 1, 1998 replacing several other plans covering non-union
employees. Under the Cash Balance Plan, employees' pensions are measured by
reference to account balances to which credits are made based on a fixed
percentage of compensation paid for the year, plus interest at a rate comparable
to the yield on long-term treasury securities. Upon retirement, employees are
permitted to take a lump-sum distribution equal to their account balance, or
receive an annuity benefit, based on formulas set forth in the plan. The
estimated annual benefits payable upon retirement at normal retirement age for
Messrs. Fisher and Flood are $8,466 and $36,234, respectively, based upon
amounts accrued to December 31, 1999.
In connection with the Cash Balance Plan, effective June 1, 1998 the
Company also began making certain matching contributions to its 401(k) profit
sharing plan for those employees who are also participants in the Cash Balance
Plan. The amounts contributed for the benefit of the Named Executive Officers
under this plan are included in the Summary Compensation Table under the heading
"All Other Compensation."
SUPPLEMENTAL RETIREMENT PLAN FOR NON-EMPLOYEE EXECUTIVES
Effective June 29, 1999, Penn Traffic established the Supplemental
Retirement Plan for Non-Employee Executives (the "Non-Employee Plan"), an
unfunded deferred compensation plan pursuant to which Mr. Hirsch and Mr. Fox, as
non-employee executives, would be able to earn retirement benefits. Pursuant to
the Non-Employee Plan, Messrs. Hirsch and Fox would be able to accrue pay-based
retirement benefits in the amount of 3% of the management fees allocable to each
of Messrs. Hirsch and Fox during a plan year plus accrue interest credits on the
outstanding balance of their accumulated pay-based credits in the amount of 5%
each year. As of January 31, 2000, the effective date of the termination of the
Management Agreement (pursuant to which Hirsch & Fox LLC provided services to
the Company), Mr. Hirsch is no longer eligible to accrue benefits under the
Non-Employee Plan. Pursuant to such agreement, Mr. Hirsch will receive the
benefits he accrued under the Non-Employee Plan during Fiscal 2000 in a lump sum
payment on the date provided for in the plan. The Company will be amending the
Non-Employee Plan to allow Mr. Fox to continue to accrue benefits under the
Non-Employee Plan notwithstanding the termination of the Management Agreement.
19
<PAGE>
EMPLOYMENT CONTRACTS
EMPLOYMENT AGREEMENT WITH JOSEPH V. FISHER
On October 30, 1998, the Company and Mr. Fisher entered into an employment
agreement which agreement provided for Mr. Fisher to assume the position of
President and Chief Executive Officer of the Company for a term commencing on
November 23, 1998 and ending on February 1, 2002. On June 29, 1999,
Mr. Fisher's employment agreement was amended in connection with the
consummation of the Plan. On December 2, 1999, and January 31, 2000 the
agreement was further amended. The following describes the principal terms of
Mr. Fisher's employment agreement in its original form as well as the effects
the amendments have had.
Under his original employment agreement, Mr. Fisher was entitled to
receive an annual base salary of $500,000, and a bonus ranging from 0 to 100% of
his base salary depending on performance (provided that Mr. Fisher was
guaranteed to receive at least a 50% bonus for the fiscal year ended
January 30, 1999 (pro rata based on days employed) and the fiscal year ending
January 29, 2000. As an inducement to enter into the employment agreement,
Mr. Fisher received (a) a signing bonus of $1 million, (b) a loan in the amount
of $1 million, which was scheduled to be forgiven over 12 consecutive quarterly
periods (or immediately, in the event the Company terminates Mr. Fisher's
employment other than for cause or due to his death or disability, Mr. Fisher
terminates his employment for "good reason," or in certain circumstances
following a change of control) and (c) ten-year options with a four-year vesting
period to purchase 500,000 shares of Penn Traffic's former common stock at an
exercise price equal to fair market value at the grant date. The employment
agreement further provided that upon the occurrence of a "change of control" all
unvested options would immediately vest.
