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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 March 30, 1996
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Commission File Number 0-26602
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THE GRAND UNION COMPANY
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(Exact name of registrant as specified in its charter)
Delaware 22-1518276
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
201 Willowbrook Boulevard, Wayne, New Jersey 07470-0966
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 201-890-6000
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Securities registered pursuant to Section 12 (b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common Stock, Par Value $1.00 National Market System of NASD
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Securities registered pursuant to Section 12 (g) of the Act: None
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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
requirements for the past 90 days.
Yes X No
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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]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of June 19, 1996 is $40,226,000. For the purpose of this
calculation, all members of the Board of Directors and all stockholders with
sole or shared voting power over 10% or more of the Company's common stock are
presumed to be affiliates.
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No
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As of June 19, 1996 there were issued and outstanding 10,000,000 shares, par
value $1.00 per share, of the Registrant's Common Stock.
Documents Incorporated by Reference: None
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THE GRAND UNION COMPANY
PART I
ITEM 1. BUSINESS
GENERAL
The Grand Union Company, a Delaware corporation ("Grand Union" or the
"Company"), currently operates 229 retail food stores under the "Grand Union"
name in six northeastern states. Through June 15, 1995, Grand Union's common
stock was wholly owned by Grand Union Capital Corporation ("Capital"), a
wholly-owned subsidiary of Grand Union Holdings Corporation ("Holdings"). On
November 29, 1994, Grand Union announced that it intended to develop a capital
restructuring plan with certain of its lenders. On January 25, 1995, the Company
filed a voluntary petition for relief under chapter 11 ("Chapter 11") of Title
11 of the United States Code (the "Code") in the United States Bankruptcy Court
for the District of Delaware (the "Bankruptcy Court"). The Bankruptcy Court
confirmed the Second Amended Chapter 11 Plan of The Grand Union Company, dated
as of April 19, 1995 (as confirmed, the "Plan"), on May 31, 1995, and the
Company emerged from Chapter 11 on June 15, 1995 (the "Effective Date")(See
"Item 1 - Business - Recent History" and "Item 3 - Legal Proceedings"). Grand
Union's common stock is now listed on the NASDAQ Stock Market under the symbol
GUCO. Upon confirmation of the Plan, a new Board of Directors was elected
(See "Item 10 - Directors and Executive Officers of the Registrant").
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BUSINESS STRATEGY
During the past year, the Company has developed a strategic operating plan
which incorporates a number of initiatives which it believes will build on
its current strengths and respond to challenges. The significant elements of
these initiatives, many of which have been introduced during the 52 weeks ended
March 30, 1996 ("Fiscal 1996") include the following:
PRICE IMAGE. Grand Union is taking steps to enhance its price image. The
Company's "More Lower Prices" campaign, in which the Company matches the shelf
prices of the perceived low price leader in each of its markets, was introduced
in May 1995 in certain of the Company's markets and was extended to all areas by
May 1996. Newspaper, television and radio advertising has been used to support
this initiative. Additionally, the Company has remained competitive with its
competition on weekly promotional features. During Fiscal 1996, the Company
increased its selection of private label items, which are comparable in quality
to national brands but offered at lower prices.
SUPERIOR PRODUCE DEPARTMENTS. Grand Union is building on its already high
quality produce departments by further emphasizing convenience items such as
salad bars, melon bars, platters and fruit baskets. Quality of produce is
emphasized through offering locally grown products and fresh juice and by
focusing customers' attention on Grand Union's unique five point inspection
program. The Company also offers a full assortment of organically grown
produce, which is of increasing importance to a segment of the Company's
customers. Produce is displayed and advertised within the store to communicate
the quality and extent of the produce selection.
BEST TAKE-OUT RESTAURANT IN TOWN. The Company believes there is an
increasing demand for convenience oriented products. To capitalize on its
slogan as 'The Best Take-Out Restaurant in Town' and its already
well-developed food preparation skills, the Company is expanding areas such as
self-service meals, hot foods, soups and sandwiches, platters in various
departments, holiday dinner programs, oven ready meats and seafood and fried
fish.
LABOR EFFECTIVENESS. The Company is addressing store labor levels in
view of the increased preparation time necessary to carry out the objectives
discussed above in its service departments. Additionally, the Company
believes there are increased sales opportunities available by maintaining an
in-stock position at all times, providing a clean and safe shopping environment
and providing quick, convenient service in each department and at the front end.
CATEGORY MANAGEMENT. Strategies are being designed by product category to
continually define the appropriate mix of superior products, exceptional values,
routine needs and convenience items which will maximize sales and profits.
LOW COST OPERATOR. The Company intends to seek opportunities to reduce
operating costs consistent with its overall objective of providing a high
level of customer service. During Fiscal 1996, the Company took several
steps to fulfill this objective. The Company re-evaluated the method in
which it distributed product to its stores, resulting in a decision to close
its warehouses and enter into agreements with a wholesaler, thereby lowering
the Company's distribution costs (See "Item 1-Business-Distribution and Supply
and Management Information Systems"). During Fiscal 1996, the Company completed
store voluntary resignation incentive programs which resulted in a reduction
of the Company's average hourly pay. In March 1996, the Company completed an
organizational restructuring which will enable it to more effectively manage
its business at a reduced cost.
PROTOTYPE STORE FORMAT. Grand Union has developed a prototype for
existing stores called MASTERS (Maximize All Space, Totally Expand the Right
Stuff) which is designed to significantly increase the number and variety of
product offerings. Two stores have been renovated using this format during
Fiscal 1996.
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 grocery and general merchandise products as well as high-quality
perishables and service departments. 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, beer and wine departments are included
in many locations, subject to the limitations of state and 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.
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SELECTED DATA
The table below sets forth certain statistical information with respect to
Grand Union retail stores for the periods indicated.
Fiscal Fiscal Fiscal
1996 1995 1994
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Number of stores (at end of period) 229 231 254
Total selling square feet at end of period (in thousands) 4,305 4,276 4,532
Average sales per selling square foot per week $10.28 $10.29 $10.76
SUMMARY OF OPERATIONS
Grand Union currently operates 229 stores including 84 stores in
northeastern New York, 40 stores in Vermont, 43 stores in central and
northern New Jersey, 28 stores in Westchester, Orange, Rockland, Dutchess and
Putnam Counties of New York, 14 stores on Long Island, New York, and 12
stores in Fairfield County, Connecticut. The Company also has a limited
presence in New Hampshire (3 stores), New York City (3 stores) and
Pennsylvania (2 stores).
In upstate New York, Grand Union generally operates in small cities and
rural communities. Commercial development in upstate New York 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 Albany, New York metropolitan area, Grand Union's
competitors, including Golub Corporation ("Price Chopper") and Hannaford
Brothers, Inc. ("Hannaford"), have opened a number of new stores in the last
five years. Such newly opened stores are generally larger and more modern
than the Company's stores in the relevant markets. During the 52 weeks
ended April 1, 1995 ("Fiscal 1995"), the Company closed 7 stores in the
Albany area.
In the Mid-Hudson Valley area of New York, the Company's principal
competitors are Big V Supermarkets Inc. (a member of the Wakefern ("ShopRite")
cooperative), Price Chopper, Hannaford and The Great Atlantic & Pacific Tea
Company, Inc. ("A&P"). Weak economic conditions in the Mid-Hudson Valley area
have been accompanied by a number of competitive openings in recent years.
In Vermont, Grand Union's principal competitors are Price Chopper,
Hannaford and A&P. The competitive environment in Vermont evolves very slowly
due to zoning and environmental regulations in the state which restrict
commercial development (including supermarkets).
A number of stores in the Adirondack and Vermont areas are in resort areas
and generally experience significant increases in sales in the summer months and
in some cases during the winter ski season.
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In New Jersey, the Company competes primarily against Pathmark Stores, Inc.
("Pathmark"), A&P, Edwards Supermarkets, Inc. ("Edwards"), ShopRite and various
supermarkets supplied by the Twin County ("Foodtown") cooperative. In
Westchester, Orange, Rockland, Dutchess and Putnam Counties in New York, the
Company generally competes with A&P, Edwards and ShopRite. On Long Island, the
Company's principal competitors are A&P/Waldbaums, Pathmark, King Kullen Grocery
Co., Inc. and the Stop & Shop Company ("Stop & Shop"). Grand Union's main
competitors in Fairfield County, Connecticut are Stop & Shop and A&P. These
stores serve densely populated communities with demographics particularly
well-suited for store formats emphasizing specialty departments. Accordingly,
the sales mix in these stores includes a larger percentage of higher margin
perishable department items. In addition, the high population density as well as
the geographic concentration of stores provide substantial opportunities to
achieve additional economies of scale, particularly in advertising.
CAPITAL INVESTMENT
The Company's capital spending is primarily directed towards renovating and
upgrading the existing Grand Union store base and opening new and replacement
stores in existing marketing areas. Capital expenditures, including capitalized
leases other than real estate leases, for Fiscal 1996 and Fiscal 1995 were
approximately $46,000,000 and $71,000,000, respectively.
During the most recent fiscal year, the Company implemented on a test
basis its MASTERS program, designed to enhance the sales potential of the
Company's existing stores, through targeted capital expenditures, enhanced
displays, and an increase in the number and variety of product offerings and
customer services.
DISTRIBUTION AND SUPPLY AND MANAGEMENT INFORMATION SYSTEMS
DISTRIBUTION AND SUPPLY. On June 15, 1995, January 2, 1996 and January
21, 1996, the Company entered into supply and distribution agreements with
C&S Wholesale Grocers, Inc. ("C&S"), under which C&S stocks and distributes
to all Grand Union stores substantially all of the merchandise formerly owned
and warehoused by Grand Union. Under two of the agreements, C&S stocks and
supplies grocery and perishable products from its own warehouses. Under the
most recent agreement, C&S stocks and supplies health and beauty care and
general merchandise products from the Company's Montgomery, New York
warehouse. As in prior years, Grand Union also utilizes a frozen food
distribution facility operated by a third party. Management believes that
the agreements with C&S enhance the Company's ability to offer consistently
fresh and high quality products to its customers at a reduced distribution cost.
From September 1993 until September 1995, Grand Union and the Penn
Traffic Company ("Penn Traffic")were parties to a combined purchasing and
distribution agreement relating to general merchandise and health and beauty
care products. In September 1995, upon termination of the agreement, Grand
Union purchased from Penn Traffic $12,821,000 of merchandise which had been
owned by Penn Traffic under the joint buying arrangement. In February 1996,
in connection with the agreement discussed above, C&S purchased $10,000,000
of general merchandise and health and beauty care products stored at the
Company's Montgomery, New York warehouse.
Prior to the commencement of distribution by C&S, the Company operated five
distribution centers, aggregating approximately 2.1 million square feet. Grand
Union also leased space in three additional storage facilities and, from time to
time, utilized limited space in several other facilities.
Prior to the agreements with C&S, products sold, including private label
products, were purchased through a large group of unaffiliated suppliers.
MANAGEMENT INFORMATION SYSTEMS. Financial, purchasing and operating system
requirements are supported through a central computer system located in Wayne,
New Jersey. Grand Union currently utilizes scanning systems in 183 stores
(representing approximately 91% of total sales) and intends to continue to
invest in scanning and other store systems in the future where such systems are
economically justified.
COMMISSARY. Grand Union operates a 20,000 square foot commissary located
in Newburgh, New York, in which high quality cooked meat products, salads, salad
ingredients and soups are prepared for sale in the Company's delicatessen
departments.
EMPLOYEES
As of March 30, 1996, Grand Union had approximately 15,000 employees, of
whom approximately 66% were employed on a part-time basis. Approximately 45% of
Grand Union's employees are covered by collective bargaining
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agreements negotiated with 10 local unions. As of March 30, 1996, substantially
all of the employees covered by these collective bargaining agreements are
employed at store locations.
The Company, as a result of a major organizational change, closed its
Northern Region office located in Colonie, New York in March, 1996. As a
result, a number of employees were relocated to the Corporate offices and
approximately 50 employees were terminated. The Company provided for severance
payments based on the employee's position with the Company and length of
service.
Approximately 238 and 206 warehouse employees and transportation workers,
respectively, represented by the International Brotherhood of Teamsters were
terminated in connection with the closing of the Carlstadt, New Jersey and
Mt. Kisco, New York warehouses on or about March 1, 1996 and approximately
188 employees represented by the Independent Warehouse Employees Association
and 148 employees represented by the Independent Transportation Workers
Association were terminated in connection with the closing of the Waterford,
New York warehouse on or around July 31, 1995. The Company reached a
settlement with the unions which provided for additional severance payments
for members in consideration of the resolution of various legal claims
asserted by the collective bargaining units.
The Company entered into a new labor agreement on June 7, 1995 with United
Food and Commercial Workers, Local 1262 ("Local 1262"). The agreement, which
expires March 13, 1999, covers approximately 1,900 clerks working in 33 Grand
Union stores located in New York City, Long Island and Westchester, Putnam and
Dutchess Counties in New York. The Company also entered into a new labor
agreement with Teamsters Local #445 on November 27, 1995 which expires on
December 4, 1999, covering approximately 120 warehouse employees at the
Company's Montgomery, New York distribution center. The Company also negotiated
a labor agreement with UFCW Local #342-50 in November 1995 which expires on
October 23, 1999 and covers approximately 300 non-managerial, meat department
employees in the Company's Long Island, New York stores. The Company's other
labor agreements have expiration dates ranging from March 1997 through March
1999.
The Company believes that its relationship with its employees is
generally satisfactory.
TRADE NAMES, SERVICE MARKS AND TRADEMARKS
Grand Union owns and actively uses over 20 trade names, service marks and
trademarks (collectively, "Marks"). Among these Marks are the name "Grand
Union"-Registered Trademark-, the symbol of a red dot, both of which are
material to the Company's business, and the words "Grand Premium"-Registered
Trademark-, "Grand Classics" -Registered Trademark-, "Big Gold
Top"-Registered Trademark-, "Holland Hall"-Registered Trademark-, and "Red
Dot Special"-Registered Trademark-, all of which are significant to the
Company's business. The Company also has common law rights in, has filed for,
or intends to file for various other Marks.
COMPETITION
The food retailing business is highly competitive. The Company competes
with numerous national, regional and local supermarket chains. The Company 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. Some of the Company's competitors have greater financial
resources than the Company and could use those resources to take steps which
would adversely affect the Company's competitive position. (See also "Item 7 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations".)
RECENT HISTORY
CHAPTER 11 REORGANIZATION
On November 29, 1994, Grand Union announced that it intended to develop a
capital restructuring plan with certain of its lenders. On January 25, 1995,
in connection with an agreement reached with its bank lenders and with
members of informal committees of certain holders of Grand Union notes, the
Company filed a voluntary petition for relief under Chapter 11 of the Code in
Bankruptcy Court. The Bankruptcy Court confirmed the Second Amended Chapter
11 Plan of The Grand Union Company, dated as of April 19, 1995, on May 31,
1995, and the Company emerged from Chapter 11 on June 15, 1995. Significant
provisions of the Plan included:
1. Payment in full of all allowed administrative claims and all allowed
general unsecured and priority claims.
2. Payment in full of obligations under the Company's existing bank
credit agreement (the "Bank Credit Agreement"), including principal and
accrued interest. Concurrently, the Company entered into an Amended and
Restated Credit Agreement (the "New Bank Facility"), providing for a
five-year revolving credit facility of $100,000,000 and a seven-year term
loan facility of $104,144,371, secured by a lien on substantially all of
the assets of Grand Union and its subsidiaries.
3. Cancellation of obligations under the Company's 11.375% Senior Notes
due 1999 and 11.25% Senior Notes due 2000 (collectively, the "Senior
Notes"), which had an aggregate principal amount of $525,000,000 plus
accrued interest, in exchange for the issuance of $595,421,000
aggregate principal amount of new 12% senior notes due 2004 and cash
payments of $54,922 for fractional amounts to the holders of the
Senior Notes.
4. Cancellation of obligations under the Company's 12.25% Senior
Subordinated Notes due 2002, 12.25% Senior Subordinated Notes due 2002,
Series A and 13% Senior Subordinated Notes due 1998 (collectively, the
"Subordinated Notes"), which had an aggregate principal amount of
$566,150,000, in exchange for issuance to each holder of Subordinated
Notes its pro rata share of an aggregate of 10,000,000 shares of new
common stock (the "New Common Stock").
5. Issuance of warrants, which expire June 15, 2000, to purchase an
aggregate of 900,000 shares of New Common Stock to holders of 15% Senior
Zero Coupon Notes due 2004 and 16.5% Senior Subordinated Zero Coupon
Notes due 2007 (collectively, the "Capital Notes") pursuant to the terms
of a settlement reached among the Company, its then indirect parent
companies, the Official Committee of Unsecured Creditors of its then
parent company and certain holders of Capital Notes. The warrants are
comprised of 300,000 Series 1 Warrants to purchase shares of New Common
Stock at a purchase price of $30 per share and 600,000 Series 2 Warrants
to purchase shares of New Common Stock at a purchase price of $42 per
share.
The Plan made no provision for the holders of the remaining long-term
debt, redeemable preferred stock, common stock or warrants to purchase common
shares of the Company's then indirect parent.
OCTOBER 1993 ACQUISITION
On October 18, 1993, the Company acquired five supermarket locations on
Long Island for cash consideration of $18,300,000, of which $6,000,000 was
allocated to property, equipment and leasehold improvements, $10,100,000 was
allocated to goodwill and $2,200,000 was for store inventory. The acquisition
was financed through the application of a
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portion of the proceeds of the sale to institutional investors of $50,000,000
principal amount of Series A 12.25% Subordinated Notes.
SALE OF THE SOUTHERN REGION
On March 29, 1993, Grand Union sold 48 of its 51 Southern Region stores to
A&P. The three remaining Southern Region stores were closed and subleased.
Grand Union received net cash proceeds of approximately $25,000,000 and was
relieved of approximately $4,500,000 of capital lease obligations.
THE 1992 RECAPITALIZATION
On July 22, 1992, Holdings, Capital and Grand Union completed a
recapitalization (the "1992 Recapitalization"). In connection with the 1992
Recapitalization, Holdings, through Capital and Grand Union, entered into 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 and $500,000,000 principal amount of Grand Union 12.25% Subordinated
Notes, and sold $343,000,000 principal amount of Capital Senior Zero Notes and
$745,000,000 principal amount of Capital Subordinated Zero 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 1992 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 1992 Recapitalization and
approximately 3.4% of the common stock of Holdings held by Grand Union
management. At the time of the 1992 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 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 1992 Recapitalization.
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 and offices.
The following table indicates the location and number of stores as of March 30,
1996.
Number of
Locations Stores
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New York 129
New Jersey 43
Vermont 40
Connecticut 12
New Hampshire 3
Pennsylvania 2
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Total 229
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As of March 30, 1996, Grand Union owns 13 and leases 216 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. Nine 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.
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Grand Union currently operates one distribution center in Montgomery, New
York which is 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 was part of its Carlstadt, New Jersey Grocery
Distribution Center and a 101,000 square foot facility in Waverly, New York.
Grand Union's lease on its distribution center has 33 years remaining, including
options. See Note 10 to the Consolidated Financial Statements, Property Leases,
for information on leases and annual rents.
ITEM 3. LEGAL PROCEEDINGS
CHAPTER 11 PROCEEDINGS. Reference is made to "Item 1. Business - Recent
History" for information regarding the Company's Chapter 11 proceedings. One
proceeding challenging the order confirming the Plan is pending. The
Company does not believe that this proceeding will result in any modification
or revocation of the order.
ENVIRONMENTAL - CONNECTICUT. 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. 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 costs 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 $2,000,000. Investigations are continuing, and there can be no assurance
that the amount of such liability will not exceed $2,000,000.
ENVIRONMENTAL - NEW YORK. In 1991, Grand Union's landlord brought an
action against Grand Union, 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 the Comprehensive Environmental Response Compensation and Liability
Act ("CERCLA") and consequential damages (pursuant to the court's supplemental
jurisdiction). The plaintiff claims that Grand Union and other tenants
discharged hazardous substances from their premises which caused the plaintiff
to incur response costs. The gravamen of the plaintiff's claim is that Grand
Union placed household cleaning products containing volatile organic substances
in a compactor situated at the rear of its premises and that such substances
were released into the environment. Grand Union believes that the evidence will
not support the allegation and is vigorously defending the matter. In
connection with the Company's Chapter 11 proceedings, the plaintiff filed a
proof of claim in the amount of $4,389,518. The U.S. Environmental Protection
Agency carried out a removal action at this site and recently notified the
Company that it was a potentially responsible party within the meaning of
Section 107(a) of CERCLA. The Company is unable to determine the amount of its
potential liability arising from this matter, but does not believe that the
amount of potential liability is likely to be materially adverse to the
Company's financial condition.
FTC ORDER. 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, operated stores in some of the same geographic areas in Vermont
and upstate New York. In order to satisfy the concerns of federal antitrust
authorities arising therefrom in connection with the acquisition of Grand Union
by Holdings, prior to consummation thereof MTH Holdings, Inc. ("MTH Holdings"),
which indirectly controlled Grand Union and Penn Traffic, an affiliate of Miller
Tabak Hirsch + Co., a New York Limited Partnership, and GUAC entered into an
Agreement to Hold Separate with Salomon Inc. and the Federal Trade Commission
("FTC") and an Agreement Containing Consent Order (the "Order") with the FTC,
which Order was subsequently modified on February 16, 1996 (collectively, the
"FTC Agreements").
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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 $10,700,000 with an option to extend the term of such operation
for an additional five years. Grand Union paid P&C Foods $7,500,000 for an
option to purchase the stores at an amount defined in the Operating Agreement.
Pursuant to the terms of the Operating Agreement, the 1992 Recapitalization
triggered a $15,000,000 prepayment obligation to P&C Foods. The Operating
Agreement was assumed during the Chapter 11 case and will continue on its then
current terms.
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
notification to the FTC.
As required by the FTC Agreements, following commencement of the Chapter 11
proceedings, Grand Union notified the FTC that a change of control of the
Company would occur upon completion of the reorganization. The Agreement to
Hold Separate was, by its terms, applicable only until certain stores identified
therein could be divested. All required divestitures have occurred and, as of
the Effective Date, there is no longer any control affiliation between Penn
Traffic and Grand Union, which may in the future be direct competitors in
certain market areas. The consummation of the Plan did not result in any change
in the applicability of the FTC Agreements.
OTHER PROCEEDINGS. The Company is also subject to certain other legal
proceedings and claims arising in connection with its business. It is
management's opinion that the ultimate resolution of such claims will not have a
material adverse effect on the Company's consolidated results of operations or
its financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS
MATTERS
The New Common Stock of the Company is listed on the NASDAQ Stock Market
under the symbol GUCO. At the close of business on March 30, 1996, there were
10,000,000 shares of New Common Stock, $1.00 par value outstanding and entitled
to vote. There are approximately 2,600 holders of record as of June 19, 1996.
The quarterly market value of the Company's stock is discussed in Note 17
to the Consolidated Financial Statements.
No cash dividends were declared or paid during each of the three fiscal
years ended March 30, 1996. Payment of dividends to holders of New Common Stock
is restricted by Grand Union's New Bank Facility and by the terms of the New
Senior Notes.
9
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
As discussed in Item 1, the Company emerged from its Chapter 11
proceedings effective June 15, 1995 (the "Effective Date"). For financial
reporting purposes, the Company accounted for the consummation of the Plan
effective June 17, 1995. In accordance with the American Institute of
Certified Public Accountants Statement of Position 90-7, "Financial Reporting
By Entities In Reorganization Under The Bankruptcy Code", the Company has
applied Fresh-Start Reporting as of the Effective Date which has resulted in
significant changes to the valuation of certain of the Company's assets and
liabilities, and to its stockholders' equity. In connection with the
adoption of Fresh-Start Reporting, a new entity has been deemed created for
financial reporting purposes. The periods prior to the Effective Date have
been designated "Predecessor Company" and the period subsequent to the
Effective Date has been designated "Successor Company". All information is
derived from the consolidated financial statements of the Company. This
information should be read in conjunction with the historical financial
statements of the Company, including the notes thereto, included elsewhere
herein. The financial statements prior to the Effective Date reflect the
accounts of Holdings pushed down to the accounts of Grand Union. All dollars
are in millions, except per share data.
<TABLE>
<CAPTION>
Successor
Company Predecessor Company
-------------------------------------------------------------------------------
41 Weeks 11 Weeks 52 Weeks 52 Weeks 53 Weeks 52 Weeks
Ended Ended Ended Ended Ended Ended
March 30, June 17, April 1, April 2, April 3, March 28,
1996 1995 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Sales $ 1,819.9 $ 487.9 $ 2,391.7 $ 2,477.3 $ 2,834.0 $ 2,968.5
Gross profit 569.9 143.8 708.3 731.7 822.3 820.5
Operating and administrative expenses 453.7 117.5 571.6 552.5 627.0 622.3
Depreciation and amortization 143.8 17.2 87.1 78.6 80.6 78.7
Unusual items 22.0 18.6 27.4 4.5 201.5 --
Interest expense 79.2 19.8 182.0 183.8 174.5 172.0
Loss before income taxes, extraordinary
items and cumulative effect of
accounting change 128.8 29.3 159.8 87.6 261.2 52.5
Income tax (benefit) provision (18.9) -- -- -- 4.5 12.5
Extraordinary items -- 854.8 -- -- (47.7) --
Cumulative effect of accounting change -- -- -- 30.3 -- --
Net income (loss) (109.9) 825.5 (159.8) (118.0) (313.4) (65.1)
Net loss per share (7) 10.99 -- -- -- -- --
Ratio of earnings to fixed charges (1) -- -- -- -- -- --
Deficiency in earnings available to
cover fixed charges 128.8 29.3 159.8 87.6 261.2 52.5
BALANCE SHEET DATA:
Total assets $ 1,178.2 (6) $ 1,394.8 $ 1,394.2 $ 1,418.2 $ 1,536.8
Total debt and capital lease obligations (2) 875.1 (6) 1,614.9 1,532.2 1,402.5 1,251.1
Redeemable stock (2) -- (6) 174.2 154.7 139.8 128.9
Nonredeemable stock and stockholders'
equity (deficit) 44.1 (6) (824.3) (644.8) (510.3) (190.8)
OPERATING AND OTHER DATA:
EBITDA (3) $ 94.2 $ 7.7 $ 109.3 $ 144.4 $ (53.9) $ 198.2
Adjusted EBITDA (4) 117.7 26.6 135.6 180.1 196.7 196.3
EBITDA as a percentage of sales 5.2% 1.6% 4.6% 5.8% (1.9)% 6.7%
Adjusted EBITDA as a percentage of sales 6.5% 5.5% 5.7% 7.3% 6.9 % 6.6%
Capital expenditures (5) $ 43.0 $ 3.0 $ 70.8 $ 86.2 $ 66.2 $ 34.6
LIFO provision (credit) 1.5 .3 (1.1) 0.9 1.4 (1.9)
Number of stores at year end 229 N/A 231 254 250 304
</TABLE>
10
<PAGE>
(1) The ratio of earnings to fixed charges is computed by dividing (i) earnings
before income taxes, extraordinary items, 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) Amounts as of April 1, 1995 are classified in the Consolidated Balance
Sheet as Liabilities Subject to Compromise.
(3) Earnings before interest expense, depreciation, amortization and income
taxes.
(4) Earnings before interest expense, depreciation, amortization, LIFO
provision, unusual items, extraordinary items, cumulative effect of
accounting change and income taxes.
(5) Includes capitalized leases other than real estate capitalized leases.
(6) Balance sheet data is not applicable at this date.
(7) Loss per share data is not meaningful for periods prior to the Effective
Date due to the significant changes in the capital structure of the
Company.
11
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL:
As discussed in Item 1, the Company emerged from its Chapter 11
proceedings effective June 15, 1995 (the "Effective Date"). For financial
reporting purposes, the Company accounted for the consummation of the Plan
effective June 17, 1995. In accordance with the American Institute of
Certified Public Accountants Statement of Position 90-7, "Financial Reporting
By Entities In Reorganization Under The Bankruptcy Code", the Company has
applied Fresh-Start Reporting as of the Effective Date which has resulted in
significant changes to the valuation of certain of the Company's assets and
liabilities, and to its stockholders' equity. In connection with the
adoption of Fresh-Start Reporting, a new entity has been deemed created for
financial reporting purposes. The periods prior to the Effective Date have
been designated "Predecessor Company" and the period subsequent to the
Effective Date has been designated "Successor Company". For purposes of the
discussion of Results of Operations for the 52 weeks ended March 30, 1996,
and Liquidity and Capital Resources, the results of the Predecessor Company
and Successor Company have been combined.
RESULTS OF OPERATIONS
The following table sets forth certain statement of operations data
reflecting the combination discussed above (all dollars in millions):
Fiscal Fiscal Fiscal
1996 1995 1994
---- ---- ----
Sales $ 2,307.8 $ 2,391.7 $ 2,477.3
Gross profit 713.7 708.3 731.7
Operating and administrative expenses 571.2 571.6 552.5
Depreciation and amortization 77.1 87.1 78.6
Amortization of excess reorganization value 84.0 -- --
Unusual items 40.6 27.4 4.5
Interest expense 99.0 182.0 183.8
Income tax benefit 18.9 -- --
Extraordinary credit 854.8 -- --
Cumulative effect of accounting change -- -- 30.3
Net income (loss) 715.6 (159.8) (118.0)
EBITDA 101.9 109.3 144.4
Adjusted EBITDA 144.3 135.6 180.1
LIFO provision (income) 1.8 (1.1) 0.9
Sales percentage increase (decrease) (a) (3.5)% (3.5)% (3.3)%
Gross profit as a percentage of sales 30.9 29.6 29.5
Operating and administrative expenses
as a percentage of sales 24.7 23.9 22.3
EBITDA as a percentage of sales 4.4 4.6 5.8
Adjusted EBITDA as a percentage of sales 6.3 5.7 7.3
(a) Fiscal 1994 decrease excludes the Southern Region (12.6% decrease including
the Southern Region).
