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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended OCTOBER 12, 1996
Commission File Number 0-26602
THE GRAND UNION COMPANY
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22 - 1518276
-------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
201 Willowbrook Boulevard, Wayne, New Jersey 07470 - 0966
- -------------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
201-890-6000
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X . No .
------- --------
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 November 26, 1996, there were issued and outstanding 10,000,000
shares of the Registrant's common stock.
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THE GRAND UNION COMPANY
INDEX
PART I - FINANCIAL INFORMATION (UNAUDITED)
ITEM 1. FINANCIAL STATEMENTS.
Page No.
Consolidated Statement of Operations - 12 weeks ended
October 12, 1996 and October 14, 1995 3
Consolidated Statement of Operations - 28 weeks ended
October 12, 1996, 17 weeks ended October 14, 1995
(Successor Company) and 11 weeks ended
June 17, 1995 (Predecessor Company) 4
Consolidated Balance Sheet - October 12, 1996 and
March 30, 1996 5
Consolidated Statement of
Cash Flows - 28 weeks ended
October 12, 1996, 17 weeks ended October 14, 1995
(Successor Company) and 11 weeks ended
June 17, 1995 (Predecessor Company) 6
Notes to Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 9
PART II - OTHER INFORMATION
ITEM 2. CHANGE IN SECURITIES. 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 13
All items which are not applicable or to which the answer is negative have been
omitted from this report.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
THE GRAND UNION COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
(unaudited)
12 Weeks Ended
-------------------------------------
October 12, October 14,
1996 1995
------------ --------------
Sales $ 533,412 $ 523,711
Cost of sales (371,254) (361,074)
------------ --------------
Gross profit 162,158 162,637
Operating and administrative
expenses (131,809) (129,932)
Depreciation and amortization (19,732) (17,002)
Amortization of excess
reorganization value (23,678) (24,717)
Unusual item - (4,500)
Interest expense, net (24,574) (22,433)
------------ --------------
Loss before income tax benefit (37,635) (35,947)
Income tax benefit 6,982 5,872
------------ --------------
Net loss (30,653) (30,075)
Accrued dividends on
preferred stock (243) -
------------ --------------
Net loss applicable to
common stock $ (30,896) $ (30,075)
------------ --------------
------------ --------------
Net loss per common share $ (3.09) $ (3.01)
------------ --------------
------------ --------------
See accompanying notes to consolidated financial statements (unaudited).
3
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THE GRAND UNION COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Predecessor
Successor Company Company
-------------------------- -------------
28 Weeks 17 Weeks 11 Weeks
Ended Ended Ended
October 12, October 14, June 17,
1996 1995 1995
-------------- ------------ -----------
Sales $1,260,235 $ 756,374 $ 487,882
Cost of sales (876,178) (520,657) (344,041)
-------------- ------------ -----------
Gross profit 384,057 235,717 143,841
Operating and administrative expenses (312,687) (185,424) (117,544)
Depreciation and amortization (45,145) (23,957) (17,215)
Amortization of excess
reorganization value (55,250) (34,827) -
Unusual items - (4,500) (18,627)
Interest expense, net (contractual
interest of $43,360 for the 11 weeks
ended June 17, 1995) (56,861) (31,979) (19,791)
-------------- ------------ -----------
Loss before income tax benefit and
extraordinary gain on debt discharge (85,886) (44,970) (29,336)
Income tax benefit 11,421 5,372 -
-------------- ------------ -----------
Loss before extraordinary gain on
debt discharge (74,465) (39,598) (29,336)
Extraordinary gain on debt discharge - - 854,785
-------------- ------------ -----------
Net (loss) income (74,465) (39,598) 825,449
Accrued dividends on preferred stock (243) - -
-------------- ------------ -----------
Net (loss) income applicable to
common stock $ (74,708) $ (39,598) $ 825,449
-------------- ------------ -----------
-------------- ------------ -----------
Net loss per common share $ (7.47) $ (3.96)
-------------- ------------
-------------- ------------
See accompanying notes to consolidated financial statements (unaudited).