The employment agreement also provided that if Mr. Fisher's employment is
terminated by the Company other than (a) as a result of disability or (b) for
cause, or if Mr. Fisher terminates his employment for "good reason," the Company
will continue to pay to Mr. Fisher his base salary then in effect (in the manner
in which his salary payments had been paid) for the lesser of (x) 24 months from
the date of termination and (y) the number of months remaining from the
effective date of termination until February 1, 2002; provided that, if the
termination occurs between February 1, 2001 and February 1, 2002, his base
salary payments will continue for 12 months from the date of termination. In
addition, if during Mr. Fisher's employment a "change of control" occurs, and
following that event Mr. Fisher resigns from his position with the Company or is
terminated from his position within six months from the date of that event,
Mr. Fisher will be entitled to enter into a consulting agreement with the
Company and receive a lump sum payment in an amount equal to 24 months of his
base salary.
The June 29, 1999 amendment to Mr. Fisher's employment agreement had the
following effects (a) Mr. Fisher was appointed to the newly constituted Board of
Directors and Executive Committee of the Company and (b) Mr. Fisher's options to
purchase
20
<PAGE>
500,000 shares of the Company's former common stock (as described in the
paragraph above) were canceled and he received ten-year, fully vested options to
purchase 280,000 shares of new Common Stock of the reorganized Company with an
exercise price of $18.30 per share. Otherwise, Mr. Fisher's original employment
agreement with the Company remains in full force and effect throughout its term.
The December 2, 1999 amendment had the following effects: (a) Mr. Fisher
was granted, as of September 22, 1999, options to purchase 140,000 shares of
Common Stock with an exercise price of $8.75 per share and a four-year vesting
period, (b) an additional "change of control" concept was added (a "Section 12
Change of Control," which is described below) and (c) Mr. Fisher's right to
receive continuing base salary payments in certain specified circumstances after
his termination was modified to account for the addition of the Section 12
Change of Control provision. Pursuant to the December 2, 1999 amendment, if,
prior to the "Determination Date" (as described below), a Section 12 Change of
Control occurs, then, in lieu of the lump sum payments in connection with the
consulting agreement described above, Mr. Fisher will be entitled to receive the
payment described below on the date of the occurrence of the Section 12 Change
of Control. Under the amendment, the "Determination Date" means December 31,
2000; provided that, if a definitive agreement (as such agreement may be
amended, modified or supplemented from time to time) with respect to an event
which would constitute a Section 12 Change of Control is executed on or before
August 31, 2000, or if such definitive agreement is terminated and within six
months of the date of such termination the Company enters into another
definitive agreement with respect to an event which would constitute a
Section 12 Change of Control with the same entity (or such entity's affiliate)
that was a party to the first such agreement, then the "Determination Date" will
be the date on which the transaction contemplated by such definitive agreement
is consummated. The payment to which Mr. Fisher will be entitled upon a
Section 12 Change of Control will be the greater of (i) Mr. Fisher's base salary
for the remainder of his term (but not less than one year's base salary) and
(ii) $5 million minus the sum of (A) the "in-the-money" value on the date of the
occurrence of a "change of control" of the options granted to Mr. Fisher on
June 29, 1999 plus (B) the "in-the-money" value on the date of the occurrence of
a "change of control" of Mr. Fisher's options granted on September 22, 1999 that
are vested and exercisable. In addition, the amendment provides that, in the
event that any payment made to Mr. Fisher pursuant to a "change of control" is
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended, Mr. Fisher shall be entitled to an additional payment in an
amount such that, after payment of all taxes by Mr. Fisher, including any excise
tax imposed on such additional payment, he will retain an amount equal to the
excise tax imposed on the payment made to him upon a "change of control."
The January 31, 2000 amendment had the following effects:
(a) Mr. Fisher's salary was increased to $1,000,000 per year, (b) Mr. Fisher's
target bonus was changed to a discretionary bonus, (c) the definition of
"Determination Date" was changed to March 31, 2001 or such later date set forth
in an engagement letter entered into between
21
<PAGE>
the Company and an investment bank regarding the investment bank's success fee,
(d) the definition of "cause" was changed in a manner more advantageous to
Mr. Fisher and (e) the $5 million amount referred to in clause (ii) in the
paragraph above was changed to $4.9 million.
