EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement"), dated as of January 29, 1995, by
and among THE PENN TRAFFIC COMPANY, a Delaware corporation with its principal
offices located at 1200 State Fair Boulevard, Syracuse, New York 13221-4737
("Penn Traffic" or the "Company"), and JOHN T. DIXON, residing at 37 West Lake
Street, Skaneateles, New York 13152 (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive has been appointed by the Board of Directors of
Penn Traffic to the positions of President and Chief Executive Officer,
effective as of the date hereof; and
WHEREAS, the Executive and the Company desire to enter into this
Agreement pertaining to the terms of the employment of the Executive by the
Company in such capacities;
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
1. TERM. The Executive's "Employment Period", as this phrase is used
throughout this Agreement, shall commence on the date hereof and end on the last
date of the fiscal year commencing on the date hereof, and shall be
automatically extended at the end of such fiscal year (and any subsequent fiscal
year into which the Employment Period has been extended) for a period, in each
case, the duration of which is coterminous with that of the then next succeeding
fiscal year, unless, in each case, notice of termination has been given by the
Company or the Executive not later than 30 days prior to the end of the
Employment Period.
2. EMPLOYMENT. During the Employment Period, the Company hereby
agrees to employ the Executive and the Executive hereby accepts such employment
by the Company, upon the terms and conditions herein set forth. The Executive
shall be employed as the President and Chief Executive Officer of the Company
during the Employment Period. During
the Employment Period, the Executive shall have duties and responsibilities
relating to the supervision, control and general management and operations of
the Company and shall report only to the Board of Directors and Chairman of the
Company. Throughout the Employment Period, the Executive shall devote his
full-time efforts during normal business hours to the business and affairs of
the Company, except for vacation periods and periods of illness or incapacity.
If any of the positions of President or Chief Executive Officer of the Company
shall cease to exist at any time during the Employment Period due to a merger or
any other corporate combination or reorganization, the Executive agrees to
accept another position, having the scope and responsibilities of President and
Chief Executive Officer of the historical businesses of the Company, as shall be
assigned to him from time to time by the Board of Directors and Chairman of the
Company or its successor, and to perform the duties thereof under the terms of
this Agreement. During the Employment Period, the Executive shall perform his
duties in the Syracuse, New York area, except that the Executive agrees to make
such business trips to such other locations as may be reasonably necessary and
appropriate in the performance of his duties.
3. COMPENSATION AND BENEFITS DURING THE EMPLOYMENT PERIOD.
As compensation for the Executive's services to be rendered as
provided for in this Agreement, during the Employment Period the Company shall
pay compensation and provide benefits to the Executive as follows:
(a) BASE SALARY. During the Employment Period, the Company shall pay
the Executive an annual base salary, subject to increase, but not decrease, from
time to time by the Board of Directors of the Company, in the aggregate amount
of $400,000 (the "Base Salary"), payable in equal weekly installments. The Base
Salary may be increased from time to time at the discretion of the Board of
Directors of the Company, and in such event, references herein to "Base Salary"
shall mean the Base Salary as so increased.
(b) INCENTIVE COMPENSATION. As incentive compensation hereunder, the
Executive shall be eligible for cash bonus awards, at the sole discretion of the
Board of Directors, not to exceed, with respect to any fiscal year within the
Employment Period, an amount equal to 50% of the
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Base Salary with respect to such fiscal year (a "Cash Bonus").
(c) ADDITIONAL BENEFITS. During the Employment Period, the Executive
shall be entitled to all rights and benefits for which he is otherwise eligible
under any generally instituted insurance plans and benefit plans of the Company
applicable to senior executives of the Company and to any additional fringe
benefits which may be authorized and approved from time to time by the Board of
Directors of the Company. Specifically, without limitation, the Executive shall
receive the following benefits:
(i) RETIREMENT BENEFITS. The Executive shall continue to be a
participant in the Penn Traffic Corporate/P&C Foods Pension Plan (the
"Pension Plan").
(ii) REIMBURSEMENT FOR EXPENSES. During the Employment Period, to
the extent such expenditures meet the requirements and the policies of the
Company, the Company shall reimburse the Executive promptly for all travel,
entertainment, parking, business meeting and similar expenditures in
pursuance and furtherance of the Company's business. The Executive shall
provide documentation to the Company of such expenses incurred.