Sales for Fiscal 1996 decreased $83.9 million or 3.5% compared to Fiscal
1995. The sales decline in Fiscal 1996 was a result of the sale or closure of
24 stores during Fiscal 1995 which were not replaced and from same store sales
decreases, partially offset by sales of incremental new stores. Same store
sales (sales of stores which were operated during the comparable periods of both
fiscal years including stores replaced during the year) declined .9% for the
year. Same store sales changes, by quarter for Fiscal 1996, beginning with
the first quarter, were 0.1%, (2.8)%, (1.3)% and 0.4%. Same store sales
comparisons were negatively influenced by the Company's strong promotional
programs during the second and third quarters of Fiscal 1995, and the effects
of closing two distribution centers servicing its metropolitan New York area
stores. Same store sales were positively influenced by the positive impact of
the "More Lower Prices" price repositioning program implemented in most of
the Company's stores during the year, by additional marketing and store
service programs introduced in the second quarter of this year in the
metropolitan Albany, New York and Bergen County, New Jersey areas and by the
severe snowstorms which struck the New York metropolitan area in late
December and early January. During Fiscal 1996, the Company opened two
incremental new stores and two replacement stores and completed three
enlargements and four major renovations.
12
<PAGE>
Sales for Fiscal 1995 decreased $85.6 million or 3.5% as compared to Fiscal
1994. The sales decrease in Fiscal 1995 resulted from the sale or closure of 24
stores which were not replaced, 20 of which were sold or closed in the third
and fourth quarters of the year in connection with the Company's restructuring,
partially offset by sales from incremental new stores. Same store sales
declined 4.8% in Fiscal 1995. Same store sales decreases resulted from the
effect of competitive openings in Fiscal 1995 and Fiscal 1994, weak economic
conditions, particularly in upstate New York and Vermont, an increased emphasis
on value-oriented products and the effect of publicity surrounding the Company's
Chapter 11 proceedings (see "Liquidity and Capital Resources"). Sales declines
were partially offset by the effect of replacement stores, enlargements and
renovations in Fiscal 1995 and Fiscal 1994. Sales comparisons were also
affected by the exclusion from Fiscal 1995 (and inclusion in Fiscal 1994) of the
holiday shopping period preceding Easter and the effect of a 22 day work
stoppage during Fiscal 1994 discussed below. During Fiscal 1995, the Company
opened one incremental new store and four replacement stores, enlarged or
renovated eight stores and closed or sold 28 stores (including replaced stores).
Gross profit, as a percentage of sales, was 30.9% in Fiscal 1996, compared
to 29.6% in Fiscal 1995. Gross profit percentages in Fiscal 1996 were impacted
favorably by the savings generated by closing three distribution centers and
entering into agreements with C&S Wholesale Grocers, Inc. ("C&S") to supply
product to Grand Union's stores, and the restoration this year of vendor
promotional allowances and other vendor support which were not available to the
Company during the bankruptcy proceedings in Fiscal 1995. Gross margin was
negatively affected by the "More Lower Prices" price repositioning program
implemented in most of the Company's stores during Fiscal 1996.
Gross profit, as a percentage of sales, was 29.6% in Fiscal 1995 compared
to 29.5% in Fiscal 1994. The relatively flat level of gross profit, as a
percentage of sales, reflects higher grocery margins and promotional allowance
income in the first half of the year and income resulting from a liquidation of
LIFO inventories, offset by the effects of promotional pricing programs begun
during the second quarter in certain areas and by the effects of significantly
reduced income from promotional allowances and forward buy inventory purchases,
both directly related to the Company's announcement that it would seek a capital
restructuring.
Operating and administrative expenses, as a percentage of sales, were 24.7%
during Fiscal 1996, compared to 23.9% during Fiscal 1995. Store labor increased,
as a percentage of sales, as a result of the Company's metropolitan Albany, New
York and Bergen County, New Jersey marketing and customer service programs,
offset by the benefits of the Company's special voluntary resignation incentive
programs completed during the second quarter. Advertising costs increased in
Fiscal 1996 in connection with the "More Lower Prices" price repositioning
program and the Albany and Bergen County marketing and customer service
programs. Occupancy costs increased, as a percentage of sales, principally as a
result of decreased sales in Fiscal 1996. Included in operating and
administrative expenses were gains from the sale of stores totaling $5.4 million
in Fiscal 1996 and $2.5 million in Fiscal 1995.
Operating and administrative expenses, as a percentage of sales, were 23.9%
in Fiscal 1995, compared to 22.3% in Fiscal 1994. The increase resulted
primarily from increases, as a percentage of sales, in store labor and fringe
costs and utilities expense, principally relating to the sales decline, and from
increased insurance expense.
The decrease in depreciation and amortization expense during Fiscal 1996
principally resulted from the absence of amortization of goodwill after the
Effective Date. The increase in depreciation and amortization in Fiscal 1995
compared to Fiscal 1994 was attributable to the Company's higher level of
capital expenditures in Fiscal 1995 and Fiscal 1994 as compared to prior years.
In accordance with Fresh-Start Reporting, the Company valued its assets
and liabilities at fair market values and eliminated its retained earnings at
the Effective Date. The total reorganization value as of the Effective Date
was determined to be $1,334.0 million which was $521.7 million in excess of
the aggregated fair value of the Company's tangible and identified intangible
assets. Such excess is being amortized on a straight-line basis over a
five-year period. See Note 1 of the consolidated financial statements for a
more comprehensive discussion.
Unusual items in Fiscal 1996 consisted of (a) a $2.5 million
organizational restructuring provision, (b) a $15.0 million provision related
to the closure of the Company's two New York metropolitan area warehouses, (c) a
$4.5 million provision relating to voluntary resignation incentive programs and
(d) $18.6 million of restructuring charges, incurred in connection with the
Chapter 11 proceedings. Unusual items in Fiscal 1995 consisted of (a) a store
closure provision which totaled $16.9 million offset by $4.0 million of proceeds
from the termination of a warehouse sublease, (b) a charge of $3.7 million for
an early retirement program offered to certain employees and (c) $10.8 million
of restructuring charges incurred in
13
<PAGE>
connection with the Chapter 11 proceedings. The Fiscal 1994 unusual items
related to charges for an early retirement program.
Interest expense was substantially less in Fiscal 1996 compared to Fiscal
1995 as a result of the decreased level of debt of the Successor Company. As a
result of the Chapter 11 proceedings, the Company did not accrue interest
expense on its Subordinated Notes or on the debt of its then parent companies
subsequent to January 25, 1995.
The Company recorded an income tax benefit of $18.9 million during Fiscal
1996 consisting of federal and state income taxes. Operating loss and credit
carryforwards of the Predecessor Company have been offset by taxable gains
realized on the debt discharged in connection with the Plan. There are no
remaining operating loss or credit carryforwards of the Predecessor Company and
there was no change in the tax basis of the Company's assets as of the Effective
Date. No income taxes were provided in either Fiscal 1995 or Fiscal 1994.
During Fiscal 1996, in connection with the Company's emergence from Chapter
11, the Company recorded an extraordinary gain on debt discharge of $854.8
million.
The Company believes that both EBITDA and Adjusted EBITDA, which are
disclosed in the above table, are useful supplemental disclosures for the
investment community. However, EBITDA and Adjusted EBITDA should not be
construed as substitutes for earnings or cash flow data required by generally
accepted accounting principles. EBITDA is defined as earnings before income
taxes, interest expense, extraordinary gain on debt discharge, cumulative effect
of an accounting change, depreciation and amortization. Adjusted EBITDA is
defined as EBITDA before LIFO provision and unusual items.
LIQUIDITY AND CAPITAL RESOURCES
The Company continues to be highly leveraged. Interest payments during
Fiscal 1996 totaled approximately $67 million (approximately $100 million on
an annualized basis). Capital expenditures, including capitalized leases
other than real estate leases, totaled approximately $46 million in Fiscal 1996
and are expected to total $40-$50 million in Fiscal 1997. Capital
expenditures during Fiscal 1996 related to new, enlarged or remodeled stores,
store systems and maintenance capital. Fiscal 1997 capital expenditures will
also principally be dedicated to new and replacement stores, remodels, store
systems and maintenance capital. Bankruptcy related obligations, principally
lease rejection liabilities, totaling $7 million (included in accounts payable
and accrued liabilities at March 30, 1996) are expected to be paid during the
next fiscal year. There are no significant scheduled debt principal
repayments prior to June, 2000. The Company plans to finance its working
capital, interest expense and capital expenditure requirements from
operations, from its Amended and Restated Credit Agreement (the "New Bank
Facility"), and, to a limited extent, from equipment leases or purchase money
mortgages. The Company's ability to fund the payment of interest and other
obligations when due is dependent on cash generated from its operations, net
of cash capital expenditures. The Company's ability to complete its planned
capital expenditure program is dependent on its operating performance.
During Fiscal 1996, the Company implemented certain price repositioning,
marketing and customer service programs. The Company intends to extend these
programs to additional stores in Fiscal 1997. Although these programs tend to
adversely affect gross profit and operating expenses in periods in which they
are made, and there is no assurance that such programs will lead to improved
sales and profits over the long term, Grand Union believes that they are
necessary in order to improve future sales and profits.
During Fiscal 1996, the Company obtained from its banks a waiver and
amendment to the New Bank Facility. The waiver and amendment relieves the
Company from the agreement's EBITDA requirements to the extent of (a) $15
million in charges relating to the closure of warehouse operations and (b) a
$2.5 million organizational restructuring provision. The waiver and amendment
also provides relief from other technical requirements related to the two
most recent C&S agreements. As of March 30, 1996, the Company is in
compliance with the covenants of its debt instruments, as amended.
As of March 30, 1996, the Company had $33.0 million of borrowings and
approximately $43.9 million of letters of credit outstanding under its $100
million revolving credit facility.
During the fourth quarter of Fiscal 1996, the Company entered into an
agreement with an investment banking financial advisor to assist the Company
in actively seeking additional sources of capital to fund an expanded capital
expenditure program. There is no assurance that the Company will secure
additional capital.
Significant expenditures and resources used to finance such expenditures
for the three fiscal years ended March 30, 1996 are reflected in the following
table (in millions):
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
1996 1995 1994
------- ------- --------
<S> <C> <C> <C>
Resources used:
Debt and capital lease repayments $ 102.0 $ 11.3 $ 8.7
Capital expenditures 43.7 63.0 81.0
Loan placement fees 3.1 -- 1.8
Other -- -- .2
------- ------- --------
$ 148.8 $ 74.3 $ 91.7
------- ------- --------
------- ------- --------
Financed by:
Proceeds from New Bank Facility $ 137.2 $ -- $ --
Property disposals 11.0 2.1 .6
Operating activities, including cash and temporary investments 0.6 43.2 13.4
Debt incurred -- 29.0 77.7
------- ------- --------
$ 148.8 $ 74.3 $ 91.7
------- ------- --------
------- ------- --------
</TABLE>
During Fiscal 1996, funds for debt and capital lease repayments (primarily
the repayment of obligations outstanding under the Old Bank Credit Agreement),
capital expenditures and loan placement fees were principally obtained from cash
provided by the New Bank Facility ($104.1 million from a seven-year term loan
facility and $33 million from a $100 million five-year revolving credit
facility).
During Fiscal 1995 and Fiscal 1994, cash requirements were principally
obtained from borrowings and from cash provided by operating activities.
Borrowings included $29 million in Fiscal 1995 and $25 million in Fiscal 1994
under the Revolving Credit Facility. Additionally, Fiscal 1994 borrowings
included proceeds from the sale of $50 million principal amount of Series A
12.25% Subordinated Notes. Debt repayments for Fiscal 1995 and Fiscal 1994
consisted of scheduled repayments of capital leases and various mortgages.
14
<PAGE>
From September 1993 until September 1995, Grand Union and the Penn
Traffic Company ("Penn Traffic") were parties to a combined purchasing and
distribution agreement relating to general merchandise and health and beauty
care products. In September 1995, Grand Union purchased from Penn Traffic
approximately $12.8 million of merchandise which had been owned by Penn
Traffic under the joint buying arrangement. In February 1996, C&S purchased
$10.0 million of general merchandise and beauty care products stored at the
Company's Montgomery, New York warehouse.
On June 15, 1995, January 2, 1996 and January 21, 1996, the Company entered
into supply agreements with C&S, under which C&S will stock and distribute to
all Grand Union stores substantially all of the merchandise formerly owned and
warehoused by Grand Union. Under two of the agreements, C&S will stock and
supply grocery and perishable products from its own warehouses. Under the most
recent agreement, C&S will stock and supply health and beauty care and general
merchandise products from the Company's Montgomery, New York warehouse. As a
result of the three agreements with C&S, the Company's liquidity has increased
by approximately $5 to $10 million.
On November 29, 1994, Grand Union announced that it intended to develop a
capital restructuring plan with certain of its lenders. On January 25, 1995,
in connection with an agreement reached with its bank lenders and with
members of informal committees of certain holders of Grand Union notes, the
Company filed a voluntary petition for relief under chapter 11 ("Chapter 11")
of Title 11 of the United States Code in the United States Bankruptcy Court
for the District of Delaware (the "Bankruptcy Court"). The Bankruptcy Court
confirmed the Second Amended Chapter 11 Plan of The Grand Union Company,
dated as of April 19, 1995, on May 31, 1995, and the Company emerged from
Chapter 11 on June 15, 1995. Significant provisions of the Plan included:
1. Payment in full of all allowed administrative claims and all
allowed general unsecured and priority claims.
2. Payment in full of obligations under the Company's existing bank
credit agreement, including principal and accrued interest.
Concurrently, the Company entered into the New Bank Facility.
3. Cancellation of obligations under the Company's 11.375% Senior
Notes due 1999 and 11.25% Senior Notes due 2000 (collectively, the
"Senior Notes"), which had an aggregate principal amount of
$525,000,000 plus accrued interest, in exchange for the issuance of
$595,421,000 aggregate principal amount of new 12% senior notes due
2004 and cash payments of $54,922 for fractional amounts to the
holders of the Senior Notes.
4. Cancellation of obligations under the Company's 12.25% Senior
Subordinated Notes due 2002, 12.25% Senior Subordinated Notes due
2002, Series A and 13% Senior Subordinated Notes due 1998
(collectively, the "Subordinated Notes"), which had an aggregate
principal amount of $566,150,000, in exchange for issuance to each
holder of Subordinated Notes its pro rata share of an aggregate of
10,000,000 shares of new common stock (the "New Common Stock").
5. Issuance of warrants, which expire June 15, 2000, to purchase an
aggregate of 900,000 shares of New Common Stock to holders of 15%
Senior Zero Coupon Notes due 2004 and 16.5% Senior Subordinated Zero
Coupon Notes due 2007 (collectively, the "Capital Notes") pursuant
to the terms of a settlement reached among the Company, its then
indirect parent companies, the Official Committee of Unsecured
Creditors of its then parent company and certain holders of Capital
Notes. The warrants are comprised of 300,000 Series 1 Warrants to
purchase shares of New Common Stock at a purchase price of $30 per
share and 600,000 Series 2 Warrants to purchase shares of New Common
Stock at a purchase price of $42 per share.
The Plan made no provision for the holders of the remaining long-term
debt, redeemable preferred stock, common stock or warrants to purchase common
shares of the Company's then indirect parent.
15
<PAGE>
IMPACT OF NEW ACCOUNTING STANDARDS
In November 1995, the Financial Accounting Standards Board issued
Statement No. 123, "Accounting for Stock Based Compensation" ("SFAS No. 123"),
which establishes accounting standards for stock based employee compensation
plans. SFAS No. 123 specifies a fair value based method of accounting for stock
based compensation plans and encourages (but does not require) entities to adopt
that method in place of the provisions of APB Opinion 25, "Accounting for Stock
Issued to Employees". The Company has not yet determined which method of
accounting will be used or what impact the adoption of the accounting
requirements of SFAS No. 123 might have on the Company's results of operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
<S> <C>
INDEX TO FINANCIAL STATEMENTS:
Reports of Independent Accountants F-1
Consolidated Statement of Operations for the 41 weeks ended March 30, 1996
(Successor Company), the 11 weeks ended June 17, 1995, the 52 weeks ended April 1, 1995
and the 52 weeks ended April 2, 1994 (Predecessor Company) F-3
Consolidated Balance Sheet at March 30, 1996 (Successor Company) and April 1, 1995
(Predecessor Company) F-4
Consolidated Statement of Cash Flows for the 41 weeks ended March
30, 1996 (Successor Company), the 11 weeks ended June 17, 1995, the 52 weeks ended April 1, 1995
and the 52 weeks ended April 2, 1994 (Predecessor Company) F-5
Notes to Consolidated Financial Statements F-6
</TABLE>
All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements or
notes thereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
16
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages and present principal occupations of the directors and
executive officers of Grand Union as of June 1, 1996, are as set forth below.
Name Age Positions
---- --- ---------
Roger E. Stangeland 66 Director and Chairman
Joseph J. McCaig 51 Director, President and Chief Executive
Officer
William A. Louttit 49 Director, Executive Vice President and Chief
Operating Officer
Darrell W. Stine 58 Executive Vice President - Operations
Kenneth R. Baum 48 Senior Vice President, Chief Financial Officer
and Secretary
Gilbert C. Vuolo 52 Senior Vice President, Human Resources and
Labor Relations
Daniel E. Josephs 64 Director
William G. Kagler 64 Director
Douglas T. McClure, Jr. 43 Director
David Y. Ying 41 Director
MR. STANGELAND has been Chairman of the Board and a Director of Grand
Union since June 15, 1995. Mr. Stangeland is a Director and Chairman
Emeritus of The Vons Companies, Inc. ("Vons"), a large Southern California
based grocery retailer. From 1985 until his retirement on May 3, 1995, he was
Chairman of the Board of Vons. Mr. Stangeland is the immediate Past Chairman
of the Board of the Food Marketing Institute, a national supermarket trade
organization, and continues as a Director of that organization. He is also a
Director of Quality Drug Corporation, a retail drug company.
MR. McCAIG became President and Chief Executive Officer of Grand Union in
July 1989. He served as President and Chief Operating Officer from 1981 until
July 1989 and has been a Director of Grand Union since 1981. Mr. McCaig has
been with the Company for 35 years.
MR. LOUTTIT has been Executive Vice President and Chief Operating Officer
of Grand Union since July 1989. He served as Executive Vice President in charge
of Merchandising from 1984 until July 1989 and has been a Director of Grand
Union since 1981. Mr. Louttit has been with the Company for 31 years.
MR. STINE was appointed Executive Vice President of Grand Union in July
1994. He served as Senior Vice President with responsibility for the Company's
New York Region from 1988 until July 1994. Mr. Stine has been with the Company
for 42 years.
MR. BAUM was appointed Senior Vice President, Chief Financial Officer and
Secretary of Grand Union in July 1994. Mr. Baum served as Vice President and
Controller from 1983 until July 1994 and as a Director of Grand Union from July
1994 until June 15, 1995. Mr. Baum has been with the Company for 14 years.
MR. VUOLO was appointed Senior Vice President, Human Resources and Labor
Relations, effective April 1, 1996. Prior to that, he served as Vice President,
Human Resources and Labor Relations from 1989 to 1994. Mr. Vuolo has been with
the Company for 34 years.
MR. JOSEPHS is currently a self-employed consultant and has been a
Director since June 15, 1995. Mr. Josephs served as Director, President and
Chief Operating Officer of Dominick's Finer Foods, a supermarket chain based
in the Chicago area, from 1985 until March 1995. Mr. Josephs is also a
director of Great Lakes Real Estate Investment Trust, which acquires and
manages small suburban office buildings.
MR. KAGLER has been a Director since June 15, 1995. Mr. Kagler served
Skyline Chili, Inc. as Chairman of the Executive Committee of the Board from
November 1994 until November 1995, as Chairman of the Board and Chief Executive
Officer from November 1993 until November 1994, and as President and Chief
Executive Officer from November 1991 until November 1993. Prior thereto, he
served as President of The Kroger Co., a Cincinnati based food retailer. He
holds Directorships of The Fifth Third Bank, a bank, Union Central Life
Insurance Co., an insurance company, and The Ryland Group Inc., a home builder
and mortgage insurance firm.
MR. McCLURE has been a Director since June 15, 1995. Mr. McClure is a
managing director of the Private Merchant Banking Company, a position he has
held since February 1996. From April 1992 until February 1994, he was a
managing director of New Street Capital Corp., a merchant banking firm. From
1987 to April 1992, he was a managing director with the investment firm of
Drexel Burnham Lambert. Mr. McClure is a Director of AMPEX Corporation, a
manufacturer and distributor of recording products and systems, and of
WestPoint Stevens Inc., a textile manufacturer.
17
<PAGE>
MR. YING has been a Director since June 15, 1995. Mr. Ying has been a
managing director at Donaldson, Lufkin & Jenrette Securities Corporation
since January 1993, and is the head of the firm's Restructuring Group. From
January 1990 to January 1993, Mr. Ying was a managing director with the
investment firm of Smith Barney.
Executive officers of Grand Union are appointed and serve at the discretion
of the Board of Directors. Each director of Grand Union is elected for a period
of one year and will serve until his successor is duly elected and qualified.
Prior to June 15, 1995, the Board of Directors of Grand Union consisted of
Messrs. McCaig, Louttit, Baum, Gary D. Hirsch (Chairman) and Martin A. Fox.
On January 25, 1995, the Company filed a voluntary petition for relief
under Chapter 11 of the federal bankruptcy laws. Messrs. McCaig, Louttit and
Baum were also executive officers of the Company within two years prior to the
date of such filing. Mr. McCaig was also a director of Grand Union Capital
Corporation and Grand Union Holdings Corporation, both of which became subject
to Chapter 11 proceedings on February 16, 1995. The current directors of Grand
Union were selected by certain members of the Official Committee of Unsecured
Creditors which was appointed by the United States Trustee for the District of
Delaware, pursuant to the Chapter 11 proceedings discussed above.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and persons who own beneficially more than 10% of a
registered class of the Company's equity securities to file with the
Securities and Exchange Commission initial reports of ownership and reports
of changes in ownership of Common Stock and other equity securities of the
Company. Officers, directors and greater than 10% beneficial stockholders
are required by regulations promulgated by the Securities and Exchange
Commission to furnish the Company with copies of all Section 16(a) reports
they file. Based solely on its review of the copies of reporting forms
furnished to the Company, or written representations that no annual Form 5
reports were required, the Company believes that all filing requirements
under Section 16(a) of the Securities Exchange Act of 1934 applicable to its
directors, officers and any persons holding 10% or more of the Company's
Common Stock with respect to the Company's fiscal year ended March 30, 1996,
were satisfied.
18
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth compensation paid or accrued by the Company
to the Company's Chief Executive Officer, and the four other executive officers
whose salary and bonus exceeded $100,000 for the fiscal year ended March 30,
1996 (collectively, the "Named Executive Officers"), for services rendered to
the Company and its subsidiaries in all capacities during the three fiscal years
ended March 30, 1996:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION AWARDS
SECURITIES ALL OTHER
NAME AND ANNUAL COMPENSATION UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) OPTIONS/SARS (#) ($)(2)
------------------ ---- --------- ----------- ---------------- --------
<S> <C> <C> <C> <C> <C>
Joseph J. McCaig 1996 454,310 90,000 47,800 181,786
President and Chief 1995 502,165 22,493 -- 980,968
Executive Officer 1994 523,712 123,479 -- 30,109
William A. Louttit 1996 354,019 71,540 28,000 82,742
Executive Vice President 1995 335,669 15,037 -- 437,355
and Chief Operating Officer 1994 349,731 66,392 -- 14,038
Darrell W. Stine 1996 281,142 56,780 19,000 40,070
Executive Vice President - 1995 257,077 18,000 -- 621,911
Operations 1994 251,134 17,446 -- 14,535
Kenneth R. Baum 1996 203,654 42,000 11,720 9,392
Senior Vice President, 1995 152,769 7,154 -- 31,691
Chief Financial Officer 1994 143,715 20,603 -- 4,739
and Secretary
Gilbert C. Vuolo 1996 145,792 29,440 6,560 4,244
Senior Vice President, Human 1995 132,885 6,231 -- 4,450
Resources and Labor Relations 1994 121,399 23,906 -- 3,553
</TABLE>
_______________
The "Other Annual Compensation" column was omitted since the aggregate amount of
perquisites and other personal benefits in respect of Fiscal 1996, Fiscal 1995
and Fiscal 1994 is less than the lower of $50,000 or 10% of the total annual
salary and bonus reported for each of the named executive officers and no other
compensation of the type required to be described in the "Other Annual
Compensation" column was paid in Fiscal 1996, Fiscal 1995 or Fiscal 1994.
(1) Included in the bonus column for Fiscal 1994 are amounts paid during Fiscal
1995 for performance in Fiscal 1994, and included in the bonus column for Fiscal
1995 are amounts paid during Fiscal 1996 for performance in Fiscal 1995. All
amounts included in the bonus column for Fiscal 1996 are retention payments paid
for remaining in the Company's employ through the bankruptcy and the end of the
current fiscal year.
(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 1996,
Fiscal 1995 and Fiscal 1994, respectively, for each of the named executive
officers as follows: Mr. McCaig - $1,414, $1,455, and $2,964; Mr. Louttit -
$1,526, $765, and $2,331; Mr. Stine - $1,563, $1,547, and $2,313; Mr. Baum -
$1,546, $1,525, and $1,650; and Mr. Vuolo - $1,516, $1,526, and $1,439; and (ii)
premium payments for life insurance made by the Company in Fiscal 1996, Fiscal
1995 and Fiscal 1994, respectively, for each of the named executive officers as
follows: Mr. McCaig - $10,843, $31,090, and $27,145; Mr. Louttit - $4,795,
$10,013, and $11,707; Mr. Stine - $7,795, $13,522, and $12,222; Mr. Baum -
$2,741, $3,302, and $3,089; and Mr. Vuolo - $2,416, $2,612, and $1,802. The
Fiscal 1996 and Fiscal 1995 amounts for Messrs. McCaig, Louttit, Stine and Baum
also include the value of securities distributed from custodial accounts
established pursuant to non-competition and confidentiality agreements entered
into by Messrs. McCaig, Louttit, Stine and Baum in August 1993. Such amounts
were distributed as a result of the Company's filing for bankruptcy in 1995, and
offset the Company's obligations to such executives under Grand Union's
Supplemental Retirement Program for Key Executives. Such distributions
19
<PAGE>
were made in Fiscal 1996 and Fiscal 1995, respectively, in the following
amounts: Mr. McCaig - $169,217 and $948,423; Mr. Louttit - $76,109 and
$426,577; Mr. Stine - $30,401 and $606,842; and Mr. Baum - $4,793 and $26,864.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Option Term
- ---------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g)
Number of % of Total
Securities Options/SARs Exercise
Underlying Granted to Price or
Options/SARs Employees in Base Price Expiration
Name Granted Fiscal Year ($/Sh) Date 5%($) 10%($)
- ----------- ------------- ------------- ---------- ----------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
J. McCaig 47,800 22.69% 6.625 Dec 11, 2005 119,155 504,698
W. Louttit 28,000 13.29% 6.625 Dec 11, 2005 116,660 295,639
D. Stine 19,000 9.02% 6.625 Dec 11, 2005 79,162 200,612
K. Baum 11,720 5.56% 6.625 Dec 11, 2005 48,831 123,746
G. Vuolo 6,560 3.11% 6.625 Dec 11, 2005 27,332 69,264
Aggregate Increase for All Stockholders 41,664,269 105,585,438
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
Number of Securities Value of
Underlying Unexercised Unexercised In-the-Money
Options/SARs at FY-End (#) Options/SARs at FY-End ($)
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
J. McCaig 0 47,800 -- $ 0
W. Louttit 0 28,000 -- 0
D. Stine 0 19,000 -- 0
K. Baum 0 11,720 -- 0
G. Vuolo 0 6,560 -- 0
PENSION PLAN TABLE
The table below shows, on a combined basis for the Grand Union Company
Employees' Retirement Plan (the "Retirement Plan"), and The Grand Union Company
Supplemental Retirement Program for Key Executives (the "Supplemental Plan"),
the estimated annual benefit payable upon retirement to specified compensation
and years of service classifications of 5, 10 and 15 or more years of service.
The credited years of service under these Plans for Messrs. McCaig, Louttit,
Stine, Baum and Vuolo are 22 years, 20 years, 28 years, 13 years and 22 years,
respectively. The current base compensation set forth in "salary" column of 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.
20
<PAGE>
Years of Service
Final Average -------------------------------------------
Compensation 5 10 15 or more
- ------------------ ---------- ---------- -----------
$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
The benefits actually payable to an individual executive are reduced, in
some cases substantially, through offsets for primary Social Security benefits
and the actuarial equivalent of the value of securities received by those
executives who received distributions from custodial accounts in 1995 and
1994. Below, for each named executive, is the total estimated offset amount
in each case determined as a single life annuity payable beginning at age 62.