4
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THE GRAND UNION COMPANY
CONSOLIDATED BALANCE SHEET
(dollars in thousands, except par value)
(unaudited)
October 12, March 30,
1996 1996
--------------- --------------
ASSETS
Current assets:
Cash and temporary investments $ 31,539 $ 39,425
Receivables 26,055 20,948
Inventories 138,072 133,506
Other current assets 13,551 13,709
--------------- --------------
Total current assets 209,217 207,588
Property, net 457,785 473,726
Excess reorganization value, net 382,422 437,672
Deferred tax asset 65,337 53,916
Other assets 11,808 12,304
--------------- --------------
$ 1,126,569 $ 1,185,206
--------------- --------------
--------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of
long-term debt $ 1,461 $ 1,813
Current portion of obligations
under capital leases 7,669 7,080
Accounts payable and
accrued liabilities 150,716 170,010
--------------- --------------
Total current liabilities 159,846 178,903
--------------- --------------
Long-term debt 737,652 738,067
--------------- --------------
Obligations under capital leases 136,924 128,114
--------------- --------------
Other noncurrent liabilities 94,468 95,978
--------------- --------------
Redeemable Class A preferred
stock, $1.00 par value,
3,500,000 shares
authorized, 802,644 shares
issued and outstanding,
liquidation preference $40,243 40,243 -
--------------- --------------
Stockholders' equity:
Common stock, $1.00 par value,
30,000,000 shares authorized,
10,000,000 shares issued and
outstanding 10,000 10,000
Preferred stock, $1.00 par value,
10,000,000 shares authorized
less amount authorized as
Class A preferred stock,
no shares issued and outstanding - -
Capital in excess of par value 131,757 144,000
Accumulated deficit (184,321) (109,856)
--------------- --------------
Total stockholders' equity (42,564) 44,144
--------------- --------------
$ 1,126,569 $ 1,185,206
--------------- --------------
--------------- --------------
See accompanying notes to consolidated financial statements (unaudited).
5
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THE GRAND UNION COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
Predecessor
Successor Company Company
------------------------- ------------
28 Weeks 17 Weeks 11 Weeks
Ended Ended Ended
October 12, October 14, June 17,
1996 1995 1995
------------ ----------- ------------
OPERATING ACTIVITIES:
Net (loss) income $ (74,465) $ (39,598) $ 825,449
Adjustments to reconcile net
(loss) income to net cash
provided by (used for) operating
activities before reorganization
items paid:
Depreciation and amortization 45,145 23,957 17,215
Amortization of excess
reorganization value 55,250 34,827 -
Deferred taxes (11,421) (4,947) -
LIFO charge 700 400 300
Noncash interest (102) 14,638 1,126
Extraordinary gain on
debt discharge - - (854,785)
Net changes in assets and
liabilities:
Receivables (5,107) (5,758) 1,769
Inventories (5,266) 11,062 12,646
Accounts payable and accrued
liabilities (17,525) (52,446) (34,928)
Other current assets 158 (734) 2,776
Other (2,183) (3,231) 4,493
----------- ----------- ------------
Net cash provided by (used for)
operating activities before
reorganization items paid (14,816) (21,830) (23,939)
Reorganization items paid (3,720) (12,108) (4,913)
----------- ----------- ------------
Net cash provided by (used for)
operating activities (18,536) (33,938) (28,852)
INVESTMENT ACTIVITIES: ----------- ----------- ------------
Capital expenditures (18,226) (13,975) (3,301)
Disposals of property 7,901 - 5,452
----------- ----------- ------------
Net cash (used for) provided by
investment activities (10,325) (13,975) 2,151
FINANCING ACTIVITIES: ----------- ----------- ------------
Net proceeds from sale of
preferred stock 28,000 - -
Obligations under capital
leases discharged (6,600) (2,407) (1,707)
Retirement of long-term debt (6,425) (356) (239)
Net proceeds from long-term debt 6,000 18,089 -
Proceeds from New Bank agreement - - 104,144
Payment of Old Bank debt - - (93,144)
Loan placement fees - - (3,125)
----------- ----------- ------------
Net cash provided by (used for)
financing activities 20,975 15,326 5,929
(Decrease) increase in cash and ----------- ----------- ------------
temporary investments (7,886) (32,587) (20,772)
Cash and temporary investments at
beginning of period 39,425 68,651 89,423
Cash and temporary investments at ----------- ----------- ------------
end of period $ 31,539 $ 36,064 $ 68,651
------------ ----------- ------------
------------ ----------- ------------
Supplemental disclosure of cash
flow information:
Interest payments $ 55,034 $ 8,652 $ 9,515
Capital lease obligations incurred 15,999 280 20,072
Accrued dividends on preferred stock 243 - -
See accompanying notes to consolidated financial statements (unaudited).