EMPLOYMENT AGREEMENT WITH MARTIN A. FOX
Upon the termination of the management agreement with Hirsch & Fox LLC (as
described below) the Company entered into an employment agreement with Mr. Fox,
one of the members of Hirsch & Fox LLC, which provides for Mr. Fox to be the
Executive Vice President and Chief Financial Officer of the Company for a term
ending March 31, 2001. Under his employment agreement, Mr. Fox is entitled to
receive an annual base salary of $1,000,000 and a discretionary bonus to be
determined by the Board of Directors in its sole discretion. In addition,
Mr. Fox holds the following options to purchase Common Stock: (i) fully vested
options to purchase 130,000 shares of the Common Stock with an exercise price
equal to $18.30 per share, (ii) options to purchase 87,000 shares of Common
Stock with an exercise price equal to $18.30 per share, such options to vest 50%
on the third anniversary of the date of grant (i.e., June 29, 1999) and 50% on
the fourth anniversary of such date and (iii) options to purchase 87,000 shares
of Common Stock with an exercise price equal to $8.75 per share, such options to
vest upon the occurrence of a change of control if the agreement relating to the
change of control is entered into prior to March 31, 2001 or such later date set
forth in an engagement letter entered into between the Company and an investment
bank prior to March 31, 2000, regarding the bank's success fee (the
"Determination Date").
The employment agreement also provides that if Mr. Fox's employment is
terminated by the Company other than (a) as a result of death or disability or
(b) cause, or if Mr. Fox terminates his employment for "good reason," the
Company will make a lump sum payment to Mr. Fox of his salary then in effect in
an amount that Mr. Fox would have been entitled to receive from the date of such
termination until March 31, 2001, had a termination not occurred prior to such
date. In addition, if a change of control occurs prior to the Determination
Date but following such termination of employment, the Company will make the
"change of control payment" (described below) less that portion of the lump sum
payment which Mr. Fox receives that is attributable to the period following the
change of control.
The employment agreement also provides that Mr. Fox will be entitled to
receive a certain lump sum payment upon certain specified changes of
control. Specifically, if prior to the Determination Date the Company enters
into a definitive agreement in respect of a change of control (as defined) or a
change of control occurs, then Mr. Fox will be entitled to receive a lump sum
payment (subject to offset as set forth in the paragraph above) on the date of
the occurrence change of control in the following amount: the greater of
(i) Mr. Fox's salary for the remainder of the term (but not less than one year's
salary) and (ii) $2.9 million, minus the sum of (A) the "in-the-money" value on
the date of the
22
<PAGE>
occurrence of a change of control of the options granted to Mr. Fox on June 29,
1999 plus (B) the "in-the-money" value on the date of the occurrence of a change
of control of the options granted to Mr. Fox on September 22, 1999. In
addition, in the event that any payment made to Mr. Fox pursuant to a change of
control is subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended, Mr. Fox will receive an additional payment in
an amount such that after payment of all taxes, including any excise tax imposed
on such additional payment, he will retain an amount equal to the excise tax
imposed on the payment made to him upon a change of control.
EMPLOYMENT AGREEMENT WITH LESLIE B. KNOX
On August 14, 1999, the Company and Mr. Leslie Knox entered into an
employment agreement, which agreement provided for Mr. Knox to assume the
position of Senior Vice President and Chief Marketing Officer of the Company for
a term commencing on May 3, 1999 and ending on May 3, 2001. Under his
employment agreement, Mr. Knox is entitled to receive an annual base salary of
$275,000, and a bonus ranging from 0 to 40% of his base salary depending on
performance (provided that Mr. Knox was guaranteed to receive at least $55,000
for the fiscal year ended January 29, 2000). In addition, on July 7, 1999
Mr. Knox was granted ten-year options to purchase 50,000 shares of Common Stock
with an exercise price equal to $12.13 per share, such options to vest 20% on
the grant date and 20% on each of the four succeeding anniversaries of the grant
date.