Estimated Annual
Payment Offset Amounts
Prior Social Total
Distributions Security Offset
------------- -------- --------
J. McCaig $209,000 $17,000 $226,000
W. Louttit 105,000 18,000 123,000
D. Stine 77,000 14,000 91,000
K. Baum 7,000 19,000 26,000
G. Vuolo -- 17,000 17,000
THE GRAND UNION COMPANY EMPLOYEES' RETIREMENT PLAN
The Retirement Plan is a tax-qualified, noncontributory retirement plan,
providing retirement benefits for its eligible salaried and hourly non-union
employees, union employees not covered by other pension plans, and all of its
officers. Under the Retirement Plan, a participant's benefit is generally 1.5%
of the average of his five consecutive years of highest compensation multiplied
by years of service not in excess of 35 minus primary social security benefits.
Benefits under the plan are paid under several alternatives, including monthly
or lump sum payments at the employee's election. Benefits are normally payable
at age 65, however, the plan provides for early retirement with reduced benefits
commencing at age 55. The Internal Revenue Code places certain limits on
pension benefits which may be paid under plans qualified under the Internal
Revenue Code.
SUPPLEMENTAL RETIREMENT PLAN FOR KEY EXECUTIVES
The Supplemental Plan is a non-qualified pension plan pursuant to which
certain key employees of Grand Union and its affiliates ("Participants"),
including Messrs. McCaig, Louttit, Stine, Baum and Vuolo, earn a supplemental
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
21
<PAGE>
the product of 4-1/3% of the Participant's final year's base salary rate in
effect immediately prior to his separation, multiplied by the Participant's
number of years of credited service (up to 15 years) under the Supplemental
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 for a Participant who 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. Supplemental 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 Supplemental Plan benefits will be paid to a Participant whose
employment with Grand Union terminates prior to the Participant's attaining age
50. In May 1995, the Bankruptcy Court approved a modification to the
Supplemental Plan which provides that (x) in the case of Joseph J. McCaig, final
year's base salary shall be deemed to be an amount not less than $500,000 and
(y) notwithstanding the general requirement of the Supplemental Plan,
benefits will not be paid to persons who retire prior to age 50, persons who
were Participants in the Supplemental Plan prior to April 1, 1995 will be
eligible for early retirement without forfeiture of benefits under the
Supplemental Plan from and after age 47.
In August 1993, in consideration of non-competition and confidentiality
agreements entered into by certain executives of Grand Union, including Messrs.
McCaig, Louttit, Stine and Baum, Grand Union agreed to transfer to a custodial
account to be held by an independent custodian securities having a specified
value intended to approximate the benefits payable to the specified executives
under the Supplemental Plan (plus a reserve for claims and expenses of the
custodian). Such securities were to have been transferred to the custodian over
a four-year period. Pursuant to the terms of the agreements, the executives for
whose benefit securities had been transferred to the custodian were entitled to
receive a distribution of such securities upon Grand Union's filing of the
Chapter 11 petition in January 1995. Accordingly, in February and September of
1995, securities having an aggregate value of approximately $1,855,576
(representing securities on deposit with the custodian as of the Filing Date
plus interest thereon) were distributed to the executives entitled thereto. In
addition, under a separate agreement entered into in 1994, Mr. Stine received
a payment of $433,650, representing an advanced payment of a portion of the
benefits to which he would be entitled had he retired under the SERP. The
value of the securities so distributed to each executive reduced the future
amounts payable to such executive pursuant to the Supplemental Plan. Upon
distribution of the securities to the executives for whose benefit they were
held, the custodial accounts were terminated.
COMPENSATION OF DIRECTORS
Effective from June 15, 1995, each non-employee director other than Mr.
Stangeland receives an annual fee of $25,000 for serving on the Board, and
meeting fees of $1,500 for each Board meeting attended in person, $750 for each
committee meeting attended in person and each telephonic Board meeting attended,
and $375 for each telephonic committee meeting attended. In addition, the
Chairman of the Audit Committee, Mr. Ying, and the Chairman of the Compensation
Committee, Mr. Kagler, receive $500 for each Committee meeting they attend in
person as Chairman and $250 for each telephonic committee meeting they attend as
Chairman. Prior to June 15, 1995, the directors of Grand Union were not
compensated for their services as such. Directors receive reimbursement of
reasonable expenses incidental to attendance at meetings of the Board of
Directors.
Effective from January 1, 1996, Mr. Stangeland receives an annual retainer
of $100,000 for serving as Chairman of the Board. In addition, Mr. Stangeland
receives a $4,000 daily fee for days spent at the Company and when undertaking
substantial travel on the Company's behalf. Mr. Stangeland absorbs incidental
expenses incurred when working on the Company's behalf from his office in
California. Mr. Stangeland was paid $204,000 in daily fees with respect to
services performed during Fiscal 1996. Mr. Josephs and Mr. Kagler receive a
$2,000 daily fee for activity on the Company's behalf which requires substantial
travel. Mr. Josephs and Mr. Kagler received $11,000 and $9,000, respectively,
with respect to services performed during Fiscal 1996.
Each non-employee director also receives an automatic initial grant of
options to purchase 5,000 shares of Common Stock, and additional grants to
purchase 1,500 shares with each re-election by stockholders. All directors are
reimbursed for expenses incurred on the Company's behalf.
SEVERANCE POLICY
In May 1995, Grand Union adopted a severance policy, which was approved by
the Bankruptcy Court, with respect to its salaried employees whereby a salaried
employee who is involuntarily terminated without cause or who is constructively
terminated (which is defined to mean an involuntary transfer that would require
relocation outside the Company's current operating area or (x)
22
<PAGE>
with respect to persons holding the position of chief executive officer, chief
operating officer or chief financial officer, either removal from such position,
or a reduction in salary of 5% or more in any year and (y) with respect to any
other salaried employee, either a reduction in salary of 10% or more in any year
or a reduction in grade level of more than two grades in any year) is entitled
to receive a lump-sum severance payment equal to (i) in the case of salaried
employees holding the office of President, Executive Vice President or Senior
Vice President, 18 months' base salary; (ii) in the case of salaried employees
holding the office of Corporate Vice President, 12 months' base salary; (iii) in
the case of salaried employees holding the office of appointed vice president or
director, 6 months' base salary; and (iv) in the case of all other salaried
employees, one week's base salary for each year of service to the Company up to
a maximum of 26 weeks.
CHANGE-IN-CONTROL PROVISIONS
Under the Company's 1995 Equity Incentive Plan and 1995 Non-Employee
Directors Stock Option Plan, certain provisions take effect on a
change-in-control of the Company. Under both plans, on the twentieth (20th)
trading day prior to the effective date of the change in control all stock
options not otherwise vested become fully vested, and any restrictions or
other conditions applicable to restricted stock or other incentives awarded
under the 1995 Equity Incentive Plan lapse or are deemed satisfied and such
awards become fully vested and/or immediately payable. In addition, the
value of any canceled award is paid out in cash unless the award holder
receives either (i) the right to acquire the same basket of cash and
securities available to holders of common stock, or (ii) if pooling of
interests is a condition of the transaction, an equivalent right in a
successor security which would enable the transaction to qualify for pooling
of interests. Under both plans, a change-in-control is defined to include:
(1) any person, entity or Group (persons or entities acting together) is or
becomes the beneficial owner of more than 50% of the Voting Stock of the
Company; (2) a consolidation, merger, or sale of substantially all of the
assets of the Company, with the effect that any person, entity or Group
becomes the beneficial owner of more than 50% of the Voting Stock of the
Company or the Company is not the surviving entity; (3) during any
consecutive two-year period commencing July 1, 1996, individuals who
constituted the Board of Directors at the beginning of such period, together
with any new directors whose election by the Board or nomination for election
by stockholders was approved by 2/3 of the directors who were in office at
the beginning of the period or whose election or nomination was so approved,
cease to constitute a majority of the Board then in office; or (4) any order,
judgment or decree of dissolution or split-up of the Company, and such order
remains undischarged or unstayed for a period in excess of 60 days. For
purposes of determining whether a change in control has occurred, "more than
50% of the Voting Stock" means more than 50% of one or more classes of stock
pursuant to which the holders have the general power to vote for the election
of members of the Board of Directors, and the aggregate of such classes for
which the person, entity or Group holds more than 50% has the power to elect
more than 50% of the members of the Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors maintains a personnel and compensation committee
(the "Compensation Committee") consisting of three directors. Since June 15,
1995, the members of the Compensation Committee have been Messrs. Kagler,
Stangeland and Josephs, with Mr. Kagler acting as Chairman.
No member of the Board participates in decisions regarding his own
compensation as an executive officer of Grand Union.
23
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
Set forth below is certain information as of June 10, 1996, regarding the
beneficial ownership of the Company's Common Stock by (i) any person known by
the Company to beneficially own more than 5% of the Common Stock of the Company;
(ii) each director and nominee for director supported by the Board of Directors;
(iii) each of the Named Executive Officers identified in the Summary
Compensation Table; and (iv) all directors and executive officers as a group.
Except as otherwise indicated, the Company believes, based on information
furnished by such owners, that the beneficial owners of the Company's Common
Stock listed below have sole investment and voting power with respect to such
shares, subject to applicable community property laws. Ownership information is
based on information furnished by the respective individuals.
<TABLE>
<CAPTION>
FIVE PERCENT STOCKHOLDERS, NOMINEES FOR DIRECTOR, AMOUNT AND
EXECUTIVE OFFICERS NAMED IN SUMMARY NATURE OF
COMPENSATION TABLE, AND DIRECTORS BENEFICIAL PERCENT
AND EXECUTIVE OFFICERS AS A GROUP OWNERSHIP OF CLASS
---------------------------------- --------- --------
<S> <C> <C>
Putnam Investments, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,243,830 (1)(2) 32.44%
One Post Office Square
Boston, MA 02109
Putnam Investment Management . . . . . . . . . . . . . . . . . . . . . . . . . 3,125,089 (1)(3) 31.25%
One Post Office Square
Boston, MA 02109
Putnam High Yield Trust (Equity Convertible) . . . . . . . . . . . . . . . . . 1,688,770 (1)(4) 16.89%
One Post Office Square
Boston, MA 02109
Putnam Diversified Income Trust (High Yield) . . . . . . . . . . . . . . . . . 539,505 (1)(5) 5.40%
One Post Office Square
Boston, MA 02109
Kemper Financial Services, Inc.. . . . . . . . . . . . . . . . . . . . . . . . 1,172,683 (6) 11.73%
120 South LaSalle Street
Chicago, Il 60603
Roger E. Stangeland. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000 *
Joseph J. McCaig . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 *
William A. Louttit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000 *
Daniel E. Josephs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 *
William G. Kagler. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500 *
Douglas T. McClure, Jr.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 *
David Y. Ying. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 *
Darrell W. Stine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000 *
Kenneth R. Baum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 *
Gilbert C. Vuolo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 *
All Directors and Executive Officers as a group (10 persons) . . . . . . . . . 31,500 *
</TABLE>
_______________
*Less than 1%.
(1) Putnam Investments, Inc. wholly owns two registered investment advisers:
Putnam Investment Management, Inc. and The Putnam Advisory Company, Inc.
Shares of Common Stock beneficially held by Putnam Investments, Inc. are as
a result of the holdings of various investment funds and other
institutional investors for which Putnam Investment Management, Inc., The
Putnam Advisory Company or affiliated entities act as investment advisers.
These shares of Common Stock include the shares held by Putnam High Yield
Trust and Putnam Diversified Income Fund, whose holdings are also
separately reported in the table. See Notes (4) and (5).
24
<PAGE>
(2) Includes 3,243,830 shares held with shared dispositive power, and no shares
held with shared voting power, sole dispositive power or sole voting power.
(3) Includes 3,125,089 shares held with shared dispositive power, and no shares
held with shared voting power, sole dispositive power or sole voting power.
(4) Includes 1,688,770 shares held with shared dispositive power and shared
voting power, and no shares held with sole dispositive power or sole voting
power. These shares of Common Stock are also beneficially owned by Putnam
Investment Management. See Note (1) above.
(5) Includes 539,505 shares held with shared dispositive power and shared
voting power, and no shares held with sole voting power, or sole
dispositive power. All of the shares held by Putnam Diversified Income
Fund are also beneficially owned by Putnam Investment Management. See Note
(1) above.
(6) Includes 1,172,683 shares with shared voting power and shared dispositive
power, and no shares with sole dispositive power or sole voting power.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PRE-BANKRUPTCY RELATIONSHIPS AND TRANSACTIONS.
On January 25, 1995, the Company filed a petition under Chapter 11 of the
federal bankruptcy laws. The Company emerged from bankruptcy on June 15, 1995,
the effective date of the bankruptcy court's approval of the Company's
reorganization plan. Prior to June 15, 1995, the Company was a wholly owned
subsidiary of Grand Union Capital Corporation ("Capital"), which in turn was a
wholly owned subsidiary of Grand Union Holdings Corporation ("Holdings").
Holdings was controlled by Miller Tabak Hirsch & Co. ("MTH") and its affiliates,
which also control Penn Traffic.
The following applies to relationships which existed prior to June 15,
1995. Mr. Gary D. Hirsch served as Chairman and a Director of Grand Union and
also as Chairman and a Director of Penn Traffic. Mr. Martin A. Fox served as a
Director, Vice President and Assistant Secretary of Grand Union and Vice
Chairman - Finance and Assistant Secretary of Penn Traffic. Messrs. Hirsch and
Fox received compensation from MTH, of which Mr. Hirsch is a general partner of
the managing partner, and Mr. Fox is Executive Vice President. Messrs. Hirsch
and Fox did not receive salaries from Penn Traffic and did not participate in
cash bonus plans of Penn Traffic, and received no compensation in their
capacities as executive officers or directors of Grand Union.
Until May 31, 1995, Mr. McCaig was a member of the Board of Directors of
Penn Traffic, for which he received compensation of $10,000 per annum and $1,000
per Board of Directors meeting attended. Mr. McCaig became a Director of
Holdings in July 1989 and a Director of Capital in July 1992. He became
President of Holdings and Capital in May 1993. Mr. McCaig served as a Director
of Penn Traffic from September 1992 until May 1995.
Mr. Hirsch is no longer a director of the Company. While he was a
director, he was an indirect beneficiary of the following transactions. Prior
to June 15, 1995, MTH was engaged as financial advisor to Penn Traffic and as
a financial advisor to the Company, in the latter case pursuant to an
agreement (the "MTH Agreement"), under which MTH was to have provided certain
financial consulting and business management services to the Company through
July 1997. In accordance with the Company's post-bankruptcy Reorganization
Plan, the MTH Agreement was terminated on June 15, 1995 and Grand Union
executed a settlement agreement (the "MTH Settlement Agreement"). The MTH
Settlement Agreement provides for the termination of the MTH Agreement,
payment by Grand Union of accrued and unpaid fees under the MTH Agreement
through June 15, 1995, and for the indemnification of MTH and certain
entities related to MTH (the "MTH Entities") from certain claims and
liabilities, subject to the terms and limitations set forth in the MTH
Settlement Agreement. The Company deposited $3.0 million relating to the
indemnification in escrow on June 15, 1995. During Fiscal 1996, the Company
paid $315,000 to MTH, pursuant to the MTH Agreement. On July 30, 1990, P&C
Foods, which is indirectly controlled by MTH, and Grand Union entered into an
Operating Agreement pursuant to which Grand Union acquired the right to
operate 13 P&C Foods' stores in New England under the Grand Union name until
July 2000. Pursuant to the Operating Agreement, 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. 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 of the Company in 1992. The
Operating Agreement was assumed during the Chapter 11 bankruptcy case and
will continue on its current terms. From September 1993 until September 1995,
Grand Union participated in a program to consolidate the purchasing, storage
and distribution of health and beauty care and general merchandise product
with Penn Traffic. During Fiscal 1996, Grand Union
25
<PAGE>
purchased from Penn Traffic's inventory of health and beauty care and general
merchandise products at cost approximately $30.1 million for store
operations and approximately $12.8 million at the termination of the
agreement.
POST-BANKRUPTCY RELATIONSHIPS.
Mr. Ying, a director of the Company since June 15, 1995, has been a
managing director of Donaldson Lufkin & Jenrette Securities Corporation
("DLJ") since January 1993. During Fiscal 1995 and Fiscal 1996, DLJ acted as
financial advisor to the Informal Committee of certain holders of
Subordinated Notes in connection with the restructuring of Grand Union and
received compensation of approximately $1.3 million from the Company for such
services. Near the end of Fiscal 1996, the Company entered into an agreement
with DLJ to provide investment banking services and advice to the Company.
During the term of DLJ's engagement, it has the exclusive right to act as
sole managing underwriter, exclusive placement agent, sole dealer manager or
exclusive solicitation agent with respect to any public offering of the
Company's securities, any private offering of any of the Company's debt
securities, or any exchange offer or refinancing transaction relating to the
Company's Senior Notes or other securities of the Company.
Under the agreement, DLJ receives a retainer fee of $200,000, a Transaction
Fee, and, if a fairness opinion is requested, a Fairness Fee. In the case of a
private placement, the Transaction Fee is 5% of the gross proceeds of the
private placement, offset by the retainer fee, and the Fairness Fee is 1.5% of
the gross proceeds of the private placement. In the case of a divestiture, the
Transaction Fee is a percentage of the aggregate consideration, based on a
sliding scale, from 2% of a $50 million consideration to 0.9% if the aggregate
consideration is $450 million or more. The Fairness Fee in a divestiture is the
greater of $350,000 or 25% of the Transaction Fee. In the case of a sale of 36%
to 100% of the business, securities or assets of the Company, the Transaction
Fee varies ratably from 0.4% of the aggregate consideration to 0.6% of the
aggregate consideration, offset by the retainer fee and the Fairness Fee. In
the case of a sale, the Fairness Fee is $1 million.
The agreement also contains various other provisions, including an
obligation by DLJ to keep confidential certain information provided to it by the
Company, and an obligation by the Company to indemnify and hold harmless DLJ,
its parent and its affiliates, and the directors, officers, agents and
employees of DLJ, its parent and its affiliates ("Indemnified Persons"), from
and against various potential losses and liabilities arising out of or in
connection with misstatements or omissions in disclosure documents or in
connection with advice or services rendered by an Indemnified Person.
26
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORT ON FORM 8-K
THE FOLLOWING DOCUMENTS ARE FILED AS A PART OF THIS REPORT:
(a) FINANCIAL STATEMENTS
All financial statements as set forth under Item 8.
(b) REPORT ON FORM 8-K
None.
(c) EXHIBITS
Exhibit
Number Description of Document
- ------ -----------------------
2.1 Second Amended Chapter 11 Plan of Reorganization of The Grand Union
Company ("Grand Union"), filed with the United States Bankruptcy
Court, District of Delaware, on April 19, 1995, incorporated by
reference to Exhibit T3E1 to Grand Union's Form T-3 dated May 8, 1995.
2.2 Findings of Fact, Conclusions of Law and Order Confirming the Second
Amended Plan of Reorganization proposed by Grand Union, dated May 31,
1995, incorporated by reference to Exhibit 2.2 to Grand Union's Annual
Report on Form 10-K for the fiscal year ended April 1, 1995 ("Fiscal
1995").
2.3 Minute Order Clarifying Findings of Fact, Conclusions of Law and Order
Confirming Second Amended Plan of Reorganization proposed by Grand
Union, dated June 14, 1995, incorporated by reference to Exhibit 2.3
to Grand Union's Annual Report on Form 10-K for Fiscal 1995.
3.1 Restated Certificate of Incorporation of Grand Union, incorporated by
reference to Exhibit 3.1 to Grand Union's Annual Report on Form 10-K
for Fiscal 1995.
3.2 By-laws of the Grand Union Company, as restated through March 30,
1996.
4.1 Form of New Common Stock Certificate of Grand Union, incorporated by
reference to Exhibit 4.1 to Grand Union's Annual Report on Form 10-K
for Fiscal 1995.
4.2 Indenture dated as of June 15, 1995, between Grand Union, as Issuer
and IBJ Schroder Bank & Trust Company, as Trustee for the 12% Senior
Notes due September 1, 2004, including form of the 12% Senior Note due
2004, incorporated by reference to Exhibit 4.2 to Grand Union's Annual
Report on Form 10-K for Fiscal 1995.
4.3 Amended and Restated Borrower Pledge Agreement dated as of June 15,
1995, made by Grand Union to Bankers Trust Company ("Bankers Trust"),
as Collateral Agent, incorporated by reference to Exhibit 4.3 to Grand
Union's Annual Report on Form 10-K for Fiscal 1995.
4.4 Amended and Restated Borrower Security Agreement dated as of June 15,
1995, between Grand Union and Bankers Trust, as Collateral Agent,
incorporated by reference to Exhibit 4.4 to Grand Union's Annual
Report on Form 10-K for Fiscal 1995.
4.5 Warrant Agreement dated as of June 15, 1995, between Grand Union and
American Stock Transfer & Trust Company, as Warrant Agent for 300,000
Series 1 Warrants and 600,000 Series 2 Warrants, incorporated by
reference to Exhibit 4.5 to Grand Union's Annual Report on Form 10-K
for Fiscal 1995.
27
<PAGE>
Exhibit
Number Description of Document
- ------ -----------------------
4.6 Registration Rights Agreement dated as of June 15, 1995, among Grand
Union and Each of the Persons Named in Schedule A thereto for the New
Common Stock, incorporated by reference to Exhibit 4.6 to Grand
Union's Annual Report on Form 10-K for Fiscal 1995.
4.7 Registration Rights Agreement dated as of June 15, 1995, by and among
Grand Union and The Holders Named therein for the Registrable Notes,
incorporated by reference to Exhibit 4.7 to Grand Union's Annual
Report on Form 10-K for Fiscal 1995.
10.1 Agreement to Hold Separate dated July 17, 1989, by and among MTH
Holdings Inc. ("MTH Holdings"), GU Acquisition Corporation ("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 Grand Union's Registration Statement
on Form S-1 (Registration No. 33-29707) (the "1989 Grand Union
Registration Statement").
10.2 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.
10.3 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).
10.4 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 GUAC's Registration Statement on
Form S-1 (Registration No. 33-22398).
10.5 Agreement and Master Sublease dated as of July 30, 1990, by and
between Grand Union and P&C Food Markets, Inc. ("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).
10.6 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 Grand Union's Report
on Form 8-K dated February 4, 1993.
10.7 Asset Purchase Agreement dated as of September 20, 1993 among
Foodarama Supermarkets, Inc., ShopRite of Malverne, Inc. and Grand
Union, incorporated by reference to Exhibit No. 10.19 to Grand Union's
Registration Statement on Form S-1 (Registration No. 33-70956).
10.8* Third Amendment and Restatement of The Grand Union Company
Supplemental Retirement Program for Key Executives effective as of
June 15, 1995.
10.9 Amended and Restated Credit Agreement dated as of June 15, 1995, among
Grand Union, the lending institutions listed from time to time on
Schedule 1 thereto, and Bankers Trust, as Agent, including Exhibits A-
1, A-2 and A-3, and various Schedules thereto, incorporated by
reference to Exhibit 10.9 to Grand Union's Annual Report on Form 10-K
for Fiscal 1995.
10.10 Amended and Restated Borrower Pledge Agreement dated as of June 15,
1995, made by Grand Union to Bankers Trust, as Collateral Agent
(included in Exhibit 4.3) , incorporated by reference to Exhibit 10.10
to Grand Union's Annual Report on Form 10-K for Fiscal 1995.
10.11 Amended and Restated Borrower Security Agreement dated as of June 15,
1995, between Grand Union and Bankers Trust, as Collateral Agent
(included in Exhibit 4.4), incorporated by reference to Exhibit 10.11
to Grand Union's Annual Report on Form 10-K for Fiscal 1995.
28
<PAGE>
Exhibit
Number Description of Document
- ------ -----------------------
10.12 Subsidiary Security Agreement dated as of June 15, 1995, among the
corporations listed on Schedule 1 thereto and Bankers Trust, as
Collateral Agent, incorporated by reference to Exhibit 10.12 to Grand
Union's Annual Report on Form 10-K for Fiscal 1995.
10.13 Subsidiary Guaranty dated as of June 15, 1995, made by each of the
corporations from time to time listed on Annex A attached thereto in
favor of the Banks and the Agent from time to time party to the Credit
Agreement, incorporated by reference to Exhibit 10.13 to Grand Union's
Annual Report on Form 10-K for Fiscal 1995.
10.14 Form of Indenture of Open-End Mortgage, Deed of Trust, Deed to Secure
Debt, Security Agreement, Assignment of Leases, Rents and Profits,
Financing Statement and Fixture Filing, dated as of June 15, 1995,
made by Grand Union to Bankers Trust, as Collateral Agent,
incorporated by reference to Exhibit 10.14 to Grand Union's Annual
Report on Form 10-K for Fiscal 1995.
10.15 Letter dated June 15, 1995, containing MTH Settlement Agreement
between Miller Tabak Hirsch + Co. ("MTH") and Grand Union in
connection with (i) the termination of the Agreement, dated July 22,
1992, between MTH and Grand Union, and (ii) the Second Amended Plan of
Reorganization, dated April 19, 1995, of Grand Union, incorporated by
reference to Exhibit 10.15 to Grand Union's Annual Report on Form 10-K
for Fiscal 1995.
10.16 Agreement dated as of April, 1995, among Grand Union, Grand Union
Capital Corporation ("Capital"), Holdings, the Official Committee of
Unsecured Creditors of Capital and certain holders of Zero Coupon
Notes issued by Capital and guaranteed by Holdings named therein,
incorporated by reference to Exhibit 10.16 to Grand Union's Annual
Report on Form 10-K for Fiscal 1995.
10.17 Waiver dated June 14, 1995, with respect to the Second Amended Chapter
11 Plan of Grand Union, among Grand Union, Bankers Trust, the Official
Committee of Unsecured Creditors of Grand Union and the Informal
Committee of Senior Noteholders, incorporated by reference to Exhibit
10.17 to Grand Union's Annual Report on Form 10-K for Fiscal 1995.
10.18* The Grand Union Company 1995 Equity Incentive Plan, incorporated by
reference to Exhibit 10.1 to Grand Union's Quarterly report on Form
10-Q for the 40 weeks ended January 6, 1996 ("Third Quarter of Fiscal
1996").
10.19* The Grand Union Company 1995 Non-Employee Director's Stock Option
Plan, incorporated by reference to Exhibit 10.2 to Grand Union's
Quarterly report on Form 10-Q for the Third Quarter of Fiscal 1996.
10.20** Supply and Distribution Agreement between The Grand Union Company and
C&S Wholesalers, dated June 15, 1995, incorporated by reference to
Exhibit 10.3 to Grand Union's Quarterly report on Form 10-QA for the
Third Quarter of Fiscal 1996.
10.21** First Amendment to the Supply and Distribution Agreement between The
Grand Union Company and C&S Wholesalers, dated June 15, 1995,
incorporated by reference to Exhibit 10.4 to Grand Union's Quarterly
report on Form 10-QA for the Third Quarter of Fiscal 1996.
10.22** Supply and Distribution Agreement between The Grand Union Company and
C&S Wholesalers, dated January 2, 1996, incorporated by reference to
Exhibit 10.5 to Grand Union's Quarterly report on Form 10-QA for the
Third Quarter of Fiscal 1996.
29
<PAGE>
Exhibit
Number Description of Document
- ------ -----------------------
10.23 Non-competition Agreement between The Grand Union Company and Joseph
J. McCaig.
10.24 Non-competition Agreement between The Grand Union Company and William
A. Louttit.
10.25 Non-competition Agreement between The Grand Union Company and Kenneth
R. Baum, Jr.
10.26 Non-competition Agreement between The Grand Union Company and Darrell
W. Stine.
10.27 Non-competition Agreement between The Grand Union Company and Gilbert
C. Vuolo.
10.28 Investment Banking Agreement between The Grand Union Company and
Donaldson, Lufkin & Jenrette.
10.29 Waiver and First Amendment to the Amended and Restated Credit
Agreement dated February 16, 1996.
10.30 Agreement between The Grand Union Company and Darrell W. Stine
related to SERP obligations.
21.1 Subsidiaries of Grand Union.
24.1 Power of Attorney.
27.1 Financial Data Schedule.
* Compensatory plan or arrangement
** Confidential treatment requested
30
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 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/ Kenneth R. Baum
-------------------------- Date June 27, 1996
Kenneth R. Baum
Senior Vice President, Chief Financial Officer and Secretary
(Principal Financial Officer and Principal Accounting Officer)
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/ Roger E. Stangeland * Director and Chairman June 27, 1996
- --------------------------
Roger E. Stangeland
/s/ Joseph J. McCaig * Director, President and Chief June 27, 1996
- -------------------------- Executive Officer (Principal
Joseph J. McCaig Executive Officer)
/s/ William A. Louttit * Director, Executive Vice June 27, 1996
- -------------------------- President and Chief
William A. Louttit Operating Officer
/s/ Daniel E. Josephs * Director June 27, 1996
- --------------------------
Daniel E. Josephs
/s/ William G. Kagler * Director June 27, 1996
- --------------------------
William G. Kagler
/s/ Douglas T. McClure, Jr * Director June 27, 1996
- --------------------------
Douglas T. McClure, Jr
/s/ David Y. Ying * Director June 27, 1996
- --------------------------
David Y. Ying
/s/ Kenneth R. Baum Senior Vice President, Chief June 27, 1996
- -------------------------- Financial Officer and Secretary
Kenneth R. Baum (Principal Financial Officer and
Principal Accounting Officer)
* By:/s/ Kenneth R. Baum
- ---------------------------
Kenneth R. Baum, Attorney-in-Fact
31
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
(Post-Emergence)
To the Shareholders and the Board of Directors of
The Grand Union Company
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations and cash flows present fairly, in all
material respects, the financial position of The Grand Union Company and its
subsidiaries (the "Company") at March 30, 1996 and the results of their
operations and their cash flows for the 41 weeks then ended, 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 audit. We
conducted our audit of these statements in accordance with generally accepted
auditing standards which require that we plan and perform an 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 audit provides a reasonable basis for the opinion expressed
above.