6
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THE GRAND UNION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - BASIS OF ACCOUNTING
The accompanying interim consolidated financial statements of The Grand
Union Company (the "Company") include the accounts of the Company and its
subsidiaries, all of which are wholly-owned. These consolidated financial
statements as of and for the periods subsequent to June 17, 1995 were prepared
in accordance with the principles of fresh-start reporting contained within the
American Institute of Certified Public Accountants Statement of Position 90-7,
"Financial Reporting By Entities In Reorganization Under The Bankruptcy Code"
("Fresh-Start Reporting"). Therefore, in connection with the implementation of
Fresh-Start Reporting, a new entity was deemed created for financial reporting
purposes and, where applicable, the consolidated financial statements for the
"Successor Company" have been separately identified from those of the
"Predecessor Company". In the opinion of management, the consolidated
financial statements include all adjustments, which, except for fresh-start
adjustments, consist only of normal recurring adjustments necessary for a fair
presentation of operating results for the interim periods.
These consolidated financial statements should be read in conjunction with
the consolidated financial statements and related notes contained in the
Company's Annual Report on Form 10-K for the 52 weeks ended March 30, 1996.
Operating results for the periods presented are not necessarily indicative of
the results for the full fiscal year.
NOTE 2 - ISSUANCE OF PREFERRED STOCK
On July 30, 1996, the Company entered into an agreement (the "Stock
Purchase Agreement") to sell $100 million of 8.5% convertible preferred stock,
$1.00 par value per share (the "Class A Preferred Stock") to an investment
group composed of Trefoil Capital Investors II, L. P., a Delaware limited
partnership, and GE Investment Private Placement Partners II, A Limited
Partnership, a Delaware limited partnership (collectively, the "Purchasers").
On September 17, 1996, the Company sold 800,000 shares of Class A Preferred
Stock to the Purchasers for aggregate proceeds of $40,000,000 (the "Principal
Closing"). Under the terms of the Stock Purchase Agreement, the Company will
sell to the Purchasers an additional 400,000 shares of Class A Preferred Stock
at a purchase price of $50 per share (the "Stated Value") on each of February
25, 1997, August 25, 1997 and February 25, 1998. Any or all of the additional
purchases may be accelerated by the Purchasers at their option. Each of the
additional purchases is subject to the satisfaction or waiver of certain closing
conditions as specified in the Stock Purchase Agreement.
Dividends are cumulative and payable quarterly at 8.5% of the Stated Value
per annum. Dividends are payable, at the option of the Company, in additional
shares of Class A Preferred Stock or common stock through the third anniversary
of the Principal Closing. From the third anniversary through the fifth
anniversary of the Principal Closing, dividends are payable in cash, unless the
terms of the Company's bank credit agreement or 12% senior note indenture
prohibit cash dividends, in which case dividends may be paid in Class A
Preferred Stock or common stock. After the fifth anniversary of the Principal
Closing, dividends are payable in cash. To the extent that any dividends on the
Class A Preferred Stock are paid in shares of common stock, the Company is
required to pay a premium in additional shares of common stock equal to 33 1/3%
of the number of shares of common stock that would otherwise be paid as the
dividend. On September 12, 1996, the Company declared a dividend on the Class A
Preferred Stock, payable in 2,644 shares of Class A Preferred Stock on September
30, 1996. The aggregate Stated Value of the dividend was $132,200.