The employment agreement also provides that if the Company terminates
Mr. Knox's employment other than (a) as a result of death or disability or
(b) for cause, or if Mr. Knox terminates his employment for "good reason," the
Company will continue to pay to Mr. Knox his base salary then in effect for a
period of 12 months from the date of termination.
TERMINATION OF MANAGEMENT AGREEMENT WITH HIRSCH & FOX LLC
On January 31, 2000, the Company and Hirsch & Fox LLC entered into an
agreement terminating the management agreement pursuant to which Hirsch & Fox
LLC provided management and consulting services to the Company (the "Termination
Agreement"). Under the Termination Agreement, Hirsch & Fox LLC received, among
other things, a lump sum payment of $4.9 million (the "Cash Payment") and
reimbursement for all of their documented expenses incurred through the
January 31, 2000. The Cash Payment was allocated as follows:
(i) $1.35 million in full satisfaction of management fees allocable to
Mr. Hirsch under the Management Agreement, (ii) $1.7 million in full
satisfaction of Mr. Hirsch's right to receive a payment upon a change of control
as contemplated by the Management Agreement, (iii) $300,000 in exchange for the
cancellation of his then-exercisable options to purchase 360,000 shares of
Common Stock and (iv) $1.55 million in full satisfaction of management fees and
annual bonus allocable to Mr. Fox under the Management Agreement. In exchange
for these
23
<PAGE>
payments and other non-cash consideration, Hirsch & Fox LLC agreed to forego the
remainder of the term under the Management Agreement, which was scheduled to
expire on June 30, 2001. In addition, Mr. Fox entered into a separate
employment agreement with Company to act as the Company's Executive Vice
President and Chief Financial Officer through March 31, 2001. The principal
terms of this agreement are described above under the heading "Employment
Agreement with Martin A. Fox."
CHANGE OF CONTROL POLICY
The Company's Executive Enhanced Severance Policy, effective from
January 1, 2000 through December 31, 2001, provides that in the event of a
"Change of Control" (as defined in the policy), certain executives of the
Company will be eligible to receive severance payments ranging from 6 months to
18 months of base salary if such executive's employment is terminated within one
year of such change in control, for reasons other than "Cause" or "Total
Disability" (each as defined in the policy) or if executive terminates his/her
employment for "Good Reason" (as defined in the policy) within one year of such
change in control. Under the policy, each executive has the option of receiving
his/her severance payment in a lump sum or in the same manner as base salary
would have been paid to the executive had he/she remained employed by the
Company within one year of such change of control.
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<PAGE>
COMPENSATION OF DIRECTORS
In Fiscal 2000, directors who were not regularly employed by the Company
received an annual fee of $20,000 ($5,000 per quarter). In addition,
Messrs. Allumbaugh, Collins, Harberts, Nechamkin, Rosenblatt, Sonnino and Zurkow
each received a grant of 20,000 fully vested options to purchase Common Stock
with an exercise price of $12.13 per share in accordance with the terms of the
Company's 1999 Directors' Stock Option Plan (the "Directors Plan"). On May 10,
2000, Mr. Jenkins was awarded options to purchase 20,000 shares at $5.89 per
share pursuant to the Directors Plan. 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 conjunction with a Board
meeting he attended. Directors who are officers of the Company do not receive
fees for attending meetings of the Board of Directors or its committees.
In July 1999, the Company adopted the Directors Plan. The Directors Plan
makes available to the Company's directors, who are not employees of the Company
options to acquire in the aggregate up to 250,000 shares of new Common
Stock. Under the terms of the Directors Plan, each eligible director receives
as of the date of appointment to the Board of Directors an option to purchase
20,000 shares of new 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. The Directors Plan also provides for the issuance
of additional options annually thereafter as of the first business day after the
conclusion of each Annual Meeting of Stockholders of the Company. The options
expire 10 years after the date of grant and vest immediately upon
issuance. Options to acquire an additional 90,000 shares may be granted under
the Directors Plan.
