<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
FORM T-3
FOR APPLICATIONS FOR QUALIFICATION OF INDENTURES UNDER THE
TRUST INDENTURE ACT OF 1939
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THE GRAND UNION COMPANY
(Name of applicant)
201 Willowbrook Boulevard
Wayne, New Jersey 07470-0966
(Address of principal executive offices)
------------
SECURITIES TO BE ISSUED UNDER THE INDENTURE TO BE QUALIFIED
-----------------------------------------------------------
TITLE OF CLASS AMOUNT
12% Senior Notes $595,475,922
due September 1, 2004
Approximate date of proposed public offering: On or promptly after the
Effective Date (as defined in the Second Amended Chapter 11 Plan of
Reorganization of The Grand Union Company, dated April 19, 1995).
Name and address of agent for service:
Joseph J. McCaig
President and Chief Executive Officer
The Grand Union Company
201 Willowbrook Boulevard
Wayne, New Jersey 07470-0966
The applicant hereby amends this application for qualification on such date or
dates as may be necessary to delay its effectiveness until (i) the 20th day
after the filing of a further amendment which specifically states that it shall
supersede this amendment, or (ii) such date as the Commission, acting pursuant
to Section 307(c) of the Act, may determine upon the written request of the
applicant.
<PAGE>
GENERAL
1. GENERAL INFORMATION. FURNISH THE FOLLOWING AS TO THE APPLICANT:
a. Form of organization: A corporation.
b. State or other sovereign power under the laws of which organized:
Delaware
2. SECURITIES ACT EXEMPTION APPLICABLE. STATE BRIEFLY THE FACTS RELIED UPON
BY THE APPLICANT AS A BASIS FOR THE CLAIM THAT REGISTRATION OF THE INDENTURE
SECURITIES UNDER THE SECURITIES ACT OF 1933 IS NOT REQUIRED.
On January 25, 1995 (the "Filing Date"), the applicant, The Grand
Union Company (the "Company" or the "Debtor"), commenced a case under Chapter 11
of the United States Bankruptcy Code, 11 U.S.C. section 101 et seq. (the
"Bankruptcy Code"), in the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court"). Since the Filing Date, the Debtor has
continued to operate as a debtor-in-possession subject to the supervision of the
Bankruptcy Court in accordance with the Bankruptcy Code.
The Company proposes to issue, as part of its Second Amended Chapter
11 Plan of Reorganization dated April 19, 1995 (the "Plan"), pursuant to section
1121(a) of the Bankruptcy Code, up to $595,475,922 of its 12% Senior Notes due
September 1, 2004 (the "Senior Notes"). The Senior Notes will be issued to
discharge in part claims of existing creditors in the bankruptcy proceedings
described below.
The Senior Notes are proposed to be issued in reliance upon the
exemption from registration under the Securities Act of 1933, as amended
(the "Securities Act"), set forth in section 1145(a)(1) of the Bankruptcy Code.
Section 1145 of the Bankruptcy Code exempts the offer or sale of securities
under a plan of reorganization from registration under the Securities Act and
state law. Under section 1145, the issuance of securities is exempt from
registration if three principal requirements are satisfied: (1) the securities
are issued by a debtor, its successor, or an affiliate participating in a joint
plan with the debtor (provided that such entity is not an underwriter as defined
in section 1145(b) of the Bankruptcy Code) under a plan of reorganization; (2)
the recipients of the securities hold a claim against the debtor or such
affiliate, an interest in the debtor or such affiliate, or a claim for an
administrative expense against the debtor or such affiliate; and (3) the
securities are issued entirely in exchange for the recipients' claim against or
interest in the debtor or such affiliate, or "principally" in such exchange and
"partly" for cash or property.
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<PAGE>
The applicant believes that the issuance of the Senior Notes under the
indenture to be entered into by the Company and IBJ Schroder Bank & Trust
Company, as Trustee (the "Indenture") to holders of prepetition senior secured
notes under the Plan will satisfy all three conditions of section 1145 of the
Bankruptcy Code because (a) the issuances are expressly contemplated under the
Plan as part of the reorganization; (b) the recipients are holders of "claims"
against the Debtor; and (c) the recipients would obtain such Senior Notes in
exchange for their claims.
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<PAGE>
AFFILIATIONS
3. AFFILIATES. FURNISH A LIST OR DIAGRAM OF ALL AFFILIATES OF THE APPLICANT
AND INDICATE THE RESPECTIVE PERCENTAGES OF VOTING SECURITIES OR OTHER BASES OF
CONTROL.
AS OF MAY 8, 1995
----------------------------------------
GAC HOLDINGS PARTNERS, INC.
(general partner of GAC Holdings, L.P.)
------------------------------------------
|
|
------------------
GAC HOLDINGS, L.P.
------------------
|
|
37.680 % *
|
|
--------------------------------
GRAND UNION HOLDINGS CORPORATION
--------------------------------
|
|
100.000 %
|
|
-------------------------------
GRAND UNION CAPITAL CORPORATION
-------------------------------
|
|
100.000 %
|
|
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THE GRAND UNION COMPANY
-----------------------
- --------------------------
* Percentage indicates voting power of, in each case, entity named above
percentage in entity named below percentage, on a fully diluted basis.
AS OF EFFECTIVE DATE
The holders of prepetition subordinated debt of The Grand Union Company on
the Effective Date will own all of the originally issued shares of common stock
of the reorganized company.
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<PAGE>
MANAGEMENT AND CONTROL
4. DIRECTORS AND EXECUTIVE OFFICERS. LIST THE NAMES AND COMPLETE MAILING
ADDRESSES OF ALL DIRECTORS AND EXECUTIVE OFFICERS OF THE APPLICANT AND ALL
PERSONS CHOSEN TO BECOME DIRECTORS OR EXECUTIVE OFFICERS. INDICATE ALL OFFICES
WITH THE APPLICANT HELD OR TO BE HELD BY EACH PERSON NAMED.
AS OF MAY 8, 1995
<TABLE>
<CAPTION>
Name Address Office
---- ------- -------
<S> <C> <C>
Gary D. Hirsch The Grand Union Company Director and
201 Willowbrook Boulevard Chairman
Wayne, New Jersey 07470-0966
Martin A. Fox The Grand Union Company Director, Vice President
201 Willowbrook Boulevard and Assistant Secretary
Wayne, New Jersey 07470-0966
Joseph J. McCaig The Grand Union Company Director, President and
201 Willowbrook Boulevard Chief Executive Officer
Wayne, New Jersey 07470-0966
William A. Louttit The Grand Union Company Director, Executive Vice
201 Willowbrook Boulevard President and Chief Operating
Wayne, New Jersey 07470-0966 Officer
Kenneth R. Baum The Grand Union Company Director, Senior Vice President,
201 Willowbrook Boulevard Chief Financial Officer and
Wayne, New Jersey 07470-0966 Secretary
Darrell W. Stine The Grand Union Company Executive Vice President
201 Willowbrook Boulevard - New York Region
Wayne, New Jersey 07470-0966
John S. McLaughlin The Grand Union Company Vice President - Northern
201 Willowbrook Boulevard Region
Wayne, New Jersey 07470-0966
Raymond H. Ayers The Grand Union Company Vice President - Real Estate
201 Willowbrook Boulevard
Wayne, New Jersey 07470-0966
Francis E. Nicastro The Grand Union Company Vice President and Treasurer
201 Willowbrook Boulevard
Wayne, New Jersey 07470-0966
Glenn L. Goldberg The Grand Union Company Vice President and Assistant
201 Willowbrook Boulevard Secretary
Wayne, New Jersey 07470-0966
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<PAGE>
Name Address Office
---- ------- -------
John Hinkel The Grand Union Company Vice President - Distribution
201 Willowbrook Boulevard
Wayne, New Jersey 07470-0966
William E. Kinslow The Grand Union Company Vice President - Management
201 Willowbrook Boulevard Information Systems
Wayne, New Jersey 07470-0966
Donald C. Vaillancourt The Grand Union Company Vice President - Corporate
201 Willowbrook Boulevard Communications
Wayne, New Jersey 07470-0966
Gilbert Vuolo The Grand Union Company Vice President - Personnel
201 Willowbrook Boulevard
Wayne, New Jersey 07470-0966
Louis Andrew DePaolis The Grand Union Company Vice President - Advertising
201 Willowbrook Boulevard and Sales Promotion
Wayne, New Jersey 07470-0966
Alfred T. Rossi The Grand Union Company Vice President - Facilities
201 Willowbrook Boulevard Management
Wayne, New Jersey 07470-0966
Alan Dudish The Grand Union Company Vice President - Nonperishables
201 Willowbrook Boulevard Merchandising and
Wayne, New Jersey 07470-0966 Distribution
</TABLE>
AS OF EFFECTIVE DATE
The Company intends to name new directors prior to the date on which the
Plan is confirmed by the Bankruptcy Court. With the exception of Mr. Hirsch,
Mr. Fox and Mr. Goldberg, who will not continue to be employed by the Company,
the executive officers are expected to continue.
-6-
<PAGE>
5. PRINCIPAL OWNERS OF VOTING SECURITIES. FURNISH THE FOLLOWING INFORMATION
AS TO EACH PERSON OWNING 10 PERCENT OR MORE OF THE VOTING SECURITIES OF THE
APPLICANT.
AS OF MAY 8, 1995
Name and Complete Title of Class Amount Percentage of
Mailing Address Owned Owned Voting Securities
Owned
Grand Union
Capital Corporation Common Stock 801.5 100%
shares
AS OF EFFECTIVE DATE
The holders of prepetition subordinated debt of The Grand Union Company on
the Effective Date will own all of the originally issued shares of common stock
of the reorganized company.
UNDERWRITERS
6. UNDERWRITERS. GIVE THE NAME AND COMPLETE MAILING ADDRESS OF (A) EACH
PERSON WHO, WITHIN THREE YEARS PRIOR TO THE DATE OF FILING THE APPLICATION,
ACTED AS AN UNDERWRITER OF ANY SECURITIES OF THE OBLIGOR WHICH WERE OUTSTANDING
ON THE DATE OF FILING THE APPLICATION, AND (B) EACH PROPOSED PRINCIPAL
UNDERWRITER OF THE SECURITIES PROPOSED TO BE OFFERED. AS TO EACH PERSON
SPECIFIED IN (A), GIVE THE TITLE OF EACH CLASS OF SECURITIES UNDERWRITTEN.
a. Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
and
BT Securities Corporation
130 Liberty Street
New York, New York 10006
Goldman, Sachs & Co. and BT Securities Corporation each served as
underwriter for the Company's issuances of 11-1/4% Senior Notes due 2000 and
12-1/4% Senior Subordinated Notes due 2002.
b. None
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<PAGE>
CAPITAL SECURITIES
7. CAPITALIZATION. (A) FURNISH THE FOLLOWING INFORMATION AS TO EACH
AUTHORIZED CLASS OF SECURITIES OF THE APPLICANT.
AS OF MAY 8, 1995
<TABLE>
<CAPTION>
AMOUNT AMOUNT
TITLE OF CLASS AUTHORIZED OUTSTANDING
<S> <C> <C>
Common Stock, 900 shares 801.5 shares
$50,000 par value
13% Senior Subordinated $200,000,000 $ 16,150,000
Notes Due 1998
11-1/4% Senior Notes $350,000,000 $350,000,000
Due 2000
12-1/4% Senior $500,000,000 $500,000,000
Subordinated Notes Due
2002
11-3/8% Senior Notes $175,000,000 $175,000,000
Due 1999
12-1/4% Senior $ 50,000,000 $ 50,000,000
Subordinated Notes Due
2002, Series A
</TABLE>
AS OF EFFECTIVE DATE
<TABLE>
<CAPTION>
AMOUNT AMOUNT
TITLE OF CLASS AUTHORIZED OUTSTANDING
<S> <C> <C>
12% Senior Notes $595,475,922 $595,475,922
Due 2004
Common Stock,
$1.00 par value 30 million shares 10 million shares
Preferred Stock,
$1.00 par value 10 million shares none
</TABLE>
(B) GIVE A BRIEF OUTLINE OF THE VOTING RIGHTS OF EACH CLASS OF
VOTING SECURITIES REFERRED TO IN PARAGRAPH (A) ABOVE.
-8-
<PAGE>
AS OF MAY 8, 1995
With respect to the voting rights of the common stock of the Company, each
holder of a share of such common stock is entitled to one vote on all matters on
which such shareholders are entitled to vote.
AS OF EFFECTIVE DATE
With respect to the voting rights of the common stock of the Company, each
holder of a share of such common stock will be entitled to one vote on all
matters on which such shareholders are entitled to vote.
INDENTURE SECURITIES
8. ANALYSIS OF INDENTURE PROVISIONS. INSERT AT THIS POINT THE ANALYSIS OF
INDENTURE PROVISIONS REQUIRED UNDER SECTION 305(A)(2) OF THE ACT.
(a) Definition of Default: Events of Default under the Indenture include
the following:
(i) the failure by the Company to pay interest on any Senior Note
for a period of 30 days after such interest becomes due and payable;
(ii) the failure by the Company to pay the principal of (or premium,
if any, on) any Senior Note when such principal becomes due and payable,
whether at the stated maturity or upon acceleration, redemption or
otherwise;
(iii) a default in the observance of any other covenant contained in
the Indenture that continues for 30 days after the Company has been given
notice of the default by the Trustee or the holders of 25% in principal
amount of the Senior Notes then outstanding;
(iv) a default or defaults on other Indebtedness (as defined in the
Indenture) of the Company or any subsidiary, which Indebtedness has an
outstanding principal amount of more than $15,000,000 individually or in
the aggregate if such Indebtedness has attained final maturity or if the
holders of such Indebtedness have accelerated payment thereof under the
terms of the instrument under which such Indebtedness is or may be
outstanding and, in each case, it remains unpaid;
-9-
<PAGE>
(v) one or more judgments or decrees is entered against the Company
or any subsidiary involving a liability (not paid or fully covered by
insurance) of $5,000,000 or more in the case of any one such judgment or
decree and $10,000,000 or more in the aggregate for all such judgments and
decrees for the Company and all its subsidiaries and all such judgments and
decrees have not been vacated, discharged or stayed or bonded pending
appeal within 30 days from the date of entry thereof;
(vi) the Company or any Material Subsidiary (as defined in the
Indenture) pursuant to or within the meaning of the Bankruptcy Code (as
defined in the Indenture):
(1) commences a voluntary case in bankruptcy or any other action
or proceeding for any other relief under any law affecting creditors'
rights that is similar to the Bankruptcy Code;
(2) consents by answer or otherwise to the commencement against
it of an involuntary case or proceeding of bankruptcy or insolvency;
(3) seeks or consents to the appointment of a receiver, trustee,
assignee, liquidator, custodian or similar official (collectively, a
"Custodian") of it or for all or substantially all of its Property (as
defined in the Indenture);
(4) makes a general assignment for the benefit of its creditors;
or
(5) consents to the entry of a judgment, decree or order for
relief against it in an involuntary case; and
(vii) a court of competent jurisdiction enters a judgment, order or
decree under any Bankruptcy Code (as defined in the Indenture) that is for
relief against the Company or any Material Subsidiary in an involuntary
case or proceeding which shall:
(1) approve a petition seeking reorganization, arrangement,
adjustment or composition in respect of the Company or any Material
Subsidiary of the Company,
(2) appoint a Custodian for the Company or any Material
Subsidiary or for all or substantially all of the Property of any of
them; or
(3) order the winding up or liquidation of the Company or any
Material Subsidiary,
-10-
<PAGE>
and in each case the judgment, order or decree remains unstayed and in
effect for 60 days, or any dismissal, stay, rescission or termination
ceases to remain in effect.
Within 90 days after the occurrence of an Event of Default that is
continuing, the Trustee shall give notice thereof to the Holders; PROVIDED,
HOWEVER, that, except in the case of a default in payment of principal of or
interest on the Senior Notes, the Trustee may withhold such notice as long as it
in good faith determines that such withholding is in the interests of the
Holders. (Section 5.01)
(b) Authentication and Delivery; Application of Proceeds.
The Indenture provides that, upon a written order of the Company
signed by two officers, the Trustee shall authenticate Senior Notes for original
issue up to $595,475,922. The Senior Notes will be signed for the Company by
the Company's President or a Vice President and shall be attested by the
Company's Secretary or an Assistant Secretary. A Senior Note shall not be valid
until authenticated by the manual signature of the Trustee. The signature shall
be conclusive evidence that the Senior Note has been authenticated under the
Indenture.
The Trustee may appoint an Authenticating Agent acceptable to the
Company to authenticate Senior Notes. An Authenticating Agent may authenticate
Senior Notes whenever the Trustee may do so. Each reference in the Indenture to
authentication by the Trustee includes authentication by such agent. An
Authenticating Agent has the same rights as an Agent (as defined in the
Indenture) to deal with the Company or an Affiliate (as defined in the
Indenture). (Section 2.02)
The Senior Notes will be issued in exchange for claims against the
Company or its affiliates as provided in the Plan, and accordingly, the issuance
of the Senior Notes will not result in proceeds to the Company.
(c) Release and Substitution of Property Subject to the Lien of the
Indenture: Not Applicable.
(d) Satisfaction and Discharge. The Company may terminate its obligations
under the Indenture when all outstanding Senior Notes theretofore authenticated
and issued have been delivered to the Trustee for cancellation. In addition,
the Company shall be Discharged (as defined in the Indenture) from its
obligations with respect to the Senior Notes (except with respect to (A) the
rights of the holders of the Senior Notes to receive, from the trust fund
described in Section 7.01 of the Indenture, payment of the principal of,
premium, if any, and the interest on such Senior Notes when such payments are
due, (B) the Company's obligations under Sections 2.03, 2.04, 2.05, 2.06, 2.07,
3.17, 6.07 and 6.08 of the Indenture and (C) the rights, powers, trusts, duties
and immunities of the Trustee
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<PAGE>
under the Indenture) when the Company deposits with the Trustee, in trust, money
or U.S. Government Obligations (as defined in the Indenture) which, through the
payment of interest thereon and principal thereof in accordance with their
terms, will provide money in an amount sufficient to pay all the principal of
and interest on the Senior Notes on the dates such payments are due in
accordance with the terms of the Senior Notes. (Section 7.01)
(e) Evidence of Compliance.
The Company shall deliver to the Trustee, within 120 days after the
end of each fiscal year of the Company, a certificate signed by two officers of
the Company (one of whom must be the Chairman of the Board of Directors, the
President, any Vice President or the Treasurer of the Company), stating that a
review of the activities of the Company and its subsidiaries during the
preceding fiscal year has been made and, as to each such officer signing such
certificate, that to the best of his or her knowledge the Company has kept,
observed, performed and fulfilled each and every covenant contained in the
Indenture and is not in default in the performance or observance of any of the
terms, provisions and conditions thereof (or, if a Default or Event of Default
shall have occurred, describing all such Defaults or Events of Defaults of which
he or she may have knowledge and the status thereof).
The Company shall, as long as any of the Senior Notes are outstanding,
deliver to the Trustee, promptly, but in any case within 10 Business Days (as
defined in the Indenture) of any Officer becoming aware of any Default, Event of
Default or default in the performance of any covenant, agreement or condition
contained in the Indenture, a certificate signed by two officers of the Company
(one of whom must be the Chairman of the Board of Directors, the President, any
Vice President or the Treasurer of the Company) specifying such Default or Event
of Default and the status thereof.
Upon payment in full of all outstanding Indebtedness under the Bank
Credit Agreement (as defined in the Indenture), the Company shall deliver a
certificate signed by two officers of the Company (one of whom must be the
Chairman of the Board of Directors, the President, any Vice President or the
Treasurer of the Company) to the Trustee stating that such Indebtedness has been
paid in full and discharged. (Section 3.18)
9. OTHER OBLIGORS. GIVE THE NAME AND COMPLETE MAILING ADDRESS OF ANY PERSON,
OTHER THAN THE APPLICANT, WHO IS AN OBLIGOR UPON THE INDENTURE SECURITIES.
There are no other obligors with respect to the Senior Notes.
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<PAGE>
CONTENTS OF APPLICATION FOR QUALIFICATION. This application for
qualification comprises:
a. Pages numbered 1 to 15, consecutively.
b. The statement of eligibility and qualification of the trustee
under the Indenture to be qualified.
c. The following exhibits in addition to those filed as a part of
the statement of eligibility and qualification of the trustee.
Exhibit T3A1. Certificate of Incorporation of the Company, as amended,
incorporated by reference to Exhibit No. 3.1 to the Registration
Statement on Form S-1 of the Company, Grand Union Capital
Corporation and Grand Union Holdings Corporation (Registration
No. 33-48282 (the "1992 Grand Union Registration Statement")
Exhibit T3A2. Proposed Restated Certificate of Incorporation of the Company
(included in Exhibit T3E1 hereof)
Exhibit T3B1. By-Laws of the Company, incorporated by reference to Exhibit No.
3.4 to the 1992 Grand Union Registration Statement
Exhibit T3B2. Proposed Restated By-Laws of the Company (included in Exhibit
T3E1 hereof)
Exhibit T3C. Form of Indenture
Exhibit T3E1. Disclosure Statement for Second Amended Chapter 11 Plan of
Reorganization of The Grand Union Company dated April 19, 1995,
including Plan as an exhibit thereto, as filed with the United
States Bankruptcy Court for the District of Delaware
Exhibit T3E2. Order approving disclosure statement, establishing voting
procedures and setting confirmation hearing
Exhibit T3E3. Notice of hearing to consider confirmation of and time fixed for
voting on the Second Amended Chapter 11 Plan of Reorganization
filed by The Grand Union Company
Exhibit T3E4. Ballots for voting on Second Amended Plan of Reorganization,
dated April 19, 1995, submitted by The Grand Union Company, Class
4-Senior Note Claims
Exhibit T3E5. Summary ballots for voting on Second Amended Plan of
Reorganization, dated April 19, 1995, submitted by The Grand
Union Company, Class 4-Senior Note Claims
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<PAGE>
Exhibit T3F. Cross Reference Sheet showing the location in the Indenture of
the provisions inserted therein pursuant to Section 310 through
318(a), inclusive, of the Trust Indenture Act of 1939 (included
in Exhibit T3C hereof)
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
applicant, The Grand Union Company, a corporation organized and existing under
the laws of the State of Delaware, has duly caused this application to be signed
on its behalf by the undersigned, thereunto duly authorized, and its seal to be
hereunto affixed and attested, all in the City of Wayne, and State of New
Jersey, on the 8th day of May, 1995.
THE GRAND UNION COMPANY
[SEAL]
By: /s/ Kenneth R. Baum
_________________________________
Name: Kenneth R. Baum
Title: Senior Vice President,
Chief Financial Officer
and Secretary
Attest:
/s/ Francis E. Nicastro
______________________________
Name: Francis E. Nicastro
Title: Vice President and Treasurer
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<PAGE>
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
--------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
--
--------------------
IBJ SCHRODER BANK & TRUST COMPANY
(Exact name of trustee as specified in its charter)
New York 13-5375195
(Jurisdiction of incorporation (I.R.S. employer
or organization if not a U.S. national bank) identification No.)
One State Street, New York, New York 10004
(Address of principal executive offices) (Zip code)
IBJ SCHRODER BANK & TRUST COMPANY
1 State Street
New York, New York 10004
(212) 858-2000
(Name, address and telephone number of agent for service)
The Grand Union Company
(Exact name of obligor as specified in its charter)
Delaware 22-1518276
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
201 Willowbrook Boulevard
Wayne, New Jersey 07470-0966
(Address of principal executive offices) (Zip code)
--------------------
12% Senior Notes due September 1, 2004
(Title of indenture securities)
- --------------------------------------------------------------------------------
<PAGE>
- 2 -
Item 1. General information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising
authority to which it is subject.
New York State Banking Department, Two
Rector Street, New York, New York
Federal Deposit Insurance Corporation,
Washington, D.C.
Federal Reserve Bank of New York Second
District,
33 Liberty Street, New York, New York
(b) Whether it is authorized to exercise corporate
trust powers.
Yes
Item 2. Affiliations with the obligor.
If the obligor is an affiliate of the trustee,
describe each such affiliation.
The obligor is not an affiliate of the trustee.
(See Note on Page 8)
Item 3. Voting securities of the trustee.
Furnish the following information as to each class
of voting securities of the trustee:
As of April 24, 1995
Col. A Col. B
Title of class Amount outstanding
-------------- ------------------
Not Applicable
Item 4. Trusteeships under other indentures.
If the trustee is a trustee under another
indenture under which any other securities, or
certificates of interest or participation in any
other securities, of the obligor are outstanding,
furnish the following information:
<PAGE>
- 3 -
(a) Title of the securities outstanding under each such other indenture.
Not Applicable
(b) A brief statement of the facts relied upon as a basis for the claim
that no conflicting interest within the meaning of Section 310(b)(1)
of the Act arises as a result of the trusteeship under any such other
indenture, including a statement as to how the indenture securities
will rank as compared with the securities issued under such other
indenture.
Not Applicable
Item 5. Interlocking directorates and similar relationships with the obligor
or underwriters.
If the trustee or any of the directors or executive officers of the
trustee is a director, officer, partner, employee, appointee, or
representative of the obligor or of any underwriter for the obligor,
identify each such person having any such connection and state the
nature of each such connection.
Not Applicable
Item 6. Voting securities of the trustee owned by the obligor or its
officials.
Furnish the following information as to the voting securities of the
trustee owned beneficially by the obligor and each director, partner,
and executive officer of the obligor:
As of April 24, 1995
Col A Col. B Col. C Col. D
Name of owner Title of class Amount owned Percent of voting
beneficially securities repre-
sented by
amount given
in Col. C
- ------------ -------------- ------------ -----------------
Not Applicable
Item 7. Voting securities of the trustee owned by underwriters or their
officials.
Furnish the following information as to the voting securities of the
trustee owned beneficially by each underwriter for the obligor and
each director, partner, and executive officer of each such
underwriter:
As of April 24, 1995
<PAGE>
- 4 -
Col A Col. B Col. C Col. D
Name of Owner Title of class Amount owned Percent of voting
beneficially securities repre-
sented by
amount given
in Col. C
- ------------ -------------- ------------ -----------------
Not Applicable
Item 8. Securities of the obligor owned or held by the trustee.
Furnish the following information as to securities of
the obligor owned beneficially or held as collateral security
for obligations in default by the trustee:
As of April 24, 1995
Col A Col. B Col. C Col. D
Title of class Whether the secur- Amount owned bene- Percent of class
ities are voting ficially or held represented
or nonvoting as collateral sec- by amount
securities urity for oblig- given in Col. C
ations in default
- ------------ -------------- ------------ -----------------
Not Applicable
Item 9. Securities of underwriters owned or held by the trustee.
If the trustee owns beneficially or holds as collateral security
for obligations in default any securities of an underwriter
for the obligor, furnish the following information as
to each class of securities of such underwriter any of which
are so owned or held by the trustee:
As of April 24, 1995
Col A Col. B Col. C Col. D
Title of issuer Amount outstanding Amount owned bene- Percent of class
and title of ficially or held represented
class as collateral sec- by amount
urity for oblig- given in Col. C
ations in default
by trustee
- ------------ -------------- ------------ -----------------
Not Applicable
<PAGE>
- 5 -
Item 10. Ownership or holdings by the trustee of voting securities of
certain affiliates or security holders of the obligor.
If the trustee owns beneficially or holds as collateral
security for obligations in default voting securities of a
person who, to the knowledge of the trustee (1) owns 10
percent or more of the voting securities of the obligor or
(2) is an affiliate, other than a subsidiary, of the
obligor, furnish the following information as to the voting
securities of such person:
As of April 24, 1995
Col A Col. B Col. C Col. D
Title of issuer Amount outstanding Amount owned bene- Percent of class
and title of class ficially or held represented
as collateral sec- by amount
urity for oblig- given in Col. C
ations in default
by trustee
- ------------ -------------- ------------ -----------------
Not Applicable
Item 11. Ownership or holdings by the trustee of any
securities of a person owning 50 percent or more
of the voting securities of the obligor.
If the trustee owns beneficially or holds as collateral security
for obligations in default any securities of a person who, to the
knowledge of the trustee, owns 50 percent or more of the voting
securities of the obligor, furnish the following information as to
each class of securities of such person any of which are so owned or
held by the trustee:
As of April 24, 1995
Col A Col. B Col. C Col. D
Title of issuer Amount outstanding Amount owned bene- Percent of class
and title of class ficially or held represented
as collateral sec- by amount
urity for oblig- given in Col. C
ations in default
by trustee
- ------------ -------------- ------------ -----------------
Not Applicable
<PAGE>
- 6 -
Item 12. Indebtedness of the Obligor to the Trustee.
Except as noted in the instructions, if the obligor is indebted to the
trustee, furnish the following information:
As of April 24, 1995
Col. A Col. B Col. C
Nature of Amount Date
Indebtedness Outstanding Due
------------ ----------- ------
Not Applicable
Item 13. Defaults by the Obligor.
(a) State whether there is or has been a default with
respect to the securities under this indenture.
Explain the nature of any such default.
None
(b) If the trustee is a trustee under another
indenture under which any other securities, or
certificates of interest or participation in any
other securities, of the obligor are outstanding,
or is trustee for more than one outstanding series
of securities under the indenture, state whether
there has been a default under any such indenture
or series, identify the indenture or series
affected, and explain the nature of any such
default.
None
Item 14. Affiliations with the Underwriters.
If any underwriter is an affiliate of the trustee,
describe each such affiliation.
Not Applicable
<PAGE>
- 7 -
Item 15. Foreign Trustee.
Identify the order or rule pursuant to which the
foreign trustee is authorized to act as sole
trustee under indentures qualified or to be
qualified under the Act.
Not Applicable
Item 16. List of exhibits.
List below all exhibits filed as part of this
statement of eligibility.
*1. A copy of the Charter of IBJ Schroder Bank & Trust Company as
amended to date. (See Exhibit 1A to Form T-1, Securities and
Exchange Commission File No. 22-18460).
*2. A copy of the Certificate of Authority of the trustee
to Commence Business (Included in Exhibit 1 above).
*3. A copy of the Authorization of the trustee to exercise corporate
trust powers, as amended to date (See Exhibit 4 to Form T-1,
Securities and Exchange Commission File No. 22-19146).
*4. A copy of the existing By-Laws of the trustee, as amended to date
(See Exhibit 4 to Form T-1, Securities and Exchange Commission
File No. 22-19146).
5. Not Applicable
6. The consent of United States institutional trustee required
by Section 321(b) of the Act.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or
examining authority.
* The Exhibits thus designated are incorporated herein by reference as
exhibits hereto. Following the description of such Exhibits is a reference
to the copy of the Exhibit heretofore filed with the Securities and
Exchange Commission, to which there have been no amendments or changes.
<PAGE>
- 8 -
NOTE
In answering any item in this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor and its directors or
officers, the trustee has relied upon information furnished to it by the
obligor.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
trustee of all facts on which to base responsive answers to Item 2, the
answer to said Item are based on incomplete information.
Item 2, may, however, be considered as correct unless amended by an
amendment to this Form T-1.
Pursuant to General Instruction B, the trustee has responded to Items 1, 2
and 16 of this form since to the best knowledge of the trustee as indicated
in Item 13, the obligor is not in default under any indenture under which
the applicant is trustee.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, IBJ Schroder Bank & Trust Company, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 24th day
of April, 1995.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/Thomas J. Bogert
---------------------------------
Thomas J. Bogert
Assistant Vice President
<PAGE>
EXHIBIT 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the issue by The Grand Union Company
of its 12% Senior Notes due September 1, 2004, we hereby consent that reports of
examinations by Federal, State, Territorial, or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/Thomas J. Bogert
---------------------------------
Thomas J. Bogert
Assistant Vice President
Dated: April 24, 1995
<PAGE>
EXHIBIT 7
CONSOLIDATED REPORT OF CONDITION OF
IBJ SCHRODER BANK & TRUST COMPANY
OF NEW YORK, NEW YORK
AND FOREIGN AND DOMESTIC SUBSIDIARIES
REPORT AS OF DECEMBER 31, 1994
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
IN THOUSANDS
--------------
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin...$ 25,481
Interest-bearing balances............................$ 289,418
Securities: Held to Maturity...........................$ 51,486
Available-for-sale.........................$ 31,056
Federal funds sold and securities purchased under
agreements to resell in domestic offices of the bank
and of its Edge and Agreement subsidiares, and in IBFs:
Federal Funds sold...................................$ 37,417
Securities purchased under agreements to resell......$ 1,061,745
Loans and lease financing receivables:
Loans and leases, net of unearned income......$2,145,876
LESS: Allowance for loan and lease losses....$ 48,256
LESS: Allocated transfer risk reserve........$ 441
Loans and leases, net of unearned
income, allowance, and reserve.......................$ 2,097,179
Assets held in trading accounts...........................$ 824,995
Premises and fixed assets.................................$ 10,452
Other real estate owned...................................$ 802
Investments in unconsolidated subsidiaries and
associated companies ................................$ 0
Customers' liability to this bank on acceptances
outstanding..........................................$ 1,565
Intangible assets.........................................$ 62,530
Other assets..............................................$ 159,872
TOTAL ASSETS..............................................$ 4,653,998
-----------
-----------
<PAGE>
LIABILITIES
Deposits:
In domestic offices..................................$ 633,082
Noninterest-bearing.....................$187,256
Interest-bearing........................$445,826
In foreign offices, Edge and Agreement
subsidiaries, and IBFs..........................$ 854,734
Noninterest-bearing.....................$ 14,039
Interest-bearing........................$840,695
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of the bank and
of its Edge and Agreement subsidiaries, and in IBFs:
Federal funds purchased..............................$ 247,200
Securities sold under agreements to repurchase.......$ 766,161
Demand notes issued to the U.S. Treasury..................$ 9,925
Trading Liabilities.......................................$ 689,931
Other borrowed money......................................$ 802,560
Mortgage indebtedness and obligations under
capitalized leases......................................$ 9,077
Bank's liability on acceptances executed and outstanding..$ 1,565
Subordinated notes and debentures.........................$ 0
Other liabilities.........................................$ 302,325
TOTAL LIABILITIES........................................$4,316,560
----------
Limited life preferred stock and related surplus..........$ 0
<PAGE>
EQUITY CAPITAL
Perpetual preferred stock and related surplus............$ 50,000
Common Stock.............................................$ 41,473
Surplus (excluding surplus related to preferred stock)...$ 282,945
Undivided profits and capital reserves...................$ (36,920)
Plus: Net unrealized gains (losses) on available-for-
sale equity securities.........................$ (60)
Cumulative foreign currency translation adjustments......$ 0
TOTAL EQUITY CAPITAL.....................................$ 337,438
TOTAL LIABILITIES, LIMITED-LIFE PREFERRED
STOCK AND EQUITY CAPITAL...............................$ 4,653,998
-----------
-----------
</TABLE>
<PAGE>
Exhibit T3C
DRAFT 4/13/95
THE GRAND UNION COMPANY, as Issuer
and IBJ SCHRODER BANK & TRUST COMPANY, as Trustee
$595,475,922
- --------------------------------------------------------------------------------
INDENTURE
Dated as of _______________, 1995
- --------------------------------------------------------------------------------
12% Senior Notes due September 1, 2004
<PAGE>
CROSS REFERENCE TABLE(1)
[SUBJECT TO FURTHER REVIEW]
Trust Indenture Reference
Act Section Section
- --------------- ---------
310(a)(1) 6.10
(a)(2) 6.10
(a)(3) N.A.
(a)(4) N.A.
(a)(5) 6.10
(b) 6.10, 6.08(c)
(c) N.A.
311(a) 6.11
(b) 6.11
(c) N.A.
312(a) 2.05
(b) 10.03
(c) 10.03
313(a) 6.06
(b)(1) N.A.
(b)(2) 6.06
(c) 6.06, 10.02
(d) 6.06
314(a) 3.07(a), 3.18(a)
(b) N.A.
(c)(1) 10.04
(c)(2) 10.04
(c)(3) N.A.
(d) N.A.
(e) 10.05
315(a) 6.01(b)
(b) 6.05, 10.02
(c) 6.01(a)
(d) 6.01(c)
(e) 5.11
316(a) 2.09
(a)(1)(A) 5.05
(a)(1)(B) 5.04
(a)(2) N.A.
(b) 5.07
(c) 8.04(b)
317(a)(1) 5.08
(a)(2) 5.09
(b) 2.04
318(a) 10.01
N.A. means not applicable
- ----------------
(1) This Cross-Reference Table is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE . . . . . . . . . . . . . . . 1
SECTION 1.01.
(a) DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) ACCOUNTING TERMS. . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 1.02. OTHER DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT . . . . . . 16
SECTION 1.04. RULES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 2
THE SECURITIES. . . . . . . . . . . . . . . 17
SECTION 2.01. FORM AND DATING . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.02. EXECUTION AND AUTHENTICATION. . . . . . . . . . . . . . . . . 17
SECTION 2.03. REGISTRAR AND PAYING AGENT. . . . . . . . . . . . . . . . . . 18
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST . . . . . . . . . . . . . 18
SECTION 2.05. HOLDER LISTS. . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.06. TRANSFER AND EXCHANGE . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.07. REPLACEMENT SECURITIES. . . . . . . . . . . . . . . . . . . . 20
SECTION 2.08. OUTSTANDING SECURITIES. . . . . . . . . . . . . . . . . . . . 20
SECTION 2.09. TREASURY SECURITIES . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.10. TEMPORARY SECURITIES. . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.11. CANCELLATION. . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.12. DEFAULTED INTEREST. . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 3
-i-
<PAGE>
Page
----
COVENANTS. . . . . . . . . . . . . . . . 22
SECTION 3.01. PAYMENT OF SECURITIES . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.02. LIMITATION ON RESTRICTED PAYMENTS . . . . . . . . . . . . . . 22
SECTION 3.03. LIMITATION ON INDEBTEDNESS. . . . . . . . . . . . . . . . . . 24
SECTION 3.04. LIMITATION ON LIENS . . . . . . . . . . . . . . . . . . . . . 28
SECTION 3.05. LIMITATION ON SALE AND LEASEBACK TRANSACTIONS . . . . . . . . 29
SECTION 3.06. LIMITATION ON ASSET SALES . . . . . . . . . . . . . . . . . . 30
SECTION 3.07. SEC REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.08. LIMITATION ON PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES . . 33
SECTION 3.09. LIMITATION ON INDEBTEDNESS AND PREFERRED STOCK OF
SUBSIDIARIES (OTHER THAN NON-BORROWING SUBSIDIARIES). . . . . 34
SECTION 3.10. LIMITATION ON INDEBTEDNESS OF NON-BORROWING SUBSIDIARIES. . . 37
SECTION 3.11. TRANSACTIONS WITH AFFILIATES. . . . . . . . . . . . . . . . . 37
SECTION 3.12. RESTRICTIONS ON BECOMING AN INVESTMENT COMPANY. . . . . . . . 38
SECTION 3.13. CONTINUED EXISTENCE AND RIGHTS. . . . . . . . . . . . . . . . 38
SECTION 3.14. MAINTENANCE OF PROPERTIES AND OTHER MATTERS . . . . . . . . . 38
SECTION 3.15. TAXES AND CLAIMS. . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 3.16. STAY, EXTENSION AND USURY LAWS. . . . . . . . . . . . . . . . 40
SECTION 3.17. MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST . . . . . . . 40
SECTION 3.18. COMPLIANCE CERTIFICATE. . . . . . . . . . . . . . . . . . . . 41
ARTICLE 4
SUCCESSORS; CHANGE OF CONTROL; OPTIONAL PREPAYMENT. . . . . . 42
-ii-
<PAGE>
Page
----
SECTION 4.01. WHEN COMPANY MAY MERGE, ETC.; CHANGE OF CONTROL;
HOLDERS' RIGHT OF OPTIONAL PREPAYMENT . . . . . . . . . . . . 42
ARTICLE 5
DEFAULTS AND REMEDIES. . . . . . . . . . . . . 44
SECTION 5.01. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 5.02. ACCELERATION. . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 5.03. OTHER REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 5.04. WAIVER OF DEFAULTS. . . . . . . . . . . . . . . . . . . . . . 47
SECTION 5.05. CONTROL BY MAJORITY . . . . . . . . . . . . . . . . . . . . . 47
SECTION 5.06. LIMITATION ON SUITS . . . . . . . . . . . . . . . . . . . . . 47
SECTION 5.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. . . . . . . . . . . . . 48
SECTION 5.08. COLLECTION SUIT BY TRUSTEE. . . . . . . . . . . . . . . . . . 48
SECTION 5.09. TRUSTEE MAY FILE PROOFS OF CLAIM. . . . . . . . . . . . . . . 48
SECTION 5.10. PRIORITIES. . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 5.11. UNDERTAKING FOR COSTS . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 6
TRUSTEE . . . . . . . . . . . . . . . . 50
SECTION 6.01. DUTIES OF TRUSTEE . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 6.02. RIGHTS OF TRUSTEE . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 6.03. INDIVIDUAL RIGHTS OF TRUSTEE. . . . . . . . . . . . . . . . . 52
SECTION 6.04. TRUSTEE'S DISCLAIMER. . . . . . . . . . . . . . . . . . . . . 52
SECTION 6.05. NOTICE OF DEFAULTS. . . . . . . . . . . . . . . . . . . . . . 52
SECTION 6.06. REPORTS BY TRUSTEE TO HOLDERS . . . . . . . . . . . . . . . . 53
SECTION 6.07. COMPENSATION AND INDEMNITY. . . . . . . . . . . . . . . . . . 53
SECTION 6.08. REPLACEMENT OF TRUSTEE. . . . . . . . . . . . . . . . . . . . 54
-iii-
<PAGE>
Page
----
SECTION 6.09. SUCCESSOR TRUSTEE BY MERGER, ETC. . . . . . . . . . . . . . . 55
SECTION 6.10. ELIGIBILITY; DISQUALIFICATION . . . . . . . . . . . . . . . . 55
SECTION 6.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY . . . . . . 55
SECTION 6.12. AUTHENTICATING AGENT. . . . . . . . . . . . . . . . . . . . . 55
ARTICLE 7
DISCHARGE OF INDENTURE. . . . . . . . . . . . . 57
SECTION 7.01. TERMINATION OF COMPANY'S OBLIGATIONS. . . . . . . . . . . . . 57
SECTION 7.02. APPLICATION OF TRUST MONEY. . . . . . . . . . . . . . . . . . 58
SECTION 7.03. REPAYMENT TO COMPANY. . . . . . . . . . . . . . . . . . . . . 58
SECTION 7.04. REINSTATEMENT . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE 8
AMENDMENTS. . . . . . . . . . . . . . . . 59
SECTION 8.01. WITHOUT CONSENT OF HOLDERS. . . . . . . . . . . . . . . . . . 59
SECTION 8.02. WITH CONSENT OF HOLDERS . . . . . . . . . . . . . . . . . . . 60
SECTION 8.03. COMPLIANCE WITH TRUST INDENTURE ACT . . . . . . . . . . . . . 60
SECTION 8.04. REVOCATION AND EFFECT OF CONSENTS . . . . . . . . . . . . . . 61
SECTION 8.05. NOTATION ON EXCHANGE OF SECURITIES. . . . . . . . . . . . . . 61
SECTION 8.06. TRUSTEE PROTECTED . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE 9
REDEMPTIONS . . . . . . . . . . . . . . . 62
SECTION 9.01. NOTICE TO TRUSTEE . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 9.02. SELECTION OF THE SECURITIES TO BE REDEEMED. . . . . . . . . . 62
SECTION 9.03. NOTICE OF REDEMPTION. . . . . . . . . . . . . . . . . . . . . 63
SECTION 9.04. EFFECT OF NOTICE OF REDEMPTION. . . . . . . . . . . . . . . . 63
SECTION 9.05. DEPOSIT OF REDEMPTION PRICE ON OPTIONAL REDEMPTION. . . . . . 64
-iv-
<PAGE>
Page
----
SECTION 9.06. SECURITIES REDEEMED IN PART . . . . . . . . . . . . . . . . . 64
ARTICLE 10
MISCELLANEOUS. . . . . . . . . . . . . . . 64
SECTION 10.01. TRUST INDENTURE ACT CONTROLS. . . . . . . . . . . . . . . . . 64
SECTION 10.02. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 10.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS . . . . . . . . . 66
SECTION 10.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. . . . . . 66
SECTION 10.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION . . . . . . . . 66
SECTION 10.06. RULES BY TRUSTEE AND AGENTS . . . . . . . . . . . . . . . . . 67
SECTION 10.07. LEGAL HOLIDAYS. . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 10.08. NO RECOURSE AGAINST OTHERS. . . . . . . . . . . . . . . . . . 67
SECTION 10.09. DUPLICATE ORIGINALS . . . . . . . . . . . . . . . . . . . . . 67
SECTION 10.10. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 10.11. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS . . . . . . . . 67
SECTION 10.12. SUCCESSORS. . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 10.13. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 10.14. TABLE OF CONTENTS, HEADINGS, ETC. . . . . . . . . . . . . . . 68
SECTION 10.15. BENEFITS OF INDENTURE . . . . . . . . . . . . . . . . . . . . 69
-v-
<PAGE>
INDENTURE dated as of _______, 1995 between THE GRAND UNION COMPANY, a
Delaware corporation (the "Company"), and IBJ SCHRODER BANK & TRUST COMPANY, a
banking company organized under the laws of the State of New York, as trustee
(the "Trustee").
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Company's 12% Senior
Notes due September 1, 2004 (the "Securities").
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01.
(a) DEFINITIONS.
"ADDITIONAL ASSETS" means any Property or assets substantially related
to the Company's primary business.
"AFFILIATE" means, with respect to any referenced Person, a Person (i)
which directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under direct or indirect common control with, such
referenced 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 Stock of such referenced Person or (iii) of which 5%
or more of the combined voting power of the total Voting Stock (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 referenced Person, or a Subsidiary of such referenced Person.
For purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling," "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
or policies of such Person, whether through the ownership of voting securities,
by agreement or otherwise; PROVIDED, HOWEVER, that beneficial ownership of 5% or
more of the voting securities of another Person, shall be deemed to be control.
When used herein without reference to any Person, Affiliate means an Affiliate
of the Company.
"AGENT" means any Registrar, Paying Agent or co-Registrar.
<PAGE>
"ASSET SALE" means the sale or other disposition, in a transaction
which is not a Sale and Leaseback Transaction permitted under the terms of this
Indenture, by the Company or any of its Subsidiaries to any Person other than
the Company or another of its Subsidiaries of (i) any of the Capital Stock of
any of the Subsidiaries of the Company or (ii) any other assets of the Company
or any other assets of its Subsidiaries outside the ordinary course of business
of the Company or such Subsidiary.
"AVERAGE LIFE" means, as of the date of determination, with respect to
any debt security, the quotient obtained by dividing (i) the sum of the products
of (x) the numbers of years from the date of determination to the dates of each
successive scheduled principal payment of such debt security multiplied by (y)
the amount of such principal payment by (ii) the sum of all such principal
payments.
"BANK CREDIT AGREEMENT" means either (i) the Bankers Trust Bank Credit
Agreement, (ii) the Alternative Credit Documents, if the Company has made the
election provided for in Section 6.01(a) (ii) of the Plan, or (iii) any
successor agreement, together with documents related thereto, including, without
limitation, any security agreements, pledge agreements, mortgages or guarantees
in each case as such agreements may be amended, restated, supplemented or
otherwise modified from time to time and includes any agreement renewing,
extending the maturity of, refinancing (including by way of placement or
issuance of notes) or restructuring (including the inclusion of additional
borrowers, guarantors or lenders) all or any portion of the Indebtedness under
such agreements.
"BANKERS TRUST BANK CREDIT AGREEMENT" means the Amended and Restated Credit
Agreement dated as of ________, 1995 among the Company, Bankers Trust Company,
for itself and as agent, and the other parties thereto, as it may be amended
from time to time.
"BANKRUPTCY CODE" means Title 11 of the United States Code, as from
time to time in effect. For purposes of Sections 5.01, 6.07 and 6.08 hereof,
the term "Bankruptcy Code" also includes any similar federal, state or foreign
law relating to bankruptcy, insolvency, receivership, winding-up, liquidation,
reorganization or relief of debtors or any amendment to, succession to or change
in any such law.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or
any duly authorized committee of such board.
"BORROWING SUBSIDIARY" means any direct or indirect wholly-owned
Subsidiary of the Company which is permitted to
-2-
<PAGE>
incur Indebtedness under the terms of this Indenture pursuant to Section 3.09
hereof and which is primarily engaged in any business in which a supermarket
chain is at the time engaged or any related business or in any business in which
the Company is engaged on the Issue Date.
"BUSINESS DAY" means any day which is not a Legal Holiday.
"CAPITAL STOCK" means, with respect to any Person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such Person's capital stock, including, without limitation, preferred or
preference stock, and any rights (other than debt securities convertible into
capital stock), warrants or options exchangeable for or convertible into such
capital stock.
"CAPITALIZED LEASE OBLIGATIONS" means, at the time any determination
thereof is made, as to any Person, the obligation of such Person to pay rent or
other amounts under a lease of (or other agreement conveying the right to use)
real or personal Property which obligation is required to be classified and
accounted for as a capital lease obligation on a balance sheet of such Person
under GAAP and, for purposes of this Indenture, the amount of such obligation at
any date shall be the outstanding amount thereof at such date, determined in
accordance with GAAP.
"CHANGE OF CONTROL" means the occurrence of any of the following
events:
(a) any Person or Persons acting together which would constitute a
"group" (a "Group") for purposes of Section 13(d) of the Exchange Act, or
any successor provision thereto, together with any Affiliates thereof
(other than a Permitted Holder or Permitted Holders), is or becomes the
beneficial owner of more than 50% of the total Voting Stock of the Company;
(b) the Company consolidates with, or merges into, another Person or
sells, assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person in one transaction or a
series of related transactions, or any Person consolidates with, or merges
with or into, the Company, in any such event pursuant to a transaction in
which the outstanding Voting Stock of the Company is converted into or
exchanged for cash, securities (other than Voting Stock) or other property
with the effect that any Person or Group (other than a Permitted Holder or
Permitted
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Holders) becomes the beneficial owner of more than 50% of the total Voting
Stock of the Company or any successor corporation or securities
representing more than 50% of the total Voting Stock of the Company or any
successor corporation;
(c) during any consecutive two-year period, commencing as of the date
of this Indenture, individuals who at the beginning of such period
constituted the Board of Directors of the Company (together with any new
directors whose election by such Board or whose nomination for election by
the stockholders of the Company was approved by a vote of 66 2/3% 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 (other than death or disability) to
constitute a majority of the Board of Directors of the Company then in
office; or
(d) any order, judgment or decree shall be entered against the
Company decreeing the dissolution or split-up of the Company and such order
shall remain undischarged or unstayed for a period in excess of 60 days;
PROVIDED, HOWEVER, that none of the events described in the foregoing clauses
(a) through (d) shall constitute a "Change of Control" unless Standard & Poor's
Corporation or Moody's Investors Service, Inc. shall within 180 days after the
occurrence of such event (such 180-day period to be extended by that number of
days, not exceeding 45 days, during which the Securities shall have been placed
after the date of such event on credit watch with negative implications status)
have downgraded the rating assigned by such agency to the Securities on the date
of such event.
"COMPANY" means the Person designated as the "Company" in the first
paragraph of this instrument until any successor corporation shall have become
such Person pursuant to the terms of this Indenture, and thereafter means any
such successor.
"CONSOLIDATED INTEREST COVERAGE RATIO" means, with respect to the
Company for any period, the ratio of:
(i) the aggregate amount of Consolidated Operating Income of the
Company for the four consecutive fiscal quarters for which financial
information in respect thereof is available immediately prior to the
Transaction Date
to
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(ii) the aggregate amount of Consolidated Interest Expense of the
Company for the four consecutive fiscal quarters for which financial
information in respect thereof is available immediately prior to the
Transaction Date; PROVIDED, HOWEVER, that, for purposes of calculating the
Consolidated Interest Coverage Ratio of the Company, (a) Consolidated
Operating Income shall be calculated on the basis of the first-in,
first-out method of inventory valuation, as determined in accordance with
GAAP, (b) the Consolidated Operating Income and Consolidated Interest
Expense of the Company shall include the Consolidated Operating Income and
Consolidated Interest Expense of any Person to be acquired by the Company
or any of its Subsidiaries in connection with the transaction giving rise
to the need to calculate the Consolidated Interest Coverage Ratio, on a pro
forma basis for the four consecutive fiscal quarters for which financial
information in respect thereof is available immediately prior to the
Transaction Date and shall also include the Consolidated Operating Income
and Consolidated Interest Expense of any other Person which has been
acquired during such four consecutive fiscal quarters, on a pro forma basis
from the beginning of such four consecutive fiscal quarters through the
date first included in the Company's Consolidated Operating Income and
Consolidated Interest Expenses, such pro forma Consolidated Operating
Income and Consolidated Interest Expense to be determined on the same basis
as used in determining such items for the Company, and (c) Consolidated
Interest Expense and Redeemable Dividends shall be calculated as if (i) any
Indebtedness incurred or proposed to be incurred or issued since the
beginning of the four consecutive fiscal quarters for which financial
information in respect thereof is available immediately prior to the
Transaction Date, or to be incurred or issued at or prior to the time of
the transaction giving rise to the need to calculate the Consolidated
Interest Coverage Ratio is effected (the "Transaction Time"), had been
incurred or issued as of the beginning of such four quarter period, and
(ii) any Indebtedness repaid since the beginning of such four quarter
period or to be repaid with the proceeds of such Indebtedness or equity
incurred or issued or to be incurred or issued at or prior to the
Transaction Time, had been repaid as of the beginning of such four quarter
period. For purposes of determining the Consolidated Interest Coverage
Ratio of the Company for any period, (i) any Indebtedness incurred or
proposed to be incurred or Redeemable Stock issued or proposed to be issued
which for purposes of clause (c) above is deemed to have been incurred or
issued as of the beginning of the four quarter period described in clause
(c) which bears
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interest at a fluctuating rate will be deemed to have borne interest during
such four quarter period at the rate in effect on the Transaction Date and
(ii) "Subsidiary" shall mean any Subsidiary of the Company other than any
Subsidiary (and Subsidiaries of such Subsidiary) of which the Company does
not own or control, directly or indirectly, a sufficient amount of Voting
Stock in order to cause a merger of such Subsidiary into the Company or
another Subsidiary without the approval of any other holder of Voting Stock
of such Subsidiary.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, without
duplication (A) the sum of (i) the aggregate amount of interest recognized by
the Company and its Subsidiaries during such period in respect of Indebtedness
of the Company and its Subsidiaries (including, without limitation, all interest
capitalized by the Company or any of its Subsidiaries during such period and all
commissions, discounts and other fees and charges owed by the Company and its
Subsidiaries with respect to letters of credit and bankers' acceptance financing
and the net costs associated with Interest Swap Obligations of the Company and
its Subsidiaries), (ii) to the extent any Indebtedness of any Person is
guaranteed by the Company or any of its Subsidiaries, the aggregate amount of
interest paid or accrued by such Person during such period attributable to any
such Indebtedness, and (iii) any cash Redeemable Stock dividend accrued and
payable, and less (B) amortization or write-off of deferred financing costs of
the Company and its Subsidiaries during such period and, to the extent included
in (A) above, any charge related to any premium or penalty paid in connection
with redeeming or retiring any Indebtedness prior to its stated maturity, and in
the case of both (A) and (B) above, elimination of intercompany accounts among
the Company and its Subsidiaries and as determined in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, for any period, the aggregate net
income of the Company and its Subsidiaries for such period on a consolidated
basis, determined in accordance with GAAP but excluding for such purpose the
impact of any Fresh Start Accounting adjustment; PROVIDED, HOWEVER, that there
shall be excluded therefrom, after giving effect to any related tax effect, (i)
gains and losses from Asset Sales or reserves relating thereto, (ii) items
classified as extraordinary or nonrecurring, including without limitation income
relating to the cancellation of indebtedness resulting from the Restructuring,
(iii) the income (or loss) of any Joint Venture, except to the extent of the
amount of cash dividends or other distributions in respect of its capital stock
or interest in the Joint Venture actually paid to, and received by, the Company
or any of its Subsidiaries during
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such period by such Joint Venture out of funds legally available therefor, (iv)
except to the extent includable pursuant to clause (iii), the income (or loss)
of any Person accrued or attributable to any period prior to the date it becomes
a Subsidiary of the Company or is merged into or consolidated with the Company
or any of its Subsidiaries or that Person's assets (or a portion thereof) are
acquired by the Company or any of its Subsidiaries and (v) the cumulative effect
of changes in accounting principles in the year of adoption of such change.
"CONSOLIDATED OPERATING INCOME" means, with respect to the Company for
any period, the Consolidated Net Income of the Company and its Subsidiaries for
such period (A) increased by the sum of (i) Consolidated Interest Expense of the
Company for such period, (ii) income tax expense of the Company and its
Subsidiaries, on a consolidated basis, for such period (after giving effect to
any income tax expense adjustments made in arriving at Consolidated Net Income),
(iii) depreciation expense of the Company and its Subsidiaries, on a
consolidated basis, for such period, (iv) amortization expense of the Company
and its Subsidiaries, on a consolidated basis, for such period, (v) amortization
or write-off of deferred financing costs of the Company and its Subsidiaries, on
a consolidated basis, for such period and (vi) other non cash items, but only to
the extent the items referred to in subclauses (i) through (vi) of this clause
(A) reduced such Consolidated Net Income and (B) decreased by the sum of (i) non
cash items increasing such Consolidated Net Income and (ii) any revenues
received or accrued by the Company or any of its Subsidiaries from any Person
(other than the Company or any of its Subsidiaries) in respect of any Investment
for such period (other than revenue from any Qualified Investment), but only to
the extent that subclauses (i) and (ii) of this clause (B) increased such
Consolidated Net Income, all as determined in accordance with GAAP.
"DEFAULT" means an event or condition that is, or, with the lapse of
time or the giving of notice or both, would become, an Event of Default as
defined in Section 5.01.
"FAIR MARKET VALUE" means, with respect to any Asset Sale or any
non-cash consideration received by or transferred to any Person, the sale value
that would be obtained in an arm's-length transaction between an informed and
willing seller under no compulsion to sell and an informed and willing buyer, as
determined in good faith by the Board of Directors of the Company.
"FRESH START ACCOUNTING" means Fresh Start Accounting as described in
Statement of Position 90-7,
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"Financial Reporting by Entities in Reorganization Under the Bankruptcy Code"
(Am. Inst. of Certified Public Accountants 1990), as then in effect, or such
comparable statement then in effect.
"GAAP" means, at any particular time, generally accepted accounting
principles as in effect in the United States of America at such time.
"GUARANTEE" means any direct or indirect obligation, contingent or
otherwise, of a Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other Person in any manner.
"HOLDER" means a Person in whose name a Security is registered.
"INDEBTEDNESS," as applied to any Person, means, without duplication,
(i) any obligation, contingent or otherwise, for borrowed money (whether or not
the recourse of the lender is to the whole of the assets of such Person or only
to a portion thereof), (ii) any obligation owed for all or any part of the
purchase price of Property or other assets or for the cost of Property or other
assets constructed or of improvements thereto (including any obligation under or
in connection with any letter of credit related thereto), other than accounts
payable included in current liabilities incurred in respect of Property and
services purchased in the ordinary course of business which are not overdue by
more than 90 days, according to the terms of sale, unless being contested or
negotiated in good faith, (iii) any obligation, contingent or otherwise, of a
Person under or in connection with any letter of credit issued for the account
of such Person, and all drafts drawn, or demands for payment honored,
thereunder, (iv) any obligation, contingent or otherwise, as set forth in
subclauses (i) and (ii) of this definition, secured by any Lien in respect of
Property even though the Person owning the Property has not assumed or become
liable for payment of such obligation, (v) any Capitalized Lease Obligation,
(vi) any note payable, bond, debenture, draft accepted or similar instrument
representing an extension of credit (other than extensions of credit for
Property and services purchased in the ordinary course of business which are not
overdue by more than 90 days, according to the terms of sale, unless being
contested or negotiated in good faith), whether or not representing an
obligation for borrowed money, (vii) the maximum fixed repurchase price of any
Redeemable Stock, (viii) any obligations of such Person in respect of Interest
Swap Obligations and (ix) any Guarantees and any obligation which is in economic
effect a Guarantee, regardless of its characterization, with respect to
Indebtedness (of a kind otherwise described in this definition) of another
Person.
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For purposes of the preceding sentence, the maximum fixed repurchase price of
any Redeemable Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Redeemable Stock as if such
Redeemable Stock were repurchased on any date on which Indebtedness shall be
required to be determined pursuant to the Indenture. The amount of Indebtedness
of any Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described above and the maximum liability of any
such contingent obligations at such date.
"INDENTURE" means this Indenture, as amended, modified or supplemented
from time to time, together with any exhibits, schedules or other attachments
hereto.
"INTEREST SWAP OBLIGATIONS" means the obligations of any Person
pursuant to any interest rate swap agreement, interest rate cap, collar or floor
agreement or other similar agreement or arrangement.
"INVESTMENT" means, with respect to any Person (such Person being
referred to in this definition as the "Investor"), (i) any amount paid by the
Investor, directly or indirectly, or any transfer of Property by the Investor,
directly or indirectly (such amount to be the Fair Market Value of such Property
at the time of transfer by the Investor), to any other Person for Capital Stock
of, or as a capital contribution to, any other Person; (ii) any direct or
indirect loan or advance to any other Person (other than accounts receivable of
such Investor arising in the ordinary course of business); and (iii) Guarantees
of the Indebtedness of another Person.
"ISSUE DATE" means ___________, 1995, the date on which the Securities
are first to be issued under this Indenture.
"JOINT VENTURE" means any Person (other than a Subsidiary of the
Company) in which any Person other than the Company or any of its Subsidiaries
has a joint or shared equity interest with the Company or any of its
Subsidiaries.
"LIEN" means any mortgage, lien (statutory or other), charge, pledge,
hypothecation, conditional sales agreement, adverse claim, title retention
agreement or other security interest, encumbrance or title defect in or on, or
any interest or title of any vendor, lessor, lender or other secured party to or
of such Person under any conditional sale, trust receipt or other title
retention agreement with respect to, any Property or asset of such Person.
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"MATERIAL ACQUISITION" means any merger, consolidation, acquisition or
lease of assets, acquisition of securities or other business combination or
acquisition, or any two or more such transactions if part of a common plan to
acquire a business or group of businesses, if the assets thus acquired in the
aggregate would have constituted a Material Subsidiary if they had been acquired
as a Subsidiary, based upon the consolidated financial statements of the Company
and its Subsidiaries for the most recent fiscal year for which financial
statements are available.
"MATERIAL SUBSIDIARY" means, with respect to the Company, at any time,
each existing Subsidiary and each Subsidiary hereafter acquired or formed which
(i) for the most recent fiscal year of the Company for which financial
statements are available accounted for more than 10% of the consolidated
revenues of the Company and its Subsidiaries or (ii) as at the end of such
fiscal year, was the owner (beneficial or otherwise) of more than 10% of the
consolidated assets of the Company and its Subsidiaries, all as shown on the
consolidated financial statements of the Company and its Subsidiaries for such
fiscal year.
"NET PROCEEDS" means, with respect to an Asset Sale by the Company or
any of its Subsidiaries, (i) the gross proceeds received by the Company or its
Subsidiary in connection with such Asset Sale (the amount of any non-cash
consideration received as proceeds to be the Fair Market Value of such
consideration, provided that liabilities assumed by the buyer shall not be
deemed proceeds received by the Company or its Subsidiary), minus (ii) the sum
of (a) reasonable fees and expenses incurred by the Company or such Subsidiary
in connection with such Asset Sale, including any tax on income resulting from
the gain realized from such Asset Sale, (b) payments made with respect to
liabilities associated with the assets which are the subject of the Asset Sale,
including without limitation, trade payables and other accrued liabilities, and
payments made to retire Indebtedness where the assets disposed of in such Asset
Sale constituted security for or had been pledged to secure such Indebtedness
and payment of such Indebtedness is required in connection with such Asset Sale
and (c) appropriate amounts to be provided by the Company or any Subsidiary
thereof, as the case may be, as a reserve, in accordance with GAAP, against any
liabilities associated with such assets and retained by the Company or any
Subsidiary thereof, as the case may be, after such Asset Sale, including,
without limitation, liabilities under any indemnification obligations and
severance and other employee termination costs associated with such Asset Sale.
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"NON-BORROWING SUBSIDIARY" means any direct or indirect wholly-owned
Subsidiary of the Company which (i) is not permitted to incur Indebtedness and
does not at any time, in the present or future, have outstanding Indebtedness
and (ii) which is not permitted to issue preferred or preference stock, pursuant
to its certificate of incorporation or otherwise, and does not at any time, in
the present or the future, have outstanding preferred or preference stock.
"OFFICER" means the Chairman of the Board of Directors, the President,
any Vice President, the Treasurer, the Secretary, any Assistant Treasurer or any
Assistant Secretary of the Company.
"OFFICERS' CERTIFICATE" means a certificate signed by two Officers of
the Company, one of whom must be the Chairman of the Board of Directors, the
President, any Vice President or the Treasurer of the Company.
"OPINION OF COUNSEL" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.
"PERMITTED HOLDERS" means any Person which directly or indirectly
through one or more intermediaries beneficially owns or holds or is entitled to
receive on the Issue Date 20% or more of the combined voting power of the Voting
Stock of the Company, or any Affiliate of any such Person.
"PERSON" means any individual, corporation, limited or general
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"PLAN" means the plan of reorganization of the Company, as confirmed
by the United States Bankruptcy Court for the District of Delaware on _________,
1995.
"PRINCIPAL", or "PRINCIPAL" of a debt security means the principal
amount of a debt security plus the premium, if any, on such debt security.
"PROPERTY" means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"QUALIFIED INVESTMENT" means the following kinds of instruments if, on
the date of purchase or other acquisition of any such instrument by the Company
or any Subsidiary the remaining term to maturity thereof is not more than one
year: (i) obligations issued or unconditionally guaranteed as to
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principal and interest by the United States of America or by any agency or
authority controlled or supervised by and acting as an instrumentality of the
United States of America; (ii) obligations (including, but not limited to,
demand or time deposits, bankers' acceptances and certificates of deposit)
issued by (a) a depository institution or trust company incorporated under the
laws of the United States of America, any state thereof or the District of
Columbia or (b) a United States branch office or agency of any foreign
depository institution guaranteed by such U.S. bank or depository, provided that
such U.S. bank trust company or United States branch office or agency has, at
the time of the Company's or any Subsidiary's investment therein or contractual
commitment providing for such investment, capital, surplus and undivided profits
(as of the date of such institution's most recently published financial
statements) in excess of $100 million and the long-term unsecured debt
obligations (other than such obligations rated on the basis of the credit of a
person or entity other than such institution) of such institution, at the time
of the Company's or any Subsidiary's investment therein or contractual
commitment providing for such investment, is rated at least A-1 by Standard &
Poor's Corporation or A3 by Moody's Investors Service, Inc.; and (iii) debt
obligations (including, but not limited to, commercial paper and medium-term
notes) issued or unconditionally guaranteed as to principal and interest by any
corporation, state or municipal government or agency or instrumentality thereof,
or foreign sovereignty if the commercial paper of such corporation, state or
municipal government or foreign sovereignty has, at the time of the Company's or
any Subsidiary's investment therein or contractual commitment providing for such
investment, credit ratings of A-1 by Standard & Poor's Corporation, or P-1 by
Moody's Investors Service, Inc., or the debt obligations of such corporation,
state or municipal government or foreign sovereignty, at the time of the
Company's or any Subsidiary's investment therein or contractual commitment
providing for such investment, have credit ratings of at least A-1 by Standard &
Poor's Corporation or A3 by Moody's Investors Service, Inc.
"REDEEMABLE DIVIDEND" means, for any dividend payable with regard to
Redeemable Stock, the quotient of the dividend divided by the difference between
one and the maximum statutory federal income tax rate (expressed as a decimal
number between 1 and 0) then applicable to the issuer of such Redeemable Stock.
"REDEEMABLE STOCK" means, with respect to any Person, any equity
security that by its terms or otherwise is required to be redeemed or is
redeemable at the option of the
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holder thereof at any time prior to the maturity of the Securities.
"REDEMPTION DATE" means, when used with respect to any Security to be
redeemed, the date fixed for such redemption pursuant to this Indenture and the
Securities.
"REDEMPTION PRICE" means, when used with respect to any Security to be
redeemed, the price fixed for such redemption pursuant to this Indenture and the
Securities as set forth in Article 9 of this Indenture and paragraph 6 of the
Securities.
"RESTRICTED PAYMENT" means (i) a dividend or other distribution
declared and paid on the Capital Stock of the Company to its stockholders (in
their capacity as such), other than dividends or distributions consisting of
shares of the Company's Capital Stock (or rights or warrants to subscribe for or
purchase shares of such Capital Stock), (ii) a payment made by the Company or
any Subsidiary to purchase, redeem, acquire or retire any Capital Stock of the
Company (or rights or warrants to subscribe for or purchase shares of such
Capital Stock), (iii) a payment made by the Company or any Subsidiary to
acquire, retire or redeem any debt of or equity interest in any Affiliate of the
Company or any of its Subsidiaries, (iv) any other Investment in any Affiliate
of the Company or any of its Subsidiaries (other than in any Non-Borrowing
Subsidiary) or (v) a payment made in purchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Debt.
"RESTRUCTURING" means the restructuring of the Company's debt and
equity capitalization pursuant to the Plan.
"REVOLVING CREDIT FACILITY" means (i) the revolving credit facility
(or any similar facility) available under the Bankers Trust Bank Credit
Agreement, including any related letters of credit, or (ii) any other credit
facility secured by accounts receivable, inventory and proceeds thereof.
"SALE AND LEASEBACK TRANSACTION" means any direct or indirect
arrangement with any Person or to which such Person is a party, providing for
the leasing to the Company or a Subsidiary of any Property, whether owned at the
date of this Indenture or thereafter acquired, which has been or is to be sold
or transferred by the Company or such Subsidiary to such Person, or to any other
Person to whom funds have been or are to be advanced by such Person, on the
security of such Property.
"SEC" means the Securities and Exchange Commission.
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"SECURITIES" has the meaning set forth in the second paragraph of this
Indenture.
"SENIOR INDEBTEDNESS" means, at any date, (i) Indebtedness under the
Bank Credit Agreement and the Securities including, in each case, interest
thereon accruing at the contract rate, whether or not an allowed claim in a case
under the Bankruptcy Code, and all other obligations and indemnities owing
thereunder; (ii) any renewals, extensions, modifications, amendments or
refundings of Indebtedness under the Securities; (iii) Indebtedness arising as a
result of Interest Swap Obligations of the Company or any Subsidiary; and (iv)
any other Indebtedness of the Company for money borrowed or under letters of
credit, in either case entered into in compliance with the Indenture, unless the
instrument under which such Indebtedness is created, incurred, assumed or
guaranteed expressly provides that such Indebtedness is subordinated in right of
payment to any Indebtedness.
"SUBORDINATED DEBT" means, at any date, any Indebtedness of the
Company that is expressly subordinated in any respect in right of payment to the
Securities, Indebtedness under the Bank Credit Agreement or to any other Senior
Indebtedness, including, without limitation, principal, premium, interest, fees,
indemnities and amounts in respect of claims and rights of rescission.
"SUBSIDIARY" means, with respect to any Person, any corporation,
association or other business entity of which securities representing more than
50% of the combined voting power of the total Voting Stock (or in the case of an
association or other business entity which is not a corporation, more than 50%
of the equity interest) is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof. When used herein without reference to any
Person, Subsidiary means a Subsidiary of the Company.
"SURVIVING CORPORATION" means the corporation formed by or surviving
any consolidation or merger involving the Company or to which a transfer, sale
or lease of all or substantially all of the Company's Property is made.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-
77bbbb), as amended by the Trust Indenture Reform Act of 1990, as in effect on
the date of execution of this Indenture, except as provided in Section 8.03.
"TRANSACTION DATE" means the date of the transaction giving rise to
the need to calculate the Consolidated Interest
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Coverage Ratio; PROVIDED that if such transaction is related to or in connection
with any acquisition of any Person, the Transaction Date shall be the earlier of
(i) the date on which the Company or any of its Subsidiaries enters into an
agreement with such Person to effect such acquisition, (ii) the date on which
the Company or any of its Subsidiaries first makes a public announcement of any
offer or proposal to effect such acquisition, (iii) the date on which the
Company or any of its Subsidiaries first makes a filing with the SEC or the
Federal Trade Commission in connection with any proposed acquisition, and (iv)
the date such acquisition is consummated, PROVIDED, HOWEVER, that if subsequent
to the occurrence of an event described in clause (i), (ii) or (iii) above or
clause (A), (B) or (C) below the Company or any of its Subsidiaries shall amend
the terms of such acquisition with respect to the consideration payable by the
Company or any of its Subsidiaries in connection with such acquisition, the
Transaction Date shall be the earlier of (A) the date on which the Company or
any of its Subsidiaries enters into a binding written agreement with such Person
to effect such acquisition on such amended terms, (B) the date on which the
Company or any of its Subsidiaries makes a public announcement of any offer or
proposal to effect such acquisition on such amended terms and (C) the date on
which the Company or any of its Subsidiaries first makes a filing disclosing
such amended terms with the SEC or the Federal Trade Commission in connection
with any proposed acquisition.
"TRUSTEE" means the party named as such above unless and until a
successor replaces it in accordance with the terms of this Indenture and
thereafter means such successor.
"TRUST OFFICER," when used with respect to the Trustee, means any
officer within the Corporate Trust and Agency Group (or any successor group) of
the Trustee, including without limitation any Vice President, Assistant Vice
President, Secretary or any other officer customarily performing functions
similar to those performed by any of the above-designated officers who shall, in
any case, be responsible for the administration of this Indenture or have
familiarity with it, and also means, with respect to a particular corporate
trust matter, any other officer of the Trustee to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
"VOTING STOCK" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to vote for the election of directors, managers or trustees of any
Person (irrespective of whether or not at the time stock of any class or classes
will have or might have voting power by the reason of the happening of any
contingency).
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(b) ACCOUNTING TERMS. Unless otherwise specified herein, all
accounting terms herein shall be interpreted, all accounting determinations
shall be made, and all financial statements required to be delivered hereunder
shall be prepared in accordance with GAAP.
SECTION 1.02. OTHER DEFINITIONS.
Term Defined in Section
"Authenticating Agent" 6.12
"Custodian" 5.01
"Discharged" 7.01
"Event of Default" 5.01
"Exchange Act" 3.07
"Legal Holiday" 10.07
"Paying Agent" 2.03
"Registrar" 2.03
"Repayment Date" 4.01
"U.S. Government Obligations" 7.01
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Securities;
"indenture security holder" means a Holder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Securities means the Company.
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All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings assigned to them thereby.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles in effect
on the date of the construction of such term;
(c) "OR" is not exclusive;
(d) words in the singular include the plural, and in the plural
include the singular; and
(e) provisions apply to successive events and transactions.
ARTICLE 2
THE SECURITIES
SECTION 2.01. FORM AND DATING.
The Securities shall be substantially in the form of Exhibit A, which
is part of this Indenture. The Securities may have notations, legends or
endorsements required by law, stock exchange rule or usage. If determined to be
necessary by the Company or its counsel, the Company may require that a legend
be placed on the Securities relating to original issue discount or other
applicable tax matters or as required by any securities exchange on which the
Securities may be listed. The Company shall furnish any such legend in writing
to the Trustee. Each Security shall be dated the date of its authentication.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
The Securities shall be signed for the Company by the Company's
President or a Vice President and shall be attested by the Company's Secretary
or an Assistant Secretary, in each case by manual or facsimile signature. The
Company's seal shall be reproduced on the Securities.
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If an Officer whose signature is on a Security no longer holds that
office at the time the Security is authenticated, the Security shall
nevertheless be valid.
A Security shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Security has been authenticated under this Indenture.
The Trustee shall authenticate Securities for original issue up to
$595,475,922 upon a written order of the Company signed by two Officers. The
aggregate principal amount of Securities outstanding at any time may not exceed
the amount of $595,475,922 except as provided in Section 2.07.
The Trustee may appoint an Authenticating Agent acceptable to the
Company to authenticate Securities. An Authenticating Agent may authenticate
Securities whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
Authenticating Agent has the same rights as an Agent to deal with the Company or
an Affiliate. The Trustee initially appoints _____________________, a ________
banking corporation ("_____________"), as Authenticating Agent.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Securities may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Securities may be presented for payment ("Paying Agent").
The Registrar shall keep a register of the Securities and of their transfer and
exchange. The Company may appoint one or more co-Registrars and one or more
additional Paying Agents. The term Paying Agent includes any additional Paying
Agent. The Company or any of its Subsidiaries may act as Paying Agent,
Registrar or co-Registrar. Upon any bankruptcy or reorganization proceeding
relative to the Company, the Trustee shall serve as the Paying Agent.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture that shall implement the provisions of this
Indenture that relate to such Agent. The Company shall give prompt written
notice to the Trustee of the name and address of any such Agent and any change
in the address of such Agent. If the Company fails to maintain a Registrar or
Paying Agent, the Trustee shall act as such. The Company initially appoints
_____________ as Paying Agent and Registrar.
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SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree that such Paying Agent will:
(a) hold all sums held by it for the payment of the principal of,
premium, if any, or interest on the Securities in trust for the benefit of
the Persons entitled thereto until such sums shall be paid to such Persons
or otherwise disposed of as herein provided;
(b) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities) in the making of any payment of
principal, premium, if any, or interest; and
(c) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
Upon such payment over to the Trustee, the Paying Agent shall have no further
liability for such money.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders. If the Trustee is not the Registrar, the Company shall furnish to the
Trustee not less than ten days before each interest payment date and at such
other times as the Trustee may request in writing all information in the
possession or control of the Company or any Paying Agent as to the names and
addresses of the Holders, in such form and as of such date as the Trustee may
reasonably require.
SECTION 2.06. TRANSFER AND EXCHANGE.
When Securities are presented to the Registrar or a co-Registrar with
a request to register the transfer of, or to exchange them for an equal
principal amount of Securities of other denominations, the Registrar shall
register the transfer or make the exchange if its requirements for such
transactions are met. To permit registrations of transfer and exchanges, the
Company shall issue and the Trustee shall authenticate Securities at the
Registrar's request.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may
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require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange.
The Company shall not be required (i) to issue, register the transfer
of or exchange Securities during a period beginning at the opening of business
15 days before the day of any selection of Securities for redemption under
Section 9.02 and ending at the close of business on the day of such day of
selection, or (ii) to register the transfer of or exchange any Security so
selected for redemption in whole or in part, except the unredeemed portion of
any Security being redeemed in part.
SECTION 2.07. REPLACEMENT SECURITIES.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
If the Holder of a Security claims that the Security has been lost,
destroyed or wrongfully taken, the Company shall issue and the Trustee shall
authenticate a replacement Security if the Trustee's requirements are met. If
required by the Trustee or the Company, such Holder shall provide an indemnity
bond sufficient in the judgment of both the Company and the Trustee to protect
the Company, the Trustee, any Agent or any Authenticating Agent from any loss
which any of them may suffer if a Security is replaced. The Company may charge
the Holder for its expenses in replacing a Security.
Every replacement Security issued pursuant to the provisions of this
Section 2.07 by virtue of the fact that any Security is destroyed, lost or
stolen shall constitute an additional contractual obligation of the Company,
whether or not the destroyed, lost or stolen Security shall be found at any
time, and shall be entitled to all the benefits of this Indenture equally and
proportionally with any and all other Securities duly issued hereunder.
SECTION 2.08. OUTSTANDING SECURITIES.
The Securities outstanding at any time are all the Securities
authenticated by the Trustee except for (a) those canceled by it, (b) those
delivered to it for cancellation and (c) those described in this Section as not
outstanding.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee receives proof
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satisfactory to it that the replaced Security is held by a bona fide purchaser.
If Securities are considered paid under Section 3.01, they cease to be
outstanding and interest on them ceases to accrue.
Except as provided in Section 2.09, a Security does not cease to be
outstanding because the Company or an Affiliate holds the Security.
SECTION 2.09. TREASURY SECURITIES.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company or an Affiliate shall be considered as though they are not
outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities which the Trustee actually knows are so owned shall be so considered.
SECTION 2.10. TEMPORARY SECURITIES.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of definitive Securities but may
have variations that the Company considers appropriate for temporary Securities.
Without unreasonable delay, the Company shall prepare and deliver to the
Trustee, and the Trustee shall authenticate, definitive Securities in exchange
for temporary Securities.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for registration of transfer, exchange or
payment. The Trustee shall cancel all Securities surrendered for registration
of transfer, exchange, payment, replacement or cancellation and shall destroy
canceled Securities and deliver a certificate of such destruction to the
Company. Subject to Section 2.07, the Company may not issue new Securities to
replace Securities that it has paid or that have been delivered to the Trustee
for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Company fails to make a payment of interest on the Securities,
it shall pay such interest thereafter in
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any lawful manner. It may pay such interest, plus any interest payable on it,
to the Persons who are Holders on a subsequent special record date. The Company
shall fix such special record date and payment date, except for a payment of
interest made within the 30-day period in paragraph (i) of Section 5.01 of this
Indenture which may be paid to the holders of the Securities on the regular
record date for such interest payment. Such special record date shall not be
less than 10 days prior to the payment date of such defaulted interest. The
Company shall notify the Trustee, in writing, of the amount of defaulted
interest proposed to be paid on each Security and the date of the proposed
payment, and at the same time, the Company shall deposit with the Trustee an
amount of money equal to the aggregate amount proposed to be paid in respect of
such defaulted interest or shall make arrangements satisfactory to the Trustee
for such deposit prior to the date of the proposed payment, such money, when
deposited, to be held in trust for the benefit of the Person entitled to such
defaulted interest as provided in this section. At least 5 days before such
record date, the Company shall mail to Holders a notice that states the record
date, payment date, and amount of such interest to be paid.
ARTICLE 3
COVENANTS
SECTION 3.01. PAYMENT OF SECURITIES.
The Company shall punctually pay the principal of and interest on the
Securities on the dates and in the manner provided in the Securities.
Principal, premium, if any, and interest shall be considered paid on the date
due if the Paying Agent holds on that date money designated for and sufficient
to pay all principal and interest then due.
The Company shall pay interest on overdue principal and premium, if
any, at the rate borne by the Securities; it shall pay interest on overdue
installments of interest at the same rate to the extent permitted by law.
SECTION 3.02. LIMITATION ON RESTRICTED PAYMENTS.
(a) The Company shall not, nor shall it permit any of its
Subsidiaries to, make any Restricted Payment (other than Investments in (i)
Affiliates which are not wholly-owned Subsidiaries in an aggregate amount not to
exceed $20 million at any time outstanding and (ii) Borrowing Subsidiaries in an
aggregate amount at any time outstanding not to exceed the sum of (x) $30
million less (y) the aggregate amount of outstanding Investments in Affiliates
which are not
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wholly-owned Subsidiaries permitted by clause (i) hereof) if, after giving
effect thereto:
(A) any Default shall have occurred and be continuing, or
(B) the Company could not incur at least $1.00 of additional
Indebtedness pursuant to Section 3.03(a) of this Indenture, or
(C) the aggregate amount of Restricted Payments made subsequent
to the date of this Indenture by the Company and its Subsidiaries (other than
(i) Investments in Affiliates which are not wholly-owned Subsidiaries in an
amount not to exceed $20 million in the aggregate and (ii) Investments in
Borrowing Subsidiaries in an aggregate amount not to exceed the sum of (x) $30
million less (y) the aggregate amount of outstanding Investments in Affiliates
which are not wholly-owned Subsidiaries permitted by clause (i) of the first
paragraph of this Section 3.02(a)) would exceed the sum of (a) 50% (or minus
100% in the event of a deficit) of aggregate Consolidated Net Income (which is
defined to exclude the impact of any Fresh Start Accounting adjustment and any
extraordinary income, including income relating to cancellation of indebtedness
resulting from the Restructuring) of the Company for the period commencing on
April 2, 1995 and ending on the last day of the fiscal quarter immediately
preceding the date of such payment, and (b) the aggregate Net Proceeds,
including cash and the Fair Market Value of Property other than cash, received
by the Company subsequent to the Issue Date from capital contributions from any
of its stockholders or from the issuance or sale (other than to a Subsidiary)
subsequent to the Issue Date of shares of its Capital Stock (other than
Redeemable Stock) of any class (or rights or warrants to subscribe for or
purchase shares of such capital stock) or of any convertible securities or debt
obligations which have been converted into, exchanged for or satisfied by the
issuance of shares of the Company's Capital Stock (other than Redeemable Stock).
(b) The provisions of this Section 3.02 shall not prevent the Company
from (i) paying a dividend on Capital Stock within 60 days after the declaration
thereof if, on the date on which the dividend was declared, the Company could
have paid such dividend in accordance with the provisions of this Indenture, or
(ii) repurchasing shares of its Capital Stock (X) solely in exchange for other
shares of its Capital Stock (other than Redeemable Stock) or (Y) pursuant to a
court order.
(c) The provisions of this Section 3.02 shall not prevent redemptions
or repurchases of the Company's common
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stock in connection with repurchase provisions under employee stock option or
stock purchase agreements or other agreements to compensate management
employees, PROVIDED that such redemptions or purchases shall not exceed
$2,000,000 in any fiscal year or $5,000,000 in the aggregate subsequent to the
date hereof.
(d) Payments made in purchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Debt must meet the tests set
forth in paragraph (a) of this Section 3.02 except to the extent that any such
purchase, redemption, defeasance or other acquisition or retirement for value is
made out of the proceeds of the issuance of (i) Subordinated Debt having a final
maturity no earlier than the final maturity of, and an Average Life equal to or
longer than, the Indebtedness being retired or repurchased or (ii) Capital Stock
(other than Redeemable Stock) of the Company.
SECTION 3.03. LIMITATION ON INDEBTEDNESS.
(a) The Company shall not create, incur, assume, guarantee or
otherwise become liable with respect to, or become responsible for the payment
of, any Indebtedness, unless, after giving effect thereto, the Consolidated
Interest Coverage Ratio of the Company on a pro forma basis for the four
consecutive fiscal quarters for which financial information in respect thereof
is available immediately prior to any Transaction Date that is prior to
September, 1997 would be greater than 1.85:1 and for any Transaction Date
thereafter would be greater than 2.0:1.
(b) Notwithstanding the foregoing, the Company may incur, create,
assume, guarantee or otherwise become liable with respect to, any or all of the
following Indebtedness:
(i) Indebtedness evidenced by the Securities, and Indebtedness under
the Bank Credit Agreement (including any refinancings thereof permitted by
clause (ii) of this Section 3.03(b)) in a maximum principal amount at any
time outstanding not to exceed the greater of (x) $250 million or (y) the
sum of $100 million plus 65% of the total inventory of the Company and its
Subsidiaries (calculated on a "first-in" "first-out" basis) plus 85% of the
total accounts receivable of the Company and its Subsidiaries, subject to
one or more permanent reductions of both (x) and (y) as provided in clause
(iii) of Section 3.05 and the proviso set forth in the second paragraph of
Section 3.06(a);
(ii) Indebtedness the proceeds of which are used to refinance (x) all
or a portion of the Indebtedness evidenced by the Securities, or (y)
Indebtedness under
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the Bank Credit Agreement (as limited by clause (i) of this Section
3.03(b)) or (z) other Indebtedness of the Company and of its Subsidiaries,
in each case in a principal amount not to exceed the principal amount so
refinanced (or, if such Indebtedness provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration of the maturity thereof, in an amount not greater than such
lesser amount) plus any prepayment penalties and premiums, accrued and
unpaid interest on the Indebtedness so refinanced, plus customary fees,
expenses and costs related to the incurrence of such refinancing
Indebtedness, PROVIDED that, in the case of this clause (ii),
(1) if the Securities are refinanced in part, such new
Indebtedness is expressly made pari passu or subordinate in right of
payment to the remaining Securities,
(2) if the Indebtedness to be refinanced is subordinate in right
of payment to the Securities, such new Indebtedness is subordinate in
right of payment to the Securities at least to the extent that the
Indebtedness to be refinanced is subordinate in right of payment to
the Securities,
(3) if the Indebtedness to be refinanced is pari passu in right
of payment to the Securities, such new Indebtedness is expressly made
pari passu or subordinate in right of payment to the Securities, and
(4) if the Securities are refinanced in part or if the
Indebtedness to be refinanced is pari passu or subordinate in right of
payment to the Securities and scheduled to mature after the maturity
date of the Securities, such new Indebtedness as of the date of
incurrence does not mature prior to the final scheduled maturity date
of the Securities and has an Average Life equal to or greater than the
remaining Average Life of the Securities;
(iii) Indebtedness of the Company remaining outstanding immediately
after the issuance of the Securities;
(iv) Indebtedness to a Subsidiary of the Company;
(v) Indebtedness incurred in connection with the refurbishment,
improvement, construction or acquisition (whether by acquisition of stock,
assets or otherwise) of
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any Property or Properties of the Company or of any Subsidiary that
constitute a part of the then present business of the Company or of any
Subsidiary (or incurred within twelve months of any such acquisition or the
completion of such refurbishment, improvement or construction), PROVIDED
THAT at the time of the incurrence thereof:
(a) (1) such Indebtedness, together with any other then outstanding
Indebtedness incurred during the most recently completed four
consecutive fiscal quarter period in reliance upon either this clause
(v) or clause (vi) of Section 3.09 hereof does not exceed, in the
aggregate, 3% of consolidated net sales of the Company and its
Subsidiaries during the four consecutive fiscal quarter period ended
immediately prior to the date of calculation; provided, that for
purposes of this clause (a)(1), such Indebtedness shall include,
without limitation, an amount equal to (x) the aggregate outstanding
principal amount of any mortgages that the Company or any Subsidiary
is deemed to have entered into in connection with any Sale and
Leaseback Transaction that the Company or any Subsidiary has entered
into during the four consecutive fiscal quarter period ended
immediately prior to the date of calculation, less (y) the aggregate
principal amount of any Senior Indebtedness that has been repaid with
the Net Proceeds of any Sale and Leaseback Transaction that the
Company or any Subsidiary has entered into within twelve months of the
acquisition, or completion of construction or refurbishment, of the
Property that is the subject of any such transaction; and
(2) such Indebtedness, together with all then outstanding
Indebtedness incurred in reliance upon either this clause (v) or
clause (vi) of Section 3.09 hereof does not exceed, in the aggregate,
3% of the consolidated net sales of the Company and its Subsidiaries
during the most recently completed twelve consecutive fiscal quarter
period; provided that, for purposes of this clause (a)(2), such
Indebtedness shall include, without limitation, an amount equal to (x)
the aggregate outstanding principal amount of any mortgages that the
Company or any Subsidiary is deemed to have entered into in connection
with any Sale and Leaseback Transactions to which the Company or any
Subsidiary is then a party less (y) the aggregate principal amount of
any Senior
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Indebtedness that has been repaid with the Net Proceeds of any Sale
and Leaseback Transaction that the Company or any Subsidiary has
entered into within twelve months of the acquisition, or completion of
construction or refurbishment, of the Property that is the subject of
any such transaction; except that, for purposes of calculating the
limitation set forth in clause (a)(2) the seven Sale and Leaseback
Transactions identified in clause (ii) of Section 3.05 hereof shall
not be included; or
(b) such Indebtedness (including an amount equal to the sum of (x) the
aggregate outstanding principal amount of any mortgages that the
Company or any Subsidiary is deemed to have entered into in connection
with any Sale and Leaseback Transaction to which the Company or any
Subsidiary is then a party less (y) the aggregate principal amount of
any Senior Indebtedness that has been repaid with the Net Proceeds of
any Sale and Leaseback Transaction) does not exceed the amount of
proceeds received by the Company or any of its Subsidiaries from
insurance policies maintained by the Company or any Subsidiary in
respect of such Property or Properties;
(vi) Indebtedness consisting of Guarantees by the Company of
Indebtedness of any Subsidiary, provided that such Indebtedness is
otherwise permitted under this Indenture;
(vii) Indebtedness under Interest Swap Obligations, PROVIDED that such
Interest Swap Obligations are related to payment obligations on
Indebtedness otherwise permitted under this Section 3.03;
(viii) commercial letters of credit and standby letters of credit
incurred in the ordinary course of business by the Company;
(ix) Indebtedness represented by industrial revenue or development
bonds, provided that the aggregate amount of Indebtedness incurred in
reliance upon the exception of this clause (ix) or of clause (x) of Section
3.09 shall not exceed at any one time an aggregate principal amount
outstanding of $25,000,000;
(x) Capitalized Lease Obligations relating to Property used in the
business of the Company;
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(xi) Indebtedness incurred in respect of performance bonds and
performance and completion Guarantees incurred in the ordinary course of
business;
(xii) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business, PROVIDED that such Indebtedness
is extinguished within five Business Days from the date of its incurrence;
and
(xiii) other Indebtedness for borrowed money in an amount not to exceed
$75,000,000 in the aggregate.
SECTION 3.04. LIMITATION ON LIENS.
Neither the Company nor any Subsidiary shall create, incur, assume or
permit to exist any Lien on or with respect to any Property or assets of the
Company or of any Subsidiary or any interest therein or any income or profits
therefrom, other than:
(i) any Lien existing as of the date of this Indenture and any Lien
securing Indebtedness under the Bank Credit Agreement pursuant to the terms
of such Bank Credit Agreement as in effect on the Issue Date;
(ii) any Lien arising in the ordinary course of business, other than
in connection with Indebtedness for borrowed money;
(iii) any Lien on the Company's or a Subsidiary's accounts receivable,
inventories, and proceeds thereof securing Indebtedness incurred pursuant
to the provisions of the Revolving Credit Facility;
(iv) any Lien on Property acquired by the Company or by any Subsidiary
after the date of this Indenture created solely to secure Indebtedness
incurred to finance such acquisition or assumed in connection with such
acquisition, whether by acquisition of stock, assets or otherwise (or
entered into in connection with Indebtedness that is permitted under clause
(v) of Section 3.03(b) or clause (vi) of Section 3.09), PROVIDED that in
each case such acquisition does not constitute a Material Acquisition;
(v) any Lien on Property acquired by the Company or any Subsidiary
which constitutes a Material Acquisition created solely to secure
Indebtedness incurred to finance such Material Acquisition or assumed in
connection with
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such Material Acquisition, PROVIDED that after giving effect to such
Indebtedness the Consolidated Interest Coverage Ratio would be greater than
the then applicable Consolidated Interest Coverage Ratio described in
Section 3.03(a) above;
(vi) any Lien on any asset of the Company or any Subsidiary created
solely to secure Indebtedness incurred to finance the refurbishment,
improvement, construction or acquisition (whether by acquisition of stock,
assets or otherwise) of such asset (or created within twelve months of any
such acquisition or the completion of such refurbishment, improvement or
construction) or relating to Indebtedness assumed in connection with any
such acquisition, PROVIDED that such Lien secures Indebtedness permitted
under clause (v) of Section 3.03(b), or clause (vi) of Section 3.09;
(vii) any Lien created in connection with a Capitalized Lease
Obligation that the Company or a Subsidiary is permitted to enter into
under the terms of this Indenture;
(viii) any Lien relating to judgments or awards that the Company or any
Subsidiary is contesting in good faith;
(ix) any Lien for taxes that are not yet due or that the Company or
any Subsidiary is contesting in good faith; and
(x) any Lien extending, renewing or replacing any Liens permitted by
clauses (i), (iv), (v), (vi) or (vii).
In the case of Liens permitted under clauses (i), (iv), (v), (vi), (vii) and
(x), such Liens may relate solely to the Property (including any improvements
thereon) subject thereto as of the date of this Indenture or the date such Lien
was incurred, as the case may be (and, in the case of Indebtedness under the
Bank Credit Agreement, any after acquired Property), and may secure the payment
only of the Indebtedness so secured as of such date.
SECTION 3.05. LIMITATION ON SALE AND LEASEBACK TRANSACTIONS.
The Company shall not, and shall not permit any Subsidiary to, enter
into, assume, guarantee or otherwise become liable with respect to any Sale and
Leaseback Transaction, PROVIDED, that the Company may enter into:
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(i) a Sale and Leaseback Transaction that, had such Sale and
Leaseback Transaction been structured as a mortgage rather than as a Sale
and Leaseback Transaction, the Company would have been permitted to enter
into such transaction pursuant to clause (v) of Section 3.03(b), clause
(vi) of Section 3.04 and clause (vi) of Section 3.09, PROVIDED, HOWEVER,
that such Sale and Leaseback Transaction is entered into within twelve
months of the acquisition, or completion of construction or refurbishment,
of the Property that is the subject of any such transactions;
(ii) a Sale and Leaseback Transaction with respect to the Company's
Property located in New Fairfield, Connecticut, Dumont, New Jersey,
Valatie, New York, Morrisville, Vermont, Corinth, New York, Tannersville,
New York and Manchester Center, Vermont; and
(iii) a Sale and Leaseback Transaction if within 90 days of entering
into such arrangement either (1) the Company applies the Net Proceeds of
the sale of the Property leased pursuant to such Sale and Leaseback
Transaction to the payment of Senior Indebtedness other than Indebtedness
incurred under the Bank Credit Agreement (except that Indebtedness under
the Bank Credit Agreement may be repaid from such Net Proceeds to the
extent the principal amount of Indebtedness under the Bank Credit Agreement
permitted by Section 3.03(b) is permanently reduced by an amount equal to
the principal amount of the Indebtedness under the Bank Credit Agreement so
repaid from Net Proceeds) or (2)(a) if such arrangement is entered into
prior to September 1, 2000, the Company makes a pro rata offer to all
Holders of Securities to repurchase Securities at 104% of their principal
amount, plus accrued and unpaid interest through the date of repurchase, or
(b) if such arrangement is entered into on or after September 1, 2000, the
Company redeems the Securities, in either case at par plus the then
applicable premium, if any, and in an aggregate amount equal to the greater
of the Net Proceeds of the sale of the Property leased pursuant to such
Sale and Leaseback Transaction or the Fair Market Value of the Property so
leased at the time of entering into such Sale and Leaseback Transaction.
SECTION 3.06. LIMITATION ON ASSET SALES.
(a) The Company shall not consummate, and shall not permit any
Subsidiary to consummate, any Asset Sale unless (i) such sale is for Fair Market
Value and (ii) at least 75% of the Net Proceeds thereof received by the Company
or such Subsidiary is in the form of cash; PROVIDED, that for purposes
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of this covenant securities received by the Company or any Subsidiary from such
transferee that are promptly converted by the Company or such Subsidiary into
cash shall be deemed to be cash, and provided further, that notwithstanding any
other provision in this paragraph, the Company or any Subsidiary may consummate
Asset Sales for which it receives, in a single transaction or in a series of
related transactions, aggregate Net Proceeds in an amount not to exceed
$25,000,000 without regard to the foregoing limitation on receiving a specified
percentage of the Net Proceeds in cash.
To the extent the Company or such Subsidiary has not reinvested such
Net Proceeds in Additional Assets or used such Net Proceeds to repay Senior
Indebtedness (other than the Securities) within twelve months following the
consummation of the Asset Sale (or in the case of Net Proceeds received in the
form of securities, within twelve months after such securities are converted
into cash), the Company either shall apply such Net Proceeds (or any portion
thereof) to the repayment of such Senior Indebtedness or apply such Net Proceeds
(or the remaining portion thereof) in accordance with the following paragraph;
PROVIDED, HOWEVER, that if Net Proceeds of Asset Sales are applied to reduce the
Indebtedness under the Bank Credit Agreement (or any refinancing or renewal
thereof), the principal amount of Indebtedness under the Bank Credit Agreement
permitted by Section 3.03(b) shall be reduced permanently by an amount equal to
the principal amount of the Indebtedness under the Bank Credit Agreement so
repaid from Net Proceeds.
If (1) no Senior Indebtedness other than the Securities is outstanding
at such time or the Company does not apply any or applies only a portion of such
Net Proceeds to the repayment of Senior Indebtedness other than the Securities
or (2) the application of such Net Proceeds results in the payment of all
outstanding Senior Indebtedness other than the Securities, then such Net
Proceeds or any remaining portion thereof, in each case not so applied to the
payment of Senior Indebtedness other than the Securities, shall be applied to a
pro rata offer to all Holders of Securities to repurchase the Securities at a
purchase price in cash equal to 102% of their principal amount plus accrued and
unpaid interest through the date of repurchase. Notwithstanding the foregoing,
in the event the Net Proceeds resulting from any Asset Sale, after giving effect
to any related repayment of Senior Indebtedness other than Securities, are less
than $25,000,000, the Company may defer extending such pro rata offer to
repurchase Securities until such time as such Net Proceeds, plus the aggregate
amount of Net Proceeds resulting from any subsequent Asset Sale or Asset Sales
not otherwise reinvested in Additional Assets or applied to repay Senior
Indebtedness other than Securities, are equal to at least $25,000,000, at which
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time the Company shall apply the aggregate amount of such Net Proceeds to a pro
rata offer to repurchase the Securities at a purchase price in cash equal to
102% of their principal amount, plus accrued and unpaid interest through the
date of repurchase.
(b) Pending the application thereof in accordance with paragraph (a)
of this Section, the Company shall either apply the Net Proceeds of any Asset
Sale to repay temporarily any Senior Indebtedness other than the Securities or
invest such Net Proceeds in Qualified Investments.
SECTION 3.07. SEC REPORTS.
(a) The Company shall deliver to the Trustee within 5 days after
filed with the SEC, copies of the annual, quarterly and periodic reports and of
the information, documents and other reports (or copies of such portions of any
of the foregoing as the SEC may by rules and regulations prescribe) which the
Company files with the SEC pursuant to Sections 13 and 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Whether or not required
by the rules and regulations of the SEC, as long as any Securities are
outstanding, the Company shall continue to file with the SEC for public
availability (unless the SEC will not accept such a filing) and the Trustee on
the same timely basis such reports, information and other documents as the
Company would be required to file with the SEC if the Company were subject to
the requirements of such Section 13 or 15(d) of the Exchange Act and had a class
of securities listed on a national securities exchange. The Company also will
make such information available to Holders who request it in writing and shall
comply with the other provisions of TIA Section 314(a).
(b) So long as any of the Securities remain outstanding, the Company
shall cause any annual report to stockholders and any quarterly or other
financial reports furnished by it to stockholders, excluding internal management
reports and distributions to stockholders in their capacity as directors or
officers of the Company, to be filed with the Trustee and mailed to the Holders
at their addresses appearing in the register of Securities maintained by the
Registrar. If the Company is not required to furnish annual or quarterly
reports to its stockholders pursuant to the Exchange Act, the Company shall
cause its consolidated financial statements, including any notes thereto, and
with respect to the annual information only, a report thereon by the Company's
certified independent accountants, and a "Management's Discussion and Analysis
of Financial Condition and Results of Operations," comparable to that which
would have been required to appear in annual or quarterly reports filed under
Section 13 or 15(d) of the Exchange Act if the Company had a class of securities
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listed on a national securities exchange, to be so filed with the Trustee and
mailed to the Holders at their addresses appearing in the register of Securities
maintained by the Registrar within 100 days after the end of each fiscal year
and within 60 days after the end of each of the Company's first three fiscal
quarters in each fiscal year.
(c) The Company shall furnish to Holders and to beneficial owners of
Securities and to prospective purchasers of Securities that are designated by
Holders, upon their request, the information required to be delivered pursuant
to Rule 144(A)(d)(4) under the Securities Act of 1933, as amended.
SECTION 3.08. LIMITATION ON PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any Subsidiary to, create
or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction that by its terms expressly restricts the ability of
any Subsidiary to:
(a) pay dividends or make any other distributions on such Subsidiary's
capital stock or pay any Indebtedness owed to the Company or any Subsidiary,
(b) make any loans or advances to the Company or any Subsidiary, or
(c) transfer any of its Property to the Company or any Subsidiary,
other than, with respect to clauses (b) and (c) of this Section, encumbrances or
restrictions specifically:
(i) permitted under the terms of any instrument or agreement relating
to any Indebtedness of the Company or any Subsidiary existing on the date
of this Indenture, including, without limitation, this Indenture or the
Bank Credit Agreement;
(ii) relating to any Property acquired by the Company or any of its
Subsidiaries after the date of this Indenture, provided that such
encumbrance or restriction relates only to the Property which is acquired,
and, in the case of any encumbrance or restriction that constitutes a Lien,
the Company or such Subsidiary would be permitted to incur the Lien under
Section 3.04 of this Indenture;
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(iii) relating to (x) any industrial revenue or development bonds, (y)
any obligation of the Company or any Subsidiary incurred in the ordinary
course of business to pay the purchase price of Property acquired by the
Company or such Subsidiary, or (z) any lease of Property by the Company or
such Subsidiary in the ordinary course of business, provided that such
encumbrance or restriction relates only to the Property which is the
subject of such industrial revenue or development bond, such Property
purchased or such Property leased and any such lease, as the case may be;
(iv) relating to any Indebtedness of any Subsidiary at the date of
acquisition of such Subsidiary by the Company or any Subsidiary of the
Company, provided that such Indebtedness was not incurred in connection
with or in anticipation of such acquisition and, provided further that the
Company or Subsidiary would be permitted to incur any Lien securing such
Indebtedness under Section 3.04 of this Indenture; or
(v) under any replacement or refinancing agreements of instruments
referred to in clauses (i), (ii) and (iii), provided that the provisions
relating to such encumbrance or restriction contained in any such
replacement or refinancing agreement or instrument are no more restrictive
than the provisions relating to such encumbrance or restriction contained
in such original agreement or instrument.
SECTION 3.09. LIMITATION ON INDEBTEDNESS AND PREFERRED STOCK OF
SUBSIDIARIES (OTHER THAN NON-BORROWING SUBSIDIARIES)
The Company shall not permit any Subsidiary to create, incur,
guarantee, assume or issue any Indebtedness or issue any preferred or preference
stock, except for:
(i) Indebtedness or preferred stock outstanding on the date of this
Indenture;
(ii) Indebtedness or preferred stock issued to and held by the
Company or a wholly-owned Subsidiary (but only as long as held or owned by
the Company or a wholly-owned Subsidiary);
(iii) Indebtedness or preferred stock issued by a Person prior to the
time (a) such Person becomes a Subsidiary, (b) such Person merges with or
into a Subsidiary or (c) a Subsidiary merges with or into such Person,
provided that such Indebtedness or preferred stock was not issued or
incurred by such Person in
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anticipation of the type of transaction contemplated by subclauses (a), (b)
or (c);
(iv) Indebtedness under the Bank Credit Agreement;
(v) Indebtedness the proceeds of which are used to refinance any
other Indebtedness of any Subsidiary, in each case in a principal amount
not to exceed the principal amount so refinanced (or, if such Indebtedness
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration of the maturity thereof, in an
amount not greater than such lesser amount), plus any prepayment penalties
and premiums, accrued and unpaid interest on the Indebtedness so
refinanced, plus customary fees, expenses and costs related to the
incurrence of such refinancing Indebtedness;
(vi) Indebtedness incurred in connection with the refurbishment,
improvement, construction or acquisition (whether by acquisition of stock,
assets or otherwise) of any Property or Properties of a Subsidiary of the
Company that constitute a part of the then present business of the Company
or any Subsidiary of the Company (or incurred within twelve months of any
such acquisition or the completion of such refurbishment, improvement or
construction), provided that either:
(a) (1) such Indebtedness, together with any other Indebtedness incurred
during the most recently completed four consecutive fiscal quarter
period in reliance upon either this clause (vi) or clause (v) of
Section 3.03(b) hereof does not exceed in the aggregate 3% of
consolidated net sales of the Company and its Subsidiaries during the
four consecutive fiscal quarter period ended immediately prior to the
date of calculation; provided that (a) for purposes of this clause
(a)(1), such Indebtedness shall include, without limitation, an amount
equal to (x) the aggregate outstanding principal amount of any
mortgages that the Company or any Subsidiary is deemed to have entered
into in connection with any Sale and Leaseback Transaction that the
Company or any Subsidiary has entered into during the four consecutive
fiscal quarter period ended immediately prior to the date of
calculation, less (y) the aggregate principal amount of any Senior
Indebtedness that has been repaid with the Net Proceeds of any Sale
and Leaseback Transaction that the Company or any Subsidiary has
entered into within twelve months of the acquisition, or completion of
construction or refurbishment, of the
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Property that is the subject of any such transaction; and
(2) such Indebtedness, together with all then outstanding
Indebtedness incurred in reliance upon either this clause (vi) or
clause (v) under Section 3.03(b) hereof does not exceed in the
aggregate 3% of the consolidated net sales of the Company and its
Subsidiaries during the most recently completed twelve consecutive
fiscal quarter period; provided that, for purposes of this clause
(a)(2), such Indebtedness shall include, without limitation, an amount
equal to (x) the aggregate outstanding principal amount of any
mortgages that the Company or any Subsidiary is deemed to have entered
into in connection with any Sale and Leaseback Transactions to which
the Company or any Subsidiary is then a party less (y) the aggregate
principal amount of any Senior Indebtedness that has been repaid with
the Net Proceeds of any Sale and Leaseback Transaction that the
Company or any Subsidiary has entered into within twelve months of the
acquisition, or completion of construction or refurbishment, of the
Property that is the subject of any such transaction; except that, for
purposes of calculating the limitation set forth in clause (a)(2), the
seven Sale and Leaseback Transactions identified in clause (ii) of
Section 3.05 shall not be included; or
(b) such Indebtedness (including an amount equal to the sum of (x) the
aggregate outstanding principal amount of any mortgages that the
Company or any Subsidiary is deemed to have entered into in connection
with any Sale and Leaseback Transaction to which the Company or any
Subsidiary is then a party less (y) the aggregate principal amount of
any Senior Indebtedness that has been repaid with the Net Proceeds of
any Sale and Leaseback Transaction) does not exceed the amount of
proceeds received by the Company or any of its Subsidiaries from
insurance maintained by the Company or any Subsidiary in respect of
such Property or Properties;
(vii) Indebtedness consisting of Guarantees by a Subsidiary of
Indebtedness of the Company or any other Subsidiary, provided that such
Indebtedness is otherwise permitted under this Indenture;
(viii) Indebtedness under Interest Swap Obligations, provided that
such Interest Swap Obligations
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are related to payment obligations on Indebtedness otherwise permitted
under this Section 3.09;
(ix) commercial letters of credit and standby letters of credit
incurred in the ordinary course of business by a Subsidiary;
(x) Indebtedness represented by industrial revenue or development
bonds, provided that the aggregate amount of Indebtedness incurred in
reliance upon this clause (x) or clause (ix) of Section 3.03(b) shall not
exceed at any one time an aggregate principal amount outstanding of
$25,000,000;
(xi) Capitalized Lease Obligations relating to Property used in the
business of a Subsidiary;
(xii) Indebtedness incurred in respect of performance bonds and
performance and completion Guarantees incurred in the ordinary course of
business; and
(xiii) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business, provided that such Indebtedness
is extinguished within five Business Days of its incurrence.
SECTION 3.10. LIMITATION ON INDEBTEDNESS OF NON-BORROWING SUBSIDIARIES.
The Company shall not permit any Non-Borrowing Subsidiary to create,
incur, assume, issue or guarantee any Indebtedness or issue any preferred or
preference stock, or to engage in any Sale and Leaseback Transaction.
SECTION 3.11. TRANSACTIONS WITH AFFILIATES.
(a) The Company shall not, and shall not permit any Subsidiary to,
enter into any transaction after the date of the issuance of the Securities with
any Affiliate (other than the Company or a Subsidiary) unless (i) the Board of
Directors of the Company determines, in its reasonable good faith judgment, that
such transaction is in the best interests of the Company or such Subsidiary,
based on full disclosure of all relevant facts and circumstances, (ii) such
transaction is on terms no less favorable to the Company or such Subsidiary than
those that could be obtained in a comparable arm's-length transaction with an
entity that is not an
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Affiliate, and (iii) the transaction is otherwise permissible under this
Indenture.
(b) This covenant does not apply to redemptions or repurchases of
common stock in connection with repurchase provisions under employee stock
option or stock purchase agreements or other agreements to compensate management
employees, PROVIDED that such redemptions or purchases shall not exceed
$2,000,000 in any fiscal year or $5,000,000 in the aggregate subsequent to the
date of this Indenture.
(c) The provisions of this Section 3.11 shall not prevent the Company
from (i) paying a dividend on Capital Stock within 60 days after the declaration
thereof if, on the date on which the dividend was declared, the Company could
have paid such dividend in accordance with the provisions of this Indenture, or
(ii) repurchasing shares of its Capital Stock (x) solely in exchange for other
shares of its Capital Stock (other than Redeemable Stock) or (y) pursuant to a
court order.
SECTION 3.12. RESTRICTIONS ON BECOMING AN
INVESTMENT COMPANY.
Neither the Company nor any Subsidiary shall become an investment
company within the meaning of the Investment Company Act of 1940, as such
statute and the regulations thereunder and any successor statute or regulations
thereto may from time to time be in effect.
SECTION 3.13. CONTINUED EXISTENCE AND RIGHTS.
Subject to Article 4, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect (i) its existence
as a corporation, and the corporate partnership or other existence of each of
its Subsidiaries, in accordance with the respective organizational documents (as
the same may be amended from time to time) of the Company or any such Subsidiary
and (ii) the licenses, rights (charter and statutory) and franchises of the
Company and its Subsidiaries; PROVIDED, HOWEVER, that the Company shall not be
required to preserve any such right, license or franchise, or the corporate,
partnership or other existence of any of its Subsidiaries, if the Board of
Directors shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Company and its Subsidiaries, taken as a
whole.
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SECTION 3.14. MAINTENANCE OF PROPERTIES AND OTHER MATTERS.
(a) The Company shall, and shall cause each of its Subsidiaries to,
maintain its Properties in good working order and condition to the extent
material to the operations of the Company and make all necessary repairs,
renewals, replacements, additions, betterments and improvements thereto,
ordinary wear and tear excepted, to the extent and in the manner customary for
similar types of business; PROVIDED, HOWEVER, that nothing in this Section shall
prevent the Company or any of its Subsidiaries from discontinuing the operation
and maintenance of any of its Properties, if such discontinuance is, in the
judgment of the Company or the Subsidiary, as the case may be, desirable in the
conduct of its respective business and not disadvantageous in any material
respect to the Holders.
(b) The Company shall insure and keep insured, and shall cause each
Subsidiary to insure and keep insured, with financially sound and reputable
insurers, so much of their respective Properties and in such amounts as is
usually and customarily insured by companies engaged in a similar business with
respect to Properties of a similar character against loss by fire and the
extended coverage perils. The Trustee shall not be required to see that such
insurance is effected or maintained.
(c) The Company shall keep, and shall cause each Subsidiary to keep,
proper books of record and account in which full and correct entries shall be
made of all its business transactions, and shall reflect in its financial
statements adequate accruals and appropriations to reserves. The Company shall
cause its books of record and account and those of each of its Subsidiaries to
be examined, either on a consolidated or an individual basis, by one or more
firms of independent public accountants not less frequently than annually and
shall not make any change in the accounting principles applied to its financial
statements not concurred in by such firm or firms. The Company shall prepare
its financial statements in accordance with GAAP.
(d) The Company shall, and shall cause each of its Subsidiaries to,
comply with all applicable statutes, laws, orders, ordinances and all rules,
regulations and restrictions of any governmental department, commission, board,
regulatory authority, bureau, agency and instrumentality of the foregoing and to
obtain all licenses, permits, franchises and other governmental authorizations
necessary to the ownership or operation of its Properties and to the conduct of
its business, except such as are being contested in good faith and by
appropriate proceedings and
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except if such non-compliance or failure to obtain does not materially adversely
affect, and as far the Company can at the time foresee, is not reasonably likely
to materially and adversely affect, the business, earnings, Properties,
prospects or condition, financial or other, of the Company and its Subsidiaries
taken as a whole.
SECTION 3.15. TAXES AND CLAIMS.
The Company shall pay, and shall cause each of its Subsidiaries to,
pay (or, if appropriate, withhold and pay over) prior to delinquency:
(i) all material taxes, assessments and governmental charges or
levies imposed upon it or its Property (or required by it to withhold and
pay over), and
(ii) all material claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like Persons which if unpaid
might result in the creation of a Lien upon its Properties;
PROVIDED that items of the foregoing description need not be paid while being
contested in good faith (and by appropriate proceedings in the opinion of the
Company's independent counsel in any case involving more than $1,000,000); and
PROVIDED FURTHER that adequate book reserves (in the opinion of the Company's
independent accountants) have been established with respect thereto; and
PROVIDED FURTHER that the owning company's title to, and its right to use, its
Property is not materially adversely affected thereby.
SECTION 3.16. STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the covenants,
or the performance, of this Indenture; and the Company (to the extent that it
may lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it shall not, by resort to any such law, hinder, delay
or impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law has
been enacted.
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SECTION 3.17. MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST.
(a) If the Company shall at any time act as its own Paying Agent, it
shall, on or before each due date of the principal of, premium, if any, and
interest on the Securities, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal, premium, if any,
and interest so becoming due until such sum shall be paid to such Persons or
otherwise disposed of as herein provided, and shall promptly notify the Trustee
of its action or failure so to act.
(b) Whenever the Company shall have one or more Paying Agents, it
shall, on or prior to each date for the payment of the principal of or interest
on the Securities, deposit with a Paying Agent a sum sufficient to pay the
principal, premium, if any, and interest so becoming due, such sum to be held in
trust for the benefit of the Persons entitled to such payments; and, unless such
Paying Agent is the Trustee, the Company shall promptly notify the Trustee of
its action or failure so to act.
(c) For the purpose of obtaining the satisfaction and discharge of
this Indenture or for any other purpose, the Company may at any time pay, or
direct any Paying Agent to pay, to the Trustee all sums held in trust by the
Company or by such Paying Agent, such sums to be held by the Trustee upon the
same trusts as those upon which such sums were held by the Company or such
Paying Agent; and, upon such payment by the Company or any Paying Agent to the
Trustee, the Company or such Paying Agent, as the case may be, shall be released
from all further liability with respect to such money.
SECTION 3.18. COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Trustee, within 120 days after
the end of each fiscal year of the Company, an Officers' Certificate, complying
with Section 314(a)(4) of the TIA, stating that a review of the activities of
the Company and its Subsidiaries during the preceding fiscal year has been made
under the supervision of the signing Officers with a view to determining whether
the Company has kept, observed, performed and fulfilled its obligations under
this Indenture, and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge the Company has kept,
observed, performed and fulfilled each and every covenant contained in this
Indenture and is not in default in the performance or observance of any of the
terms, provisions and conditions hereof (or, if a Default or Event of Default
shall have occurred, describing
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all such Defaults or Events of Defaults of which he or she may have knowledge
and the status thereof).
(b) The Company shall, as long as any of the Securities are
outstanding, deliver to the Trustee, promptly, but in any case within 10
Business Days of any Officer becoming aware of any Default, Event of Default or
default in the performance of any covenant, agreement or condition contained in
this Indenture, an Officers' Certificate specifying such Default or Event of
Default and the status thereof.
(c) Upon payment in full of all outstanding Indebtedness under the
Bank Credit Agreement, the Company shall deliver an Officers' Certificate to the
Trustee stating that such Indebtedness has been paid in full and discharged.
ARTICLE 4
SUCCESSORS; CHANGE OF CONTROL; OPTIONAL PREPAYMENT
SECTION 4.01. WHEN COMPANY MAY MERGE, ETC.; CHANGE OF CONTROL;
HOLDERS' RIGHT OF OPTIONAL PREPAYMENT.
(a) The Company shall not consolidate with or merge into, or
transfer, sell or lease all or substantially all of its Property to, another
Person unless (i) the Surviving Corporation is a United States corporation, (ii)
the Surviving Corporation is bound by all the terms of this Indenture, (iii)
immediately after giving effect to such transaction no Default or Event of
Default exists, (iv) the consolidated net worth (determined in accordance with
GAAP) of the Surviving Corporation is equal to or greater than the consolidated
net worth of the Company immediately prior to such transaction and (v) in the
case of any such consolidation, merger, transfer, sale or lease other than into
or to a wholly-owned Subsidiary of the Company, immediately after and giving
effect to any such consolidation, merger, transfer, sale or lease and any
financings or other transactions in connection therewith the Consolidated
Interest Coverage Ratio of the Surviving Corporation would be greater than the
then applicable Consolidated Interest Coverage Ratio described under paragraph
(a) of Section 3.03 of this Indenture.
(b) In the event of a Change of Control, the Company shall be
obligated to make an offer to purchase all of the then outstanding Securities at
a purchase price in cash equal to 101% of its principal amount plus accrued
interest, after the occurrence of such Change of Control.
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(c) Not less than 20 nor more than 60 Business Days prior to the
consummation of a merger, consolidation, transfer, sale or lease that would
constitute a Change of Control and not more than 45 Business Days following the
occurrence of any other event constituting a Change of Control, the Company
shall give Holders notice of such right of prepayment, mailed by first class
mail to the Holders' last addresses as they appear upon the register. Such
notice shall state: (i) that Holders are entitled to have their Securities
prepaid in whole but not in part at 101% of their principal amount plus accrued
interest through the payment date pursuant to this Section 4.01; (ii) if a
Change of Control has occurred, that a Change of Control has occurred, or, if a
proposed merger, consolidation, transfer, sale or lease would constitute a
Change of Control, the proposed date of the consummation of the merger,
consolidation, transfer, sale or lease; (iii) that Holders shall be entitled to
tender their Securities for repayment, specifying the repayment price and the
repayment date (the "Repayment Date") (which, in the case of a merger,
consolidation, transfer, sale or lease that would constitute a Change of Control
shall not be later than the consummation date of the merger, consolidation,
transfer, sale or lease, and, in the case of any other Change of Control, shall
be no earlier than 30 days and no later than 60 days after the date such notice
is mailed) and that Holders shall be entitled to tender their Securities for
repayment until five Business Days prior to the Repayment Date, (iv) the name
and address of the Paying Agent, (v) that the Securities must be tendered to the
Paying Agent by five Business Days prior to the Repayment Date to collect the
principal, premium and accrued interest thereon, (vi) that any Security not
tendered by five Business Days prior to the Repayment Date shall continue to
accrue interest at the applicable rate borne by the Security, (vii) that any
Security accepted for payment shall cease to accrue interest after the Repayment
Date, (viii) that Holders electing to have a Security repurchased shall be
required to surrender the Security, with the form entitled "Option of Holder to
Elect Repurchase" on the reverse of the Security completed, to the Paying Agent
at the address specified in the Notice on or prior to the close of business on
the fifth Business Day preceding the Repayment Date, (ix) that Holders shall be
entitled to withdraw their election if the Paying Agent receives, not later than
the close of business on the fifth Business Day preceding the Repayment Date, a
telegram, telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of Securities the Holder delivered for repurchase,
the certificate number(s) of the Securities the Holder delivered for repurchase
and a statement that such Holder is withdrawing his election to have such
Securities repurchased, (x) that Holders electing to have their Securities
repurchased must tender all Securities which they hold and (xi) any other
information
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necessary to enable Holder to tender Securities and have such Securities
repurchased pursuant to this Section. Notwithstanding that the Company shall
have given any such notice pursuant to this paragraph, the Company shall have no
obligation to consummate a merger, consolidation, transfer, sale or lease that
would constitute a Change of Control that is the subject of any such notice,
provided that the Company shall mail a notice to Holders, stating that the
proposed merger, consolidation, transfer, sale or lease was not consummated and
that Holders shall not have the right to require the Company to prepay their
Securities, not later than two Business Days after the Company determines that
such proposed merger, consolidation, transfer, sale or lease shall not be
consummated, and the Company shall promptly return any Securities tendered for
prepayment to their respective Holders.
(d) The Company shall deliver to the Trustee, contemporaneously with
the mailing of the notice specified in paragraph (c) of this Section informing
Holders of their right to tender their Securities for prepayment, (i) an
Officers' Certificate to the foregoing effect stating that the Holders are
entitled to have their Securities repaid and (ii) an Opinion of Counsel stating
that the proposed transaction complies with this Indenture and that all
conditions precedent to the consummation of the transaction under this Indenture
have been met. The Company shall also deliver to the Trustee an Officers'
Certificate and an Opinion of Counsel in connection with any Supplemental
Indenture upon the execution thereof, as specified in Section 8.06 of this
Indenture.
ARTICLE 5
DEFAULTS AND REMEDIES
SECTION 5.01. EVENTS OF DEFAULT.
Each of the following events is an "EVENT OF DEFAULT":
(i) the failure by the Company to pay interest on any Security for a
period of 30 days after such interest becomes due and payable;
(ii) the failure by the Company to pay the principal of (or premium,
if any, on) any Security when such principal becomes due and payable,
whether at the stated maturity or upon acceleration, redemption or
otherwise;
(iii) a default in the observance of any other covenant contained in
this Indenture that continues for 30 days after the Company has been given
notice of the
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default by the Trustee or the Holders of 25% in principal amount of the
Securities then outstanding;
(iv) a default or defaults on other Indebtedness of the Company or any
Subsidiary, which Indebtedness has an outstanding principal amount of more
than $15,000,000 individually or in the aggregate if such Indebtedness has
attained final maturity or if the holders of such Indebtedness have
accelerated payment thereof under the terms of the instrument under which
such Indebtedness is or may be outstanding and, in each case, it remains
unpaid;
(v) one or more judgments or decrees is entered against the Company
or any Subsidiary involving a liability (not paid or fully covered by
insurance) of $5,000,000 or more in the case of any one such judgment or
decree and $10,000,000 or more in the aggregate for all such judgments and
decrees for the Company and all its Subsidiaries and all such judgments and
decrees have not been vacated, discharged or stayed or bonded pending
appeal within 30 days from the date of entry thereof;
(vi) the Company or any Material Subsidiary pursuant to or within the
meaning of the Bankruptcy Code:
(1) commences a voluntary case in bankruptcy or any other action
or proceeding for any other relief under any law affecting creditors'
rights that is similar to the Bankruptcy Code;
(2) consents by answer or otherwise to the commencement against
it of an involuntary case or proceeding of bankruptcy or insolvency;
(3) seeks or consents to the appointment of a receiver, trustee,
assignee, liquidator, custodian or similar official (collectively, a
"Custodian") of it or for all or substantially all of its Property;
(4) makes a general assignment for the benefit of its creditors;
or
(5) consents to the entry of a judgment, decree or order for
relief against it in an involuntary case; and
(vii) a court of competent jurisdiction enters a judgment, order or
decree under any Bankruptcy Code
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that is for relief against the Company or any Material Subsidiary in an
involuntary case proceeding which shall:
(1) approve a petition seeking reorganization, arrangement,
adjustment or composition in respect of the Company or any Material
Subsidiary of the Company,
(2) appoint a Custodian for the Company or any Material
Subsidiary or for all or substantially all of the property of any of
them; or
(3) order the winding up or liquidation of the Company or any
Material Subsidiary,
and in each case the judgment, order or decree remains unstayed and in
effect for 60 days, or any dismissal, stay, rescission or termination
ceases to remain in effect.
Within 90 days after the occurrence of an Event of Default that is
continuing, the Trustee shall give notice thereof to the Holders; PROVIDED,
HOWEVER, that, except in the case of a default in payment of principal of or
interest on the Securities, the Trustee may withhold such notice as long as it
in good faith determines that such withholding is in the interests of the
Holders.
SECTION 5.02. ACCELERATION.
If an Event of Default (other than an Event of Default relating to the
Company or a Material Subsidiary described in paragraphs (vi) or (vii) of
Section 5.01 of this Indenture) shall have occurred and be continuing, the
Trustee by written notice to the Company, or the Holders of at least 25% in
principal amount of the Securities by written notice to the Company and the
Trustee, may declare to be due and payable the principal amount of the
Securities, plus accrued interest, and such amounts shall become due and payable
upon the earlier of (x) five days from the date of such notice, so long as the
Event of Default giving rise to such notice has not been cured or waived and (y)
the acceleration of the Indebtedness under the Bank Credit Agreement (or any
renewal or refinancing thereof). If an Event of Default relating to the Company
or a Material Subsidiary of the kind described in paragraphs (vi) or (vii) of
Section 5.01 of this Indenture shall occur, such amount shall IPSO FACTO become
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder.
Subject to Sections 5.07 and 8.02, the Holders of not less than a
majority in principal amount of the then
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outstanding Securities by written notice to the Trustee, on behalf of the
Holders of all the Securities, may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration, (a)
if the rescission would not conflict with any judgment or decree, (b) if all
existing Events of Default have been cured or waived except nonpayment of
principal or interest that has become due solely because of acceleration, (c) to
the extent the payment of such interest is lawful, interest on overdue
installments of interest and overdue principal, which has become due otherwise
than by the declaration of acceleration, has been paid, and (d) in the event of
the cure or waiver of a Default or Event of Default under Section 5.01(iv), the
Trustee shall have received an Officers' Certificate and an Opinion of Counsel
that such Default or Event of Default has been cured or waived. Upon any such
rescission, such Default shall cease to exist and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of this
Indenture; but no rescission shall extend to any subsequent or other Default or
impair any right consequent thereon.
SECTION 5.03. OTHER REMEDIES.
(a) If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by an action at law, suit in equity or other
appropriate proceeding to collect the payment of principal of or interest on the
Securities or to enforce the performance of any provision of the Securities or
this Indenture.
(b) The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder in exercising any right or remedy
accruing upon an Event of Default or a Default shall not impair the right or
remedy or constitute a waiver of or acquiescence in such Event of Default or a
Default. All remedies are cumulative to the extent permitted by law.
SECTION 5.04. WAIVER OF DEFAULTS.
Subject to Sections 5.07 and 8.02, the Holders of not less than a
majority in principal amount of the then outstanding Securities by written
notice to the Trustee may waive any existing Default or Event of Default and its
consequences except a continuing Default or Event of Default in the payment of
the principal, premium, if any, or interest on any Security.
SECTION 5.05. CONTROL BY MAJORITY.
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The Holders of a majority in principal amount of the then outstanding
Securities may direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture or is unduly prejudicial to the rights of
other Holders or would subject the Trustee to personal liability. The Company
may, but shall not be obligated to, pursuant to the procedures of paragraph (b)
of Section 8.04 of this Indenture, fix a record date for the purpose of
determining the Holders entitled to vote on the direction of any such
proceeding.
SECTION 5.06. LIMITATION ON SUITS.
(a) Except to enforce the right to receive payment of principal,
premium (if any) or interest when due (including in connection with an offer to
purchase or call), no Holder may institute any proceeding with respect to this
Indenture or for any remedy hereunder unless such Holder has previously given to
the Trustee written notice of a continuing Event of Default and unless the
Holders of at least 25% in principal amount of the Securities have requested the
Trustee in writing to pursue remedies in respect of such Event of Default and
have offered the Trustee indemnity satisfactory to the Trustee against loss,
liability, or expense to be thereby incurred and the Trustee has failed so to
act for 60 days after receipt of the same and during which 60 days no contrary
instruction has been received by the Trustee from the Holders of a majority in
principal amount of the then outstanding Securities.
(b) A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over another Holder.
SECTION 5.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Security to receive payment of principal, premium (if any) and
interest on the Securities on or after the respective due dates expressed in the
Securities (including in connection with an offer to purchase or call), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of the Holder.
SECTION 5.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in paragraphs (a) or (b) of Section
5.01 of this Indenture occurs and is continuing, the Trustee is authorized to
recover, in any proceeding that it deems, in its sole discretion, most
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effective to protect the interests of the Holders, judgment in its own name and
as trustee of an express trust against the Company for the whole amount of
principal, premium (if any) and interest remaining unpaid on the Securities and
interest on overdue principal and to the extent lawful, interest and such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
SECTION 5.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
(a) In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal or interest) shall be entitled
and empowered, by intervention in such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest owing and unpaid in respect of the Securities
and to file such other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and of the Holders allowed in such
judicial proceeding, and
(ii) to collect and receive any moneys or other securities or property
payable or deliverable upon the conversion or exchange of the Securities or
upon any such claims and to distribute the same;
and any receiver, assignee, trustee, liquidator, sequestrator (or other similar
official) in any such judicial proceeding is hereby authorized by each Holder to
make such payments to the Trustee, and in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 6.07 of this Indenture.
(b) Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or accept or
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adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Securities or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the claim of any
Holder in any such proceeding.
SECTION 5.10. PRIORITIES.
Any money collected by the Trustee pursuant to this Article shall be
paid and applied in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 6.07 of this Indenture;
Second: to Holders for amounts due and unpaid on the Securities for
principal, premium, if any, and interest, ratably, without
preference or priority of any kind, according to the amounts due
and payable on the Securities for principal, premium, if any, and
interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders under this Section.
SECTION 5.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted to
be taken by it as a Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs including reasonable
attorneys' fees and disbursements, against any party litigant in the suit,
having due regard to the merits and good faith of the claims or defenses made by
the party litigant. This Section does not apply to a suit by the Trustee, a
suit by a Holder pursuant to Section 5.06 of this Indenture, or a suit by
Holders of more than 10% in principal amount of the then outstanding Securities.
ARTICLE 6
TRUSTEE
SECTION 6.01. DUTIES OF TRUSTEE.
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(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee need perform only those duties that are specifically
set forth in this Indenture and no others and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
(2) the Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, in the
absence of bad faith on its part, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture. The
Trustee, however, shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own wilful
misconduct, except that:
(1) this paragraph does not limit the effect of paragraph (b) of this
Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 5.05 of this Indenture.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee may refuse to perform any duty or exercise any right
or power unless it receives indemnity satisfactory to it against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree with the Company. Money held in
trust by the Trustee need not be
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segregated from other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to
expend or risk any of its own funds or incur any liability.
SECTION 6.02. RIGHTS OF TRUSTEE.
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document. The Trustee may
conclusively rely as to the identity and addresses of Holders and other matters
contained therein on the register of the Securities maintained by the Registrar
pursuant to Section 2.03 of this Indenture and shall not be affected by notice
to the contrary.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate and an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such Certificate or Opinion or both. The Trustee may consult with counsel and
the written advice of such counsel or any opinion of counsel shall be full and
complete authorization and protection in respect of any action taken, suffered
or omitted to be taken by it hereunder in good faith and reliance thereon.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers.
SECTION 6.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or any
Affiliate with the same rights it would have as if it were not Trustee. Any
Agent may do the same with like rights. The Trustee, however, is subject to
Sections 6.10 and 6.11 of this Indenture.
SECTION 6.04. TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, or any money paid to the Company or
upon the
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Company's direction under any provision hereof, it shall not be responsible for
the use or application of any money received by any Paying Agent other than the
Trustee, and it shall not be responsible for any statement in the Securities
other than its certificate of authentication or for any statement of the Company
in this Indenture.
SECTION 6.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known to a Trust Officer of the Trustee, the Trustee shall mail the Holders a
notice of the Default or Event of Default within 90 days after it occurs.
Except in the case of a Default or Event of Default in payment on any Security,
the Trustee may withhold notice if and so long as a Committee of Trust Officers
in good faith determines that withholding the notice is in the interest of
Holders.
SECTION 6.06. REPORTS BY TRUSTEE TO HOLDERS.
If required by the TIA, within 60 days after each February 15
following the date of this Indenture, the Trustee shall mail to Holders and the
Company a brief report dated as of such February 15 that complies with TIA
Section 313(a). The Trustee shall also comply with TIA Section 313(b)(2) and
transmit all reports in accordance with TIA Section 313(c).
A copy of each such report shall be filed, at the time of its mailing
to Holders, with the SEC and each stock exchange, if any, on which the
Securities are listed. The Company shall notify the Trustee in writing when the
Securities are listed or delisted on or from any stock exchange.
SECTION 6.07. COMPENSATION AND INDEMNITY.
(a) The Company shall pay to the Trustee from time to time reasonable
compensation for its services. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable out-of-pocket expenses
incurred by it. Such expenses shall include the reasonable compensation and
out-of-pocket expenses of the Trustee's agents and counsel.
(b) The Company shall defend and indemnify the Trustee against any
loss or liability incurred by it in connection with its services hereunder
except as set forth in the next paragraph. The Trustee shall notify the Company
promptly of any claim for which it may seek indemnity.
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(c) The Company need not reimburse any expense or indemnify against
any loss or liability incurred by the Trustee through negligence, bad faith or
wilful misconduct.
(d) The Trustee may have separate counsel, and the Company shall pay
the reasonable fees and expenses of such counsel.
(e) To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or Property held
or collected by the Trustee, except that held in trust to pay principal and
interest on particular Securities. Such lien shall survive the satisfaction and
discharge of this Indenture or any other termination under the Bankruptcy Code.
(f) When the Trustee incurs expenses or renders services after an
Event of Default specified in paragraph (vi) or (vii) of Section 5.01 of this
Indenture occurs, such expenses and the compensation for such services are
intended to constitute expenses of administration under the Bankruptcy Code.
SECTION 6.08. REPLACEMENT OF TRUSTEE.
(a) A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
(b) The Trustee may resign by so notifying the Company. The Holders
of a majority in principal amount of the then outstanding Securities may remove
the Trustee by so notifying the Trustee and the Company. The Company may remove
the Trustee if:
(1) the Trustee fails to comply with Section 6.10;
(2) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under the Bankruptcy
Code;
(3) a Custodian or public officer takes charge of the Trustee or its
Property; or
(4) the Trustee becomes incapable of acting.
(c) If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Holders of a majority in principal amount of the then outstanding
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Securities may appoint a successor Trustee to replace the successor Trustee
appointed by the Company.
(d) If a successor Trustee does not take office within 60 days after
the retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holders of at least 10% in principal amount of the then outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
(e) If the Trustee fails to comply with Section 6.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
(f) A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 6.07 of this Indenture.
(g) Notwithstanding the replacement of the Trustee pursuant to this
Section 6.08, the Company's obligations under Section 6.07 of this Indenture
hereof shall continue for the benefit of the retiring Trustee in connection with
the rights and duties hereunder prior to such replacement.
SECTION 6.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.
SECTION 6.10. ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a). The Trustee shall always have a combined
capital and surplus of at least $50,000,000 as set forth in its most recent
published annual report of condition. Neither the Company nor any Person
directly or indirectly controlling, controlled by, or under common control with
the Company shall serve as trustee. The Trustee is subject to TIA Section
310(b).
SECTION 6.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
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The Trustee is subject to TIA Section 311(a). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated therein.
SECTION 6.12. AUTHENTICATING AGENT.
(a) Each Authenticating Agent appointed by the Trustee pursuant to
Section 2.02 of this Indenture (an "Authenticating Agent") shall at all times be
a corporation organized and doing business under the laws of the United States,
any State thereof or the District of Columbia, authorized under such laws to act
as Authenticating Agent, having a combined capital and surplus of not less than
$5,000,000 and subject to supervision or examination by federal or state
authority. If such Authenticating Agent publishes reports of condition at least
annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section, the combined capital
and surplus of such Authenticating Agent shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time an Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section, such Authenticating Agent shall
resign immediately in the manner and with the effect specified in this Section.
(b) Any corporation into which an Authenticating Agent may be merged
or converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, PROVIDED such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Company, the Trustee or the Authenticating Agent.
(c) An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice
of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 6.12, the Trustee may appoint a successor
Authenticating Agent which shall be acceptable to the Company and shall mail
written notice of such appointment to all Holders of the Securities. Any
successor Authenticating Agent, upon acceptance of its appointment hereunder,
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with
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like effect as if originally named as an Authenticating Agent. No successor
Authenticating Agent shall be appointed unless eligible under the provisions of
this Section.
(d) The Company agrees to pay each Authenticating Agent from time to
time reasonable compensation for its services under Section 2.02 of this
Indenture and this Section 6.12 and the Trustee shall be entitled to be
reimbursed for any such payments made by it. Initially, _____________ is
appointed as Authenticating Agent for the Trustee.
(e) If an appointment is made pursuant to Section 2.02 of this
Indenture or this Section 6.12, the Securities may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternate
certificate of authentication in the following form:
"This is one of the 12% Senior Notes due September 1, 2004 issued
under the within-mentioned Indenture.
Dated:
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By:______________________________
as Authenticating Agent
By:______________________________
Authorized Signatory"
ARTICLE 7
DISCHARGE OF INDENTURE
SECTION 7.01. TERMINATION OF COMPANY'S OBLIGATIONS.
The Company may terminate its obligations under this Indenture at any
time by delivering all outstanding Securities to the Trustee for cancellation.
The Company, at its option, (i) shall be Discharged (as defined herein) from any
and all obligations with respect to the Securities (except for certain
obligations of the Company to register the transfer or exchange of the
Securities, replace stolen, lost, or mutilated
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Securities, maintain paying agencies, hold moneys for payment in trust and
compensate the Trustee as provided in Section 6.07 of this Indenture) or (ii)
need not comply with the restrictive covenants in Sections 3.02, 3.03, 3.04,
3.05, 3.06, 3.08, 3.09, 3.10, 3.11, 3.14 and 4.01 of this Indenture, in each
case if the Company deposits with the Trustee, in trust, money or U.S.
Government Obligations which, through the payment of interest thereon and
principal thereof in accordance with their terms, will provide money in an
amount sufficient to pay all the principal of and interest on the Securities on
the dates such payments are due in accordance with the terms of the Securities.
To exercise any such option, the Company shall deliver to the Trustee (a) an
Opinion of Counsel to the effect that the deposit and related defeasance would
not cause the holders of the Securities to recognize income, gain or loss for
federal income tax purposes and, in the case of a Discharge pursuant to clause
(i) above, accompanied by a ruling to such effect received from or published by
the United States Internal Revenue Service and (b) an Officers' Certificate and
an Opinion of Counsel to the effect that all conditions precedent to the
defeasance have been complied with.
"DISCHARGED" means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by, and obligations under, the
Securities and to have satisfied all the obligations under this Indenture
relating to the Securities (and the Trustee, at the request and the expense of
the Company, shall execute instruments satisfactory in form and substance to the
Trustee and the Company acknowledging the same), except (A) the rights of the
Holders of Securities to receive, from the trust fund described above, payment
of the principal of, premium, if any, and the interest on such Securities when
such payments are due, (B) the Company's obligations with respect to the
Securities under Sections 2.03, 2.04, 2.05, 2.06, 2.07, 3.17, 6.07 and 6.08 of
this Indenture and (C) the rights, powers, trusts, duties and immunities of the
Trustee hereunder.