Each share of Class A Preferred Stock is convertible at the option of the
holder, at any time, into 6.8966 shares of common stock. At October 12, 1996,
the 802,644 outstanding shares of Class A Preferred Stock were convertible into
an aggregate 5,535,515 shares of common stock.
The Company is required to redeem the Class A Preferred Stock no later than
June 1, 2005. Additionally, the Class A Preferred Stock may be redeemed at the
Company's option at $50 per share plus all accrued and unpaid dividends if the
volume-weighted average price of the Company's common stock over a 60-day period
exceeds $13.05 per share after September 17, 1998, or $14.50 per share after
September 17, 1999. After September 17, 2001, the Company's right to redeem
is not contingent on the price of the common stock and the redemption price is
approximately $51.60 per share plus all accrued and unpaid dividends, declining
ratably to $50 per share plus all accrued and unpaid dividends after September
17, 2004.
The Stock Purchase Agreement and the Certificate of Designation of
Preferred Stock, setting forth the powers, preferences, rights, qualifications,
limitations and restrictions of such class of preferred stock (the "Certificate
of Designation"), also contain provisions with respect to the rights of the
Purchasers to elect a specified number of directors, the number of disinterested
directors, voting rights and pre-emptive rights with respect to any sale by the
Company of shares of common stock or securities convertible
7
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into, or exchangeable for, common stock. The liquidation preference of the
Class A Preferred Stock is equal to its Stated Value plus any accrued and unpaid
dividends.
The Class A Preferred Stock has been classified as Redeemable Class A
Preferred Stock in the accompanying Consolidated Balance Sheet. The dividend on
the Class A Preferred Stock and the accrued and unpaid dividends through October
12, 1996 have been accounted for by a charge against Capital in Excess of Par
Value and a corresponding increase in the value of the Class A Preferred Stock.
The Company has recorded, as a charge to Capital in Excess of Par Value,
expenses directly related to the sale of the Class A Preferred Stock totaling
$12,000,000. The expenses include transaction fees paid to Shamrock Capital
Advisors, Inc. and GE Investment Management Corporation of $2,000,000 each, fees
paid to Donaldson, Lufkin and Jenrette, the Company's financial advisor and a
related party, of approximately $5,200,000 and legal and other professional fees
and expenses of $2,800,000.
NOTE 3 - NET LOSS PER SHARE
The Company's outstanding warrants to purchase common stock and options to
purchase common stock under the Company's 1995 Non-Employee Director's Stock
Option Plan and 1995 Equity Incentive Plan are considered common stock
equivalents. The inclusion of these common stock equivalents in the Company's
primary earnings per share calculation would have been anti-dilutive for the
periods presented. Accordingly, only the weighted average number of common
shares, totaling 10,000,000, were included in the calculation.
The Company's Class A Preferred Stock is not deemed to be a common stock
equivalent. A fully diluted earnings per share calculation is not presented
because inclusion of the Class A Preferred Stock in the calculation would have
been anti-dilutive for the periods presented.
Earnings (loss) per common share data is not meaningful for periods prior
to June 17, 1995 due to the significant change in the capital structure of the
Company.