25
<PAGE>
COMPENSATION AND STOCK OPTION COMMITTEE
The Compensation and Stock Option Committee (the "Compensation Committee")
of the Board of Directors is currently composed of Messrs. Allumbaugh, Jenkins
(since May 10, 2000), Nechamkin and Zurkow with Mr. Zurkow as Chairman.
The Compensation Committee reviews the annual recommendations of the Chief
Executive Officer concerning the compensation of officers and of certain of the
employees of the Company, 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 also administers the 1999 Equity Incentive
Plan and 1999 Directors' Stock Option Plan.
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 and
within the food distribution industry, individual performance, length of service
and internal comparability considerations. Pursuant to Mr. Fisher's amended and
restated employment agreement, he will receive an annual Base Salary of
$1,000,000.
CASH BONUS PLANS
Cash bonuses are paid to executive officers under the Company's Corporate
Incentive Plan. Participants in the Corporate Incentive Plan (the "CIP") are
determined by the Board of Directors upon recommendation of the Compensation
Committee. Target bonus opportunities under the CIP are based on achievement of
previously established financial results for the Company, and on achievement of
individual objectives.
For Fiscal 2000, bonuses were accrued pursuant to the CIP. For Fiscal
1999 no bonuses were paid pursuant to the CIP. Some bonuses were paid in Fiscal
1998 and Fiscal 1999 in appreciation for contributions made during those years
by selected officers. These amounts are included in the "Bonus" column of the
Summary Compensation Table.
STOCK OPTIONS
In addition to Annual Compensation, the Company provides to certain of its
officers and employees long-term incentive compensation under the Company's
Equity Plan. Most of the stock options granted under the Equity Plan vest over
a period of years determined by the Company's Compensation and Stock Option
Committee. The Equity Plan provides for long-term incentives based upon
objective, quantifiable measures of the
26
<PAGE>
Company's performance over time through the payment of incentive compensation of
the types commonly known as stock options. See also "Executive Compensation - -
Summary Compensation Table" above.
OTHER COMPENSATION
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.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Fisher receives his annual compensation pursuant to his employment
agreement. In addition, Mr. Fisher received grants of options to purchase
420,000 shares of Common Stock that are intended to provide him with an
incentive to increase stockholder value for all stockholders. For a more
in-depth discussion of Mr. Fisher's employment agreement, please see the
discussion of Joseph V. Fisher's compensation under his employment agreement
above.
Peter L. Zurkow, Chairman
Byron E. Allumbaugh
Gabriel S. Nechamkin
27
<PAGE>
PERFORMANCE GRAPH
The following are graphs which compare the cumulative total stockholder
return of the Company's common stock, the cumulative total return of Standard &
Poor's 500 Stock Index ("S&P Index") and the cumulative total return of
Standard & Poor's Retail Food Index(1) ("S&P Food Index") for (a) the period
from January 28, 1995 through June 28, 1999 and (b) the period from June 29,
1999 through January 29, 2000. The Company includes two graphs to demonstrate
(a) the performance of its former common stock through the date of the
completion of the Company's financial restructuring and (b) the performance of
the Common Stock since the completion of the Company's financial restructuring
on June 29, 1999.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1/28/95 2/3/96 2/1/97 1/31/98 1/30/99 6/28/99 6/29/99 1/29/00
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Penn Traffic $100 $44 $7 $18 $2 $0 $100 $63
S & P 500 100 135 167 208 272 287 100 103
S & P Food 100 124 144 194 306 227 100 94
</TABLE>
(1) Includes Albertson's, Great Atlantic & Pacific, Kroger, Safeway and
Winn-Dixie.
(2) Assumes $100 invested on January 28, 1995 in the Company's former
common stock, the S&P 500 Index and the S&P Food Index (also assumes
reinvestment of dividends).
(3) Assumes $100 invested on June 29, 1999 in Penn Traffic Common Stock,
the S&P 500 Index and the S&P Food Index (also assumes reinvestment of
dividends).