(iii) AUTOMOBILE. During the Employment Period, the Company shall
provide the Executive an automobile of his choice appropriate to his
position, comparable or superior in quality to a Buick and at any time not
more than three years old. All expenses relating to such automobile,
including, without limitation, those with respect to insurance, gasoline,
tolls, parking, repairs and maintenance, shall be paid for by the Company
or reimbursed by the Company to the Executive.
(iv) References in this paragraph (c) to any plans, insurance
arrangements or other benefits to be provided by the Company shall be
applicable to any successor to the Company.
4. PERFORMANCE OF DUTIES. The Executive agrees that during the
Employment Period he will faithfully perform his duties hereunder subject to the
direction of the Board of Directors and Chairman of the Company. In addition to
performance of his duties for the Company, if so requested, the Executive agrees
to serve as a director of the Company without additional compensation.
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5. NO COMPETITION; CONFIDENTIALITY. The Executive agrees that while
this Agreement is in effect and for a period of five (5) years after termination
of the Employment Period, the Executive will not without the prior written
consent of the Company, as principal, agent, employee, employer, consultant,
stockholder (other than as the holder of shares of capital stock of the Company
or of less than 5% of the shares of any other corporation), director or
co-partner, or in any other individual or representative capacity whatever,
directly or indirectly:
(a) engage in any business activity located in the United States in
competition with the Company or any subsidiary or Affiliate thereof;
(b) induce or attempt to induce any person who is then in the employ of
the Company or any subsidiary or Affiliate thereof to leave the employ
of the Company or such subsidiary or Affiliate, or employ or attempt
to employ any such person or any person who at any time during the
preceding twenty-four (24) months was in the employ of the Company or
any subsidiary or Affiliate thereof; or
(c) induce or attempt to induce any other person, firm or corporation to
do any of the above (provided, that this Section 5 shall not be
interpreted so as to prohibit the Executive from providing references
for employees of the Company or its subsidiaries or Affiliates which
have been solicited by an employee or prospective employer).
The Executive agrees that he will not at any time from and after the date
hereof, divulge, furnish or make accessible to any person, or himself make use
of, any confidential or proprietary information of the Company obtained by him
while in the employ of the Company other than in connection with his employment
with the Company as provided hereunder, including, without limitation,
information with respect to any products, services, improvements, formulas,
designs, styles, processes, research, analyses, suppliers, customers, methods of
distribution or manufacture, contract terms and conditions, pricing, financial
condition, organization, personnel, business activities, budgets, plans,
objectives or strategies of the Company or its proprietary products or of any
subsidiary or Affiliate of the Company and that he will, prior to or upon the
termination of his employment with the
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Company, return to the Company all such confidential or non-public information
in written or other physical form or which has been reduced to written or other
physical form or stored electronically on computer disks or tapes, and all
copies thereof, in his possession or custody or under his control; PROVIDED,
HOWEVER, that (x) confidential information shall not include publicly available
information or information known generally to the public (without fault on the
part of the Executive), and (y) the Executive may disclose such information as
may be required pursuant to any applicable law, rule or regulation or in
connection with any judicial or administrative proceeding or inquiry.
Notwithstanding the foregoing, in the event that the Executive
receives a subpoena or other process or order issued by a court which may
require him to disclose any confidential information, the Executive agrees (i)
to notify the Company as promptly as practicable of the existence, terms and
circumstances surrounding such process or order, and (ii) to cooperate with the
Company, at the Company's request, in taking legally available steps to resist
or narrow such process or order and to obtain an order or other reliable
assurance that confidential treatment will be given to such information as is
required to be disclosed.
As used in this Section 5, "Affiliate" shall have the meaning set
forth in Section 6(d) hereof.
In view of the services which the Executive will perform for the
Company and its subsidiaries and Affiliates in his positions as an executive
officer thereof, which are special, unique, extraordinary and intellectual in
character and will place him in a position of confidence and trust with the
customers and employees of the Company and its subsidiaries and Affiliates and
will provide him with access to confidential financial information, trade
secrets, "know-how" and other confidential and proprietary information of the
Company and its subsidiaries and Affiliates, and recognizing the substantial
sums paid and to be paid to the Executive pursuant to the terms hereof, the
Executive expressly acknowledges that the restrictive covenants set forth in
this Section 5 are necessary in order to protect and maintain the proprietary
interests and other legitimate business interests of the Company and its
subsidiaries and Affiliates and that the enforcement of such restrictive
covenants will not prevent him from earning a livelihood. The Executive
acknowledges that the remedy at law for any breach or threatened breach of this
Section 5 will be
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inadequate and, accordingly, that the Company shall, in addition to all other
available remedies (including, without limitation, seeking such damages as it
can show it has sustained by reason of such breach), be entitled to specific
performance or injunctive relief without being required to post bond or other
security and without having to prove the inadequacy of the available remedies at
law.