NOTE 4 - SUBSEQUENT EVENT
On November 7, 1996, the shareholders approved the 1995 Non-Employee
Directors' Stock Option Plan and the 1995 Equity Incentive Plan. Additionally,
approval was given to an increase in the number of authorized shares of common
stock to 60,000,000 and a decrease in the par value to $.01. Also approved
were two amendments to the Company's certificate of incorporation, a fair price
amendment and an amendment to permit stockholder action by written consents.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
GENERAL:
As discussed in Note 1, as of 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 applied Fresh-Start Reporting. In connection with the adoption of
Fresh-Start Reporting, a new entity was deemed created for financial reporting
purposes. For purposes of the discussion of Results of Operations for the 28
weeks ended October 14, 1995, 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):
12 Weeks Ended 28 Weeks Ended
------------------------ -------------------------
October 12, October 14, October 12, October 14,
1996 1995 1996 1995
------------------------ -------------------------
Sales $ 533.4 $ 523.7 $ 1,260.2 $ 1,244.3
Gross profit 162.2 162.6 384.1 379.6
Operating and
administrative expenses (131.8) (129.9) (312.7) (303.0)
Depreciation and
amortization (19.7) (17.0) (45.1) (41.2)
Amortization of excess
reorganization value (23.7) (24.7) (55.3) (34.8)
Unusual items - (4.5) - (23.1)
Interest expense, net (24.6) (22.4) (56.9) (51.8)
Income tax benefit 7.0 5.8 11.4 5.4
Extraordinary gain on
debt discharge - - - 854.8
Net (loss) income (30.7) (30.1) (74.5) 785.9
LIFO provision (0.3) (0.3) (0.7) (0.7)
Sales percentage
increase (decrease) 1.9% (5.9%) 1.3% (4.6%)
Same store sales percentage
increase (decrease) 2.0 (2.8) 1.4 (1.1)
Gross profit as a
percentage of sales 30.4 31.1 30.5 30.5
Operating and administrative
expenses as a percentage
of sales 24.7 24.8 24.8 24.3
Sales for the 12 (the "second quarter") and 28 (the "year to date") weeks
ended October 12, 1996 increased $9.7 million, or 1.9%, and $16.0 million, or
1.3%, respectively, as compared to the 12 and 28 weeks ended October 14, 1995.
Same store sales (sales of stores which were operated during the comparable
periods of both fiscal years) increased 2.0% and 1.4% during the second quarter
and year to date, respectively, compared to the prior year. Same store sales
increases for the second quarter and year to date resulted from the continued
maturation of the Company's marketing and customer service programs, partially
offset by the negative impact of the wet, cool summer on its northern resort
stores. The Company opened one new store and one replacement store and closed
three stores during the 28 weeks ended October 12, 1996.
Gross profit, as a percentage of sales, decreased 0.7% to 30.4% in the
second quarter compared to the prior year as a result of the "More Lower
Prices" marketing program implemented last year and completed earlier this
year partially offset by the positive benefits from outsourcing warehouse
distribution. Gross profit, as a percentage of sales, was equal to last year
for the year to date period. In addition to the factors affecting the
second quarter comparison, the year to date comparison reflects the positive
benefit of the restoration of vendor promotional allowances and other vendor
support to normal levels this year from bankruptcy impacted levels
experienced in last year's first quarter.
Operating and administrative expenses, as a percentage of sales, decreased
0.1% to 24.7% for the second quarter and increased 0.5% to 24.8% for the year to
date. The decrease in operating expenses, as a percentage of sales, in the
second quarter resulted from decreases in store labor expense and a gain
from the sale of a store, offset by increased advertising expense. The
increase in operating expenses, as a percentage of sales, in the year to date
resulted from increased advertising expense and decreased gains on the sales
of stores, offset by decreased store labor expense. Store labor expense in
both the quarter and year to date, as a percentage of sales, reflected
savings in store average hourly pay from the store voluntary resignation
programs completed last year, in excess of the cost of increased store labor
hours in support of the Company's marketing and customer service programs.
Depreciation and amortization increased $2.7 million to $19.7 million for
the second quarter and $3.9 million to $45.1 million for the year to date
principally from increases in capitalized leases.
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Interest expense increased $2.2 million to $24.6 million and $5.1 million
to $56.9 million for the second quarter and year to date periods, respectively,
compared with the same periods of the prior year. The second quarter increase
is principally a result of higher levels of capitalized leases in the current
year. In addition, the year to date increase was impacted by the finalization
of debt levels upon emergence from bankruptcy.