28
<PAGE>
CERTAIN TRANSACTIONS
Mr. Harold S. Poster, a director of the Company until June 29, 1999, is a
partner in the law firm of Gilmartin, Poster & Shafto. During Fiscal 2000,
Gilmartin, Poster & Shafto provided legal services to Penn Traffic in connection
with various matters, for which Gilmartin, Poster & Shafto received fees in the
aggregate amount of $132,699.
2. RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected PricewaterhouseCoopers LLP,
independent certified public accountants, as independent auditors for the
Company for the fiscal year ending February 3, 2001. A proposal to ratify such
selection will be submitted to stockholders at the Annual Meeting. Although
ratification by stockholders is not a prerequisite to the ability of the Board
of Directors to select PricewaterhouseCoopers LLP as the Company's independent
auditors, the Company believes such ratification to be desirable. If the
stockholders do not ratify the selection of PricewaterhouseCoopers LLP, the
selection of independent auditors will be reconsidered by the Board of
Directors; however, the Board of Directors may select PricewaterhouseCoopers LLP
notwithstanding the failure of the stockholders to ratify its selection.
It is expected that a representative of PricewaterhouseCoopers LLP will be
present at the meeting, will have an opportunity to make statements, if he
desires to do so, and will be available to respond to appropriate questions.
PricewaterhouseCoopers LLP, or its predecessor, has performed the annual
examination of the Company's financial statements since 1981.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS
PROPOSAL. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS
STOCKHOLDERS SPECIFY A CONTRARY VOTE.
3. ALL OTHER MATTERS THAT MAY COME BEFORE THE MEETING
As of the date of this Proxy 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.
29
<PAGE>
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 as the director 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 Securities and Exchange Commission,
any proposal of a stockholder intended to be presented at the Company's 2001
Annual Meeting of Stockholders must be received by the Secretary of the Company
by April 15, 2001, in order for the proposal to be considered for inclusion in
the Company's notice of meeting, proxy statement and proxy relating to the 2001
Annual Meeting of Stockholders, provided, however, that in the event that the
date of the annual meeting is changed by more than 30 days from such anniversary
date (July 12, 2000) notice by the stockholder to be timely must have been
received no later than the close of business on the 10th day following the day
on which public announcement of the date of such meeting is first made.
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. A quorum comprising the
holders of a majority of the outstanding shares of Common Stock on the record
date must be present in person or represented by proxy for the transaction of
business at the Annual Meeting.
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 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
$3,500 plus expenses.
By Order of the Board of Directors
FRANCIS D. PRICE JR.
Secretary
May 26, 2000
Syracuse, New York
30
<PAGE>
PROXY PROXY
THE PENN TRAFFIC COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
FOR THE ANNUAL MEETING OF STOCKHOLDERS--JULY 12, 2000
The undersigned hereby appoints Peter L. Zurkow and Joseph V. Fisher
proxies, each with the power to appoint his substitute and with authority in
each to act in the absence of the other, to represent and to vote all shares
of common stock of The Penn Traffic Company which the undersigned is entitled
to vote at the Annual Meeting of Stockholders to be held at the Wyndham
Hotel, 6301 Route 298, East Syracuse, New York 13057 on July 12, 2000 at 1:00
P.M. local time, and at all adjournments thereof, as indicated on the
proposals described in the Proxy Statement, and all other matters properly
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 THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
<PAGE>
THE PENN TRAFFIC COMPANY
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/
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: 01-Byron E. Allumbaugh, 02-Kevin P. Collins, 03-Joseph V.
Fisher, 04-Martin A. Fox, 05-David B. Jenkins, 06-Gabriel S.
Nechamkin, 07-Lief D. Rosenblatt, 08-Mark D. Sonnino, and
09-Peter L. Zurkow.
INSTRUCTION: To withhold authority to vote for an individual nominee,
write that nominee's name in the following space:
- ------------------------------------------------------------------------------
FOR WITHHOLD FOR ALL
ALL ALL EXCEPT
/ / / / / /
2. The proposal to ratify the appointment of PricewaterhouseCoopers LLP as
the independent accountants for The Penn Traffic Company for the fiscal year
ending February 3, 2001.
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: , 2000
-------------------------
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.)
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT!
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