"U.S. GOVERNMENT OBLIGATIONS" means direct obligations of, and
obligations guaranteed by, the United States of America for the payment of which
the full faith and credit of the United States of America is pledged.
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SECTION 7.02. APPLICATION OF TRUST MONEY.
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Section 7.01 of this Indenture. It shall apply
the deposited money and the money from U.S. Government Obligations through the
Paying Agent and in accordance with this Indenture to the payment of principal
and interest on the Securities.
SECTION 7.03. REPAYMENT TO COMPANY.
(a) The Trustee and the Paying Agent shall promptly pay to the
Company upon written request any excess money or securities held by them at any
time.
(b) The Trustee and the Paying Agent shall pay to the Company upon
written request any money held by them for the payment of principal, premium, if
any, or interest that remains unclaimed for two years after the date upon which
such payment shall have come due; PROVIDED, HOWEVER, that the Trustee or such
Paying Agent, shall, upon the written request and at the expense of the Company,
cause to be published once in a newspaper of general circulation in The City of
New York or mailed to each such Holder, notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such publication or mailing, any unclaimed balance of such
money then remaining shall be repaid to the Company. After payment to the
Company, Holders entitled to the money must look to the Company for payment as
general creditors unless an applicable abandoned property law designates another
Person.
SECTION 7.04. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Sections 7.01 and 7.02 of this
Indenture by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to Section 7.01 of this Indenture until such time
as the Trustee or Paying Agent is permitted to apply such money or U.S.
Government Obligations in accordance with Section 7.01 of this Indenture;
PROVIDED, HOWEVER, that if the Company has made any payment of interest on or
principal of any Securities because of the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Securities to
receive such payment from the money or U.S. Government Obligations held by the
Trustee or Paying Agent.
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ARTICLE 8
AMENDMENTS
SECTION 8.01. WITHOUT CONSENT OF HOLDERS.
The Company, when duly authorized by resolution of its Board of
Directors, and the Trustee may amend this Indenture or the Securities without
the consent of any Holder:
(a) to cure any ambiguity, defect or inconsistency with any other
provision herein;
(b) to comply with Section 4.01 of this Indenture;
(c) to make any change that does not adversely affect the legal
rights hereunder of any Holder; or
(d) to comply with the requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA.
After an amendment under this Section becomes effective, the Company
shall mail to Holders a notice briefly describing the amendment.
SECTION 8.02. WITH CONSENT OF HOLDERS.
The Company, when duly authorized by resolution of its Board of
Directors, and the Trustee may amend this Indenture or the Securities with the
written consent of the Holders of at least a majority in principal amount of the
then outstanding Securities. However, without the consent of each Holder
affected, an amendment under this Section may not:
(a) reduce the amount of Securities whose Holders must consent to an
amendment;
(b) reduce the rate of or change the time for payment of interest,
including defaulted interest, on any Security;
(c) reduce the principal of or change the fixed maturity of any
Security, or change the date on which any Security may be subject to
redemption or reduce the Redemption Price therefor;
(d) make any Security payable in currency other than that stated in
the Security;
(e) make any change in Section 5.04 or 5.07 or this Section 8.02 of
this Indenture;
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(f) make any change in the ranking of the Securities with respect to
any other obligation of the Company in a way that adversely affects the
rights of any Holder; or
(g) waive a Default in the payment of the principal of, and interest
on, any Security.
After an amendment under this Section becomes effective, the Company
shall mail to Holders a notice briefly describing the amendment.
SECTION 8.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment to this Indenture or the Securities shall be set forth
in a supplemental indenture that complies with the TIA as then in effect.
SECTION 8.04. REVOCATION AND EFFECT OF CONSENTS.
(a) Until an amendment or waiver becomes effective, a consent to it
by a Holder of a Security is a continuing consent by the Holder and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security, even if notation of the consent is not
made on any Security. However, any such Holder or subsequent Holder may revoke
the consent as to his Security or portion of a Security if the Trustee receives
written notice of revocation before the date on which the Trustee receives an
Officers' Certificate certifying that the Holders of the requisite principal
amount of Securities have consented to such amendment or waiver. An amendment
or waiver becomes effective upon receipt by the Trustee of such Officers'
Certificate and the written consents from the Holders of the requisite
percentage in principal amount of Securities.
(b) The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to consent to any amendment
or waiver, which record date shall be at least 5 Business Days prior to the
first solicitation of such consent. If a record date is fixed, then
notwithstanding the second and third sentence of paragraph (a) of this Section,
those persons who were Holders at such record date (or their duly designated
proxies), and only those persons, shall be entitled to consent to such amendment
or waiver or to revoke any consent previously given, whether or not such persons
continue to be Holders after such record date. No such consent shall be valid
or effective for more than 120 days after such record date.
(c) After an amendment or waiver becomes effective, it shall bind
every Holder.
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SECTION 8.05. NOTATION ON EXCHANGE OF SECURITIES.
Upon the Company's written request, the Trustee shall place an
appropriate notation (to be provided by the Company) about an amendment or
waiver on any Security thereafter authenticated. The Company in exchange for
all Securities may issue and the Trustee shall authenticate new Securities that
reflect the amendment or waiver.
SECTION 8.06. TRUSTEE PROTECTED.
The Trustee shall sign all supplemental indentures, except that the
Trustee need not sign any supplemental indenture that adversely affects its
rights. In signing or refusing to sign such amendment or supplemental
indenture, the Trustee shall be entitled to receive and, subject to Section 6.01
of this Indenture, shall be fully protected in relying upon, an Officers'
Certificate and an Opinion of Counsel as conclusive evidence that such amendment
or supplemental indenture is authorized or permitted by this Indenture, that it
is not inconsistent herewith, that all conditions precedent to the execution
thereof have been met, that it will be valid and binding upon the Company in
accordance with its terms and that, after the execution thereof, the Company
will not be in Default and no Event of Default will have occurred and be
continuing.
ARTICLE 9
REDEMPTIONS
SECTION 9.01. NOTICE TO TRUSTEE.
If the Company elects to redeem Securities pursuant to the optional
redemption provisions of paragraph 6 of the Securities and Section 9.03 hereof,
the Company shall notify the Trustee of the Redemption Date, the principal
amount of Securities to be redeemed, and the Redemption Price and shall deliver
to the Trustee an Officers' Certificate certifying resolutions of the Board of
Directors authorizing the redemption and an Opinion of Counsel with respect to
the due authorization of such redemption and that such redemption is being made
in accordance with this Indenture and the Securities and does not violate any
other agreement binding on the Company.
The Company shall give the notice to the Trustee provided for in this
Section at least 45 days (unless such shorter period shall be satisfactory to
the Trustee) but not more than 60 days before a Redemption Date.
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SECTION 9.02. SELECTION OF THE SECURITIES TO BE REDEEMED.
If less than all of the Securities are to be redeemed, the Trustee or
the Registrar for the Securities, PRO RATA or by lot, or by any manner that is
acceptable to the Trustee, shall select, subject to the remainder of this
Section, the Securities to be redeemed. The Trustee shall make the selection
not more than 60 days and not less than 30 days before each Redemption Date from
Securities outstanding not previously called for redemption. The Trustee may
select for redemption portions of the principal of Securities that have
denominations larger than $1,000. Securities and portions of them it selects
shall be in amounts of $1,000 or integral multiples of $1,000. Provisions of
this Indenture that apply to Securities called for redemption shall also apply
to portions of Securities called for redemption. The Trustee shall notify the
Company promptly in writing of the Securities or portions of Securities to be
called for redemption.
SECTION 9.03. NOTICE OF REDEMPTION.
(a) At least 30 but not more than 60 days before a Redemption Date,
the Company shall mail a notice of redemption by first-class mail to each Holder
whose Securities are to be redeemed at the Holder's last address as it appears
upon the register.
(b) The notice shall identify the Securities to be redeemed and shall
state:
(i) the Redemption Date;
(ii) the Redemption Price and the amount of accrued interest to be
paid;
(iii) the name and address of the Paying Agent;
(iv) that the Securities called for redemption must be surrendered to
the Paying Agent to collect the Redemption Price and accrued interest, if
any;
(v) that, unless the Company defaults in making the redemption
payment, interest on the Securities called for redemption ceases to accrue
on and after the specified Redemption Date; and
(vi) if any Security is being redeemed in part, the portion of the
principal amount (equal to $1,000 or any integral multiple thereof) of such
Security to be redeemed and that, on or after the Redemption Date, upon
surrender of such Security, a new Security or Securities
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in principal amount equal to the unredeemed portion thereof will be issued.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense.
SECTION 9.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed pursuant to paragraph 6 of the
Securities and in accordance with Section 9.03 hereof, the Securities called for
redemption become irrevocably due and payable on the specified Redemption Date
at the Redemption Price. A notice of redemption may not be conditional.
Notice of redemption shall be deemed to be given when mailed, whether
or not the Holder receives such notice. In any event, failure to give such
notice, or any defect therein, shall not affect the validity of the proceedings
for the redemption of the Securities.
SECTION 9.05. DEPOSIT OF REDEMPTION PRICE ON OPTIONAL REDEMPTION.
On or before each Redemption Date the Company shall deposit with the
Trustee or the Paying Agent money (which shall be immediately available funds if
deposited on the Redemption Date and which must be received by such Paying Agent
prior to 10:00 a.m. New York City time) sufficient to pay the Redemption Price
of and accrued interest on all Securities to be redeemed on that date. The
Paying Agent shall return to the Company any money not required for that
purpose.
SECTION 9.06. SECURITIES REDEEMED IN PART.
Upon surrender of a Security that is redeemed in part, the Company
shall issue and the Trustee shall authenticate a new Security equal in principal
amount to the unredeemed portion of the Security surrendered.
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies, or conflicts
with another provision which is required to be included in this Indenture by the
TIA, the required provision shall control.
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SECTION 10.02. NOTICES.
Any notice or communication to the Company or the Trustee is duly
given if in writing and (a) delivered in Person, (b) mailed by first-class mail
or (c) transmitted by facsimile transmission (confirmed by guaranteed overnight
courier) to the following addresses:
The Company's address is:
201 Willowbrook Boulevard
Wayne, New Jersey 07470-6799
Attn: Kenneth R. Baum
Telephone number: (201) 890-6000
Facsimile number: (201) 890-6540
With a copy to:
_________________________
_________________________
_________________________
_________________________
The Trustee's address is:
One State Street
New York, New York 10004
Telephone number: (212) 858-2000
Facsimile number: (212)
At the date of execution hereof, the Paying Agent's, Authenticating Agent's and
Registrar's address is:
_________________________
_________________________
_________________________
_________________________
The Company or the Trustee by written notice to the other may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication to a Holder shall be mailed by first-class
mail (registered or certified, return receipt requested) or overnight air
courier guaranteeing next day delivery, to his address shown on the register
kept by the Registrar; PROVIDED that items required under the TIA to be sent to
Holders in compliance with TIA Section 313(c) shall be mailed to Holders in
compliance with such section. Failure to mail a notice or a communication to a
Holder or any defect in it shall not affect its sufficiency with respect to
other Holders.
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If a notice or communication is delivered, mailed or transmitted in
the manner provided above within the time prescribed, it is duly given, whether
or not the addressee receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
SECTION 10.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Securities.
The Trustee shall comply with the provisions of TIA Section 312(b). The
Company, the Trustee, the Registrar and any agent of any of them shall have the
protection of TIA Section 312(c).
SECTION 10.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(b) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 10.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he has made such
examination or investigation as is
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necessary to enable him to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been complied with.
SECTION 10.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 10.07. LEGAL HOLIDAYS.
A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions in the State of New York are not required to be open. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that place
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period.
SECTION 10.08. NO RECOURSE AGAINST OTHERS.
The Securities and the obligations of the Company under this Indenture
are solely obligations of the Company and no officer, director, employee or
stockholder, as such, shall be liable for any failure by the Company to pay
amounts on the Securities when due or perform any such obligation.
SECTION 10.09. DUPLICATE ORIGINALS.
The parties may sign any number of copies or counterparts of this
Indenture. One signed copy is enough to prove this Indenture.
SECTION 10.10. GOVERNING LAW.
The laws of the State of New York shall govern this Indenture and the
Securities.
SECTION 10.11. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or a Subsidiary. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
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SECTION 10.12. SUCCESSORS.
All agreements of the Company in this Indenture and the Securities
shall bind its successor. All agreements of the Trustee in this Indenture shall
bind its successor.
SECTION 10.13. SEVERABILITY.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 10.14. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table, and headings of the
Articles and Sections of this Indenture have been inserted for the convenience
of reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
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SECTION 10.15. BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder and the Holders, any benefit or any legal or equitable right, remedy
or claim under this Indenture.
SIGNATURES
Dated: __________ __, 1995 THE GRAND UNION COMPANY
By:________________________
Name:
Title:
Attest:
___________________________ (SEAL)
Dated: ________ __, 1995 IBJ SCHRODER BANK & TRUST
COMPANY, Trustee
By:_________________________
Name:
Title:
Attest:
___________________________ (SEAL)
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Exhibit A
No. $________
THE GRAND UNION COMPANY
Incorporated under the laws of the State
of Delaware
12% Senior Notes due September 1, 2004
THE GRAND UNION COMPANY promises to pay to ___________________ or
registered assigns, the principal sum of _______ Dollars on September 1, 2004
and to pay interest thereon semiannually in arrears from September 1, 1995
(notwithstanding that the date of issue is prior thereto) at the rate of 12% per
annum on March 1 and September 1 of each year commencing March 1, 1996 until the
principal hereof is paid or made available for payment. Payment of principal
and premium, if any, and interest shall be made in the manner and subject to the
terms set forth in provisions appearing on the reverse hereof, which provisions,
in their entirety, shall for all purposes have the same effect as if set forth
at this place.
IN WITNESS WHEREOF, THE GRAND UNION COMPANY has caused this instrument
to be executed in its corporate name by the manual or facsimile signature of its
President or a Vice President and attested by its Secretary or an Assistant
Secretary.
THE GRAND UNION COMPANY
By____________________________
Name:
Title:
Attest:____________________
Name:
Title:
SEAL
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<PAGE>
Exhibit A
FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the 12% Senior Notes due September 1, 2004 issued under
the within-mentioned Indenture.
Dated:
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By:_____________________________
Authorized Signatory
or
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By:_____________________________
as Authenticating Agent
By:_____________________________
Authorized Signatory
A-2
<PAGE>
Exhibit A
(Back of Security)
THE GRAND UNION COMPANY
12% Senior Notes due
September 1, 2004
1. INTEREST. THE GRAND UNION COMPANY (the "Company"), a Delaware
corporation, promises to pay interest on the principal amount of this Security
at the rate per annum shown above from September 1, 1995. The Company will pay
interest semiannually in arrears on March 1 and September 1 of each year,
commencing March 1, 1996. Interest on the Securities will accrue from the most
recent date on which interest has been paid or, if no interest has been paid,
from September 1, 1995. Interest will be computed on the basis of a 360-day
year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the
Securities (except defaulted interest) to the Persons who are registered Holders
of Securities at the close of business on the regular record date, which shall
be the February 15 and August 15, as the case may be, next preceding the
interest payment date even though Securities are canceled after the record date
and on or before the interest payment date. Any such interest not so punctually
paid or duly provided for or paid within the 30-day period in paragraph (a) of
Section 5.01 of the Indenture, and any interest payable on such defaulted
interest (to the extent lawful), will forthwith cease to be payable to the
Holder on such regular record date and shall be payable to the Person in whose
name this Security is registered at the close of business on a special record
date for the payment of such defaulted interest to be fixed by the Company,
notice of which shall be given to Holders not less than 5 days prior to such
special record date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts. However, the Company may pay principal,
premium, if any, and interest by check payable in such money. It may mail an
interest check to a Holder's registered address.
3. PAYING AGENT AND REGISTRAR. _____________ will act as Paying
Agent and Registrar. The Company may change any Paying Agent, Registrar or
co-Registrar without notice to any Holder. The Company may act in any such
capacity.
4. INDENTURE. The Company has issued the Securities under an
Indenture dated as of _______, 1995 (the "Indenture") between the Company and
the Trustee. The terms of the Securities include those stated in the Indenture
and
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<PAGE>
Exhibit A
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S.C. Sections 77aaa-77bbbb), as amended by the Trust Indenture Reform Act
of 1990, as in effect on the date of the Indenture ("TIA"). The Securities are
subject to all such terms, and Holders are referred to the Indenture and the TIA
for a statement of such terms. The Securities are obligations of the Company
limited to $595,475,922 in aggregate principal amount. The Securities are
unsecured general obligations of the Company. Unless otherwise defined herein,
all capitalized terms shall have the meanings assigned to them in the Indenture.
5. DENOMINATIONS, TRANSFER, EXCHANGE. The Securities are in
registered form without coupons in denominations of $1,000 and integral
multiples thereof. The transfer of Securities may be registered and Securities
may be exchanged as provided in the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not exchange or register the transfer of any
Security or portion of a Security selected for redemption. Also, it need not
exchange or register the transfer of any Securities for a period of 15 days
before a selection of Securities to be redeemed.
6. OPTIONAL REDEMPTION. The Securities may not be redeemed at the
option of the Company prior to September 1, 2000, except as set forth below. On
or after such date, the Securities may be redeemed at the election of the
Company as a whole at any time or in part from time to time at the Redemption
Prices (expressed in percentages of principal amount) set forth below plus
accrued interest to the Redemption Date, if redeemed during the 12-month period
beginning on September 1 of the years indicated below:
Year Percentage
2000 104%
2001 102
2002 and thereafter 100
Notwithstanding the foregoing, the Securities may be redeemed at the
election of the Company prior to September 1, 1998 with the proceeds of one or
more issuances of equity securities, so long as such redemption, when aggregated
with all prior such redemptions, shall not result in more than 33 1/3% of the
principal amount of the Securities originally issued having been so redeemed, at
the Redemption Prices (expressed in percentages of principal amount) set forth
below plus accrued interest to the Redemption Date, if redeemed
A-4
<PAGE>
Exhibit A
during the 12-month period beginning September 1 of the years indicated below:
Year Percentage
1995 103%
1996 106
1997 106
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the Redemption Date to each Holder of
Securities to be redeemed, at his registered address. Securities in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. On and after the Redemption Date interest ceases to accrue
on Securities or portions of them called for redemption. The Securities will
not have the benefit of any sinking fund obligation.
7. PERSONS DEEMED OWNERS. The registered Holder of a Security may be
treated as its owner for all purposes.
8. AMENDMENTS AND WAIVERS. Subject to certain exceptions, the
Indenture or the Securities may be amended with the consent of the Holders of at
least a majority in principal amount of the then outstanding Securities.
Without the consent of any Holder, the Indenture or the Securities may be
amended to cure any ambiguity, defect or inconsistency, to comply with Section
4.01 of the Indenture, to secure the Securities, to make any change that does
not adversely affect the legal rights of any Holder or to comply with the
requirements of the SEC to maintain qualification of the Indenture under the
TIA.
9. DEFAULTS AND REMEDIES. An Event of Default, as defined in the
Indenture, is: (i) the failure to pay interest on the Securities for a period
of 30 days after such interest becomes due and payable; (ii) the failure to pay
the principal or premium, if any, on the Securities when such principal becomes
due and payable, whether at the stated maturity or upon acceleration, redemption
or otherwise; (iii) a default in the observance of any other covenant contained
in the Indenture that continues for 30 days after the Company has been given
notice of the default by the Trustee or the Holders of 25% in principal amount
of the Securities then outstanding, (iv) a default or defaults on other
Indebtedness of the Company or any Subsidiary, which Indebtedness has an
outstanding principal amount of more than $15,000,000 individually or in the
aggregate if such Indebtedness has attained final maturity or if the holders of
such Indebtedness have accelerated payment thereof under the terms of the
instrument under which such Indebtedness is or may be outstanding and it
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<PAGE>
Exhibit A
remains unpaid; (v) one or more judgments or decrees is entered against the
Company or any Subsidiary involving a liability (not paid or fully covered by
insurance) of $5,000,000 or more in the case of any one such judgment or decree
and $10,000,000 or more in the aggregate for all such judgments and decrees for
the Company and all its Subsidiaries and all such judgments and decrees have not
been vacated, discharged or stayed or bonded pending appeal within 30 days from
the entry thereof; or (vi) certain events of bankruptcy, insolvency or
reorganization affecting the Company or any Material Subsidiary as provided in
the Indenture.
In case an Event of Default (other than an Event of Default resulting
from bankruptcy, insolvency, or reorganization of the Company or a Material
Subsidiary) shall have occurred and be continuing, the Trustee by written notice
to the Company or the Holders of at least 25% in principal amount of the
Securities by written notice to the Company and the Trustee, may declare to be
due and payable the principal amount of the Securities, plus accrued interest,
and such amounts shall become due and payable upon the earlier of (i) five days
from the date of such notice, so long as the Event of Default giving rise to
such notice has not been cured or waived and (ii) the acceleration of the
Indebtedness under the Bank Credit Agreement (or any renewal or refinancing
thereof). In case an Event of Default resulting from bankruptcy, insolvency, or
reorganization of the Company or a Material Subsidiary shall occur, such amount
shall ipso facto become immediately due and payable without any declaration or
other act on the part of the Trustee or any Holder. Such declaration or
acceleration by the Trustee or the Holders may be rescinded and past defaults
may be waived (except, unless theretofore cured, a default in payment of
principal of or interest on the Securities issued under the Indenture) by the
Holders of a majority in principal amount of the Securities upon conditions
provided in the Indenture. Except to enforce the right to receive payment of
principal or interest when due, no Holder may institute any proceeding with
respect to the Indenture or for any remedy thereunder except as provided in the
Indenture. Subject to certain restrictions, the Holders of a majority in
principal amount of the Securities have the right to direct the time, method,
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee. The Trustee,
however, may refuse to follow any direction that conflicts with law or the
Indenture, that is unduly prejudicial to the rights of any Holder, or that would
subject the Trustee to personal liability. The Company must furnish an annual
compliance certificate to the Trustee.
10. PREPAYMENT AT HOLDER'S OPTION UPON CHANGE OF CONTROL EVENTS. In
the event of a Change of Control, the
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<PAGE>
Exhibit A
Company shall be obligated to make an offer to purchase this Security at a
purchase price in cash equal to 101% of its principal amount plus accrued
interest, after the occurrence of such Change of Control. Holders of Securities
which are the subject of such an offer to repurchase shall receive an offer to
repurchase and may elect to have such Securities repurchased in accordance with
the provisions of the Indenture pursuant to and in accordance with the terms of
the Indenture. The Company shall give the Holder of this Security notice of
such right of repurchase not less than 20 nor more than 60 Business Days prior
to the consummation of a merger, consolidation, transfer, sale or lease that
would constitute a Change of Control and not more than 45 Business Days
following any other event constituting a Change of Control, mailed by
first-class mail to the Holder's last address as it appears upon the register.
The Holder shall have the right to have this Security repurchased if, among
other things, the Security is tendered for repurchase no later than five
Business Days prior to the applicable repurchase date. The Company shall have
no obligation to consummate any merger, consolidation, transfer, sale or lease
that would constitute a Change of Control, and, if any such merger,
consolidation, transfer, sale or lease that was the subject of any notice
described above is not consummated, the Holder will not be entitled to have this
Security prepaid, and any Securities tendered for prepayment will be returned.
11. TRUSTEE DEALINGS WITH THE COMPANY. IBJ Schroder Bank & Trust
Company, the Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company or any Affiliate with the same rights it would have as if it
were not the Trustee.
12. NO RECOURSE AGAINST OTHERS. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Holder by accepting a Security waives and releases all such
liability. The waiver and release are part of the consideration for the issue
of the Securities.
13. UNCLAIMED MONEY. If money for the payment of principal of or
interest on any Security remains unclaimed for two years after the date on which
such payment shall have come due, the Trustee or Paying Agent will pay the money
back to the Company at the Company's written request. After that, Holders
entitled to this money must look to the Company for payment, unless a law
governing abandoned property designates another Person.
A-7
<PAGE>
Exhibit A
14. DISCHARGE UPON REDEMPTION OR MATURITY. Subject to the terms of
the Indenture, the Indenture will be discharged and canceled upon the payment of
all Securities. The Indenture contains provisions for defeasance at any time of
certain restrictive covenants with respect to this Security (in each case upon
compliance with certain conditions set forth therein).
15. AUTHENTICATION. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an Authenticating Agent.
16. GOVERNING LAW. The laws of the State of New York shall govern
this Security and the Indenture.
17. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Holder or an assignee, such as TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and UNIF GIFT
MIN ACT (= Uniform Gifts to Minors Act).
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture, which contains, in larger type, the text
of this Security. Requests may be made to The Grand Union Company, 201
Willowbrook Boulevard, Wayne, New Jersey 07470-6799, Attention: Kenneth R.
Baum.
A-8
<PAGE>
Exhibit A
OPTION OF HOLDER TO ELECT REPURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.01 of the Indenture, check the box:
/ /
Dated: _________________ Your Signature:___________________
(Sign exactly as your name
appears on the other side of
this Security)
Signature Guarantee:______________________________________
(Signature must be guaranteed by an
eligible institution within the mean-
ing of Rule 17(A)(d)-15 under the
Securities Exchange Act of 1934, as
amended)
A-9
<PAGE>
Exhibit A
ASSIGNMENT FORM
To assign this Security, fill in the form below: I or we assign and transfer
this Security to
___________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
___________________________________________________________
___________________________________________________________
___________________________________________________________
___________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint _____________________________ agent to transfer this
Security on the books of the Company. The agent may substitute another to act
for him.
________________________________________________________________________________
Dated: _________________ Your Signature:___________________
(Sign exactly as your name
appears on the other side of
this Security)
Signature Guarantee:______________________________________
(Signature must be guaranteed by an
eligible institution within the mean-
ing of Rule 17(A)(d)-15 under the
Securities Exchange Act of 1934, as
amended)
A-10
<PAGE>
Exhibit T3E1
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re: Chapter 11
THE GRAND UNION COMPANY, Case No. 95-84 (PJW)
also d/b/a Big Star,
Debtor.
DISCLOSURE STATEMENT
FOR SECOND AMENDED CHAPTER 11
PLAN OF REORGANIZATION
OF THE GRAND UNION COMPANY
WILLKIE FARR & GALLAGHER DONOVAN LEISURE NEWTON & IRVINE
One Citicorp Center 30 Rockefeller Plaza
153 East 53rd Street New York, New York 10112
New York, New York 10022 Attn: John J. McCann
Attn: Myron Trepper Phone: (212) 632-3000
Barry N. Seidel
Phone: (212) 821-8000
YOUNG, CONAWAY, STARGATT & TAYLOR
P.O. Box 391
11th Floor, Rodney Square North
Wilmington, Delaware 19899
Attn: James L. Patton, Jr.
Laura Davis Jones
Phone: (302) 571-6600
<PAGE>
The Grand Union Company (the "Debtor"), as debtor in possession under chapter
11 of title 11 of the United States Code (the "Bankruptcy Code"), hereby
proposes and files this Disclosure Statement (the "Disclosure Statement") for
the Second Amended Chapter 11 Plan of Reorganization of The Grand Union
Company, dated April 19, 1995 (the "Plan").
THE DEBTOR STRONGLY URGES ALL HOLDERS OF CLAIMS IN IMPAIRED CLASSES TO ACCEPT
THE PLAN.
THIS DISCLOSURE STATEMENT IS DESIGNED TO PROVIDE ADEQUATE INFORMATION TO
ENABLE HOLDERS OF CLAIMS AGAINST THE DEBTOR TO MAKE AN INFORMED JUDGMENT ON
WHETHER TO ACCEPT OR REJECT THE PLAN. ALL HOLDERS OF CLAIMS ARE HEREBY ADVISED
AND ENCOURAGED TO READ THIS DISCLOSURE STATEMENT AND THE PLAN IN THEIR ENTIRETY
BEFORE VOTING TO ACCEPT OR REJECT THE PLAN. PLAN SUMMARIES AND STATEMENTS MADE
IN THIS DISCLOSURE STATEMENT ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO
THE PLAN, WHICH IS ANNEXED HERETO AS APPENDIX "A", OTHER APPENDICES ANNEXED
HERETO AND OTHER DOCUMENTS REFERENCED AS FILED WITH THE COURT BEFORE OR
CONCURRENTLY WITH THE FILING OF THIS DISCLOSURE STATEMENT. FURTHERMORE, THE
PROJECTED FINANCIAL INFORMATION CONTAINED HEREIN HAS NOT BEEN THE SUBJECT OF AN
AUDIT. SUBSEQUENT TO THE DATE HEREOF, THERE CAN BE NO ASSURANCE THAT: (A) THE
INFORMATION AND REPRESENTATIONS CONTAINED HEREIN WILL CONTINUE TO BE MATERIALLY
ACCURATE; AND (B) THIS DISCLOSURE STATEMENT CONTAINS ALL MATERIAL INFORMATION.
ALL HOLDERS OF IMPAIRED CLAIMS SHOULD READ AND CONSIDER CAREFULLY THE MATTERS
DESCRIBED IN THIS DISCLOSURE STATEMENT AS A WHOLE, INCLUDING THE SECTION
ENTITLED "RISK FACTORS," PRIOR TO VOTING ON THE PLAN. IN MAKING A DECISION TO
ACCEPT OR REJECT THE PLAN, EACH CREDITOR MUST RELY ON ITS OWN EXAMINATION OF
THE DEBTOR AS DESCRIBED IN THIS DISCLOSURE STATEMENT AND THE TERMS OF THE PLAN,
INCLUDING THE MERITS AND RISKS INVOLVED. IN ADDITION, CONFIRMATION AND
CONSUMMATION OF THE PLAN ARE SUBJECT TO CONDITIONS PRECEDENT THAT COULD LEAD TO
DELAYS IN CONSUMMATION OF THE PLAN. ALSO, THERE CAN BE NO ASSURANCE THAT EACH
OF THESE CONDITIONS WILL BE SATISFIED OR WAIVED (AS PROVIDED IN THE PLAN) OR
THAT THE PLAN WILL BE CONSUMMATED. EVEN AFTER THE EFFECTIVE DATE, DISTRIBUTIONS
UNDER THE PLAN MAY BE SUBJECT TO SUBSTANTIAL DELAYS FOR CREDITORS WHOSE CLAIMS
ARE DISPUTED.
THIS DISCLOSURE STATEMENT HAS BEEN APPROVED BY ORDER OF THE BANKRUPTCY COURT
AS CONTAINING ADEQUATE INFORMATION OF A KIND AND IN SUFFICIENT DETAIL TO ENABLE
HOLDERS OF CLAIMS TO MAKE AN INFORMED JUDGMENT WITH RESPECT TO VOTING TO ACCEPT
OR REJECT THE PLAN. HOWEVER, THE BANKRUPTCY COURT'S APPROVAL OF THIS DISCLOSURE
STATEMENT DOES NOT CONSTITUTE A RECOMMENDATION OR DETERMINATION BY THE
BANKRUPTCY COURT WITH RESPECT TO THE MERITS OF THE PLAN.
NO PARTY IS AUTHORIZED BY THE DEBTOR TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS WITH RESPECT TO THE PLAN OTHER THAN THAT WHICH IS CONTAINED IN
THIS DISCLOSURE STATEMENT. NO REPRESENTATIONS OR INFORMATION CONCERNING THE
DEBTOR, ITS FUTURE BUSINESS OPERATIONS OR THE VALUE OF ITS PROPERTIES HAVE BEEN
AUTHORIZED BY THE DEBTOR OTHER THAN AS SET FORTH HEREIN. ANY INFORMATION OR
REPRESENTATIONS GIVEN TO OBTAIN YOUR ACCEPTANCE OR REJECTION OF THE PLAN WHICH
ARE DIFFERENT FROM OR
i
<PAGE>
INCONSISTENT WITH THE INFORMATION OR REPRESENTATIONS CONTAINED HEREIN AND IN
THE PLAN SHOULD NOT BE RELIED UPON BY ANY CREDITOR IN VOTING ON THE PLAN.
THIS DISCLOSURE STATEMENT HAS BEEN PREPARED IN ACCORDANCE WITH SECTION 1125
OF THE BANKRUPTCY CODE AND RULE 3016(c) OF THE FEDERAL RULES OF BANKRUPTCY
PROCEDURE AND NOT IN ACCORDANCE WITH FEDERAL OR STATE SECURITIES LAWS OR OTHER
APPLICABLE NONBANKRUPTCY LAW. PERSONS OR ENTITIES HOLDING OR TRADING IN OR
OTHERWISE PURCHASING, SELLING OR TRANSFERRING CLAIMS AGAINST, OR SECURITIES OF,
THE DEBTOR SHOULD EVALUATE THIS DISCLOSURE STATEMENT IN LIGHT OF THE PURPOSE
FOR WHICH IT WAS PREPARED.
THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR HAS SUCH COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED HEREIN.
WITH RESPECT TO CONTESTED MATTERS, ADVERSARY PROCEEDINGS AND OTHER PENDING OR
THREATENED ACTIONS, THIS DISCLOSURE STATEMENT AND THE INFORMATION CONTAINED
HEREIN SHALL NOT BE CONSTRUED AS AN ADMISSION OR STIPULATION, BUT RATHER AS
STATEMENTS MADE IN SETTLEMENT NEGOTIATIONS GOVERNED BY RULE 408 OF THE FEDERAL
RULES OF EVIDENCE AND ANY OTHER RULE OR STATUTE OF SIMILAR IMPORT.
THIS DISCLOSURE STATEMENT SHALL NEITHER BE ADMISSIBLE IN ANY PROCEEDING
INVOLVING THE DEBTOR OR ANY OTHER PARTY NOR BE CONSTRUED TO BE ADVICE ON THE
TAX, SECURITIES OR OTHER LEGAL EFFECTS OF THE PLAN. EACH CREDITOR SHOULD,
THEREFORE, CONSULT WITH ITS OWN LEGAL, BUSINESS, FINANCIAL AND TAX ADVISORS AS
TO ANY SUCH MATTERS CONCERNING THE SOLICITATION, THE PLAN OR THE TRANSACTIONS
CONTEMPLATED THEREBY.
This Disclosure Statement, the Plan annexed hereto as Appendix "A" (and the
other appendices hereto), the accompanying form of Ballot, and the related
materials delivered together herewith are being furnished by the Debtor to
holders of Impaired Claims pursuant to section 1125 of the Bankruptcy Code, in
connection with the solicitation by the Debtor of votes to accept or reject the
Plan (and the transactions contemplated thereby), as described herein.
ii
<PAGE>
TABLE OF CONTENTS
Page
----
I. INTRODUCTION AND SUMMARY. . . . . . . . . . . . . . . . . . . . . . 1
A. The Solicitation . . . . . . . . . . . . . . . . . . . . . . . 1
B. The Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. Exchange of Senior Note Claims for New Senior Notes . . . . 1
2. Subordinated Debt Conversion and Equity Recapitalization. . 2
3. Post-Confirmation Credit Agreement and Credit
Agreement Claims. . . . . . . . . . . . . . . . . . . . . . 2
4. Interest Rate Protection Agreement Claims . . . . . . . . . 3
5. Trade Creditors . . . . . . . . . . . . . . . . . . . . . . 3
6. General Unsecured Claims. . . . . . . . . . . . . . . . . . 4
7. The Zero Settlement . . . . . . . . . . . . . . . . . . . . 4
8. Board of Directors. . . . . . . . . . . . . . . . . . . . . 4
9. Restated Certificate of Incorporation . . . . . . . . . . . 5
C. Summary of Classification and Treatment of Claims and
Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
D. Conditions to Confirmation and the Occurrence of the Effective
Date of the Plan. . . . . . . . . . . . . . . . . . . . . . . . 11
II. BACKGROUND. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
A. The Debtor. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
B. Significant Events Preceding Commencement of the
Chapter 11 Case . . . . . . . . . . . . . . . . . . . . . . . . 13
1. 1992 Recapitalization and The Present Capital Structure . . 13
2. Asset Dispositions. . . . . . . . . . . . . . . . . . . . . 14
3. Failure to Make Certain Interest Payments . . . . . . . . . 14
4. Retention of Financial Advisors . . . . . . . . . . . . . . 15
C. Recent Financial Performance. . . . . . . . . . . . . . . . . . 15
III. SUPPORT OF THE PLAN BY PARTIES IN INTEREST. . . . . . . . . . . . . 16
IV. THE BANKRUPTCY PLAN VOTING INSTRUCTIONS AND PROCEDURES. . . . . . . 16
A. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
B. Holders of Claims Entitled to Vote. . . . . . . . . . . . . . . 16
C. Vote Required for Class Acceptance. . . . . . . . . . . . . . . 16
D. Counting of Ballots for Determining Acceptance of the Plan. . . 17
E. Voting Deadline . . . . . . . . . . . . . . . . . . . . . . . . 17
F. Voting Procedures . . . . . . . . . . . . . . . . . . . . . . . 17
1. Beneficial Owners of Credit Agreement Debt . . . . . . . . . 17
2. Beneficial Owners of Old Securities. . . . . . . . . . . . . 18
3. Brokerage Firms, Banks, and Other Nominees . . . . . . . . . 18
4. Defects, Irregularities, Etc.. . . . . . . . . . . . . . . . 18
G. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . 18
V. THE CHAPTER 11 CASE . . . . . . . . . . . . . . . . . . . . . . . . 19
A. Continuation of Business; Stay of Litigation. . . . . . . . . . 19
B. Significant Events During the Chapter 11 Case . . . . . . . . . 19
1. First Day Orders. . . . . . . . . . . . . . . . . . . . . . 19
2. Prepetition Wage and Benefits Order . . . . . . . . . . . . 19
3. Cash Collateral Order . . . . . . . . . . . . . . . . . . . 20
4. DIP Facility. . . . . . . . . . . . . . . . . . . . . . . . 20
5. Trade Creditor Order. . . . . . . . . . . . . . . . . . . . 20
6. Appointment of Official Committee . . . . . . . . . . . . . 21
C. Chapter 11 Cases of Holdings and Capital. . . . . . . . . . . . 21
D. Zero Settlement . . . . . . . . . . . . . . . . . . . . . . . . 22
iii
<PAGE>
Page
----
VI. THE PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
A. General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
B. Classification and Treatment of Claims and Interests
Under the Plan . . . . . . . . . . . . . . . . . . . . . . . . . 24
1. Treatment of Administrative Expenses and Certain
Priority Claims . . . . . . . . . . . . . . . . . . . . . . 25
a. Administrative Expenses . . . . . . . . . . . . . . . . 25
b. Priority Tax Claims . . . . . . . . . . . . . . . . . . 26
2. Class 1 - Credit Agreement Claims . . . . . . . . . . . . . 26
3. Class 2 - Interest Rate Protection Agreement Claims . . . . 28
4. Class 3 - Miscellaneous Secured Claims. . . . . . . . . . . 28
5. Class 4 - Senior Note . . . . . . . . . . . . . . . . . . . 29
6. Class 5 - Priority Claims . . . . . . . . . . . . . . . . . 29
7. Class 6 - Trade Claims. . . . . . . . . . . . . . . . . . . 29
8. Class 7 - General Unsecured Claims. . . . . . . . . . . . . 31
9. Class 8 - Senior Subordinated Note Claims . . . . . . . . . 32
10. Class 9 - Senior Zero Note Claims . . . . . . . . . . . . . 33
11. Class 10 - Junior Zero Note Claims. . . . . . . . . . . . . 33
12. Class 11 - Subordinated Claims. . . . . . . . . . . . . . . 34
13. Class 12 - Interests. . . . . . . . . . . . . . . . . . . . 34
C. Effects of Plan Confirmation. . . . . . . . . . . . . . . . . . 34
1. Discharge . . . . . . . . . . . . . . . . . . . . . . . . . 34
2. Binding Effect. . . . . . . . . . . . . . . . . . . . . . . 34
3. Releases . . . . . . . . . . . . . . . . . . . . . . . . . 35
4. Release of Claims of the Debtor . . . . . . . . . . . . . . 35
5. Exculpation . . . . . . . . . . . . . . . . . . . . . . . . 36
6. Injunction. . . . . . . . . . . . . . . . . . . . . . . . . 36
7. Revesting . . . . . . . . . . . . . . . . . . . . . . . . . 36
D. Executory Contracts and Unexpired Leases. . . . . . . . . . . . 37
1. General . . . . . . . . . . . . . . . . . . . . . . . . . . 37
2. The Plan. . . . . . . . . . . . . . . . . . . . . . . . . . 37
E. Termination of Indemnification Obligations. . . . . . . . . . . 37
F. Claims of Holders of Zero Notes and Capital Indenture Trustees. 39
G. Retention and Enforcement of Causes of Action . . . . . . . . . 39
H. Registration Rights . . . . . . . . . . . . . . . . . . . . . . 39
I. Distributions Under the Plan. . . . . . . . . . . . . . . . . . 39
1. Time of Distributions Under the Plan. . . . . . . . . . . . 39
2. Fractional Securities . . . . . . . . . . . . . . . . . . . 40
3. Compliance with Tax Requirements . . . . . . . . . . . . . 41
4. Allocation Between Principal and Accrued Interest . . . . . 41
5. Distribution of Unclaimed Property. . . . . . . . . . . . . 41
6. Set-Offs. . . . . . . . . . . . . . . . . . . . . . . . . . 41
7. Manner of Payment . . . . . . . . . . . . . . . . . . . . . 41
8. Indenture Trustee Reserve . . . . . . . . . . . . . . . . . 41
J. Surrender and Cancellation ofInstruments. . . . . . . . . . . . 42
K. Procedures for Resolving Disputed Claims. . . . . . . . . . . . 43
1. Objections to Claims. . . . . . . . . . . . . . . . . . . . 43
2. Payments and Distributions With Respect to Disputed Claims. 43
L. Retention of Jurisdiction . . . . . . . . . . . . . . . . . . . 43
M. Claims of Subordination . . . . . . . . . . . . . . . . . . . . 44
N. Amendment and Modification to the Plan. . . . . . . . . . . . . 44
O. Withdrawal of the Plan. . . . . . . . . . . . . . . . . . . . . 44
P. Conditions to Modification, Withdrawal and Waiver Rights. . . . 45
iv
<PAGE>
Page
----
Q. Conditions to Confirmation and the Occurrence of
the Effective Date of the Plan. . . . . . . . . . . . . . . . . 45
1. Entry of Confirmation Order and Settlement Order. . . . . . 46
2. Regulatory Approvals. . . . . . . . . . . . . . . . . . . . 46
3. Trust Indenture Act . . . . . . . . . . . . . . . . . . . . 46
4. Credit Conditions . . . . . . . . . . . . . . . . . . . . . 46
5. Delivery of Documents . . . . . . . . . . . . . . . . . . . 46
6. Other Orders. . . . . . . . . . . . . . . . . . . . . . . . 46
R. Directors of Reorganized Grand Union. . . . . . . . . . . . . . 46
S. Dissolution of Committees . . . . . . . . . . . . . . . . . . . 47
VII. ACCEPTANCE AND CONFIRMATION OF THE PLAN . . . . . . . . . . . . . . 48
A. Solicitation of Acceptance. . . . . . . . . . . . . . . . . . . 48
B. Confirmation Hearing. . . . . . . . . . . . . . . . . . . . . . 48
C. Requirements for Confirmation of the Plan . . . . . . . . . . . 48
1. The Plan is Fair and Equitable. . . . . . . . . . . . . . . 49
2. The Best Interests Test . . . . . . . . . . . . . . . . . . 49
a. The Debtor's Estimate of Liquidation Value . . . . . 50
i. Assumptions. . . . . . . . . . . . . . . . . . 50
ii. Liquidation Analysis . . . . . . . . . . . . . 51
iii. Recoveries under the Plan. . . . . . . . . . . 53
b. Conclusion . . . . . . . . . . . . . . . . . . . . . 54
3. Feasibility . . . . . . . . . . . . . . . . . . . . . . . . 54
VIII. CREDITORS' COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . 54
IX. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN . . . . . 55
A. Liquidation Under Chapter 7 . . . . . . . . . . . . . . . . . . 55
B. Alternative Plan. . . . . . . . . . . . . . . . . . . . . . . . 55
X. RISK FACTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
A. Business Risks. . . . . . . . . . . . . . . . . . . . . . . . . 56
1. Tax Issues. . . . . . . . . . . . . . . . . . . . . . . . . 56
2. Financial Condition of the Debtor; Payment at Maturity;
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . 56
3. Capital Expenditure Program . . . . . . . . . . . . . . . . 57
4. Environmental Regulation and Litigation . . . . . . . . . . 57
5. Competition . . . . . . . . . . . . . . . . . . . . . . . . 57
6. Collective Bargaining Agreements. . . . . . . . . . . . . . 58
B. Bankruptcy Risks. . . . . . . . . . . . . . . . . . . . . . . . 58
1. Objection to Classifications. . . . . . . . . . . . . . . . 58
2. Risk of Nonconfirmation of the Plan . . . . . . . . . . . . 58
3. Potential Effect of Bankruptcy on Certain Relationships . . 58
C. Liquidity Risks . . . . . . . . . . . . . . . . . . . . . . . . 59
1. Restrictions on Transfer. . . . . . . . . . . . . . . . . . 59
2. Potential Illiquidity of Plan Securities. . . . . . . . . . 59
XI. DESCRIPTION OF POST-CONFIRMATION CREDIT AGREEMENT . . . . . . . . . 59
XII. DESCRIPTION OF NEW SENIOR NOTES . . . . . . . . . . . . . . . . . . 59
XIII. DESCRIPTION OF NEW CAPITAL STOCK. . . . . . . . . . . . . . . . . . 60
A. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
B. New Common Stock. . . . . . . . . . . . . . . . . . . . . . . . 60
C. Corporate Governance. . . . . . . . . . . . . . . . . . . . . . 61
D. Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . 61
XIV. SELECTED HISTORICAL FINANCIAL DATA. . . . . . . . . . . . . . . . . 61
v
<PAGE>
Page
----
XV. CERTAIN INFORMATION CONCERNING THE DEBTOR . . . . . . . . . . . . . 62
A. Store Formats . . . . . . . . . . . . . . . . . . . . . . . 62
B. Merchandising Strategy. . . . . . . . . . . . . . . . . . . . . 62
1. Value . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
2. Merchandise Assortment. . . . . . . . . . . . . . . . . . . 62
3. Efficiencies of Distribution. . . . . . . . . . . . . . . 62
C. Selected Data . . . . . . . . . . . . . . . . . . . . . . . . . 62
D. Summary of Operations . . . . . . . . . . . . . . . . . . . . . 63
1. Northern Region . . . . . . . . . . . . . . . . . . . . . . 63
2. New York Region . . . . . . . . . . . . . . . . . . . . . . 63
E. Capital Investment. . . . . . . . . . . . . . . . . . . . . . . 64
F. Distribution, Supply and Management Information Systems . . . . 64
1. Distribution. . . . . . . . . . . . . . . . . . . . . . . . 64
2. Montgomery, New York Distribution Agreement . . . . . . . . 64
3. Management-Information Systems. . . . . . . . . . . . . . . 65
4. Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . 65
5. Commissary. . . . . . . . . . . . . . . . . . . . . . . . . 65
G. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . 65
1. Location and Number of Stores . . . . . . . . . . . . . . . 65
2. Other Properties. . . . . . . . . . . . . . . . . . . . . . 66
H. Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
I. Regulatory and Legal Matters. . . . . . . . . . . . . . . . . . 67
1. Federal Trade Commission. . . . . . . . . . . . . . . . . . 67
2. Environmental . . . . . . . . . . . . . . . . . . . . . . . 68
3. Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
J. Trade Names, Service Marks and Trademarks . . . . . . . . . . . 69
K. Competition . . . . . . . . . . . . . . . . . . . . . . . . . . 69
L. Outstanding Pension Plans and Liabilities . . . . . . . . . . . 69
M. Executive Officers. . . . . . . . . . . . . . . . . . . . . . . 71
N. Executive Compensation. . . . . . . . . . . . . . . . . . . . . 71
O. Related Party Transactions. . . . . . . . . . . . . . . . . . . 72
1. MTH Management Agreement. . . . . . . . . . . . . . . . . . 72
2. P&C Foods . . . . . . . . . . . . . . . . . . . . . . . . . 72
3. Montgomery Warehouse. . . . . . . . . . . . . . . . . . . . 73
4. Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
XVI. EXEMPTIONS FROM SECURITIES ACT REGISTRATION . . . . . . . . . . . . 73
XVII. ABSENCE OF PUBLIC TRADING MARKET; AVAILABLE INFORMATION;
FILINGS WITH THE COMMISSION AND RELATED MATTERS . . . . . . . . . . 74
XVIII. CERTAIN FEDERAL INCOME TAX CONSEQUENCES . . . . . . . . . . . . . . 75
A. Tax Consequences to Creditors . . . . . . . . . . . . . . . . . 75
1. Holders of Senior Note Claims and Senior Subordinated
Note Claims . . . . . . . . . . . . . . . . . . . . . . . . 75
2. Original Issue Discount . . . . . . . . . . . . . . . . . . 76
3. Market Discount . . . . . . . . . . . . . . . . . . . . . . 77
4. Market Discount, Treatment of Receipt of New
Common Stock or New Senior Notes . . . . . . . . . . . . . 77
5. Holders of Credit Agreement Claims. . . . . . . . . . . . . 78
6. Allocation of Consideration Received. . . . . . . . . . . . 78
7. Distribution of Warrants to Holders of Zero Notes . . . . . 79
8. Backup Withholding and Information Reporting. . . . . . . . 79
vi
<PAGE>
Page
----
B. Tax Consequences to Reorganized Grand Union . . . . . . . . . . 79
1. Cancellation of Indebtedness. . . . . . . . . . . . . . . . 79
2. Limitation on Net Operating Losses. . . . . . . . . . . . . 79
3. Liability of Reorganized Grand Union for
Prior Federal Income Taxes. . . . . . . . . . . . . . . . . 80
XIX. FINANCIAL AND LEGAL ADVISORS; FEES AND EXPENSES . . . . . . . . . . 80
XX. CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
APPENDICES
Appendix A - Second Amended Chapter 11 Plan of Reorganization of The Grand Union
Company, dated April 19, 1995
Appendix B - Pro Forma Capitalization and Financial Projections
Appendix C - Term Sheet of New Senior Notes
Appendix D - Debtor's 10-K for the Fiscal Year ended April 2, 1994 and 10-Q for
the Fiscal Quarter ended January 7, 1995
vii
<PAGE>
I. INTRODUCTION AND SUMMARY
The following introduction and summary is qualified in its entirety by, and
should be read in conjunction with, the more detailed information and financial
statements and notes thereto appearing elsewhere in this Disclosure Statement.
References herein to a "fiscal" year refer to the fiscal year of the Debtor
ended the Saturday closest to the last day of March in the calendar year
indicated (e.g., references to fiscal 1994 are references to the Debtor's
fiscal year ended April 2, 1994), except as otherwise indicated. All
capitalized terms used in this Disclosure Statement have the meanings ascribed
to such terms in the Plan, a copy of which is annexed hereto as Appendix "A",
except as otherwise indicated.
A. The Solicitation
The Debtor is hereby soliciting (the "Solicitation") votes for acceptance of
the Plan under the Bankruptcy Code from the holders of (i) Credit Agreement
Claims, (ii) Interest Rate Protection Agreement Claims, (iii) (a) the Debtor's
11-1/4% Senior Notes and (b) the Debtor's 11-3/8% Senior Notes, (iv) Priority
Claims, (v) General Unsecured Claims, (vi) (a) the Debtor's 13% Senior
Subordinated Notes, (b) the Debtor's 12-1/4% Senior Subordinated Notes and (c)
the Debtor's 12-1/4% Senior Subordinated Notes, Series A, (vii) Grand Union
Capital Corporation's Senior Zero Notes and (viii) Grand Union Capital
Corporation's Junior Zero Notes. The Debtor is not soliciting votes from
holders of, among others, Trade Claims, which are not Impaired by the Plan. If
the requisite acceptances of the Plan are obtained, the Debtor intends to use
such acceptances to obtain confirmation of the Plan by the Bankruptcy Court.
The Bankruptcy Court has fixed the close of business (Eastern Standard Time) on
April 19, 1995 as the record date for the determination of those holders of
Claims entitled to vote on the Plan.
B. The Plan
Set forth below is a summary of the significant principles upon which the
Plan is founded.
1. Exchange of Senior Note Claims for New Senior Notes
On or about the Effective Date and subject to Section 12.02 of the Plan, the
Senior Note Claims (equal to the aggregate face amount of the 11-1/4% Senior
Notes due 2000 and the 11-3/8% Senior Notes due 1999, plus accrued but unpaid
interest and interest on overdue interest as of the Effective Date) will be
exchanged for the New Senior Notes. The Debtor estimates that the aggregate
amount of the Senior Note Claims is approximately $570,807,000, assuming an
Effective Date of April 29, 1995, calculated as follows (all numbers are
rounded to the nearest thousand):
<TABLE>
<CAPTION>
Compound
Principal Interest Interest
Senior Note Issue Amount Amount Amount Total
- ------------------- -------------- ------------- ---------- --------------
<S> <C> <C> <C> <C>
11-1/4% Senior Notes $350,000,000 $30,953,000 $634,000 $381,587,000
11-3/8% Senior Notes 175,000,000 13,990,000 230,000 189,220,000
-------------- ------------- ---------- --------------
Total ............. $570,807,000
-------------
-------------
</TABLE>
For a more detailed description of the New Senior Notes, see "DESCRIPTION OF
NEW SENIOR NOTES" and the Term Sheet of New Senior Notes, annexed hereto as
Appendix "C".
1
<PAGE>
2. Subordinated Debt Conversion and Equity Recapitalization
The Debtor estimates that the aggregate amount of the Senior Subordinated
Note Claims is approximately $602,494,000, calculated as follows (all numbers
are rounded to the nearest thousand):
<TABLE>
<CAPTION>
Compound
Principal Interest Interest
Senior Subordinated Note Issue Amount Amount Amount Total
- ------------------------------------------- ------------ ----------- -------- ------------
<S> <C> <C> <C> <C>
13% Senior Subordinated Notes............. $ 16,150,000 $ 671,000 $ N/A $ 16,821,000
12-1/4% Senior Subordinated Notes......... 500,000,000 32,326,000 104,000 532,430,000
12-1/4% Senior Subordinated Notes, Series A 50,000,000 3,233,000 10,000 53,243,000
------------ ----------- -------- ------------
Total.................................... $602,494,000
------------
------------
</TABLE>
On or about the Effective Date, the Senior Subordinated Notes will be
cancelled and, subject to Section 12.02 of the Plan, the holders thereof will
be entitled to receive 100% of the 10,000,000 shares of New Common Stock to be
issued under the Plan. All of the issued and outstanding shares of the old
common stock will be cancelled. The following table sets forth the expected
ownership of the New Common Stock after giving effect to the Plan:
Shares of New Common Stock
Post-Restructuring
<TABLE>
<CAPTION>
Number of % of
Issued Issued
Senior Subordinated Note Issue Shares Shares
- ----------------------------------------- ---------- --------
<S> <C> <C>
13% Senior Subordinated Notes............. 279,190 2.79%
12-1/4% Senior Subordinated Notes......... 8,837,100 88.37%
12-1/4% Senior Subordinated Notes, Series A 883,710 8.84%
---------- --------
Total................................ 10,000,000 100.00%
---------- --------
---------- --------
</TABLE>
For a discussion of the terms of the New Common Stock, see "DESCRIPTION OF
NEW CAPITAL STOCK."
3. Post-Confirmation Credit Agreement and Credit Agreement Claims
(a) On the Effective Date, each holder of an Allowed Credit Agreement Claim
will receive with respect to such Claim the treatment set forth in subparagraph
(i) hereof, unless, at the sole option of the Debtor (which option will be
exercised not later than five (5) days prior to the commencement of the
confirmation hearing), such holder will receive the treatment described in
subparagraph (ii) below:
(i) (x) Reorganized Grand Union will execute the Post-Confirmation
Credit Documents and such documents will become effective (provided that
the other conditions contained in the Commitment Letter and the Credit
Facility Term Sheet, as and if amended by consent of Bankers Trust and the
Debtor, have been satisfied). Pursuant to the Post-Confirmation Credit
Agreement, the commitment with respect to the amount of the Revolving
Credit Facility and the Term Facility will be increased in the aggregate by
not less than $65 million;
(y) The Post-Confirmation Facility will be secured by a perfected,
first priority lien and security interest in all of the tangible and
intangible assets (including, without limitation, all assets as described
in the Commitment Letter, including leases) of Reorganized Grand Union and
its subsidiaries, whether in existence at the Effective Date or acquired
thereafter, subject only to such liens as may be permitted pursuant to the
Post-Confirmation Credit Documents. Pursuant to the Intercreditor
Agreement, the Additional Facility Lenders will have priority (with respect
to the Additional Facility and with respect to those loans owed to, and
letter of credit exposure of, such Additional Facility Lenders under the
Existing Credit Agreement as set forth in the Intercreditor Agreement) over
Existing Banks who do not contribute to the Additional Facility; and
2
<PAGE>
(z) Upon confirmation of the Plan, but effective as of the Effective
Date, the Debtor, Reorganized Grand Union, any Entity issuing securities
under the Plan, any Entity acquiring property under the Plan, and any
Creditor and/or equity security holder of the Debtor, will be deemed
contractually to subordinate any present or future claim, right or other
interest they may have in and to any proceeds received from the
disposition, release, or liquidation of any Leasehold Interest, or any
funds or proceeds received as a result of a subsequent pledge of such
Leasehold Interest, to the obligations owed to the Post-Confirmation Banks
pursuant to the Post-Confirmation Credit Documents until such obligations
are paid in full; or
(ii) The Debtor will obtain a binding Alternative Commitment Letter
from an alternative lender for the provision of not less than $204 million
in loan facilities (of which not less than $57 million will be term
facilities) on the Effective Date on terms satisfactory to the Debtor and
reasonably satisfactory to the Official Committee and the Informal
Committee of Senior Noteholders, in which event:
(x) The holder of an Allowed Credit Agreement Claim will receive on
the Effective Date, cash payments equal to 100% of such Allowed Credit
Agreement Claim; and
(y) Upon payment in full of the Allowed Credit Agreement Claims, the
Existing Credit Agreement will be terminated and the notes issued pursuant
thereto will be cancelled.
(b) On the Effective Date, all interest, fees, expenses and other charges
that have accrued pursuant to the terms of the Existing Credit Documents but
have not been paid as of the Effective Date will be paid to the Senior Bank
Agent for distribution to those parties entitled to receive such interest,
fees, expenses and other charges pursuant to the Existing Credit Documents.
For a more detailed description of the terms of the Post-Confirmation Credit
Agreement, see "DESCRIPTION OF POST-CONFIRMATION CREDIT AGREEMENT" and the
Commitment Letter and the Credit Facility Term Sheet, both of which are annexed
to the Plan as Exhibit "A".
4. Interest Rate Protection Agreement Claims
With respect to each Allowed Interest Rate Protection Agreement Claim, at the
sole option of Reorganized Grand Union, to be exercised on the Effective Date:
(a) the legal, equitable and contractual rights to which the Allowed Interest
Rate Protection Agreement Claim entitles the holder of such Allowed Interest
Rate Protection Agreement Claim will be unaltered by the Plan and the Debtor
shall, on the Effective Date, cure any defaults with respect thereto; or (b) on
the Effective Date, the holder of an Allowed Interest Rate Protection Agreement
Claim will receive a cash payment equal to 100% of such Allowed Interest Rate
Protection Agreement Claim.
5. Trade Creditors
THE PLAN PROVIDES FOR ANY UNPAID PREPETITION TRADE CLAIMS TO BE PAID IN FULL
AND SUCH CLAIMS ARE UNIMPAIRED UNDER THE PLAN. SINCE THE COMMENCEMENT OF THE
BANKRUPTCY CASE, THE DEBTOR HAS REMAINED IN POSSESSION OF AND CONTINUES TO
OPERATE ITS BUSINESS IN THE ORDINARY COURSE AND TO PAY ALL POSTPETITION CLAIMS
OF TRADE CREDITORS IN FULL ON A TIMELY BASIS. THE DEBTOR HAS OBTAINED THE
APPROVAL OF THE BANKRUPTCY COURT TO PAY IN THE ORDINARY COURSE THE PREPETITION
CLAIMS OF EACH TRADE CREDITOR WHO AGREES (I) TO CONTINUE TO SUPPLY PRODUCTS TO
THE DEBTOR ON CUSTOMARY TRADE TERMS (INCLUDING PRIOR ALLOWANCES AND PRACTICES)
AND (II) THAT IF THIS "TRADE PAYMENT PROGRAM" OR SUCH TRADE CREDITOR'S
PARTICIPATION THEREIN IS TERMINATED, THEN ANY PAYMENTS BY THE DEBTOR TO SUCH
TRADE CREDITOR IN RESPECT OF ANY PREPETITION CLAIMS WILL BE DEEMED TO HAVE BEEN
MADE IN PAYMENT OF THEN OUTSTANDING POSTPETITION OBLIGATIONS OWED TO SUCH TRADE
CREDITOR AND SUCH TRADE CREDITOR WILL IMMEDIATELY REPAY TO THE DEBTOR
3
<PAGE>
ANY PAYMENTS MADE TO SUCH CREDITOR ON ACCOUNT OF PREPETITION CLAIMS TO THE
EXTENT THE AGGREGATE AMOUNT OF SUCH PAYMENTS EXCEEDS THE POSTPETITION
OBLIGATIONS THEN OUTSTANDING (WITHOUT THE RIGHT OF ANY SETOFFS, CLAIMS,
PROVISIONS FOR PAYMENT OF RECLAMATION OR TRUST FUND CLAIMS, OR OTHERWISE). SEE
"THE CHAPTER 11 CASE-TRADE CREDITOR ORDER." THE DEBTOR BELIEVES THAT IT WILL
HAVE SUFFICIENT FUNDS FROM OPERATIONS, THE DIP FACILITY AND THE USE OF CASH
COLLATERAL FOR THE TIMELY PAYMENT OF ITS TRADE CREDITORS IN THE ORDINARY COURSE
THROUGH THE CONCLUSION OF THE BANKRUPTCY PROCEEDING, AND TO HAVE SUFFICIENT
LIQUIDITY FROM OPERATIONS AND THE POST-CONFIRMATION CREDIT AGREEMENT TO MAKE
SUCH PAYMENTS THEREAFTER.
Under the Plan, each trade creditor asserting, in the aggregate, less than
$25,000 in Trade Claims, will not be required to file a proof (or proofs) of
claim with respect to such Trade Claims. Each trade creditor asserting, in the
aggregate, $25,000 or more in Trade Claims, will be required to file a proof
(or proofs) of claim with respect to such Trade Claims. For further
information, see "THE PLAN-Classification and Treatment of Claims and Interests
under the Plan-Class 6-Trade Claims."
6. General Unsecured Claims
On the latest of (a) the Effective Date, (b) the date such General Unsecured
Claim becomes an Allowed Claim, and (c) the date, or dates, on which
Reorganized Grand Union or the Debtor, as the case may be, and the holder of
such General Unsecured Claim otherwise agree or have agreed, each holder of an
Allowed General Unsecured Claim will be entitled to receive payment in full in
an amount equal to 100% of such Allowed General Unsecured Claim. General
Unsecured Claims include, among other things, the fees and expenses of the
Indenture Trustees pursuant to the Indentures whether accruing before or after
the Filing Date (except to the extent such fees and expenses are Miscellaneous
Secured Claims or Administrative Expenses).
7. The Zero Settlement
In settlement of various actions brought by the Official Committee of
Unsecured Creditors of Grand Union Capital Company, the Debtor's parent company
and also a debtor in possession under chapter 11 of the Bankruptcy Code, the
Debtor has agreed to provide Warrants for the right to purchase a certain
number of shares of New Common Stock to holders of the Zero Notes issued by
Grand Union Capital Corporation.
For a more complete description of the terms of the Debtor's settlement with
the Official Committee of Unsecured Creditors of Grand Union Capital
Corporation and the terms of the warrants, see "THE CHAPTER 11 CASE-Zero
Settlement" and "THE PLAN-Classification and Treatment of Claims and Interests
Under the Plan-Class 9-Senior Zero Note Claims and Class 10-Junior Zero Note
Claims."
8. Board of Directors
The Debtor's Board of Directors currently consists of Messrs. Hirsch
(Chairman), Fox, McCaig (Chief Executive Officer), Louttit (Chief Operating
Officer) and Baum (Chief Financial Officer). In addition, the Debtor is a party
to the MTH Management Agreement.
On the Effective Date, each of the existing members of the Board of Directors
will be deemed to have resigned. The initial Post Reorganization Board of
Directors will consist of seven (7) members who will be selected by the members
of the Official Committee which were members of the Informal Committee of
certain holders of Senior Subordinated Notes. Such board members will be
identified not less than five (5) days prior to the Confirmation Date; provided
that if and to the extent that any member(s) of the Post Reorganization Board
are not so identified by five (5) days prior to the Confirmation Date, the
Debtor will designate such member(s). The composition of the Post
Reorganization Board of Directors will be subject to approval of the
4
<PAGE>
Bankruptcy Court. A list of such directors will be filed at or prior to the
Confirmation Hearing. See "THE PLAN-Directors of Reorganized Grand Union." From
and after the Effective Date, selection of the members of the Post
Reorganization Board will be governed by the Restated Bylaws and/or the
Restated Certificate of Incorporation, as the case may be.
The Debtor anticipates that (i) Reorganized Grand Union will maintain officer
and director insurance liability coverage comparable to that currently in
effect and (ii) while the precise amount of the compensation to outside
directors will be determined by the Post Reorganization Board of Directors,
Reorganized Grand Union will compensate its outside directors in a manner
consistent with compensation provided to outside directors of companies of a
similar size and nature.
Messrs. Hirsch and Fox have informed the Debtor that they do not intend to be
candidates for election as directors of Reorganized Grand Union. Further, on
the Effective Date, the MTH Management Agreement will be terminated and
Reorganized Grand Union will execute the MTH Settlement Agreement. See "The
Plan-Directors of Reorganized Grand Union." A copy of the MTH Settlement
Agreement is annexed to the Plan as Exhibit "B". There can be no assurances
that the Post Reorganization Board will not make one or more changes in senior
management after the Effective Date. It is anticipated that any changes which
are intended to be made prior to the confirmation hearing will be disclosed at
such hearing.
9. Restated Certificate of Incorporation
On the Effective Date, Reorganized Grand Union will adopt the Restated
Certificate of Incorporation, the principal effects of which are: (i) to
authorize 30,000,000 shares of New Common Stock (of which up to 10,000,000
shares will be issued under the Plan) and 10,000,000 shares of Preferred Stock;
(ii) to provide for the cancellation of the old common stock; and (iii) to
prohibit the issuance of non-voting equity securities, as and to the extent
required by section 1123(a)(6) of the Bankruptcy Code.
The Restated Certificate of Incorporation will provide that a director of
Reorganized Grand Union will not be personally liable to Reorganized Grand
Union or its stockholders for monetary damages for any breach of fiduciary duty
as a director, except in certain cases where liability is mandated by the
Delaware General Corporation Law (the "DGCL"). The provision has no effect on
any non-monetary remedies that may be available to Reorganized Grand Union for
non-compliance with federal or state securities laws. The Restated Certificate
of Incorporation provides, among other things, for indemnification, to the
fullest extent permitted by the DGCL, of any person who is or was involved in
any manner in any investigation, claim or other proceeding by reason of the
fact that such person is or was a director or officer of Reorganized Grand
Union, or is or was serving at the request of Reorganized Grand Union as a
director or officer of another corporation, against all expenses and
liabilities actually and reasonably incurred by such person in connection with
the investigation, claim or other proceeding.
C. Summary of Classification and Treatment of Claims and Interests
The Plan categorizes the Claims against and Interests in the Debtor into
twelve (12) Classes. The Plan also provides that expenses incurred by the
Debtor during the Chapter 11 Case will be paid in full and specifies the manner
in which the Claims and Interests in each Class are to be treated. To the
extent that the terms of this Disclosure Statement vary with the terms of the
Plan, the terms of the Plan shall be controlling. The table below provides a
summary of the classification and treatment of Claims and Interests under the
Plan:
Class Type of Claim or Interest Treatment
- ----- ------------------------- ---------
N/A Administrative Expenses Allowed Administrative Expenses will be paid
in full in cash by Reorganized Grand Union,
at its option, on (a) the later of (i) the
Effective Date and (ii) the date on which the
Bankruptcy Court enters an order allowing
such Administrative Expense, or (b) the
5
<PAGE>
Class Type of Claim or Interest Treatment
- ----- ------------------------- ---------
N/A Administrative Expenses date, or dates, on which Reorganized Grand
(cont'd) Union or the Debtor, as the case may be, and
the Entity claiming such Allowed
Administrative Expense otherwise agree or
have agreed; provided, however, that Allowed
Administrative Expenses representing
obligations incurred in the ordinary course
of business by the Debtor during the Chapter
11 Case will be paid by the Debtor or
Reorganized Grand Union, as the case may be,
in the ordinary course of business and in
accordance with any terms and conditions of
the particular transaction, and any
agreements relating thereto. Any final
request for payment of Administrative
Expenses, including, without limitation,
applications for compensation and
reimbursement of expenses by professionals
employed by the Debtor and the Official
Committee, must be filed no later than
forty-five (45) days after the Effective
Date; provided that, no request for payment
of an Administrative Expense need be filed
with respect to an Administrative Expense
which is paid or payable by the Debtor or
Reorganized Grand Union in the ordinary
course, including, without limitation, any
Administrative Expense which would have been
a Trade Claim had it arisen prior to the
Filing Date.
N/A Priority Tax Claims With respect to each Allowed Priority Tax
Claim, at the sole option of Reorganized
Grand Union, the holder of an Allowed
Priority Tax Claim will be entitled to
receive on account of such Allowed Priority
Tax Claim: (a) equal cash payments made on
the last Business Day of every three (3)
month period following the Effective Date,
over a period not exceeding six (6) years
after the assessment of the tax on which such
Claim is based, totalling the principal
amount of such Claim plus simple interest on
any outstanding balance from the Effective
Date calculated at the interest rate
available on ninety (90) day United States
Treasuries on the Effective Date; (b) such
other treatment agreed to by the holder of
such Allowed Priority Tax Claim and the
Debtor or Reorganized Grand Union, as the
case may be, provided such treatment is on
more favorable terms to the Debtor or
Reorganized Grand Union, as the case may be,
than the treatment set forth in clause (a)
hereof; or (c) payment in full, provided
that, with respect to paragraphs (b) and (c)
hereof, such treatment is approved by the
Bankruptcy Court.
1 Credit Agreement Claims Impaired. (a) On the Effective Date, each
holder of an Allowed Credit Agreement Claim
will receive with respect to such Claim the
treatment set forth in subsection (i) below,
unless, at the sole option of the Debtor
(which option will be exercised not later
than five (5) days prior to the commencement
of the confirmation hearing), such holder
will receive the treatment described in
subsection (ii) below: (i)(x) Reorganized
Grand Union will execute the
Post-Confirmation Credit Documents and such
documents will become effective (provided
that the other conditions contained in the
Commitment Letter and the Credit Facility
Term Sheet, as and if amended by consent of
Bankers Trust and the Debtor, have been
satisfied); pursuant to the Post-Confirmation
Credit
6
<PAGE>
Class Type of Claim or Interest Treatment
- ----- ------------------------- ---------
Agreement, the commitment with respect to the
amount of the Revolving Credit Facility and
the Term Facility will be increased in the
aggregate by not less than $65 million; (y)
the Post-Confirmation Facility will be
secured by a perfected, first priority lien
and security interest in all of the tangible
and intangible assets (including, without
limitation, all assets as described in the
Commitment Letter, including leases) of
Reorganized Grand Union and its subsidiaries,
whether in existence at the Effective Date or
acquired thereafter, subject only to such
liens as may be permitted pursuant to the
Post-Confirmation Credit Documents; pursuant
to the Intercreditor Agreement, the
Additional Facility Lenders will have
priority (with respect to the Additional
Facility and with respect to those loans owed
to, and letter of credit exposure of, such
Additional Facility Lenders under the
Existing Credit Agreement as set forth in the
Intercreditor Agreement) over Existing Banks
who do not contribute to the Additional
Facility; and (z) upon confirmation of the
Plan, but effective as of the Effective Date,
the Debtor, Reorganized Grand Union, any
Entity issuing securities under the Plan, any
Entity acquiring property under the Plan, and
any Creditor and/or equity security holder of
the Debtor, will be deemed contractually to
subordinate any present or future claim,
right or other interest they may have in and
to any proceeds received from the
disposition, release, or liquidation of any
Leasehold Interest, or any funds or proceeds
received as a result of a subsequent pledge
of such Leasehold Interest, to the
obligations owed to the Post-Confirmation
Banks pursuant to the Post-Confirmation
Credit Documents until such obligations are
paid in full; or (ii) the Debtor will obtain
a binding Alternative Commitment Letter from
an alternative lender for the provision of
not less than $204 million in loan facilities
(of which not less than $57 million will be
term facilities) on the Effective Date, in
which event: (x) the holder of an Allowed
Credit Agreement Claim will receive on the
Effective Date, cash payments equal to 100%
of such Allowed Credit Agreement Claim; and
(y) upon payment in full of the Allowed
Credit Agreement Claims, the Existing Credit
Agreement will be terminated and the notes
issued pursuant thereto will be cancelled.
(b) On the Effective Date, all interest,
fees, expenses and other charges that have
accrued pursuant to the terms of the Existing
Credit Documents but have not been paid as of
the Effective Date will be paid to the Senior
Bank Agent for distribution to those parties
entitled to receive such interest, fees,
expenses and other charges pursuant to the
Existing Credit Documents.
2 Interest Rate Protection Impaired. With respect to each Allowed
Agreement Claims Interest Rate Protection Agreement Claim, at
the sole option of Reorganized Grand Union,
to be exercised on the Effective Date: (a)
the legal, equitable and contractual rights
to which the Allowed Interest Rate Protection
Agreement Claim entitles the holder of such
Allowed Interest Rate Protection Agreement
Claim will be unaltered by the Plan and the
Debtor shall, on the Effective Date,
7
<PAGE>
Class Type of Claim or Interest Treatment
- ----- ------------------------- ---------
2 Interest Rate Protection cure any defaults with respect thereto; or
Agreement Claims(cont'd) (b) on the Effective Date, the holder of an
Allowed Interest Rate Protection Agreement
Claim will receive a cash payment equal to
100% of such Allowed Interest Rate Protection
Agreement Claim.
3 Miscellaneous Secured Unimpaired. With respect to each Allowed
Claim Miscellaneous Secured Claim, at the sole
option of Reorganized Grand Union to be
exercised on the Effective Date: (a) the
legal, equitable and contractual rights of
such Allowed Miscellaneous Secured Claim will
remain unaltered, or (b) Reorganized Grand
Union will provide such other treatment that
will render such Allowed Miscellaneous
Secured Claim Unimpaired under section 1124
of the Bankruptcy Code; provided that the
Miscellaneous Secured Claims, if any, of the
Indenture Trustees for the Senior Notes will
be treated in accordance with Section 12.07
of the Plan.
4 Senior Note Claims Impaired. On the Effective Date, the Senior
Notes will be cancelled, Reorganized Grand
Union will execute the New Senior Note
Indenture, and, subject to Section 12.02 of
the Plan, each holder of an Allowed Senior
Note Claim will be entitled to receive its
pro rata share of New Senior Notes. Such pro
rata share will be determined by the ratio
between the amount of such holder's Allowed
Senior Note Claims and the aggregate amount
of Allowed Senior Note Claims, each
calculated as of the Filing Date without
taking into account any interest on overdue
interest or Sections 7.02 and 7.03 of the
Plan, and pursuant to Section 12.02 of the
Plan.
5 Priority Claims (other Impaired. On the latest of (a) the Effective
than Administrative Date, (b) the date such Priority Claim
Expenses and Priority Tax becomes an Allowed Claim, or (c) the date,
Claims) or dates, on which Reorganized Grand Union or
the Debtor, as the case may be, and the
holder of such Allowed Priority Claim
otherwise agree or have agreed, each holder
of a Priority Claim will receive payment in
full of 100% of such Allowed Priority Claim.
6 Trade Claims Unimpaired. (a) Each Creditor asserting Trade
Claim(s) that, in the aggregate, are less
than $25,000 in amount (Class 6(a) Claims),
need not file a proof of claim with respect
to such Trade Claim(s) in order to receive a
distribution under the Plan. (b) Each
Creditor asserting Trade Claim(s) that, in
the aggregate, are $25,000 or more in amount
(Class 6(b) Claims), must file a proof of
claim with respect to such Trade Claim(s) on
or before the Claims Bar Date. In the Event
that any such Creditor does not timely file a
proof of claim with respect to its Trade
Claim(s), all Trade Claim(s) asserted by such
Creditor will be barred and discharged;
provided, however, that such Trade Creditor
will be treated as having filed a proof of
claim with respect to its Trade Claim(s) in
the amount(s), if any, that is/are listed in
the Schedules regardless of whether such
Trade Claim(s) are listed in the Schedules as
disputed, contingent or unliquidated. (c)
With respect to each Trade Claim included in
either Class 6(a) or in Class 6(b) that is
8
<PAGE>
Class Type of Claim or Interest Treatment
- ----- ------------------------- ---------
not barred or discharged pursuant to Section
6.06(b) of the Plan, and subject to the terms
of any Trade Agreement and to the rights set
forth in Section 6.06(e) of the Plan, at the
sole option of the Debtor, (i) the legal,
equitable and contractual rights to which the
Trade Claim entitles the holder of such Claim
will remain unaltered or (ii) the Debtor will
provide such other treatment that will render
such Trade Claim an Unimpaired Claim under
section 1124 of the Bankruptcy Code. (d)
Unless a Creditor asserting Trade Claim(s)
files a written objection to the Plan, such
Creditor will be deemed to have waived and
forever released any right to assert or claim
that it may be entitled to interest accruing
with respect to such Creditor's Trade
Claim(s) and any such claims or assertions
for interest will be forever barred and
discharged. In the event that a Creditor
asserting Trade Claim(s) objects to the Plan
in writing, such objecting Creditor's Trade
Claim(s) will be deemed included in Class 7
of the Plan (General Unsecured Claims) and
will be deemed to have voted to reject the
Plan. In the event included in Class 7, the
objecting Creditor asserting a Trade Claim
will be subject to the proof of claim and
bankruptcy claims administration requirements
that are applicable to other Class 7
Creditors. Notwithstanding anything herein to
the contrary, a Creditor whose Claim would
have been included in either Class 6(a) or
6(b) but for the objection referenced in this
paragraph: (i) with respect to a Creditor
which would have been included in Class 6(a),
(y) such Creditor may rely on the amount of
its Claim as set forth in the Schedules in
the event that its Claim is not listed as
contingent, disputed or unliquidated, or, (z)
in the event that its Claim is so designated,
or not scheduled, such Creditor will have ten
(10) days from the date its objection is
filed within which to file a proof claim
which Claim may not exceed $25,000 plus any
Claim for interest on such Claim; and (ii)
with respect to a Creditor which would have
been included in Class 6(b), such Creditor
will either (y) Have filed a proof of claim
by the Claims Bar Date or (z) its Claim will
be limited by the amount of such Claim as set
forth in the Schedules unless such Claim is
listed as contingent, disputed or
unliquidated and, in the event of such
designation, such Creditor will have ten (10)
days from the date its objection is filed
within which to file a proof of claim which
Claim will not exceed the amount for which it
was scheduled plus any claim for interest on
such Claim. (e) The Debtor's failure to file
an objection with the Bankruptcy Court to a
Trade Claim will be without prejudice to
Reorganized Grand Union's right to contest or
otherwise defend against such Trade Claim in
the appropriate forum, including the
Bankruptcy Court, when and if such Trade
Claim is sought to be enforced by the holder
thereof.
7 General Unsecured Claims Impaired. On the latest of (a) the Effective
Date, (b) the date on which such General
Unsecured Claim becomes an Allowed Claim, or
(c) the date, or dates, on which Reorganized
Grand Union or the Debtor, as the case may
be, and the holder of such General
9
<PAGE>
Class Type of Claim or Interest Treatment
- ----- ------------------------- ---------
7 General Unsecured Claims Unsecured Claim otherwise agree or have
(cont'd) agreed, each holder of an Allowed General
Unsecured Claim will receive payment in full
of 100% of such Allowed General Unsecured
Claim. Subject to Section 12.07 of the Plan,
any General Unsecured Claims of an Indenture
Trustee will be paid in full on the Effective
Date or on such later date as agreed to by
the parties.
8 Senior Subordinated Impaired. On the Effective Date, the Senior
Note Claims Subordinated Notes will be cancelled, and,
subject to Section 12.02 of the Plan, each
holder of an Allowed Senior Subordinated Note
Claim will be entitled to receive its pro
rata share of the 10,000,000 shares of New
Common Stock to be issued under the Plan.
Such pro rata share will be determined by the
ratio between the amount of such holder's
Allowed Senior Subordinated Note Claim and
the aggregate amount of all Allowed Senior
Subordinated Note Claims as of the Effective
Date, and pursuant to Section 12.02 of the
Plan. Senior Subordinated Note Claims will be
allowed in an amount equal to the principal
amount of such notes plus accrued but unpaid
interest to the Filing Date.
9 Senior Zero Note Claims Impaired. (a) Subject to the terms and
conditions set forth in the Zero Settlement,
and solely for purposes of effectuating such
settlement, on the Effective Date, the Senior
Zero Note Claims will be allowed as set forth
in Section 7.09 of the Plan (subordinate to
all Claims and Administrative Expenses
against the Debtor, other than Claims set
forth in Classes 10 and 11), in the amount
allowed pursuant to Section 7.09 of the Plan,
the Senior Zero Notes will be cancelled, and,
subject to Section 12.02 of the Plan, each
holder of an Allowed Senior Zero Note Claim
will be entitled to receive its pro rata
share of 240,000 Series 1 Warrants and of
480,000 Series 2 Warrants to be issued under
the Plan as its full recovery against the
Debtor and Reorganized Grand Union on its
Senior Zero Note Claims. Such pro rata share
will be determined by the ratio between the
face amount of such holder's Senior Zero
Notes and the aggregate face amount of all
Senior Zero Notes and pursuant to Section
12.02 of the Plan. (b) Notwithstanding
anything in the Plan to the contrary, it will
be a condition to the issuance of the
Warrants (i) with respect to the Senior Zero
Note Claims held by a particular Entity
holding Senior Zero Notes that, in the
aggregate, are $200,000 or more in face
amount, that such Entity execute and deliver
a Zero Claims Release, and (ii) with respect
to each holder of a Senior Zero Note Claim,
that such holder not have filed a written
objection to confirmation of the Plan (which
is not withdrawn prior to commencement of the
hearing on confirmation of the Plan). Any
Warrants not issued by operation of the
foregoing before the later of (i) two (2)
years from the Effective Date, and (ii) six
(6) months following the date such holder's
Claim becomes an Allowed or Ultimately
Allowed Claim will be deemed to be unclaimed
property and cancelled. (c) The Debtor has
not and shall not be deemed to have assumed
any liability related to or arising from the
Zero Notes.
10
<PAGE>
Class Type of Claim or Interest Treatment
- ----- ------------------------- ---------
10 Junior Zero Note Claims Impaired. (a) Subject to the terms and
conditions set forth in the Zero Settlement,
and solely for purposes of effectuating such
settlement, on the Effective Date, the Junior
Zero Note Claims will be allowed as set forth
in Section 7.10 of the Plan (subordinate to
all Claims and Administrative Expenses
against the Debtor, other than Claims set
forth in Class 11) in the amount allowed
pursuant to Section 7.10 of the Plan, the
Junior Zero Notes will be cancelled, and,
subject to Section 12.02 of the Plan, each
holder of an Allowed Junior Zero Note Claim
will be entitled to receive its pro rata
share of 60,000 Series 1 Warrants and of
120,000 Series 2 Warrants to be issued under
the Plan as its full recovery against the
Debtor and Reorganized Grand Union on its
Junior Zero Note Claims. Such pro rata share
will be determined by the ratio between the
face amount of such holder's Junior Zero
Notes and the aggregate amount of all Junior
Zero Notes, and pursuant to Section 12.02 of
the Plan. (b) Notwithstanding anything in the
Plan to the contrary, it will be a condition
to the issuance of the Warrants (i) with
respect to the Junior Zero Note Claims held
by a particular Entity holding Junior Zero
Notes that, in the aggregate, are $200,000 or
more in face amount, that such Entity execute
and deliver a Zero Claims Release, and (ii)
with respect to each holder of a Junior Zero
Note Claim, that such holder not have filed a
written objection to the Plan (which is not
withdrawn prior to commencement of the
hearing on confirmation of the Plan). Any
Warrants not issued by operation of the
foregoing before the later of (i) two (2)
years from the Effective Date, and (ii) six
(6) months following the date such holder's
Claim becomes an Allowed or Ultimately
Allowed Claim will be deemed to be unclaimed
property and cancelled. (c) The Debtor has
not and shall not be deemed to have assumed
any liability related to or arising from the
Zero Notes.
11 Subordinated Claims Impaired. On the Effective Date, all
Subordinated Claims will be discharged. No
distributions will be made on account of
Class 11.
12 Interests Impaired. On the Effective Date, all
Interests of the Debtor will be cancelled. No
distributions will be made in respect of
Class 12.
For a more detailed description of the treatment of the foregoing classes of
Claims and Interests, see "THE PLAN-Classification and Treatment of Claims and
Interests Under the Plan."
D. Conditions to Confirmation and the Occurrence of the Effective Date of the
Plan
Prior to confirmation of the Plan, the following conditions must occur and be
satisfied or (a) have been waived by the Debtor, with the consent of the Senior
Bank Agent (if the alternative funding option pursuant to Section 6.01(a)(ii)
of the Plan is not elected), the Official Committee, and the Informal Committee
of Senior Noteholders, or (b) have been waived by the Senior Bank Agent (if the
alternative funding option pursuant to Section 6.01(a)(ii) of the Plan is not
elected), the Official Committee, and the Informal Committee of Senior
Noteholders, such waiver having been approved by order of the Bankruptcy Court
upon motion of the Senior Bank Agent (if applicable), the Official Committee,
and the Informal Committee of Senior Noteholders:
(a) If the Debtor elects the treatment set forth in Section 6.01(a)(i) of
the Plan with respect to Credit Agreement Claims: (i) the Post-Confirmation
Credit Documents (including the Intercreditor Agreement)
11
<PAGE>
shall have been filed with the Bankruptcy Court not less than five (5)
Business Days prior to the Voting Deadline; and (ii) the Debtor shall have
received authority to execute, and the Bankruptcy Court shall have approved,
the Post-Confirmation Credit Documents and all documents necessary to
effectuate the Post-Confirmation Credit Documents, which authority and
approval will be contained in the Confirmation Order.
(b) If the Debtor elects the treatment set forth in Section 6.01(a)(ii) of
the Plan with respect to Credit Agreement Claims: (i) the Debtor shall have
entered into an Alternative Commitment Letter, which shall have been approved
by the Bankruptcy Court; (ii) the Alternative Credit Documents shall have been
filed with the Bankruptcy Court not less than five (5) Business Days prior to
the Confirmation Date; and (iii) the Debtor shall have received authority to
execute, and the Bankruptcy Court shall have approved, the Alternative Credit
Documents and all other documents necessary to effectuate the Alternative
Credit Documents.
(c) The Settlement Order approving the Zero Settlement shall have been
entered.
(d) The Claims Bar Date shall have been established by the Bankruptcy Court
as a date which is no less than five (5) Business Days prior to the
Confirmation Date.
(e) As of a date which is three (3) Business Days prior to the Confirmation
Date, the Official Committee shall not have filed a written notice that is not
withdrawn asserting that such Committee has determined in the exercise of its
fiduciary duties to unsecured creditors generally that the amount of the
General Unsecured Claims has rendered the Plan not feasible pursuant to
section 1129 of the Bankruptcy Code.
Before the Effective Date occurs, the following conditions must occur and be
satisfied or have been waived (a) by the Debtor, with the consent of the Senior
Bank Agent (if the alternative funding option pursuant to Section 6.01(a)(ii)
of the Plan is not elected), the Official Committee, and the Informal Committee
of Senior Noteholders, or (b) by the Senior Bank Agent (if the alternative
funding option pursuant to Section 6.01(a)(ii) of the Plan is not elected), the
Official Committee, and the Informal Committee of Senior Noteholders, such
waiver having been approved by order of the Bankruptcy Court upon motion of the
Senior Bank Agent (if applicable), the Official Committee, and the Informal
Committee of Senior Noteholders: (i) the Confirmation Order and Settlement
Order shall have become Final Orders; (ii) unless otherwise waived by the
Debtor with the consent of the Official Committee and the Informal Committee of
Senior Noteholders (and the Senior Bank Agent, if the Debtor does not elect the
treatment set forth in Section 6.01(a)(ii) of the Plan with respect to Credit
Agreement Claims), which consent shall not be unreasonably withheld, there
shall have been obtained all regulatory approvals required in connection with
the consummation of the Plan; (iii) the New Senior Note Indenture shall have
been qualified under the Trust Indenture Act of 1939 (15 U.S.C. (S)(S)
77aaa-77bbb) as currently in effect; (iv) the Post-Confirmation Credit
Documents or the Alternative Credit Documents, as the case may be, shall be
executed by all necessary parties thereto and delivered and all conditions to
the effectiveness of such documents shall have been satisfied or waived as
provided therein subject to the occurrence of the Effective Date; (v) all other
documents provided for in the Plan shall have been executed and delivered by
the parties thereto, unless such execution or delivery has been waived by the
parties benefited by such documents; and (vi) any order necessary to satisfy
any condition to effectiveness of the Plan shall be a Final Order. The
Effective Date of the Plan shall be that day that is five (5) Business Days
after the conditions to the occurrence of the Effective Date of the Plan have
been satisfied or waived, or such earlier day after such conditions have been
satisfied or waived that is designated by the Debtor.
A hearing to consider confirmation of the Plan has been scheduled for May 31,
1995 at 10:00 a.m., as a result of which, if all conditions to confirmation of
the Plan have occurred or been waived, the Confirmation Order will be entered
by the Bankruptcy Court.
The Debtor believes that all conditions to the Effective Date of the Plan
will likely be satisfied within thirty (30) days of the Confirmation Date, and
that the Effective Date of the Plan could occur by the middle of June 1995.
12
<PAGE>
II. BACKGROUND
A. The Debtor
The Debtor is one of the largest food retailers in the Northeast, operating
234 supermarkets in six states under the "Grand Union" name. The Debtor is a
wholly-owned subsidiary of Grand Union Capital Corporation ("Capital"), which
in turn is a wholly-owned subsidiary of Grand Union Holdings Corporation
("Holdings").
The Debtor currently operates 128 stores in its Northern Region, including
forty stores in Vermont, eighty-five stores in upstate New York and three
stores in New Hampshire. The Debtor believes it generally operates in excellent
locations, having operated in most of the markets it currently serves in the
Northern Region for more than twenty-five years, and in many communities for
over fifty years.
The Debtor currently operates 106 stores in its New York Region. The Debtor's
primary New York Region marketing area comprises the more affluent suburban
communities of central and northern New Jersey (forty-four stores),
Westchester, Orange, Rockland, Dutchess and Putnam Counties in New York
(twenty-seven stores), Long Island (fifteen stores) and Fairfield County,
Connecticut (fifteen stores). The Debtor also has a limited presence in New
York City (three stores) and Pennsylvania (two stores).
In general, the Debtor's merchandising strategy is directed toward providing
value to its customers through competitive pricing, a wide assortment of
national brand and private label products, high quality produce and a number of
service departments. An important component of the Debtor's business strategy
is its capital investment program directed toward renovating and upgrading the
existing store base and opening new and replacement stores in existing market
areas (see "RISK FACTORS-Business Risks-Capital Expenditures"). Capital
investments in new and replacement stores and store enlargements have improved
store sales and profitability due to the wider assortment of grocery and
general merchandise products offered as well as expanded perishable service
departments offering high quality, higher margin products.
See "CERTAIN INFORMATION CONCERNING THE DEBTOR" for a more complete
description of the business of the Debtor.
B. Significant Events Preceding Commencement of the Chapter 11 Case
1. 1992 Recapitalization and The Present Capital Structure
In July 1992, the Debtor and its direct and indirect parent companies engaged
in a series of transactions which included the merger of GU Acquisition
Corporation ("GUAC"), a wholly-owned subsidiary of Holdings and the direct
parent company of the Debtor, with and into the Debtor, and the formation of
Capital as a wholly-owned subsidiary of Holdings and the new direct parent
company of the Debtor. The July 1992 transactions included the sale to
institutional investors of approximately 28.4% of the common stock of Holdings
on a fully diluted basis for approximately $25 million and the repurchase of
(i) shares and an option to purchase shares owned by Salomon Brothers Holding
Company Inc, (ii) certain warrants held by the parties to the Debtor's bank
credit agreements existing prior to the July 1992 transactions, and (iii)
approximately 3.4% of the common stock of Holdings held by the management of
the Debtor at that time. Purchases and sales of Holdings common stock
interests, including options and warrants, were made through a disbursement
equity account established for the purpose of effecting various transfers of
interests in Holdings common stock. The transactions involving Holdings' common
stock interests did not involve any payments by the Debtor, Capital or
Holdings.
As part of the July 1992 series of transactions, Capital sold to
institutional investors $343 million principal amount of its 15% Zero Coupon
Notes due 2004, Series A and B (together, the "Senior Zero Notes") and $745
million principal amount of its 16-1/2% Senior Subordinated Zero Coupon Notes
due 2007, Series A and B (together, the "Junior Zero Notes," and, together with
the Senior Zero Notes, the "Zero Notes"). The purchasers of the Zero Notes, who
paid aggregate consideration of approximately $200 million,
13
<PAGE>
also received warrants to purchase at a nominal price shares representing
approximately 19.9% of the common stock of Holdings on a fully diluted basis.
All of the proceeds of the sale of the Zero Notes were applied to repayment of
indebtedness of Holdings, including the approximately $493 million of Holdings
Senior Increasing Rate Notes. The balance of the funds required to retire
Holdings' outstanding indebtedness was provided by a portion of the proceeds of
the funds raised by the Debtor, as described below. No proceeds of the sale of
Zero Notes were transferred to the Debtor.
As part of its recapitalization in 1992, the Debtor entered into the Existing
Credit Agreement with the Existing Banks which provided for a $210 million term
loan facility and a $100 million revolving credit facility, and also issued
$350 million principal amount of 11-1/4% Senior Notes due 2000 and $500 million
principal amount of 12-1/4% Senior Subordinated Notes due 2002. Proceeds of this
new indebtedness were applied to payment of substantially all of the previous
outstanding indebtedness of the Debtor (including previously outstanding
indebtedness of GUAC) and to payment of a dividend from the Debtor to Capital
and from Capital to Holdings which was used for payment of a portion of the
outstanding indebtedness of Holdings.
On January 28, 1993, the Debtor sold $175 million principal amount of 11-3/8%
Senior Notes due 1999 in a private placement. Net proceeds of the sale of such
notes were used to repay indebtedness under the Existing Credit Agreement. An
additional $20.9 million of the indebtedness under the Existing Credit
Agreement was repaid from the proceeds of the sale of the Southern Region in
1993. See "BACKGROUND-Significant Events Preceding Commencement of Chapter 11
Case-Asset Dispositions."
2. Asset Dispositions
On March 29, 1993, the Debtor sold forty-eight of its fifty-one Southern
Region stores to The Great Atlantic & Pacific Tea Company, Inc. ("A&P"). The
three Southern Region stores not sold to A&P were closed and the properties
have been subleased. The Debtor received net cash proceeds of approximately $25
million and was relieved of approximately $4.5 million of capital lease
obligations.
3. Failure to Make Certain Interest Payments
The Debtor made interest payments of approximately $53.4 million on its
Senior Notes, 12-1/4% Senior Subordinated Notes and 12-1/4% Senior Subordinated
Notes, Series A on July 15, 1994, payments of approximately $10 million on its
Senior Notes on August 15, 1994, and payments of approximately $1 million on
its 13% Senior Subordinated Notes on September 30, 1994. After giving effect to
those payments, the Debtor believed that it had sufficient liquidity, when
supplemented by the sale of underperforming assets, to allow it to continue
operations and to make its next interest payment.
On November 29, 1994, the Debtor announced that after giving effect to
committed capital expenditures, cash from operations would not be sufficient to
fund cash and interest payments due in early calendar 1995, and that asset
sales which were able to be arranged by the interest-payment date were not
likely to generate an amount of net proceeds which, together with cash from
operations, would be adequate to fund such interest payments. The Debtor
promptly began discussions with its creditors concerning the possibility that
the interest payments would not be made when due.
At the time of its announcement on November 29, 1994, the Debtor was not in
default under any of its loan documents. However, on December 6, 1994, the
Debtor obtained from the Existing Banks a Limited Waiver and Agreement pursuant
to which the Existing Banks waived any event of default which might
subsequently arise under the Existing Credit Agreement in the event of the
Debtor's failure to make the payments of interest due on January 15, 1995 on
its Senior and Senior Subordinated Notes. The Limited Waiver and Agreement also
waived compliance with certain covenants in the Existing Credit Agreement,
thereby permitting the Debtor to continue to make borrowings in the ordinary
course under its revolving line of credit through February 14, 1995.
Throughout the period following the November 29 announcement and the December
limited waiver, the Debtor continued to discuss its financial condition with
its lenders and trade creditors. On January 15,
14
<PAGE>
1995, the Debtor did not make the interest payments which were due, but intense
negotiations continued over the next few weeks. Those discussions resulted in
an agreement in principle with the Existing Banks and the three Informal
Committees regarding the Debtor's capital restructuring. The three Informal
Committees consisted of certain holders of: (i) Senior Notes (represented by
Stroock & Stroock & Lavan and Rosenthal, Monhait, Gross & Goddess, P.A.), (ii)
Senior Subordinated Notes (represented by Ropes & Gray), and (iii) Trade Claims
(represented by Pepper, Hamilton & Scheetz).
The Informal Committee of certain holders of Senior Subordinated Notes was
composed of (i) Putnam Investments Management (holding $183.5 million face
amount of Senior Subordinated Notes on the Filing Date) and (ii) Federated
Research Corporation (holding $21.175 million face amount of Senior
Subordinated Notes on the Filing Date). Both entities are now members of the
Official Committee (as defined below).
According to Stroock & Stroock & Lavan, counsel to the Informal Committee of
certain holders of Senior Notes, such Informal Committee is currently composed
of: (i) Angelo Gordon & Co., (ii) Lehman Brothers, Inc., (iii) Soros Fund
Management, (iv) Trust Company of the West, and (v) State Street Bank and Trust
Company, as Indenture Trustee. The members of such Informal Committee currently
hold Senior Notes in the aggregate face amount of $118,820,000.
4. Retention of Financial Advisors
On November 28, 1994, the Debtor entered into a letter agreement pursuant to
which the Debtor engaged Goldman, Sachs & Co. ("Goldman Sachs") and BT
Securities Corporation ("BT Securities," and together with Goldman Sachs, the
"Financial Advisors") as its financial advisors to consider financial
alternatives available to it, including evaluating appropriate capital
structures and financing or refinancing alternatives. The arrangement provided
for a $300,000 per month cash fee, and an $8 million "Restructuring Fee"
payable upon the consummation of a "Restructuring Transaction." On January 22,
1995, the parties agreed to reduce the Restructuring Fee to $5 million and the
Financial Advisors agreed, in addition to their previous commitment, to prepare
a valuation of the Debtor (and to testify, if requested, concerning it) and to
attempt to obtain commitments to a restructuring plan. The Debtor paid an
aggregate of approximately $785,000 in cash fees prior to the commencement of
this Chapter 11 Case; $5 million remains outstanding under such fee
arrangement. The term sheet, dated as of January 23, 1995, respecting the terms
of the proposed restructuring of the Debtor, provided that advisory fees for
financial advisors to be paid by the Debtor would be agreed upon by the
Informal Committees representing certain holders of Senior Subordinated Notes
and certain holders of Senior Notes. The Official Committee has not advised the
Debtor that it assents to the fee arrangement and reserves the right to object
thereto. (The Plan classifies such fees as General Unsecured Claims. See "THE
PLAN-Classification and Treatment of Claims and Interests Under the
Plan-General Unsecured Claims.")
C. Recent Financial Performance
<TABLE>
<CAPTION>
12 weeks ended 40 weeks ended
---------------------- ----------------------
January 8, January 7, January 8, January 7,
1994 1995 1994 1995
---------- ----------- ---------- -----------
(Dollars in millions)
<S> <C> <C> <C> <C>
Sales............................................... $583.5 $563.3 $1,904.4 $1,867.6
Gross profit........................................ 171.1 149.5 545.9 540.0
Operating and administrative expense................ 127.4 127.9 408.8 420.1
Depreciation and amortization....................... 18.3 21.2 59.4 67.2
Provision for store closings and nonrecurring item.. -- 10.6 -- 10.6
Restructuring costs................................. -- 1.9 -- 1.9
Interest expense.................................... 42.4 47.4 139.6 154.2
Cumulative effect of accounting change.............. -- -- 30.3 --
Net loss............................................ 16.9 59.5 92.2 114.0
EBITDA (1).......................................... 43.5 21.8 137.7 120.7
- --------
<FN>
(1) Earnings before LIFO provision, depreciation and amortization, provision
for store closings and nonrecurring item, restructuring costs, interest
expense, income taxes and cumulative effect of accounting change. EBITDA
for the 40 weeks ended January 8, 1994 was reduced by approximately $8
million due to the 22-day work stoppage in May 1993.
</TABLE>
15
<PAGE>
See the Debtor's 10-Q for the 12 and 40 weeks ended January 7, 1995, for a
complete discussion and analysis of recent financial performance, attached
hereto as Appendix "D".
III. SUPPORT OF THE PLAN BY
PARTIES IN INTEREST
The Official Committee has voted to support the Plan and recommends that
creditors vote in favor of the Plan.
The Informal Committee of certain holders of Senior Notes supports the Plan
and recommends that holders of Senior Notes vote in favor of the Plan.
IV. THE BANKRUPTCY PLAN VOTING
INSTRUCTIONS AND PROCEDURES
A. General
The Debtor is seeking the acceptance of the Plan by holders of (i) Credit
Agreement Claims (Class 1), (ii) Interest Rate Protection Agreement Claims
(Class 2), (iii) Senior Note Claims (Class 4), (iv) Priority Claims (Class 5),
(v) General Unsecured Claims (Class 7), (vi) Senior Subordinated Note Claims
(Class 8), (vii) Senior Zero Note Claims (Class 9) and (viii) Junior Zero Note
Claims (Class 10). Holders of Miscellaneous Secured Claims (Class 3) and Trade
Claims (Class 6) are Unimpaired under the Plan and are conclusively presumed to
have accepted the Plan. Holders of Subordinated Claims (Class 11) and holders
of the Debtor's Interests (Class 12) will not receive any distribution in
respect of such Claims or Interests and thus are deemed to have rejected the
Plan.
B. Holders of Claims Entitled to Vote
As more fully described below, the Plan designates twelve (12) separate
Classes of Claims and Interests. See "THE PLAN-Classification and Treatment of
Claims and Interests Under the Plan." Generally, a claim or interest as to
which legal, equitable or contractual rights are altered is "impaired." A
holder of an allowed impaired claim or interest that will receive a
distribution under a plan of reorganization is entitled to vote to accept or
reject such plan. The Claims in Classes 1, 2, 4, 5, 7, 8, 9, 10 and 11 and the
Interests in Class 12 are Impaired under the Plan. Of these Classes, only the
holders in Classes 1, 2, 4, 5, 7, 8, 9 and 10 whose Claims are not disputed are
being solicited and are entitled to vote to accept or reject the Plan. Classes
11 and 12 will not receive any distribution under the Plan and therefore are
conclusively presumed to have rejected the Plan.
A Ballot to be used to accept or reject the Plan has been enclosed with all
copies of this Disclosure Statement mailed to holders of Claims whose Claims
are Impaired by the Plan but who have not been conclusively presumed to reject
the Plan as a matter of law. Accordingly, this Disclosure Statement (and the
appendices hereto), together with the accompanying Ballot and the related
materials delivered together herewith, are being furnished to holders of Credit
Agreement Claims (Class 1), Interest Rate Protection Agreement Claims (Class
2), Senior Note Claims (Class 4), Priority Claims (Class 5), General Unsecured
Claims (Class 7), Senior Subordinated Note Claims (Class 8), Senior Zero Note
Claims (Class 9) and Junior Zero Note Claims (Class 10) and may not be relied
upon or used for any purpose by such holders other than to determine whether or
not to vote to accept or reject the Plan.
C. Vote Required for Class Acceptance
The Bankruptcy Court will determine whether sufficient acceptances have been
received to confirm the Plan. A class of impaired claims is deemed to have
accepted a chapter 11 plan if votes to accept the plan
16
<PAGE>
have been cast by creditors (other than any entity designated under section
1126(e) of the Bankruptcy Code) that hold at least two-thirds in dollar amount
and more than one-half in number of the allowed claims of such class held by
creditors that have voted to accept or reject the plan. Because Classes 11 and
12 will not receive any distribution under the Plan and thus will be
conclusively presumed to have rejected the Plan as a matter of law, the Debtor
must request that the Bankruptcy Court confirm the Plan pursuant to section
1129(b) of the Bankruptcy Code. The Debtor also may seek confirmation of the
Plan under section 1129(b) with respect to Classes 7, 8, 9 and/or 10, as the
case may be, to the extent such Classes reject the Plan.
D. Counting of Ballots for Determining Acceptance of the Plan
The Debtor intends to count all validly executed Ballots received prior to
the Voting Deadline (as defined below) for purposes of determining whether each
Impaired voting Class has accepted or rejected the Plan.
E. Voting Deadline
Ballots will not be accepted after 5:00 p.m., Eastern Standard Time, on May
24, 1995 (the "Voting Deadline"), unless the Bankruptcy Court, at the request
of the Debtor, extends the Voting Deadline, in which event the solicitation
period will terminate at such extended time on such extended date. Except to
the extent permitted by the Bankruptcy Court, Ballots that are received after
the Voting Deadline will not be accepted or used by the Debtor in connection
with the Debtor's request for confirmation of the Plan (or any permitted
modification thereof).
Consistent with the provisions of Rule 3017 of the Bankruptcy Rules, the
Bankruptcy Court has fixed the record date-the time and date for the
determination of holders of record of Claims who are entitled to vote on the
Plan-as the close of business, Eastern Standard Time, on April 19, 1995 (the
"Record Date").
F. Voting Procedures
The Debtor is providing copies of this Disclosure Statement, Ballots, and
where appropriate, Summary Ballots, to all known holders of Impaired Claims,
including the Existing Banks (as holders of Credit Agreement Claims), all known
holders of General Unsecured Claims and all registered holders of the Senior
Notes, the Senior Subordinated Notes, the Senior Zero Notes and the Junior Zero
Notes (collectively, the Senior Notes, the Senior Subordinated Notes, the
Senior Zero Notes and the Junior Zero Notes are the "Old Securities").
Registered holders may include brokerage firms, commercial banks, trust
companies, or other nominees. Any such nominee who requires additional copies
of the Disclosure Statement and Ballots for distribution to beneficial holders
may obtain them from the Debtor's balloting agent, Bankruptcy Services, Inc.,
by calling (212) 527-0727 (Attn: Kathy Gerber). If such entities do not hold
for their own account, then they are required to provide promptly copies of
this Disclosure Statement and appropriate Ballots to their customers and to
beneficial owners. Any beneficial owner who has not received a Ballot should
contact his or its brokerage firm, nominee, or the Debtor. The following is
only a summary of the voting rules. Reference should be made to the "Order
Approving the Disclosure Statement, Establishing Voting Procedures and Setting
Confirmation Hearing" prior to voting.
1. Beneficial Owners of Credit Agreement Debt
Under the Existing Credit Agreement, the Existing Banks may have granted
participants certain rights with respect to the approval of waivers or
amendments to the Existing Credit Agreement. For purposes of voting on the
Plan, the Debtor will recognize only the Existing Banks as the holders of the
Credit Agreement Debt. Each Existing Bank that has granted any such
participation may complete a Summary Ballot to reflect the votes of itself and
its respective participants, provided that such Summary Ballot shall be counted
as a single vote in favor of the Plan to the extent it contains one or more
acceptances of the Plan (in an aggregate amount of such acceptances) and/or as
a single vote against the Plan to the extent it contains one or more
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rejections of the Plan (in an aggregate amount of such rejections).
Accordingly, each such Summary Ballot may contain, at most, one each of a vote
accepting the Plan and a vote rejecting the Plan.
2. Beneficial Owners of Old Securities
For purposes of voting to accept or reject the Plan, the beneficial owners of
Old Securities as of the Record Date will be deemed to be the "holders" of such
Claims represented by such Old Securities. The beneficial owner of an Old
Security is any person who possesses investment power with respect to such Old
Security, including the power to dispose, or to direct the disposition of, such
Old Security. Any beneficial owner holding Old Securities in "street name"
through a brokerage firm, bank, trust company, or other nominee can vote only
by following these instructions:
1. Fill in all the applicable information on the Ballot.
2. Sign the Ballot (unless the Ballot has already been signed by the
brokerage firm, bank, trust company, or other nominee).
3. Return the Ballot to your brokerage firm, bank, trust company, or other
nominee. If you have any questions, contact Bankruptcy Services, Inc. or the
Debtor or your brokerage firm, bank, trust company, or other nominee for
instructions.
Any Ballot submitted to a brokerage firm or proxy intermediary will not be
counted until such brokerage firm or proxy intermediary properly completes and
delivers a corresponding Summary Ballot to the Debtor (as discussed below).
Any beneficial owner holding Old Securities in its own name (i.e., the
beneficial holder is the record holder) can vote by completing and signing the
enclosed Ballot and returning it directly to the Debtor's balloting agent
(using the enclosed pre-addressed envelope).
3. Brokerage Firms, Banks, and Other Nominees
A brokerage firm which is the registered holder of Old Securities for a
beneficial owner may vote on behalf of such beneficial owner by (i)
distributing a copy of this Disclosure Statement and all appropriate Ballots to
such owner, (ii) collecting all such Ballots, and (iii) completing a Summary
Ballot compiling the votes and other information from the Ballots collected and
transmitting such Summary Ballot together with the Ballots completed by the
beneficial owners to Bankruptcy Services, Inc. at the address set forth on the
Ballot. A proxy intermediary acting on behalf of a brokerage firm or bank may
follow the procedures outlined in the preceding sentence to vote on behalf of
such beneficial owner.
4. Defects, Irregularities, Etc.
Unless otherwise directed by the Bankruptcy Court, all questions as to the
validity, form, eligibility (including time of receipt), acceptance, and
revocation or withdrawal of Ballots will be determined by the Bankruptcy Court
after notice and a hearing, pursuant to Bankruptcy Rule 3018(a). Any defects or
irregularities in connection with deliveries of Ballots must be cured within
such time as the Bankruptcy Court determines. Neither the Debtor nor any other
person will be under any duty to provide notification of defects or
irregularities with respect to deliveries of Ballots nor will any of them incur
any liabilities for failure to provide such notification.
G. Miscellaneous
No statements or information concerning the Debtor or Reorganized Grand Union
(particularly as to future business, results of operations or financial
condition, or with respect to the distributions to be made under the Plan) or
any of the assets or business of the Debtor or Reorganized Grand Union have
been authorized by the Debtor or should be relied upon, other than as set forth
in this Disclosure Statement.
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IN ORDER FOR YOUR BALLOT TO BE COUNTED, YOUR BALLOT MUST BE COMPLETED IN
ACCORDANCE WITH THE INSTRUCTIONS SET FORTH ON THE BALLOT AND THE "ORDER
APPROVING THE DISCLOSURE STATEMENT, ESTABLISHING VOTING PROCEDURES AND SETTING
CONFIRMATION HEARING."
IF YOU HAVE ANY QUESTIONS REGARDING THE PROCEDURES FOR VOTING ON THE PLAN,
PLEASE CONTACT:
Bankruptcy Services, Inc.
400 Park Avenue, 9th Floor
New York, New York 10022
(800) 344-8624
V. THE CHAPTER 11 CASE
A. Continuation of Business; Stay of Litigation
On January 25, 1995 (the "Filing Date"), the Debtor commenced the Chapter 11
Case. Since the Filing Date, the Debtor has continued to operate as a debtor in
possession subject to the supervision of the Bankruptcy Court in accordance
with the Bankruptcy Code. Thus, the Debtor's management remained in place and
has continued to date to manage the Debtor's affairs. The Debtor is authorized
to operate in the ordinary course of business. Transactions out of the ordinary
course of business have required Bankruptcy Court approval. In addition, the
Bankruptcy Court has supervised the Debtor's employment of attorneys,
accountants and other professionals.
An immediate effect of the filing of the bankruptcy petition was the
imposition of the automatic stay under the Bankruptcy Code which, with limited
exceptions, enjoined the commencement or continuation of all collection efforts
by creditors, enforcement of liens against the Debtor and litigation against
the Debtor. This injunction remains in effect, unless modified or lifted by
order of the Bankruptcy Court, until consummation of a plan of reorganization.
B. Significant Events During the Chapter 11 Case
1. First Day Orders
The Debtor submitted numerous so-called "first day orders," along with
supporting motions, to the Bankruptcy Court on the Filing Date, which were
approved. These first day orders include, among others, (i) orders authorizing
the retention of Young, Conaway, Stargatt & Taylor and Willkie Farr & Gallagher
as bankruptcy counsel to the Debtor and Donovan Leisure Newton & Irvine as
special corporate counsel to the Debtor; (ii) an order authorizing the
retention of Price Waterhouse LLP as accountants and consultants to the Debtor;
(iii) an order authorizing the Debtor to pay certain prepetition employee
wages, reimbursable expenses and benefits and workers' compensation benefits
(further discussed below); (iv) an order authorizing the Debtor to maintain its
prepetition bank accounts, business forms, stationery, checks, and cash
management system and granting additional time to comply with investment
guidelines; (v) an order extending the time in which the Debtor is required to
file certain information, including schedules and lists; (vi) an order
authorizing the Debtor to continue certain consumer related practices; (vii) an
order determining adequate assurance of payment for future utility services and
restraining utility companies from discontinuing, altering or refusing service;
(viii) an interim order authorizing use of cash collateral and providing
adequate protection (further discussed below); (ix) an order authorizing the
Debtor to pay the prepetition claims of certain service providers; (x) an order
authorizing the Debtor to pay sales, use, cigarette and tobacco taxes in the
ordinary course; and (xi) an order authorizing the Debtor to mail initial
notices and to file a list of creditors in lieu of a matrix.
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2. Prepetition Wage and Benefits Order
On the Filing Date, the Bankruptcy Court approved an order authorizing the
Debtor to pay certain prepetition (i) employee wages, salaries and other
compensation and reimbursable employee expenses, (ii) employee medical, dental
and similar benefits, and (iii) workers' compensation benefits (the
"Prepetition Wage and Benefits Order"). Pursuant to such order, the Debtor has
paid approximately (i) $8.7 million in various categories of employee
compensation owing as of the Filing Date, (ii) $100,000 in prepetition
reimbursable business expenses (for employees whose gross pay equals $104,000
per year or less), and (iii) $7.2 million in employee benefits, and workers'
compensation claims. The Debtor believes such relief was necessary to avoid
serious disruption to its business at a critical juncture in the Debtor's
reorganization. Payments made pursuant to such order will reduce the amount of
Priority Claims and General Unsecured Claims payable by the Debtor on the
Effective Date. See "THE PLAN-Classification and Treatment of Claim and
Interests Under the Plan-Class 5-Priority Claims."
3. Cash Collateral Order
On the Filing Date, the Bankruptcy Court approved an interim order
authorizing the Debtor's use of cash collateral and providing adequate
protection (the "Interim Cash Collateral Order"). Pursuant to such order, the
Debtor obtained authority to, inter alia, use cash collateral (as defined in
section 363(c)(2)(A) of the Bankruptcy Code) that secures the obligations to
certain of the Debtor's secured creditors in order to permit the Debtor to
continue to make ordinary course and other approved payments. The Debtor
believes such relief was required to permit the Debtor to continue to operate
its business without disruption and to preserve the good will and value of the
Debtor's business. The Debtor obtained the consent of the required Existing
Banks and certain holders of Senior Notes to the use of cash collateral (as
provided in the Interim Cash Collateral Order). In return for such consent, the
Debtor was required to provide such Creditors with adequate protection with
regard to any decline in the value of their prepetition collateral by way of
certain superpriority Claims and liens. On February 16, 1995, the Bankruptcy
Court granted final approval of the Debtor's use of cash collateral (the "Final
Cash Collateral Order").
4. DIP Facility
On January 30, 1995, the Bankruptcy Court gave interim approval of
debtor-in-possession financing (the "DIP Facility"), pursuant to which Bankers
Trust Company ("Bankers Trust") provided the Debtor with debtor-in-possession
financing of up to $150 million in the form of a revolving credit facility to
be used by the Debtor for its working capital and general corporate
requirements. The interim approval allowed the Debtor to immediately utilize
$50 million of the revolving credit facility. On February 16, 1995, the
Bankruptcy Court granted final approval of the DIP Facility. The DIP Facility
will mature on the earliest of (i) July 31, 1996, (ii) the effective date of a
plan of reorganization for the Debtor, and (iii) the date of substantial
consummation of such plan of reorganization. Pursuant to the Bankruptcy Court's
approval of the DIP Facility, Bankers Trust has a priority over virtually all
other Claims in the Chapter 11 Case, including Administrative Expenses, and a
lien that is senior to substantially all liens, Claims, and encumbrances
arising before or after the Filing Date.
A commitment fee of .5% per annum on the average unused portion of the DIP
Facility (which may be reduced unilaterally by the Debtor), covering the period
from January 20, 1995 until the termination of the DIP Facility, will be paid
by the Debtor. In addition, the Debtor will pay a Facility Fee of 1.5% of the
total amount of the DIP Facility, and an annual administrative agency and
collateral monitoring fee of $100,000.
The DIP Facility includes certain restrictive covenants that apply to the
Debtor, including restrictions on other indebtedness, liens, sales of assets,
dividends and distributions, capital expenditures, mergers, acquisitions,
divestitures, reorganizations, payments of pre-Filing Date debt (with certain
exceptions) and transactions with affiliates, and requirements regarding
satisfaction of certain financial ratios and insurance coverage. The DIP
Facility also includes typical events of default, including entry of an order
granting relief to prepetition creditors from the automatic stay, a conversion
of the Chapter 11 Case into a case under chapter 7, and/or a change of
ownership or control of the Debtor.
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5. Trade Creditor Order
On February 10, 1995, the Bankruptcy Court approved an order authorizing
provisional payment of prepetition Trade Claims (the "Trade Creditor Order").
The Trade Creditor Order provides a mechanism by which the Debtor is authorized
(but not obligated) to pay outstanding prepetition Trade Claims (other than
Trade Claims of "insiders" as such term is defined in section 101(31) of the
Bankruptcy Code) provided that certain requirements are satisfied (the "Trade
Payment Program"). Among other things, the Debtor may only make payment on
account of a trade creditor's outstanding prepetition Trade Claims to the
extent of the value of any unpaid goods shipped by the relevant trade creditor
to the Debtor after February 10, 1995. In addition, the Debtor may not make
such payments unless and until the relevant trade creditor executes a written
agreement, the form of which is attached to the Trade Creditor Order (the
"Trade Agreement"), setting forth, inter alia: the trade creditor's prepetition
Claims against the Debtor, the customary trade terms between the trade creditor
and the Debtor in effect up to November 28, 1994, and the trade creditor's
agreement to continue to ship goods to the Debtor in accordance with such
customary trade terms.
A Trade Agreement will be deemed to have terminated if the relevant trade
creditor has failed to comply with the terms of the Trade Agreement. The Trade
Payment Program will also be deemed to have terminated if: (i) the Chapter 11
Case is converted to a case under chapter 7 of the Bankruptcy Code, (ii) the
Senior Bank Agent delivers notice subsequent to the entry of an order
appointing the election of a trustee or an examiner with expanded powers in the
Chapter 11 Case, or (iii) the Debtor fails to confirm and substantially
consummate a plan of reorganization acceptable to the Senior Bank Agent by May
31, 1995 and June 16, 1995, respectively. If the Trade Payment Program or any
trade creditor's participation therein is terminated, then any payments made by
the Debtor to any such trade creditor in respect of any prepetition Claims will
be deemed to have been made in payment of then outstanding postpetition
obligations owed to such trade creditor and such trade creditor will
immediately repay to the Debtor any payments made to such creditor on account
of prepetition Claims to the extent the aggregate amount of such payments
exceeds the postpetition obligations then outstanding (without the right of any
setoffs, claims, provisions for payment of reclamation or trust fund claims, or
otherwise).
6. Appointment of Official Committee
On February 6, 1995, the United States Trustee for the District of Delaware
appointed the following Entities to the Official Committee of Unsecured
Creditors of The Grand Union Company (the "Official Committee"): (i) the United
States Trust Company of New York, as Indenture Trustee ("U.S. Trust"), (ii)
Putnam Investment Management, (iii) Federated Research Corporation, (iv)
Chemical Bank, as Indenture Trustee, (v) Leland Zaubler, (vi) White Rose
Division of DiGiorgio Corporation, (vii) Kraft Foods/Kraft General Foods,
(viii) Nestle USA, Inc., and (ix) the Pension Benefit Guaranty Corporation (the
"PBGC"). The Official Committee is represented by the law firms of Ropes & Gray
and Pepper, Hamilton & Scheetz.
Following the appointment of the Official Committee, the Informal Committees
representing certain holders of Senior Subordinated Notes and certain trade
creditors ceased independent activity. However, the Informal Committee
representing certain holders of Senior Notes continues to participate in the
Plan process.
C. Chapter 11 Cases of Holdings and Capital
On February 6, 1995, certain members of an unofficial committee (the
"Informal Zero Committee") purporting to represent certain holders of the Zero
Notes, commenced an involuntary chapter 11 bankruptcy case against Capital, the
Debtor's parent company, in the Bankruptcy Court (the "GUCC Chapter 11 Case").
The Informal Zero Committee's advisors consisted of The Argosy Group, L.P,
Marcus Montgomery Wolfson P.C. and Williams, Hershman & Wisler, P.A. On
February 16, 1995, Capital filed a response to the involuntary petition in
which it consented to the entry of an order for relief. In addition, on
February 16, 1995, Holdings, the Debtor's indirect parent company (and the
parent company of Capital), filed a voluntary petition for relief under chapter
11 of the Bankruptcy Code in the Bankruptcy Court (the "GUHC Chapter 11 Case").
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D. Zero Settlement
On February 23, 1995, the Informal Zero Committee filed a motion to
substantively consolidate the Debtor's Chapter 11 Case with the GUCC Chapter 11
Case (the "Substantive Consolidation Motion"). Substantive consolidation
generally is the merging of the assets and liabilities of affiliated entities
in a bankruptcy proceeding so that the combined assets and liabilities are
treated as though held and incurred by a single entity. The consolidated assets
create a single fund from which claims against the consolidated debtors are to
be satisfied. In addition, all intercompany claims and guarantees between the
consolidated debtors are extinguished. Specifically, the Substantive
Consolidation Motion sought to consolidate the unsecured claims against the
Debtor and Capital and pool the assets of both entities to satisfy these
claims.
On March 3, 1995, with the addition of other creditors, the Informal Zero
Committee was replaced by the Official Committee of Unsecured Creditors of
Grand Union Capital Corporation (the "Capital Committee"), which was appointed
by the United States Trustee. Thereafter, the Capital Committee continued the
prosecution of the Substantive Consolidation Motion. The Capital Committee's
advisors consist of The Argosy Group, L.P, Peterson Consulting, L.P., Marcus
Montgomery Wolfson P.C. and Williams, Hershman & Wisler, P.A.
The Informal Zero Committee and/or the Capital Committee filed the following
additional pleadings: (1) an objection to the Debtor's motion for an order
authorizing the interim and final DIP Facility orders; (2) a response to the
Debtor's motion to strike such objection; (3) an objection each to the Debtor's
disclosure statements, dated February 6, 1995 and March 22, 1995, respectively;
(4) a motion to vacate the interim and final orders approving the DIP Facility;
(5) a motion to disqualify Goldman Sachs and BT Securities from appearing on
behalf of the Debtor in the Chapter 11 Case; and (6) a motion to have the GUCC
Chapter 11 Case jointly administered with the Debtor's Chapter 11 Case
(collectively, the "Additional Motions").
After negotiation, the Debtor and the Capital Committee reached an agreement
to resolve the Substantive Consolidation Motion and the Additional Motions (the
"Zero Settlement"), a copy of which is annexed to the Plan as Exhibit "G".
Pursuant to and solely for the purposes of the Zero Settlement, the Senior Zero
Note Claims and the Junior Zero Note Claims shall be allowed in an amount equal
to the value as of the Effective Date of the distributions made on account of
such Claims under the Plan. Warrants for the right to purchase the New Common
Stock of Reorganized Grand Union (the "Warrants") will be distributed to
Classes 9 and 10, consisting of the holders of the Zero Notes.
Two series of Warrants will be issued pursuant to the Warrant Agreement, a
copy of which is annexed as Exhibit "E" to the Plan. Both series of Warrants
shall have a term of five (5) years from the Effective Date of the Plan. Series
1 Warrants shall consist of 300,000 Warrants with a strike price of $30 per
share of New Common Stock. Series 2 Warrants shall consist of 600,000 Warrants
with a strike price of $42 per share of New Common Stock.
In connection with the Zero Settlement, the members of the Capital Committee
and certain holders of Zero Notes that are parties to the Zero Settlement, and
their affiliates, agents, and assigns (collectively, the "Releasors"), have
executed releases in favor of the Debtor, Capital, and Holdings, the respective
affiliates of the Debtor, Capital, and Holdings, present and former
stockholders, directors, or officers of the Debtor, Capital, or Holdings,
including Miller Tabak & Hirsch & Co. ("MTH") and its present and former
partners, officers, employees, advisors, attorneys, consultants, agents, and
representatives including, without limitation, Messrs. Martin A. Fox, Glenn L.
Goldberg, Claude Incaudo and James A. Lash, and any person or entity that
directly or indirectly controls MTH, including Gary Hirsch, Jeffrey Miller and
Jeffrey Tabak, the members of each of the Official Committee and the Informal
Committee, each of the Post-Confirmation Banks, BT Securities, Goldman Sachs,
and each of the foregoing entity's and/or person's respective attorneys,
advisors, financial advisors, investment bankers, employees, successors,
agents, and assigns, and any other person and/or entity against whom any of the
Releasors may have a Released Claim, as defined below (collectively, the
"Released Persons"), from any and all claims, demands, actions, causes of
action,
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suits, costs, dues, sums of money, accounts, bills, bonds, covenants,
contracts, controversies, agreements, promises, variances, trespasses, damages,
judgments, expenses, and liability whatsoever, known or unknown, at law or in
equity, irrespective of whether such claims arise out of contract, tort,
violation of laws or other regulations or otherwise, which the Releasors ever
had or now have against the Released Persons or any of them, for, or by reason
of, any matter, cause or thing whatsoever from the beginning of the world to
and including the date of the Zero Settlement arising out of or in connection
with, or related in any manner to, the issuance, ownership, purchase, and/or
sale of the Zero Notes including without limitation, any claim for substantive
consolidation of the Debtor's Chapter 11 Case and the GUCC Chapter 11 Case, any
claims arising under any state or federal securities law and/or any claims
arising under sections 544, 548 and 550 of the Bankruptcy Code or under similar
state laws, including fraudulent conveyance claims (the "Zero Releases"),
except for such Releasor's right to receive warrants pursuant to the Plan or
any Allowed Claim in Classes 1, 2, 3, 4 or 8 of the Plan held by such Releasor.
The Zero Releases have been delivered to the Debtor and will be deemed
effective, subject to delivery of the global certificates provided for under
Section 2.1 of the Warrant Agreement, upon the Effective Date of the Plan;
provided, however, that the releases by the noteholders set forth above (in
Section 8 of the Zero Settlement) and the Debtor's release of the noteholders
in Section 11 of the Zero Settlement, shall not be effective if, prior to the
commencement of the distribution of Warrants by the Warrant Agent (as defined
in the Warrant Agreement), in whole or in part, such distribution is enjoined
by an Entity other than a holder (present, former or future) of a Zero Note;
and provided further that the immediately preceding proviso shall be of no
force and effect if such injunction is dissolved.
Pursuant to the Zero Settlement, Capital and Holdings will each deliver
similar releases. Capital and Holdings will need to obtain the approval of the
Bankruptcy Court to deliver these releases.
Further pursuant to the Zero Settlement and upon the Effective Date of the
Plan, the Capital Committee will withdraw, with prejudice, the Substantive
Consolidation Motion and the Additional Motions.
Finally, the reasonable fees and expenses of the Informal Zero Committee's
and the Capital Committee's professional advisors after the Filing Date will be
allowed as Administrative Expenses in the Debtor's Chapter 11 Case, on the
terms and conditions set forth in the Plan, subject to a cap in the aggregate
amount of $750,000.
The Zero Settlement remains subject to Bankruptcy Court approval in
accordance with Rule 9019 of the Federal Rules of Bankruptcy Procedure. A
separate motion will be filed by the Debtor seeking approval of the Zero
Settlement and will be heard by the Bankruptcy Court on or before the
Confirmation Date.
VI. THE PLAN
THE FOLLOWING IS A SUMMARY OF CERTAIN SIGNIFICANT PROVISIONS OF THE PLAN.
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED
INFORMATION SET FORTH IN THE PLAN WHICH IS ATTACHED TO THIS DISCLOSURE
STATEMENT AS APPENDIX "A". TO THE EXTENT THAT THE TERMS OF THIS DISCLOSURE
STATEMENT VARY WITH THE TERMS OF THE PLAN, THE TERMS OF THE PLAN SHALL BE
CONTROLLING.
A. General
Chapter 11 is the principal business reorganization chapter of the Bankruptcy
Code. Under chapter 11, a debtor is authorized to reorganize its business for
the benefit of itself and its creditors and stockholders.
Formulation of a plan of reorganization is the principal objective of a
chapter 11 reorganization case. In general, a chapter 11 plan of reorganization
(i) divides claims and equity interests into separate classes, (ii)
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specifies the property that each class is to receive under the plan, and (iii)
contains other provisions necessary to the reorganization of the debtor.
Chapter 11 does not require each holder of a claim or interest to vote in favor
of the plan of reorganization in order for the bankruptcy court to confirm the
plan. However, a plan of reorganization must be accepted by the holders of at
least one class of claims that is impaired (as defined above) without
considering the votes of "insiders" within the meaning of the Bankruptcy Code.
Distributions to be made under the Plan will be made after confirmation of
the Plan, on the Effective Date or as soon thereafter as is practicable, or at
such other time or times specified in the Plan.
B. Classification and Treatment of Claims and Interests Under the Plan
Section 1122 of the Bankruptcy Code requires that a plan of reorganization
classify the claims of a debtor's creditors and the interests of its equity
holders. The Bankruptcy Code also provides that, except for certain claims
classified for administrative convenience, a plan of reorganization may place a
claim or interest of a creditor or equity holder in a particular class only if
such claim or interest is substantially similar to the other claims or
interests of such class. The Plan places Credit Agreement Claims, Interest Rate
Protection Agreement Claims, Miscellaneous Secured Claims, Senior Note Claims,
Priority Claims, Trade Claims, General Unsecured Claims, Senior Subordinated
Note Claims, Senior Zero Note Claims, Junior Zero Note Claims, Subordinated
Claims and Interests in separate Classes. The Debtor believes it has classified
all Claims and Interests in compliance with the provisions of section 1122 of
the Bankruptcy Code. If a Creditor or Interest holder challenges such
classification of Claims of Interests and the Bankruptcy Court finds that a
different classification is required for the Plan to be confirmed, the Debtor,
to the extent permitted by the Bankruptcy Court, intends to make such
reasonable modifications to the classification of Claims or Interests under the
Plan to provide for whatever classification might be required by the Bankruptcy
Court for confirmation; provided, however, the Debtor will not reclassify Class
1 (Credit Agreement Claims), Class 6 (Trade Claims), Class 7 (General Unsecured
Claims) and Class 8 (Senior Subordinated Note Claims) without first receiving
the acceptance of the Senior Bank Agent (in the case of Class 1) and the
Official Committee (in the case of Classes 6, 7 and 8).
Except to the extent that such modification of classification adversely
affects the treatment of a holder of a Claim and requires resolicitation,
acceptance of the Plan by any holder of a Claim pursuant to this Solicitation
will be deemed to be a consent to the Plan's treatment of such holder of a
Claim regardless of the Class as to which such holder of a Claim is ultimately
deemed to be a member.
The Bankruptcy Code also requires that a plan of reorganization provide the
same treatment for each claim or interest of a particular class unless the
holder of a particular claim or interest agrees to a less favorable treatment
of its claim or interest. The Debtor believes that it has complied with such
standard. If the Bankruptcy Court finds otherwise, it could deny confirmation
of the Plan if the Creditors or equity holders affected do not consent to the
treatment afforded them under the Plan.
The PBGC has requested that the following explanation be included in this
Disclosure Statement:
In the event that the Grand Union Employees' Retirement Plan terminates prior
to confirmation of the Debtor's Plan of Reorganization, the Pension Benefit
Guaranty Corporation asserts that it will have an administrative expense claim,
a priority tax claim, and/or, in the alternative, a general unsecured claim
against the Debtor in the approximate amount of $46.3 million (see infra,
SectionXV(L)).
The Debtor believes that much or all the claim referred to above would be
properly characterized as a General Unsecured Claim. Moreover, based on the
most recent actuarial data and asset information, the Debtor's actuary has
calculated that the appropriate amount of the PBGC's claim, using the PBGC's
own methods and assumptions, would not exceed $32.0 million, and the PBGC has
indicated that it will review these calculations. The Debtor's actuary has also
determined that, in the event of a liquidation, the Debtor
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could adopt certain amendments to the Retirement Plan which could eliminate any
underfunded pension liability, and could even result in overfunding. The Debtor
does not intend to make such amendments to the Retirement Plan in the context
of its reorganization under the Plan. Moreover, the PBGC has asserted that if
the above-referenced amendments are made, they would not necessarily affect the
calculation of the unfunded benefit liabilities in the event the Retirement
Plan terminates.
1. Treatment of Administrative Expenses and Certain Priority Claims
a. Administrative Expenses. Administrative Expenses consist of (a) any cost
or expense of administration of the Chapter 11 Case allowable under section
503(b) of the Bankruptcy Code, including, without limitation, the fees and
expenses of the professionals employed by the Debtor, the Official Committee,
the Informal Committee(s) and the Indenture Trustees (if and to the extent the
fees and expenses of the Indenture Trustees are not General Unsecured Claims or
Miscellaneous Secured Claims), to the extent allowed or, as applicable, agreed
to by the Debtor and/or Reorganized Grand Union pursuant to Sections 2.02, 2.03
or 2.04 of the Plan, and (b) any fees or charges assessed against the Debtor's
estate under title 28, United States Code, section 1930. Such expenses include,
for example, costs incurred in the operation of the Debtor's business after the
commencement of the Chapter 11 Case, postpetition taxes, if any, and certain
other obligations arising after the commencement of the Chapter 11 Case. See
"CERTAIN INFORMATION CONCERNING THE DEBTOR-Regulatory and Legal
Matters-Environmental."
Assuming that neither significant litigation nor objections are filed with
respect to the Plan and assuming the Plan is confirmed in May 1995, the Debtor
estimates that unpaid Administrative Expenses as of the Effective Date are not
expected to exceed approximately $130 million (which includes, inter alia,
ordinary course Trade Claims and fees and expenses of professionals from the
Filing Date through the Effective Date, anticipated to be in the amount of $7.5
million). Such amount also includes the statutory fees payable to the United
States Trustee, which the Debtor estimates should not exceed $10,000. The
Debtor's estimate of Administrative Expenses does not include amounts that will
be payable in the ordinary course of business by Reorganized Grand Union under
the Debtor's retiree health programs that will be assumed under the Plan.
Under the Plan, all Allowed Administrative Expenses (not paid prior to the
Effective Date) will be paid in full in cash by Reorganized Grand Union, at its
option, on (a) the later of (i) the Effective Date and (ii) the date on which
the Bankruptcy Court enters an order allowing such Administrative Expense, or
(b) the date, or dates, on which Reorganized Grand Union or the Debtor, as the
case may be, and the Entity claiming such Allowed Administrative Expense
otherwise agree or have agreed; provided, however, that Allowed Administrative
Expenses representing obligations incurred in the ordinary course of business
by the Debtor during the Chapter 11 Case will be paid by the Debtor or
Reorganized Grand Union, as the case may be, in the ordinary course of business
and in accordance with any terms and conditions of the particular transaction,
and any agreements relating thereto. Any final request for payment of an
Administrative Expense, including, without limitation, applications for
compensation and reimbursement of expenses by professionals employed by the
Debtor and the Official Committee, must be filed no later than forty-five (45)
days after the Effective Date; provided that no request for payment of an
Administrative Expense need be filed with respect to an Administrative Expense
which is paid or payable by the Debtor or Reorganized Grand Union in the
ordinary course, including, without limitation, any Administrative Expense
which would have been a Trade Claim had it arisen prior to the Filing Date.
The reasonable fees and expenses incurred on or after the Filing Date (which
may, as such fees relate to financial advisors, include a request by such
professionals for success fees) by the counsel and financial advisors retained
by agreement with the Debtor prior to the Filing Date by the Informal
Committees (together with the reasonable fees and expenses of local counsel) or
the Indenture Trustees (to the extent they are not General Unsecured Claims or
Miscellaneous Secured Claims, and subject to Section 12.07 of the Plan) with
respect to the Chapter 11 Case will be paid (without application by or on
behalf of any such professionals to the Bankruptcy Court, and without notice
and a hearing, unless specifically requested by the Bankruptcy Court upon
request of a party in interest) by Reorganized Grand Union as an Administrative
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<PAGE>
Expense under the Plan. If Reorganized Grand Union and any professional
retained by an Informal Committee or an Indenture Trustee cannot agree on the
amount of fees and expenses to be paid to such professional, the amount of any
such fees and expenses will be determined by the Bankruptcy Court.
Notwithstanding anything contained in the Plan to the contrary, the fees and
expenses of the legal and financial advisors to the Informal Committee of
Senior Noteholders will be paid as set forth in the Final Cash Collateral
Order.
In addition, the reasonable fees and expenses incurred on or after the Filing
Date by the Capital Committee Advisors or the Informal Zero Committee Advisors
with respect to this Chapter 11 Case or the GUCC Chapter 11 Case will be paid
by Reorganized Grand Union after notice and a hearing in accordance with the
procedures established by the Bankruptcy Court for professionals employed by
the Debtor or the Official Committee; provided, however, that the aggregate
maximum amount of fees and expenses for the Capital Committee Advisors and the
Informal Zero Committee Advisors that shall be payable in this Chapter 11 Case
shall not exceed $750,000 (plus the amount of any prepetition retainer).
Applications for such compensation and reimbursement of expenses by such
professionals must be filed no later than forty-five (45) days after the
Effective Date.
Finally, the reasonable fees and expenses incurred on or after the Filing
Date through the Effective Date by the GUHC and GUCC Legal Advisors with
respect to this Chapter 11 Case, the GUCC Chapter 11 Case or the GUHC Chapter
11 Case will be paid (after application of any retainer held by any such
professional) by Reorganized Grand Union after notice and a hearing in
accordance with the procedures established by the Bankruptcy Court for
professionals employed by the Debtor or the Official Committee. Applications
for compensation and reimbursement of expenses by such professionals must be
filed no later than forty-five (45) days after the Effective Date. On and after
the Effective Date, Reorganized Grand Union will pay the reasonable fees and
expenses of the GUHC and GUCC Legal Advisors incurred with respect to the
dissolution of GUCC and GUHC. Notwithstanding anything in the Plan to the
contrary, the aggregate amount of fees and expenses payable to the GUHC and
GUCC Legal Advisors pursuant to Section 2.04 of the Plan will not exceed, in
the aggregate, $150,000, in addition to the amount of any retainers paid to
such professionals.
b. Priority Tax Claims. A Priority Tax Claim is any Claim against the Debtor
of the type specified in section 507(a)(8) of the Bankruptcy Code. These Claims
consist of certain unsecured Claims of governmental units for taxes. The Debtor
estimates that Priority Tax Claims will not exceed $5 million.
Under the Plan, with respect to each Allowed Priority Tax Claim, at the sole
option of Reorganized Grand Union, the holder of an Allowed Priority Tax Claim
will be entitled to receive on account of such Allowed Priority Tax Claim: (a)
equal cash payments made on the last Business Day of every three (3) month
period following the Effective Date, over a period not exceeding six (6) years
after the assessment of the tax on which such Claim is based, totalling the
principal amount of such Claim plus simple interest on any outstanding balance
from the Effective Date calculated at the interest rate available on ninety
(90) day United States Treasuries on the Effective Date; (b) such other
treatment agreed to by the holder of such Allowed Priority Tax Claim and the
Debtor or Reorganized Grand Union, as the case may be, provided such treatment
is on more favorable terms to the Debtor or Reorganized Grand Union, as the
case may be, than the treatment set forth in clause (a) hereof; or (c) payment
in full, provided that, with respect to paragraphs (b) and (c) hereof, such
treatment is approved by the Bankruptcy Court.
2. Class 1-Credit Agreement Claims. Class 1 consists of any Claims against
the Debtor by the Existing Banks pursuant to the Existing Credit Documents. The
Credit Agreement Claims are secured. The Credit Agreement Claims will be
allowed in full. On or prior to fifteen (15) days prior to the date first set
for the hearing on confirmation of the Plan, the Senior Bank Agent will file
with the Bankruptcy Court and serve on counsel for the Debtor, the Official
Committee and the Informal Committee of Senior Noteholders a schedule setting
forth the proposed amounts of Allowed Credit Agreement Claims (on a per Entity
basis) of each of the Existing Banks to be estimated as of the Confirmation
Date. If no objection is filed by the Debtor, the
26
<PAGE>
Official Committee or the Informal Committee of Senior Noteholders and served
on the Senior Bank Agent within five (5) days after receipt of such schedule,
the Credit Agreement Claims will be deemed Allowed in the amount set forth on
the schedule together with such additional amounts which may accrue subsequent
to the Confirmation Date through and including the Effective Date. In the event
the Debtor, the Official Committee or the Informal Committee of Senior
Noteholders objects to the scheduled amounts, the only issue that will be
determined by the Bankruptcy Court is the amount of each Existing Bank's
Allowed Credit Agreement Claims. Notwithstanding anything contained in the Plan
to the contrary the fees and expenses incurred on account of the Credit
Agreement Claims will be paid as set forth in the Final Cash Collateral Order.