6. TERMINATION OF THE EMPLOYMENT PERIOD.
(a) DEATH OF THE EXECUTIVE. The Employment Period shall
automatically terminate upon the death of the Executive.
(b) BY THE EXECUTIVE. The Executive shall be entitled to terminate
the Employment Period for Good Reason (as defined in paragraph (d) below)
following a Change of Control (as defined in paragraph (d) below).
(c) BY THE COMPANY. The Company shall be entitled to terminate the
Employment Period (1) in the event of the Executive's Disability (as defined in
paragraph (d) below); (2) for Cause (as defined in paragraph (d) below); or (3)
for any reason other than Disability or Cause.
(d) DEFINITIONS. For purposes of this Agreement, the following terms
shall have the following meanings:
(i) AFFILIATE. "Affiliate" shall mean, with respect to any person, a
person (i) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common
control with, such person, (ii) which directly or indirectly
through one or more intermediaries beneficially owns or holds 5%
or more of the combined voting power of the total voting
securities of such person or (iii) of which 5% or more of the
combined voting power of the total voting securities (or in the
case of a person which is not a corporation, 5% or more of the
equity interest) directly or indirectly through one or more
intermediaries is beneficially owned or held by such person, or a
subsidiary of such person.
(ii) CAUSE. "Cause" shall mean (x) conviction of the Executive of a
felony, or (y) the
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Executive's willful and continued failure substantially to
perform his obligations under this Agreement, or (z) the
Executive's willfully engaging in conduct which is demonstrably
and materially injurious to the Company, monetarily or otherwise.
For purposes of this subparagraph (ii), no act, or failure to
act, on the Executive's part shall be considered "willful" unless
done, or omitted to be done, by the Executive not in good faith
and without reasonable belief that the Executive's action or
omission was in the best interest of the Company. Termination
for Cause shall be effected by a notice thereof delivered by the
Company to the Executive and shall be effective as of the date of
such notice; PROVIDED, HOWEVER, that (x) if such termination is
because of the Executive's willful and continued failure
substantially to perform his obligations under this Agreement,
(y) such notice is the first such notice of termination for any
reason delivered by the Company to the Executive within any
twelve-month period, and (z) within seven days following the date
of such notice the Executive shall cease his refusal and shall
use his best efforts to perform such obligations, the notice of
termination shall not be effective.
(iii) DISABILITY. "Disability" shall mean the Executive's failure
substantially to perform his services hereunder on a full-time
basis for a period of six consecutive months, or for shorter
periods aggregating six months in any twelve-month period, as a
result of incapacity due to physical or mental illness.
(iv) GOOD REASON. "Good Reason" shall mean the occurrence of any of
the following events following a Change in Control of the
Company:
(x) The assignment to the Executive of any duties inconsistent
with the Executive's positions, duties, responsibilities
and status with the Company prior to a Change in Control, or a
substantial change in the nature or status of the Executive's
responsibilities
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from those in effect immediately prior to a Change in Control;
(y) The material breach by the Company of any of the terms and
conditions hereof or the taking of any action by the Company
which would adversely affect the Executive's compensation or his
participation in, or materially reduce the Executive's benefits
under, any of plans, programs or arrangements enjoyed by the
Executive (or deprive the Executive of any material fringe
benefit) pursuant hereto immediately prior to the Change in
Control which is not cured within ten (10) days of written notice
from the Executive, specifying in reasonable detail such alleged
breach or adverse action; or
(z) The requirement subsequent to a Change of Control that the
Executive be based at a location more than 25 miles from the
location where the Executive is based immediately prior to the
Change in Control.