As discussed in Note 1 to the consolidated financial statements, on May 31,
1995, the United States Bankruptcy Court for the District of Delaware
confirmed the Company's Plan of Reorganization, as amended (the "Plan").
Confirmation of the Plan resulted in the discharge of all claims against the
Company that arose before January 25, 1995 and terminated all rights and
interests of equity shareholders as provided for in the Plan. The Plan
became effective on June 15, 1995 and the Company emerged from bankruptcy.
In connection with its emergence from bankruptcy, the Company adopted
Fresh-Start Reporting as of June 18, 1995.
PRICE WATERHOUSE LLP
New York, New York
May 17, 1996
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
(Pre-Emergence)
To the Shareholders and the Board of Directors of
The Grand Union Company
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations and cash flows present fairly, in all
material respects, the financial position of The Grand Union Company and its
subsidiaries (the "Company") at April 1, 1995 and the results of their
operations and their cash flows for the 11 weeks ended June 17, 1995 and for
each of the two years in the period ended April 1, 1995, 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 an 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 discussed in Note 1 to the consolidated financial statements, on
January 25, 1995, the Company filed a voluntary petition for relief under
chapter 11 of Title 11 of the United States Code in the United States Bankruptcy
Court for the District of Delaware. The Company's Plan of Reorganization, as
amended, became effective on June 15, 1995 and the Company emerged from
bankruptcy. In connection with its emergence from bankruptcy, the Company
adopted Fresh-Start Reporting as of June 18, 1995.
As discussed in Note 2 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.
PRICE WATERHOUSE LLP
New York, New York
May 17, 1996
F-2
<PAGE>
THE GRAND UNION COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
(all dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Successor
Company Predecessor Company
----------------------------------------------------------
41 Weeks 11 Weeks 52 Weeks 52 Weeks
Ended Ended Ended Ended
March 30, June 17, April 1, April 2,
1996 1995 1995 1994
------------ ---------- ----------- -----------
<S> <C> <C> <C> <C>
Sales $ 1,819,928 $ 487,882 $ 2,391,696 $ 2,477,339
Cost of sales (1,250,072) (344,041) (1,683,355) (1,745,606)
------------ --------- ---------- -----------
Gross profit 569,856 143,841 708,341 731,733
Operating and administrative expenses (453,620) (117,544) (571,640) (552,536)
Depreciation and amortization (59,840) (17,215) (87,098) (78,577)
Amortization of excess reorganization value (83,985) -- -- --
Unusual items (22,000) (18,627) (27,417) (4,468)
Interest expense, net (contractual interest totaled
$43,360 and $203,285 for the 11 weeks ended
June 17, 1995 and the 52 weeks ended April 1,
1995, respectively- See Note 1) (79,194) (19,791) (182,016) (183,797)
------------ --------- ----------- ----------
Loss before income taxes, extraordinary
gain and cumulative effect of accounting change (128,783) (29,336) (159,830) (87,645)
Income tax benefit 18,927 -- -- --
------------ --------- ----------- ---------
Loss before extraordinary gain and
cumulative effect of accounting change (109,856) (29,336) (159,830) (87,645)
Extraordinary gain on debt discharge -- 854,785 -- --
------------ --------- ----------- ---------
(Loss) income before cumulative effect of
accounting change (109,856) 825,449 (159,830) (87,645)
Cumulative effect of accounting change -- -- -- (30,308)
------------ --------- ----------- ---------
Net (loss) income (109,856) 825,449 (159,830) (117,953)
Accrued dividends on old preferred stock -- -- (19,480) (16,011)
------------ --------- ----------- -----------
Net (loss) income applicable to common stock $ (109,856) $ 825,449 $ (179,310) $ (133,964)
------------ --------- ----------- -----------
------------ --------- ----------- -----------
Net (loss) per common share $ (10.99)
------------
------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
THE GRAND UNION COMPANY
CONSOLIDATED BALANCE SHEET
(all dollars in thousands, except par value)
<TABLE>
<CAPTION>
Successor Predecessor
Company Company
------------ ------------
March 30, April 1,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and temporary investments $ 39,425 $ 89,423
Receivables 20,948 18,592
Inventories 133,506 189,467
Other current assets 13,709 16,787
----------- -----------
Total current assets 207,588 314,269
Property, net 405,579 426,962
Excess reorganization value, net 437,672 --
Goodwill, net -- 545,451
Beneficial leases, net 68,147 27,218
Deferred tax asset 53,916 --
Other assets 12,304 80,856
----------- -----------
$ 1,185,206 $ 1,394,756
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt $ 1,813 $ --
Current portion of obligations under capital leases 7,080 --
Accounts payable and accrued liabilities 170,010 174,126
----------- -----------
Total current liabilities 178,903 174,126
----------- -----------
Long-term debt 738,067 --
----------- -----------
Obligations under capital leases 128,114 --
----------- -----------
Other noncurrent liabilities 95,978 53,072
----------- -----------
Liabilities subject to compromise -- 1,817,698
----------- -----------
Commitments and contingencies -- --
----------- ------------
Redeemable stock subject to compromise:
Old common stock -- 9,407
Old preferred stock -- 164,792
------------ -------------
Total redeemable stock -- 174,199
------------ -------------
Stockholders' equity (deficit):
New Common Stock, $1.00 par value; 30,000,000 shares authorized,
10,000,000 shares issued and outstanding 10,000 --
New Preferred Stock, $1.00 par value; 10,000,000 shares authorized,
no shares issued and outstanding -- --
Old common stock -- 1
Old treasury stock -- (156)
Capital in excess of par value 144,000 --
Accumulated deficit (109,856) (824,184)
------------ ------------
Total stockholders' equity (deficit) 44,144 (824,339)
------------ ------------
$ 1,185,206 $ 1,394,756
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
THE GRAND UNION COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(all dollars in thousands)
<TABLE>
<CAPTION>
Successor
Company Predecessor Company
---------------- ----------------------------------------
41 Weeks 11 Weeks 52 Weeks 52 Weeks
Ended Ended Ended Ended
March 30, June 17, April 1, April 2,
1996 1995 1995 1994
------------ ------------ ----------- ----------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income $ (109,856) $ 825,449 $ (159,830) $ (117,953)
Adjustments to reconcile net (loss) income to net cash
(used for) provided by operating activities before
reorganization items paid:
Extraordinary gain on debt discharge -- (854,785) -- --
Cumulative effect of accounting change -- -- -- 30,308
Depreciation and amortization 143,825 17,215 87,098 78,577
LIFO charge (income) 1,500 300 (1,100) 900
Deferred taxes (18,927) -- -- --
Charges relating to pension settlement and early
retirement programs -- -- 3,747 4,468
Noncash interest 14,552 1,126 38,418 40,185
Net changes in assets and liabilities:
Receivables (12,652) 1,769 18,480 (12,505)
Inventories 48,872 12,646 17,696 28,259
Other current assets 123 2,776 657 (1,303)
Accounts payable and accrued liabilities (59,509) (34,928) 86,550 (44,807)
Other (7,733) 4,493 7,330 (18,039)
------------ ----------- ------------ ------------
Net cash provided by (used for) operating activities
before reorganization items paid 195 (23,939) 99,046 (11,910)
Reorganization items paid (20,729) (4,913) (10,770) --
------------ ----------- ------------ ------------
Net cash (used for) provided by operating activities (20,534) (28,852) 88,276 (11,910)
------------ ---------- ------------ ------------
INVESTMENT ACTIVITIES:
Capital expenditures (40,402) (3,301) (62,973) (81,029)
Disposals of property 5,555 5,452 2,128 584
------------ ----------- ------------ ------------
Net cash (used for) provided by investment activities (34,847) 2,151 (60,845) (80,445)
------------ ----------- ------------ ------------
FINANCING ACTIVITIES:
Proceeds from New Bank agreement -- 104,144 -- --
Payment of Old Bank debt -- (93,144) -- --
Net proceeds from long-term debt 33,089 -- 29,000 77,661
Obligations under capital leases discharged (6,126) (1,707) (10,339) (8,218)
Loan placement fees -- (3,125) -- (1,775)
Retirement of long-term debt (808) (239) (963) (514)
Purchase of redeemable Class A common stock -- -- -- (156)
------------ ----------- ------------ ------------
Net cash provided by financing activities 26,155 5,929 17,698 66,998
------------ ----------- ------------ ------------
(Decrease) increase in cash and temporary investments (29,226) (20,772) 45,129 (25,357)
Cash and temporary investments at beginning of period 68,651 89,423 44,294 69,651
------------ ----------- ------------ ------------
Cash and temporary investments at end of period $ 39,425 $ 68,651 $ 89,423 $ 44,294
------------ ----------- ------------ ------------
------------ ----------- ------------ ------------
Supplemental disclosure of cash flow information:
Interest payments $ 57,565 $ 9,515 $ 89,985 $ 142,501
Capital lease obligations incurred 8,529 20,072 31,686 24,522
Accrued dividends on old preferred stock -- -- 19,480 16,011
Issuance of Junior Notes -- -- -- 939
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
THE GRAND UNION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
Grand Union, a Delaware corporation, ("Grand Union" or the "Company") is a
regional food retailer which currently operates 229 stores in six northeastern
states. Since June 15, 1995, the Company has been publicly owned and is traded
on the NASDAQ Stock Market. Through June 15, 1995, Grand Union was wholly owned
by Grand Union Capital Corporation ("Capital"), a wholly owned subsidiary of
Grand Union Holdings Corporation ("Holdings").
On November 29, 1994, Grand Union announced that it was not likely to be
able to fund cash interest payments due in early calendar 1995, and that it
intended to develop a capital restructuring plan. Beginning on January 16,
1995, Grand Union did not make interest payments required under 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 certain holders of Grand Union's 11.375% Senior Notes due 1999
(the "11.375% Senior Notes") and 11.25% Senior Notes due 2000 (the "11.25%
Senior Notes" and, collectively with the 11.375% Senior Notes, the "Senior
Notes") and certain holders of Grand Union's 12.25% Senior Subordinated Notes
due 2002 (the "12.25% Subordinated Notes"), 12.25% Senior Subordinated Notes due
2002, Series A (the "Series A 12.25% Subordinated Notes") and 13% Senior
Subordinated Notes due 1998 (the "13% Subordinated Notes" and, collectively with
the 12.25% Subordinated Notes and the Series A 12.25% Subordinated Notes, the
"Subordinated Notes") on the terms of a capital restructuring.
CHAPTER 11 BANKRUPTCY FILINGS - On January 25, 1995 (the "Filing Date"), as
part of the implementation of such agreement, Grand Union filed a voluntary
petition for relief under chapter 11 ("Chapter 11") of Title 11 of the United
States Code (the "Code") in the United States Bankruptcy Court for the District
of Delaware (the "Bankruptcy Court"). From the Filing Date through June 15,
1995 (the "Effective Date", as defined below), Grand Union operated as a debtor-
in-possession under Chapter 11 of the Code and was subject to the supervision of
the Bankruptcy Court in accordance with the Code. During this period, Grand
Union's business was operated under a series of "first day orders", which, among
other things, permitted it to retain certain financial and legal advisors and
which authorized payment of certain pre-petition employee costs, including
worker's compensation benefits, and pre-petition trade claims, subject to the
satisfaction of various requirements.
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 providing for borrowings of up to $150 million on a revolving credit
basis. On February 16, 1995, final approval of the DIP Facility was granted and
the Bankruptcy Court also issued a Final Cash Collateral Order which allowed
Grand Union to use cash collateral to pay operating expenses in the ordinary
course of business. The DIP Facility provided for a commitment fee equal to .5%
of the average unused portion. There were no borrowings made under the DIP
Facility during the Chapter 11 proceedings and it was terminated on the
Effective Date.
On February 16, 1995, Capital consented to the entry of an order for relief
in respect of an involuntary Chapter 11 petition filed in the Bankruptcy Court
on February 6, 1995 by entities purporting to be holders of Capital's 15% Senior
Zero Coupon Notes due 2004 (the "Capital Senior Zero Notes") and 16.5% Senior
Subordinated Zero Coupon Notes due 2007 (the "Capital Subordinated Zero Notes"
and, collectively with the Capital Senior Zero Notes, the "Capital Notes"). On
February 16, 1995, Holdings, of which Capital was a wholly owned subsidiary,
filed a voluntary Chapter 11 petition in the Bankruptcy Court.
PLAN OF REORGANIZATION - The Bankruptcy Court confirmed the Second Amended
Chapter 11 Plan of The Grand Union Company, dated as of April 19, 1995, (as
confirmed, the "Plan"), on May 31, 1995 (the "Confirmation Date"), and the
Company emerged from Chapter 11 on June 15, 1995 (the "Effective Date"). One
proceeding challenging the order confirming the Plan is pending. The Company
does not believe that this proceeding will result in any modification or
revocation of the order.
On the Effective Date, Grand Union adopted a restated certificate of
incorporation (the "New Certificate"), the principal effects of which were:
(i) to authorize 30,000,000 shares of new common stock (the "New Common
Stock") (of which 10,000,000 shares were issued under the Plan) and (ii) to
prohibit the issuance of non-voting equity securities. The Plan provided for
full payment of all allowed administrative expenses and all allowed general
unsecured and priority claims. On the Effective Date, obligations relating
to the Company's existing bank credit agreement (the "Bank Credit Agreement")
were paid in full and the Company entered into an Amended and Restated Credit
Agreement (the "New Bank Facility") with its bank lending group which
provides for a five-year revolving credit facility of $100,000,000 (the "New
Revolving Credit Facility") and
F-6
<PAGE>
a seven-year term loan facility of $104,144,371 (the "New Term Loan"). The New
Bank Facility is secured by a lien on substantially all of the assets of Grand
Union and its subsidiaries.
As of the Effective Date, the Senior Notes, which had an aggregate
principal amount of $525,000,000 plus accrued interest, were deemed cancelled
and each holder of Senior Notes became entitled to receive its pro rata share
of Grand Union's new 12% Senior Notes due 2004 (the "New Senior Notes")
having an aggregate principal amount of $595,475,922 issued pursuant to the
Plan. Subsequent to the Effective Date, the Company issued $595,421,000
aggregate principal amount of New Senior Notes and made cash payments of
$54,922 for fractional amounts to the holders of the Senior Notes. The New
Senior Notes began to accrue interest beginning on September 1, 1995.
Accordingly, the New Senior Notes have been discounted at 12% for the period
from June 15, 1995 to September 1, 1995 and imputed interest was charged at
12% during that period. In addition, the difference between such discounted
value and the fair value of the New Senior Notes at the Effective Date was
recorded as a debt premium totaling $5,779,000 which is being amortized over
the life of the New Senior Notes.
As of the Effective Date, the Subordinated Notes, which had an aggregate
principal amount of $566,150,000, and the old capital stock of Grand Union were
deemed cancelled and each holder of Subordinated Notes became entitled to
receive its pro rata share of an aggregate of 10,000,000 shares of New Common
Stock issued pursuant to the Plan.
The Plan also provided for the issuance of warrants to purchase an aggregate
of 900,000 shares of New Common Stock to holders of several other series of
long-term debt of its then parent company (the "Capital Notes") pursuant to the
terms of a settlement reached among the Company, its then direct and indirect
parent companies, the Official Committee of Unsecured Creditors of its then
parent company and certain holders of the Capital Notes. Such warrants are
comprised of 300,000 Series 1 Warrants to purchase shares of New Common Stock at
a purchase price of $30 per share and of 600,000 Series 2 Warrants to purchase
shares of New Common Stock at a purchase price of $42 per share. The warrants
expire on June 15, 2000.
The Plan made no provision for the holders of the remaining long-term debt,
Redeemable Preferred Stock, common shares or warrants to purchase common shares
of the Company's then indirect parent. Holdings and Capital were dissolved on
March 28, 1996 and March 27, 1996, respectively.
Interest expense was not accrued on the Subordinated Notes, Capital Notes,
and Holdings Junior Notes subsequent to the Filing Date. Accordingly, interest
expense for the 11 weeks ended June 17, 1995 and 52 weeks ended April 1, 1995
excludes contractual interest expense of $23,569,000 and $21,269,000,
respectively.
BASIS OF PRESENTATION - As of the Effective Date, the Company adopted fresh-
start reporting in accordance with American Institute of Certified Public
Accountants Statement of Position 90-7, "Financial Reporting By Entities in
Reorganization Under The Bankruptcy Code" ("Fresh-Start Reporting"). In
connection with the adoption of Fresh-Start Reporting, a new entity has been
deemed created for financial reporting purposes. The periods presented prior to
the Effective Date have been designated "Predecessor Company" and the period
subsequent to the Effective Date has been designated "Successor Company". Fresh-
Start Reporting requires a segregation of liabilities subject to compromise by
the Bankruptcy Court as of the Filing Date and identification of all
transactions and events that are directly associated with the reorganization of
the Company. The most significant difference between the current year and prior
year presentation is the reclassification of substantially all of the
outstanding debt and other liabilities as of April 1, 1995, to "Liabilities
Subject to Compromise". See Note 3 for a detailed description of liabilities
subject to compromise.
For financial reporting purposes, the Company accounted for the consummation
of the Plan effective June 17, 1995. In accordance with Fresh-Start Reporting,
the Company valued its assets and liabilities at fair values and eliminated its
retained earnings at the Effective Date. The reorganization value of the Company
was determined utilizing several methods which yielded similar results including
(a) the trading value of the Company's New Common Stock for a representative
number of days subsequent to the Effective Date and the fair value of the
Company's obligations as of the Effective Date, (b) discounted cash flows and
(c) a multiple of adjusted trailing year operating cash flow. The total
reorganization value as of the Effective Date was determined to be
$1,334,000,000 which was $521,657,000 in excess of the aggregate fair value of
the Company's tangible and identified intangible assets. Such excess, is
classified as "Excess reorganization value, net" in the accompanying March 30,
1996 consolidated balance sheet.
F-7
<PAGE>
The components of reorganization items included as unusual items in the
consolidated statement of operations are as follows (in thousands):
<TABLE>
<CAPTION>
11 Weeks 52 Weeks
Ended Ended
June 17, April 1,
1995 1995
--------- ---------
<S> <C> <C>
Fresh-Start Reporting:
Establish excess reorganization value $ 521,657 $ -
Eliminate existing goodwill (540,434) -
Revalue beneficial leases 40,633 -
Establish deferred tax asset 35,414 -
Revalue pension assets and liabilities and postretirement obligations (23,653) -
Record lease rejection liability (19,734) -
Provide for warehouse closing (10,450) -
Eliminate LIFO inventory reserve 7,757 -
Provide for other reorganization liabilities (5,400) -
Record liability for fair value of interest rate protection agreement (3,500) -
Other (1,905) -
---------- ---------
Total Fresh-Start Reporting 385 -
Professional fees incurred in connection with the reorganization (20,000) (5,704)
Interest earned on accumulated cash resulting from the Chapter 11
proceedings 988 173
Debtor-in-possession financing fees - (3,740)
Other - (1,499)
---------- ---------
Total reorganization items $ (18,627) $(10,770)
---------- ---------
---------- ---------
</TABLE>
At June 17, 1995, as a result of the debt restructuring, the Company
recorded an extraordinary gain on debt discharge as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Elimination of Old Debt, deferred financing fees and accrued interest
discharged $1,589,506
Issuance of New Senior Notes (580,721)
Issuance of New Common Stock (154,000)
-----------
Extraordinary gain on debt discharge $ 854,785
-----------
-----------
</TABLE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION.
The consolidated financial statements include the accounts of Grand Union
and its subsidiaries, all of which are wholly owned. Intercompany
transactions and balances have been eliminated.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect (a) the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities at the date of the
financial statements and (b) the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates. Areas of significant estimates include self insurance reserves,
realization of deferred tax assets and retirement benefit reserves.
FISCAL YEAR.
The Company's fiscal year ends on the Saturday nearest the last day of
March. The years ended March 30, 1996 ("Fiscal 1996"), April 1, 1995
("Fiscal 1995") and April 2, 1994 ("Fiscal 1994") were each comprised of 52
weeks. Fiscal 1996 includes the 11 weeks prior to the Effective Date
which have been designated "Predecessor Company" and the 41 weeks
subsequent to the Effective Date which have been designated "Successor
Company".
TEMPORARY CASH INVESTMENTS.
Temporary cash investments consist of short-term investments in highly
liquid securities and cash equivalents, with initial maturities of three
months or less.
F-8
<PAGE>
INVENTORY VALUATION.
Grocery and general merchandise inventories are valued at the lower of
last-in, first-out ("LIFO") cost or market. At March 30, 1996 and April 1,
1995, approximately $111,327,000 and $158,755,000, respectively, of grocery
and general merchandise inventories were valued using the LIFO method.
Replacement cost exceeded LIFO cost of these inventories by approximately
$1,500,000 and $7,457,000 at March 30, 1996 and April 1, 1995,
respectively. During Fiscal 1995, inventory levels were reduced resulting
in a liquidation of LIFO inventories that had been carried at a value lower
than current cost. Net loss was decreased by approximately $1,628,000 as a
result of the 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.
As of the Effective Date, the Company eliminated its LIFO reserve in
conjunction with the implementation of Fresh-Start Reporting (See Note 1).
PROPERTY.
Land, 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.
EXCESS REORGANIZATION VALUE AND GOODWILL.
Goodwill was amortized using the straight-line method over a 40 year life.
At April 1, 1995, accumulated amortization was $91,604,000. In accordance
with Fresh-Start Reporting, the remaining value of goodwill was eliminated
as of the Effective Date (See Note 1). Excess Reorganization Value,
established in connection with Fresh-Start Reporting, is being amortized on
a straight-line basis over five years. Accumulated amortization was
$83,985,000 at March 30, 1996.
BENEFICIAL LEASES.
Amortization of beneficial leases is computed using the straight-line
method over the lease life. As of the Effective Date, the Company revalued
its beneficial lease assets in conjunction with the implementation of
Fresh-Start Reporting (See Note 1). At March 30, 1996 and April 1, 1995,
accumulated amortization was $14,275,000 and $33,426,000, respectively.
DEFERRED FINANCING FEES.
Financing fees are deferred and amortized over the expected life of the
related loan. In connection with the implementation of Fresh-Start
Reporting, the deferred financing fees asset related to discharged debt was
eliminated as of the Effective Date (See Note 1) and a new asset was
recorded relating to the New Bank Facility. At March 30, 1996 and April 1,
1995, deferred financing fees of $3,125,000 and $44,069,000 and accumulated
amortization thereon of $356,000 and $13,712,000, respectively, are
included in other assets in the accompanying consolidated balance sheet.
INCOME TAXES.
Deferred income taxes are recorded to reflect the tax consequences on
future years of temporary differences between the tax basis of assets and
liabilities and their financial reporting amounts at each year end.
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"). In conjunction with the implementation of
Fresh-Start Reporting, as of the Effective Date, the Company revalued its
pension asset to its fair value.
POSTRETIREMENT BENEFITS OTHER THAN PENSION.
The Company accrues the estimated cost of retiree benefit payments, other
than pension, during the years each employee provides services.
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, which increased the Company's net
loss by $30,308,000, as of April 4, 1993.
F-9
<PAGE>
SELF INSURANCE.
The Company self insures workers' compensation, automobile liability,
general liability and non-union employee medical costs up to varying
deductible limits and 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 incurred during each policy
year.
ADVERTISING COSTS.
Advertising costs are expensed as incurred. Advertising expense for the 41
weeks ended March 30, 1996, 11 weeks ended June 17, 1995, Fiscal 1995 and
Fiscal 1994 was $28,084,000, $7,383,000, $31,691,000 and $32,887,000.
STORE CLOSURE EXPENSE.
Estimated whole dollar net costs of holding and disposing of closed stores
are provided as of the later of the date the decision is made to close the
store or the date such costs are reasonably estimable.
PRE-OPENING COSTS.
Store pre-opening costs are charged to expense as incurred.
FAIR VALUE OF FINANCIAL INSTRUMENTS.
The carrying amount of cash, temporary cash investments, receivables,
accounts payable and accrued liabilities approximates fair value. The fair
value of the Company's debt at March 30, 1996 is discussed in Note 9. At
April 1, 1995, outstanding pre-petition accounts payable, accrued
liabilities, long-term debt and redeemable preferred stock are classified
as Liabilities Subject to Compromise. The fair value of these liabilities
is based on the provisions of the Plan, as discussed in Note 1. 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.
Net loss per share for the 41 weeks ended March 30, 1996 has been
calculated on the basis of 10,000,000 shares outstanding. Warrants were
excluded from the calculation because their inclusion would be
anti-dilutive. Net loss per common share data is not meaningful for
periods prior to the Effective Date due to the significant change in the
capital structure of the Company.
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-TERM ASSETS TO BE DISPOSED OF.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 Accounting for the Impairment of
Long-Lived Assets and for Long-Term Assets to be Disposed of ("SFAS
No. 121"), which establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill related
to those assets to be held and used and for long-lived assets and certain
identifiable intangibles to be disposed of. The Company adopted SFAS No.
121 as of the Effective Date.
RECLASSIFICATIONS.
Certain amounts have been reclassified in the prior year financial
statements to conform to current year presentation.
F-10
<PAGE>
NOTE 3 - LIABILITIES SUBJECT TO COMPROMISE
Certain obligations of the Company which were in existence as of the Filing
Date were not paid while the Company operated as a debtor-in-possession. The
Company's estimate of these claims is reflected in the accompanying Fiscal 1995
balance sheet as "Liabilities Subject to Compromise" as follows (in thousands):
Debt (a)
GRAND UNION
Equipment Mortgage Notes $ 2,997
Bank Credit Agreement 93,144
11.25% Senior Notes 350,000
11.375% Senior Notes 175,000
12.25% Senior Subordinated Notes 500,000
12.25% Senior Subordinated Notes, Series A 50,000
13% Senior Subordinated Notes 16,150
CAPITAL
15% Senior Zero Coupon Notes 170,239
16.5% Senior Subordinated Zero Coupon Notes 100,965
HOLDINGS
12% Junior Subordinated Notes 7,862
----------
Total debt 1,466,357
Accounts payable (b) 62,006
Accrued liabilities 20,583
Interest payable 68,060
Obligations under capital leases 148,586
Other noncurrent liabilities 52,106
----------
Total Liabilities Subject to Compromise $1,817,698
----------
----------
(a) See Note 9 for additional information on debt securities.
(b) Accounts payable at April 1, 1995 are net of payments made on certain
pre-petition liabilities in accordance with first-day orders obtained from
the Bankruptcy Court.
NOTE 4 - UNUSUAL ITEMS
Unusual items included in the consolidated statement of operations consist of
the following (in thousands):
<TABLE>
<CAPTION>
Successor
Company Predecessor Company
-------- -----------------------------------------
41 Weeks 11 Weeks 52 Weeks 52 Weeks
Ended Ended Ended Ended
March 30, June 17, April 1, April 2,
1996 1995 1995 1994
-------- ------- -------- ---------
<S> <C> <C> <C> <C>
Provision for organizational restructuring $ 2,500 $ -- $ -- $ --
Provision for warehouse closures 15,000 -- -- --
Charges relating to voluntary resignation
incentive programs 4,500 -- --
Reorganization items (See Note 1) -- 18,627 10,770 --
Provision for store closures -- -- 12,900 --
Charges relating to pension settlement and
early retirement programs (See Note 12) -- -- 3,747 4,468
-------- ------- -------- ---------
$22,000 $18,627 $ 27,417 $ 4,468
-------- ------- -------- ---------
-------- ------- -------- ---------
</TABLE>
The provision for organizational restructuring is principally comprised of the
cash cost of severance and future lease payments, approximately one-half of
which has been paid by March 30, 1996.
F-11
<PAGE>
On June 15, 1995, January 2, 1996 and January 21, 1996, the Company entered
into supply agreements with C&S Wholesale Grocers, Inc. ("C&S"), under which C&S
will stock and distribute to all Grand Union stores substantially all of the
merchandise formerly owned and warehoused by Grand Union. Under two of the
agreements, C&S will stock and supply grocery and perishable products from its
own warehouses. Under the most recent agreement, C&S will stock and supply
health and beauty care and general merchandise products from the Company's
Montgomery, New York warehouse. Accordingly, the Company recorded a
provision relating to the closure of two metropolitan New York warehouses
consisting principally of cash costs of severance, pension withdrawal liability,
security and other expenses directly related to the closing of the warehouses.
Substantially all of the net costs of closing these facilities were paid prior
to March 30, 1996.
During the 41 weeks ended March 30, 1996, the Company made cash payments of
$4,500,000 relating to voluntary resignation incentive programs under which
certain classes of store employees accepted monetary incentives to voluntarily
resign from their positions.
During Fiscal 1995, the Company established a provision for store closings,
net of a non-recurring item. The provision included a charge of $16,900,000
($8,200,000 of which required cash outlays) relating to the closure of sixteen
stores principally consisting of store closing costs, estimated carrying costs
through expected dates of disposition and the remaining net book value of store
fixed assets. Additionally, the Company realized $4,000,000 of proceeds from the
termination of a warehouse sublease. All stores were closed prior to April 1,
1995. Substantially all of the costs of closing these facilities were paid as
of March 30, 1996.