For purposes of the Plan, the Debtor estimates that the aggregate principal
amount of the Credit Agreement Claims will be $93 million (not including
outstanding letters of credit), which reflects amounts due and owing under the
Existing Credit Documents.
(a) On the Effective Date, each holder of an Allowed Credit Agreement Claim
will receive with respect to such Claim the treatment set forth in subparagraph
(i) hereof, unless, at the sole option of the Debtor (which option will be
exercised not later than five (5) days prior to the commencement of the
confirmation hearing), such holder will receive the treatment described in
subparagraph (ii) below:
(i) (x) Reorganized Grand Union will execute the Post-Confirmation
Credit Documents and such documents will become effective (provided
that the other conditions contained in the Commitment Letter and the
Credit Facility Term Sheet, as and if amended by consent of Bankers
Trust and the Debtor, have been satisfied). Pursuant to the
Post-Confirmation Credit Agreement, the commitment with respect to the
amount of the Revolving Credit Facility and the Term Facility will be
increased in the aggregate by not less than $65 million;
(y) The Post-Confirmation Facility will be secured by a
perfected, first priority lien and security interest in all of
the tangible and intangible assets (including, without
limitation, all assets as described in the Commitment Letter,
including leases) of Reorganized Grand Union and its
subsidiaries, whether in existence at the Effective Date or
acquired thereafter, subject only to such liens as may be
permitted pursuant to the Post-Confirmation Credit Documents.
Pursuant to the Intercreditor Agreement, the Additional Facility
Lenders will have priority (with respect to the Additional
Facility and with respect to those loans owed to, and letter of
credit exposure of, such Additional Facility Lenders under the
Existing Credit Agreement as set forth in the Intercreditor
Agreement) over Existing Banks who do not contribute to the
Additional Facility; and
(z) Upon confirmation of the Plan, but effective as of the
Effective Date, the Debtor, Reorganized Grand Union, any Entity
issuing securities under the Plan, any Entity acquiring property
under the Plan, and any Creditor and/or equity security holder of
the Debtor, will be deemed contractually to subordinate any
present or future claim, right or other interest they may have in
and to any proceeds received from the disposition, release, or
liquidation of any Leasehold Interest, or any funds or proceeds
received as a result of a subsequent pledge of such Leasehold
Interest, to the obligations owed to the Post-Confirmation Banks
pursuant to the Post-Confirmation Credit Documents until such
obligations are paid in full; or
(ii) The Debtor will obtain a binding Alternative Commitment Letter
from an alternative lender for the provision of not less than $204
million in loan facilities (of which not less than $57 million will be
term facilities) on the Effective Date on terms satisfactory to the
Debtor and reasonably satisfactory to the Official Committee and the
Informal Committee of Senior Noteholders, in which event:
(x) The holder of an Allowed Credit Agreement Claim will
receive on the Effective Date, cash payments equal to 100% of
such Allowed Credit Agreement Claim; and
(y) Upon payment in full of the Allowed Credit Agreement
Claims, the Existing Credit Agreement will be terminated and the
notes issued pursuant thereto will be cancelled.
27
<PAGE>
(b) On the Effective Date, all interest, fees, expenses and other charges
that have accrued pursuant to the terms of the Existing Credit Documents but
have not been paid as of the Effective Date will be paid to the Senior Bank
Agent for distribution to those parties entitled to receive such interest,
fees, expenses and other charges pursuant to the Existing Credit Documents.
(c) Notwithstanding section 1141(c) or any other provision of the Bankruptcy
Code, all prepetition liens on property of the Debtor held by or on behalf of
the holders of Claims in this Class with respect to such Claims will survive
the Effective Date and continue in accordance with the contractual terms of the
underlying agreements with such holders until, as to each such holder, the
Allowed or Subsequently Allowed Claims of such holder in this Class are paid in
full; provided, however, on and after the Effective Date, such liens will not
attach to the Warrants, the New Senior Notes or New Common Stock. Class 1 is
Impaired.
3. Class 2-Interest Rate Protection Agreement Claims. Class 2 consists of the
Claims against the Debtor for payment of amounts due under the Interest Rate
Protection Agreement. The Interest Rate Protection Agreement Claims will be
allowed in full. On or prior to fifteen (15) days prior to the date first set
for hearing on confirmation of the Plan, the Senior Bank Agent will file with
the Bankruptcy Court and serve on counsel for the Debtor, the Official
Committee and the Informal Committee of Senior Noteholders written notice of
the proposed amount of the Allowed Interest Rate Protection Agreement Claims to
be estimated as of the Confirmation Date. If no objection is filed by the
Debtor, the Official Committee or the Informal Committee of Senior Noteholders
and served on the Senior Bank Agent within five (5) days after receipt of such
notice, the Interest Rate Protection Agreement Claims will be deemed Allowed in
the amount asserted by the Senior Bank Agent in such schedule together with
such additional amounts which may accrue subsequent to the Confirmation Date
through and including the Effective Date. In the event the Debtor, the Official
Committee or the Informal Committee of Senior Noteholders objects to the
proposed amount, the only issue that will be determined by the Bankruptcy Court
is the amount of the Interest Rate Protection Claims. For purposes of the Plan,
the Debtor estimates that the aggregate amount of the Interest Rate Protection
Agreement Claims will be $4,519,500 million.
With respect to each Allowed Interest Rate Protection Agreement Claim, at the
sole option of Reorganized Grand Union, to be exercised on the Effective Date:
(a) the legal, equitable and contractual rights to which the Allowed Interest
Rate Protection Agreement Claim entitles the holder of such Allowed Interest
Rate Protection Agreement Claim will be unaltered by the Plan and the Debtor
shall, on the Effective Date, cure any defaults with respect thereto; or (b) on
the Effective Date, the holder of an Allowed Interest Rate Protection Agreement
Claim will receive a cash payment equal to 100% of such Allowed Interest Rate
Protection Agreement Claim.
Notwithstanding section 1141(c) or any other provision of the Bankruptcy
Code, all prepetition liens on property of the Debtor held by or on behalf of
the holders of Claims in this Class with respect to such Claims will survive
the Effective Date and continue in accordance with the contractual terms of the
underlying agreements with such holders until, as to each such holder, the
Allowed or Subsequently Allowed Claims of such holder in this Class are paid in
full; provided, however, on and after the Effective Date, such liens will not
attach to the Warrants, the New Senior Notes or New Common Stock. Class 2 is
Impaired.
4. Class 3-Miscellaneous Secured Claims. Class 3 consists of all
Miscellaneous Secured Claims under section 506(a) of the Bankruptcy Code
(including, without limitation, the Claims of the Indenture Trustees for the
Senior Notes for fees and expenses, if and to the extent such Claims are
secured Claims), other than Credit Agreement Claims, Interest Rate Protection
Agreement Claims and Senior Note Claims. The Debtor estimates that
Miscellaneous Secured Claims will aggregate approximately $3 million.
Pursuant to the terms of the Plan, with respect to each Allowed Miscellaneous
Secured Claim, at the sole option of Reorganized Grand Union to be exercised on
the Effective Date: (a) the legal, equitable and contractual rights to which
the Allowed Miscellaneous Secured Claim entitles the holder of such Claim will
remain unaltered by the Plan, or (b) Reorganized Grand Union will provide such
other treatment that will
28
<PAGE>
render such Allowed Miscellaneous Secured Claim an Unimpaired Claim under
section 1124 of the Bankruptcy Code; provided that the Miscellaneous Secured
Claims, if any, of the Indenture Trustees for the Senior Notes will be treated
in accordance with Section 12.07 of the Plan. The Debtor's failure to object to
such Claim in the Chapter 11 Case will be without prejudice to Reorganized
Grand Union's right to contest or otherwise defend against such Claim in the
appropriate forum when and if such Claim is sought to be enforced by the holder
thereof.
Notwithstanding section 1141(c) or any other provision of the Bankruptcy
Code, all prepetition liens on property of the Debtor held by or on behalf of
the holders of Claims in this Class with respect to such Claims will survive
the Effective Date and continue in accordance with the contractual terms of the
underlying agreements with such holders until, as to each such holder, the
Allowed or Subsequently Allowed Claims of such holder in this Class are paid in
full. Class 3 is not Impaired.
5. Class 4-Senior Note Claims. Class 4 consists of all Senior Note Claims.
The Senior Note Claims are secured. On the Effective Date, the Senior Notes
will be cancelled, Reorganized Grand Union will execute the New Senior Note
Indenture and, subject to Section 12.02 of the Plan, each holder of an Allowed
Senior Note Claim will be entitled to receive its pro rata share of New Senior
Notes. Such pro rata share will be determined by the ratio between the amount
of such holder's Allowed Senior Note Claim and the aggregate amount of Allowed
Senior Note Claims, each calculated as of the Filing Date without taking into
account any interest on overdue interest or Sections 7.02 and 7.03 of the Plan,
and pursuant to Section 12.02 of the Plan. Pursuant to the Plan, Senior Note
Claims have been allowed in the aggregate amount of $525 million (representing
the face amount of the Senior Notes giving rise to such Claims) plus accrued
but unpaid interest and interest on overdue interest on such Senior Notes as of
the Effective Date. Assuming an Effective Date of April 29, 1995, the Debtor
estimates that Senior Note Claims will aggregate approximately $570,807,000.
The New Senior Notes will not be secured by any property of Reorganized Grand
Union. See "DESCRIPTION OF NEW SENIOR NOTES" and the Term Sheet of New Senior
Notes, annexed hereto as Appendix "C".
In addition, Reorganized Grand Union will enter into a Registration Rights
Agreement with each Entity which, as of the Effective Date (i) holds Senior
Notes entitling such holder to the New Senior Notes to be issued under the Plan
and (ii) requests in writing that Reorganized Grand Union execute such
Registration Rights Agreement. The final draft of such Registration Rights
Agreement will be filed by the Debtor with the Bankruptcy Court no later than a
date which is five (5) days prior to the first date set by the Bankruptcy Court
as the Voting Deadline. Such Registration Rights Agreement will be in form and
substance reasonably satisfactory to the Senior Bank Agent, the Official
Committee and the Informal Committee of Senior Noteholders. Class 4 is
Impaired.
6. Class 5-Priority Claims. Class 5 consists of all Claims which are entitled
to priority in payment under section 507(a) of the Bankruptcy Code, other than
Administrative Expenses and Priority Tax Claims. Priority Claims include Claims
for wages, salaries and contributions to employee benefit plans, to the extent
that such Claims are entitled to priority under section 507(a) of the
Bankruptcy Code. In light of the payments already made pursuant to the
Prepetition Wage and Benefits Order (see "THE CHAPTER 11 CASE-Prepetition Wage
and Benefits Order"), the Debtor estimates that remaining Priority Claims will
not exceed $1 million.
Pursuant to the terms of the Plan, on the latest of (a) the Effective Date,
(b) the date such Priority Claim becomes an Allowed Priority Claim, or (c) the
date, or dates, on which Reorganized Grand Union or the Debtor, as the case may
be, and the holder of such Priority Claim otherwise agree or have agreed, each
holder of an Allowed Priority Claim will receive payment in full of 100% of
such Allowed Priority Claim. Class 5 is Impaired.
7. Class 6-Trade Claims. Class 6 consists of all Claims against the Debtor
for goods provided prior to the Filing Date to the Debtor for resale to the
general public in the ordinary course of business. Class 6 is composed of two
subclasses: (i) Class 6(a) consists of Trade Claim(s) asserted by a Creditor
whose aggregate
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<PAGE>
asserted Trade Claim(s) total less than $25,000; and (ii) Class 6(b) consists
of Trade Claim(s) asserted by a Creditor whose aggregate asserted Trade
Claim(s) total $25,000 or more. As of the Filing Date, approximately $100
million of Trade Claims were outstanding. However, the Debtor estimates that as
of the Effective Date, Trade Claims will aggregate less than $20 million due to
the implementation of the Trade Payment Program, as discussed below.
Pursuant to the Trade Creditor Order, the Debtor is authorized to pay during
the Chapter 11 Case prepetition Trade Claims to the extent of the value of any
unpaid goods shipped by the relevant trade creditor to the Debtor after
February 10, 1995. However, the Debtor may not make such payments unless and
until the relevant trade creditor first executes a Trade Agreement with the
Debtor. See "THE CHAPTER 11 CASE-Trade Creditor Order." If the Trade Payment
Program or any trade creditor's participation therein is terminated, then any
payments made by the Debtor to any such trade creditor in respect of any
prepetition Claims will be deemed to have been made in payment of then
outstanding postpetition obligations owed to such trade creditor and such trade
creditor will immediately repay to the Debtor any payments made to such
creditor on account of prepetition Claims to the extent the aggregate amount of
such payments exceeds the postpetition obligations then outstanding (without
the right of any setoffs, claims, provisions for payment of reclamation or
trust fund claims, or otherwise).
Subject to Section 6.06(b) of the Plan, Unimpaired Claims which are Trade
Claims will neither be deemed Allowed nor Disputed for purposes of the Plan.
The right to payment on such Claim will be determined, resolved or adjudicated,
as the case may be, as if the Chapter 11 Case had not been commenced, subject
to the following sentence. Notwithstanding the foregoing, the Plan is without
prejudice to the Debtor's or Reorganized Grand Union's rights to contest or
otherwise defend against such Claims in the appropriate forum, including the
Bankruptcy Court, when and if such Claim is sought to be enforced by the holder
thereof.
(a) Each Creditor asserting Trade Claim(s) that, in the aggregate, are less
than $25,000 in amount (Class 6(a) Claims), need not file a proof of claim with
respect to such Trade Claim(s) in order to receive a distribution under the
Plan.
(b) Each Creditor asserting Trade Claim(s) that, in the aggregate, are
$25,000 or more in amount (Class 6(b) Claims), must file a proof of claim with
respect to such Trade Claim(s) on or before the Claims Bar Date. In the Event
that any such Creditor does not timely file a proof of claim with respect to
its Trade Claim(s), all Trade Claim(s) asserted by such Creditor will be barred
and discharged; provided, however, that such Trade Creditor will be treated as
having filed a proof of claim with respect to its Trade Claim(s) in the
amount(s), if any, that is/are listed in the Schedules regardless of whether
such Trade Claim(s) are listed in the Schedules as disputed, contingent or
unliquidated.
(c) With respect to each Trade Claim included in either Class 6(a) or in
Class 6(b) that is not barred or discharged pursuant to Section 6.06(b) of the
Plan, and subject to the terms of any Trade Agreement and to the rights set
forth in Section 6.06(e) of the Plan, at the sole option of the Debtor, (i) the
legal, equitable and contractual rights to which the Trade Claim entitles the
holder of such Claim will remain unaltered or (ii) the Debtor will provide such
other treatment that will render such Trade Claim an Unimpaired Claim under
section 1124 of the Bankruptcy Code.
(d) Unless a Creditor asserting Trade Claim(s) files a written objection to
the Plan, such Creditor will be deemed to have waived and forever released any
right to assert or claim that it may be entitled to interest accruing with
respect to such Creditor's Trade Claim(s) and any such claims or assertions for
interest will be forever barred and discharged. In the event that a Creditor
asserting Trade Claim(s) objects to the Plan in writing, such objecting
Creditor's Trade Claim(s) will be deemed included in Class 7 of the Plan
(General Unsecured Claims) and will be deemed to have voted to reject the Plan.
In the event included in Class 7, the objecting Creditor asserting a Trade
Claim will be subject to the proof of claim and bankruptcy claims
administration requirements that are applicable to other Class 7 Creditors.
Notwithstanding anything herein
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<PAGE>
to the contrary, a Creditor whose Claim would have been included in either
Class 6(a) or 6(b) but for the objection referenced in this paragraph: (i) with
respect to a Creditor which would have been included in Class 6(a), (y) such
Creditor may rely on the amount of its Claim as set forth in the Schedules in
the event that its Claim is not listed as contingent, disputed or unliquidated,
or, (z) in the event that its Claim is so designated, or not scheduled, such
Creditor will have ten (10) days from the date its objection is filed within
which to file a proof claim which Claim may not exceed $25,000 plus any Claim
for interest on such Claim; and (ii) with respect to a Creditor which would
have been included in Class 6(b), such Creditor will either (y) have filed a
proof of claim by the Claims Bar Date or (z) its Claim will be limited by the
amount of such Claim as set forth in the Schedules unless such Claim is listed
as contingent, disputed or unliquidated and, in the event of such designation,
such Creditor will have ten (10) days from the date its objection is filed
within which to file a proof of claim which Claim will not exceed the amount
for which it was scheduled plus any claim for interest on such Claim.
(e) The Debtor's failure to file an objection with the Bankruptcy Court to a
Trade Claim will be without prejudice to Reorganized Grand Union's right to
contest or otherwise defend against such Trade Claim in the appropriate forum,
including the Bankruptcy Court, when and if such Trade Claim is sought to be
enforced by the holder thereof. Classes 6(a) and 6(b) are not Impaired.
8. Class 7-General Unsecured Claims. Class 7 consists of all Unsecured Claims
against the Debtor other than Senior Subordinated Note Claims, Subordinated
Claims, Senior Zero Note Claims, Junior Zero Note Claims or Trade Claims.
General Unsecured Claims also include, without limitation, Intercompany Claims
and any Unsecured Claims arising from or with respect to the leasing of real
estate and equipment, utility service, employee benefits, claims brought by
associations or entities for reimbursement of workers' compensation claims, the
fees and expenses of the Indenture Trustees pursuant to the Indentures whether
accruing before or after the Filing Date (except to the extent such fees and
expenses are Miscellaneous Secured Claims or Administrative Expenses), or the
provision of financial, legal and other professional services to the Debtor or
for which the Debtor has agreed to pay (including payment for services provided
by the Debtor's Financial Advisors (see "BACKGROUND-Certain Events Preceding
Commencement of the Chapter 11 Case-Retention of Financial Advisors")). Claims
brought by associations or entities for reimbursement of workers' compensation
claims that arise after the Filing Date will be classified as Administrative
Expenses. Solely for purposes of effectuating the Zero Settlement, the
reasonable fees and expenses of the Capital Indenture Trustees (whether
accruing before or after the Filing Date) will constitute General Unsecured
Claims. The Debtor believes that Intercompany Claims, if any, will not have a
material impact on the Plan or the distributions to be made thereunder. See
also "CERTAIN INFORMATION CONCERNING THE DEBTOR-Regulatory and Legal
Matters-Environmental."
The Debtor estimates that the aggregate amount of General Unsecured Claims
that will be allowed is approximately $80 million. The Debtor's estimate
assumes that lease rejection damages will not exceed $12 million, in aggregate,
not including Claims related to rejection of leases for distribution facilities
currently operated by the Debtor. The Debtor intends to file a motion to reject
the leases on its Waterford, New York distribution facilities. However, the
Debtor intends to enter into discussions with the landlord for those facilities
and with the unions representing the Waterford employees. The outcome of those
discussions may affect the Debtor's intention to reject these leases. The
Debtor is also reviewing its options related to its lease on its Montgomery,
New York warehouse, operated under an agreement with The Penn Traffic Company.
See "CERTAIN INFORMATION CONCERNING THE DEBTOR-Related Party
TransactionsMontgomery Warehouse." No determination on assumption or rejection
of this lease has been made. If the leases for both distribution facilities
mentioned above were rejected, General Unsecured Claims could increase by
approximately $9 million. In addition, the $80 million estimate includes
approximately $30 million of workers' compensation, general liability and
automobile liability claims against the Debtor. Since the Filing Date, the
Debtor has made payments on account of such claims in the ordinary course of
business to the extent such claims are within the scope of the Prepetition Wage
and Benefits Order or otherwise would cause a draw under a letter of credit
issued by the Existing Banks, as provided by the Final Cash Collateral Order.
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The Debtor believes that any workers' compensation obligations accrued, but not
yet paid, as of the Effective Date, will be paid in the ordinary course of
business by Reorganized Grand Union, thus reducing significantly the amount of
General Unsecured Claims that will be paid on the Effective Date. In addition,
the Debtor's estimate includes approximately $14 million of other liabilities
under its self-insurance program that the Debtor believes will be liquidated
over time, further reducing the Debtor's cash needs on the Effective Date.
On the latest of (a) the Effective Date, (b) the date, or dates, on which
such General Unsecured Claim becomes an Allowed General Unsecured Claim, or (c)
the date, or dates, on which Reorganized Grand Union or the Debtor, as the case
may be, and the Entity claiming such Allowed General Unsecured Claim otherwise
agree or have agreed, each holder of an Allowed General Unsecured Claim will
receive payment in full of 100% of such Allowed General Unsecured Claim.
Subject to Section 12.07 of the Plan, any General Unsecured Claims of an
Indenture Trustee will be paid in full on the Effective Date or on such later
date as agreed to be the parties. Class 7 is Impaired.
9. Class 8-Senior Subordinated Note Claims. Class 8 consists of all Senior
Subordinated Note Claims. The Plan provides for Senior Subordinated Note Claims
to be allowed in the principal amount of such notes plus accrued but unpaid
interest and interest on interest, if any, as follows (all numbers are rounded
to the nearest thousand):
<TABLE>
<CAPTION>
<S> <C>
13% Senior Subordinated Note Claims............ $ 16,821,000
12-1/4% Senior Subordinated Note, Series A Claims 53,243,000
12-1/4% Senior Subordinated Note Claims......... 532,430,000
------------
TOTAL.......................................... $602,494,000
------------
------------
</TABLE>
Unlike the 13% Senior Subordinated Notes, both series of 12-1/4% Senior
Subordinated Notes are guaranteed by Capital. Because, under their respective
Indentures, the three series of Senior Subordinated Notes are pari passu in the
priority of their claims against the Debtor, they receive equal treatment under
the Plan with respect to their Allowed Claims.
On the Effective Date the Senior Subordinated Notes will be cancelled. Also
on the Effective Date, and, subject to Section 12.02 of the Plan, each holder
of an Allowed Senior Subordinated Note Claim will be entitled to receive its
pro rata share of the New Common Stock to be issued under the Plan. Such pro
rata share will be determined by the ratio between such holder's Allowed Senior
Subordinated Note Claim and the aggregate amount of all Allowed Senior
Subordinated Note Claims as of the Effective Date, and pursuant to Section
12.02 of the Plan. The holders of Allowed Senior Subordinated Note Claims will
receive in the aggregate, on a pro rata basis, 100% of the New Common Stock to
be issued under the Plan. See "DESCRIPTION OF NEW CAPITAL STOCK."
In addition, Reorganized Grand Union will enter into a Registration Rights
Agreement with each Entity which, as of the Effective Date, (i) holds Senior
Subordinated Notes entitling such holder to receive ten percent (10%) or more
of the shares of New Common Stock to be issued under the Plan and (ii) requests
in writing that Reorganized Grand Union execute such Registration Rights
Agreement. The final draft of such Registration Rights Agreement will be filed
by the Debtor with the Bankruptcy Court no later than a date which is five (5)
days prior to the first date set by the Bankruptcy Court as the Voting
Deadline. Such Registration Rights Agreement will be in form and substance
reasonably satisfactory to the Senior Bank Agent and the Official Committee.
Class 8 is Impaired.
To assure that the Senior Subordinated Noteholders receive their New Common
Stock without reduction for the fees and expenses and as an integral part of
the distributions to such Noteholders and their bargained for consideration, a
cash reserve will be established in respect of the Indenture Trustees' fees and
expenses.
U.S. Trust, the Indenture Trustee for the 12-1/4% Senior Subordinated Notes
and the 12-1/4% Senior Subordinated Notes, Series A, estimates that its
compensation and expenses will not exceed $250,000 if the
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Plan is consummated on or prior to May 31, 1995 without substantial opposition.
As discussed above, the Plan provides that U.S. Trust's Claim (and the Claims
of the other Indenture Trustees) will be paid in cash in full on the Effective
Date of the Plan from a reserve to be established for that purpose. U.S. Trust
asserts that it has the right to recover its compensation and expenses from the
distributions to be made to the holders of the two series of 12-1/4% Senior
Subordinated Notes if its compensation and expenses are not paid by the Debtor.
U.S. Trust has reserved its right to seek payment from the distributions if a
satisfactory reserve is not established. Exercise of this right would reduce
the stated distributions to the holders of the 12-1/4% Senior Subordinated
Notes. U.S. Trust does not presently anticipate seeking to recover any part of
its compensation and expenses as an Administrative Expense of the Chapter 11
Case. See "THE PLAN-Classification and Treatment of Claims and Interests Under
the Plan-General Unsecured Claims."
10. Class 9-Senior Zero Note Claims. Class 9 consists of any Claims asserted
against the Debtor by a holder of a Senior Zero Note relating to or arising
from ownership of a Senior Zero Note issued by Capital. For purposes of
effectuating the Zero Settlement only, the Senior Zero Note Claims will be
allowed in an amount equal to the value as of the Effective Date of the
distributions made on account of such Claims under the Plan.
(a) Subject to the terms and conditions set forth in the Zero Settlement, and
solely for purposes of effectuating such settlement, on the Effective Date, the
Senior Zero Note Claims will be allowed as set forth in Section 7.09 of the
Plan (subordinate to all Claims and Administrative Expenses against the Debtor,
other than Claims set forth in Classes 10 and 11), in the amount allowed
pursuant to Section 7.09 of the Plan, the Senior Zero Notes will be cancelled,
and, subject to Section 12.02 of the Plan, each holder of an Allowed Senior
Zero Note Claim will be entitled to receive its pro rata share of 240,000
Series 1 Warrants and of 480,000 Series 2 Warrants to be issued under the Plan
as its full recovery against the Debtor and Reorganized Grand Union on its
Senior Zero Note Claims. Such pro rata share will be determined by the ratio
between the face amount of such holder's Senior Zero Notes and the aggregate
face amount of all Senior Zero Notes and pursuant to Section 12.02 of the Plan.
(b) Notwithstanding anything in the Plan to the contrary, it will be a
condition to the issuance of the Warrants (i) with respect to the Senior Zero
Note Claims held by a particular Entity holding Senior Zero Notes that, in the
aggregate, are $200,000 or more in face amount, that such Entity execute and
deliver a Zero Claims Release, and (ii) with respect to each holder of a Senior
Zero Note Claim, that such holder not have filed a written objection to
confirmation of the Plan (which is not withdrawn prior to commencement of the
hearing on confirmation of the Plan). Any Warrants not issued by operation of
the foregoing before the later of (i) two (2) years from the Effective Date,
and (ii) six (6) months following the date such holder's Claim becomes an
Allowed or Ultimately Allowed Claim will be deemed to be unclaimed property and
cancelled.
(c) The Debtor has not and shall not be deemed to have assumed any liability
related to or arising from the Zero Notes. Class 9 is Impaired.
11. Class 10-Junior Zero Note Claims. Class 10 consists of any Claims
asserted against the Debtor by a holder of a Junior Zero Note relating to or
arising from the ownership of a Junior Zero Note issued by Capital. For
purposes of effectuating the Zero Settlement only, the Junior Zero Note Claims
will be allowed in an amount equal to the value as of the Effective Date of the
distributions made on account of such Claims under the Plan.
(a) Subject to the terms and conditions set forth in the Zero Settlement, and
solely for purposes of effectuating such settlement, on the Effective Date, the
Junior Zero Note Claims will be allowed as set forth in Section 7.10 of the
Plan (subordinate to all Claims and Administrative Expenses against the Debtor,
other than Claims set forth in Class 11) in the amount allowed pursuant to
Section 7.10 of the Plan, the Junior Zero Notes will be cancelled, and, subject
to Section 12.02 of the Plan, each holder of an Allowed Junior Zero Note Claim
will be entitled to receive its pro rata share of 60,000 Series 1 Warrants and
of 120,000
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Series 2 Warrants to be issued under the Plan as its full recovery against the
Debtor and Reorganized Grand Union on its Junior Zero Note Claims. Such pro
rata share will be determined by the ratio between the face amount of such
holder's Junior Zero Notes and the aggregate amount of all Junior Zero Notes,
and pursuant to Section 12.02 of the Plan.
(b) Notwithstanding anything in the Plan to the contrary, it will be a
condition to the issuance of the Warrants (i) with respect to the Junior Zero
Note Claims held by a particular Entity holding Junior Zero Notes that, in the
aggregate, are $200,000 or more in face amount, that such Entity execute and
deliver a Zero Claims Release, and (ii) with respect to each holder of a Junior
Zero Note Claim, that such holder not have filed a written objection to
confirmation of the Plan (which is not withdrawn prior to commencement of the
hearing on confirmation of the Plan). Any Warrants not issued by operation of
the foregoing before the later of (i) two (2) years from the Effective Date,
and (ii) six (6) months following the date such holder's Claim becomes an
Allowed or Ultimately Allowed Claim will be deemed to be unclaimed property and
cancelled.
(c) The Debtor has not assumed and shall not be deemed to have assumed any
liability related to or arising from the Zero Notes. Class 10 is Impaired.
12. Class 11-Subordinated Claims. Class 11 consists of any Claim against the
Debtor subject to subordination pursuant to sections 510(b) or (c) of the
Bankruptcy Code. Class 11 does not include Senior Subordinated Note Claims. On
the Effective Date, all Subordinated Claims will be discharged and no
distributions will be made on account of Class 11. Class 11 is Impaired.
13. Class 12-Interests. Class 12 consists of all equity interest in the
Debtor including, but not limited to, those represented by shares of capital
stock of the Debtor and any options, warrants, calls, subscriptions or other
similar rights or other agreements, commitments or outstanding securities
obligating the Debtor to issue, transfer or sell any shares of capital stock of
the Debtor. On the Effective Date, all Interests will be cancelled and no
distributions will be made in respect of Class 12. Class 12 is Impaired.
C. Effects of Plan Confirmation
The PBGC has asked the Debtor to clarify the impact of Plan confirmation on
liabilities related to the Debtor's Retirement Plan. In accordance with that
request, nothing contained in the Plan shall be construed as discharging,
releasing or relieving the Debtor, Reorganized Grand Union, or any other party,
in any capacity, from any liability with respect to the Grand Union Employees'
Retirement Plan to which any such party is subject as of immediately prior to
the Effective Date under any law or regulatory provision, and neither the PBGC
nor the Retirement Plan will be enjoined from enforcing such liability as a
result of the Plan's provisions for satisfaction, release and discharge of
Claims.
1. Discharge. Except as otherwise specifically provided by the Plan, the
confirmation of the Plan (subject to the occurrence of the Effective Date) will
discharge the Debtor and Reorganized Grand Union from any debt (including,
without limitation, Class 11 Claims and Claims related to Class 12 Interests)
that arose before the Confirmation Date, and any debt of the kind specified in
sections 502(g), 502(h) and 502(i) of the Bankruptcy Code, whether or not a
proof of claim for such debt is filed or is deemed filed, whether or not such
Claim is Allowed, and whether or not the holder of such Claim has voted on the
Plan. The effect of discharging a Claim is to release the Debtor and
Reorganized Grand Union from any obligations to make payments with respect to
such debt, other than those specifically provided by the Plan, and to prohibit
any collection efforts by the holder of the Claim.
2. Binding Effect. The provisions of the Plan will be binding upon and inure
to the benefit of the Debtor, Reorganized Grand Union, any holder of a Claim or
Interest, their respective predecessors, successors, assigns, agents, officers
and directors and any other Entity affected by the Plan.
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3. Releases. Except as otherwise specifically provided by the Plan, the
distributions and rights that are provided in the Plan will be in complete
satisfaction, discharge and release, effective as of the Confirmation Date (but
subject to the occurrence of the Effective Date) of (i) all Claims and Causes
of Action against, liabilities of, liens on, obligations of and Interests in
the Debtor or Reorganized Grand Union or the direct or indirect assets and
properties of the Debtor or Reorganized Grand Union, whether known or unknown,
and (ii) all Causes of Action (whether known or unknown, either directly or
derivatively through the Debtor or Reorganized Grand Union) against, claims (as
defined in section 101 of the Bankruptcy Code in the case of GUCC and GUHC)
against, liabilities (as guarantor of a Claim or otherwise) of, liens on the
direct or indirect assets and properties of, and obligations of successors and
assigns of the Debtor, Affiliates of the Debtor and their successors and
assigns, and present and former stockholders, directors, officers, agents
(including MTH), attorneys, advisors, financial advisors, investment bankers
and employees of the Debtor and such Affiliates based on the same subject
matter as any Claim or Interest, or based on any act or omission, transaction
or other activity or security, instrument or other agreement of any kind or
nature occurring, arising or existing prior to the Effective Date that was or
could have been the subject of any Claim or Interest, in each case regardless
of whether a proof of claim or interest was filed, whether or not Allowed and
whether or not the holder of the Claim or Interest has voted on the Plan.
Further, except as otherwise specifically provided by the Plan, any Entity
accepting any distribution pursuant to the Plan will be presumed conclusively
to have released the Debtor, Reorganized Grand Union, and any other Entity
accepting any distribution pursuant to the Plan, successors and assigns of the
Debtor and such Entities, Affiliates of the Debtor, Reorganized Grand Union and
such Entities, successors and assigns of such Affiliates, present and former
stockholders, directors, officers, agents (including MTH), attorneys, advisors,
financial advisors, investment bankers and employees of the Debtor, such
Affiliates and such Entities, and any Entity claimed to be liable derivatively
through any of the foregoing, from any Cause of Action based on the same
subject matter as the Claim or Interest on which a distribution is received.
The release described in the preceding sentence will be enforceable as a matter
of contract against any Entity that accepts any distribution pursuant to the
Plan.
Notwithstanding anything contained in the Plan to the contrary, the foregoing
releases will be enforced only to the extent permitted by applicable law.
In informal comments, the staff of the Securities and Exchange Commission
(the "Commission") indicated to the Debtor its concerns about the
enforceability of third party releases under the Plan. In response to such
comments, the Debtor modified the scope of the releases, such that they will
"be enforced only to the extent permitted by applicable law." After reviewing
the Debtor's modification to the Plan, the staff of the Commission informed the
Debtor that it would reserve its right to address the enforceability of the
releases, as modified, at confirmation of the Plan.
4. Release of Claims of the Debtor. On the Effective Date, the Debtor and the
Debtor-In-Possession will be conclusively deemed to release (i) all
professionals (including, but not limited to, advisors and attorneys) retained
by (aa) the Debtor (that were retained as of November 1, 1994 in connection
with the Debtor's restructuring, but only as to claims which arise in
connection with such restructuring, or were retained by order of the Bankruptcy
Court), (bb) the Senior Bank Agent, the Official Committee or the Informal
Committees, provided that such professionals were disclosed to the Debtor prior
to the Filing Date or retained by order of the Bankruptcy Court, (cc) the
Indenture Trustees, or (dd) the Capital Indenture Trustees, the Informal Zero
Committee, or the Capital Committee, (ii) MTH and (iii) all directors and
officers of the Debtor holding such offices at any time during the period from
and including the Filing Date through and including the Confirmation Date from
all liability based upon any act or omission related to past service with, for
or on behalf of the Debtor or the Debtor-In-Possession except for: (a) any
indebtedness of any such person to the Debtor for money borrowed by such
person; (b) any setoff or counterclaim the Debtor or Debtor-In-Possession may
have or assert against any such person, provided that the aggregate amount
thereof will not exceed the aggregate amount of any Claims held or asserted by
such person against the Debtor or Debtor-In-Possession, as the case may be; (c)
the uncollected amount of any claim made by the Debtor or Debtor-In-
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Possession (whether in a filed pleading, by letter or otherwise asserted in
writing) prior to the Effective Date against such person which claim has not
been adjudicated to Final Order, settled or compromised; or (d) claims arising
from the fraud, willful misconduct or gross negligence of such persons.
In addition, on the Confirmation Date, subject to the occurrence of the
Effective Date, the Debtor will be deemed to have released all Causes of Action
against the members of the Official Committee, the members of the Informal
Committees, the members of the Capital Committee, the members of the Informal
Zero Committee, the Additional Facility Lenders, the Existing Banks, the holders
of Senior Notes, the Indenture Trustees, the Capital Indenture Trustees or the
holders of Senior Subordinated Notes, in their respective capacities as such.
Notwithstanding anything contained in the Plan to the contrary, the foregoing
releases will be enforced only to the extent permitted by applicable law.
Nothing in the Plan will be construed as discharging, releasing or relieving
the Debtor, Reorganized Grand Union, or any other party, in any capacity, from
any liability with respect to the Retirement Plan to which any such party is
subject as of immediately prior to the Effective Date under any law or
regulatory provision.
The releases embodied in the Plan are in addition to, and not in lieu of, any
other release separately given, conditionally or unconditionally, by the Debtor
or Debtor-In-Possession to any other person or Entity.
5. Exculpation. Neither Reorganized Grand Union, the Official Committee, any
of the Informal Committees, the Capital Committee, the Informal Zero Committee,
the Senior Bank Agent, nor (as applicable) any of their respective members,
officers, directors, shareholders, employees, agents (including MTH), attorneys,
accountants or other advisors, will have or incur any liability to any holder of
a Claim or Interest for any act or failure to act in connection with, or arising
out of, the pursuit of confirmation of the Plan, the consummation of the Plan or
the administration of the Plan or the property to be distributed under the Plan,
except for any act or failure to act that constitutes willful misconduct or
recklessness as determined pursuant to a Final Order, and in all respects, such
Entities (a) will be entitled to rely upon the advice of counsel with respect to
their duties and responsibilities under the Plan, and will be fully protected
from liability in acting or in refraining from action in accordance with such
advice, and (b) will be fully protected from liability with respect to any act
or failure to act that is approved or ratified by the Bankruptcy Court.
6. Injunction. The satisfaction, release and discharge pursuant to Section
14.01 of the Plan will also act as an injunction against any Entity's commencing
or continuing any action, employment of process, or act to collect, offset or
recover any Claim or Cause of Action satisfied, released or discharged under the
Plan to the fullest extent authorized or provided by the Bankruptcy Code,
including, without limitation, to the extent provided for or authorized by
sections 524 and 1141 thereof. Nothing in the Plan will be construed as
discharging, releasing or relieving the Debtor, Reorganized Grand Union, or any
other party, in any capacity, from any liability with respect to the Retirement
Plan to which any such party is subject as of immediately prior to the Effective
Date under any law or regulatory provision, and neither the PBGC nor the
Retirement Plan will be enjoined from enforcing such liability as a result of
the Plan's provisions for satisfaction, release and discharge of Claims.
7. Revesting. On the Effective Date, pursuant to section 1141 of the
Bankruptcy Code, title to all property of the Debtor's estate will pass to
Reorganized Grand Union, free and clear of all Claims of Creditors and Interests
(except as otherwise provided in the Plan). Reorganized Grand Union may pay any
expenses, including any fees and expenses of professionals, accruing from and
after the Confirmation Date without any application to the Bankruptcy Court.
Confirmation of the Plan (subject to occurrence of the Effective Date) will be
binding and the Debtor's debts will, without in any way limiting Section 14.01
of the Plan, be discharged as provided in section 1141 of the Bankruptcy Code.
The previous sentence notwithstanding, nothing in the Plan will be construed as
discharging, releasing or relieving the Debtor, Reorganized Grand
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Union, or any other party, in any capacity, from any liability with respect to
the Retirement Plan to which any such party is subject as of immediately prior
to the Effective Date under any law or regulatory provision.
D. Executory Contracts and Unexpired Leases
1. General. Subject to the approval of the Bankruptcy Court, the Bankruptcy
Code empowers a debtor in possession to assume or reject executory contracts and
unexpired leases. Generally, an "executory contract" is a contract under which
material performance is due from both parties. If an executory contract or
unexpired lease is rejected by a debtor in possession, the other parties to the
agreement may file a claim for damages incurred by reason of the rejection,
which claim is treated as a prepetition claim. If an executory contract or
unexpired lease is assumed by a debtor in possession, the debtor in possession
has the obligation to perform its obligations thereunder in accordance with the
terms of such agreement and failure to perform such obligations could result in
a claim for damages which may be entitled to administrative expense status.
2. The Plan. Any unexpired lease or executory contract that has not been
expressly rejected by the Debtor with the Bankruptcy Court's approval on or
prior to the Confirmation Date will, as of the Confirmation Date (subject to the
occurrence of the Effective Date), be deemed to have been assumed by the Debtor
unless there is pending before the Bankruptcy Court on the Confirmation Date a
motion to reject such unexpired lease or executory contract or such executory
contract or unexpired lease is otherwise designated for rejection, provided that
such lease or executory contract is ultimately rejected; provided, however,
that, as of the Confirmation Date (subject to the occurrence of the Effective
Date), any executory contracts or unexpired leases to which an Insider or
Affiliate of the Debtor is party shall be deemed to have been rejected by the
Debtor unless, by such date, either (i) such unexpired lease or executory
contract has been expressly assumed by the Debtor or Reorganized Grand Union, as
the case may be, or (ii) a motion seeking such assumption has been filed,
provided that such motion is ultimately allowed; provided, however, that no
executory contract or unexpired lease will be subject to the foregoing deemed
rejection (subject to explicit assumption) solely by virtue of the fact that one
or more wholly owned subsidiaries of the Debtor is party to such contract or
lease.
For purposes of the Plan, leases of nonresidential real property which were
assigned by the Debtor prior to the Filing Date will be treated as being neither
executory nor unexpired, and notwithstanding Section 9.01 of the Plan, will be
deemed neither assumed nor rejected pursuant to the Plan.
With respect to any executory contract or unexpired lease rejected by the
Debtor, the rejection will be deemed to constitute a breach of such contract or
lease immediately before the Filing Date and may result in a pre-Filing Date
Claim against the Debtor for damages. A Claim for damages against the Debtor
arising from the rejection of any executory contract or unexpired lease pursuant
to a Final Order will be forever barred and will not be enforceable against the
Debtor, Reorganized Grand Union, any of their affiliates or their respective
property or interests in property, and no holder of any such Claim will
participate in any distributions under the Plan, unless a proof of claim is
filed with the Bankruptcy Court within (a) the time period established by the
Bankruptcy Court in such Final Order approving such rejection or (b) if no such
time period is or was established, thirty (30) days from and after the date of
entry of such Final Order.
The Debtor estimates that rejection of executory contracts and unexpired
leases from the Chapter 11 Case will give rise to General Unsecured Claims
aggregating no more than $12 million, not including Claims related to rejection
of the leases for distribution facilities, if such leases are ultimately
rejected. See "THE PLAN-Classification and Treatment of Claims and Interests
Under the Plan-Class 7-General Unsecured Claims."
E. Termination of Indemnification Obligations
(a) Except as and to the extent set forth in subsections (b) and (c) of
Section 14.06 of the Plan and in the MTH Settlement Agreement, and
notwithstanding any other provision of the Plan, all obligations of the
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Debtor to indemnify, or pay contribution or reimbursement to, its present or
former directors, officers, agents (including, without limitation, MTH),
employees and representatives holding such positions at any time prior to the
Confirmation Date whether pursuant to its certificate of incorporation, bylaws,
contractual obligations or any applicable laws or otherwise in respect of all
past, present and future actions, suits and proceedings against any of such
directors, officers, agents, employees and representatives based upon any act or
omission related to service with, for or on behalf of the Debtor or
Debtor-In-Possession or any present or former Affiliate will be discharged under
the Plan, all such undertakings and agreements will be rejected and terminated,
and Reorganized Grand Union will have no obligation thereunder pursuant to the
Plan or otherwise.
(b) The obligations of the Debtor pursuant to law or its certificate of
incorporation or bylaws or otherwise to indemnify, or to pay contribution or
reimbursement to, the Indemnified Persons, as defined below, in respect of all
past, present or future actions, suits and proceedings, whether commenced or
threatened, against such Indemnified Persons, which include obligations based
upon any act or omission arising out of the performance by an Indemnified Person
of services to the Debtor, its present or former subsidiaries, Capital or
Holdings, for or at the request of the Debtor, prior to the Effective Date,
whether prior to the Filing Date or not, will not be discharged or impaired by
confirmation of the Plan and will not be subordinated under section 510 of the
Bankruptcy Code or otherwise, or be disallowed by reason of section 502(e) of
the Bankruptcy Code or otherwise; provided, however, that the limited continuing
obligations preserved by Section 14.06(b) of the Plan will not cover any claim
for indemnification, contribution, reimbursement or other payment by an
Indemnified Person arising out of or related, directly or indirectly, to any
action, suit or proceeding against any Indemnified Person (i) brought by Capital
or Holdings, (ii) brought by any other person or any other person which is a
present or former purchaser, seller, underwriter or owner, in each case acting
in such capacity, of present or former securities of the Debtor, its
predecessors or any present or former Affiliate thereof, including, without
limitation, Capital or Holdings in such capacity, (iii) brought by any trustee,
receiver or other representative of asserting the rights of Capital, Holdings or
any other person described in (i) hereof, or (iv) brought by any other person (a
"Third Party Claimant") against an Indemnified Person asserting claims for
contribution, reimbursement or indemnity by such Third Party Claimant arising
out of or related to any action, suit or proceeding against such Third Party
Claimant which, had it been brought against an Indemnified Person, would be
described in (i), (ii) or (iii) hereof (such claims being hereinafter referred
to as the "Excluded Claims"). As used herein, the term "Indemnified Persons"
will mean (x) the Debtor's present and former directors, officers and employees
which have held such position with the Debtor at any time during the period from
and including one year prior to the Filing Date through and including the
Confirmation Date, (y) persons who retired as directors, officers or employees
of the Debtor ("Retirees") prior to the Effective Date and (z) MTH and the MTH
Entities, as defined in the MTH Settlement Agreement. Any liability of the
Debtor under the foregoing provision of the Plan which is attributable to the
period from the Filing Date to the Effective Date and which under the Bankruptcy
Code has the priority of an expense of administration will be entitled to such
priority, but no aggregate amount of dollars will be paid by reason of such
priority which is greater than the absolute maximum payable under this
paragraph.
(c) Notwithstanding the provisions of subsections (a) and (b) of Section 14.06
of the Plan, the obligations of the Debtor pursuant to law or its certificate of
incorporation or bylaws or otherwise to indemnify, or to pay contribution or
reimbursement to, the Continuing Indemnified Persons, as defined below, in
respect of legal fees, costs, expert advice and witnesses and expenses ("Defense
Expenses") incurred by the Continuing Indemnified Persons in the defense of
Excluded Claims will not be discharged or impaired by reason of confirmation of
the Plan or otherwise and will not be subordinated under section 510 of the
Bankruptcy Code or otherwise and will not be disallowed under section 502(e) of
the Bankruptcy Code or otherwise. As used herein, the term "Continuing
Indemnified Persons" will mean those persons who are entitled to indemnification
under the certificate of incorporation or bylaws of the Debtor as in effect
prior to the Filing Date and who shall have served as directors, officers or
employees of the Debtor at any time, from and after one year before the Filing
Date and Retirees, but will not include any MTH Entity. Upon written request of
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any one or more Continuing Indemnified Person, the Board of Directors may, in
its reasonable discretion, apply funds that would be used in respect of the
defense of an Excluded Claim to the settlement thereof if such settlement
payment will be less than the reasonably anticipated Defense Expenses which
would be incurred in respect of such Excluded Claim and such application would
be in the best interest of Reorganized Grand Union. Any liability of the Debtor
under the foregoing provision of the Plan which is attributable to the period
from the Filing Date to the Effective Date and which under the Bankruptcy Code
has the priority of an expense of administration will be entitled to such
priority, but no aggregate amount of dollars will be paid by reason of such
priority which is greater than the absolute maximum payable under this
paragraph.
(d) No Indemnified Person or Continuing Indemnified Person will be required to
file any Claim or Administrative Expense to establish rights preserved under
subsections (b) and (c) of Section 14.06 of the Plan.
F. Claims of Holders of Zero Notes and Capital Indenture Trustees
As of the Effective Date, the holders of the Zero Notes will not be heard,
either directly or indirectly, other than with respect to any post-confirmation
modifications to the Plan or the Confirmation Order or with respect to matters
concerning distribution of the Warrants, applications by professionals for
compensation or reimbursement of expenses or payment of Claims of the Capital
Indenture Trustees.
G. Retention and Enforcement of Causes of Action
Except as expressly provided in Section 14.01 of the Plan, and except for any
avoidance actions against holders of Unimpaired Class 6 Trade Claims or any
Causes of Action released pursuant to Article 14 of the Plan, pursuant to
section 1123(b)(3) of the Bankruptcy Code, Reorganized Grand Union will retain,
with the exclusive right to enforce in its sole discretion, any and all Causes
of Action of the Debtor or Debtor-In-Possession, including all Causes of Action
which may exist under sections 510, 542, 544 through 550 and 553 of the
Bankruptcy Code or under similar state laws, including, without limitation,
fraudulent conveyance claims, if any, and all other Causes of Action of a
trustee and debtor in possession under the Bankruptcy Code. The Debtor or
Reorganized Grand Union, as the case may be, may, but will not be required to,
set off against any Claim and the distributions to be made pursuant to the Plan
in respect of such Claim, any claims of any nature whatsoever which the Debtor
or Debtor-in-Possession may have against the holder of such Claim, but neither
the failure to do so nor the allowance of any Claim under the Plan will
constitute a waiver or release of any such claim the Debtor or
Debtor-in-Possession may have against such holder.
H. Registration Rights
Reorganized Grand Union will enter into a Registration Rights Agreement with
each Entity which, as of the Effective Date, (a) (i) holds Senior Subordinated
Notes entitling such holder to received ten (10%) percent or more of the shares
of New Common Stock or (ii) holds Senior Notes entitling such holder to the New
Senior Notes to be issued under the Plan, and (b) requests in writing that
Reorganized Grand Union execute such agreement. The final drafts of such
Registration Rights Agreements will be filed by the Debtor with the Bankruptcy
Court no later than a date which is five (5) days prior to the first date set by
the Bankruptcy Court as the Voting Deadline. Such Registration Rights Agreements
will be in form and substance reasonably satisfactory to the Senior Bank Agent,
the Official Committee and, with respect to the Registration Rights Agreement
for the New Senior Notes, the Informal Committee of Senior Noteholders.
I. Distributions Under the Plan
1. Time of Distributions Under the Plan. Except as otherwise provided in the
Plan and without in any way limiting Section 11.02 and Article 13 of the Plan,
payments and distributions in respect of Allowed Claims will be made by
Reorganized Grand Union (or its designee) on or as promptly as practicable after
the Effective Date. Cash or securities otherwise distributable with respect to
Disputed Claims will be held by
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Reorganized Grand Union pending resolution of all objections to each such Claim.
When such objections have been resolved and the Claim has become an Ultimately
Allowed Claim, Reorganized Grand Union will make an appropriate distribution
with respect to such Ultimately Allowed Claim. See "THE PLAN-Procedures for
Resolving Disputed Claims."
2. Fractional Securities. (a) Fractional shares of New Common Stock,
fractional Warrants and New Senior Notes in non-integral multiples of $1,000
will not be distributed. Instead, on the date of final distribution of such
securities to the persons entitled thereto, the aggregate of all fractional
interests (including, for such purposes, New Senior Notes in a principal amount
less than $1,000) that would otherwise be issued to such persons will instead be
placed in two separate pools in respect of each such securities (hereinafter the
"Fractional Securities Pools") provided Section 12.02 of the Plan will not
affect the distributions to such holders of whole shares of New Common Stock,
whole Warrants or New Senior Notes in $1,000 increments, but solely the
fractional portion thereof. There will be a single Fractional Securities Pool
for the fractional interests in New Common Stock and a single Fractional
Securities Pool for the fractional interests in New Senior Notes. With respect
to the Warrants, there will be separate Fractional Securities Pools established
for each of (i) the fractional interests in Series 1 Warrants to be distributed
to holders of Class 9 Claims, (ii) the fractional interests in Series 1 Warrants
to be distributed to holders of Class 10 Claims, (iii) the fractional interests
in Series 2 Warrants to be distributed to holders of Class 9 Claims, (iv) the
fractional interests in Series 2 Warrants to be distributed to holders of Class
10 Claims.
(b) All holders of Allowed or Ultimately Allowed Claims entitled to a
fractional interest in New Common Stock, as the case may be, will be placed on a
list (hereinafter a "Distribution List") in descending order according to the
size of the fractional interest in the New Common Stock to which each such
holder is entitled. In the event two or more holders of Allowed or Ultimately
Allowed Claims are entitled to the same fractional interest (rounded to six
decimal places) in New Common Stock, their relative ranking on the Distribution
List will be determined by lot. A whole share of New Common Stock will be
distributed to holders entitled to the largest fractions of New Common Stock
until all of the whole shares of the New Common Stock, in the Fractional
Securities Pool for the New Common Stock will have been distributed.
(c) (i) Subject to subparagraph (ii), the holders of Allowed or Ultimately
Allowed Claims entitled to a fractional interest in the New Senior Notes
(i.e., New Senior Notes in a principal amount less than $1,000) will be
entitled to receive either, at the election of the Debtor or Reorganized
Grand Union (which election will be exclusive of the other option) (x) cash
equal to the principal amount of the fractional New Senior Notes to which
they would otherwise be entitled, and the New Senior Notes which would
otherwise have been issued in respect of such fractional interests will be
cancelled by the Debtor or Reorganized Grand Union, or (y) (a) the holders
entitled to a fractional interest which is greater than $500 will receive an
additional $1,000 New Senior Note (subject to subparagraph (ii) hereof) and
(b) the holders entitled to a fractional interest which is $500 or less will
not be entitled to any distribution with respect to such fractional interest.
(ii) Notwithstanding subparagraph (i) hereof, in the event that the
aggregate amount of the cash which would be distributed pursuant to
subparagraph (i)(x) is less than $100,000, then the Debtor or Reorganized
Grand Union must elect option (x). Notwithstanding subsection (i)(y)(a), in
no event will the aggregate New Senior Notes distributed pursuant to the
Plan exceed $595,475,922 in aggregate principal amount, and if the New Senior
Notes to be distributed pursuant to subparagraph (c)(i)(y) would cause the
aggregate to exceed this amount, then, in ascending order according to the
size of their respective fractional interests, the holders entitled to
receive New Senior Notes pursuant to subsection (c)(i)(y)(a) will be deemed
to instead fall under subsection (c)(i)(y)(b) with respect to such fractional
interests.
(d) All holders of Allowed or Ultimately Allowed Claims entitled to a
fractional interest in Warrants will be treated as follows with respect to such
fractional interests. In descending order of size of fractional interests, the
holders of fractional interests in each of the four (4) separate Fractional
Securities Pools
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established with respect to the Warrants pursuant to Section 12.02(a) of the
Plan will receive (in addition to the number of whole Warrants to which each is
otherwise entitled) a whole Warrant with respect to such fractional interest
until the aggregate number of each Series of Warrants to be distributed,
respectively (x) to holders of Claims in Class 9 pursuant to Section 6.09(a) of
the Plan and (y) to holders of Claims in Class 10 pursuant to Section 6.10(a) of
the Plan have been distributed; provided that, in the event two or more holders
of Allowed or Ultimately Allowed Claims in the same Fractional Securities Pool
are entitled to the same fractional interest (rounded to six decimal places)
with respect to the Warrants to be distributed with respect to that pool, their
relative ranking on the distribution list will be determined by lot.
3. Compliance with Tax Requirements. Reorganized Grand Union will comply with
all withholding and reporting requirements imposed by federal, state or local
taxing authorities in connection with making distributions pursuant to the Plan.
In connection with each distribution with respect to which the filing of an
information return (such as an Internal Revenue Service Form 1099 or 1042)
and/or withholding is required, Reorganized Grand Union will file such
information return with the Internal Revenue Service and provide any required
statements in connection therewith to the recipients of such distribution,
and/or effect any such withholding and deposit all moneys so withheld to the
extent required by law. With respect to any Entity from whom a tax
identification number, certified tax identification number of other tax
information required by law to avoid withholding has not been received by
Reorganized Grand Union (or its distribution agent), Reorganized Grand Union
may, at its sole option, withhold the amount required and distribute the balance
to such Entity or decline to make such distribution until the information is
received; provided, however, Reorganized Grand Union will not be obligated to
liquidate New Senior Notes, Warrants or New Common Stock to perform such
withholding.
4. Allocation Between Principal and Accrued Interest. Except as specifically
provided in the Plan, on the Effective Date, the aggregate consideration paid to
creditors in respect of their Claims will be treated as allocated first to the
principal amount of such Claims and then to any accrued interest thereon;
provided, however, that the foregoing will not apply to distributions with
respect to Claims in Classes 9 and 10 (i.e., there shall be no mandatory
reporting requirement by operation of the Plan).
5. Distribution of Unclaimed Property. Any distribution of property under the
Plan that is unclaimed after two years following the Effective Date will
irrevocably revert to Reorganized Grand Union, without regard to any state
escheatment laws.
6. Set-Offs. Except as otherwise expressly provided in the Plan, the Plan is
not intended to, and will not, abrogate or impair any rights of setoff of the
Debtor or Reorganized Grand Union.
7. Manner of Payment. Except with respect to Credit Agreement Claims and
Interest Rate Protection Agreement Claims, payment of which will be made by wire
transfer of same day funds, payments provided under the Plan may be made, at the
option of the Debtor or Reorganized Grand Union, in cash, by wire transfer or by
check drawn on any money market center bank.
8. Indenture Trustee Reserve. (a) To the extent that, as of the Effective
Date, (i) any pending General Unsecured Claims, Miscellaneous Secured Claims or
Administrative Expenses of an Indenture Trustee (including a good faith estimate
submitted to the Debtor by each Indenture Trustee of its estimated fees and
expenses accruing through the Effective Date) are not paid on the Effective
Date, or (ii) any pending General Unsecured Claims, Miscellaneous Secured Claims
or Administrative Expenses of an Indenture Trustee for its fees and expenses are
not yet Allowed or Ultimately Allowed Claims as of the Effective Date, the
Debtor will establish on the Effective Date a separate cash reserve (a
"Reserve") for each Indenture Trustee in the amount of any such amounts then
outstanding, to consist of cash equal to the total of the above unpaid or
pending fees and expenses of each Indenture Trustee (including such good faith
estimate of fees and expenses through the Effective Date), as of the Effective
Date.
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(b) The obligation of Reorganized Grand Union to pay each Indenture Trustee
its fees and expenses owing to it under its applicable Indenture and the Plan,
including, without limitation, its General Unsecured Claims, Miscellaneous
Secured Claims and Administrative Expenses, will be secured by the amounts in
the Reserve established for that Indenture Trustee; provided, however, that the
Lien Rights of the Indenture Trustees under their respective Indentures will be
deemed to attach to the cash in the applicable Reserve to the same extent as if
the cash in the Reserve were property received by the Indenture Trustee pursuant
to its Indenture; and provided, further, that each Indenture Trustee will be
conclusively deemed to have taken any and all action required, including under
its respective Indenture or applicable law, to perfect its Lien Rights as to the
cash in the Reserve established for its benefit, including, without limitation,
any requirement of possession for such perfection.
(c) In consideration of the foregoing, and subject to the establishment of the
Reserves in the specified amounts and under the foregoing terms and conditions,
the Indenture Trustees each are deemed to have waived their Lien Rights in the
New Senior Notes and the New Common Stock to be distributed under the Plan to
holders of, respectively, the Senior Notes and the Senior Subordinated Notes,
and will be deemed to have waived and released any and all right, title and
interest in and to property of the Debtor or Reorganized Grand Union other than
in and to the cash in the applicable Reserve. Each Indenture Trustee will be
entitled to Allowed Claims for the reasonable fees and expenses incurred by such
Indenture Trustee under the respective Indenture. Upon payment by the Debtor or
Reorganized Grand Union of such Claims, the respective Lien Rights of the
Indenture Trustee will be extinguished. Objections to such Claims will be
governed by the provisions respecting Impaired Claims set forth in Section 13.01
of the Plan.
J. Surrender and Cancellation of Instruments
On the Effective Date, any outstanding security, note or instrument evidencing
an Impaired Claim or Impaired Interest will become a Cancelled Security. On the
Effective Date, each of the respective transfer books maintained for the
Cancelled Securities will be closed. Except for the right to receive the
distributions, if any, called for by the Plan, the holder of a Cancelled
Security will have no rights arising from or relating to such Cancelled Security
after the Effective Date, including, without limitation, any rights of
subordination or subrogation that may be construed to be contained in such
Cancelled Security. Each holder of a Cancelled Security evidencing an Allowed
Claim or Ultimately Allowed Claim will surrender such Cancelled Security to
Reorganized Grand Union (or its designee), and Reorganized Grand Union (or its
designee) will distribute to the holder thereof the appropriate consideration
therefor in accordance with the Plan as promptly as is reasonably practicable.
No distribution under the Plan will be made to or on behalf of any holder of an
Allowed Claim or Ultimately Allowed Claim evidenced by a Cancelled Security
unless and until such Cancelled Security is received by Reorganized Grand Union
(or its designee). If a Cancelled Security is lost or destroyed, the holder of
such Cancelled Security must deliver an affidavit of loss or destruction to the
Debtor or Reorganized Grand Union (or their designee), as well as an agreement
to indemnify the Debtor, Reorganized Grand Union (and post a bond if so
requested by Reorganized Grand Union or the Debtor), in form and substance
reasonably acceptable to Reorganized Grand Union, before such holder may receive
any distribution under the Plan in respect of such lost or destroyed Cancelled
Security. Any holder of an Allowed Claim or an Ultimately Allowed Claim that
fails to surrender a Cancelled Security in accordance with the foregoing before
the later to occur of (i) two (2) years from the Effective Date and (ii) six (6)
months following the date such holder's Claim becomes an Allowed Claim or
Ultimately Allowed Claim will be deemed to have no further Claim and no
distributions will be made under the Plan in respect of such Claim. The Debtor
or Reorganized Grand Union may waive the above requirements respecting
cancellation and surrender of Cancelled Securities. Each Indenture and Capital
Indenture, and the obligations of the respective Indenture Trustee and the
Capital Indenture Trustee thereunder, and, subject to the implementation of
Section 12.07 of the Plan (to the extent of applicable), any Lien Rights of the
Indenture Trustees or Capital Indenture Trustees thereunder, will be cancelled
and discharged on the Effective Date.
U.S. Trust, the Indenture Trustee for the 12-1/4% Senior Subordinated Notes
and the 12-1/4% Senior Subordinated Notes, Series A, asserts that the
protections of the above provisions of the Plan, relating to the
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requirement that holders of Cancelled Securities whose Securities have been lost
or destroyed supply evidence of loss and adequate indemnity to protect against
claims from any other party which may later present the certificates in order to
receive a distribution under the Plan, should be extended to the Indenture
Trustees. The Debtor disagrees and believes that, because the Indenture Trustees
perform no services in connection with consummation of the Plan and have no role
in connection therewith, there is no basis for providing such protections to the
Indenture Trustees.
Notwithstanding anything contained in the Plan to the contrary, if Reorganized
Grand Union does not elect to treat Credit Agreement Claims in the manner
described in Section 6.01(a)(ii) of the Plan and Bankers Trust effects the
Post-Confirmation Facility by way of an amendment and restatement of existing
documents, the Existing Credit Documents will not be cancelled, discharged,
satisfied and/or otherwise expunged except to the extent provided in such
amendments and restatements.
K. Procedures for Resolving Disputed Claims
1. Objections to Claims. Any party in interest may object to an Impaired
Claim, other than an Impaired Claim otherwise allowed as provided in the Plan,
by filing an objection with the Bankruptcy Court and serving such objection upon
the holder of such Claim not later than the last to occur of (a) the 45th day
following the Effective Date, (b) thirty (30) days after the filing of the proof
of claim of such Claim or (c) such other date set by order of the Bankruptcy
Court (the application for which may be made on an ex parte basis), whichever is
later. Only Reorganized Grand Union will have the authority to file objections
to Unimpaired Claims. Objections to Unimpaired Claims may be filed by
Reorganized Grand Union at any time.
Unless otherwise ordered by the Bankruptcy Court or agreed to by written
stipulation of the Debtor or Reorganized Grand Union, or until the Debtor's or
Reorganized Grand Union's objection thereto is withdrawn, the Debtor or
Reorganized Grand Union will litigate the merits of each Disputed Claim until
determined by a Final Order; provided, however, subject to the approval of the
Bankruptcy Court, if necessary, the Debtor or Reorganized Grand Union, as the
case may be, may compromise and settle any objection to any Claim.
2. Payments and Distributions With Respect to Disputed Claims. No payments or
distributions will be made in respect of a Disputed Claim unless and until and
unless such Disputed Claim becomes an Ultimately Allowed Claim.
Subject to the provisions of the Plan, payments and distributions with respect
to each Disputed Claim that becomes an Ultimately Allowed Claim, which would
have been otherwise been made on the Effective Date had the Ultimately Allowed
Claim been an Allowed Claim on the Effective Date, will be made within thirty
(30) days after the date that such Disputed Claim becomes an Ultimately Allowed
Claim. Holders of Disputed Claims that become Ultimately Allowed Claims will be
bound, obligated and governed in all respects by the provisions of the Plan.
L. Retention of Jurisdiction
The business and the assets of the Debtor will remain subject to the
jurisdiction of the Bankruptcy Court until the Effective Date. From and after
the Effective Date, the Plan provides for the retention of jurisdiction by the
Bankruptcy Court over Reorganized Grand Union and the Chapter 11 Case to the
fullest extent permissible by law, including, but not limited to, for the
purposes of determining all disputes and other issues presented by or arising
under the Plan including, without limitation, exclusive jurisdiction to: (i)
determine and adjudicate all disputes relating to Claims and Administrative
Expenses (including those allowed by operation of law), including the allowance,
amount and classification thereof, provided, however, the Bankruptcy Court's
jurisdiction shall be concurrent, not exclusive, after the Effective Date with
respect to the enforcement or adjudication of any Unimpaired Claim, (ii)
determine all other matters, including any matter arising in an adversary
proceeding related to the Chapter 11 Case, pending on the Effective Date, (iii)
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consider and allow any and all applications for compensation for professional
services rendered and disbursements incurred in connection therewith, (iv)
remedy any defect or omission or reconcile any inconsistency in the Confirmation
Order, (v) interpret and enforce the provisions of the Plan, and issue such
orders, consistent with section 1142 of the Bankruptcy Code, as may be necessary
to effectuate consummation and full and complete implementation of the Plan, and
(vi) determine other such matters as may be set forth in the Confirmation Order
or that may arise in connection with the implementation of the Plan.
M. Claims of Subordination
(a) Subject to the Confirmation Order becoming a Final Order (or the
requirement therefor being waived in accordance with Sections 15.02(a) and 16.07
of the Plan) and subject to the distributions that are required to be made under
the Plan as of the Effective Date to Classes 1, 2 and 4 having been made, as of
the Effective Date, each holder of an Allowed or Ultimately Allowed Claim, (i)
by virtue of the acceptance of the Plan by such holder's Class in accordance
with section 1126 of the Bankruptcy Code, (ii) by virtue of the acceptance of
the Plan by such holder, (iii) by virtue of the acceptance of any distribution
under the Plan on account of such Claim, or (iv) by virtue of the confirmation
of the Plan, waives, releases and relinquishes any and all rights, claims or
causes of action arising under and in any way related to any subordination
agreement in effect as of the Filing Date, whether arising out of contract or
under applicable law, including without limitation, any claim or security
interest in the Debtor's common stock or subsections (a) or (c) of section 510
of the Bankruptcy Code and the provisions of the Indentures, to the payment and
distributions of consideration made or to be made hereunder or otherwise
consistent with the Plan to any holder of an Allowed or Ultimately Allowed Claim
against the Debtor; provided, however, that the holders of Credit Agreement
Claims will retain all rights under subordination agreements entered into prior
to the Filing Date, if any, as to all persons, other than claims against (x)
holders of Senior Note Claims, Senior Subordinated Note Claims, and the
Indenture Trustees with respect thereto and (y) distributions made with respect
to Junior Zero Note Claims, Senior Zero Note Claims, and Capital Indenture
Trustees hereunder; and provided further that the foregoing will not affect the
rights of any party to seek subordination under section 510(b) or (c) of the
Bankruptcy Code of any Claim that otherwise would constitute a General Unsecured
Claim.
(b) Pursuant to Bankruptcy Rule 9019, and any applicable state law, and as
consideration for the distributions and other benefits provided under the Plan,
the provisions of Section 14.05 of the Plan will constitute a good faith
compromise and settlement of any Cause of Action relating to the matters
described in Section 14.05 which could be brought by any holder of a Claim or
Interest against or involving another holder of a Claim or Interest, which
compromise and settlement is in the best interests of Creditors and holders of
Interests and is fair, equitable and reasonable. This settlement will be
approved by the Bankruptcy Court as a settlement of all such Causes of Action.
The Bankruptcy Court's approval of this settlement pursuant to Bankruptcy Rule
9019 and its finding that this is a good faith settlement pursuant to any
applicable state law, including, without limitation, the laws of the states of
New York, New Jersey and Delaware, given and made after due notice and
opportunity for hearing, will bar any such Cause of Action relating to the
matters described in Section 14.05 of the Plan which could be brought by any
holder of a Claim or Interest against or involving another holder of a Claim or
Interest.
N. Amendment and Modification to the Plan
Subject to the provisions of Section 16.16 of the Plan, the Plan may be
altered, amended, or modified by the Debtor, before or after the Confirmation
Date, as provided in section 1127 of the Bankruptcy Code.
O. Withdrawal of the Plan
Subject to the provisions of Section 16.16 of the Plan, the Debtor reserves
the right, at any time prior to the entry of the Confirmation Order, to revoke
or withdraw the Plan. If the Debtor revokes or withdraws the Plan or if the
Confirmation Date does not occur, then the Plan will be deemed null and void.
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P. Conditions to Modification, Withdrawal and Waiver Rights
Notwithstanding any provisions of the Plan to the contrary, including, without
limitation, Sections 16.06, 16.07, 16.11 and 16.15 of the Plan, the Debtor may:
(a) withdraw the Plan after having first given four (4) Business Days notice in
writing to counsel for the Senior Bank Agent, the Official Committee and the
Informal Committee of Senior Noteholders (to be served via facsimile and
overnight delivery) of the date of the proposed withdrawal and the reason
therefor; provided, however, that the Senior Bank Agent, the Official Committee
or the Informal Committee of Senior Noteholders may object to such withdrawal
and seek an order of the Bankruptcy Court preventing the occurrence thereof; or
(b) amend or modify the Plan; provided, however, that the Debtor must first
obtain the consent of the Senior Bank Agent, the Official Committee, and/or the
Informal Committee of Senior Noteholders, as the case may be, if the Claims or
Interests of their respective constituencies (in their capacities as such) are
adversely and materially affected by such amendment or modification.
Q. Conditions to Confirmation and the Occurrence of the Effective Date of the
Plan
Prior to confirmation of the Plan, the following conditions must occur and be
satisfied or (a) have been waived with the consent of the Senior Bank Agent (if
the alternative funding option pursuant to Section 6.01(a)(ii) of the Plan is
not elected), the Official Committee, and the Informal Committee of Senior
Noteholders, or (b) have been waived by the Senior Bank Agent (if the
alternative funding option pursuant to Section 6.01(a)(ii) of the Plan is not
elected), the Official Committee, and the Informal Committee of Senior
Noteholders, such waiver having been approved by order of the Bankruptcy Court
upon motion of the Senior Bank Agent (if applicable), the Official Committee,
and the Informal Committee of Senior Noteholders:
(a) If the Debtor elects the treatment set forth in Section 6.01(a)(i) of the
Plan with respect to Credit Agreement Claims:
(i) The Post-Confirmation Credit Documents (including the
Intercreditor Agreement) shall have been filed with the Bankruptcy
Court not less than five (5) Business Days prior to the Voting
Deadline; and
(ii) The Debtor shall have received authority to execute, and the
Bankruptcy Court shall have approved, the Post-Confirmation Credit
Documents and all other documents necessary to effectuate the
Post-Confirmation Credit Documents, which authority and approval will
be contained in the Confirmation Order.
(b) If the Debtor elects the treatment set forth in Section 6.01(a)(ii) of the
Plan with respect to Credit Agreement Claims:
(i) The Debtor shall have entered into an Alternative Commitment
Letter, which shall have been approved by the Bankruptcy Court;
(ii) The Alternative Credit Documents shall have been filed with the
Bankruptcy Court not less than five (5) days prior to the Confirmation
Date; and
(iii) The Debtor shall have received authority to execute, and the
Bankruptcy Court shall have approved, the Alternative Credit Documents
and all other documents necessary to effectuate the Alternative Credit
Documents.
(c) The Settlement Order shall have been entered.
(d) The Claims Bar Date shall have been established by the Bankruptcy Court as
a date which is no less than five (5) Business Days prior to the Confirmation
Date.
(e) As of a date which is three (3) Business Days prior to the Confirmation
Date, the Official Committee shall not have filed a written notice that is not
withdrawn asserting that such Committee has determined in
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the exercise of its fiduciary duties to unsecured creditors generally that the
amount of the General Unsecured Claims has rendered the Plan not feasible
pursuant to section 1129 of the Bankruptcy Code.
Before the Effective Date occurs, the following conditions must occur and be
satisfied or have been waived (x) by the Debtor, with the consent of the Senior
Bank Agent (if the alternative funding option pursuant to Section 6.01(a)(ii) of
the Plan is not elected), the Official Committee, and the Informal Committee of
Senior Noteholders, or (y) by the Senior Bank Agent (if the alternative funding
option pursuant to Section 6.01(a)(ii) of the Plan is not elected), the Official
Committee, and the Informal Committee of Senior Noteholders, such waiver having
been approved by order of the Bankruptcy Court upon motion of the Senior Bank
Agent (if applicable), the Official Committee, and the Informal Committee of
Senior Noteholders:
1. Entry of Confirmation Order and Settlement Order. The Confirmation
Order and Settlement Order shall have become Final Orders;
2. Regulatory Approvals. Unless otherwise waived by the Debtor with
the consent of the Official Committee and the Informal Committee of
Senior Noteholders (and the Senior Bank Agent, if the Debtor does not
elect the treatment set forth in Section 6.01(a)(ii) of the Plan with
respect to Credit Agreement Claims), which consent shall not be
unreasonably withheld, there shall have been obtained all regulatory
approvals required in connection with the consummation of the Plan;
3. Trust Indenture Act. The New Senior Note Indenture shall have been
qualified under the Trust Indenture Act of 1939 (15 U.S.C. (S)(S)
77aaa-77bbb) as currently in effect;
4. Credit Conditions. The Post-Confirmation Credit Documents or the
Alternative Credit Documents, as the case may be, shall be executed by
all necessary parties thereto and delivered and all conditions to the
effectiveness of such documents shall have been satisfied or waived as
provided therein, subject to the occurrence of the Effective Date;
5. Delivery of Documents. All other documents provided for in the
Plan shall have been executed and delivered by the parties thereto,
unless such execution or delivery has been waived by the parties
benefited by such documents; and
6. Other Orders. Any order necessary to satisfy any condition to
effectiveness of the Plan shall be a Final Order.
The Effective Date of the Plan shall be that day that is five (5) Business
Days after the conditions to the occurrence of the Effective Date of the Plan
have been satisfied or waived, or such earlier day after such conditions have
been satisfied or waived that is designated by the Debtor.
A hearing to consider confirmation of the Plan has been scheduled for May 31,
1995 at 10:00 a.m., as a result of which, if all conditions to confirmation of
the Plan have occurred or been waived, the Confirmation Order will be entered by
the Bankruptcy Court.
The Debtor believes that all conditions to the Effective Date of the Plan will
likely be satisfied within thirty (30) days of the Confirmation Date, and that
the Effective Date of the Plan could occur by the middle of June 1995.
R. Directors of Reorganized Grand Union
On the Effective Date, each of the existing members of the Board of Directors
will be deemed to have resigned. The initial Post Reorganization Board of
Directors will consist of seven (7) members who will be selected by the members
of the Official Committee which were members of the Informal Committee of
certain holders of Senior Subordinated Notes. Such board members will be
identified not less than five (5) days prior to the Confirmation Date; provided
that if and to the extent that any member(s) of the Post Reorganization Board
are not so identified by five (5) days prior to the Confirmation Date, the
Debtor will designate such
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member(s). The composition of the Post Reorganization Board of Directors will be
subject to approval of the Bankruptcy Court. A list of such directors will be
filed at or prior to the Confirmation Hearing.
From and after the Effective Date, selection of the members of the Post
Reorganization Board shall be governed by the Restated Bylaws and/or the
Restated Certificate of Incorporation, as the case may be. See "DESCRIPTION OF
NEW CAPITAL STOCK-Corporate Governance." The Debtor anticipates that (i)
Reorganized Grand Union will maintain officer and director insurance liability
coverage comparable to that currently in effect and (ii) while the precise
amount of the compensation to outside directors will be determined by the Post
Reorganization Board of Directors, Reorganized Grand Union will compensate its
outside directors in a manner consistent with compensation provided to outside
directors of companies of a similar size and nature.
There can be no assurances that the Post Reorganization Board will not make
one or more changes in senior management after the Effective Date. It is
anticipated that any changes which are intended to be made prior to the
confirmation hearing will be disclosed at such hearing.
In addition, Reorganized Grand Union will execute the MTH Settlement
Agreement, pursuant to which, inter alia: (a) the MTH Management Agreement (see
"CERTAIN INFORMATION CONCERNING THE DEBTOR-Related Party Transactions") will be
terminated as of the Effective Date; (b) MTH will be paid all amounts due and
owing under the MTH Management Agreement for fees accrued prior to the Effective
Date; and (c) all further obligations of the Debtor and/or Reorganized Grand
Union under the MTH Management Agreement shall cease as of the Effective Date,
including, without limitation, the Debtor's obligation to compensate MTH for the
period from and after the Effective Date through July 22, 1997 (the date the MTH
Management Agreement otherwise would have expired on its own terms). The MTH
Settlement Agreement further provides that Reorganized Grand Union will
indemnify and hold harmless MTH and certain Entities related to MTH (the "MTH
Entities") from certain losses, claims, damages or liabilities, subject to the
provisions and restrictions of the MTH Settlement Agreement. The MTH Settlement
Agreement requires the Debtor or Reorganized Grand Union, as the case may be, to
pay or reimburse MTH and the MTH Entities for the first $3 million of any
liability on certain claims and two-thirds of any additional amount above $3
million, not to exceed $13 million in the aggregate, subject to adjustment if
certain releases are not received. The first $3 million of the fund must be
deposited in an escrow account on the Effective Date, which moneys will be
returned to Reorganized Grand Union as provided in the governing escrow
agreement. Finally, the amount paid by Reorganized Grand Union to the GUHC and
GUCC Legal Advisors for services rendered in connection with the dissolution of
Capital and Holdings, as provided in Section 2.04(b) of the Plan, shall be
applied against the first $3,000,000 (or greater amount, if adjusted) of the
above-referenced fund and shall reduce Reorganized Grand Union's aggregate
liability under the MTH Settlement Agreement by a like amount.
Reference should be made to the MTH Settlement Agreement, a copy of which is
annexed as Exhibit "B" to the Plan, for the full and complete provisions of the
MTH Settlement Agreement.
S. Dissolution of Committees
Except as otherwise provided below, on the Effective Date all Committees,
including the Official Committee and the Informal Committees, will cease to
exist and their members and employees or agents (including, without limitation,
attorneys, investment bankers, financial advisors, accountants and other
professionals) will be released and discharged from all further authority,
duties, responsibilities and obligations relating to, arising from or in
connection with the Chapter 11 Case. The Official Committee will continue to
exist after such date solely with respect to (i) any objections made by the
Official Committee pursuant to Section 13.01 of the Plan or other matters
pending before the Bankruptcy Court to which the Official Committee is party,
until such objections or matters are resolved; (ii) all fee applications filed
pursuant to section 330 of the Bankruptcy Code or Claims for fees and expenses
by professionals employed by the Debtor or agreed to be paid by the Debtor; and
(iii) any post-confirmation modifications to the Plan or
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Confirmation Order. The Informal Committee of Senior Noteholders will continue
to exist after such date (x) until substantially all of the distributions to be
made with respect to Senior Note Claims under the Plan have been made and (y)
solely with respect to any matters pending before the Bankruptcy Court to which
such Informal Committee is party, until such matters are resolved.
VII. ACCEPTANCE AND CONFIRMATION OF THE PLAN
Described below are certain important considerations under the Bankruptcy Code
in connection with confirmation of the Plan.
A. Solicitation of Acceptance
The Debtor is soliciting the acceptance of the Plan from all beneficial owners
of Claims in certain Classes of Claims that are "impaired" under the Plan. The
solicitation of acceptances from holders of Claims in Unimpaired Classes is not
required under the Bankruptcy Code. The solicitation of acceptances of the Plan
from the holders of Claims and Interests in Classes 11 and 12 is not required
because under the Bankruptcy Code, such holders are conclusively presumed to
have rejected the Plan. The following Classes are Impaired and are entitled to
vote on the Plan (with regard to Classes 1, 2, 4, 8, 9 and 10, holders of Claims
in such Classes will be entitled to vote regardless of whether such Claims have
been theretofore Allowed):
Class 1 - Credit Agreement Claims
Class 2 - Interest Rate Protection Agreement Claim
Class 4 - Senior Note Claims
Class 5 - Priority Claims
Class 7 - General Unsecured Claims
Class 8 - Senior Subordinated Note Claims
Class 9 - Senior Zero Note Claims
Class 10 - Junior Zero Note Claims
The Record Date for determining whether holders of Impaired Claims are
entitled to accept or reject the Plan is April 19, 1995.
B. Confirmation Hearing
Section 1128(a) of the Bankruptcy Code requires the Bankruptcy Court, after
notice, to hold a confirmation hearing (the "Confirmation Hearing"). Section
1128(b) of the Bankruptcy Code provides that any party in interest may object to
confirmation of the Plan.
Notice of the Confirmation Hearing will be provided to all holders of Claims
and Interests and other parties in interest (the "Confirmation Notice"). The
Confirmation Hearing may be adjourned from time to time by the Bankruptcy Court
without further notice except for an announcement of the adjourned date made at
the Confirmation Hearing or any adjournment thereof. Objections to confirmation
of the Plan must be made in writing, specifying in detail the name and address
of the person or entity objecting, the grounds for the objection, and the nature
and amount of the Claim or Interest held by the objector. Objections must be
filed with the Bankruptcy Court, together with proof of service, and served upon
the parties so designated in the Confirmation Notice, on or before the time and
date designated in the Confirmation Notice as being the last date for serving
and filing objections to confirmation of the Plan. Objections to confirmation of
the Plan are governed by Bankruptcy Rule 9014 and the local rules of the
Bankruptcy Court.
C. Requirements for Confirmation of the Plan
As discussed below, the Debtor intends to request confirmation of the Plan
pursuant to section 1129(b) of the Bankruptcy Code. Under section 1129(b) of the
Bankruptcy Code, the Bankruptcy Court will confirm
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<PAGE>
the Plan despite the lack of acceptance by an Impaired Class or Classes if the
Bankruptcy Court finds that (a) the Plan does not discriminate unfairly with
respect to each non-accepting Impaired Class, (b) the Plan is "fair and
equitable" with respect to each non-accepting Impaired Class, (c) at least one
Impaired Class has accepted the Plan (without counting acceptances by insiders)
and (d) the Plan satisfies the requirements set forth in Bankruptcy Code section
1129(a) other than section 1129(a)(8).
The Debtor believes that, upon acceptance of the Plan by at least one impaired
Class, determined without including any acceptance of the Plan by any insider,
the Plan will satisfy all the statutory requirements of chapter 11 of the
Bankruptcy Code, that the Debtor has complied or will have complied with all of
the requirements of chapter 11, and that the Plan has been proposed in good
faith.
1. The Plan is Fair and Equitable
The Bankruptcy Code establishes different "fair and equitable" tests for
holders of secured claims and unsecured claims. With respect to a Class of
Unsecured Claims that does not accept the Plan, the Debtor must demonstrate to
the Bankruptcy Court that either (a) each holder of an Unsecured Claim of the
dissenting Class receives or retains under the Plan property of a value equal to
the Allowed amount of its Unsecured Claim or (b) the holders of Claims or
Interests that are junior to the Claims of the holders of such Unsecured Claims
will not receive or retain any property under the Plan. With respect to a Class
of secured Claims that does not accept the Plan, the Debtor must demonstrate to
the Bankruptcy Court that either (a) the holders of such Claims are retaining
the liens securing such Claims and that each holder of a Claim of such Class
will receive on account of such Claim deferred cash payments totalling at least
the Allowed amount of such Claim, of a value, as of the Effective Date, of at
least the value of such holder's interest in such property, or (b) the holders
of such Claims will realize the indubitable equivalent of such Claims under the
Plan. The Debtor believes the Plan is fair and equitable.
2. The Best Interests Test
Whether or not the Plan is accepted by each Impaired Class of Claims entitled
to vote on the Plan, in order to confirm the Plan the Bankruptcy Court must,
pursuant to section 1129(b)(7) of the Bankruptcy Code, independently determine
that the Plan is in the best interests of each holder of a Claim or Interest
Impaired by the Plan if the Plan is not unanimously accepted. Thus, the Plan
must provide each holder of a Claim or Interest in such Impaired Class a
recovery on account of such holder's Claim or Interest that has a value, as of
the Effective Date, at least equal to the value of the distribution each such
holder would receive in a liquidation of the Debtor under chapter 7 of the
Bankruptcy Code.
To determine the value that holders of Impaired Claims and Interests would
receive if the Debtor were liquidated under chapter 7, the Bankruptcy Court must
determine the aggregate dollar amount that would be generated from the
liquidation of the Debtor's assets if the Debtor's Chapter 11 Case were
converted to a chapter 7 liquidation case and the Debtor's assets were
liquidated by a chapter 7 trustee (the "Liquidation Value"). The Liquidation
Value would consist of the net proceeds from the disposition of the Debtor's
assets, augmented by cash held by the Debtor and reduced by certain increased
costs and Claims that arise in a chapter 7 liquidation case that do not arise in
a chapter 11 reorganization case.
The Liquidation Value available for satisfaction of general creditors and
Interests in the Debtor would be reduced by: (a) the Claims of Secured Creditors
to the extent of the value of their collateral, and (b) the costs, fees and
expenses of the liquidation under chapter 7, which would include: (i) the
compensation of a trustee and its counsel and other professionals retained, (ii)
disposition expenses, (iii) all unpaid expenses incurred by the Debtor during
the Chapter 11 Case (such as compensation for attorneys, financial advisors,
investment bankers, brokers, auctioneers and accountants and the costs and
expenses of members of any statutory committee of unsecured creditors appointed
by the United States Trustee pursuant to section 1102 of the Bankruptcy Code and
any other such appointed committee) which are allowed in a chapter 7 case, (iv)
litigation costs, and (v) Claims arising from the operation of the Debtor during
the pendency of the Chapter 11 Case and the chapter 7 liquidation case. The
liquidation itself would trigger certain Claims, such as Claims
49
<PAGE>
for severance pay and would accelerate other priority payments which would
otherwise be paid in the ordinary course. These Claims would be paid in full out
of the liquidation proceeds before the balance would be made available to pay
most other Claims or to make any distribution in respect of Interests.
Liquidation would also involve the rejection of additional executory contracts
and unexpired leases of the Debtor and substantial additional rejection damage
Claims. The Debtor believes that the liquidation would also generate an increase
in other General Unsecured Claims.
To determine if the Plan is in the best interests of each impaired Class, the
present value of the distributions from the proceeds of the liquidation of the
Debtor's assets and properties, after subtracting the amounts attributable to
the foregoing Claims, costs, fees and expenses, are then compared with the value
of the property offered to such Classes of Claims and Interests under the Plan
on the Effective Date.
a. The Debtor's Estimate of Liquidation Value
(i) Assumptions
The analysis is based on the projected assets and liabilities of the Debtor as
of April 29, 1995. Underlying the liquidation analysis are a number of estimates
and assumptions that are inherently subject to significant uncertainties and
contingencies, many of which are beyond the control of the Debtor. Accordingly,
there can be no assurances that the values assumed in the following analysis
would be realized if the Debtor were in fact liquidated. Accordingly, although
the analysis that follows is necessarily presented with numerical specificity,
the actual liquidation values could vary significantly from the amounts set
forth below. This analysis has been prepared solely for purposes of estimating
proceeds in a complete chapter 7 liquidation, and do not represent values that
are appropriate for any other purpose. Variance from the estimates may be caused
by, among others, the following:
1. Nature and timing of sales process. Under section 704 of the
Bankruptcy Code, a chapter 7 trustee must, along with its other duties,
collect and convert the property of the estate as expeditiously as is
compatible with the best interest of the parties. The liquidation
analysis assumes there would be pressure to complete the liquidation of
the Debtor's operating properties and financial assets over a period of
approximately 6-9 months. It is possible that the disposition of
certain assets could reasonably exceed 12 months, causing deterioration
in the value of the Debtor's estate. The liquidation analysis assumes
that the Debtor's business has ceased, that assets are sold for their
fair market values on an asset by asset basis, and that realization of
any going concern value is not possible.
2. Discount factor applied to assets. The precise discount
attributable to assets in a chapter 7 case cannot be computed on the
basis of any known empirical data. Accordingly, for purposes of the
liquidation analysis, assets are valued based on the Debtor's best
estimates, which would vary on an asset by asset (and category by
category) basis.
3. Estimated liquidation expenses. Such expenses were estimated to be
incurred upon liquidation of the Debtor's assets, excluding cash and
cash equivalents.
4. Estimated Claims. A conversion to a chapter 7 case would likely
result in additional Claims, including Claims resulting from the
rejection of executory contracts.
Liquidation values of major operating properties and non-operating assets were
based in part upon the financial projections prepared by the Debtor and assume a
discount applied to each asset to account for the nature and timing of the sales
process. The Debtor applied a discount to all assets, other than cash and cash
equivalents, ranging from 0 to 100 percent of their respective going concern
values. The precise discount factors attributable to a chapter 7 liquidation are
subject to various circumstances. Total chapter 7 expenses are estimated to be
approximately $10 million. For purposes of the liquidation analysis, the Debtor
has assumed any tax liability would be de minimis. This assumption was based
upon the utilization of available tax benefits to offset any gains in the
disposition of assets.
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<PAGE>
In analyzing the priorities and the amount of Claims to be satisfied out of
the Liquidation Value, the Debtor made the assumption that recoveries under a
liquidation scenario adhere to all contractual subordination provisions in the
Indentures under which the Senior Subordinated Notes were issued with respect to
the determination of the priority of distributions.
(ii) Liquidation Analysis
LIQUIDATION ANALYSIS AS OF APRIL 29, 1995*
(all numbers in thousands)
<TABLE>
<CAPTION>
ASSETS
Adequate
Net DIP Lender Protection Miscellaneous Senior Secured Unencumbered
Proceeds(a) Liens Liens(c) Liens(d) Creditor Liens(e) Proceeds(f)
------------- ---------- ---------- ------------- ----------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Cash.................. $ 59,828(b) $0 $0 $ 0 $ 58,828(g) $ 1,000(g)
Inventory (h)......... 120,000 0 0 0 120,000 0
Real estate (i)....... 50,000 0 0 1,350 48,650 0
Equipment (j)......... 60,000 0 0 1,650 58,350 0
Favorable leases (k).. 44,000 0 0 0 0 44,000
Other (l)............. 5,000 0 0 0 5,000 0
------------- ---------- ---------- ------------- ----------------- ------------
Total asset value..... $338,828 $0 $0 $3,000 $290,828 $45,000
============= ========== ========== ============= ================= ============
</TABLE>
<TABLE>
<CAPTION>
CLAIMS AND EQUITY INTERESTS
Estimated
-------------------- Unencumbered Unencumbered
Estimated Liquidation Recovery Proceeds Proceeds
Claim $ % Consumed Remaining
-------------- ------------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C>
Post-Petition Secured Debt
DIP Facility Loans................ $ 0 $ 0 100.00% 0 $45,000
Adequate Protection Claims (c).... 0 0 100.00% 0 45,000
Post-Petition Unsecured Debt
Administrative Expenses (m)....... 45,000 45,000 100.00% 45,000 0
Pre-Petition Secured Debt (n)
Credit Agreement Claim............ 132,000 55,514 42.06% 0 0
Interest Rate Protection Agreement
Claim............................. 4,519.5 1,900 42.06% 0 0
Senior Note Claims................ 555,000 233,414 42.06% 0 0
-------------- ----------- ------------
Total Senior Secured Claims....... 691,519.5 290,828 42.06% 0 0
Miscellaneous Secured Claims (d).. 3,000 3,000 100.00% 0 0
Pre-Petition Unsecured Debt
Priority Claims................... 1,000 0 0.00% 0 0
Priority Tax Claims............... 5,000 0 0.00% 0 0
General Unsecured Claims
Trade Claims (o).................. 100,000 0 0.00% 0 0
Other General Unsecured
Claims (p)........................ 73,000 0 0.00% 0 0
Rejection Damage Claims........... 72,000 0 0.00% 0 0
Secured Creditor Deficiency
Claims (q)........................ 400,691.5 0 0.00% 0 0
Senior Subordinated Note Claims... 602,494 0 0.00% 0 0
-------------- ----------- ------------
Total General Unsecured
Claims............................ 1,248,185.5 0 0.00% 0 0
Subordinated Claims............... 0 0 0.00% 0 0
Pre-Petition Interests
Equity Interests n/a n/a n/a 0 0
51
<PAGE>
<CAPTION>
<FN>
- ------
* Assumes hypothetical liquidation of the Debtor under chapter 7 of the
Bankruptcy Code on April 29, 1995. All amounts set forth herein are included
solely for the purposes of this liquidation analysis.
(a) Amounts set forth are the Debtor's estimated liquidation recoveries, net of
direct costs of liquidation. Such amounts have been reduced to their
present value as of April 29, 1995 (where appropriate) to reflect the
liquidation of assets after April 29, 1995.
(b) Cash reflects a reduction of $8 million on account of PACA/PASA proceeds
held in constructive trust by the Debtor for prepetition claims of
PACA/PASA trust beneficiaries. Such claims would be reinstated because the
Trade Program terminates in the event of a liquidation.
(c) For presentation purposes only, it is assumed that no such Adequate
Protection claims exist. If any Adequate Protection Claims exist, they will
be paid prior to Administrative Expenses, subject to a $5 million carve out
for certain expenses, and will reduce amounts available to unsecured
prepetition creditors. For a discussion concerning the Adequate Protection
claims, see "THE CHAPTER 11 CASE-Cash Collateral Order."
(d) For a discussion concerning such liens, see "THE PLAN-Classification and
Treatment of Claims and Interests Under the Plan-Miscellaneous Secured
Claims."
(e) Refers to security interests held by creditors in Classes 1 (Credit
Agreement Claims), 2 (Interest Rate Protection Agreement Claims) and 4
(Senior Note Claims).
(f) Unencumbered proceeds are those net proceeds not subject to a valid lien or
encumbrance.
(g) Assumes that projected cash on hand on April 29, 1995, includes proceeds
resulting from the sale or other disposition of assets not subject to the
prepetition liens of the creditors in Classes 1 (Credit Agreement Claims),
2 (Interest Rate Protection Agreement Claim) and 4 (Senior Note Claims).
(h) Assumed at 60% of book value.
(i) Assumption based on past appraisals and the Debtor's experience in the
relevant real estate markets.
(j) Assumed at 20% of book value based on the Debtor's experience in equipment
sales.
(k) Assumption based on the Debtor's experience in the relevant real estate
markets.
(l) Estimated value of miscellaneous other tangible and intangible assets,
other than Causes of Action.
(m) Includes Administrative Expenses from the Chapter 11 Case and additional
administrative expenses after conversion to chapter 7, including the
chapter 7 trustee's fees. Assumes that the Trade Program is terminated and
that all postpetition Trade Claims are deemed paid in full as a result
thereof, pursuant to the terms of the Trade Creditor Order.
(n) It is the position of the Senior Bank Agent and the Informal Committee of
certain holders of Senior Notes that in a liquidation, the Claims of senior
secured creditors would be paid in full prior to payment of all unsecured
claims, including Administrative Expenses, Priority Tax Claims, Priority
Claims, Trade Claims and General Unsecured Claims.
(o) Assumes that the Trade Program is terminated and that payments on account
of prepetition Trade Claims made pursuant to the Trade Creditor Order are
deemed to be payments on account of postpetition advances by trade
creditors.
(p) In the event of a liquidation, which would cause the termination of the
Debtor's Retirement Plan, the Debtor's actuary has informed the Debtor that
it could adopt certain amendments to the Retirement Plan which could
eliminate any underfunded pension liability, and could even result in
overfunding. The Debtor does not intend to make such amendments to the
Retirement Plan in the context of its reorganization under the Plan. As
noted above, however, the PBGC's estimate of what the Retirement Plan's
unfunded benefit liability would be upon termination is $46.3 million, and
the PBGC asserts that, if the above-referenced amendments are made, they
would not necessarily affect the calculation of unfunded benefit
liabilities in the event the Retirement Plan terminates. Solely for the
purpose of this chart, General Unsecured Claims do not include claims
arising from the rejection of unexpired leases and executory contracts. In
addition, in the event of a liquidation, General Unsecured Claims would be
increased by approximately $5 million, reflecting amounts owed under the
Debtor's retiree health programs.
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<PAGE>
(q) Any recovery on account of the senior secured deficiency claims would be
increased because the holders of Credit Agreement Claims, Interest Rate
Protection Agreement Claims and Senior Note Claims are, until such holders
are compensated in full, entitled to any recovery otherwise payable to
holders of Senior Subordinated Note Claims.
</TABLE>
(iii) Recoveries under the Plan
In the table below, the Debtor presents a comparison between estimated
reorganization recoveries and liquidation recoveries by Class of Claims and
Interests. The Plan recovery data presented in the table below are based, in
part, upon the Debtor's assumption of the reorganization value of the Debtor.
Comparison of Recoveries under
the Plan versus Liquidation (1)
<TABLE>
<CAPTION>
Estimated Estimated Estimated
Amount of Recovery Amount of Estimated
Allowed Claims Under Allowed Claims Recovery in
Claim Class and Type Under Plan Plan (%) in Liquidation Liquidation (%)
- -------------------------------------------- -------------- --------- -------------- ---------------
<S> <C> <C> <C> <C>
DIP Facility Loans.......................... $ N/A N/A $ 0 100.00%
Adequate Protection Claims.................. N/A N/A 0 100.00%
Administrative Expenses..................... 130,000,000 100.00% 45,000,000 100.00%
Priority Tax Claims......................... 5,000,000 100.00% 5,000,000 0.00%
1-Credit Agreement Claims (2)............... 93,000,000 100.00% 132,000,000 42.06%
2-Interest Rate Protection Agreement Claim.. 4,519,500 100.00% 4,519,500 42.06%
3-Miscellaneous Secured Claims.............. 3,000,000 100.00% 3,000,000 42.06%
4-Senior Note Claims (3).................... 570,807,000 100.00% 555,000,000 42.06%
5-Priority Claims........................... 1,000,000 100.00% 1,000,000 0.00%
6-Trade Claims (4).......................... 20,000,000 100.00% 100,000,000 0.00%
7-General Unsecured Claims (5).............. 80,000,000 100.00% 73,000,000 0.00%
Rejection Damage Claims..................... N/A N/A 72,000,000 0.00%
Secured Creditor Deficiency Claims.......... N/A N/A 400,691,500 0.00%
8-Senior Subordinated Note Claims (6)....... 602,494,000 28.21% 602,494,000 0.00%
9-Senior Zero Note Claims (7)............... - - 0 0.00%
10-Junior Zero Note Claims (7).............. - - 0 0.00%
11-Subordinated Claims...................... 0 0.00% 0 0.00%
12-Interests................................ N/A N/A N/A N/A
<FN>
- ------
(1) The Debtor has assumed a reorganization value of $950 million. Reference
should be made to the Debtor's Pro Forma Capitalization and Financial
Projections, annexed hereto as Appendix "B", for a discussion of how this
value was derived. The total reorganization value includes a value
attributed to the New Common Stock, based on the current trading value of
the Senior Subordinated Notes, of $170 million, and the long term
indebtedness contemplated by the Plan.
(2) The amount of Credit Agreement Claims would be increased in the event of a
liquidation because of draws upon outstanding letters of credit.
(3) The amount of Senior Note Claims is greater under the Plan because the Plan
includes the claims of the holders of Senior Notes for interest and
interest on overdue interest through the Effective Date. The figure of
$570,807,000 represents the sum of (i) the principal amounts of the 11-1/4%
Senior Notes due 2000 and the 11-3/8% Senior Notes due 1999 ($350,000,000
and $175,000,000, respectively), plus (ii) interest on the Senior Notes
through an assumed Effective Date of April 29, 1995 ($30,953,000 and
$13,990,000, respectively), plus (iii) interest on overdue interest through
such assumed Effective Date ($634,000 and $230,000, respectively).
53
<PAGE>
(4) The amount of Trade Claims would be increased in the event of a liquidation
because of the termination of the Trade Program and the reinstatement of
prepetition Trade Claims, which reduces dollar for dollar the amount of
Administrative Expenses.
(5) The Debtor has chosen to transfer the $12 million in estimated rejection
damages that are currently contemplated under the Plan (and which would
constitute General Unsecured Claims) to the category of Rejection Damage
Claims, which includes both rejection damages contemplated under the Plan
and those resulting from a liquidation. In addition, in the event of a
liquidation, General Unsecured Claims would increase by approximately $5
million, reflecting amounts owed under the Debtor's retiree health
programs.
(6) The figure of $602,494,000 represents the sum of (i) the principal amounts
of the 13% Senior Subordinated Notes, the 12-1/4% Senior Subordinated Notes,
and the 12-1/4% Senior Subordinated Notes, Series A ($16,150,000,
$500,000,000 and $50,000,000, respectively), plus (ii) interest on the
Senior Subordinated Notes through the Filing Date ($671,000, $32,326,000
and $3,233,000, respectively), plus (iii) interest on overdue interest, if
any, through the Filing Date ($0, $104,000 and $10,000, respectively).
(7) For purposes of effectuating the Zero Settlement only, the Zero Note Claims
will be allowed in amounts equal to the value as of the Effective Date of
the distributions made on account of such Claims under the Plan, which
amounts have not been determined as of the date hereof.
</TABLE>
b. Conclusion
Due to the numerous uncertainties and time delays associated with liquidation
under chapter 7, it is not possible to predict with certainty the outcome of
liquidation of the Debtor or the timing of any distribution to creditors. As
the Liquidation Analysis and Comparison of Recoveries under the Plan versus
Liquidation demonstrate, however, liquidation under chapter 7 of the Bankruptcy
Code would result in much lower distributions for most Creditors than that
provided for in the Plan.
3. Feasibility
Even if the Plan is accepted by each Class of Claims voting on the Plan, and
even if the Bankruptcy Court determines that the Plan satisfies the best
interests test, the Bankruptcy Code requires that, in order for the Plan to be
confirmed by the Bankruptcy Court, it must be demonstrated that consummation of
the Plan is not likely to be followed by the liquidation or the need for
further financial reorganization of the Debtor. For purposes of determining
whether the Plan meets this requirement, the Debtor has analyzed its ability to
meet its obligations under the Plan. As part of such analyses, the Debtor has
prepared forecasts of Reorganized Grand Union's cash flow (assuming the
transactions contemplated by the Plan are consummated) for the five (5) fiscal
years through April 1, 2000. These forecasts, and the significant assumptions
on which they are based, are set forth in Appendix "B" hereto. Based on such
forecasts, the Debtor believes that Reorganized Grand Union will be able to
make all payments required to be made pursuant to the Plan.
VIII. CREDITORS' COMMITTEES
Pursuant to section 1102(a) of the Bankruptcy Code, following the
commencement of a chapter 11 case, the United States Trustee may appoint a
committee of creditors holding unsecured claims against the chapter 11 debtor,
and may appoint additional committees of creditors or of equity holders as
deemed appropriate to assure the adequate representation of holders of claims
and interests in the chapter 11 case.
On February 6, 1995, the United States Trustee appointed the Official
Committee. The Official Committee retained the law firms of Ropes & Gray and
Pepper, Hamilton & Scheetz as its co-counsel and Ernst & Young as its
accountants. See "THE CHAPTER 11 CASE-Appointment of Official Committee."
In addition, prior to the Filing Date, the Debtor entered into discussions
with the three Informal Committees in connection with a restructuring of the
Debtor. See "BACKGROUND-Significant Events
54
<PAGE>
Preceding Commencement of the Chapter 11 Case-Failure to Make Certain Interest
Payments"). The three Informal Committees consisted of certain holders of: (i)
Senior Notes (represented by Stroock & Stroock & Lavan and Rosenthal, Monhait,
Gross & Goddess, P.A.), (ii) Senior Subordinated Notes (represented by Ropes &
Gray), and (iii) Trade Claims (represented by Pepper, Hamilton & Scheetz).
Following the appointment of the Official Committee, the Informal Committees
representing certain holders of Senior Subordinated Notes and certain trade
creditors ceased independent activity. However, the Informal Committee
representing certain holders of Senior Notes continues to participate in the
Plan process as an independent entity paid by the Debtor for its reasonable
fees and expenses pursuant to the Plan.
In connection with these prepetition negotiations and with the approval of
the Debtor, each of the Informal Committees retained legal and financial
advisors. Pursuant to the Plan, the reasonable fees and expenses incurred
(which may, as such fees relate to financial advisors, include a request by
such professionals for success fees) on or after the Filing Date by such
advisors will be paid (without application by or on behalf of any such advisors
to the Bankruptcy Court, and without notice and a hearing, unless specifically
requested by the Bankruptcy Court upon request of a party in interest) by
Reorganized Grand Union as an Administrative Expense. If Reorganized Grand
Union and any such professional cannot agree on the amount of fees and expenses
to be paid to such professional, the amount of such fees and expenses will be
determined by the Bankruptcy Court. See "THE PLAN-Classification and Treatment
of Claims and Interests Under the Plan-Treatment of Administrative Expenses and
Certain Priority Claims."
The reasonable fees and expenses of the legal and financial advisors to the
Informal Committees incurred prior to the Filing Date will be treated as
General Unsecured Claims.
IX. ALTERNATIVES TO CONFIRMATION
AND CONSUMMATION OF THE PLAN
If the Plan is not confirmed by the Bankruptcy Court and consummated, the
alternatives to the Plan include (a) liquidation of the Debtor under chapter 7
of the Bankruptcy Code and (b) an alternative plan of reorganization.
A. Liquidation Under Chapter 7
If no plan can be confirmed, the Debtor's Chapter 11 Case may be converted to
a case under chapter 7 of the Bankruptcy Code, pursuant to which a trustee
would be appointed to liquidate the assets of the Debtor for distribution to
creditors and Interest holders in accordance with the priorities established by
the Bankruptcy Code. For the reasons discussed above, under "ACCEPTANCE AND
CONFIRMATION OF THE PLAN-Best Interests Test," the Debtor believes that
confirmation of the Plan will provide each holder of a Claim entitled to
receive a distribution under the Plan with a recovery that is not less (and is
expected to be substantially more) than it would receive pursuant to
liquidation of the Debtor under chapter 7 of the Bankruptcy Code.
B. Alternative Plan
If the Plan is not confirmed, the Debtor (or if the Debtor's exclusive period
in which to file a plan of reorganization has expired, any other party in
interest) may be entitled to file a different plan. Such a plan might involve
either a reorganization and continuation of the Debtor's business or an orderly
liquidation of its assets. The Debtor has explored various other alternatives
in connection with the formulation and development of the Plan. The Debtor
believes the Plan enables holders of Claims to realize the most value under the
circumstances. In a liquidation under chapter 11, the Debtor's assets would be
sold in an orderly fashion over a more extended period of time than in a
liquidation under chapter 7, probably resulting in somewhat greater (but
indeterminate) recoveries than would be obtained in a chapter 7 liquidation.
Further,
55
<PAGE>
if a trustee were not appointed (such appointment is not required in a chapter
11 case) the expenses for professional fees would most likely be lower than
those incurred in a chapter 7 case. Although preferable to a chapter 7
liquidation, the Debtor believes that liquidation under chapter 11 would result
in substantially lower recoveries than provided for by the Plan. Further, any
alternative plan would likely be less favorable to holders of Claims because,
inter alia, distributions would be delayed.
X. RISK FACTORS
HOLDERS OF CLAIMS SHOULD READ AND CONSIDER CAREFULLY THE FACTORS SET FORTH
BELOW, AS WELL AS THE OTHER INFORMATION SET FORTH IN THIS DISCLOSURE STATEMENT
(AND THE DOCUMENTS DELIVERED TOGETHER HEREWITH AND/OR INCORPORATED BY REFERENCE
HEREIN), PRIOR TO VOTING TO ACCEPT OR REJECT THE PLAN.
A. Business Risks
1. Tax Issues
Reorganized Grand Union expects that all or substantially all its net
operating loss carryovers ("NOLs") will be eliminated as a consequence of the
Plan. In addition, certain other tax attributes of Reorganized Grand Union may
under certain circumstances be eliminated or reduced as a consequence of the
Plan. The elimination or reduction of NOLs and such other tax attributes may
substantially increase the amount of tax payable by Reorganized Grand Union
following the consummation of the Plan as compared with the amount of tax
payable had no such attribute reduction been required. For a further discussion
of the federal income tax consequences of the Plan, see "CERTAIN FEDERAL INCOME
TAX CONSEQUENCES-Tax Consequences to Reorganized Grand Union."
2. Financial Condition of the Debtor; Payment at Maturity; Dividends
The Debtor is currently, and after the Effective Date Reorganized Grand Union
will continue to be, highly leveraged. There can be no assurance that the
operating cash flow of Reorganized Grand Union, after giving effect to
operating requirements, will be adequate to fully fund the payment of interest
under its post-confirmation indebtedness when due as well as all capital
expenditures contemplated in the Debtor's cash-flow projections.
The Debtor believes that its capital investment program is crucial to the
Debtor's future profitability and its ability to generate the cash flow
necessary for its operating requirements, to pay interest on its debt and for
payment of the principal amounts of the Post-Confirmation Credit Agreement debt
and New Senior Notes at maturity. There can be no assurance that the financial
resources available under the Plan will be sufficient to fund the capital
expenditures which are necessary to keep the Debtor competitive and enable it
to be sufficiently profitable to service its debt.
The ability of Reorganized Grand Union to service its indebtedness and to
repay or refinance it at maturity may depend on its ability to raise sufficient
new equity capital, or, possibly, on its ability to sell selected assets of
Reorganized Grand Union or Reorganized Grand Union as a whole. If Reorganized
Grand Union meets the forecasts described in Appendix "B" hereto, the Debtor
believes that, based on current market conditions, such refinancing and new
equity capital should be obtainable. However, there can be no assurance that
the projections can be met, that such financing will be obtained, that, if
obtained, it will be on terms favorable to Reorganized Grand Union, or that
Reorganized Grand Union will be able to be sold in whole or in part on terms
that will yield sufficient proceeds to pay off Reorganized Grand Union's
obligations.
The pendency of the Chapter 11 Case has negatively affected the operations of
the Debtor and its results of operations, and adverse effects of the Chapter 11
Case may affect future periods as well.
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The Post-Confirmation Credit Agreement will contain restrictive financial and
operating covenants and prohibitions, including provisions which will limit
Reorganized Grand Union's ability to make capital expenditures and pay cash
dividends and make other distributions to holders of New Common Stock and
Preferred Stock (if any shares thereof are issued). Restrictions on capital
investment are expected to be more restrictive when Reorganized Grand Union's
cash flow and profitability are lower than projected and less restrictive if
they are higher than projected. There may be further capital expenditure
restrictions if certain agreed-upon financial tests are not met. As noted
above, failure to make necessary capital expenditures could have an adverse
effect on Reorganized Grand Union's ability to remain competitive and on
profitability.
There can be no assurance that Reorganized Grand Union will be able to
achieve or maintain the financial performance tests expected to be contained in
the Post-Confirmation Credit Agreement. Failure to meet such financial tests or
other covenants would result in a default thereunder. If any such default were
not remedied within the applicable grace period, if any, the lenders under the
Post-Confirmation Credit Agreement would be entitled to declare the amounts
outstanding thereunder due and payable, accelerate the payment of all such
amounts and foreclose upon all of the tangible and intangible assets (including
leases) of Reorganized Grand Union and its subsidiaries. See "DESCRIPTION OF
POST-CONFIRMATION CREDIT AGREEMENT."
There can be no assurance that Reorganized Grand Union's performance and its
ability to satisfy its debt service obligations will not be adversely affected
by one or a combination of the above or other factors.
3. Capital Expenditure Program
The Debtor's performance will be dependant upon, among other things, its
ability to make major capital expenditures over the next several years in order
to remain competitive in certain markets. As noted above, financial resources
provided for after the consummation of the Plan may not be sufficient to fund
the capital expenditures which are necessary to enable the Debtor to achieve a
level of profitability which will allow the Debtor to service its debt. (See
"RISK FACTORS-Business Risks-Financial Condition of the Debtor; Payment at
Maturity; Dividends.")
4. Environmental Regulation and Litigation
The Debtor is subject to extensive regulation under environmental and
occupational health and safety laws and regulations. In addition, the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA")
generally imposes joint and several liability for clean-up and enforcement
costs, without regard to fault on parties allegedly responsible for
contamination at a site. While the Debtor believes it has provided adequate
reserves for its share of potential costs associated with the clean-up of
hazardous substances at various sites no assurance can be given that the
reserved amounts will be sufficient to satisfy Reorganized Grand Union's
obligations. See "CERTAIN INFORMATION CONCERNING THE DEBTOR-Regulatory and
Legal Matters."
5. Competition
The food retailing business is highly competitive. The Debtor competes with
numerous national, regional and local supermarket chains, particularly A&P,
Price Chopper, Hannaford Brothers, Inc., ShopRite, Pathmark, Foodtown and Stop
& Shop. The Debtor also competes with convenience stores, stores owned and
operated or otherwise affiliated with large food wholesalers, unaffiliated
independent food stores, warehouse/merchandise clubs, discount drugstore chains
and discount general merchandise chains. Most of the Debtor's principal
competitors have had greater financial resources than the Debtor and have used
those resources to take steps which have already adversely affected and could
in the future adversely affect the Debtor's competitive position and financial
performance, including the opening of competitive stores with better physical
facilities.
Existing store sales growth has experienced a negative trend in the Northern
Region, especially in the Albany metropolitan area and Mid-Hudson Valley
markets. This trend may continue, especially if the Debtor
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lacks sufficient capital to make investments in these markets. The projections
included in Appendix "B" hereto assume that this negative sales trend can be
mitigated during 1996 and reversed in subsequent years. There can be no
assurance that this assumption will prove correct. Competitive store openings
are expected to continue and during the pendency of the Chapter 11 Case certain
competitors may perceive a vulnerability on the part of the Debtor and may make
additional attempts to increase sales and build market share, to the detriment
of the Debtor. The Debtor has had to respond to this competitive environment in
a manner that has, in some instances, adversely affected its operating results
and may continue to do so in the future. The Debtor's ability to compete may
also be adversely affected by its high leverage and the limitations imposed by
its debt agreements. See "CERTAIN INFORMATION CONCERNING THE
DEBTOR-Competition."
6. Collective Bargaining Agreements
As of January 31, 1995, the Debtor had approximately 17,000 employees, of
whom approximately 60% were employed on a part-time basis. Approximately 50% of
the Debtor's employees are covered by collective bargaining agreements
negotiated with fourteen unions. Approximately 88% of the employees covered by
these collective bargaining agreements are employed in store locations and
approximately 12% are employed in distribution facilities. These contracts
expire at various times through December 1998. The Debtor's labor contract with
United Food and Commercial Workers, Local 1262, covering approximately 1,900
clerks working in thirty-three Grand Union stores located in New York City,
Long Island, Westchester County, New York, Putnam County, New York, and
Dutchess County, New York, expires in June 1995. Discussions with Local 1262
regarding a new labor agreement or an extension of the existing contract are
presently underway. A prolonged labor dispute could have a material adverse
effect on the Debtor. See "CERTAIN INFORMATION CONCERNING THE
DEBTOR-Employees."
B. Bankruptcy Risks
1. Objection to Classifications
Section 1122 of the Bankruptcy Code provides that a plan may place a claim or
an interest in a particular class only if such claim or interest is
substantially similar to the other claims or interests of such class. The
Debtor believes that the classification of Claims and Interests under the Plan
complies with the requirements set forth in the Bankruptcy Code. However, there
can be no assurance that the Bankruptcy Court would reach the same conclusion.
2. Risk of Nonconfirmation of the Plan
Even if all Classes of Claims that are entitled to vote accept the Plan, the
Plan might not be confirmed by the Bankruptcy Court. Section 1129 of the
Bankruptcy Code sets forth the requirements for confirmation and requires,
among other things, that the confirmation of a plan of reorganization is not
likely to be followed by the liquidation or the need for further financial
reorganization, and that the value of distributions to dissenting creditors and
equity security holders not be less than the value of distributions such
creditors and equity security holders would receive if the debtor were
liquidated under chapter 7 of the Bankruptcy Code. The Debtor believes that the
Plan satisfies all the requirements for confirmation of a plan of
reorganization under the Bankruptcy Code. There can be no assurance, however,
that the Bankruptcy Court would also conclude that the requirements for
confirmation of the Plan have been satisfied. See "ACCEPTANCE AND CONFIRMATION
OF THE PLAN."
3. Potential Effect of Bankruptcy on Certain Relationships
The effect, if any, which the commencement of the Chapter 11 Case may have
upon the operations of Reorganized Grand Union cannot be accurately predicted
or quantified. The Debtor believes the filing of the Chapter 11 Case and
consummation of the Plan will have a minimal future effect on relationships
with employees and suppliers, especially in view of the fact that the Debtor
intends to pay the Claims of such parties in full, in the ordinary course of
business. If confirmation and consummation of the Plan do not occur
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expeditiously, the Chapter 11 Case could adversely affect the Debtor's
relationships with its customers, suppliers and employees, resulting in a
material adverse impact on the operations of the Debtor. Moreover, even an
expedited Chapter 11 Case could have a detrimental impact on future sales and
patronage due to the possibility that the Chapter 11 Case may create a negative
image of the Debtor in the eyes of its customers.
C. Liquidity Risks
1. Restrictions on Transfer
Holders of New Common Stock or New Senior Notes who are deemed to be
"underwriters" as defined in subsection 1145(b) of the Bankruptcy Code, or who
are otherwise deemed to be "affiliates" or "control persons" of Reorganized
Grand Union within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"), will be unable to offer or sell their New Common Stock or
New Senior Notes after the Effective Date, except pursuant to an available
exemption from registration under the Securities Act and under equivalent state
securities or "blue sky" laws. See "EXEMPTIONS FROM SECURITIES ACT
REGISTRATION."
2. Potential Illiquidity of Plan Securities
No established trading market exists for the Warrants, the New Common Stock
or the New Senior Notes, and no assurance can be given that such a trading
market will develop following the effectiveness of the Plan or, if a trading
market for the Warrants, the New Common Stock or the New Senior Notes develops,
no assurance can be given as to the liquidity of such a trading market.
As provided in the Plan, Reorganized Grand Union will use its reasonable best
efforts to cause the New Senior Notes, the New Common Stock and the Warrants to
be listed on one or more stock exchanges or quoted on the National Market
System on or before the date which is one hundred twenty (120) days after the
Effective Date. Moreover, the Warrant Agreement provides that, if the New
Common Stock is so listed or quoted, the Debtor shall use its best efforts to
have the Warrants listed on such stock exchange(s) or quoted on the National
Market System, as applicable. There can be no assurance, however, that the
Warrants, the New Common Stock or the New Senior Notes will be listed on any
stock exchange or quoted on the National Market System.
XI. DESCRIPTION OF POST-CONFIRMATION CREDIT AGREEMENT
The salient provisions of the Post-Confirmation Credit Agreement are set
forth in the Commitment Letter and the Credit Facility Term Sheet, both of
which are annexed to the Plan, collectively marked as Exhibit "A". The Debtor
anticipates that the Post-Confirmation Credit Agreement will be in all respects
substantially the same as the Existing Credit Agreement except to the extent
that Reorganized Grand Union's financial condition may give rise to different
financial tests and ratios and that the obligations under the Post-Confirmation
Credit Agreement will be secured by liens on substantially all of Reorganized
Grand Union's assets. Unless the Debtor elects to obtain alternative financing,
the Post-Confirmation Credit Documents will be filed with the Bankruptcy Court
not less than five (5) Business Days prior to the Voting Deadline.
XII. DESCRIPTION OF NEW SENIOR NOTES
The New Senior Notes will be issued under an indenture between the Debtor and
the IBJ Schroder Bank & Trust Company, as Trustee. The New Senior Notes are
limited to $595,475,922 aggregate original principal amount and will mature
September 1, 2004. The New Senior Notes will bear interest at a rate of 12% per
annum, commencing September 1, 1995, notwithstanding that the original date of
issuance may be prior to that date. Interest on the Senior Notes will be
payable semi-annually on each March and September, commencing March 1, 1996, to
the holders of record of Senior Notes as of the close of business on the
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February 15th and August 15th immediately preceding such interest payment date.
Interest on the Senior Notes will commence to accrue from September 1, 1995
and, after the initial interest payment, will accrue from the most recent date
to which interest has been paid. Interest will be computed on the basis of a
year comprised of twelve 30-day months. The Senior Notes will be issued in
fully registered form only, in denominations of $1,000 and integral multiples
thereof. The New Senior Notes will be unsecured obligations of Reorganized
Grand Union.
As provided in the Plan, Reorganized Grand Union will use its reasonable best
efforts to cause the New Senior Notes to be listed on one or more stock
exchanges or quoted on the National Market System on or before the date which
is one hundred twenty (120) days after the Effective Date. There can be no
assurance, however, that the New Senior Notes will be listed on any stock
exchange or quoted on the National Market System.
For a further description of the terms of the New Senior Notes, see the Term
Sheet of New Senior Notes annexed hereto as Appendix "C". The form of the
indenture respecting the New Senior Notes will be filed with the Bankruptcy
Court prior to the Voting Deadline.
XIII. DESCRIPTION OF NEW CAPITAL STOCK
A. General
Pursuant to its certificate of incorporation, the Debtor's authorized capital
stock consists of 900 shares of common stock, par value $50,000 per share. As
of the date hereof, 801.5 shares of the Debtor's common stock are issued and
outstanding, all of which are owned by Capital. Pursuant to the Plan, the
Debtor's certificate of incorporation will be amended and restated, the old
common stock of the Debtor that is outstanding immediately prior to the
Effective Date will be cancelled and New Common Stock will be issued to certain
creditors of the Debtor.
Under the Restated Certificate of Incorporation, Reorganized Grand Union's
authorized capital stock will consist of (i) 30,000,000 shares of New Common
Stock (of which up to 10,000,000 shares will be issued under the Plan) and (ii)
10,000,000 shares of preferred stock ("Preferred Stock"), none of which will be
issued and outstanding as of the Effective Date. All shares of the New Common
Stock, when issued pursuant to the Plan, will be fully paid and nonassessable.
Pursuant to the terms of the Plan, as of the Effective Date, all shares of the
New Common Stock to be issued under the Plan will be issued to holders of
Allowed Senior Subordinated Note Claims. See the Restated Certificate of
Incorporation and Restated Bylaws annexed to the Plan as Exhibit "D" and
Exhibit "C", respectively.
B. New Common Stock
Subject to the preferential rights of any series of Preferred Stock which may
be issued by Reorganized Grand Union, and to any restrictions on payment of
dividends imposed by the Post-Confirmation Credit Agreement or the Alternative
Credit Documents, as the case may be, the holders of New Common Stock will be
entitled to such dividends (whether payable in cash, property or capital stock)
as may be declared from time to time by the Post Reorganization Board of
Directors from funds, property or stock legally available therefor, and will be
entitled after payment of all prior claims, to receive pro rata all assets of
Reorganized Grand Union upon the liquidation, dissolution or winding up of
Reorganized Grand Union. Holders of New Common Stock have no redemption,
conversion or preemptive rights to purchase or subscribe for securities of
Reorganized Grand Union. Any offer to redeem, purchase or reacquire any shares
of New Common Stock by Reorganized Grand Union shall be made pro rata to all
holders of New Common Stock.
As provided in the Plan, Reorganized Grand Union will use its reasonable best
efforts to cause the New Common Stock to be listed on one or more stock
exchanges or quoted on the National Market System on or
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before the date which is one hundred twenty (120) days after the Effective
Date. Moreover, the Warrant Agreement provides that, if the New Common Stock is
so listed or quoted, the Debtor shall use its best efforts to have the Warrants
listed on such stock exchange(s) or quoted on the National Market System, as
applicable. There can be no assurance, however, that the New Common Stock or
Warrants will be listed on any stock exchange or quoted on the National Market
System.
Except as required by law, the respective holders of New Common Stock shall
vote on all matters as a single class and each holder of New Common Stock shall
be entitled to one vote for each share of the New Common Stock that it owns.
Holders of New Common Stock will not have cumulative voting rights.
C. Corporate Governance
The initial board of directors of Reorganized Grand Union will consist of
seven (7) directors, who will be chosen by the members of the Official
Committee which were members of the Official Committee of certain holders of
Senior Subordinated Notes or, if and to the extent not chosen by such holders
in a timely fashion, by the Debtor. The initial board of directors shall be
approved by the Bankruptcy Court. Two of the present directors, Messrs. Hirsch
and Fox, have informed the Debtor they do not intend to be candidates for
election as directors of Reorganized Grand Union.
Any vacancy in the board of directors of Reorganized Grand Union, whether
arising from death, resignation, or any other cause, may be filled by a
majority of the remaining directors. Each director so elected will hold office
until his successor shall have been elected and qualified.
The Debtor anticipates that (i) Reorganized Grand Union will maintain officer
and director insurance liability coverage comparable to that currently in
effect and (ii) while the precise amount of the compensation to outside
directors will be determined by the Post Reorganization Board of Directors,
Reorganized Grand Union will compensate its outside directors in a manner
consistent with compensation provided to outside directors of companies of a
similar size and nature.
D. Preferred Stock
The authorized capital stock of Reorganized Grand Union will include
10,000,000 shares of Preferred Stock, none of which will be issued or
outstanding upon the consummation of the Plan. The Post Reorganization Board of
Directors is authorized to divide the Preferred Stock into series and, with
respect to each series, to determine the preferences and rights and the
qualifications, limitations or restrictions thereof, including the dividend
rights, conversion rights, voting rights, redemption rights and terms,
liquidation preferences, sinking fund provisions, the number of shares
constituting the series and the designation of such series. The Post
Reorganization Board may, without stockholder approval, issue Preferred Stock
with voting and other rights that could adversely affect the voting power of
the holders of New Common Stock and could have certain antitakeover effects.
The payment of dividends, if any, on such Preferred Stock would be subject to
any restrictions on payment of dividends imposed by the Post-Confirmation
Credit Agreement or the Alternative Credit Documents, as the case may be.
XIV. SELECTED HISTORICAL FINANCIAL DATA
Reference should be made to the Debtor's 10-K for the Fiscal Year ended April
2, 1994 and 10-Q for the Fiscal Quarter ended January 7, 1995, included as
Appendix "D" to this Disclosure Statement.
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XV. CERTAIN INFORMATION CONCERNING THE DEBTOR
Reference should be made to the Debtor's 10-K for the Fiscal Year ended April
2, 1994 and 10-Q for the Fiscal Quarter ended January 7, 1995, included as
Appendix "D" to this Disclosure Statement, which contain a discussion and
analysis of the Debtor's financial condition and results of operations.
The Debtor is a leading food retailer in the northeastern United States. The
Debtor has been engaged in the food retailing business for 120 years, making it
one of the oldest major retail food companies in the United States. The Debtor
currently operates 234 supermarkets and food stores under the "Grand Union"
name in six states.
A. Store Formats
The Debtor's store sizes and formats vary depending upon the demographics and
competitive conditions in each location, as well as the availability of real
estate. Grand Union supermarkets offer a wide selection of national brand and
private label products as well as high-quality produce, meat and general
merchandise. The majority of the Debtor's sales are generated from stores which
also contain a number of high margin specialty and service areas for such goods
as imported and domestic produce, salads, hot and cold prepared foods, seafood
and fresh-baked goods. Select stores feature in-store kitchens and pharmacies.
Liquor and wine departments are included where permitted by local law. The
Debtor's supermarkets range in size from 14,000 to 64,000 square feet and newly
constructed stores are typically in excess of 40,000 square feet.
B. Merchandising Strategy
The Debtor's current merchandising strategy is premised upon the following:
1. Value. The Debtor's strategy is to provide value to the customer by
offering competitive prices and a wide variety of advertised and unadvertised
specials, sponsoring special promotions and offering a wide selection of
private label products.
2. Merchandise Assortment. The Debtor believes that many consumers prefer
food stores that not only offer the wide variety of food and non-food items
carried by conventional supermarkets, but also sell an expanded assortment of
high-quality food items and produce. Accordingly, the Debtor continues to
upgrade existing departments with new selections and, where appropriate, has
added specialty departments, including full service butcher and seafood shops,
floral departments, delicatessens and bakeries. This merchandising strategy
provides consumers with a broader product offering and a more convenient
shopping experience, while shifting the Debtor's sales mix toward higher margin
products.
3. Efficiencies of Distribution. The Debtor's distribution system has
contributed to its ability to pursue efficiently its strategy of offering the
consumer a wide assortment of quality products at competitive prices.
Strategically located distribution centers make it possible for the Debtor to
minimize in-store stockroom space, thereby increasing store selling space.
C. Selected Data
The table below sets forth certain statistical information with respect to
the Debtor's supermarkets, excluding the stores formerly operated in the
Southern Region, for the periods indicated.
<TABLE>
<CAPTION>
52 Weeks 53 Weeks 52 Weeks 40 Weeks
Ended Ended Ended Ended
March 28, April 3, April 2, January 7,
1992 1993 1994 1995
--------- -------- -------- ----------
<S> <C> <C> <C> <C>
Number of stores (at end of period)............. 251 250 254 236
Total selling square feet (in thousands)........ 4,213 4,276 4,532 4,353
Average gross square feet per store............. 23,439 23,922 24,966 25,841
Average sales per selling square foot per week.. $11.69 $11.23 $10.76 $10.34
</TABLE>
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D. Summary of Operations
1. Northern Region. The Debtor currently operates 128 stores in its Northern
Region including forty stores in Vermont, eighty-five stores in upstate New
York and three stores in New Hampshire. The Debtor believes it generally
operates in excellent locations, having operated in most of the markets it
currently serves in the Northern Region for more than twenty-five years, and in
many communities for over fifty years.
In Vermont, the Debtor operates forty stores throughout the state in
virtually every significant community. The Debtor has the preeminent market
share in the state, having more sales than all other chain-store operators
combined. The Debtor's strong position in Vermont allows it to achieve
significant economies in purchasing, distribution, advertising and field
supervision. Zoning and environmental regulations in the state have long
restricted commercial development (including supermarkets). Accordingly, the
competitive environment in Vermont evolves very slowly. The Debtor's
long-standing presence in Vermont was enhanced through the acquisition in 1990
of certain stores operated by P&C Foods, a division of The Penn Traffic Company
("Penn Traffic"). The Debtor has focused its capital expenditures in Vermont on
improving existing locations and replacing stores where possible. The largest
competitors to the Debtor in Vermont are Golub Corporation ("Price Chopper"),
Hannaford Brothers, Inc. ("Hannaford") and A&P. Price Chopper has recently
enlarged or replaced certain of the facilities in Vermont which it acquired
from P&C Foods in 1990. See "CERTAIN INFORMATION CONCERNING THE DEBTOR-Related
Party Transactions."
In upstate New York, the Debtor generally operates in small cities and rural
communities, where the Debtor estimates it typically has the leading market
share, and in the Albany, New York metropolitan area (the "Capital District")
where, according to Debtor estimates, it has the second largest market share
with thirty-four stores. Although generally not as restrictive as Vermont,
commercial development in the upstate New York market place has been and
continues to be constrained by zoning and environmental restrictions,
particularly in areas regulated by the Adirondack Park Commission. In the more
urban Capital District, where Price Chopper has the larger market share and
Hannaford operates nine stores, the Debtor's competitors have opened several
stores in the last two years. Such newly opened stores are generally larger and
more modern than the Debtor's stores in the relevant markets. These openings
have had an adverse effect on the Debtor's sales and profitability. Victory
Markets, Inc. ("Great American") competes against the Debtor in a number of
communities in the Hudson and Mohawk River Valleys.
In the Mid-Hudson Valley area of New York (fourteen stores), the Debtor
estimates that it has the leading market share. Principal competitors are Big V
Supermarkets Inc. (operating under the ShopRite name), Price Chopper, Hannaford
and A&P. Weak economic conditions in the Mid-Hudson Valley area have been
accompanied by a number of competitive openings in recent years.
A number of stores in the Northern Region (particularly in the Adirondack
area and Vermont) are in resort areas and generally experience significant
increases in sales in the summer months and in some cases during the winter ski
season.
2. New York Region. The Debtor currently operates 106 stores in its New York
Region. The Debtor's primary New York Region marketing area comprises the more
affluent suburban communities of central and northern New Jersey (forty-four
stores), Westchester, Orange, Rockland, Dutchess and Putnam Counties in New
York (twenty-seven stores), Long Island (fifteen stores) and Fairfield County,
Connecticut (fifteen stores). The Debtor also has a limited presence in New
York City (three stores) and Pennsylvania (two stores).
Within its primary New York Region marketing areas, the Debtor generally
operates stores in mature, densely populated markets where it believes its
below-market long-term leases generally provide it with a significant cost
advantage over new supermarkets. These stores serve communities with
demographics particularly well-suited for store formats emphasizing specialty
departments. Accordingly, the sales mix in this region includes a larger
percentage of higher margin perishable department items than in the Northern
Region. In addition, the high population density as well as the geographic
concentration of stores in the region
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provide substantial opportunities to achieve additional economies of scale,
particularly in advertising and distribution.
Because the New York Region is a fragmented market with no single food
retailer having a dominant market share, competition is market specific. In New
Jersey, the Debtor competes primarily against Pathmark Stores, Inc.
("Pathmark"), A&P and various supermarkets supplied by the Wakefern
("ShopRite") and Twin County ("Foodtown") cooperatives. In Westchester, Orange,
Rockland, Dutchess and Putnam Counties in New York, the Debtor generally
competes with A&P, Edwards Supermarkets, Inc. and ShopRite. On Long Island, the
Debtor's principal competitors are A&P/Waldbaums, Pathmark, King Kullen Grocery
Co., Inc. and Foodtown. The Debtor's main competitors in Fairfield County,
Connecticut are the Stop & Shop Company and A&P.
E. Capital Investment
The Debtor's capital spending is primarily directed toward renovating and
upgrading the existing Grand Union store base and opening new and replacement
stores in existing marketing areas. Since 1992, the Debtor has increased its
rate of capital investment from the level in the 1989-1992 period. Capital
expenditures, including capitalized leases other than real estate leases, for
the fiscal year ending April 2, 1994 were approximately $86 million and are
expected to be approximately $70 million for the fiscal year ending April 1,
1995.
The Debtor anticipates that the terms of the proposed financing will likely
limit its ability to make capital expenditures to approximately $45-$50 million
per annum over the next several years as against the Debtor's earlier plans for
a higher level of capital investment. There can be no assurance that financial
resources adequate to maintain the projected level will be available, or that
the expenditure of such amount will result in sufficient levels of
profitability to allow the Debtor to service its debt. See "RISK
FACTORS-Business Risks-Capital Expenditure Program."
F. Distribution, Supply and Management Information Systems
1. Distribution. The Debtor believes its distribution system enhances its
ability to offer consistently fresh and high quality dairy products, meats,
baked goods, produce and frozen foods. Moreover, this system enables the Debtor
to take advantage of cost saving, volume purchase opportunities.
The Debtor currently operates five distribution centers aggregating
approximately 2.1 million square feet. In addition, the Debtor utilizes a
frozen food distribution facility operated by a third party and also leases
space in three additional storage facilities and, from time to time, utilizes
limited space in several other facilities.
The strategic location of the distribution centers makes it possible for the
Debtor to make frequent shipments to stores, which reduces the amount of
in-store stockroom space, thereby limiting nonproductive store inventories.
The Debtor intends to file a motion to reject the leases on its Waterford,
New York distribution facilities. However, the Debtor intends to enter into
discussions with the landlord for those facilities and with the unions
representing the Waterford employees. The outcome of those discussions may
affect the Debtor's intention to reject these leases. The Debtor also is
reviewing its options related to its lease on its Montgomery, New York
warehouse, operated under an agreement with Penn Traffic. No determination on
assumption or rejection of this lease has been made.
2. Montgomery, New York Distribution Agreement. In September 1993, the Debtor
entered into a program to consolidate the purchasing and distribution of health
and beauty care products and general merchandise with Penn Traffic (the
"Montgomery Agreement"). Under this program, the Debtor purchases
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health and beauty care products for both the Debtor and Penn Traffic and is
reimbursed by Penn Traffic for such portion of those products as is sold by
Penn Traffic; Penn Traffic purchases general merchandise for both Penn Traffic
and the Debtor and is reimbursed by the Debtor for such portion of such
merchandise as is sold by the Debtor. The Debtor's general merchandise
warehouse in Montgomery, New York is used to store and distribute general
merchandise and health and beauty care products to Grand Union stores and to
certain of Penn Traffic's stores and wholesale customers. Under the
arrangement, Penn Traffic owns the inventory of general merchandise and health
and beauty care products located at the Montgomery warehouse and shares the
cost of operating the warehouse in an amount proportionate to Penn Traffic's
usage of the facility. Under the agreement governing such arrangement, either
Penn Traffic or the Debtor may terminate the program from and after July 1,
1995, upon six (6) months prior written notice. See "CERTAIN INFORMATION
CONCERNING THE DEBTOR-Related Party Transactions-Montgomery Warehouse."
Under the Bankruptcy Code, moreover, the Debtor may unilaterally terminate
such arrangement pursuant to section 365 of the Bankruptcy Code. In the event
the program is terminated, the Debtor will be required to purchase merchandise
of the type now located in the warehouse but owned by Penn Traffic. Whether
purchased from Penn Traffic or third-party vendors, the cost to the Debtor of
bringing the Debtor's inventory level to the level maintained by the Debtor
prior to the execution of the Montgomery Agreement is estimated to be $15
million.
3. Management-Information Systems. Financial, distribution, purchasing and
operating system requirements are supported through a central computer system
located in Wayne, New Jersey. The Debtor currently utilizes scanning systems in
166 stores (representing approximately 85% of total sales) and intends to
continue to invest in scanning and other store systems in the future.
4. Suppliers. Products sold, including private label products, are purchased
through a large group of unaffiliated suppliers. The Debtor is not dependent
upon any single supplier, and its grocery purchases are of a sufficient volume
to qualify for minimum price brackets for most products sold.
5. Commissary. The Debtor operates a 20,000 square foot commissary located in
Newburgh, New York in which high quality cooked meat products, salads and soups
are prepared for sale in the Debtor's delicatessen departments.
G. Properties
The Debtor conducts its operations primarily in leased stores, distribution
centers and offices. The following table indicates the current location and
number of stores.
1. Location and Number of Stores
Northern Region:
Vermont......... 40
New York........ 85
New Hampshire... 3
New York Region:
New York........ 45
New Jersey...... 44
Connecticut..... 15
Pennsylvania.... 2
---
TOTAL.............. 234
===
The Debtor currently owns fifteen and leases 219 of its store sites pursuant
to commercial leases. Management believes that none of such leases is
individually material to the Debtor. Most of these leases
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contain several renewal options. Eighteen store leases which do not contain
renewal options will expire over the next five years and management anticipates
that it will be able to renegotiate acceptable lease terms for most of these
locations, if so desired.
In the first half of Fiscal 1995, the Debtor has closed a total of four
stores (not including stores which were closed but replaced), two in the
Northern Region and two in the New York Region. Five stores were closed in the
New York Region and nine in the Northern Region during the third quarter of
Fiscal 1995. Three stores have been closed during the fourth quarter of Fiscal
1995 and three additional stores may be closed by the end of Fiscal 1995. In
the aggregate, stores that were or are expected to be closed and not replaced
in Fiscal 1995 represent an aggregate of approximately 566,000 square feet of
closed store space and generated approximately $130 million in annual revenues.
2. Other Properties. The Debtor currently operates five distribution centers
which are leased and a commissary, which is housed in a building owned by the
Debtor on a ground-leased site in Newburgh, New York. The Debtor owns a 66,160
square foot site which is part of its Carlstadt, New Jersey Grocery
Distribution Center and a 101,000 square foot facility in Waverly, New York.
The Debtor's leased distribution centers each have approximately thirty years
or more remaining on the respective leases including options.
H. Employees
As of January 31, 1995, the Debtor had approximately 17,000 employees, of
whom approximately 60% were employed on a part-time basis. Approximately 50% of
the Debtor's employees are covered by collective bargaining agreements
negotiated with fourteen unions. Approximately 88% of the employees covered by
these collective bargaining agreements are employed in store locations and
approximately 12% are employed in distribution facilities.
The Debtor's labor agreement with United Food and Commercial Workers, Local
1262, covering approximately 1,900 clerks working in thirty-three Grand Union
stores located in New York City, Long Island, Westchester County, New York,
Putnam County, New York, and Dutchess County, New York, expires in June 1995.
Discussions with Local 1262 regarding a new labor agreement or an extension of
the existing agreement are presently underway. In addition, the Debtor's labor
agreements with each of the United Food and Commercial Workers, Locals 1, 174,
342-50, 371 and 464A are set to expire, depending upon the applicable labor
agreement, between October 1995 and December 1998. If an extension or
replacement of any of these existing agreements is not obtained, the applicable
United Food and Commercial Workers local retains the right to strike. The
consequences of such an action may be adverse to the Debtor and/or Reorganized
Grand Union.