(v) CHANGE IN CONTROL. A "Change in Control" shall mean an event or
series of events by which (i) any "person" (as such term is used
in Section 13(d) and 14(d) of the Securities Exchange Act of 1934
(the "Exchange Act")) (other than Riverside Acquisition Company,
Limited Partnership ("RAC"), Miller Tabak Hirsch + Co. ("MTH") or
any Affiliate of either thereof) is or becomes the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to
acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of 50% or
more of the outstanding shares of common stock of the Company or
securities representing 50% or more of the combined voting power
of the Company's voting securities, (ii) the Company consolidates
with or merges into another corporation or conveys, transfers or
leases all or substantially all of its assets to any person, or
any
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corporation consolidates with or merges into the Company, in
either event pursuant to a transaction in which the outstanding
voting securities of the Company are changed into or exchanged
for cash, securities or other property, other than any such
transaction between the Company and its subsidiaries, with the
effect that any "person" (other than RAC, MTH or any Affiliate of
either thereof) becomes the "beneficial owner," directly or
indirectly, of 50% or more of the outstanding shares of common
stock of the Company or securities representing 50% or more of
the combined voting power of the voting securities of the
Company, or (iii) during any period of two consecutive years,
individuals who at the beginning of such period constituted
Penn Traffic's Board of Directors (together with any new or
replacement directors whose election by the Company's Board of
Directors, or whose nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of
the directors then still in office who were either directors at
the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to
constitute a majority of the directors then in office.
7. COMPENSATION UPON TERMINATION OF EMPLOYMENT.
Upon the termination of this Agreement during the Employment Period,
the Company and the Executive shall each have no further obligation or liability
to each other subsequent to such termination except as set forth in paragraphs
(a) through (f) below:
(a) If the Employment Period is terminated (i) by the Executive other
than for Good Reason following a Change in Control or (ii) by the Company or its
successor for Cause, the Company (or its successor) shall be required to pay the
Executive the Base Salary which is accrued but unpaid as of the date of
termination.
(b) If no Change of Control has occurred and the Employment Period is
terminated by the Company for a reason other than (i) for Cause or (ii) the
death or Disability of the Executive, the Company shall be required to continue
to
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pay to the Executive a lump sum in an amount equal to the sum of (A) an amount
equal to 100% of the Executive's Base Salary for the year in which such
termination occurs plus (B) an amount equal to the Maximum Cash Bonus which the
Executive would have been entitled to receive in respect of such year (i.e.,
50% of the Executive's Base Salary) prorated to reflect the actual number of
days the Executive was employed during the fiscal year of such termination. In
the event of such termination, the Executive shall also be entitled to receive
the continuation of life and health insurance benefits for a period of two
years from the date of such termination. Such termination of the Employment
Period by the Company for a reason other than (i) for Cause or (ii) the death or
Disability of the Executive shall be effective seven days after the delivery of
notice of termination to the Executive.
(c) (1) If, following a Change of Control, the Employment Period is
terminated (i) by the Company or its successor for a reason other than (x) for
Cause or (y) the death or Disability of the Executive, or (ii) by the Executive
for Good Reason, then the Company or its successor shall be required to pay to
the Executive a lump sum in an amount equal to the sum of (A) an amount equal to
100% of the Executive's Base Salary for the year in which such termination
occurs plus (B) an amount equal to the Maximum Cash Bonus which the Executive
would have been eligible to receive in respect of such year (i.e., 50% of the
Executive's Base Salary). In addition, in the event of such termination of the
Employment Period, the Company or its successor shall be required to continue to
provide the Executive and his spouse, at the Company's or its successor's
expense, with coverage under the Company's life and health insurance plans as
in effect immediately prior to the delivery of notice of such termination, or to
provide the Executive, at the Company's or its successor's expense, with life
and health insurance benefits comparable to those received by the Executive
under the Company's life and health insurance plans as in effect immediately
prior to the delivery of notice of such termination, during a period of two
years from the date of such termination. Such termination of the Employment
Period shall be effective seven days after the delivery of notice of termination
to the Executive, in the case of termination by the Company or its successor
for a reason other than (i) for Cause or (ii) the death or Disability of the
Executive, or, in the case of termination by the Executive for Good Reason,
seven days after the delivery of notice of termination to the Company or its
successor. The lump sum payment required to
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be paid to the Executive hereunder in the event of such termination shall be
made on the date of termination.
(c) (2) If there is a substantial risk that, absent the application of
this Section 7(c)(2), a payment to the Executive under Section 7(c)(1) of this
Agreement might constitute a "parachute payment" (as such term is defined in
Section 280G(b)(2) of the Internal Revenue Code of 1986 (the "Code")), and the
maximum dollar amount of the payment which could be paid to the Executive
pursuant to Section 7(c)(1) of this Agreement without subjecting him to the tax
imposed by Section 4999 of the Code exceeds the present value (using the rate
specified in Section 1274(b)(2)(B) of the Code) of all payments to be made and
benefits to be provided to the Executive under such Section 7(c)(1) of this
Agreement (without regard to the application of this Section 7(c)(2)) reduced by
the sum of (i) the tax imposed by Section 4999 of the Code on these payments and
(ii) the income taxes (at the highest marginal Federal and State and local
income tax rates applicable to the Executive) on the tax imposed by Section 4999
of the Code and the income taxes on the amount in this clause (ii), then the
payment to be made to the Executive pursuant to Section 7(c)(1) of this
Agreement shall be reduced so that the amount of that payment, when combined
with all other payments to be paid and benefits to be provided to the Executive
pursuant to this Agreement which could constitute a parachute payment, will be
$1.00 less than the amount which, if paid to the Executive, would constitute a
parachute payment. Donovan Leisure Newton & Irvine (or another law firm
mutually acceptable to the Executive and the Company (or its successor)) shall
determine whether any payment to be made under this Agreement constitutes a
"parachute payment" and the amount of any reduction, if any, in the payment
pursuant to Section 7(c)(1) hereof.