NOTE 5 - ACQUISITION OF LONG ISLAND STORES
On October 18, 1993, the Company acquired five supermarket locations on
Long Island for cash consideration of $18,300,000, of which $6,000,000 was
allocated to property, equipment and leasehold improvements, $10,100,000 was
allocated to goodwill and $2,200,000 for store inventory. 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 Series A 12.25%
Subordinated Notes.
NOTE 6 - PROPERTY
Property, at cost, consists of the following (in thousands):
Successor Predecessor
Company Company
------------ -----------
March 30, April 1,
1996 1995
------------ -----------
Property owned:
Land $ 18,776 $ 18,815
Buildings 57,309 68,427
Fixtures and equipment 144,268 254,615
Leasehold improvements 107,220 147,050
------------ -----------
327,573 488,907
Less: accumulated depreciation and amortization 32,493 183,968
------------ -----------
Property owned, net 295,080 304,939
------------ -----------
Property held under capital leases:
Land and buildings 97,801 123,030
Equipment 18,184 22,911
------------ -----------
115,985 145,941
Less: accumulated amortization 5,486 23,918
------------ -----------
Property held under capital leases, net 110,499 122,023
------------ -----------
Property $ 405,579 $ 426,962
------------ -----------
------------ -----------
Depreciation and amortization of owned and leased property for the 41 weeks
ended March 30, 1996, the 11 weeks ended June 17, 1995, Fiscal 1995 and Fiscal
1994 was $42,706,000, $11,246,000, $57,089,000, and $52,760,000, respectively.
F-12
<PAGE>
NOTE 7 - RECEIVABLES AND ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Receivables at March 30, 1996 and April 1, 1995 are net of allowances for
doubtful accounts of $1,146,000 and $998,000, respectively.
Accounts payable and accrued liabilities consist of the following (in
thousands):
Successor Predecessor
Company Company
------------ -----------
March 30, April 1,
1996 1995
------------ -----------
Accounts and drafts payable $ 86,638 $112,647
Accrued liabilities:
Payroll 18,179 19,741
Interest 8,740 12,977
Self insurance 12,098 6,207
Other 44,355 22,554
------------ -----------
$ 170,010 $174,126
------------ -----------
------------ -----------
NOTE 8 - INCOME TAXES
The components of the income tax benefit are as follows (in thousands):
<TABLE>
<CAPTION>
Successor
Company Predecessor Company
-------- -----------------------------------------
41 Weeks 11 Weeks 52 Weeks 52 Weeks
Ended Ended Ended Ended
March 30, June 17, April 1, April 2,
1996 1995 1995 1994
-------- ------- -------- ---------
<S> <C> <C> <C> <C>
Current tax benefit:
Federal $ -- $ -- $ -- $ --
State -- -- -- --
--------- -------- --------- ----------
-- -- -- --
--------- -------- --------- ----------
Deferred tax benefit:
Federal 16,157 -- -- --
State 2,770 -- -- --
--------- -------- --------- ----------
Total Deferred 18,927 -- -- --
--------- -------- --------- ----------
Income tax benefit $ 18,927 $ -- $ -- $ --
--------- -------- --------- ----------
--------- -------- --------- ----------
</TABLE>
F-13
<PAGE>
The reconciliation of the income tax benefit computed at the federal statutory
rate to the reported income tax benefit is as follows (in thousands):
<TABLE>
<CAPTION>
Successor
Company Predecessor Company
-------- -----------------------------------------
41 Weeks 11 Weeks 52 Weeks 52 Weeks
Ended Ended Ended Ended
March 30, June 17, April 1, April 2,
1996 1995 1995 1994
-------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Benefit computed at federal statutory tax rate $ 45,074 $ 10,268 $ 55,941 $ 41,284
Increase (decrease) in the benefit resulting from:
Amortization of excess reorganization value (28,992) -- -- --
Amortization of goodwill -- (6,295) (5,379) (5,486)
State and local taxes, net of federal tax benefit 2,770 -- -- --
Effect of change in rate on temporary differences -- -- -- 3,099
Deferred tax asset valuation allowance -- (3,948) (51,014) (37,912)
Other 75 (25) 452 (985)
-------- ---------- ----------- ----------
Income tax benefit $ 18,927 $ -- $ -- $ --
-------- ---------- ----------- ----------
-------- ---------- ----------- ----------
</TABLE>
The components of the net deferred tax asset are as follows (in thousands):
Successor Predecessor
Company Company
------------ -----------
March 30, April 1,
1996 1995
------------ -----------
Deferred tax assets
Non-cash interest $ 5,727 $31,354
Insurance reserve 19,300 15,470
Pension 4,077 7,273
Post retirement benefit liability 14,676 11,870
Other miscellaneous reserves 25,477 26,213
Net operating loss carryforward 15,246 132,253
------- --------
Total deferred tax assets 84,503 224,433
------- --------
Deferred tax liabilities
Depreciable assets 26,016 18,227
Other 4,571 --
------- --------
Total deferred tax liabilities 30,587 18,227
------- --------
Net deferred tax asset before valuation allowance 53,916 206,206
Valuation allowance -- (206,206)
------- --------
Deferred tax asset $53,916 $ --
------- --------
------- --------
Under existing income tax laws, the Company is not required to include in
its taxable income any cancellation of debt income as a result of the debt
forgiven pursuant to the Plan. Accordingly, no income taxes have been provided
on the extraordinary gain on debt discharge in the statement of operations for
the 11 weeks ended June 17, 1995.
There are no remaining operating loss or credit carryforwards of the
Predecessor Company and there was no change in the tax basis of the Company's
assets as of the Effective Date.
As of March 30, 1996, the Company had a net operating loss carryforward of
approximately $37,000,000 for tax purposes, expiring in the year 2011.
F-14
<PAGE>
NOTE 9 - DEBT
As previously discussed, long-term debt as of April 1, 1995 was classified
in the consolidated balance sheet as Liabilities Subject to Compromise.
Comparative amounts, had the April 1, 1995 amounts not been reclassified, are as
follows (in thousands):
<TABLE>
<CAPTION>
Successor Predecessor
Company Company
------------ -----------
March 30, April 1,
1996 1995
------------ -----------
<S> <C> <C>
GRAND UNION:
Equipment mortgage notes $ 2,039 $ 2,997
Bank Credit Agreements
Term Loan 104,144 39,144
Revolving Credit Facility 33,000 54,000
New 12% Senior Notes due September 1, 2004
(includes $5,276 of unamortized debt premium) 600,697 --
11.25% Senior Notes, settled pursuant to the Plan -- 350,000
11.375% Senior Notes, settled pursuant to the Plan -- 175,000
12.25% Senior Subordinated Notes, settled pursuant to the Plan -- 500,000
12.25% Senior Subordinated Notes, Series A, settled pursuant to the Plan -- 50,000
13% Senior Subordinated Notes, settled pursuant to the Plan -- 16,150
CAPITAL:
15% Senior Zero Coupon Notes, settled pursuant to the Plan -- 170,239
16.50% Senior Subordinated Zero Coupon Notes, settled pursuant to the Plan -- 100,965
HOLDINGS:
12% Junior Subordinated Notes, settled pursuant to the Plan -- 7,862
------------ -----------
739,880 1,466,357
Less: current maturities of long-term debt 1,813 1,010
------------ -----------
Long-term debt $ 738,067 $1,465,347
------------ -----------
------------ -----------
</TABLE>
On the Effective Date, obligations relating to the Predecessor Company's
Bank Credit Agreement were paid in full and the Company entered into the New
Bank Facility with a group of lenders. The New Bank Facility consists of the
New Revolving Credit Facility which expires June 15, 2000 and provides for
borrowings or issued letters of credit aggregating $100,000,000 and the New
Term Loan totaling $104,144,371. The New Bank Facility is secured by
substantially all of the assets of the Company and its subsidiaries, whether
in existence at the Effective Date or acquired thereafter, excluding those
assets permitted to be financed by third parties. Outstanding borrowings
bear interest at a rate equal to the applicable margin (1.5% and 2% for the
New Revolving Credit Facility and New Term Loan, respectively) plus the
higher of (a) the prime rate, as defined, (b) the adjusted certificate of
deposit rate, as defined, plus 0.5% or (c) the federal funds rate, as
defined, plus 0.25%. Alternatively, the Company may borrow, at its option,
at the LIBOR rate, as defined, plus the applicable margin (3.0% and 3.5% for
the New Revolving Credit Facility and Term Loan, respectively). At March 30,
1996, borrowings under the New Revolving Credit Facility and the New Term
Loan were at weighted interest rates of 9.75% and 9.08%, respectively. The
New Term Loan requires quarterly principal payments of $13,018,000 from
September 30, 2000 through June 15, 2002. The New Bank Facility provides for
mandatory prepayments based on the occurrence of certain specified
transactions. As of March 30, 1996, the Company had issued $43,945,000 of
letters of credit.
The New Bank Facility contains certain restrictions and financial covenants
relating to, among other things, minimum financial performance and limitations
on the incurrence of additional indebtedness, asset sales, dividends, capital
expenditures, prepayment of other indebtedness and restrictions on issuance of
subsidiary stock. On February 16, 1996, the Company sought and obtained from
its banks a waiver and amendment to its New Bank Facility which relieves the
Company from the agreement's EBITDA requirements to the extent of (a)
$15,000,000 in charges related to the closure of warehouse operations and
(b) $2,500,000 in charges relating to organizational restructuring. The waiver
and amendment also provide relief from other technical requirements related to
two of the C&S agreements (see Note 4). The Company was in compliance with the
terms and restrictive covenants of the New Bank Facility, as amended, as of
March 30, 1996.
The Predecessor Company entered into a debtor-in-possession revolving
credit agreement on January 30, 1995 (the "DIP Facility") with the banks party
thereto. This agreement amended the bank credit agreement in effect prior to
execution of the New Bank Facility. Under the DIP Facility, the Predecessor
Company was allowed to borrow up to $150,000,000 in the form of a revolving
credit facility for its working capital and general corporate requirements
during the bankruptcy proceedings. The
F-15
<PAGE>
DIP Facility provided for a commitment fee equal to 0.5% of the average
unused portion and was secured by first priority liens on all the assets and
capital stock of the Company which secured the Bank Credit Agreement. The
Predecessor Company had no borrowings under the DIP Facility during the
Chapter 11 proceedings and the DIP Facility terminated on the Effective Date.
The Term Loan and Revolving Credit Facility prior to the DIP Facility
provided 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 the Predecessor
Company. As of April 1, 1995, borrowings under the Term Loan and Revolving
Credit Facility were at weighted interest rates of 13.0% and 12.5% (each
including a 2% penalty), respectively. The Predecessor Company was charged
commitment fees of 0.5% per annum on the average unused portion of the
Revolving Credit Facility.
Pursuant to the Plan, on the Effective Date, the Senior Notes were deemed
cancelled and each holder of Senior Notes became entitled to receive its pro
rata share of the Successor Company's New Senior Notes having an aggregate
principal amount of $595,475,922. Interest on the New Senior Notes is
payable semi-annually each March 1 and September 1, commencing March 1, 1996.
As discussed in Note 1, on the Effective Date, the Subordinated Notes were
deemed cancelled and each holder of Subordinated Notes became entitled to
receive its pro rata share of 10,000,000 shares of New Common Stock.
As discussed in Note 1, on the Effective Date, Capital's equity interest in
Grand Union was cancelled without receipt by Capital of any consideration for
such equity and, under certain conditions, holders of the Capital Notes
became entitled to receive their pro rata share of 300,000 Series 1 Warrants
to purchase shares of New Common Stock at a purchase price of $30 and 600,000
Series 2 Warrants to purchase shares of New Common Stock at a purchase price
of $42 per share. The warrants, none of which were exercised as of March 30,
1996, expire on June 15, 2000.
The Plan made no provisions for Holding's Junior Notes.
As discussed in Note 1, effective January 25, 1995, as a result of the
Chapter 11 filing, the Company discontinued accruing interest on the
Subordinated Notes, the Capital Notes and the Holdings Junior Notes.
The New Bank Facility is recorded at carrying value, which approximates
fair value as of March 30, 1996. The fair value of the New Senior Notes,
based upon published trading values, is $519,505,000 at March 30, 1996. The
fair value of all debt instruments as of April 1, 1995 was based on the
provisions of the Plan, as discussed in Note 1.
Grand Union was party to an interest rate swap agreement which expired
February 9, 1996, entered into in connection with the Bank Credit Agreement.
Under the terms of the agreement, which continued under the New Bank
Facility, Grand Union received a fixed rate of 4.53% on $150,000,000 of debt
and paid a floating rate based on three month LIBOR, as determined in three
month intervals. The floating rate at April 1, 1995 was 6.25%. The net
amount received or paid was included in net interest expense and was not
material to interest expense in any period presented. At April 1, 1995, the
estimated fair value of the interest rate swap agreement was a liability of
approximately $2,158,000 which was not recorded on the books of the Company.
Maturities of long term debt during each of the next five fiscal years are
approximately $1,813,000, $109,000, $92,000, $25,000 and $39,054,000,
respectively.
NOTE 10 - PROPERTY LEASES
The Company operates principally in leased stores 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.
F-16
<PAGE>
Future minimum payments under capital and non-cancelable operating leases,
net of minimum sublease income, as of March 30, 1996 are as follows (in
thousands):
<TABLE>
<CAPTION>
Capital Operating
------- ---------
<S> <C> <C>
Fiscal
1997 $ 24,463 $ 30,318
1998 22,819 29,745
1999 20,802 27,958
2000 19,490 26,167
2001 18,177 19,743
Later years 248,070 144,719
--------- --------
Total minimum lease payments 353,821 278,650
Less: estimated executory costs included in total
minimum lease payments 371 --
Less: sublease rental income -- 1,628
--------- --------
Net minimum lease payments 353,450 $277,022
--------
--------
Less: portion representing interest 218,256
---------
Present value of net minimum lease payments 135,194
Less: current portion of obligations under capital
leases 7,080
--------
Non-current portion of obligations under capital
leases $128,114
--------
--------
</TABLE>
The minimum lease payments shown above do not include future minimum
sublease rental income of $2,054,000 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 41 weeks ended March
30, 1996, the 11 weeks ended June 17, 1995, Fiscal 1995 and Fiscal 1994 were
$130,000, $39,000, $253,000 and $313,000, respectively.
The rental expense for all operating leases was $33,923,000, $8,696,000,
$31,900,000 and $30,170,000 during the 41 weeks ended March 30, 1996, the 11
weeks ended June 17, 1995, Fiscal 1995 and Fiscal 1994, respectively.
Contingent rental expense included in total rental expense was $2,127,000,
$638,000, $3,114,000 and $3,658,000 during the 41 weeks ended March 30, 1996,
the 11 weeks ended June 17, 1995, Fiscal 1995 and Fiscal 1994, respectively.
F-17
<PAGE>
NOTE 11 - STOCKHOLDERS' EQUITY (DEFICIT) AND REDEEMABLE OLD COMMON AND
PREFERRED STOCK
Changes in Stockholders' Equity (Deficit) and Redeemable Old Common Stock
were as follows (in thousands):
<TABLE>
<CAPTION>
New Redeemabable Old Capital in
Common Old Common Common Excess of Equity
Stock Stock (a) Stock Par Value (Deficit)
------ ------------ ------ ---------- ---------
<S> <C> <C> <C> <C> <C>
Predecessor Company
- -------------------
Balance at April 3, 1993 $ -- $ 9,547 $ 1 $ -- $(510,344)
Net loss -- -- -- -- (117,953)
Accrued preferred stock
dividends of Predecessor
Company -- -- -- -- (16,011)
Pension adjustment -- -- -- -- (456)
Reclassification of
redeemable stock of
Predecessor Company (b) -- (140) -- -- 140
Payments of notes
receivable from former
management investors
of Predecessor Company (b) -- -- -- -- 7
------- ------- ---- -------- ---------
Balance at April 2, 1994 -- 9,407 1 -- (644,617)
Net loss -- -- -- -- (159,830)
Accrued preferred stock
dividends of Predecessor
Company -- -- -- -- (19,480)
Pension adjustment -- -- -- -- (257)
------- ------- ---- -------- ---------
Balance at April 1, 1995 -- 9,407 1 -- (824,184)
Net income for the 11
weeks ended June 17,
1995 -- -- -- -- 825,449
Extinguishment of
stockholders' equity
in connection with
bankruptcy -- (9,407) (1) -- (1,265)
------- ------- ---- -------- ---------
Balance at June 17, 1995 $ -- $ -- $ -- $ -- $ --
------- ------- ---- -------- ---------
------- ------- ---- -------- ---------
Successor Company
- -----------------
Balance at June 17, 1995 $ -- $ -- $ -- $ -- $ --
Issuance of New Common
Stock 10,000 -- -- 144,000 --
Net loss for the 41
weeks ended March 30,
1996 -- -- -- -- (109,856)
------- ------- ---- -------- ---------
Balance at March 30, 1996 $10,000 $ -- $ -- $144,000 $(109,856)
------- ------- ---- -------- ---------
------- ------- ---- -------- ---------
</TABLE>
(a) The Redeemable Old Common Stock represents shares of Holdings held by
management investors, which were redeemable under certain limited
circumstances at the option of the holder.
(b) Grand Union purchased 164 shares of common stock of Holdings from former
management investors for $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.
The Company's Certificate of Incorporation and Bylaws were restated as of
the Effective Date. The New Certificate authorizes 40,000,000 shares of
stock, of which 30,000,000 shares will be reserved for issuance as New Common
Stock and 10,000,000 shares will be reserved for issuance as new preferred
stock. Under the Plan, on the Effective Date, the Old Common Stock was
cancelled and, as described in Note 1, holders of the Subordinated Notes
became entitled to receive their pro rata share of 10,000,000 shares of New
Common Stock. In addition, on the Effective Date, holders of Capital Senior
Zero Notes and Capital Subordinated Zero Notes who executed releases became
entitled to receive an aggregate of Series 1 Warrants to purchase 300,000
shares of New Common Stock at an exercise price of $30 per share and Series 2
Warrants to purchase 600,000 shares of New Common Stock at an exercise price
of $42 per share. Both the Series 1 Warrants and the Series 2 Warrants will
expire five years after the Effective Date. The New Common Stock and all
other equity securities issued under the New Certificate will be voting
securities (although the voting rights of any new preferred stock issued will
differ from those of New Common Stock) and will not have any preemptive
rights to subscribe for additional shares. The New Common Stock is not
subject to conversion or redemption and when issued will be fully paid and
non-assessable.
F-18
<PAGE>
Changes in Redeemable Old Preferred Stock of the Predecessor Company were
as follows (in thousands):
Series A Series B Series C Total
-------- -------- -------- -----
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
Accrued preferred stock
dividends 8,152 1,099 10,229 19,480
------- ------ ------- --------
Balance at April 1, 1995 69,182 9,010 86,600 164,792
Extinguishment of
Predecessor Company
Stock in connection with
bankruptcy (69,182) (9,010) (86,600) (164,792)
------- ------ ------- --------
Balance at June 17, 1995 $ -- $ -- $ -- $ --
------- ------ ------- --------
------- ------ ------- --------
The Series A cumulative exchangeable redeemable preferred stock ("Series A
old preferred stock") had 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 old preferred stock") had 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 old
preferred stock") had a $.01 par value; 500,000 shares authorized; and
440,771 shares issued and outstanding.
The Series A, Series B and Series C old preferred stock each carried
dividend rates of 12% per annum. At the discretion of Holdings, cash
dividends were payable on the Series A, Series B and Series C old preferred
stock semi-annually each March 1, and September 1; however, no cash dividends
could be declared or paid on the Series A, Series B or Series C old preferred
stock while the Bank Credit Agreement was outstanding. Such declaration or
payment would have violated the terms of indebtedness incurred to refinance
the 13% Subordinated Notes or the Bank Credit Agreement. If cash dividends
were prohibited, dividends on the Series B old preferred stock were payable
in Holdings Junior Notes annually each March 1. Series B old preferred
stock, and accrued and unpaid dividends thereon, could have been converted at
any time, at the holder's option, into shares of Series C old preferred
stock. Series C old preferred stock, and accrued and unpaid dividends
thereon, could have been converted at any time, at the holder's option, into
shares of Series B old preferred stock; or the Series C old preferred shares
could have been converted at any time, at the holder's option, into the same
number of shares of Series B old preferred stock and the accrued and unpaid
dividends on such stock into a principal amount of Holdings Junior Notes.
Redeemable Old Preferred Stock of the Predecessor Company had no voting
rights except as required by law and except that holders of each series had 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, was required to issue any prior ranking preferred stock.
Through July 23, 1994, dividends accrued on the old preferred stock at a
rate of 12% per annum, reflecting management's estimate that the old
preferred stock would be redeemed prior to the July 14, 1996 dividend step-up
date. As of July 24, 1994, the Company changed its estimate of the date on
which the old preferred stock was expected to be redeemed from on or before
the date of the dividend step-up to an indeterminate date. Accordingly, from
July 24, 1994 through the Filing Date, the Company accrued dividends
recognizing a yield to redemption rate of 18.2% per annum for the Series A
old preferred stock, 19.3% for the Series B old preferred stock and 18.3% for
the Series C old preferred stock. Accrued undeclared dividends were recorded
as an increase of stockholders' deficit and as an increase in the respective
preferred stock carrying value.
The Redeemable Stock of Holdings has been classified as Redeemable Stock
Subject to Compromise in the accompanying April 1,1995 consolidated balance
sheet. The Plan made no provision for the holders of the Redeemable
Preferred Stock. Accordingly, as of the Filing Date, dividends were no
longer accrued on the preferred stock.
The fair value of Redeemable Old Preferred Stock as of April 1, 1995 was
based on the provisions of the Plan as discussed in Note 1.
NOTE 12 - PENSION PLANS
The Company has not segregated the respective Successor and Predecessor
Company pension expense for Fiscal 1996 because it is impractical to do so.
F-19
<PAGE>
The components of net periodic pension expense for the Company's defined
benefit pension plans are as follows (in thousands):
Fiscal Fiscal Fiscal
1996 1995 1994
------ ------ ------
Service cost - benefits earned during the
period $ 4,317 $ 4,715 $ 5,212
Interest costs on projected benefit
obligations 12,523 13,706 13,742
Return on plan assets (32,921) (12,179) (9,068)
Net amortization and deferral 17,877 (4,042) (7,610)
Charges relating to pension settlement and
early retirement programs -- 3,747 4,468
-------- -------- -------
Net periodic pension expense $ 1,796 $ 5,947 $ 6,744
-------- -------- -------
-------- -------- -------
During Fiscal 1995 and Fiscal 1994 the Company incurred charges totaling
$3,747,000 and $4,468,000, respectively, relating to pension settlements,
under both its qualified and nonqualified pension plans, principally as a
result of early retirement programs offered to certain employees.
The actuarial present value of benefit obligations and the funded status of
the Company's pension plans are as follows (in thousands):
<TABLE>
<CAPTION>
Qualified Unqualified
-------------------------- --------------------------
Successor Predecessor Successor Predecessor
Company Company Company Company
---------- ---------- ----------- -----------
March 30, April 1, March 30, April 1,
1996 1995 1996 1995
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefits $ 146,821 $ 142,272 $ 3,968 $ 4,161
Nonvested benefits 3,948 4,383 -- --
---------- ---------- --------- ---------
Total benefits $ 150,769 $ 146,655 $ 3,968 $ 4,161
---------- ---------- --------- ---------
---------- ---------- --------- ---------
Projected benefit obligations $ (167,010) $ (164,037) $ (4,618) $ (5,076)
Plan assets, primarily stocks and
bonds, at fair value 170,684 161,201 -- --
---------- ---------- --------- ---------
Funded (unfunded) status 3,674 (2,836) (4,618) (5,076)
Unrecognized net loss (8,259) 20,401 1,364 1,545
Unrecognized prior service cost -- 1,480 (25) (28)
Adjustment required to recognize
minimum liability -- -- (689) (602)
---------- ---------- --------- ---------
Pension (liability) asset $ (4,585) $ 19,045 $ (3,968) $ (4,161)
---------- ---------- --------- ---------
---------- ---------- --------- ---------
</TABLE>
The pension liability as of March 30, 1996 is carried in other noncurrent
liabilities in the accompanying consolidated balance sheet. The pension
asset and liability at April 1, 1995 are included in Other Assets and
Liabilities Subject to Compromise, respectively.
Significant actuarial assumptions used in all Company sponsored plans were
as follows:
Fiscal Fiscal Fiscal
1996 1995 1994
----------- ----------- ----------
Discount rates 8.0% 7.5% 7.0% - 8.0%
Rates of increase in future
compensation 4.0% - 5.0% 3.5% - 3.9% 3.9% - 4.3%
Long-term rate of return on plan
assets 9.75% 9.5% 9.5%
F-20
<PAGE>
NOTE 13 - 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 postretirement plans currently are not funded. 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").
The Company has not segregated the respective Successor and Predecessor
Company postretirement benefit expense for Fiscal 1996 because it is
impractical to do so.
The unfunded accumulated postretirement benefit obligation consists of the
following (in thousands):
Successor Predecessor
Company Company
---------- -----------
March 30, April 1,
1996 1995
---------- -----------
Retirees $17,761 $16,062
Fully eligible active plan participants 2,613 2,924
Other active plan participants 16,194 16,131
Unrecognized net loss -- (1,226)
---------- -----------
$36,568 $33,891
---------- -----------
---------- -----------
Net postretirement benefit cost consisted of the following (in thousands):
Fiscal Fiscal Fiscal
1996 1995 1994
--------- --------- ---------
Service cost - benefits earned
during the period $ 591 $ 695 $ 728
Interest cost on accumulated
postretirement benefit obligation 2,594 2,604 2,571
--------- --------- ---------
$ 3,185 $ 3,299 $ 3,299
--------- --------- ---------
--------- --------- ---------
The assumed health care trend cost rate used in measuring the accumulated
postretirement obligation as of March 30, 1996 and April 1, 1995 was 12.0%
and 13.0%, respectively, for associates pre-age 65 and 9.0% and 10.0% for
associates post-age 65 for March 30, 1996 and April 1, 1995, respectively,
decreasing each successive year by 1% until the respective trend rates reach
5.5% after which the trend rate remains constant. An increase of 1% in the
assumed health care cost trend rate for the current year would increase the
accumulated postretirement benefit obligation by approximately $800,000 and
the annual net postretirement health care cost by approximately $60,000.
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 7.25%, 8.0% and 7.5% for Fiscal 1996,
Fiscal 1995 and Fiscal 1994, respectively, and the interest cost component of
the net periodic cost was 8.0%, 7.5% and 8.0% for Fiscal 1996, Fiscal 1995
and Fiscal 1994, respectively.
NOTE 14 - EQUITY COMPENSATION PLANS
During the 41 weeks ended March 30, 1996, the Board of Directors of the
Company adopted The Grand Union Company 1995 Equity Incentive Plan
("Employees' Plan"), which provides for issuance of options to purchase up to
950,000 shares of the Company's common stock, and The Grand Union Company
1995 Non-Employee Directors' Stock Option Plan ("Directors' Plan"), which
provides for the issuance of options to purchase up to 50,000 shares of the
Company's common stock. Both Plans are subject to stockholder approval and
will be administered by a committee of the Board of Directors.
Options were granted to purchase 210,680 shares under the Employees' Plan,
at an exercise price of $6.625 per share, and 25,000 shares under the
Directors' Plan, at an exercise price of $5.75 per share. The exercise
prices were at fair market
F-21
<PAGE>
value on the respective grant dates. All options expire in December, 2005, and
no options may be exercised prior to approval by the Shareholders.
NOTE 15 - RELATED PARTY TRANSACTIONS
Donaldson, Lufkin and Jenrette ("DLJ"), a managing director of which serves
on the board of directors of the Company, provided the Company with consulting
services in connection with the bankruptcy. DLJ was paid $1,278,000 in Fiscal
1996 for services in connection with the bankruptcy proceedings. Additionally,
the Company entered into an agreement with DLJ in February, 1996 to act as
exclusive financial advisor to the Company for the purpose of identifying
alternative sources of new capital. The agreement provided for a $200,000
retainer fee.
Prior to the Effective Date, the Company was party to a financial advisory
agreement with MTH (the "MTH Agreement"), pursuant to which MTH, which
indirectly controlled the Company and Penn Traffic Company ("Penn Traffic"), was
to have provided certain financial consulting and business management services
to the Company through July 1997. In accordance with the Plan, the MTH
Agreement was terminated on the Effective Date and Grand Union executed a
settlement agreement (the "MTH Settlement Agreement"), which provides for the
termination of the MTH Agreement, payment by Grand Union of accrued and unpaid
fees under the MTH Agreement through the Effective Date and for the
indemnification of MTH and certain entities related to MTH from certain claims
and liabilities, subject to the terms and limitations set forth in the MTH
Settlement Agreement. The Company deposited $3,000,000 relating to the
indemnification in escrow on the Effective Date. During the 11 weeks ended June
17, 1995, Fiscal 1995, and Fiscal 1994, the Company paid $315,000, $750,000 and
$900,000, respectively, to MTH, pursuant to the MTH Agreement.
From September 1993 until September 1995, Grand Union and Penn Traffic were
parties to a combined purchasing and distribution agreement relating to general
merchandise and health and beauty care products. In September 1995, Grand Union
purchased from Penn Traffic approximately $12,821,000 of merchandise which had
been owned by Penn Traffic under the joint buying arrangement.
NOTE 16- CONTINGENCY MATTERS AND COMMITMENTS
The Company is subject to certain legal proceedings and claims arising in
connection with its business. It is management's opinion that the ultimate
resolution of such legal proceedings and claims will not have a material adverse
effect on the Company's consolidated results of operations or its financial
position.