On May 29, 1993, the Debtor settled a labor dispute with United Food and
Commercial Workers, Local 1262, which represents clerks working in 61 Grand
Union stores located in northern New Jersey and in Orange County, New York, and
Rockland County, New York. The expiration of the Debtor's contract on April 24,
1993, after an extension from the contract's original expiration date on April
10, 1993, resulted in work stoppages at some, and eventually all, of the 61
Grand Union stores involved during the period from May 7, 1993 through May 29,
1993, as well as work stoppages at 251 Foodtown, Pathmark and ShopRite stores
whose employees are covered by identical collective bargaining agreements. On
June 17, 1993, a new four year agreement with Local 1262 was ratified by the
approximately 3,600 members of Local 1262 employed by the Debtor and by the
approximately 23,000 members of Local 1262 employed by Foodtown, Pathmark and
ShopRite.
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The Debtor is a party to seventeen labor contracts, which cover a number of
employees and have the expiration dates set forth below:
Collective Bargaining Agreements
<TABLE>
<CAPTION>
Approximate Contract Contract
Number of Inception Expiration
Bargaining Unit Region Employees Date Date
- ---------------------------------------------- -------- ----------- --------- ----------
<S> <C> <C> <C> <C>
UFCW 1, Store #1825 Northern 23 9/11/94 9/13/97
Bakery 3, Bakers New York 42 2/1/93 1/31/96
UFCW 174, Meat & Deli New York 21 12/15/91 Indefinite
UFCW 342, Meat & Deli New York 279 10/18/92 10/21/95
UFCS 371, All Store Departments New York 900 6/26/94 6/28/97
Teamsters 445, Whse. Employees New York 196 4/3/94 4/4/98
Teamsters 456, Whse. Employees New York 144 7/26/93 7/26/97
Teamsters 456, Drivers & Loaders New York 110 9/4/94 9/5/98
UFCS 464A Meat & Deli New York 982 1/1/95 12/19/98
UFCW 464A (formerly 489) Meat & Deli New York 163 5/1/94 3/14/98
Teamsters 560 Drivers & Loaders New York 99 4/1/94 3/31/98
Teamsters 863, Whse. Employees New York 105 10/16/94 10/10/98
Local 1199 Pharmacists New York 6 10/19/93 10/19/96
UFCS 1262 Grocery, Produce, & Front-End Clerks New York 1,873 3/15/92 6/95
UFCW 1262 Grocery, Produce, & Front-End Clerks New York 3,337 4/11/93 4/12/97
ITEA Drivers, Loaders & Mechanics Northern 188 10/31/94 11/1/97
IWEA Warehouse Employees Northern 252 5/8/94 5/2/98
</TABLE>
I. Regulatory and Legal Matters
1. Federal Trade Commission
At the time of the acquisition of the Debtor by Holdings in July 1989, the
Debtor and P&C Foods (then a subsidiary and currently a division of Penn
Traffic, which is under common control with the Debtor) operated stores in some
of the same geographic areas in Vermont and upstate New York. In order to
satisfy the concerns of federal and state antitrust authorities arising
therefrom in connection with the acquisition of the Debtor by Holdings, prior
to consummation thereof (i) the Debtor, GUAC, MTH Holdings, Inc., a New York
corporation ("MTH Holdings") and an affiliate of MTH, and P&C Foods entered
into an "Assurance Pursuant to 9 Vermont Statutes Annotated Section 2459,"
dated July 5, 1989 (the "Vermont Assurance"), and an "Agreement to Hold
Separate" with the Attorney General of the State of Vermont and (ii) MTH
Holdings and GUAC entered into an "Agreement Containing Consent Order" with the
Bureau of Competition of the Federal Trade Commission ("FTC") and an "Agreement
to Hold Separate" with Salomon Inc and the FTC (collectively, the "FTC
Agreements").
As required by the FTC Agreements, the Debtor has advised the FTC that it is
anticipated that upon consummation of the Plan there will be a change of
control of the Debtor. No such notice is required to be given to the State of
Vermont. Each of the Agreements to Hold Separate was, by its terms, applicable
only until certain stores identified therein could be divested. All required
divestitures have occurred and following consummation of the Plan there will no
longer be any control affiliation between Penn Traffic and Reorganized Grand
Union, which may in the future be direct competitors in certain market areas.
Consummation of the Plan is not expected, by itself, to result in any change in
the applicability of either the Vermont Assurance or the FTC Agreements.
The FTC Agreements required the divestiture by MTH Holdings and/or the Debtor
(including in each case their respective subsidiaries and affiliates) of
sixteen stores located in Vermont and upstate New York.
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Such divestitures were completed on July 30, 1990. Thirteen of the sixteen
stores divested were P&C Foods stores and three of the sixteen stores divested
were Grand Union stores. In a related transaction, the Debtor and P&C Foods
entered into the Operating Agreement, pursuant to which the Debtor acquired the
right to operate P&C Foods' thirteen remaining stores in New England under the
Grand Union name until July 2000, for an average annual rent of approximately
$10.7 million with an option to extend the term of such operation for an
additional five years. The Debtor paid P&C Foods $7.5 million for an option to
purchase the stores at an amount defined in the Operating Agreement. Pursuant
to the terms of the Operating Agreement, a $15 million prepayment of the annual
fee was made to P&C Foods in connection with the July 1992 recapitalization of
the Debtor.
The FTC Agreements also provide, among other things, that the Debtor
(including its subsidiaries and affiliates) shall not acquire, for a period of
ten years, any retail grocery stores in specified counties in Vermont and New
York without the prior approval of the FTC.
2. Environmental
Soil and ground-water contamination has been detected at a shopping center
owned by the Debtor which is located in Connecticut. The Debtor is
investigating whether such contamination was caused by improper disposal of
perchloroethylene wastes by a dry cleaner previously operating at this location
or by an off-site source. The Debtor has undertaken, under approval by the
Connecticut Department of Environmental Protection, a proposal for a remedial
investigation designed to identify the sources of such soil and ground-water
contamination and to determine the length, depth and breadth of the
contamination on and off-site. Sampling analyses for the ground-water at the
shopping center and for drinking water in private residences located in the
immediately surrounding area confirm that the source of the on-site
contamination, in part, is an off-site shopping center and a gasoline station
located nearby. In May 1993, a Remedial Action and Investigation Report was
submitted to the Connecticut Department of Environmental Protection. The Debtor
is awaiting a response from the Connecticut Department of Environmental
Protection.
The Debtor's potential responsibility does not arise from any aspect of its
operation of a supermarket at the shopping center but from the actions of a
former tenant. Any contamination caused on-site by a source located off-site
would be the responsibility of another party. The Debtor believes that the
current intention of the Connecticut Department of Environmental Protection is
to seek reimbursement of past costs and clean up from some or all of these
other parties. The Debtor is unable to determine the amount of its potential
liability arising from the on-site contamination, but does not believe, based
upon the results of investigations made to date, that the amount of potential
liability is likely to be materially adverse to the Debtor's results of
operations or financial condition. Management presently estimates, based upon
investigations made by the Debtor's environmental consultant to date, that such
liability should not exceed $2 million. Investigations are continuing, and
there can be no assurance that the amount of such liability will not exceed $2
million.
In 1991, the Debtor's landlord brought an action (entitled James A. Klein,
d/b/a James A. Klein Enterprises v. The Grand Union Company, et al., 91 CIV
8469 (CLB)) against the Debtor, two other tenants at the Apple Valley Shopping
Center in LaGrange, New York, and a supplier of hazardous substances to one of
the tenants, seeking approximately $1,600,000 in response costs within the
meaning of CERCLA and consequential damages (pursuant to the court's
supplemental jurisdiction). The plaintiff claims that the Debtor and other
tenants discharged hazardous substances from their premises which caused the
plaintiff to incur response costs. At the time this Chapter 11 Case was filed,
the Debtor's motion for summary judgment had been denied and the matter was
awaiting trial in the Southern District of New York before District Judge
Charles Brieant. The gravamen of the plaintiff's claim is that the Debtor
placed household cleaning products containing volatile organics in a compactor
situated at the rear of its premises which were released into the environment.
The Debtor believes that the evidence will not support the allegation and that
it will not be found liable to the plaintiff. Region II U.S. Environmental
Protection Agency carried out a removal action at this site and recently
notified the Debtor that it was a potentially responsible party within the
meaning of Section 107(a) of CERCLA, 42 U.S.C. 9607(a). The EPA notice letter
relates to the same facts that form the basis of the plaintiff's claim before
the Southern District of New York.
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Except as provided above, the Debtor believes that there are no other
material, outstanding environmental actions involving the Debtor.
3. Other
The Debtor is involved in various legal proceedings arising out of its
business, none of which is expected to have a material effect upon its results
of operations or financial position.
J. Trade Names, Service Marks and Trademarks
The Debtor uses a variety of trade names, service marks and trademarks.
Except for "Grand Union," the Debtor does not believe any of such trade names,
service marks or trademarks is material to its business.
K. Competition
The food retailing business is highly competitive. The Debtor competes with
numerous national, regional and local chains, convenience stores, stores owned
and operated and otherwise affiliated with large food wholesalers, unaffiliated
independent food stores, warehouse clubs, discount drugstore chains and
discount general merchandise chains. Some of the Debtor's competitors (which
may include Penn Traffic) have greater financial resources than the Debtor and
could use those resources to take steps which could adversely affect the
Debtor's competitive position. See "RISK FACTORS-Business Risks-Competition."
L. Outstanding Pension Plans and Liabilities
The Debtor currently maintains two tax-qualified employee benefit
arrangements, The Grand Union Savings Plan (the "Savings Plan") and The Grand
Union Employees' Retirement Plan (the "Retirement Plan"). Participation in both
Plans is open to salaried and hourly employees of the Debtor, other than
members of a collective bargaining unit that has bargained with the Debtor
regarding benefits. The Savings Plan is a profit-sharing plan with a cash or
deferred arrangement under which participants may make before-tax contributions
of up to 10% of compensation, subject to the $9,240 calendar year limitation in
effect for 1994. After-tax contributions may also be made. The Debtor matches
25% of the first 4% of compensation contributed on a before-tax basis. The
Retirement Plan is a defined benefit pension plan under which a participant's
benefit paid in the form of a single life annuity at age 65 is generally (i)
1.5% of his "highest annual compensation" multiplied by years of service not in
excess of 35 minus (ii) 1.5% of primary social security benefit multiplied by
years of service not in excess of 35. For 1994, the pension benefit which may
be paid under the Retirement Plan is subject to a limit of $118,800 and the
amount of a participant's compensation that may be taken into account under the
Retirement Plan is limited to $150,000 for 1994.
The Debtor also maintains The Grand Union Supplemental Retirement Program for
Key Executives, a non-qualified pension arrangement pursuant to which certain
key employees of the Debtor and its affiliates earn a pension in addition to
the benefit to which they are entitled under the Retirement Plan.
As reflected in the most recent valuation reports prepared by the Debtor's
actuary, as of April 1, 1994, the fair value of the Retirement Plan's assets
exceeded the accumulated benefit obligation (for both vested and non-vested
benefits) by approximately $12.4 million, and the Retirement Plan continued to
meet the minimum funding requirements set forth under the Internal Revenue Code
and the Employee Retirement Income Security Act of 1974, as amended. Assuming
certain actuarial assumptions are satisfied, the Debtor expects that the
Retirement Plan's funding reserve requirement would remain overfunded at a
sufficient level on a market value basis to preclude any required cash
contribution at least through March 31, 1996. However, a change in prevailing
interest rates could have a significant effect, either positive or negative, on
the amount of the Debtor's pension liability.
The filing of a petition under the Bankruptcy Code does not automatically
terminate a defined benefit pension plan. However, upon the termination of a
defined benefit pension plan there could be further increases
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or decreases in unfunded pension liability to reflect the use of different
actuarial assumptions than those used for purposes of the valuation reports.
Although the Debtor necessarily reserves in itself the right to amend, modify
or terminate the Retirement Plan, as well as the Savings Plan, the Debtor
expects to continue both plans indefinitely.
The PBGC has requested that the following explanation be included in this
Disclosure Statement:
The PBGC administers the mandatory pension plan termination insurance
program established under Title IV of ERISA. Upon termination of an
underfunded pension plan covered by Title IV, the PBGC becomes trustee
of the plan and, within certain statutory limits, guarantees the
payment of pension benefits to participants and beneficiaries. See 29
U.S.C. (S) 1322.
The Debtor is a "contributing sponsor" of the Retirement Plan, which
is covered by Title IV of ERISA. See 29 U.S.C. (S) 1301(a)(13). A
"contributing sponsor" of a single-employer pension plan is a person
who is responsible for meeting the funding requirements under 29 U.S.C.
(S) 1082 or 26 U.S.C. (S) 412.
According to the Debtor's actuary, the Retirement Plan is overfunded
for all benefit liabilities on an on-going basis. The PBGC, however,
has determined that the Retirement Plan is underfunded for all benefit
liabilities on a termination basis. The different actuarial assumptions
mandated by Title IV of ERISA to calculate the Retirement Plan's
funding status as of an assumed date of plan termination of February 1,
1995, have resulted in an estimated underfunding for all benefit
liabilities of $46.3 million. The PBGC expects to file a contingent
estimated priority claim with respect to the Retirement Plan's unfunded
benefit liabilities, as well as a contingent, unliquidated claim for
funding contributions. These claims generally would be contingent upon
the termination of the Retirement Plan. As noted below, the Debtor
intends to continue the Retirement Plan post-confirmation and the PBGC
has advised the Debtor that it supports such intent. The PBGC also
intends to file a priority claim for approximately $31,000 related to
pension termination insurance premiums.1
Under ERISA, the Debtor and each member of the Debtor's controlled
group are jointly and severally liable to the PBGC for the "total
amount of unfunded benefit liabilities" of the Retirement Plan, see 29
U.S.C. (S)(S) 1362(a), (b), and for the payment of premiums due with
respect to the Retirement Plan, see 29 U.S.C. (S) 1307(e)(2). Under
ERISA, the Debtor and each member of the Debtor's controlled group also
are jointly and severally liable to the Retirement Plan for
contributions necessary to satisfy the minimum funding standards of
ERISA and the Internal Revenue Code. See 29 U.S.C. (S)(S) 1082(c)(11),
1362(c); 26 U.S.C. (S) 412(c)(11).
As defined by ERISA, a "controlled group" includes a
parent-subsidiary and/or brother-sister group of corporations, trades
or businesses connected through common ownership and control, as
defined under Sections 414(b) and (c) of the Internal Revenue Code and
regulations promulgated thereunder. See 29 U.S.C. (S) 1301(a)(14).
The Debtor is part of a controlled group which includes Grand Union
Capital Corporation and Grand Union Holdings Corporation. If the
Retirement Plan were to terminate prior to confirmation of the Debtor's
proposed Plan of Reorganization, these companies and any others in the
Debtor's controlled group would incur joint and several liability under
ERISA for any unfunded obligations with respect to the Retirement Plan.
However, the Debtor's proposed Plan of Reorganization contemplates the
cancellation of the equity interest in the Debtor presently held by
Grand Union Capital Corporation, which cancellation would remove Grand
Union Capital Corporation and Grand Union Holdings Corporation from the
Debtor's controlled group.
- ------
1 The Debtor believes that substantive defenses are available with respect to
the PBGC's assertion that its claims for unfunded benefit liabilities and
statutorily required funding contributions would be entitled to priority
status. Rather, the Debtor believes that most or all of such claims would be
properly characterized as General Unsecured Claims.
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A pension plan covered by Title IV of ERISA may only be terminated in
accordance with that statute. The PBGC has discretionary authority to
seek termination of a pension plan whenever it determines that the
PBGC's possible long-run loss may increase unreasonably unless the plan
is terminated. The filing of a petition under the Bankruptcy Code does
not automatically result in termination, but the Debtor could
voluntarily seek termination of the Retirement Plan under certain
circumstances. However, the Debtor intends to continue the Retirement
Plan post-confirmation. Based on the PBGC's understanding of the
current status and value of the Debtor's controlled group, the fact
that the Debtor is in compliance with statutory minimum funding
requirements, the current terms of the proposed Plan of Reorganization,
and the fact that the proposed Plan of Reorganization does not impair
any claims of or relating to the Retirement Plan, the PBGC has advised
the Debtor that it supports the Debtor's intention to maintain the
Retirement Plan as the Debtor emerges from Chapter 11.
M. Executive Officers
The names, ages and present principal occupations of the executive officers
of the Debtor are set forth below.
Name Age Positions
- -------------------- --- ------------------------------------------------
Joseph J. McCaig.... 50 Director, President and Chief Executive Officer
William A. Louttit.. 48 Director, Executive Vice President and Chief
Operating Officer
Kenneth R. Baum..... 46 Director, Senior Vice President, Chief Financial
Officer, Secretary
Darrell W. Stine.... 57 Executive Vice President-New York Region
Mr. McCaig became Chief Executive Officer of the Debtor in July 1989 and was
appointed President, Chief Operating Officer and a Director of the Debtor prior
to 1983. Mr. McCaig has been employed by the Debtor for over thirty years.
Mr. Louttit has been Executive Vice President and Chief Operating Officer of
the Debtor since 1989 and has been a Director since 1981. He joined the Debtor
in 1964, serving in a variety of positions before being elected a Vice
President in 1980. He was named Executive Vice President in charge of
Merchandising in 1984 and was promoted to Chief Operating Officer in 1989.
Mr. Baum was appointed Senior Vice President, Chief Financial Officer,
Secretary and a Director of the Debtor in July 1994. He joined the Debtor in
1982 and was named Vice President and Controller in 1983.
Mr. Stine was appointed Executive Vice President of the Debtor in July 1994.
He joined the Debtor in 1954 and was named a Vice President with responsibility
for the Debtor's New York Region in 1985 and Senior Vice President in 1988.
Executive officers of the Debtor are appointed and serve at the discretion of
the Board of Directors.
For further information regarding the Debtor's executive officers, see the
Debtor's Annual Report on Form 10-K for the 52 Weeks ended April 2, 1994, a
copy of which is annexed hereto as Appendix "D".
N. Executive Compensation
The following table sets forth the compensation paid or accrued by the Debtor
to each of the four (4) most highly-compensated executive officers of the
Debtor for services rendered to the Debtor in all capacities during the
calendar year ended December 31, 1994. The Debtor made no grants of stock
options or stock appreciation rights in Calendar 1994 nor did the Debtor make
any awards in Calendar 1994 under any long-term incentive plan.
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Compensation Other
Name and Principal Position Salary Bonus Compensation (1)
- -------------------------------------------------------------- -------- -------- ----------------
<S> <C> <C> <C>
Joseph J. McCaig $512,437 $123,479 $27,552
Chief Executive Officer, President and Director
William A. Louttit 342,454 66,392 9,507
Executive Vice President, Chief Operating Officer and Director
Darrell W. Stine 256,923 17,446 10,794
Executive Vice President-New York Region
Kenneth R. Baum 149,862 20,603 4,086
Senior Vice President, Chief Financial Officer and Secretary
<FN>
- ------
(1) Includes benefits such as 401(k) contributions and life insurance.
</TABLE>
O. Related Party Transactions
1. MTH Management Agreement
On July 22, 1992, MTH entered into the MTH Management Agreement for a term
ending in July 1997, under which MTH provides certain financial consulting and
business management services to the Debtor, Capital and Holdings, for which MTH
receives an annual fee of $900,000. In connection with the corporate
reorganization and overhead reduction program announced on July 26, 1994, MTH
agreed to reduce the annual fee to $750,000. During the period from July 1989
through July 1992, MTH received an annual fee of $600,000 for its services
performed. On the Effective Date, the MTH Management Agreement will be
terminated and Reorganized Grand Union will execute the MTH Settlement
Agreement. See "THE PLANDirectors of Reorganized Grand Union." A copy of the
MTH Settlement Agreement is annexed as Exhibit "B" to the Plan.
2. P&C Foods
As described above (see "CERTAIN INFORMATION CONCERNING THE DEBTOR-Regulatory
and Legal Matters"), in order to satisfy certain obligations under agreements
entered into with federal and state antitrust authorities in connection with
the acquisition of the Debtor by Holdings in July 1989, thirteen P&C Foods
stores were divested by Penn Traffic and certain of the Debtor's stores were
divested by the Debtor in July 1990. In a related transaction, on July 30,
1990, the Debtor entered into an Operating Agreement with P&C Foods pursuant to
which it acquired the right to operate P&C Foods' thirteen remaining stores in
New England under the Grand Union name until July 2000, with an option to
extend the term of such operation for an additional five years. P&C Foods also
granted the Debtor an option to purchase such stores. In connection with these
transactions, the Debtor agreed to pay P&C Foods a minimum annual fee averaging
$10.7 million per year (since reduced to its present level of approximately $8
million per year) during the ten-year lease term plus, beginning with the year
commencing July 31, 1992, additional contingent fees of up to $700,000 per year
based upon sales performance of the stores operated by the Debtor. In addition,
the Debtor paid P&C Foods $7.5 million for the option to purchase the stores.
Pursuant to the terms of the Operating Agreement, a $15 million prepayment of
the annual fee was made to P&C Foods in connection with the July 1992
recapitalization of the Debtor.
Pursuant to the terms of the Operating Agreement, in April 1992, the Debtor
purchased P&C Foods' White River Junction, Vermont warehouse for cash
consideration of approximately $5 million.
The Debtor also maintains additional arrangements with Penn Traffic, which
either party has the right to terminate at any time. Such arrangements include
(i) the coordinated purchasing of certain products for resale and packaging
supplies; (ii) the Debtor's purchase of frozen dough from Penn Traffic's Penny
Curtis Bakery; and (iii) occasionally, the Debtor's sale of certain products
from its commissary to Penn Traffic.
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3. Montgomery Warehouse
During its fiscal year ended April 2, 1994, the Debtor entered into a program
to consolidate the purchasing and distribution of health and beauty care
products and general merchandise with Penn Traffic. The agreement is terminable
on six months' notice, by either party, after July 1, 1995. Under this program,
the Debtor purchases health and beauty care ("HBC") products for both itself
and certain divisions of Penn Traffic, and Penn Traffic purchases general
merchandise ("GM") products for both itself and the Debtor. The Debtor's
general merchandise warehouse in Montgomery, New York is used to store and
distribute HBC and GM products to the Debtor's stores and to certain of Penn
Traffic's stores and wholesale customers. Under the arrangement, Penn Traffic
owns the inventory of GM and HBC products located at the Montgomery warehouse
and shares the cost of operating the warehouse in an amount proportionate to
Penn Traffic's usage of the facility. In connection with this agreement, in
September 1993, Penn Traffic purchased all of the HBC and GM inventories
previously owned by the Debtor for approximately $12.8 million. During its
fiscal year ended April 2, 1994, the Debtor purchased from vendors
approximately $75.3 million of HBC products under the agreement which amounts
were reimbursed to the Debtor by Penn Traffic. Additionally, the Debtor
purchased approximately $48.2 million from Penn Traffic's inventory of HBC and
GM products at cost. At January 7, 1995, the Debtor had recorded a net
receivable of approximately $2.9 million related to this agreement. See
"CERTAIN INFORMATION CONCERNING THE DEBTOR-Distribution, Supply and Management
Information Systems-Montgomery, New York Distribution Agreement."
4. Other
Mr. Hirsch, who is Chairman and a director of the Debtor, Chairman and a
director of Capital and Chairman and a director of Holdings, is Chairman and a
director of Penn Traffic. Mr. Fox, who is a director, Vice President and
Assistant Secretary of the Debtor, a director, Vice President, Secretary and
Treasurer of Capital, and a director, Vice President, Secretary and Treasurer
of Holdings, is Vice Chairman-Finance and a director of Penn Traffic. Messrs.
Hirsch and Fox do not receive salaries from Penn Traffic and do not participate
in cash bonus plans of Penn Traffic, and receive no compensation in their
capacities as executive officers of the Debtor, Capital or Holdings. Messrs.
Hirsch and Fox receive compensation solely from MTH. Penn Traffic has engaged
MTH as a financial advisor and investment banker. As described above, MTH has
entered into the MTH Management Agreement, which will be terminated on the
Effective Date, pursuant to which MTH has received fees for services provided
to the Debtor. Mr. McCaig is a member of the Board of Directors of Penn
Traffic. Mr. Incaudo, a director of Holdings, is a director, of Penn Traffic
and was President and Chief Executive Officer of Penn Traffic until his
retirement in January 1995.
XVI. EXEMPTIONS FROM SECURITIES ACT REGISTRATION
The New Common Stock, the New Senior Notes and the Warrants to be issued on
the Effective Date will be issued pursuant to the exemption from the
registration requirements of the Securities Act (and of equivalent state
securities or "blue sky" laws) provided by section 1145(a)(1) of the Bankruptcy
Code. Generally, section 1145(a)(1) of the Bankruptcy Code exempts from the
registration requirements of the Securities Act and equivalent state securities
and "blue sky" laws the issuance of securities directly or through a warrant to
purchase such securities if the following conditions are satisfied: (a) the
securities are issued by a debtor (or its successor) under a plan of
reorganization, (b) the recipients of the securities hold a claim against, an
interest in, or a claim for an administrative expense against, the debtor, and
(c) the securities are issued entirely in exchange for the recipient's claim
against or interest in the debtor, or are issued "principally" in such exchange
and "partly" for cash or property. Section 1145(a)(2) of the Bankruptcy Code
also exempts from such registration requirements offers of securities through
warrants and similar rights distributed pursuant to the exemption set forth in
section 1145(a)(1). The Debtor believes that the issuance of the New Common
Stock, the New Senior Notes and the Warrants will satisfy the aforementioned
requirements.
The New Common Stock, the New Senior Notes and the Warrants may be resold by
the holders thereof without registration unless, as more fully described below,
any such holder is deemed to be an "underwriter"
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with respect to such securities, as defined in section 1145(b)(1) of the
Bankruptcy Code. Generally, section 1145(b)(1) of the Bankruptcy Code defines
an "underwriter" as any person who (a) purchases a claim against, or interest
in, a bankruptcy case, with a view towards the distribution of any security to
be received in exchange for such claim or interest, (b) offers to sell
securities issued under a bankruptcy plan on behalf of the holders of such
securities, (c) offers to buy securities issued under a bankruptcy plan from
persons receiving such securities, if the offer to buy is made with a view
towards distribution of such securities and under an agreement made in
connection with the plan, with the consummation of the plan or with the offer
of sale of securities under the plan, or (d) is an issuer as contemplated by
section 2(11) of the Securities Act. Although the definition of the term
"issuer" appears in section 2(4) of the Securities Act, the reference
(contained in section 1145(b)(1)(D) of the Bankruptcy Code) to section 2(11) of
the Securities Act purports to include as "underwriters" all persons who,
directly or indirectly, through one or more intermediaries, control, are
controlled by, or are under common control with, an issuer of securities.
"Control" (as such term is defined in Rule 405 of Regulation C under the
Securities Act) means the possession, direct or indirect, of the power to
direct or cause the direction of the policies of a person, whether through the
ownership of voting securities by contract, or otherwise.
The New Senior Note Indenture will be governed by the Trust Indenture Act of
1939.
THE FOREGOING SUMMARY DISCUSSION IS GENERAL IN NATURE AND HAS BEEN INCLUDED
IN THIS DISCLOSURE STATEMENT SOLELY FOR INFORMATIONAL PURPOSES. THE DEBTOR
MAKES NO REPRESENTATIONS CONCERNING, AND DOES NOT HEREBY PROVIDE ANY OPINION OR
ADVICE WITH RESPECT TO, THE SECURITIES LAW AND BANKRUPTCY LAW MATTERS DESCRIBED
ABOVE. IN LIGHT OF THE COMPLEX AND SUBJECTIVE INTERPRETIVE NATURE OF WHETHER A
PARTICULAR RECIPIENT OF NEW COMMON STOCK, NEW SENIOR NOTES OR WARRANTS MAY BE
DEEMED TO BE AN "UNDERWRITER" WITHIN THE MEANING OF SECTION 1145(b)(1) OF THE
BANKRUPTCY CODE UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS AND,
CONSEQUENTLY, THE UNCERTAINTY CONCERNING THE AVAILABILITY OF EXEMPTIONS FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND EQUIVALENT STATE
SECURITIES AND "BLUE SKY" LAWS, THE DEBTOR ENCOURAGES EACH CREDITOR TO CONSIDER
CAREFULLY AND CONSULT WITH ITS OWN LEGAL ADVISOR(S) WITH RESPECT TO SUCH (AND
ANY RELATED) MATTERS.
XVII. ABSENCE OF PUBLIC TRADING MARKET;
AVAILABLE INFORMATION; FILINGS WITH THE COMMISSION
AND RELATED MATTERS
The Debtor's 11-1/4% Senior Notes and 12-1/4% Senior Subordinated Notes were
issued in a registered public offering pursuant to the Securities Act and are
publicly-traded. The remainder of the Debtor's other securities (the
11-3/8% Senior Notes, the 13% Senior Subordinated Notes and the 12-1/4%
Senior Subordinated Notes, Series A) were privately placed pursuant to section
144 of the Securities Act. Certain of these other securities were subsequently
registered.
The Debtor currently complies with the informational and periodic reporting
requirements of the Securities Exchange Act of 1934, as amended, and, in
accordance therewith, files periodic reports and other documents and
information with the Commission. Such reports, documents and information may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024 Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at its regional offices at Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and at 75 Park Place, 14th
Floor, New York, New York 10007.
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No established trading market exists for the New Common Stock, the New Senior
Notes or the Warrants. As provided in the Plan, Reorganized Grand Union will
use its reasonable best efforts to cause the New Senior Notes, the New Common
Stock and the Warrants to be listed on one or more stock exchanges or quoted on
the National Market System on or before the date which is one hundred twenty
(120) days after the Effective Date. Moreover, the Warrant Agreement provides
that, if the New Common Stock is so listed or quoted, the Debtor shall use its
best efforts to have the Warrants listed on such stock exchange(s) or quoted on
the National Market System, as applicable. There can be no assurance, however,
that the New Senior Notes, the New Common Stock or Warrants will be listed on
any stock exchange or quoted on the National Market System. Moreover, no
assurance can be given that a trading market for such securities will develop
following the effectiveness of the Plan or, if a trading market for the New
Common Stock, the Warrants or the New Senior Notes develops, no assurance can
be given as to the liquidity of such a trading market. The Debtor anticipates
that Reorganized Grand Union will comply with public reporting obligations.
XVIII. CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes certain federal income tax consequences
of the Plan to holders of Senior Notes, Senior Subordinated Notes, Credit
Agreement Claims and Zero Notes based upon the Internal Revenue Code of 1986,
as amended (the "IRC"), the Treasury regulations (including temporary and
proposed regulations) promulgated thereunder (the "Regulations"), judicial
authorities and current administrative rulings and practice. The tax
consequences of certain aspects of the Plan are uncertain because of the lack
of applicable legal authority and may be subject to administrative or judicial
interpretations that differ from the discussion below. The Debtor has not
requested a ruling from the Internal Revenue Service ("IRS") with respect to
these matters, and no opinion of counsel has been sought or obtained by the
Debtor with respect thereto. The following discussion does not address state,
local or foreign tax considerations that may be applicable to creditors.
ACCORDINGLY, ALL CREDITORS OF THE DEBTOR ARE STRONGLY URGED TO CONSULT THEIR
OWN TAX ADVISORS REGARDING THE TAX CONSEQUENCES OF THE PLAN TO THEM AND TO
REORGANIZED GRAND UNION. THE DEBTOR IS NOT MAKING ANY REPRESENTATIONS REGARDING
THE PARTICULAR TAX CONSEQUENCES OF THE CONFIRMATION AND CONSUMMATION OF THE
PLAN AS TO ANY CREDITOR, NOR IS THE DEBTOR RENDERING ANY FORM OF LEGAL OPINION
AS TO SUCH TAX CONSEQUENCES.
A. Tax Consequences to Creditors
The federal income tax consequences to creditors arising from the Plan may
vary depending upon, among other things, whether the Senior Notes, the Senior
Subordinated Notes, the New Senior Notes or the Credit Agreement Claims
constitute "securities" for federal income tax purposes. The determination of
whether such debt instruments constitute "securities" depends upon an
evaluation of the nature of the debt instruments. Important factors to be
considered include, among other things, the length of time to maturity, the
degree of continuing interest in the issuer, the similarity of the debt
instrument to a cash payment, and the purpose of the borrowing. Generally,
corporate debt instruments with maturities when issued of less than five years
are not considered securities, and corporate debt instruments with maturities
when issued of ten years or more are considered securities. Although the
treatment of the Senior Notes and Senior Subordinated Notes as "securities" is
not entirely certain because their stated terms are less than ten years, the
Debtor believes and intends to take the position that the Senior Notes, the
Senior Subordinated Notes and the New Senior Notes should be treated as
"securities" for federal income tax purposes. The Debtor further believes and
intends to take the position that the Credit Agreement Claims should not be
treated as "securities" for federal income tax purposes.
1. Holders of Senior Note Claims and Senior Subordinated Note Claims.
Provided the Senior Notes, Senior Subordinated Notes and New Senior Notes
constitute "securities" for federal income tax purposes (as
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discussed above), the exchange of Senior Notes and Senior Subordinated Notes
for, respectively, the New Senior Notes and the New Common Stock should
constitute a "recapitalization" for federal income tax purposes. Accordingly,
except as discussed below with respect to accrued market discount (see "CERTAIN
FEDERAL INCOME TAX CONSEQUENCES-Tax Consequences to Creditors-Market Discount,
Treatment of Receipt of New Common Stock or New Senior Notes") and Claims for
accrued interest, holders of Senior Notes and Senior Subordinated Notes should
not recognize any gain or loss on the exchange. In such case, a holder's tax
basis in the New Common Stock or New Senior Notes (other than the New Common
Stock or New Senior Notes received for accrued interest) should be equal to its
tax basis in the Senior Notes or Senior Subordinated Notes, as the case may be,
exchanged therefor (exclusive of any basis attributable to accrued interest),
and such Creditor's holding period for the New Common Stock or New Senior Notes
(other than the New Common Stock or New Senior Notes received for accrued
interest) will include the holding period of the Senior Notes or the Senior
Subordinated Notes, provided that the Senior Notes or the Senior Subordinated
Notes are held as capital assets on the Effective Date.
If any of the Senior Notes, the Senior Subordinated Notes or the New Senior
Notes were not treated as "securities," the exchange of Senior Notes for New
Senior Notes, or the exchange of Senior Subordinated Notes for New Common
Stock, as the case may be, would be treated as a taxable exchange. In such
case, a holder of Senior Notes or Senior Subordinated Notes would generally
recognize taxable gain or loss on the exchange equal to the difference between
the issue price of the New Senior Notes or the fair market value of the New
Common Stock, as the case may be, over such holder's basis in the exchanged
debt instruments (exclusive of any basis attributable to accrued interest). A
holder's tax basis in New Senior Notes so received would generally be equal to
the issue price of such New Senior Notes and a holder's tax basis in New Common
Stock so received would generally be equal to the fair market value of such New
Common Stock. The holding period for any New Senior Notes or New Common Stock
will begin on the day after the Effective Date.
As noted below (see "CERTAIN FEDERAL INCOME TAX CONSEQUENCES-Tax Consequences
to Creditors-Allocation of Consideration Received"), under the Plan, some New
Common Stock and New Senior Notes may be distributed to holders of Senior Notes
or Senior Subordinated Notes with respect to their Claims for accrued interest.
Holders of such Claims for accrued interest which have not previously included
such accrued interest in taxable income will be required to recognize ordinary
income equal to the fair market value of the New Common Stock or the issue
price of the New Senior Notes, as the case may be, received with respect to
such Claims for accrued interest. Holders of such Claims for accrued interest
which have included such accrued interest in taxable income generally may take
an ordinary deduction to the extent that such Claim is not fully satisfied
under the Plan (after allocating the distribution between principal and accrued
interest as described below), even if the underlying Claim is held as a capital
asset. The tax basis of the New Common Stock or New Senior Notes received in
exchange for such Claims for accrued interest will be the fair market value of
the New Common Stock on the Effective Date or the issue price of the New Senior
Notes, as the case may be, and the holding period for the New Common Stock or
New Senior Notes received in exchange for such Claims will begin on the day
after the Effective Date.
2. Original Issue Discount. Under the IRC, a holder of a debt instrument
which has original issue discount ("OID") must include a portion of the OID in
gross income in each taxable year or portion thereof in which the holder holds
the debt instrument even if the holder has not received a cash payment in
respect of such OID. The IRC defines OID as the difference between the issue
price and the stated redemption price at maturity of a debt instrument
(assuming the difference exceeds a de minimis amount). The stated redemption
price at maturity is generally the total of all payments due the holder of the
instrument, other than certain interest payments based on a fixed rate and
payable unconditionally at fixed periodic intervals of one year or less during
the entire term of the instrument. The issue price of a debt instrument issued
for property (such as an outstanding debt instrument) depends on the
circumstances surrounding its issuance. The issue price of a debt instrument
that is publicly-traded is generally the fair market value of the debt
instrument when issued. The fair market value is generally determined from the
price at which such debt instrument trades on the first day on which it trades
after issuance. If the new debt instrument is not publicly-
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traded and is issued for property (such as an outstanding debt instrument) that
is publicly-traded, then the issue price is generally determined from the price
at which such property trades on the issue date. Under the IRC as interpreted
by Treasury Regulations, a holder acquiring a debt instrument in a
reorganization exchange may exclude all of the OID on such debt instrument from
such holder's taxable income if it is acquired at a "premium" (that is, if the
adjusted tax basis in the acquired debt instrument exceeds the sum of all
payments due on the instrument after the acquisition date less certain stated
interest) and may exclude a part of the OID on such debt instrument from such
holder's taxable income if it is acquired at an "acquisition premium" (that is,
if the adjusted tax basis in the acquired debt instrument exceeds its adjusted
issue price). It is not possible at present to determine the issue price of the
New Senior Notes and whether the New Senior Notes will be issued with OID, due
to the uncertainty of the trading price.
Section 1275(c) of the IRC and the relevant Treasury Regulations require
information to be set forth on the face of certain debt instruments issued with
OID that are not publicly-offered (within the meaning of the applicable
Treasury Regulations), including the amount of OID and the issue date of the
instrument. If the instrument is publicly-offered, the issuer must instead
furnish certain information to the Secretary of the Treasury. The Debtor or
Reorganized Grand Union or their agents will appropriately legend the New
Senior Notes or furnish such information if they are issued with OID in
accordance with the IRC and the relevant Treasury Regulations.
If the New Senior Notes are issued with OID, a portion of Reorganized Grand
Union's interest deduction with respect to the OID of the New Senior Notes may
be deferred until paid and the remainder disallowed if the New Senior Notes are
considered "applicable high yield discount obligations." The disallowed portion
of the OID may qualify for the dividends received deduction for a corporate
holder of New Senior Notes. An applicable high yield discount obligation must
meet three requirements: (i) maturity of greater than five years; (ii) a yield
to maturity greater than or equal to a specified rate (five percentage points
plus the applicable federal rate for the calendar month in which the obligation
is issued); and (iii) significant OID within the meaning of Section 163(i)(2)
of the IRC. Because it is not possible at present to determine the OID, if any,
on the New Senior Notes or the yield to maturity when the New Senior Notes are
issued, it cannot be determined whether the high yield discount obligation
rules will apply.
3. Market Discount. The market discount provisions of the IRC may apply to
holders of certain Claims. In general, a debt obligation other than a debt
obligation with a fixed maturity of one year or less that is acquired by a
holder in the secondary market (or, in certain circumstances, upon original
issuance) is a "market discount bond" as to that holder if its stated
redemption price at maturity (or, in the case of a debt obligation having OID,
the revised issue price) exceeds the tax basis of the bond in the holder's
hands immediately after its acquisition. However, a debt obligation will not be
a "market discount bond" if such excess is less than a statutory de minimis
amount. Gain recognized by a creditor with respect to a "market discount bond"
will generally be treated as ordinary interest income to the extent of the
market discount accrued on such bond during the creditor's period of ownership,
unless the creditor elected to include accrued market discount in taxable
income currently. A holder of a market discount bond that was required under
the market discount rules of the IRC to defer deduction of all or a portion of
interest on indebtedness incurred or maintained to acquire or carry the bond
may be allowed to deduct such interest, in whole or in part, on disposition of
such bond; however, continued deferral of the deduction for all or a portion of
the interest on indebtedness incurred or maintained to acquire or carry a Claim
that is a market discount bond may be required. Any such deferred interest
expense would be attributed to the New Common Stock or New Senior Notes
received in exchange for the Claim, and would be treated as interest paid or
accrued in the year in which the New Common Stock or New Senior Notes are
disposed of.
4. Market Discount, Treatment of Receipt of New Common Stock or New Senior
Notes. Under the market discount rules, any accrued but unrecognized market
discount with respect to Senior Notes or Senior Subordinated Notes would not
(subject to the discussion below) be recognized upon the exchange of such debt
instruments for New Senior Notes or New Common Stock, as the case may be. In
the case of accrued
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but unrecognized market discount with respect to the Senior Notes, such market
discount would generally be treated as market discount with respect to the New
Senior Notes. In the case of accrued but unrecognized market discount with
respect to the Senior Subordinated Notes, such market discount would generally
be treated as ordinary income to the extent of gain recognized upon the
subsequent disposition of New Common Stock. The treatment of accrued market
discount in nonrecognition transactions is, however, subject to the issuance of
Treasury Regulations that have not yet been promulgated. In the absence of such
regulations, the application of the market discount rules in the present
transaction is uncertain.
In addition, because the exchange of New Common Stock for Senior Subordinated
Notes would qualify as an exchange under Section 351 of the IRC as well as a
recapitalization, it is possible that Treasury Regulations authorized but not
yet promulgated will provide that holders of Senior Subordinated Notes will be
required to recognize accrued but unrecognized market discount upon such
exchange to the extent of gain realized.
It may be noted generally that the Treasury Department is authorized to issue
regulations that may affect or change the rules discussed above. Creditors
should consult their tax advisors regarding the application of the market
discount rules to them.
5. Holders of Credit Agreement Claims. Under the Plan, holders of Allowed
Credit Agreement Claims will, at the Debtor's discretion, be entitled to
receive certain consideration described above. See "THE PLAN-Classification and
Treatment of Claims and Interests Under the Plan-Credit Agreement Claims." In
the event the Debtor exercises its option to execute the Post-Confirmation
Credit Documents, such execution may (subject to the discussion below)
constitute a taxable exchange of such Allowed Credit Agreement Claims. In
addition, in the event the Debtor exercises its option to terminate the
Existing Credit Agreement, such termination will constitute a taxable exchange
of such Allowed Credit Agreement Claims. In the case of a taxable exchange,
holders of Allowed Credit Agreement Claims will (subject to the accrued
interest and market discount rules discussed above) generally recognize taxable
gain or loss equal to the difference between the fair market value of the
consideration received over such holders' basis in the Allowed Credit Agreement
Claims.
As noted above, the execution of the Post-Confirmation Credit Documents
pursuant to the Debtor's option under the Plan may, depending on the terms of
the Post-Confirmation Credit Documents, be treated as an exchange under Section
1001 of the IRC of the Existing Credit Agreement for a modified debt instrument
(i.e., the Post-Confirmation Credit Documents) that differs materially either
in kind or in extent. In such case, such execution would give rise to a taxable
exchange with respect to the Allowed Credit Agreement Claims. Because of the
uncertainty relating to the terms of the Post-Confirmation Credit Documents,
the Debtor is currently unable to determine whether such execution would give
rise to a taxable exchange. In addition, the federal income tax consequences to
holders of Allowed Credit Agreement Claims is uncertain due to the potential
application of Treasury regulations applicable to modifications of debt
instruments currently promulgated in proposed form. Holders of Allowed Credit
Agreement Claims are urged to consult their tax advisors regarding the
application of the above rules.
6. Allocation of Consideration Received. Reorganized Grand Union intends to
take the position that consideration distributed to Creditors will be allocated
first in satisfaction of such Creditors' Claims for principal to the extent
thereof and thereafter, to the extent of any excess, for accrued interest.
Certain legislative history indicates that an allocation provided in a
bankruptcy plan may be binding for federal income tax purposes. However, the
IRS may take the position that consideration distributed to Creditors should be
allocated (i) to Claims for principal and Claims for accrued interest in
proportion to the relative amounts thereof, or (ii) first in satisfaction of
such Creditors Claims for accrued interest to the extent thereof and
thereafter, to the extent of any excess, to the principal amount of Claims held
by such Creditors. Creditors should consult their own tax advisors as to the
proper allocation of consideration between principal and interest.
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7. Distribution of Warrants to Holders of Zero Notes. Pursuant to the Plan,
the Debtor will issue the Series 1 Warrants and Series 2 Warrants to the
holders of the Zero Notes. For federal income tax purposes, the Debtor intends
to take the position that the Warrants were issued to the holders of the Zero
Notes in exchange for the release of such holders' asserted Claims against the
Debtor, and, accordingly, the holders of the Zero Notes should realize ordinary
income in an amount equal to the fair market value of the Warrants on the date
such Warrants are issued. On that basis, the distribution of the Warrants to
the holders of the Zero Notes should not effect the tax basis of such holders
in the Zero Notes.
8. Backup Withholding and Information Reporting. A noncorporate holder of
Senior Notes, Senior Subordinated Notes, New Senior Notes or New Common Stock
may be subject to backup withholding at the rate of 31% with respect to
"reportable payments," which include dividends or interest paid on or the
proceeds of a sale, exchange or redemption of such securities. The payor will
generally be required to deduct and withhold the prescribed amounts if (a) the
payee fails to furnish a taxpayer identification number to the payor in the
manner required, (b) the IRS notifies the payor that the taxpayer
identification number furnished by the payee is incorrect, or (c) there has
been a failure of the payee to certify under penalty of perjury that the payee
is not subject to withholding under Section 3406(a)(1)(D) of the IRC. In
general, if any one of these events occurs, the Debtor would be required to
withhold an amount equal to 31% from any dividend payment made with respect to
New Common Stock, or any payment of interest or principal pursuant to the terms
of the Senior Notes, the Senior Subordinated Notes or the New Senior Notes. In
such case, Reorganized Grand Union may not be required pursuant to the Plan to
make any distribution to any Entity. See "THE PLAN-Distributions Under the
Plan-Compliance with Tax Requirements." Amounts paid as backup withholding do
not constitute an additional tax and will be credited against the holder's
federal income tax liabilities, so long as the required information is provided
to the IRS. The Debtor will report to the holders of Senior Notes, Senior
Subordinated Notes, New Senior Notes or New Common Stock and to the IRS the
amount of any "reportable payments" for each calendar year on the appropriate
IRS Form 1099.
For holders of the Senior Notes, Reorganized Grand Union does not intend to
report the payment of any interest by reason of the exchange of the New Senior
Notes for Senior Notes unless the issue price of the New Senior Notes (see
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES-Tax Consequences to Creditors-Original
Issue Discount") exceeds the principal amount of the Senior Notes exchanged
therefore, in which case Reorganized Grand Union will report the amount of such
excess attributable to accrued interests to holders and the IRS as interest on
IRS Form 1099-INT.
B. Tax Consequences to Reorganized Grand Union
1. Cancellation of Indebtedness
Under general tax principles, Reorganized Grand Union would realize
cancellation of debt ("COD") income to the extent that a Creditor receives from
Reorganized Grand Union pursuant to the Plan an amount of consideration in
respect of a Claim against the Debtor that is worth less than the amount of
such Claim. For this purpose, the amount of consideration received by a
Creditor would equal the fair market value of the New Common Stock or the issue
price of the New Senior Notes, as the case may be, received by such Creditor.
Because the Debtor will be in a bankruptcy case at the time the COD income is
realized, it will not be required to include COD income in gross income, but
rather will be required to reduce its net operating loss carryovers ("NOLs") by
the amount so excluded (and, if such amount exceeds the amount of NOLs, certain
other tax attributes). As noted above, it is possible that the New Senior Notes
will be issued with OID. In that case, Reorganized Grand Union would realize an
amount of COD income equal to the excess of the stated principal amounts of the
Senior Notes over the issue price of the New Senior Notes. The Debtor believes
that all or substantially all of its NOLs will be eliminated as a consequence
of the recognition of COD income.
2. Limitation on Net Operating Losses. The Debtor believes that the
transactions contemplated by the Plan will cause an ownership change under
section 382 of the IRC. While the Debtor believes that all or
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substantially all of its NOLs will be eliminated as a consequence of the
recognition of COD income, such ownership changes could have a significant
adverse effect on the Debtor's utilization of any remaining NOLs as well as
certain built-in losses. Moreover, events outside the control of the Debtor may
cause or have caused an ownership change under Section 382 of the IRC to occur
prior to the consummation of the Plan.
3. Liability of Reorganized Grand Union for Prior Federal Income Taxes. Under
the Treasury Regulations, corporations which are members of an affiliated group
filing consolidated federal income tax returns are severally liable for the
federal income tax liability of the affiliated group for each taxable year for
which they were a member of such group during all or any part of such taxable
year. Since July 1989, the Debtor has been a member of the affiliated group
filing federal income tax returns of which Holdings is the common parent (the
"Holdings Group"). The consummation of the Plan will result in the Debtor
ceasing to be a member of the Holdings Group as of the day following the day
that the Plan is consummated. Furthermore, the consummation of the Plan will
result in the recognition of certain built-in gains within the Holdings Group.
As a result of the substantial net operating losses of Holdings, such gains are
not expected to result in any regular income tax liability, but because of
limitations on the carryforward of alternative minimum net operating losses,
ten percent (10%) of such recognized gains will be subject to the alternative
minimum income tax.
As a former member of the Holdings Group, Reorganized Grand Union may be held
liable for the income taxes of the Holdings Group for taxable years during
which the Debtor was a member of the Holdings Group, including the alternative
minimum tax liability of the Holdings Group for the entire taxable year during
which the Plan is consummated. In view of the substantial losses of the
Holdings Group during years which the Debtor has been a member of the Holdings
Group, the Debtor believes that the income tax liability (including the
alternative minimum tax liability) of the Holdings Group for which the Debtor
may be severally liable would be less than $1 million.
THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE PLAN ARE
COMPLEX AND, IN MANY RESPECTS, UNCERTAIN. THE FOREGOING IS INTENDED TO BE A
SUMMARY ONLY AND, AS SUCH, DOES NOT THE DISCUSS ALL ASPECTS OF FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO A PARTICULAR CREDITOR OR HOLDER OF INTERESTS
IN THE DEBTOR. ALL CREDITORS AND HOLDERS OF INTERESTS IN THE DEBTOR ARE
STRONGLY URGED TO CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE TAX
CONSEQUENCES OF THE PLAN THAT ARE RELEVANT TO THEIR PARTICULAR CIRCUMSTANCES.
XIX. FINANCIAL AND LEGAL ADVISORS; FEES AND EXPENSES
The Debtor has engaged Willkie Farr & Gallagher and Young Conaway Stargatt &
Taylor to act as bankruptcy co-counsel, Price Waterhouse LLP, the Debtor's
regular outside accountants and consultants, to act as the Debtor's accountants
and consultants, and Donovan Leisure Newton & Irvine, the Debtor's regular
corporate counsel, to act as special corporate counsel. For their services to
the Debtor in connection with the Chapter 11 Case, these professionals will
receive customary hourly fees and will be reimbursed for all reasonable
out-of-pocket expenses.
The three Informal Committees, with the Debtor's consent and at its expense,
engaged the following legal and financial advisors in connection with the
Debtor's restructuring: (a) for the committee representing certain holders for
Senior Notes, the law firms of Stroock & Stroock & Lavan and Rosenthal,
Monhait, Gross & Goddess, P.A. and the investment banking firm of Houlihan
Lokey Howard & Zukin; (b) for the committee representing certain holders of
Senior Subordinated Notes, the law firm of Ropes and Gray and the investment
banking firm of Donaldson, Lufkin & Jenrette; and (c) for the committee
representing certain trade creditors, the law firm of Pepper, Hamilton &
Scheetz.
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The Plan provides that the reasonable fees and expenses incurred on or after
the Filing Date (which may, as such fees relate to financial advisors, include
a request by such professionals for success fees) by the counsel and financial
advisors retained by agreement with the Debtor prior to the Filing Date by the
Informal Committees (together with the reasonable fees and expenses of local
counsel) with respect to the Chapter 11 Case will be paid (without application
by or on behalf of any such professionals to the Bankruptcy Court, and without
notice and a hearing, unless specifically requested by the Bankruptcy Court
upon request of a party in interest) by Reorganized Grand Union as an
Administrative Expense. If Reorganized Grand Union and any professional cannot
agree on the amount of fees and expenses to be paid to such professional, the
amount of any such fees and expenses will be determined by the Bankruptcy
Court.
The reasonable fees and expenses of the legal and financial advisors to the
Informal Committees incurred prior to the Filing Date will be treated as
General Unsecured Claims.
In addition, the fees and expenses of the professionals retained by the
Official Committee (and any other committee appointed in this case) will be
payable as Administrative Expenses, subject to application of and approval by
the Bankruptcy Court, on notice and a hearing, on the later of the Effective
Date or the date such fees and expenses are approved by the Bankruptcy Court.
The reasonable fees and expenses incurred on or after the Filing Date by the
Capital Committee Advisors or the Informal Zero Committee Advisors with respect
to this Chapter 11 Case or the GUCC Chapter 11 Case will be paid by Reorganized
Grand Union after notice and a hearing in accordance with the procedures
established by the Bankruptcy Court for professionals employed by the Debtor or
the Official Committee; provided, however, that the aggregate maximum amount of
fees and expenses for the Capital Committee Advisors and the Informal Zero
Committee Advisors that shall be payable in this Chapter 11 Case shall not
exceed $750,000 (plus the amount of any prepetition retainer). Applications for
such compensation and reimbursement of expenses by such professionals must be
filed no later than forty-five (45) days after the Effective Date.
Finally, the reasonable fees and expenses incurred on or after the Filing
Date through the Effective Date by the GUHC and GUCC Legal Advisors with
respect to this Chapter 11 Case, the GUCC Chapter 11 Case or the GUHC Chapter
11 Case will be paid (after application of any retainer held by any such
professional) by Reorganized Grand Union after notice and a hearing in
accordance with the procedures established by the Bankruptcy Court for
professionals employed by the Debtor or the Official Committee. Applications
for compensation and reimbursement of expenses by such professionals must be
filed no later than forty-five (45) days after the Effective Date. On and after
the Effective Date, Reorganized Grand Union will pay the reasonable fees and
expenses of the GUHC and GUCC Legal Advisors incurred with respect to the
dissolution of GUCC and GUHC. Notwithstanding anything in the Plan to the
contrary, the aggregate amount of fees and expenses payable to the GUHC and
GUCC Legal Advisors pursuant to Section 2.04 of the Plan will not exceed, in
the aggregate, $150,000, in addition to the amount of any retainers paid to
such professionals.
The Debtor estimates that the aggregate amount of all such administrative
fees and expenses will be approximately $7.5 million.
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XX. CONCLUSION
The Debtor believes that confirmation of the Plan is desirable and in the
best interests of all holders of Claims and Interests. The Debtor therefore
urges you to vote to accept the Plan.
Dated: Wilmington, Delaware
April 19, 1995
THE GRAND UNION COMPANY
By: /s/ Francis E. Nicastro
Francis E. Nicastro
An Officer
WILLKIE FARR & GALLAGHER
Co-Counsel for the Debtor
and Debtor-in-Possession
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Phone: (212) 821-8000
YOUNG, CONAWAY, STARGATT & TAYLOR
Co-Counsel for The Grand Union
Debtor and Debtor-in-Possession
P.O. Box 391
11th Floor, Rodney Square North
Wilmington, Delaware 19899
Phone: (302) 571-6600
DONOVAN LEISURE NEWTON & IRVINE
Special Corporate Counsel for the
Debtor and Debtor-in-Possession
30 Rockefeller Plaza
New York, New York 10112
Phone: (212) 632-3000
82
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Appendix A
<PAGE>
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re: Chapter 11
THE GRAND UNION COMPANY, Case No. 95-84 (PJW)
also d/b/a Big Star,
Debtor.
---------------------------------
SECOND AMENDED CHAPTER 11 PLAN
OF THE GRAND UNION COMPANY
---------------------------------
April 19, 1995
WILLKIE FARR & GALLAGHER YOUNG, CONAWAY, STARGATT & TAYLOR
Co-Counsel for the Debtor Co-Counsel for the Debtor
and Debtor-in-Possession and Debtor-in-Possession
One Citicorp Center 11th Floor
153 East 53rd Street Rodney Square North
New York, NY 10022-4677 P.O. Box 391
Attn: Myron Trepper Wilmington, DE 19899-0391
Barry N. Seidel Attn: James L. Patton, Jr.
(212) 821-8000 Laura Davis Jones
(302) 571-6600
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE 1 RULES OF INTERPRETATION AND DEFINITIONS. . . . . . . . . . . . . 1
1.01. Rules of Interpretation. . . . . . . . . . . . . . . . . . 1
1.02. Definitions. . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 PROVISIONS FOR TREATMENT OF ADMINISTRATIVE EXPENSES. . . . . . . 9
2.01. Administrative Expenses. . . . . . . . . . . . . . . . . . 9
Compensation to Legal Counsel and Financial Advisors to
2.02. the Informal Committees/Indenture Trustees . . . . . . . . 9
Compensation to the Capital Committee Advisors and the
2.03. Informal Zero Committee Advisors . . . . . . . . . . . . . 9
2.04. Compensation to GUHC and GUCC Legal Advisors . . . . . . . 9
ARTICLE 3 PROVISIONS FOR TREATMENT OF PRIORITY TAX CLAIMS. . . . . . . . . 10
3.01. Priority Tax Claims. . . . . . . . . . . . . . . . . . . . 10
ARTICLE 4 CLASSIFICATION OF CLAIMS AND INTERESTS . . . . . . . . . . . . . 10
4.01. Secured Claims . . . . . . . . . . . . . . . . . . . . . . 10
4.02. Priority Claims. . . . . . . . . . . . . . . . . . . . . . 10
4.03. Unsecured Claims . . . . . . . . . . . . . . . . . . . . . 10
4.04. Interests. . . . . . . . . . . . . . . . . . . . . . . . . 11
IDENTIFICATION OF CLASSES OF CLAIMS AND INTERESTS IMPAIRED
ARTICLE 5 AND NOT IMPAIRED BY THIS PLAN. . . . . . . . . . . . . . . . . . 11
Classes of Claims Impaired by this Plan and Entitled to
5.01. Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.02. Classes Receiving No Property Deemed to Reject this Plan . 11
Unimpaired Classes Conclusively Presumed to Accept this
5.03. Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 6 PROVISIONS FOR TREATMENT OF CLAIMS AND INTERESTS . . . . . . . . 11
6.01. Credit Agreement Claims (Class 1). . . . . . . . . . . . . 11
6.02. Interest Rate Protection Agreement Claims (Class 2). . . . 12
6.03. Miscellaneous Secured Claims (Class 3) . . . . . . . . . . 12
6.04. Senior Note Claims (Class 4) . . . . . . . . . . . . . . . 13
6.05. Priority Claims (Class 5). . . . . . . . . . . . . . . . . 13
6.06. Trade Claims (Class 6) . . . . . . . . . . . . . . . . . . 13
6.07. General Unsecured Claims (Class 7) . . . . . . . . . . . . 14
6.08. Senior Subordinated Claims (Class 8) . . . . . . . . . . . 14
6.09. Senior Zero Note Claims (Class 9). . . . . . . . . . . . . 14
6.10. Junior Zero Note Claims (Class 10) . . . . . . . . . . . . 15
6.11. Subordinated Claims (Class 11) . . . . . . . . . . . . . . 15
6.12. Interests (Class 12) . . . . . . . . . . . . . . . . . . . 15
ARTICLE 7 ALLOWANCE OF CLAIMS. . . . . . . . . . . . . . . . . . . . . . . 15
7.01. Credit Agreement Claims. . . . . . . . . . . . . . . . . . 15
7.02. 11-1/4% Senior Note Claims. . . . . . . . . . . . . . . . . 16
7.03. 11-3/8% Senior Note Claims. . . . . . . . . . . . . . . . . 16
7.04. 13% Senior Subordinated Note Claims. . . . . . . . . . . . 16
7.05. 12-1/4% Senior Subordinated Note A Claims . . . . . . . . . 16
7.06. 12-1/4% Senior Subordinated Note Claims . . . . . . . . . . 16
7.07. Unimpaired Trade Claims. . . . . . . . . . . . . . . . . . 16
7.08. Interest Rate Protection Claims. . . . . . . . . . . . . . 16
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Page
----- ---------------------------------------------------------- ----
7.09. Senior Zero Note Claims. . . . . . . . . . . . . . . . . . 16
7.10. Junior Zero Note Claims. . . . . . . . . . . . . . . . . . 16
ACCEPTANCE OR REJECTION OF THIS PLAN; EFFECT OF REJECTION
ARTICLE 8 BY ONE OR MORE IMPAIRED CLASSES OF CLAIMS OR INTERESTS . . . . . 17
8.01. Each Impaired Class of Claims Entitled to Vote . . . . . . 17
8.02. Acceptance by an Impaired Class of Creditors . . . . . . . 17
8.03. Presumed Acceptances by Unimpaired Classes . . . . . . . . 17
8.04. Deemed Rejection by Class 11 and Class 12. . . . . . . . . 17
Confirmation Pursuant to Section 1129(b) of the Bankruptcy
8.05. Code . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 9 UNEXPIRED LEASES AND EXECUTORY CONTRACTS . . . . . . . . . . . . 17
Assumption and Rejection of Unexpired Leases and Executory
9.01. Contracts. . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 10 OPERATION AND MANAGEMENT OF REORGANIZED GRAND UNION . . . . . . 18
10.01. Resignation of Board of Directors. . . . . . . . . . . . 18
10.02. Board of Directors . . . . . . . . . . . . . . . . . . . 18
10.03. Termination of MTH Agreement . . . . . . . . . . . . . . 18
Listing of New Senior Notes, New Common Stock and
10.04. Warrants . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 11 IMPLEMENTATION OF THIS PLAN . . . . . . . . . . . . . . . . . . 18
11.01. Vesting of Property. . . . . . . . . . . . . . . . . . . 18
Surrender and Cancellation of Securities, Notes or Other
11.02. Instruments; Discharge of Indenture Obligations. . . . . 18
11.03. The Debtor's Causes of Action. . . . . . . . . . . . . . 19
11.04. Restated Certificate of Incorporation; Restated Bylaws . 19
11.05. Registration Rights. . . . . . . . . . . . . . . . . . . 19
Filing of Credit Documents/Indenture/Registration Rights
11.06. Agreements . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 12 PROVISIONS COVERING DISTRIBUTIONS . . . . . . . . . . . . . . . 20
12.01. Time of Distributions Under this Plan. . . . . . . . . . 20
12.02. Fractional Securities. . . . . . . . . . . . . . . . . . 20
12.03. Compliance With Tax Requirements . . . . . . . . . . . . 21
12.04. Persons Deemed Holders of Registered Securities. . . . . 21
12.05. Allocation Between Principal and Accrued Interest. . . . 22
12.06. Distribution of Unclaimed Property . . . . . . . . . . . 22
12.07. Indenture Trustee Reserves . . . . . . . . . . . . . . . 22
ARTICLE 13 RESOLUTION OF DISPUTED CLAIMS . . . . . . . . . . . . . . . . . 23
13.01. Objections to Claims . . . . . . . . . . . . . . . . . . 23
13.02. Procedure. . . . . . . . . . . . . . . . . . . . . . . . 23
Payments and Distributions With Respect to Disputed
13.03. Claims . . . . . . . . . . . . . . . . . . . . . . . . . 23
Timing of Payments and Distributions With Respect to
13.04. Disputed Claims. . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 14 DISCHARGE, RELEASES AND SETTLEMENTS OF CLAIMS . . . . . . . . . 23
14.01. Discharge of All Claims and Interests and Releases . . . 23
14.02. Exculpation. . . . . . . . . . . . . . . . . . . . . . . 25
14.03. Injunction . . . . . . . . . . . . . . . . . . . . . . . 25
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Page
----- -------------------------------------------------------- ----
14.04. Preservation of Rights . . . . . . . . . . . . . . . . . 25
14.05. Claims of Subordination. . . . . . . . . . . . . . . . . 25
14.06. Termination of Indemnification Obligations . . . . . . . 26
14.07. Preservation of Insurance. . . . . . . . . . . . . . . . 27
Claims of Holders of Zero Notes and Capital Indenture
14.08. Trustees . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 15 CONFIRMATION AND CONSUMMATION OF THE PLAN . . . . . . . . . . . 27
15.01. Conditions to Confirmation . . . . . . . . . . . . . . . 27
15.02. Conditions to the Effective Date . . . . . . . . . . . . 28
ARTICLE 16 MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . 29
16.01. Bankruptcy Court to Retain Jurisdiction. . . . . . . . . 29
16.02. Binding Effect of this Plan. . . . . . . . . . . . . . . 29
16.03. Nonvoting Stock. . . . . . . . . . . . . . . . . . . . . 30
16.04. Authorization of Corporate Action. . . . . . . . . . . . 30
16.05. Retiree Benefits . . . . . . . . . . . . . . . . . . . . 30
16.06. Withdrawal of this Plan. . . . . . . . . . . . . . . . . 30
16.07. Final Order. . . . . . . . . . . . . . . . . . . . . . . 30
16.08. Method of Notice . . . . . . . . . . . . . . . . . . . . 30
16.09. Dissolution of any Committee . . . . . . . . . . . . . . 31
16.10. Continued Confidentiality Obligations. . . . . . . . . . 31
16.11. Amendments and Modifications to Plan . . . . . . . . . . 31
16.12. Time . . . . . . . . . . . . . . . . . . . . . . . . . . 31
16.13. Section 1145 Exemption . . . . . . . . . . . . . . . . . 32
16.14. Section 1146 Exemption . . . . . . . . . . . . . . . . . 32
16.15. Severability . . . . . . . . . . . . . . . . . . . . . . 32
16.16. Conditions to Modification, Withdrawal and Waiver Rights 32
16.17. Setoff Rights Unaffected . . . . . . . . . . . . . . . . 32
16.18. Manner of Payment. . . . . . . . . . . . . . . . . . . . 32
EXHIBITS:
Exhibit A Commitment Letter and Credit Facility Term Sheet
Exhibit B MTH Settlement Agreement
Exhibit C Restated Bylaws
Exhibit D Restated Certificate of Incorporation
Exhibit E Warrant Agreement
Exhibit F Zero Claims Release
Exhibit G Zero Settlement
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DEBTOR'S CHAPTER 11 PLAN
THE GRAND UNION COMPANY, the above-captioned Debtor and Debtor-In-Possession,
proposes the following chapter 11 plan pursuant to section 1121(a) of the
Bankruptcy Code:
ARTICLE 1
Rules of Interpretation and Definitions
1.01. Rules of Interpretation. Whenever from the context it appears
appropriate, each term stated in either the singular or the plural shall include
the singular and the plural, and pronouns stated in the masculine, feminine or
neuter gender shall include the masculine, the feminine and the neuter. The
words "herein," "hereof," "hereto," "hereunder" and others of similar import,
refer to the Plan as a whole and not to any particular section, subsection or
clause contained in the Plan. Captions and headings to articles, sections and
exhibits are inserted for convenience of reference only and are not intended to
be part of or to affect the interpretation of the Plan. The rules of
construction set forth in section 102 of the Bankruptcy Code shall apply. In
computing any period of time prescribed or allowed by the Plan, the provisions
of Bankruptcy Rule 9006(a) and Section 16.12 hereof shall apply; provided,
however, that in the event of any inconsistency, Bankruptcy Rule 9006(a) shall
govern.
1.02. Definitions. Unless the context requires otherwise, the following words
and phrases shall have the meanings set forth below when used in
initially-capitalized form in this Plan:
Additional Facility: The amounts by which the Revolving Credit Facility and
the Term Facility shall increase as set forth in Section 6.01(a)(i) of this
Plan.
Additional Facility Lenders: Bankers Trust or Bankers Trust and the syndicate
of commercial banks and other financial lenders arranged by Bankers Trust to
provide the Additional Facility.
Administrative Expense: Collectively, (a) any cost or expense of
administration of the Chapter 11 Case allowable under section 503(b) of the
Bankruptcy Code, including, without limitation, the fees and expenses of
professionals employed by the Debtor, the Official Committee, the Informal
Committee(s) and the Indenture Trustees (if and to the extent the fees and
expenses of the Indenture Trustees are not General Unsecured Claims or
Miscellaneous Secured Claims), to the extent allowed or, as applicable, agreed
to by the Debtor and/or Reorganized Grand Union pursuant to Sections 2.02, 2.03
or 2.04 of the Plan, and (b) any fees or charges assessed against the Debtor's
estate under title 28, United States Code, section 1930.
Affiliate(s): shall have the meaning set forth in section 101 of the
Bankruptcy Code and shall include GUCC and GUHC.
Allowed: Subject to Section 7.07 hereof, with respect to Administrative
Expenses or Claims, (a) any Administrative Expense or Claim against the Debtor,
proof of which is timely filed or by order of the Bankruptcy Court is not or
will not be required to be filed, (b) any Claim that has been or is hereafter
listed in the Schedules as liquidated in amount and not disputed or contingent,
or (c) any Administrative Expense or Claim allowed pursuant to this Plan and, in
each such case in (a) and (b) above, as to which either (i) no objection to the
allowance thereof has been interposed within the applicable period of time fixed
by this Plan, the Bankruptcy Code, the Bankruptcy Rules or the Bankruptcy Court,
or (ii) such an objection is so interposed and the Administrative Expense or
Claim shall have been allowed by a Final Order (but only to the extent so
allowed).
Alternative Commitment Letter: If the Debtor elects the treatment set forth in
Section 6.01(a)(ii) hereof with respect to the Credit Agreement Claims, a
binding commitment to provide Reorganized Grand Union not less than $204 million
in loan facilities (of which not less than $57 million shall be term facilities)
on the
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Effective Date on terms satisfactory to the Debtor and reasonably satisfactory
to the Official Committee and the Informal Committee of Senior Noteholders,
which loan facility shall in part be used to pay Credit Agreement Claims in full
on the Effective Date, as provided in Section 6.01(a)(ii)(x) herein.
Alternative Credit Documents: New credit documents to be executed on the
Effective Date by Reorganized Grand Union and which will contain those terms set
forth in the Alternative Commitment Letter.
Ballot: The form of ballot distributed, together with the Disclosure
Statement, to holders of Claims entitled to vote for the purpose of acceptance
or rejection of this Plan.
Bankers Trust: Bankers Trust Company.
Bankruptcy Code: Title 11 of the United States Code, as amended from time to
time, as applicable to the Chapter 11 Case.
Bankruptcy Court: The United States Bankruptcy Court for the District of
Delaware.
Bankruptcy Rules: The Federal Rules of Bankruptcy Procedure, as amended,
promulgated under section 2075 of title 28 of the United States Code and the
Local Rules of the Bankruptcy Court, as applicable from time to time during the
Chapter 11 Case.
Board of Directors: The board of directors of the Debtor as it exists
immediately prior to the Effective Date.
Business Day: Any day other than a Saturday, Sunday or "legal holiday" as
defined in Bankruptcy Rule 9006(a).
Cancelled Security: A security, note or other instrument evidencing an
Impaired Claim or Impaired Interest outstanding immediately prior to the
Effective Date.
Capital Committee: The Official Committee of Unsecured Creditors of Grand
Union Capital Corporation.
Capital Committee Advisors: Collectively, The Argosy Group, L.P., Peterson
Consulting L.P., Marcus Montgomery Wolfson P.C., and Williams, Hershman &
Wisler, P.A., in their capacity as advisors to the Capital Committee.
Capital Indenture Trustees: The trustees under the Capital Indentures, in
their capacity as such (i.e., First Trust National Association and Marine
Midland Bank, and any of their successors and assigns).
Capital Indentures: The indentures governing the Zero Notes.
Causes of Action: Any and all actions, causes of action, suits, accounts,
controversies, agreements, promises, rights to legal remedies, rights to
equitable remedies, rights to payment and claims, whether known or unknown,
reduced to judgment, not reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, secured, unsecured and
whether asserted or assertable directly or derivatively, in law, equity or
otherwise.
Chapter 11 Case: The case under chapter 11 of the Bankruptcy Code concerning
the Debtor which was commenced on the Filing Date.
Claim: Any right to (a) payment from the Debtor, whether or not such right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable,
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secured or unsecured, or (b) an equitable remedy for breach of performance if
such breach gives rise to a right to payment from the Debtor, whether or not
such right to an equitable remedy is reduced to judgment, fixed, contingent,
matured, unmatured, disputed, undisputed, secured or unsecured.
Claims Bar Date: The date fixed by the Bankruptcy Court as the deadline for
filing proofs of claim applicable to Creditors whose Claims are included in
Class 3, Class 5, Class 6(b), Class 7 and Class 11 of the Plan.
Commission: The Securities and Exchange Commission.
Commitment Letter: The agreement with Bankers Trust, dated January 24, 1995,
as amended from time to time, pursuant to which Bankers Trust agreed to provide
Reorganized Grand Union with no less than an additional $65 million of secured
loan facilities (in addition to the facilities currently outstanding under the
Existing Credit Agreement), upon those terms and conditions set forth in the
Commitment Letter and the Credit Facility Term Sheet. Conformed copies of the
Commitment Letter and the Credit Facility Term Sheet are collectively annexed
hereto as Exhibit A.
Committee(s): Any committee or committees appointed pursuant to section
1102(a) of the Bankruptcy Code in the Chapter 11 Case, including, without
limitation, the Official Committee.
Confirmation Date: The date and time on which the Confirmation Order is
entered on the docket maintained by the Clerk of the Bankruptcy Court.
Confirmation Order: The order entered by the Bankruptcy Court confirming the
Plan.
Credit Agreement Claim: Any Claim against the Debtor by the Existing Banks
pursuant to the Existing Credit Documents.
Credit Facility Term Sheet: The term sheet, dated February 2, 1995, as amended
from time to time, by and between the Debtor and Bankers Trust, as contemplated
in the Commitment Letter. Conformed copies of the Commitment Letter and the
Credit Facility Term Sheet are collectively annexed hereto as Exhibit A.
Creditor: Any Entity that is the holder of a Claim against the Debtor that
arose on or before the Filing Date or a Claim against the Debtor's estate of the
kind specified in section 502(g), 502(h) or 502(i) of the Bankruptcy Code.
Debtor: The Grand Union Company.
Debtor-In-Possession: The Debtor as debtor-in-possession pursuant to sections
1107 and 1108 of the Bankruptcy Code.
Disclosure Statement: The disclosure statement distributed to holders of
Claims entitled to vote for the purpose of acceptance or rejection of this Plan
in accordance with section 1126(b) of the Bankruptcy Code and Bankruptcy Rule
3018.
Disputed: With respect to Administrative Expenses or Impaired Claims, any
Administrative Expense or Impaired Claim that is not yet Allowed or disallowed.
Effective Date: That day that is five (5) Business Days after the conditions
to the occurrence of the Effective Date of the Plan set forth in Section 15.02
have been satisfied or waived, or such earlier day after such conditions have
been satisfied or waived that is designated by the Debtor.
11-1/4% Senior Note Claim: Any Claim against the Debtor by a holder of an
11-1/4% Senior Note for principal and interest.
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11-1/4% Senior Notes: Collectively, the 11-1/4% Senior Notes due 2000, as
amended, modified, restated or supplemented from time to time, issued by the
Debtor.
11-3/8% Senior Note Claim: Any Claim against the Debtor by a holder of an
11-3/8% Senior Note for principal and interest.
11-3/8% Senior Notes: Collectively, the 11-3/8% Senior Notes due 1999, as
amended, modified, restated or supplemented from time to time, issued by the
Debtor.
Entity: Includes, without limitation, any individual, corporation, limited or
general partnership, joint venture, association, joint stock company, estate,
entity, trust, trustee, United States trustee, unincorporated organization,
government, governmental unit (as defined in the Bankruptcy Code), agency or
political subdivision thereof.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Existing Banks: Collectively, the banks and other financial institutions party
to the Existing Credit Agreement, or their successors and assigns, as the case
may be, as of the date to which reference to the Existing Banks is made.
Existing Credit Agreement: The Credit Agreement, dated as of July 14, 1992,
among the Company, the Existing Banks, Bankers Trust, as administrative agent,
and Midlantic National Bank, as co-agent, and various other lending
institutions, as amended.
Existing Credit Documents: The Credit Documents as defined in the Existing
Credit Agreement.
Filing Date: January 25, 1995.
Final Order: An order or judgment entered on the docket by the Clerk of the
Bankruptcy Court or any other court exercising jurisdiction over the subject
matter and the parties (a) that has not been reversed, stayed, modified or
amended, (b) as to which no appeal, certiorari proceeding, reargument or other
review or rehearing has been requested or is still pending, and (c) as to which
the time for filing a notice of appeal or petition for certiorari or request for
reargument or further review or rehearing has expired.
General Unsecured Claim: Any Unsecured Claim against the Debtor other than a
Senior Subordinated Claim, a Subordinated Claim, Senior Zero Note Claim, Junior
Zero Note Claim or a Trade Claim. General Unsecured Claims shall include,
without limitation, Intercompany Claims and any Unsecured Claims arising from or
with respect to the leasing of real estate and equipment, utility service,
employee benefits, the fees and expenses of Indenture Trustees pursuant to the
Indentures whether accruing before or after the Filing Date (except to the
extent such fees and expenses are Miscellaneous Secured Claims or Administrative
Expenses), or the provision of financial, legal or other professional services
to the Debtor or for which the Debtor has agreed to pay. Solely for purposes of
effectuating the Zero Settlement, the reasonable fees and expenses of the
Capital Indenture Trustees (whether accruing before or after the Filing Date)
shall constitute General Unsecured Claims.
GUCC: Grand Union Capital Corporation.
GUCC Chapter 11 Case: The case under chapter 11 of the Bankruptcy Code
concerning GUCC which was commenced on February 6, 1995.
GUHC: Grand Union Holdings Corporation.
GUHC and GUCC Legal Advisors: Saul, Ewing, Remick & Saul and Patterson,
Belknap, Webb & Tyler, L.L.P., in their capacity as attorneys for GUHC and GUCC.
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GUHC Chapter 11 Case: The case under chapter 11 of the Bankruptcy Code
concerning GUHC which was commenced on February 16, 1995.
Impaired: Any Claim or Interest that is impaired within the meaning of section
1124 of the Bankruptcy Code.
Indenture Trustees: The trustees under the Indentures in their capacity as
such (i.e., First Trust National Association; First Trust of California,
National Association; United States Trust Company of New York; Chemical Bank;
and State Street Bank and Trust Company; and any of their successors and
assigns).
Indentures: The indentures governing the Senior Notes and Senior Subordinated
Notes.
Informal Committee(s): The informal committees established prior to the Filing
Date consisting of certain holders of: (a) Senior Notes (represented by Stroock
& Stroock & Lavan and Rosenthal, Monhait, Gross & Goddess, P.A.), (b) Senior
Subordinated Notes (represented by Ropes & Gray) and (c) Trade Claims
(represented by Pepper, Hamilton & Scheetz).
Informal Zero Committee: The informal committee established prior to the
Filing Date consisting of certain holders of Zero Notes (represented by Marcus
Montgomery Wolfson, P.C.).
Informal Zero Committee Advisors: Collectively, The Argosy Group L.P., Marcus
Montgomery Wolfson, P.C., and Williams, Hershman & Wisler, P.A., in their
capacity as advisors to the Informal Zero Committee.
Insider: As defined in section 101 of the Bankruptcy Code; provided that MTH
and Penn Traffic, and any Affiliate of such entities other than the Debtor,
shall be deemed to be Insiders for purposes of this Plan.
Intercompany Claim: Any Claim arising prior to the Filing Date against the
Debtor originally held by GUCC or GUHC or any wholly-owned subsidiary of the
Debtor.
Intercreditor Agreement: The agreement between the Additional Facility Lenders
and the Existing Banks who do not become Additional Facility Lenders to be
executed on and become effective as of the Effective Date. If the Intercreditor
Agreement is included in an amendment and restatement of the Existing Credit
Agreement (i.e., the Post-Confirmation Credit Agreement), reference herein to
the Intercreditor Agreement shall be to the Post-Confirmation Credit Agreement.
Interest Rate Protection Agreement: The Interest Rate and Currency Exchange
Agreement, dated as of July 19, 1992, by and between the Debtor and Bankers
Trust.
Interest Rate Protection Agreement Claims: Any Claims against the Debtor for
payment of amounts due under the Interest Rate Protection Agreement.
Interests: The equity interests in the Debtor including, but not limited to,
those represented by shares of capital stock of the Debtor and any options,
warrants, calls, subscriptions or other similar rights or other agreements,
commitments or outstanding securities obligating the Debtor to issue, transfer
or sell any shares of capital stock of the Debtor.
Junior Zero Note Claims: Any Claim asserted against the Debtor by a holder of
a Junior Zero Note relating to or arising from the ownership of a Junior Zero
Note issued by GUCC.
Junior Zero Notes: Collectively, the 16.5% Senior Subordinated Zero Coupon
Notes due January 15, 2007, Series A and B, as amended, modified, restated or
supplemented from time to time, issued by GUCC.
Leasehold Interest: All real property leasehold interests (a) assumed by the
Debtor either pursuant to this Plan or by separate order of the Bankruptcy Court
and/or (b) acquired by Reorganized Grand Union on or after the Effective Date.
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Lien Rights: (a) the rights of each Indenture Trustee or Capital Indenture
Trustee under the Indentures or Capital Indentures to collect and receive any
property deliverable in respect of the Claims of the respective securityholders
and to apply the property in accordance with the priorities in the applicable
Indenture or Capital Indenture, as the case may be, and (b) its lien, prior to
the Securities (as defined in the respective Indenture or Capital Indenture), on
that property.
Miscellaneous Secured Claim: Any Claim that is a secured claim under section
506(a) of the Bankruptcy Code (including, without limitation, the Claims of the
Indenture Trustees for the Senior Notes for fees and expenses, if and to the
extent such Claims are secured claims), other than Credit Agreement Claims,
Interest Rate Protection Agreement Claims and Senior Note Claims.
MTH: Miller Tabak Hirsch & Co. and its Affiliates.
MTH Management Agreement: The management agreement, dated July 22, 1992, by
and between MTH and the Debtor.
MTH Settlement Agreement: An agreement substantially in the form annexed
hereto as Exhibit B, pursuant to which: (a) MTH shall be paid all amounts due
and owing under the MTH Management Agreement for services provided through the
Effective Date; and (b) MTH shall waive any rights to damages for termination of
the MTH Management Agreement, including, without limitation (x) compensation for
the period from and after the Effective Date through July 22, 1997 (the date the
MTH Management Agreement otherwise would have expired on its own terms); and (y)
except to the extent set forth in Section 14.06 below and in the MTH Settlement
Agreement, any indemnification claims arising under the MTH Management
Agreement.
New Common Stock: The shares of Common Stock to be issued by Reorganized Grand
Union pursuant to the terms of the Plan (or issuable after the Effective Date)
and having the relative rights as set forth in the Restated Certificate of
Incorporation.
New Senior Note Indenture: An indenture, dated as of the Effective Date,
satisfactory to the Debtor to be entered into by Reorganized Grand Union with
respect to the New Senior Notes.
New Senior Notes: Collectively, the notes to be issued on or promptly after
the Effective Date by Reorganized Grand Union pursuant to the New Senior Note
Indenture in the aggregate principal amount of $595,475,922, which notes shall
be unsecured and bear interest at 12% per annum from September 1, 1995, to the
holders of Allowed Senior Note Claims.
Official Committee: The Official Committee of Unsecured Creditors of The Grand
Union Company appointed by the United States Trustee on February 6, 1995,
pursuant to section 1102(a) of the Bankruptcy Code.
Plan: This Second Amended Chapter 11 Plan, as amended or modified from time to
time.
Post-Confirmation Banks: The Existing Banks and the Additional Facility
Lenders.
Post-Confirmation Credit Agreement: Either a new credit agreement or the
amendment and restatement of the Existing Credit Agreement (whichever Bankers
Trust, in its sole discretion, may select) which is to be executed as of the
Effective Date by Reorganized Grand Union and which will contain those terms set
forth in the Commitment Letter and the Credit Facility Term Sheet and which will
evidence the Revolving Credit Facility and the Term Facility on and after the
Effective Date.
Post-Confirmation Credit Documents: Either new documents of the type included
in the definition of Credit Documents in the Existing Credit Agreement replacing
such Credit Documents or amendments and restatements of such documents
(whichever Bankers Trust, in its sole discretion, may select).
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Post-Confirmation Facility: The loans and other financial accommodations
provided pursuant to the Post-Confirmation Credit Documents including the
Revolving Credit Facility and the Term Facility.
Post Reorganization Board: The board of directors of Reorganized Grand Union
as determined pursuant to Section 10.02 hereof.
Priority Claim: Any Claim, other than a Priority Tax Claim or an
Administrative Expense, which is entitled to priority in payment under section
507(a) of the Bankruptcy Code.
Priority Tax Claim: Any Claim which is entitled to priority in payment under
section 507(a)(8) of the Bankruptcy Code.
Registration Rights Agreement(s): The agreements to be entered into by
Reorganized Grand Union pursuant to Section 11.05 of this Plan.
Reorganized Grand Union: The Debtor from and after the Effective Date.
Restated Bylaws: The bylaws of Reorganized Grand Union, as amended and
restated pursuant to this Plan, substantially in the form of Exhibit C hereto.
Restated Certificate of Incorporation: The certificate of incorporation of
Reorganized Grand Union, as amended and restated pursuant to this Plan,
substantially in the form of Exhibit D to this Plan.
Retirement Plan: The Grand Union Employees' Retirement Plan.
Revolving Credit Facility: As the text requires, either the revolving credit
facility in the Existing Credit Agreement or in the Post-Confirmation Credit
Agreement.
Schedules: The Schedules of Assets and Liabilities and the Statement of
Affairs for Debtor Engaged in Business, including any amendment thereto, that
are required to be filed by the Debtor on or prior to April 4, 1995.
Senior Bank Agent: Bankers Trust as agent pursuant to the Existing Credit
Agreement.
Senior Note Claim: Any Claim against the Debtor by a holder of a Senior Note
for any principal and interest due and owing on such Senior Note.
Senior Noteholders: The holders of Senior Notes.
Senior Notes: The 11-1/4% Senior Notes and the 11-3/8% Senior Notes.
Senior Subordinated Claim: Any Claim against the Debtor by the holder of a
Senior Subordinated Note for principal and interest due and owing on such Senior
Subordinated Note.
Senior Subordinated Notes: Collectively, the 12-1/4% Senior Subordinated
Notes, the 12-1/4% Senior Subordinated Notes, Series A, and the 13% Senior
Subordinated Notes.
Senior Zero Note Claims: Any Claim asserted against the Debtor by a holder of
a Senior Zero Note relating to or arising from the ownership of a Senior Zero
Note issued by GUCC.
Senior Zero Notes: Collectively, the 15% Senior Zero Coupon Notes due July 15,
2004, Series A and B, as amended, modified, restated or supplemented from time
to time, issued by GUCC.
Series 1 Warrants: The Series 1 Warrants to be issued under the Plan pursuant
to a warrant agreement substantially in the form annexed hereto as Exhibit E.
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Series 2 Warrants: The Series 2 Warrants to be issued under the Plan pursuant
to a warrant agreement substantially in the form annexed hereto as Exhibit E.
Settlement Order: An order of the Bankruptcy Court approving the Zero
Settlement in this Chapter 11 Case.
Subordinated Claim: Any Claim against the Debtor subject to subordination
pursuant to sections 510(b) or (c) of the Bankruptcy Code.
Term Facility: As the text requires, either the term loan facility in the
Existing Credit Agreement or in the Post-Confirmation Credit Agreement.
13% Senior Subordinated Note Claim: Any Claim against the Debtor by a holder
of a 13% Senior Subordinated Note for principal and interest due and owing on
such notes.
13% Senior Subordinated Notes: Collectively, the 13% Senior Subordinated Notes
due 1998, as amended, restated or supplemented from time to time, issued by GU
Acquisition Corporation.
Trade Agreement: An agreement executed by and between the Debtor and a holder
of a Trade Claim as contemplated pursuant to the Order Granting Authority for
Provisional Payment of Prepetition Trade Claims entered by the Bankruptcy Court
on February 10, 1995.
Trade Claim: A Claim of an Entity against the Debtor for goods provided prior
to the Filing Date by such Entity to the Debtor for resale to the general public
in the ordinary course of business.
12-1/4% Senior Subordinated Note A Claim: Any Claim against the Debtor by a
holder of a 12-1/4% Senior Subordinated Note, Series A for principal and
interest due and owing on such note.
12-1/4% Senior Subordinated Note Claim: Any Claim against the Debtor by a
holder of a 12-1/4% Senior Subordinated Note for principal and interest due
and owing on such note.
12-1/4% Senior Subordinated Notes: Collectively, the 12-1/4% Senior
Subordinated Notes due 2002, as amended, restated or supplemented from time
to time, issued by the Debtor.
12-1/4% Senior Subordinated Notes, Series A: Collectively, the 12-1/4%
Senior Subordinated Notes due 2002, Series A, as amended, restated or
supplemented from time to time, issued by the Debtor.
Ultimately Allowed Claim: Any Disputed Claim to the extent that it becomes an
Allowed Claim in accordance with Section 13.02 of this Plan.
Unimpaired Claim: A Claim which is not Impaired.
Unsecured Claim: Any Claim other than a Credit Agreement Claim, an Interest
Rate Protection Agreement Claim, a Senior Note Claim, a Miscellaneous Secured
Claim, an Administrative Expense, a Priority Claim or a Priority Tax Claim.
Warrants: Collectively, the Series 1 Warrants and the Series 2 Warrants.
Zero Claims Release: A release substantially in the form of Exhibit F hereto
(all terms not defined therein shall have the meanings ascribed to such terms in
this Plan).
Zero Notes: Collectively, the Senior Zero Notes and the Junior Zero Notes.
Zero Settlement: A settlement, substantially in the form annexed hereto as
Exhibit G (all terms not defined therein shall have the meanings ascribed to
such terms in this Plan), concerning, among other things, the Senior Zero Note
Claims and the Junior Zero Note Claims.
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ARTICLE 2
Provisions for Treatment of Administrative Expenses
2.01. Administrative Expenses. Each holder of an Allowed Administrative
Expense shall be entitled to payment in full in cash by Reorganized Grand Union,
at its option, on (a) the later of (i) the Effective Date and (ii) the date on
which the Bankruptcy Court enters an order allowing such Administrative Expense,
and (b) the date, or dates, on which Reorganized Grand Union or the Debtor, as
the case may be, and the Entity claiming such Allowed Administrative Expense
otherwise agree or have agreed; provided, however, that Allowed Administrative
Expenses representing obligations incurred in the ordinary course of business by
the Debtor during the Chapter 11 Case shall be paid by the Debtor or Reorganized
Grand Union, as the case may be, in the ordinary course of business and in
accordance with any terms and conditions of the particular transaction, and any
agreements relating thereto. Any final request for payment of an Administrative
Expense, including, without limitation, applications for compensation and
reimbursement of expenses by professionals employed by the Debtor and the
Official Committee must be filed no later than 45 days after the Effective Date;
provided that no request for payment of an Administrative Expense need be filed
with respect to an Administrative Expense which is paid or payable by the Debtor
or Reorganized Grand Union in the ordinary course, including, without
limitation, any Administrative Expense which would have been a Trade Claim had
it arisen prior to the Filing Date.
2.02. Compensation to Legal Counsel and Financial Advisors to the Informal
Committees/Indenture Trustees. The reasonable fees and expenses incurred on or
after the Filing Date by the counsel and financial advisors retained by
agreement with the Debtor prior to the Filing Date by the Informal Committees
(together with the reasonable fees and expenses of local counsel) or the
Indenture Trustees (to the extent they are not General Unsecured Claims or
Miscellaneous Secured Claims, and subject to Section 12.07 hereof) with respect
to this Chapter 11 Case shall be paid (without application by or on behalf of
any such professionals to the Bankruptcy Court, and without notice and a
hearing, unless specifically required by the Bankruptcy Court upon request of a
party in interest) by Reorganized Grand Union as an Administrative Expense under
the Plan. If Reorganized Grand Union and any such professional retained by an
Informal Committee or an Indenture Trustee cannot agree on the amount of fees
and expenses to be paid to such professional, the amount of any such fees and
expenses shall be determined by the Bankruptcy Court. Notwithstanding anything
contained in this Plan to the contrary, the fees and expenses of the legal and
financial advisors to the Informal Committee of Senior Noteholders shall be paid
as set forth in the final cash collateral order entered by the Bankruptcy Court
on February 16, 1995.
2.03. Compensation to the Capital Committee Advisors and the Informal Zero
Committee Advisors. The reasonable fees and expenses incurred on or after the
Filing Date by the Capital Committee Advisors or the Informal Zero Committee
Advisors with respect to this Chapter 11 Case or the GUCC Chapter 11 Case shall
be paid by Reorganized Grand Union after notice and a hearing in accordance with
the procedures established by the Bankruptcy Court for professionals employed by
the Debtor or the Official Committee; provided, however, that the aggregate
maximum amount of fees and expenses for the Capital Committee Advisors and the
Informal Zero Committee Advisors that shall be payable in this Chapter 11 Case
shall not exceed $750,000 (plus the amount of any prepetition retainer).
Applications for such compensation and reimbursement of expenses by such
professionals must be filed no later than 45 days after the Effective Date.
2.04. Compensation to GUHC and GUCC Legal Advisors.
(a) The reasonable fees and expenses incurred on or after the Filing Date
through the Effective Date by the GUHC and GUCC Legal Advisors with respect to
this Chapter 11 Case, the GUCC Chapter 11 Case or the GUHC Chapter 11 Case shall
be paid (after application of any retainer held by any such professional) by
Reorganized Grand Union after notice and a hearing in accordance with the
procedures established by the Bankruptcy Court for professionals employed by the
Debtor or the Official Committee. Applications for compensation and
reimbursement of expenses by such professionals must be filed no later than 45
days after the Effective Date.
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(b) On and after the Effective Date, Reorganized Grand Union shall pay the
reasonable fees and expenses of the GUHC and GUCC Legal Advisors incurred with
respect to the dissolution of GUCC and GUHC.
(c) Notwithstanding anything in this Plan to the contrary, the aggregate
amount of fees and expenses payable pursuant to this Section 2.04 shall not
exceed, in the aggregate, $150,000, in addition to the amount of any retainers
paid to such professionals.
ARTICLE 3
Provisions for Treatment of Priority Tax Claims
3.01. Priority Tax Claims. With respect to each Allowed Priority Tax Claim, at
the sole option of Reorganized Grand Union, the holder of an Allowed Priority
Tax Claim shall be entitled to receive on account of such Allowed Priority Tax
Claim: (a) equal cash payments made on the last Business Day of every three
month period following the Effective Date, over a period not exceeding six years
after the assessment of the tax on which such Claim is based, totalling the
principal amount of such Claim plus simple interest on any outstanding balance
from the Effective Date calculated at the interest rate available on ninety (90)
day United States Treasuries on the Effective Date; (b) such other treatment
agreed to by the holder of such Allowed Priority Tax Claim and the Debtor or
Reorganized Grand Union, provided such treatment is on more favorable terms to
the Debtor or Reorganized Grand Union, as the case may be, than the treatment
set forth in paragraph (a) hereof; or (c) payment in full, provided that, with
respect to paragraphs (b) and (c) hereof, such treatment is approved by the
Bankruptcy Court.
ARTICLE 4
Classification of Claims and Interests
Pursuant to section 1122 of the Bankruptcy Code, set forth below is a
designation of classes of Claims and Interests. Administrative Expenses and
Priority Tax Claims of the kinds specified in sections 507(a)(1) and 507(a)(8)
of the Bankruptcy Code (set forth in Articles 2 and 3, above) have not been
classified and are excluded from the following classes in accordance with
section 1123(a)(1) of the Bankruptcy Code.
4.01. Secured Claims.
Class 1. Class 1 consists of all Credit Agreement Claims.
Class 2. Class 2 consists of all Interest Rate Protection Agreement Claims.
Class 3. Class 3 consists of all Miscellaneous Secured Claims.
Class 4. Class 4 consists of all Senior Note Claims.
4.02. Priority Claims.
Class 5. Class 5 consists of all Priority Claims.
4.03. Unsecured Claims.
Class 6(a). Class 6(a) consists of Trade Claim(s) asserted by a Creditor whose
aggregate asserted Trade Claim(s) total less than $25,000.
Class 6(b). Class 6(b) consists of all Trade Claim(s) asserted by a Creditor
whose aggregate asserted Trade Claims(s) total $25,000 or more.
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Class 7. Class 7 consists of all General Unsecured Claims.
Class 8. Class 8 consists of all Senior Subordinated Claims.
Class 9. Class 9 consists of all Senior Zero Note Claims.
Class 10. Class 10 consists of all Junior Zero Note Claims.
Class 11. Class 11 consists of all Subordinated Claims.
4.04. Interests.
Class 12. Class 12 consists of all Interests.
ARTICLE 5
Identification of Classes and Claims and
Interests Impaired and Not Impaired by this Plan
5.01. Classes of Claims Impaired by this Plan and Entitled to Vote. Credit
Agreement Claims (Class 1), Interest Rate Protection Agreement Claims (Class 2),
Senior Note Claims (Class 4), Priority Claims (Class 5), General Unsecured
Claims (Class 7), Senior Subordinated Claims (Class 8), Senior Zero Note Claims
(Class 9) and Junior Zero Note Claims (Class 10), are Impaired by this Plan and
the holders of Allowed Claims in such Classes are entitled to vote to accept or
reject this Plan; provided, however, that the holders of Claims to be Allowed
pursuant to Article 7 of this Plan shall be entitled to vote on the Plan,
regardless of whether they have filed a proof of claim.
5.02. Classes Receiving No Property Deemed to Reject this Plan. Claims in
Class 11 and Interests in Class 12 are Impaired and do not receive or retain any
property under this Plan. Under section 1126(g) of the Bankruptcy Code, the
holders of such Interests and Claims are deemed to reject this Plan and the
votes of such holders will not be solicited.
5.03. Unimpaired Classes Conclusively Presumed to Accept this Plan.
Miscellaneous Secured Claims (Class 3) and Trade Claims (Class 6), are not
Impaired by this Plan. Under section 1126(f) of the Bankruptcy Code, the holders
of such Claims are conclusively presumed to accept this Plan, and the votes of
such holders will not be solicited.
ARTICLE 6
Provisions for Treatment of
Claims and Interests
6.01. Credit Agreement Claims (Class 1).
(a) On the Effective Date, the holder of an Allowed Credit Agreement Claim
shall receive with respect to such Claim the treatment set forth in subparagraph
(i) of this Section 6.01(a), unless, at the sole option of the Debtor (which
option shall be exercised not later than five (5) days prior to the commencement
of the confirmation hearing), such holder shall receive the treatment described
in subparagraph (ii) of this Section 6.01(a).
(i) (x) Reorganized Grand Union shall execute the Post-Confirmation Credit
Documents and such documents shall become effective (provided that the other
conditions contained in the Commitment Letter and the Credit Facility Term
Sheet, as and if amended by consent of Bankers Trust and the Debtor, have been
satisfied). Pursuant to the Post-Confirmation Credit Agreement, the commitment
with respect to the amount of the Revolving Credit Facility and the Term
Facility shall be increased in the aggregate by not less than $65 million.
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(y) The Post-Confirmation Facility shall be secured by a perfected, first
priority lien and security interest in all of the tangible and intangible
assets (including, without limitation, all assets as described in the
Commitment Letter, including leases) of Reorganized Grand Union and its
subsidiaries, whether in existence at the Effective Date or acquired
thereafter, subject only to such liens as may be permitted pursuant to the
Post-Confirmation Credit Documents. Pursuant to the Intercreditor Agreement,
the Additional Facility Lenders shall have priority (with respect to the
Additional Facility and with respect to those loans owed to, and letter of
credit exposure of, such Additional Facility Lenders under the Existing
Credit Agreement as set forth in the Intercreditor Agreement) over Existing
Banks who do not contribute to the Additional Facility.
(z) Upon confirmation of the Plan, but effective as of the Effective
Date, the Debtor, Reorganized Grand Union, any Entity issuing securities
under the Plan, any entity acquiring property under the Plan, and any
Creditor and/or equity security holder of the Debtor, shall be deemed
contractually to subordinate any present or future claim, right or other
interest they may have in and to any proceeds received from the disposition,
release, or liquidation of any Leasehold Interest, or any funds or proceeds
received as a result of a subsequent pledge of such Leasehold Interest, to
the obligations owed to the Post-Confirmation Banks pursuant to the Post-
Confirmation Credit Documents until such obligations are paid in full.
(ii) (x) The holder of an Allowed Credit Agreement Claim shall receive on the
Effective Date, cash payments equal to 100% of such Allowed Credit Agreement
Claim.
(y) Upon payment in full of the Allowed Credit Agreement Claims, the
Existing Credit Agreement shall be terminated and the notes issued pursuant
thereto shall be cancelled.
(b) On the Effective Date, all interest, fees, expenses and other charges that
have accrued pursuant to the terms of the Existing Credit Documents but have not
been paid as of the Effective Date shall be paid to the Senior Bank Agent for
distribution to those parties entitled to receive such interest, fees, expenses
and other charges pursuant to the Existing Credit Documents.
(c) Notwithstanding section 1141(c) or any other provision of the Bankruptcy
Code, all prepetition liens on property of the Debtor held by or on behalf of
the holders of Claims in this Class with respect to such Claims shall survive
the Effective Date and continue in accordance with the contractual terms of the
underlying agreements with such holders until, as to each such holder, the
Allowed or Subsequently Allowed Claims of such holder in this Class are paid in
full; provided, however, on and after the Effective Date, such liens shall not
attach to the Warrants, the New Senior Notes or New Common Stock. Class 1 is
Impaired.
6.02. Interest Rate Protection Agreement Claims (Class 2). With respect to
each Allowed Interest Rate Protection Agreement Claim, at the sole option of
Reorganized Grand Union to be exercised on the Effective Date: (a) the legal,
equitable and contractual rights to which the Allowed Interest Rate Protection
Agreement Claim entitles the holder of such Claim shall be unaltered by the Plan
and the Debtor shall, on the Effective Date, cure any defaults with respect
thereto; or (b) on the Effective Date, the holder of an Allowed Interest Rate
Protection Agreement Claim shall receive a cash payment equal to 100% of such
Allowed Interest Rate Protection Agreement Claim. Notwithstanding section
1141(c) or any other provision of the Bankruptcy Code, all prepetition liens on
property of the Debtor held by or on behalf of the holders of Claims in this
Class with respect to such Claims shall survive the Effective Date and continue
in accordance with the contractual terms of the underlying agreements with such
holders until, as to each such holder, the Allowed or Subsequently Allowed
Claims of such holder in this Class are paid in full; provided, however, on and
after the Effective Date, such liens shall not attach to the Warrants, the New
Senior Notes or New Common Stock. Class 2 is Impaired.
6.03. Miscellaneous Secured Claims (Class 3). With respect to each Allowed
Miscellaneous Secured Claim, at the sole option of Reorganized Grand Union to be
exercised on the Effective Date: (a) the legal, equitable and contractual rights
to which the Allowed Miscellaneous Secured Claim entitles the holder of
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such Claim shall be unaltered by the Plan, or (b) Reorganized Grand Union shall
provide such other treatment that will render such Allowed Miscellaneous Secured
Claim an Unimpaired Claim under section 1124 of the Bankruptcy Code; provided
that the Miscellaneous Secured Claims, if any, of the Indenture Trustees shall
be treated in accordance with Section 12.07 of this Plan. The Debtor's failure
to object to such Claim in the Chapter 11 Case shall be without prejudice to
Reorganized Grand Union's right to contest or otherwise defend against such
Claim in the appropriate forum when and if such Claim is sought to be enforced
by the holder thereof. Notwithstanding section 1141(c) or any other provision of
the Bankruptcy Code, all prepetition liens on property of the Debtor held by or
on behalf of the holders of Claims in this Class with respect to such Claims
shall survive the Effective Date and continue in accordance with the contractual
terms of the underlying agreements with such holders until, as to each such
holder, the Allowed or Subsequently Allowed Claims of such holder in this Class
are paid in full. Class 3 is not Impaired.
6.04. Senior Note Claims (Class 4). On the Effective Date, the Senior Notes
shall be cancelled, Reorganized Grand Union shall execute the New Senior Note
Indenture, and, subject to section 12.02 hereof, each holder of an Allowed
Senior Note Claim shall be entitled to receive, in exchange for such Allowed
Senior Note Claim, its pro rata share of New Senior Notes. Such pro rata share
shall be determined by the ratio between the amount of such holder's Allowed
Senior Note Claims and the aggregate amount of Allowed Senior Note Claims, each
calculated as of the Filing Date without taking into account any interest on
overdue interest or Sections 7.02 and 7.03 hereof, and pursuant to Section 12.02
hereof. Class 4 is Impaired.
6.05. Priority Claims (Class 5). On the latest of (a) the Effective Date, (b)
the date such Priority Claim becomes an Allowed Claim, or (c) the date, or
dates, on which Reorganized Grand Union or the Debtor, as the case may be, and
the holder of such Priority Claim otherwise agree or have agreed, each holder of
an Allowed Priority Claim shall be entitled to receive payment in full of 100%
of such Allowed Priority Claim. Class 5 is Impaired.
6.06. Trade Claims (Class 6).
(a) Class 6(a). Each Creditor asserting Trade Claim(s) that, in the aggregate,
are less than $25,000 in amount, need not file a proof of claim with respect to
such Trade Claim(s) in order to receive a distribution under this Plan.
(b) Class 6(b). Each Creditor asserting Trade Claim(s) that, in the aggregate,
are $25,000 or more in amount, must file a proof of claim with respect to such
Trade Claim(s) on or before the Claims Bar Date. In the event that any such
Creditor does not timely file a proof of claim with respect to its Trade
Claim(s), all Trade Claim(s) asserted by such Creditor shall be barred and
discharged; provided, however, that such Trade Creditor shall be treated as
having filed a proof of claim with respect to its Trade Claim(s) in the
amount(s), if any, that is/are listed in the Schedules regardless of whether
such Trade Claim(s) are listed in the Schedules as disputed, contingent or
unliquidated.
(c) With respect to each Trade Claim included in either Class 6(a) or in Class
6(b) that is not barred or discharged pursuant to Section 6.06(b) hereof, and
subject to the terms of any Trade Agreement and to the rights set forth in
Section 6.06(e) hereof, at the sole option of the Debtor, (i) the legal,
equitable and contractual rights to which the Trade Claim entitles the holder of
such Claim shall remain unaltered or (ii) the Debtor shall provide such other
treatment that will render such Trade Claim an Unimpaired Claim under section
1124 of the Bankruptcy Code.
(d) Unless a Creditor asserting Trade Claim(s) files a written objection to
the Plan, such Creditor shall be deemed to have waived and forever released any
right to assert or claim that it may be entitled to interest accruing with
respect to such Creditor's Trade Claim(s) and any such claims or assertions for
interest shall be barred and discharged. In the event that a Creditor asserting
Trade Claim(s) objects to the Plan in writing, such objecting Creditor's Trade
Claim(s) shall be deemed included in Class 7 of the Plan and shall be deemed to
have voted to reject the Plan. In the event included in Class 7, the objecting
Creditor asserting a Trade
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Claim shall be subject to the proof of claim and bankruptcy claims
administration requirements that are applicable to other Class 7 Creditors.
Notwithstanding anything herein to the contrary, a Creditor whose Claim would
have been included in either Class 6(a) or 6(b) but for the objection referenced
in this paragraph: (i) with respect to a Creditor which would have been included
in Class 6(a), (y) such Creditor may rely on the amount of its Claim as set
forth in the Schedules in the event that its Claim is not listed as contingent,
disputed or unliquidated, or, (z) in the event that its Claim is so designated,
or not scheduled, such Creditor shall have ten (10) days from the date its
objection is filed within which to file a proof of claim which Claim may not
exceed $25,000 plus any Claim for interest on such Claim; and (ii) with respect
to a Creditor which would have been included in Class 6(b), such Creditor shall
either (y) have filed a proof of claim by the Claims Bar Date or (z) its Claim
shall be limited by the amount of such Claim as set forth in the Schedules
unless such Claim is listed as contingent, disputed or unliquidated and, in the
event of such designation, such Creditor shall have ten (10) days from the date
its objection is filed within which to file a proof of claim which Claim shall
not exceed the amount for which it was scheduled plus any claim for interest on
such Claim.
(e) The Debtor's failure to file an objection with the Bankruptcy Court to a
Trade Claim shall be without prejudice to Reorganized Grand Union's right to
contest or otherwise defend against such Trade Claim in the appropriate forum,
including the Bankruptcy Court, when and if such Trade Claim is sought to be
enforced by the holder thereof. Neither Class 6(a) nor Class 6(b) is Impaired.
6.07. General Unsecured Claims (Class 7). On the latest of (a) the Effective
Date, (b) the date such General Unsecured Claim becomes an Allowed Claim, and
(c) the date, or dates, on which Reorganized Grand Union or the Debtor, as the
case may be, and the holder of such General Unsecured Claim otherwise agree or
have agreed, each holder of an Allowed General Unsecured Claim shall be entitled
to receive payment in full of 100% of such Allowed General Unsecured Claim.
Subject to Section 12.07 hereof, any General Unsecured Claims of an Indenture
Trustee shall be paid in full on the Effective Date or on such later date as
agreed to by the parties. Class 7 is Impaired.
6.08. Senior Subordinated Claims (Class 8). On the Effective Date, the Senior
Subordinated Notes shall be cancelled, and, subject to Section 12.02 hereof,
each holder of an Allowed Senior Subordinated Claim shall be entitled to receive
its pro rata share of the New Common Stock to be issued under the Plan. Such pro
rata share shall be determined by the ratio between the amount of such holder's
Allowed Senior Subordinated Claim and the aggregate amount of all Allowed Senior
Subordinated Claims as of the Effective Date, and pursuant to Section 12.02
hereof. The holders of Allowed Class 8 Claims shall receive in the aggregate, on
a pro rata basis, 100% of the New Common Stock to be issued under the Plan.
Class 8 is Impaired.
6.09. Senior Zero Note Claims (Class 9).
(a) Subject to the terms and conditions set forth in the Zero Settlement, and
solely for purposes of effectuating such settlement, on the Effective Date, the
Senior Zero Note Claims shall be allowed as set forth in Section 7.09 hereof
(subordinate to all Claims and Administrative Expenses against the Debtor, other
than Claims set forth in Classes 10 and 11), the Senior Zero Notes shall be
cancelled, and, subject to Section 12.02 hereof, each holder of an Allowed
Senior Zero Note Claim shall be entitled to receive its pro rata share of
240,000 Series 1 Warrants and 480,000 Series 2 Warrants to be issued under the
Plan as its full recovery against the Debtor and Reorganized Grand Union on its
Senior Zero Note Claims. Such pro rata share shall be determined by the ratio
between the face amount of such holder's Senior Zero Notes and the aggregate
face amount of all Senior Zero Notes and pursuant to Section 12.02 hereof.
(b) Notwithstanding anything in this Plan to the contrary, it shall be a
condition to the issuance of the Warrants (i) with respect to Senior Zero Note
Claims held by a particular Entity holding Senior Zero Notes that, in the
aggregate, are $200,000 or more in face amount, that such Entity execute and
deliver a Zero Claims Release, and (ii) with respect to each holder of a Senior
Zero Note Claim, that such holder not have filed a written objection to
confirmation of the Plan (which is not withdrawn prior to commencement of the
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hearing on confirmation of this Plan). Any Warrants not issued by operation of
the foregoing before the later of (i) two years from the Effective Date, and
(ii) six months following the date such holder's Claim becomes an Allowed or
Ultimately Allowed Claim shall be deemed to be unclaimed property and cancelled.
(c) The Debtor has not assumed and shall not be deemed to have assumed any
liability related to or arising from the Zero Notes.
6.10. Junior Zero Note Claims (Class 10).
(a) Subject to the terms and conditions set forth in the Zero Settlement, and
solely for purposes of effectuating such settlement, on the Effective Date, the
Junior Zero Note Claims shall be allowed as set forth in Section 7.10 hereof
(subordinate to all Claims and Administrative Expenses against the Debtor, other
than Claims set forth in Class 11) , the Junior Zero Notes shall be cancelled,
and, subject to Section 12.02 hereof, each holder of an Allowed Junior Zero Note
Claim shall be entitled to receive its pro rata share of 60,000 Series 1
Warrants and 120,000 Series 2 Warrants to be issued under the Plan as its full
recovery against the Debtor and Reorganized Grand Union on its Junior Zero Note
Claims. Such pro rata share shall be determined by the ratio between the face
amount of such holder's Junior Zero Notes and the aggregate amount of all Junior
Zero Notes, and pursuant to Section 12.02 hereof.
(b) Notwithstanding anything in this Plan to the contrary, it shall be a
condition to the issuance of the Warrants (i) with respect to Junior Zero Note
Claims held by a particular Entity holding Junior Zero Notes that, in the
aggregate, are $200,000 or more in face amount, that such Entity execute and
deliver a Zero Claims Release, and (ii) with respect to each holder of a Junior
Zero Note Claim, that such holder not have filed a written objection to the Plan
(which is not withdrawn prior to commencement of the hearing on confirmation of
this Plan). Any Warrants not issued by operation of the foregoing before the
later of (i) two years from the Effective Date, and (ii) six months following
the date such holder's Claim becomes an Allowed or Ultimately Allowed Claim
shall be deemed to be unclaimed property and cancelled.
(c) The Debtor has not and shall not be deemed to have assumed any liability
related to or arising from the Zero Notes.
6.11. Subordinated Claims (Class 11). No distributions shall be made in
respect of Class 11. On the Effective Date, any Claims in Class 11 shall be
discharged. Class 11 is Impaired.
6.12. Interests (Class 12). No distributions shall be made in respect of Class
12. On the Effective Date, all Interests shall be cancelled. Class 12 is
Impaired.
ARTICLE 7
Allowance of Claims
7.01. Credit Agreement Claims. Credit Agreement Claims shall be allowed in
full as set forth herein. On or prior to fifteen (15) days prior to the date
first set for hearing on confirmation of the Plan, the Senior Bank Agent shall
file with the Bankruptcy Court and serve on counsel for the Debtor, the Official
Committee and the Informal Committee of Senior Noteholders a schedule setting
forth the proposed amounts of Allowed Credit Agreement Claims (on a per Entity
basis) of each of the Existing Banks to be estimated as of the Confirmation
Date. If no objection is filed by the Debtor, the Official Committee or the
Informal Committee of Senior Noteholders and served on the Senior Bank Agent
within five (5) days after receipt of such schedule, the Credit Agreement Claims
shall be deemed Allowed in the amount set forth on the schedule, together with
such additional amounts which may accrue subsequent to the Confirmation Date
through and including the Effective Date. In the event the Debtor, the Official
Committee or the Informal Committee of Senior Noteholders objects to the
scheduled amounts, the only issue that will be determined by the Bankruptcy
Court is the amount of each Existing Bank's Allowed Credit Agreement Claim.
Notwithstanding anything
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contained in this Plan to the contrary, the fees and expenses incurred on
account of the Credit Agreement Claims shall be paid as set forth in the final
cash collateral order entered by the Bankruptcy Court on February 16, 1995.
7.02. 11-1/4% Senior Note Claims. 11-1/4% Senior Note Claims shall be
allowed in the aggregate amount equal to $350 million in principal plus
accrued but unpaid interest and interest on overdue interest on the 11-1/4%
Senior Notes to the Effective Date.
7.03. 11-3/8% Senior Note Claims. 11-3/8% Senior Note Claims shall be
allowed in the aggregate amount equal to $175 million in principal plus
accrued but unpaid interest and interest on overdue interest on the 11-3/8%
Senior Notes to the Effective Date.
7.04. 13% Senior Subordinated Note Claims. 13% Senior Subordinated Note
Claims shall be allowed in the aggregate amount of $16,820,673.61,
representing principal plus accrued but unpaid interest and interest on
interest, if any, on the 13% Senior Subordinated Notes to the Filing Date.
7.05. 12-1/4% Senior Subordinated Note A Claims. 12-1/4% Senior
Subordinated Note A Claims shall be allowed in the aggregate amount of
$53,243,059.90, representing principal plus accrued but unpaid interest and
interest on interest, if any, on the 12-1/4% Senior Subordinated Notes,
Series A to the Filing Date.
7.06. 12-1/4% Senior Subordinated Note Claims. 12-1/4% Senior Subordinated
Note Claims shall be allowed in the aggregate amount of $532,430,598.96,
representing principal plus accrued but unpaid interest and interest on
interest, if any, on the 12-1/4% Senior Subordinated Notes to the Filing Date.
7.07. Unimpaired Trade Claims. Subject to Section 6.06(b) of this Plan,
Unimpaired Claims which are Trade Claims shall neither be deemed Allowed nor
Disputed for purposes of this Plan. The right to payment on such Claim shall
be determined, resolved or adjudicated, as the case may be, as if the Chapter
11 Case had not been commenced, subject to the following sentence. The Plan
shall be without prejudice to the Debtor's or Reorganized Grand Union's
rights to contest or otherwise defend against such Claims in the appropriate
forum, including the Bankruptcy Court, when and if such Claim is sought to be
enforced by the holder thereof.
7.08. Interest Rate Protection Claims. The Interest Rate Protection Claims
shall be allowed in full as set forth herein. On or prior to fifteen (15)
days prior to the date first set for hearing on confirmation of the Plan, the
Senior Bank Agent shall file with the Bankruptcy Court and serve on counsel
for the Debtor, the Official Committee and the Informal Committee of Senior
Noteholders written notice of the proposed amount of the Allowed Interest
Rate Protection Claims to be estimated as of the Confirmation Date. If no
objection is filed by the Debtor, the Official Committee or the Informal
Committee of Senior Noteholders and served on the Senior Bank Agent within
five (5) days after receipt of such schedule, the Interest Rate Protection
Claims shall be deemed Allowed in the amount asserted by the Senior Bank
Agent in such schedule together with such additional amounts which may accrue
subsequent to the Confirmation Date through and including the Effective Date.
In the event the Debtor, the Official Committee or the Informal Committee of
Senior Noteholders objects to the proposed amount, the only issue that will
be determined by the Bankruptcy Court is the amount of the Interest Rate
Protection Claims.
7.09. Senior Zero Note Claims. For purposes of effectuating the Zero
Settlement only, the Senior Zero Note Claims shall be allowed in an amount
equal to the value as of the Effective Date of the distributions made on
account of such Claims under the Plan.
7.10. Junior Zero Note Claims. For purposes of effectuating the Zero
Settlement only, the Junior Zero Note Claims shall be allowed in an amount
equal to the value as of the Effective Date of the distributions made on
account of such Claims under the Plan.
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ARTICLE 8
Acceptance or Rejection of this Plan;
Effect of Rejection by one or More Impaired
Classes of Claims or Interests
8.01. Each Impaired Class of Claims Entitled to Vote. Subject to Section 8.04
hereof, the holders of Claims and Interests in each Impaired Class of Claims are
entitled to vote as a class to accept or reject this Plan. Holders of Claims in
Classes 1, 2, 4, 8, 9 and 10 shall be entitled to vote on the Plan whether or
not such claims have theretofore been Allowed.
8.02. Acceptance by an Impaired Class of Creditors. Consistent with section
1126(c) of the Bankruptcy Code and except as provided in section 1126(e) of the
Bankruptcy Code, an Impaired Class of Claims shall have accepted this Plan if
this Plan is accepted by the holders of at least two-thirds in dollar amount and
more than one-half in number of the Allowed Claims of such Class that have
timely and properly voted to accept or reject this Plan.
8.03. Presumed Acceptances by Unimpaired Classes. Miscellaneous Secured Claims
(Class 3) and Trade Claims (Class 6), which are not Impaired under this Plan,
are conclusively presumed to have accepted this Plan, and the Debtor will not
solicit acceptances from such Classes.
8.04. Deemed Rejection by Class 11 and Class 12. Class 11 (Subordinated
Claims) and Class 12 (Interests), which are Impaired under this Plan, are deemed
to have rejected this Plan, and the Debtor will not solicit votes from holders
of Claims and Interests in such Classes.
8.05. Confirmation Pursuant to Section 1129(b) of the Bankruptcy Code. The
Debtor intends to request that the Bankruptcy Court confirm this Plan in
accordance with section 1129(b) of the Bankruptcy Code because Class 11 and
Class 12 are deemed to have rejected the Plan pursuant to section 1126(g) of the
Bankruptcy Code. The Debtor also may seek confirmation of the Plan under section
1129(b) of the Bankruptcy Code with respect to Class 7, Class 8, Class 9 and
Class 10, as the case may be, to the extent such Classes reject the Plan.
ARTICLE 9
Unexpired Leases and Executory Contracts
9.01. Assumption and Rejection of Unexpired Leases and Executory Contracts.
(a) Any unexpired lease or executory contract that has not been expressly
rejected by the Debtor with the Bankruptcy Court's approval on or prior to the
Confirmation Date shall, as of the Confirmation Date (subject to the occurrence
of the Effective Date), be deemed to have been assumed by the Debtor unless
there is pending before the Bankruptcy Court on the Confirmation Date a motion
to reject such unexpired lease or executory contract or such executory contract
or unexpired lease is otherwise designated for rejection, provided that such
lease or executory contract is ultimately rejected; provided, however, that, as
of the Confirmation Date (subject to the occurrence of the Effective Date), any
executory contracts or unexpired leases to which an Insider or Affiliate of the
Debtor is party shall be deemed to have been rejected by the Debtor unless, by
such date, either (i) such unexpired lease or executory contract has been
expressly assumed by the Debtor or Reorganized Grand Union or (ii) a motion
seeking such assumption has been filed, provided that such motion is ultimately
granted; provided, however, that no executory contract or unexpired lease shall
be subject to the foregoing deemed rejection (subject to explicit assumption)
solely by virtue of the fact that one or more wholly owned subsidiaries of the
Debtor is party to such contract or lease.
(b) For purposes of this Plan, leases of nonresidential real property which
were assigned by the Debtor prior to the Filing Date shall be treated as being
neither executory nor unexpired, and notwithstanding this Section 9.01, shall be
deemed neither assumed nor rejected pursuant to this Plan.
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ARTICLE 10
Operation and Management
of Reorganized Grand Union
10.01. Resignation of Board of Directors. Upon the inauguration of the Post
Reorganization Board on the Effective Date, each of the members of the Debtor's
Board of Directors shall be deemed to have resigned.
10.02. Board of Directors.
(a) On the Effective Date, the operation of Reorganized Grand Union shall
become the general responsibility of the Post Reorganization Board, in
accordance with applicable law.
(b) The initial members of the seven (7) member Post Reorganization Board
shall be selected by the members of the Official Committee which were members of
the Informal Committee of certain holders of Senior Subordinated Notes. Such
board members shall be identified not less than five (5) days prior to the
Confirmation Date; provided that, if and to the extent that any member(s) of the
Post Reorganization Board are not so identified by five (5) days prior to the
Confirmation Date, the Debtor shall designate such member(s).
(c) From and after the Effective Date, selection of members of the Post
Reorganization Board shall be governed by the Restated Bylaws and/or the
Restated Certificate of Incorporation, as the case may be.
10.03. Termination of MTH Agreement. On the Effective Date, the MTH Management
Agreement shall be terminated and Reorganized Grand Union shall execute the MTH
Settlement Agreement.
10.04. Listing of New Senior Notes, New Common Stock and Warrants. Reorganized
Grand Union will use its reasonable best efforts to cause the New Senior Notes,
the New Common Stock and the Warrants to be listed on one or more stock
exchanges or quoted on the National Market System on or before the date which is
one hundred twenty (120) days after the Effective Date.
ARTICLE 11
Implementation of this Plan
11.01. Vesting of Property. On the Effective Date, pursuant to section 1141 of
the Bankruptcy Code, title to all property of the Debtor's estate shall pass to
Reorganized Grand Union free and clear of all Claims and Interests (except as
otherwise provided in this Plan). Reorganized Grand Union may pay any expenses,
including any fees and expenses of professionals, accruing from and after the
Confirmation Date without any application to the Bankruptcy Court. Confirmation
of this Plan (subject to the occurrence of the Effective Date) shall be binding
and the Debtor's debts shall, without in any way limiting Section 14.01 of this
Plan, be discharged as provided in section 1141 of the Bankruptcy Code. The
previous sentence notwithstanding, nothing in the Plan shall be construed as
discharging, releasing, or relieving the Debtor, Reorganized Grand Union, or any
other party, in any capacity, from any liability with respect to the Retirement
Plan to which any such party is subject as of immediately prior to the Effective
Date under any law or regulatory provision.
11.02. Surrender and Cancellation of Securities, Notes or Other Instruments;
Discharge of Indenture Obligations.
(a) On the Effective Date, each of the respective transfer books maintained
for the Cancelled Securities will be closed. Except for the right to receive the
distributions, if any, called for by this Plan, the holder of a Cancelled
Security shall have no rights arising from or relating to such Cancelled
Security after the Effective Date, including, without limitation, any rights of
subordination or subrogation that may be construed to be contained in such
Cancelled Security. Each holder of a Cancelled Security evidencing an Allowed or
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Ultimately Allowed Claim shall surrender such Cancelled Security to Reorganized
Grand Union (or its designee), and Reorganized Grand Union (or its designee)
shall distribute to the holder thereof the appropriate consideration therefor in
accordance with this Plan as promptly as is reasonably practicable. No
distribution under this Plan shall be made to or on behalf of any holder of an
Allowed or Ultimately Allowed Claim evidenced by a Cancelled Security unless and
until such Cancelled Security is received by Reorganized Grand Union (or its
designee). If a Cancelled Security is lost or destroyed, the holder of such
Cancelled Security must deliver an affidavit of loss or destruction to the
Debtor or Reorganized Grand Union (or their designee), as well as an agreement
to indemnify the Debtor and Reorganized Grand Union (and post a bond if so
requested by Reorganized Grand Union or the Debtor), in form and substance
reasonably acceptable to Reorganized Grand Union, before such holder may receive
any distribution under this Plan in respect of such lost or destroyed Cancelled
Security. Any holder of an Allowed or Ultimately Allowed Claim that fails to
surrender a Cancelled Security related thereto or deliver an affidavit and an
indemnity agreement before the later to occur of (i) two years from the
Effective Date, and (ii) six months following the date such holder's Claim
becomes an Allowed or Ultimately Allowed Claim shall be deemed to have no
further Claim and no distributions shall be made under this Plan in respect of
such Claim. The Debtor or Reorganized Grand Union may waive the requirements of
this Section.
(b) Each Indenture and Capital Indenture, and the obligations of the Indenture
Trustee and Capital Indenture Trustee thereunder, and, subject to the
implementation of Section 12.07 hereof (to the extent applicable), any Lien
Rights of the Indenture Trustees or Capital Indenture Trustees thereunder, shall
be cancelled and discharged on the Effective Date.
(c) Notwithstanding anything contained herein to the contrary, if Reorganized
Grand Union does not elect to treat Credit Agreement Claims in the manner
described in Section 6.01(a)(ii) hereof and Bankers Trust effects the
Post-Confirmation Facility by way of an amendment and restatement of existing
documents, the Existing Credit Documents shall not be cancelled, discharged,
satisfied and/or otherwise expunged except to the extent provided in such
amendments and restatements.
11.03. The Debtor's Causes of Action. Except as expressly provided in Section
14.01 hereof, and except for any avoidance actions against holders of Unimpaired
Class 6 Trade Claims or any Causes of Action released pursuant to Article 14
hereof, pursuant to section 1123(b)(3) of the Bankruptcy Code, Reorganized Grand
Union shall retain, with the exclusive right to enforce in its sole discretion,
any and all Causes of Action of the Debtor or Debtor-In-Possession, including
all Causes of Action which may exist under sections 510, 542, 544 through 550
and 553 of the Bankruptcy Code or under similar state laws, including, without
limitation, fraudulent conveyance claims, if any, and all other Causes of Action
of a trustee and debtor-in-possession under the Bankruptcy Code. The Debtor or
Reorganized Grand Union, as the case may be, may, but shall not be required to,
set off against any Claim and the distributions to be made pursuant to the Plan
in respect of such Claim, any claims of any nature whatsoever which the Debtor
or Debtor-In-Possession may have against the holder of such Claim, but neither
the failure to do so nor the allowance of any Claim hereunder shall constitute a
waiver or release of any such claim the Debtor or Debtor In Possession may have
against such holder.
11.04. Restated Certificate of Incorporation; Restated Bylaws. On or prior to
the Effective Date, the Debtor shall file its restated certificate of
incorporation and the restated bylaws shall be deemed adopted, such that they
become the Restated Certificate of Incorporation and Restated Bylaws.
11.05. Registration Rights. Reorganized Grand Union shall enter into
Registration Rights Agreements with each Entity which, as of the Effective Date
(a) holds Senior Subordinated Notes entitling such holder to received ten
percent (10%) or more of the shares of New Common Stock and requests in writing
that the Debtor execute such Registration Rights Agreement or (b) holds Senior
Notes entitling such holder to New Senior Notes to be issued under the Plan and
requests in writing that the Debtor execute such Registration Rights Agreement.
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11.06. Filing of Credit Documents/Indenture/Registration Rights Agreements.
The Post-Confirmation Credit Agreement (and such other of the Post-Confirmation
Credit Documents as the Debtor, the Official Committee or the Informal Committee
of Senior Noteholders shall reasonably request) and the final drafts of the New
Senior Note Indenture and the Registration Rights Agreements shall be filed by
the Debtor with the Bankruptcy Court no later than a date which is five (5) days
prior to the first date set by the Bankruptcy Court as the deadline for voting
to accept or reject the Plan. The Post-Confirmation Credit Documents shall be in
form and substance satisfactory to the Debtor and the Senior Bank Agent (if the
Debtor does not elect the treatment set forth in Section 6.01(a)(ii) hereof).
Notice of any modification to the Post-Confirmation Credit Documents after their
filing with the Bankruptcy Court shall be provided to the Official Committee and
the Informal Committee of Senior Noteholders. The New Senior Note Indenture and
the Registration Rights Agreements shall be in form and substance reasonably
satisfactory to the Senior Bank Agent, the Official Committee and, with respect
to the New Senior Note Indenture and the Registration Rights Agreement for the
New Senior Notes, the Informal Committee of Senior Noteholders. In the event the
Debtor chooses the treatment to be afforded to the Existing Banks as set forth
in Section 6.01(a)(i) hereof, the terms and conditions of the Post-Confirmation
Credit Documents shall include in all respects the terms and conditions of the
Commitment Letter and the Credit Facility Term Sheet except to the extent that
the Debtor and Bankers Trust otherwise agree. In the Confirmation Order, the
Bankruptcy Court shall approve the Post-Confirmation Credit Documents in
substantially the form filed with the Bankruptcy Court and authorize the Debtor
to execute the same together with such other documents as Bankers Trust may
reasonably require in order to effectuate the treatment afforded to the
Post-Confirmation Banks hereunder.
ARTICLE 12
Provisions Covering Distributions
12.01. Time of Distributions Under this Plan. Except as otherwise provided in
this Plan and without in any way limiting Section 11.02 and Article 13 of this
Plan, payments and distributions in respect of Allowed Claims shall be made by
Reorganized Grand Union (or its designee) on or as promptly as practicable after
the Effective Date.
12.02. Fractional Securities.
(a) Fractional shares of New Common Stock, fractional Warrants and New Senior
Notes in non-integral multiples of $1,000 shall not be distributed. Instead, on
the date of final distribution of such securities to the persons entitled
thereto, the aggregate of all fractional interests (including, for such
purposes, New Senior Notes in a principal amount less than $1,000) that would
otherwise be issued to such persons shall instead be placed in two separate
pools in respect of each such securities (hereinafter the "Fractional Securities
Pools") provided this Section 12.02 shall not affect the distributions to such
holders of whole shares of Common Stock, whole Warrants or New Senior Notes in
$1,000 increments, but solely the fractional portion thereof. There shall be a
single Fractional Securities Pool for the fractional interests in New Common
Stock and a single Fractional Securities Pool for the fractional interests in
New Senior Notes. With respect to the Warrants, there shall be separate
Fractional Securities Pools established for each of (i) the fractional interests
in Series 1 Warrants to be distributed to holders of Class 9 Claims, (ii) the
fractional interests in Series 1 Warrants to be distributed to holders of Class
10 Claims, (iii) the fractional interests in Series 2 Warrants to be distributed
to holders of Class 9 Claims and (iv) the fractional interests in Series 2
Warrants to be distributed to holders of Class 10 Claims.
(b) All holders of Allowed or Ultimately Allowed Claims entitled to a
fractional interest in New Common Stock, as the case may be, shall be placed on
a list (hereinafter the "Distribution List") in descending order according to
the size of the fractional interest in the New Common Stock to which each such
holder is entitled. In the event two or more holders of Allowed or Ultimately
Allowed Claims are entitled to the same fractional interest (rounded to six
decimal places) in New Common Stock, their relative
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ranking on the Distribution List shall be determined by lot. A whole share of
New Common Stock shall be distributed to holders entitled to the largest
fractions of New Common Stock until all of the whole shares of the New Common
Stock in the Fractional Securities Pool for the New Common Stock shall have been
distributed.
(c) (i) Subject to subparagraph (ii), the holders of Allowed or Ultimately
Allowed Claims entitled to a fractional interest in the New Senior Notes (i.e.,
New Senior Notes in a principal amount less than $1,000) shall be entitled to
receive either, at the election of the Debtor or Reorganized Grand Union (which
election shall be exclusive of the other option) (x) cash equal to the principal
amount of the fractional New Senior Notes to which they would otherwise be
entitled, and the New Senior Notes which would otherwise have been issued in
respect of such fractional interests shall be cancelled by the Debtor or
Reorganized Grand Union, or (y) (a) the holders entitled to a fractional
interest which is greater than $500 shall receive an additional $1,000 New
Senior Note (subject to subparagraph (ii)) and (b) the holders entitled to a
fractional interest which is $500 or less shall not be entitled to any
distribution with respect to such fractional interest.
(ii) Notwithstanding subparagraph (i) hereof, in the event that the aggregate
amount of the cash which would be distributed pursuant to subparagraph (i)(x) is
less than $100,000, then the Debtor or Reorganized Grand Union must elect option
(x). Notwithstanding subsection (i)(y)(a), in no event shall the aggregate New
Senior Notes distributed pursuant to this Plan exceed $595,475,922 in aggregate
principal amount, and if the New Senior Notes to be distributed pursuant to
subparagraph (c)(i)(y) would cause the aggregate to exceed this amount, then, in
ascending order according to the size of their respective fractional interests,
the holders entitled to receive New Senior Notes pursuant to subsection
(c)(i)(y)(a) shall be deemed to instead fall under subsection (c)(i)(y)(b) with
respect to such fractional interests.
(d) All holders of Allowed or Ultimately Allowed Claims entitled to a
fractional interest in Warrants shall be treated as follows with respect to such
fractional interests. In descending order of size of fractional interests, the
holders of fractional interests in each of the four separate Fractional
Securities Pools established with respect to the Warrants pursuant to
subparagraph (a) of this Section 12.02 shall receive (in addition to the number
of whole Warrants to which each is otherwise entitled) a whole Warrant with
respect to such fractional interest until the aggregate number of each Series of
Warrants to be distributed, respectively (x) to holders of Claims in Classes 9
pursuant to Section 6.09(a) hereof and (y) to holders of Claims in Class 10
pursuant to Section 6.10(a) hereof have been distributed; provided that, in the
event two or more holders of Allowed or Ultimately Allowed Claims in the same
Fractional Securities Pool are entitled to the same fractional interest (rounded
to six decimal places) with respect to the Warrants to be distributed with
respect to that pool, their relative ranking on the distribution list shall be
determined by lot.
12.03. Compliance With Tax Requirements. In connection with each distribution
with respect to which the filing of an information return (such as an Internal
Revenue Service Form 1099 or 1042) and/or withholding is required, Reorganized
Grand Union shall file such information return with the Internal Revenue Service
and provide any required statements in connection therewith to the recipients of
such distribution, and/or effect any such withholding and deposit all moneys so
withheld as required by law. With respect to any Entity from whom a tax
identification number, certified tax identification number or other tax
information required by law to avoid withholding has not been received by
Reorganized Grand Union (or its distribution agent), Reorganized Grand Union
may, at its option, withhold the amount required and distribute the balance to
such Entity or decline to make such distribution until the information is
received; provided, however, that Reorganized Grand Union shall not be obligated
to liquidate New Senior Notes, Warrants or New Common Stock to perform such
withholding.
12.04. Persons Deemed Holders of Registered Securities. Except as otherwise
provided herein and subject to Section 11.02, the Debtor and Reorganized Grand
Union (or their designee) shall be entitled to treat the record holder of a
registered security as the holder of the Claim or Interest in respect thereof
for purposes of all notices, payments or other distributions under this Plan
unless the Debtor or Reorganized Grand Union,
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as the case may be, shall have received written notice specifying the name and
address of any new holder thereof (and the nature and amount of the interest of
such new holder) at least ten (10) Business Days prior to the date of such
notice, payment or other distribution. In the event of any dispute regarding the
identity of any party entitled to any payment or distribution in respect of any
Claim under this Plan, no payments or distributions will be made in respect of
such Claim until the Bankruptcy Court resolves that dispute pursuant to a Final
Order.
12.05. Allocation Between Principal and Accrued Interest. Except as
specifically provided in this Plan, on the Effective Date, the aggregate
consideration paid to Creditors in respect of their Claims shall be treated as
allocated first to the principal amount of such Claims and then to the accrued
interest thereon; provided, however, that the foregoing shall not apply to
distributions with respect to Claims in Classes 9 and 10. (i.e., there shall be
no mandated reporting requirement by operation of this Plan).
12.06. Distribution of Unclaimed Property. Any distribution of property under
this Plan that is unclaimed after two years following the Effective Date shall
irrevocably revert to Reorganized Grand Union, without regard to state
escheatment laws.
12.07. Indenture Trustee Reserves.
(a) To the extent that, as of the Effective Date, (i) any pending General
Unsecured Claims, Miscellaneous Secured Claims or Administrative Expenses of an
Indenture Trustee (including a good faith estimate submitted to the Debtor by
each Indenture Trustee of its estimated fees and expenses accruing through the
Effective Date) are not paid on the Effective Date, or (ii) any pending General
Unsecured Claims, Miscellaneous Secured Claims or Administrative Expenses of an
Indenture Trustee for its fees and expenses are not yet Allowed or Ultimately
Allowed Claims as of the Effective Date, the Debtor shall establish on the
Effective Date a separate cash reserve (a "Reserve") for each Indenture Trustee
in the amount of any such amounts then outstanding, to consist of cash equal to
the total of the above unpaid or pending fees and expenses of each Indenture
Trustee (including such good faith estimate of fees and expenses through the
Effective Date), as of the Effective Date.
(b) The obligation of Reorganized Grand Union to pay each Indenture Trustee
its fees and expenses owing to it under its applicable Indenture and this Plan,
including, without limitation, its General Unsecured Claims, Miscellaneous
Secured Claims and Administrative Expenses, shall be secured by the amounts in
the Reserve established for that Indenture Trustee; provided, however, that the
Lien Rights of the Indenture Trustees under their respective Indentures shall be
deemed to attach to the cash in the applicable Reserve to the same extent as if
the cash in the Reserve were property received by the Indenture Trustee pursuant
to its Indenture; and provided, further, that each Indenture Trustee shall be
conclusively deemed to have taken any and all action required, including under
its respective Indenture or applicable law, to perfect its Lien Rights as to the
cash in the Reserve established for its benefit, including, without limitation,
any requirement of possession for such perfection.
(c) In consideration of the foregoing, and subject to the establishment of the
Reserves in the specified amounts and under the foregoing terms and conditions,
the Indenture Trustees each are deemed to have waived their Lien Rights in the
New Senior Notes and the New Common Stock to be distributed under the Plan to
the holders of, respectively, the Senior Notes and the Senior Subordinated
Notes, and shall be deemed to have waived and released any and all right, title
and interest in and to property of the Debtor or Reorganized Grand Union other
than in and to the cash in the applicable Reserve. Each Indenture Trustee shall
be entitled to Allowed Claims for the reasonable fees and expenses incurred by
such Indenture Trustee under the respective Indenture. Upon payment by the
Debtor or Reorganized Grand Union of such Claims, the respective Lien Rights of
the Indenture Trustee shall be extinguished. Objections to such claims shall be
governed by the provisions respecting Impaired Claims set forth in Section 13.01
hereof.
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ARTICLE 13
Resolution of Disputed Claims
13.01. Objections to Claims. Any party in interest may object to an Impaired
Claim, other than an Impaired Claim otherwise allowed as provided in this Plan,
by filing an objection with the Bankruptcy Court and serving such objection upon
the holder of such Claim not later than the last to occur of (a) the 45th day
following the Effective Date, (b) 30 days after the filing of the proof of claim
of such Claim, or (c) such other date set by order of the Bankruptcy Court (the
application for which may be made on an ex parte basis), whichever is later.
Only Reorganized Grand Union shall have the authority to file objections to
Unimpaired Claims. Objections to Unimpaired Claims may be filed by Reorganized
Grand Union at any time.
13.02. Procedure. Unless otherwise ordered by the Bankruptcy Court or agreed
to by written stipulation of the Debtor or Reorganized Grand Union, or until the
objection of the Debtor or Reorganized Grand Union is withdrawn, the Debtor or
Reorganized Grand Union shall litigate the merits of each Disputed Claim until
determined by a Final Order; provided, however, subject to the approval of the
Bankruptcy Court, if necessary, the Debtor or Reorganized Grand Union, as the
case may be, may compromise and settle any objection to any Claim.
13.03. Payments and Distributions With Respect to Disputed Claims. No payments
or distributions shall be made in respect of a Disputed Claim until and unless
such Disputed Claim becomes an Ultimately Allowed Claim.
13.04. Timing of Payments and Distributions With Respect to Disputed Claims.
Subject to the provisions of this Plan, payments and distributions with respect
to each Disputed Claim that becomes an Ultimately Allowed Claim, which would
have otherwise been made had the Ultimately Allowed Claim been an Allowed Claim
on the Effective Date shall be made within thirty (30) days after the date that
such Disputed Claim becomes an Ultimately Allowed Claim. Holders of Disputed
Claims that become Ultimately Allowed Claims shall be bound, obligated and
governed in all respects by the provisions of this Plan.