(d) If the Employment Period is terminated because of the Executive's
death, the Executive's estate or beneficiaries shall be entitled to receive a
lump sum payment equal to 100% of his Base Salary at the time of such
termination. If the Employment Period is terminated because of the Executive's
Disability, the Executive shall be entitled to continue to receive an amount
equal to 100% of his Base Salary and to continuation of health insurance
benefits for a period of one calendar year from the date of such termination by
reason of Disability.
(e) Notwithstanding the termination of the Employment Period, the
provisions of Sections 5 and 8 of this
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Agreement shall continue in full force and effect and shall not be limited by
reason of such termination.
8. MITIGATION OF DAMAGES. In the event of termination of the
Employment Period by the Company (or its successor) following a Change of
Control for a reason other than for Cause, or in the event of the termination of
the Employment Period by the Executive for Good Reason following a Change of
Control, the Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise.
9. MISCELLANEOUS.
(a) SUCCESSORS; BINDING AGREEMENT. This Agreement shall be binding
upon any successor to the Company in the event of a Change in Control, and shall
inure to the benefit of and be enforceable by Executive's personal or legal
representatives, beneficiaries, designees, executors, administrators,
successors, heirs, distributees, devisees, and legatees.
(b) MODIFICATION; NO WAIVER. No provision of this Agreement may be
modified, waived, or discharged unless such waiver, modification, or discharge
is agreed to in writing signed by the Executive and by the Company. No waiver
by either party hereto at any time of any breach by the other party hereto of,
or compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar provisions
or conditions at the time of or at any prior or subsequent time. A failure of
the Executive to claim or take any benefit provided by this Agreement shall not
constitute a waiver of such benefit, or any other benefit provided by this
Agreement.
(c) SEVERABILITY. The covenants and agreements contained herein are
separate and severable and the invalidity or unenforceability of any one or more
of such covenants or agreements, if not material to the employment arrangement
that is the basis for this Agreement, shall not affect the validity or
enforceability of any other covenant or agreement contained herein. In
addition, if, in any judicial proceeding, a court shall refuse to enforce one or
more of the covenants or agreements contained herein because the duration
thereof is too long, or the scope thereof is too broad, it is expressly agreed
between the parties hereto that such duration or scope shall be deemed reduced
to the extent
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necessary to permit the enforcement of such covenants or agreements.
(d) NOTICES. All notices and other communications required or
permitted hereunder shall be in writing and shall be delivered personally or
sent by registered or certified mail, return receipt requested, to the parties
hereto at their respective addresses as set forth at the beginning of this
Agreement or at such other addresses as they shall designate in writing by
notice duly given hereunder. All notices and other communications required or
permitted hereunder and delivered to the Company by the Executive shall be
addressed to the attention of the Chairman of the Board of the Company.
(e) ASSIGNMENT. This Agreement shall not be assignable by either
party without the prior written consent of the other party.
(f) COMPLETE UNDERSTANDING. This Agreement constitutes the entire
understanding between the parties hereto and no agreement, representation,
warranty or covenant has been made by either party except as expressly set forth
herein. Effective upon the execution and delivery of this Agreement, all prior
agreements with respect to the subject matter thereof shall be terminated,
provided that any payments due and payable thereunder shall be made to the
Executive by the Company. This Agreement shall not be altered, waived, modified
or amended except by a written instrument executed by the parties hereto.
10. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED FOR ALL PURPOSES BY
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THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED AND WHOLLY
PERFORMED WITHIN SUCH STATE.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
THE PENN TRAFFIC COMPANY
Attest:
By /s/ Gary D. Hirsch
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/s/ Francis D. Price
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/s/ John T. Dixon
----------------------------
JOHN T. DIXON
Witness:
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