NOTE 17 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED) (IN THOUSANDS, EXCEPT LOSS
PER SHARE AND MARKET PRICE)
<TABLE>
<CAPTION>
PREDECESSOR
Fiscal 1996 COMPANY SUCCESSOR COMPANY
- ----------- ------------- -----------------------------------------------
1st (a) 2nd 3rd 4th
----------------------- ----------- ---------- -----------
11 Weeks 5 Weeks
Ended Ended
June 17, July 22,
1995 1995
----------- -----------
<S> <C> <C> <C> <C> <C>
Sales $ 487,882 $ 232,663 $ 523,711 $ 543,617 $519,937
Gross profit 143,841 73,080 162,637 166,863 167,276
Unusual items (18,627) - (4,500) (15,000) (2,500)
Loss before income taxes and
extraordinary gain on debt
discharge (29,336) (9,023) (35,947) (48,834) (34,979)
Extraordinary gain on debt
discharge 854,785 - - - -
Net income (loss) 825,449 (9,523) (30,075) (40,994) (29,264)
Net loss per share - (0.95) (3.01) (4.10) (2.93)
Market Price Range-high - - 15 1/8 12 1/4 8 9/16
Market Price Range-low - - 10 4 7/8 5 13/16
</TABLE>
F-22
<PAGE>
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-------------------------------------------------
Fiscal 1995: 1st (a) 2nd 3rd 4th
- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales $747,692 $556,663 $563,281 $524,060
Gross profit 230,816 170,896 154,467 152,162
Unusual items - - (12,512) (14,905)
Net loss (24,982) (29,465) (59,518) (45,865)
Accrued preferred stock dividends (5,293) (6,411) (6,469) (1,307)
Net loss applicable to common stock (30,275) (35,876) (65,987) (47,172)
</TABLE>
(a) Represents 16 weeks, all other quarters are 12 weeks.
Loss per common share data is not meaningful for the period prior to the
effective date due to the significant change in the capital structure of the
Company.
F-23
<PAGE>
Exhibit 3.2
THE GRAND UNION COMPANY
BY-LAWS
AS AMENDED THROUGH APRIL 3, 1996
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 first Thursday in September of
each year, or on such other date 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.
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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 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
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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 maybe 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.
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 maybe.
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
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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.
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 accord
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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
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
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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.
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Exhibit 10.8
THIRD
AMENDMENT AND RESTATEMENT
OF THE GRAND UNION COMPANY
SUPPLEMENTAL RETIREMENT PROGRAM
FOR KEY EXECUTIVES
I. PURPOSE:
The purpose of The Grand Union Company Supplemental Retirement Program for
Key Executives (the "Plan") is to advance the interests of The Grand Union
Company (and its subsidiaries) (the "Company") by encouraging and enabling
the Company to attract, motivate and retain key executives and, at the same
time, recognize the executive's contribution to the Company's success and
years of loyal service.
II. EFFECTIVE DATE; DEFINITIONS:
The effective date of this Third Amendment and Restatement of the Plan is
June 15, 1995. The Plan, as herein written, applies to persons who are
employed by the Company or become employed by the Company on or after such
effective date and who have previously been designated as participants or
who are hereafter designated as participants in accordance with Section III
hereof. As of June 15, 1995, the only participants are the individuals
named on Exhibit D. The rights and obligations with respect to each person
who retired, died, or whose employment terminated, or who otherwise ceased
participation in the Plan, prior to June 15, 1995 shall be determined under
the terms and provisions of the Plan as in effect on the date of such
retirement, death, termination of employment or cessation of participation.
Except as otherwise expressly provided herein, or as otherwise required by
the context, all words and phrases used herein which are defined in The
Grand Union Company Employees' Retirement Plan (the "Qualified Plan") shall
have the same meaning as in the Qualified Plan.
III. ADMINISTRATION AND ELIGIBILITY:
The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors
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of the Company. The key executives who are or will be participants shall
be selected from time to time by the Committee and shall receive benefits
in accordance with the provisions of this Plan.
The Committee has the power and discretion to interpret the Plan and any
agreement evidencing benefits granted hereunder and to make all other
determinations in connection with the administration of the Plan, all of
which shall be final and conclusive.
IV. CREDITED SERVICE:
Credited Service shall have the same meaning as in the Qualified Plan,
except that a participant shall also receive credit for (i) service with
The Grand Union Company and (ii) service with another company within the
Corporate Group prior to the time such company became a member of such
Group.
V. PAYMENT:
Benefits pursuant to the terms of this Plan shall be paid directly from the
general assets of the Company. All such benefits shall be paid in a single
sum no later than 30 days following a participant's date of retirement or
other termination of employment.
VI. RETIREMENT ELIGIBILITY:
A. RETIREMENT AT OR AFTER AGE 62.
1. Although "normal" retirement under the Qualified Plan is age 65,
under this Plan, a participant may retire as early as age 62
without penalty.
2. A participant who retires under the Plan at age 62 or later shall
be paid a single sum in cash which is equal to the "actuarial
present value" (as defined in paragraph A.6 below) of the pension
determined under paragraph A.3 below reduced by all amounts
previously paid to the participant under the Plan including, but
not limited to, any payment shown on Exhibit D plus interest on
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such previous payment amount from the date of such previous
payment to the date of such retirement at the interest discount
rate set forth in Exhibit A in effect at the time of such payment
or in the case of a payment amount shown on Exhibit D, the
interest rate shown on Exhibit D for such payment amount (in the
aggregate as to each participant, "the Prior Payment"). An
additional single sum payment may be made to such participant
following his retirement, as provided in paragraph A.7 below.
3. The annual amount of pension payable upon retirement at age 62 or
later is determined as the "Target Benefit" minus the "Plan
Offsets". Such pension is deemed to be payable monthly and is
based on a life annuity form of payment for participants who are
not married on the date of their retirement and on a joint and
survivor annuity form of payment for participants who are married
on such date, which annuity is payable in full (i.e., without
actuarial reduction) to the participant during his life, and,
following his death, at the rate of fifty percent (50%) to the
spouse to whom the participant is married on the date of his
retirement, for the remainder of her lifetime.
4. The "Target Benefit" is an annual pension, payable monthly, equal
to 65% of the Final Year's Base Salary for a participant who has
15 or more years of Credited Service. For participants with less
than 15 years of Credited Service, the target benefit is 4-1/3%
of the Final Year's Base Salary multiplied by years of Credited
Service. For purposes of this Plan, the term "Final Year's Base
Salary" shall mean (i) except as provided in (ii) below, the
annualized rate of base salary being paid to the participant
immediately prior to his death or retirement or in the case of a
participant who is disabled within the
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meaning of the long term disability income plan sponsored by the
Company under which he is covered, the annualized rate of base
salary being paid to such disabled participant immediately prior
to the onset of his disability or (ii) in the case of Joseph J.
McCaig, Final Year's Base Salary shall be the greater of Final
Year's Base Salary as determined under (i) above or $500,000.
5. "Plan Offsets" upon retirement at age 62 or later are equal to
the sum of (i) the annual primary Social Security benefits
payable at age 62 (or at later retirement) to the participant
(the actual amount as provided by the participant to the Company
or as determined on an assumed basis by the Company), (ii) the
benefits payable at age 62 (or at later retirement) from the
Qualified Plan (expressed as an annual straight life annuity),
and (iii) the benefits payable from the qualified retirement
plans of previous employers (including, without limitation,
Colonial Stores Incorporated and J. Weingarten Incorporated) and
from the Colonial Stores Supplemental Plan (in each case
expressed as an annual straight life annuity). In the case of a
participant who is potentially eligible for an increase in the
annual benefit payable under the Qualified Plan after retirement
as a result of cost of living adjustments, made in accordance
with Section 415(d) of the Internal Revenue Code of 1986, as
amended (the "Code"), to the maximum annual benefit limitation
under Section 415(b) of the Code, the amount of "Plan Offsets"
shall be increased to reflect the expected increase in annual
benefit payable under the Qualified Plan. The assumption(s) as
to cost of living increases to the maximum annual benefit
limitation under Section 415(b) of the Code for the purpose of
determining the amount of "Plan Offsets" attributable to benefits
payable under the Qualified Plan in each
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year of expected payment following retirement are set forth in
Exhibit A. A demonstration of the methodology to be used in
calculating a participant's retirement benefit and the actuarial
present value thereof under this Section VI.A is attached hereto
as Exhibit B, but in the event of any discrepancy between the
figures or computations set forth in Exhibit B and the terms of
the Plan, the terms of the Plan shall control.
6. (i) The actuarial present value of a participant's benefit under
the Plan is the sum of the present values of the amount of
pension determined under paragraph A.3 above (expressed as a
monthly benefit) for each year included in the period measured,
in the case of an unmarried participant, by the participant's
life expectancy only, and, in the case of a participant who is
married as of the date of his retirement, by the joint life
expectancy of the participant and his spouse, as of such date.
(ii) The present value, as of the single sum payment date, of an
unmarried participant's benefit for any year included in the
period described in paragraph A.6(i) above, is equal to the
amount determined under paragraph A.3 to be payable for such year
on a monthly basis, multiplied by a present value factor. The
present value factor is based on the participant's age at the
single sum payment date, the interest discount rate set forth in
Exhibit A attached hereto and the 1983 Individual Annuity
Mortality Table.
(iii) The present value, as of the single sum payment date, of a
married participant's benefit for any year included in the period
described in paragraph A.6(i) above, is equal to the sum of (a)
the amount determined as if he were unmarried, as described in
paragraph A.6(ii) above,
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and (b) fifty percent (50%) of the amount determined under
paragraph A.3, representing a survivor's benefit payable on a
monthly basis to the participant's surviving spouse for such
year, multiplied by a present value factor. The present value
factor is based on the participant's and spouse's ages at the
single sum payment date, the interest discount rate set forth in
Exhibit A and the 1983 Individual Annuity Mortality Table. Where
the participant's spouse is more than ten (10) years younger than
the participant, the present value of the participant's benefit
attributable to the survivor element of the joint and survivor
annuity will be computed by reducing the amount of benefit to be
continued to the spouse after the participant's death by 2% for
each year by which the difference in the participant's and the
spouse's age exceeds ten (10). The reduction for any such
partial year shall be determined by interpolating for the number
of months between the percentage reduction applicable to the last
full year of the age differential in excess of ten (10) years and
the next full year of such differential.
7. In the event that legislation is enacted following a
participant's retirement and receipt of the actuarial present
value of his pension hereunder that has the effect of
eliminating, reducing or suspending cost of living adjustments to
the maximum annual benefit limitation under Section 415(b) of the
Code or of reducing such limitation, then within thirty (30) days
of the effective date of such legislation, the participant (or
his estate) shall be entitled to receive an additional single sum
payment in cash equal to the present value of the amount by which
his Qualified Plan benefit is assumed to increase in each year of
expected payment following such effective date, to reflect cost
of living adjustments to the maximum annual benefit
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<PAGE>
limitation under Section 415(b) of the Code.
B. EARLY RETIREMENT.
1. (i) A participant between the ages of 50 (age 47 for any person
who became a participant prior to April 1, 1995) and 55 may,
with the Company's consent, retire and receive a single sum
pension benefit under this Plan; provided, however, that
such consent shall not be required of a participant who (a)
is covered under a Company-sponsored long term disability
income plan and is disabled or awaiting certification of
disability status under the terms of such plan, (b) is
involuntarily terminated other than for proper cause (as
defined in Section VII(d) below) or (c) has a termination of
employment on account of a Constructive Termination. A
participant between the ages of 55 and 62 may retire at any
time and receive a single sum pension benefit under this
Plan.
(ii) A participant who is involuntarily terminated (other than
for proper cause as defined in Section VII(d) below) or has
a termination of employment on account of a Constructive
Termination following a Change in Control shall be deemed to
have been retired by the Company for purposes of this Plan
and shall receive a single sum pension benefit regardless of
his then attained age.
For purposes of paragraph B.1 above, Constructive Termination shall
mean after June 15, 1995 (i) with respect to a participant holding the
position of Chief Executive Officer, Chief Operating Officer or Chief
Financial Officer, either an involuntary reduction in base salary that
exceeds 5% in any year, or an
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<PAGE>
involuntary removal from sole possession of said position, or (ii)
with respect to any other participant, either an involuntary reduction
in base salary that exceeds 10% in any year, or an involuntary
reduction in grade level of more than two grades in any year or (iii)
any involuntary transfer that would require relocation outside of the
current operating area of Grand Union and for purposes of paragraph
B.1(ii) above, Change in Control shall mean a Change of Control as
defined in the Indenture between the Company as issuer and IBJ
Schroeder Bank & Trust Company as Trustee for the issuance of up to
$595,475,922 of 12% Senior Notes due September 1, 2004 as dated as of
June 15, 1995.
2. A participant who retires early under paragraph B.1 above shall
be paid a single sum in cash which is equal to the "actuarial
present value" (as defined in paragraph B.6 below) of the monthly
equivalent of the pension determined under paragraph B.3 below
reduced by such participant's Prior Payment, if any. An
additional single sum payment may be made to such participant
following his retirement, as provided in paragraph B.7 below.
3. The annual amount of pension payable upon early retirement is
determined as the "Target Benefit" (determined under paragraph
B.4 below) minus the "Plan Offsets" (set forth in paragraph B.5
below).
4. The "Target Benefit" (as defined in paragraph A.4 above) shall be
reduced 5% per year for each year that the date of commencement
of benefits precedes age 62. To illustrate, a participant
retiring at age 58 will receive 80% of the "Target Benefit".
5. "Plan Offsets" upon early retirement are equal to the sum of:
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<PAGE>
(a) The assumed annual primary Social Security benefit that
would be payable to the participant at age 65, determined by
assuming continued employment with the Company to age 65 at
the salary level in effect at retirement, which benefit is
then reduced by 6-2/3% per year for each of the first three
years that the commencement date of the benefits under this
Plan precedes age 65 and 5% per year for each year in excess
of three years; and
(b) Benefits payable from the Qualified Plan, assuming the
earliest commencement and payment of benefits under the
straight life annuity form. In the case of a participant
who is potentially eligible for an increase in the annual
benefit payable under the Qualified Plan after retirement as
a result of cost of living adjustments made in accordance
with Section 415(d) of the Code to the maximum annual
benefit limitation under Section 415(b) of the Code, the
amount of "Plan Offsets" shall be increased to reflect the
expected increase in annual benefit payable under the
Qualified Plan (the assumption(s) as to cost of living
increases to the maximum annual benefit limitation under
Section 415(b) of the Code for the purpose of determining
the amount of "Plan Offsets" attributable to benefits
payable under the Qualified Plan in each year of expected
payment following retirement are set forth in Exhibit A);
and
(c) The benefits payable from qualified retirement plans of
previous employers (including, without limitation, Colonial
Stores Incorporated and J. Weingarten Incorporated) and from
the Colonial Stores Supplemental Plan, all
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<PAGE>
of which shall be ascertained in the same manner, wherever
possible, as the Qualified Plan benefits.
6. The actuarial present value of a participant's benefit payable
under the Plan in the event of early retirement shall be
determined in the same manner as is described in paragraph A.6
above, but with reference to the amount of pension determined
under "paragraph B.3" substituted for any references to paragraph
A.3 contained therein. A demonstration of the methodology to be
used in calculating a participant's retirement benefit and the
actuarial present value thereof under this Section VI.B is
attached hereto as Exhibit B, but in the event of any discrepancy
between the figures or computations set forth in Exhibit B and
the terms of the Plan, the terms of the Plan shall control.
7. In the event that legislation is enacted following a
participant's early retirement and receipt of the actuarial
present value of his pension hereunder that has the effect of
eliminating, reducing or suspending cost of living adjustments to
the maximum annual benefit limitation under Section 415(b) of the
Code or of reducing such limitation, then the participant (or his
estate) shall be entitled to receive an additional single sum
payment determined in the manner and payable at the time
described in paragraph A.7 above.
VII. LOSS OF BENEFITS:
Benefits will not be paid under this Plan in the following circumstances:
(a) Except as otherwise provided in paragraph B.1 of Section VI,
termination of a participant's employment prior to age 50;
(b) Except as otherwise provided in paragraph B.1 of Section VI,
termination of a participant's
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employment between the ages of 50 and 55 without the Company's
consent;
(c) Except as otherwise provided in Section VIII(b), death of a
participant prior to retirement;
(d) Disqualification for proper cause. For this purpose, proper cause
shall mean a refusal to perform one's duties, proven dishonesty or the
commission of an act or acts constituting a felony, or other willful
misconduct inimical to the best interests of the Company.
For purposes of this Plan, a participant who becomes disabled shall not be
considered to have terminated his employment with the Company during the
qualifying period set forth in a Company-sponsored long term disability
income plan under which he is covered and throughout the period during
which disability benefits are paid to him from such plan until he gives
notice to the Company of his election to retire under the terms of this
Plan.
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VIII. MISCELLANEOUS:
(a) NONALIENABILITY. No benefit payable at any time hereunder shall be
subject in any manner to alienation, sale, transfer, assignment,
pledge, attachment or other legal process, or encumbrance of any kind.
Any attempt to alienate, sell, transfer, assign, pledge or otherwise
encumber any such benefit, whether currently or hereafter payable,
shall be void. Except as otherwise specifically provided by law, no
such benefit shall, in any manner, be liable for or subject to the
debts or liabilities of any participant or any other person entitled
to such benefits.
(b) PAYMENT ON DEATH. In the event a participant should die after
termination of employment but prior to payment of a benefit to which
he has become entitled under the Plan, such benefit shall be paid to
the participant's estate. In addition, if the participant should die
while employed but after the effective date of any reduction or
discontinuance by the Company of the level of life insurance coverage
applicable to the participant, based on his Final Year's Base Salary
in effect immediately prior to his death and the table set forth in
Exhibit C attached hereto, then that portion of the actuarial present
value of the pension he has accrued under the Plan, which shall be
determined as if he had retired on the day immediately preceding his
date of death, as does not exceed the amount by which the level of
such participant's Company-provided life insurance has been reduced or
discontinued, shall be paid to the participant's estate. For purposes
of the preceding sentence, any participant who dies prior to attaining
age 55 shall be deemed eligible to retire early under Section VI.B.
(c) NO RIGHTS TO EMPLOYMENT. This Plan shall not be construed as
providing any participant with the right to be retained in the
Company's employ or to receive any benefit not specifically provided
hereunder.
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(d) AMENDMENT AND TERMINATION. The Company shall have the right, at any
time and from time to time, to amend in whole or in part, or to
terminate any of the provisions of this Plan, and such amendment or
termination shall be binding upon all participants and parties in
interest; provided that no such amendment or termination shall impair
any rights which have accrued hereunder. For example, if this Plan is
terminated, a participant who has reached age 50 (age 47 for a person
who became a participant prior to April 1, 1995) on or prior to the
date of such termination shall be entitled to receive a single sum
payment upon his retirement, equal to the actuarial present value of
his pension, determined in accordance with the provisions of Section
VI.A.6 or VI.B.6, whichever is applicable, and based upon a "Target
Benefit" calculated with reference to his Final Year's Base Salary,
and, where applicable, Credited Service on the date of such
termination, reduced by his Prior Payment, if any. If this Plan (as
herein amended and restated effective June 15, 1995) is further
amended, a participant who has reached age 50 (age 47 for a person who
became a participant prior to April 1, 1995) on or prior to the
effective date of such amendment shall be entitled to receive a
benefit upon his retirement, in accordance with the terms of the Plan,
as amended; provided, however, that in no event shall any such
amendment impair the right of any such participant to receive a single
sum payment upon his retirement, equal to the actuarial present value
of his pension, determined under the provisions of Section VI.A.6 and
VI.B.6, whichever is applicable, as in effect on the day immediately
preceding the effective date of such amendment, which pension shall be
based on a "Target Benefit" that is not less than the "Target Benefit"
calculated in accordance with the provisions of Section VI.A.4 or
VI.B.4, whichever is applicable, as in effect on such date, with
reference to the participant's Final Year's Base Salary, and, where
applicable, Credited Service on such date, and an amount of "Plan
Offsets" that is not
13
<PAGE>
greater than the amount of "Plan Offsets" calculated in accordance
with the provisions of Section VI.A.5 or VI.B.5, whichever is
applicable, as in effect on such date, reduced by his Prior Payment,
if any, calculated in accordance with the provisions of Section VI A.2
or VI B.2, whichever is applicable, as in effect on such date. The
types of Plan amendments to which this paragraph (d) applies include,
but are not limited to, amendments which (i) cease or reduce the rate
of benefit accrual, (ii) change any of the actuarial assumptions
specified in the Plan resulting in a reduction in the actuarial
present value of participants' accrued benefits, (iii) eliminate the
single sum method of payment, or (iv) change the requirements for
benefit eligibility to the detriment of any participant. The
preceding provisions of this paragraph (d) shall be applicable to all
participants, regardless of their attained age, in the event the Plan
is amended or terminated following a Change in Control (as defined in
Section VI.B.1.).
(e) GOVERNING LAW. This Plan shall be governed by and construed in
accordance with the laws of the State of New Jersey.
(f) SUCCESSORS AND ASSIGNS. This Plan and all of the provisions hereof
shall be binding upon the Company and its successors and assigns.
IX. EXECUTION:
The undersigned, being a duly authorized officer of the Company, has
hereby executed this Third Amendment and Restatement of the Plan below as
evidence of its adoption by the Company as of the 15th day of June, 1995.
By: /S/ Gilbert Vuolo
----------------------------------
Title: Vice President, Human Resources
and Labor Relations
14
<PAGE>
EXHIBIT A
Interest Discount Rates and Assumptions Used in the
Calculation of Actuarial Present Value
(a) INTEREST DISCOUNT RATE - The average yield, rounded to the nearest
0.25%, on long-term (over 10 years) United States Treasury notes and
bonds during the 12-month period ending two months preceding the month
in which a participant receives, or is scheduled to receive his or her
single sum benefit payment; provided, however, that to the extent, but
only to the extent and only so long as, Treasury Regulations prohibit,
as a requirement of qualification under Section 401(a) of the Code,
the use by the Qualified Plan of an interest rate higher than the
interest rate in effect on the first day of the Plan Year of the
Qualified Plan specified by Section 417(e)(3)(B) of the Code and
Treasury Regulations thereunder, the interest rate shall not be higher
than said required rate.
(b) ASSUMPTION AS TO COST OF LIVING INCREASES TO ANNUAL BENEFIT LIMITATION
UNDER SECTION 415(b) OF THE CODE - The average of the cost of living
increases to the annual benefit limitation under Section 415(b) of the
Code (determined without regard to Section 415(d)(4) as added by the
Retirement Protection Act of 1994) for the two (2) consecutive years
immediately preceding the year of retirement, unless the cost of
living increase for the year of retirement is known when a single sum
payment is due under the Plan, in which event, the average of such
increases for the year of retirement and the immediately preceding
year shall be used. In calculating the cost of living increase for
the period from 1994 to 1995, the change of the measurement period to
a nine month period, as added by the Retirement Protection Act of
1994, shall be disregarded.
<PAGE>
EXHIBIT C
Life Insurance Benefit Levels
FINAL YEAR'S
BASE SALARY RANGE LIFE INSURANCE BENEFIT
----------------- ----------------------
$ 70,000 - 99,999 $400,000
$100,000 - 129,999 500,000
$130,000 - 174,999 700,000
$175,000 - 209,999 900,000
$210,000 - 274,999 1,050,000
$275,000 - 349,999 1,300,000
$350,000 - 474,999 1,600,000
$475,000 - 599,999 2,200,000
$600,000 - 699,999 2,600,000
$700,000 and above 3,000,000
<PAGE>
EXHIBIT D
NAME DATE OF PAYMENT AMOUNT INTEREST RATE
- ----- --------------- ------ -------------
Joseph J. McCaig February 23, 1995 $ 948,423.12 6%
Joseph J. McCaig August 24, 1995 169,216.70 6%
William A. Louttit February 23, 1995 426,577.14 6%
William A. Louttit August 24, 1995 76,109.47 6%
Kenneth R. Baum February 23, 1995 26,864.16 6%
Kenneth R. Baum August 24, 1995 4,793.07 6%
Darrell W. Stine November 28, 1994 388,500.00 6%
Darrell W. Stine February 23, 1995 173,191.58 6%
Darrell W. Stine August 24, 1995 30,400.67 6%
<PAGE>
Exhibit 10.23
Agreement
AGREEMENT made and entered into as of the 15th day of June, 1995 by
and between THE GRAND UNION COMPANY, a Delaware corporation having its principal
executive offices at 201 Willowbrook Boulevard, Wayne, New Jersey 07470 ("Grand
Union") and Joseph J. McCaig, an individual residing at ______________________
________________ ("Executive").
WHEREAS, Executive is a key employee of Grand Union, and
WHEREAS, Executive and Grand Union have previously entered into a
Non-Competition and Confidentiality Agreement dated August 25, 1993 (the
"Prior Agreement"), and
WHEREAS, in view of the bankruptcy filing by Grand Union and the
changes in the terms and conditions of Executive's employment as a result of
such filing, and in order to protect and maintain Grand Union's legitimate
business interests, the parties deem it desirable to amend and restate the Prior
Agreement in accordance with the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein, Executive and Grand Union agree as follows:
1. The Prior Agreement is hereby superseded in its entirety by this
Agreement.
2. During the term of Executive's employment with Grand Union and,
if such employment is voluntarily terminated by Executive (other than on
account of a Constructive Termination), for a period of two (2) years after
the date of such termination, Executive shall not directly or indirectly
own, invest in (other than a less-than-1% interest of), act as a principal
or partner of, operate, and/or be employed by or otherwise perform services
for any entity operating one or more supermarkets within a ten (10) mile
radius of any Grand
<PAGE>
Union store if the aggregate of such Grand Union stores (x) represent ten
percent (10%) or more of the total number of Grand Union stores operating
at the date of such termination or (y) account for ten percent (10%) or
more of the annual sales volume of Grand Union for the fiscal year
immediately preceding the year of such termination. For this purpose, (a)
"supermarket" means any store which is part of a supermarket or combination
store chain or is a warehouse club selling grocery and perishable items to
the public, (b) an entity operating supermarkets includes any wholesaler to
independently-owned supermarkets operating under the same tradename, and
(c) "Constructive Termination" means (i) either an involuntary reduction in
base salary that exceeds 5% in any year, or an involuntary removal from
sole possession of the position of President and Chief Executive Officer,
or (ii) any involuntary transfer that would require relocation outside of
the current operating area of Grand Union.
3. The terms and provisions of this Agreement shall be binding upon
and shall inure to the benefit of Grand Union and its successors and
assigns and to Executive and his heirs, executors, legal representatives
and beneficiaries.
4. This Agreement shall not be construed as providing Executive with
the right to be retained in Grand Union's employ and shall not otherwise
affect Grand Union's right to terminate Executive's employment.
5. This Agreement may be amended, superseded or cancelled, or any of
the terms or provisions hereof may be waived, only by a written instrument
specifically stating that it amends, supersedes or cancels this Agreement,
or waives the terms thereof, executed by Executive and Grand Union.
6. This Agreement shall be governed by and construed in accordance
with the laws of the State of New Jersey applicable to agreements to be
performed wholly therein, without regard to the choice of law principles
thereof. The parties have specifically directed their attention to the
laws of the State of New Jersey and recognize that this Agreement by its
2
<PAGE>
terms has applicability outside the State of New Jersey. In the event that
this Agreement is sought to be enforced in any jurisdiction other than the
State of New Jersey, the parties intend that the courts of such
jurisdiction apply New Jersey law except that, with respect to the
provisions of Section 2, the parties intend that either the law of the
State of New Jersey or the law of the jurisdiction in which such provisions
are sought to be enforced, whichever shall be more favorable to the
enforcement of such provisions, shall be applied.
7. Executive acknowledges that he has read and fully understands
this Agreement and enters into this Agreement voluntarily and with the
benefit of advice of counsel.
8. This instrument contains the entire agreement of the parties with
respect to the subject matter hereof and supersedes any and all prior
agreements, writings and negotiations among the parties with respect
thereto. This Agreement may be signed in two or more counterparts, each of
which shall constitute an original and all of which taken together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, Grand Union and Executive have executed this
Agreement to be effective on the date first written above.
THE GRAND UNION COMPANY
By: /s/ Gilbert Vuolo
------------------------------
Attest:
/s/ John W. Schroeder
- -----------------------
/s/ Joseph J. McCaig
------------------------------
Joseph J. McCaig, Executive
3
<PAGE>
Attest:
/s/ Dianna Passaro
- -------------------------
4
<PAGE>
Exhibit 10.24
Agreement
AGREEMENT made and entered into as of the 15th day of June, 1995 by
and between THE GRAND UNION COMPANY, a Delaware corporation having its principal
executive offices at 201 Willowbrook Boulevard, Wayne, New Jersey 07470 ("Grand
Union") and William A. Louttit, an individual residing at _____________________
__________________ ("Executive").
WHEREAS, Executive is a key employee of Grand Union, and
WHEREAS, Executive and Grand Union have previously entered into a
Non-Competition and Confidentiality Agreement dated August 25, 1993 (the
"Prior Agreement"), and
WHEREAS, in view of the bankruptcy filing by Grand Union and the
changes in the terms and conditions of Executive's employment as a result of
such filing, and in order to protect and maintain Grand Union's legitimate
business interests, the parties deem it desirable to amend and restate the Prior
Agreement in accordance with the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein, Executive and Grand Union agree as follows:
1. The Prior Agreement is hereby superseded in its entirety by this
Agreement.