ARTICLE 14
Discharge, Releases and Settlements of Claims
14.01. Discharge of All Claims and Interests and Releases.
(a) Except as otherwise specifically provided by this Plan, the confirmation
of this Plan (subject to the occurrence of the Effective Date) shall discharge
the Debtor and Reorganized Grand Union from any debt (including, without
limitation, Class 11 Claims and Claims related to Class 12 Interests) that arose
before the Confirmation Date, and any debt of the kind specified in sections
502(g), 502(h) or 502(i) of the Bankruptcy Code, whether or not a proof of Claim
is filed or is deemed filed, whether or not such Claim is Allowed, and whether
or not the holder of such Claim has voted on this Plan.
(b) Except as otherwise specifically provided by this Plan, the distributions
and rights that are provided in this Plan shall be in complete satisfaction,
discharge and release, effective as of the Confirmation Date (but subject to the
occurrence of the Effective Date) of (i) all Claims and Causes of Action
against, liabilities of, liens on, obligations of and Interests in the Debtor or
Reorganized Grand Union or the direct or indirect assets and properties of the
Debtor or Reorganized Grand Union, whether known or unknown, and (ii) all Causes
of Action (whether known or unknown, either directly or derivatively through the
Debtor or Reorganized Grand Union) against, claims (as defined in section 101 of
the Bankruptcy Code in the case of GUCC and GUHC) against, liabilities (as
guarantor of a Claim or otherwise) of, liens on the direct or indirect assets
and properties of, and obligations of successors and assigns of the Debtor,
Affiliates of the Debtor and their successors and assigns, and present and
former stockholders, directors, officers, agents (including MTH), attorneys,
advisors, financial advisors, investment bankers and employees of the Debtor and
such Affiliates
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based on the same subject matter as any Claim or Interest, in each case
regardless of whether a proof of Claim or Interest was filed, whether or not
Allowed and whether or not the holder of the Claim or Interest has voted on this
Plan, or based on any act or omission, transaction or other activity or
security, instrument or other agreement of any kind or nature occurring, arising
or existing prior to the Effective Date that was or could have been the subject
of any Claim or Interest, in each case regardless of whether a proof of Claim or
Interest was filed, whether or not Allowed and whether or not the holder of the
Claim or Interest has voted on this Plan.
(c) Except as otherwise specifically provided by this Plan, any Entity
accepting any distribution pursuant to this Plan shall be presumed conclusively
to have released the Debtor, Reorganized Grand Union and any other Entity
accepting any distribution pursuant to this Plan, successors and assigns of the
Debtor and such Entities, Affiliates of the Debtor and such Entities, successors
and assigns of such Affiliates, present and former stockholders, directors,
officers, agents (including MTH), attorneys, advisors, financial advisors,
investment bankers and employees of the Debtor, such Affiliates and such
Entities, and any Entity claimed to be liable derivatively through any of the
foregoing, from any Cause of Action based on the same subject matter as the
Claim or Interest on which the distribution is received. The release described
in the preceding sentence shall be enforceable as a matter of contract against
any Entity that accepts any distribution pursuant to this Plan.
(d) On the Effective Date, the Debtor and the Debtor-In-Possession will be
conclusively deemed to release (i) all professionals (including, but not limited
to, advisors and attorneys) retained by (aa) the Debtor (that were retained as
of November 1, 1994 in connection with the Debtor's restructuring, but only as
to claims which arise in connection with such restructuring, or were retained by
order of the Bankruptcy Court), (bb) the Senior Bank Agent, the Official
Committee or the Informal Committees, provided that such professionals were
disclosed to the Debtor prior to the Filing Date or retained by order of the
Bankruptcy Court, (cc) the Indenture Trustees, or (dd) the Capital Indenture
Trustees, the Informal Zero Committee, or the Capital Committee, (ii) MTH and
(iii) all directors and officers of the Debtor holding such offices at any time
during the period from and including the Filing Date through and including the
Confirmation Date from all liability based upon any act or omission related to
past service with, for or on behalf of the Debtor or the Debtor-In-Possession
except for:
(i) any indebtedness of any such person to the Debtor or
Debtor-In-Possession for money borrowed by such person;
(ii) any setoff or counterclaim the Debtor or Debtor-In-Possession
may have or assert against any such person, provided that the aggregate
amount thereof shall not exceed the aggregate amount of any Claims held
or asserted by such person against the Debtor or Debtor-In-Possession,
as the case may be;
(iii) the uncollected amount of any claim made by the Debtor or
Debtor-In-Possession (whether in a filed pleading, by letter or
otherwise asserted in writing) prior to the Effective Date against such
person which claim has not been adjudicated to Final Order, settled or
compromised; or
(iv) claims arising from the fraud, willful misconduct or gross
negligence of such persons.
(e) On the Confirmation Date, subject to the occurrence of the Effective Date,
the Debtor shall be deemed to have released all Causes of Action against the
members of the Official Committee, the members of the Informal Committees, the
members of the Capital Committee, the members of the Informal Zero Committee,
the Additional Facility Lenders, the Existing Banks, the holders of Senior
Notes, the Indenture Trustees, the Capital Indenture Trustees or the holders of
Senior Subordinated Notes, in their respective capacities as such.
(f) Notwithstanding anything herein to the contrary, the foregoing releases
shall be enforced only to the extent permitted by applicable law.
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(g) Nothing in the Plan shall be construed as discharging, releasing or
relieving the Debtor, Reorganized Grand Union, or any other party, in any
capacity, from any liability with respect to the Retirement Plan to which any
such party is subject as of immediately prior to the Effective Date under any
law or regulatory provision.
The Releases embodied in this Plan are in addition to, and not in lieu of, any
other release separately given, conditionally or unconditionally, by the Debtor
or Debtor-In-Possession to any other person or entity.
14.02. Exculpation. Neither Reorganized Grand Union, the Official Committee,
any of the Informal Committees, the Capital Committee, the Informal Zero
Committee, the Senior Bank Agent, nor (as applicable) any of their respective
members, officers, directors, shareholders, employees, agents (including MTH),
attorneys, accountants or other advisors, shall have or incur any liability to
any holder of a Claim or Interest for any act or failure to act in connection
with, or arising out of, the pursuit of confirmation of the Plan, the
consummation of the Plan or the administration of the Plan or the property to be
distributed under the Plan, except for any act or failure to act that
constitutes willful misconduct or recklessness as determined pursuant to a Final
Order, and in all respects, such Entities (a) shall be entitled to rely upon the
advice of counsel with respect to their duties and responsibilities under the
Plan, and shall be fully protected from liability in acting or in refraining
from action in accordance with such advice, and (b) shall be fully protected
from liability with respect to any act or failure to act that is approved or
ratified by the Bankruptcy Court.
14.03. Injunction. The satisfaction, release and discharge pursuant to Section
14.01 of this Plan shall also act as an injunction against any Entity commencing
or continuing any action, employment of process, or act to collect, offset or
recover any Claim or Cause of Action satisfied, released or discharged under
this Plan to the fullest extent authorized or provided by the Bankruptcy Code,
including, without limitation, to the extent provided for or authorized by
sections 524 and 1141 thereof. Nothing in the Plan shall be construed as
discharging, releasing or relieving the Debtor, Reorganized Grand Union, or any
other party, in any capacity, from any liability with respect to the Retirement
Plan to which any such party is subject as of immediately prior to the Effective
Date under any law or regulatory provision, and neither the Pension Benefit
Guaranty Corporation nor the Retirement Plan shall be enjoined from enforcing
such liability as a result of the Plan's provisions for satisfaction, release
and discharge of Claims.
14.04. Preservation of Rights. Notwithstanding any provision of this Plan or
the Disclosure Statement, or any exhibit hereto or thereto, or the Confirmation
Order, nothing herein or in the Disclosure Statement, in any exhibit hereto or
thereto or in the Confirmation Order shall affect any rights preserved pursuant
to Section 14.06 of this Plan.
14.05. Claims of Subordination.
(a) Subject to the Confirmation Order becoming a Final Order (or the
requirement therefor being waived in accordance with Sections 15.02(a) and
16.07) and subject to the distributions that are required to be made under the
Plan as of the Effective Date to Classes 1, 2 and 4 having been made, as of the
Effective Date, each holder of an Allowed or Ultimately Allowed Claim, (i) by
virtue of the acceptance of the Plan by such holder's Class in accordance with
section 1126 of the Bankruptcy Code, (ii) by virtue of the acceptance of the
Plan by such Holder, (iii) by virtue of the acceptance of any distribution under
the Plan on account of such Claim or (iv) by virtue of the confirmation of the
Plan, waives, releases and relinquishes any and all rights, claims or causes of
action arising under and in any way related to any subordination agreement in
effect as of the Filing Date, whether arising out of contract or under
applicable law, including, without limitation, any claim or security interest in
the Debtor's common stock or subsections (a) or (c) of section 510 of the
Bankruptcy Code and the provisions of the Indentures, to the payment and
distributions of the consideration made or to be made hereunder or otherwise
consistent with the Plan to any holder of an Allowed or Ultimately Allowed Claim
against the Debtor; provided, however, that the holders of Credit Agreement
Claims shall retain all rights under subordination agreements in effect as of
the Filing Date, if any, as to all persons, other than claims against (x)
holders of Senior Note Claims, Senior Subordinated Claims, and the Indenture
Trustees
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with respect thereto and (y) distributions made with respect to Junior Zero Note
Claims, Senior Zero Note Claims, and Capital Indenture Trustees hereunder; and
provided further that the foregoing shall not affect the rights of any party to
seek subordination under section 510(b) or (c) of the Bankruptcy Code of any
Claim that otherwise would constitute a General Unsecured Claim.
(b) Pursuant to Bankruptcy Rule 9019, and any applicable state law, and as
consideration for the distributions and other benefits provided under this Plan,
the provisions of this Section 14.05 shall constitute a good faith compromise
and settlement of any Causes of Action relating to the matters described in this
Section 14.05 which could be brought by any holder of a Claim or Interest
against or involving another holder of a Claim or Interest, which compromise and
settlement is in the best interests of Creditors and holders of Interests and is
fair, equitable and reasonable. This settlement shall be approved by the
Bankruptcy Court as a settlement of all such Causes of Action. The Bankruptcy
Court's approval of this settlement pursuant to Bankruptcy Rule 9019 and its
finding that this is a good faith settlement pursuant to any applicable state
law, including, without limitation, the laws of the states of New York, New
Jersey and Delaware, given and made after due notice and opportunity for
hearing, shall bar any such Cause of Action relating to the matters described in
this Section 14.05 which could be brought by any holder of a Claim or Interest
against or involving another holder of a Claim or Interest.
14.06. Termination of Indemnification Obligations.
(a) Termination of Indemnification Obligations. Except as and to the extent
set forth in subsections (b) and (c) of this Section 14.06 and in the MTH
Settlement Agreement, and notwithstanding any other provision of the Plan, all
obligations of the Debtor to indemnify, or to pay contribution or reimbursement
to, its present or former directors, officers, agents (including, without
limitation, MTH), employees and representatives holding such positions at any
time prior to the Confirmation Date whether pursuant to its certificate of
incorporation, bylaws, contractual obligations or any applicable laws or
otherwise in respect of all past, present and future actions, suits and
proceedings against any of such directors, officers, agents, employees and
representatives based upon any act or omission related to service with, for or
on behalf of the Debtor or Debtor-In-Possession or any present or former
Affiliate shall be discharged under the Plan, all such undertakings and
agreements shall be rejected and terminated, and Reorganized Grand Union shall
have no obligation thereunder pursuant to this Plan or otherwise.
(b) Limited Continuing Indemnification. The obligations of the Debtor pursuant
to law or its certificate of incorporation or bylaws or otherwise to indemnify,
or to pay contribution or reimbursement to, the Indemnified Persons, as defined
below, in respect of all past, present and future actions, suits and
proceedings, whether commenced or threatened, against such Indemnified Persons,
which include obligations based upon any act or omission arising out of the
performance by an Indemnified Person of services to the Debtor, its present or
former subsidiaries, GUCC, or GUHC, for or at the request of the Debtor, prior
to the Effective Date, whether prior to the Filing Date or not, shall not be
discharged or impaired by confirmation of this Plan and shall not be
subordinated under Section 510 of the Code or otherwise, or be disallowed by
reasons of Section 502(e) of the Code or otherwise; provided, however, that the
limited continuing obligations preserved by this Section 14.06(b) shall not
cover any claim for indemnification, contribution, reimbursement or other
payment by an Indemnified Person arising out of or related, directly or
indirectly, to any action, suit or proceeding against any Indemnified Person (i)
brought by GUCC or GUHC, (ii) brought by any other person which is a present or
former purchaser, seller, underwriter or owner, in each case acting in such
capacity, of present or former securities of the Debtor, its predecessors or any
present or former Affiliate thereof, including, without limitation, GUCC or
GUHC, in such capacity or (iii) brought by any trustee, receiver or other
representative of or asserting the rights of GUCC, GUHC or any other person
described in (i) of this Section 14.06(b) or (iv) brought by any other person (a
"Third Party Claimant") against an Indemnified Person asserting claims for
contribution, reimbursement or indemnity by such Third Party Claimant arising
out of or related to any action, suit or proceeding against such Third Party
Claimant which, had it been brought against an Indemnified Person, would be
described in (i), (ii) or (iii) of this Section
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14.06(b) (such claims being hereinafter referred to as the "Excluded Claims").
As used in this Section 14.06(b), the term "Indemnified Persons" shall mean (x)
the Debtor's present and former directors, officers and employees which have
held such position with the Debtor at any time during the period from and
including one year prior to the Filing Date through and including the
Confirmation Date, (y) persons who retired as directors, officers or employees
of the Debtor ("Retirees") prior to the Effective Date and (z) MTH and the other
MTH Entities, as defined in the MTH Settlement Agreement. Any liability of the
Debtor under this paragraph which is attributable to the period from the Filing
Date to the Effective Date and which under the Bankruptcy Code has the priority
of an expense of administration shall be entitled to such priority, but no
aggregate amount of dollars shall be paid by reason of such priority which is
greater than the absolute maximum payable under this paragraph.
(c) Additional Limited Indemnification for Costs. Notwithstanding the
provisions of subsections (a) and (b) of this Section 14.06, the obligations of
the Debtor pursuant to law or its certificate of incorporation or bylaws or
otherwise to indemnify, or to pay contribution or reimbursement to, the
Continuing Indemnified Persons, as defined below, in respect of legal fees,
costs, expert advice and witnesses and expenses ("Defense Expenses") incurred by
the Continuing Indemnified Persons in the defense of Excluded Claims shall not
be discharged or impaired by reason of confirmation of this Plan or otherwise
and shall not be subordinated under Section 510 of the Code or otherwise and
shall not be disallowed under Section 502(e) of the Code or otherwise. As used
in this Section 14.06(c), the term "Continuing Indemnified Persons" shall mean
those persons who are entitled to indemnification under the certificate of
incorporation or bylaws of the Debtor as in effect prior to the Filing Date and
who shall have served as directors, officers or employees of the Debtor at any
time from and after one year before the Filing Date and Retirees, but shall not
include any MTH Entity. Upon written request of any one or more Continuing
Indemnified Person, the Board of Directors may, in its reasonable discretion,
apply funds that would be used in respect of the defense of an Excluded Claim to
the settlement thereof if such settlement payment will be less than the
reasonably anticipated Defense Expenses which would be incurred in respect of
such Excluded Claim and such application would be in the best interest of
Reorganized Grand Union. Any liability of the Debtor under this paragraph which
is attributable to the period from the Filing Date to the Effective Date and
which under the Bankruptcy Code has the priority of an expense of administration
shall be entitled to such priority, but no aggregate amount of dollars shall be
paid by reason of such priority which is greater than the absolute maximum
payable under this paragraph.
(d) No Indemnified Person or Continuing Indemnified Person shall be required
to file any Claim or Administrative Expense to establish rights preserved under
subsections (b) and (c) of this Section 14.06.
14.07. Preservation of Insurance. The Debtor's discharge and release as
provided herein, except as necessary to be consistent with this Plan, shall not
diminish or impair the enforceability of any insurance policies that may cover
claims against the Debtor or any other person or entity.
14.08. Claims of Holders of Zero Notes and Capital Indenture Trustees. As of
the Effective Date, the holders of the Zero Notes shall not be heard, either
directly or indirectly, other than with respect to any post-confirmation
modifications to the Plan or the Confirmation Order or with respect to matters
concerning distribution of the Warrants, applications by professionals for
compensation or reimbursement of expenses or payment of Claims of the Capital
Indenture Trustees.
ARTICLE 15
Confirmation and Consummation of the Plan
15.01. Conditions to Confirmation. Prior to confirmation of the Plan, the
following conditions must occur and be satisfied or (a) have been waived by the
Debtor, with the consent of the Senior Bank Agent (if the alternative funding
option pursuant to Section 6.01(a)(ii) is not elected), the Official Committee,
and the Informal Committee of Senior Noteholders, or (b) have been waived by the
Senior Bank Agent (if the alternative funding option pursuant to Section
6.01(a)(ii) is not elected), the Official Committee, and the
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Informal Committee of Senior Noteholders, such waiver having been approved by
order of the Bankruptcy Court upon motion of the Senior Bank Agent (if
applicable), the Official Committee, and the Informal Committee of Senior
Noteholders:
(a) If the Debtor elects the treatment set forth in Section 6.01(a)(i)
hereof with respect to Credit Agreement Claims:
(i) The Post-Confirmation Credit Documents (including the
Intercreditor Agreement) shall have been filed with the Bankruptcy
Court not less than five (5) days prior to the Confirmation Date;
and
(ii) The Debtor shall have received authority to execute, and
the Bankruptcy Court shall have approved, the Post-Confirmation
Credit Documents and all other documents necessary to effectuate
the Post-Confirmation Credit Documents, which authority and
approval shall be contained in the Confirmation Order;
(b) If the Debtor elects the treatment set forth in Section
6.01(a)(ii) hereof with respect to Credit Agreement Claims:
(i) The Debtor shall have entered into an Alternative
Commitment Letter, which shall have been approved by the
Bankruptcy Court;
(ii) The Alternative Credit Documents shall have been filed
with the Bankruptcy Court not less than five (5) days prior to
the Confirmation Date;
(iii) The Debtor shall have received authority to execute, and
the Bankruptcy Court shall have approved, the Alternative Credit
Documents and all other documents necessary to effectuate the
Alternative Credit Documents;
(c) The Settlement Order shall have been entered;
(d) The Claims Bar Date shall have been established by the Bankruptcy
Court as a date which is no less than five Business Days prior to the
Confirmation Date; and
(e) As of a date which is three (3) Business Days prior to the
Confirmation Date, the Official Committee shall not have filed a
written notice that is not withdrawn asserting that such Committee has
determined in the exercise of its fiduciary duties to unsecured
creditors generally that the amount of the General Unsecured Claims has
rendered the Plan not feasible pursuant to section 1129 of the
Bankruptcy Code.
15.02. Conditions to the Effective Date. Before the Effective Date occurs, the
following conditions must occur and be satisfied or have been waived (a) by the
Debtor, with the consent of the Senior Bank Agent (if the alternative funding
option pursuant to Section 6.01(a)(ii) is not elected), the Official Committee,
and the Informal Committee of Senior Noteholders, or (b) by the Senior Bank
Agent (if the alternative funding option pursuant to Section 6.01(a)(ii) is not
elected), the Official Committee, and the Informal Committee of Senior
Noteholders, such waiver having been approved by order of the Bankruptcy Court
upon motion of the Senior Bank Agent (if applicable), the Official Committee,
and the Informal Committee of Senior Noteholders:
(a) Confirmation Order and Settlement Order. The Confirmation Order
and Settlement Order shall have become Final Orders;
(b) Regulatory Approval. Unless otherwise waived by the Debtor with
the consent of the Official Committee and the Informal Committee of
Senior Noteholders (and the Senior Bank Agent, if the Debtor does not
elect the treatment set forth in Section 6.01(a)(ii) hereof with
respect to Credit Agreement Claims), which consent shall not be
unreasonably withheld, there shall have been obtained all regulatory
approvals required in connection with the consummation of this Plan;
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(c) TIA. The New Senior Note Indenture shall have been qualified
under the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-77bbb) as
currently in effect;
(d) Credit Conditions. The Post-Confirmation Credit Document or
Alternative Credit Agreements, as the case may be, shall be executed by
all necessary parties thereto and delivered and all conditions to
effectiveness of such documents shall have been satisfied or waived as
provided therein, subject to the occurrence of the Effective Date;
(e) Delivery of Documents. All other documents provided for under
this Plan shall have been executed and delivered by the parties
thereto, unless such execution or delivery has been waived by the
parties benefited by such documents; and
(f) Other Orders. Any order necessary to satisfy any condition to
effectiveness of this Plan shall be a Final Order.
ARTICLE 16
Miscellaneous Provisions
16.01. Bankruptcy Court to Retain Jurisdiction. The business and assets of the
Debtor shall remain subject to the jurisdiction of the Bankruptcy Court until
the Effective Date. From and after the Effective Date, the Bankruptcy Court
shall retain and have exclusive jurisdiction over Reorganized Grand Union and
the Chapter 11 Case to the fullest extent permissible by law, including, but not
limited to, for the purposes of determining all disputes and other issues
presented by or arising under this Plan including, without limitation, exclusive
jurisdiction to:
(a) determine any and all disputes relating to Claims and
Administrative Expenses, including those allowed by operation of the
Plan, and the allowance, amount and classification thereof; provided,
however, the Bankruptcy Court's jurisdiction shall be concurrent, not
exclusive, after the Effective Date with respect to the enforcement or
adjudication of any Unimpaired Claim,
(b) determine any and all disputes among Creditors with respect to
their Claims,
(c) consider and allow any and all applications for compensation for
professional services rendered and disbursements incurred in connection
therewith,
(d) determine any and all applications, motions, adversary
proceedings and contested or litigated matters pending on the Effective
Date and arising in or related to the Chapter 11 Case or this Plan,
(e) remedy any defect or omission or reconcile any inconsistency in
the Confirmation Order,
(f) issue such orders, consistent with section 1142 of the Bankruptcy
Code, as may be necessary to effectuate the consummation and full and
complete implementation of this Plan,
(g) enforce and interpret any provisions of this Plan,
(h) determine such other matters as may be set forth in the
Confirmation Order or that may arise in connection with the
implementation of this Plan,
(i) determine the final amounts allowable as compensation or
reimbursement of expenses pursuant to section 503(b) of the Bankruptcy
Code, and
(j) determine any and all disputes among Creditors with respect to
the Zero Claims Release.
16.02. Binding Effect of this Plan. The provisions of this Plan shall be
binding upon and inure to the benefit of the Debtor, Reorganized Grand Union,
any holder of a Claim or Interest, their respective predecessors, successors,
assigns, agents, officers and directors and any other Entity affected by this
Plan.
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16.03. Nonvoting Stock. In accordance with section 1123(a)(6) of the
Bankruptcy Code, the certificate of incorporation of Reorganized Grand Union
shall contain a provision prohibiting the issuance of nonvoting equity
securities by Reorganized Grand Union.
16.04. Authorization of Corporate Action. The entry of the Confirmation Order
shall constitute authorization for the Debtor and Reorganized Grand Union to
take or cause to be taken any corporate action necessary or appropriate to
consummate the provisions of this Plan prior to and through the Effective Date
(including, without limitation, the filing of or amending or restating the
certificate of incorporation of Reorganized Grand Union), and all such actions
taken or caused to be taken shall be deemed to have been authorized and approved
by the Bankruptcy Court. All matters provided for under the Plan involving the
corporate structure of the Debtor and/or Reorganized Grand Union in connection
with the Plan, and any corporate action required by the Debtor and/or
Reorganized Grand Union in connection with the Plan, and any corporate action
required by the Debtor and/or Reorganized Grand Union in connection with the
Plan, shall be deemed to have occurred and shall be in effect pursuant to
section 303 of the Delaware General Corporation Law and the Bankruptcy Code,
without any requirement of further action by the stockholders or directors of
the Debtor and/or Reorganized Grand Union. On the Effective Date, the
appropriate officers of Reorganized Grand Union and members of the Post
Reorganization Board are authorized and directed to execute and deliver the
agreements, documents and instruments contemplated by the Plan and the
Disclosure Statement in the name of and on behalf of Reorganized Grand Union.
16.05. Retiree Benefits. On and after the Effective Date, Reorganized Grand
Union shall continue to pay all retiree benefits, as that term is defined in
section 1114 of the Bankruptcy Code, to the extent required by section
1129(a)(3) of the Bankruptcy Code, without prejudice to Reorganized Grand
Union's rights under applicable non-bankruptcy law to modify, amend or terminate
the foregoing arrangements.
16.06. Withdrawal of this Plan. Subject to the provisions of Section 16.16 of
this Plan, Debtor reserves the right, at any time prior to the entry of the
Confirmation Order, to revoke or withdraw this Plan. If the Debtor revokes or
withdraws this Plan or if the Confirmation Date does not occur, then this Plan
shall be deemed null and void.
16.07. Final Order. Subject to the provisions of Sections 15.02(a) and 16.16
of this Plan, any requirement in the Plan for a Final Order may be waived by the
Debtor upon written notice to the Bankruptcy Court; provided, however, that
nothing contained herein shall prejudice the right of any party in interest to
seek a stay pending appeal with respect to such Final Order.
16.08. Method of Notice. All notices required to be given under this Plan, if
any, shall be in writing and shall be sent by first class mail, postage prepaid,
or by overnight courier:
If to the Debtor to:
The Grand Union Company
201 Willowbrook Boulevard
Wayne, New Jersey 07470
Attn: Mr. Francis E. Nicastro
(201) 890-6000
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with copies to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677
Attn: Myron Trepper
Barry N. Seidel
(212) 821-8000
and
Young, Conaway Stargatt & Taylor
11th Fl., Rodney Square North
P.O. Box 391
Wilmington, Delaware 19899-0391
Attn: James L. Patton, Jr.
Laura Davis Jones
(302) 571-6600
Any of the above may, from time to time, change its address for future notices
and other communications hereunder by filing a notice of the change of address
with the Bankruptcy Court. Any and all notices given under this Plan shall be
effective when received.
16.09. Dissolution of any Committee. Except as otherwise provided in this
Section 16.09, on the Effective Date all Committees, including the Official
Committee and the Informal Committees, shall cease to exist and their members
and employees or agents (including, without limitation, attorneys, investment
bankers, financial advisors, accountants and other professionals) shall be
released and discharged from all further authority, duties, responsibilities and
obligations relating to, arising from or in connection with the Chapter 11 Case.
The Official Committee shall continue to exist after such date solely with
respect to (i) any objections made by the Official Committee pursuant to Section
13.01 of this Plan or other matters pending before the Bankruptcy Court to which
the Official Committee is party, until such objections or matters are resolved;
(ii) all fee applications filed pursuant to section 330 of the Bankruptcy Code
or Claims for fees and expenses by professionals employed by the Debtor or
agreed to be paid by the Debtor; and (iii) any post-confirmation modifications
to the Plan or Confirmation Order. The Informal Committee of Senior Noteholders
shall continue to exist after such date (x) until substantially all of the
distributions to be made with respect to Senior Note Claims under this Plan have
been made and (y) solely with respect to any matters pending as of the Effective
Date before the Bankruptcy Court to which the Informal Committee of Senior
Noteholders is party, until such matters are resolved.
16.10. Continued Confidentiality Obligations. Pursuant to the terms thereof,
members of and advisors to any Committee, Informal Committee, the Informal Zero
Committee or the Capital Committee, any other holder of a Claim or Interest and
their respective predecessors and successors shall continue to be obligated and
bound by the terms of any confidentiality agreement executed by them in
connection with the Chapter 11 Case or the Debtor, to the extent that such
agreement, by its terms, may continue in effect after the Confirmation Date.
16.11. Amendments and Modifications to Plan. Subject to the provisions of
Section 16.16 of this Plan, this Plan may be altered, amended or modified by the
Debtor, before or after the Confirmation Date, as provided in section 1127 of
the Bankruptcy Code.
16.12. Time. Unless otherwise specified herein, in computing any period of
time prescribed or allowed by the Plan, the day of the act or event from which
the designated period begins to run shall not be included.
A-31
<PAGE>
The last day of the period so computed shall be included, unless it is not a
Business Day, in which event the period runs until the end of the next
succeeding day which is a Business Day.
16.13. Section 1145 Exemption. Pursuant to, in accordance with, and solely to
the extent provided under, section 1145 of the Bankruptcy Code, the issuance of
the New Senior Notes, the New Common Stock, the Warrants and the New Common
Stock to be issued upon the exercise of the Warrants under this Plan is exempt
from the registration requirements of Section 5 of the Securities Act of 1933,
as amended, and any state or local law requiring registration or licensing of an
issuer, underwriter, broker or dealer in, such New Senior Notes, New Common
Stock or Warrants, and is deemed to be a public offering of the New Senior
Notes, New Common Stock and Warrants.
16.14. Section 1146 Exemption. To the extent permitted by section 1146(c) of
the Bankruptcy Code, the issuance, transfer or exchange of any security under
the Plan, or the execution, delivery or recording of an instrument of transfer
pursuant to, in implementation of or as contemplated by the Plan, or the
revesting, transfer or sale of any real property of the Debtor pursuant to, in
implementation of or as contemplated by the Plan shall not be taxed under any
state or local law imposing a stamp tax, transfer tax or similar tax or fee.
Consistent with the foregoing, each recorder of deeds or similar official for
any county, city or governmental unit in which any instrument hereunder is to be
recorded shall, pursuant to the Confirmation Order, be ordered and directed to
accept such instrument, without requiring the payment of any documentary stamp
tax, deed stamps, stamp tax, transfer tax, intangible tax or similar tax.
16.15. Severability. If any provision of the Plan is determined to be
unenforceable, such determination shall not limit or affect the enforceability
and operative effect of any other provisions of the Plan. Subject to the
provisions of Section 16.16 of this Plan, to the extent any provision of the
Plan would, by its inclusion in the Plan, prevent or preclude the Bankruptcy
Court from entering the Confirmation Order, the Bankruptcy Court, on the request
of the Debtor, may modify or amend such provision, in whole or in part, as
necessary to cure any defect or remove any impediment to the confirmation of the
Plan existing by reason of such provision.
16.16. Conditions to Modification, Withdrawal and Waiver Rights.
Notwithstanding any provisions contained herein to the contrary, including,
without limitation, Sections 16.06, 16.07, 16.11 and 16.15, the Debtor may: (a)
withdraw the Plan after having first given four (4) Business Days notice in
writing to counsel for the Senior Bank Agent, the Official Committee and the
Informal Committee of Senior Noteholders (to be served via facsimile and
overnight delivery) of the date of the proposed withdrawal and the reason
therefor; provided, however, that the Senior Bank Agent, the Official Committee
or the Informal Committee of Senior Noteholders may object to such withdrawal
and seek an order of the Bankruptcy Court preventing the occurrence thereof; or
(b) amend or modify the Plan; provided, however, that the Debtor must first
obtain the consent of the Senior Bank Agent, the Official Committee, and/or the
Informal Committee of Senior Noteholders, as the case may be, if the Claims or
interests of their respective constituencies (in their capacities as such) are
adversely and materially affected by such amendment or modification.
16.17. Setoff Rights Unaffected. Except as otherwise expressly provided in
this Plan, this Plan is not intended to, and shall not, abrogate or impair any
rights of setoff of the Debtor or Reorganized Grand Union.
16.18. Manner of Payment. Except with respect to Credit Agreement Claims and
Interest Rate Protection Agreement Claims, payment of which shall be made by
wire transfer of same day funds, payments provided hereunder may be made, at the
option of the Debtor or Reorganized Grand Union, in cash, by wire transfer or by
check drawn on any money market center bank.
A-32
<PAGE>
Dated: Wilmington, Delaware
April 19, 1995
Respectfully submitted,
THE GRAND UNION COMPANY
By: /s/ Francis E. Nicastro
------------------------
Francis E. Nicastro
An Officer
WILLKIE FARR & GALLAGHER
Co-counsel for Debtor and
Debtor-In-Possession
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677
(212) 821-8000
By: /s/ Myron Trepper
---------------------------
Myron Trepper (MT-2636)
Barry N. Seidel (BNS-1945)
A Member of the Firm
- and -
YOUNG, CONAWAY, STARGATT
& TAYLOR
Co-counsel for Debtor and
Debtor-In-Possession
11th Fl., Rodney Square North
P.O. Box 391
Wilmington, Delaware 19899-0391
(302) 571-6642
By: /s/ James L. Patton, Jr.
----------------------------
James L. Patton, Jr. (#2202)
Laura Davis Jones (#2436)
A Member of the Firm
A-33
<PAGE>
Exhibit A
<PAGE>
Bankers Trust Company
Mailing Address:
One Bankers Trust Plaza P.O. Box 318, Church Street Station
New York, New York 10006 New York, New York 10008
[CONFORMED COPY]
January 24, 1995
VIA HAND
The Grand Union Company
201 Willowbrook Boulevard
Wayne, New Jersey 07470
Attention: Mr. Francis E. Nicastro
Vice President and Treasurer
Re: The Grand Union Company Credit Facility --
Additional Facility Commitment Letter
------------------------------------------
Gentlemen:
You have advised us that, in connection with a contemplated plan of
reorganization of The Grand Union Company (the "Company"), in order to
provide for (a) the working capital needs of the Company and its subsidiaries
as set forth in the Company's Five Year Business Plan revised as of January
17, 1995 and (b) the issuance of additional letters of credit necessary to
the operations of the Company and its subsidiaries, the Company desires the
aggregate principal amount of credit provided for in the Credit Agreement
dated as of July 14, 1992 among the Company, Grand Union Holdings Corporation
(formerly known as GND Holdings Corporation) ("Holdings"), Grand Union
Capital Corporation ("GU Capital"), the lending institutions party thereto
(the "Existing Lenders"), Bankers Trust Company ("BTCo"), as agent, and
Midlantic Bank, N.A., as co-agent (as amended through the date hereof, the
"Existing Credit Agreement") to be increased by $65,000,000 to an aggregate
principal committed amount of approximately $204,144,371.
Specifically, you have advised us that the Company requests from us
a commitment to amend the Existing Credit Agreement pursuant to an Amended
and Restated Credit Agreement (the "Amended and Restated Credit Agree-
<PAGE>
The Grand Union Company
January 24, 1995
Page 2
ment") to provide (a) an additional $18,000,000 secured term loan facility
(the "C Term Loan Facility") for the purpose of borrowing one term loan on
the closing date of the Amended and Restated Credit Agreement and (b)
$47,000,000 in additional secured revolving credit facilities on the closing
date of the Amended and Restated Credit Agreement (collectively referred to
as the "Additional Facility").
The Company's request for us to consider the Additional Facility
has been made in the context of, and is materially related to, a proposed
restructuring of the Company's capital structure that will be consummated in
connection with a prenegotiated reorganization case under Chapter 11 of Title
11 of the United States Code (the "Reorganization Plan"). You have further
advised us that as part of the Reorganization Plan: (a) the holders of the
Company's 11-1/4% Senior Notes due July 15, 2000 (the "11-1/4% Notes"), and
the Company's 11-3/8% Senior Notes due February 15, 1999 (the "11-3/8%
Notes"; and together with the 11-1/4% Notes, the "Senior Notes"), have agreed
in principle to release the liens and security interests of the Senior Notes
in the Collateral (as defined in the Existing Credit Agreement); and (b) the
holders of the Company's 12-1/4% Senior Subordinated Notes due July 15, 2002
(the "12-1/4% Notes"), the Company's 12-1/4% Senior Subordinated Notes due
July 15, 2002, Series A (the "Series A Notes"), and the Company's 13% Senior
Subordinated Notes due March 2, 1998 (the "13% Notes"; and together with the
12-1/4% Notes and Series A Notes, the "Subordinated Notes"), have agreed in
principle to convert the Company's obligations under the Subordinated Notes
into all of the issued shares of the Company's common stock. Additionally,
you have advised us that the Company will provide for the full principal
payment of other claims against the Company as allowed in the Chapter 11
case.
BTCo, on the terms and subject to the conditions set forth or
referred to herein, is pleased to advise you of its commitment to provide the
Additional Facility. All revolving loans will mature on the fifth
anniversary of the date of the effectiveness of the Loan Documentation (as
hereinafter defined) (the "Closing Date"). The B Term Loan Facility (as
defined in the Existing Credit Agreement) and the C Term Loan Facility will
mature on the seventh anniversary of the Closing Date; PROVIDED, HOWEVER,
that the term loans will be amortized in eight equal quarterly mandatory
prepayments beginning on the fifth anniversary of the Closing Date.
<PAGE>
The Grand Union Company
January 24, 1995
Page 3
In connection with the Additional Facility, BTCo, at its election,
may arrange a syndicate of commercial banks and other financial institutions
(BTCo and such other financial institutions being collectively referred to as
the "Additional Facility Lenders") to provide a portion of the Additional
Facility. Additionally, BTCo is prepared to act as Agent for the Additional
Facility Lenders and to recommend that the Existing Lenders commit to
contribute to the Additional Facility.
This commitment letter is based in material part on the Company's
representations that the Company has successfully completed all required
negotiations to promptly implement the Reorganization Plan and that the
Reorganization Plan is feasible and there is no known impediment to
confirmation and consummation of the Reorganization Plan in a Chapter 11 case
on an expedited basis. Additionally, it is BTCo's position that the relative
status quo among the Company's creditors must be maintained during the brief
duration of the pre- confirmation Chapter 11 case to be pursued by the
Company. Accordingly, in addition to the other requirements and conditions
set forth in this letter, our commitment is subject to the following specific
conditions precedent:
- - TIMELINE FOR CONSUMMATION OF REORGANIZATION PLAN: The Disclosure
Statement for Second Amended Chapter 11 Plan of Reorganization of The
Grand Union Company filed on April 19, 1995 and the order approving the
adequacy thereof entered on April 19, 1995 shall not be materially
amended or modified. A plan of reorganization that is acceptable to the
Existing Lenders and Additional Facility Lenders which incorporates the
Reorganization Plan and an identified and qualified management team to
execute the Reorganization Plan must be confirmed by order of the
Bankruptcy Court on or prior to June 2, 1995 and must be substantially
consummated on or prior to June 16, 1995.
- - CONVERSION OF OTHER DEBT: On the Effective Date of the Reorganization
Plan, the Senior Notes shall be converted to unsecured debt and all
secured liens held by the Senior Noteholders shall be released. The
terms of the indenture to be executed in favor of the Senior Notes as
contemplated by the Reorganization Plan shall be acceptable to BTCo.
(In that regard, the Company is advised that, subject to reinvestment
provisions to be negotiated in the Amended and Restated Credit Agreement:
(a) all pro-
<PAGE>
The Grand Union Company
January 24, 1995
Page 4
ceeds of our collateral must be used to repay the lenders under the
Amended and Restated Credit Agreement; and (b) all proceeds of any future
debt or equity offering must first be used to repay the C Term Loan
Facility and, thereafter, must be used to repay the B Term Loan Facility
and Senior Notes on a PRO RATA basis.) Additionally, the Subordinated
Notes shall be exchanged for common stock of the Company. The only
liens on the Company's assets shall be those securing the obligations
owed pursuant to the Amended and Restated Credit Agreement except with
respect to lessors' interests in capitalized leases and existing
purchase money security interests and other liens on assets having an
aggregate value not exceeding $15,000,000.
- - LIEN PRIORITY AND COLLATERAL: On the Effective Date of the
Reorganization Plan, the Company's obligations under the Amended and
Restated Credit Agreement shall be secured by a perfected, first
priority security interest in all of the assets (including leases) of
the Company, Holdings, GU Capital and each of their respective
subsidiaries; PROVIDED, HOWEVER, that the Additional Facility Lenders
shall be entitled to priority over Existing Lenders who do not
contribute to the Additional Facility up to the entire amount owed to
such Additional Facility Lenders pursuant to the Amended and
Restated Credit Agreement, on terms that must be agreed to in an
intercreditor agreement between the Existing Lenders and the Additional
Facility Lenders. Additionally, the Existing Lenders must also consent
to the Amended and Restated Credit Agreement.
- - PAYMENT OF OTHER CLAIMS: On the later of allowance or the Effective
Date of the Reorganization Plan, the Company shall pay the allowed
claims of administrative and unsecured creditors of the Company
(unless such creditors have agreed to different treatment), including
prepetition and reclamation obligations owed to trade creditors.
BTCo will not support the accelerated payment of prepetition unsecured
claims (except usual and customary prepetition priority claim payments
with respect to the Company's employees) during the brief reorganization
case planned by the Company; PROVIDED, HOWEVER, that if the Court
authorizes such payments such authorization in and of itself shall not
constitute cause for termination of this commitment letter.
<PAGE>
The Grand Union Company
January 24, 1995
Page 5
- - CASH COLLATERAL AND DIP FINANCING FACILITY: Any interim cash collateral
order and any debtor in possession financing facility that may be offered
by the Company for approval in any bankruptcy case shall be on terms that
are acceptable to BTCo as Agent for the Existing Lenders.
- - PAYMENT OF INTEREST, FEES AND EXPENSES: During the pendency of any
bankruptcy case filed by the Company, BTCo and the remaining Existing
Lenders will agree to accrue interest payable under the Existing Credit
Agreement; PROVIDED, HOWEVER that: (a) all such accrued interest is paid
in cash on the Effective Date of the Reorganization Plan; and (b) BTCo
and the Existing Lenders receive prompt periodic reimbursement of fees
and expenses as provided in the Existing Credit Agreement and in this
letter.
BTCo reserves the sole right to apportion in any manner it deems
appropriate the total amount of the Additional Facility among the Additional
Facility Lenders that agree to be a part of the syndicate for the Additional
Facility. The Company understands and agrees that BTCo may employ the
services of any of its affiliates in connection with the syndication of the
Additional Facility (the "Syndication") and that BTCo may share any
information relating to the Company and its subsidiaries with such affiliates
and such affiliates may share any such information relating to the Company
and its subsidiaries with BTCo.
By its acceptance of the terms of this letter in the manner
provided below, the Company agrees that BTCo will act as sole and exclusive
administrative agent and arranger or, if BTCo so requests, as Co-Agent, for
the Amended and Restated Credit Agreement, or if BTCo so requests, any other
financing facility contemplated by the Reorganization Plan (including any
amendments or modifications thereto), unless you and BTCo after reasonable
efforts and in good faith are unable to agree on the terms of such financing.
The Company also agrees to assist and fully cooperate, to the
extent requested by BTCo or any of its affiliates, in achieving the
Syndication, and acknowledges that the Syndication of the Additional Facility
may occur in whole or in part after definitive documentation for the Amended
and Restated Credit Agreement has been executed. The Syndication will be
accomplished by a variety of means, including direct contact during such
Syndication between senior management and advisors of the Company and the
proposed syndicate members.
<PAGE>
The Grand Union Company
January 24, 1995
Page 6
The Company's assistance in connection with the Syndication of the Additional
Facility will also include, if BTCo or any of its affiliates so requests at
any time prior to the closing of the Amended and Restated Credit Agreement,
the restructuring, in a manner mutually acceptable to BTCo and the Company,
of the terms and conditions of the Amended and Restated Credit Agreement if,
in BTCo's sole judgment, any portion of the Syndication of the Additional
Facility shall have been unsuccessful.
Without limitation of the foregoing, to assist BTCo in the
Syndication of the Additional Facility, the Company hereby agrees both before
and after the closing of the Amended and Restated Credit Agreement to (a)
provide and cause its advisors to provide BTCo, BTCo's affiliates and actual
and prospective syndicate members upon request with all information deemed
necessary by BTCo or any of its affiliates to complete such Syndication,
including but not limited to (i) information and evaluations prepared by the
Company and its advisors or on its behalf relating to the transactions
contemplated hereby and (ii) information, projections and valuations
described herein or in the Company's Reorganization Plan in support of the
Company's Reorganization Plan, (b) assist BTCo and its affiliates upon their
request in the preparation of an Information Memorandum to be completed by
March 1, 1995 and used in connection with the Syndication of the Additional
Facility, and (c) make available officers of the Company from time to time
for purposes of the foregoing and to attend and make presentations regarding
the Additional Facility and the Company's and its subsidiaries' businesses
and prospects, as appropriate, at a meeting or meetings of prospective
syndicate members.
BTCo's obligations hereunder are subject to the negotiation,
execution and delivery of a definitive term sheet (the "Term Sheet") and the
negotiation, execution and delivery of definitive documentation for the
Amended and Restated Credit Agreement that, in each case, is in form and
substance satisfactory to BTCo (collectively, the "Loan Documentation"). The
Term Sheet and Loan Documentation shall be prepared by special counsel to
BTCo and shall contain the loan pricing and such covenants, representations
and warranties, events of default, conditions precedent, security
arrangements, indemnities and other terms and provisions as shall be
satisfactory to BTCo. The Loan Documents shall consist of an amendment and
restatement of the Existing Credit Agreement and each other Credit Document
(as defined in the Existing Credit Agreement) and such
<PAGE>
The Grand Union Company
January 24, 1995
Page 7
other documents as BTCo may reasonably require in light of the transactions
contemplated hereby.
As you are aware, BTCo has not had the opportunity to complete its
business, financial or legal due diligence analysis and review of the Company
or its subsidiaries, their respective businesses or the Reorganization Plan
or the other transactions contemplated hereby. BTCo's willingness and
obligations hereunder to provide all or any of the Additional Facility in the
manner contemplated hereby are therefore subject, without limitation, to (a)
the completion of such analysis and review and BTCo's satisfaction with the
results thereof, (b) BTCo's satisfaction with the structure and terms and the
financial, accounting and tax aspects of the Reorganization Plan and the
other transactions contemplated thereby, including the effect of any
prepetition trade payments that may be authorized by the Court on the
Company's capital structure and/or Reorganization Plan and (c) BTCo's
determination that there has not occurred or become known any condition or
any change in the business, operations, assets, condition of the Company or
any of its subsidiaries which in the judgment of BTCo is material and
adverse.
Without limiting the foregoing, if after completing such review and
analysis, BTCo is not satisfied with respect to the business, property,
operations, assets, liabilities, condition (financial or otherwise) or
prospects of the Company or its subsidiaries or their respective businesses,
the feasibility of the Reorganization Plan or the other transactions
contemplated hereby or the ability of the Company to satisfy its obligations
under the Amended and Restated Credit Agreement after giving effect thereto,
BTCO may decline to provide all or any of the Additional Facility. Any
determination or election to be made by BTCo under this letter shall be made
in BTCo's sole discretion. BTCo shall not be responsible or liable for any
damages which may be alleged as a result of its failure to arrange or
participate in the Additional Facility in the event that it declines to
arrange or participate in the proposed financing contemplated by the Amended
and Restated Credit Agreement in accordance with the terms outlined in this
letter or the Term Sheet.
The Company hereby represents, warrants and covenants that all
information (other than projections, if any) and data concerning the Company
and its subsidiaries which has been or is hereafter furnished or otherwise
made avail-
<PAGE>
The Grand Union Company
January 24, 1995
Page 8
able to BTCo and its affiliates by the Company is and will be complete and
correct in all material respects and does not and will not contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements contained therein not misleading in light of the
circumstances under which such statements are made. Projections, if any,
will constitute the Company's good faith estimate of the items projected.
The costs and expenses of BTCo (including the fees and expenses of
Skadden, Arps, Slate, Meagher & Flom, special counsel to BTCo, and Policano &
Manzo, financial advisors to such special counsel) in connection with (a) the
preparation, execution, delivery and enforcement of this letter or any other
document (including, without limitation, the Term Sheet, the Fee Letter (as
hereinafter defined) and the Loan Documentation), (b) BTCo's due diligence
with respect to the Company and its subsidiaries, the Additional Facility,
the Amended and Restated Credit Agreement, the other transactions
contemplated hereby and the Reorganization Plan, (c) the Syndication
(including the preparation of any information for prospective syndicate
members as described above and costs and expenses incurred by BTCo in
connection with any assignment of all or any portion of the Additional
Facility after the initial funding thereof), and (d) the other transactions
contemplated hereby shall be paid by the Company promptly upon request
therefor, regardless of whether the Additional Facility, the Amended and
Restated Credit Agreement, any Syndication or each or any other transaction
contemplated hereby is consummated.
The Company agrees to indemnify and hold harmless BTCo, each
Existing Lender, each prospective and actual member of a syndicate for the
Additional Facility and each of the foregoing entities' respective
affiliates, advisors, directors, officers, agents, attorneys and employees
and each other person or entity, if any, controlling such persons or entities
(all such persons and entities being referred to hereafter as "Indemnified
Persons") from and against all losses, claims, damages, liabilities,
proceedings, actions, suits, investigations, inquiries or expenses of any
kind or nature whatsoever which may be incurred by, asserted against or
involve any Indemnified Person as a result of or arising out of or in any way
related to any of the transactions contemplated hereby (whether or not
consummated) or the preparation, execution, delivery and enforcement of this
letter or the Fee Letter and, upon demand by BTCo, to pay or reimburse any
such Indemnified Person for any legal or other out-of-pocket expenses
<PAGE>
The Grand Union Company
January 24, 1995
Page 9
incurred in connection with investigating, defending, or preparing to defend
any such action, suit, proceeding (including any inquiry or investigation) or
claim (whether or not such Indemnified Person is named as a party to any
action or proceeding out of which any such expenses arise); PROVIDED that the
Company shall not be responsible to any such Indemnified Person for any
losses, claims, damages, liabilities or expenses which resulted primarily
from such Indemnified Person's gross negligence or willful misconduct. If
and to the extent the foregoing obligations are unenforceable for any reason
or are insufficient to hold any Indemnified Person harmless as so provided,
the Company agrees to make the maximum contribution to the payment and
satisfaction of such obligations which is permissible under applicable law.
Neither BTCo, any Existing Lender, any prospective or actual member of any
syndicate for the Additional Facility nor any affiliate of any of the
foregoing persons or entities shall be responsible or liable to the Company
or any other person or entity for consequential damages which may be alleged
as a result of this letter.
By its acceptance of this letter, the Company hereby agrees to pay,
or cause to be paid, to BTCo the non-refundable fees as set forth in the
letter addressed to the Company from BTCo of even date herewith (the "Fee
Letter"). The provisions of this paragraph and the immediately preceding two
paragraphs shall survive any termination of this letter and the consummation
of the transactions contemplated hereby.
By its acceptance of delivery of this letter, the Company agrees
that the Company shall not disclose to any person or entity (other than on a
confidential basis to its directors, officers, employees, auditors and
financial and legal advisors who need to know about this letter and the Fee
Letter) the existence or terms of this letter or the Fee Letter; PROVIDED
that after the execution and delivery by the Company of this letter and the
Fee Letter in accordance with the terms hereof, the Company may disclose this
letter or the terms hereof.
This letter may not be assigned by the Company without the prior
written consent of BTCo. BTCo shall have the right to effect the Syndication
as provided above and BTCo, each Existing Lender and each actual member of a
syndicate for the Additional Facility shall have the right to assign and sell
participations in any interest in the Additional Facility and the Amended and
<PAGE>
The Grand Union Company
January 24, 1995
Page 10
Restated Credit Agreement in accordance with the Term Sheet and the
applicable provisions of the Loan Documentation.
This letter will terminate at 5:00 p.m., New York time, on February
6, 1995, unless, prior to such time, the Company: (a) notifies BTCo in
writing that the commitment letter is to be extended and (b) causes to be
wire transferred to BTCo the Extension Fee provided for in the Fee Letter;
PROVIDED, HOWEVER, that if prior to February 6, 1995 the Company files a
motion with the Bankruptcy Court seeking authority to extend the commitment
letter, then the February 6, 1995 termination date set forth above shall be
extended by the number of days required to obtain a hearing on the motion but
shall not in any event be extended beyond February 15, 1995. If the
commitment letter is extended by the Company and unless earlier terminated in
accordance with the terms hereof, the obligations of BTCo hereunder shall
terminate at 5:00 p.m., New York time, on June 16, 1995.
This letter may be executed in any number of counterparts and by
the different parties hereto on separate counterparts, each of which shall be
an original but all of which shall constitute one and the same instrument.
This letter is solely for the benefit of the Company, BTCo and its affiliates
and, to the extent specified herein, the Existing Lenders and prospective and
actual members of the syndicate for the Additional Facility, and no provision
hereof shall be deemed to confer rights on any other person or entity. THIS
LETTER WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS.
This letter and the Fee Letter supersede all prior discussions and
agreements, and set forth the sole and complete agreement of BTCo and the
Company in respect of the transactions contemplated hereby. Any term of this
letter may be amended, supplemented or otherwise modified and the observance
of any term of this letter may be waived (either generally or in a particular
instance and either retroactively or prospectively), only by a written
document signed by the Company and BTCo.
If the Company is in agreement with the foregoing, please execute
the enclosed copy of this letter and return the same to BTCo, attention Mary
Kay Coyle, no later than 2:00 p.m., New York time, on Tuesday, January 24,
1995, whereupon the undertakings of the parties shall become effective to the
extent and
<PAGE>
The Grand Union Company
January 24, 1995
Page 11
in the manner provided hereby and in the Fee Letter. This offer shall
terminate if not so accepted by the Company on or prior to 2:00 p.m., New
York City time, on January 24, 1995, in which case the Company shall return
all copies and originals of this letter and the Fee Letter to BTCo as
promptly as possible.
Very truly yours,
BANKERS TRUST COMPANY
By: /s/ Michael R. Shraga
---------------------------------
Name: Michael R. Shraga
----------------------------
Title: Managing Director
---------------------------
ACCEPTED AND AGREED TO
AS OF THE DATE FIRST
WRITTEN ABOVE:
THE GRAND UNION COMPANY
By: /s/ Gary D. Hirsch
---------------------------------
Name: Gary D. Hirsch
----------------------------
Title: Chairman of the Board
---------------------------
<PAGE>
Bankers Trust Company
Mailing Address:
Bankers Trust Plaza P.O. Box 318, Church Street Station
New York, New York 10006 New York, New York 10008
[CONFORMED COPY]
February 2, 1995
VIA HAND
The Grand Union Company
201 Willowbrook Boulevard
Wayne, New Jersey 07470
Attention: Mr. Francis E. Nicastro
Vice President and Treasurer
Re: The Grand Union Company Credit Facility --
Additional Facility Term Sheet
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Gentlemen:
Reference is made to the commitment letter dated January 24, 1995
(the "Commitment Letter") addressed to you from Bankers Trust Company
("BTCo"). The parties hereto agree that this letter together with the
preliminary summary of certain terms and conditions of the Amended and
Restated Credit Agreement (as defined in the Commitment Letter) attached as
Exhibit A hereto, constitute the Term Sheet referenced in the Commitment
Letter and that the terms hereof are incorporated in and made a part of the
Commitment Letter. This letter supersedes any prior letters (other than the
Commitment Letter and the Fee Letter (as defined in the Commitment Letter))
from BTCo with respect to the subject matter hereof.
This letter may be executed in any number of counterparts and by
the different parties hereto on separate counterparts, each of which shall be
an original but all of which shall constitute one and the same instrument.
THIS LETTER AND THE TERM SHEET ATTACHED HERETO AS EXHIBIT A WILL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS.
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The Grand Union Company
February 2, 1995
Page 2
If the Company is in agreement with the foregoing and the Term
Sheet, please execute the enclosed copy of this letter and return the same to
BTCo, attention Mary Kay Coyle, no later than 5:00 p.m., New York time, on
Thursday, February 2, 1995, whereupon the undertakings of the parties shall
become effective to the extent and in the manner provided hereby and in the
Commitment Letter and the Fee Letter.
Very truly yours,
BANKERS TRUST COMPANY
By: /s/ Michael R. Shraga
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Name: Michael R. Shraga
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Title: Managing Director
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ACCEPTED AND AGREED TO
AS OF THE DATE FIRST
WRITTEN ABOVE:
THE GRAND UNION COMPANY
By: /s/ Francis E. Nicastro
------------------------------------
Name: Francis E. Nicastro
--------------------------------
Title: Vice President and Treasurer
------------------------------
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EXHIBIT A
$204,144,371 OF
SENIOR SECURED CREDIT FACILITIES
Summary of Certain Terms and Conditions
SUBJECT TO THE COMMITMENT LETTER DATED JANUARY 24, 1995
Capitalized terms used but not defined herein shall have the
respective meanings assigned thereto in the Commitment Letter.
BORROWER:
The Grand Union Company (the "Borrower")
TOTAL COMMITMENT:
A total initial commitment amount of $204,144,371 (the "Total
Commitment"), to be allocated among the facilities set forth below in a
manner which is mutually satisfactory to BTCo and the Borrower.
REVOLVING FACILITY:
(a) FACILITY. A revolving credit facility (the "Revolving
Facility"), with tranches to be allocated in accordance with an intercreditor
agreement (the "Intercreditor Agreement") among the Lenders (as hereinafter
defined), in an initial commitment amount of up to $147,000,000 (the "Total
Revolving Loan Commitment"), of which up to (a) $60,000,000 shall be
available for the issuance of standby letters of credit ("SBLC's"), and (b)
$15,000,000 shall be available for the borrowing of swingline loans
("Swingline Loans"). Loans (including Swingline Loans) made pursuant to the
Revolving Facility ("Revolving Loans") may be repaid and reborrowed to the
extent of the unutilized portion of the Total Revolving Loan Commitment at
the time of reborrowing. The SBLC's will not extend beyond the Final
Revolving Loan Maturity Date. In no event will Revolving Loans outstanding
and outstanding SBLC exposure ever exceed the Total Revolving Loan Commitment
as then in effect.
(b) FINAL REVOLVING LOAN MATURITY DATE. Fifth anniversary of the
Closing Date.
TERM LOAN FACILITY:
(a) FACILITY. A term loan credit facility (the "Term Loan
Facility"; and, together with the Revolving Facility, the "Facilities"), with
tranches to be allocated in accordance with the terms of the Intercreditor
Agreement, in an amount not less than $57,144,371.
(b) FINAL TERM LOAN MATURITY DATE. Seventh anniversary of the
Closing Date. Beginning on the fifth anniversary of the Closing Date, Loans
made pursuant to the Term Loan Facility (the "Term Loans") shall amortize in
eight equal quarterly payments. The Term Loans together with the Revolving
Loans shall hereafter be referred to as the "Loans."
PURPOSE:
Loans may be utilized to provide for working capital and other
general corporate purposes of the Borrower.
AGENT:
Bankers Trust Company ("BTCo")
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LENDERS:
The lenders under the Existing Credit Agreement and syndicates of
commercial banks and other financial institutions to be formed by BTCo.
CLOSING DATE:
That date, which is not earlier than the effective date of the
Reorganization Plan, on or before June 16, 1995 (the "Closing Date").
GUARANTIES:
Each now and hereafter existing subsidiary of the Borrower shall be
required to provide a guaranty of all amounts and other obligations owing under
the Facilities (collectively, the "Guaranties"), subject to such exceptions, if
any, as are acceptable to BTCo and the Required Lenders.
The Guaranties shall contain terms and conditions substantially
similar to those contained in the guaranties entered into in connection with
the Existing Credit Agreement, with such changes as BTCo or the Lenders shall
require.
SECURITY:
The Facilities (and all obligations under the Guaranties) shall be
secured by a perfected first priority security interest in all of the
tangible and intangible assets (including, without limitation, all assets as
described in the Commitment Letter) of the Borrower and its subsidiaries,
whether in existence at the Closing Date or acquired thereafter; PROVIDED,
HOWEVER, that, pursuant to the Intercreditor Agreement, the Additional
Facility Lenders shall have priority (with respect to the Additional Facility
and with respect to those loans owed to and letter of credit exposure of such
Additional Facility Lenders under the Existing Credit Agreement as set forth
in the Intercreditor Agreement) over Existing Lenders who do not contribute
to the Additional Facility.
OPTIONAL REVOLVING LOAN COMMITMENT REDUCTIONS:
Upon 3 business days' prior written notice, the Borrower may
terminate entirely, or reduce permanently, in whole or in part, in $2,000,000
increments, the unutilized portion of the Total Revolving Loan Commitment.
MANDATORY REVOLVING LOAN COMMITMENT REDUCTIONS:
In addition, on terms and conditions substantially similar to those
in the Existing Credit Agreement, once the Term Loans have been repaid in
full, the Total Revolving Loan Commitment shall automatically be reduced on
each day a mandatory prepayment of Term Loans would have been required under
the circumstances described in clauses (i) and (ii) in the section below
entitled "Mandatory Prepayments" if the Term Loans were then outstanding in
such amount by an amount equal to the amount of the required mandatory
prepayment of Term Loans that would have been so required.
OPTIONAL PREPAYMENTS:
Permitted in whole or in part in an amount equal to $2,000,000 upon
2 business days' prior notice, without any premium or penalty; PROVIDED that
Eurodollar Rate Loans shall only be prepayable on the last day of the
interest period applicable thereto. Optional prepayments that are to be
applied to the Term Loans shall be applied ratably to the respective
scheduled prepayments thereof in the inverse order of maturity.
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MANDATORY PREPAYMENTS:
(a) MANDATORY PREPAYMENT OF TERM LOANS. Mandatory Prepayments of
Term Loans shall be required on terms and conditions substantially similar to
those contained in the Existing Credit Agreement; PROVIDED, that, (i) subject
to negotiated reinvestment baskets, all proceeds of collateral securing the
Facilities shall be applied to the prepayment of the Term Loans, (ii) subject
to negotiated baskets, all proceeds of any future indebtedness of the
Borrower for money borrowed, sale-leaseback and other similar transactions
shall be used to prepay the Term Loans and (iii) all proceeds up to
$65,000,000 of any future equity offerings by the Borrower shall be used to
prepay the Loans in accordance with the Intercreditor Agreement.
Mandatory prepayments of Term Loans will be applied to reduce
future scheduled amortization payments in the order and on terms
substantially similar to those contained in the Existing Credit Agreement
subject to such additional provisions relating to allocations between the
Term Loan Facility tranches.
(b) MANDATORY PREPAYMENTS OF REVOLVING LOANS. Revolving Loans
shall be required to be prepaid (and after all Revolving Loans have been
repaid in full, outstanding SBLC's shall be required to be cash
collateralized) at any time that the sum of the aggregate principal amount of
outstanding Revolving Loans plus the outstanding SBLC exposure exceeds the
Total Revolving Loan Commitment as then in effect, in an amount equal to such
excess.
INTEREST RATES:
At the Borrower's option, outstanding Loans may be maintained from
time to time as:
(a) loans ("Base Rate Loans") which bear interest at a rate equal
to the sum (the "Base Rate") of (i) the higher of (A) the Prime Lending Rate
(as defined in the Existing Credit Agreement), (B) the sum of 1/2 of 1% plus
the Adjusted Certificate of Deposit Rate (as defined in the Existing Credit
Agreement), and (C) the sum of 1/4 of 1% plus the Federal Funds Rate (as
defined in the Existing Credit Agreement), plus (ii) the Applicable Margin;
and/or
(b) loans ("Eurodollar Rate Loans") which bear interest at a rate
equal to the sum of the relevant one, two, three or six months Eurodollar
Rate (as defined in the Existing Credit Agreement), plus the Applicable
Margin;
PROVIDED that: (i) all Loans will be subject to terms and conditions
substantially similar to those contained in the Existing Credit Agreement and
(ii) Swingline Loans shall only be maintained as Base Rate Loans.
"Applicable Margin" shall mean with respect to: (i) the Revolving
Loans, (A) 1-1/2% in the case of any such Loans that are Base Rate Loans and
(B) 3% in the case of any such Loans that are Eurodollar Rate Loans and (ii)
the Term Loans, (A) 2% in the case of any such Loans that are Base Rate Loans
and (B) 3-1/2% in the case of any such Loans that are Eurodollar Rate Loans.
Interest on Loans shall be payable as set forth in the Existing
Credit Agreement. Interest periods for Eurodollar Loans shall be one, two,
three or six months.
DEFAULT RATE:
Overdue amounts under the Facilities shall bear interest at a rate
equal to the greater of (a) the Base Rate in effect from time to time plus
the sum of 2% and the applicable base rate margin, and (b) the interest rate
otherwise applicable thereto (without giving effect to any reductions to such
rate) plus 2% per annum. Interest at the Default Rate shall be payable on
demand.
UNUSED COMMITMENT FEE:
1/2 of 1% per annum of the average daily unused amount of the Total
Revolving Loan Commitment, commencing on the Closing Date and payable monthly
in arrears on the last day of each month.
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SBLC FEES:
3% per annum on the amount available under each outstanding SBLC,
commencing on the Closing Date and payable in arrears on the last day of each
month for the account of all the Lenders. In addition, a 1/4 of 1% per annum
facing fee as well as customary issuance and drawing charges, in respect of
each outstanding SBLC will be payable by the Borrower.
ASSIGNMENT FEES:
$3,500 per assignment payable upon execution to the Agent (such fee
not to be paid by the Borrower). An additional fee to be negotiated will be
payable to any other facing bank upon any assignment.
CALCULATION OF FEES AND INTEREST:
Interest, Unused Commitment Fees and SBLC Fees shall be calculated
on the basis of a 360-day year for the actual number of days elapsed.
NOTIFICATION SCHEDULE:
Eurodollar
Rate Loans - 3 business days
Base Rate Loans - 1 business day
Swingline Loans - same day, if notice given by 11:00 A.M., New York
City time
CONDITIONS TO INITIAL LOANS:
Usual conditions for facilities of this type and such other
conditions as may be appropriate in the context of the proposed
Reorganization Plan, including but not limited to the conditions set forth in
the Commitment Letter and the following:
(a) Execution of the Amended and Restated Credit Agreement, the
Intercreditor Agreement and the other credit documents in form and substance
satisfactory to BTCo and the Existing Lenders.
(b) The Guaranties shall have been executed and delivered.
(c) All orders, including without limitation the confirmation
order, of the Bankruptcy Court entered in connection with the Reorganization
Plan (as amended or supplemented from time to time and approved by BTCo, the
Existing Lenders and the other Lenders (the "Confirmation Orders")) shall be
satisfactory to BTCo (which orders shall, except as agreed to by BTCo, be
final orders on the Closing Date) and, as of the Closing Date and after
giving effect to the initial Loans, such Reorganization Plan shall have been
substantially consummated in accordance with the terms thereof and the terms
of the Confirmation Orders.
(d) All aspects of the equity ownership and corporate and
operational governance (including the composition of the Board of Directors
and the management of the Borrower) of the Borrower and its subsidiaries, to
the extent not expressly set forth in the Reorganization Plan, shall be
satisfactory to BTCo. Additionally, all agreements relating to, and the
corporate and capital structure of, the Borrower and its subsidiaries after
giving effect to the transactions contemplated hereby, and all organizational
documents of such entities, to the extent not expressly set forth in the
Reorganization Plan, shall be satisfactory to BTCo.
(e) All necessary governmental and all material third party
approvals and/or consents in connection with the consummation of the
Reorganization Plan and the Facilities shall have been obtained and remain in
effect, and all applicable waiting periods shall have expired without any
action being taken by any competent authority which restrains, prevents, or
imposes materially adverse conditions upon, the consummation of the
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Reorganization Plan and the Facilities. Additionally, there shall not exist
any judgement, order, injunction or other restraint prohibiting or imposing
materially adverse conditions upon the Facilities.
(f) No litigation, investigation or inquiry by any entity (private
or governmental) shall be pending or threatened with respect to the
Facilities, any of the other transactions contemplated hereby or any
documentation executed in connection herewith, or with respect to any
material debt of the Borrower or its subsidiaries which is to remain
outstanding after the Closing Date, or which BTCo or the Required Lenders
shall determine could have a materially adverse effect on the ability of the
Borrower and its subsidiaries to perform their obligations to the Lenders or
the business, property, assets, condition (financial or otherwise) or
prospects of the Borrower and its subsidiaries taken as a whole.
(g) The Lenders shall have received legal opinions from counsel,
and covering matters, acceptable to BTCo (including, without limitation, the
absence of any conflict with any of the agreements and instruments governing
the Borrowers indebtedness, and local counsel opinions in respect of all
mortgages and other security documents securing the Facilities).
(h) The indebtedness of the Borrower and its subsidiaries existing
on the Closing Date, including without limitation capital leases, shall be as
described in the Reorganization Plan (including, without limitation, the
Borrower's proposed amendment of the Senior Notes and the conversion of the
Subordinated Notes on the terms set forth in the Commitment Letter) and, to
the extent not described in the Reorganization Plan, shall be satisfactory to
BTCo, and the Borrower and its subsidiaries shall have no outstanding
indebtedness other than as described in the Reorganization Plan and the
Post-Confirmation Projections defined below (with exceptions, if any, as may
be acceptable to BTCo in its sole discretion).
(i) The Lenders shall have received the five-year annual financial
projections included in the BTCo confidential Information Memorandum
regarding the Borrower and monthly projections through the Fiscal Year ended
in the year 1996 and annual projections through the Fiscal Year ended in the
year 2000 of the Borrower and its subsidiaries (collectively, the
"Post-Confirmation Projections"), and BTCo shall be satisfied with the
accounting practices and procedures to be utilized by the Borrower and its
subsidiaries, and any changes to such Post-Confirmation Projections prior to
the Closing Date shall be satisfactory to BTCo.
(j) BTCo shall be satisfied on the Closing Date (i) that the
Borrower's cash-on-hand, trade support and other operations are as set forth
in the Post-Confirmation Projections and (ii) with the results of operations
set forth in the most recent financial statements delivered by the Borrower
prior to such date.
(k) To the extent not previously received, BTCo shall have
received audited financial statements for the most recent fiscal year of the
Borrower.
(l) To the extent not previously established, a cash management
system, together with cash concentration accounts for the Borrower shall have
been established to the satisfaction of BTCo.
(m) To the extent not previously delivered, the Lenders shall have
received (i) financial statements for the most recent fiscal period ending at
least 30 days prior to the Closing Date certified by the chief financial
officer of the Borrower, and (ii) such inventory analyses as BTCo shall
request, in each case satisfactory to BTCo.
(n) To the extent not previously accomplished, the termination of,
and repayment of all amounts owing under, or with respect to letters of
credit, provisions for payment of reimbursement obligations by cash
collateralization or the issuance of Letters of Credit in accordance with the
terms thereof, under the debtor in possession financing facility.
(o) All franchises, licenses, permits, certifications,
accreditation and other rights, consents and approvals which are necessary
for the operations of the Borrower's and its subsidiaries' respective
businesses after giving effect to the transactions contemplated hereby shall
be in full force and effect.
(p) All loans and other financing to the Borrower and its
subsidiaries shall be in full compliance with all applicable requirements of
the margin regulations.
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(q) All costs, fees, expenses (including, without limitation,
legal fees and expenses) and other compensation contemplated hereby and by
the Commitment Letter and the Fee Letter that are payable to the Lenders
and/or BTCo shall have been paid to the extent due.
(r) The Lenders shall have received, and shall be satisfied with,
all appropriate information and advice of professional consultants,
including, without limitation, (A) environmental and hazardous substance
(including hazardous or toxic materials and waste, or medical waste)
assessments, reports or analyses, which, in each such case, shall be in
scope, and in form and substance, acceptable to BTCo and (B) insurance
certificates that are in form and substance substantially similar to the ones
required by the Existing Credit Agreement.
(s) All labor and related employee agreements and liabilities, and
all pension and other employee benefit plans and liabilities of the Borrower
and its subsidiaries after giving effect to the Reorganization Plan shall be
satisfactory to BTCo.
(t) Subject to the qualifications and exceptions referred to under
the "Security" section above, the Lenders shall have a perfected first
priority security interest in all of the assets of the Borrower and its
subsidiaries pursuant to documentation that is satisfactory in form and
substance to BTCo and the Lenders; PROVIDED, HOWEVER, that liens with respect
to lessors' interests in capitalized leases and existing purchase money
security interest, interests of consignors in goods shipped to the Borrower
on consignment, and other liens on assets having an aggregate value not
exceeding $15,000,000 in the aggregate will be permitted.
(u) There shall not have occurred and be continuing a material
disruption of or material adverse change since the date of the Commitment
Letter in financial, banking or capital markets that in the sole discretion
of BTCo has materially adversely impaired the syndication of loans or the
placement of securities of generally the same type and size as any of the
types of loans contemplated by the Revolving Facility or the Term Loan
Facility in such markets; and the Closing Date occurs on a date that is no
earlier than April 17, 1995.
CONDITIONS TO ALL LOANS AND SBLC'S:
Usual for facilities of this type, including but not limited to the
following:
(a) No Event of Default or default (including, but not limited to,
cross-defaults) under the Facilities;
(b) All representations and warranties are true and correct on the
date of such borrowing or issuance, as applicable, as though made on and as
of such date, except for those representations and warranties expressly
relating to a particular point in time;
(c) Since January 28, 1995, nothing shall have occurred (and the
Lenders shall have become aware of no facts or conditions not previously
known) which BTCo or the Required Lenders shall determine (i) could have a
material adverse effect on the rights or remedies of the Lenders or the Agent
or on the ability of the Borrower and its subsidiaries to perform their
obligations to the Lenders, or (ii) has had or could have a materially
adverse effect on the business, property, assets, conditions (financial or
otherwise) or prospects of the Borrower and its subsidiaries taken as a
whole; and
(d) Receipt of borrowing notices and other documents or opinions
as requested by the Agent or any Lender.
REPRESENTATIONS AND WARRANTIES:
Usual for facilities of this type and such additional ones as may
be appropriate in the context of the proposed Reorganization Plan, including
but not limited to representations and warranties regarding corporate powers
and organization, good standing, third party approvals, enforceability of the
documentation for the Facilities, no violation, use of proceeds, financial
statements, government approvals, Investment Company Act, Public Utility
Holding Company Act, litigation or governmental investigations materially
affecting the business, assets, property, condition (financial or otherwise)
or prospects of the Borrower and its subsidiaries taken as a whole, no
material ad-
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verse change in the business, assets, property, condition (financial or
otherwise) or prospects of the Borrower and its subsidiaries taken as a
whole, compliance with laws (including, but not limited to ERISA,
environmental and labor), taxes, title to properties, patents and trademarks,
disclosure, employee benefit plans, labor relations, collective bargaining
agreements, existing indebtedness, restrictions on subsidiaries and the first
priority nature of the security interests in the property intended to secure
the Facilities; it being understood that each such representation and
warranty shall contain materiality thresholds substantially similar to those
set forth for such type of representation and warranty in the Existing Credit
Agreement.
AFFIRMATIVE COVENANTS:
Usual for facilities of this type and such additional ones as may
be appropriate in the context of the proposed Reorganization Plan, including
but not limited to affirmative covenants concerning the maintenance of
properties and insurance, good repair, access to and inspection of books,
records, property and business, payment of taxes and other liabilities,
compliance with statutes (including, but not limited to, environmental
statutes, ERISA and worker health and safety), maintenance of corporate
existence and franchises, maintenance of corporate separateness, maintenance
of fiscal years and fiscal quarters, additional security, further assurances,
interest rate protection and delivery of reports, financial statements,
certificates, notices of litigation, defaults, ERISA events and other adverse
actions and other information requested from time to time by any Lender,
through the Agent.
NEGATIVE AND FINANCIAL COVENANTS:
Usual for facilities of this type and such additional ones as may
be appropriate in the context of the proposed Reorganization Plan, it being
understood that the negative and financial covenants and the exceptions
thereto shall be substantially similar to those contained in the Existing
Credit Agreement, but with such changes and additions thereto (including,
without limitation, such changes to (i) the required ratios and other
financial maintenance and incurrence tests contained therein, and (ii) the
respective amounts of the numerous indebtedness, lien, investment, dividend
and other baskets contained therein) as BTCo may require in light of the
Reorganization Plan and the other transactions contemplated thereby and the
capital structure of the Borrower after giving effect thereto. Although the
negative and financial covenants have not yet been specifically determined,
it is anticipated that the negative and financial covenants shall in any
event include, without limitation, with respect to the Borrower and its
subsidiaries: (a) Limitations on mergers, consolidations, sale or purchase of
assets, etc.; (b) Limitations on liens; (c) Limitations on indebtedness; (d)
Restrictions on capital expenditures; (e) Restrictions on advances,
investments and loans, etc.; (f) Limitations on dividends; (g) Restrictions
on transactions with affiliates; (h) Restrictions on changes in business; (i)
Financial covenants, including the following: (i) EBITDA tests; (ii) Fixed
charge coverage ratio tests; (iii) EBITDA to total cash interest expense
tests; (iv) Cumulative EBITDA minus adjusted consolidated capital
expenditures tests; and (v) Certain additional financial covenants; (j)
Limitation on voluntary payments, preferred stock, etc.; (k) Restrictions on
issuance of subsidiary stock; (l) Limitations on restrictions affecting
subsidiaries; (m) No other post closing designated senior indebtedness; and
(n) Restrictions on voluntary prepayments of debt, amendments to the
transaction documents, etc.
EVENTS OF DEFAULT:
Usual for facilities of this type and such additional ones as may
be appropriate in the context of the proposed Reorganization Plan, it being
understood that the events of default shall be substantially similar to those
contained in the Existing Credit Agreement, but with such changes and
additions thereto as BTCo may require in light of the Reorganization Plan and
the other transactions contemplated hereby and the capital structure of the
Borrower after giving effect thereto.
INCREASED COSTS AND YIELD PROTECTION:
Customary for facilities of this type, including protective
provisions for such matters as defaulting banks, capital adequacy, increased
costs, funding losses, illegality and withholding taxes.
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REQUIRED LENDERS:
As set forth in the Intercreditor Agreement, but in any event not
more than 51% of the Total Commitment.
ASSIGNMENTS AND PARTICIPATIONS:
The Borrower may not assign its rights or obligations without the
consent of the Lenders. Assignments by the Lenders will be permitted with
the consent of the Agent and, in the case of assignments of Revolving Loans
to non- Lenders, the facing bank, which consents shall not be unreasonably
withheld, in minimum amounts of $5,000,000 in the case of assignments to
non-Lenders. Assignments to Federal Reserve Banks shall not require consent.
Participations by the Lenders shall be permitted and participants
may be granted voting rights limited to decisions affecting changes in
amount, rate, fees, and maturity date. Participants will be entitled to the
same benefits as the Lenders with respect to the provision of information and
also with respect to increased costs and yield protection, but only to the
extent the participating Lender would have incurred such costs. Assignments
and participations shall be subject to such other limitations as BTCo may
require.
EXPENSES AND INDEMNIFICATIONS:
All out-of-pocket expenses and costs of the Agent in connection
with the syndication of the Facilities (including but not limited to
printing, duplicating, mailing, travel expenses) and in connection with the
preparation, execution, and delivery of documentation evidencing the
Facilities, and waivers, consents and amendments thereof (including fees and
expenses of Skadden, Arps, Slate, Meagher & Flom, special counsel to BTCo,
and Policano & Manzo, L.L.C., financial advisors to such special counsel)
shall be paid by the Borrower. Out- of-pocket costs and expenses of the
Lenders and the Agent with respect to stamp and documentary taxes and
enforcement shall be paid by the Borrower. The Borrower shall indemnify the
Agent and each Lender for, among other customary items, costs, losses,
liabilities and damages of the Lenders and the Agent arising from litigation,
proceedings or other claims.
GOVERNING LAW:
State of New York
THE TERMS AND CONDITIONS OF THIS TERM SHEET ARE NOT LIMITED TO THOSE
CONTAINED IN THIS SUMMARY.
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Exhibit B
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4/18/95
MTH Settlement Agreement
Miller Tabak Hirsch & Co.
331 Madison Avenue
12th Floor
New York, New York 10017
, 1995
The Grand Union Company
201 Willowbrook Boulevard
Wayne, New Jersey 07470
Dear Sirs:
In connection with, among other things, (i) the agreement dated July 22,
1992 (the "Agreement") between Miller Tabak Hirsch & Co. ("MTH") and The
Grand Union Company (the "Company") and (ii) the Second Amended Plan of
Reorganization dated April , 1995 (the "Plan") of the Company filed on
April , 1995 in connection with the chapter 11 case filed by the Company on
January 25, 1995 in the United States Bankruptcy Court for the District of
Delaware, this will confirm our agreement as follows:
1. Termination of Agreement. The Agreement shall be terminated as of the
Effective Date, as such term is defined in the Plan, and the obligations of
the Company under the Agreement, including its obligation to pay fees to MTH
in the amount of $750,000 per year for financial services rendered by MTH,
shall cease as of the Effective Date. The Company shall remain obligated to
pay to MTH all fees accrued prior to the Effective Date.
2. Indemnification of MTH Entities. The Company hereby confirms that,
notwithstanding the termination of the Agreement, it will indemnify, pay
contribution to, reimburse and hold harmless MTH and its present and former
partners, officers, employees, advisors, attorneys, consultants, agents and
representatives, including Messrs. Martin A. Fox, Glenn L. Goldberg, Claude
Incaudo and James A. Lash, and any person or entity that directly or
indirectly controls MTH, including Gary Hirsch, Jeffrey Miller and Jeffrey
Tabak (MTH and any such partner, officer, employee, advisor, attorney,
consultant, agent, representative, person or entity being hereinafter
referred to individually as an "MTH Entity" and collectively as the "MTH
Entities"), from and against any losses, claims, damages or liabilities,
joint or several, including the reimbursement of legal and other expenses
(including costs of investigation) in connection with any action, suit or
proceeding, whether commenced or threatened, incurred by any MTH Entity or to
which any MTH Entity may become subject, in connection with the services or
matters which are the subject of the Agreement, which services the parties
agree include the performance of services of any of the MTH Entities to the
Company or any direct or indirect subsidiary thereof, Grand Union Capital
Corporation ("GUCC") or Grand Union Holding Corporation ("GUHC") (GUCC, GUHC
or any such other subsidiary hereinafter referred to individually as an
"Affiliate" and collectively as the "Affiliates") for or at the request of
the Company, prior to the Effective Date, whether prior to the Filing Date
(as defined in the Plan) or not; provided, however, that the indemnification,
contribution, reimbursement or hold harmless provisions of this paragraph 2
shall not cover any claim to be indemnified, reimbursed or held harmless by
any MTH Entity arising out of or related, directly or indirectly, to any
action, suit or proceeding against any MTH Entity (i) brought by GUCC or
GUHC, (ii) brought by any person which is a present or former purchaser,
seller, underwriter or owner of present or former securities of the Company,
its predecessors or any present or former Affiliate thereof, including,
without limitation, GUCC or GUHC, in such capacity, (iii) brought by any
trustee, receiver or other representative on behalf of, or asserting the
rights of GUCC, GUHC or any other person described in clause (i) hereof, or
(iv) brought by any other person (a "Third Party Claimant") against an MTH
Entity asserting claims for contribution, reimbursement or indemnity by such
Third Party
<PAGE>
Claimant arising out of or related to any action, suit or proceeding against
such Third Party Claimant which, had it been brought against an MTH Entity,
would be described in clauses (i), (ii) or (iii) hereof (such claims
described in clauses (i), (ii), (iii) and (iv) being hereinafter referred to
as the "Excluded Claims"); and provided further, however, that the Company
shall not be liable to any MTH Entity as an indemnified party hereunder in
respect of any loss, claim, damage or liability to the extent that a court
having jurisdiction shall have determined by a final judgment that such loss,
claim, damage or liability of such indemnified party resulted from the
willful misfeasance or gross negligence of such indemnified party. In the
event that the foregoing indemnity, contribution or reimbursement is
unavailable or insufficient to indemnify and hold such MTH Entity harmless,
then the Company shall contribute to amounts paid or payable by such MTH
Entity in respect of such losses, claims, damages and liabilities in such
proportion as appropriately reflects all equitable considerations, including
but not limited to the relative benefits received by, and fault of, the
Company or such Affiliate on the one hand, and such MTH Entity, on the other
hand, in connection with the matters as to which such losses, claims, damages
or liabilities relate. For purposes of this agreement, the term "MTH Entity"
shall exclude any advisor, financial advisor, investment banker (including
Goldman, Sachs & Co., BT Securities Corporation and Nomura Securities
International), attorney, or consultant directly engaged by the Company or
any Affiliate of the Company and shall also exclude any person or entity
other than the individuals expressly named above who are designated by MTH to
be excluded from being an MTH Entity.
3. Limited Liability Relating to Excluded Claims.
(a) To the extent that any losses, claims, damages or liabilities
(including the reimbursement of legal and other expenses, including costs of
investigation), arise out of Excluded Claims ("Excluded Claims Liability"),
the Company shall indemnify, pay contribution or reimburse MTH or any other
MTH Entity in respect of Excluded Claims as set forth in this paragraph 3.
(b) The Company and MTH agree that the Company shall indemnify, pay
contribution or reimburse MTH and the other MTH Entities for the first
$3,000,000 of any Excluded Claims Liability and that any Excluded Claims
Liability above $3,000,000 shall be shared, 662/3% to be borne by the Company
and 331/3% to be borne by MTH or such other MTH Entities; provided that the
Company's indemnity, contribution and reimbursement obligations under this
paragraph 3 shall not exceed $13,000,000 in the aggregate; and provided
further that the first $3,000,000 of any Excluded Claims Liability shall be
increased to $3,150,000 and the limit on the Company's indemnity,
contribution and reimbursement obligations under this paragraph shall be
increased to $14,000,000 in the aggregate if the release by Federated
Research Corp. referred to in paragraph 5 hereof is not delivered for any
reason to MTH and any claim is asserted by or on behalf of Federated Research
Corp. (including any claim for contribution or reimbursement) against MTH or
any MTH Entity or Federated Research Corp. commences an action, suit or
proceeding against MTH or any MTH Entity in connection with the Company or
any Affiliate of the Company (the Company's obligations as set forth and
limited in this clause (b) of this paragraph 3 are hereinafter referred to as
the "Excluded Claims Fund").
(c) The Company agrees that the Excluded Claims Fund may be used, subject
to the limitations and allocations thereof as set forth in clause (b) of this
paragraph 3, to pay any judgment, settle any claim, pay any legal or other
expense or pay any contribution or reimbursement and, in the sole and
absolute discretion of Gary Hirsch or his designee, any loss, claim, damage
or liability incurred by or asserted against any present or former officer or
director of the Company, GUCC or GUHC that is not an MTH Entity (the
"Continuing Management Group") arising out of Excluded Claims (as used here
such term shall have the definition as set forth in Section 15.06(b) of the
Plan), and that any such settlement in respect of any asserted Excluded
Claims Liability or such Excluded Claims shall be in the sole and absolute
discretion of Gary Hirsch or his designee.
(d) The Company agrees to pay promptly its share, as determined under the
provisions of clause (b) of this paragraph 3, of (i) any Excluded Claims
Liability that is a legal or other expense incurred in connection with
defending or preparing to defend any Excluded Claims Liability promptly upon
being furnished an
2
<PAGE>
invoice for such expense that has been approved by Gary Hirsch or his
designee (whether for an expense of MTH or any MTH Entity) with a
certification of Gary Hirsch or his designee that such expense is subject to
reimbursement hereunder, (ii) any judgment against MTH or any other MTH
Entity unless a stay of execution of such judgment is obtained within 20 days
after the date of such judgment and such stay is thereafter fully maintained
in effect, and (iii) any settlement approved by Gary Hirsch or his designee
described in clause (c) of this paragraph 3.
(e) The Company agrees that the first $3,000,000 of the Company's
obligation for the Excluded Claims Fund shall be deposited in escrow on the
Effective Date on the terms and with the escrow agent described in the Escrow
Agreement annexed hereto as Exhibit A.
(f) For purposes of this paragraph 3 and the determination of Excluded
Claims, the term "partners" as used in paragraph 2 above with respect to an
MTH Entity shall include all partnerships or other persons or entities which
may be general or limited partners of MTH and their respective partners,
shareholders, directors, officers and employees.
(g) The Company has agreed as provided in the Plan to pay certain legal
fees and expenses of the "GUHC and GUCC Legal Advisors" (as such term is
defined in the Plan). MTH agrees that the amount paid by the Company to the
GUHC and GUCC Legal Advisors for services rendered in connection with the
dissolution of GUCC and GUHC as provided in Section 2.04(b) of the Plan shall
be applied against the first $3,000,000 or $3,150,000, as the case may be, of
the Excluded Claims Fund and reduce the Company's Excluded Claims Liability
under clause (b) of this paragraph 3 by such amount.
4. Insurance. The Company agrees that any insurance presently in effect
covering officers and directors of the Company, GUCC or GUHC will remain in
full force and effect with coverage substantially similar in amounts and
terms at the sole expense of the Company for not less than six years after
the Effective Date of the Plan.
5. Releases of MTH and Other MTH Entities. The Company shall release MTH
and each other MTH Entity from all claims, losses, damages and liabilities
and all suits, actions and causes of action which the Company has or may have
against MTH or any other MTH Entity arising out of any act or failure to act
of MTH or any other MTH Entity in connection with the Company or any
Affiliate of the Company, including any transaction or agreement to which the
Company or any Affiliate of the Company was or is a party and any security,
note, instrument or other obligation issued by the Company or any Affiliate
of the Company, and MTH shall similarly release the Company and such
Affiliates, all such releases to become effective upon the Effective Date of
the Plan. In addition, Putnam Investment Management and various funds managed
by it or its affiliates, Federated Management and various funds managed by it
or its affiliates, and Leland Zaubler shall execute releases in favor of MTH
and the other MTH Entities by which MTH and such MTH Entities shall be
released from all claims arising in connection with the Company, GUHC, and
GUCC and shall on or before April 21, 1995 deliver such releases to counsel
for MTH to be held in escrow pursuant to the Escrow Agreement annexed hereto
as Exhibit B until the Effective Date of the Plan or any plan which is
substantially similar to the Plan, whereupon such releases shall be delivered
to MTH, provided that the releases executed by Federated Management and
various funds managed by it and its affiliates and by Leland Zaubler shall be
delivered to MTH only if the Plan or such substantially similar Plan, the
terms of which are not less advantageous to such parties in any material
respect, as confirmed by the Bankruptcy Court includes the same or
substantially similar release provisions as those contained in Sections 14.01
(b)(i) and 14.01 (c) of the Plan. Notwithstanding anything in the Plan to the
contrary, neither MTH nor any MTH Entity shall have waived or released or be
deemed to have waived or released any rights it may have against any person
or entity which has not released or is not deemed to have released MTH or
such MTH Entity of all claims arising in connection with the Company, GUHC or
GUCC. The provisions of this agreement shall not affect or release any
agreement or obligation between the Company and Penn Traffic Company.
6. Amended Plan of Reorganization of Company. Except to the extent that any
such release prevents confirmation of the Plan, the Company agrees (i) to
provide for the release and settlement of all claims, losses,
3
<PAGE>
damages and liabilities and Causes of Action (as such term is defined in the
Plan) against MTH and the other MTH Entities as set forth in the Plan and
(ii) to otherwise provide for the rights and remedies of MTH and the other
MTH Entities and benefits to MTH and the other MTH Entities as set forth in
the Plan.
7. Legal Expenses. The reasonable legal expenses of MTH for services of
Denis F. Cronin and Gilmartin, Poster & Shafto incurred in connection with
the negotiation and preparation of this agreement, the Plan, and otherwise in
connection with the Company's pending chapter 11 case in the United States
Bankruptcy Court for the District of Delaware, will be paid by the Company.
8. Effective Date. This agreement shall become effective on the Effective
Date of the Plan.
9. Headings. Headings are for reference only and are to be ignored in
interpreting this agreement.
10. Counterparts. This agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
taken together shall constitute one and the same instrument.
11. Entire Agreement. This agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof,
integrates all of the terms and conditions mentioned herein or incidental
hereto, and supersedes all oral and written negotiations and agreements with
respect to the subject matter hereof.
12. Governing Law. This agreement may not be changed orally, shall be
binding on the respective successors and assigns of the parties hereto, and
shall be governed by and construed and interpreted in accordance with the
laws of the State of New York.
Very truly yours,
Miller Tabak Hirsch & Co.
By
----------------------------------
Accepted and Agreed:
The Grand Union Company
By
-----------------------------------
BY ITS SIGNATURE BELOW, EACH OF THE
UNDERSIGNED AGREES TO EXECUTE AND
DELIVER THE RELEASE ON THE TERMS
DESCRIBED IN THE SECOND SENTENCE OF
PARAGRAPH 5 OF THIS AGREEMENT:
EACH OF PUTNAM DIVERSIFIED INCOME
TRUST, PUTNAM HIGH INCOME CONVERTIBLE
AND BOND FUND, PUTNAM MANAGED HIGH
YIELD TRUST, PUTNAM CAPITAL MANAGER
TRUST-PCM HIGH YIELD FUND, PUTNAM
MASTER INCOME TRUST, PUTNAM PREMIER
INCOME TRUST, PUTNAM MASTER
INTERMEDIATE INCOME TRUST, PUTNAM
CAPITAL MANAGER TRUST-PCM DIVERSIFIED
IN-
4
<PAGE>
COME, PUTNAM ASSET ALLOCATION
FUNDS-BALANCED PORTFOLIO, PUTNAM
ASSET ALLOCATION FUNDS-CONSERVATIVE
PORTFOLIO, PUTNAM ASSET ALLOCATION
FUNDS-GROWTH PORTFOLIO, PUTNAM HIGH
YIELD MUNICIPAL TRUST, PUTNAM GLOBAL
GOVERNMENTAL INCOME TRUST, PUTNAM
HIGH YIELD ADVANTAGE FUND, PUTNAM
HIGH YIELD TRUST AND PUTNAM MANAGED
HIGH YIELD TRUST
By:
-----------------------------------
PUTNAM DIVERSIFIED INCOME
PORTFOLIO/SMITH BARNEY/TRAVELERS
SERIES FUND BY PUTNAM INVESTMENT
MANAGEMENT
By:
-----------------------------------
EACH OF SOUTHERN FARM BUREAU ANNUITY
INSURANCE COMPANY TRAVELERS SERIES
FUND, AMERITECH PENSION TRUST, US
BOND TRUST 93, US BOND TRUST 91, US
BOND TRUST 92, US BOND TRUST 94-03,
US BOND TRUST 93-11, CENTRAL STATES,
SOUTHEAST AND SOUTHWEST AREAS PENSION
FUND, US BOND TRUST 91-12, US BOND
TRUST 90, MARSH & McLENNAN COMPANIES,
INC. U.S. RETIREMENT PLAN AND PUTNAM
EMBASSY FUNDS LTD. DIVERSIFIED INCOME
FUND BY THE PUTNAM ADVISORY COMPANY,
INC.
By:
-----------------------------------
FEDERATED ADVISERS AS
ATTORNEY-IN-FACT FOR FEDERATED HIGH
YIELD TRUST, FIXED INCOME SECURITIES,
INC. ON BEHALF OF ITS STRATEGIC
INCOME FUND, INVESTMENT SERIES FUNDS,
INC. ON BEHALF OF ITS FORTRESS BOND
FUND, INSURANCE MANAGEMENT SERIES ON
BEHALF OF ITS CORPORATE BOND FUND,
AND LIBERTY HIGH INCOME BOND FUND,
INC.
By:
-----------------------------------
- ---------------------------
LELAND ZAUBLER
5
<PAGE>
EXHIBIT A
[To be provided and executed on or
prior to the Effective Date of the Plan]
<PAGE>
EXHIBIT B
[To be provided and executed on or
prior to the Effective Date of the Plan]
<PAGE>
Exhibit C
<PAGE>
THE GRAND UNION COMPANY
BY-LAWS
As restated on , 1995.
ARTICLE I.
Stockholders
Section I. The annual meeting of the stockholders of the Corporation for the
purpose of electing directors and for the transaction of such other business as
may properly be brought before the meeting shall be held at such place, within
or without the State of Delaware, and at such hour, as may be determined by the
Board of Directors, on the third Wednesday in June of each year (or if said day
be a legal holiday then on the next succeeding day not a legal holiday), or on
such later date, not later than 30 days thereafter, as may be fixed by the
Board of Directors.
Section II. Special meetings of the stockholders may be held upon call of the
Board of Directors or of the Executive Committee or of the Chairman of the
Board (and shall be called by the Chairman of the Board at the request in
writing of stockholders owning a majority of the outstanding shares of the
Corporation entitled to vote at the meeting) at such time and at such place
within or without the State of Delaware, as may be fixed by the Board of
Directors or by the Executive Committee or the Chairman of the Board or by the
stockholders owning a majority of the outstanding stock of the Corporation
entitled to vote, as the case may be, and as may be stated in the notice
setting forth such call.
Section III. Notice of the time and place of every meeting of stockholders
shall be delivered personally or mailed at least ten days previous thereto to
each stockholder of record entitled to vote at the meeting, who shall have
furnished a written address to the Secretary of the Corporation for the
purpose. Such further notice shall be given as may be required by law. Meetings
may be held without notice if all stockholders entitled to vote at the meeting
are present, or if notice is waived by those not present.
Section IV. The holders of record of a majority of the issued and outstanding
shares of the Corporation, which are entitled to vote at the meeting, shall,
except as otherwise provided by law, constitute a quorum at all meetings of the
stockholders. If there be no such quorum present in person or by proxy, the
holders of a majority of such shares so present or represented may adjourn the
meeting from time to time.
Section V. Meetings of the stockholders shall be presided over by the
Chairman of the Board or, if the Chairman is not present, by the President or a
Vice-President or, if no such officer is present, by a chairman to be chosen at
the meeting. The Secretary of the Corporation, or in his absence, an Assistant
Secretary shall act as secretary of the meeting, if present.
Section VI. Each stockholder entitled to vote at any meeting shall have one
vote in person or by proxy for each share of stock held by him which has voting
power upon the matter in question at the time; but no proxy shall be voted
after three years from its date, unless such proxy expressly provides for a
longer period.
Section VII. When a quorum is present at any meeting, a plurality of the
votes properly cast for election to any office shall elect to such office and a
majority of the votes properly cast upon any question other than election to an
office shall decide the question, except when a larger vote is required by law,
by the certificate of incorporation or by these by-laws. No ballot shall be
required for any election unless requested by a stockholder present or
represented at the meeting and entitled to vote in the election. In the event a
ballot shall be required, the chairman of each meeting at which directors are
to be elected shall appoint two inspectors of election, unless such appointment
shall be unanimously waived by those stockholders present
<PAGE>
or represented by proxy at the meeting and entitled to vote in the election of
directors. No director, or candidate for the office of director, shall be
appointed as such inspector. The inspectors shall first take and subscribe an
oath or affirmation faithfully to execute the duties of inspector at such
meeting with strict impartiality and according to the best of their ability, and
shall take charge of the polls and after the balloting shall make a certificate
of the result of the vote taken. Except where the stock transfer books of the
Corporation shall have been closed or a date shall have been fixed as a record
date for the determination of the stockholders entitled to vote, as hereinafter
provided, no share of stock shall be voted at any election of directors which
shall have been transferred on the books on the Corporation within twenty days
next preceding such election.
Section VIII. The Board of Directors may close the stock transfer books of
the Corporation for a period not exceeding sixty days preceding the date of any
meeting of stockholders or the date for payment of any dividend or the date for
the allotment of rights or the date when any change or conversion or exchange
of stock shall go into effect; or, in lieu of closing the stock transfer books,
the Board of Directors may fix in advance a date, not exceeding sixty days
preceding the date of any meeting of stockholders or the date for the payment
of any dividend, or the date for allotment of rights, or the date when any
change or conversion or exchange of stock shall go into effect, as a record
date for the determination of the stockholders entitled to notice of, and to
vote at, any such meeting, or entitled to receive payment of any such dividend,
or to any such allotment of rights, or to exercise the rights in respect of any
such change, conversion or exchange of stock, and in such case only such
stockholders as shall be stockholders of record on the date so fixed shall be
entitled to such notice of, and to vote at, such meeting, or to receive payment
of such dividend, or to receive such allotment of rights, or to exercise such
rights, as the case may be, notwithstanding any transfer of any stock on the
books of the Corporation after any such record date as aforesaid.
ARTICLE II.
Board of Directors
Section I. The Board of Directors of the Corporation shall consist of not
less than three nor more than twelve persons, who shall hold office until the
annual meeting of the stockholders next ensuing after their election and until
their respective successors are elected and shall qualify and shall initially
consist of seven directors. Within the limits above specified, the number of
directors shall be determined by resolutions of the Board of Directors or by
the stockholders at an annual meeting. Newly created directorships resulting
from any increase in the authorized number of Directors shall be filled in the
same manner and with the same effect prescribed in Section 2 of this Article II
with respect to vacancies. A majority of the Board of Directors shall
constitute a quorum.
Section II. Vacancies in the Board of Directors shall be filled by a majority
of the remaining directors, though less than a quorum, and the directors so
chosen shall hold office until the next annual election and until their
successors shall be duly elected and qualified, unless sooner displaced
pursuant to law.
Section III. Meetings of the Board of Directors shall be held at such place
within or without the State of Delaware as may from time to time be fixed by
resolution of the Board or as may be specified in the call of any meeting.
Regular meetings of the Board of Directors shall be held at such times as may
from time to time be fixed by resolution of the Board; and special meetings may
be held at any time upon the call of the Executive Committee or the Chairman of
the Board, by oral, telegraphic or written notice, duly served on or sent or
mailed to each director not less than two days before the meeting. A meeting of
the Board may be held without notice immediately after the annual meeting of
stockholders at the same place at which such meeting is held. Notice need not
be given of regular meetings of the Board held at times fixed by resolutions of
the Board. Meetings may be held at any time without notice if all the directors
are present or if those not present waive notice of the meeting in writing.
2
<PAGE>
Section IV. Except as may be otherwise provided by law, by the certificate of
incorporation or by these by-laws, when a quorum is present at any meeting the
vote of a majority of the directors present shall be the act of the Board of
Directors.
Section V. Any action required or permitted to be taken at any meeting of the
Board of Directors or a committee thereof may be taken without a meeting if all
the members of the Board or of such committee, as the case may be, consent
thereto in writing, and such writing or writings are filed with the records of
the meetings of the Board or of such committee. Such consent shall be treated
for all purposes as the act of the Board or of such committee, as the case may
be.
Section VI. Members of the Board of directors, or any committee designated by
such Board, may participate in a meeting of such Board or committee by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other or by any other means
permitted by law. Such participation shall constitute presence in person at
such meeting.
Section VII. The Board of Directors may also, by resolution or resolutions,
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of two or more of the directors of the Corporation, which,
to the extent provided in said resolution or resolutions, shall have and may
exercise the powers of the Board of Directors in the management of the business
and affairs of the Corporation, and may have power to authorize the seal of the
Corporation to be affixed to all papers which may require it. Such committee or
committees shall have such name or names as may be determined from time to time
by resolution adopted by the Board of Directors. A majority of the members of
any such committee may determine its action and fix the time and place of its
meetings unless the Board of Directors shall otherwise provide. The Board of
Directors shall have power at any time to fill vacancies in, to change the
membership of, or to dissolve any such committee.
ARTICLE III.
Officers
Section I. The Board of Directors as soon as may be after the election held
in each year shall choose a President of the Corporation, one or more Vice
Presidents, a Secretary, Treasurer, such Assistant Secretaries, Assistant
Treasurers and such other officers, agents, and employees as it may deem
proper.
Section II. The term of office of all officers shall be one year, or until
their respective successors are chosen; but any officer may be removed from
office at any time by the affirmative vote of a majority of the members of the
Board.
Section III. Subject to such limitations as the Board of Directors, or the
Executive Committee may from time to time prescribe, the officers of the
Corporation shall each have such powers and duties as generally pertain to
their respective offices, as well as such powers and duties as from time to
time may be conferred by the Board of Directors or by the Executive Committee.
ARTICLE IV.
Certificates of Stock
Section I. The interest of each stockholder of the Corporation shall be
evidenced by a certificate or certificates for shares of stock in such form as
the Board of Directors may from time to time prescribe. The shares in the stock
of the Corporation shall be transferable on the books of the Corporation by the
holder thereof in person or by his attorney, upon surrender for cancellation of
a certificate or certificates for the same number of shares, with an assignment
and power of transfer endorsed thereon or attached thereto, duly executed, and
with such proof of the authenticity of the signature as the Corporation or its
agents may reasonably require.
3
<PAGE>
Section II. The certificates of stock shall be signed by the Chairman of the
Board or the President or a Vice President and by the Secretary or the
Treasurer or an Assistant Secretary or an Assistant Treasurer, shall be sealed
with the seal of the Corporation (or shall bear a facsimile of such seal), and
shall be countersigned and registered in such manner, if any, as the Board of
Directors may by resolution prescribe.
Section III. Certificates for shares of Stock in the Corporation may be
issued in lieu of certificates alleged to have been lost, stolen, destroyed or
mutilated, upon the receipt of (1) such evidence of loss, theft, destruction or
mutilation, and (2) a bond of indemnity in such amount, upon such terms and
with such surety, if any, as the Board of Directors may require in each
specific case or in accordance with general resolutions.
ARTICLE V.
Corporate Books
The books of the Corporation, except the original or duplicate stock ledger,
may be kept outside of the State of Delaware, at the office of the Corporation
in Wayne, New Jersey or at such other place or places as the Board of Directors
may from time to time determine.
ARTICLE VI.
Checks, Notes, Etc.
All checks and drafts on the Corporation's bank accounts and all bills of
exchange and promissory notes, and all acceptances, obligations and other
instruments for the payment of money, shall be signed by such officer or
officers or agent or agents as shall be thereunto authorized from time to time
by the Board of Directors.
ARTICLE VII.
Fiscal Year
The fiscal year of the Corporation shall end on the Saturday nearest the
thirty-first day of March in each year.
ARTICLE VIII.
Corporate Seal
The corporate seal shall have inscribed thereon the name of the Corporation
and the words "Incorporated Delaware 1928." In lieu of the corporate seal, when
so authorized by the Board of Directors or a duly empowered committee thereof,
a facsimile thereof may be impressed or affixed or reproduced.
ARTICLE IX.
Offices
The Corporation and the stockholders and the directors may have offices
outside of the State of Delaware at such places as shall be determined from
time to time by the Board of Directors.
ARTICLE X.
Amendments
The by-laws of the Corporation, regardless of whether made by the
stockholders or by the Board of Directors, may be amended, added to, rescinded
or repealed at any meeting of the Board of Directors or of the stockholders,
provided notice of the proposed change is given in the notice of the meeting.
No change of the time or place for the annual meeting of the stockholders for
the election of directors shall be made except in accordance with the laws of
the State of Delaware.
4
<PAGE>
Exhibit D
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
THE GRAND UNION COMPANY
Pursuant to Section 303 of the General Corporation Law
of the State of Delaware and Orders of the United States
Bankruptcy Court for the District of Delaware
------------
THE GRAND UNION COMPANY, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (hereinafter
called the "Corporation"), DOES HEREBY CERTIFY:
1. The name of the Corporation is The Grand Union Company and the date of
filing of its original Certificate of Incorporation in the office of the
Secretary of State was May 17, 1928.
2. Pursuant to a court order issued in the Chapter 11 Proceedings of the
Corporation before the United States Bankruptcy Court for the District of
Delaware, Case No. 95-84-PJW, all authorized and issued and outstanding shares
of common stock of the Corporation are hereby cancelled.
3. The following Restated Certificate of Incorporation was duly adopted in
accordance with the applicable provisions of Section 303 of the General
Corporation Law of the State of Delaware.
4. The text of the Certificate of Incorporation as amended or supplemented
heretofore, is further amended and restated hereby to read in its entirety as
follows:
FIRST: The name of the Corporation is THE GRAND UNION COMPANY (hereinafter
called the "Corporation").
SECOND: The address of the registered office of the Corporation in the State
of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a Corporation may be organized under the General Corporation
Law of the State of Delaware (the "DGCL").
FOURTH: (A) The total number of shares of all classes of capital stock which
the Corporation shall have authority to issue is 40,000,000, of which
10,000,000 shares shall be Preferred Stock of the par value of $1.00 per share
and 30,000,000 shares shall be Common Stock of the par value of $1.00 per
share.
(B) The Board of Directors is expressly authorized, by resolution or
resolutions, to provide for the issue of all or any shares of the Preferred
Stock, in one or more series, and to fix for each such series such voting
powers, full or limited, and such designations, preferences and relative,
participating, optional or other special rights and such qualifications,
limitations or restrictions thereon, as shall be stated and expressed in the
resolution or resolutions adopted by the Board of Directors providing for the
issue of such series (a "Preferred Stock Designation") and as may be permitted
by the DGCL and as are consistent with paragraph (C) of this Article FOURTH.
The number of authorized shares of Preferred Stock may be increased or
decreased (but
<PAGE>
not below the number of shares thereof then outstanding) by the affirmative vote
of a majority of the holders of the voting power of all the then outstanding
shares of the capital stock of the Corporation entitled to vote generally in the
election of directors (the "Voting Stock") voting together as a single class,
without a separate vote of the holders of the Preferred Stock, or any series
thereof, unless a vote of any such holders is required pursuant to any Preferred
Stock Designation.
(C) The Corporation is subject to the requirements of Section 1123(a)(6) of
the United States Bankruptcy Code (11 U.S.C. 1123(a)(6)) ("Section 1123(a)(6)")
and shall be prohibited from issuing any nonvoting equity securities, and
shall, at all times, provide, as to the several classes of securities from
time-to-time possessing voting power, an appropriate distribution of power
among such classes. A Preferred Stock Designation shall not authorize the
issuance of such nonvoting equity securities, and shall include in its
provisions, if the class designated by such Preferred Stock Designation has a
preference in respect of dividends, adequate provisions for the election of
directors representing such preferred class in the event of default in the
payment of such dividends consistent with the requirements of Section
1123(a)(6).
FIFTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation:
(1) Election of directors of the Corporation need not be by written ballot
unless the By-Laws so provide.
(2) All the powers of this Corporation, insofar as the same may be lawfully
vested by this Restated Certificate of Incorporation in the Board of Directors,
are hereby conferred upon the Board of Directors of this Corporation. In
furtherance and not in limitation of that power the Board of Directors is
authorized to make, adopt, alter, amend and repeal from time to time the
By-Laws of the Corporation, by vote of a majority of the directors present at
any regular meeting of the Board, or at any special meeting of the Board,
provided that notice of such proposed alternation, amendment, repeal or
adoption of new By-Laws is given in the notice of such special meeting, or by
written consent without a meeting signed by all directors. The power of the
Board of Directors to adopt, amend or repeal By-Laws is subject to the right of
stockholders entitled to vote with respect thereto to alter and repeal By-Laws
made by the Board of Directors.
(3) The Corporation shall, to the maximum extent permitted from time to time
under the DGCL, indemnify and upon request shall advance expenses to any person
who is or was a party or is threatened to be made a party to any threatened,
pending, or completed action, suit, proceeding or claim, whether civil,
criminal, administrative or investigative, by reason of the fact that such
person is or was or has agreed to be a director or officer of the Corporation
or while a director or officer is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or agent of any
corporation, partnership, joint venture, trust or other enterprise, including
service with respect to employee benefit plans, against expenses (including
attorney's fees and expenses), judgment, fines, penalties and amounts paid in
settlement incurred in connection with the investigation, preparation to defend
or defense of such action, suit proceeding or claim; provided, however, that
the foregoing shall not require the Corporation to indemnify or advance
expenses to any person in connection with any action, suit, proceeding, claim
or counterclaim initiated by or on behalf of such person. Such indemnification
shall not be exclusive of other indemnification rights arising under any
by-law, agreement, vote of directors or stockholders or otherwise and shall
inure to the benefit of the heirs and legal representatives of such person. Any
person seeking indemnification under this paragraph (3) of ARTICLE FIFTH shall
be deemed to have met the standard of conduct required for such indemnification
unless the contrary shall be established. Any repeal or modification of the
foregoing provisions of this paragraph (3) of ARTICLE FIFTH shall not adversely
affect any right or protection of a director or officer of the Corporation with
respect to any acts or omissions of such director or officer occurring prior to
such repeal or modification.
(4) A director of the Corporation shall not be liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent that exculpation from
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liability is not permitted under the DGCL at the time such liability is
determined. No amendment or repeal of this paragraph (4) of ARTICLE FIFTH shall
apply to or have any effect on the liability or alleged liability to any
director of the Corporation for or with respect to any acts or omissions of
such director occurring prior to such amendment or repeal.
SIXTH: The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Restated Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights preferences and
privileges of whatever nature conferred upon stockholders, directors or any
other persons whomsoever, by and pursuant to this Restated Certificate of
Incorporation in its present form or as amended are granted subject to this
reservation.
SEVENTH: If at any time the Corporation shall have a class of stock
registered pursuant to the provisions of the Securities Exchange Act of 1934,
for so long as such class is so registered, any action by the stockholders of
such class must be taken at an annual or special meeting and may not be taken
by written consent.
IN WITNESS WHEREOF, The Grand Union Company has caused this Certificate of
Amendment of Certificate of Incorporation to be signed on its behalf by
, its Chairman of the Board, and its corporate seal to be hereunto affixed by
, its Secretary, this day of , 1995.
THE GRAND UNION COMPANY
By:
---------------------
Chairman of the Board
By:
---------------------
Secretary
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Exhibit E
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
WARRANT AGREEMENT
between
THE GRAND UNION COMPANY
and
( )
as Warrant Agent
300,000 Series 1 Warrants
600,000 Series 2 Warrants
Dated as of May , 1995
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE 1 DEFINITIONS.................................................... 1
ARTICLE 2 ISSUANCE OF WARRANTS........................................... 4
2.1 Initial Issuance......................................... 4
2.2 Initial Share Amount..................................... 4
2.3 Form of Warrant Certificates............................. 4
2.4 Execution of Warrant Certificates........................ 4
2.5 Countersignature of Warrant Certificates................. 5
ARTICLE 3 EXERCISE PERIOD................................................ 5
ARTICLE 4 EXERCISE PRICES................................................ 5
4.1 Series 1................................................. 5
4.2 Series 2................................................. 5
ARTICLE 5 EXERCISE OF WARRANTS........................................... 5
5.1 Manner of Exercise....................................... 5
5.2 When Exercise Effective.................................. 6
5.3 Delivery of Certificates, etc. .......................... 6
5.4 Fractional Shares........................................ 6
ADJUSTMENT OF THE AMOUNT OF COMMON STOCK ISSUABLE AND
ARTICLE 6 THE EXERCISE PRICES UPON EXERCISE.............................. 6
6.1 Stock Dividends, Split-ups and Combinations of Shares.... 6
6.2 Distributions............................................ 7
6.3 Common Stock (or Other Securities) Issued for less than Fair
Value.................................................... 7
6.4 Adjustments for Mergers and Consolidations............... 8
6.5 Calculation to Nearest Cent and One-hundredth of Share... 8
6.6 Notice of Adjustment in Exercise Price................... 8
6.7 Other Notices............................................ 8
6.8 No Change in Warrant Terms on Adjustment................. 8
6.9 Treasury Shares.......................................... 9
ARTICLE 7 CONSOLIDATION, MERGER, ETC. ................................... 9
7.1 Cancellation of Warrants upon Non-Surviving Merger....... 9
7.2 Assumption of Obligations................................ 9
ARTICLE 8 LISTING RIGHTS................................................. 9
ARTICLE 9 NO DILUTION OR IMPAIRMENT...................................... 9
ARTICLE 10 REPORTS........................................................ 10
ARTICLE 11 NOTIFICATION OF CERTAIN EVENTS................................. 10
11.1 Corporate Action......................................... 10
11.2 Available Information.................................... 11
ARTICLE 12 RESERVATION OF STOCK........................................... 11
12.1 Reservation; Due Authorization, etc. .................... 11
12.2 Compliance with Law...................................... 11
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Page
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ARTICLE 13 PAYMENT OF TAXES............................................ 11
ARTICLE 14 LOSS OR MUTILATION.......................................... 12
ARTICLE 15 WARRANT REGISTRATION........................................ 12
15.1 Registration.......................................... 12
15.2 Transfer or Exchange.................................. 12
15.3 Valid and Enforceable................................. 12
15.4 Endorsement........................................... 13
15.5 No Service Charge..................................... 13
15.6 Cancellation.......................................... 13
ARTICLE 16 WARRANT AGENT............................................... 13
16.1 Obligations Binding................................... 13
16.2 No Liability.......................................... 13
16.3 Instructions.......................................... 13
16.4 Agents................................................ 13
16.5 Cooperation........................................... 14
16.6 Agent Only............................................ 14
16.7 Right to Counsel...................................... 14
16.8 Compensation.......................................... 14
16.9 Accounting............................................ 14
16.10 No Conflict........................................... 14
16.11 Resignation; Termination.............................. 14
16.12 Change of Warrant Agent............................... 15
16.13 Successor Warrant Agent............................... 15
ARTICLE 17 REMEDIES, ETC. ............................................. 15
17.1 Remedies.............................................. 15
17.2 Warrant Holder Not Deemed a Stockholder............... 15
17.3 Right of Action....................................... 16
ARTICLE 18 MISCELLANEOUS............................................... 16
18.1 Notices............................................... 16
18.2 Governing Law and Consent to Forum.................... 16
18.3 Benefits of this Agreement............................ 16
18.4 Agreement of Holders of Warrant Certificates.......... 17
18.5 Counterparts.......................................... 17
18.6 Amendments............................................ 17
18.7 Consent to Jurisdiction............................... 17
18.8 Headings.............................................. 17
EXHIBITS
Exhibit A: Forms of Warrant Certificate
A-1: Series 1 Warrant Certificate
A-2: Series 2 Warrant Certificate
Exhibit B: Release
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WARRANT AGREEMENT
THIS WARRANT AGREEMENT, is made and entered into as of May , 1995 (the
"Agreement"), by and between THE GRAND UNION COMPANY, a Delaware corporation
(the "Company"), and [ ] as Warrant Agent (the "Warrant Agent").
WITNESSETH:
WHEREAS, in connection with the financial restructuring of the Company
pursuant to its plan of reorganization (the "Plan"), and in settlement of
certain litigation in the Bankruptcy Case and in the Capital Case (each as
defined herein) (the "Settlement"), the Company proposes, inter alia, to issue
two series of warrants which, in aggregate, are exercisable to purchase up to
900,000 shares of Common Stock (as defined herein), subject to adjustment as
provided herein (the "Warrants"), to the holders of the Zero Coupon Notes (as
defined herein) in exchange for such Zero Coupon Notes and any and all claims
such holders may have against the Company and in exchange for the release by
such holders of any and all claims against or interests in the Released
Persons; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to act, in connection with the
issuance, transfer, exchange, replacement and exercise of the Warrant
Certificates and other matters as provided herein; and
WHEREAS, the Company desires to enter into this Agreement to set forth the
terms and conditions of the Warrants and the rights of the holders thereof;
NOW, THEREFORE, in consideration of the foregoing premises and of the mutual
agreements set forth herein, the Company and the Warrant Agent hereby agree as
follows:
ARTICLE 1
Definitions
As used herein, the following terms have the following respective meanings:
"Affiliate" means with respect to any Person, any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For purposes of this definition, (a) "control" when
used with respect to any Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting Common Stock (or equivalent equity interests), by contract or
otherwise, and the terms "controlling" or "controlled" have meanings
correlative to the foregoing, and (b) a subsidiary of a Person is an Affiliate
of such Person and of each other subsidiary of that Person.
"Agreement" means this Warrant Agreement, as the same may be amended or
modified from time to time hereafter.
"Bankruptcy Code" means title 11, United States Code.
"Bankruptcy Court" means the United States Bankruptcy Court for the District
of Delaware.
"Business Day" means any day other than a Saturday or a Sunday or a day on
which commercial banking institutions in New York City, New York are authorized
or required by law to be closed; provided that, in determining the period
within which certificates or Warrants are to be issued and delivered at a time
when shares of Common Stock (or Other Securities) are listed or admitted to
trading on any national securities exchange or in the over-the-counter market
and in determining the Fair Value of any securities listed or
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admitted to trading on any national securities exchange or in the
over-the-counter market, "Business Day" shall mean any day when the principal
exchange on which such securities are then listed or admitted to trading is
open for trading or, if such securities are traded in the over-the-counter
market in the United States, such market is open for trading; and provided
further that any reference in this Agreement to "days" (unless Business Days
are specified) shall mean calendar days.
"Capital" means Grand Union Capital Corporation, a Delaware corporation, and
the corporate parent of the Company prior to the Effective Date.
"Capital Case" means the case under chapter 11 of the Bankruptcy Code
concerning Capital which was commenced on February 6, 1995 before the
Bankruptcy Court.
"Chapter 11 Case" means the case under Chapter 11 of the Bankruptcy Code
concerning the Company which was commenced January 25, 1995 before the
Bankruptcy Court.
"Common Stock" means the Company's Common Stock par value $ per share as
authorized from and after the Effective Date.
"Commission" means the Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act or the Exchange
Act, whichever is the relevant statute for the particular purpose.
"Company" means The Grand Union Company, a Delaware corporation.
"Effective Date" has the meaning specified in the Plan.
"Exchange Act" means the Securities Exchange Act of 1934, or any successor
Federal statute, and the rules and regulations of the Commission thereunder,
all as the same shall be amended and in effect at the time. Reference to a
particular section of the Securities Exchange Act of 1934 shall include a
reference to the comparable section, if any, of any such successor Federal
statute.
"Exercise Period" has the meaning specified in Article 3.
"Exercise Price" has the meaning specified in Article 4.
"Fair Value" means (i) with respect to Common Stock or any Other Security, in
each case if such security is listed on one or more stock exchanges or quoted
on the National Market System of NASDAQ (the "National Market System"), the
average of the closing sales prices of a share of such Common Stock or, if an
Other Security in the minimum denomination in which such security is traded, on
the primary national or regional stock exchange on which such security is
listed or on the National Market System if quoted thereon or (ii) if the Common
Stock or Other Security, as the case may be, is not so listed or quoted but is
traded in the over-the-counter market (other than the National Market System),
the average of the closing bid and asked prices of a share of such Common Stock
or Other Security, in each case for the 30 Business Days (or such lesser number
of Business Days as such Common Stock or other security shall have been so
listed, quoted or traded) next preceding the date of measurement; provided,
however, that if no such sales price or bid and asked prices have been quoted
during the preceding 30-day period or there is otherwise no established trading
market for such security, then "Fair Value" means the value of such Common
Stock or Other Security as determined reasonably and in good faith by the Board
of Directors of the Company; and provided, further, however, that in the event
the current market price of a share of such Common Stock or of the minimum
traded denomination of such Other Security is determined during a period
following the announcement by the Company of (i) a dividend or distribution on
the Common Stock or Other Security payable in shares of Common Stock or in such
Other Security, or (ii) any subdivision, combination or reclassification of the
Common Stock or Other Security, and prior to the expiration of 30 Business Days
after the ex-dividend date for such dividend or distribution, or the record
date for such subdivision, combination
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or reclassification, then, and in each such case, the "Fair Value" shall be
appropriately adjusted to take into account ex-dividend trading. Anything
herein to the contrary notwithstanding, in case the Company shall issue any
shares of Common Stock, rights, options, or Other Securities in connection with
the acquisition by the Company of the stock or assets of any other Person or
the merger of any other Person into the Company, the Fair Value of the Common
Stock or Other Securities so issued shall be determined as of the date the
number of shares of Common Stock, rights, options or Other Securities was
determined (as set forth in a written agreement between the Company and the
other party to the transaction) rather than on the date of issuance of such
shares of Common Stock, rights, options or Other Securities.
"Junior Zero Coupon Notes" means the aggregate $745 million principal amount
16.50% Junior Subordinated Zero Coupon Notes of Capital due January 15, 2007.
"Original Issue Date" has the meaning specified in Section 2.1.
"Other Securities" means any stock (other than Common Stock) and other
securities of the Company or any other Person (corporate or otherwise) that the
holders of the Warrants at any time shall be entitled to receive, or shall have
received, upon the exercise of the Warrants, in lieu of or in addition to
Common Stock, or that at any time shall be issuable or shall have been issued
in exchange for or in replacement of Common Stock or Other Securities.
"Person" means any individual, partnership, association, joint venture,
corporation, business, trust, unincorporated organization, government or
department, agency or subdivision thereof, or other person or entity.
"Plan" means the plan of reorganization of the Company, as confirmed by order
of the Bankruptcy Court entered on May , 1995.
"Public Offering" means any offering of Common Stock (or Other Securities) to
the public pursuant to an effective registration statement under the Securities
Act.
"Release" means the release to be executed by the holders of the Zero Coupon
Notes which hold, (i) in aggregate, $200,000 or more in face amount of the
Senior Zero Coupon Notes or (ii) in aggregate, $200,000 or more in face amount
of the Junior Zero Coupon Notes, as a condition to their receipt of the
Warrants, such release in the form attached hereto as Exhibit B.
"Released Persons" means the beneficiaries of the Release, as set forth
therein.
"Securities Act" means the Securities Act of 1933, or any successor Federal
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be amended and in effect at the time. Reference to a particular
section of the Securities Act of 1933 shall include a reference to the
comparable section, if any, of any such successor Federal statute.
"Senior Zero Coupon Notes" means the aggregate $343 million principal amount
15.00% Senior Zero Coupon Notes of Capital due July 15, 2004.
"Series 1 Warrants" means the Warrants to purchase, in aggregate, 300,000
shares of Common Stock at the Exercise Price described herein, subject to
adjustment as provided herein, issued in exchange for Zero Coupon Notes
pursuant to the Plan and the Settlement.
"Series 2 Warrants" means the Warrants to purchase, in aggregate, 600,000
shares of Common Stock at the Exercise Price described herein, subject to
adjustment as provided herein, issued in exchange for Zero Coupon Notes
pursuant to the Plan and the Settlement.
"Settlement" means the settlement of certain litigation in the Capital Case
and the Chapter 11 Case effected pursuant to the Plan pursuant to which the
Company has assumed claims arising from and relating to the Zero Coupon Notes.
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"Warrant Agent" means .
"Warrant Certificates" has the meaning specified in Section 2.3.
"Warrants" means, collectively, the two series of the Company's Warrants to
purchase up to an aggregate of 900,000 shares of Common Stock at the Exercise
Price specified for each such series, subject to adjustment as provided herein,
issued in exchange for the Zero Coupon Notes pursuant to the Plan and the
Settlement.
"Zero Coupon Notes" means, collectively, the Senior Zero Coupon Notes and the
Junior Zero Coupon Notes.
ARTICLE 2
Issuance of Warrants
2.1 Initial Issuance. On the date hereof (the "Original Issue Date"), which
is also the Effective Date, the Company shall, pursuant to the Plan and the
Settlement, deliver to the Company's disbursing agent under the Plan for
re-distribution to the holders of the Zero Coupon Notes, global certificates
for an aggregate of 900,000 Warrants, consisting of 300,000 Series 1 Warrants
and 600,000 Series 2 Warrants. The global certificates shall be issued in the
following denominations: (i) for the holders of the Senior Zero Coupon Notes, a
global certificate for 240,000 Series 1 Warrants and a global certificate for
480,000 Series 2 Warrants; and (b) for the holders of the Junior Zero Coupon
Notes, a global certificate for 60,000 Series 1 Warrants and a global
certificate for 120,000 Series 2 Warrants. Subject, solely with respect to any
holder of Zero Coupon Notes which holds, (i) in aggregate, $200,000 or more in
face amount of the Senior Zero Coupon Notes or (ii) in aggregate, $200,000 or
more in face amount of the Junior Zero Coupon Notes, to the delivery by such
holder to the Company of an executed Release in the form attached hereto as
Exhibit B by each holder of a Zero Coupon Note which is to receive a Warrant as
a condition to such receipt, and upon the direction of the Company, the Warrant
Agent shall issue and deliver such additional Warrant Certificates, as
increments of, and in reduction of, the global certificates described above, as
are required from time to time in order to effect the distributions with
respect to the Zero Coupon Notes provided under the Plan and Settlement.
2.2 Initial Share Amount. The number of shares of Common Stock purchasable
upon exercise of the Warrants shall be one (1) Warrant to one (1) share of
Common Stock, subject to adjustments from and after the Original Issue Date as
provided in Article 6 of this Agreement.
2.3 Form of Warrant Certificates. The Series 1 Warrants and Series 2 Warrants
shall be evidenced, respectively, by certificates substantially in the forms
attached hereto as Exhibit A-1 and A-2 (collectively, the "Warrant
Certificates"). Each Warrant Certificate shall be dated as of the date on which
it is countersigned by the Warrant Agent, which shall be on the Original Issue
Date or, in the event of a division, exchange, substitution or transfer of any
of the Warrants, on the date of such event. The Warrant Certificate may have
such further legends and endorsements stamped, printed, lithographed or
engraved thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any law or with any rule or regulation pursuant thereto or with any
rule or regulation of any securities exchange on which the Warrants may be
listed.
2.4 Execution of Warrant Certificates. Warrant Certificates shall be executed
on behalf of the Company by its President, any Vice President, its Treasurer or
Secretary, either manually or by facsimile signature printed thereon. In case
any such officer of the Company whose signature shall have been placed upon any
Warrant Certificate shall cease to be such officer of the Company before
countersignature by the Warrant Agent or issuance and delivery thereof, such
Warrant Certificate nevertheless may be countersigned by the Warrant Agent and
issued and delivered with the same force and effect as though such person had
not ceased to be such officer of the Company.
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2.5 Countersignature of Warrant Certificates. Warrant Certificates shall be
manually countersigned by an authorized signatory of the Warrant Agent and
shall not be valid for any purpose unless so countersigned. Such manual
countersignature shall constitute conclusive evidence of such authorization.
The Warrant Agent is hereby authorized to countersign, in accordance with the
provisions of this Section 2.5, and deliver any new Warrant Certificates, as
directed by the Company pursuant to Section 2.1 and as and when required
pursuant to the provisions of Articles 14 and 15. Each Warrant Certificate
shall, when manually countersigned by an authorized signatory of the Warrant
Agent, entitle the registered holder thereof to exercise the rights as the
holder of the number of Warrants set forth thereon, subject to the provisions
of this Agreement.
ARTICLE 3
Exercise Period
Each Warrant shall entitle the holder thereof to purchase from the Company
one (1) share of Common Stock (subject to the adjustments provided herein), at
any time during the five (5) year period that commences on the First Business
Day that is one (1) day after the Original Issue Date, and that terminates at
5:00 p.m., New York City time on the First Business Day that is five (5) years
after the Original Issue Date (the "Exercise Period"); provided, however, that
in the event of a reorganization of the Company of the nature described in
Article 7.1 hereof, any Warrants that are not exercised prior to consummation
of such transaction shall be cancelled upon consummation of such transaction,
and the holders of such cancelled Warrants shall not be entitled to receive any
property with respect to their cancelled Warrants.
ARTICLE 4
Exercise Prices
4.1 Series 1. The Exercise Price for the Series 1 Warrants shall be $30.00
per share of Common Stock (subject to adjustment pursuant to Article 6 hereof).
4.2 Series 2. The Exercise Price for the Series 2 Warrants shall be $42.00
per share of Common Stock (subject to adjustment pursuant to Article 6 hereof).
ARTICLE 5
Exercise of Warrants
5.1 Manner of Exercise. All or any of the Warrants represented by a Warrant
Certificate may be exercised by the registered holder thereof during normal
business hours on any Business Day, by surrendering such Warrant Certificate,
with the subscription form set forth therein duly executed by such holder, by
hand or by mail to the Warrant Agent at its office addressed to [Warrant Agent:
Address], or, if such exercise shall be in connection with an underwritten
Public Offering, at the location designated by the Company. Such Warrant
Certificate shall be accompanied by payment in respect of each Warrant that is
exercised, which shall be made by certified or official bank or bank cashier's
check payable to the order of the Company, except as otherwise provided herein.
Such payment shall be in an amount equal to the product of the number of shares
of Common Stock (without giving effect to any adjustment therein) designated in
such subscription form multiplied by the original Exercise Price for the Series
of Warrants being exercised (plus such additional consideration as may be
provided herein). Upon such surrender and payment, such holder shall thereupon
be entitled to receive the number of duly authorized, validly issued, fully
paid and nonassessable shares of Common Stock (or Other Securities) determined
as provided in Articles 2 and 3, and as and if adjusted pursuant to Article 6.
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5.2 When Exercise Effective. Each exercise of any Warrant pursuant to Section
5.1 shall be deemed to have been effected immediately prior to the close of
business on the Business Day on which the Warrant Certificate representing such
Warrant, duly executed, with accompanying payment shall have been delivered as
provided in Section 5.1, and at such time the Person or Persons in whose name
or names the certificate or certificates for Common Stock (or Other Securities)
shall be issuable upon such exercise as provided in Section 5.3 shall be deemed
to have become the holder or holders of record thereof.
5.3 Delivery of Certificates, etc. (a) As promptly as practicable after the
exercise of any Warrant, and in any event within five (5) Business Days
thereafter (or, if such exercise is in connection with an underwritten Public
Offering, concurrently with such exercise), the Company at its expense (other
than as to payment of transfer taxes which will be paid by the holder) will
cause to be issued and delivered to such holder, or as such holder may
otherwise direct in writing (subject to Article 14),
(i) a certificate or certificates for the number of shares of Common Stock
(or Other Securities) to which such holder is entitled, and
(ii) if less than all the Warrants represented by a Warrant Certificate are
exercised, a new Warrant Certificate or Certificates of the same tenor and
for the aggregate number of Warrants that were not exercised, executed and
countersigned in accordance with Sections 2.4 and 2.5.
(b) The Warrant Agent shall countersign any new Warrant Certificate, register
it in such name or names as may be directed in writing by such holder, and
shall deliver it to the person entitled to receive the same in accordance with
this Section 5.3. The Company, whenever required by the Warrant Agent, will
supply the Warrant Agent with Warrant Certificates executed on behalf of the
Company for such purpose.
5.4 Fractional Shares. No fractional shares of Common Stock (or Other
Securities) shall be issued upon any exercise of Warrants. If more than one
Warrant Certificate shall be delivered for exercise at one time by the same
holder, the number of full shares or securities that shall be issuable upon
exercise shall be computed on the basis of the aggregate number of Warrants
exercised. As to any fraction of a share of Common Stock (or Other Securities),
the Company shall pay a cash adjustment in respect thereto in an amount equal
to the product of the Fair Value per share of Common Stock (or Other
Securities) as of the Business Day next preceding the date of such exercise
multiplied by such fraction of a share.
ARTICLE 6
Adjustment of the Amount of Common Stock
Issuable and the Exercise Prices upon Exercise
6.1 Stock Dividends, Split-ups and Combinations of Shares. If after the date
hereof the number of outstanding shares of Common Stock is increased by a
dividend or share distribution in each case payable in shares of Common Stock
or by a split-up or other reclassification of shares of Common Stock, then, in
the case of such events, the amount of Common Stock issuable for each Warrant
and the Exercise Price will be adjusted as follows: on the day following the
date fixed for the determination of holders of shares of Common Stock entitled
to receive such dividend or share distribution, and in the cases of split-ups,
combinations and other reclassifications, on the day following the effective
date thereof: (a) the Exercise Price in effect immediately prior to such action
shall be adjusted to a new Exercise Price that bears the same relationship to
the Exercise Price in effect immediately prior to such event as the total
number of shares of Common Stock outstanding immediately prior to such action
bears to the total number of shares of Common Stock outstanding immediately
after such event, and (b) the number of shares of Common Stock purchasable upon
the exercise of any Warrant after such event shall be the number of Shares of
Common Stock obtained by multiplying the number of shares of Common Stock
purchasable immediately prior to such adjustment upon the exercise of such
Warrant by the Exercise Price in effect immediately prior to such adjustment
and dividing the product so obtained by the Exercise Price in effect after such
adjustment.
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6.2 Distributions. If after the date hereof the Company shall distribute to
all holders of its shares of Common Stock evidences of its indebtedness or
assets (excluding cash distributions made as a dividend payable out of earnings
or out of surplus legally available for dividends under the laws of the
jurisdiction of incorporation of the Company) or rights to subscribe to shares
of Common Stock expiring more than 45 days after the issuance thereof, then in
each such case the Exercise Price in effect immediately prior to such
distribution shall be decreased to an amount determined by multiplying such
Exercise Price by a fraction, the numerator of which is the Fair Value of a
share of the Common Stock at the date of such distribution less the Fair Value
per share of Common Stock outstanding at such date of the assets or evidences
of indebtedness so distributed or of such subscription rights (as determined by
the Board of Directors of the Company, whose determination shall be conclusive,
and described in a statement filed with the Warrant Agent) and the denominator
of which is the Fair Value of a share of Common Stock at such date. Such
adjustment shall be made whenever any such distribution is made, and shall
become effective retroactively on the date immediately after the record date
for the determination of stockholders entitled to receive such distribution.
6.3 Common Stock (or Other Securities) Issued for less than Fair Value. (a)
If at any time or from time to time after the Original Issue Date shares of
Common Stock (or Other Securities) shall be issued, distributed or sold to
holders of Common Stock for a consideration less than Fair Value (or, with
respect to distributions of Other Securities, for no consideration), then the
equivalent number of shares of Common Stock (or such Other Securities) shall
also be issuable upon exercise of the Warrants, and the Exercise Price shall be
adjusted to include the Fair Value of the consideration paid by holders of
Common Stock for such shares of Common Stock (or Other Securities), if any;
provided, however, that only such shares of Common Stock (or Other Securities)
issued for consideration less than Fair Value (or, with respect to Other
Securities, without consideration) shall be taken into account for purposes of
this adjustment; and provided further, that any consideration paid, in whatever
form, by the holders of Common Stock for such Common Stock (or Other
Securities) shall be taken into account for purposes of determining the
adjustment required to be made hereunder, such that an adjustment shall be made
solely if and to the extent that the Fair Value of such Common Stock (or Other
Securities) exceeds the Fair Value of any consideration paid.
(b) For purposes of this Section 6.3, Common Stock (or Other Securities)
shall be deemed to have been issued for Fair Value if issued to the Company's
employees or directors under bona fide employee benefit or stock option plans,
or issued by the Company pursuant to an employment agreement or consulting
agreement, which plan or agreement has been adopted or approved by the board of
directors of the Company and, when required by law, approved by the holders of
Common Stock.
(c) All options or convertible securities issued or delivered in payment of
any dividend or other distribution on any class of stock of the Company, shall
be deemed to have been issued without consideration.
(d) For purposes of this Section 6.3, and except as otherwise provided
herein, options or convertible securities shall be deemed to have been issued
for a consideration per share determined by dividing
(i) the total amount, if any, received and receivable by the Company as
consideration for the issuance, sale, grant or assumption of the relevant
options or convertible securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating thereto,
without regard to any provision thereof for subsequent adjustment of such
consideration) payable to the Company upon the exercise in full of such
options or the conversion or exchange of such convertible securities (and in
the case of options for convertible securities, the exercise of such options
and the conversion or exchange of such convertible securities),
by
(ii) the maximum number of shares of Common Stock issuable (as set forth in
the instruments relating thereto, without regard to any provision thereof for
subsequent adjustment of such number) upon the exercise of such options or
the conversion or exchange of such convertible securities (and in
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the case of options for convertible securities, the exercise of such options
and the conversion or exchange of such convertible securities).
6.4 Adjustments for Mergers and Consolidations. In case the Company, after
the date hereof, shall merge or consolidate with another Person, other than in
a Non-Surviving Merger (upon which, pursuant to Section 7.1, the Warrants shall
be cancelled), then, in the case of any such transaction, proper provision
shall be made so that, upon the basis and terms and in the manner provided in
this Warrant Agreement, the holders of the Warrants, upon the exercise thereof
at any time after the consummation of such transaction (subject to the Exercise
Period), shall be entitled to receive (at the aggregate Exercise Price in
effect at the time of the transaction for all Common Stock or Other Securities
issuable upon such exercise immediately prior to such consummation), in lieu of
the Common Stock or Other Securities issuable upon such exercise prior to such
consummation, the greatest amount of securities, cash or other property to
which such holder would have been entitled as a holder of Common Stock (or
Other Securities) upon such consummation if such holder had exercised the
rights represented by the Warrants held by such holder immediately prior
thereto, subject to adjustments (subsequent to such consummation) as nearly
equivalent as possible to the adjustments provided for in Sections 6.1, 6.2 and
6.3 hereof.
6.5 Calculation to Nearest Cent and One-hundredth of Share. All calculations
under this Article 6 shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be.
6.6 Notice of Adjustment in Exercise Price. Whenever the Exercise Price and
securities issuable shall be adjusted as provided in this Article 6, the
Company shall forthwith file with the Warrant Agent a statement, signed by the
Chairman of the Board of Directors, the Vice Chairman of the Board of
Directors, the President or any Vice President of the Company and by its
Treasurer or an Assistant Treasurer or its Secretary or an Assistant Secretary,
stating in detail the facts requiring such adjustment, the Exercise Price that
will be effective after such adjustment and the impact of such adjustment on
the number and kind of securities issuable upon exercise of the Warrants. The
Company shall also cause a notice setting forth any such adjustments to be sent
by mail, first class, postage prepaid, to each registered holder of Warrants at
his address appearing on the Warrant register. The Warrant Agent shall have no
duty with respect to any statement filed with it except to keep the same on
file and available for inspection by registered holders of Warrants during
reasonable business hours. The Warrant Agent shall not at any time be under any
duty or responsibility to any holder of a Warrant to determine whether any
facts exist which may require any adjustment to the Exercise Price or
securities issuable, or with respect to the nature or extent of any adjustment
of the Exercise Price or securities issuable when made or with respect to the
method employed in making such adjustment.
6.7 Other Notices. In case the Company after the date hereof shall propose to
take any action of the type described in sections 6.1, 6.2, 6.3 or 6.4 of this
Article 6, the Company shall give notice to the Warrant Agent and to each
registered holder of a Warrant in the manner set forth in subsection 6.6 of
this Article 6, which notice shall specify, in the case of action of the type
specified in subsection 6.2, 6.3 or 6.4, the date on which a record shall be
taken with respect to any such action. Such notice shall be given, in the case
of any action of the type specified in subsection 6.2, 6.3 or 6.4, at least ten
days prior to the record date with respect thereto. Failure to give such
notice, or any defect therein, shall not affect the legality or validity of any
such action. Where appropriate, such notice may be given in advance and may be
included as part of a notice required to be mailed under the provisions of
subsection 6.6 of this Article 6.
6.8 No Change in Warrant Terms on Adjustment. Irrespective of any adjustments
in the Exercise Price or the number of shares of Common Stock (or any inclusion
of Other Securities) issuable upon exercise, Warrants theretofore or thereafter
issued may continue to express the same prices and number of shares as are
stated in the similar Warrants issuable initially, or at some subsequent time,
pursuant to this Agreement, and the Exercise Price and such number of shares
issuable upon exercise specified thereon shall be deemed to have been so
adjusted.