2. During the term of Executive's employment with Grand Union and,
if such employment is voluntarily terminated by Executive (other than on
account of a Constructive Termination), for a period of two (2) years after
the date of such termination, Executive shall not directly or indirectly
own, invest in (other than a less-than-1% interest of), act as a principal
or partner of, operate, and/or be employed by or otherwise perform services
for any entity operating one or more supermarkets within a ten (10) mile
radius of any Grand Union store if the aggregate of such Grand Union stores
<PAGE>
(x) represent ten percent (10%) or more of the total number of Grand Union
stores operating at the date of such termination or (y) account for ten
percent (10%) or more of the annual sales volume of Grand Union for the
fiscal year immediately preceding the year of such termination. For this
purpose, (a) "supermarket" means any store which is part of a supermarket
or combination store chain or is a warehouse club selling grocery and
perishable items to the public, (b) an entity operating supermarkets
includes any wholesaler to independently-owned supermarkets operating under
the same tradename, and (c) "Constructive Termination" means (i) either an
involuntary reduction in base salary that exceeds 5% in any year, or an
involuntary removal from sole possession of the position of Executive Vice
President and Chief Operating Officer, or (ii) any involuntary transfer
that would require relocation outside of the current operating area of
Grand Union.
3. The terms and provisions of this Agreement shall be binding upon
and shall inure to the benefit of Grand Union and its successors and
assigns and to Executive and his heirs, executors, legal representatives
and beneficiaries.
4. This Agreement shall not be construed as providing Executive with
the right to be retained in Grand Union's employ and shall not otherwise
affect Grand Union's right to terminate Executive's employment.
5. This Agreement may be amended, superseded or cancelled, or any of
the terms or provisions hereof may be waived, only by a written instrument
specifically stating that it amends, supersedes or cancels this Agreement,
or waives the terms thereof, executed by Executive and Grand Union.
6. This Agreement shall be governed by and construed in accordance
with the laws of the State of New Jersey applicable to agreements to be
performed wholly therein, without regard to the choice of law principles
thereof. The parties have specifically directed their attention to the
laws of the State of New Jersey and recognize that this Agreement by its
terms has applicability outside the State of New
2
<PAGE>
Jersey. In the event that this Agreement is sought to be enforced in any
jurisdiction other than the State of New Jersey, the parties intend that
the courts of such jurisdiction apply New Jersey law except that, with
respect to the provisions of Section 2, the parties intend that either the
law of the State of New Jersey or the law of the jurisdiction in which such
provisions are sought to be enforced, whichever shall be more favorable to
the enforcement of such provisions, shall be applied.
7. Executive acknowledges that he has read and fully understands
this Agreement and enters into this Agreement voluntarily and with the
benefit of advice of counsel.
8. This instrument contains the entire agreement of the parties with
respect to the subject matter hereof and supersedes any and all prior
agreements, writings and negotiations among the parties with respect
thereto. This Agreement may be signed in two or more counterparts, each of
which shall constitute an original and all of which taken together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, Grand Union and Executive have executed this
Agreement to be effective on the date first written above.
THE GRAND UNION COMPANY
By: /s/ Gilbert Vuolo
-------------------------------
Attest:
/s/ John W. Schroeder
- ------------------------
/s/ William A. Louttit
--------------------------------
William A. Louttit, Executive
Attest:
3
<PAGE>
/s/ Judy Barbarino
- -------------------------
4
<PAGE>
Exhibit 10.25
Agreement
AGREEMENT made and entered into as of the 15th day of June, 1995 by
and between THE GRAND UNION COMPANY, a Delaware corporation having its principal
executive offices at 201 Willowbrook Boulevard, Wayne, New Jersey 07470 ("Grand
Union") and Kenneth R. Baum, an individual residing at _________________________
("Executive").
WHEREAS, Executive is a key employee of Grand Union, and
WHEREAS, Executive and Grand Union have previously entered into a Non-
Competition and Confidentiality Agreement dated August 25, 1993 (the "Prior
Agreement"), and
WHEREAS, in view of the bankruptcy filing by Grand Union and the
changes in the terms and conditions of Executive's employment as a result of
such filing, and in order to protect and maintain Grand Union's legitimate
business interests, the parties deem it desirable to amend and restate the Prior
Agreement in accordance with the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein, Executive and Grand Union agree as follows:
1. The Prior Agreement is hereby superseded in its entirety by this
Agreement.
2. During the term of Executive's employment with Grand Union and,
if such employment is voluntarily terminated by Executive (other than on
account of a Constructive Termination), for a period of two (2) years after
the date of such termination, Executive shall not directly or indirectly own,
invest in (other than a less-than-1% interest of), act as a principal or
partner of, operate, and/or be employed by or otherwise perform services for
any entity operating one or more supermarkets within a ten (10) mile radius
of any Grand Union store if the aggregate of such Grand Union stores
<PAGE>
(x) represent ten percent (10%) or more of the total number of Grand Union
stores operating at the date of such termination or (y) account for ten
percent (10%) or more of the annual sales volume of Grand Union for the
fiscal year immediately preceding the year of such termination. For this
purpose, (a) "supermarket" means any store which is part of a supermarket or
combination store chain or is a warehouse club selling grocery and perishable
items to the public, (b) an entity operating supermarkets includes any
wholesaler to independently-owned supermarkets operating under the same
tradename, and (c) "Constructive Termination" means (i) either an involuntary
reduction in base salary that exceeds 5% in any year, or an involuntary
removal from sole possession of the position of Senior Vice President and
Chief Financial Officer, or (ii) any involuntary transfer that would require
relocation outside of the current operating area of Grand Union.
3. The terms and provisions of this Agreement shall be binding upon
and shall inure to the benefit of Grand Union and its successors and assigns
and to Executive and his heirs, executors, legal representatives and
beneficiaries.
4. This Agreement shall not be construed as providing Executive with
the right to be retained in Grand Union's employ and shall not otherwise
affect Grand Union's right to terminate Executive's employment.
5. This Agreement may be amended, superseded or cancelled, or any of
the terms or provisions hereof may be waived, only by a written instrument
specifically stating that it amends, supersedes or cancels this Agreement, or
waives the terms thereof, executed by Executive and Grand Union.
6. This Agreement shall be governed by and construed in accordance
with the laws of the State of New Jersey applicable to agreements to be
performed wholly therein, without regard to the choice of law principles
thereof. The parties have specifically directed their attention to the laws
of the State of New Jersey and recognize that this Agreement by its terms has
applicability outside the State of New
2
<PAGE>
Jersey. In the event that this Agreement is sought to be enforced in any
jurisdiction other than the State of New Jersey, the parties intend that the
courts of such jurisdiction apply New Jersey law except that, with respect to
the provisions of Section 2, the parties intend that either the law of the
State of New Jersey or the law of the jurisdiction in which such provisions
are sought to be enforced, whichever shall be more favorable to the
enforcement of such provisions, shall be applied.
7. Executive acknowledges that he has read and fully understands this
Agreement and enters into this Agreement voluntarily and with the benefit of
advice of counsel.
8. This instrument contains the entire agreement of the parties with
respect to the subject matter hereof and supersedes any and all prior
agreements, writings and negotiations among the parties with respect thereto.
This Agreement may be signed in two or more counterparts, each of which shall
constitute an original and all of which taken together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, Grand Union and Executive have executed this
Agreement to be effective on the date first written above.
THE GRAND UNION COMPANY
By: /s/ Gilbert Vuolo
-------------------------------
Attest:
/s/ John W. Schroeder
- ----------------------
/s/ Kenneth R. Baum
-------------------------------
Kenneth R. Baum, Executive
Attest:
3
<PAGE>
/s/ John W. Schroeder
- -----------------------
4
<PAGE>
Exhibit 10.26
Agreement
AGREEMENT made and entered into as of the 15th day of June, 1995 by
and between THE GRAND UNION COMPANY, a Delaware corporation having its principal
executive offices at 201 Willowbrook Boulevard, Wayne, New Jersey 07470 ("Grand
Union") and Darrell W. Stine, an individual residing at _______________________
________________ ("Executive").
WHEREAS, Executive is a key employee of Grand Union, and
WHEREAS, Executive and Grand Union have previously entered into a Non-
Competition and Confidentiality Agreement dated August 25, 1993 (the "Prior
Agreement"), and
WHEREAS, in view of the bankruptcy filing by Grand Union and the
changes in the terms and conditions of Executive's employment as a result of
such filing, and in order to protect and maintain Grand Union's legitimate
business interests, the parties deem it desirable to amend and restate the Prior
Agreement in accordance with the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein, Executive and Grand Union agree as follows:
1. The Prior Agreement is hereby superseded in its entirety by this
Agreement.
2. During the term of Executive's employment with Grand Union and,
if such employment is voluntarily terminated by Executive (other than on
account of a Constructive Termination), for a period of two (2) years after
the date of such termination, Executive shall not directly or indirectly own,
invest in (other than a less-than-1% interest of), act as a principal or
partner of, operate, and/or be employed by or otherwise perform services for
any entity operating one or more supermarkets within a ten (10) mile radius
of any Grand Union store if the aggregate of such Grand Union stores
<PAGE>
(x) represent ten percent (10%) or more of the total number of Grand Union
stores operating at the date of such termination or (y) account for ten
percent (10%) or more of the annual sales volume of Grand Union for the
fiscal year immediately preceding the year of such termination. For this
purpose, (a) "supermarket" means any store which is part of a supermarket or
combination store chain or is a warehouse club selling grocery and perishable
items to the public, (b) an entity operating supermarkets includes any
wholesaler to independently-owned supermarkets operating under the same
tradename, and (c) "Constructive Termination" means (i) either an involuntary
reduction in base salary that exceeds 10% in any year, or an involuntary
reduction in grade level of more than two grades in any year, or (ii) an
involuntary transfer that would require relocation outside of the current
operating area of Grand Union.
3. The terms and provisions of this Agreement shall be binding upon
and shall inure to the benefit of Grand Union and its successors and assigns
and to Executive and his heirs, executors, legal representatives and
beneficiaries.
4. This Agreement shall not be construed as providing Executive with
the right to be retained in Grand Union's employ and shall not otherwise
affect Grand Union's right to terminate Executive's employment.
5. This Agreement may be amended, superseded or cancelled, or any of
the terms or provisions hereof may be waived, only by a written instrument
specifically stating that it amends, supersedes or cancels this Agreement, or
waives the terms thereof, executed by Executive and Grand Union.
6. This Agreement shall be governed by and construed in accordance
with the laws of the State of New Jersey applicable to agreements to be
performed wholly therein, without regard to the choice of law principles
thereof. The parties have specifically directed their attention to the laws
of the State of New Jersey and recognize that this Agreement by its terms has
applicability outside the State of New Jersey. In the event that this
Agreement is sought to
2
<PAGE>
be enforced in any jurisdiction other than the State of New Jersey, the
parties intend that the courts of such jurisdiction apply New Jersey law
except that, with respect to the provisions of Section 2, the parties intend
that either the law of the State of New Jersey or the law of the jurisdiction
in which such provisions are sought to be enforced, whichever shall be more
favorable to the enforcement of such provisions, shall be applied.
7. Executive acknowledges that he has read and fully understands
this Agreement and enters into this Agreement voluntarily and with the
benefit of advice of counsel.
8. This instrument contains the entire agreement of the parties with
respect to the subject matter hereof and supersedes any and all prior
agreements, writings and negotiations among the parties with respect thereto.
This Agreement may be signed in two or more counterparts, each of which shall
constitute an original and all of which taken together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, Grand Union and Executive have executed this
Agreement to be effective on the date first written above.
THE GRAND UNION COMPANY
By: /s/ Gilbert Vuolo
-------------------------------
Attest:
/s/ John W. Schroeder
- -------------------------
/s/ Darrel W. Stine
------------------------------
Darrell W. Stine, Executive
Attest:
3
<PAGE>
/s/ John W. Schroeder
- -------------------------
4
<PAGE>
Exhibit 10.27
Agreement
AGREEMENT made and entered into as of the 1st day of April, 1996 by
and between THE GRAND UNION COMPANY, a Delaware corporation having its principal
executive offices at 201 Willowbrook Boulevard, Wayne, New Jersey 07470 ("Grand
Union") and Gilbert C. Vuolo, an individual residing at ______________________
______________________ ("Executive").
In consideration of the mutual covenants contained herein, Executive and
Grand Union agree as follows:
1. During the term of Executive's employment with Grand Union and, if
such employment is voluntarily terminated by Executive (other than on
account of a Constructive Termination), for a period of two (2) years
after the date of such termination, Executive shall not directly or
indirectly own, invest in (other than a less-than-1% interest of), act
as a principal or partner of, operate, and/or be employed by or
otherwise perform services for any entity operating one or more
supermarkets within a ten (10) mile radius of any Grand Union store if
the aggregate of such Grand Union stores (x) represent ten percent
(10%) or more of the total number of Grand Union stores operating at
the date of such termination or (y) account for ten percent (10%) or
more of the annual sales volume of Grand Union for the fiscal year
immediately preceding the year of such termination. For this purpose,
(a) "supermarket" means any store which is part of a supermarket or
combination store chain or is a warehouse club selling grocery and
perishable items to the public, (b) an entity operating supermarkets
includes any wholesaler to independently-owned supermarkets operating
under the same tradename, and (c) "Constructive Termination" means (i)
either an involuntary reduction in base salary that exceeds 5% in any
year, or an involuntary removal from possession of the position of
Senior Vice President, or (ii) any involuntary transfer that would
require relocation outside
<PAGE>
of the current operating area of Grand Union.
2. The terms and provisions of this Agreement shall be binding upon and
shall inure to the benefit of Grand Union and its successors and
assigns and to Executive and his heirs, executors, legal
representatives and beneficiaries.
3. This Agreement shall not be construed as providing Executive with the
right to be retained in Grand Union's employ and shall not otherwise
affect Grand Union's right to terminate Executive's employment.
4. This Agreement may be amended, superseded or cancelled, or any of the
terms or provisions hereof may be waived, only by a written instrument
specifically stating that it amends, supersedes or cancels this
Agreement, or waives the terms thereof, executed by Executive and
Grand Union.
5. This Agreement shall be governed by and construed in accordance with
the laws of the State of New Jersey applicable to agreements to be
performed wholly therein, without regard to the choice of law
principles thereof. The parties have specifically directed their
attention to the laws of the State of New Jersey and recognize that
this Agreement by its terms has applicability outside the State of New
Jersey. In the event that this Agreement is sought to be enforced in
any jurisdiction other than the State of New Jersey, the parties
intend that the courts of such jurisdiction apply New Jersey law
except that, with respect to the provisions of Section 2, the parties
intend that either the law of the State of New Jersey or the law of
the jurisdiction in which such provisions are sought to be enforced,
whichever shall be more favorable to the enforcement of such
provisions, shall be applied.
6. Executive acknowledges that he has read and fully understands this
Agreement and enters into this Agreement voluntarily and with the
benefit
2
<PAGE>
of advice of counsel.
7. This instrument contains the entire agreement of the parties with
respect to the subject matter hereof and supersedes any and all prior
agreements, writings and negotiations among the parties with respect
thereto. This Agreement may be signed in two or more counterparts,
each of which shall constitute an original and all of which taken
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, Grand Union and Executive have executed this Agreement
to be effective on the date first written above.
THE GRAND UNION COMPANY
By: /s/ Joseph J. McCaig
---------------------------------
Attest:
/s/ John W. Schroeder
- -------------------------------------
/s/ Gilbert C. Vuolo
---------------------------------
Executive
Attest:
/s/ John W. Schroeder
- -------------------------------------
3
<PAGE>
Exhibit 10.28
-------------
January 17, 1996
PRIVATE AND CONFIDENTIAL
- -------------------------
The Grand Union Company
201 Willowbrook Boulevard
Wayne, NJ 97470-6799
Attention: Joseph J. McCaig, Chief Executive Officer
Gentlemen:
This letter agreement (the "Agreement") confirms our understanding
that The Grand Union Company (which together with its subsidiaries is
hereinafter referred to as the "Company") has engaged Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ") to act as its exclusive investment
banking financial advisor, commencing upon your acceptance of this Agreement,
with respect to the review and analysis of financial and structural
alternatives available to the Company with a view to meeting the Company's
long term strategic objectives.
As discussed, we propose to undertake certain services on your behalf
including to the extent requested by you: (i) assisting you in analyzing the
Company's operations and its historical performance; (ii) assisting you in
analyzing the Company's future prospects; (iii) assisting you in preparing an
analysis of strategic and financing alternatives for the Company; (iv)
presenting the analysis of strategic and financing alternatives to the Board
of Directors of the Company (the "Board"), and (v) assisting you in
implementing any such strategic or financing alternative adopted by the
Board.
During the term of DLJ's engagement hereunder, DLJ shall have the
exclusive right (but not the obligation) to act as sole managing underwriter,
exclusive placement agent, sole dealer manager or exclusive solicitation
agent, as the case may be, with respect to any registered public offering of
any of the Company's securities, any private offering of any of the Company's
debt securities pursuant to an exemption from registration under the
Securities Act of 1933 (as amended), or any exchange offer or refinancing
transaction relating to the Company's 12% Senior Notes or any other
securities of the Company, in each case in connection with any strategic or
financial alternative adopted by the Board of Directors. In any of the
events described above, except where otherwise provided for in the Agreement,
the Company and DLJ will enter into a customary underwriting agreement or
engagement letter, as applicable, containing customary terms and conditions,
and in form and substance, reasonably acceptable to DLJ and its counsel and
you and your counsel.
During the term of DLJ's engagement hereunder, in the event the Company
decides to explore a private placement of equity securities (a "Private
Placement"), a divestiture of assets or a line of business of the Company (a
"Divestiture") or a sale, merger, consolidation or any other business
combination, in one or a series of transactions involving all or a
significant portion of the
<PAGE>
The Grand Union Company January 17, 1996
Page 2
business or securities of the Company other than a Divestiture (a "Sale")
(each, a "Transaction"), we propose to undertake certain services on your
behalf including to the extent requested by you: (i) assisting you in
preparing an offering memorandum describing the Company, its operations, its
historical performance and its future prospects; (ii) identifying and
contacting selected qualified investors or acquirors acceptable to you; (iii)
arranging for potential investors or acquirors to conduct business
investigations; (iv) negotiating the financial aspects of any proposed
Transaction under your guidance including negotiating with the creditors of
the Company with respect to the application of the proceeds raised in a
Transaction; (v) assisting the Company in evaluating any proposed
Transaction, including assisting the Company in analyzing a potential
investor or acquiror and its operations, historical performance, future
prospects and securities; and (vi) delivering an opinion to the Board of
Directors of the Company, if requested, as to the fairness from a financial
point of view of the consideration to be received by the Company's
stockholders in any proposed Transaction. In no event shall an underwritten
public offering of the Company's securities or any other transaction covered
by the immediately preceding paragraph be considered a Transaction.
As compensation for the services to be provided by DLJ hereunder, the
Company agrees (i) to pay to DLJ (a) a retainer fee of $200,000 ("the
Retainer"), payable promptly upon execution of this Agreement, (b)
additional cash compensation (the "Transaction Fee") as set forth below,
(c) additional cash compensation (the "Fairness Fee") as set forth below at
the time that the Board of Directors of the Company requests delivery and DLJ
delivers the opinion referred to in clause (vi) of the preceding paragraph
and (ii) upon request by DLJ from time to time, to reimburse DLJ promptly for
all reasonable out-of-pocket expenses (including the reasonable fees and
expenses of counsel) incurred by DLJ in connection with its engagement
hereunder, which the Company shall have the right to audit and request
documentation for, whether or not a Transaction is consummated. As DLJ will
be acting on your behalf, the Company agrees to the indemnification and other
obligations set forth in Schedule I attached hereto, which Schedule is an
integral part hereof.
As compensation for the services to be provided by DLJ hereunder in the
case of a Private Placement, the Company agrees to pay DLJ a Transaction Fee
equal to five percent (5.0%) of the gross proceeds of such Private Placement
which shall be earned upon the consummation of the Private Placement, and
shall be paid at closing of the proposed financing. The Fairness Fee, if a
fairness opinion is requested, for such a Private Placement shall be equal to
an additional one and one half percent (1.5%) of the gross proceeds of such
Private Placement. In the case of a Private Placement, the Retainer shall be
credited against the Transaction Fee.
<PAGE>
The Grand Union Company January 17, 1996
Page 3
As compensation for the services to be provided by DLJ hereunder in the
case of a Divestiture, the Company agrees to pay DLJ a Transaction Fee in an
amount equal to the schedule as set forth below:
AGGREGATE CONSIDERATION TRANSACTION FEE
($ IN MILLIONS) ($ IN MILLIONS)
----------------------- ----------------
$50 $1.00
100 1.25
150 1.80
200 2.30
250 2.75
300 3.15
350 3.50
400 3.80
450 4.05
For a Divestiture in which the Aggregate Consideration is between any
two categories the Transaction Fee shall be calculated by the linear
interpolation between the respective Transaction Fees. If a fairness opinion
is requested in the case of a Divestiture, the Fairness Fee shall be equal to
the greater of 25% of the Transaction Fee and $350,000. In the case of a
Divestiture, the Retainer Fee and the Fairness Fee shall be credited against
the Transaction Fee. The Transaction Fee shall be due and payable promptly
upon the consummation of a Divestiture. For the purpose of this Agreement, a
Divestiture shall be deemed to have been consummated upon closing.
In the case of a Sale the Transaction Fee shall be equal to (x) in the
case of a Transaction involving 100% of the business, securities or assets of
the Company, six tenths of one percent (0.6%) of the Aggregate
Consideration, or (y) in the case of a Transaction involving 36% or more, but
less than 100%, of the business, securities or assets of the Company, 2/3 of
the amount referred to in clause (x), plus an amount ratably increasing from
0 to 1/3 of the fee in clause (x) in direct proportion to the percentage of
the business or securities or assets involved in the Transaction increasing
from 36% to 100%(1). "Aggregate Consideration" means all cash and non-cash
consideration received by the Company and/or its shareholders, stock option
holders and warrant holders, plus the amount of any debt assumed (including
capitalized leases but excluding any outstanding letters of credit) or if not
assumed repaid, by the purchaser in connection with the Transaction,
including, in the case of a sale or other disposition by the Company of
assets, the net value of any assets not sold by the Company. In each of
cases (x) and (y) the Retainer Fee and the Fairness Fee shall be credited
against the Transaction Fee. If a fairness opinion is requested, the Fairness
Fee in the case of a Sale shall be equal to $1,000,000. Any sale of equity
securities to an investor or acquiror which results in the investor or
acquiror holding greater than 36% of the pro forma outstanding stock of the
Company shall be considered a Sale.
- ---------------------------
1) For example, in the case of a Sale involving 60% of the business,
securities or assets of the Company, the Transaction Fee would be an
amount equal to:
[(2/3) * (6/10) + (1/3) * (6/10) * ((.60 - .36) / (1.00 - .36))]%
* Aggregate Consideration.
<PAGE>
The Grand Union Company January 17, 1996
Page 4
The Transaction Fee shall be payable in cash promptly upon consummation
of a Sale. For purposes of this Agreement, a Sale shall be deemed to have
been consummated upon the earliest of any of the following events to occur:
(a) the acquisition or purchase of equity securities equal to at least 36% of
the equity securities of the Company outstanding pro forma for such
acquisition or purchase (if the Company or DLJ have been requested to assist
in such acquisition or purchase); (b) a merger or consolidation of the
Company with another person; or (c) in the case of any other Sale, the
consummation thereof.
In the event that the consideration received in a Transaction is paid in
whole or in part in the form of securities or other assets, the value of such
securities or other assets, for purposes of calculating our additional
compensation, shall be the fair market value thereof, as the parties hereto
shall mutually agree, on the day prior to the consummation of the
Transaction; provided, that if such consideration includes securities with an
existing public trading market, the value thereof shall be determined by the
average of the last sales price for such securities on the last five trading
days thereof prior to such consummation. In the event that all or some
portion of the consideration is related to the future earnings or operations
of the Company, the portion of DLJ's compensation relating thereto shall be
calculated and shall be paid at the time the Transaction is consummated (as
determined by the preceding paragraph) based upon the estimated net present
value thereof which DLJ and the Company will in good faith mutually agree
upon.
The Company shall make available to DLJ all financial and other
information concerning its business and operations which DLJ reasonably
requests as well as any other information relating to any Transaction
prepared by the Company or any of its other advisors. In performing its
services hereunder (including, without limitation, in giving an opinion of
the type referred to in the fourth paragraph hereof), DLJ shall be entitled
to rely without investigation upon all information that is available from
public sources as well as all other information supplied to it by the Company
or its counsel or independent accountants and shall not in any respect be
responsible for the accuracy or completeness of, or have any obligation to
verify, the same or to conduct any appraisal of assets, it being understood
that the Company shall approve the form and content of any offering
memorandum or other presentation materials prior to their distribution. To
the extent consistent with legal requirements, all information given to DLJ
by the Company, unless publicly available or otherwise available to DLJ
without restriction or breach of any confidentiality agreement, will be held
by DLJ in confidence and will not be disclosed to anyone other than DLJ's
agents and advisors without the Company's prior approval or used for any
purpose other than those referred to in this Agreement.
Any opinion requested by the Company and any advice, written or oral,
provided by DLJ pursuant to this Agreement will be treated by the Company as
confidential, will be solely for the information and assistance of the
Company in connection with its consideration of a transaction of the type
referred to in the fourth paragraph of this Agreement and will not be used,
circulated, quoted or otherwise referred to for any other purpose, nor will
it be filed with, included in or referred to in whole or in part in any
registration statement, proxy statement or any other document, except in each
case with our prior written consent, which consent shall not be unreasonably
withheld or delayed, or except as otherwise required by law. We understand
that our opinion may be reproduced in full in any proxy statement mailed to
shareholders of the Company, and we agree to provide our written consent to
such use, provided that we are afforded a reasonable opportunity to
<PAGE>
The Grand Union Company January 17, 1996
Page 5
review and comment on those portions of any such proxy statement that
include or refer to our opinion or otherwise refer to DLJ.
In order to coordinate our efforts with respect to a possible
Transaction satisfactory to the Company, during the period of our engagement
hereunder neither the Company nor any representative thereof (other than DLJ)
will, without DLJ's consent, initiate discussions regarding a Transaction
except through DLJ. In the event the Company or its management receives an
inquiry regarding a Transaction, it will promptly advise DLJ of such inquiry
in order that we may evaluate such prospective purchaser and its interest and
assist the Company in any resulting negotiations.
This Agreement may be terminated by either the Company or DLJ upon
receipt of written notice to that effect by the other party. Upon any
termination of this Agreement, DLJ will be entitled to prompt payment of all
fees accrued prior to such termination and reimbursement of all out-of-pocket
expenses as described above. The indemnity and other provisions contained in
Schedule I will remain operative and in full force and effect regardless of
any termination of this Agreement.
In addition, if at any time prior to 12 months after the termination of
this Agreement without the payment of a Transaction Fee on a Sale, a
Transaction is consummated, or if at any time prior to 18 months after the
termination of this Agreement, a Transaction is consummated with any party
contacted regarding a transaction during the period of our engagement, DLJ
will be entitled to payment in full of the Transaction Fee. In connection
with a Transaction referred to in the preceding sentence DLJ, shall, if
requested by the Company, provide the opinion referred to in clause (vi) of
the fourth paragraph hereof in connection with such Transaction; provided
that the Company allows DLJ a reasonable amount of time within which to
update its analysis supporting such opinion and providing that the Company
reimburses DLJ for any additional out-of-pocket expenses incurred by DLJ in
rendering such opinion. Upon the Company's request during the term of this
Agreement and promptly following any termination of this Agreement, DLJ will
provide the Company with written notice of the parties contacted by DLJ
regarding a Transaction during the period of our engagement.
It is understood that if the Company completes a transaction in lieu of
any Transaction for which DLJ is entitled to compensation pursuant to this
Agreement, DLJ and the Company will in good faith mutually agree upon
acceptable compensation for DLJ taking into account, among other things, the
results obtained and the custom and practice of investment bankers acting in
similar transactions.
The Company further agrees that it will not enter into any transaction
referred to in either of the two preceding paragraphs unless, prior to or
simultaneously with such transaction, adequate provision is made with respect
to the payment of compensation to DLJ as contemplated by such paragraphs.
Please note that DLJ is a full service securities firm engaged in
securities trading and brokerage activities, as well as providing investment
banking and financial advisory services. In the ordinary course of our
trading and brokerage activities, DLJ or its affiliates may at any time hold
long or short positions, and may trade or otherwise effect transactions, for
our own account or on the accounts of customers, in debt or equity securities
of the Company or other entities that may be
<PAGE>
The Grand Union Company January 17, 1996
Page 6
involved in the Transaction. We recognize our responsibility for compliance
with Federal laws in connection with any such activities.
The Company acknowledges and agrees that DLJ has been retained solely to
provide the advice or services set forth in this Agreement. DLJ shall act as
an independent contractor, and any duties of DLJ arising out of its
engagement hereunder shall be owed solely to the Company.
This Agreement shall be binding upon and inure to the benefit of the
Company, DLJ, each Indemnified Person (as defined in Schedule I hereto) and
their respective successors and assigns.
This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York.
The Company and DLJ each irrevocably and unconditionally submits to the
exclusive jurisdiction of any State or Federal court sitting in New York City
over any suit, action or proceeding arising out of or relating to this letter
(including Schedule I hereto). The Company and DLJ each hereby agrees that
service of any process, summons, notice or document by U.S. registered mail
addressed to the Company shall be effective service of process for any
action, suit or proceeding brought in any such court. The Company and DLJ
each irrevocably and unconditionally waives any objection to the laying of
venue of any such suit, action or proceeding brought in any such court and
any claim that any such suit, action or proceeding brought in such a court
has been brought in an inconvenient forum. The Company and DLJ each agrees
that a final judgment in any such suit, action or proceeding brought in any
such court shall be conclusive and binding upon it and may be enforced in any
other courts to whose jurisdiction it is or may be subject, by suit upon such
judgment.
If any term, provision, covenant or restriction contained in this
Agreement, including Schedule I, is held by a court of competent jurisdiction
or other authority to be invalid, void, unenforceable or against its
regulatory policy, the remainder of the terms, provisions, covenants and
restrictions contained in this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
After reviewing this Agreement, please confirm that the foregoing is in
accordance with your understanding by signing and returning to me the
duplicate of this letter attached hereto, whereupon it shall be our binding
Agreement.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Martin C. Murrer
-------------------------
Martin C. Murrer
Senior Vice President
Accepted and agreed to
this 26 day of February, 1996
THE GRAND UNION COMPANY
By: /s/ Joseph J. McCaig
-----------------------
Joseph J. McCaig
Chief Executive Officer
<PAGE>
SCHEDULE I
This Schedule I is a part of and is incorporated into that certain
letter agreement (together, the "Agreement"), dated January 17, 1996 by and
between The Grand Union Company (which together with its subsidiaries and
affiliates is hereinafter referred to as the "Company") and Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJ").
The Company agrees to indemnify and hold harmless DLJ, its affiliates
and its parent and its affiliates, and the respective directors, officers,
agents and employees of DLJ, its affiliates and its parent and its affiliates
(DLJ and each such entity or person, an "Indemnified Person") from and
against any losses, claims, damages, judgments, assessments, costs and other
liabilities (collectively "Liabilities"), and will reimburse each
Indemnified Person for all fees and expenses (including the reasonable fees
and expenses of counsel) (collectively, "Expenses") as they are incurred in
investigating, preparing, pursuing or defending any claim, action, proceeding
or investigation, whether or not in connection with pending or threatened
litigation or arbitration and whether or not any Indemnified Person is a
party (collectively, "Actions"), (i) caused by, or arising out of or in
connection with, any untrue statement or alleged untrue statement of a
material fact contained in the exclusive sale memorandum or offering
memorandum and in the proxy statement, if any, provided to the Company's
shareholders, (including any amendments thereof and supplements thereto,
collectively, the "Disclosure Documents") or by any omission or alleged
omission to state therein a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading (other than untrue statements or alleged untrue statements in, or
omissions or alleged omissions from, information relating to an Indemnified
Person furnished in writing by or on behalf of such Indemnified Person
expressly for use in the Disclosure Documents) or (ii) otherwise arising out
of or in connection with advice or services rendered or to be rendered by any
Indemnified Person pursuant to this Agreement, the transactions contemplated
hereby or any Indemnified Person's actions or inactions in connection with
any such advice, services or transactions; provided that, in the case of
clause (ii) only, the Company will not be responsible for any Liabilities or
Expenses of any Indemnified Person that are determined by a judgment of a
court of competent jurisdiction which is no longer subject to appeal or
further review to have resulted solely from any Indemnified Person's gross
negligence or willful misconduct in connection with any of the advice,
actions, inactions or services referred to above. The Company also agrees to
reimburse each Indemnified Person for all Expenses as they are incurred in
connection with enforcing such Indemnified Person's rights under this
Agreement (including, without limitation, its rights under this Schedule I).
In the event that it is determined in accordance with the foregoing sentence
that an Indemnified Person is not entitled to indemnity hereunder, DLJ shall
promptly reimburse or shall cause such Indemnified Person to reimburse the
Company for all amounts paid to or on behalf of any Indemnified Person under
this Schedule I.
Upon receipt by an Indemnified Person of actual notice of an Action
against such Indemnified Person with respect to which indemnity may be sought
under this Agreement, such Indemnified Person shall promptly notify the
Company in writing; provided that failure so to notify the Company shall not
relieve the Company from any liability which the Company may have on account
of this indemnity or otherwise, except to the extent the Company shall have
been prejudiced by such failure. The Company shall have the right to assume
the defense of any such Action including the employment of counsel reasonably
satisfactory to DLJ. Any Indemnified Person shall have the right to employ
separate counsel in any such Action and participate in the defense thereof,
but the fees and expenses of such counsel shall be at the expense of such
Indemnified Person, unless: (i) the Company has failed promptly to assume
the defense and employ counsel or (ii) the named parties to any such Action
(including any impleaded parties) include such Indemnified Person and the
Company, and such Indemnified Person shall have been advised by counsel that
there may be one or more legal defenses available to it which are different
from or in addition to those available to the Company; provided that the
Company shall not in such event be responsible hereunder for the fees and
expenses of more than one firm of separate counsel in connection with any
Action in the same jurisdiction, in addition to any local counsel. The
Company shall not be liable for any settlement of any Action effected without
its written consent (which shall not be unreasonably withheld). In addition,
the Company will not, without prior written consent of DLJ, settle,
compromise or consent to the entry of any judgment in or otherwise seek to
terminate
<PAGE>
any pending or threatened Action in respect of which indemnification or
contribution may be sought hereunder (whether or not any Indemnified Person
is a party thereto) unless such settlement, compromise, consent or
termination includes an unconditional release of each Indemnified Person from
all Liabilities arising out of such Action.
In the event that the foregoing indemnity is unavailable to an
Indemnified Person other than due to the gross negligence or willful
misconduct of any Indemnified Person, the Company shall contribute to the
Liabilities and Expenses paid or payable by such Indemnified Person in such
proportion as is appropriate to reflect (i) the relative benefits to the
Company and its shareholders, on the one hand, and to DLJ, on the other hand,
of the matters contemplated by this Agreement or (ii) if the allocation
provided by the immediately preceding clause is not permitted by the
applicable law, not only such relative benefits but also the relative fault
of the Company, on the one hand, and DLJ, on the other hand, in connection
with the matters as to which such Liabilities or Expenses relate, as well as
any other relevant equitable considerations; provided that in no event shall
the Company contribute less than the amount necessary to ensure that all
Indemnified Persons, in the aggregate, are not liable for any Liabilities and
Expenses in excess of the amount of fees actually received by DLJ pursuant to
this Agreement. For purposes of this paragraph, the relative benefits to the
Company and its shareholders, on the one hand, and to DLJ, on the other hand,
of the matters contemplated by this Agreement shall be deemed to be in the
same proportion as (a) the total value paid or contemplated to be paid or
received or contemplated to be received by the Company or the Company's
shareholders, as the case may be, in the transaction or transactions that are
within the scope of this Agreement, whether or not any such transaction is
consummated, bears to (b) the fees paid to DLJ under this Agreement.
The Company also agrees that no Indemnified Person shall have any
liability (whether direct or indirect, in contract or tort or otherwise) to
the Company for or in connection with advice or services rendered or to be
rendered by any Indemnified Person pursuant to this Agreement, the
transactions contemplated hereby or any Indemnified Person's actions or
inactions in connection with any such advice, services or transactions except
for Liabilities (and related Expenses) of the Company that are determined by
a judgment of a court of competent jurisdiction which is no longer subject to
appeal or further review to have resulted solely from (i) any Indemnified
Person's gross negligence or willful misconduct in connection with any such
advice, actions, inactions or services, or (ii) the material breach by DLJ of
an express provision of this Agreement which was not cured by DLJ within ten
business days of DLJ having received written notice of such breach from the
Company.
The reimbursement, indemnity and contribution obligations of the Company
set forth herein shall apply to any modification of this Agreement and shall
remain in full force and effect regardless of any termination of, or the
completion of any Indemnified Person's services under or in connection with,
this Agreement.
<PAGE>
Exhibit 10.29
WAIVER AND FIRST AMENDMENT
TO THE
AMENDED AND RESTATED CREDIT AGREEMENT
WAIVER AND FIRST AMENDMENT dated as of February 16, 1996 (this
"Agreement") to the AMENDED AND RESTATED CREDIT AGREEMENT dated as of June
15, 1995 (the "Credit Agreement"), each among THE GRAND UNION COMPANY, a
Delaware corporation (the "Borrower"), the institutions from time to time
party thereto as lenders (the "Banks") and BANKERS TRUST COMPANY, as agent
(the "Agent"). Capitalized terms used herein and not defined herein shall
have the respective meanings set forth for such terms in the Credit Agreement.
W I T N E S S E T H :
WHEREAS, in connection with the transfer to C&S Wholesale Grocers,
Inc. ("C&S") of the supply and distribution operations for the Borrower's
New York Region (the "NY Region S&D Conversion"), the Borrower anticipates
incurring certain costs and expenses related to the ceasing of operations at
its Mount Kisco and Carlstadt facilities (the "New York Warehouses") in an
aggregate amount not to exceed $15,000,000;
WHEREAS, the Borrower anticipates recoveries from the sale of the
Carlstadt facility and equipment sold in connection with the ceasing of
operations at the New York Warehouses in an amount of approximately
$2,500,000;
WHEREAS, in conjunction with the NY Region S&D Conversion the
Borrower has eliminated its regional office structure and, in connection with
such centralization, desires to make certain staff reductions that would
involve the incurrence by the Borrower of certain related costs and expenses
in an aggregate amount not to exceed $2,500,000;
WHEREAS, the Borrower has requested that (a) for purposes of
determining the Borrower's compliance
<PAGE>
with the financial covenants under the Credit Agreement, the costs and
expenses described above be added-back to EBIT in calculating the Borrower's
EBITDA for any relevant period, and (b) the Banks consent to certain other
actions the Borrower desires to take in connection with the NY Region S&D
Conversion and the transfer to C&S of the supply and distribution operations
in respect of inventory handled at the Borrower's Montgomery facility (the
"Montgomery Warehouse"); and
WHEREAS, subject to and upon the terms and conditions hereinafter
set forth, the Banks party hereto are willing to agree to the foregoing;
NOW, THEREFORE, the parties hereto hereby agree as follows:
Section 1. AMENDMENTS. The Credit Agreement is hereby amended as
follows:
(a) Section 7.1(f) of the Credit Agreement is amended by inserting
the following at the end of such Section:
"In addition, promptly, and in any event within three Business Days
after an officer of the Borrower or any of its Subsidiaries obtains
knowledge there of, (i) notice of the occurrence of any default or event
of termination under any now or hereafter existing agreement between the
Borrower, on the one hand, and C&S Wholesale Grocers, Inc. (or its
successors and assigns), on the other hand, and (ii) copies of each such
agreement entered into after the date hereof and each amendment or other
modification to each such now or hereafter existing agreement."
(b) The following is hereby inserted after Section 8.15 of the
Credit Agreement as a new Section:
"8.16 AMENDMENTS, ETC. TO CERTAIN MATERIAL AGREEMENTS.
The Borrower will not
2
<PAGE>
terminate or, without the prior written consent of the Agent, directly
or indirectly amend or modify in any material adverse respect
(including, without limitation, in any manner that would have an adverse
effect on any Credit Party's ability to perform its obligations
hereunder or under any other Credit Document) any now or hereafter
existing agreements between the Borrower and C&S Wholesale Grocers, Inc.,
including without limitation, (a) the Supply and Distribution Agreement
dated as of June 15, 1995, as amended by the First Amendment thereto
dated as of January 2, 1996 and the Second Amendment thereto dated as of
February 16, 1996, (b) the Supply and Distribution Agreement dated as of
January 2, 1996, as amended by the First Amendment thereto dated as of
February 16, 1996, and (c) the Supply and Operating Agreement dated as of
January 21, 1996."
(c) The definition of the term "EBITDA" in Section 10 of the
Credit Agreement is amended by inserting the following at the end of such
definition:
"; and PROVIDED FURTHER that, for purposes of calculating EBITDA for
any period, the following shall be added back to EBIT for such period to
the extent deducted, in accordance with the definition of EBIT contained
herein, from Consolidated Net Income for such period in determining such
EBIT: (a) costs and expenses in an aggregate amount not to exceed
$15,000,000 incurred by the Borrower in the third and fourth fiscal
quarters of its fiscal year ending in March, 1996 relating to the ceasing
of operations at its Mount Kisco and Carlstadt facilities, and (b)costs and
expenses in an aggregate amount not to exceed $2,500,000 incurred by the
Borrower in the fourth quarter of its fiscal year ending in March, 1996
in connection with the central ization of its regional operations; and
PROVIDED FURTHER that, for purposes of calculating EBITDA for any
period, EBIT shall be calculated, notwithstanding anything to the
contrary contained
3
<PAGE>
in the definition of EBIT contained herein, without giving effect to any
gains from the sale of the Carlstadt facility and equipment sold in
connection with the ceasing of operations at such facilities".
Section 2. WAIVERS. (a) Any violation of Section 8.1
("Consolidation, Merger, Sale or Purchase of Assets, etc.") of the Credit
Agreement that is caused solely by the sale, in and of itself, by the
Borrower to C&S of forward buy and reserve inventory of the Borrower located
at the New York Warehouses on the date hereof (a "Conversion-Related Sale")
is hereby waived; PROVIDED that (i) the aggregate cost of the inventory so
sold to C&S does not exceed $12,700,000, (ii) all inventory so sold to C&S is
sold pursuant to one or more transaction for cash, payable no later than
March 1, 1996, in an amount that is at least equal to 98% of the Borrower's
actual cost for such inventory, (iii) such sales occur no later than March 1,
1996, and (iv) any inventory so sold to C&S was located at the New York
Warehouses on January 2, 1996. In addition, any violation of Section 8.2
("Liens") that is caused solely by any Conversion-Related Sale meeting the
requirements of clauses (i) through (iv) of the proviso to the foregoing
sentence being subject to an obligation or agreement on the part of the
Borrower to repurchase from C&S any of the inventory so sold to C&S within
120 days of the sale of such inventory to C&S is hereby waived so long as the
aggregate amount paid (and required to be paid) for each and any item of such
inventory that is repurchased by the Borrower does not exceed the amount of
cash paid to the Borrower by C&S in respect of such item (after giving
effect to any discounts extended to C&S with respect thereto).
(b) Any violation of Section 9.2 ("Liens") of the Credit Agreement
caused solely by the filing, in and of itself, by the Borrower in favor of
C&S of precautionary Uniform Commercial Code financing statements with the
Secretary of State of the State of New York and the County Clerk of Orange
County, New York that
4
<PAGE>
are satisfactory in form and substance to the Agent in its sole discretion
is hereby waived; provided that such financing statements relate solely to
inventory of a type listed on Schedule I to Exhibit A hereto.
(c) Each Bank party hereto concurs with the making by the Agent in
favor of C&S of acknowledgements and agreements in form and substance
substantially similar to those set forth in Exhibit A hereto and such other
acknowledgements and agreements in respect of inventory of a type listed on
Schedule I to such Exhibit A and located from time to time at the Montgomery
facility that, in the Agent's good faith belief, are not adverse to the Banks
in any material respect.
Section 3. REPRESENTATIONS AND WARRANTIES. The Borrower hereby
represents and warrants to the Agent and each Bank that:
(a) no Default or Event of Default has occurred and is continuing
on and as of the date hereof, and, after giving effect hereto, no Default or
Event of Default will occur at any time as a result of the execution,
delivery or performance by the Borrower of any of its obligations, covenants
and agreements under any of its existing contracts and agreements with C&S;
and
(b) the representations and warranties of the Borrower and the
other Credit Parties contained in the Credit Agreement and the other Credit
Documents are true and correct on and as of the date hereof as if made on and
as of the date hereof, except to the extent such representations and
warranties expressly relate to a different specific date.
Section 4. EFFECTIVENESS. This Agreement shall become effective
when the Agent shall have executed and delivered a counterpart of this
Agreement and received duly executed counterparts of this Agreement from the
Borrower, each Subsidiary of the Borrower that is a party to any Credit
Document and as
5
<PAGE>
many of the Banks as shall be necessary to comprise the "Required Banks".
Section 5. STATUS OF CREDIT DOCUMENTS. This Agreement is limited
solely for the purposes and to the extent expressly set forth herein, and,
except as express ly modified hereby, the terms, provisions and conditions of
the Credit Documents and the Liens granted thereunder shall continue in full
force and effect and are hereby ratified and confirmed in all respects.
Section 6. COUNTERPARTS. This Agreement may be executed and
delivered in any number of counterparts and by the different parties hereto
on separate counter parts, each of which when so executed and delivered shall
be an original, but all of which shall together constitute one and the same
instrument. A complete set of counterparts shall be lodged with the Borrower
and the Agent.
Section 7. GOVERNING LAW. THIS MODIFICATION SHALL BE CONSTRUED IN
ACCORDANCE WITH, AND SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK
(WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF).
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their respective
duly authorized officers to execute and deliver this Waiver and First
Amendment to the Amended and Restated Credit Agreement as of the date first
above written.
THE GRAND UNION COMPANY
By: /s/ Frank Nicastro
-------------------------
Name: Frank Nicastro
Title: Vice President and
Treasurer
BANKERS TRUST COMPANY,
Individually and as Agent
By: /s/ Michael R. Shruga
-------------------------
Name: Michael R. Shruga
Title: Managing Director
BANKAMERICA BUSINESS CREDIT, INC.
By: /s/ Patrick J. Wilson
-------------------------
Name: Patrick J. Wilson
Title: V.P.
BANK POLSKA KASA OPIEKI, SA
By: /s/ William A. Shea
-------------------------
Name: William A. Shea
Title: Vice President
Senior Lending Officer
7
<PAGE>
CITIBANK, N.A.
By: /s/ Hans L. Christensen
-------------------------
Name: Hans L. Christensen
Title: Vice President
COMPAGNIE FINANCIORE DE CIC ET
DE L'UNION EUROPIENNE
By: /s/ Sean Mounier
-------------------------
Name: Sean Mounier
Title: First Vice President
By: /s/ Brian O'Leary
-------------------------
Name: Brian O'Leary
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Gretchen Bergstressa
-------------------------
Name: Gretchen Bergstressa
Title: V.P.
HELLER FINANCIAL, INC.
By: /s/ T. Bukowski
-------------------------
Name: T. Bukowski
Title: V.P.
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED
8
<PAGE>
By: /s/ Victor Ichosia
-----------------------------
Name: Victor Ichosia
Title: Managing Director
NATIONSBANK N.A. (CAROLINAS)
By:
------------------------------
Name:
Title:
NATWEST BANK N.A.
By: /s/ George Triebenbacher
------------------------------
Name: George Triebenbacher
Title: V.P.
QUANTUM PARTNERS LDC
By:
-------------------------------
Name:
Title:
SENIOR DEBT PORTFOLIO
By: Boston Management and Research,
as Investment Advisor
By: /s/ Jeffrey S. Garner
-------------------------------
Name: Jeffrey S. Garner
Title: Vice President
9
<PAGE>
TRANSAMERICA BUSINESS CREDIT
CORPORATION
By: /s/ Michael Burns
-------------------------------
Name:
Title:
10
<PAGE>
VAN KAMPEN MERRITT PRIME RATE
INCOME TRUST
By: /s/ Jeffrey W. Maillet
-------------------------
Name: Jeffrey W. Maillet
Title: Sr. Vice Pres. & Portfolio Mgr.
11
<PAGE>
The foregoing Modification No. 1 to the Amended and Restated Credit
Agreement is hereby consented and agreed to, and the Liens and guaranties
under the Credit Documents are hereby confirmed, by:
MERCHANDISING SERVICES, INC.
GRAND UNION STORES, INC. OF VERMONT
GRAND UNION STORES OF NEW HAMPSHIRE, INC.
By: /s/ Frank Nicastro
-------------------------
Name: Frank Nicastro
Title: V.P. & Treasurer
of each of the above
listed entities
12
<PAGE>
Exhibit A to
WAIVER & FIRST AMENDMENT
Form of
C&S CONSENT AND AGREEMENT
13
<PAGE>
EXHIBIT 10.30
AGREEMENT made as of this 28th day of November, 1994, by and between THE
GRAND UNION COMPANY, a Delaware corporation having its principal executive
offices at 201 Willowbrook Boulevard, Wayne, New Jersey 07470 ("Grand
Union"), and DARRELL W. STINE, an individual residing at_____________________
("Executive").
WHEREAS, Executive is a participant in the Second Amendment and
Restatement of The Grand Union Company Supplemental Retirement Program for
Key Executives, as in effect on the date hereof (the "SERP"), and Executive
is currently eligible to retire from Grand Union and to receive a benefit
pursuant to the SERP; and
WHEREAS, Executive is a valuable employee of Grand Union, and Grand Union
is desirous of continuing to have available to it the continued services of
Executive on a full-time basis, at least for an additional eighteen months;
and
WHEREAS, Executive and Grand Union entered into an agreement, dated as of
August 25, 1993, and denominated the "Non-Competition and Confidentiality
Agreement" (the "Prior Agreement"); and
WHEREAS, Grand Union is willing to make a partial payment to Executive at
this time of his accrued benefit under the SERP and, in addition, to
compensate Executive for the earlier payment of income and employment taxes
on that payment in exchange for Executive's agreement to continue working for
Grand Union at least for an additional eighteen months.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
contained herein, Executive and Grand Union agree as follows:
1. PAYMENT TO EXECUTIVE. Upon execution of this Agreement, Grand Union
shall pay to Executive the sum of four hundred thirty-three thousand six
hundred and fifty dollars ($433,650), representing (a) an advance payment of
a portion of the benefits to which the Executive would be entitled under the
SERP had Executive retired of three hundred and eighty-eight thousand five
hundred dollars ($388,500) (the "SERP Payment") and (b) a payment to
compensate the Executive for the earlier payment of income and employment
taxes on the SERP Payment of forty-five thousand one hundred and fifty
dollars ($45,150) (the "Tax Payment").
2. CONTINUED SERVICE BY EXECUTIVE. In consideration for the receipt of
the SERP Payment and the Tax Payment, Executive agrees to remain in the
full-time employ of Grand Union, and to make his services available to Grand
Union on essentially a full-time basis until May 31, 1996 (absences for
illnesses, holidays and vacations excluded), unless Executive shall be
precluded therefrom by reason of his total disability. Notwithstanding the
foregoing, Executive shall be permitted to terminate his employment with
Grand Union in the event that, without his consent, Grand Union shall (1)
materially diminish his duties, responsibilities or position or assign to
Executive duties or responsibilities materially inconsistent with his
position or (ii) reduce his rate of compensation or materially reduce the
benefits to which he is currently entitled under all of the fringe benefit
plans of Grand Union or (iii) relocate its principal executive offices more
than 75 miles from Wayne, New Jersey. Executive agrees that neither a change
in the ownership or control of Grand Union nor any financial restructuring,
including the bankruptcy or insolvency of Grand Union, by itself, shall give
Executive any right to terminate his employment with Grand Union.
3. AFFECT ON SERP BENEFITS. The Executive agrees that notwithstanding
any provision to the contrary in the SERP or any other agreement with Grand
Union to which the Executive is a party, Grand Union's obligation to make any
payment under the SERP to Executive, or in the event of his death to his
estate, shall be reduced and offset by an amount equal to the SERP Payment
plus an amount equal to interest from the date of payment of the SERP Payment
until the date any amount would first be payable to Executive (or in the
event of his death, to his beneficiary) under the SERP upon his termination
of employment at the interest rate provided in the SERP for the calculation
of his lump sum benefit upon his termination of employment.
<PAGE>
4. PRIOR AGREEMENT MATTERS. Executive (a) acknowledges, ratifies and
confirms the Executive's obligations under the Prior Agreement, (b) waives
any claim that a Funding Event, as defined in the Prior Agreement, may occur
by reason of any amendment to the SERP, either express or implied, to reduce
the benefits payable thereunder to Executive in an amount equal to the SERP
Payment, and (c) acknowledges and agrees that Grand Union's obligations to
make any payments under the Prior Agreement or to transfer any Securities to
the Custodial Account (as both such terms are defined in the Prior Agreement)
shall be reduced and offset by the SERP Payment. Furthermore, Executive
consents and agrees that the Full Funding Value of Account, as set forth on
Appendix A to the Prior Agreement, shall be reduced by the SERP Payment, and
Executive agrees to execute an amendment to the Prior Agreement to effectuate
the foregoing.
5. MISCELLANEOUS. (a) This Agreement shall not be construed as
providing Executive (i) with any right to be retained in Grand Union's employ
for any period, (ii) as obligating Grand Union to continue Executive's
employment or (iii) to restrict the right of Grand Union to terminate
Executive's employ, either with or without cause.
(b) This Agreement shall be governed by and construed in accordance with
the laws of the State of New Jersey.
(c) Any amendment of this Agreement shall be in writing and signed by the
parties hereto.
(d) This Agreement contains the entire agreement of the parties with
respect to the subject matter hereof and supersedes any and all prior
agreements, understandings and negotiations with respect thereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
THE GRAND UNION COMPANY
by: /s/ Floyd Hall
--------------------------
Title: Chief Executive Officer
-------------------------
Attest:
/s/ James Herlihy
- -----------------------------
DARRELL W. STINE
/s/ Darrell W. Stine
--------------------------------
Attest:
/s/ Gilbert Vuolo
- -----------------------------
<PAGE>
SERP Payment: $388,500.00
Tax Payment:
(a) Calculation of Taxes on SERP Payment
Federal income tax (net of benefit
of State tax deduction) $147,692.00
State Income Tax $ 27,195.00
Medicare tax $ 5,633.25
-----------
Total $180,520.25
(b) Calculation of time value of tax payment
3 years and 1 month at 7.5% interest
rate, compounded annually $ 45,141.11
ASSUMPTIONS:
Estimated benefit amount is $570,500 and estimated value of Custodial Account
is $182,000, both at January 1, 1995, based upon Kwasha Lipton calculations
in an October 14, 1994, memorandum to Gil Vuolo.
<PAGE>
Exhibit 21.1
THE GRAND UNION COMPANY
SUBSIDIARY LISTING
Grand Union Stores of New Hampshire, Inc.
Grand Union Stores of Vermont
Merchandising Services, Inc.
Speciality Merchandising Services, Inc.
<PAGE>
EXHIBIT 24.1
THE GRAND UNION COMPANY
POWER OF ATTORNEY
Each of the undersigned directors and officers of The Grand Union
Company hereby constitutes and appoints Joseph J. McCaig and Kenneth R. Baum,
and each of them, with full authority to act alone, as his true and lawful
attorney-in-fact and agent, with full powers of substitution to do any and
all acts and things in his name and behalf in his capacity as director and
officer and to execute any and all instruments for him and in his name in the
capacity indicated below, which said attorney-in-fact and agent may deem
necessary or advisable to enable said corporation to comply with the
Securities Exchange Act of 1934, as amended, and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection with
The Grand Union Company's Annual Report on Form 10-K, for the period ended
March 30, 1995, including specifically but without limitation, power and
authority to sign for each in his name in his capacity as members of the
board of directors,and to sign any and all amendments hereto, and each does
hereby ratify and confirm all that said attorney-in-fact and agent may
lawfully do or cause to be done by virtue hereof.
SIGNATURE TITLE DATE
/s/ Roger E. Stangeland Director and Chairman June 13, 1996
- ----------------------------
Roger E. Stangeland
/s/ Joseph J. McCaig Director, President and Chief June 13, 1996
- ---------------------------- Executive Officer (Principal
Joseph J. McCaig Executive Officer)
/s/ William A. Louttit Director, Executive Vice June 13, 1996
- ---------------------------- President and Chief
William A. Louttit Operating Officer
/s/ Daniel E. Josephs Director June 13, 1996
- ----------------------------
Daniel E. Josephs
/s/ William G. Kagler Director June 13, 1996
- ----------------------------
William G. Kagler
/s/ Douglas T. McClure, Jr. Director June 13, 1996
- -----------------------------
Douglas T. McClure, Jr.
/s/ David Y. Ying Director June 13, 1996
- -----------------------------
David Y. Ying
/s/ Kenneth R. Baum Senior Vice President, June 13, 1996
- ----------------------------- Chief Financial Officer
Kenneth R. Baum and Secretary
(Principal Financial Officer and
Principal Accounting Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-30-1996
<PERIOD-START> APR-02-1995
<PERIOD-END> MAR-30-1996
<CASH> 39,425
<SECURITIES> 0
<RECEIVABLES> 20,948
<ALLOWANCES> 0
<INVENTORY> 133,506
<CURRENT-ASSETS> 207,588
<PP&E> 443,558
<DEPRECIATION> 37,979
<TOTAL-ASSETS> 1,185,206
<CURRENT-LIABILITIES> 178,903
<BONDS> 595,421
0
0
<COMMON> 10,000
<OTHER-SE> 34,144
<TOTAL-LIABILITY-AND-EQUITY> 1,185,206
<SALES> 2,307,810
<TOTAL-REVENUES> 0
<CGS> 1,594,113
<TOTAL-COSTS> 1,594,113
<OTHER-EXPENSES> 772,831
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 98,985
<INCOME-PRETAX> (158,119)
<INCOME-TAX> 18,927
<INCOME-CONTINUING> (139,192)
<DISCONTINUED> 0
<EXTRAORDINARY> 854,785
<CHANGES> 0
<NET-INCOME> 715,593
<EPS-PRIMARY> (10.99)<F1>
<EPS-DILUTED> 0
<FN>
<F1>All amounts except earnings per share include the 41 weeks ended March 30, 1996
and the 11 weeks ended June 17, 1995. Earnings per share data is for the 41
weeks ended march 30, 1996 because earnings per share data is not meaningful
for periods prior to the effective data due to the significant changes in the
capital structure of the Company.
</FN>
</TABLE>