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6.9 Treasury Shares. Shares of Common Stock at any time owned by the Company
shall not be deemed to be outstanding for the purposes of any computation under
this Article 6.
ARTICLE 7
Consolidation, Merger, Etc.
7.1 Cancellation of Warrants upon Non-Surviving Merger. In the event of a
merger or consolidation of the Company with another Person in which (i) the
Company is not the continuing or surviving corporation of such consolidation or
merger and (ii) immediately prior to the transaction either (x) such continuing
or surviving corporation was not an Affiliate of the Company or (y) such
continuing or surviving corporation was an Affiliate of the Company but the
board of directors of the Company has determined in good faith that the merger
or consolidation is an arms length transaction, i.e., on terms comparable to
those on which the Company would enter into a transaction with a non-Affiliate,
then any Warrants which are not exercised prior to consummation of such merger
or consolidation (a "Non-Surviving Merger") shall be cancelled upon
consummation of the transaction, and the holders of such cancelled Warrants
shall not be entitled to receive any property with respect to their cancelled
Warrants.
7.2 Assumption of Obligations. Notwithstanding anything contained herein to
the contrary, the Company will not effect a merger or consolidation other than
a Non-Surviving Merger unless, prior to the consummation of such transaction,
each Person (other than the Company) which may be required to deliver any
Common Stock, Other Securities, securities, cash or property upon the exercise
of this Warrant as provided herein shall assume, by written instrument
delivered to the Warrant Agent, with a copy delivered to each holder of a
Warrant hereunder, the obligations of the Company under this Warrant Agreement
and under each of the Warrants, including, without limitation, the obligation
to deliver such shares of Common Stock, Other Securities, cash or property as
may be required pursuant to Article 6 hereof.
ARTICLE 8
Listing Rights
If the Common Stock is listed on one or more stock exchanges or quoted on the
National Market System, then the Company shall use its best efforts to have the
Warrants listed on such stock exchange(s) or quoted on the National Market
System, as applicable.
ARTICLE 9
No Dilution or Impariment
The Company will not, by amendment of its certificate of incorporation or
through any consolidation, merger, reorganization, transfer of assets,
dissolution, issuance or sale of securities or any other voluntary action or
omission, avoid or seek to avoid the observance or performance of any of the
terms of this Agreement or any of the Warrants issued hereunder, but will at
all times in good faith observe and perform all such terms and take all such
action as may be necessary or appropriate in order to protect the rights of
each holder of a Warrant against dilution or other impairment of the kind
specified herein provided, however, that, subject to compliance with the
applicable provisions of this Agreement, the Company shall not be prohibited by
this Article 9 or by any provision of this Agreement from making decisions
providing for, inter alia, the merger or consolidation of the Company or the
sale of its assets which transactions, in the judgment of the Company's board
of directors, are in the best interests of the Company and the shareholders.
Without limiting the generality of the foregoing, the Company (a) will not
permit the par value of any shares of stock receivable upon the exercise of any
Warrant to exceed the amount payable therefor upon such exercise, (b) will take
all such action as may be necessary or appropriate in order that the Company
may validly and
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legally issue fully paid and nonassessable shares of stock upon the exercise of
all of the Warrants from time to time outstanding, (c) will not take any action
that results in any adjustment of the shares issuable upon exercise of the
Warrants (or which entitles the holders of the Warrants to receive Other
Securities upon such exercise) if the total number of shares of Common Stock
(or Other Securities) issuable after the action upon the exercise of all of the
Warrants would exceed the total number of shares of Common Stock (or Other
Securities) then authorized by the Company's certificate of incorporation and
available for the purpose of issuance upon such exercise and (d) will not issue
any capital stock of any class that is preferred as to dividends or as to the
distribution of assets upon voluntary or involuntary dissolution, liquidation
or winding-up, unless such stock is sold for a cash consideration at least
equal to the amount of such preference upon voluntary or involuntary
dissolution, liquidation or winding-up.
ARTICLE 10
Reports
In each case of any adjustment or readjustment in the shares of Common Stock
(or Other Securities) issuable upon the exercise of the Warrants, the Company
at its expense will promptly compute such adjustment or readjustment after
giving effect to such, in accordance with the terms of this Agreement and shall
prepare a report setting forth such adjustment or readjustment and showing in
reasonable detail the method of calculation thereof and the facts upon which
such adjustment or readjustment is based. The Company will forthwith mail a
copy of each such report to the Warrant Agent, which shall promptly mail a copy
to each holder of a Warrant. The Warrant Agent will cause the same to be
available for inspection at its principal office during normal business hours
by any holder of a Warrant or any prospective purchaser of a Warrant designated
by the holder thereof.
ARTICLE 11
Notification of Certain Events
11.1 Corporate Action. In the event of:
(a) any taking by the Company of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are entitled
to receive any dividend (other than a regular periodic dividend payable in cash
out of earned surplus) or other distribution of any kind, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class
or any other securities or property, or to receive any other right or interest
of any kind; or
(b) (i) any capital reorganization of the Company, (ii) any reclassification
of the capital shares of the Company (other than a change in par value or from
par value to no par value or from no par value to par value or as a result of a
split-up or combination), (iii) the consolidation or merger of the Company with
or into any other corporation (other than a consolidation or merger in which
the Company is the continuing corporation and which does not result in any
change in the shares of Common Stock) including a consolidation or merger which
would result in the cancellation of any outstanding Warrants pursuant to
Section 7.1 hereof, (iv) the sale of the properties and assets of the Company
as, or substantially as, an entirety to another Person, or (v) an exchange
offer for Common Stock (or Other Securities); or
(c) the voluntary or involuntary dissolution, liquidation, or winding up of
the Company,
the Company shall cause to be filed with the Warrant Agent and mailed to each
holder of a Warrant a notice specifying (x) the date or expected date on which
any such record is to be taken for the purpose of such dividend, distribution,
rights, event, transaction or amendment (or vote thereon) and the amount and
character of any such dividend, distribution, exchange, rights, or vote, or, if
a record is not to be taken, the
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date as of which the holders of Common Stock of record to be entitled to such
dividend, distribution, exchange or rights are to be determined, and the amount
and character of such dividend, distribution or rights, or (y) the date or
expected date on which any such reorganization, reclassification,
recapitalization, consolidation, merger, sale, transfer, exchange offer,
dissolution, liquidation or winding up is expected to become effective, and the
time, if any such time is to be fixed, as of which holders of record of Common
Stock (or Other Securities) shall be entitled to exchange their shares of
Common Stock (or Other Securities) for the securities or other property
deliverable upon such reorganization, reclassification, recapitalization,
consolidation, merger, sale, transfer, exchange offer, dissolution, liquidation
or winding up and in the case of a transaction which would cause the
cancellation of any outstanding Warrants, the effect of such transaction, if
known. Such notice shall be delivered not less than 20 days prior to such date
therein specified, in the case of any such date referred to in clause (x) of
the preceding sentence, and not less than 30 days prior to such date therein
specified, in the case of any such date referred to in clause (y) of the
preceding sentence. Failure to give such notice within the time provided or any
defect therein shall not affect the legality or validity of any such action.
11.2 Available Information. The Company shall promptly file with the Warrant
Agent copies of its annual reports and of the information, documents and other
reports (or copies of such portions of any of the foregoing as the Commission
may by rules and regulations prescribe) that the Company is required to file
with the Commission pursuant to Section 13 or 15(d) of the Exchange Act. If the
Company is not required to make such filings, the Company shall promptly
deliver to the Warrant Agent copies of any annual, quarterly or other reports
and financial statements that are provided to any holders of equity or debt
securities of the Company (other than bank debt) in their capacity as holders
of such securities.
ARTICLE 12
Reservation of Stock
12.1 Reservation; Due Authorization, etc. The Company shall at all times
reserve and keep available, free from preemptive rights, out of its authorized
but unissued Common Stock (or out of authorized Other Securities), solely for
issuance and delivery upon exercise of Warrants, the full number of shares of
Common Stock (and Other Securities) from time to time issuable upon the
exercise of all Warrants and any other outstanding warrants, options or similar
rights, from time to time outstanding. All shares of Common Stock (and Other
Securities) shall be duly authorized and, when issued upon such exercise, shall
be duly and validly issued, and (in the case of shares) fully paid and
nonassessable, and free from all taxes, liens, charges, security interests,
encumbrances and other restrictions created by or through the Company.
12.2 Compliance with Law. The Company will use its best efforts, at its
expense and on a continual basis, to assure that all shares of Common Stock
(and Other Securities) that may be issued upon exercise of Warrants may be so
issued and delivered without violation of any Federal or state securities law
or regulation, or any other law or regulation applicable to the Company or any
of its subsidiaries, provided that with respect to any such exercise involving
a sale or transfer of Warrants or any such securities issuable upon such
exercise, the Company shall have no obligation to register such Warrants or
securities under any such securities law except as provided in Article 8 hereof
or in a registration rights agreement entered into by the parties.
ARTICLE 13
Payment of Taxes
The Company will pay any and all documentary stamp or similar issue taxes
payable to the United States of America or any State, or any political
subdivision or taxing authority thereof or therein, in respect of the issuance
or delivery of shares of Common Stock (or Other Securities) on exercise of
Warrants, provided that the Company shall not be required to pay any tax that
may be payable in respect of any transfer of a Warrant
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or any transfer involved in the issuance and delivery of Common Stock (or Other
Securities) in a name other than that of the registered holder of the Warrants
to be exercised, and no such issuance or delivery shall be made unless and
until the person requesting such issuance has paid to the Company the amount of
any such tax or has established, to the reasonable satisfaction of the Company,
that such tax has been paid.
ARTICLE 14
Loss or Mutilation
Upon receipt by the Company and the Warrant Agent of evidence reasonably
satisfactory to them of the ownership of and the loss, theft, destruction or
mutilation of any Warrant Certificate and of an indemnity bond reasonably
satisfactory to them in form or amount, and (in the case of mutilation) upon
surrender and cancellation thereof, then, in the absence of notice to the
Company or the Warrant Agent that the Warrants represented thereby have been
acquired by a bona fide purchaser, the Company shall execute and deliver to the
Warrant Agent and, upon the Company's request, an authorized signatory of the
Warrant Agent shall manually countersign and deliver, to the registered holder
of the lost, stolen, destroyed or mutilated Warrant Certificate, in exchange
for or in lieu thereof, a new Warrant Certificate of the same tenor and for a
like aggregate number of Warrants. Upon the issuance of any new Warrant
Certificate under this Article 14, the Company may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other expenses (including the reasonable fees and
expenses of the Warrant Agent) in connection therewith. Every new Warrant
Certificate executed and delivered pursuant to this Article 14 in lieu of any
lost, stolen or destroyed Warrant Certificate shall be entitled to the same
benefits of this Agreement equally and proportionately with any and all other
Warrant Certificates, whether or not the allegedly lost, stolen or destroyed
Warrant Certificate shall be at any time enforceable by anyone. The provisions
of this Article 14 are exclusive and shall preclude (to the extent lawful) all
other rights or remedies with respect to the replacement of mutilated, lost,
stolen or destroyed Warrant Certificates.
ARTICLE 15
Warrant Registration
15.1 Registration. The Warrant Certificates shall be issued in registered
form only and shall be registered in the names of the record holders of the
Warrant Certificates to whom they are to be delivered. The Company shall
maintain or cause to be maintained a register in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Warrants and of transfers or exchanges of Warrant Certificates
as provided in this Agreement. Such register shall be maintained at the office
of the Company or the Warrant Agent located at the respective address therefor
as provided in Section 17.1. Such register shall be open for inspection upon
notice at all reasonable times by the Warrant Agent and each holder of a
Warrant.
15.2 Transfer or Exchange. Subject to Section 2.1 hereof, at the option of
the holder, Warrant Certificates may be exchanged or transferred for other
Warrant Certificates for a like aggregate number of Warrants, upon surrender of
the Warrant Certificates to be exchanged at the office of the Company or the
Warrant Agent maintained for such purpose at the respective address therefor as
provided in Section 17.1, and upon payment of the charges herein provided.
Whenever any Warrant Certificates are so surrendered for exchange or transfer,
the Company shall execute, and an authorized signatory of the Warrant Agent
shall manually countersign and deliver, the Warrant Certificates that the
holder making the exchange is entitled to receive.
15.3 Valid and Enforceable. All Warrant Certificates issued upon any
registration of transfer or exchange of Warrant Certificates shall be the valid
obligations of the Company, evidencing the same obligations, and entitled to
the same benefits under this Agreement, as the Warrant Certificates surrendered
for such registration of transfer or exchange.
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15.4 Endorsement. Every Warrant Certificate surrendered for registration of
transfer or exchange shall (if so required by the Company or the Warrant Agent)
be duly endorsed, or be accompanied by an instrument of transfer in form
reasonably satisfactory to the Company and the Warrant Agent and duly executed
by the registered holder thereof or such holder's officer or representative
duly authorized in writing.
15.5 No Service Charge. No service charge shall be made for any registration
of transfer or exchange of Warrant Certificates.
15.6 Cancellation. Any Warrant Certificate surrendered for registration of
transfer, exchange or the exercise of the Warrants represented thereby shall,
if surrendered to the Company, be delivered to the Warrant Agent, and all
Warrant Certificates surrendered or so delivered to the Warrant Agent shall be
promptly cancelled by the Warrant Agent. Any such Warrant Certificate shall not
be reissued by the Company and, except as provided in this Article 15 in case
of an exchange or transfer, in Article 14 in case of a mutilated Warrant
Certificate and in Article 3 in case of the exercise of less than all the
Warrants represented thereby, no Warrant Certificate shall be issued hereunder
in lieu thereof. The Warrant Agent shall deliver to the Company from time to
time or otherwise dispose of such cancelled Warrant Certificates in a manner
reasonably satisfactory to the Company.
ARTICLE 16
Warrant Agent
16.1 Obligations Binding. The Warrant Agent undertakes the duties and
obligations imposed by this Agreement upon the terms and conditions set forth
in this Article 16. The Company, and the holders of Warrants by their
acceptance thereof, shall be bound by all of such terms and conditions.
16.2 No Liability. The Warrant Agent shall not by countersigning Warrant
Certificates or by any other act hereunder be accountable with respect to or be
deemed to make any representations as to the validity or authorization of the
Warrants or the Warrant Certificates (except as to its countersignature
thereon), as to the validity, authorization or value (or kind or amount) of any
Common Stock or of any Other Securities or other property delivered or
deliverable upon exercise of any Warrant, or as to the purchase price of such
Common Stock, securities or other property. The Warrant Agent shall not (i) be
liable for any recital or statement of fact contained herein or in the Warrant
Certificates or for any action taken, suffered or omitted by the Warrant Agent
in good faith in the belief that any Warrant Certificate or any other document
or any signature is genuine or properly authorized, (ii) be responsible for
determining whether any facts exist that may require any adjustment of the
purchase price and the number of shares of Common Stock purchasable upon
exercise of Warrants, or with respect to the nature or extent of any such
adjustments when made, or with respect to the method of adjustment employed,
(iii) be responsible for any failure on the part of the Company to issue,
transfer or deliver any Common Stock or Other Securities or property upon the
surrender of any Warrant for the purpose of exercise or to comply with any
other of the Company's covenants and obligations contained in this Agreement or
in the Warrant Certificates or (iv) be liable for any act or omission in
connection with this Agreement except for its own bad faith, negligence or
willful misconduct.
16.3 Instructions. The Warrant Agent is hereby authorized to accept
instructions with respect to the performance of its duties hereunder from the
President, any Vice President, the Treasurer or any Assistant Treasurer of the
Company and to apply to any such officer for advice or instructions. The
Warrant Agent shall not be liable for any action taken, suffered or omitted by
it in good faith in accordance with the instructions of any such officer.
16.4 Agents. The Warrant Agent may execute and exercise any of the rights and
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys, agents or employees, provided reasonable care has been
exercised in the selection and in the continued employment of any such
attorney, agent or employee. The Warrant Agent shall not be under any
obligation or duty to institute, appear in, or
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defend any action, suit or legal proceeding in respect hereof, but this
provision shall not affect the power of the Warrant Agent to take such action
as the Warrant Agent may consider proper. The Warrant Agent shall promptly
notify the Company in writing of any claim made or action, suit or proceeding
instituted against the Warrant Agent arising out of or in connection with this
Agreement.
16.5 Cooperation. The Company will perform, execute, acknowledge and deliver
or cause to be performed, executed, acknowledged and delivered all such further
acts, instruments and assurances as may reasonably be required by the Warrant
Agent in order to enable the Warrant Agent to carry out or perform its duties
under this Agreement.
16.6 Agent Only. The Warrant Agent shall act solely as agent. The Warrant
Agent shall not be liable except for the performance of such duties as are
specifically set forth herein, and no implied covenants or obligations shall be
read into this Agreement against the Warrant Agent, whose duties and
obligations shall be determined solely by the express provisions hereof.
16.7 Right to Counsel. The Warrant Agent may at any time consult with legal
counsel satisfactory to it (who may be legal counsel for the Company) and the
Warrant Agent shall incur no liability or responsibility to the Company or to
any Warrant holder for any action taken, suffered or omitted by the Warrant
Agent in good faith in accordance with the opinion or advice of such counsel.
16.8 Compensation. The Company agrees to pay the Warrant Agent reasonable
compensation for its services hereunder and to reimburse the Warrant Agent for
its reasonable expenses hereunder; and further agrees to indemnify the Warrant
Agent and hold it harmless against any and all liabilities, including, but not
limited to, judgments, costs and counsel fees, for anything done, suffered or
omitted by the Warrant Agent in the execution of its duties and powers
hereunder, except for any such liabilities that arise as a result of the
Warrant Agent's bad faith, negligence or willful misconduct.
16.9 Accounting. The Warrant Agent shall account promptly to the Company with
respect to Warrants exercised and concurrently pay to the Company all moneys
received by the Warrant Agent on behalf of the Company on the purchase of
shares of Common Stock (or Other Securities) through the exercise of Warrants.
16.10 No Conflict. The Warrant Agent and any stockholder, director, officer
or employee of the Warrant Agent may buy, sell or deal in any of the Warrants
or other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Warrant Agent under this Agreement. Nothing herein shall preclude the Warrant
Agent from acting in any other capacity for the Company or for any other legal
entity.
16.11 Resignation; Termination. The Warrant Agent may resign its duties and
be discharged from all further duties and liabilities hereunder (except
liabilities arising as a result of the Warrant Agent's negligence or willful
misconduct), after giving 30 days' prior written notice to the Company. The
Company may remove the Warrant Agent upon 30 days written notice, and the
Warrant Agent shall thereupon in like manner be discharged from all further
duties and liabilities hereunder, except as to liabilities arising as a result
of the Warrant Agent's bad faith, negligence or willful misconduct. The Company
shall cause to be mailed (by first class mail, postage prepaid) to each
registered holder of a Warrant at such, holder's last address as shown on the
register of the Company, at the Company's expense, a copy of such notice of
resignation or notice of removal, as the case may be. Upon such resignation or
removal the Company shall promptly appoint in writing a new warrant agent. If
the Company shall fail to make such appointment within a period of 30 days
after it has been notified in writing of such resignation by the resigning
Warrant Agent or after such removal, then the holder of any Warrant may apply
to any court of competent jurisdiction for the appointment of a new warrant
agent. Pending appointment of a successor to the Warrant Agent, either by the
Company or by such a court, the duties of the Warrant Agent shall be carried
out by the Company. Any successor warrant agent, whether appointed by the
Company or by such a court, shall be a corporation, incorporated under the
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laws of the United States or of any State thereof and authorized under such
laws to exercise corporate trust powers, be subject to supervision and
examination by Federal or State authority, and have a combined capital and
surplus of not less than $100,000,000 as set forth in its most recent published
annual report of condition. After acceptance in writing of such appointment by
the new warrant agent it shall be vested with the same powers, rights, duties
and responsibilities as if it had been originally named herein as the Warrant
Agent, without any further assurance, conveyance, act or deed; but if for any
reason it shall be necessary or expedient to execute and deliver any further
assurance, conveyance, act or deed, the same shall be done at the expense of
the Company and shall be legally and validly executed and delivered by the
resigning or removed Warrant Agent. Not later than the effective date of any
such appointment the Company shall file notice thereof with the resigning or
removed Warrant Agent and shall forthwith cause at copy of such notice to be
mailed (by first class mail, postage prepaid) to each registered holder of a
Warrant at such holder's last address as shown on the register of the Company.
Failure to give any notice provided for in this Section 16.11, or any defect in
any such notice, shall not affect the legality or validity of the resignation
of the Warrant Agent or the appointment of a new warrant agent, as the case may
be.
16.12 Change of Warrant Agent. If at any time the name of the Warrant Agent
shall be changed and at such time any of the Warrant Certificates shall have
been countersigned but not delivered, the Warrant Agent may adopt the
countersignature under its prior name and deliver Warrant Certificates so
countersigned; and if at that time any of the Warrant Certificates shall not
have been countersigned, the Warrant Agent may countersign such Warrant
Certificates either in its prior name or in its changed name; and in all such
cases such Warrant Certificates shall have the full force and effect provided
in the Warrant Certificates and this Agreement.
16.13 Successor Warrant Agent. Any corporation into which the Warrant Agent
or any new warrant agent may be merged or any corporation resulting from any
consolidation to which the Warrant Agent or any new warrant agent shall be a
party or any corporation succeeding to all or substantially all the agency
business of the Warrant Agent or any new warrant agent shall be a successor
Warrant Agent under this Agreement without any further act, provided that such
corporation would be eligible for appointment as a new warrant agent under the
provisions of Section 16.11 of this Article 16. The Company shall promptly
cause notice of the succession as Warrant Agent of any such successor Warrant
Agent to be mailed (by first class mail, postage prepaid) to each registered
holder of a Warrant at his last address as shown on the register of the
Company.
ARTICLE 17
Remedies, Etc.
17.1 Remedies. The Company stipulates that the remedies at law of each holder
of a Warrant in the event of any default or threatened default by the Company
in the performance of or compliance with any of the terms of this Warrant
Agreement are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
17.2 Warrant Holder Not Deemed a Stockholder. Prior to the exercise of the
Warrants represented thereby no holder of a Warrant Certificate, as such, shall
be entitled to any rights of a stockholder of the Company, including, but not
limited to, the right to vote, to receive dividends or other distributions, to
exercise any preemptive right or, except as otherwise provided herein, to
receive any notice of meetings of stockholders, and no such holder shall be
entitled to receive notice of any proceedings of the Company except as provided
in this Agreement. Nothing contained in this Agreement shall be construed as
imposing any liabilities on such holder to purchase any securities or as a
stockholder of the Company, whether such liabilities are asserted by the
Company or by creditors or stockholders of the Company or otherwise.
15
<PAGE>
17.3 Right of Action. All rights of action in respect of this Agreement are
vested in the registered holders of the Warrants. Any registered holder of any
Warrant, without the consent of the Warrant Agent or the registered holder of
any other Warrant, may in such holder's own behalf and for such holder's own
benefit enforce, and may institute and maintain any suit, action or proceeding
against the Company suitable to enforce, or otherwise in respect of, such
holder's right to exercise such holder's Warrants in the manner provided in the
Warrant Certificate representing such Warrants and the Company's obligations
under this Agreement and the Warrants.
ARTICLE 18
Miscellaneous
18.1 Notices. Any notice, demand or delivery authorized by this Agreement
shall be sufficiently given or made if sent by first class mail, postage
prepaid, addressed to any registered holder of a Warrant at such holder's last
known address appearing on the register of the Company, and to the Company or
the Warrant Agent as follows:
If to the Company:
The Grand Union Company
201 Willowbrook Boulevard
Wayne, New Jersey 07470
Attn: Mr. Kenneth Baum
Telephone: (201) 890-6000
Facsimile: (201) 890-6012
If to the Warrant Agent:
[Warrant Agent]
or such other address as shall have been furnished in writing, in accordance
with this Section 18.1, to the party giving or making such notice, demand or
delivery.
18.2 Governing Law and Consent to Forum. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED
TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. THE COMPANY AND THE PARTIES EACH HEREBY
IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN
THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE CITY OF NEW YORK IN
RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, AND EACH IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PERSON TO SERVE PROCESS IN
ANY MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION.
18.3 Benefits of this Agreement. This Agreement shall be binding upon and
inure to the benefit of the Company and the Warrant Agent and their respective
successors and assigns, and the registered and beneficial holders from time to
time of the Warrants and of holders of the Common Stock, where applicable.
Nothing in this Agreement is intended or shall be construed to confer upon any
other person, any right, remedy or claim under or by reason of this Agreement
or any part hereof.
16
<PAGE>
18.4 Agreement of Holders of Warrant Certificates. Every holder of a Warrant
Certificate, by accepting the same, covenants and agrees with the Company, the
Warrant Agent and with every other holder of a Warrant Certificate that the
Warrant Certificates are transferable on the registry books of the Warrant
Agent only upon the terms and conditions set forth in this Agreement, and the
Company and the Warrant Agent may deem and treat the person in whose name the
Warrant Certificate is registered as the absolute owner for all purposes
whatsoever and neither the Company nor the Warrant Agent shall be affected by
any notice to the contrary.
18.5 Counterparts. This Agreement may be executed in any number of
counterparts and each such counterpart shall for all purposes be deemed to be
an original, and all such counterparts shall together constitute but one and
the same instrument.
18.6 Amendments. The Warrant Agent may, without the consent or concurrence of
the holders of the Warrants, by supplemental agreement or other writing, join
with the Company in making any amendments or modifications of this Agreement
that they shall have been advised by counsel (a) are required to cure any
ambiguity or to correct any defective or inconsistent provision or clerical
omission or mistake or manifest error herein contained and which do not
accurately reflect the understanding of the parties hereto, (b) add to the
covenants and agreements of the Company in this Agreement further covenants and
agreements of the Company thereafter to be observed, or surrender any rights or
power reserved to or conferred upon the Company in this Agreement or (c) do not
and will not adversely affect, alter or change the rights, privileges or
immunities of the registered holders of Warrants or of any person entitled to
the benefits of this Agreement who has not assented to such change, in writing.
Any other amendment to this Agreement may be effected only with the consent of
all of the parties entitled to benefit hereunder who would be affected by such
change.
18.7 Consent to Jurisdiction. The parties hereby expressly acknowledge and
agree that, to the extent permitted by applicable law, the Bankruptcy Court
shall have exclusive jurisdiction to hear and determine any and all disputes
concerning the distribution of Warrants hereunder to holders of Zero Coupon
Notes pursuant to the Plan. The Warrant Agent hereby assents to the
jurisdiction of the Bankruptcy Court with respect to any such disputes and
waives any argument of lack of such jurisdiction.
18.8 Headings. The table of contents hereto and the descriptive headings of
the several sections hereof are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed, as of the day and year first above written.
THE GRAND UNION COMPANY
By:
------------------------
Name:
Title:
[Warrant Agent]
By:
------------------------
Name:
Title:
17
<PAGE>
EXHIBIT A
FORMS OF WARRANT CERTIFICATE
<PAGE>
EXHIBIT A-1
FORM OF SERIES 1 WARRANT CERTIFICATE
<PAGE>
[FORM OF FACE OF SERIES 1 WARRANT CERTIFICATE]
Series 1 Warrant Number of Series 1 Warrant(s):
No.
Exercisable During the Period Commencing May , 1995
and Terminating at 5:00 p.m. May , 2000
except as provided below
SERIES 1 WARRANT TO PURCHASE
COMMON STOCK
OF
THE GRAND UNION COMPANY
This Certifies that or registered assigns, is the owner of the
number of SERIES 1 WARRANTS set forth above, each of which represents the
right, at any time after May , 1995 and on or before 5:00 p.m., New York
City time, on May , 2000, subject to acceleration as provided below, to
purchase from The Grand Union Company, a Delaware corporation (the "Company"),
at the price of $30.00 (the "Exercise Price"), one share of Common Stock,
$[ ] par value, of the Company as such stock was constituted as of May ,
1995, subject to adjustment as provided in the Warrant Agreement hereinafter
referred to, upon surrender hereof, with the subscription form on the reverse
hereof duly executed, by hand or by mail to [Warrant Agent, address],
Attention: Corporate Trust Operations, or to any successor thereto, as the
warrant agent under the Warrant Agreement, at the office of such successor
maintained for such purpose (any such warrant agent being herein called the
"Warrant Agent") (or, if such exercise shall be in connection with an
underwritten Public Offering of shares of such Common Stock (or Other
Securities) (as such term and other capitalized terms used herein are defined
in the Warrant Agreement) subject to the Warrant Agreement, at the location at
which the Company shall have agreed to deliver such securities), and
simultaneous payment in full (by certified or official bank or bank cashier's
check payable to the order of the Company) of the Exercise Price in respect of
each Warrant represented by this Warrant Certificate that is so exercised, all
subject to the terms and conditions hereof and of the Warrant Agreement.
Upon any partial exercise of the Warrants represented by this Warrant
Certificate, there shall be issued to the holder hereof a new Warrant
Certificate representing the Warrants that were not exercised.
No fractional shares may be issued upon the exercise of rights to purchase
hereunder, and as to any fraction of a share otherwise issuable, the Company
will make a cash adjustment in lieu of such issuance, as provided in the
Warrant Agreement.
This Warrant Certificate is issued under and in accordance with a Warrant
Agreement, dated as of May , 1995 (the "Warrant Agreement"), between the
Company and [Warrant Agent], as Warrant Agent, and is subject to the terms and
provisions contained therein, all of which terms and provisions the holder of
this Warrant Certificate consents to by acceptance hereof. Copies of the
Warrant Agreement are on file at the above-mentioned office of the Warrant
Agent and may be obtained by writing to the Warrant Agent.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS WARRANT SET FORTH
ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE
SAME EFFECT AS IF SET FORTH AT THIS PLACE.
Dated:
THE GRAND UNION COMPANY
By:
------------------------
Title:
Countersigned:
[Warrant Agent], as Warrant Agent
By:
------------------------
Authorized Signatory
<PAGE>
[FORM OF REVERSE OF WARRANT CERTIFICATE]
THE GRAND UNION COMPANY
The transfer of this Warrant Certificate and all rights hereunder is
registrable by the registered holder hereof, in whole or in part, on the
register of the Company upon surrender of this Warrant Certificate at the
office or agency of the Company or the office of the Warrant Agent maintained
for such purpose at [Warrant Agent, address], Attention: Corporate Trust
Operations, duly endorsed or accompanied by a written instrument of transfer
duly executed and in form satisfactory to the Company and the Warrant Agent, by
the registered holder hereof or his attorney duly authorized in writing and
upon payment of any necessary transfer tax or other governmental charge imposed
upon such transfer or registration thereof. Upon any partial transfer the
Company will cause to be delivered to such holder a new Warrant Certificate or
Certificates with respect to any portion not so transferred.
This Warrant Certificate may be exchanged at the office or agency of the
Company or the office of the Warrant Agent maintained for such purpose at
[Warrant Agent, address], Attention: Corporate Trust Operations, for Warrant
Certificates representing the same aggregate number of Warrants, each new
Warrant Certificate to represent such number of Warrants as the holder hereof
shall designate at the time of such exchange.
Prior to the exercise of the Warrants represented hereby, the holder of this
Warrant Certificate, as such, shall not be entitled to any rights of a
stockholder of the Company, including, but not limited to, the right to vote,
to receive dividends or other distributions, to exercise any preemptive right
or, except as provided in the Warrant Agreement, to receive any notice of
meetings of stockholders, and shall not be entitled to receive notice of any
proceedings of the Company except as provided in the Warrant Agreement. Nothing
contained herein shall be construed as imposing any liabilities upon the holder
of this Warrant Certificate to purchase any securities or as a stockholder of
the Company, whether such liabilities are asserted by the Company or by
creditors or stockholders of the Company or otherwise.
This Warrant Certificate shall be void and all rights represented hereby
shall cease unless exercised on or before the close of business on May ,
2000.
PRIOR TO THE EXPIRATION OF THE EXERCISE PERIOD, THE COMPANY MAY ENGAGE IN A
CONSOLIDATION OR MERGER AS TO WHICH IT IS NOT THE SURVIVING COMPANY AND IN
CERTAIN SUCH EVENTS ANY WARRANTS WHICH ARE NOT EXERCISED PRIOR TO THE
CONSUMMATION OF SUCH TRANSACTION WILL BE CANCELED. WARRANTHOLDERS WILL RECEIVE
PRIOR NOTICE OF ANY SUCH TRANSACTION, AND WILL HAVE THE OPPORTUNITY TO EXERCISE
THEIR WARRANTS AND, UPON SUCH EXERCISE, EXERCISE THEIR RIGHTS AS HOLDERS OF
COMMON STOCK, PRIOR TO ITS CONSUMMATION.
This Warrant Certificate shall not be valid for any purpose until it shall
have been manually countersigned by an authorized signatory of the Warrant
Agent.
Witness the facsimile seal of the Company and the signature of its duly
authorized officer.
<PAGE>
SUBSCRIPTION FORM
(To be executed only upon exercise of warrant)
TO THE GRAND UNION COMPANY
[Warrant Agent], as Warrant Agent
Attention: Corporate Trust Operations
The undersigned (i) irrevocably exercises the Warrants represented by the
within Warrant Certificate, (ii) purchases one share of Common Stock of The
Grand Union Company (before giving effect to the adjustments provided in the
Warrant Agreement referred to in the within Warrant Certificate) for each
Warrant so exercised and herewith makes payment in full of the purchase price
of $30.00 in respect of each Warrant so exercised as provided in the Warrant
Agreement (such payment being by certified or official bank or bank cashier's
check payable to the order of The Grand Union Company, all on the terms and
conditions specified in the within Warrant Certificate and the Warrant
Agreement, (iii) surrenders this Warrant Certificate and all right, title and
interest therein to The Grand Union Company and (iv) directs that the
securities or other property deliverable upon the exercise of such Warrants be
registered or placed in the name and at the address specified below and
delivered thereto.
Dated: , 19
---------------------------
(Owner)*
---------------------------
(Signature of Authorized
Representative)
---------------------------
(Street Address)
---------------------------
(City) (State) (Zip Code)
Securities or property to be
issued and delivered to:
- ----------------------------
Signature Guaranteed**
Please insert social
security or other
identifying number
---------------
Name
---------------------------------------------------------------------------
Street Address
-----------------------------------------------------------------
City, State and Zip Code
-------------------------------------------------------
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned registered holder of the within Warrant
Certificate hereby sells, assigns and transfers unto the Assignee named below
all of the rights of the undersigned under the within Warrant Certificate, with
respect to the number of warrants set forth below:
Name of
Assignee Address No. of Warrants
- -------- ------- ---------------
Please insert social
security or other
identifying number
of Assignee
- ---------------
and does hereby irrevocably constitute and appoint attorney to make
such transfer on the books of The Grand Union Company maintained for the
purpose, with full power of substitution in the premises.
Dated: , 19
Name *
-------------------
Signature of Authorized
Representative
-------------------------
Signature Guaranteed **
-------------------
- ------
* The signature must correspond with the name as written upon the face of the
within Warrant Certificate in every particular, without alteration or
enlargement or any change whatsoever.
** The signature must be guaranteed by a securities transfer agents medallion
program ("stamp") participant or an institution receiving prior approval from
the Warrant Agent.
<PAGE>
EXHIBIT A-2
FORM OF SERIES 2 WARRANT CERTIFICATE
<PAGE>
[FORM OF FACE OF SERIES 2 WARRANT CERTIFICATE]
Series 2 Warrant Number of Series 2 Warrant(s):
No.
Exercisable During the Period Commencing May , 1995
and Terminating at 5:00 p.m. May , 2000
except as provided below
SERIES 2 WARRANT TO PURCHASE
Common Stock
OF
THE GRAND UNION COMPANY
This Certifies that or registered assigns, is the owner of the
number of SERIES 2 WARRANTS set forth above, each of which represents the
right, at any time after May , 1995 and on or before 5:00 p.m., New York
City time, on May , 2000 subject to acceleration as provided below, to
purchase from The Grand Union Company, a Delaware Corporation (the "Company"),
at the price of $42.00 (the "Exercise Price"), one share of Common Stock, [ ]
par value, of the Company as such stock was constituted as of May , 1995,
subject to adjustment as provided in the Warrant Agreement hereinafter referred
to, upon surrender hereof, with the subscription form on the reverse hereof
duly executed, by hand or by mail to [Warrant Agent] as Warrant Agent under the
Warrant Agreement, at [Warrant agent address], Attention: Corporate Trust
Operations, or to any successor thereto, as the warrant agent under the Warrant
Agreement, at the office of such successor maintained for such purpose (any
such warrant agent being herein called the "Warrant Agent") (or, if such
exercise shall be in connection with an underwritten Public Offering of shares
of such Common Stock (or Other Securities) (as such term and other capitalized
terms used herein are defined in the Warrant Agreement) subject to the Warrant
Agreement, at the location at which the Company shall have agreed to deliver
such securities), and simultaneous payment in full (by certified or official
bank or bank cashier's check payable to the order of the Company) of the
Exercise Price in respect of each Warrant represented by this Warrant
Certificate that is so exercised, all subject to the terms and conditions
hereof and of the Warrant Agreement.
Upon any partial exercise of the Warrants represented by this Warrant
Certificate, there shall be issued to the holder hereof a new Warrant
Certificate representing the Warrants that were not exercised.
No fractional shares may be issued upon the exercise of rights to purchase
hereunder, and as to any fraction of a share otherwise issuable, the Company
will make a cash adjustment in lieu of such issuance, as provided in the
Warrant Agreement.
This Warrant Certificate is issued under and in accordance with a Warrant
Agreement, dated as of May , 1995 (the "Warrant Agreement"), between the
Company and [ ], as Warrant Agent, and is subject to the terms
and provisions contained therein, all of which terms and provisions the holder
of this Warrant Certificate consents to by acceptance hereof. Copies of the
Warrant Agreement are on file at the above-mentioned office of the Warrant
Agent and may be obtained by writing to the Warrant Agent.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS WARRANT SET FORTH
ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE
SAME EFFECT AS IF SET FORTH AT THIS PLACE.
Dated:
THE GRAND UNION COMPANY
By:
------------------------
Title:
Countersigned:
[Warrant Agent], as Warrant Agent
By:
---------------------------
Authorized Signatory
<PAGE>
[FORM OF REVERSE OF WARRANT CERTIFICATE]
THE GRAND UNION COMPANY
The transfer of this Warrant Certificate and all rights hereunder is
registrable by the registered holder hereof, in whole or in part, on the
register of the Company upon surrender of this Warrant Certificate at the
office or agency of the Company or the office of the Warrant Agent maintained
for such purpose at [Warrant Agent, address], Attention: Corporate Trust
Operations, duly endorsed or accompanied by a written instrument of transfer
duly executed and in form satisfactory to the Company and the Warrant Agent, by
the registered holder hereof or his attorney duly authorized in writing and
upon payment of any necessary transfer tax or other governmental charge imposed
upon such transfer or registration thereof. Upon any partial transfer the
Company will cause to be delivered to such holder a new Warrant Certificate or
Certificates with respect to any portion not so transferred.
This Warrant Certificate may be exchanged at the office or agency of the
Company or the office of the Warrant Agent maintained for such purpose at
[Warrant Agent, address], Attention: Corporate Trust Operations, for Warrant
Certificates representing the same aggregate number of Warrants, each new
Warrant Certificate to represent such number of Warrants as the holder hereof
shall designate at the time of such exchange.
Prior to the exercise of the Warrants represented hereby, the holder of this
Warrant Certificate, as such, shall not be entitled to any rights of a
stockholder of the Company, including, but not limited to, the right to vote,
to receive dividends or other distributions, to exercise any preemptive right
or, except as provided in the Warrant Agreement, to receive any notice of
meetings of stockholders, and shall not be entitled to receive notice of any
proceedings of the Company except as provided in the Warrant Agreement. Nothing
contained herein shall be construed as imposing any liabilities upon the holder
of this Warrant Certificate to purchase any securities or as a stockholder of
the Company, whether such liabilities are asserted by the Company or by
creditors or stockholders of the Company or otherwise.
This Warrant Certificate shall be void and all rights represented hereby
shall cease unless exercised on or before the close of business on May ,
2000.
PRIOR TO THE EXPIRATION OF THE EXERCISE PERIOD, THE COMPANY MAY ENGAGE IN A
CONSOLIDATION OR MERGER AS TO WHICH IT IS NOT THE SURVIVING COMPANY AND IN
CERTAIN SUCH EVENTS ANY WARRANTS WHICH ARE NOT EXERCISED PRIOR TO THE
CONSUMMATION OF SUCH TRANSACTION WILL BE CANCELED. WARRANT HOLDERS WILL RECEIVE
PRIOR NOTICE OF ANY SUCH TRANSACTION, AND WILL HAVE THE OPPORTUNITY TO EXERCISE
THEIR WARRANTS AND, UPON SUCH EXERCISE, EXERCISE THEIR RIGHTS AS HOLDERS OF
COMMON STOCK, PRIOR TO ITS CONSUMMATION.
This Warrant Certificate shall not be valid for any purpose until it shall
have been manually countersigned by an authorized signatory of the Warrant
Agent.
Witness the facsimile seal of the Company and the signature of its duly
authorized officer.
<PAGE>
SUBSCRIPTION FORM
(To be executed only upon exercise of warrant)
TO THE GRAND UNION COMPANY
[Warrant Agent], as Warrant Agent
Attention: Corporate Trust Operations
The undersigned (i) irrevocably exercises the Warrants represented by the
within Warrant Certificate, (ii) purchases one share of Common Stock of The
Grand Union Company (before giving effect to the adjustments provided in the
Warrant Agreement referred to in the within Warrant Certificate) for each
Warrant so exercised and herewith makes payment in full of the purchase price
of $42.00 in respect of each Warrant so exercised as provided in the Warrant
Agreement (such payment being by certified or official bank or bank cashier's
check payable to the order of The Grand Union Company), all on the terms and
conditions specified in the within Warrant Certificate and the Warrant
Agreement, (iii) surrenders this Warrant Certificate and all right, title and
interest therein to The Grand Union Company and (iv) directs that the
securities or other property deliverable upon the exercise of such Warrants be
registered or placed in the name and at the address specified below and
delivered thereto.
Dated: , 19
---------------------------
(Owner)*
---------------------------
(Signature of Authorized
Representative)
---------------------------
(Street Address)
---------------------------
(City) (State) (Zip Code)
Securities or property to be
issued and delivered to:
- ---------------------------
Signature Guaranteed**
Please insert social
security or other
identifying number
Name
---------------------------------------------------------------------------
Street Address
-----------------------------------------------------------------
City, State and Zip Code
-------------------------------------------------------
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned registered holder of the within Warrant
Certificate hereby sells, assigns and transfers unto the Assignee named below
all of the rights of the undersigned under the within Warrant Certificate, with
respect to the number of warrants set forth below:
Name of No. of
Assignee Address Warrants
- -------- ------- --------
Please insert social
security or other
identifying number
of Assignee
- ---------------
and does hereby irrevocably constitute and appoint attorney to
make such transfer on the books of The Grand Union Company maintained for the
purpose, with full power of substitution in the premises.
Dated: , 19
Name *
----------------------
Signature of Authorized
Representative
------------------------
Signature Guaranteed **
------------------
- ------
* The signature must correspond with the name as written upon the face of the
within Warrant Certificate in every particular, without alteration or
enlargement or any change whatsoever.
** The signature must be guaranteed by a securities transfer agents medallion
program ("stamp") participant or an institution receiving prior approval from
the Warrant Agent.
<PAGE>
EXHIBIT B
RELEASE
<PAGE>
Release
For good and valuable consideration, the receipt of which is hereby
acknowledged, including, without limitation, the issuance of warrants to
purchase common stock of Reorganized Grand Union pursuant to the Plan, the
undersigned hereby unconditionally and irrevocably releases the following
persons, subject to the Warrants having been released for distribution: the
Company, Capital, and Holdings, the respective affiliates of the Company,
Capital, and Holdings, present and former stockholders, directors, and officers
of the Company, Capital, and Holdings, including Miller Tabak Hirsch & Co.
("MTH") and its present and former partners, directors, officers, employees,
advisors, attorneys, consultants, agents, and representatives including,
without limitation, Mssrs. Martin A. Fox, Glenn L. Goldberg, Claude Incaudo and
James A. Lash, and any person or entity that directly or indirectly controls
MTH, including Gary Hirsch, Jeffrey Miller and Jeffrey Tabak, the members of
each of the Official Committee and the Informal Committees, each of the
Post-Confirmation Banks, BT Securities Corporation, Goldman, Sachs & Co., and
each of the foregoing entity's and/or person's respective attorneys, advisors,
financial advisors, investment bankers, employees, successors, agents, and
assigns, and any other person and/or entity against whom the undersigned may
have a Released Claim, as defined below (collectively, the "Released Persons"),
from any and all claims, demands, actions, causes of action, suits, costs,
dues, sums of money, accounts, bills, bonds, covenants, contracts,
controversies, agreements, promises, variances, trespasses, damages, judgments,
expenses, and liability whatsoever, known or unknown, at law or in equity,
irrespective of whether such claims arise out of contract, tort, violation of
laws or other regulations or otherwise, which the undersigned ever had or now
has against the Released Persons or any of them, for, or by reason of, any
matter, cause or thing whatsoever from the beginning of the world to and
including the date hereof arising out of or in connection with, or related in
any manner to, the issuance, ownership, purchase, and/or sale of the Zero
Coupon Notes including, without limitation, any claim for substantive
consolidation of the Company's Bankruptcy Case and Capital's Bankruptcy Case,
any claims arising under any state or federal securities law and/or any claims
arising under Sections 544, 548 and 550 of the Bankruptcy Code or under similar
state laws, including fraudulent conveyance claims (the "Released Claims");
provided, however, that the undersigned is not hereby releasing the right to
receive Warrants pursuant to the Plan or any Allowed Claim in Classes 1, 2, 3,
4 or 8 of the Plan held by the undersigned.
---------------------------
/s/
<PAGE>
Exhibit F
<PAGE>
Zero Claims Release
For good and valuable consideration, the receipt of which is hereby
acknowledged, including, without limitation, the issuance of warrants to
purchase common stock of Reorganized Grand Union pursuant to the Plan, the
undersigned hereby unconditionally and irrevocably releases the following
persons, subject to the Warrants having been released for distribution: the
Company, Capital, and Holdings, the respective affiliates of the Company,
Capital, and Holdings, present and former stockholders, directors, and officers
of the Company, Capital, and Holdings, including Miller Tabak Hirsch & Co.
("MTH") and its present and former partners, directors, officers, employees,
advisors, attorneys, consultants, agents, and representatives including,
without limitation, Mssrs. Martin A. Fox, Glenn L. Goldberg, Claude Incaudo and
James A. Lash, and any person or entity that directly or indirectly controls
MTH, including Gary Hirsch, Jeffrey Miller and Jeffrey Tabak, the members of
each of the Official Committee and the Informal Committees, each of the
Post-Confirmation Banks, BT Securities Corporation, Goldman, Sachs & Co., and
each of the foregoing entity's and/or person's respective attorneys, advisors,
financial advisors, investment bankers, employees, successors, agents, and
assigns, and any other person and/or entity against whom the undersigned may
have a Released Claim, as defined below (collectively, the "Released Persons"),
from any and all claims, demands, actions, causes of action, suits, costs,
dues, sums of money, accounts, bills, bonds, covenants, contracts,
controversies, agreements, promises, variances, trespasses, damages, judgments,
expenses, and liability whatsoever, known or unknown, at law or in equity,
irrespective of whether such claims arise out of contract, tort, violation of
laws or other regulations or otherwise, which the undersigned ever had or now
has against the Released Persons or any of them, for, or by reason of, any
matter, cause or thing whatsoever from the beginning of the world to and
including the date hereof arising out of or in connection with, or related in
any manner to, the issuance, ownership, purchase, and/or sale of the Zero
Coupon Notes including, without limitation, any claim for substantive
consolidation of the Company's Bankruptcy Case and Capital's Bankruptcy Case,
any claims arising under any state or federal securities law and/or any claims
arising under Sections 544, 548 and 550 of the Bankruptcy Code or under similar
state laws, including fraudulent conveyance claims (the "Released Claims");
provided, however, that the undersigned is not hereby releasing the right to
receive Warrants pursuant to the Plan or any Allowed Claim in Classes 1, 2, 3,
4 or 8 of the Plan held by the undersigned.
---------------------------
/s/
<PAGE>
Exhibit G
<PAGE>
AGREEMENT
This Agreement (the "Agreement"), dated as of April , 1995, is made among
The Grand Union Company (the "Company"), Grand Union Capital Corporation
("Capital"), Grand Union Holdings Corporation ("Holdings"), the Official
Committee of Unsecured Creditors of Grand Union Capital Corporation (the
"Capital Committee"), certain holders, that are signatories to this Agreement,
of the 15% Senior Zero Coupon Notes Due 2004, Series A and B (the "Senior Zero
Coupon Notes") and the 16.5% Senior Subordinated Zero Coupon Notes Due 2007,
Series A and B (the "Senior Subordinated Zero Coupon Notes" and, together with
the Senior Zero Coupon Notes, the "Zero Coupon Notes") issued by Capital and
guaranteed by Holdings (each such holder of Zero Coupon Notes, in its capacity
as such, a "Noteholder" and collectively with the Company, Capital, Holdings,
and the Capital Committee, the "Parties"). All terms not otherwise defined
herein shall have the meanings ascribed to such terms in the Second Amended
Chapter 11 Plan of the Company dated April 19, 1995, as amended as provided in
Section 1(d) hereof (the "Plan") annexed hereto as Exhibit A. This Agreement is
made in consideration of, and in reference to, the following:
RECITALS
WHEREAS, on January 25, 1995, the Company filed a voluntary petition for
relief under chapter 11 of the Bankruptcy Code, 11 U.S.C. (S)(S) 101 et seq.
(the "Bankruptcy Code"), in the United States Bankruptcy Court for the District
of Delaware (the "Bankruptcy Court"), commencing Case No. 95-84 (PJW) (the
"Company Bankruptcy Case"); and
WHEREAS, on February 6, 1995, certain members of a then unofficial committee
of holders of Zero Coupon Notes (the "Unofficial Capital Committee") commenced
an involuntary chapter 11 bankruptcy case against Capital, Case No. 95-130
(PJW), in the Bankruptcy Court, in response to which Capital consented to an
entry of an order for relief on February 16, 1995 (the "Capital Bankruptcy
Case"); and
WHEREAS, on February 16, 1995, Holdings filed a voluntary petition for relief
under chapter 11 of the Bankruptcy Code in the Bankruptcy Court, commencing Case
No. 95-172 (PJW) (the "Holdings Bankruptcy Case," together with the Company
Bankruptcy Case and the Capital Bankruptcy Case, the "Bankruptcy Cases"); and
WHEREAS, the Company, Capital and Holdings remain in possession of their
respective assets and continue to manage their affairs as debtors and
debtors-in-possession in their respective Bankruptcy Cases; and
WHEREAS, the Company is a wholly-owned subsidiary of Capital which, in turn,
is a wholly-owned subsidiary of Holdings; and
WHEREAS, both prior to and after the commencement of the Bankruptcy Cases, the
Unofficial Capital Committee made certain allegations including that (i) Capital
had breached certain fiduciary obligations that it purportedly owed to the
Noteholders, and (ii) certain purported transfers by Capital to Holdings of
proceeds received from the sale of Zero Coupon Notes were avoidable; and
WHEREAS, on February 23, 1995, the Unofficial Capital Committee filed a motion
in the Bankruptcy Court to substantively consolidate the Company Bankruptcy Case
and the Capital Bankruptcy Case (the "Motion"); and
WHEREAS, on March 3, 1995, the United States Trustee appointed the Capital
Committee; and
WHEREAS, the Capital Committee adopted and continues to prosecute the Motion
and, additionally, either has filed or continues to prosecute various other
motions, applications, and objections in the Bankruptcy Cases including, without
limitation, the following:
<PAGE>
1. Objection of the Unofficial Committee of Bondholders of Grand Union
Capital Corporation to Debtor's Motion for an Order Authorizing Interim and
Final DIP Financing filed in the Company Bankruptcy Case on February 7, 1995;
2. Response of the Unofficial Committee of Zero Coupon Noteholders of Grand
Union Capital Corporation to Debtor's Motion to Strike Objections filed in
the Company Bankruptcy Case on February 15, 1995;
3. Objection of the Committee of Zero Coupon Noteholders to Debtor's
Disclosure Statement for the Plan of Reorganization of Grand Union Company
filed in the Company Bankruptcy Case on March 2, 1995;
4. Motion Pursuant to Rule 60(b) Vacating the Orders Approving Post-
Petition Financing Agreement of the Debtor With Bankers Trust Company and
Exit Financing Commitment Fee and Reopening Hearing on the Motions filed in
the Company Bankruptcy Case on March 16, 1995;
5. Motion of the Capital Committee to Disqualify Goldman Sachs and BT
Securities filed in the Company Bankruptcy Case on March 17, 1995;
6. Objection of the Capital Committee to Debtor's First Amended Disclosure
Statement for the First Amended Plan of Reorganization of Grand Union Company
filed in the Company Bankruptcy Case on April 3, 1995; and
7. Application for Order Pursuant to Rule 1015(b) of the Federal Rules of
Bankruptcy Procedure for Joint Administration of Grand Union Capital
Corporation and Grand Union Holdings Corporation filed in both the Capital
and Holdings Bankruptcy Cases on March 15, 1995.
(Hereinafter, the claims, allegations and/or contentions that are the subject of
or are asserted by either the Unofficial Capital Committee or the Capital
Committee in any of the matters described in these recitals (including, without
limitation, the Motion), and any appeals related thereto, are collectively
referred to as the "Capital Claims"); and
WHEREAS, the Company, Capital, and Holdings dispute any liability to the
Noteholders, the Unofficial Capital Committee or the Capital Committee with
respect to the Capital Claims; and
WHEREAS, due to the complexities of the various issues raised by the Capital
Claims, and in order to avoid the inherent uncertainty and expense involved
therein, the parties hereto believe that it is in their respective best
interests to compromise and settle all of the controversies which exist among
them upon the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the foregoing, the Parties hereby
memorialize their agreement as follows:
Section 1. Support of the Plan. Each of the Noteholders and the Capital
Committee agree that, so long as (x) with respect to each Noteholder, such
Noteholder is the beneficial owner of, or has investment authority or discretion
as to, any Zero Coupon Notes and (y) no Material Change, as defined below, or a
Disabling Contingency, as defined in Section 12(a) of this Agreement, shall have
occurred:
(a) Each Noteholder and the Capital Committee will (i) support and assist in
the filing of the Plan, (ii) support and assist in the filing of the
Disclosure Statement for the Plan, (iii) support and use its reasonable
efforts to obtain acceptance of the Plan, (iv) take, or cause to be taken,
any and all such other actions as are necessary to cause such Zero Coupon
Notes beneficially owned, or as to which such Noteholder has investment
authority or discretion, to be voted on the Plan, and (v) not agree to,
consent to, or vote for any plan, other than the Plan as it may be amended,
that does not contain the terms set forth in the Plan.
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<PAGE>
(b) Each Noteholder and the Capital Committee will not object to or
otherwise commence any proceeding to oppose or alter either the Plan or the
Disclosure Statement for the Plan, will withdraw any pending objection to the
Disclosure Statement for the Plan, and will not take any action that is
inconsistent with, or that would delay approval of the Disclosure Statement
for the Plan or acceptance, confirmation, effectiveness or substantial
consummation of the Plan.
(c) While the Noteholders and the Capital Committee have agreed to support
and use their reasonable efforts to obtain acceptance of the Plan as set
forth in (a) above, it is understood that the Noteholders can have no legally
binding obligation to vote to accept the Plan. Nothing contained herein shall
be construed as a solicitation of an acceptance or rejection of, or require
any party to accept or reject, the Plan.
(d) The Noteholders and the Capital Committee acknowledge that the Plan may
be modified or amended, and any such modification or amendment which does not
constitute a Material Change shall not affect the Parties' obligations set
forth in this Section 1. For purposes hereof, a "Material Change" means any
modification or amendment of the Plan proposed or supported for approval by
the Company such that the Plan contains terms that are different from those
set forth in the Plan and which materially and adversely affect a Noteholder's
treatment (either absolutely or relatively as compared to the treatment of
other claims), unless the affected Noteholder agrees to such terms.
Section 2. Transfer of Claims, Interests and Securities. No Noteholder shall,
directly or indirectly, sell, assign, hypothecate or otherwise dispose of
(collectively, "transfer") (x) any Zero Coupon Notes beneficially owned by it or
as to which such Noteholder has investment authority or discretion, (including
Zero Coupon Notes acquired after the date hereof), (y) any claim (as that term
is defined in Section 101(5) of the Bankruptcy Code) arising from, based on or
related to, Zero Coupon Notes or (z) any option, warrant, interest in, or right
to acquire, any Zero Coupon Notes or claims referred to in clauses (x) or (y)
above, provided that a party shall be permitted to transfer Zero Coupon Notes,
claims or interests therein to (i) another Noteholder that is a party to this
Agreement, (ii) an Affiliate (as that term is defined in Rule 12b-2 of the
General Rules and Regulations promulgated under the Securities Act of 1934, as
amended) of a Noteholder, which agrees in writing to be bound by the terms of
this Agreement or (iii) any person or entity that is not a Noteholder and a
party to this Agreement, or an Affiliate of a Noteholder, that agrees in writing
to be bound by the terms of this Agreement. Such an Affiliate, person or entity
which enters into the agreements required by clauses (ii) or (iii) of the
preceding sentence shall be deemed to be a party to this Agreement for all
purposes. Nothing contained in this Agreement is intended to or shall restrict
the transfer of the warrants referred to in Section 4 of this Agreement
subsequent to their issuance.
Section 3. Ownership of Zero Coupon Notes. Each Noteholder represents and
warrants that (i) Exhibit B sets forth the total principal amount of Zero Coupon
Notes beneficially owned, or as to which such Noteholder, or its Affiliates have
investment authority or discretion, and such Zero Coupon Notes constitute all of
such securities so owned or controlled by such Noteholder and its Affiliates.
Section 4. Plan Treatment. The Plan shall contain provisions providing for the
issuance to Noteholders of warrants for the purchase of Reorganized Grand
Union's common stock.
Section 5. Other Representations and Warranties. (a) By their execution of
this Agreement, each Noteholder and the Capital Committee represent and warrant
that they (i) have read and understand the Plan, (ii) have had the opportunity
to discuss and negotiate the terms of the Plan with the assistance of legal,
financial and other advisors of their choosing ("Advisors"), and have had the
opportunity to consult with their Advisors with respect to their decision to
execute this Agreement, (iii) have read and understand the Disclosure Statement
for the Plan, and (iv) have had adequate access, directly or through such
Advisors, to such financial, business or other information relating to the
Company, Capital, and Holdings that they deemed necessary or advisable to enter
into this Agreement.
3
<PAGE>
(b) The Parties further represent and warrant to one another as follows: (i)
Each party is the sole and lawful owner of all right, title and interest in
and to every claim and other matter which the party releases herein, and that
the party has not heretofore assigned or transferred, or purported to assign
or transfer, to any person, firm or entity, any such claim or other matters
herein released; and (ii) except as expressly stated in this Agreement, no
party has made any statement or representation to any other party regarding
any facts relied upon by said party in entering into this Agreement, and each
party specifically does not rely upon any statement, representation or
promise of any other party in executing this Agreement or in making the
settlement provided for herein, except as expressly stated in this Agreement.
(c) Capital and Holdings each represents and warrants to the Capital Committee
that, after giving effect to the releases contained in or contemplated by this
Agreement and the Plan, it has no material assets except as disclosed in its
schedules and statements filed, as amended, in the Bankruptcy Cases.
Section 6. Authorization. Each Noteholder, the Capital Committee, the Company,
Capital, and Holdings each represents and warrants, subject to Bankruptcy Court
approval with respect to the Company, Capital, and Holdings, that it has the
power, and is authorized, to enter into this Agreement.
Section 7. Withdrawal and/or Dismissal of Capital Claims. Each of the Parties
and those entities that have indicated their lack of objection to this Agreement
on page 16 hereof agrees to forbear and stand still on all litigation, including
pre-trial discovery, relating to the Capital Claims. Upon the Effective Date of
the Plan, the Noteholders and the Capital Committee will withdraw and/or dismiss
the Capital Claims with prejudice. The Company agrees to forbear and stand still
on any appeal from the order of the United States District Court for the
District of Delaware granting the Unofficial Capital Committee standing to
appear in the Company's Bankruptcy Case (the "Standing Order") until a Material
Change or a Disabling Contingency, as defined in Section 12 of this Agreement,
occurs. This standstill shall not, however, preclude the Company from filing a
notice of appeal from the Standing Order or the Capital Committee from
responding to such appeal if it is not stayed.
Section 8. Noteholder and Capital Committee Releases. For good and valuable
consideration, the receipt of which is hereby acknowledged, including, without
limitation, the issuance of warrants to purchase common stock of Reorganized
Grand Union pursuant to the Plan, each of the Noteholders and the Capital
Committee, and their affiliates, agents, and assigns (the "Releasors") hereby
unconditionally and irrevocably release the following persons: the Company,
Capital, and Holdings, the respective affiliates of the Company, Capital, and
Holdings, present and former stockholders, directors, and officers of the
Company, Capital, and Holdings, including Miller Tabak Hirsch & Co. ("MTH") and
its present and former partners, directors, officers, employees, advisors,
attorneys, consultants, agents, and representatives including, without
limitation, Messrs. Martin A. Fox, Glenn L. Goldberg, Claude Incaudo and James
A. Lash, and any person or entity that directly or indirectly controls MTH,
including Gary Hirsch, Jeffrey Miller and Jeffrey Tabak, the members of each of
the Official Committee and the Informal Committees, each of the
Post-Confirmation Banks, BT Securities Corporation, Goldman, Sachs & Co., and
each of the foregoing entity's and/or person's respective attorneys, advisors,
financial advisors, investment bankers, employees, successors, agents, and
assigns, and any other person and/or entity against whom any of the Releasors
may have a Released Claim, as defined below in this section (collectively, the
"Released Persons"), from any and all claims, demands, actions, causes of
action, suits, costs, dues, sums of money, accounts, bills, bonds, covenants,
contracts, controversies, agreements, promises, variances, trespasses, damages,
judgments, expenses, and liability whatsoever, known or unknown, at law or in
equity, irrespective of whether such claims arise out of contract, tort,
violation of laws or other regulations or otherwise, which the Releasors ever
had or now have against the Released Persons or any of them, for, or by reason
of, any matter, cause or thing whatsoever from the beginning of the world to and
including the date hereof arising out of or in connection with, or related in
any manner to, the issuance, ownership, purchase, and/or sale of the Zero Coupon
Notes including, without limitation, any claim for substantive consolidation of
the Company's Bankruptcy Case and Capital's Bankruptcy Case, any claims arising
under any state or federal securities law and/or any claims arising under
Sections 544, 548 and 550 of the Bankruptcy Code or under similar state laws,
including fraudulent
4
<PAGE>
conveyance claims (the "Released Claims"); provided, however, that a Releasor is
not releasing hereby such Releasor's right to receive warrants pursuant to the
Plan or any Allowed Claim in Classes 1, 2, 3, 4 or 8 of the Plan held by such
Releasor.
Section 9. Capital Release. For good and valuable consideration, the receipt
of which is hereby acknowledged, including, without limitation, the issuance of
warrants to purchase common stock of Reorganized Grand Union pursuant to the
Plan and the Releases contained in this Agreement, Capital and its affiliates
(other than the Company), agents, and assigns (the "Releasors") hereby
unconditionally and irrevocably release the following persons: the Company,
Holdings, the Noteholders, and the Capital Committee, the respective affiliates
of the Company, Holdings, the Noteholders, and the Capital Committee, present
and former stockholders, directors, and officers of the Company and Holdings,
including Miller Tabak Hirsch & Co. ("MTH") and its present and former partners,
directors, officers, employees, advisors, attorneys, consultants, agents, and
representatives including, without limitation, Mssrs. Martin A. Fox, Glenn L.
Goldberg, Claude Incaudo and James A. Lash, and any person or entity that
directly or indirectly controls MTH, including Gary Hirsch, Jeffrey Miller and
Jeffrey Tabak, the members of each of the Official Committee and the Informal
Committees, each of the Post-Confirmation Banks, BT Securities Corporation,
Goldman, Sachs & Co., each of the foregoing entity's and/or person's respective
attorneys, advisors, financial advisors, investment bankers, employees,
successors, agents, and assigns, each holder of a Zero Coupon Note that executes
and delivers a Zero Claims Release pursuant to the Plan, and any other person
and/or entity against whom any of the Releasors may have a Released Claim, as
defined below in this section (collectively, the "Released Persons"), from any
and all claims, demands, actions, causes of action, suits, costs, dues, sums of
money, accounts, bills, bonds, covenants, contracts, controversies, agreements,
promises, variances, trespasses, damages, judgments, expenses, and liability
whatsoever, known or unknown, at law or in equity, irrespective of whether such
claims arise out of contract, tort, violation of laws or other regulations or
otherwise, which the Releasors ever had or now have against the Released Persons
or any of them, for, or by reason of, any matter, cause or thing whatsoever from
the beginning of the world to and including the date hereof arising out of or in
connection with, or related in any manner to, the issuance, ownership, purchase,
and/or sale of the Zero Coupon Notes including without limitation, any claims
arising under any state or federal securities law and/or any claims arising
under Sections 544, 548 and 550 of the Bankruptcy Code or under similar state
laws, including fraudulent conveyance claims (the "Released Claims").
Section 10. Holdings Release. For good and valuable consideration, the receipt
of which is hereby acknowledged, including, without limitation, the issuance of
warrants to purchase common stock of Reorganized Grand Union pursuant to the
Plan and the Releases contained in this Agreement, Holdings and its affiliates
(other than the Company), agents, and assigns (the "Releasors") hereby
unconditionally and irrevocably release the following persons: the Company,
Capital, the Noteholders, and the Capital Committee, the respective affiliates
of the Company, Capital, the Noteholders, and the Capital Committee, present and
former stockholders, directors, and officers of the Company or Capital,
including Miller Tabak Hirsch & Co. ("MTH") and its present and former partners,
directors, officers, employees, advisors, attorneys, consultants, agents, and
representatives including, without limitation, Mssrs. Martin A. Fox, Glenn L.
Goldberg, Claude Incaudo and James A. Lash, and any person or entity that
directly or indirectly controls MTH, including Gary Hirsch, Jeffrey Miller and
Jeffrey Tabak, the members of each of the Official Committee and the Informal
Committees, each of the Post-Confirmation Banks, BT Securities Corporation,
Goldman, Sachs & Co., each of the foregoing entity's and/or person's respective
attorneys, advisors, financial advisors, investment bankers, employees,
successors, agents, and assigns, each holder of a Zero Coupon Note that executes
and delivers a Zero Claims Release pursuant to the Plan and any other person
and/or entity against whom any of the Releasors may have a Released Claim, as
defined below in this section (collectively, the "Released Persons"), from any
and all claims, demands, actions, causes of action, suits, costs, dues, sums of
money, accounts, bills, bonds, covenants, contracts, controversies, agreements,
promises, variances, trespasses, damages, judgments, expenses, and liability
whatsoever, known or unknown, at law or in equity, irrespective of whether such
claims arise out of contract, tort, violation of laws or other regulations or
otherwise, which the Releasors ever had or now have against the Released Persons
or any of them, for, or by
5
<PAGE>
reason of, any matter, cause or thing whatsoever from the beginning of the world
to and including the date hereof arising out of or in connection with, or
related in any manner to, the issuance, ownership, purchase, and/or sale of the
Zero Coupon Notes including without limitation, any claims arising under any
state or federal securities law and/or any claims arising under Sections 544,
548 and 550 of the Bankruptcy Code or under similar state laws, including
fraudulent conveyance claims (the "Released Claims").
Section 11. Company Release. For good and valuable consideration, the receipt
of which is hereby acknowledged, including, without limitation, the Releases
contained in this Agreement, the Company and its affiliates, agents, and assigns
(the "Releasors") hereby unconditionally and irrevocably release the following
persons: Capital, Holdings, the Noteholders, and the Capital Committee, the
respective affiliates of the Noteholders and the Capital Committee, and the
respective officers, directors, employees, advisors, attorneys and consultants,
in such capacities, of the Noteholders and the Capital Committee (collectively,
the "Released Persons"), from any and all claims, demands, actions, causes of
action, suits, costs, dues, sums of money, accounts, bills, bonds, covenants,
contracts, controversies, agreements, promises, variances, trespasses, damages,
judgments, expenses, and liability whatsoever, known or unknown, at law or in
equity, irrespective of whether such claims arise out of contract, tort,
violation of laws or other regulations or otherwise, which the Releasors ever
had or now have against the Released Persons or any of them, for, or by reason
of, any matter, cause or thing whatsoever from the beginning of the world to and
including the date hereof arising out of or in connection with, or related in
any manner to, the issuance, ownership, purchase, and/or sale of the Zero Coupon
Notes including without limitation, any claims arising under any state or
federal securities law and/or any claims arising under Sections 544, 548 and 550
of the Bankruptcy Code or under similar state laws, including fraudulent
conveyance claims.
Section 12. Occurrence of Certain Events. (a) The Noteholders and the Capital
Committee shall be released of their obligations under this Agreement in the
event of either a Material Change, as defined in Section 1 of this Agreement,
or: (i) the Company withdraws or otherwise fails to prosecute the Plan; (ii) the
Bankruptcy Court enters an order that becomes a Final Order denying the Joint
Motion to Compromise Controversies, as defined in Section 14 of this Agreement,
in the Company's Bankruptcy Case; (iii) the Bankruptcy Court enters an order
that becomes a Final Order denying confirmation of the Plan; or (iv) the
Bankruptcy Court does not enter an order confirming the Plan on or before August
15, 1995 (a "Disabling Contingency").
(b) In the event of a Material Change in the Plan, or a Disabling
Contingency, the Company shall not schedule a hearing on any of the Capital
Claims, or on a new plan of reorganization, such that any such hearing occurs
prior to 20 days after the occurrence of the Material Change, or the
Disabling Contingency, as applicable.
Section 13. Covenant Not to Sue. Each Noteholder and the Capital Committee
hereby covenant not to commence any action against any Released Person, as
defined in Section 8 of this Agreement, asserting a Released Claim, as defined
in that section.
Section 14. Bankruptcy Court Motion for Approval. In order to effectuate a
timely resolution of these matters, certain of the parties hereto shall jointly
file a motion in the Bankruptcy Cases requesting Bankruptcy Court approval of
this Settlement Agreement pursuant to Bankruptcy Rule 9019 (the "Joint Motion to
Compromise Controversies"). The Parties to this Agreement will cooperate fully
with one another and will use their respective best efforts to secure the entry
of a Final Order approving the Joint Motion to Compromise Controversies as
promptly as possible.
Section 15. Effective Date. This Agreement shall be effective upon its
execution by each of the Parties, subject to Bankruptcy Court approval of the
Joint Motion to Compromise Controversies; provided, however, that
notwithstanding such Bankruptcy Court approval, with respect to the provisions
of this Agreement relating to the releases contained in Sections 8, 9, 10 and
11, above, this Agreement shall be deemed effective, subject to delivery of the
global certificates provided for in Section 2.1 of the Warrant Agreement, upon
the
6
<PAGE>
occurrence of the Effective Date of the Plan (assuming the order approving the
Joint Motion to Compromise Controversies is a Final Order) and provided further
that the releases by the Noteholders set forth in Section 8 and the Company's
release of the Noteholders in Section 11, above, shall not be effective if prior
to the commencement of the distribution of the Warrants by the Warrant Agent (as
defined in the Warrant Agreement), in whole or in part, such distribution is
enjoined by an Entity other than a holder (present, former or future) of a Zero
Note; and provided further that the immediately preceding proviso shall be of no
force and effect if such injunction is dissolved. To the extent a particular
term or provision of this Agreement is not approved by the Bankruptcy Court,
this Agreement may nonetheless become effective if the party that is the
intended beneficiary of such term or provision agrees in writing to the deletion
of such term from this Agreement. In addition, if orders approving this
Agreement have been entered in the Capital Bankruptcy Case and the Holdings
Bankruptcy Case, the Company may waive the requirement that any such order be a
Final Order with the consent of the Official Committee, which consent shall not
be unreasonably withheld. If the Company waives such requirement, this Agreement
shall not be binding upon Capital or Holdings if a Final Order approving it has
not been entered in its Bankruptcy Case.
Section 16. Specific Performance. It is understood and agreed by the
Noteholders and the Capital Committee that money damages would not be a
sufficient remedy for any breach of this Agreement by any Noteholder or the
Capital Committee and that the Company shall be entitled to specific performance
and injunctive or other equitable relief as a remedy for any such breach, and
each Noteholder and the Capital Committee agree to waive any requirement for the
securing or posting of a bond in connection with such remedy.
Section 17. No Admission of Liability. The settlement set forth herein is in
the best interest of all of the Parties, and the estates of the Company,
Capital, and Holdings, because of, among other reasons, the substantial risks
inherent in and the significant expenses arising from continuing litigation with
respect of the Capital Claims. This Agreement is in compromise of disputed
claims and nothing contained herein shall be construed or offered as an
admission of liability, or of the amount of any claim, on behalf of, or with
respect to, any claims asserted by or against the Parties. The Company, Capital,
and Holdings expressly deny such alleged liability to the Noteholders and the
Capital Committee.
Section 18. Joint Negotiation. This Agreement is a product of negotiation
among the Parties and represents jointly conceived, bargained for, and agreed
upon, language that has been mutually determined by the Parties to express their
intentions in entering into this Agreement. Any ambiguity or uncertainty in this
Agreement shall be deemed to be caused by or attributable to all Parties hereto
collectively.
Section 19. Final Agreement. Except as set forth in the Plan, this Agreement
is the complete, final and exclusive statement of all of the agreements,
conditions, promises and covenants among the Parties with respect to the subject
matter hereof and supersedes all prior or contemporaneous agreements,
negotiations, representations, statements, understandings and discussions among
the Parties and/or their respective counsel with respect to the subject matter
covered. Except as set forth in the Plan, there exist no prior or
contemporaneous negotiations, statements, promises or agreements that survive
the execution of this Agreement.
Section 20. Disclosure. The Parties contemplate that this Agreement will be
disclosed in the Disclosure Statement for the Plan and/or a press release issued
by the Company, Capital, and/or Holdings, and consent to such disclosure.
Section 21. Amendments or Modifications. To be legally binding, any amendment
or modification to this Agreement must be in writing, must refer specifically to
this Agreement and must be signed by duly-authorized representatives of all
Parties hereto.
Section 22. Binding Effect. This Agreement shall be binding on the Parties and
any and all of their successors and assigns including, without limitation, any
trustee that may be appointed in any of the Bankruptcy Cases.
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<PAGE>
Section 23. No Waiver of Breach. The failure of any party to require the
performance of any of the terms or provisions of this Agreement or the waiver by
any party of any breach under this Agreement shall neither prevent a subsequent
enforcement of such term or provision nor be deemed a waiver of any such
subsequent breach.
Section 24. Headings. The descriptive headings of the several sections of this
Agreement are inserted for convenience of reference only and do not constitute a
part of this Agreement.
Section 25. Governing Law. In all respects, including all matters of
construction, validity and performance, this Agreement and the obligations
arising hereunder shall be governed by, and construed and enforced in accordance
with, the laws of the State of New York applicable to contracts made and
performed in such state, without regard to the principles thereof regarding
conflicts of law, and any applicable laws of the United States of America.
Section 26. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall, collectively and separately, constitute one
agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement the day of
April, 1995.
THE GRAND UNION COMPANY
By: ___________________________
GRAND UNION CAPITAL CORPORATION
By: ___________________________
GRAND UNION HOLDINGS CORPORATION
By: ___________________________
OFFICIAL COMMITTEE OF UNSECURED CREDITORS OF
GRAND UNION CAPITAL CORPORATION
By: ___________________________
DEAN WITTER HIGH YIELD SECURITIES
By: ___________________________
VARIABLE HIGH YIELD
By: ___________________________
DEAN WITTER DIVERSIFIED INCOME TRUST
By: ___________________________
HIGH INCOME ADVANTAGE TRUST
By: ___________________________
HIGH INCOME ADVANTAGE TRUST II
By: ___________________________
HIGH INCOME ADVANTAGE TRUST III
By: ___________________________
DEAN WITTER HIGH INCOME SECURITIES
By: ___________________________
LUTHERAN BROTHERHOOD HIGH YIELD FUND
By: ___________________________
LB SERIES FUND, INC. HIGH YIELD PORTFOLIO
By: ___________________________
9
<PAGE>
FRANKLIN AGE HIGH INCOME FUND
By: ___________________________
FRANKLIN INCOME FUND
By: ___________________________
FRANKLIN VALUEMARK FUND-INCOME
By: ___________________________
BARRE & COMPANY INC.
By: ___________________________
LOCAL 68 IUOE ANNUITY FUND
By: ___________________________
LOCAL 68 IUOE PENSION FUND
By: ___________________________
The Official Committee of Unsecured Creditors of The Grand Union Company and
The Informal Committee of Senior Secured Noteholders, which entities are not
parties to this Agreement, have reviewed it, have no objection to it, and
consent to Section 7 of it.
OFFICIAL COMMITTEE OF UNSECURED
CREDITORS OF THE GRAND UNION COMPANY
By: ___________________________
INFORMAL COMMITTEE OF SENIOR
SECURED NOTEHOLDERS
By: ___________________________
10
<PAGE>
EXHIBIT A
[See Appendix "A" to the Disclosure Statement, The Second Amended Plan of
Reorganization]
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
15% Zero 16.5% Zero
Member Coupon Notes Coupon Notes
- ----------------------------------------- ------------ ------------
<S> <C> <C>
Dean Witter High Yield Securities
Two World Trade Center
New York, NY 10048.............................. $58,415,000 $123,220,000
Variable High Yield
Two World Trade Center
New York, NY 10048.............................. 19,558,000 26,950,000
Dean Witter Diversified Income Trust
Two World Trade Center
New York, NY 10048.............................. 18,000,000 45,750,000
High Income Advantage Trust
Two World Trade Center
New York, NY 10048.............................. 19,000,000 34,000,000
High Income Advantage Trust II
Two World Trade Center
New York, NY 10048.............................. 21,500,000 55,500,000
High Income Advantage Trust III
Two World Trade Center
New York, NY 10048.............................. 10,000,000 20,000,000
Dean Witter High Income Securities
Two World Trade Center
New York, NY 10048.............................. 6,000,000 2,000,000
LB Series Fund, Inc. High Yield Portfolio
625 Fourth Avenue South
Minneapolis, MN 55415........................... 23,200,000 23,500,000
Lutheran Brotherhood High Yield Fund
625 Fourth Avenue South
Minneapolis, MN 55415........................... 19,000,000 20,000,000
Frankline AGE High Income Fund
777 Mariners Island Blvd.
7th Floor
San Mateo, CA 94404............................. 12,500,000 99,850,400
Franklin Income Fund
777 Mariners Island Blvd.
7th Floor
San Mateo, CA 94404............................. 25,000,000 47,700,000
Franklin Valuemark Fund-Income
777 Mariners Island Blvd.
7th Floor
San Mateo, CA 94404............................. 1,648,000 3,933,000
Barre & Company Incorporated
717 N. Harwood, Suite 560
Dallas, TX 75201................................ 3,400,000 -0-
</TABLE>
<TABLE>
<CAPTION>
<PAGE>
15% Zero 16.5% Zero
Member Coupon Notes Coupon Notes
- ------------------------------------------------ ------------ ------------
<S> <C> <C>
Marine Midland Bank, as Indenture Trustee
for the 16.5% Zero Coupon Notes
140 Broadway-12th Floor
New York, NY 10005.............................. N/A N/A
First Trust National Assn., as Indenture Trustee
for the 15% Zero Coupon Notes
180 East 5th Street
St. Paul, MN 55101.............................. N/A N/A
Local 68 IUOE Pension Fund & Annuity Fund
14 Fairfield Place
West Caldwell, NJ 07006......................... -0- 3,000,000
</TABLE>
2
<PAGE>
Appendix B
<PAGE>
PRO FORMA CAPITALIZATION AND FINANCIAL PROJECTIONS
I. PRO FORMA CAPITALIZATION
The following table summarizes (i) the consolidated capitalization of the
Debtor as of April 29, 1995 before giving effect to the transactions
contemplated by the Plan and (ii) the capitalization of Reorganized Grand Union
as of April 29, 1995 as adjusted to give effect to the transactions contemplated
by the Plan.
<PAGE>
THE GRAND UNION COMPANY
PRO FORMA CAPITALIZATION
<TABLE>
<CAPTION>
Pre- Post-
Confirmation Confirmation
April 29, 1995 April 29,1995
-------------- -------------
(in thousands)
<S> <C> <C>
Current maturities of long-term debt and
capital lease obligations $8,444 $8,444
---------- ----------
Long-term debt and capital lease obligations:
Grand Union:
Prepetition Revolving Credit Facility 54,000 --
Debtor-in-Possession Revolving Credit
Facility -- --
New Revolving Credit Facility -- 12,781
Term Loan 39,144 57,144
New Senior Notes -- 572,151
11 1/4% Senior Notes 350,000 --
11 3/8% Senior Notes 175,000 --
Mortgage Notes 1,938 1,938
12 1/4% Senior Subordinated Notes 500,000 --
12 1/4% Senior Subordinated Notes,
Series A 50,000 --
13% Senior Subordinated Notes 16,150 --
Capital lease obligations 142,038 122,364
Capital: (1)
Senior Zero Coupon Notes 170,239 --
Senior Subordinated Zero Coupon Notes 100,965 --
Holdings: (1)
Junior Notes 7,862 --
---------- ----------
Total long-term debt and capital
lease obligations 1,607,336 766,378
---------- ----------
Redeemable stock of Holdings (1) 174,199 --
---------- ----------
Stockholder's deficit:
Common stock 1 170,000
Accumulated deficit (846,582)
---------- ----------
Total Stockholder's deficit (846,581) 170,000
---------- ----------
Total capitalization $943,398 $944,822
---------- ----------
---------- ----------
<FN>
- -------------------
(1) Obligations of Capital and Holdings included herein result from the
application of push down accounting to the accounts of the Debtor.
</TABLE>
-2-
<PAGE>
II. FINANCIAL PROJECTIONS
A. PROJECTED FINANCIAL INFORMATION
As a condition of the confirmation of a plan of reorganization, the
Bankruptcy Code requires, among other things, that the Bankruptcy Court
determine that confirmation of the plan is not likely to be followed by the
liquidation or need for further financial reorganization of the debtor. In
connection with the development of the Plan, and for the purposes of determining
whether the Plan satisfies this feasibility standard, the Debtor has analyzed
the ability of Reorganized Grand Union to meet its obligations under the Plan
with sufficient liquidity and capital resources to conduct it business. The
Debtor has prepared certain unaudited projections of Reorganized Grand Union's
operating profit, cash flow, and related balance sheets for the five (5) fiscal
years ending on March 30, 1996 through April 1, 2000 (the "Projections"). Such
projections, and the major assumptions which underlie them, are set forth below.
As a matter of course, the Debtor does not make public projections or
forecasts of its anticipated financial position or results of operations. The
Debtor does not intend to, and disclaims any obligation to, furnish updated
business plans or projections to shareholders or creditors after the Effective
Date or to make any such information public, whether or not the Projections, in
light of events or occurrences after the date hereof, cease to have a reasonable
basis.
The Projections should be read in conjunction with the assumptions and
explanations included herein, the historical financial statements of Grand
Union, and the other information contained in this disclosure statement,
including the information set forth in the section entitled "RISK FACTORS."
The independent auditors of Grand Union have not examined or compiled the
Projections presented herein, and, accordingly, assume no responsibility for
them.
B. PRINCIPAL ASSUMPTIONS
The Projections are based on and assume the successful implementation of
the Debtor's business plans, and reflect numerous assumptions, including
assumptions with respect to the future performance of the Debtor, the
performance of the industry, general business and economic conditions, and other
matters, most of which are beyond the control of the Debtor. Therefore, while
the projections are necessarily presented with numerical specificity, the actual
results achieved during the projection period will vary from the projected
results, and may
3
<PAGE>
vary substantially. No representation can be or is being made with respect to
the accuracy of the Projections or the ability of the Debtor to achieve the
projected results. While the Debtor believes that the assumptions which
underlie the Projections are reasonable in light of current circumstances and in
light of the information available to the Debtor, in deciding whether to vote to
accept the Plan, holders of claims must make their own determinations as to the
reasonableness of the assumptions and the reliability of the projections.
Additional information concerning the assumptions underlying the
projections is as follows:
1. PLAN TERMS AND EFFECTIVE DATE. The Projections assume that the Plan
will be confirmed in accordance with its terms, that all transactions
contemplated by the Plan will be consummated by the Effective Date, which, for
purposes of these Projections only, is assumed to be April 29, 1995. Results of
operations for the 52 weeks ended April 1, 1995 have been significantly affected
by reduced amounts of promotional allowances and other vendor support which had
formerly been, but is not currently, available to the Debtor. Any significant
delay of the Effective Date of the Plan could have a significant negative impact
on projected EBITDA for the 52 weeks ended March 30, 1996, and could result in
additional reorganization expenses.
2. GENERAL ECONOMIC CONDITIONS. The Projections were prepared assuming
that economic conditions in the markets served by the Debtor do not differ
markedly over the next five (5) years from current economic conditions.
Inflation in revenues and costs are assumed to remain relatively low.
3. SALES. Sales reflect the assumed effect of store openings and
closings as well as enlargements. Additionally, sales reflect the assumed
impact of competitive store openings. These assumptions, in conjunction with an
assumed inflation rate of 1.5%, yield a 1.5% decrease in sales for FYE 1996
versus FYE 1995, and an overall compound increase in sales over the entire five
(5) year projection period of 2.1% per annum. The Projections assume certain
negative sales trends can be mitigated or reversed during 1996 and subsequent
years. In addition, the Projections assume that there will be no significant
lingering effect of the bankruptcy process on the Company. See the section
entitled "RISK FACTORS."
4. GROSS PROFIT. The Projections assume that margins will increase as a
result of a fully resumed forward buy program, product mix improvements and more
effective marketing and decrease by a moderation in pricing in certain markets.
4
<PAGE>
5. OPERATING AND ADMINISTRATIVE EXPENSES. Operating and administrative
expenses are assumed to be impacted by the changing sales volume (including the
effect of the fixed or semi-fixed nature of certain expenses as sales levels
change), the Debtor's capital expenditure program and by moderate inflationary
pressures.
6. INCOME TAXES. The Projections assume that Reorganized Grand Union
will not succeed to any net operating loss carryforwards for income tax
purposes, and that the combined federal, state and local income tax rate is 41%.
See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES."
7. CAPITAL EXPENDITURES. Capital expenditures consist of investments in
new and replacement stores, store enlargements, store upgrades, technological
improvements, and expenditures necessary to maintain store and warehouse
facilities. The Debtor believes that the level of operating profit which the
Company can achieve is highly dependent on the level of capital Reorganized
Grand Union is able to invest. The Projections assume a level of capital
expenditures which, under the assumptions in the Projections, can be supported
by the capital structure and operating results of Reorganized Grand Union.
As more fully discussed in the section entitled "RISK FACTORS," the projected
operating results are highly dependant on the successful implementation of the
capital expenditure program assumed. In addition, there can be no assurances
that Reorganized Grand Union can achieve the assumed results of such capital
expenditure program or that Reorganized Grand Union will be able to fund the
capital expenditure program assumed.
8. EBITDA. EBITDA is defined for purposes of this disclosure statement
as earnings before lifo provision, depreciation and amortization, provision for
storee closings, provision for pension settlement, interest expense,
reorganization items, income tax benefit (provision) and extraordinary item.
9. "FRESH START" ACCOUNTING. The projections have been prepared under
the principles of "fresh start" accounting for periods beginning and after April
30, 1995. These principles are contained in the American Institute of Certified
Public Accountants Statement of Position 90-7 "Financial Reporting by Entities
in Reorganization Under the Bankruptcy Code." Under fresh start accounting
principles, the Company will determine the reorganization value of the
reorganized company. This value will be allocated, based on estimated fair
market values, to specific tangible or identifiable intangible assets, and the
Company will record an intangible asset equal to the reorganization value in
excess of amounts allocable to identifiable assets. The Projections assume
that the reorganization value in excess of
5
<PAGE>
amounts allocable to identifiable assets will be amortized over twenty (20)
years.
10. REORGANIZATION VALUE. For purposes of this Disclosure Statement and
in order to prepare the financial projections required under the Bankruptcy
Code, the Debtor has estimated the reorganization value of Reorganized Grand
Union as of April 29, 1995 at approximately $950 million. The total
reorganization value includes a value attributed to common stock, based on the
current trading value of the Senior Subordinated Notes, of $170 million, and the
long term indebtedness contemplated by the Plan. The common stock amount in the
fresh start balance sheet at April 29, 1995 is not an estimate of the trading
value of Reorganized Grand Union's common stock after confirmation of this Plan,
which value is subject to many uncertainties and cannot be reasonably estimated
at this time. Neither the Debtor nor its financial advisors make any
representation as to the trading value of the shares to be issued under this
Plan.
11. WORKING CAPITAL. Projected inventory levels in FYE 1996 through 2000
reflect a full investment in forward buy inventories. Elements of working
capital are projected on the basis of historic patterns applied to projected
levels of operation.
6
<PAGE>
C. PROJECTED BALANCE SHEETS
The following tables summarize (i) (a) the projected balance sheets of the
Debtor as of April 1, 1995 and April 29, 1995, respectively, before giving
effect to the transactions contemplated by the Plan, (b) the pro forma
adjustments to the Debtor's balance sheet that would result from the
transactions contemplated by the Plan and (c) the projected balance sheet of
Reorganized Grand Union as of April 29, 1995 as adjusted to give effect to the
transactions contemplated by the Plan and (ii) projected balance sheets of
Reorganized Grand Union as of March 30, 1996, March 29, 1997, March 28, 1998,
April 3, 1999 and April 1, 2000.
7
<PAGE>
THE GRAND UNION COMPANY
PROJECTED BALANCE SHEETS
APRIL 1, 1995 AND APRIL 29, 1995
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Fresh Start
April 1, April 29, Debt Fresh Start April 29,
1995 1995 Discharge Adjustments 1995
---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and temporary cash investments 89,505 67,828 (23,219) 44,609
Receivables 18,592 21,119 21,119
Inventories 186,508 185,659 9,642 195,301
Other current assets 16,800 14,934 14,934
---------- ---------- ---------- ---------- ----------
Total current assets 311,405 289,540 (23,219) 9,642 275,963
Property, net 428,243 426,305 (1,184) 425,121
Goodwill, net 545,451 544,234 (544,234)
Reorganization value in excess of amounts
allocable to identifiable assets 520,200 520,200
Beneficial leases, net 27,218 26,768 26,768
Deferred financing fees, net 44,069 43,673 (43,673)
Other assets 36,813 39,980 98 40,078
---------- ---------- ---------- ---------- ----------
1,393,199 1,370,500 (23,219) (59,151) 1,288,130
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Obligations under revolving credit facility 12,781 12,781
Current maturities of long-term debt 1,011 1,011
Current portion of obligations under
capital leases 8,383 7,433 7,433
Accounts payable and accrued liabilities 120,067 113,342 15,400 124,673 253,415
---------- ---------- ---------- ---------- ----------
Total current liabilities 128,450 120,775 29,192 124,673 274,640
Long-term debt 631,233 631,233
Obligations under capital leases 122,364 122,364
Other noncurrent liabilities 89,893 89,893
Liabilities subject to compromise 1,918,324 1,922,107 (1,585,177) (336,930)
Redeemable stock subject to compromise 174,199 174,199 (174,199)
Common stock 1 1 169,999 170,000
Accumulated deficit (827,775) (846,582) 905,733 (59,151)
---------- ---------- ---------- ---------- ----------
1,393,199 1,370,500 (23,219) (59,151) 1,288,130
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
April 1, April 29, Debt Fresh Start
1995 1995 Discharge Adjustments
--------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
LIABILITIES SUBJECT TO COMPROMISE
Revolver 54,000 54,000 (54,000)
Accounts payable and accrued
liabilities 120,000 120,000 (120,000)
Current portion of long-term debt 1,011 1,011 (1,011)
Interest payable 81,066 86,280 (81,607) (4,673)
Long-term debt 1,411,346 1,411,298 (1,411,298)
Obligations under capital leases 141,466 142,038 (19,674) (122,364)
Unfunded pension liability 3,816 3,741 (3,741)
Other noncurrent liabilities 105,619 103,739 (17,587) (86,152)
--------- ---------- ---------- -----------
TOTAL LIABILITIES SUBJECT TO COMPROMISE 1,918,324 1,922,107 (1,585,177) (336,930)
--------- ---------- ---------- -----------
--------- ---------- ---------- -----------
</TABLE>
-8-
<PAGE>
THE GRAND UNION COMPANY
PROJECTED BALANCE SHEETS
AS OF FISCAL YEARS ENDING 1996 THROUGH 2000
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
March 30, March 29, March 28, April 3, April 1,
1996 1997 1998 1999 2000
--------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and temporary cash investments 44,609 45,857 47,143 48,467 49,831
Inventories 202,096 210,158 216,897 221,880 230,756
Other current assets 29,908 38,697 35,030 38,235 41,370
--------- --------- --------- --------- ----------
Total current assets 276,613 294,712 299,070 308,582 321,957
Property, net 418,467 404,975 401,427 393,063 384,866
Reorganization value in excess of amounts
allocable to identifiable assets 496,191 470,181 444,171 418,161 392,151
Beneficial leases, net 21,368 15,518 9,668 3,818
Other assets 43,408 49,846 55,170 59,865 63,752
--------- --------- --------- --------- ----------
1,256,047 1,235,232 1,209,506 1,183,489 1,162,726
--------- --------- --------- --------- ----------
--------- --------- --------- --------- ----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Obligations under revolving credit
facility 53,245 54,231 50,096 38,341 31,918
Current maturities of long-term debt 1,011 1,011 1,011 891
Current portion of obligations under
capital leases 8,033 8,533 9,033 10,533 12,033
Accounts payable and accrued liabilities 194,762 203,945 209,431 213,486 214,387
--------- --------- --------- --------- ----------
Total current liabilities 257,051 267,720 269,571 263,251 258,338
Long-term debt 653,985 653,465 652,945 652,623 652,623
Obligations under capital leases 118,231 114,358 110,548 106,303 102,247
Other noncurrent liabilities 86,246 85,227 82,962 80,320 80,063
Common stock 170,000 170,000 170,000 170,000 170,000
Accumulated deficit (29,466) (55,538) (76,520) (89,008) (100,545)
--------- --------- --------- --------- ----------
1,256,047 1,235,232 1,209,506 1,183,489 1,162,726
--------- --------- --------- --------- ----------
--------- --------- --------- --------- ----------
</TABLE>
-9-
<PAGE>
D. PROJECTED STATEMENTS OF OPERATIONS
The following table sets forth projected statements of operations for
(i)(a) the Debtor for the fiscal year ended April 1, 1995, (b) the Debtor for
the period from April 2, 1995 through April 29, 1995 and (c) Reorganized Grand
Union after giving effect to the transactions contemplated by the Plan for the
period from April 30, 1995 through March 30, 1996, and (ii) Reorganized Grand
Union for the fiscal years ended March 30, 1996, March 29, 1997, March 28, 1998,
April 3, 1999 and April 1, 2000.
10
<PAGE>
THE GRAND UNION COMPANY
PROJECTED STATEMENTS OF OPERATIONS
FISCAL YEARS ENDED APRIL 1, 1995 AND MARCH 30, 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
52 Weeks 4 Weeks 48 Weeks 52 Weeks
Ending Ending Ending Ending
April 1, 1995 April 29, 1995 March 30, 1996 March 30, 1996
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Sales 2,391,694 176,572 2,209,101 2,385,673
Cost of sales (1,706,165) (123,060) (1,545,169) (1,668,229)
------------- ------------- ------------ -------------
Gross profit 685,529 53,512 663,932 717,444
Operating and administrative expense (550,915) (43,428) (515,503) (558,931)
Depreciation and amortization (87,097) (6,287) (86,084) (92,371)
Provision for store closings (14,250)
Provision for pension settlement (3,213)
Interest expense, net (181,841) (7,082) (93,814) (100,896)
------------- ------------- ------------ -------------
Loss before reorganization items
and taxes (151,787) (3,285) (31,469) (34,754)
Reorganization items
Professional fees (11,477) (15,523) (15,523)
Fresh start adjustment (59,151) (59,151)
Income tax benefit (provision) 2,003 2,003
------------- ------------- ------------ -------------
Loss before extraordinary item (163,264) (77,959) (29,466) (107,425)
Extraordinary item 905,733 905,733
------------- ------------- ------------ -------------
Net income (loss) (163,264) 827,774 (29,466) 798,308
Accrued preferred stock dividends (19,479)
------------- ------------- ------------ -------------
Net income applicable to common stock (182,743) 827,774 (29,466) 798,308
------------- ------------- ------------ -------------
------------- ------------- ------------ -------------
EBITDA (a) 135,590 10,185 151,729 161,914
------------- ------------- ------------ -------------
------------- ------------- ------------ -------------
<FN>
- ------------------------------------------------------
(a) Earnings before LIFO provision, depreciation and
amortization, provision for store closings, provision for
pension settlement, interest expense, reorganization items,
income tax benefit (provision) and extraordinary item.
</TABLE>
-11-
<PAGE>
THE GRAND UNION COMPANY
PROJECTED STATEMENTS OF OPERATIONS
FISCAL YEARS ENDED 1996 THROUGH 2000
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Pro Forma (*)
52 Weeks 52 Weeks 52 Weeks 53 Weeks 52 Weeks
Ending Ending Ending Ending Ending
March 30, 1996 March 29, 1997 March 28, 1998 April 3, 1999 April 1, 2000
-------------- -------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Sales 2,385,673 2,482,365 2,568,570 2,658,869 2,678,110
Cost of sales (1,668,229) (1,726,256) (1,777,089) (1,829,207) (1,833,579)
------------ ------------ ------------ ------------ ------------
Gross profit 717,444 756,109 791,481 829,662 844,531
Operating and administrative expense (558,931) (585,315) (613,359) (636,849) (653,385)
Depreciation and amortization (92,371) (94,558) (94,305) (94,534) (94,268)
Interest expense (100,896) (102,350) (101,305) (101,370) (98,357)
------------ ------------ ------------ ------------ ------------
Income (loss) before taxes (34,754) (26,114) (17,488) (3,091) (1,479)
Income tax benefit (provision) 2,003 43 (3,494) (9,397) (10,058)
------------ ------------ ------------ ------------ ------------
Net loss (32,751) (26,071) (20,982) (12,488) (11,537)
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
EBITDA (a) 161,914 173,994 181,522 196,413 194,946
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
<FN>
- ----------------------------------------------------------------
(*) Pro Forma without the effects of the bankruptcy proceeding.
(a) Earnings before LIFO provision, depreciation and
amortization, interest expense, reorganization items,
income tax benefit (provision) and extraordinary item.
</TABLE>
-12-
<PAGE>
E. PROJECTED STATEMENTS OF CASH FLOWS
The following table sets forth projected cash flow data for (i)(a) the
Debtor for the fiscal year ended April 1, 1995, (b) the Debtor for the period
from April 2, 1995 through April 29, 1995 and (c) Reorganized Grand Union after
giving effect to the transactions contemplated by the Plan for the period from
April 30, 1995 through March 30, 1996, and (ii) Reorganized Grand Union for the
fiscal years ended March 30, 1996, March 29, 1997, March 28, 1998, April 3, 1999
and April 1, 2000.
13
<PAGE>
THE GRAND UNION COMPANY
PROJECTED STATEMENTS OF CASH FLOWS
FISCAL YEARS ENDED APRIL 1, 1995 AND MARCH 30, 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
52 Weeks 4 Weeks 48 Weeks 52 Weeks
Ending Ending Ending Ending
April 1, 1995 April 29, 1995 March 30, 1996 March 30, 1996
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss from operations (151,787) (3,285) (29,465) (32,750)
Adjustments to reconcile net loss from operations to net
cash provided by (used for) operating activities:
Depreciation and amortization 92,200 6,682 86,360 93,042
Noncash interest 33,318 23,328 23,328
Receivables 18,480 (2,527) 6,348 3,821
Inventories 19,555 849 (6,795) (5,946)
Other current assets 82 1,866 (6,958) (5,092)
Accounts payable and accrued liabilities 76,542 (40,391) (48,794) (89,185)
Other 754 (3,310) 1,493 (1,817)
-------- -------- -------- --------
Net cash provided by (used for) operating activities
before reorganization items 89,144 (40,116) 25,517 (14,599)
Operating cash flows from reorganization items:
Professional fees paid for services rendered in
connection with the Chapter 11 proceeding (9,800) (2,000) (15,200) (17,200)
-------- -------- -------- --------
Net cash provided by (used for) operating activities 79,344 (42,116) 10,317 (31,799)
-------- -------- -------- --------
INVESTMENT ACTIVITIES:
Capital expenditures (63,493) (2,250) (44,825) (47,075)
Disposals of property 10,399
-------- -------- -------- --------
Net cash provided by used for investment activities (53,094) (2,250) (44,825) (47,075)
-------- -------- -------- --------
FINANCING ACTIVITIES:
Retirement of long-term debt (962) (576) (576)
Net change in financing under the revolving credit facility 29,000 40,464 40,464
Obligations under capital leases discharged (9,077) (530) (5,380) (5,910)
-------- -------- -------- --------
Net cash provided by (used for) financing activities 18,961 (530) 34,508 33,978
-------- -------- -------- --------
Increase (decrease) in cash and temporary cash investments 45,211 (44,896) (44,896)
Cash and temporary cash investments at beginning of period 44,294 89,505 44,609 89,505
-------- -------- -------- --------
Cash and temporary cash investments at end of period 89,505 44,609 44,609 44,609
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
-14-
<PAGE>
THE GRAND UNION COMPANY
PROJECTED STATEMENTS OF CASH FLOWS
FISCAL YEARS ENDED 1996 THROUGH 2000
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Pro Forma (*)
52 Weeks 52 Weeks 52 Weeks 53 Weeks 52 Weeks
Ending Ending Ending Ending Ending
March 30, 1996 March 29, 1997 March 28, 1998 April 3, 1999 April 1, 2000
-------------- -------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss (32,751) (26,071) (20,982) (12,488) (11,537)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 93,042 94,558 94,305 94,534 94,268
Receivables 3,821 (7,434) 3,649 931 (2,388)
Inventories (5,946) (8,061) (6,740) (4,983) (8,876)
Other current assets (5,092) (1,355) 18 (4,136) (747)
Accounts payable and accrued liabilities (30,956) 5,144 760 (1,551) (1,899)
Other (1,817) (7,026) (6,459) (5,343) (5,186)
-------- -------- -------- -------- --------
Net cash provided by operating activities 20,301 49,755 64,551 66,964 63,635
-------- -------- -------- -------- --------
INVESTMENT ACTIVITIES:
Capital expenditures (47,075) (43,600) (53,300) (48,700) (50,400)
-------- -------- -------- -------- --------
Net cash used for investment activities (47,075) (43,600) (53,300) (48,700) (50,400)
-------- -------- -------- -------- --------
FINANCING ACTIVITIES:
Retirement of long-term debt (576) (520) (520) (442) (891)
Net cash flow from the issuance/repayment of debt 40,464 986 (4,135) (11,754) (6,424)
Obligations under capital leases discharged (5,910) (5,373) (5,310) (4,744) (4,556)
-------- -------- -------- -------- --------
Net cash provided by (used for) financing activities 33,978 (4,907) (9,965) (16,940) (11,871)
-------- -------- -------- -------- --------
Increase in cash and temporary cash investments 7,204 1,248 1,286 1,324 1,364
Cash and temporary cash investments at beginning
of period 37,405 44,609 45,857 47,143 48,467
-------- -------- -------- -------- --------
Cash and temporary cash investments at end of period 44,609 45,857 47,143 48,467 49,831
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
<FN>
(*) Pro Forma without the effects of the bankruptcy proceeding.
</TABLE>
-15-
<PAGE>
Appendix C
<PAGE>
TERM SHEET OF NEW SENIOR NOTES
General
The Senior Notes will be issued under an indenture dated as of ,
1995 (the "Indenture") between the Company and IBJ Schroder Bank & Trust
Company, as Trustee (the "Trustee").
The terms of the Senior Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
in effect on the date of the Indenture (the "Trust Indenture Act"). The
statements under this caption relating to the Senior Notes and the Indenture
are summaries and do not purport to be complete, although they do include all
material terms of the Senior Notes and the Indenture.
The Senior Notes are limited to $595,475,922 aggregate original principal
amount and will mature September 1, 2004. The Senior Notes shall bear interest
at a rate of 12% per annum, commencing September 1, 1995, notwithstanding that
the original date of issuance (the "Issue Date") may be prior to that date.
Interest on the Senior Notes will be payable semi-annually on each March and
September, commencing March 1, 1996, to the holders of record of Senior Notes
as of the close of business on the February 15th and August 15th immediately
preceding such interest payment date. Interest on the Senior Notes will
commence to accrue from September 1, 1995 and, after the initial interest
payment, will accrue from the most recent date to which interest has been paid.
Interest will be computed on the basis of a year comprised of twelve 30-day
months. The Senior Notes will be issued in fully registered form only, in
denominations of $1,000 and integral multiples thereof.
Certain Definitions
Set forth is a summary of certain of the defined terms used in the Indenture.
"Additional Assets" means any Property or assets substantially related to the
Company's primary business.
"Affiliate" means, with respect to any referenced Person, a Person (i) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under direct or indirect common control with, such
referenced 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 Stock of such referenced Person or (iii) of which 5%
or more of the combined voting power of the total Voting Stock (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 referenced Person, or a Subsidiary of such referenced Person.
For purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling," "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
or policies of such Person, whether through the ownership of voting securities,
by agreement or otherwise; provided, however, that beneficial ownership of 5%
or more of the voting securities of another Person, shall be deemed to be
control. When used herein without reference to any Person, Affiliate means an
Affiliate of the Company.
"Asset Sale" means the sale or other disposition, in a transaction which is
not a Sale and Leaseback Transaction permitted under the terms of the
Indenture, by the Company or any of its Subsidiaries to any Person other than
the Company or another of its Subsidiaries of (i) any of the Capital Stock of
any of the Subsidiaries of the Company or (ii) any other assets of the Company
or any other assets of its Subsidiaries outside the ordinary course of business
of the Company or such Subsidiary.
"Average Life" means, as of the date of determination, with respect to any
debt security, the quotient obtained by dividing (i) the sum of the products of
(x) the numbers of years from the date of determination
<PAGE>
to the dates of each successive scheduled principal payment of such debt
security multiplied by (y) the amount of such principal payment by (ii) the sum
of all such principal payments.
"Bank Credit Agreement" means either the (i) Amended and Restated Credit
Agreement dated as of , 1995 among the Company, Bankers Trust
Company, for itself and as Agent, and the other financial institutions party
thereto, (ii) the Alternative Credit Documents, if the Company has made the
election provided for in Section 6.01(a)(ii) of the Plan, or (iii) any
successor agreement, together with documents related thereto, including,
without limitation, any security agreements, pledge agreements, mortgages or
guarantees in each case as such agreements may be amended, restated,
supplemented or otherwise modified from time to time and includes any agreement
renewing, extending the maturity of, refinancing (including by way of placement
or issuance of notes) or restructuring (including the inclusion of additional
borrowers, guarantors or lenders) all or any portion of the Indebtedness under
such agreements.
"Bankruptcy Code" means Title 11 of the United States Code, as from time to
time in effect.
"Borrowing Subsidiary" means any direct or indirect wholly-owned Subsidiary
of the Company which is permitted to incur Indebtedness under the terms of the
Indenture pursuant to the "Limitations on Indebtedness and Preferred Stock of
Subsidiaries (other than Non-Borrowing Subsidiaries)" and which is primarily
engaged in any business in which a supermarket chain is at the time engaged or
any related business or in any business in which the Company is engaged on the
issue date of the Senior Notes.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such Person's capital stock, including, without limitation, preferred or
preference stock, and any rights (other than debt securities convertible into
capital stock), warrants or options exchangeable for or convertible into such
capital stock.
"Capitalized Lease Obligations" means, at the time any determination thereof
is made, as to any Person, the obligation of such Person to pay rent or other
amounts under a lease of (or other agreement conveying the right to use) real
or personal Property which obligation is required to be classified and
accounted for as a capital lease obligation on a balance sheet of such Person
under GAAP and, for purposes of the Indenture, the amount of such obligation at
any date shall be the outstanding amount thereof at such date, determined in
accordance with GAAP.
"Change of Control" means the occurrence of any of the following events: (a)
any Person or Persons acting together which would constitute a "group" (a
"Group") for purposes of Section 13(d) of the Exchange Act, or any successor
provision thereto, together with any Affiliates thereof (other than a Permitted
Holder or Permitted Holders), is or becomes the beneficial owner of more than
50% of the total Voting Stock of the Company; (b) the Company consolidates
with, or merges into, another Person or sells, assigns, conveys, transfers,
leases or otherwise disposes of all or substantially all of its assets to any
Person in one transaction or a series of related transactions, or any Person
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which the outstanding Voting Stock of the Company
is converted into or exchanged for cash, securities (other than Voting Stock)
or other property with the effect that any Person or Group (other than a
Permitted Holder or Permitted Holders) becomes the beneficial owner of more
than 50% of the total Voting Stock of the Company or any successor corporation
or securities representing more than 50% of the total Voting Stock of the
Company or any successor corporation; (c) during any consecutive two-year
period, commencing as of the date of the Indenture, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election by such Board or whose
nomination for election by the stockholders of the Company was approved by a
vote of 662/3% 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 (other than death or
disability) to constitute a majority of the Board of Directors of the Company
then in office; (d) any order, judgment or decree shall be entered against the
Company decreeing the dissolution or split-up of the Company and such order
shall remain undischarged or unstayed for a period in excess of 60 days;
C-2
<PAGE>
provided, however, that none of the events described in the foregoing clauses
(a) through (d) shall constitute a "Change of Control" unless Standard & Poor's
Corporation or Moody's Investors Service, Inc. shall within 180 days after the
occurrence of such event (such 180-day period to be extended by that number of
days, not exceeding 45 days, during which the Securities shall have been placed
after the date of such event on credit watch with negative implications status)
have downgraded the rating assigned by such agency to the Senior Notes on the
date of such event.
"Consolidated Interest Coverage Ratio" means, with respect to the Company for
any period, the ratio of (i) the aggregate amount of Consolidated Operating
Income of the Company for the four consecutive fiscal quarters for which
financial information in respect thereof is available immediately prior to the
Transaction Date to (ii) the aggregate amount of Consolidated Interest Expense
of the Company for the four consecutive fiscal quarters for which financial
information in respect thereof is available immediately prior to the
Transaction Date; provided, however, that, for purposes of calculating the
Consolidated Interest Coverage Ratio of the Company, (a) Consolidated Operating
Income shall be calculated on the basis of the first-in, first-out method of
inventory valuation, as determined in accordance with GAAP, (b) the
Consolidated Operating Income and Consolidated Interest Expense of the Company
shall include the Consolidated Operating Income and Consolidated Interest
Expense of any Person to be acquired by the Company or any of its Subsidiaries
in connection with the transaction giving rise to the need to calculate the
Consolidated Interest Coverage Ratio, on a pro forma basis for the four
consecutive fiscal quarters for which financial information in respect thereof
is available immediately prior to the Transaction Date and shall also include
the Consolidated Operating Income and Consolidated Interest Expense of any
other Person which has been acquired during such four consecutive fiscal
quarters, on a pro forma basis from the beginning of such four consecutive
fiscal quarters through the date first included in the Company's Consolidated
Operating Income and Consolidated Interest Expenses, such pro forma
Consolidated Operating Income and Consolidated Interest Expense to be
determined on the same basis as used in determining such items for the Company,
and (c) Consolidated Interest Expense and Redeemable Dividends shall be
calculated as if (i) any Indebtedness incurred or proposed to be incurred or
issued since the beginning of the four consecutive fiscal quarters for which
financial information in respect thereof is available immediately prior to the
Transaction Date, or to be incurred or issued at or prior to the time of the
transaction giving rise to the need to calculate the Consolidated Interest
Coverage Ratio is effected (the "Transaction Time"), had been incurred or
issued as of the beginning of such four quarter period, and (ii) any
Indebtedness repaid since the beginning of such four quarter period or to be
repaid with the proceeds of such Indebtedness or equity incurred or issued or
to be incurred or issued at or prior to the Transaction Time, had been repaid
as of the beginning of such four quarter period. For purposes of determining
the Consolidated Interest Coverage Ratio of the Company for any period, (i) any
Indebtedness incurred or proposed to be incurred or Redeemable Stock issued or
proposed to be issued which for purposes of clause (c) above is deemed to have
been incurred or issued as of the beginning of the four quarter period
described in clause (c) which bears interest at a fluctuating rate will be
deemed to have borne interest during such four quarter period at the rate in
effect on the Transaction Date and (ii) "Subsidiary" shall mean any Subsidiary
of the Company other than any Subsidiary (and Subsidiaries of such Subsidiary)
of which the Company does not own or control, directly or indirectly, a
sufficient amount of Voting Stock in order to cause a merger of such Subsidiary
into the Company or another Subsidiary without the approval of any other holder
of Voting Stock of such Subsidiary.
"Consolidated Interest Expense" means, for any period, without duplication
(A) the sum of (i) the aggregate amount of interest recognized by the Company
and its Subsidiaries during such period in respect of Indebtedness of the
Company and its Subsidiaries (including, without limitation, all interest
capitalized by the Company or any of its Subsidiaries during such period and
all commissions, discounts and other fees and charges owed by the Company and
its Subsidiaries with respect to letters of credit and bankers' acceptance
financing and the net costs associated with Interest Swap Obligations of the
Company and its Subsidiaries), (ii) to the extent any Indebtedness of any
Person is guaranteed by the Company or any of its Subsidiaries, the aggregate
amount of interest paid or accrued by such Person during such period
attributable to any such Indebtedness, and (iii) any cash Redeemable Stock
dividend accrued and payable, and less (B) amortization
C-3
<PAGE>
or write-off of deferred financing costs of the Company and its Subsidiaries
during such period and, to the extent included in (A) above, any charge related
to any premium or penalty paid in connection with redeeming or retiring any
Indebtedness prior to its stated maturity and in the case of both (A) and (B)
above, elimination of intercompany accounts among the Company and its
Subsidiaries and as determined in accordance with GAAP.
"Consolidated Net Income" means, for any period, the aggregate net income of
the Company and its Subsidiaries for such period on a consolidated basis,
determined in accordance with GAAP but excluding for such purpose the impact of
any Fresh Start Accounting adjustment; provided, however, that there shall be
excluded therefrom, after giving effect to any related tax effect, (i) gains
and losses from Asset Sales or reserves relating thereto, (ii) items classified
as extraordinary or nonrecurring, including without limitation income relating
to the cancellation of indebtedness resulting from the Restructuring, (iii) the
income (or loss) of any Joint Venture, except to the extent of the amount of
cash dividends or other distributions in respect of its capital stock or
interest in the Joint Venture actually paid to, and received by, the Company or
any of its Subsidiaries during such period by such Joint Venture out of funds
legally available therefor, (iv) except to the extent includable pursuant to
clause (iii), the income (or loss) of any Person accrued or attributable to any
period prior to the date it becomes a Subsidiary of the Company or is merged
into or consolidated with the Company or any of its Subsidiaries or that
Person's assets (or a portion thereof) are acquired by the Company or any of
its Subsidiaries and (v) the cumulative effect of changes in accounting
principles in the year of adoption of such change.
"Consolidated Operating Income" means, with respect to the Company for any
period, the Consolidated Net Income of the Company and its Subsidiaries for
such period (A) increased by the sum of (i) Consolidated Interest Expense of
the Company for such period, (ii) income tax expense of the Company and its
Subsidiaries, on a consolidated basis, for such period (after giving effect to
any income tax expense adjustments made in arriving at Consolidated Net
Income), (iii) depreciation expense of the Company and its Subsidiaries, on a
consolidated basis, for such period, (iv) amortization expense of the Company
and its Subsidiaries, on a consolidated basis, for such period, (v)
amortization or write-off of deferred financing costs of the Company and its
Subsidiaries, on a consolidated basis, for such period and (vi) other non cash
items, but only to the extent the items referred to in subclauses (i) through
(vi) of this clause (A) reduced such Consolidated Net Income and (B) decreased
by the sum of (i) non cash items increasing such Consolidated Net Income and
(ii) any revenues received or accrued by the Company or any of its Subsidiaries
from any Person (other than the Company or any of its Subsidiaries) in respect
of any Investment for such period (other than revenue from any Qualified
Investment), but only to the extent that subclauses (i) and (ii) of this clause
(B) increased such Consolidated Net Income, all as determined in accordance
with GAAP.
"Default" means an event or condition that is, or, with the lapse of time or
the giving of notice or both, would become, an Event of Default as set forth in
"Events of Default."
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, with respect to any Asset Sale or any non-cash
consideration received by or transferred to any Person, the sale value that
would be obtained in an arm's length transaction between an informed and
willing seller under no compulsion to sell and an informed and willing buyer,
as determined in good faith by the Board of Directors of the Company.
"Fresh Start Accounting" means Fresh Start Accounting as described in
Statement of Position 90-7, "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code" (Am. Inst. of Certified Public Accountants 1990), as
then in effect, or such comparable statement then in effect.
"GAAP" means, at any particular time, generally accepted accounting
principles as in effect in the United States of America at such time.
C-4
<PAGE>
"Guarantee" means any direct or indirect obligation, contingent or otherwise,
of a Person guaranteeing or having the economic effect of guaranteeing any
Indebtedness of any other Person in any manner.
"Indebtedness," as applied to any Person, means, without duplication, (i) any
obligation, contingent or otherwise, for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to
a portion thereof), (ii) any obligation owed for all or any part of the
purchase price of Property or other assets or for the cost of Property or other
assets constructed or of improvements thereto (including any obligation under
or in connection with any letter of credit related thereto), other than
accounts payable included in current liabilities incurred in respect of
Property and services purchased in the ordinary course of business which are
not overdue by more than 90 days, according to the terms of sale, unless being
contested or negotiated in good faith, (iii) any obligation of a Person under
or in connection with any letter of credit issued for the account of such
Person, and all drafts drawn, or demands for payment honored, thereunder, (iv)
any obligation, contingent or otherwise, as set forth in subclauses (i) and
(ii) of this definition, secured by any Lien in respect of Property even though
the Person owning the Property has not assumed or become liable for payment of
such obligation, (v) any Capitalized Lease Obligation, (vi) any note payable,
bond, debenture, draft accepted or similar instrument representing an extension
of credit (other than extensions of credit for Property and services purchased
in the ordinary course of business which are not overdue by more than 90 days,
according to the terms of sale, unless being contested or negotiated in good
faith), whether or not representing an obligation for borrowed money, (vii) the
maximum fixed repurchase price of any Redeemable Stock, (viii) any obligations
of such Person in respect of Interest Swap Obligations and (ix) any Guarantees
and any obligation which is in economic effect a Guarantee, regardless of its
characterization, with respect to Indebtedness (of a kind otherwise described
in this definition) of another Person. For purposes of the preceding sentence,
the maximum fixed repurchase price of any Redeemable Stock which does not have
a fixed repurchase price shall be calculated in accordance with the terms of
such Redeemable Stock as if such Redeemable Stock were repurchased on any date
on which Indebtedness shall be required to be determined pursuant to the
Indenture. The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and the maximum liability of any such contingent obligations at such
date.
"Interest Swap Obligations" means the obligations of any Person pursuant to
any interest rate swap agreement, interest rate cap, collar or floor agreement
or other similar agreement or arrangement.
"Investment" means, with respect to any Person (such Person being referred to
in this definition as the "Investor"), (i) any amount paid by the Investor,
directly or indirectly, or any transfer of Property by the Investor, directly
or indirectly (such amount to be the Fair Market Value of such Property at the
time of transfer by the Investor), to any other Person for Capital Stock of, or
as a capital contribution to, any other Person; (ii) any direct or indirect
loan or advance to any other Person (other than accounts receivable of such
Investor arising in the ordinary course of business); and (iii) Guarantees of
the Indebtedness of another Person.
"Joint Venture" means any Person (other than a Subsidiary of the Company) in
which any Person other than the Company or any of its Subsidiaries has a joint
or shared equity interest with the Company or any of its Subsidiaries.
"Lien" means any mortgage, lien (statutory or other), charge, pledge,
hypothecation, conditional sales agreement, adverse claim, title retention
agreement or other security interest, encumbrance or title defect in or on, or
any interest or title of any vendor, lessor, lender or other secured party to
or of such Person under any conditional sale, trust receipt or other title
retention agreement with respect to, any Property or asset of such Person.
"Material Acquisition" means any merger, consolidation, acquisition or lease
of assets, acquisition of securities or other business combination or
acquisition, or any two or more such transactions if part of a common plan to
acquire a business or group of businesses, if the assets thus acquired in the
aggregate would
C-5
<PAGE>
have constituted a Material Subsidiary if they had been acquired as a
Subsidiary, based upon the consolidated financial statements of the Company and
its Subsidiaries for the most recent fiscal year for which financial statements
are available.
"Material Subsidiary" means, with respect to the Company, at any time, each
existing Subsidiary and each Subsidiary hereafter acquired or formed which (i)
for the most recent fiscal year of the Company for which financial statements
are available accounted for more than 10% of the consolidated revenues of the
Company and its Subsidiaries or (ii) as at the end of such fiscal year, was the
owner (beneficial or otherwise) of more than 10% of the consolidated assets of
the Company and its Subsidiaries, all as shown on the consolidated financial
statements of the Company and its Subsidiaries for such fiscal year.
"Net Proceeds" means, with respect to an Asset Sale by the Company or any of
its Subsidiaries, (i) the gross proceeds received by the Company or its
Subsidiary in connection with such Asset Sale (the amount of any non-cash
consideration received as proceeds to be the Fair Market Value of such
consideration, provided that liabilities assumed by the buyer shall not be
deemed proceeds received by the Company or its Subsidiary), minus (ii) the sum
of (a) reasonable fees and expenses incurred by the Company or such Subsidiary
in connection with such Asset Sale, including any tax on income resulting from
the gain realized from such Asset Sale, (b) payments made with respect to
liabilities associated with the assets which are the subject of the Asset Sale,
including without limitation, trade payables and other accrued liabilities, and
payments made to retire Indebtedness where the assets disposed of in such Asset
Sale constituted security for or had been pledged to secure such Indebtedness
and payment of such Indebtedness is required in connection with such Asset Sale
and (c) appropriate amounts to be provided by the Company or any Subsidiary
thereof, as the case may be, as a reserve, in accordance with GAAP, against any
liabilities associated with such assets and retained by the Company or any
Subsidiary thereof, as the case may be, after such Asset Sale, including,
without limitation, liabilities under any indemnification obligations and
severance and other employee termination costs associated with such Asset Sale.
"Non-Borrowing Subsidiary" means any direct or indirect wholly-owned
Subsidiary of the Company which (i) is not permitted to incur Indebtedness and
does not at any time, in the present or the future, have outstanding
Indebtedness and (ii) is not permitted to issue preferred or preference stock,
pursuant to its certificate of incorporation or otherwise, and does not at any
time, in the present or the future, have outstanding preferred or preference
stock.
"Permitted Holders" means any Person which directly or indirectly through one
or more intermediaries beneficially owns or holds or is entitled to receive on
the Issue Date 20% or more of the combined voting power of the Voting Stock of
the Company, or any Affiliate of any such Person.
"Person" means any individual, corporation, limited or general partnership,
joint venture, association, joint stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Plan" means the plan of reorganization of the Company, as confirmed by the
United States Bankruptcy Court for the District of Delaware on ,
1995.
"Property" means any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible.
"Qualified Investment" means the following kinds of instruments if, on the
date of purchase or other acquisition of any such instrument by the Company or
any Subsidiary the remaining term to maturity thereof is not more than one
year: (i) obligations issued or unconditionally guaranteed as to principal and
interest by the United States of America or by any agency or authority
controlled or supervised by and acting as an instrumentality of the United
States of America; (ii) obligations (including, but not limited to, demand or
time deposits, bankers' acceptances and certificates of deposit) issued by (a)
a depository institution or trust
C-6
<PAGE>
company incorporated under the laws of the United States of America, any state
thereof or the District of Columbia, or (b) a United States branch office or
agency of any foreign depository institution guaranteed by such U.S. bank or
depository, provided that such U.S. bank trust company or United States branch
office or agency has, at the time of the Company's or any Subsidiary's
investment therein or contractual commitment providing for such investment,
capital, surplus and undivided profits (as of the date of such institution's
most recently published financial statements) in excess of $100 million and the
long-term unsecured debt obligations (other than such obligations rated on the
basis of the credit of a person or entity other than such institution) of such
institution, at the time of the Company's or any Subsidiary's investment
therein or contractual commitment providing for such investment, is rated at
least A-1 by Standard & Poor's Corporation or A3 by Moody's Investors Service,
Inc.; and (iii) debt obligations (including, but not limited to, commercial
paper and medium-term notes) issued or unconditionally guaranteed as to
principal and interest by any corporation, state or municipal government or
agency or instrumentality thereof, or foreign sovereignty if the commercial
paper of such corporation, state or municipal government or foreign sovereignty
has, at the time of the Company's or any Subsidiary's investment therein or
contractual commitment providing for such investment, credit ratings of A-1 by
Standard & Poor's Corporation, or P-1 by Moody's Investors Service, Inc., or
the debt obligations of such corporation, state or municipal government or
foreign sovereignty, at the time of the Company's or any Subsidiary's
investment therein or contractual commitment providing for such investment,
have credit ratings of at least A-1 by Standard & Poor's Corporation or A3 by
Moody's Investors Service, Inc.
"Redeemable Dividend" means, for any dividend payable with regard to
Redeemable Stock, the quotient of the dividend divided by the difference
between one and the maximum statutory federal income tax rate (expressed as a
decimal number between 1 and 0) then applicable to the issuer of such
Redeemable Stock.
"Redeemable Stock" means, with respect to any Person, any equity security
that by its terms or otherwise is required to be redeemed or is redeemable at
the option of the holder thereof at any time prior to the maturity of the
Senior Notes.
"Restricted Payment" means (i) a dividend or other distribution declared and
paid on the Capital Stock of the Company to its stockholders (in their capacity
as such), other than dividends or distributions consisting of shares of the
Company's Capital Stock (or rights or warrants to subscribe for or purchase
shares of such Capital Stock), (ii) a payment made by the Company or any
Subsidiary to purchase, redeem, acquire or retire any Capital Stock of the
Company (or rights or warrants to subscribe for or purchase shares of such
Capital Stock), (iii) a payment made by the Company or any Subsidiary to
acquire, retire or redeem any debt of or equity interest in any Affiliate of
the Company or any of its Subsidiaries, (iv) any other Investment in any
Affiliate of the Company or any of its Subsidiaries (other than in any
Non-Borrowing Subsidiary) or (v) a payment made in purchase, redemption,
defeasance or other acquisition or retirement for value of Subordinated Debt.
"Restructuring" means the restructuring of the Company's debt and equity
capitalization pursuant to the Plan.
"Revolving Credit Facility" means (i) the revolving credit facility (or any
similar facility) available under the Bankers Trust Bank Credit Agreement,
including any related letters of credit, or (ii) any other credit facility
secured by accounts receivable, inventory and proceeds thereof.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which such Person is a party, providing for the leasing
to the Company or a Subsidiary of any Property, whether owned at the date of
the Indenture or thereafter acquired, which has been or is to be sold or
transferred by the Company or such Subsidiary to such Person, or to any other
Person to whom funds have been or are to be advanced by such Person, on the
security of such Property.
C-7
<PAGE>
"Senior Indebtedness" means, at any date, (i) Indebtedness under the Bank
Credit Agreement and the Senior Notes including, in each case, interest thereon
accruing at the contract rate, whether or not an allowed claim in a case under
the Bankruptcy Code, and all other obligations and indemnities owing
thereunder; (ii) any renewals, extensions, modifications, amendments or
refundings of Indebtedness under the Senior Notes; (iii) Indebtedness arising
as a result of Interest Swap Obligations of the Company or any Subsidiary; and
(iv) any other Indebtedness of the Company for money borrowed or under letters
of credit, in either case entered into in compliance with the Indenture, unless
the instrument under which such Indebtedness is created, incurred, assumed or
guaranteed expressly provides that such Indebtedness is subordinated in right
of payment to any Indebtedness.
"Subordinated Debt" means, at any date, any Indebtedness of the Company that
is expressly subordinated in any respect in right of payment to the Senior
Notes, Indebtedness under the Bank Credit Agreement or to any other Senior
Indebtedness, including, without limitation, principal, premium, interest,
fees, indemnities and amounts in respect of claims and rights of rescission.
"Subsidiary" means, with respect to any Person, any corporation, association
or other business entity of which securities representing more than 50% of the
combined voting power of the total Voting Stock (or in the case of an
association or other business entity which is not a corporation, more than 50%
of the equity interest) is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof. When used herein without reference to any
Person, Subsidiary means a Subsidiary of the Company.
"Transaction Date" means the date of the transaction giving rise to the need
to calculate the Consolidated Interest Coverage Ratio, provided that if such
transaction is related to or in connection with any acquisition of any Person,
the Transaction Date shall be the earlier of (i) the date on which the Company
or any of its Subsidiaries enters into an agreement with such Person to effect
such acquisition, (ii) the date on which the Company or any of its Subsidiaries
first makes a public announcement of any offer or proposal to effect such
acquisition, (iii) the date on which the Company or any of its Subsidiaries
first makes a filing with the Securities and Exchange Commission or the Federal
Trade Commission in connection with any proposed acquisition, and (iv) the date
such acquisition is consummated, provided, however, that if subsequent to the
occurrence of an event described in clause (i), (ii) or (iii) above or clause
(A), (B) or (C) below the Company or any of its Subsidiaries shall amend the
terms of such acquisition with respect to the consideration payable by the
Company or any of its Subsidiaries in connection with such acquisition, the
Transaction Date shall be the earlier of (A) the date on which the Company or
any of its Subsidiaries enters into a binding written agreement with such
Person to effect such acquisition on such amended terms, (B) the date on which
the Company or any of its Subsidiaries makes a public announcement of any offer
or proposal to effect such acquisition on such amended terms and (C) the date
on which the Company or any of its Subsidiaries first makes a filing disclosing
such amended terms with the Commission or the Federal Trade Commission in
connection with any proposed acquisition.
"Voting Stock" means any class or classes of Capital Stock pursuant to which
the holders thereof have the general voting power under ordinary circumstances
to vote for the election of directors, managers or trustees of any Person
(irrespective of whether or not at the time stock of any class or classes will
have or might have voting power by the reason of the happening of any
contingency).
Redemption
The Senior Notes are not redeemable at the option of the Company prior to
September 1, 2000, except as set forth below. On or after such date, the Senior
Notes are redeemable at the option of the Company, in whole or any time or in
part, from time to time, on not less than 30 nor more than 60 days' prior
notice, mailed by first-class mail to the holders' last addresses as they shall
appear upon the register for the Senior Notes, at the following prices
(expressed in percentages of the principal amount), if redeemed during the
respective twelve month periods indicated below, in each case together with
interest accrued to the redemption date:
C-8
<PAGE>
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
September 1, 2000-August 31, 2001 104%
September 1, 2001-August 31, 2002 102%
</TABLE>
and thereafter at the principal amount thereof, together with interest accrued
to the redemption date.
Notwithstanding the foregoing, the Senior Notes may be redeemed prior to
September 1, 1998 with the proceeds of one or more issuances of equity
securities, so long as such redemption, when aggregated with all prior
redemptions, shall not result in more than 331/3% of the principal amount of
Senior Notes originally issued having been redeemed, at the redemption prices
(expressed in percentages of principal amount) set forth below, if redeemed
during the respective twelve month periods indicated below, in each case
together with interest accrued to the redemption date:
<TABLE>
<CAPTION>
Year Percentage
- --------------------------------- ----------
<S> <C>
September 1, 1995-August 31, 1996 103%
September 1, 1996-August 31, 1997 106%
September 1, 1997-August 31, 1998 106%
</TABLE>
If less than all the Senior Notes are to be redeemed, selection of Senior
Notes for redemption will be made by the Trustee or the registrar for the
Senior Notes pro rata or by lot or by any means acceptable to the Trustee.
Covenants
The Indenture contains covenants including, among others, the following:
Restricted Payments. The Indenture provides that the Company shall not, nor
will it permit any of its Subsidiaries to, make any Restricted Payment (other
than Investments in (i) Affiliates which are not wholly-owned Subsidiaries in
an aggregate amount not to exceed $20 million at any time outstanding and (ii)
Borrowing Subsidiaries in an aggregate amount at any time outstanding not to
exceed the sum of (x) $30 million less (y) the aggregate amount of outstanding
Investments in Affiliates which are not wholly-owned Subsidiaries permitted by
clause (i) hereof) if, after giving effect thereto, (A) any Default shall have
occurred and be continuing, or (B) the Company could not incur at least $1.00
of additional Indebtedness pursuant to the terms of the Indenture described in
the first paragraphs of "Limitation on Indebtedness" below, or (C) the
aggregate amount of Restricted Payments made subsequent to the date of the
Indenture by the Company and its Subsidiaries (other than (i) Investments in
Affiliates which are not wholly-owned Subsidiaries in an amount not to exceed
$20 million in the aggregate and (ii) Investments in Borrowing Subsidiaries in
an aggregate amount not to exceed the sum of (x) $30 million less (y) the
aggregate amount of outstanding Investments in Affiliates which are not
wholly-owned Subsidiaries permitted by clause (i) hereof) would exceed the sum
of (a) 50% (or minus 100% in the event of a deficit) of aggregate Consolidated
Net Income (which is defined to exclude the impact of any Fresh Start
Accounting adjustment and any extraordinary income, including income relating
to cancellation of indebtedness resulting from the Restructuring) of the
Company for the period commencing on April 2, 1995 and ending on the last day
of the fiscal quarter immediately preceding the date of such payment, and (b)
the aggregate Net Proceeds, including cash and the Fair Market Value of
Property other than cash, received by the Company subsequent to the date on
which the Senior Notes are issued from capital contributions from any of its
stockholders or from the issuance or sale (other than to a Subsidiary)
subsequent to the date on which the Senior Notes are issued of shares of its
Capital Stock (other than Redeemable Stock) of any class (or rights or warrants
to subscribe for or purchase shares of such capital stock) or of any
convertible securities or debt obligations which have been converted into,
exchanged for or satisfied by the issuance of shares of the Company's Capital
Stock (other than Redeemable Stock).
C-9
<PAGE>
The foregoing limitations do not prevent the Company from paying a dividend
on Capital Stock within 60 days after the declaration thereof if, on the date
when the dividend was declared, the Company could have paid such dividend in
accordance with the provisions of the Indenture. In addition, the foregoing
limitations will not prevent the Company from making payments to purchase,
redeem, defease or otherwise acquire or retire for value Subordinated Debt to
the extent that any such purchase, redemption, defeasance or other acquisition
or retirement for value is made out of the proceeds of the issuance of (i)
Subordinated Debt having a final maturity no earlier than the final maturity
of, and an Average Life equal to or longer than, the Indebtedness being retired
or repurchased or (ii) Capital Stock (other than Redeemable Stock) of the
Company.
The Indenture does not prevent the Company from repurchasing shares of its
Capital Stock (a) solely in exchange for other shares of its Capital Stock
(other than Redeemable Stock) or (b) pursuant to a court order.
In addition, the Indenture provides that the covenant limiting Restricted
Payments will not apply to redemptions or repurchases of common stock in
connection with repurchase provisions under employee stock option or stock
purchase agreements or other agreements to compensate management employees;
provided, that such redemptions or purchases shall not exceed $2,000,000 in any
fiscal year or $5,000,000 in the aggregate subsequent to the date of the
Indenture.
Limitation on Indebtedness. The Indenture provides that the Company shall not
create, incur, assume, guarantee or otherwise become liable with respect to, or
become responsible for the payment of, any Indebtedness, unless, after giving
effect thereto, the Consolidated Interest Coverage Ratio of the Company on a
pro forma basis for the four consecutive fiscal quarters for which financial
information in respect thereof is available immediately prior to any
Transaction Date that is prior to September, 1997 would be greater than 1.85:1
and for any Transaction Date thereafter would be greater than 2.0:1.
Notwithstanding the foregoing, the Company may incur, create, assume,
guarantee or otherwise become liable with respect to, any or all of the
following Indebtedness:
(i) Indebtedness evidenced by the Senior Notes, and Indebtedness under the
Bank Credit Agreement (including any refinancings thereof permitted by the
following clause) in a maximum principal amount at any time outstanding not to
exceed the greater of (x) $250 million or (y) the sum of $100 million plus 65%
of the total inventory of the Company and its Subsidiaries (calculated on a
"first-in" "first-out" basis) plus 85% of the total accounts receivable of the
Company and its Subsidiaries, subject to one or more permanent reductions of
both (x) and (y) as provided in the "Limitation on Sale and Leaseback
Transactions" and in the proviso to the "Limitation on Asset Sales."
(ii) Indebtedness the proceeds of which are used to refinance (x) all or a
portion of the Indebtedness evidenced by the Senior Notes or (y) Indebtedness
under the Bank Credit Agreement (as limited by the preceding paragraph) or
other (z) Indebtedness of the Company and its Subsidiaries, in each case in a
principal amount not to exceed the principal amount so refinanced (or, if such
Indebtedness provides for an amount less than the principal amount thereof to
be due and payable upon a declaration of acceleration of the maturity thereof,
in an amount not greater than such lesser amount) plus any prepayment penalties
and premiums, accrued and unpaid interest on the Indebtedness so refinanced,
plus customary fees, expenses and costs related to the incurrence of such
refinancing Indebtedness, provided that, in the case of this clause (ii), (1)
if the Senior Notes are refinanced in part, such new Indebtedness is expressly
made pari passu or subordinate in right of payment to the remaining Senior
Notes, (2) if the Indebtedness to be refinanced is subordinate in right of
payment to the Senior Notes, such new Indebtedness is subordinate in right of
payment to the Senior Notes at least to the extent that the Indebtedness to be
refinanced is subordinate in right of payment to the Senior Notes, (3) if the
Indebtedness to be refinanced is pari passu in right of payment to the Senior
Notes, such new Indebtedness is expressly made pari passu or subordinate in
right of payment to the Senior Notes, and (4) if the Senior Notes are
refinanced in part or if the Indebtedness to be refinanced is pari passu or
C-10
<PAGE>
subordinate in right of payment to the Senior Notes and scheduled to mature
after the maturity date of the Senior Notes, such new Indebtedness as of the
date of incurrence does not mature prior to the final scheduled maturity date
of the Senior Notes and has an Average Life equal to or greater than the
remaining Average Life of the Senior Notes;
(iii) Indebtedness of the Company remaining outstanding immediately after the
issuance of the Senior Notes;
(iv) Indebtedness to a Subsidiary of the Company;
(v) Indebtedness incurred in connection with the refurbishment, improvement,
construction or acquisition (whether by acquisition of stock, assets or
otherwise) of any Property or Properties of the Company or a Subsidiary of the
Company that constitute a part of the then present business of the Company or
any Subsidiary of the Company (or incurred within twelve months of any such
acquisition or the completion of such refurbishment, improvement or
construction), provided, that at the time of the incurrence thereof:
(a) (1) such Indebtedness, together with any other then outstanding
Indebtedness incurred during the most recently completed four consecutive
fiscal quarter period in reliance upon either this clause (v) or clause
(vi) under "Limitations on Indebtedness and Preferred Stock of
Subsidiaries (other than Non-Borrowing Subsidiaries)" does not exceed, in
the aggregate, 3% of consolidated net sales of the Company and its
Subsidiaries during the four consecutive fiscal quarter period ended
immediately prior to the date of calculation; provided, that for purposes
of this clause (a)(1), such Indebtedness shall include, without
limitation, an amount equal to (x) the aggregate outstanding principal
amount of any mortgages that the Company or any Subsidiary is deemed to
have entered into in connection with any Sale and Leaseback Transaction
that the Company or any Subsidiary has entered into during the four
consecutive fiscal quarter period ended immediately prior to the date of
calculation, less (y) the aggregate principal amount of any Senior
Indebtedness that has been repaid with the Net Proceeds of any Sale and
Leaseback Transaction that the Company or any Subsidiary has entered into
within twelve months of the acquisition, or completion of construction or
refurbishment, of the Property that is the subject of any such
transaction; and
(2) such Indebtedness, together with all then outstanding Indebtedness
incurred in reliance upon either this clause (v) or clause (vi) under
"Limitations on Indebtedness and Preferred Stock of Subsidiaries (other than
Non-Borrowing Subsidiaries)" does not exceed, in the aggregate, 3% of the
consolidated net sales of the Company and its Subsidiaries during the most
recently completed twelve consecutive fiscal quarter period; provided that,
for purposes of this clause (a)(2), such Indebtedness shall include, without
limitation, an amount equal to (x) the aggregate outstanding principal amount
of any mortgages that the Company or any Subsidiary is deemed to have entered
into in connection with any Sale and Leaseback Transactions to which the
Company or any Subsidiary is then a party less (y) the aggregate principal
amount of any Senior Indebtedness that has been repaid with the Net Proceeds
of any Sale and Leaseback Transaction that the Company or any Subsidiary has
entered into within twelve months of the acquisition, or completion of
construction or refurbishment, of the Property that is the subject of any
such transaction; except that, for purposes of calculating the limitation
set forth in clause (a)(2) the seven Sale and Leaseback Transactions
identified in clause (ii) under "Limitation on Sale and Leaseback
Transactions" shall not be included; or
(b) such Indebtedness (including an amount equal to the sum of (x) the
aggregate outstanding principal amount of any mortgages that the Company
or any Subsidiary is deemed to have entered into in connection with any
Sale and Leaseback Transaction to which the Company or any Subsidiary is
then a party less (y) the aggregate principal amount of any Senior
Indebtedness that has been repaid with the Net Proceeds of any Sale and
Leaseback
C-11
<PAGE>
Transaction) does not exceed the amount of proceeds received by the
Company or any of its Subsidiaries from insurance maintained by the
Company or any Subsidiary in respect of such Property or Properties;
(vi) Indebtedness consisting of Guarantees by the Company of Indebtedness of
any Subsidiary, provided that such Indebtedness is otherwise permitted under
the Indenture;
(vii) Indebtedness under Interest Swap Obligations, provided that such
Interest Rate Swap Obligations are related to payment obligations on
Indebtedness otherwise permitted under this covenant;
(viii) commercial letters of credit and standby letters of credit incurred in
the ordinary course of business by the Company;
(ix) Indebtedness represented by industrial revenue or development bonds,
provided that the aggregate amount of Indebtedness incurred in reliance upon
the exception of this clause (ix) or clause (x) under "Limitations on
Indebtedness and Preferred Stock of Subsidiaries (other than Non-Borrowing
Subsidiaries)" shall not exceed at any one time an aggregate principal amount
outstanding of $25,000,000;
(x) Capitalized Lease Obligations relating to Property used in the business
of the Company;
(xi) Indebtedness incurred in respect of performance bonds and performance
and completion Guarantees incurred in the ordinary course of business;
(xii) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently (except in
the case of daylight overdrafts) drawn against insufficient funds in the
ordinary course of business, provided that such Indebtedness is extinguished
within five business days of its incurrence; and
(xiii) other Indebtedness for borrowed money in an amount not to exceed
$75,000,000 in the aggregate.
Limitation on Liens. The Indenture provides that neither the Company nor any
Subsidiary shall create, incur, assume or permit to exist any Lien on or with
respect to any Property or assets of the Company or any such Subsidiary or any
interest therein or any income or profits therefrom other than (i) any Lien
existing as of the date of the Indenture, and any Lien securing Indebtedness
under the Bank Credit Agreement pursuant to the terms of such Bank Credit
Agreement as in effect on the issue date of the Senior Notes; (ii) any Lien
arising in the ordinary course of business, other than in connection with
Indebtedness for borrowed money; (iii) any Lien on the Company's or a
Subsidiary's accounts receivable, inventories, and proceeds thereof securing
Indebtedness incurred pursuant to the provisions of the Revolving Credit
Facility; (iv) any Lien on Property acquired by the Company or any Subsidiary
after the date of the Indenture created solely to secure Indebtedness incurred
to finance such acquisition or assumed in connection with such acquisition,
whether by acquisition of stock, assets or otherwise (or entered into in
connection with Indebtedness that is permitted under the terms of the Indenture
described in clause (v) of the second paragraph under "Limitation on
Indebtedness" above or clause (vi) under "Limitations on Indebtedness and
Preferred Stock of Subsidiaries (other than Non-Borrowing Subsidiaries)"),
provided that in each case such acquisition does not constitute a Material
Acquisition; (v) any Lien on Property acquired by the Company or any Subsidiary
which constitutes a Material Acquisition created solely to secure Indebtedness
incurred to finance such Material Acquisition or assumed in connection with
such Material Acquisition, provided that after giving effect to such
Indebtedness the Consolidated Interest Coverage Ratio would be greater than the
then applicable Consolidated Interest Coverage Ratio described in the first
paragraph under "Limitation on Indebtedness" above; (vi) any Lien on any asset
of the Company or any Subsidiary created solely to secure Indebtedness incurred
to finance the refurbishment, improvement, construction or acquisition (whether
by acquisition of stock, assets or otherwise) of such assets (or created within
twelve months of any such acquisition or the completion of such refurbishment,
improvement or construction) or relating to Indebtedness assumed in connection
with any such acquisition, provided that such Lien secures Indebtedness
permitted under the terms of the Indenture
C-12
<PAGE>
described in clause (v) of the second paragraph under "Limitation on
Indebtedness" above or clause (vi) under "Limitations on Indebtedness and
Preferred Stock of Subsidiaries (other than Non-Borrowing Subsidiaries)"; (vii)
any Lien created in connection with a Capitalized Lease Obligation that the
Company or a Subsidiary is permitted to enter into under the terms of the
Indenture; (viii) any Lien relating to judgments or awards that the Company or
any Subsidiary is contesting in good faith; (ix) any Lien for taxes that are
not yet due or that the Company or any Subsidiary is contesting in good faith
and (x) any Lien extending, renewing or replacing any Liens permitted by
clauses (i), (iv), (v), (vi) or (vii). In the case of Liens permitted under
clauses (i), (iv), (v), (vi), (vii) and (x), such Liens may relate solely to
the Property (including any improvements thereon) subject thereto as of the
date of the Indenture or the date such Lien was incurred, as the case may be
(and, in the case of Indebtedness under the Bank Credit Agreement, any after
acquired Property), and may secure the payment only of the Indebtedness so
secured as of such date.
Limitation on Sale and Leaseback Transactions. The Indenture provides that
the Company shall not, and shall not permit any Subsidiary to, enter into,
assume, guarantee or otherwise become liable with respect to any Sale and
Leaseback Transaction, provided, that the Company may enter into (i) a Sale and
Leaseback Transaction that, had such Sale and Leaseback Transaction been
structured as a mortgage rather than as a Sale and Leaseback Transaction, the
Company would have been permitted to enter into such transaction pursuant to
the terms of the Indenture described in clause (v) of "Limitation on
Indebtedness," in clause (vi) of "Limitations on Liens" and in clause (vi) of
"Limitation on Indebtedness and Preferred Stock of Subsidiaries (other than
Non-Borrowing Subsidiaries)", provided, however, that such Sale and Leaseback
Transaction is entered into within twelve months of the acquisition, or
completion of construction or refurbishment, of the Property that is the
subject of any such transactions; (ii) a Sale and Leaseback Transaction with
respect to the Company's property located in New Fairfield, Connecticut,
Dumont, New Jersey, Valatie, New York, Morrisville, Vermont, Corinth, New York,
Tannersville, New York and Manchester Center, Vermont; and (iii) a Sale and
Leaseback Transaction if within 90 days of entering into such arrangement
either (1) the Company applies the Net Proceeds of the sale of the Property
leased pursuant to such Sale and Leaseback Transaction to the payment of Senior
Indebtedness other than Indebtedness incurred under the Bank Credit Agreement
(except that Indebtedness under the Bank Credit Agreement may be repaid from
such Net Proceeds to the extent the principal amount of Indebtedness under the
Bank Credit Agreement permitted by the second paragraph of "Limitation on
Indebtedness" is permanently reduced by an amount equal to the principal amount
of the Indebtedness under the Bank Credit Agreement so repaid from Net
Proceeds), or (2) (a) if such arrangement is entered into prior to September 1,
2000, the Company makes a pro rata offer to all holders of Senior Notes to
repurchase such Senior Notes at 104% of their principal amount, plus accrued
and unpaid interest through the date of repurchase, or (b) if such arrangement
is entered into on or after September 1, 2000, the Company redeems the Senior
Notes (as described under "Redemption"), in either case at par plus the then
applicable premium, if any, and in an aggregate amount equal to the greater of
the Net Proceeds of the sale of the Property leased pursuant to such Sale and
Leaseback Transaction or the Fair Market Value of the Property so leased at the
time of entering into such Sale and Leaseback Transaction.
Limitation on Asset Sales. The Indenture provides that the Company shall not
consummate, and shall not permit any Subsidiary to consummate, any Asset Sale
unless (i) such sale is for Fair Market Value and (ii) at least 75% of the Net
Proceeds thereof received by the Company or such Subsidiary is in the form of
cash; provided, that for purposes of this covenant securities received by the
Company or any Subsidiary from such transferee that are promptly converted by
the Company or such Subsidiary into cash shall be deemed to be cash, and
provided further, that notwithstanding any other provision in this paragraph,
the Company or any Subsidiary may consummate Asset Sales for which it receives,
in a single transaction or in a series of related transactions, aggregate Net
Proceeds in an amount not to exceed $25,000,000, without regard to the
foregoing limitation on receiving a specified percentage of the Net Proceeds in
cash. To the extent the Company has not reinvested such Net Proceeds in
Additional Assets or used such Net Proceeds to repay Senior Indebtedness (other
than Senior Notes) within twelve months following the consummation of the Asset
Sale (or in the case of Net Proceeds received in the form of securities, within
twelve months after such
C-13
<PAGE>
securities are converted into cash), the Company shall either apply such Net
Proceeds (or any portion thereof) to the repayment of Senior Indebtedness or
apply such Net Proceeds (or the remaining portion thereof) in accordance with
the following sentence; provided, however, that if Net Proceeds of Asset Sales
are applied to reduce the Indebtedness under the Bank Credit Agreement (or any
refinancing or renewal thereof), the principal amount of Indebtedness under the
Bank Credit Agreement permitted by the second paragraph of "Limitation on
Indebtedness" shall be reduced permanently by an amount equal to the principal
amount of the Indebtedness under the Bank Credit Agreement so repaid from Net
Proceeds. If (1) no Senior Indebtedness other than Senior Notes is outstanding
at such time or the Company does not apply any or applies only a portion of
such Net Proceeds to the repayment of Senior Indebtedness other than Senior
Notes or (2) the application of such Net Proceeds results in the payment of all
outstanding Senior Indebtedness other than Senior Notes, then such Net Proceeds
or any remaining portion thereof, in each case not so applied to the payment of
Senior Indebtedness other than Senior Notes, shall be applied to a pro rata
offer to repurchase the Senior Notes at a purchase price in cash equal to 102%
of their principal amount plus accrued and unpaid interest through the date of
repurchase. Notwithstanding the foregoing, in the event the Net Proceeds
resulting from any Asset Sale, after giving effect to any related repayment of
Senior Indebtedness other than Senior Notes, are less than $25,000,000, the
Company may defer extending such pro rata offer to repurchase the Senior Notes
until such time as such Net Proceeds, plus the aggregate amount of Net Proceeds
resulting from any subsequent Asset Sale or Asset Sales not otherwise
reinvested in Additional Assets or applied to repay Senior Indebtedness other
than Senior Notes, are equal to at least $25,000,000, at which time the Company
shall apply the aggregate amount of such Net Proceeds to a pro rata offer to
repurchase the Senior Notes at a purchase price in cash equal to 102% of their
principal amount, plus accrued and unpaid interest through the date of
repurchase.
Pending application thereof in accordance with the foregoing paragraph, the
Company shall either apply the Net Proceeds of any Asset Sale to repay
temporarily any Senior Indebtedness other than Senior Notes or invest such Net
Proceeds in Qualified Investments.
Transactions with Affiliates. The Indenture provides that the Company shall
not, and shall not permit any Subsidiary to, enter into any transaction after
the date of the issuance of the Senior Notes with any Affiliate (other than the
Company or a Subsidiary) unless (i) the Board of Directors of the Company
determines, in its reasonable good faith judgment, that such transaction is in
the best interests of the Company or such Subsidiary, based on full disclosure
of all relevant facts and circumstances, (ii) such transaction is on terms no
less favorable to the Company or such Subsidiary than those that could be
obtained in a comparable arm's length transaction with an entity that is not an
Affiliate, and (iii) the transaction is otherwise permissible under the
Indenture.
The covenant limiting Transactions with Affiliates does not apply to
redemptions or repurchases of common stock in connection with repurchase
provisions under employee stock option or stock purchase agreements or other
agreements to compensate management employees, provided that such redemptions
or purchases shall not exceed $2,000,000 in any fiscal year or $5,000,000 in
the aggregate subsequent to the date of the Indenture.
In addition, the covenant limiting Transactions with Affiliates will not
prevent the Company from (i) paying a dividend on Capital Stock within 60 days
after the declaration thereof if, on the date when the dividend was declared,
the Company could have paid such dividend in accordance with the provisions of
the Indenture, or (ii) repurchasing shares of its Capital Stock (x) solely in
exchange for other shares of its Capital Stock (other than Redeemable Stock) or
(y) pursuant to a court order.
Limitation on Indebtedness and Preferred Stock of Subsidiaries (other than
Non-Borrowing Subsidiaries). The Indenture provides that the Company shall not
permit any Subsidiary to create, incur, guarantee, assume or issue any
Indebtedness or issue any preferred or preference stock, except for:
(i) Indebtedness or preferred stock outstanding on the date of the Indenture;
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<PAGE>
(ii) Indebtedness or preferred stock issued to and held by the Company or a
wholly-owned Subsidiary (but only so long as held or owned by the Company or a
wholly-owned Subsidiary);
(iii) Indebtedness or preferred stock issued by a Person prior to the time
(a) such Person becomes a Subsidiary, (b) such Person merges with or into a
Subsidiary or (c) a Subsidiary merges with or into such Person, provided that
such Indebtedness or preferred stock was not issued or incurred by such Person
in anticipation of the type of transaction contemplated by subclauses (a), (b)
or (c);
(iv) Indebtedness under the Bank Credit Agreement;
(v) Indebtedness the proceeds of which are used to refinance any other
Indebtedness of any Subsidiary, in each case in a principal amount not to
exceed the principal amount so refinanced (or, if such Indebtedness provides
for an amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration of the maturity thereof, in an amount not greater
than such lesser amount), plus any prepayment penalties and premiums, accrued
and unpaid interest on the Indebtedness so refinanced, plus customary fees,
expenses and costs related to the incurrence of such refinancing Indebtedness;
(vi) Indebtedness incurred in connection with the refurbishment, improvement,
construction or acquisition (whether by acquisition of stock, assets or
otherwise) of any Property or Properties of a Subsidiary of the Company that
constitute a part of the then present business of the Company or any Subsidiary
of the Company (or incurred within twelve months of any such acquisition or the
completion of such refurbishment, improvement or construction), provided that
either:
(a) (1) such Indebtedness, together with any other Indebtedness incurred
during the most recently completed four consecutive fiscal quarter period
in reliance upon either this clause (vi) or clause (v) under "Limitation
on Indebtedness" does not exceed in the aggregate 3% of consolidated net
sales of the Company and its Subsidiaries during the four consecutive
fiscal quarter period ended immediately prior to the date of calculation;
provided that (a) for purposes of this clause (a)(1), such Indebtedness
shall include, without limitation, an amount equal to (x) the aggregate
outstanding principal amount of any mortgages that the Company or any
Subsidiary is deemed to have entered into in connection with any Sale and
Leaseback Transaction that the Company or any Subsidiary has entered into
during the four consecutive fiscal quarter period ended immediately prior
to the date of calculation, less (y) the aggregate principal amount of
any Senior Indebtedness that has been repaid with the Net Proceeds of any
Sale and Leaseback Transaction that the Company or any Subsidiary has
entered into within twelve months of the acquisition, or completion of
construction or refurbishment, of the Property that is the subject of any
such transaction; and
(2) such Indebtedness, together with all then outstanding indebtedness
incurred in reliance upon either this clause (vi) or clause (v) under
"Limitation on Indebtedness" does not exceed in the aggregate 3% of the
consolidated net sales of the Company and its Subsidiaries during the most
recently completed twelve consecutive fiscal quarter period; provided that,
for purposes of this clause (a)(2), such Indebtedness shall include, without
limitation, an amount equal to (x) the aggregate outstanding principal amount
of any mortgages that the Company or any Subsidiary is deemed to have entered
into in connection with any Sale and Leaseback Transactions to which the
Company or any Subsidiary is then a party less (y) the aggregate principal
amount of any Senior Indebtedness that has been repaid with the Net Proceeds
of any Sale and Leaseback Transaction that the Company or any Subsidiary has
entered into within twelve months of the acquisition, or completion of
construction or refurbishment, of the Property that is the subject of any
such transaction; except that, for purposes of calculating the limitation
set forth in clause (a)(2), the seven Sale and Leaseback Transactions
identified in clause (ii) under "Limitation on Sale and Leaseback
Transactions" shall not be included; or
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<PAGE>
(b) such Indebtedness (including an amount equal to the sum of (x) the
aggregate outstanding principal amount of any mortgages that the Company
or any Subsidiary is deemed to have entered into in connection with any
Sale and Leaseback Transaction to which the Company or any Subsidiary is
then a party less (y) the aggregate principal amount of any Senior
Indebtedness that has been repaid with the Net Proceeds of any Sale and
Leaseback Transaction) does not exceed the amount of proceeds received by
the Company or any of its Subsidiaries from insurance maintained by the
Company or any Subsidiary in respect of such Property or Properties;
(vii) Indebtedness consisting of Guarantees by a Subsidiary of Indebtedness
of the Company or any other Subsidiary, provided that such Indebtedness is
otherwise permitted under the Indenture;
(viii) Indebtedness under Interest Swap Obligations, provided that such
Interest Swap Obligations are related to payment obligations on Indebtedness
otherwise permitted under this covenant;
(ix) commercial letters of credit and standby letters of credit incurred in
the ordinary course of business by a Subsidiary;
(x) Indebtedness represented by industrial revenue or development bonds,
provided that the aggregate amount of Indebtedness incurred in reliance upon
this clause (x) or clause (ix) under "Limitation on Indebtedness" shall not
exceed at any one time an aggregate principal amount outstanding of
$25,000,000;
(xi) Capitalized Lease Obligations relating to Property used in the business
of a Subsidiary;
(xii) Indebtedness incurred in respect of performance bonds and performance
and completion Guarantees incurred in the ordinary course of business; and
(xiii) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently (except in
the case of daylight overdrafts) drawn against insufficient funds in the
ordinary course of business, provided that such Indebtedness is extinguished
within five business days of its incurrence.
Limitation on Indebtedness of Non-Borrowing Subsidiaries. The Indenture
provides that the Company shall not permit any Non-Borrowing Subsidiary to
create, incur, assume or guarantee any Indebtedness or issue any preferred or
preference stock, or to engage in any Sale and Leaseback Transaction.
Limitation on Payment Restrictions Affecting Subsidiaries. The Indenture
provides that the Company shall not, and shall not permit any Subsidiary to,
create or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction which encumbrance or restriction by its terms
expressly restricts the ability of any such Subsidiary to (i) pay dividends or
make any other distributions on such Subsidiary's capital stock or pay any
Indebtedness owed to the Company or any Subsidiary, (ii) make any loans or
advances to the Company or any Subsidiary or (iii) transfer any of its Property
to the Company or any Subsidiary, other than, with respect to clauses (ii) and
(iii), encumbrances or restrictions specifically: (a) permitted under the terms
of any instrument or agreement relating to any Indebtedness of the Company or
any Subsidiary existing on the date of the Indenture, including, without
limitation, the Indenture or the Bank Credit Agreement; (b) relating to any
Property acquired by the Company or any of its Subsidiaries after the date of
the Indenture, provided that such encumbrance or restriction relates only to
the Property which is acquired and, in the case of any encumbrance or
restriction that constitutes a Lien, the Company or such Subsidiary would be
permitted to incur the Lien under the covenant limiting Liens; (c) relating to
(x) any industrial revenue or development bonds, (y) any obligation of the
Company or any Subsidiary incurred in the ordinary course of business to pay
the purchase price of Property acquired by the Company or such Subsidiary, or
(z) any lease of Property by the Company or such Subsidiary in the ordinary
course of business, provided that such encumbrance or restriction relates only
to the Property which is the subject of such industrial revenue or development
bond, such Property purchased or such Property leased and any such lease,
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<PAGE>
as the case may be; (d) relating to any Indebtedness of any Subsidiary at the
date of acquisition of such Subsidiary by the Company or any Subsidiary of the
Company, provided that such Indebtedness was not incurred in connection with or
in anticipation of such acquisition, and provided further that the Company
would be permitted to incur any Lien securing such Indebtedness under the
covenant limiting Liens; or (e) under any replacement or refinancing agreements
or instruments referred to in clauses (a), (b), and (c), provided that the
provisions relating to such encumbrance or restriction contained in any such
replacement or refinancing agreement or instrument are no more restrictive than
the provisions relating to such encumbrance or restriction contained in such
original agreement or instrument.
Investment Company Act. The Indenture provides that the Company shall not
become an investment company within the meaning of the Investment Company Act
of 1940.
Mergers and Consolidations
The Company shall not consolidate with or merge into, or transfer, sell or
lease all or substantially all of its Property to, another Person unless (i)
the successor corporation is a United States corporation, (ii) the successor
corporation is bound by all the terms of the Indenture, (iii) immediately after
giving effect to such transaction no Default or Event of Default exists, (iv)
the consolidated net worth (determined in accordance with GAAP) of the
successor corporation is equal to or greater than the consolidated net worth of
the Company immediately prior to such transaction and (v) in the case of any
such consolidation, merger, transfer, sale or lease other than into or to a
wholly-owned Subsidiary of the Company, immediately after and giving effect to
any such consolidation, merger, transfer, sale or lease and any financings or
other transactions in connection therewith the Consolidated Interest Coverage
Ratio of the surviving corporation would be greater than the then applicable
Consolidated Interest Coverage Ratio described under the first paragraph of
"Limitation on Indebtedness" above. Certain mergers may constitute a Change of
Control that would give each Holder the right to require the Company to
repurchase any Senior Note held by such Holder at a purchase price in cash
equal to 101% of its principal amount plus accrued interest. See "Change of
Control" below.
Change of Control
In the event of a Change of Control, the Company will be obligated to make an
offer to purchase all of the then outstanding Senior Notes at a purchase price
in cash equal to 101% of its principal amount plus accrued interest, after the
occurrence of such Change of Control. The Company shall give holders notice of
such right of repurchase not less than 20 nor more than 60 business days prior
to the consummation of a merger, consolidation, transfer, sale or lease that
would constitute a Change of Control and not more than 45 business days
following any other event constituting a Change of Control, mailed by
first-class mail to the holders' last addresses as they appear upon the
register. Holders will have the right to have their Senior Notes repurchased if
such Senior Notes are tendered for repurchase no later than five business days
prior to the applicable repurchase.
Events of Default
Each of the following events are defined in the Indenture as "Events of
Default": (i) the failure by the Company to pay interest on any Senior Note
issued under the Indenture for a period of 30 days after such interest becomes
due and payable; (ii) the failure by the Company to pay the principal of (or
premium, if any, on) any Senior Note issued under the Indenture when such
principal becomes due and payable, whether at the stated maturity or upon
application, redemption or otherwise; (iii) a default in the observance of any
other covenant contained in the Indenture that continues for 30 days after the
Company has been given notice of the default by the Trustee or the holders of
25% in principal amount of the Senior Notes then outstanding; (iv) a default or
defaults on other Indebtedness of the Company or any Subsidiary, which
Indebtedness has an outstanding principal amount of more than $15,000,000
individually or in the aggregate if such Indebtedness has attained final
maturity or if the holders of such Indebtedness have accelerated payment
C-17
<PAGE>
thereof under the terms of the instrument under which such Indebtedness is or
may be outstanding and, in each case, it remains unpaid; (v) one or more
judgments or decrees is entered against the Company or any Subsidiary involving
a liability (not paid or fully covered by insurance) of $5,000,000 or more in
the case of any one such judgment or decree and $10,000,000 or more in the
aggregate for all such judgments and decrees for the Company and all its
Subsidiaries and all such judgments or decrees have not been vacated,
discharged or stayed or bonded pending appeal within 30 days from the entry
thereof; and (vi) events of bankruptcy, insolvency, or reorganization, as
specified in the Indenture, affecting the Company or any Material Subsidiary.
The Indenture provides that the Trustee, within 90 days after the occurrence
of an Event of Default that is continuing, will give notice thereof to the
holders of the Senior Notes issued under the Indenture; provided, however,
that, except in the case of a default in payment of principal of or interest on
the Senior Notes issued under the Indenture, the Trustee may withhold such
notice as long as it in good faith determines that such withholding is in the
interest of the holders of the Senior Notes issued under the Indenture.
In case an Event of Default (other than an Event of Default resulting from
bankruptcy, insolvency, or reorganization of the Company or a Material
Subsidiary) shall have occurred and be continuing, the Trustee or the holders
of at least 25% in principal amount of the Senior Notes issued under the
Indenture, by notice in writing, may declare to be due and payable the
principal amount of the Senior Notes issued under the Indenture, plus accrued
interest, and such amounts shall become due and payable upon the earlier of (i)
five days from the date of such notice, so long as the Event of Default giving
rise to such notice has not been cured or waived and (ii) the acceleration of
the Indebtedness under the Bank Credit Agreement (or any renewal or refinancing
thereof). In case an Event of Default resulting from bankruptcy, insolvency, or
reorganization of the Company or a Material Subsidiary shall occur, such amount
shall ipso facto become immediately due and payable without any declaration or
any act on the part of the Trustee or the holders of the Senior Notes issued
under the Indenture. Such declaration or acceleration by the Trustee or the
Holders may be rescinded and past defaults may be waived (except, unless
theretofore cured, a default in payment of principal of or interest on the
Senior Notes issued under the Indenture) by the holders of a majority in
principal amount of the Senior Notes issued under the Indenture upon conditions
provided in the Indenture. Except to enforce the right to receive payment of
principal or interest when due, no holder of a Senior Note issued under the
Indenture may institute any proceeding with respect to the Indenture or for any
remedy thereunder unless such holder has previously given to the Trustee
written notice of a continuing Event of Default and unless the holders of at
least 25% in principal amount of the Senior Notes issued under the Indenture
have requested the Trustee to pursue remedies in respect of such Event of
Default and have offered the Trustee indemnity satisfactory to the Trustee
against loss, liability, or expense to be thereby incurred and the Trustee has
failed so to act for 60 days after receipt of the same and no contrary
instructions have been received during 20 days. Subject to certain
restrictions, the holders of a majority in principal amount of the Senior Notes
issued under the Indenture are given the right to direct the time, method, and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee. The Trustee, however,
may refuse to follow any direction that conflicts with law or the Indenture,
that is unduly prejudicial to the rights of any holder of a Senior Note issued
thereunder, or that would subject the Trustee to personal liability.
The Company is required to deliver to the Trustee, within 120 days after the
end of each fiscal year, an officers' certificate indicating whether the
Company has complied with the terms of the Indenture and whether an Event of
Default exists.
Satisfaction and Discharge of the Indenture; Defeasance
The Company may terminate its obligations under the Indenture at any time by
delivering all outstanding Senior Notes issued thereunder to the Trustee for
cancellation. The Company, at its option, (i) will be discharged (as defined)
from any and all obligations with respect to the Senior Notes issued under the
Indenture (except for certain obligations of the Company to register the
transfer or exchange of such Senior
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<PAGE>
Notes, replace stolen, lost, or mutilated Senior Notes, maintain paying
agencies, hold moneys for payment in trust) and compensate the Trustee as
provided in Section 6.07 of the Indenture or (ii) need not comply with certain
restrictive covenants in the Indenture (including those described under
"Covenants"), in each case if the Company deposits with the Trustee, in trust,
money or U.S. Government Obligations which, through the payment of interest
thereon and principal thereof in accordance with their terms, will provide
money in an amount sufficient to pay all the principal of and interest on the
Senior Notes on the dates such payments are due in accordance with the terms of
the Senior Notes. To exercise any such option, the Company is required to
deliver to the Trustee (a) an opinion of counsel to the effect that the deposit
and related defeasance would not cause the holders of the Senior Notes to
recognize income, gain or loss for federal income tax purposes and, in the case
of a discharge pursuant to clause (i) above, accompanied by a ruling to such
effect received from or published by the United States Internal Revenue Service
and (b) an officers' certificate and an opinion of counsel to the effect that
all conditions precedent to the defeasance have been complied with.
Reports to Holders of the Senior Notes
So long as the Company is subject to the periodic reporting requirements of
the 1934 Act it will continue to furnish the information required thereby to
the Securities Exchange Commission and to the holders of the Senior Notes. The
Indenture provides that even if the Company is entitled under the 1934 Act not
to furnish such information to the Commission or to the holders of the Senior
Notes, it will nonetheless continue to furnish such information to the
Commission, the Trustee and the holders of the Senior Notes as if it were
subject to such period reporting requirements.
In addition, the Company has agreed that, for as long as any Senior Notes
remain outstanding, it will furnish to holders and to beneficial owners of
Securities and to prospective purchasers of Senior Notes that are designated by
holders, upon their request, the information required to be delivered pursuant
to Rule 144(A)(d)(4) under the Securities Act of 1933, as amended.
No Personal Liability of Shareholders, Officers, Directors, and Employees
No shareholder, officer, director, or employee, as such, past, present, or
future of the Company or any successor corporation shall have any personal
liability in respect of the Company's obligations under the Indenture or the
Senior Notes by reason of his or its status as such shareholder, officer,
director, or employee.
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<PAGE>
Appendix D
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended April 2, 1994
-------------
Commission File Number 33-48282
--------
THE GRAND UNION COMPANY
-----------------------
(Exact name of registrant as specified in its charter)
Delaware 22-1518276
---------------------------------- --------------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
201 Willowbrook Boulevard, Wayne, New Jersey 07470
--------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 201-890-6000
-------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Not Applicable Not Applicable
------------------- -----------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
Not Applicable
- -------------------------------------------------------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
As of July 1, 1994, there were issued and outstanding 801.5 shares of the
Registrant's common stock. The common stock is not traded in a public market.
Documents incorporated by reference: None
----
<PAGE>
THE GRAND UNION COMPANY
PART I
ITEM 1. BUSINESS
GENERAL
Grand Union Holdings Corporation ("Holdings"), a Delaware corporation, and
Grand Union Capital Corporation ("Capital"), a Delaware corporation which is a
wholly owned subsidiary of Holdings, have no operations independent of those of
The Grand Union Company ("Grand Union" or the "Company"), a Delaware corporation
and a wholly owned subsidiary of Capital. Grand Union currently operates 254
supermarkets and food stores under the "Grand Union" name in seven states.
STORE FORMATS
Grand Union's store sizes and formats vary depending upon the demographics
and competitive conditions in each location, as well as the availability of real
estate. Grand Union supermarkets offer a wide selection of national brand and
private label products as well as high-quality produce, meat and general
merchandise. The majority of the Company's sales are generated from stores
which also contain a number of high margin specialty and service areas for such
goods as imported and domestic produce, salads, hot and cold prepared foods,
seafood and fresh-baked goods. Select stores feature in-store kitchens and
pharmacies. Liquor and wine departments are included where permitted by local
law. Grand Union's supermarkets range in size from 14,000 to 64,000 square feet
and newly constructed stores are typically in excess of 40,000 square feet.
MERCHANDISING STRATEGY
Grand Union's current merchandising strategy is premised upon the
following:
VALUE. The Company's strategy is to provide value to the customer by
offering competitive prices, offering a wide variety of advertised and
unadvertised specials, sponsoring special promotions and offering a wide
selection of private label products.
MERCHANDISE ASSORTMENT. Management believes that many consumers prefer
food stores that not only offer the wide variety of food and non-food items
carried by conventional supermarkets, but also sell an expanded assortment of
high-quality food items and produce. Accordingly, Grand Union continues to
upgrade existing departments with new selections and, where appropriate, has
added specialty departments, including full service butcher and seafood shops,
floral departments, delicatessens and bakeries. This merchandising strategy
provides consumers with a wider selection of better and more convenient foods,
while shifting the Company's sales mix toward higher margin products.
EFFICIENCIES OF DISTRIBUTION. Grand Union's distribution system has
contributed to its ability to efficiently pursue its strategy of offering the
consumer a wide assortment of quality products at competitive prices.
Strategically located distribution centers make it possible for Grand Union to
minimize in-store stockroom space, thereby increasing store selling space.
SELECTED DATA
The table below sets forth certain statistical information with respect to
Grand Union retail stores, excluding the stores formerly operated in the
Southern Region, for the periods indicated.
<TABLE>
<CAPTION>
52 Weeks Ended 53 Weeks Ended 52 Weeks Ended
March 28, 1992 April 3, 1993 April 2, 1994
-------------- -------------- --------------
<S> <C> <C> <C>
Number of stores (at end of period) 251 250 254
Total selling square feet (in thousands) 4,213 4,276 4,532
Average gross square feet per store 23,439 23,922 24,966
Average sales per selling square foot per week $11.69 $11.23 $10.76
</TABLE>
1
<PAGE>
SUMMARY OF OPERATIONS
NORTHERN REGION
Grand Union currently operates 142 stores in its Northern Region including
40 stores in Vermont, 96 stores in upstate New York, five stores in New
Hampshire and a single store in Massachusetts. The Northern Region had sales of
approximately $1.1 billion for the 52 weeks ended April 2, 1994. The Company
believes it generally operates in excellent locations, having operated in 85% of
the markets it currently serves in the Northern Region for more than 25 years,
and in many communities for over 50 years.
In Vermont, Grand Union operates 40 stores throughout the state in
virtually every significant community. Grand Union has the preeminent market
share in the state, having more sales than all other chain-store operators
combined. The Company's strong position in Vermont allows it to achieve
significant economies in purchasing, distribution, advertising and field
supervision. Zoning and environmental regulations in the state have long
restricted commercial development (including supermarkets). Accordingly, the
competitive environment in Vermont evolves very slowly. Grand Union's
long-standing presence in Vermont was enhanced through the acquisition in 1990
of certain stores operated by P&C Foods, a division of The Penn Traffic Company
("Penn Traffic"). Grand Union has focused its capital expenditures in Vermont on
improving existing locations and replacing stores where possible. The largest
competitors to Grand Union in Vermont are Golub Corporation ("Price Chopper")
(11 stores), Hannaford Brothers, Inc. ("Hannaford") (six stores) and The Great
Atlantic & Pacific Tea Company, Inc. ("A&P") (three stores).
In upstate New York, Grand Union generally operates in small cities and
rural communities, where the Company estimates it typically has the leading
market share, and in the Albany, New York metropolitan area (the "Capital
District") where, according to Company estimates, it has the second largest
market share with 40 stores. Although generally not as restrictive as Vermont,
commercial development in the upstate New York market place has been and
continues to be constrained by zoning and environmental restrictions,
particularly in areas regulated by the Adirondack Park Commission. In the more
urban Capital District, where Price Chopper has the larger market share and
Hannaford operates nine stores, Grand Union's competitors have opened several
stores in the last two years. Victory Markets, Inc. (Great American) competes
against the Company in a number of communities in the Hudson and Mohawk River
Valleys.
In the Mid-Hudson Valley area of New York (16 stores), the Company
estimates that it has the leading market share. Principal competitors are Big V
Supermarkets Inc. (operating under the ShopRite name), Price Chopper and A&P.
A number of stores in the Northern Region (particularly in the Adirondack
area and Vermont) are in resort areas and generally experience significant
increases in sales in the summer months and in some cases during the winter ski
season.
NEW YORK REGION
Grand Union currently operates 112 stores in its New York Region. The New
York Region generated approximately $1.4 billion of sales for the 52 weeks ended
April 2, 1994. Grand Union's primary New York Region marketing area comprises
the more affluent suburban communities of central and northern New Jersey (45
stores), Westchester, Orange, Rockland, Dutchess and Putnam Counties in New York
(the "Lower Hudson Valley") (29 stores), Long Island (17 stores) and Fairfield
County, Connecticut (15 stores). The Company also has a limited presence in New
York City (four stores) and Pennsylvania (two stores).
Within its primary New York Region marketing areas, the Company generally
operates stores in mature, densely populated markets where it believes its
below-market long-term leases generally provide it with a significant cost
advantage over new supermarkets. These stores serve communities with
demographics particularly well-suited for store formats emphasizing specialty
departments. Accordingly, the sales mix in this region includes a larger
percentage of higher margin perishable department items than in the Northern
Region. In addition, the high population density as well as the geographic
concentration of stores in the region provide substantial opportunities to
achieve additional economies of scale, particularly in advertising and
distribution.
2
<PAGE>
Because the New York Region is a fragmented market with no single food
retailer having a dominant market share, competition is market specific. In New
Jersey, the Company competes primarily against Pathmark Stores, Inc.
("Pathmark"), A&P and various supermarkets supplied by the Wakefern ("ShopRite")
and Twin County ("Foodtown") cooperatives. In the Lower Hudson Valley, the
Company generally competes with A&P, Edwards Supermarkets, Inc. and ShopRite. On
Long Island, the Company's principal competitors are A&P/Waldbaums, Pathmark,
King Kullen Grocery Co., Inc. and Foodtown. Grand Union's main competitors in
Fairfield County, Connecticut are the Stop & Shop Company and A&P.
CAPITAL INVESTMENT
The Company's capital spending is primarily directed toward renovating and
upgrading the existing Grand Union store base and opening replacement stores and
incremental stores in existing marketing areas. Store renovations and
replacements have resulted in an upgrade of the Company's merchandise mix and an
improvement in store profitability with the expansion of specialty departments
offering high quality, higher margin products. Since the recapitalization (the
"Recapitalization") of Holdings and its subsidiaries which occurred on July 22,
1992 (see "Recent History -- The Recapitalization" below), the Company has
increased its rate of capital investment. Capital expenditures, including
capitalized leases, other than real estate leases for the fiscal year ending
April 2, 1994 were approximately $86 million.
DISTRIBUTION, SUPPLY AND MANAGEMENT INFORMATION SYSTEMS
DISTRIBUTION. Management believes that Grand Union's distribution system
enhances its ability to offer consistently fresh and high quality dairy
products, meats, baked goods, produce and frozen foods. Moreover, this system
enables Grand Union to take advantage of cost saving, volume purchase
opportunities.
Grand Union currently operates five distribution centers aggregating
approximately 2.1 million square feet. In addition, Grand Union utilizes a
frozen food distribution facility operated by a third party. Grand Union also
leases space in three additional storage facilities and, from time to time,
utilizes limited space in several other facilities.
The strategic location of the distribution centers makes it possible for
Grand Union to make frequent shipments to stores, which reduces the amount of
in-store stockroom space, thereby limiting nonproductive store inventories.
In September 1993, Grand Union entered into a program to consolidate the
purchasing and distribution of health and beauty care products and general
merchandise with Penn Traffic. Under this program, Grand Union purchases health
and beauty care products for both Grand Union and Penn Traffic, and Penn Traffic
purchases general merchandise for both Penn Traffic and Grand Union. Grand
Union's general merchandise warehouse in Montgomery, New York is used to store
and distribute general merchandise and health and beauty care products to Grand
Union stores and to certain of Penn Traffic's stores and wholesale customers.
Under the arrangement, Penn Traffic owns the inventory of general merchandise
and health and beauty care products located at the Montgomery warehouse and
shares the cost of operating the warehouse in an amount proportionate to Penn
Traffic's usage of the facility. Grand Union expects that this program will
improve the variety of general merchandise products offered to the consumer and
will reduce product procurement costs for general merchandise and health and
beauty care products.
MANAGEMENT INFORMATION SYSTEMS. Financial, distribution, purchasing and
operating system requirements are supported through a central computer system
located in Wayne, New Jersey. Grand Union currently utilizes scanning systems in
142 stores (representing approximately 73% of total sales) and intends to
continue to invest in scanning and other store systems in the future.
SUPPLIERS. Products sold, including private label products, are purchased
through a large group of unaffiliated suppliers. Grand Union is not dependent
upon any single supplier, and its grocery purchases are of a sufficient volume
to qualify for minimum price brackets for most products sold.
COMMISSARY. Grand Union operates a 20,000 square foot commissary located
in Newburgh, New York in which high quality cooked meat products, salads and
soups are prepared for sale in the Company's delicatessen departments.
3
<PAGE>
EMPLOYEES
As of April 2, 1994, Grand Union had approximately 17,000 employees, of
whom approximately 60% were employed on a part-time basis. Approximately 49% of
Grand Union's employees are covered by collective bargaining agreements
negotiated with 13 unions. Approximately 88% of the employees covered by these
collective bargaining agreements are employed in store locations and
approximately 12% are employed in distribution facilities. These contracts
expire at various times through May 1998.
On May 29, 1993, Grand Union settled a labor dispute with United Food and
Commercial Workers, Local 1262, which represents clerks working in 61 Grand
Union stores located in northern New Jersey and in Orange County, New York, and
Rockland County, New York. The expiration of Grand Union's contract on April 24,
1993, after an extension from the contract's original expiration date on April
10, 1993, resulted in work stoppages at some, and eventually all, of the 61
Grand Union stores involved during the period from May 7, 1993 through May 29,
1993, as well as work stoppages at 251 Foodtown, Pathmark and ShopRite stores
whose employees are covered by identical collective bargaining agreements. On
June 17, 1993, a new four year agreement with Local 1262 was ratified by the
approximately 3,600 members of Local 1262 employed by Grand Union and by the
approximately 23,000 members of Local 1262 employed by Foodtown, Pathmark and
ShopRite.
TRADE NAMES, SERVICE MARKS AND TRADEMARKS
Grand Union uses a variety of trade names, service marks and trademarks.
Except for Grand Union-R-, Grand Union does not believe any of such trade names,
service marks or trademarks is material to its business.
COMPETITION
The food retailing business is highly competitive. Grand Union competes
with numerous national, regional and local chains, convenience stores, stores
owned and operated and otherwise affiliated with large food wholesalers,
unaffiliated independent food stores, warehouse clubs, discount drugstore chains
and discount general merchandise chains. Some of Grand Union's competitors have
greater financial resources than the Company and could use those resources to
take steps which could adversely affect the Company's competitive position.
RECENT HISTORY
OCTOBER 1993 ACQUISITION
On October 18, 1993, Grand Union acquired five supermarket locations on
Long Island from Foodarama Supermarkets, Inc. ("Foodarama") for consideration of
approximately $16 million, plus the value of the inventory at the stores
(approximately $2 million). The total gross square footage of these five stores
is approximately 160,000 square feet. The acquisition was financed through the
application of a portion of the proceeds of the sale to institutional investors
of $50 million aggregate principal amount of 12 1/4% Senior Subordinated Notes
due 2002, Series A (the "Series A Notes") on October 18, 1993. Grand Union
plans to renovate and enlarge certain of the acquired store locations.
SALE OF THE SOUTHERN REGION
On March 29, 1993, Grand Union sold 48 of its 51 Southern Region stores to
A&P. The three Southern Region stores not sold to A&P were closed, and have
been subleased. Grand Union received net cash proceeds of approximately $25
million and was relieved of approximately $4.5 million of capital lease
obligations.
THE RECAPITALIZATION
On July 22, 1992, Holdings, Capital, a newly formed corporation, and Grand
Union completed the Recapitalization. In connection with the Recapitalization,
Grand Union entered into a new bank credit agreement (as amended from time to
time, the "Bank Credit Agreement") providing for a $210 million term loan
facility (the "Term Loan") and a $100 million revolving credit facility (the
"Revolving Credit Facility"). Additionally, Grand Union issued $350 million
principal amount of 11 1/4% Senior Notes due 2000 ( the "11 1/4% Senior Notes")
and $500 million principal amount of 12 1/4% Senior Subordinated Notes due 2002
(the "12 1/4% Senior Subordinated Notes"). The Recapitalization also included
the sale to institutional investors of $343 million principal amount of Capital
15% Series A Senior Zero Coupon Notes due 2004 (the "Senior Zero Coupon Notes"),
$745 million principal amount of Capital 16.5% Series A Senior Subordinated Zero
Coupon Notes due 2007 (the "Senior Subordinated Zero Coupon Notes") and warrants
to purchase at a nominal price shares representing approximately 19.9% of the
common stock of Holdings on a fully diluted basis for aggregate gross proceeds
of approximately $200 million. The
4
<PAGE>
Recapitalization also included the sale to institutional investors of
approximately 28.4% of the common stock of Holdings on a fully diluted basis for
approximately $25 million. The proceeds were used to retire substantially all of
the debt of Holdings, GU Acquisition Corporation ("GUAC"), a wholly owned
subsidiary of Holdings, and Grand Union as well as to repurchase the shares and
an option to purchase shares owned by Salomon Brothers Holding Company Inc
("SBHC"), certain warrants held by the parties to the Company's bank credit
agreements existing prior to the Recapitalization, and approximately 3.4% of
the common stock of Holdings held by Grand Union management.
At the time of the Recapitalization, GUAC and its wholly-owned subsidiary
Cavenham Holdings Inc., the former parent of Grand Union, were merged (the
"Merger") into Grand Union. After the consummation of the Merger, Grand Union
became a wholly owned subsidiary of Capital.
As of April 2, 1994, the ownership of Holdings on a fully diluted basis was
as follows:
GAC Holdings, Limited Partnership ("GAC Holdings")
(an affiliate of Miller Tabak Hirsch + Co., a
New York limited partnership ("MTH")) and its affiliates 38.9%
Grand Union management 12.7
Various institutional investors (including Warrants
to purchase at a nominal price approximately
19.9% of the common stock of Holdings on a fully
diluted basis) 48.4
-----
100.0%
-----
-----
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
Grand Union has no significant foreign operations or export sales.
ITEM 2. PROPERTIES
Grand Union conducts its operations primarily in leased stores,
distribution centers and offices. The following table indicates the location
and number of stores as of April 2, 1994.
Number of
Locations Stores
--------- ---------
Northern:
Vermont 40
New York 96
New Hampshire 5
Massachusetts 1
New York:
New York 50
New Jersey 45
Connecticut 15
Pennsylvania 2
---
Total 254
---
---
As of April 2, 1994, Grand Union owns 15 and leases 239 of its store sites
pursuant to commercial leases. Management believes that none of such leases is
individually material to Grand Union. Most of these leases contain several
renewal options. Twenty store leases which do not contain renewal options will
expire over the next five years and management anticipates that it will be able
to renegotiate favorable lease terms for most of these locations, if so desired.
Grand Union currently operates five distribution centers which are leased
and a commissary, which is housed in a building owned by Grand Union on a
ground-leased site in Newburgh, New York. Grand Union owns a 66,160 square foot
site which is part of its Carlstadt, New Jersey Grocery Distribution Center and
a 101,000 square foot facility in Waverly, New York. Grand Union's leased
distribution centers each have approximately 30 years or more
5
<PAGE>
remaining on the respective leases including options. See Note 9 to the
Consolidated Financial Statements, Property Leases, for information on leases
and annual rents.
ITEM 3. LEGAL PROCEEDINGS
At the time of the acquisition of Grand Union by Holdings in July 1989,
Grand Union and P&C Foods (then a subsidiary and currently a division of Penn
Traffic, which is under common control with Grand Union) operated stores in some
of the same geographic areas in Vermont and upstate New York. In order to
satisfy the concerns of federal and state antitrust authorities arising
therefrom in connection with the acquisition of Grand Union by Holdings, prior
to consummation thereof (i) Grand Union, GUAC, MTH Holdings, Inc., a New York
corporation ("MTH Holdings") and an affiliate of Miller Tabak Hirsch + Co., a
New York limited partnership, and P&C Foods entered into an Assurance Pursuant
to 9 Vermont Statutes Annotated Section 2459 and an Agreement to Hold Separate
with the Attorney General of the State of Vermont and (ii) MTH Holdings and GUAC
entered into an Agreement Containing Consent Order (the "Order") with the Bureau
of Competition of the Federal Trade Commission ("FTC") and an Agreement to Hold
Separate with Salomon Inc and the FTC (collectively, the "FTC Agreements").
The FTC Agreements required the divestiture by MTH Holdings and/or Grand
Union (including in each case their respective subsidiaries and affiliates) of
sixteen stores located in Vermont and upstate New York. Such divestitures were
completed on July 30, 1990. Thirteen of the sixteen stores divested were P&C
Foods stores and three of the sixteen stores divested were Grand Union stores.
In a related transaction, Grand Union and P&C Foods entered into an operating
agreement (the "Operating Agreement"), pursuant to which Grand Union acquired
the right to operate P&C Foods' thirteen remaining stores in New England under
the Grand Union name until July 2000, for an average annual rent of
approximately $10.7 million with an option to extend the term of such operation
for an additional five years. Grand Union paid P&C Foods $7.5 million for an
option to purchase the stores at an amount defined in the Operating Agreement.
Pursuant to the terms of the Operating Agreement, the Recapitalization triggered
a $15 million prepayment obligation to P&C Foods.
The FTC Agreements also provide, among other things, that MTH Holdings and
Grand Union (including in each case their respective subsidiaries and
affiliates) shall not acquire, for a period of ten years, any retail grocery
stores in Vermont and certain specified counties in New York without the prior
approval of the FTC and (in the case of stores in Vermont) the Attorney General
of the State of Vermont.
Soil and ground-water contamination has been detected at a shopping center
owned by Grand Union which is located in Connecticut. The Company is
investigating whether such contamination was caused by improper disposal of
perchloroethylene wastes by a dry cleaner previously operating at this location
or by an off-site source. Grand Union has undertaken, under approval by the
Connecticut Department of Environmental Protection, a proposal for a remedial
investigation designed to identify the sources of such soil and ground-water
contamination and to determine the length, depth and breadth of the
contamination on and off-site. Sampling analyses for the ground-water at the
shopping center and for drinking water in private residences located in the
immediately surrounding area confirm that the source of the on-site
contamination, in part, is an off-site shopping center and a gasoline station
located nearby. In May 1993, a Remedial Action and Investigation Report was
submitted to the Connecticut Department of Environmental Protection on May 21,
1993. The Company is awaiting a response from the Connecticut Department of
Environmental Protection.
The Company's potential responsibility does not arise from any aspect of
its operation of a supermarket at the shopping center but from the actions of a
former tenant. Any contamination caused on-site by a source located off-site
would be the responsibility of another party. The Company believes that the
current intention of the Connecticut Department of Environmental Protection is
to seek reimbursement of past costs and clean up from some or all of these other
parties. The Company is unable to determine the amount of its potential
liability arising from the on-site contamination, but does not believe, based
upon the results of investigations made to date, that the amount of potential
liability is likely to be materially adverse to the Company's financial
condition. Management presently estimates, based upon investigations made by the
Company's environmental consultant to date, that such liability should not
exceed $2 million. Investigations are continuing, and there can be no assurance
that the amount of such liability will not exceed $2 million.
6
<PAGE>
Grand Union is involved in various legal proceedings arising out of its
business, none of which is expected to have a material effect upon its results
of operations or financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth
quarter of the year covered by this Report on Form 10-K.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS
MATTERS
MARKET INFORMATION
The common stock of Grand Union is not publicly traded. See Item 12.
Security Ownership of Certain Beneficial Owners and Management.
HOLDERS
The common stock of Grand Union is wholly owned by Capital.
DIVIDENDS
There have been no cash dividends declared or paid during the three fiscal
years ended April 2, 1994. The payment of dividends to holders of common stock
of the Registrant is restricted by various debt agreements of Holdings and its
subsidiaries.
7
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The data for the 16 weeks ended July 22, 1989 reflects the historical basis
of GUAC prior to its acquisition by Holdings (predecessor basis). The data as of
March 31, 1990 and for the 36 weeks then ended, as of March 30, 1991 and March
28, 1992 and for the 52 week periods then ended, as of April 3, 1993 and for the
53 weeks then ended and as of April 2, 1994 and for the 52 weeks then ended are
derived from the consolidated financial statements of Holdings. This
information should be read in conjunction with the historical financial
statements of Holdings, including the notes thereto, included elsewhere herein.
<TABLE>
<CAPTION>
GUAC
(predecessor) Holdings (successor)
------------- --------------------
16 Weeks 36 Weeks 52 Weeks 52 Weeks 53 Weeks 52 Weeks
Ended Ended Ended Ended Ended Ended
July 22, March 31, March 30, March 28, April 3, April 2,
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ----
(dollars in millions except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Sales $903.0 $2,013.2 $2,996.6 $2,968.5 $2,834.0 $2,477.3
Gross profit 224.4 514.7 784.5 818.1 801.5 711.0
Operating and administrative expense 176.7 397.2 603.6 619.9 606.2 531.8
Depreciation and amortization 13.5 52.0 76.9 78.7 80.6 78.6
Charge relating to early retirement program -- -- -- -- -- 4.5
Loss on disposal of the Southern Region -- -- -- -- 198.0 --
Merger expense 13.9 4.1 -- -- -- --
Store closure expense 13.9 -- -- -- -- --
Recapitalization expense -- -- -- -- 3.5 --
Interest expense:
Debt 28.3 95.0 145.6 141.7 151.9 164.0
Capital lease obligations 2.8 7.1 11.0 12.3 13.2 15.0
Amortization of deferred financing fees 0.5 2.9 7.4 18.0 9.4 4.8
Loss before income taxes, extraordinary
charges and cumulative effect of accounting
change 25.3 43.6 60.0 52.5 261.2 87.6
Extraordinary charges -- -- -- -- 47.7 --
Cumulative effect of accounting change -- -- -- -- -- 30.3
Net loss 16.7 37.1 71.0 65.1 313.4 118.0
Net loss per share applicable to common stock -- 595.53 1,100.49 1,038.79 4,359.45 1,780.06
Ratio of earnings to fixed charges (1) -- -- -- -- -- --
Deficiency in earnings available to cover fixed
charges 25.3 43.6 60.0 52.5 261.2 87.6
BALANCE SHEET DATA:
Total assets (2) $1,566.5 $1,569.6 $1,536.8 $1,418.2 $1,394.2
Total debt and capital lease obligations (2) 1,180.0 1,223.8 1,251.1 1,402.5 1,532.2
Redeemable stock (2) 106.4 117.0 128.9 139.8 154.7
Nonredeemable stock and stockholders' deficit (2) 30.1 112.6 190.8 510.3 644.8
OPERATING AND OTHER DATA:
EBITDA (3) $49.6 $120.4 $185.8 $196.3 $196.7 $180.1
EBITDA as a percentage of sales 5.5% 6.0% 6.2% 6.6% 6.9% 7.3%
Capital expenditures(4) $15.7 $37.3 $34.3 $34.6 $66.2 $86.2
LIFO provision 1.9 2.8 4.9 (1.9) 1.4 0.9
Number of stores at the end of the year N/A 301 307 304 250 254
<FN>
(1) The ratio of earnings to fixed charges is computed by dividing (i) earnings
before income taxes, extraordinary charges, the cumulative effect of
accounting change and fixed charges by (ii) fixed charges. Fixed charges
consist of total interest expense plus the estimated interest component of
operating leases. No ratio is indicated where the ratio is less than one.
(2) Balance sheet data is not applicable at this date.
(3) Earnings before interest expense, depreciation, amortization, LIFO
provision, charge relating to early retirement program, store closure
expense, merger expense, recapitalization expense, loss on disposal of the
Southern Region, extraordinary charges, cumulative effect of accounting
change and income taxes.
(4) Includes capitalized leases other than real estate capitalized leases.
</TABLE>
8
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth certain statement of operations data.
<TABLE>
<CAPTION>
Pro Forma
52 Weeks 53 Weeks 53 Weeks 52 Weeks
Ended Ended Ended Ended
March 28, April 3, April 3, April 2,
1992 1993 1993 (a) 1994
---- ---- -------- ----
(dollars in millions)
<S> <C> <C> <C> <C>
Sales $2,968.5 $2,834.0 $2,562.8 $2,477.3
Gross profit 818.1 801.5 730.1 711.0
Operating and administrative expense 619.9 606.2 542.1 531.8
Depreciation and amortization 78.7 80.6 71.7 78.6
Charge relating to early retirement program -- -- -- 4.5
Loss on disposal of the Southern Region -- 198.0 -- --
Recapitalization expense -- 3.5 3.5 --
Interest expense 172.0 174.5 173.8 183.8
Income tax provision 12.5 4.5 4.5 --
Extraordinary charge -- 47.7 47.7 --
Cumulative effect of accounting change -- -- -- 30.3
Net loss 65.1 313.4 113.1 118.0
EBITDA 196.3 196.7 189.5 180.1
LIFO provision (income) (1.9) 1.4 1.4 .9
Sales percentage increase (decrease):
Including Southern Region in prior year (0.9)% (4.5)% N/A (12.6)%
Excluding Southern Region in prior year N/A N/A N/A (3.3)
Gross profit as a percentage of sales 27.6 28.3 28.5% 28.7
Operating and administrative expense as a percentage of sales 20.9 21.4 21.2 21.5
EBITDA as a percentage of sales 6.6 6.9 7.4 7.3
<FN>
(a) Pro Forma without the Southern Region.
</TABLE>
Comparison of results of operations for the 52 weeks ended April 2, 1994
("Fiscal 1994"), the 53 weeks ended April 3, 1993 ("Fiscal 1993") and the 52
weeks ended March 28, 1992 ("Fiscal 1992") are impacted by the extra week in
Fiscal 1993 and the inclusion of the operations of the Company's Southern Region
(sold on March 29, 1993) for 40 weeks in Fiscal 1993 and 52 weeks in Fiscal
1992. The analysis and discussion of Fiscal 1994 as compared to Fiscal 1993
presented below compares Fiscal 1994 operations with the pro forma operations
for Fiscal 1993, which has been prepared excluding the Southern Region. The
analysis and discussion of Fiscal 1993 as compared to Fiscal 1992 presented
below compares actual results for Fiscal 1993 (which includes the Southern
Region for 40 weeks) to Fiscal 1992 (which includes the Southern Region for 52
weeks).
Sales for Fiscal 1994 decreased $85.5 million or 3.3% as compared to Fiscal
1993 and decreased 1.6% after adjusting for the extra week in Fiscal 1993. The
sales decrease for Fiscal 1994 was attributable to continued unfavorable
economic conditions, particularly in the Northern Region, new competitive store
openings in the mid-Hudson Valley and Capital District areas of the Northern
Region and low food price inflation, partially offset by the favorable impact of
the acquisition of five supermarkets on Long Island (see Liquidity and Capital
Resources) and the Company's expanded capital expenditure program which began
after the recapitalization of Holdings in July 1992. Additionally, sales for
Fiscal 1994 were impacted by a 22 day work stoppage, which ultimately affected
sales in 61 Grand Union stores located in northern New Jersey and in Orange and
Rockland Counties, New York.
9
<PAGE>
Same store sales (sales of stores which were operated during the comparable
periods of the two fiscal years), influenced by the same factors mentioned
above, decreased 3.0% during Fiscal 1994 after adjusting for the 53rd week in
Fiscal 1993. Beginning in Fiscal 1994, the Company has revised its method of
calculating same store sales to include replacement stores. This method is used
by many supermarket chains for comparing relative sales performance. Same store
sales, excluding replacement stores and after adjusting for the 53rd week in
Fiscal 1993, decreased 4.0% during Fiscal 1994. Same store sales for the first,
second and third quarters of Fiscal 1994 were previously reported as decreases
of 5.6%, 4.2% and 3.8%, respectively. Including replacement stores, same store
sales decreased 4.8%, 3.3% and 2.7%, respectively. During Fiscal 1994, the
Company opened nine new stores (including the five acquired stores on Long
Island) and five replacement stores, enlarged or renovated 23 stores and closed
10 stores (including replaced stores).
Total selling square footage increased from 4.276 million as of April 3,
1993 to 4.532 million as of April 2, 1994 as a result of the Company's expanded
capital expenditure program and the acquisition of the five Long Island stores.
Average sales per selling square foot per week was $10.76 during Fiscal 1994 as
compared to $11.23 during Fiscal 1993. The decrease is partially attributable
to the same factors discussed above. Additionally, new and enlarged stores
include more specialty departments and devote a greater percentage of selling
space to general merchandise products, each of which typically produces lower
sales per square foot.
Sales for Fiscal 1993 decreased $134.5 million or 4.5% compared to Fiscal
1992. During Fiscal 1993 sales performance was affected by continued unfavorable
economic conditions, low food price inflation, the adverse summer weather
conditions experienced in the northeastern resort areas, the announcement made
in June 1992 that the Company was seeking offers to purchase its Southern Region
stores and the exclusion of the sales and operating results of the Southern
Region for the fourth quarter of Fiscal 1993. If the sales of the Southern
Region had also been excluded from the fourth quarter of Fiscal 1992, total
sales for Fiscal 1993 would have decreased 1.7% as compared to Fiscal 1992.
Same store sales (including replacement stores) for Fiscal 1993, excluding the
Southern Region, decreased 2.6% after adjusting for the 53rd week in Fiscal
1993, as compared to Fiscal 1992. During Fiscal 1993, the Company opened two new
and two replacement stores, enlarged or renovated 12 stores, closed seven stores
(including replaced stores) and sold or subleased 51 stores in connection with
the disposal of the Southern Region.
Total selling square footage in the Company's ongoing operations (not
including the 51 Southern Region stores) increased from 4.213 million as of
March 28, 1992 to 4.276 million as of April 3, 1993 as a result of the Company's
capital expenditure program in which two new and two replacement stores were
opened, 12 stores were enlarged or renovated and seven stores were closed.
Average sales per selling square foot per week was $11.23 during Fiscal 1993
compared to $11.69 during Fiscal 1992. This decrease is attributable to the
same factors that affected total sales in the ongoing operations: continued
unfavorable economic conditions, low food price inflation and the adverse summer
weather conditions experienced in the northeastern resort areas. Additionally,
new and enlarged stores include more service departments and devote a greater
percentage of selling space to general merchandise products, each of which
typically produces lower sales per square foot.
The increase in gross profit, as a percentage of sales, for Fiscal 1994
resulted from reduced grocery product procurement costs and a greater proportion
of higher margin produce and general merchandise sales, partially offset by
lower health and beauty care pricing for the entire year. As discussed in
Note 15 to the financial statements included elsewhere herein, gross profit was
reduced by $4.5 million in Fiscal 1994 due to the effect of promotional
allowance adjustments.
The increase in gross profit in Fiscal 1993, as a percentage of sales,
resulted primarily from increased promotional allowance income and a greater
proportion of higher margin produce and general merchandise sales, partially
offset by a reduction in health and beauty care pricing in certain trade areas
and a LIFO charge in Fiscal 1993 compared to a credit in Fiscal 1992.
The increase in operating and administrative expenses, as a percentage of
sales, in Fiscal 1994 resulted primarily from increases, as a percentage of
sales, in store labor and fringe benefits, occupancy expense and utilities
expense principally resulting from the decline in sales. In addition, the
reduced sales which resulted from the work stoppage which occurred in May 1993
had a negative impact on operating and administrative expense
10
<PAGE>
as a percentage of sales. The increase in operating and administrative expense
for Fiscal 1994 was partially offset by a $3.8 million credit to operating and
administrative expense resulting from a reduction of the Company's self
insurance reserves.
The increase in operating and administrative expense, as a percentage of
sales, in Fiscal 1993 resulted primarily from increases, as a percentage of
sales, in store labor and fringe benefits, store advertising and promotion and
store occupancy costs.
Depreciation and amortization was $78.6 million for the 52 weeks ended
April 2, 1994 compared to $71.7 million for the 53 weeks ended April 3, 1993.
The increase was attributable to the Company's expanded capital expenditure
program which began after the Recapitalization in July 1992.
During Fiscal 1994, the Company incurred a $4.5 million charge relating to
an early retirement plan offered to certain employees.
During Fiscal 1993, the Company recognized a loss of $198 million relating
to the disposal of the Southern Region. The loss is comprised of 1) write-off of
goodwill and beneficial leases of $106.4 million, 2) difference between proceeds
received and the book value of tangible assets of $37.3 million, 3) reserve for
remaining Southern Region real estate of $26.9 million, 4) employee termination
expenses of $9.8 million, 5) operating loss of the Southern Region subsequent to
the date the decision was made to sell the region of $7.0 million and 6) other
miscellaneous items of $10.6 million.
Interest expense increased $10.0 million in Fiscal 1994 and $2.5 million in
Fiscal 1993. The Fiscal 1994 increase was primarily due to the increased level
of debt outstanding, partially offset by the decrease in amortization of loan
placement fees. The Fiscal 1993 increase was primarily due to the extra week
included in Fiscal 1993 and the increased level of debt incurred as a result of
the Recapitalization in July 1992 (see "Liquidity and Capital Resources"),
partially offset by a decrease in the Company's average borrowing rate and the
decrease in amortization of loan placement fees.
There was no income tax provision for Fiscal 1994 as a result of the
Recapitalization. The income tax provision for Fiscal 1993 represents state
income taxes. The Company adopted Statement of Financial Accounting Standards
No. 109, "Accounting For Income Taxes" ("FAS No. 109"), during Fiscal 1993. The
adoption of FAS No. 109 had no effect on the Consolidated Statement of
Operations.
During Fiscal 1994, the Company recorded a $30.3 million charge as the
cumulative effect of an accounting change relating to the adoption of Statement
of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions". This charge represents the
portion of future retiree benefit costs related to service already rendered by
both active and retired employees up to the date of adoption.
During Fiscal 1993, Holdings recorded a $3.5 million charge relating to
expenses incurred in connection with the Recapitalization and extraordinary
charges totaling $47.7 million relating to the early retirement of debt.
EBITDA was $180.1 million or 7.3% of sales for the 52 weeks ended April 2,
1994, compared to $189.5 million or 7.4% of sales for the 53 weeks ended
April 3, 1993. The Company estimates that the 22 day work stoppage in May 1993
had the effect of reducing Fiscal 1994 EBITDA by approximately $8.0 million as a
result of lost sales, product losses and other costs associated with the work
stoppage.
In general, the Company has not experienced significant inflationary cost
increases during the periods covered by this report.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Resources used to finance significant expenditures for the three fiscal
years ended April 2, 1994 are reflected in the following table:
<TABLE>
<CAPTION>
52 Weeks 53 Weeks 52 Weeks
Ended Ended Ended
March 28, April 3, April 2,
1992 1993 1994
--------- -------- --------
(in millions)
<S> <C> <C> <C>
Resources used:
Capital expenditures $29.3 $58.1 $81.0
Debt repayment 66.5 1,358.4 8.7
Loan placement fees 5.3 63.6 1.8
Purchase of redeemable Class A common stock -- -- .2
Premiums on debt repayment -- 24.1 --
Prepayment under P&C Foods operating agreement -- 15.0 --
------ -------- -----
$101.1 $1,519.2 $91.7
------ -------- -----
------ -------- -----
Financed by:
Debt incurred $15.6 $1,443.4 $77.7
Operating activities, including cash and temporary cash investments 80.0 31.2 13.4
Property disposals 4.8 1.4 .6
Proceeds relating to the sale of the fixed assets of the Southern Region -- 25.0 --
Refunded insurance deposits 0.7 11.6 --
Capital contribution -- 5.0 --
Proceeds from issuance of warrants -- 1.2 --
Proceeds from the issuance of common stock -- 0.4 --
------ -------- -----
$101.1 $1,519.2 $91.7
------ -------- -----
------ -------- -----
</TABLE>
During Fiscal 1994, the cash requirements listed above were principally
obtained from borrowings and from cash provided by operating activities. The
borrowings included proceeds from the sale of $50 million principal amount of
Series A Notes and $25 million borrowed under the Revolving Credit Facility.
Debt repayment for Fiscal 1994 and Fiscal 1993, other than the debt refinanced
as part of the Recapitalization, consisted of scheduled repayments of capital
leases and various mortgages.
During Fiscal 1993, Holdings completed a Recapitalization, as discussed
below, which included the refinancing of substantially all of its debt and the
purchase of certain common stock and warrants to purchase common stock. As a
result of the Recapitalization, a prepayment of rent under the P&C Foods
Operating Agreement was required and certain cash insurance deposits were
refunded. Cash from operating activities during Fiscal 1993 compared to Fiscal
1992 decreased primarily due to the increase in cash interest expense during
Fiscal 1993 and an increase in net working capital investment for the Company's
ongoing operations.
In connection with the Recapitalization completed on July 22, 1992, Grand
Union entered into a new Bank Credit Agreement providing for a $210 million Term
Loan consisting of the A Term Loan and B Term Loan and a $100 million Revolving
Credit Facility. Additionally, Grand Union issued $350 million of 11 1/4%
Senior Notes and $500 million of 12 1/4% Senior Subordinated Notes. The
Recapitalization also included the sale to institutional investors of $343
million principal amount of Senior Zero Coupon Notes, $745 million principal
amount of Senior Subordinated Zero Coupon Notes and warrants to purchase at a
nominal price shares representing approximately 19.9% of the common stock of
Holdings on a fully diluted basis for aggregate gross proceeds of approximately
$200 million. The Recapitalization also included the sale to institutional
investors of approximately 28.4% of the common stock of Holdings on a fully
diluted basis for approximately $25 million. The proceeds were used to retire
substantially all of the debt of Holdings, GUAC and Grand Union as well as to
repurchase the shares and an option to purchase shares owned by SBHC, certain
warrants held by the parties to the Company's bank credit agreements existing
prior to the Recapitalization, and approximately 3.4% of the common stock of
Holdings held by Grand Union management.
12
<PAGE>
On March 29, 1993, Grand Union sold 48 of its 51 Southern Region stores to
A&P. The three Southern Region stores not sold to A&P were closed and
subsequently subleased. Grand Union received net cash proceeds of approximately
$25 million and was relieved of approximately $4.5 million of capital lease
obligations. The Company recognized a loss of $198 million on the disposal of
the Southern Region.
On January 28, 1993, Grand Union sold $175 million principal amount of 11
3/8% Senior Notes due 2000 (the "11 3/8% Senior Notes") in a private placement.
Net proceeds of the sale of the 11 3/8% Senior Notes were used to repay $142
million of indebtedness under the Term Loan and the remainder was used to repay
indebtedness under the Revolving Credit Facility. An additional $20.9 million
of the Term Loan was repaid from the proceeds of the sale of the Southern Region
on March 29, 1993. All of such repaid indebtedness under the Term Loan and
under the Revolving Credit Facility had been incurred in connection with the
Recapitalization.
At April 2, 1994, there was $25.0 million of borrowings outstanding under
the Company's $100 million revolving credit facility and $32.4 million was
available for additional borrowings or letters of credit. Maturities of long-
term debt during each of the next five fiscal years are approximately $.9
million, $1.0 million, $1.1 million, $45.5 million and $217.9 million,
respectively.
In May 1993, Grand Union experienced a work stoppage by United Food and
Commercial Workers, Local 1262, which ultimately affected 61 Grand Union stores
located in northern New Jersey and in Orange and Rockland Counties, New York.
The Company estimates that its Fiscal 1994 EBITDA was reduced by approximately
$8 million as a result of the work stoppage. On June 28, 1993, the Company and
the banks party to the bank credit agreement entered into an amendment which
provided that certain financial covenants for periods through April 2, 1994 were
calculated excluding the impact of costs, expenses and lost revenue of up to $8
million resulting from the May 1993 work stoppage. After giving effect to this
amendment, the Company was in compliance with the terms and restrictive
covenants of its debt obligations for Fiscal 1994.
On October 18, 1993, Grand Union acquired five supermarket locations on
Long Island from Foodarama for consideration of approximately $16.1 million,
plus the value of the inventory at the stores (approximately $2 million). The
total gross square footage of these five stores is approximately 160,000 square
feet. The acquisition was financed through the application of a portion of the
proceeds of the sale to institutional investors of the Series A Notes on October
18, 1993. Grand Union plans to renovate and enlarge certain of the acquired
store locations.
During Fiscal 1994, the Company opened nine new stores (including the five
acquired stores on Long Island) and five replacement stores, and completed the
remodeling of 23 stores. Capital expenditures for Fiscal 1994, including
capitalized leases other than real estate capitalized leases, were approximately
$86 million (including expenditures related to the acquisition). Capital
expenditures, including capitalized leases other than real estate capitalized
leases, for the year ending April 1, 1995 are expected to be approximately $70
million. Capital expenditures will be principally for new stores, replacement
stores, remodeled stores and expansions. The Company plans to finance capital
expenditures and scheduled debt repayments primarily through cash provided by
operations. The Company will finance a limited amount of capital expenditures
through purchase money mortgages and equipment leases.
GOODWILL
Management periodically reassesses the appropriateness of both the carrying
value and remaining life of goodwill, principally based on forecasts of
operating cash flow less significant anticipated cash requirements such as
capital expenditures and debt repayments. Additionally, the Company considers
other factors such as its anticipated ability to access capital markets in the
future. The recoverability of goodwill is at risk to the extent the Company is
unable to achieve its forecast assumptions regarding sales growth and operating
cash flow, or to the extent that the Company is unable to continue to access
capital markets. Management believes, at this time, that the goodwill carrying
value and useful life continue to be appropriate.
IMPACT OF NEW ACCOUNTING STANDARDS
In November 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits" ("FAS No. 112"). This new statement is effective for
fiscal years beginning after December 15, 1993 and requires an accrual for
certain benefits paid to
13
<PAGE>
former or inactive employees after employment but before retirement. The
Company does not believe that the adoption of FAS No. 112 will have a material
impact on the Company's results of operations or financial position.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS:
Report of Independent Accountants F-1
Consolidated Statement of Operations for the 52 weeks
ended March 28, 1992, the 53 weeks ended April 3, 1993
and the 52 weeks ended April 2, 1994 F-2
Consolidated Balance Sheet at April 3, 1993 and April 2, 1994 F-3
Consolidated Statement of Cash Flows for the 52 weeks
ended March 28, 1992, the 53 weeks ended April 3, 1993
and the 52 weeks ended April 2, 1994 F-4
Notes to Consolidated Financial Statements F-5
FINANCIAL STATEMENT SCHEDULES:
For the three years ended April 2, 1994
Schedule II - Amounts Receivable From Related Parties and
Underwriters, Promoters and Employees Other Than Related Parties F-23
Schedule III - Condensed Financial Information of Registrant F-24
Schedule IV - Indebtedness to Related Parties - Noncurrent F-27
Schedule V - Property, Plant & Equipment F-28
Schedule VI - Accumulated Depreciation, Depletion & Amortization
of Property, Plant & Equipment F-29
All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements or notes
thereto.
The financial statements and related notes of Grand Union have not been
separately presented herein since such financial statements reflect the accounts
of Holdings pushed down to the accounts of Grand Union, and consequently are
substantially identical to the financial statements of Holdings.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS AND EXECUTIVE OFFICERS:
The names, ages and present principal occupations of the directors and
executive officers of Grand Union are as set forth below.
NAME AGE POSITIONS
---- --- ---------
Gary D. Hirsch 44 Director and Chairman
Joseph J. McCaig 49 Director, President and Chief Executive
Officer
William A. Louttit 48 Director, Executive Vice President and
Chief Operating Officer
Robert Terrence Galvin 51 Director, Senior Vice President, Chief
Financial Officer, Secretary
Darrell W. Stine 56 Senior Vice President - New York Region
Martin A. Fox 41 Director, Vice President and Assistant
Secretary
Charles J. Barrett 54 Senior Vice President - Personnel
14
<PAGE>
MR. HIRSCH has been Chairman and a Director of Holdings since July 1989 and
was President and Treasurer of Holdings from July 1989 until May 1993. Mr.
Hirsch became Chairman and a Director of Capital in May 1992, was President of
Capital from May 1992 until May 1993 and Treasurer of Capital from July 1992
until May 1993. Mr. Hirsch became Chairman and a Director of Grand Union in July
1992. Mr. Hirsch has been a general partner of the managing partner of MTH
(broker-dealer) since March 1982 and Managing Director of MTH Holdings since
November 1983. Mr. Hirsch was elected a Director and Chairman of Penn Traffic in
1987.
MR. MCCAIG became Chief Executive Officer of Grand Union in July 1989 and
was appointed President, Chief Operating Officer and a Director of Grand Union
prior to 1983. Mr. McCaig has been employed by Grand Union for 30 years. Mr.
McCaig became a Director of Holdings in July 1989, a Director of Capital in July
1992, and a Director of Penn Traffic in September 1992. Mr. McCaig became
President of Holdings and Capital in May 1993.
MR. LOUTTIT has been Executive Vice President and Chief Operating Officer
of Grand Union since 1989 and has been a Director since 1981. He joined Grand
Union in 1964, serving in a variety of positions before being elected a
Corporate Vice President in 1980. He was named Executive Vice President in
charge of Merchandising in 1984 and was promoted to Chief Operating Officer in
1989.
MR. GALVIN was appointed Senior Vice President, Chief Financial Officer,
Secretary and a Director of Grand Union in 1986.
MR. STINE was elected a Senior Vice President of Grand Union in 1988. He
joined Grand Union in 1954 and was named a Corporate Vice President with
responsibility for the Company's New York Region in 1985.
MR. FOX became a Director, Vice President and Secretary of Capital in May
1992 and Treasurer of Capital in May 1993. Mr. Fox was appointed as Vice
President, Assistant Secretary and a Director of Grand Union and as Vice
President, Secretary and a Director of Holdings in July 1992. Mr. Fox became
Treasurer of Holdings in May 1993. Mr. Fox has been Executive Vice President of
MTH from March 1988 to the present. Mr. Fox became Vice Chairman - Finance and
a Director of Penn Traffic in February 1993 and Assistant Secretary in 1989. Mr.
Fox had been a Vice President of Penn Traffic since 1989.
MR. BARRETT has been Senior Vice President of Personnel of Grand Union
since 1989. He joined Grand Union in 1961, serving in a variety of functions
until being elected a Corporate Vice President in 1984.
Mr. Hirsch is Chairman and a Director, Mr. McCaig is President and a
Director and Mr. Fox is Vice President, Secretary, Treasurer and a Director of
Capital. Mr. Hirsch is Chairman and a Director, Mr. McCaig is President and a
Director, Mr. Fox is Vice President, Secretary, Treasurer and a Director, and
Claude J. Incaudo is a Director of Holdings. Mr. Incaudo (age 60) has been a
Director since 1988 and President and Chief Executive Officer of Penn Traffic
since February 1990. Mr. Incaudo has been the President of P&C Foods, a division
of Penn Traffic or its predecessors, since 1982. Mr. Incaudo joined P&C Foods in
1977 as Director of Store Operations and became Senior Vice President of Store
Operations in 1979.
Executive officers of each of Holdings, Capital and Grand Union are
appointed and serve at the discretion of the Board of Directors. Each director
of Holdings, Capital and Grand Union is elected for a period of one year and
serves until his successor is duly elected and qualified.
ITEM 11. EXECUTIVE COMPENSATION
See "Certain Transactions" for a description of the agreement pursuant to
which MTH provides financial consulting and business management services to
Holdings and to its subsidiaries. Mr. Hirsch is a general partner of the
managing partner of MTH and Mr. Fox is an executive officer of MTH.
The following table sets forth the compensation paid or accrued by Grand
Union to each of the six most highly-compensated executive officers of the
Company for services rendered to the Company in all capacities during the three
fiscal years ended April 2, 1994. Officers of Holdings and Capital are not
compensated for their services
15
<PAGE>
as such. The Company made no grants of stock options or stock appreciation
rights in Fiscal 1994 nor did the Company make any awards in Fiscal 1994 under
any long-term incentive plan.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Other Annual All Other
Fiscal Salary Bonus Compensation Compensation
Year ($) ($) ($) (1) ($) (2)
------ ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Joseph J. McCaig 1994 523,712 120,140 -- 30,109
Chief Executive Officer, 1993 518,077 133,707 -- 27,076
President and Director 1992 493,269 125,642 -- --
William A. Louttit 1994 349,731 65,943 -- 14,038
Executive Vice President, Chief 1993 345,385 85,932 -- 7,479
Operating Officer and Director 1992 328,846 76,736 -- --
Darrell W. Stine 1994 251,134 45,460 -- 14,535
Senior Vice President - 1993 248,336 63,334 -- 12,193
New York Region 1992 236,192 51,218 -- --
Robert J. Saba (3) 1994 226,903 72,511 -- 14,592
Senior Vice President - 1993 248,336 105,813 -- 14,334
Northern Region 1992 236,192 104,497 -- --
Robert Terrence Galvin 1994 245,635 46,676 -- 9,687
Senior Vice President, Chief Financial 1993 242,789 59,578 -- 8,551
Officer, Secretary and Director 1992 231,192 50,175 -- --
Brooke D. Lennon (4) 1994 186,000 35,130 -- 15,982
Senior Vice President - Merchandising 1993 169,177 41,398 -- 13,250
1992 159,158 39,579 -- --
<FN>
(1) No information is provided in the "Other Annual Compensation" column since
the aggregate amount of perquisites and other personal benefits in respect
of each of Fiscal 1994 and Fiscal 1993 is less than the lower of $50,000
and 10% of the total annual salary and bonus reported for each of the named
officers and no other compensation of the type required to be described in
the "Other Annual Compensation" column was paid in Fiscal 1994 or Fiscal
1993. Pursuant to Securities and Exchange Commission rules, disclosure of
"Other Annual Compensation" is required only for amounts earned in Fiscal
1994 and Fiscal 1993.
(2) "All Other Compensation" includes the following: (i) contributions to the
Company's Savings Plan under Section 401(k) made by the Company in Fiscal
1994 and Fiscal 1993, respectively, for each of the named executive
officers as follows: Mr. McCaig $2,964 and $1,928; Mr. Louttit $2,331 and
$0; Mr. Stine $2,313 and $2,136; Mr. Saba $2,278 and $2,157; Mr. Galvin
$2,470 and $2,128; and Mr. Lennon $2,106 and $2,359, and (ii) premium
payments for term life insurance made by the Company in Fiscal 1994 and
Fiscal 1993, respectively, for each of the named executive officers as
follows: Mr. McCaig $27,145 and $25,148; Mr. Louttit $11,707 and $7,479;
Mr. Stine $12,222 and $10,057; Mr. Saba $12,314 and $12,177; Mr. Galvin
$7,217 and $6,423; and Mr. Lennon $13,876 and $10,891. Pursuant to
Securities and Exchange Commission rules, disclosure of "All Other
Compensation" is required only for amounts earned in Fiscal 1994 and Fiscal
1993.
(3) Mr. Saba retired on February 1, 1994.
(4) Mr. Lennon held the position of Senior Vice President - Merchandising until
his death in June 1994.
</TABLE>
THE GRAND UNION COMPANY EMPLOYEES' RETIREMENT PLAN
Grand Union maintains and makes cash contributions to The Grand Union
Company Employees' Retirement Plan (the "Retirement Plan"), a qualified
retirement plan, for retirement benefits for its salaried and hourly non-union
employees, union employees not covered by other pension plans, and all its
officers. Under the Retirement Plan, a participant's benefit, paid in the form
of a single life annuity at age 65, is generally (a) 1.5% of his "highest annual
16
<PAGE>
compensation" multiplied by years of service not in excess of 35 minus (b) 1.5%
of primary social security benefit multiplied by years of service not in excess
of 35. Grand Union intends to amend the Retirement Plan to take into account
recently issued regulations regarding the integration of plan benefits with
social security, to limit the amount of compensation that can be taken into
account under the Retirement Plan to $200,000 per year and to incorporate other
nonsubstantive amendments. Grand Union anticipates that such amendments will not
have a material adverse effect on the financial condition of the Company.
However, the limit on compensation that can be taken into account under the
Retirement Plan could limit future benefit accruals under the Retirement Plan
and, consequently, could increase benefits payable under the Supplemental
Retirement Program for Key Executives discussed below.
The Code places certain limits on pension benefits which may be paid under
plans qualified under the Code. The current limit of such pension benefit is
$118,800 per annum.
SUPPLEMENTAL RETIREMENT PROGRAM FOR KEY EXECUTIVES
Grand Union maintains The Grand Union Company Supplemental Retirement
Program for Key Executives (the "Supplemental Plan"), a non-qualified pension
plan pursuant to which certain key employees of Grand Union and its affiliates
("Participants"), including Messrs. McCaig, Louttit, Stine, Saba and Galvin,
earn a pension in addition to the pension benefit to which they are entitled
under the Retirement Plan. The pension benefit under the Supplemental Plan is
calculated as an annual pension payable monthly (i) if the Participant is not
married on his retirement date, for the Participant's life, or (ii) if the
Participant is married on his retirement date, the same amount as described in
clause (i) for the duration of the Participant's life and thereafter 50% of such
amount for the duration of the life of the Participant's surviving spouse. The
amount of the annual pension payable upon retirement at age 62 or later is
determined as the "target benefit" minus the "plan offsets". The "target
benefit" is an annual pension equal to (i) for a Participant having at least 15
years of credited service under the Plan, 65% of the Participant's final year's
base salary, or (ii) for a Participant having less than 15 years of credited
service under the Plan, the product of 4-1/3% of the Participant's final year's
base salary multiplied by the Participant's number of years of credited service
under the Plan. "Plan offsets" for Participants retiring at age 62 or later are
equal to the sum of the Participant's (i) primary Social Security benefits
payable at the later of age 62 or the Participant's actual retirement age, (ii)
benefits under the Retirement Plan payable at the later of age 62 or the
Participant's actual retirement age in the form of a single life annuity, and
(iii) benefits, if any, payable from the qualified retirement plan(s) of the
Participant's previous employer(s). Participants may also retire early (i) at
or after attaining age 50 but prior to attaining age 55, with the consent of
Grand Union (the consent requirement is waived if the Participant becomes
disabled or is involuntarily terminated other than for cause), or (ii) at or
after age 55, without any requirement for consent by Grand Union. For
Participants who retire early, the "target benefit" is reduced by 5% per year
for each year the Participant is under age 62. Plan benefits are payable in an
actuarially determined single sum no later than 30 days following the
Participant's date of retirement or other termination of employment. In
general, no Plan benefits will be paid to a Participant whose employment with
Grand Union terminates prior to the Participant's attaining age 50.
In August 1993, in consideration of non-competition and confidentiality
agreements entered into by certain executives of Grand Union, including Messrs.
McCaig, Louttit, Stine, Saba and Galvin, Grand Union agreed to transfer to a
custodial account to be held by an independent custodian securities having a
value of approximately $4.45 million, which amount approximates the benefits
payable to the specified executives under the Supplemental Retirement Plan (plus
a reserve of $225,000 for claims and expenses of the custodian). Such
securities are to be transferred to the custodian over a four-year period,
except that in the event of a "change in control" of Grand Union (as defined in
the non-competition and confidentiality agreements), all such securities not
previously transferred to the custodian must be transferred to the custodian.
The securities are distributable to the specified executives only if Grand Union
enters bankruptcy while the executives are still in the employ of Grand Union,
and the value of any securities distributed to each executive reduces the amount
payable to the executive pursuant to the Supplemental Plan. If an executive
terminates his employment with Grand Union for any reason whatsoever prior to
that event, including his retirement or death, the securities held by the
custodian for his benefit are forfeited to Grand Union.
The table below shows, on a combined basis for the Supplemental Plan and
the Retirement Plan, the estimated annual benefit payable upon retirement to
specified compensation and years of service classifications up to the maximum of
15 years of service. The credited years of service under these Plans for Messrs.
McCaig, Louttit, Stine, Saba and Galvin are 20 years, 18 years, 26 years, 29
years and 8 years, respectively. The current compensation
17
<PAGE>
set forth in the Summary Compensation Table does not differ substantially from
covered compensation under these Plans. The retirement benefits shown are based
upon retirement at age 62 and the payment of a single-life annuity to the
employee. The benefits shown do not reflect any offset as a result of primary
Social Security benefits.
<TABLE>
<CAPTION>
Years of Service
Final Average ----------------------------------------
Compensation 5 10 15 or more
------------ ------- ------- -----------
<S> <C> <C> <C>
$100,000 $21,667 $43,333 $65,000
150,000 32,500 65,000 97,500
200,000 43,333 86,667 130,000
250,000 54,167 108,333 162,500
300,000 65,000 130,000 195,000
350,000 75,833 151,667 227,500
400,000 86,667 173,333 260,000
450,000 97,500 195,000 292,500
500,000 108,333 216,667 325,000
550,000 119,167 238,333 357,500
600,000 130,000 260,000 390,000
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors of Grand Union, consisting of Messrs. Hirsch,
McCaig, Fox, Louttit and Galvin, has no separate compensation committee, and
compensation decisions are considered by the entire Board of Directors, subject
to final approval by the Board of Directors of Holdings. Mr. McCaig is President
and Chief Executive Officer of Grand Union, President and a director of Capital
and President and a director of Holdings, Mr. Louttit is Executive Vice
President and Chief Operating Officer of Grand Union and Mr. Galvin is Senior
Vice President, Chief Financial Officer and Secretary of Grand Union. Mr. McCaig
does not participate in deliberations of the Grand Union or Holdings Boards of
Directors regarding his own compensation as an executive officer of Grand Union,
and neither Mr. Louttit nor Mr. Galvin participates in deliberations of the
Grand Union Board of Directors regarding his own compensation.
Mr. Hirsch, who is Chairman and a director of Grand Union, Chairman and a
director of Capital and Chairman and a director of Holdings, is Chairman and a
director of Penn Traffic. Mr. Fox, who is a director, Vice President and
Assistant Secretary of Grand Union, a director, Vice President, Secretary and
Treasurer of Capital, and a director, Vice President, Secretary and Treasurer of
Holdings, is Vice Chairman - Finance and a director of Penn Traffic. Messrs.
Hirsch and Fox did not receive salaries from Penn Traffic and do not participate
in cash bonus plans of Penn Traffic, and receive no compensation in their
capacities as executive officers of Grand Union, Capital and Holdings. As
described below, Messrs. Hirsch and Fox receive compensation from MTH. Penn
Traffic has engaged MTH as a financial advisor and investment banker for a term
ending in January 1995. Mr. McCaig is a member of the Board of Directors of
Penn Traffic, for which he receives compensation of $10,000 per annum and
$1,000 per Board meeting attended. Mr. Incaudo, a director of Holdings, is a
director, President and Chief Executive Officer of Penn Traffic.
The directors and officers of Holdings and Capital, and the directors of
Grand Union, are not compensated for their services as such. Directors of
Holdings, Capital and Grand Union receive reimbursement of reasonable expenses
incidental to attendance at meetings of the Board of Directors and all
committees.
Messrs. Hirsch and Fox receive compensation from MTH. Mr. Hirsch is a
general partner of the managing partner of MTH, and Mr. Fox is Executive Vice
President of MTH. As described below, Grand Union has engaged MTH as a
financial advisor for a term ending in July 1997.
MTH has entered into a financial advisory agreement for a term ending in
July 1997 under which MTH provides certain financial consulting and business
management services to Holdings and its subsidiaries. During the period from
July 1989 through July 1992, MTH received an annual fee of $600,000 for its
services performed under this agreement. In connection with the
Recapitalization, the agreement was amended to provide for an annual fee of
18
<PAGE>
$900,000 after a reevaluation of the nature and extent of the services that have
been provided by MTH from the inception of the agreement.
In July 1992, Mr. McCaig became indebted to Holdings in the amount of
$227,676, equal to income taxes incurred by him as a result of receipt of
additional shares of Holdings common stock at the time of the Recapitalization.
Such indebtedness is evidenced by a promissory note with a maturity of seven
years, bearing no interest unless Mr. McCaig should leave the Company's employ,
and is secured by, and with recourse limited to, the shares received.
As compensation for his services in connection with the acquisition of the
Company by Holdings in 1989, Mr. Hirsch received an option to purchase shares of
Holdings common stock. In connection with the Recapitalization, Mr. Hirsch
transferred such option and a note payable to Holdings in the amount of
approximately $3.6 million to a disbursement escrow account established for the
purpose of effecting various transfers of interest in Holdings common stock (the
"Equity Escrow") in exchange for 8,229 shares of Holdings common stock. The note
payable to Holdings has a maturity of 10 years, provides for interest equal to
any cash dividends paid on the 8,229 shares of Holdings common stock and is
secured by, and with recourse limited to, the 8,229 shares of Holdings common
stock and any property (other than cash) distributed on or with respect to such
shares.
LIMITATION OF DIRECTORS' LIABILITIES
Section 102 of the Delaware General Corporation Law allows a corporation to
eliminate the personal liability of directors of a corporation to the
corporation or to any of its stockholders for monetary damages for a breach of
fiduciary duty as a director, except in the case where the director breached his
duty of loyalty, failed to act in good faith, engaged in intentional misconduct
or knowingly violated a law, authorized the payment of a dividend or approved a
stock repurchase in violation of the Delaware General Corporation Law or
obtained an improper personal benefit. Under Holdings' Certificate of
Incorporation, a director of Holdings shall not be liable to Holdings or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except to the extent such exemption from liability or limitation thereof is not
permitted under the General Corporation Law of Delaware.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of the date of this Report, 48,505 shares of Holdings voting Class A
Common Stock, par value $.01 per share, are outstanding. As of the date of this
Report, Warrants to purchase 18,750 shares of Holdings' Class A Common Stock at
an exercise price of $.01 per Warrant and 26,719 shares of non-voting Class B
Common Stock are also outstanding. The information in the table below presents
the beneficial ownership of (i) each person known by Holdings to own
beneficially more than five percent of the outstanding voting common stock of
Holdings, (ii) each director of Holdings and (iii) all directors and officers of
Holdings as a group.
There are 801.5 shares of common stock, $50,000 par value per share, of
Grand Union outstanding, all of which outstanding shares of common stock are
beneficially owned by Capital, and 1,000 shares of common stock, $1.00 par value
per share, of Capital are currently outstanding, all of which are beneficially
owned by Holdings. Holdings has sole voting and investment power with respect to
all shares of common stock of Capital and Capital has sole voting and investment
power with respect to all shares of common stock of Grand Union.
19
<PAGE>
<TABLE>
<CAPTION>
Number of Shares of
Common Stock Beneficially Percentage of Outstanding
Beneficial Owner Owned Shares of Common Stock (1)
- -------------------------------------- ------------------------- --------------------------
<S> <C> <C>
GAC Holdings, Limited Partnership (2) 28,344 58.4%
331 Madison Avenue
New York, New York 10017
Gary D. Hirsch (2) 36,573 75.4
331 Madison Avenue
New York, New York 10017
Joseph J. McCaig 3,380 7.0
201 Willowbrook Boulevard
Wayne, New Jersey 07470
Martin A. Fox (2) -- --
331 Madison Avenue
New York, New York 10017
Claude J. Incaudo (2) -- --
1200 State Fair Boulevard
Syracuse, New York 13221
Fidelity Devonshire Trust: 8,728 15.2
Fidelity Equity-Income Fund
82 Devonshire Street, F7E
Boston, Massachusetts 02109
Fidelity Magellan Fund 8,728 15.2
82 Devonshire Street, F7E
Boston, Massachusetts 02109
Fidelity Puritan Trust: 8,105 14.3
Fidelity Puritan Fund
82 Devonshire Street, F7E
Boston, Massachusetts 02109
Fidelity Fixed-Income Trust: 3,088 6.0
Spartan High Income Fund
82 Devonshire Street, F7E
Boston, Massachusetts 02109
Nomura Securities International 4,844 9.1
2 World Financial Center, 22nd Floor
Building B
New York, New York 10281
All directors and officers of Holdings
as a group (4 persons) (2) 39,953 82.4
<FN>
(1) For purposes of the computation of percentages of common stock ownership of
Holdings presented in this table, a holder is deemed to beneficially own
all shares which may be acquired by such holder upon exercise of warrants
or conversion of shares of Class B Common Stock held by such holder which
warrants are exercisable or shares of Class B Common Stock are convertible
within 60 days, and such shares which may be acquired by such holder (but
no shares which may be acquired by any other holder upon exercise of
warrants or conversion of such shares of Class B Common Stock held by such
other holder) are deemed to be outstanding. If ownership were determined on
a fully diluted basis after giving effect to exercise of Warrants to
purchase 18,750 shares of Class A Common Stock and including 26,719 shares
of Class B Common Stock, percentages of common stock ownership would be as
follows: GAC Holdings 30.2%; Gary D. Hirsch 38.9%; Joseph J. McCaig 3.6%;
Fidelity Devonshire Trust: Fidelity Equity-Income Fund 9.3%; Fidelity
Magellan Fund 9.3%; Fidelity Puritan Trust: Fidelity Puritan Fund 8.6%;
Fidelity Fixed-Income Trust: Spartan High Income Fund 3.3%; Nomura
Securities International 5.2%; and all directors and officers of Holdings
as a group 42.4%.
</TABLE>
20
<PAGE>
<TABLE>
<C> <S>
(2) GAC Holdings Partners, Inc., a corporation controlled by MTH Holdings, is
the sole general partner of GAC Holdings. MTH and certain other investors,
including Mr. Hirsch, Mr. Fox, Mr. Incaudo and certain individuals
affiliated with MTH, and including Penn Traffic, of which Mr. Incaudo is
President and Chief Executive Officer, are limited partners of Grand
Acquisition Company, Limited Partnership, which is the sole limited partner
of GAC Holdings. Mr. Hirsch is a general partner of the managing partner of
MTH. MTH and Mr. Hirsch may be deemed to share voting and dispositive power
with respect to shares of common stock of Holdings owned by GAC Holdings
and may be deemed the beneficial owners of such shares.
</TABLE>
Various investment funds and other institutional investors for which
Fidelity Management & Research Company or affiliated entities ("FMR Co.") acts
as investment advisor, including Fidelity Devonshire Trust: Fidelity
Equity-Income Fund, Fidelity Magellan Fund, Fidelity Puritan Trust: Fidelity
Puritan Fund and Fidelity Fixed-Income Trust: Spartan High Income Fund, the
common stock holdings of which are set forth on the foregoing table, own shares
representing approximately 26.5% of the shares of common stock of Holdings on a
fully diluted basis, all of which shares are shares of Class B Common Stock (see
"Description of the Holdings Capital Stock-Class B Common Stock"). Various
investment funds and other institutional investors for which FMR Co. acts as
investment advisor, including the entities named in the preceding sentence, the
common stock holdings of which are set forth on the foregoing table, also
acquired Warrants to purchase for a nominal price approximately 10.2% of the
common stock of Holdings on a fully diluted basis in connection with purchases
of Senior Zero Coupon Notes and Senior Subordinated Zero Coupon Notes issued by
Capital as part of the Recapitalization.
THE MANAGEMENT SUBSCRIPTION AGREEMENTS
Pursuant to the terms of subscription agreements which were entered into
shortly before the closing of the acquisition of GUAC by Holdings (collectively,
the "Management Subscription Agreements"), between Holdings and the Management
Investors, the Management Investors purchased shares (the "Management Shares")
of common stock of Holdings representing (prior to the Recapitalization)
approximately 13.4% of the Holdings common stock on a fully diluted basis for
consideration of $1,000 per share in cash or the contribution of 1.45748 shares
of GUAC common stock for one share of Holdings common stock. The Management
Subscription Agreements were amended in connection with the Recapitalization.
Pursuant to the terms of the Management Subscription Agreements, as amended,
each Management Investor has agreed that, for a period of five years from the
date of consummation of the Recapitalization, no Management Investor will sell,
distribute, transfer, assign, pledge, hypothecate or otherwise dispose of or
encumber any of their Management Shares, except under the circumstances and on
the terms and conditions specified in the Management Subscription Agreements.
The Management Subscription Agreements, as amended, provide that the Management
Investors will have demand registration rights with respect to the Management
Shares after the earlier of (x) the sale of 20% or more of the then outstanding
shares of Holdings common stock in a registered public offering, (y) the fifth
anniversary of the date of the consummation of the Recapitalization or (z) the
occurrence of certain other events specified therein. The Management
Subscription Agreements, as amended, also provide that if a Management Investor
ceases to be employed by the Company under certain circumstances or, upon the
seventh anniversary of the date of the consummation of the Recapitalization, the
Management Investor will have the right to require Holdings to repurchase all of
such Management Investor's Management Shares at a price equal to the fair market
value of such Management Shares. Holdings would not be obligated to purchase any
Management Shares, however, if such a purchase would result in an event of
default under its preferred stock or under any of its indebtedness. In
connection with the Recapitalization, certain Management Investors received,
through the Equity Escrow, approximately 2,530 shares of Holdings common stock.
After giving effect to the receipt of such shares and to certain purchases and
sales of shares of Holdings common stock by members of management of Grand Union
in connection with the Recapitalization and in connection with the sale of the
Southern Region, the Management Investors own shares representing approximately
12.7% of the shares of Holdings common stock on a fully diluted basis.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Those members of the management of Grand Union who received additional
shares of Holdings common stock at the time of the Recapitalization (as
described under "The Management Subscription Agreements" above), became indebted
to Holdings in amounts (aggregating approximately $500,000 for all management
investors) equal to income taxes incurred by them as a result of receipt of such
shares. Such indebtedness is evidenced by individual promissory notes with a
maturity of seven years, bearing no interest unless the obligor should leave the
21
<PAGE>
Company's employ, and are secured by, and with recourse limited to, the shares
received. Among the management investors from whom Holdings holds such notes is
Mr. McCaig, who is indebted to Holdings in the amount of $227,676.
As compensation for his services in connection with the acquisition of GUAC
by Holdings, Mr. Hirsch received an option to purchase shares of Holdings common
stock. In connection with the Recapitalization, Mr. Hirsch transferred such
option and a note payable to Holdings in the amount of approximately $3.6
million to the Equity Escrow in exchange for 8,229 shares of Holdings common
stock. The note payable to Holdings has a maturity of 10 years, provides for
interest equal to any cash dividends paid on the 8,229 shares of Holdings common
stock and is secured by, and with recourse limited to, the 8,229 shares of
Holdings common stock and any property (other than cash) distributed on or with
respect to such shares.
MTH has entered into a financial advisory agreement for a term ending in
July 1997 under which MTH provides certain financial consulting and business
management services to Holdings and its subsidiaries. During the period from
July 1989 through July 1992, MTH received an annual fee of $600,000 for its
services performed under this agreement. In connection with the
Recapitalization, the agreement was amended to provide for an annual fee of
$900,000 after a reevaluation of the nature and extent of the services that have
been provided by MTH from the inception of the agreement.
At the time of the acquisition of GUAC by Holdings in July 1989, Grand
Union and P&C Foods, which is controlled by MTH, operated stores in some of the
same geographic areas in Vermont and upstate New York. In connection with the
acquisition, agreements were entered into with federal and state antitrust
authorities which required the divestiture of 16 Grand Union stores or P&C Foods
stores. The divestitures required by these agreements were completed on July 30,
1990. Thirteen of the sixteen stores divested were P&C Foods stores.
In a related transaction, on July 30, 1990, P&C Foods and Grand Union
entered into an operating agreement (the "Operating Agreement") pursuant to
which Grand Union acquired the right to operate P&C Foods' thirteen remaining
stores in New England under the Grand Union name until July 2000, with an option
to extend the term of such operation for an additional five years. P&C Foods
also granted Grand Union an option to purchase such stores. In connection with
these transactions, Grand Union agreed to pay P&C Foods a minimum annual fee
which will average $10.7 million per year during the ten-year lease term plus,
beginning with the year commencing July 31, 1992, additional contingent fees of
up to $700,000 per year based upon sales performance of the stores operated by
Grand Union. In addition, Grand Union paid P&C Foods $7.5 million for the option
to purchase the stores. Pursuant to the terms of the Operating Agreement, a $15
million prepayment of the annual fee was made to P&C Foods in connection with
the Recapitalization.
Pursuant to the terms of the Operating Agreement, in April 1992, Grand
Union purchased P&C Foods' White River Junction, Vermont warehouse for cash
consideration of approximately $5 million.
In September 1993, Grand Union entered into a program to consolidate the
purchasing and distribution of health and beauty care products and general
merchandise with Penn Traffic. Under this program, Grand Union procures health
and beauty care products for both Grand Union and Penn Traffic, and Penn Traffic
procures general merchandise for both Penn Traffic and Grand Union. Grand
Union's general merchandise warehouse in Montgomery, New York is used to store
and distribute general merchandise and health and beauty care products to Grand
Union stores and to certain of Penn Traffic's stores and wholesale customers.
Under the arrangement, Penn Traffic owns the inventory of general merchandise
and health and beauty care products located at the Montgomery warehouse and
shares the cost of operating the warehouse in an amount proportionate to Penn
Traffic's usage of the facility. Grand Union expects that this program will
improve the variety of general merchandise products offered to the consumer in
the Company's stores and will reduce product procurement costs for general
merchandise and health and beauty care products.
22
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
THE FOLLOWING DOCUMENTS ARE FILED AS A PART OF THIS REPORT:
See Item 8.
REPORTS ON FORM 8-K
No reports on Form 8-K have been filed by the Registrant during the last
quarter of the period covered by this Report.
23
<PAGE>
EXHIBITS (REGULATION S-K ITEM 601)
Exhibit
Number Description of Document
- ------- -----------------------
2.1 Stock Purchase Agreement dated as of April 8, 1989 among GU
Acquisition Corporation ("GUAC"), GND Holdings Corporation (which has
changed its name to Grand Union Holdings Corporation) ("Holdings")
and the stockholders of GUAC named therein, incorporated by reference
to Exhibit No. 2.1 to The Grand Union Company's Registration
Statement on Form S-1 (Registration No. 33-29707) (the "1989 Grand
Union Registration Statement").
3.1 Certificate of Incorporation of Grand Union, as amended ("Capital"),
incorporated by reference to Exhibit No. 3.1 to the Registration
Statement on Form S-1 of Grand Union, Grand Union Capital Corporation
("Capital") and Holdings (Registration No. 33-48282) (the "1992 Grand
Union Registration Statement").
3.2 By-laws of Grand Union, incorporated by reference to Exhibit No. 3.4
to the 1992 Grand Union Registration Statement.
3.2A Amendment to By-laws of Grand Union, incorporated by reference to
Exhibit No. 3.4A to the 1992 Grand Union Registration Statement.
4.1 Indenture dated as of October 18, 1993, among Grand Union, as Issuer,
Capital, as Guarantor and United States Trust Company of New York
("U.S. Trust"), as Trustee for the 12 1/4% Senior Subordinated Notes
Due 2002, Series A, including form of the 12 1/4% Senior Subordinated
Note Due 2002, incorporated by reference to Exhibit No. 4.1 to Grand
Union's Registration Statement on Form S-1 (Registration No. 33-
70956) ( the "October 1993 Grand Union Registration Statement").
4.2 Indenture dated as of January 28, 1993, among Grand Union, as Issuer,
Capital and Holdings, as Guarantors and First Trust of California,
National Association, as Trustee for the 11 3/8% Senior Notes Due
1999, including form of the 11 3/8% Senior Note Due 1999,
incorporated by reference to Exhibit No. 4.11 to The Grand Union
Company's Report on 10-Q dated February 2, 1993 (the "Grand Union
10-Q").
4.3 Indenture dated as of July 22, 1992, among Grand Union, Capital,
Holdings and First Trust National Association, as Trustee ("First
Trust") for the Grand Union 11 1/4% Senior Notes Due 2000, including
form of 11 1/4% Senior Note Due 2000, incorporated by reference to
Exhibit No. 4.1 to the Registration Statement on Form S-1 of Capital
and Holdings (Registration No. 33-50496) (the "Capital Registration
Statement").
4.4 Indenture dated as of July 22, 1992, among Grand Union, Capital,
Holdings and U.S. Trust, as Trustee for the Grand Union 12 1/4%
Senior Subordinated Notes Due 2002, including form of 12 1/4% Senior
Subordinated Note Due 2002, incorporated by reference to Exhibit No.
4.2 to the Capital Registration Statement.
4.5 Borrower Pledge Agreement dated as of July 22, 1992 made by Grand
Union to Bankers Trust Company ("Bankers Trust"), as Collateral
Agent, incorporated by reference to Exhibit No. 10.9 to the Capital
Registration Statement.
4.5A First Amendment dated as of January 28, 1993 to the Pledge Agreement
filed as Exhibit No. 4.5, incorporated by reference to Exhibit No.
4.13A to the Grand Union 10-Q.
4.6 Borrower Security Agreement dated as of July 22, 1992, between Grand
Union and Bankers Trust, as Collateral Agent, incorporated by
reference to Exhibit No. 10.12 to the Capital Registration Statement.
4.6A First Amendment dated as of January 28, 1993 to the Borrower Security
Agreement filed as Exhibit No. 4.6, incorporated by reference to
Exhibit No. 4.14A to the Grand Union 10-Q.
24
<PAGE>
Exhibit
Number Description of Document
- ------- -----------------------
4.7 Indenture dated as of March 2, 1988 for GUAC 13% Senior Subordinated
Notes Due 1998, including form of the GUAC 13% Senior Subordinated
Note Due 1998, by and between GUAC and Manufacturers Hanover Trust
Company, as Trustee, incorporated by reference to Exhibit No. 4.1 to
GUAC's Registration Statement on Form S-1 (Registration No. 33-22398)
(the "GUAC Registration Statement").
4.7A Supplemental Indenture dated as of August 10, 1989 to the Indenture
filed as Exhibit No. 4.7, incorporated by reference to Exhibit No.
4.1A to the GUAC Registration Statement.
4.7B Supplemental Indenture dated as of December 19, 1990 to the Indenture
filed as Exhibit No. 4.7, incorporated by reference to Exhibit No.
4.1B to the GUAC Registration Statement.
4.7C Supplemental Indenture dated as of July 22, 1992 to the Indenture
filed as Exhibit No. 4.7, incorporated by reference to Exhibit
No. 4.7C to the Capital Registration Statement.
4.8 Registration Rights Agreement dated as of March 2, 1988 by and among
GUAC and the purchasers of the GUAC 13% Senior Subordinated Notes Due
1998 listed on the signature page thereof, incorporated by reference
to Exhibit No. 4.2 to the GUAC Registration Statement.
4.9 Note Purchase Agreement dated as of October 18, 1993, among Grand
Union, Capital and BT Securities Corporation incorporated by
reference to Exhibit No. 4.1 to the October 1993 Grand Union
Registration Statement.
4.10 Form of Note Purchase Agreement dated as of January 28, 1993, among
Grand Union, Capital, Holdings and the Purchasers named therein,
incorporated by reference to Exhibit No. 4.12 to the Grand Union
10-Q.
10.1 Form of Management Subscription Agreement entered into by and between
Holdings and each of certain members of management of Grand Union,
all dated as of July 14, 1989, providing, in the aggregate, for the
purchase of 12,358 shares of common stock of Holdings, incorporated
by reference to Exhibit No. 10.3 to 1989 Grand Union Registration
Statement.
10.1A Form of Amendment to Management Subscription Agreement entered into
by and between Holdings and each of certain members of management of
Grand Union, all dated as of July 22, 1992, incorporated by reference
to Exhibit No. 10.1A to the Capital Registration Statement.
10.2 Agreement to Hold Separate dated July 17, 1989 by and among MTH
Holdings Inc. ("MTH Holdings"), GUAC, Salomon Inc and the Federal
Trade Commission (the "FTC") entered into in the matter of MTH
Holdings and GUAC before the FTC, incorporated by reference to
Exhibit No. 10.5 to the 1989 Grand Union Registration Statement.
10.3 Agreement containing Consent Order among MTH Holdings, GUAC and the
FTC entered into in the matter of MTH Holdings and GUAC before the
FTC, incorporated by reference to Exhibit No. 10.6 to the 1989 Grand
Union Registration Statement.
25
<PAGE>
Exhibit
Number Description of Document
- ------- -----------------------
10.4 Assurance dated July 6, 1989 pursuant to 9 Vermont Statutes Annotated
Section 2459 by and among MTH Holdings, P&C Food Markets, Inc. ("P&C
Foods"), GUAC and the Attorney General of the State of Vermont,
incorporated by reference to Exhibit No. 10.7 to the 1989 Grand Union
Registration Statement.
10.5 Asset Purchase Agreement, dated as of January 25, 1990, by and
between Grand Union and Price Chopper Operating Co. of Vermont, Inc.,
incorporated by reference to Exhibit No. 10.15 to Holdings
Registration Statement on Form S-1 (Registration No. 33-32879) (the
"Holdings Registration Statement").
10.6 Asset Purchase Agreement, dated as of February 9, 1990, by and
between Grand Union and Price Chopper Operating Co., Inc.,
incorporated by reference to Exhibit No. 10.49 to the GUAC
Registration Statement.
10.7 Agreement and Master Sublease dated as of July 30, 1990, by and
between Grand Union and P&C Foods, incorporated by reference to
Exhibit No. 10.18 to Holdings' Report on Form 10-Q dated July 21,
1990 (Commission File No. 33-29707).
10.8 Credit Agreement dated as of July 14, 1992, among Grand Union,
Capital, Holdings, the lending institutions party thereto, Bankers
Trust, as Agent, and Midlantic National Bank, as Co-Agent,
incorporated by reference to Exhibit No. 10.8 to the Capital
Registration Statement.
10.8A First Amendment dated as of January 15, 1993 to the Credit Agreement
filed as Exhibit No. 10.8, incorporated by reference to
Exhibit No. 10.32A to the Grand Union 10-Q.
10.8B Second Amendment dated as of January 16, 1993 to the Credit Agreement
filed as Exhibit No. 10.8, incorporated by reference to
Exhibit No. 10.32B to the Grand Union 10-Q.
10.8C Third Amendment dated as of April 1, 1993 to the Credit Agreement
filed as Exhibit No. 10.8, incorporated by reference to Exhibit
No. 10.8C to the Registration Statement on Form S-1 of Grand Union
and Capital (Registration No. 33-58438) (the "1993 Grand Union
Registration Statement").
10.8D Fourth Amendment dated as of June 28, 1993 to the Credit Agreement
filed as Exhibit No. 10.8, incorporated by reference to Holdings
Report on Form 10-K for the fiscal year ended April 3, 1993.
10.8E Fifth Amendment dated as of July 13, 1993 to the Credit Agreement
filed as Exhibit No. 10.8, incorporated by reference to Exhibit
No. 10.8E to the 1993 Grand Union Registration Statement.
10.8F Sixth Amendment dated as of September 8, 1993 to the Credit Agreement
filed as Exhibit 10.8 incorporated by reference to Exhibit No. 10.8F
to the October 1993 Grand Union Registration Statement.
10.9 Borrower Pledge Agreement dated as of July 22, 1992, made by Grand
Union to Bankers Trust, as Collateral Agent (included in Exhibit No.
4.5), incorporated by reference to Exhibit No. 10.9 to the Capital
Registration Statement.
10.9A First Amendment dated as of January 28, 1993 to the Borrower Pledge
Agreement filed as Exhibit No. 10.09, incorporated by reference to
Exhibit No. 4.13A to the Grand Union 10-Q.
10.10 Pledge Agreement, dated as of July 22, 1992, made by Holdings to
Bankers Trust, as Collateral Agent, incorporated by reference to
Exhibit No. 10.10 to the Capital Registration Statement.
10.10A First Amendment dated as of January 28, 1993 to the Pledge Agreement
filed as Exhibit No. 10.10, incorporated by reference to Exhibit
No. 10.35A to the Grand Union 10-Q.
10.11 Pledge Agreement, dated as of July 22, 1992, made by Capital to
Bankers Trust, as Collateral Agent, incorporated by reference to
Exhibit No. 10.11 to the Capital Registration Statement.
10.11A First Amendment dated as of January 28, 1993 to the Pledge Agreement
filed as Exhibit No. 10.11, incorporated by reference to Exhibit
No. 10.36A to the Grand Union 10-Q.
10.12 Borrower Security Agreement dated as of July 22, 1992, between Grand
Union and Bankers Trust, as Collateral Agent, incorporated by
reference to Exhibit No. 10.12 to the Capital Registration Statement.
10.12A First Amendment dated as of January 28, 1993 to the Borrower Security
Agreement filed as Exhibit No. 10.12, incorporated by reference to
Exhibit No. 4.14A to the Grand Union 10-Q.
10.13 Escrow Agreement dated as of July 22, 1992, between Holdings and
Bankers Trust, as Escrow Agent, incorporated by reference to Exhibit
No. 10.13 to the Capital Registration Statement.
26
<PAGE>
Exhibit
Number Description of Document
- ------- -----------------------
10.14 Stock Purchase Agreement dated as of July 22, 1992, by and between
Holdings and the purchasers of Class B Common Stock of Holdings named
therein, incorporated by reference to Exhibit No. 10.14 to the
Capital Registration Statement.
10.15 Agreement dated as of July 22, 1992, by and among GAC Holdings
Limited Partnership ("GAC Holdings"), Holdings and Gary D. Hirsch,
incorporated by reference to Exhibit No. 10.15 to the Capital
Registration Statement.
10.16 Financial Advisory Agreement dated July 22, 1992, by and between
Grand Union and Miller Tabak Hirsch + Co., incorporated by reference
to Exhibit No. 10.16 to the Capital Registration Statement.
10.17 Equity Escrow Agreement dated as of July 22, 1992, by and among GAC
Holdings, Holdings, Salomon Brothers Holding Company Inc, and
Gary D. Hirsch and U.S. Trust, as Escrow Agent, incorporated by
reference to Exhibit No. 10.17 to the Capital Registration
Statement.
10.18 Asset Purchase Agreement dated as of February 4, 1993, between The
Great Atlantic & Pacific Tea Company, Inc. and Grand Union,
incorporated by reference to Exhibit No. 2.1 to The Grand Union
Company's Report on Form 8-K dated February 4, 1993.
10.19 Asset Purchase Agreement dated as of September 20, 1993 among
Foodarama Supermarkets, Inc., ShopRite of Malverne, Inc. and Grand
Union.
*10.20 Second Amendment and Restatement of The Grand Union Company
Supplemental Retirement Program for Key Executives adopted as of
April 1, 1993, incorporated by reference to Exhibit No. 10.20 to
Holdings' Report on Form 10-K dated July 1, 1994.
*10.21 Form of Non-Competition and Confidentiality Agreement entered into by
Grand Union and certain executives (including Messrs. McCaig,
Louttit, Saba, Stine, Galvin and Lennon) dated as of August 25, 1993,
incorporated by reference to Exhibit No. 10.21 to Holdings' Report on
Form 10-K dated July 1, 1994.
10.22 Custodian Agreement dated as of August 25, 1993 between Grand Union
and United States Trust Company of New York, incorporated by
reference to Exhibit No. 10.22 to Holdings' Report on Form 10-K dated
July 1, 1994.
21.1 Subsidiaries of Grand Union, incorporated by reference to Exhibit
No. 22.1 to the 1993 Grand Union Registration Statement.
- -------------------
* Compensatory plan or arrangement.
27
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
THE GRAND UNION COMPANY
(Registrant)
/s/ Martin A. Fox
--------------------------------------
Martin A. Fox
Vice President and Assistant Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Gary D. Hirsch Director and Chairman July 1, 1994
- --------------------------
Gary D. Hirsch
/s/ Martin A. Fox Director, Vice President and July 1, 1994
- -------------------------- Assistant Secretary
Martin A. Fox
/s/ Joseph J. McCaig Director, President and Chief July 1, 1994
- -------------------------- Executive Officer (Principal
Joseph J. McCaig Executive Officer)
/s/ William A. Louttit Director, Executive Vice July 1, 1994
- -------------------------- President and Chief
William A. Louttit Operating Officer
/s/ Robert Terrence Galvin Director, Senior Vice July 1, 1994
- -------------------------- President, Chief Financial
Robert Terrence Galvin Officer and Secretary
(Principal Financial Officer)
/s/ Kenneth R. Baum Vice President and Controller July 1, 1994
- -------------------------- (Principal Accounting Officer)
Kenneth R. Baum
28
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Grand Union Holdings Corporation
In our opinion, the consolidated financial statements listed in the index
appearing under Item 8 on page 14 present fairly, in all material respects, the
financial position of Grand Union Holdings Corporation and its subsidiaries at
April 3, 1993 and April 2, 1994, and the results of their operations and their
cash flows for the 52 weeks ended March 28, 1992, the 53 weeks ended April 3,
1993 and the 52 weeks ended April 2, 1994, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
As described in Note 1 to the consolidated financial statements, the Company
adopted Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions", effective April 4,
1993 and Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes", effective March 29, 1992.
PRICE WATERHOUSE
New York, New York
June 1, 1994
F - 1
<PAGE>
GRAND UNION HOLDINGS CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
52 Weeks 53 Weeks 52 Weeks
Ended Ended Ended
March 28, April 3, April 2,
1992 1993 1994
----------- ----------- -----------
(in thousands except share data)
<S> <C> <C> <C>
Sales $2,968,466 $2,833,987 $2,477,339
Cost of sales (2,150,338) (2,032,481) (1,766,303)
---------- ---------- ----------
Gross profit 818,128 801,506 711,036
Operating and administrative expenses (619,927) (606,178) (531,839)
Depreciation and amortization (78,721) (80,551) (78,577)
Charge relating to early retirement program -- -- (4,468)
Loss on disposal of the Southern Region -- (198,000) --
Recapitalization expense -- (3,516) --
Interest expense:
Debt:
Obligations requiring current cash interest (76,357) (107,644) (128,661)
Obligations requiring no current cash interest (65,325) (44,271) (35,354)
Capital lease obligations (12,301) (13,191) (14,951)
Amortization of deferred financing fees (18,018) (9,378) (4,831)
---------- ---------- ----------
Loss before income taxes, extraordinary charges and
cumulative effect of accounting change (52,521) (261,223) (87,645)
Income tax provision (12,532) (4,535) --
---------- ---------- ----------
Loss before extraordinary charges and cumulative effect
of accounting change (65,053) (265,758) (87,645)
Extraordinary charges relating to early extinguishment of debt -- (47,663) --
Cumulative effect of accounting change -- -- (30,308)
---------- ---------- ----------
Net loss (65,053) (313,421) (117,953)
Accrued preferred stock dividends (12,856) (14,623) (16,011)
---------- ---------- ----------
Net loss applicable to common stock $(77,909) $(328,044) $(133,964)
---------- ---------- ----------
---------- ---------- ----------
Weighted average number of common shares outstanding 75,000 75,249 75,258
---------- ---------- ----------
---------- ---------- ----------
Per Share Data:
Loss applicable to common stock before extraordinary
charges and cumulative effect of accounting change
(after accrued preferred stock dividends) $(1,038.79) $(3,726.05) $(1,377.34)
---------- ---------- ----------
---------- ---------- ----------
Extraordinary charges -- $(633.40) --
---------- ---------- ----------
---------- ---------- ----------
Cumulative effect of accounting change -- -- $(402.72)
---------- ---------- ----------
---------- ---------- ----------
Net loss applicable to common stock $(1,038.79) $(4,359.45) $(1,780.06)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F - 2
<PAGE>
GRAND UNION HOLDINGS CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
April 3, 1993 April 2, 1994
------------- -------------
(in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and temporary cash investments $69,651 $44,294
Receivables 24,567 37,072
Inventories 235,222 206,063
Other current assets 16,141 17,444
---------- ----------
Total current assets 345,581 304,873
Property 360,179 400,554
Goodwill 567,500 563,276
Beneficial leases 39,039 33,074
Deferred financing fees 51,777 48,721
Other assets 54,089 43,726
---------- ----------
$1,418,165 $1,394,224
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current maturities of long-term debt $466 $914
Current portion of obligations under capital leases 6,144 7,099
Accounts payable and accrued liabilities 283,032 238,225
---------- ----------
Total current liabilities 289,642 246,238
---------- ----------
Long-term debt 1,291,097 1,404,089
---------- ----------
Obligations under capital leases 104,791 120,140
---------- ----------
Other noncurrent liabilities 103,191 113,810
---------- ----------
Commitments and contingencies
Redeemable stock:
Class A common stock, $.01 par value 9,547 9,407
Preferred stock (liquidation preference $145,312,000 in aggregate) 130,240 145,312
---------- ----------
Total redeemable stock 139,787 154,719
---------- ----------
Nonredeemable common stock and stockholders' deficit:
Class A common stock, $.01 par value; authorized 473,281 shares; issued
and outstanding 48,669 and 48,505 shares (net of treasury shares) less
12,096 and 11,932 shares, respectively, shown as redeemable common stock 1 1
Class B common stock, $.01 par value; 26,719 authorized, issued and
outstanding -- --
Treasury stock; 164 shares of Class A common stock at cost -- (156)
Accumulated deficit (510,344) (644,617)
---------- ----------
Total nonredeemable common stock and stockholders' deficit (510,343) (644,772)
---------- ----------
$1,418,165 $1,394,224
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F - 3
<PAGE>
GRAND UNION HOLDINGS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
52 Weeks 53 Weeks 52 Weeks
Ended Ended Ended
March 28, April 3, April 2,
1992 1993 1994
----------- ----------- ----------
(in thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $(65,053) $(313,421) $(117,953)
Adjustments to reconcile net loss to net cash provided by
(used for) operating activities:
Extraordinary charges on early extinguishment of debt -- 47,663 --
Cumulative effect of accounting change -- -- 30,308
Write-off of goodwill and beneficial leases and loss on fixed
assets related to the disposal of the Southern Region -- 137,017 --
Depreciation and amortization 78,721 80,551 78,577
Charge relating to early retirement program -- -- 4,468
Noncash interest 65,325 44,271 35,354
Amortization of deferred financing fees 18,018 9,378 4,831
Receivables (4,333) (878) (12,505)
Inventories (13,833) (14,467) 29,159
Other current assets 768 (3,485) (1,303)
Accounts payable and accrued liabilities 13,606 27,160 (44,807)
Other (5,930) 13,393 (18,039)
----------- ----------- ----------
Net cash provided by (used for) operating activities 87,289 27,182 (11,910)
----------- ----------- ----------
INVESTMENT ACTIVITIES:
Capital expenditures (29,293) (58,089) (81,029)
Disposals of property 4,787 1,394 584
Proceeds relating to the sale of the fixed assets of the
Southern Region -- 25,000 --
Refunded insurance deposits 650 11,636 --
Prepayment under P&C Food Markets, Inc. operating agreement -- (15,000) --
----------- ----------- ----------
Net cash used for investment activities (23,856) (35,059) (80,445)
----------- ----------- ----------
FINANCING ACTIVITIES:
Proceeds from the issuance of long-term debt 15,660 1,443,421 77,661
Obligations under capital leases discharged (7,629) (9,644) (8,218)
Loan placement fees (5,310) (63,643) (1,775)
Retirement of long-term debt (58,852) (1,348,762) (514)
Purchase of redeemable Class A common stock -- -- (156)
Capital contribution -- 5,004 --
Proceeds from issuance of warrants -- 1,187 --
Proceeds from issuance of common stock -- 369 --
Premiums on debt retirement -- (24,086) --
----------- ----------- ----------
Net cash provided by (used for) financing activities (56,131) 3,846 66,998
----------- ----------- ----------
Increase (decrease) in cash and temporary cash investments 7,302 (4,031) (25,357)
Cash and temporary cash investments at beginning of year 66,380 73,682 69,651
----------- ----------- ----------
Cash and temporary cash investments at end of year $73,682 $69,651 $44,294
----------- ----------- ----------
----------- ----------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F - 4
<PAGE>
GRAND UNION HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Grand Union Holdings Corporation ("Holdings" or the "Company"), a Delaware
corporation, and Grand Union Capital Corporation ("Capital"), a Delaware
corporation which is a wholly owned subsidiary of Holdings, are companies whose
principal asset is the capital stock of The Grand Union Company ("Grand Union"),
a Delaware corporation and a wholly owned subsidiary of Capital. Grand Union
operates retail food stores in seven northeastern states.
FISCAL YEAR.
The Company's fiscal year ends on the Saturday nearest the last day of
March.
PRINCIPLES OF CONSOLIDATION.
The consolidated financial statements include the accounts of Holdings and
its subsidiaries, all of which are wholly owned. Intercompany transactions
and balances have been eliminated.
TEMPORARY CASH INVESTMENTS.
For purposes of the Statement of Cash Flows, temporary cash investments
consist of short-term investments in highly liquid securities and cash
equivalents, with initial maturities of three months or less, including
certificates of deposit, banker's acceptances, commercial paper, repurchase
agreements and investments in direct obligations of the Government of the
United States of America.
INVENTORY VALUATION.
Grocery and general merchandise inventories are valued at the lower of
last-in, first-out ("LIFO") cost or market in order to more accurately match
costs and related revenues. At April 3, 1993 and April 2, 1994,
approximately $200,377,000 and $173,661,000, respectively, of grocery and
general merchandise inventories were valued using the LIFO method.
Replacement cost exceeded LIFO cost of these inventories by approximately
$5,799,000, $7,178,000 and $8,106,000 at March 28, 1992, April 3, 1993 and
April 2, 1994, respectively. During the current year, inventory levels were
reduced resulting in a liquidation of LIFO inventories carried at a value
lower than current cost. Net loss was decreased by approximately $1,160,000
as a result of this liquidation. Perishable inventories are valued at the
lower of average cost or market, which adequately provides for the matching
of costs and related revenues due to the rapid turnover of such inventories.
PROPERTY.
Buildings, fixtures and equipment and leasehold improvements are recorded at
cost and include interest on the funds borrowed to finance construction.
Depreciation and amortization of buildings, fixtures and equipment and
leasehold improvements is computed using the straight line method over
estimated useful lives ranging from three to forty years. Properties held
under capital leases are capitalized net of gains on sale leaseback
transactions and are amortized using the straight line method over the life
of each lease.
PRE-OPENING COSTS.
Store pre-opening costs are charged to expense as incurred.
GOODWILL.
Goodwill is amortized using the straight line method over a 40 year life.
Management periodically reassesses the appropriateness of both the carrying
value and remaining life of goodwill, principally based on forecasts of
operating cash flow less significant anticipated cash requirements such as
capital expenditures and debt repayments. Additionally, the Company
considers other factors such as its anticipated ability to access capital
markets in the future. At April 3, 1993 and April 2, 1994, accumulated
amortization was $57,723,000 and $73,779,000, respectively.
F - 5
<PAGE>
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BENEFICIAL LEASES.
Amortization of beneficial leases is computed using the straight line method
over the average lease life, which approximates ten years. At April 3, 1993
and April 2, 1994, accumulated amortization was $21,702,000 and $27,570,000,
respectively.
DEFERRED FINANCING FEES.
Financing fees are deferred and amortized over the expected life of the
related loan. At April 3, 1993 and April 2, 1994, accumulated amortization
was $3,780,000 and $8,610,000, respectively.
INCOME TAXES.
In the fiscal year ended April 3, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS
No. 109"), retroactive to March 29, 1992. FAS No. 109 is an asset and
liability approach that requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have
been recognized in the Company's financial statements or tax returns. In
estimating future tax consequences, FAS No. 109 generally considers all
expected future events other than enactments of changes in the tax law or
tax rates. The retroactive adoption of FAS No. 109 had no effect on the
Company's financial statements.
PENSION PLANS.
The Company maintains a noncontributory, trusteed pension plan covering
eligible employees and a supplemental nonqualified, nontrusteed plan for
certain executives. The Company's policy is to fund pension amounts which
satisfy the requirements of the Employee Retirement Income Security Act of
1974, as amended ("ERISA").
POSTRETIREMENT BENEFITS.
Effective April 4, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106 "Employers' Accounting for Postretirement
Benefits Other Than Pensions" ("FAS No. 106"), which requires the Company to
accrue the estimated cost of retiree benefit payments during the years each
employee provides services. The Company has elected to recognize the
cumulative effect of this obligation, an increase in accrued postretirement
benefit costs and in net loss of $30,308,000 ($402.03 per share), at April
4, 1993.
SELF INSURANCE.
Grand Union self insures workers' compensation, automobile liability,
general liability and non-union employee medical costs up to varying
deductible limits. Grand Union carries third party insurance in excess of
such limits. Reserves are provided for the estimated whole dollar settlement
value up to the deductible limits of all claims occurring during each policy
year.
STORE CLOSURE EXPENSE.
Estimated whole dollar net costs of holding and disposing of closed stores
are provided as of the date the store is closed.
FAIR VALUE OF FINANCIAL INSTRUMENTS.
The carrying amount of cash and temporary cash investments, receivables and
accounts payable and accrued liabilities approximates fair value. The fair
value of long-term debt and redeemable stock is based on quoted market
prices provided by an investment banking firm. The fair value of interest
rate swap agreements is the amount at which such agreements could be
settled, based on estimates from counterparties.
NET LOSS PER SHARE OF COMMON STOCK.
Net loss per share of common stock is based upon the weighted average number
of shares of common stock outstanding. Fully diluted net loss per share has
not been presented since the amounts are antidilutive.
F - 6
<PAGE>
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECLASSIFICATIONS
Certain reclassifications have been made in the prior years' financial
statements to conform to classifications used in the current year.
NOTE 2 - ACQUISITION OF LONG ISLAND STORES
On October 18, 1993, Grand Union acquired five supermarket locations on Long
Island. The cost of the acquisition included cash consideration of
approximately $16,100,000 (of which approximately $6,000,000 was allocated to
property, equipment and leasehold improvements and approximately $10,100,000 was
allocated to goodwill) and approximately $2,200,000 for store inventory. The
goodwill is being amortized over 40 years. The acquisition was financed through
the application of a portion of the proceeds of the sale to institutional
investors of $50,000,000 principal amount of 12 1/4% Senior Subordinated Notes
Due 2002, Series A (the "Series A Senior Subordinated Notes") on October 18,
1993.
NOTE 3 - LOSS ON DISPOSAL OF THE SOUTHERN REGION
On March 29, 1993, Grand Union sold 48 of its 51 Southern Region stores to a
single buyer and closed and subleased the remaining three stores. The
transaction yielded total gross proceeds of approximately $43,000,000, excluding
the assumption of capital leases of approximately $4,500,000, of which
$25,000,000 related to fixed assets and $17,500,000 related to inventory.
The Company recognized a loss of $198,000,000 on the disposal of the
Southern Region. The loss is comprised of the following (in thousands):
<TABLE>
<S> <C>
Write-off of goodwill and beneficial leases $106,389
Difference between proceeds received and the book value of tangible assets 37,244
Reserve for remaining Southern Region real estate 26,948
Employee termination expenses 9,846
Operating loss of the Southern Region subsequent to the date the decision was made to
sell the region 6,971
Other 10,602
--------
$198,000
--------
--------
</TABLE>
The following unaudited pro forma summary represents the consolidated
results of the operations of the Company as though the disposal of the Southern
Region had taken place as of the beginning of the period presented (in
thousands except per share amount).
<TABLE>
<CAPTION>
53 Weeks
Ended
April 3, 1993
-------------
<S> <C>
Sales $2,562,796
Gross profit 730,146
Loss before income taxes and extraordinary charges (60,205)
Net loss applicable to common stock (127,026)
Net loss per share applicable to common stock (1,688.08)
</TABLE>
F - 7
<PAGE>
NOTE 4 - RECAPITALIZATION AND EXTRAORDINARY CHARGES
On July 22, 1992, Holdings, Capital, a newly formed corporation, and Grand
Union completed a recapitalization (the "Recapitalization"). In connection with
the Recapitalization, Holdings, through Capital and Grand Union, entered into a
new bank credit agreement (as amended from time to time, the "Bank Credit
Agreement") providing for a $210,000,000 term loan facility (the "Term Loan")
and a $100,000,000 revolving credit facility (the "Revolving Credit Facility"),
issued $350,000,000 principal amount of Grand Union 11.25% Senior Notes due 2000
(the "11.25% Senior Notes") and $500,000,000 principal amount of Grand Union
12.25% Senior Subordinated Notes due 2002 (the "12.25% Senior Subordinated
Notes"), and sold $343,000,000 principal amount of Capital 15.00% Senior Zero
Coupon Notes due 2004 (the "Senior Zero Coupon Notes") and $745,000,000
principal amount of Capital 16.50% Senior Subordinated Zero Coupon Notes due
2007 (the "Senior Subordinated Zero Coupon Notes"), together with warrants to
purchase at a nominal price approximately 19.9% of the common stock of Holdings
on a fully diluted basis, for aggregate gross proceeds of approximately
$200,000,000. The Recapitalization also included the sale to institutional
investors of approximately 28.4% of the common stock of Holdings on a fully
diluted basis for approximately $25,000,000. The proceeds were used to retire
substantially all of the debt of Holdings, GU Acquisition Corporation ("GUAC"),
a wholly owned subsidiary of Holdings, and Grand Union as well as to repurchase
the shares and option to purchase shares owned by Salomon Brothers Holding
Company Inc, certain warrants held by the parties to the term loan and revolving
credit facility existing prior to the Recapitalization and approximately 3.4%
of the common stock of Holdings held by Grand Union management.
At the time of the Recapitalization, GUAC and its wholly-owned subsidiary
Cavenham Holdings Inc., the former parent of Grand Union, were merged into Grand
Union and Grand Union became a wholly-owned subsidiary of Capital.
On January 28, 1993, Grand Union sold $175,000,000 principal amount of
11.375% Senior Notes due 2000 (the "11.375% Senior Notes") in a private
placement. Net proceeds of the sale of the 11.375% Senior Notes were used to
repay $142,000,000 of indebtedness under the Term Loan and the remainder was
used to repay indebtedness under the Revolving Credit Facility. An additional
$20,856,000 of the Term Loan was repaid from the proceeds of the sale of the
Southern Region on March 29, 1993. All of such repaid indebtedness under the
Term Loan and under the Revolving Credit Facility had been incurred in
connection with the Recapitalization.
During the 53 weeks ended April 3, 1993, the Company recorded $3,516,000
relating to expenses incurred in connection with the Recapitalization and
extraordinary charges of $47,663,000 relating to early retirement of debt. The
Company had an operating loss in the year ended April 3, 1993 and was in a net
operating loss carryforward position and, accordingly, no tax benefit was
recorded in connection with the extraordinary charges. The extraordinary
charges are comprised of the following (column in thousands):
<TABLE>
<S> <C>
Premiums paid in connection with the Recapitalization $24,086
Deferred financing fees written off in connection with the Recapitalization 16,407
Deferred financing fees written off in connection with the refinancing and prepayment of
$142,000,000 of the term loan 6,252
Deferred financing fees written off in connection with the prepayment of $20,856,000 of
the term loan resulting from the disposal of the Southern Region 918
-------
$47,663
-------
-------
</TABLE>
F - 8
<PAGE>
NOTE 5 - PROPERTY
Property, at cost, consists of the following:
<TABLE>
<CAPTION>
April 3, April 2,
1993 1994
-------- --------
(in thousands)
<S> <C> <C>
Property owned:
Land $18,875 $19,315
Buildings 51,165 53,686
Fixtures and equipment 207,508 248,230
Leasehold improvements 118,360 133,777
-------- --------
395,908 455,008
Less: accumulated depreciation and amortization 125,534 158,277
-------- --------
Property owned, net 270,374 296,731
-------- --------
Property held under capital leases:
Land and buildings 88,418 103,228
Equipment 12,831 16,905
-------- --------
101,249 120,133
Less: accumulated amortization 11,444 16,310
-------- --------
Property held under capital leases, net 89,805 103,823
-------- --------
Property $360,179 $400,554
-------- --------
-------- --------
</TABLE>
Depreciation and amortization of owned and leased property for the 52 weeks
ended March 28, 1992, the 53 weeks ended April 3, 1993 and the 52 weeks ended
April 2, 1994 was $49,853,000, $53,335,000 and $52,760,000, respectively.
NOTE 6 - RECEIVABLES AND ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Receivables at April 3, 1993 and April 2, 1994 are net of allowance for
doubtful accounts of $605,000 and $809,000, respectively.
Accounts payable and accrued liabilities consist of the following:
<TABLE>
<CAPTION>
April 3, April 2,
1993 1994
-------- --------
(in thousands)
<S> <C> <C>
Accounts and drafts payable $163,152 $136,707
Accrued liabilities:
Payroll 23,992 25,073
Interest 25,709 27,258
Self insurance 19,696 15,480
Southern Region disposal 16,284 4,334
Taxes other than income taxes 9,555 9,036
Store closure reserves 4,762 4,003
Other 19,882 16,334
-------- --------
$283,032 $238,225
-------- --------
-------- --------
</TABLE>
F - 9
<PAGE>
NOTE 7 - INCOME TAXES
The components of the income tax provision are as follows:
<TABLE>
<CAPTION>
52 Weeks 53 Weeks 52 Weeks
Ended Ended Ended
March 28, April 3, April 2,
1992 1993 1994
--------- -------- --------
(in thousands)
<S> <C> <C> <C>
Currently payable
State $10,973 $4,535 $ --
Federal -- -- --
-------- -------- --------
10,973 4,535 --
-------- -------- --------
Deferred, resulting from:
Store closure provision 1,455 (9,243) 5,816
Accrued insurance (183) (717) 2,267
Deferred financing (1,802) (320) 554
Deferred compensation (60) 1,258 (114)
Beneficial lease amortization (3,093) (2,488) (2,054)
Effect of change in rate on temporary differences -- -- (3,099)
Excess of book over tax depreciation (2,692) (14,240) (4,171)
Postretirement benefits other than pension -- -- (11,407)
Interest expense -- (7,341) (12,132)
Net operating loss (13,811) (27,884) (13,121)
Write-off of deferred tax debits 16,592 -- --
Other 5,153 (2,908) (451)
Deferred tax asset valuation allowance -- 63,883 37,912
-------- -------- --------
1,559 -- --
-------- -------- --------
Total income tax provision $12,532 $4,535 $ --
-------- -------- --------
-------- -------- --------
</TABLE>
The reconciliation of the income tax provision computed at the federal
statutory rate to the reported income tax provision is as follows:
<TABLE>
<CAPTION>
52 Weeks 53 Weeks 52 Weeks
Ended Ended Ended
March 28, April 3, April 2,
1992 1993 1994
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Benefit computed at federal statutory tax rate $(17,857) $(105,021) $(41,284)
(Increase) decrease in the benefit resulting from:
Write-off of goodwill and beneficial leases from the disposal of the
Southern Region -- 36,172 --
Effect of change in rate on temporary differences -- -- (3,099)
Amortization of goodwill 6,231 6,011 5,486
State and local taxes, net of federal tax benefit 7,242 2,738 --
Deferred tax asset valuation allowance -- 63,883 37,912
Limitation on recognition of deferred tax debits 16,592 -- --
Alternative minimum tax 503 -- --
Other (179) 752 985
-------- --------- --------
Total income tax provision $12,532 $4,535 $ --
-------- --------- --------
-------- --------- --------
</TABLE>
F - 10
<PAGE>
NOTE 7 - INCOME TAXES (CONTINUED)
As of April 2, 1994, the Company had a net operating loss carryforward of
approximately $290,268,000 for tax purposes expiring in the years 2002 through
2009. The Recapitalization resulted in an "ownership change" of the Company
within the meaning of Section 382 of the Internal Revenue Code of 1986, as
amended, as a consequence of which utilization of the existing net operating
loss carryforward in post-change periods will be limited.
NOTE 8 - DEBT
Debt of the respective companies consists of the following:
<TABLE>
<CAPTION>
April 3, 1993 April 2, 1994
------------- -------------
(in thousands)
<S> <C> <C>
GRAND UNION:
Bank Credit Agreement
Term Loan $39,144 $39,144
Revolving Credit Facility -- 25,000
11.25% Senior Notes 350,000 350,000
11.375% Senior Notes 175,000 175,000
Equipment mortgage notes 1,813 3,960
12.25% Senior Subordinated Notes 500,000 500,000
12.25% Senior Subordinated Notes, Series A -- 50,000
13% Senior Subordinated Notes 16,150 16,150
CAPITAL:
15% Senior Zero Coupon Notes 129,366 150,482
16.50% Senior Subordinated Zero Coupon Notes 74,569 88,116
HOLDINGS:
12% Junior Subordinated Notes 5,521 7,151
---------- ----------
1,291,563 1,405,003
Less: current maturities of long-term debt 466 914
---------- ----------
Long-term debt $1,291,097 $1,404,089
---------- ----------
---------- ----------
</TABLE>
The Term Loan and Revolving Credit Facility provide for interest at either a
floating rate of 2% and 1.5%, respectively, per annum above the prime rate, as
defined, or 3.5% and 3%, respectively, per annum above the LIBOR rate, as
defined, at the option of Grand Union. As of April 2, 1994, borrowings under
the Term Loan and the Revolving Credit Facility were at weighted interest rates
of 7.32% and 7.75%, respectively. The Term Loan requires quarterly payments of
approximately $9,786,000 from September 30, 1997 through June 30, 1998. In
addition, the Bank Credit Agreement provides for mandatory prepayments of the
Term Loan Facility or commitment reductions under the Revolving Credit Facility
based on certain asset sales outside the ordinary course of business of Grand
Union and its subsidiaries, the proceeds of certain debt and equity issuances
and a percentage of Excess Cash Flow (as defined).
The Revolving Credit Facility provides for borrowings or issued letters of
credit aggregating $100,000,000 through February 28, 1998. At April 2, 1994,
there were $25,000,000 of borrowings outstanding and $42,646,000 of letters of
credit issued under the Revolving Credit Facility. Grand Union is charged
commitment fees of 1/2 of 1% per annum on the average unused portion of the
Revolving Credit Facility.
The Bank Credit Agreement contains certain financial and other restrictive
covenants with respect to Grand Union relating to, among other things, minimum
financial performance and limitations on the incurrence of additional
indebtedness, asset sales, capital expenditures, prepayment of other
indebtedness and payment of dividends. In addition, in each fiscal year, there
is a clean-down period whereby for a 30 consecutive day period selected by Grand
Union, which commences on or after April 15 of each calendar year and terminates
on or before June 29 of such calendar year, there can be no outstanding
revolving loans in excess of $35,000,000.
F - 11
<PAGE>
NOTE 8 - DEBT (CONTINUED)
The 11.25% Senior Notes, due July 15, 2000, and the 12.25% Senior
Subordinated Notes and Series A Senior Subordinated Notes, both due July 15,
2002, require semi-annual interest payments each January 15 and July 15.
The 11.375% Senior Notes are due February 15, 1999 and require semi-annual
interest payments each February 15 and August 15.
The 13% Senior Subordinated Notes (the "13% Notes") are due March 1998 and
require semi-annual interest payments each March 31 and September 30.
Indebtedness under the Bank Credit Agreement, the 11.25% Senior Notes and
the 11.375% Senior Notes is guaranteed by Capital and by Holdings on a pari
passu basis and is secured by a pledge of substantially all of the assets of
Grand Union (other than leasehold interests and assets secured by permitted
liens). Capital's guarantee of the Bank Credit Agreement, the 11.25% Senior
Notes and the 11.375% Senior Notes is secured by a pledge of the common stock of
Grand Union and Holdings' guarantee of the Bank Credit Agreement, the 11.25%
Senior Notes and the 11.375% Senior Notes is secured by a pledge of the common
stock of Capital. Indebtedness under the Series A Senior Subordinated Notes is
guaranteed by Capital on a pari passu basis with Capital's guarantee of the
12.25% Senior Subordinated Notes. Capital's guarantee of the Series A Senior
Subordinated Notes is not secured.
Capital has outstanding $343,000,000 principal amount at maturity of Senior
Zero Coupon Notes due July 15, 2004. The original issue discount of
$226,855,000 is being amortized recognizing a yield to maturity of 15.71% per
annum. The carrying value represents the principal at maturity less the
unamortized discount. On July 15, 1999, cash interest will begin accruing and
is payable semi-annually on January 15 and July 15 at a rate of 15.00% on the
unpaid principal amount. The Senior Zero Coupon Notes were issued with
detachable warrants to purchase common stock of Holdings.
Capital has outstanding $745,000,000 principal amount at maturity of Senior
Subordinated Zero Coupon Notes, due January 15, 2007. The original issue
discount of $678,802,000 is being amortized recognizing a yield to maturity of
17.41% per annum. The carrying value represents the principal at maturity less
the unamortized discount. The Senior Subordinated Zero Coupon Notes were issued
with detachable warrants to purchase common stock of Holdings.
Interest on the 12% Junior Subordinated Notes (the "Junior Notes") is
compounded semi-annually each March 1 and September 1. Based upon current
restrictions, such interest is not payable until either maturity (March 1999) or
redemption of the Junior Notes.
At April 2, 1994, the fair value of long-term debt, including the current
maturities, of Grand Union, Capital and Holdings was approximately
$1,405,000,000.
In connection with the Bank Credit Agreement, Grand Union entered into an
interest rate protection agreement on $75,000,000 of its borrowings. The effect
of the interest rate protection agreement is to limit LIBOR to 6.5% and 7.0% on
$40,000,000 and $35,000,000 of borrowings, respectively, through April 1995.
Grand Union is exposed to credit loss in the event of nonperformance by the
other party to the interest rate protection agreement. Grand Union does not
anticipate nonperformance by the counterparty.
In addition Grand Union entered into an interest rate swap agreement which
converts $150,000,000 of fixed rate debt into variable rate debt. Under the
terms of this agreement Grand Union receives a fixed rate of 4.53% on
$150,000,000 and pays a floating rate based on three month LIBOR, as determined
in three month intervals. The floating rate at April 2, 1994 was 3.5%. The net
amount received or paid is included in interest expense. Grand Union is exposed
to credit loss in the event of nonperformance by the other party to the swap
agreement. Grand Union does not anticipate nonperformance by the counterparty.
F - 12
<PAGE>
NOTE 8 - DEBT (CONTINUED)
At April 2, 1994, the estimated fair value of the interest rate swap
agreement was a liability of approximately $1,821,000; this liability has not
been recorded on the books of the Company.
At April 2, 1994, the estimated fair value of the interest rate protection
agreement was an asset of approximately $42,000; this asset has not been
recorded on the books of the Company.
Maturities of long-term debt during each of the next five fiscal years are
approximately $914,000, $1,000,000, $1,100,000, $45,518,000 and $217,873,000,
respectively.
The Company was in compliance with the terms and restrictive covenants of
its debt obligations as of April 2, 1994 and for the 52 weeks then ended.
NOTE 9 - PROPERTY LEASES
The Company operates principally in leased stores, distribution facilities
and offices, and in most cases holds renewal options with varying terms. Many
of the leases contain clauses which provide for increased rentals based upon
increases in real estate taxes and lessors' operating expenses.
The following is a schedule by year of future minimum payments under capital
leases together with the present value of net minimum lease payments as of
April 2, 1994 (in thousands):
<TABLE>
<S> <C>
Years ended March:
1995 $22,734
1996 21,301
1997 19,845
1998 18,984
1999 18,190
Later years 191,058
--------
Total minimum lease payments 292,112
Less: estimated executory costs included in total minimum lease payments 847
--------
Net minimum lease payments 291,265
Less: portion representing interest 164,026
--------
Present value of net minimum lease payments 127,239
Less: current portion of capital lease obligations 7,099
--------
Capital lease obligations $120,140
--------
--------
</TABLE>
The minimum lease payments shown above do not include future minimum
sublease rental income of $991,000 under non-cancelable subleases or payments
for contingent rentals under certain store leases on the basis of sales in
excess of stipulated amounts.
Contingent rentals incurred on capital leases for the 52 weeks ended March
28, 1992, for the 53 weeks ended April 3, 1993 and for the 52 weeks ended April
2, 1994 were $423,000, $358,000 and $313,000, respectively.
F - 13
<PAGE>
NOTE 9 - PROPERTY LEASES (CONTINUED)
The following is a schedule by year of future minimum rental payments, less
minimum sublease rental income, under operating leases that have initial lease
terms in excess of one year as of April 2, 1994 (in thousands):
<TABLE>
<S> <C>
Years ended March:
1995 $28,331
1996 28,075
1997 26,626
1998 25,303
1999 23,637
Later years 136,547
--------
Total minimum payments 268,519
Less: sublease rental income 5,879
--------
Net minimum rentals $262,640
--------
--------
</TABLE>
Total rental expense for all operating leases is as follows:
<TABLE>
52 Weeks 53 Weeks 52 Weeks
Ended Ended Ended
March 28, April 3, April 2,
1992 1993 1994
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Minimum rentals $37,003 $34,764 $26,512
Contingent rentals 4,029 3,963 3,658
-------- -------- --------
$41,032 $38,727 $30,170
-------- -------- --------
-------- -------- --------
</TABLE>
As of April 2, 1994, the Company is contingently liable to third parties
arising from assignment of various leases, which resulted primarily from the
disposals of unprofitable operations during the mid 1980s. The average
remaining term of these leases is approximately three years, with varying rental
terms. The Company is exposed to credit loss in the event of nonperformance by
various assignees. The Company has not experienced and does not anticipate any
material nonperformance by these assignees.
F - 14
<PAGE>
NOTE 10 - REDEEMABLE STOCK AND NONREDEEMABLE COMMON STOCK AND STOCKHOLDERS'
DEFICIT
Changes in Redeemable Common Stock and Nonredeemable Common Stock and
Stockholders' Deficit were as follows:
<TABLE>
<CAPTION>
Nonredeemable Common Stock and
Stockholders' Deficit
------------------------------
Redeemable Additional
Common Common Paid-in-
Stock Stock Capital (Deficit)
---------- ------ ---------- ----------
(in thousands)
<S> <C> <C> <C> <C>
Balance at March 30, 1991 $12,358 $1 $ -- $(112,644)
Net loss -- -- -- (65,053)
Pension adjustment -- -- -- (259)
Accrued preferred stock dividends -- -- -- (12,856)
-------- ------- ------- ---------
Balance at March 28, 1992 12,358 1 -- (190,812)
Net loss -- -- -- (313,421)
Capital contribution -- -- 5,004 --
Proceeds from the sale of warrants -- -- 1,187 --
Reclassification of redeemable common stock sold by
management to third parties (3,180) -- 3,180 --
Accrued preferred stock dividends -- -- (9,371) (5,252)
Notes receivable from management investors -- -- -- (501)
Pension adjustment -- -- -- (358)
Proceeds from sale of common stock to management
investors 369 -- -- --
-------- ------- ------- ---------
Balance at April 3, 1993 9,547 1 -- (510,344)
Net loss -- -- -- (117,953)
Accrued preferred stock dividends -- -- -- (16,011)
Pension adjustment -- -- -- (456)
Reclassification of redeemable common stock purchased
from management investors (140) -- -- 140
Payments of notes receivable from former management
investors -- -- -- 7
-------- ------- ------- ---------
Balance at April 2, 1994 $9,407 $1 $ - $(644,617)
-------- ------- ------- ---------
-------- ------- ------- ---------
</TABLE>
The redeemable common stock represents shares held by management investors,
which are redeemable under certain limited circumstances at the option of the
holder.
Prior to the Recapitalization, 75,000 shares of common stock of Holdings
were issued and outstanding and 17,500 shares of common stock of Holdings were
reserved for issuance pursuant to exercise of outstanding options and warrants.
The Recapitalization included the sale of shares of common stock and of
options and warrants to purchase common stock held by Salomon Brothers Holding
Company Inc, by the banks party to Grand Union's bank credit agreements which
were terminated in connection with the Recapitalization and by certain members
of management, as well as the purchase of shares of common stock and of warrants
to purchase shares of common stock by various investment funds and institutional
investors. Purchases and sales of Holdings common stock interests, including
options and warrants, in connection with the Recapitalization (the "Stock
Transactions") were made through a disbursement escrow account established for
the purpose of effecting various transfers of interests in Holdings common stock
(the "Equity Escrow"). Holdings issued 1,250 new warrants for proceeds of
approximately $1,187,000 in connection with the Recapitalization. The Stock
Transactions did not involve any payments by Grand Union or Holdings. Holdings
received a capital contribution from the Equity Escrow of approximately
$5,004,000
F - 15
<PAGE>
NOTE 10 - REDEEMABLE STOCK AND NONREDEEMABLE COMMON STOCK AND STOCKHOLDERS'
DEFICIT (CONTINUED)
as a result of the net transfer of interests. As part of the Stock
Transactions, the Company's Chairman transferred to the Equity Escrow an option,
granted in connection with the acquisition of Grand Union by Holdings in July
1989, and a note payable to Holdings in the amount of approximately $3,563,000
in exchange for 8,229 shares of Holdings common stock. The note payable to
Holdings has a maturity of 10 years, provides for interest equal to any cash
dividends paid on the 8,229 shares of Holdings common stock and is secured by,
and with recourse limited to, the 8,229 shares of Holdings common stock and any
property (other than cash) distributed on or with respect to such shares. The
note has been recorded as an offset to the attributed value of the common shares
issued.
At the time of the Recapitalization, Holdings issued 388 shares of common
stock to certain members of Grand Union management, for which Holdings received
cash proceeds of approximately $369,000. After giving effect to the Stock
Transactions and the sale of such 388 shares to management investors, there were
75,388 shares of common stock of Holdings outstanding (including 26,719 shares
of non-voting, Class B common stock) and 18,750 shares of common stock of
Holdings are reserved for issuance pursuant to exercise of outstanding warrants
which may be exercised, at a nominal price, at any time prior to July 23, 2007.
During the 52 weeks ended April 2, 1994, Holdings purchased 164 shares of
common stock from former management investors for approximately $156,000 (of
which $140,000 was carried as Redeemable Common Stock) and in related
transactions was repaid $7,000 to fully satisfy notes receivable from these
management investors.
Changes in Redeemable Preferred Stock were as follows:
<TABLE>
<CAPTION>
Redeemable Preferred Stock
--------------------------------------------------------
Series A Series B Series C
Preferred Preferred Preferred
Stock Stock Stock Total
---------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C>
Balance at March 30, 1991 $42,968 $7,903 $53,770 $104,641
Accrued preferred stock dividends 5,294 936 6,626 12,856
Preferred stock dividends -- (941) -- (941)
---------- ---------- ---------- ----------
Balance at March 28, 1992 48,262 7,898 60,396 116,556
Accrued preferred stock dividends 6,071 955 7,597 14,623
Preferred stock dividends - (939) -- (939)
---------- ---------- ---------- ----------
Balance at April 3, 1993 54,333 7,914 67,993 130,240
Accrued preferred stock dividends 6,697 936 8,378 16,011
Preferred stock dividends -- (939) -- (939)
---------- ---------- ---------- ----------
Balance at April 2, 1994 $61,030 $7,911 $76,371 $145,312
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
The Company has outstanding at April 2, 1994 three classes of preferred
stock. The Series A cumulative exchangeable redeemable preferred stock ("Series
A preferred stock") has a $.01 par value; 500,000 shares authorized; and 351,745
shares issued and outstanding. The Series B cumulative redeemable convertible
preferred stock ("Series B preferred stock") has a $.01 par value; 500,000
shares authorized; and 78,256 shares issued and outstanding. The Series C
cumulative redeemable convertible preferred stock ("Series C preferred stock")
has a $.01 par value; 500,000 shares authorized; and 440,771 shares issued and
outstanding.
The Series A, Series B and Series C preferred stock each carry dividend
rates of 12% per annum. At the discretion of the Company cash dividends are
payable on the Series A, Series B and Series C preferred stock semi-annually
each March 1 and September 1; however, no cash dividends may be declared or paid
on the Series A, Series B or Series C preferred stock while the Bank Credit
Agreement is outstanding or if such declaration or payment would violate the
terms of indebtedness incurred to refinance the 13% Notes or the Bank Credit
Agreement. So long as cash dividends are prohibited, dividends on the Series B
preferred stock are payable in Junior Notes annually each March 1. Series B
preferred stock, and accrued and unpaid dividends thereon, may
F - 16
<PAGE>
NOTE 10 - REDEEMABLE STOCK AND NONREDEEMABLE COMMON STOCK AND STOCKHOLDERS'
DEFICIT (CONTINUED)
be converted at any time, at the holder's option, into shares of Series C
preferred stock. Series C preferred stock, and accrued and unpaid dividends
thereon, may be converted at any time, at the holder's option, into shares of
Series B preferred stock; or the Series C preferred shares may be converted at
any time, at the holder's option, into the same number of shares of Series B
preferred stock and the accrued and unpaid dividends on such stock into a
principal amount of Junior Notes. Holdings preferred stock has no voting rights
except as required by law and except that holders of each series have a class
vote as to any matter which would change the preferences, rights or powers of
such series and the vote of all series of preferred stock, voting together, is
required to issue any prior ranking preferred stock.
The dividend rate on the Series A, Series B and Series C preferred stock
increases from 12% to 20% as of July 14, 1996. The Company expects to redeem
the Series A, Series B and Series C preferred stock on or before the date of the
dividend step-up. Accordingly, accrued undeclared dividends have been recorded
at a rate of 12% as a reduction in additional paid-in-capital or as an increase
in stockholders' deficit, and as an increase in the respective preferred stock
carrying values.
Series A preferred stock may be exchanged into Junior Notes at the sole
option of the Company, in whole, or in part. Series A, Series B and Series C
preferred stock may be redeemed at any time at the option of the Company, in
whole, or in part. The redemption of Series A, Series B and Series C preferred
stock must be in pro rata amounts. Series A, Series B and Series C preferred
stock is redeemable at the holders' option under certain limited circumstances
relating to change of control and, accordingly, outstanding amounts of these
classes of preferred stock are shown as Redeemable stock in the accompanying
Consolidated Balance Sheet. The redemption price of Series A, Series B and
Series C preferred stock is one hundred dollars per share plus accrued and
unpaid dividends as of the date of redemption. The liquidation preference of
Series A, Series B and Series C preferred stock is one hundred dollars per share
plus accrued and unpaid dividends.
Upon the liquidation or dissolution of the Company the priority of amounts
payable to holders of preferred stock is as follows: (i) the amount of accrued
and unpaid dividends on the Series B preferred stock, and any outstanding
principal and accrued interest on Junior Notes; (ii) the amount of accrued and
unpaid dividends on the Series A and Series C preferred stock; (iii) one hundred
dollars per share for outstanding Series A and Series C preferred stock; and
(iv) one hundred dollars per share for outstanding Series B preferred stock.
At April 2, 1994, the fair value of Holdings' redeemable preferred stock was
approximately $98,378,000. The redeemable common stock of Holdings is neither
traded nor a quoted security and an estimate of fair value has not been
presented since it cannot be determined without incurring excessive costs.
F - 17
<PAGE>
NOTE 11 - PENSION PLANS
The Company's net periodic pension expense for the 52 weeks ended March 28,
1992, for the 53 weeks ended April 3, 1993 and for the 52 weeks ended April 2,
1994 was $1,661,000, $3,867,000 and $6,744,000, respectively, and included the
following components:
<TABLE>
<CAPTION>
52 Weeks 53 Weeks 52 Weeks
Ended Ended Ended
March 28, April 3, April 2,
1992 1993 1994
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Service cost - benefits earned during the period $5,627 $5,629 $5,212
Interest costs on projected benefit obligations 13,161 13,726 13,742
Return on plan assets (19,165) (21,504) (9,068)
Net amortization and deferral 2,038 4,337 (7,610)
Charge relating to early retirement program -- -- 4,468
Curtailment loss -- 1,679 --
-------- -------- --------
Net periodic pension expense $1,661 $3,867 $6,744
-------- -------- --------
-------- -------- --------
</TABLE>
As a result of the disposal of the Southern Region and an early retirement
program offered to certain employees, a net curtailment loss of approximately
$1,679,000 was incurred for the 53 weeks ended April 3, 1993. During the 52
weeks ended April 2, 1994, the Company incurred a charge of $4,468,000 relating
to an early retirement program offered to certain employees.
The actuarial present value of benefit obligations and the funded status of
the Company's qualified pension plan as of April 3, 1993 and April 2, 1994 are
as follows:
<TABLE>
<CAPTION>
April 3, April 2,
1993 1994
-------- --------
(in thousands)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits $156,921 $160,910
Nonvested benefits 4,160 4,503
--------- ---------
Total benefits $161,081 $165,413
--------- ---------
--------- ---------
Projected benefit obligations $(181,021) $(177,518)
Plan assets, primarily stocks and bonds, at fair value 196,259 181,337
--------- ---------
Funded status 15,238 3,819
Unrecognized net loss 13,579 18,299
Unrecognized prior service cost 1,032 1,736
--------- ---------
Pension asset $29,849 $23,854
--------- ---------
--------- ---------
</TABLE>
F - 18
<PAGE>
NOTE 11 - PENSION PLANS (CONTINUED)
The actuarial present value of benefit obligations of the Company's
unqualified and unfunded pension plan as of April 3, 1993 and April 2, 1994 is
as follows:
<TABLE>
<CAPTION>
April 3, April 2,
1993 1994
-------- --------
(in thousands)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits $5,654 $5,739
Nonvested benefits 180 624
------- -------
Total benefits $5,834 $6,363
------- -------
------- -------
Projected benefit obligations $(6,432) $(7,110)
Unrecognized net loss 1,595 2,033
Unrecognized prior service cost -- (32)
Adjustment required to recognize minimum liability (997) (1,254)
------- -------
Pension obligation $(5,834) $(6,363)
------- -------
------- -------
</TABLE>
The pension asset and pension obligation are included in Other assets and
Other liabilities, respectively, in the accompanying Consolidated Balance Sheet.
Significant actuarial assumptions used in all Company sponsored plans were
as follows:
<TABLE>
<CAPTION>
52 Weeks 53 Weeks 52 Weeks
Ended Ended Ended
March 28, April 3, April 2,
1992 1993 1994
----------- ----------- -----------
<S> <C> <C> <C>
Discount rates 8.0% - 8.8% 8.0% - 8.8% 7.0% - 8.0%
Rates of increase in future compensation 4.7% - 5.3% 4.9% - 5.3% 3.9% - 4.3%
Long-term rate of return on plan assets 9.8% 9.5% 9.5%
</TABLE>
NOTE 12 - POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS
The Company provides certain health care and life insurance benefits for
substantially all of its full-time non-union employees and union employee
groups. The Company's union employee groups are participants in multi-employer
plans which require monthly contributions and which are not subject to the
provisions of Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" ("FAS No. 106"). In
the fiscal years ended March 28, 1992 and April 3, 1993, the Company recognized
$2,110,000 and $2,329,000, respectively, as an expense for postretirement health
care and life insurance benefits for its non-union employees, as claims were
paid (pay-as-you-go basis). The Company's postretirement plans currently are
not funded. Additionally, at April 3, 1993, in connection with the disposition
of the Southern Region, Grand Union provided approximately $2,920,000 relating
to anticipated postretirement health care and life insurance benefits of
Southern Region employees.
Effective April 4, 1993, the Company adopted FAS No. 106, which requires the
Company to accrue the estimated cost of retiree benefit payments during the
years each employee provides services. The Company recognized the cumulative
effect of this obligation, an increase in accrued postretirement benefit costs
of $30,308,000 and a decrease in net earnings of $30,308,000 ($402.03 per
share), at April 4, 1993.
F - 19
<PAGE>
NOTE 12 - POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS (CONTINUED)
The unfunded accumulated postretirement benefit obligation consists of the
following at April 4, 1993, including amounts provided at April 3, 1993 in
connection with the disposition of the Southern Region, and April 2, 1994:
<TABLE>
<CAPTION>
April 4,
1993
(date of April 2,
adoption) 1994
--------- --------
(in thousands)
<S> <C> <C>
Retirees $18,129 $17,050
Fully eligible active plan participants 5,807 2,411
Other active plan participants 9,292 15,645
Unrecognized net loss -- (1,412)
--------- --------
$33,228 $33,694
--------- --------
--------- --------
</TABLE>
Net postretirement benefit cost for the 52 weeks ended April 2, 1994
consisted of the following components (in thousands):
<TABLE>
<S> <C>
Service cost - benefits earned during the period $728
Interest cost on accumulated postretirement benefit obligation 2,571
-------
$3,299
-------
-------
</TABLE>
The assumed health care trend cost rate used in measuring the accumulated
postretirement obligation as of April 4, 1993 was 15% for associates pre-age 65
and ranges from 12% to 15% for associates post-age 65 for 1993 decreasing each
successive year by 1% until the respective trend rates reach 6.5% after which
the trend rate remains constant. As of April 2, 1994, the rate used in
measuring the accumulated postretirement obligation was 14% for associates pre-
age 65 and 11% for associates post-age 65, decreasing each successive year by 1%
until the respective trend rates reach 5% after which the trend rate remains
constant. An increase of 1% in the assumed health care cost trend rate for each
year would increase the accumulated postretirement benefit obligation and the
net postretirement health care cost by approximately $800,000 and $100,000,
respectively.
Prior to January 1, 1994, Grand Union provided medical benefits which were,
in part, dependent upon the health care cost rate. Effective January 1, 1994,
Grand Union modified its postretirement health care benefits to provide benefits
for all future retirees based on a service related flat dollar premium
allowance. Accordingly, the health care trend rate will not be a significant
factor in determining Grand Union's liability for future retirees under its
postretirement health care arrangements. The modification to the plan did not
have a material effect on the accumulated postretirement benefit obligation.
The assumed discount rate used in determining the accumulated postretirement
benefit obligation was 8% and 7.5% at April 4, 1993 and April 2, 1994,
respectively, and the interest cost component of the net periodic cost was 8%.
NOTE 13 - RELATED PARTY TRANSACTIONS
The Company is party to a financial advisory agreement with Miller Tabak
Hirsch + Co. ("MTH") under which MTH provides certain financial consulting and
business management services to the Company through July 1997. During the 52
weeks ended March 28, 1992, the 53 weeks ended April 3, 1993 and the 52 weeks
ended April 2, 1994 the Company paid $600,000, $825,000 and $900,000,
respectively, to MTH.
F - 20
<PAGE>
NOTE 13 - RELATED PARTY TRANSACTIONS (CONTINUED)
In conjunction with the Recapitalization, Holdings, through Grand Union,
made a $15,000,000 prepayment as called for under an agreement (the "Operating
Agreement") between Grand Union and P&C Food Markets ("P&C Foods"), an
affiliated company controlled by MTH, whereby Grand Union in July 1990 acquired
the right to operate 13 P&C Foods' stores in New England under the Grand Union
name until July 2000 for an average annual rent of approximately $10,700,000,
with an option to extend the term of such operation for an additional five
years. The prepayment results in a reduction of rent payments over the
remaining life of the lease. In July 1990, P&C Foods also granted Grand Union
an option (the "P&C Foods Purchase Option"), at a cost of $7,500,000, to
purchase such stores at an amount defined in the Operating Agreement which
approximates fair market value.
During the year ended April 2, 1994, Grand Union entered into a program to
consolidate the purchasing and distribution of health and beauty care products
and general merchandise with Penn Traffic. Under this program, Grand Union
purchases health and beauty care ("HBC") products for both Grand Union and Penn
Traffic, and Penn Traffic purchases general merchandise ("GM") products for both
Penn Traffic and Grand Union. Grand Union's general merchandise warehouse in
Montgomery, New York is used to store and distribute HBC and GM products to
Grand Union stores and to certain of Penn Traffic's stores and wholesale
customers. Under the arrangement, Penn Traffic owns the inventory of GM and HBC
products located at the Montgomery warehouse and shares the cost of operating
the warehouse in an amount proportionate to Penn Traffic's usage of the
facility. In connection with this agreement, Penn Traffic purchased all of the
HBC and GM inventories previously owned by Grand Union for approximately
$12,821,000. During the year ended April 2, 1994, Grand Union purchased from
vendors approximately $75,262,000 of HBC products under the agreement which
amounts are reimbursable to Grand Union by Penn Traffic. Additionally, Grand
Union purchased approximately $48,163,000 from Penn Traffic's inventory of HBC
and GM products at cost. At April 2, 1994, Grand Union has recorded a net
receivable of approximately $5,014,000 related to this agreement.
NOTE 14 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
52 Weeks 53 Weeks 52 Weeks
Ended Ended Ended
March 28, April 3, April 2,
1992 1993 1994
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Cash paid for interest $89,457 $115,612 $142,501
Cash paid for income taxes 8,969 3,380 --
Capital lease obligations incurred 11,810 22,146 24,522
Accrued dividends on preferred stock 12,856 14,623 16,011
Issuance of Junior Notes 941 939 939
</TABLE>
F - 21
<PAGE>
NOTE 15 - QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
53 WEEKS ENDED APRIL 3, 1993:
1st (a) 2nd 3rd 4th (b)
---------- ---------- ---------- ----------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Sales $907,970 $660,947 $660,830 $604,240
Gross profit 253,800 187,243 183,176 177,287
Loss on disposal of the Southern Region -- -- -- (198,000)
Loss before income taxes and extraordinary charges (16,680) (15,113) (13,880) (215,550)
Extraordinary charges -- (40,493) -- (7,170)
Net loss (20,843) (55,975) (13,880) (222,723)
Accrued preferred stock dividends (4,253) (3,275) (3,369) (3,726)
Net loss applicable to common stock (25,096) (59,250) (17,249) (226,449)
Net loss per share applicable to common stock (334.61) (785.93) (228.80) (3,009.33)
52 WEEKS ENDED APRIL 2, 1994:
1st (a) 2nd 3rd 4th
---------- ---------- ---------- ----------
(in thousands, except per share data)
Sales $761,098 $559,769 $583,492 $572,980
Gross profit 215,102 159,614 171,145 165,175
Charge relating to early retirement program -- -- -- (4,468)
Loss before income taxes and cumulative effect of
accounting change (28,457) (16,546) (16,933) (25,709)
Cumulative effect of accounting change (30,308) -- -- --
Net loss (58,765) (16,546) (16,933) (25,709)
Accrued preferred stock dividends (4,743) (3,667) (3,760) (3,841)
Net loss applicable to common stock (63,508) (20,213) (20,693) (29,550)
Net loss per share applicable to common stock (843.20) (268.65) (275.09) (392.83)
<FN>
(a) Represents 16 weeks, all other quarters except footnote (b) are 12 weeks.
(b) Represents 13 weeks.
</TABLE>
Grand Union regularly records as reductions to cost of goods sold, and
correspondingly deducts from payments to vendors, promotional allowances offered
by vendors. During the 52 weeks ended April 2, 1994, Grand Union recognized
that its level of repayments of vendor allowances was greater than that
customarily experienced by it. Beginning in the second quarter of the year
ended April 2, 1994, Grand Union modified its procedures relating to the
recording and deduction of promotional allowances. These changes are expected
to improve the consistency of inter-period income recognition by reducing
required adjustments to previously deducted amounts. As a result of these
changes, the Company estimates that it experienced increases in net loss of
approximately $4,200,000 during the 12 weeks ended October 16, 1993, $1,400,000
during the 12 weeks ended January 8, 1994 and $600,000 during the 12 weeks ended
April 2, 1994. Grand Union estimates that the impact of promotional allowance
adjustments was to decrease net loss during the 16 weeks ended July 24, 1993 by
$1,700,000. Accordingly, the estimated impact for the 52 weeks ended April 2,
1994 was an increase in net loss of approximately $4,500,000. The impact of
promotional allowance adjustments was not material to prior years. Grand Union
believes that such impact will be minimal for periods subsequent to April 2,
1994.
During the 12 weeks ended October 16, 1993, Grand Union recorded a
$3,800,000 credit to operating and administrative expense resulting from a
reduction in the Company's estimate of its required level of self insurance
reserves.
F - 22
<PAGE>
FINANCIAL STATEMENTS SCHEDULES
GRAND UNION HOLDINGS CORPORATION
SCHEDULE II- AMOUNTS RECEIVABLE FROM RELATED PARTIES AND
UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER THAN
RELATED PARTIES
FOR THE YEARS ENDED MARCH 28, 1992, APRIL 3, 1993 AND APRIL 2, 1994
<TABLE>
<CAPTION>
Balance at
Balance at End of
Beginning Year
Name of Debtor of Year Additions Deductions Noncurrent
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Year Ended March 28, 1992
Joseph J. McCaig, President $ - $ - $ - $ -
Year Ended April 3, 1993
Joseph J. McCaig, President $ - $227,676 $ - $227,676
Year Ended April 2, 1994
Joseph J. McCaig, President $227,676 $ - $ - $227,676
</TABLE>
F - 23
<PAGE>
GRAND UNION HOLDINGS CORPORATION
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
52 Weeks 53 Weeks 52 Weeks
Ended Ended Ended
March 28, April 3, April 2,
1992 1993 1994
-------- -------- --------
(in thousands except per share data)
<S> <C> <C> <C>
Administrative expense $(15) $ -- $(10)
Equity income (loss) of subsidiary before extraordinary charges and
cumulative effect of accounting change 5,832 (237,777) (86,944)
Recapitalization expense -- (3,516) --
Interest expense:
Debt (65,120) (22,674) (691)
Amortization of deferred financing fees (5,718) (1,789) --
---------- ---------- ----------
Loss before income taxes, extraordinary charges and cumulative
effect of accounting change (65,021) (265,756) (87,645)
Income tax provision (32) (2) --
---------- ---------- ----------
Loss before extraordinary charge and cumulative effect of
accounting change (65,053) (265,758) (87,645)
Extraordinary charge relating to early extinguishment of debt
of subsidiary -- (38,827) --
Extraordinary charges relating to early extinguishment of debt -- (8,836) --
Cumulative effect of accounting change of subsidiary -- -- (30,308)
---------- ---------- ----------
Net loss (65,053) (313,421) (117,953)
Accrued preferred stock dividends (12,856) (14,623) (16,011)
---------- ---------- ----------
Net loss applicable to common stock $(77,909) $(328,044) $(133,964)
---------- ---------- ----------
---------- ---------- ----------
Weighted average number of common shares outstanding 75,000 75,249 75,258
---------- ---------- ----------
---------- ---------- ----------
Per Share Data:
Loss applicable to common stock before extraordinary charge
and cumulative effect of accounting change
(after accrued preferred stock dividends) $(1,038.79) $(3,726.05) $(1,377.34)
---------- ---------- ----------
---------- ---------- ----------
Extraordinary charge -- $(633.40) --
---------- ---------- ----------
---------- ---------- ----------
Cumulative effect of accounting change -- -- $(402.72)
---------- ---------- ----------
---------- ---------- ----------
Net loss applicable to common stock $(1,038.79) $(4,359.45) $(1,780.06)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F - 24
<PAGE>
GRAND UNION HOLDINGS CORPORATION
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEET
<TABLE>
<CAPTION>
April 3, April 2,
1993 1994
-------- --------
(in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and temporary cash investments $611 $183
Receivables -- 269
-------- --------
Total current assets $611 $452
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Long-term debt $5,521 $7,151
-------- --------
Accumulated losses of subsidiary in excess of investment 365,646 483,354
-------- --------
Commitments and contingencies
Redeemable stock:
Common stock, $.01 par value 9,547 9,407
Preferred stock (liquidation preference $145,312,000 in aggregate) 130,240 145,312
-------- --------
Total redeemable stock 139,787 154,719
-------- --------
Nonredeemable common stock and stockholders' deficit:
Class A common stock, $.01 par value; authorized 473,281 shares; issued
and outstanding 48,669 and 48,505 shares (net of treasury shares) less
12,096 and 11,932 shares, respectively, shown as redeemable common stock 1 1
Class B common stock, $.01 par value; 26,719 shares authorized, issued and
outstanding -- --
Treasury stock; 164 shares of Class A common stock at cost -- (156)
Accumulated deficit (510,344) (644,617)
-------- --------
Total nonredeemable common stock and stockholders' deficit (510,343) (644,772)
-------- --------
$611 $452
-------- --------
-------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
F - 25
<PAGE>
GRAND UNION HOLDINGS CORPORATION
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
52 Weeks 53 Weeks 52 Weeks
Ended Ended Ended
March 28, April 3, April 2,
1992 1993 1994
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $(65,053) $(313,421) $(117,953)
Adjustments to reconcile net loss to net cash provided by
(used for) operating activities:
Cumulative effect of accounting change of subsidiary -- -- 30,308
Extraordinary charge of subsidiary -- 38,827 --
Extraordinary charge on early extinguishment of debt -- 8,836 --
Noncash interest 65,325 22,678 691
Equity in (income) loss of subsidiary (5,832) 237,777 86,944
Amortization of deferred financing fees 5,718 1,789 --
Receivables (111) 111 (269)
Accrued liabilities (177) -- --
Other 29 (1,873) 7
-------- --------- ---------
Net cash used for operating activities (101) (5,276) (272)
-------- --------- ---------
FINANCING ACTIVITIES:
Dividend from subsidiary -- 498,925 --
Capital contribution -- 5,004 --
Proceeds from issuance of warrants -- 1,187 --
Proceeds from issuance of common stock -- 369 --
Retirement of long-term debt (10) (500,000) --
Purchase of redeemable Class A common stock -- -- (156)
-------- --------- ---------
Net cash provided by (used for) financing activities (10) 5,485 (156)
-------- --------- ---------
Increase (decrease) in cash and temporary cash investments (111) 209 (428)
Cash and temporary cash investments at beginning of year 513 402 611
-------- --------- ---------
Cash and temporary cash investments at end of year $402 $611 $183
-------- --------- ---------
-------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
F-26
<PAGE>
GRAND UNION HOLDINGS CORPORATION
SCHEDULE IV - INDEBTEDNESS TO
RELATED PARTIES - NONCURRENT
FOR THE YEARS ENDED MARCH 28, 1992, APRIL 3, 1993 AND APRIL 2, 1994
<TABLE>
<CAPTION>
Balance at
Beginning Balance at
Name of Debtor of Year Additions Deductions End of Year
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Year Ended March 28, 1992
Salomon Brothers Holding Company Inc $155,962 $17,298 $ 5,435 $167,825
Year Ended April 3, 1993
Salomon Brothers Holding Company Inc $167,825 $22,765 $190,590 $ --
Year Ended April 2, 1994
Salomon Brothers Holding Company Inc $ -- $ -- $ -- $ --
</TABLE>
F - 27
<PAGE>
GRAND UNION HOLDINGS CORPORATION
SCHEDULE V - PROPERTY, PLANT & EQUIPMENT
FOR THE YEARS ENDED MARCH 28, 1992, APRIL 3, 1993 AND APRIL 2, 1994
<TABLE>
<CAPTION>
Balance at
Beginning Additions Balance at
Classification of Year at Cost Retirements Other End of Year
- -------------- ---------- --------- ----------- ----- ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Year Ended March 28, 1992
Property owned:
Land $19,508 $26 $(752) $1,149* $19,931
Buildings 42,355 1,015 (2,370) 4,072* 45,072
Fixtures and equipment 209,142 21,541 (2,511) -- 228,172
Leasehold improvements 108,294 6,711 (2,360) -- 112,645
-------- ------- ------- ------- --------
Property owned $379,299 $29,293 $(7,993) $5,221 $405,820
-------- ------- ------- ------- --------
-------- ------- ------- ------- --------
Property leased:
Land and buildings $103,613 $6,539 $(169) $(5,221)* $104,762
Equipment 2,273 5,271 -- -- 7,544
-------- ------- ------- ------- --------
Property leased $105,886 $11,810 $(169) $(5,221) $112,306
-------- ------- ------- ------- --------
-------- ------- ------- ------- --------
Year Ended April 3, 1993
Property owned:
Land $19,931 $250 $(1,306) $ -- $18,875
Buildings 45,072 12,644 (6,551) -- 51,165
Fixtures and equipment 228,172 29,540 (50,204) -- 207,508
Leasehold improvements 112,645 15,654 (9,939) -- 118,360
-------- ------- ------- ------- --------
Property owned $405,820 $58,088 $(68,000) $ -- $395,908
-------- ------- ------- ------- --------
-------- ------- ------- ------- --------
Property leased:
Land and buildings $104,762 $14,038 $(30,382) $ -- $88,418
Equipment 7,544 8,108 (2,821) -- 12,831
-------- ------- ------- ------- --------
Property owned $112,306 $22,146 $(33,203) $ -- $101,249
-------- ------- ------- ------- --------
-------- ------- ------- ------- --------
Year Ended April 2, 1994
Property owned:
Land $18,875 $1,110 $(670) $ -- $19,315
Buildings 51,165 4,426 (1,905) -- 53,686
Fixtures and equipment 207,508 42,340 (1,618) -- 248,230
Leasehold improvements 118,360 21,321 (5,904) -- 133,777
-------- ------- ------- ------- --------
Property owned $395,908 $69,197 $(10,097) $ -- $455,008
-------- ------- ------- ------- --------
-------- ------- ------- ------- --------
Property leased:
Land and buildings $88,418 $19,311 $(4,501) $ -- $103,228
Equipment 12,831 5,211 (1,137) -- 16,905
-------- ------- ------- ------- --------
Property owned $101,249 $24,522 $(5,638) $ -- $120,133
-------- ------- ------- ------- --------
-------- ------- ------- ------- --------
<FN>
* Represents the buyout of a capital lease obligation.
</TABLE>
F - 28
<PAGE>
GRAND UNION HOLDINGS CORPORATION
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION & AMORTIZATION
OF PROPERTY, PLANT & EQUIPMENT
FOR THE YEARS ENDED MARCH 28, 1992, APRIL 3, 1993 AND APRIL 2, 1994
<TABLE>
<CAPTION>
Balance at
Beginning Balance at
Classification of Year Additions Retirements Other End of Year
- -------------- ---------- --------- ----------- ----- ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Year Ended March 28, 1992
Property owned:
Buildings $2,393 $1,409 $(169) $1,091* $4,724
Fixtures and equipment 50,069 29,966 (2,045) -- 77,990
Leasehold improvements 18,128 10,791 (992) -- 27,927
-------- ------- ------- ------- --------
Property owned $70,590 $42,166 $(3,206) $1,091 $110,641
-------- ------- ------- ------- --------
-------- ------- ------- ------- --------
Property leased:
Buildings $10,403 $6,544 $(169) $(1,091)* $15,687
Equipment 671 1,143 -- -- 1,814
-------- ------- ------- ------- --------
Property leased $11,074 $7,687 $(169) $(1,091) $17,501
-------- ------- ------- ------- --------
-------- ------- ------- ------- --------
Year Ended April 3, 1993
Property owned:
Buildings $4,724 $1,684 $(501) $ -- $5,907
Fixtures and equipment 77,990 31,849 (23,808) -- 86,031
Leasehold improvements 27,927 10,687 (5,018) -- 33,596
-------- ------- ------- ------- --------
Property owned $110,641 $44,220 $(29,327) $ -- $125,534
-------- ------- ------- ------- --------
-------- ------- ------- ------- --------
Property leased:
Buildings $15,687 $8,170 $(12,670) $ -- $11,187
Equipment 1,814 945 (2,502) -- 257
-------- ------- ------- ------- --------
Property leased $17,501 $9,115 $(15,172) $ -- $11,444
-------- ------- ------- ------- --------
-------- ------- ------- ------- --------
Year Ended April 2, 1994
Property owned:
Buildings $5,907 $3,162 $(249) $ -- $8,820
Fixtures and equipment 86,031 29,565 (6,626) -- 108,970
Leasehold improvements 33,596 10,138 (3,247) -- 40,487
-------- ------- ------- ------- --------
Property owned $125,534 $42,865 $(10,122) $ -- $158,277
-------- ------- ------- ------- --------
-------- ------- ------- ------- --------
Property leased:
Buildings $11,187 $6,282 $(3,892) $ -- $13,577
Equipment 257 3,613 (1,137) -- 2,733
-------- ------- ------- ------- --------
Property leased $11,444 $9,895 $(5,029) $ -- $16,310
-------- ------- ------- ------- --------
-------- ------- ------- ------- --------
<FN>
* Represents the buyout of a capital lease obligation.
</TABLE>
F - 29
<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended January 7, 1995
---------------
Commission File Number 33-59438
--------
THE GRAND UNION COMPANY
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22 - 1518276
-------- ------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
201 Willowbrook Boulevard, Wayne, New Jersey 07470 - 0966
-------------------------------------------- -------------
(Address of principal executive offices) (Zip Code)
201-890-6000
------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X . No .
------- -------
As of February 21, 1995, there were issued and outstanding 801.5 shares of
the registrant's common stock.
<PAGE>
THE GRAND UNION COMPANY
INDEX
PART I - FINANCIAL INFORMATION (UNAUDITED) PAGE NO.
ITEM 1. FINANCIAL STATEMENTS.
Consolidated Statement of Operations - 12 and 40 weeks ended
January 7, 1995 and January 8, 1994 3
Consolidated Balance Sheet - January 7, 1995 and April 2, 1994 4
Consolidated Statement of Cash Flows - 40 weeks ended
January 7, 1995 and January 8, 1994 5
Notes to Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. 8
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS. 13
ITEM 3. DEFAULTS ON SENIOR SECURITIES. 13
ITEM 5. OTHER INFORMATION. 13
ITEM 6. EXHIBITS, REPORTS ON FORM 8-K. 14
All items which are not applicable or to which the answer is negative have been
omitted from this report.
The financial statements and related notes of Grand Union have not been
separately presented herein since such financial statements reflect the accounts
of Grand Union Capital Corporation pushed down to the accounts of Grand Union.
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
GRAND UNION CAPITAL CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
12 Weeks Ended 40 Weeks Ended
----------------------------- --------------------------
January 7, January 8, January 7, January 8,
1995 1994 1995 1994
---------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C>
Sales $563,281 $583,492 $1,867,636 $1,904,359
Cost of sales (413,757) (412,347) (1,327,601) (1,358,498)
-------- -------- ---------- ----------
Gross profit 149,524 171,145 540,035 545,861
Operating and administrative expense (127,947) (127,436) (420,106) (408,815)
Depreciation and amortization (21,204) (18,285) (67,224) (59,369)
Provision for store closings and nonrecurring item (10,630) -- (10,630) --
Restructuring costs (1,882) -- (1,882) --
Interest expense:
Debt:
Obligations requiring current cash interest (31,893) (29,648) (104,583) (98,216)
Obligations requiring no current cash interest (9,564) (8,286) (31,154) (26,751)
Capital lease obligations (4,735) (3,283) (14,507) (10,955)
Amortization of deferred financing fees (1,187) (1,140) (3,914) (3,691)
-------- -------- ---------- ----------
Loss before income taxes and cumulative effect of
accounting change (59,518) (16,933) (113,965) (61,936)
Income tax provision -- -- -- --
-------- -------- ---------- ----------
Loss before cumulative effect of
accounting change (59,518) (16,933) (113,965) (61,936)
Cumulative effect of accounting change -- -- -- (30,308)
-------- -------- ---------- ----------
Net loss (59,518) (16,933) (113,965) (92,244)
Accrued preferred stock dividends of Grand Union
Holdings Corporation (6,469) (3,760) (18,173) (12,170)
-------- -------- ---------- ----------
Net loss applicable to common stock ($65,987) ($20,693) ($132,138) ($104,414)
-------- -------- ---------- ----------
-------- -------- ---------- ----------
Other Data:
Earnings before LIFO provision, depreciation and
amortization, provision for store closings and
nonrecurring item, restructuring costs, interest
expense, income taxes and cumulative effect of
accounting change (EBITDA) $21,802 $43,509 $120,679 $137,654
-------- -------- ---------- ----------
-------- -------- ---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
3
<PAGE>
GRAND UNION CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEET
(unaudited)
<TABLE>
<CAPTION>
January 7, April 2,
1995 1994
---------- ----------
(in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and temporary cash investments $43,300 $44,294
Receivables 20,651 37,072
Inventories 187,671 206,063
Other current assets 16,865 17,444
---------- ----------
Total current assets 268,487 304,873
Property, net 433,253 400,554
Goodwill, net 549,113 563,276
Beneficial leases, net 28,570 33,074
Deferred financing fees, net 45,257 48,721
Other assets 42,144 43,726
---------- ----------
$1,366,824 $1,394,224
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Current maturities of long-term debt $919 $914
Current portion of obligations under capital leases 7,513 7,099
Accounts payable and accrued liabilities 263,863 238,225
---------- ----------
Total current liabilities 272,295 246,238
---------- ----------
Long-term debt 1,444,520 1,404,089
---------- ----------
Obligations under capital leases 142,032 120,140
---------- ----------
Other noncurrent liabilities 112,252 113,810
---------- ----------
Commitments and contingencies
Redeemable stock of Grand Union Holdings Corporation
(liquidation preference $163,485,000 in aggregate) 172,892 154,719
---------- ----------
Stockholder's deficit:
Common stock, $.01 par value; authorized, issued and outstanding
1,000 shares 1 1
Treasury stock of Grand Union Holdings Corporation (156) (156)
Accumulated deficit (777,012) (644,617)
---------- ----------
Total stockholder's deficit (777,167) (644,772)
---------- ----------
$1,366,824 $1,394,224
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
4
<PAGE>
GRAND UNION CAPITAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
40 Weeks Ended
-------------------------------------
January 7, January 8,
1995 1994
---------- ----------
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss ($113,965) ($92,244)
Adjustments to reconcile net loss to net cash provided by
(used for) operating activities:
Cumulative effect of accounting change -- 30,308
Depreciation and amortization 67,224 59,369
Noncash interest 31,154 26,751
Amortization of deferred financing fees 3,914 3,691
Net changes in assets and liabilities:
Receivables 16,421 (14,643)
Inventories 18,392 31,915
Accounts payable and accrued liabilities 25,638 (20,364)
Other current assets 579 (408)
Other 1,660 (14,980)
--------- --------
Net cash provided by (used for) operating activities 51,017 9,395
--------- --------
INVESTMENT ACTIVITIES:
Capital expenditures (56,777) (62,636)
Disposals of property 2,016 --
--------- --------
Net cash used for investment activities (54,761) (62,636)
--------- --------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 10,000 50,011
Obligations under capital leases discharged (6,532) (5,184)
Loan placement fees -- (1,775)
Retirement of long-term debt (718) (360)
Purchase of Grand Union Holdings Corporation common stock -- (156)
--------- --------
Net cash provided by financing activities 2,750 42,536
--------- --------
Decrease in cash and temporary cash investments (994) (10,705)
Cash and temporary cash investments at beginning of period 44,294 69,651
--------- --------
Cash and temporary cash investments at end of period $43,300 $58,946
--------- --------
--------- --------
Supplemental disclosure of cash flow information:
Cash paid for interest $84,226 $74,587
Capital lease obligations incurred 28,838 12,863
Accrued dividends on preferred stock of Grand Union Holdings Corporation 18,173 12,170
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
5
<PAGE>
GRAND UNION CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - BASIS OF ACCOUNTING
The accompanying interim consolidated financial statements of Grand Union
Capital Corporation ("Capital" or the "Company") have not been audited by
independent accountants. However, in the opinion of management the results of
operations include all adjustments, which consist only of normal recurring
adjustments, necessary for a fair presentation of operating results for the
interim periods. The accompanying consolidated financial statements have been
prepared on a going concern basis which contemplates the realization of assets
and satisfaction of liabilities in the normal course of business. As discussed
in Note 2 below, subsequent to January 7, 1995, Grand Union Holdings Corporation
("Holdings"), Capital, a wholly-owned subsidiary of Holdings, and The Grand
Union Company ("Grand Union"), a wholly-owned subsidiary of Capital, each filed
a petition for reorganization under Chapter 11 of the United States Bankruptcy
Code. The accompanying consolidated financial statements do not include any
adjustments relating to the recoverability and classification of recorded assets
and liabilities that may result from the outcome of the bankruptcy proceedings.
These consolidated financial statements should be read in conjunction with
the consolidated financial statements and related notes contained in the
Company's Annual Report on Form 10-K for the fiscal year ended April 2, 1994.
Operating results for the periods presented are not necessarily indicative of
the results for the full fiscal year.
NOTE 2 - RESTRUCTURING
On November 29, 1994, Grand Union announced that it was not likely that it
would be able to fund cash interest payments due in early calendar 1995, and
that it intended to develop a capital restructuring plan. On December 21, 1994,
Grand Union entered into a Limited Waiver and Agreement with the banks party to
the Bank Credit Agreement which waived any event of default which might exist
under the Bank Credit Agreement should Grand Union fail to make payments of
interest due on January 16, 1995 in respect of Senior and Subordinated Notes of
Grand Union. The Limited Waiver and Agreement also waived compliance with
certain covenants in the Bank Credit Agreement, thereby permitting Grand Union
to continue to make borrowings in the ordinary course under its revolving line
of credit through February 15, 1995. On January 16, 1995, Grand Union announced
that, consistent with its previously announced expectations, it had not made the
interest payments due January 16 on certain of its outstanding debt obligations.
On January 24, 1995, Grand Union announced that it had reached an agreement
in principle with Grand Union's bank lenders and with members of informal
committees of holders of Grand Union's Senior Notes and Senior Subordinated
Notes on the terms of a restructuring of Grand Union's capital structure. On
January 25, 1995, as part of the implementation of such agreement, Grand Union
filed with the United States Bankruptcy Court, District of Delaware (the
"Bankruptcy Court"), a voluntary petition for reorganization under Chapter 11 of
the United States Bankruptcy Code.
On January 30, 1995, Grand Union (as debtor and as debtor-in-possession)
entered into a credit agreement (the "DIP Facility") with the banks party
thereto and with Bankers Trust Company, as Agent, providing for borrowings of up
to $150 million on a revolving credit basis. Borrowings under the DIP Facility
are secured by liens upon substantially all of the assets of Grand Union (with
certain exceptions). The DIP Facility provides for an interest rate of 1.375%
above the prime rate (as defined) or 2.375% above the LIBOR rate (as defined).
The DIP Facility also provides for a commitment fee equal to 0.5% of the average
unused portion. In addition, up to $20 million of letters of credit may be
issued under the DIP Facility at an annual cost equal to 2 5/8% of the letters
of credit issued. The DIP Facility includes covenants restricting indebtedness,
liens, sales of assets, dividends, capital expenditures and investments, and
provides minimum cash flow requirements. On January 30, 1995, the Bankruptcy
Court issued an order approving the DIP Facility on an interim basis. The
Bankruptcy Court issued an order of final approval for the DIP Facility on
February 16, 1995. On that date, the Bankruptcy Court also issued a Final Cash
Collateral Order which will allow Grand Union to use cash collateral to pay
operating expenses in the ordinary course of business.
6
<PAGE>
Grand Union filed its proposed plan of reorganization (the "Plan") and
related disclosure statement with the Bankruptcy Court on February 6, 1995. The
Plan contemplates a five-year revolving credit facility of at least $148 million
and a seven-year term loan facility of at least $57 million, all on terms to be
finalized with Grand Union's bank lenders. The new bank debt will be secured by
a lien on substantially all of the assets of Grand Union. The Plan provides
that holders of Grand Union's existing Senior Notes will receive new nine-year
senior notes in a principal amount equal to the principal amount of Senior
Notes presently outstanding ($525 million), plus an amount equal to the accrued
interest on the existing Senior Notes through September 1, 1995. The term sheet
describing the new senior notes (the "Term Sheet") filed as part of the Plan
states that the new senior notes will bear interest at the rate of 12% per
annum, or 11.75% per annum if the new senior notes are secured by a second
lien on Grand Union's assets. Grand Union believes that it is unlikely that
the new senior notes will be secured by a second lien. In addition, there is
a dispute as to whether the Term Sheet should be interpreted to provide for
interest to begin to accrue on the new senior notes on (i) the earlier of the
effective date of the Plan and September 1, 1995, or (ii) September 1, 1995.
Recognizing that there is no difference in the interpretation if the effective
date of the Plan is on or after September 1, 1995, the Plan provides that Grand
Union can delay consummation of the Plan until September 1, 1995, even if all
conditions to consummation of the Plan are satisfied or waived by Grand Union
earlier.
The Plan also provides that the holders of Grand Union's existing Senior
Subordinated Notes ($566 million principal amount currently outstanding) will
exchange their Senior Subordinated Notes for 100% of the common equity of Grand
Union. The existing common stock of Grand Union (which constitutes the
principal asset of Capital, and indirectly of Holdings) would be cancelled. The
Plan provides only for securities issued by Grand Union and consequently makes
no provision for the 15% Senior Zero Coupon Notes and 16.50% Senior
Subordinated Zero Coupon Notes issued by Capital or the 12% Junior Subordinated
Notes and various classes of redeemable and nonredeemable common and preferred
stock of Holdings.
Grand Union hopes to achieve completion of the restructuring, including
confirmation of the Plan by the Bankruptcy Court, within 90 to 120 days of the
date of filing of the bankruptcy proceedings. However, consummation of the
Plan will be subject to a number of contingencies, including receipt of
requisite creditor approvals. There can be no assurance as to whether the
restructuring will be consummated, or whether it will be consummated as
contemplated by the Plan.
On February 6, 1995, an involuntary Chapter 11 petition was filed in the
Bankruptcy Court against Capital, by entities purporting to be holders of
Capital's Senior Zero Coupon Notes and Senior Subordinated Zero Coupon Notes.
On February 16, 1995, Capital commenced a voluntary Chapter 11 case in the
Bankruptcy Court by consenting to the entry of an order for relief on that
involuntary Chapter 11 petition. Following the entry of an order for relief,
Capital expects to file a Plan of Reorganization and a Disclosure Statement
within the time period provided by applicable law.
On February 16, 1995, Holdings filed a voluntary Chapter 11 petition in
the Bankruptcy Court. Holdings expects to file a Plan of Reorganization and a
Disclosure Statement within the time period provided by applicable law.
During the 12 weeks ended January 7, 1995, Grand Union recorded $1.9
million of professional fees and expenses incurred in connection with the
restructuring of its debt. The costs associated with the restructuring,
including advisory, accounting and legal fees, will increase net loss during
the remainder of Grand Union's current fiscal year and during the fiscal year
ended March 30, 1996.
NOTE 3 - STORE CLOSINGS AND NONRECURRING ITEM
During the 12 weeks ended January 7, 1995, Grand Union established a
provision for store closings and a nonrecurring item totaling $10.6 million.
The provision includes a charge of $14.6 million relating to the closure of
fourteen stores principally consisting of the remaining book value of store
fixed assets, store closing costs and estimated carrying costs through expected
dates of disposition. Additionally, Grand Union realized $4.0 million of
proceeds from the termination of a warehouse sublease.
NOTE 4 - INTANGIBLES
Grand Union periodically reassesses the appropriateness of both the
carrying value and remaining life of goodwill. Based on its assessment of the
enterprise value of Grand Union after the restructuring, Grand Union believes
that the carrying value and useful life of goodwill continue to be appropriate.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
The following table sets forth certain statement of operations data:
<TABLE>
<CAPTION>
12 Weeks Ended 40 Weeks Ended
-------------------------- ----------------------------
January 7, January 8, January 7, January 8,
1995 1994 1995 1994
---------- ---------- ---------- ----------
(dollars in millions)
<S> <C> <C> <C> <C>
Sales $563.3 $583.5 $1,867.6 $1,904.4
Gross profit 149.5 171.1 540.0 545.9
Operating and administrative expense 127.9 127.4 420.1 408.8
Depreciation and amortization 21.2 18.3 67.2 59.4
Provision for store closings and nonrecurring item 10.6 -- 10.6 --
Restructuring costs 1.9 -- 1.9 --
Interest expense 47.4 42.4 154.2 139.6
Cumulative effect of accounting change -- -- -- 30.3
Net loss 59.5 16.9 114.0 92.2
EBITDA 21.8 43.5 120.7 137.7
LIFO provision (benefit) 0.2 (0.2) 0.8 0.6
Sales percentage decrease (increase) 3.5% (0.7)% 1.9% 2.8%
Gross profit as a percentage of sales 26.5 29.3 28.9 28.7
Operating and administrative
expense as a percentage of sales 22.7 21.8 22.5 21.5
EBITDA as a percentage of sales 3.9 7.5 6.5 7.2
</TABLE>
Sales for the 12 and 40 weeks ended January 7, 1995 decreased $20.2 million
and $36.7 million, or 3.5% and 1.9%, as compared to the 12 and 40 weeks ended
January 8, 1994, respectively. Sales declined in both the 12 and 40 week
periods of the current year due to the continuing effects of competitor store
openings and weak economic conditions, particularly in the Northern Region, and
increased emphasis on value-oriented products in the Northern Region, partially
offset by increased sales from newly built or renovated stores. Additionally,
approximately $7.5 million of the sales decline in both the 12 and 40 week
periods resulted from the closure or sale of fourteen stores during the third
quarter. Sales comparisons for the 40 week periods are also affected by the
timing of Easter (the first quarter of the current fiscal year did not include
the pre-Easter holiday shopping period, while the first quarter of the prior
fiscal year included the pre-holiday period) and by the effect of the work
stoppage experienced during the first quarter of the prior fiscal year.
Existing store sales, influenced by the factors mentioned above (other than the
store closures), decreased 3.2% and 4.2% for the 12 and 40 weeks ended January
7, 1995, respectively.
The decrease in gross profit, as a percentage of sales, for the 12 weeks
ended January 7, 1995 resulted from increased product procurement costs related
to Grand Union's announcement on November 29, 1994 that it was undertaking to
restructure its debt, Grand Union's inability to make investments in lower cost
forward buy inventory due to liquidity constraints and the marketing program
introduced in the Northern Region during the second quarter of the current
fiscal year. For the 40 weeks ended January 7, 1995, the gross profit rate
reflected lower overall product procurement costs than the prior year, despite
the higher product procurement costs in the third quarter, and increases in the
sales mix of higher margin private label, general merchandise, bakery and
produce products.
The increase in operating and administrative expense, as a percentage of
sales, for the 12 and 40 weeks ended January 7, 1995 resulted primarily from
increases, as a percentage of sales, in store labor and fringe benefits,
utilities and occupancy costs. In addition to the factors mentioned above, the
comparison of insurance expense for the 40 weeks ended January 7, 1995 to the
prior year period is influenced by the reduction of self-insurance reserves of
$3.8 million in the 40 weeks ended January 8, 1994.
Depreciation and amortization increased $2.9 million and $7.8 million for
the 12 and 40 weeks ended January 7, 1995, respectively, as a result of Grand
Union's capital expenditure program.
8
<PAGE>
During the 12 weeks ended January 7, 1995, Grand Union established a
provision for store closings and a nonrecurring item totaling $10.6
million. The provision includes a charge of $14.6 million relating to the
closure of fourteen stores principally consisting of the remaining book value of
store fixed assets, store closing costs and estimated carrying costs through
expected dates of disposition. Additionally, Grand Union realized $4.0 million
of proceeds from the termination of a warehouse sublease.
Grand Union incurred professional fees and expenses of $1.9 million during
the 12 weeks ended January 7, 1995 in connection with the restructuring of its
debt. The costs associated with the restructuring, including advisory,
accounting and legal fees, will increase net loss during the remainder of Grand
Union's current fiscal year and during the fiscal year ended March 30, 1996.
Interest expense increased $5.0 million and $14.6 million for the 12 and 40
weeks ended January 7, 1995, respectively, primarily due to the increased level
of debt outstanding.
During the 40 weeks ended January 8, 1994, Grand Union recorded a $30.3
million charge as the cumulative effect of an accounting change relating to the
adoption of Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions". This charge
represents the portion of future retiree benefit costs related to service
already rendered by both active and retired employees up to the date of
adoption.
EBITDA (earnings before LIFO provision, depreciation and amortization,
provision for store closings and nonrecurring item, restructuring costs,
interest expense, income taxes and cumulative effect of accounting change) was
$21.8 million or 3.9% of sales and $120.7 million or 6.5% of sales for the 12
and 40 weeks ended January 7, 1995, respectively, compared to $43.5 million or
7.5% of sales and $137.7 million or 7.2% of sales for the 12 and 40 weeks ended
January 8, 1994, respectively. EBITDA was significantly affected during the 12
and 40 weeks ended January 7, 1995 by increased product procurement costs
resulting from Grand Union's restructuring announcement, low levels of forward
buy inventories due to liquidity constraints and the marketing program
introduced earlier in the fiscal year in the Northern Region. These factors are
expected to continue to affect the operations of Grand Union during the
remainder of Grand Union's current fiscal year. EBITDA during the 40 weeks
ended January 8, 1994 was reduced by an estimated $8.0 million as a result of
lost sales, product losses and other costs experienced during the 22-day work
stoppage in May 1993.
Grand Union anticipates that EBITDA for the current fiscal year ending
April 1, 1995 will be approximately $140 million. EBITDA for the current fiscal
year may be further reduced by additional declines in promotional allowances and
other vendor support which had formerly been, but is not currently, available to
Grand Union. This estimate of EBITDA for the current fiscal year does not
consider any non-recurring income or expense such as that resulting from store
closings, employee separation costs, lease cancellations or items of income or
expense arising from or attributable to the restructuring process.
During the 12 weeks ended October 15, 1994, Grand Union commenced a new
marketing program in certain of its Northern Region markets. The program
includes both lower everyday prices and stronger feature programs. Grand
Union believes it must continue and extend these investments in its store
operations. Although these investments adversely affect gross profit in periods
in which they are made, and there is no assurance that they will succeed in
improving gross profit over the long term, Grand Union's believes that they are
necessary in order to preserve and expand Grand Union's sales base.
Due to Grand Union's reduced operating cash flow, Grand Union has reduced
its investment in forward buy inventory. This reduction of Grand Union's
forward buy inventory adversely affected Grand Union's gross profit during the
third quarter and will continue to adversely affect Grand Union's gross profit
in future periods until its investment in forward buy inventory can be restored.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Resources used to finance significant expenditures for the 40 weeks ended
January 7, 1995 and January 8, 1994 are reflected in the following table:
<TABLE>
<CAPTION>
40 Weeks Ended
------------------------------
January 7, January 8,
1995 1994
---------- ----------
(in millions)
<S> <C> <C>
Resources used for:
Capital expenditures $56.8 $62.6
Debt and capital lease repayments 7.3 5.5
Loan placement fees -- 1.8
Purchase of Grand Union Holdings Corporation common stock -- 0.2
---------- ----------
$64.1 $70.1
---------- ----------
---------- ----------
Financed by:
Operating activities, including cash and temporary cash investments $52.1 $20.1
Debt incurred 10.0 50.0
Property disposals 2.0 --
---------- ----------
$64.1 $70.1
---------- ----------
---------- ----------
</TABLE>
During the 40 weeks ended January 7, 1995, funds for capital expenditures
and scheduled debt repayments (principally capitalized leases) were obtained
from cash provided by operating activities, borrowings under the Revolving
Credit Facility and from property disposals. During the 40 weeks ended January
8, 1994, funds for capital expenditures, debt repayments and loan placement fees
were obtained from cash provided by operating activities and from proceeds of
the sale of $50 million principal amount of Senior Subordinated Notes, Series A.
On October 18, 1993, Grand Union acquired five supermarket locations on
Long Island from Foodarama Supermarkets, Inc. for consideration of approximately
$16.1 million, plus the value of the inventory at the stores (approximately $2
million). The acquisition was financed through the application of a portion of
the proceeds of the sale to institutional investors of the 12 1/4% Senior
Subordinated Notes, Series A on October 18, 1993.
During the 12 weeks ended January 7, 1995, Grand Union recorded $1.9
million of professional fees and expenses incurred in connection with the
restructuring of its debt. The costs associated with the restructuring,
including advisory, accounting and legal fees, will increase net loss during the
remainder of Grand Union's current fiscal year and during the fiscal year ended
March 30, 1996.
On November 29, 1994, Grand Union announced that it was not likely that it
would be able to fund cash interest payments due in early calendar 1995, and
that it intended to develop a capital restructuring plan. On December 21, 1994,
Grand Union entered into a Limited Waiver and Agreement with the banks party to
the Bank Credit Agreement which waived any event of default which might exist
under the Bank Credit Agreement should Grand Union fail to make payments of
interest due on January 16, 1995 in respect of Senior and Subordinated Notes of
Grand Union. The Limited Waiver and Agreement also waived compliance with
certain covenants in the Bank Credit Agreement, thereby permitting Grand Union
to continue to make borrowings in the ordinary course under its revolving line
of credit through February 15, 1995. On January 16, 1995, Grand Union announced
that, consistent with its previously announced expectations, it had not made the
interest payments due January 16 on certain of its outstanding debt obligations.
On January 24, 1995, Grand Union announced that it had reached an agreement
in principle with Grand Union's bank lenders and with members of informal
committees of holders of Grand Union's Senior Notes and Senior Subordinated
Notes on the terms of a restructuring of Grand Union's capital structure. On
January 25, 1995, as part of the implementation of such agreement, Grand Union
filed with the United States Bankruptcy Court, District of Delaware (the
"Bankruptcy Court"), a voluntary petition for reorganization under Chapter 11 of
the United States Bankruptcy Code.
10
<PAGE>
On January 30, 1995, Grand Union (as debtor and as debtor-in-possession)
entered into a credit agreement (the "DIP Facility") with the banks party
thereto and with Bankers Trust Company, as Agent, providing for borrowings of up
to $150 million on a revolving credit basis. Borrowings under the DIP Facility
are secured by liens upon substantially all of the assets of Grand Union (with
certain exceptions). The DIP Facility provides for an interest rate of 1.375%
above the prime rate (as defined) or 2.375% above the LIBOR rate (as defined).
The DIP Facility also provides for a commitment fee equal to 0.5% of the
average unused portion. In addition, up to $20 million of letters of credit
may be issued under the DIP Facility at an annual cost equal to 2 5/8% of the
letters of credit issued. The DIP Facility includes covenants restricting
indebtedness, liens, sales of assets, dividends, capital expenditures and
investments, and provides minimum cash flow requirements. On January 30, 1995,
the Bankruptcy Court issued an order approving the DIP Facility on an interim
basis. The Bankruptcy Court issued an order of final approval for the DIP
Facility on February 16, 1995. On that date, the Bankruptcy Court also issued
a Final Cash Collateral Order which will allow Grand Union to use cash
collateral to pay operating expenses in the ordinary course of business.
Grand Union filed its proposed plan of reorganization and related
disclosure statement with the Bankruptcy Court on February 6, 1995. The Plan
contemplates a five-year revolving credit facility of at least $148 million and
a seven-year term loan facility of at least $57 million, all on terms to be
finalized with Grand Union's bank lenders. The new bank debt will be secured by
a lien on substantially all of the assets of Grand Union. The Plan provides
that holders of Grand Union's existing Senior Notes will receive new nine-year
senior notes in a principal amount equal to the principal amount of Senior
Notes presently outstanding ($525 million), plus an amount equal to the accrued
interest on the existing Senior Notes through September 1, 1995. The term
sheet describing the new senior notes (the "Term Sheet") filed as part of the
Plan states that the new senior notes will bear interest at the rate of 12% per
annum, or 11.75% per annum if the new senior notes are secured by a second lien
on Grand Union's assets. Grand Union believes that it is unlikely that the new
senior notes will be secured by a second lien. In addition, there is a dispute
as to whether the Term Sheet should be interpreted to provide for interest to
begin to accrue on the new senior notes on (i) the earlier of the effective
date of the Plan and September 1, 1995, or (ii) September 1, 1995. Recognizing
that there is no difference in the interpretation if the effective date of the
Plan is on or after September 1, 1995, the Plan provides that Grand Union can
delay consummation of the Plan until September 1, 1995, even if all conditions
to consummation of the Plan are satisfied or waived by Grand Union earlier.
The Plan also provides that the holders of Grand Union's existing Senior
Subordinated Notes ($566 million principal amount currently outstanding) will
exchange their Senior Subordinated Notes for 100% of the common equity of Grand
Union. The existing common stock of Grand Union (which constitutes the
principal asset of Capital, and indirectly of Holdings) would be cancelled.
The Plan provides only for securities issued by Grand Union and consequently
makes no provision for the 15% Senior Zero Coupon Notes and 16.50% Senior
Subordinated Zero Coupon Notes issued by Capital or the 12% Junior Subordinated
Notes and various classes of redeemable and nonredeemable common and preferred
stock of Holdings.
Grand Union hopes to achieve completion of the restructuring, including
confirmation of the Plan by the Bankruptcy Court, within 90 to 120 days of the
date of filing of the Bankruptcy proceedings. However, consummation of the Plan
will be subject to a number of contingencies, including receipt of requisite
creditor approvals. There can be no assurance as to whether the restructuring
will be consummated, or whether it will be consummated as contemplated by the
Plan.
On February 6, 1995, an involuntary Chapter 11 petition was filed in the
Bankruptcy Court against Capital, by entities purporting to be holders of
Capital's Senior Zero Coupon Notes and Senior Subordinated Zero Coupon Notes.
On February 16, 1995, Capital commenced a voluntary Chapter 11 case in the
Bankruptcy Court by consenting to the entry of an order for relief on that
involuntary Chapter 11 petition. Following the entry of an order for relief,
Capital expects to file a Plan of Reorganization and a Disclosure Statement
within the time period provided by applicable law.
On February 16, 1995, Holdings filed a voluntary Chapter 11 petition in
the Bankruptcy Court. Holdings expects to file a Plan of Reorganization and a
Disclosure Statement within the time period provided by applicable law.
11
<PAGE>
At January 7, 1995, there was $35.0 million of borrowings outstanding and
$41.6 million of letters of credit outstanding under Grand Union's Revolving
Credit Facility. As of January 25, 1995, the date of filing of Grand Union's
Chapter 11 petition, there were $54.0 million of borrowings under the Revolving
Credit Facility. No further amounts can be borrowed under the Revolving Credit
Facility.
During the 40 weeks ended January 7, 1995, Grand Union opened four
replacement stores and completed the remodeling of eight stores. Capital
expenditures, including capitalized leases other than real estate leases, for
the year ending April 1, 1995 are expected to be approximately $70 million.
Grand Union's capital expenditures during the current fiscal year have been
financed through funds generated from operations, borrowings under the
revolving credit facility and equipment leases. Prior to the completion of
the restructuring, in order to improve liquidity, Grand Union's capital
expenditures have been curtailed.
During the 12 weeks ended January 7, 1995, Grand Union closed eleven stores
and sold an additional three stores. Three additional stores are expected to
be closed by the end of the current fiscal year.
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On January 24, 1995, Grand Union announced that it had reached
an agreement in principle with Grand Union's bank lenders and with members of
informal committees of holders of Grand Union's Senior Notes and Senior
Subordinated Notes on the terms of a restructuring of Grand Union's capital
structure. On January 25, 1995, as part of the implementation of such
agreement, Grand Union filed with the United States Bankruptcy Court, District
of Delaware (the "Bankruptcy Court"), a voluntary petition for reorganization
under Chapter 11 of the United States Bankruptcy Code, styled IN RE: THE GRAND
UNION COMPANY ALSO d/b/a BIG STAR, Chapter 11 Case No. 95-84 (PJW).
On January 30, 1995, the Bankruptcy Court approved on an
interim basis a credit agreement entered into between Grand Union and the
banks party thereto and Bankers Trust Company, as Agent (the "DIP
Facility"). The Bankruptcy Court issued an order of final approval for the
DIP Facility on February 16, 1995. On that date, the Bankruptcy Court also
issued a Final Cash Collateral Order which will allow Grand Union to use cash
collateral to pay operating expenses in the ordinary course of business.
On February 6, 1995, Grand Union filed its proposed plan of
reorganization (the "Plan") and related disclosure statement with the
Bankruptcy Court. See Note 2 Restructuring to the Financial Statements
included elsewhere herein for a description of the terms of the Plan.
Consummation of the Plan will be subject to a number of
contingencies, including receipt of requisite creditor approvals. There
can be no assurance as to whether the restructuring will be consummated,
or whether it will be consummated as contemplated by the Plan.
On February 6, 1995, an involuntary Chapter 11 petition,
styled IN RE: GRAND UNION CAPITAL CORPORATION, Chapter 11 Case No. 95-130
(PJW), was filed in the Bankruptcy Court against Capital, by entities
purporting to be holders of Capital's Senior Zero Coupon Notes and Senior
Subordinated Zero Coupon Notes. On February 16, 1995, Capital commenced
a voluntary Chapter 11 case in the Bankruptcy Court by consenting to the
entry of an order for relief on that involuntary Chapter 11 petition.
Following the entry of an order for relief, Capital expects to file a
Plan of Reorganization and a Disclosure Statement within the time period
provided by applicable law.
On February 16, 1995, Holdings filed a voluntary Chapter 11
petition, styled IN RE: GRAND UNION HOLDINGS CORPORATION, Chapter 11 Case
(PJW), in the Bankruptcy Court. Holdings expects to file a Plan of
Reorganization and a Disclosure Statement within the time period provided by
applicable law.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Grand Union did not make interest payments of $19,687,500 on its
outstanding Senior Notes and of $33,687,500 on its outstanding Senior
Subordinated Notes which were due on January 16, 1995. Such interest
payments were subject to a thirty-day grace period. As of February
21, 1995, the amount of interest in arrears on the outstanding Senior
Notes is $23,678,938 and the amount of interest in arrears on the
outstanding Senior Subordinated Notes is $40,517,294. As a result of
Grand Union's pending bankruptcy proceeding, the automatic stay
provisions of the United States Bankruptcy Code preclude the holders
from enforcing remedies with respect to the occurrence of an event of
default.
ITEM 5. OTHER INFORMATION.
Gary D. Hirsch, Chairman of the Board of Directors of Grand
Union, and Martin A. Fox, Vice President and Assistant Secretary and a
Director of Grand Union, have informed Grand Union that they intend to
resign all of their positions with Grand Union upon consummation of
the restructuring.
13
<PAGE>
ITEM 6.
(a) Exhibits
Exhibit Number Description of document
-------------- -----------------------
2.1 Chapter 11 Plan of Reorganization of The Grand
Union Company, filed by Grand Union with the
United States Bankruptcy Court, District of
Delaware, on February 6, 1995. (Exhibits to the
Plan have been omitted in reliance on Item
601(b)(2) of Regulation S-K. Grand Union agrees
to furnish supplementally to the Commission a copy
of any omitted exhibit upon request.)
10.23 Credit Agreement, dated as of January 30, 1995, as
amended through February 15, 1995, among The Grand
Union Company, as debtor and debtor-in-possession
under Chapter 11 of Title 11 of the United States
Code entitled to Bankruptcy, the Banks party
thereto and Bankers Trust Company, as Agent.
27.1 Financial Data Schedule.
(b) On December 21, 1994, Grand Union filed a report on Form 8-K
relating to the Limited Waiver and Agreement dated as of December 6,
1994, among Grand Union Holdings Corporation, Grand Union Capital
Corporation, The Grand Union Company, the lending institutions party
to the Credit Agreement dated as of July 14, 1992, and Bankers Trust
Company, as Agent.
On January 24, 1995, Grand Union filed a report on Form 8-K
relating to a press release issued with respect to an agreement in
principle with certain holders of Grand Union debt as to a
restructuring of that indebtedness and containing an outline of the
proposed restructuring terms.
On January 25, 1995, Grand Union filed a report on Form 8-K
relating to a press release issued by Grand Union stating what certain
indebtedness and interest expense of Grand Union will be, assuming the
successful completion of the proposed restructuring as contemplated by
the Plan.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE GRAND UNION COMPANY
-----------------------
(Registrant)
Date: February 21, 1995 /s/ Kenneth R. Baum
----------------- ---------------------------------------
Kenneth R. Baum
Senior Vice President, Chief Financial
Officer and Secretary (Principal
Financial Officer and Principal
Accounting Officer)
<PAGE>
Exhibit T3E2
IN THE UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
In re:
THE GRAND UNION COMPANY, Chapter 11
also d/b/a Big Star, Case No. 95-84 (PJW)
Debtor.
ORDER APPROVING DISCLOSURE STATEMENT,
ESTABLISHING VOTING PROCEDURES AND
SETTING CONFIRMATION HEARING
The Grand Union Company, the above-captioned debtor and debtor in possession
(the "Debtor"), having filed with the Clerk of this Court, on March 22, 1995,
its First Amended Disclosure Statement for First Chapter 11 Plan of
Reorganization of the Grand Union Company (the "First Amended Disclosure
Statement"), and this Court having held a hearing on April 6, 1995 (the
"Hearing"), to consider whether the First Amended Disclosure Statement contains
adequate information, in accordance with section 1125 of title 11 of the United
States Code (the "Bankruptcy Code") and Rule 3017 of the Federal Rules of
Bankruptcy Procedure (the "Bankruptcy Rules"); and the Objections (as defined
below) having been filed and/or received by the Debtor; and the Debtor, having
filed with the Court on April 19, 1995, its Second Amended Chapter 11 Plan of
Reorganization, dated April 19, 1995 (including all exhibits, the "Second
Amended Plan") and an accompanying Disclosure Statement, in order to conform
the First Amended Disclosure Statement, as the same was amended, modified or
supplemented on the record at the Hearing or to incorporate certain revisions
to the Plan (including all appendices and attachments thereto, the "Second
Amended Disclosure Statement"); and the Court having prescribed the form and
scope of notice with respect to the Hearing; and the Court having considered
the First Amended Disclosure Statement, the Second Amended Disclosure Statement
and all amendments and modifications thereto, the Objections, the responses
filed with the Court, the statements and arguments of counsel, and the record
of the Hearing; and after due deliberation and sufficient cause appearing
therefor, it is:
FOUND, that:
1. Due and proper notice of the Hearing and all adjournments thereof has been
given, as evidenced by affidavits of service filed with this Court, and no
other or further notice is required;
2. Objections to the adequacy of the information contained in the First
Amended Disclosure Statement were filed by, among others, U.S. Trust,
Connecticut Department of Revenue Services, New Jersey Self-Insurers Guaranty
Association, Valla Irene Boyd, J. Lucarelli & Sons, Inc., Frama Holding, United
Food & Commercial Workers Union, Azemma Caradoni, State Street Bank & Trust
Company, the Securities and Exchange Commission, the Informal Committee of
Senior Noteholders, American Express Travel Related Services Company, Inc.,
James A. Klein Enterprises, the Pension Benefit Guaranty Corporation, the
Official Committee of Unsecured Creditors of Grand Union Capital Corporation
(the "Capital Committee"), and Bankers Trust Company, as the agent for certain
banks (collectively, including those not listed herein, the "Objections"), and
each Objection was withdrawn or resolved;
3. The Second Amended Disclosure Statement, as the same may be amended
pursuant to the terms of this Order (the "Final Disclosure Statement"),
contains "adequate information," as that term is defined in section 1125 of the
Bankruptcy Code, with respect to the Second Amended Plan (as amended,
supplemented or modified on the record at the hearing or pursuant to the terms
of this Order, the "Plan");
<PAGE>
4. The claims classified in Classes 3 and 6, as designated and defined in the
Plan (collectively, the "Unimpaired Classes"), are not impaired within the
meaning of section 1124 of the Bankruptcy Code;
5. The claims classified in Class 11 and the interests classified in Class
12, as designated and defined in the Plan (collectively, the "Rejecting
Classes"), are Impaired and will not receive or retain any property under the
Plan on account of such claims or interests; and
6. The claims classified in Classes 1, 2, 4, 5, 7, 8, 9 and 10 as designated
and defined in the Plan (collectively, the "Voting Impaired Classes") are
Impaired; and it is therefore
ORDERED, ADJUDGED AND DECREED THAT:
A. Approval of Disclosure Statement
1. The Final Disclosure Statement hereby is approved as containing "adequate
information" within the meaning of section 1125 of the Bankruptcy Code, and any
Objections which have not been withdrawn or resolved are hereby overruled; and
2. The Debtor hereby is authorized and empowered to solicit acceptances of
the Plan in accordance with this Order.
B. Voting Procedures and Solicitation of Votes
3. Unless otherwise ordered by this Court, for purposes of voting on the
Plan, the determination of which claims are entitled to be voted and the amount
and classification of such claims that will be used to tabulate acceptances and
rejections of the Plan by the holders thereof (collectively, the "Holders")
shall be exclusively as follows:
(a) Validity of Ballots. Only ballots which meet each of the following
requirements shall be counted by the balloting agent, Bankruptcy Services, Inc.
("BSI"): (i) the ballot is received by BSI (by mail, hand, overnight courier or
otherwise) on or before 5:00 pm., on May 24, 1995 (the "Voting Deadline"); (ii)
the Holder or its authorized agent has signed the ballot properly; and (iii)
the ballot has been marked properly as accepting or rejecting the Plan. Ballots
marked as both accepting and rejecting the Plan, other than summary ballots
completed by the Intermediaries (as hereinafter defined), shall not be counted.
Ballots which have not been marked as accepting or rejecting the Plan shall not
be counted.
(b) Receipt of Ballots. For the purpose of voting on the Plan: (i) BSI will
be deemed to be in constructive receipt of any ballot timely delivered to any
post office box (or equivalent) which BSI (or its authorized agent) establishes
to receive ballots cast in connection with the Plan; (ii) any ballots BSI
receives by mail or overnight courier on the day of the Voting Deadline shall
be deemed to have been received prior to the Voting Deadline; (iii) any ballot
postmarked prior to the Voting Deadline but received after the day of the
Voting Deadline shall be deemed late and shall not be counted, unless the Court
orders otherwise; (iv) ballots BSI receives via facsimile shall be accepted
only if (A) they are received on the day of the Voting Deadline, and (B) the
signed original ballot is sent to BSI by overnight courier and received by BSI
on or before the first business day after the day of the Voting Deadline; (v)
the signature of the person executing each ballot shall be presumed to be
genuine and duly authorized; (vi) for cause shown, the Court, after notice and
a hearing, may permit a Holder to change or withdraw an acceptance or
rejection; and (vii) if a Holder sends in multiple ballots for the same claim,
the first ballot BSI receives is the ballot that governs, unless the Court
orders otherwise.
(c) Classification of Claims and Allowance For Voting Purposes. Each claim
shall be classified in the class of the Plan into which such claim
appropriately falls based upon the priority and status asserted in the proof of
claim underlying such claim (the "Proof") or, in the absence thereof, as listed
in the Debtor's Schedules of Assets and Liabilities (as may be amended from
time to time, the "Schedules") or subparagraph (g) of this paragraph 3, as
applicable. Subject to subparagraphs (d)-(k) of this paragraph 3, each claim
for which a proof of claim has been filed (or has been deemed filed pursuant to
section
2
<PAGE>
1111(a) of the Bankruptcy Code and Bankruptcy Rule 3003) shall be allowed, for
voting purposes, as follows:
(i) where the claim previously has been allowed by Order of this Court
pursuant to section 502 of the Bankruptcy Code, the amount of the claim
for voting purposes shall be equal to the amount allowed in such Order;
(ii) where the claim is deemed allowed by operation of the Plan, the
amount of the claim for voting purposes shall be equal to the amount
allowed in the Plan; and
(iii) where the claim previously has not been allowed by Order of this
Court pursuant to section 502 of the Bankruptcy Code or by operation of
the Plan, and
(A) no proof of claim has been filed on or before the deadline
for filing proofs of claim in this case (the "Bar Date") or otherwise
deemed timely filed by an Order of this Court, the amount of such
claim for voting purposes will be equal to the amount listed, if any,
in respect of such claim in the Schedules to the extent such claim is
not listed as contingent, unliquidated or disputed; or
(B) where a proof of claim has been filed on or prior to the Bar
Date, or has been filed after the Bar Date but deemed filed timely by
Order of this Court, the amount of each claim for voting purposes will
be the amount asserted in the proof of claim.
(d) Multiple Claims. Any Holder with claims in more than one class will
receive a ballot for each class of claims in which such Holder is entitled to
vote. Any Holder with more than one claim against the Debtor in the same class
shall receive only one ballot for such claims; however, such ballot will be
counted for the aggregate dollar amount of all claims in such class.
(e) Disputed Claims.
(i) General. Subject to the provisions of clause (ii) of this
subparagraph (e), no claim against which an objection has been filed shall
be counted unless such claim has been allowed temporarily for the purpose
of accepting or rejecting the Plan. For the purpose of this subparagraph,
an objection shall include pleadings filed seeking, inter alia, to estimate
or fix and allow the claim of any creditor. The allowance of a disputed
claim for voting purposes shall be subject to the other provisions of this
paragraph 3.
(ii) Voting Amount of Certain Disputed Claims. Notwithstanding any other
provision in this subparagraph (e), (1) if a motion (or stipulation) has
been filed seeking to reduce and allow or fix and allow a claim and no
pleadings objecting to the proposed allowed amount of such claim or
seeking temporary allowance thereof for voting purposes have been filed,
then such claim shall be counted for voting purposes in the amount to
which the motion or stipulation seeks to reduce and allow or fix and allow
such claim; and (2) if an objection is filed to a claim, then that claim
shall be counted for voting purposes only to the extent not objected to.
(iii) Classification. To the extent a motion or objection challenges, or
a stipulation proposes to amend, the alleged classification of a
particular claim, such claim shall be counted in the class asserted in the
proof of claim (or, in the absence thereof, the Schedules) in an amount
determined pursuant to this paragraph 3.
(f) Contingent Claims. Subject to subparagraph (j) of this paragraph 3, if a
claim has been asserted as a contingent claim, then the Holder of such claim
shall not be entitled to vote the contingent amount of such claim.
(g) Unliquidated Claims. To the extent a claim has been filed asserting an
unliquidated amount, the Holder of such claim shall be entitled to vote and
shall be treated as if such Holder was the Holder of a liquidated claim in the
amount of one ($1.00) dollar in the appropriate class; provided, however, that
any portion of such unliquidated claim also asserted as a contingent claim
shall vote only in accordance with subparagraph (f) of this paragraph 3;
provided further that any claim which is asserted as partially unliquidated
(that is, for a fixed amount plus certain unspecified amounts) shall be treated
as a claim for only the liquidated amount asserted. Notwithstanding the
foregoing, to the extent a proof of
3
<PAGE>
claim asserts more than one claim and (1) any of such claims are unliquidated
(in whole or in part), and (2) such claims are within the same class, then such
claims shall be allowed for voting purposes in the appropriate class or classes
in an amount equal to the greater of $1.00 and the aggregate liquidated amount
of such claims in such class. The allowance of an unliquidated claim for voting
purposes shall in all respects be subject to the other provisions of this
Order.
(h) Record Holders. A Ballot shall only be counted with respect to any claim
to the extent such ballot is received from the record holder of such claim. For
purposes of voting on the Plan only, each of the banks or financial
institutions (or their successors or assigns) (collectively, the "Existing
Banks") that is a party to the Credit Agreement, dated July 14, 1992, as
amended, shall be treated as an Intermediary with respect to any participations
such Existing Bank has granted, provided that the Summary Ballot of such
Existing Bank shall be counted as a single vote in favor of the Plan to the
extent it contains one or more acceptances of the Plan (in the aggregate amount
of such acceptances) and/or as single vote against the Plan to the extent it
contains one or more rejections of the plan (in an aggregate amount of such
rejections) (i.e., each such master ballot may contain, at most, one each of a
vote accepting the Plan and a vote rejecting the Plan).
(i) Stipulations and Motions Temporarily Allowing Claims for Voting Purposes.
Pursuant to Bankruptcy Rule 3018(a), due and proper notice of all motions,
stipulations and orders seeking to allow temporarily claims for voting purposes
(collectively, the "3018 Motions") shall have been given if the 3018 Motion is
served in a manner so as to be received by counsel to the Debtor, counsel to
the official committee of unsecured creditors (the "Creditors' Committee"), the
United States Trustee for the District of Delaware (the "U.S. Trustee") and the
Holder of the claim not less than 5 business days prior to the date for
presentment of an order approving such motion (the "Presentment Date").
Objections to any 3018 Motion shall be filed with this Court and served on the
foregoing persons not less than 1 business day prior to the Presentment Date.
If an objection is filed, then the Court will determine whether a hearing will
be held.
(k) Transferred Claims. The holder of a claim which was transferred prior to
the Record Date (as defined below), but which transfer is not reflected in the
Court's records as of the Record Date, may seek to have such transferred claim
allowed, and be recognized as the holder thereof, for voting purposes pursuant
to the provisions of this paragraph 3.
4. The Debtor and/or BSI (and/or their respective agents) shall serve (1) all
known holders of claims against and interests in the Debtor as of the date of
entry of this Order (such date being the "Record Date" to identify, for voting
and notification purposes only, both record and beneficial holders of claims
and interests), (2) all entities which have filed (but not withdrawn) a notice
of appearance in the Debtor's chapter 11 case, (3) each member of the
Creditors' Committee and counsel to the Creditor's Committee, (4) the U.S.
Trustee, (5) the Securities and Exchange Commission, (6) the Delaware office of
the Internal Revenue Service, (7) the United States Attorney, (8) the Pension
Benefit Guaranty Corporation, as defined in the Plan, (9) the Indenture
Trustees (as defined in the Plan), (10) each member of the Capital Committee
and counsel to the Capital Committee, (11) counsel to the Informal Committee of
Certain Holders of Senior Notes and (12) all registered beneficial owners of
the Debtor's claims and interests and any registered proxy agent, brokerage
firm, agent, custodian, servicing agent or other authorized nominee other than
an Indenture Trustee or Capital Indenture Trustee (as defined in the Plan) for
beneficial holders that are not registered owners of claims and interests, as
of the Record Date, on or before April 26, 1995, by regular mail, overnight
delivery or by hand, copies of the following documents (collectively, the
"Solicitation Package"): (a) the Final Disclosure Statement (including the Plan
as annexed thereto as Exhibit "A"); (b) this Order, without exhibits; (c) the
"Notice of Hearing to Consider Confirmation and Fixing Time For Filing
Acceptances or Rejections Thereto," substantially in the form of notice annexed
hereto as Exhibit "A"; and (d) a ballot or ballots, if applicable; provided,
however, that with respect to any Solicitation packages which the Debtor mails
to the required address that are returned as undeliverable, no efforts need be
undertaken to remail such materials;
5. Within 3 business days after the Record Date, each Indenture Trustee,
Capital Indenture Trustee or Registrar shall provide BSI with a list containing
the names, addresses and holdings of the respective holders
4
<PAGE>
of record as of the Record Date for their respective issuance. Notwithstanding
anything to the contrary herein, the persons and entities listed on such list
shall be deemed to be the record holders of the claims evidenced by the
relevant security;
6. Each record holder of a claim as of the Record Date that is not also the
beneficial holder thereof as of the Record Date (each, other than the Indenture
Trustees and a Capital Indenture Trustee, a "First Level Intermediary") is
directed to: (a) send by first class mail, overnight delivery or by hand, on or
before April 28, 1995, the appropriate Solicitation Package to the beneficial
owners of claims (or any other holder represented, directly or indirectly, by
such record holder that, as of the Record Date, is not the beneficial holder
thereof (collectively, with the First Level Intermediaries, the
"Intermediaries")) for which it holds claims; or (b) provide to BSI, on or
before April 25, 1995, two sets of labels containing the names and addresses of
the beneficial owners of claims for which such First Level Intermediary holds
claims so that BSI may make the appropriate mailings. Each First Level
Intermediary shall, as soon as practicable, but by no later than 5:00 p.m.
(Eastern time) on April 25, 1995, request of BSI or its designee sufficient
copies of the Solicitation Package to be sent by such Intermediary to the
beneficial owners of claims or other Intermediaries that it represents to the
extent such Intermediary has elected option (a) of this paragraph. The Debtor
is authorized and directed to reimburse each Intermediary for its reasonable
and actual expenses associated with the distribution of the Solicitation
Packages without further order of this Court;
7. Each First Level Intermediary is directed to: (i) tabulate the votes that
it receives from the beneficial owners and other Intermediaries that it
represents; (ii) set out the result of such votes on a Summary Ballot (the form
of which will be sent to each Intermediary that represents claimants in a
Voting Impaired Class with the Solicitation Packages by the balloting agent),
and return such Summary Ballot, together with a copy of each underlying ballot,
so that they are received by BSI by the Voting Deadline and (iii) deliver to
BSI by the Voting Deadline an affidavit certifying that the First Level
Intermediary has complied with the requirements of this Order. If a First Level
Intermediary fails to comply with any of the foregoing, BSI shall attempt to
resolve any such defect with the relevant First Level Intermediary within 2
business days after the Voting Deadline. If by such date BSI and the First
Level Intermediary are unable to resolve such differences, then the Summary
Ballot and the underlying ballots shall be counted for purposes of determining
whether a Plan has been accepted or rejected only in the manner ordered by the
Court;
8. Beneficial owners of claims or interests who hold their claims or
interests through an Intermediary must send their ballot to their Intermediary
by such date as to allow the Intermediary to send the Summary Ballot comprising
such vote to BSI so that it is received by the Voting Deadline;
9. Beneficial owners of claims or interests who are record holders of such
claims or interests must send their ballot to BSI so that it is received by the
Voting Deadlines in order for such ballot to be counted; and
10. The forms of ballot annexed hereto as Exhibit "B" hereby are approved.
C. Classes of Claims Entitled to Vote
11. The holders of claims classified in the Unimpaired Classes are not
entitled to vote to accept or reject the Plan and are conclusively presumed to
have accepted the Plan under section 1126(f) of the Bankruptcy Code;
12. The holders of claims and interests classified in the Rejecting Classes
are not entitled to vote to accept or reject the Plan and are deemed not to
have accepted the Plan under section 1126(g) of the Bankruptcy Code; and
13. The holders of claims classified in the Voting Impaired Classes are
entitled to vote to accept or reject the Plan under section 1126 of the
Bankruptcy Code and in accordance with this Order.
5
<PAGE>
D. Confirmation Hearing
14. The hearing to consider confirmation of the Plan (the "Confirmation
Hearing") shall be held at the United States Bankruptcy Court, Marine Midland
Plaza, 824 Market Street, Wilmington, Delaware 19801, on May 31, 1995 at 10:00
a.m. Eastern time, or as soon thereafter as counsel can be heard, and may be
adjourned from time to time without further notice, other than by announcement
of the adjourned date or dates at the Confirmation Hearing;
15. In accordance with Bankruptcy Rule 2002(b), notice of the Confirmation
Hearing shall be deemed adequate and sufficient, if, in addition to the notice
otherwise prescribed herein, the Debtor publishes a notice of the Confirmation
Hearing, substantially in the form of the notice annexed hereto as Exhibit "A,"
once in each of The Wall Street Journal (national edition), The New York Times
(national edition), The Albany Times-Union and The Bergen Record on or before
April 28, 1995, and in Supermarket News on or before May 8, 1995;
16. All objections to the confirmation of the Plan must: (a) be in writing;
(b) state with particularity the grounds for the objection and identify the
section or sections of the Plan to which such objection relates; and (c) be
filed with this Court and served in a manner so as to be received on or before
May 24, 1995 at 4:30 p.m. (Eastern time) by: (1) The Grand Union Company, 201
Willowbrook Boulevard, Wayne, NJ 07470-0966, Attn: Mr. Francis E. Nicastro; (2)
Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New York,
NY 10022, Attn: Barry N. Seidel, Esq.; (3) Young, Conaway, Stargatt & Taylor,
P.O. Box 391, Wilmington, Delaware, 19899-0391, Attn: James L. Patton, Esq.;
(4) Ropes & Gray, One International Place, Boston, MA 02110-2624, Attn: William
F. McCarthy, Esq.; (5) Pepper Hamilton & Schaetz, 100 Renaissance Center, Suite
3600, Detroit, MI 48243, Attn: Stuart Hertzberg, Esq.; (6) Stroock & Stroock &
Lavan, Seven Hanover Square, New York, NY 10004, Attn: Daniel H. Golden, Esq.;
(7) Skadden, Arps, Slate, Meagher & Flom, 333 West Wacker Drive, Suite 2100,
Chicago, IL 60606, Attn: John Wm. Butler, Jr., Esq.; and (8) Donovan Leisure
Newton & Irvine, 30 Rockefeller Plaza, New York, NY 10112, Attn: John J.
McCann, Esq., and (9) Marcus Montgomery Wolfson P.C., 53 Wall Street, New York,
New York 10005, Attn: Peter D. Wolfson, Esq., and
17. Any party who wishes to object to confirmation of the Plan but fails to
file and serve such objection in accordance with this Order will be barred from
objecting to confirmation of the Plan and will not be heard at the Confirmation
Hearing.
E. Miscellaneous
18. The Debtor is authorized to make non-substantive changers to the Final
Disclosure Statement and related documents without further Order of this Court,
including, without limitation, changes to correct typographical and grammatical
errors and to insert updated financial and other information, including
financial statements, if any, and to make conforming changes among the Final
Disclosure Statement, the Plan, appendices and exhibits to the Final Disclosure
Statement and the Plan, and other material in the Solicitation Package prior to
the mailing of the Solicitation Package;
19. For purposes of determining the record holder of claim for distributions
under the Plan, the record date shall be the day of the Voting Deadline;
20. The Debtor hereby is authorized and empowered to take such steps, incur
and pay such costs and expenses, execute such documents and do such things as
may be reasonably necessary to implement the provisions of this Order; and
21. This Court shall retain jurisdiction to hear all such matters as may be
related to, or arise from, this Order and/or the Solicitation Package.
Dated: Wilmington, Delaware
April 19, 1995
/S/ Honorable Peter J. Walsh
------------------------------
UNITED STATES BANKRUPTCY JUDGE
6
<PAGE>
Exhibit T3E3
IN THE UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
In re:
THE GRAND UNION COMPANY, Chapter 11
also d/b/a Big Star Case No. 95-84 (PJW)
Debtor.
NOTICE OF HEARING TO CONSIDER CONFIRMATION
OF AND TIME FIXED FOR VOTING ON THE SECOND
AMENDED CHAPTER 11 PLAN OF REORGANIZATION
FILED BY THE GRAND UNION COMPANY
PLEASE TAKE NOTICE that on January 25, 1995 (the "Filing Date"), The Grand
Union Company (the "Debtor") filed a voluntary petition for relief under
chapter 11 of title 11 of the United States Code (the "Bankruptcy Code").
PLEASE TAKE FURTHER NOTICE that the United States Bankruptcy Court for the
District of Delaware: (i) approved the disclosure statement (the "Disclosure
Statement") for the Second Amended Chapter 11 Plan Of Reorganization Filed By
The Grand Union Company, dated April 19, 1995 (the "Plan") as containing
"adequate information" within the meaning of section 1125 of the Bankruptcy
Code; and (ii) authorized the Debtor to solicit acceptances or rejections of
the Plan.
PLEASE TAKE FURTHER NOTICE that on May 31, 1995 at 10:00 a.m., or as soon
thereafter as counsel can be heard, a hearing (the "Confirmation Hearing") to
consider confirmation of the Plan will be held before the Honorable Peter J.
Walsh, United States Bankruptcy Judge, at the United States Bankruptcy Court
for the District of Delaware, Marine Midland Plaza, 824 Market Street,
Wilmington, Delaware 19801 (the "Bankruptcy Court").
PLEASE TAKE FURTHER NOTICE that objections to the confirmation of the Plan
must be in writing, state with particularity the grounds for the objection,
identify the section or sections of the Plan to which such objection relates,
and be filed with the Bankruptcy Court and served in a manner so as to be
received on or before May 24, 1995 at 4:30 p.m. (Eastern time) by: (1) The
Grand Union Company, 201 Willowbrook Boulevard, Wayne, NJ 07470-0966, Attn: Mr.
Francis E. Nicastro; (2) Willkie Farr & Gallagher, One Citicorp Center, 153
East 53rd Street, New York, NY 10022, Attn: Barry N. Seidel, Esq.; (3) Young,
Conaway, Stargatt & Taylor, P.O. Box 391, Wilmington, Delaware 19899-0391,
Attn: James L. Patton, Esq.; (4) Ropes & Gray, One International Place, Boston,
MA 02110-2624, Attn: William F. McCarthy, Esq.; (5) Pepper Hamilton & Scheetz,
100 Renaissance Center, Suite 3600, Detroit, MI 48243, Attn: Stuart Hertzberg,
Esq.; (6) Stroock & Stroock & Lavan, Seven Hanover Square, New York, NY 10004,
Attn: Daniel H. Golden, Esq.; (7) Skadden, Arps, Slate, Meagher & Flom, 333
West Wacker Drive, Suite 2100, Chicago, IL 60606, Attn: John Wm. Butler, Jr.,
Esq.; (8) Donovan Leisure Newton & Irvine, 30 Rockefeller Plaza, New York, NY
10112, Attn: John J. McCann, Esq; and (9) Marcus Montgomery Wolfson P.C., 53
Wall Street, New York, New York 10005, Attn: Peter D. Wolfson, Esq.
PLEASE TAKE FURTHER NOTICE that any party who files and serves an objection
to confirmation of the Plan other than in accordance with provisions of the
immediately preceding paragraph of this Notice will be barred from objecting to
the Plan and will not be heard at the Confirmation Hearing.
PLEASE TAKE FURTHER NOTICE that the Motion, the Plan and the Disclosure
Statement have been filed with the Clerk of the Bankruptcy Court (the "Clerk")
and may be examined at the Clerk's office during regular business hours.
<PAGE>
PLEASE TAKE FURTHER NOTICE that May 24, 1995, at 5:00 p.m. (the "Voting
Deadline") is fixed as the deadline for voting to accept or reject the Plan.
Such date is also the record date for determining the holders of claims for
distributions under the Plan. BALLOTS ACCEPTING OR REJECTING THE PLAN MUST BE
DELIVERED BY THE RECORD HOLDERS OF CLAIMS AGAINST AND INTERESTS IN THE DEBTOR
TO BANKRUPTCY SERVICES, INC. (A) BY MAIL, TO: BANKRUPTCY SERVICES, INC., GRAND
UNION BALLOT PROCESSING, P.O. BOX 5159, FDR STATION, NEW YORK, NEW YORK 10150;
OR (B) BY COURIER OR BY HAND, TO: BANKRUPTCY SERVICES, INC., GRAND UNION BALLOT
PROCESSING, 400 PARK AVENUE, 9TH FLOOR, NEW YORK, NEW YORK 10022, SO THAT SUCH
BALLOTS ARE RECEIVED ON OR BEFORE THE VOTING DEADLINE. IF YOU HAVE RECEIVED A
BALLOT FROM A PROXY AGENT, BROKERAGE FIRM, AGENT, CUSTODIAN, SERVICING AGENT OR
OTHER AUTHORIZED NOMINEE (COLLECTIVELY, THE "INTERMEDIARIES"), YOU MUST RETURN
YOUR BALLOT TO SUCH INTERMEDIARY BY SUCH DATE AS TO ALLOW THE INTERMEDIARY TO
SEND THE SUMMARY BALLOT COMPRISING SUCH VOTE TO BSI SO THAT IT IS RECEIVED BY
THE VOTING DEADLINE IN ORDER FOR SUCH BALLOT TO BE COUNTED.
PLEASE TAKE FURTHER NOTICE that if you believe you are the holder of a claim
or interest in an impaired class under the Plan and entitled to vote to accept
or reject the Plan, but did not receive a ballot, please contact Bankruptcy
Services, Inc., Grand Union Ballot Processing, 400 Park Avenue, New York, New
York 10022, or telephone (212) 527-0727.
PLEASE TAKE FURTHER NOTICE that a creditor that holds a claim against the
Debtor for goods provided prior to the Filing Date by such creditor to the
Debtor for resale to the general public in the ordinary course of business (a
"Trade Claim"), and who files an objection to the Plan, is deemed to have voted
to reject the Plan and may be required to file, on or before ten (10) days from
the date such objections are filed, proofs of claim respecting such Trade
Claims pursuant to the Order of this Court, dated April 6, 1995, establishing
the last date for filing claims in this case. To receive a copy of such Order,
please telephone Bankruptcy Services, Inc. at (212) 527-0727.
PLEASE TAKE FURTHER NOTICE that any holder of a Senior Zero Note Claim (as
defined in the Plan) or a Junior Zero Note Claim (as defined in the Plan) that
objects to confirmation of the Plan and does not withdraw such objection before
the commencement of the Confirmation Hearing will not receive a distribution
under the Plan on account of such Senior Zero Note Claim or Junior Zero Note
Claim.
PLEASE TAKE FURTHER NOTICE that all inquiries concerning the Debtor, the
Plan, the Disclosure Statement and voting, including delivery of the ballots to
the Balloting Agent, Bankruptcy Services Inc., or the Intermediary, should be
directed to the Bankruptcy Services, Inc., at (212) 527-0727.
PLEASE TAKE FURTHER NOTICE that the Confirmation Hearing may be adjourned
from time to time without further notice to creditors or other parties in
interest other than by an announcement of such adjournment in Court at the
Confirmation Hearing.
Dated: Wilmington, Delaware
April 19, 1995
/S/ HONORABLE PETER J. WALSH
------------------------------
UNITED STATES BANKRUPTCY JUDGE
2
<PAGE>
Exhibit T3E4
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
- ---------------------------
In re:
THE GRAND UNION COMPANY, Chapter 11
also d/b/a Big Star, Case No. 95-84 (PJW)
Debtor.
- ---------------------------
BALLOT FOR VOTING ON SECOND AMENDED PLAN OF REORGANIZATION,
DATED APRIL 19, 1995, SUBMITTED BY THE GRAND UNION COMPANY (THE "PLAN")
CLASS 4-SENIOR NOTE CLAIMS
11-1/4% SENIOR NOTES DUE 2000
11-3/8% SENIOR NOTES DUE 1999
NAME & ADDRESS
On April 19, 1995, the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court") approved the disclosure statement filed by
The Grand Union Company (the "Proponent") and authorized the Proponent to
solicit acceptances or rejections of the Plan, a copy of which is attached as
an exhibit to the disclosure statement. This ballot is being provided for
voting on the Plan.
The Plan may be confirmed by the Bankruptcy Court, and thereby made binding
on you, if the plan is accepted by the holders of at least 2/3 in dollar amount
and more than 1/2 in number of claims actually voting in each voting class of
claims. The votes of the claims actually voted in your class will bind those
who do not vote. If the requisite acceptances are not obtained for the Plan,
the Bankruptcy Court nevertheless may confirm the Plan if at least one impaired
class of claims has accepted the Plan and the Bankruptcy Court finds that such
Plan accords fair and equitable treatment to, and does not discriminate
unfairly against, the class(es) rejecting it.
TO HAVE YOUR VOTE ON THE PLAN COUNT YOU MUST COMPLETE AND RETURN THIS BALLOT.
PLEASE COMPLETE SECTIONS A THROUGH C BELOW.
A. VOTE TO ACCEPT OR REJECT THE PLAN (mark the appropriate box with an "X")
ACCEPT REJECT
------------ --------------
B. Under the penalties of perjury, the undersigned certifies that:
(1) Claimant's correct taxpayer identification number is:
Social Security Number - - , or
Employer Identification Number - , and
(2) Please check the Appropriate Box(es). Claimant is not subject to backup
withholding because:
~ (a) Claimant is exempt from backup withholding, or
~ (b) Claimant has not been notified by the Internal Revenue Service ("IRS")
that Claimant is subject to backup withholding as a result of a failure
to
<PAGE>
report all interest or dividends, or
~ (c) the IRS has notified Claimant that Claimant is no longer subject to
backup withholding.
(3) Claimant is the beneficial owner of the Claim and the Claim is held of
record by . The undersigned further certifies that if the Claimant
did not fill in the name of the registered holder or nominee in the
previous sentence, that Claimant is the holder of record of the Claim voted
hereby.
(4) Claimant has provided the information specified in the following table for
all additional Claims for which Claimant has submitted additional Ballots
(please use additional sheets of paper if necessary):
Account Number Registered Holder or Nominee Claim Amount
- --------- --------------- ---------
- --------- --------------- ---------
C. Dated:
Print or type name of Claimant:
Signed:
[If appropriate] By:
as:
IF YOU ARE BOTH THE RECORD HOLDER AND THE ONLY BENEFICIAL OWNER OF THE CLAIM(S)
FOR WHICH YOU ARE SUBMITTING THIS BALLOT, RETURN THIS BALLOT SO THAT IT IS
RECEIVED ON OR BEFORE 5:00 P.M., EASTERN TIME, ON MAY 24, 1995:
If by courier or by hand to:
Bankruptcy Services, Inc.
Grand Union Ballot Processing
400 Park Avenue
New York, New York 10022
If by U.S. mail to:
Bankruptcy Services, Inc.
Grand Union Ballot Processing
PO Box 5159
New York, New York 10150
IF YOU ARE THE BENEFICIAL HOLDER BUT NOT THE RECORD HOLDER, PLEASE REFER TO
PARAGRAPH 4 OF THE "VOTING INFORMATION AND INSTRUCTIONS", PRINTED BELOW.
VOTING INFORMATION AND INSTRUCTIONS
1. TO HAVE YOUR VOTES COUNT, YOU MUST INDICATE ACCEPTANCE OR REJECTION OF THE
PLAN IN THE COLUMNS INDICATED ON THE REVERSE SIDE AND SIGN AND RETURN THIS
BALLOT TO THE ADDRESS INDICATED ON THE ENCLOSED PRE-ADDRESSED ENVELOPE.
ORIGINAL BALLOTS MUST BE RECEIVED NO LATER THAN 5:00 P.M., EASTERN TIME, ON MAY
24, 1995 (THE "VOTING DEADLINE"). IF A BALLOT IS RECEIVED AFTER THE VOTING
DEADLINE, IT MAY NOT BE COUNTED. ANY BALLOT WHICH IS MARKED AS BOTH ACCEPTING
AND REJECTING THE PLAN, OTHER THAN SUMMARY BALLOTS COMPLETED BY INTERMEDIARIES,
SHALL NOT BE COUNTED FOR ANY PURPOSE CONCERNING THE PLAN. BALLOTS WHICH HAVE
NOT BEEN MARKED AS ACCEPTING OR REJECTING THE PLAN SHALL NOT BE COUNTED FOR
PURPOSES OF TABULATING VOTES FOR THE PLAN. ANY BALLOT WHICH IS NOT SIGNED SHALL
NOT BE COUNTED FOR VOTING PURPOSES.
2. To have this ballot counted, you must observe the procedures set forth in
the Order Approving Disclosure Statement, Establishing Voting Procedures and
Setting Confirmation Hearing, dated April 19, 1995 (the "Voting Procedures
<PAGE>
Order"). Such order is contained in the solicitation materials sent to you. The
procedures set forth on this ballot are intended to summarize a few of the key
voting rules. Reference to the Voting Procedures Order is still necessary for
the specific voting rules.
3. For cause shown, the Bankruptcy Court may permit a creditor to change or
withdraw an acceptance or rejection.
4. If you are both the record holder and the only beneficial owner of the
Claim indicated on the reverse side of this Ballot, you need only complete this
Ballot and return it to the Balloting Agent no later than the Voting Deadline.
If you are the beneficial owner but not the record holder of the Claim
indicated on the reverse side of this Ballot and not an Intermediary (a proxy
agent, brokerage firm, agent, custodian or other authorized nominee), then in
order for your vote to count you should complete this Ballot and send it to
your Intermediary by such date as to allow your Intermediary to send the
Summary Ballot comprising your claim to Bankruptcy Services, Inc. ("BSI") so
that it is received by the Voting Deadline. A ballot received directly from you
with respect to such Claim shall not be counted for voting purposes. If you are
the record holder but not the beneficial owner of the Claim indicated on the
reverse side of this Ballot (i.e., an Intermediary), you should contact BSI at
(212) 527-0727 to request sufficient solicitation packages and beneficial owner
ballots to send to all beneficial owners of the Claim.
5. Your signature is required in order for your vote to be counted. If your
claim is held by a partnership, the ballot should be executed in the name of
the partnership by a general partner. If the claim is held by a corporation,
then the ballot must be executed by an officer. If you are signing in a
representative capacity for either of the above, or in another representative
capacity, also indicate your title after your signature.
6. If you have claims other than in the class indicated on the ballot, then
you may receive more than one ballot. IF YOU RECEIVE MORE THAN ONE BALLOT, THEN
YOU SHOULD ASSUME THAT EACH BALLOT IS FOR A CLAIM IN A SEPARATE CLASS AND
SHOULD COMPLETE AND RETURN ALL OF THEM.
7. No claim against which an objection has been filed shall be counted unless,
after notice and hearing, the Bankruptcy Court has temporarily or otherwise
allowed such claim in such amount as the Bankruptcy Court deems proper for the
purpose of accepting or rejecting the Plan.
8. To the extent a claim has been filed asserting an unliquidated claim, the
Holder of such claim shall be entitled to vote and shall be treated as if such
Holder was the Holder of a liquidated claim in the amount of one dollar in the
appropriate class, unless, after notice and a hearing, the Bankruptcy Court has
temporarily or otherwise allowed such claim in such other amount as the
Bankruptcy Court deems proper for the purpose of accepting or rejecting the
Plan. To the extent a claim has been filed asserting a contingent claim, any
vote by the Holder of such claim shall not be counted. Any claim which is
asserted as partially unliquidated (that is, for a fixed amount plus certain
unspecified amounts) shall be treated as a claim for only the liquidated amount
asserted unless otherwise ordered by the Bankruptcy Court.
9. This Ballot is not a letter of transmittal and may not be used for any
purpose other than to vote to accept or reject the Plan. HOLDERS SHOULD NOT
SURRENDER CERTIFICATES REPRESENTING THEIR SECURITIES AT THIS TIME, AND NEITHER
THE PROPONENT NOR THE BALLOTING AGENT WILL ACCEPT DELIVERY OF ANY SUCH
CERTIFICATES TRANSMITTED TOGETHER WITH THIS BALLOT.
10. This ballot is for voting purposes only and does not constitute and shall
not be deemed a proof of claim or an admission by the Proponent of the validity
of a claim.
11. If you have any questions regarding this ballot or election procedures or
the voting procedures, please call: Bankruptcy Services, Inc. at (212)
527-0727.
<PAGE>
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
- ---------------------------
In re:
THE GRAND UNION COMPANY, Chapter 11
also d/b/a Big Star, Case No. 95-84 (PJW)
Debtor.
- ---------------------------
BALLOT FOR VOTING ON SECOND AMENDED PLAN OF REORGANIZATION,
DATED APRIL 19, 1995, SUBMITTED BY THE GRAND UNION COMPANY (THE "PLAN")
CLASS 4-SENIOR NOTE CLAIMS
11-1/4% SENIOR NOTES DUE 2000
11-3/8% SENIOR NOTES DUE 1999
On April 19, 1995, the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court") approved the disclosure statement filed by
The Grand Union Company (the "Proponent") and authorized the Proponent to
solicit acceptances or rejections of the Plan, a copy of which is attached as
an exhibit to the disclosure statement. This ballot is being provided for
voting on the Plan.
The Plan may be confirmed by the Bankruptcy Court, and thereby made binding
on you, if the plan is accepted by the holders of at least 2/3 in dollar amount
and more than 1/2 in number of claims actually voting in each voting class of
claims. The votes of the claims actually voted in your class will bind those
who do not vote. If the requisite acceptances are not obtained for the Plan,
the Bankruptcy Court nevertheless may confirm the Plan if at least one impaired
class of claims has accepted the Plan and the Bankruptcy Court finds that such
Plan accords fair and equitable treatment to, and does not discriminate
unfairly against, the class(es) rejecting it.
TO HAVE YOUR VOTE ON THE PLAN COUNT YOU MUST COMPLETE AND RETURN THIS BALLOT.
PLEASE COMPLETE SECTIONS A THROUGH C BELOW.
A. VOTE TO ACCEPT OR REJECT THE PLAN (mark the appropriate box with an "X")
ACCEPT REJECT
------------ --------------
B. Under the penalties of perjury, the undersigned certifies that:
(1) Claimant's correct taxpayer identification number is:
Social Security Number - - , or
Employer Identification Number - , and
(2) Please check the Appropriate Box(es). Claimant is not subject to backup
withholding because:
~ (a) Claimant is exempt from backup withholding, or
~ (b) Claimant has not been notified by the Internal Revenue Service ("IRS")
that Claimant is subject to backup withholding as a result of a failure
to report all interest or dividends, or
<PAGE>
~ (c) the IRS has notified Claimant that Claimant is no longer subject to
backup withholding.
(3) Claimant is the beneficial owner of the Claim and the Claim is held of
record by . The undersigned further certifies that if the Claimant
did not fill in the name of the registered holder or nominee in the
previous sentence, that Claimant is the holder of record of the Claim voted
hereby.
(4) Claimant has provided the information specified in the following table for
all additional Claims for which Claimant has submitted additional Ballots
(please use additional sheets of paper if necessary):
Account Number Registered Holder or Nominee Claim Amount
- --------- --------------- ---------
- --------- --------------- ---------
C. Dated:
Print or type name of Claimant:
Signed:
[If appropriate] By:
as:
IF YOU ARE BOTH THE RECORD HOLDER AND THE ONLY BENEFICIAL OWNER OF THE CLAIM(S)
FOR WHICH YOU ARE SUBMITTING THIS BALLOT, RETURN THIS BALLOT SO THAT IT IS
RECEIVED ON OR BEFORE 5:00 P.M., EASTERN TIME, ON MAY 24, 1995:
If by courier or by hand to:
Bankruptcy Services, Inc.
Grand Union Ballot Processing
400 Park Avenue
New York, New York 10022
If by U.S. mail to:
Bankruptcy Services, Inc.
Grand Union Ballot Processing
PO Box 5159
New York, New York 10150
IF YOU ARE THE BENEFICIAL HOLDER BUT NOT THE RECORD HOLDER, PLEASE REFER TO
PARAGRAPH 4 OF THE "VOTING INFORMATION AND INSTRUCTIONS", PRINTED BELOW.
VOTING INFORMATION AND INSTRUCTIONS
1. TO HAVE YOUR VOTES COUNT, YOU MUST INDICATE ACCEPTANCE OR REJECTION OF THE
PLAN IN THE COLUMNS INDICATED ON THE REVERSE SIDE AND SIGN AND RETURN THIS
BALLOT TO THE ADDRESS INDICATED ON THE ENCLOSED PRE-ADDRESSED ENVELOPE.
ORIGINAL BALLOTS MUST BE RECEIVED NO LATER THAN 5:00 P.M., EASTERN TIME, ON MAY
24, 1995 (THE "VOTING DEADLINE"). IF A BALLOT IS RECEIVED AFTER THE VOTING
DEADLINE, IT MAY NOT BE COUNTED. ANY BALLOT WHICH IS MARKED AS BOTH ACCEPTING
AND REJECTING THE PLAN, OTHER THAN SUMMARY BALLOTS COMPLETED BY INTERMEDIARIES,
SHALL NOT BE COUNTED FOR ANY PURPOSE CONCERNING THE PLAN. BALLOTS WHICH HAVE
NOT BEEN MARKED AS ACCEPTING OR REJECTING THE PLAN SHALL NOT BE COUNTED FOR
PURPOSES OF TABULATING VOTES FOR THE PLAN. ANY BALLOT WHICH IS NOT SIGNED SHALL
NOT BE COUNTED FOR VOTING PURPOSES.
2. To have this ballot counted, you must observe the procedures set forth in
the Order Approving Disclosure Statement, Establishing Voting Procedures and
Setting Confirmation Hearing, dated April 19, 1995 (the "Voting Procedures
Order"). Such order is contained in the solicitation materials sent to you. The
procedures set forth on this ballot are intended to summarize a few of the key
voting rules. Reference to the Voting Procedures Order is still necessary for
the specific voting rules.
<PAGE>
3. For cause shown, the Bankruptcy Court may permit a creditor to change or
withdraw an acceptance or rejection.
4. If you are both the record holder and the only beneficial owner of the
Claim indicated on the reverse side of this Ballot, you need only complete this
Ballot and return it to the Balloting Agent no later than the Voting Deadline.
If you are the beneficial owner but not the record holder of the Claim
indicated on the reverse side of this Ballot and not an Intermediary (a proxy
agent, brokerage firm, agent, custodian or other authorized nominee), then in
order for your vote to count you should complete this Ballot and send it to
your Intermediary by such date as to allow your Intermediary to send the
Summary Ballot comprising your claim to Bankruptcy Services, Inc. ("BSI") so
that it is received by the Voting Deadline. A ballot received directly from you
with respect to such Claim shall not be counted for voting purposes. If you are
the record holder but not the beneficial owner of the Claim indicated on the
reverse side of this Ballot (i.e., an Intermediary), you should contact BSI at
(212) 527-0727 to request sufficient solicitation packages and beneficial owner
ballots to send to all beneficial owners of the Claim.
5. Your signature is required in order for your vote to be counted. If your
claim is held by a partnership, the ballot should be executed in the name of
the partnership by a general partner. If the claim is held by a corporation,
then the ballot must be executed by an officer. If you are signing in a
representative capacity for either of the above, or in another representative
capacity, also indicate your title after your signature.
6. If you have claims other than in the class indicated on the ballot, then
you may receive more than one ballot. IF YOU RECEIVE MORE THAN ONE BALLOT, THEN
YOU SHOULD ASSUME THAT EACH BALLOT IS FOR A CLAIM IN A SEPARATE CLASS AND
SHOULD COMPLETE AND RETURN ALL OF THEM.
7. No claim against which an objection has been filed shall be counted unless,
after notice and hearing, the Bankruptcy Court has temporarily or otherwise
allowed such claim in such amount as the Bankruptcy Court deems proper for the
purpose of accepting or rejecting the Plan.
8. To the extent a claim has been filed asserting an unliquidated claim, the
Holder of such claim shall be entitled to vote and shall be treated as if such
Holder was the Holder of a liquidated claim in the amount of one dollar in the
appropriate class, unless, after notice and a hearing, the Bankruptcy Court has
temporarily or otherwise allowed such claim in such other amount as the
Bankruptcy Court deems proper for the purpose of accepting or rejecting the
Plan. To the extent a claim has been filed asserting a contingent claim, any
vote by the Holder of such claim shall not be counted. Any claim which is
asserted as partially unliquidated (that is, for a fixed amount plus certain
unspecified amounts) shall be treated as a claim for only the liquidated amount
asserted unless otherwise ordered by the Bankruptcy Court.
9. This Ballot is not a letter of transmittal and may not be used for any
purpose other than to vote to accept or reject the Plan. HOLDERS SHOULD NOT
SURRENDER CERTIFICATES REPRESENTING THEIR SECURITIES AT THIS TIME, AND NEITHER
THE PROPONENT NOR THE BALLOTING AGENT WILL ACCEPT DELIVERY OF ANY SUCH
CERTIFICATES TRANSMITTED TOGETHER WITH THIS BALLOT.
10. This ballot is for voting purposes only and does not constitute and shall
not be deemed a proof of claim or an admission by the Proponent of the validity
of a claim.
11. If you have any questions regarding this ballot or election procedures or
the voting procedures, please call: Bankruptcy Services, Inc. at (212)
527-0727.
<PAGE>
Exhibit T3E5
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
- ---------------------------
In re:
THE GRAND UNION COMPANY, Chapter 11
also d/b/a Big Star, Case No. 95-84 (PJW)
Debtor.
- ---------------------------
SUMMARY BALLOT FOR VOTING ON SECOND AMENDED PLAN OF REORGANIZATION,
DATED APRIL 19, 1995, SUBMITTED BY THE GRAND UNION COMPANY (THE "PLAN")
CLASS 4-SENIOR NOTE CLAIMS
NAME & ADDRESS:
On April 19, 1995, the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court") approved the disclosure statement filed by
The Grand Union Company (the "Proponent") and authorized the Proponent to
solicit acceptances or rejections of the Plan, a copy of which is attached as
an exhibit to the disclosure statement. This ballot is being provided for
voting on the Plan.
The Plan may be confirmed by the Bankruptcy Court, and thereby made binding
on you, if the plan is accepted by the holders of at least 2/3 in dollar amount
and more than 1/2 in number of claims actually voting in each voting class of
claims. The votes of the claims actually voted in your class will bind those
who do not vote. If the requisite acceptances are not obtained for the Plan,
the Bankruptcy Court nevertheless may confirm the Plan if at least one impaired
class of claims has accepted the Plan and the Bankruptcy Court finds that such
Plan accords fair and equitable treatment to, and does not discriminate
unfairly against, the class(es) rejecting it.
TO HAVE YOUR VOTE ON THE PLAN COUNT YOU MUST COMPLETE AND RETURN THIS BALLOT.
PLEASE COMPLETE SECTIONS A THROUGH C BELOW.
A. This summary ballot is provided for voting on the Plan. The undersigned
certifies that as of April 19, 1995, the record date for voting on the Plan, it
is the participant, broker, agent, custodian or other authorized nominee for
holders of claims in the above-referenced class, for which voting instructions
have been received from the beneficial owners (or their duly authorized agents
or nominees) of such claims for which it is duly authorized to act.
As instructed by the beneficial owners of the claims set forth above, the
undersigned transmits the following votes of such beneficial owners:
11-1/4% SENIOR NOTES DUE 2000 11-3/8% SENIOR NOTES DUE 1999
Acceptances: Acceptance:
----------------- ------------------
Number Number
$ $
---------------- -----------------
Face Amount Face Amount
Rejections: Rejections:
------------------ ------------------
Number Number
$ $
--------------- -----------------
Face Amount Face Amount
<PAGE>
B. Under the penalties of perjury, the undersigned certifies that:
(1) Claimant's correct taxpayer identification number is:
Social Security Number - - , or
Employer Identification Number - , and
(2) Please check the Appropriate Box(es). Claimant is not subject to backup
withholding because:
~ (a) Claimant is exempt from backup withholding, or
~ (b) Claimant has not been notified by the Internal Revenue Service ("IRS")
that Claimant is subject to backup withholding as a result of a failure
to report all interest or dividends, or
~ (c) the IRS has notified Claimant that Claimant is no longer subject to
backup withholding.
C. Dated:
Print or type name of Claimant:
Signed:
[If appropriate] By:
as:
RETURN THIS BALLOT SO THAT IT IS RECEIVED ON OR BEFORE 5:00 P.M., EASTERN TIME,
ON MAY 24, 1995 TO:
If by courier or by hand, to:
Bankruptcy Services, Inc.
Grand Union Ballot Processing
400 Park Avenue
New York, New York 10022
If by U.S. mail, to:
Bankruptcy Services, Inc.
Grand Union Ballot Processing
PO Box 5159
New York, New York 10150
VOTING INFORMATION AND INSTRUCTIONS
1. PARTICIPANTS, BROKERS, AGENTS, CUSTODIANS OR OTHER AUTHORIZED NOMINEES
VOTING ON BEHALF OF MORE THAN ONE BENEFICIAL ACCOUNT MUST FILL OUT THIS SUMMARY
BALLOT INDICATING THE TOTAL NUMBER OF CLAIMS VOTING TO ACCEPT OR REJECT THE
PLAN. FOR YOUR VOTE TO BE COUNTED, YOU MUST SIGN AND RETURN THIS SUMMARY BALLOT
IN THE ENCLOSED PRE-ADDRESSED ENVELOPE. BALLOTS MUST BE RECEIVED NO LATER THAN
5:00 P.M., EASTERN TIME, ON MAY 24, 1995 (THE "VOTING DEADLINE"). IF A BALLOT
IS RECEIVED AFTER THE VOTING DEADLINE, IT MAY NOT BE COUNTED. ANY BALLOT WHICH
IS MARKED AS BOTH ACCEPTING AND REJECTING THE PLAN, OTHER THAN SUMMARY BALLOTS
COMPLETED BY INTERMEDIARIES, SHALL NOT BE COUNTED FOR ANY PURPOSE CONCERNING
THE PLAN. BALLOTS WHICH HAVE NOT BEEN MARKED AS ACCEPTING OR REJECTING THE PLAN
SHALL NOT BE COUNTED FOR PURPOSES OF TABULATING VOTES FOR THE PLAN. ANY BALLOT
WHICH IS NOT SIGNED SHALL NOT BE COUNTED FOR VOTING PURPOSES.
2. To have this ballot counted, you must observe the procedures set forth in
the Order Approving Disclosure Statement, Establishing Voting Procedures and
Setting Confirmation Hearing, dated April 19, 1995 (the "Voting Procedures
Order"). Such order is contained in the solicitation materials sent to you. The
<PAGE>
procedures set forth on this ballot are intended to summarize a few of the key
voting rules. Reference to the Voting Procedures Order is still necessary for
the specific voting rules.
3. No fees, commissions or remuneration will be payable to any participant,
broker, nominee, dealer, agent or custodian for soliciting ballots to accept or
reject the Plan. The Debtor will, upon request, reimburse you and each
participant soliciting ballots for reasonable and customary copying, mailing
and handling expenses incurred by you in forwarding the ballots and other
enclosed materials.
4. Your signature is required in order for your vote to be counted. Please
sign your full name, indicate your title, the full name of your institution and
its full address.
5. If you have claims in more than one class, you may receive more than one
ballot. In addition, you may receive both summary ballots for you to vote on
behalf of more than one beneficial account and non-summary ballots for you to
vote on your own behalf. IF YOU RECEIVE MORE THAN ONE BALLOT, YOU SHOULD ASSUME
THAT EACH BALLOT IS FOR A CLAIM IN A SEPARATE CLASS AND SHOULD COMPLETE AND
RETURN ALL OF THEM.
6. No claim against which an objection has been filed shall be counted unless,
after notice and hearing, the Bankruptcy Court has temporarily or otherwise
allowed such claim in such amount as the Bankruptcy Court deems proper for the
purpose of accepting or rejecting the Plan.
7. To the extent a claim has been filed asserting an unliquidated claim, the
Holder of such claim shall be entitled to vote and shall be treated as if such
Holder was the Holder of a liquidated claim in the amount of one dollar in the
appropriate class, unless, after notice and a hearing, the Bankruptcy Court has
temporarily or otherwise allowed such claim in such other amount as the
Bankruptcy Court deems proper for the purpose of accepting or rejecting the
Plan. To the extent a claim has been filed asserting a contingent claim, any
vote by the Holder of such claim shall not be counted. Any claim which is
asserted as partially unliquidated (that is, for a fixed amount plus certain
unspecified amounts) shall be treated as a claim for only the liquidated amount
asserted unless otherwise ordered by the Bankruptcy Court.
8. This ballot is for voting purposes only and does not constitute and shall
not be deemed a proof of claim or an admission by the Proponent of the validity
of a claim.
9. This Ballot is not a letter of transmittal and may not be used for any
purpose other than to vote to accept or reject the Plan. HOLDERS SHOULD NOT
SURRENDER CERTIFICATES REPRESENTING THEIR SECURITIES AT THIS TIME, AND NEITHER
THE PROPONENT NOR THE BALLOTING AGENT WILL ACCEPT DELIVERY OF ANY SUCH
CERTIFICATES TRANSMITTED TOGETHER WITH THIS BALLOT.
10. Nothing contained herein or in the enclosed documents shall render you or
any other person the agent of the Debtor, or authorize you or any other person
to use any document or make any statement on behalf of the Debtor with respect
to the Plan, except for the statements contained in the documents enclosed
herewith.
11. If you have any questions regarding this ballot or election procedures or
the voting procedures, please call: Bankruptcy Services, Inc. at (212)
527-0727.
<PAGE>
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
- ---------------------------
In re:
THE GRAND UNION COMPANY, Chapter 11
also d/b/a Big Star, Case No. 95-84 (PJW)
Debtor.
- ---------------------------
SUMMARY BALLOT FOR VOTING ON SECOND AMENDED PLAN OF REORGANIZATION,
DATED APRIL 19, 1995, SUBMITTED BY THE GRAND UNION COMPANY (THE "PLAN")
CLASS 4-SENIOR NOTE CLAIMS
On April 19, 1995, the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court") approved the disclosure statement filed by
The Grand Union Company (the "Proponent") and authorized the Proponent to
solicit acceptances or rejections of the Plan, a copy of which is attached as
an exhibit to the disclosure statement. This ballot is being provided for
voting on the Plan.
The Plan may be confirmed by the Bankruptcy Court, and thereby made binding
on you, if the plan is accepted by the holders of at least 2/3 in dollar amount
and more than 1/2 in number of claims actually voting in each voting class of
claims. The votes of the claims actually voted in your class will bind those
who do not vote. If the requisite acceptances are not obtained for the Plan,
the Bankruptcy Court nevertheless may confirm the Plan if at least one impaired
class of claims has accepted the Plan and the Bankruptcy Court finds that such
Plan accords fair and equitable treatment to, and does not discriminate
unfairly against, the class(es) rejecting it.
TO HAVE YOUR VOTE ON THE PLAN COUNT YOU MUST COMPLETE AND RETURN THIS BALLOT.
PLEASE COMPLETE SECTIONS A THROUGH C BELOW.
A. This summary ballot is provided for voting on the Plan. The undersigned
certifies that as of April 19, 1995, the record date for voting on the Plan, it
is the participant, broker, agent, custodian or other authorized nominee for
holders of claims in the above referenced class, for which voting instructions
have been received from the beneficial owners (or their duly authorized agents
or nominees) of such claims for which it is duly authorized to act.
As instructed by the beneficial owners of the claims set forth above, the
undersigned transmits the following votes of such beneficial owners:
11-1/4% SENIOR NOTES DUE 2000 11-3/8% SENIOR NOTES DUE 1999
Acceptances: Acceptance:
----------------- ------------------
Number Number
$ $
---------------- -----------------
Face Amount Face Amount
Rejections: Rejections:
------------------ ------------------
Number Number
$ $
---------------- ----------------
Face Amount Face Amount
<PAGE>
B. Under the penalties of perjury, the undersigned certifies that:
(1) Claimant's correct taxpayer identification number is:
Social Security Number - - , or
Employer Identification Number - , and
(2) Please check the Appropriate Box(es). Claimant is not subject to backup
withholding because:
~ (a) Claimant is exempt from backup withholding, or
~ (b) Claimant has not been notified by the Internal Revenue Service ("IRS")
that Claimant is subject to backup withholding as a result of a failure
to report all interest or dividends, or
~ (c) the IRS has notified Claimant that Claimant is no longer subject to
backup withholding.
C. Dated:
Print or type name of Claimant:
Signed:
[If appropriate] By:
as:
RETURN THIS BALLOT SO THAT IT IS RECEIVED ON OR BEFORE 5:00 P.M., EASTERN TIME,
ON MAY 24, 1995 TO:
If by courier or by hand, to:
Bankruptcy Services, Inc.
Grand Union Ballot Processing
400 Park Avenue
New York, New York 10022
If by U.S. mail, to:
Bankruptcy Services, Inc.
Grand Union Ballot Processing
PO Box 5159
New York, New York 10150
VOTING INFORMATION AND INSTRUCTIONS
1. PARTICIPANTS, BROKERS, AGENTS, CUSTODIANS OR OTHER AUTHORIZED NOMINEES
VOTING ON BEHALF OF MORE THAN ONE BENEFICIAL ACCOUNT MUST FILL OUT THIS SUMMARY
BALLOT INDICATING THE TOTAL NUMBER OF CLAIMS VOTING TO ACCEPT OR REJECT THE
PLAN. FOR YOUR VOTE TO BE COUNTED, YOU MUST SIGN AND RETURN THIS SUMMARY BALLOT
IN THE ENCLOSED PRE-ADDRESSED ENVELOPE. BALLOTS MUST BE RECEIVED NO LATER THAN
5:00 P.M., EASTERN TIME, ON MAY 24, 1995 (THE "VOTING DEADLINE"). IF A BALLOT
IS RECEIVED AFTER THE VOTING DEADLINE, IT MAY NOT BE COUNTED. ANY BALLOT WHICH
IS MARKED AS BOTH ACCEPTING AND REJECTING THE PLAN, OTHER THAN SUMMARY BALLOTS
COMPLETED BY INTERMEDIARIES, SHALL NOT BE COUNTED FOR ANY PURPOSE CONCERNING
THE PLAN. BALLOTS WHICH HAVE NOT BEEN MARKED AS ACCEPTING OR REJECTING THE PLAN
SHALL NOT BE COUNTED FOR PURPOSES OF TABULATING VOTES FOR THE PLAN. ANY BALLOT
WHICH IS NOT SIGNED SHALL NOT BE COUNTED FOR VOTING PURPOSES.
2. To have this ballot counted, you must observe the procedures set forth in
the Order Approving Disclosure Statement, Establishing Voting Procedures and
Setting Confirmation Hearing, dated April 19, 1995 (the "Voting Procedures
Order"). Such order is contained in the solicitation materials sent to you. The
<PAGE>
procedures set forth on this ballot are intended to summarize a few of the key
voting rules. Reference to the Voting Procedures Order is still necessary for
the specific voting rules.
3. No fees, commissions or remuneration will be payable to any participant,
broker, nominee, dealer, agent or custodian for soliciting ballots to accept or
reject the Plan. The Debtor will, upon request, reimburse you and each
participant soliciting ballots for reasonable and customary copying, mailing
and handling expenses incurred by you in forwarding the ballots and other
enclosed materials.
4. Your signature is required in order for your vote to be counted. Please
sign your full name, indicate your title, the full name of your institution and
its full address.
5. If you have claims in more than one class, you may receive more than one
ballot. In addition, you may receive both summary ballots for you to vote on
behalf of more than one beneficial account and non-summary ballots for you to
vote on your own behalf. IF YOU RECEIVE MORE THAN ONE BALLOT, YOU SHOULD ASSUME
THAT EACH BALLOT IS FOR A CLAIM IN A SEPARATE CLASS AND SHOULD COMPLETE AND
RETURN ALL OF THEM.
6. No claim against which an objection has been filed shall be counted unless,
after notice and hearing, the Bankruptcy Court has temporarily or otherwise
allowed such claim in such amount as the Bankruptcy Court deems proper for the
purpose of accepting or rejecting the Plan.
7. To the extent a claim has been filed asserting an unliquidated claim, the
Holder of such claim shall be entitled to vote and shall be treated as if such
Holder was the Holder of a liquidated claim in the amount of one dollar in the
appropriate class, unless, after notice and a hearing, the Bankruptcy Court has
temporarily or otherwise allowed such claim in such other amount as the
Bankruptcy Court deems proper for the purpose of accepting or rejecting the
Plan. To the extent a claim has been filed asserting a contingent claim, any
vote by the Holder of such claim shall not be counted. Any claim which is
asserted as partially unliquidated (that is, for a fixed amount plus certain
unspecified amounts) shall be treated as a claim for only the liquidated amount
asserted unless otherwise ordered by the Bankruptcy Court.
8. This ballot is for voting purposes only and does not constitute and shall
not be deemed a proof of claim or an admission by the Proponent of the validity
of a claim.
9. This Ballot is not a letter of transmittal and may not be used for any
purpose other than to vote to accept or reject the Plan. HOLDERS SHOULD NOT
SURRENDER CERTIFICATES REPRESENTING THEIR SECURITIES AT THIS TIME, AND NEITHER
THE PROPONENT NOR THE BALLOTING AGENT WILL ACCEPT DELIVERY OF ANY SUCH
CERTIFICATES TRANSMITTED TOGETHER WITH THIS BALLOT.
10. Nothing contained herein or in the enclosed documents shall render you or
any other person the agent of the Debtor, or authorize you or any other person
to use any document or make any statement on behalf of the Debtor with respect
to the Plan, except for the statements contained in the documents enclosed
herewith.
11. If you have any questions regarding this ballot or election procedures or
the voting procedures, please call: Bankruptcy Services, Inc. at (212)
527-0727.