The Company recorded federal and state income tax benefits of $7.0 and
$11.4 million during the second quarter and year to date periods, respectively,
compared to $5.9 million and $5.4 million for the same periods last year.
The Company frequently utilizes a financial measure, EBITDA, in discussing
its operating results to normalize comparisons with companies of varying
capital structures. The Company arbitrarily defines EBITDA as earnings before
accrued preferred stock dividends, extraordinary gains or losses, income tax
benefits, interest expense, unusual items, depreciation and amortization, and
LIFO provision. The Company believes that EBITDA comparisons are useful for
investors but are not a substitute for operating data required by generally
accepted accounting principles. EBITDA, as defined by the Company, totaled
$30.6 million, 5.7% of sales, and $72.1 million, 5.7% of sales, for the second
quarter and year to date, respectively, compared to $33.0 million, 6.3% of
sales, and $77.3 million, 6.2% of sales, for the same periods last year. The
decreases are a result of the sales, gross profit and operating expense
variances discussed previously. During Fiscal 1996 and Fiscal 1997, the Company
has reduced costs through the outsourcing of distribution, the store
voluntary resignation incentive programs and reorganization of the Company's
organizational structure. These savings have been reinvested in price
repositioning and customer service programs which adversely affect gross
margin and operating expenses in periods in which they are made.
LIQUIDITY AND CAPITAL RESOURCES
On July 30, 1996, the Company entered into an agreement (the "Stock
Purchase Agreement") to sell $100 million of 8.5% convertible preferred stock,
$1.00 par value per share (the "Class A Preferred Stock") to an investment
group composed of Trefoil Capital Investors II, L. P., a Delaware limited
partnership, and GE Investment Private Placement Partners II, A Limited
Partnership, a Delaware limited partnership (collectively, the "Purchasers").
On September 17, 1996, the Company sold 800,000 shares of Class A Preferred
Stock to the Purchasers for an aggregate price of $40 million. The Company
incurred $12 million of expenses directly related to the sale of Class A
Preferred Stock, including one-time fees totaling approximately $9.2 million.
Under the terms of the Stock Purchase Agreement, the Company will sell to
the Purchasers an additional 400,000 shares of Class A Preferred Stock at a
purchase price of $50 per share (the "Stated Value") on each of February 25,
1997, August 25, 1997 and February 25, 1998. Any or all of the purchases
referred to in the preceding sentence may be accelerated by the Purchasers, with
or without the approval of the Company.
Proceeds from the sale of the Preferred Stock are being used to accelerate
Grand Union's capital spending program. The Company anticipates capital
spending, including capitalized leases other than real estate leases, of
approximately $250 million over the three year period ending March 1999.
The Company is and will continue to be highly leveraged. Interest payments
totaled approximately $55 million for the 28 weeks ended October 12, 1996 and
will be approximately $100 million for the full year. Capital expenditures,
including capitalized leases other than real estate leases, totaled
approximately $20 million for the 28 weeks ended October 12, 1996 and are
expected to total between $65 and $70 million for the full year. Fiscal 1997
capital expenditures will principally be dedicated to new and replacement
stores, remodels, store systems and maintenance capital. Through October 12,
1996, the Company had opened one new and one replacement store. By the end of
the fiscal year, the Company expects to open an additional replacement store and
complete ten M.A.S.T.E.R.S. ("Maximize All Space, Totally Expand the Right
Stuff") renovations. 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 proceeds
received from the sale of Class A Preferred Stock, operations, its Amended and
Restated Credit Agreement (the "New Bank Facility"), and, to a limited extent,
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 expanded capital expenditure program is dependent on its
operating performance.
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Resources used to finance significant expenditures are as follows (in
millions):
28 Weeks Ended
----------------------------
October 12, October 14,
1996 1995
-------------- ------------
Resources used for:
Capital expenditures $ 18.2 $ 17.3
Debt and capital lease repayments 13.0 97.9
Operating activities, including cash and
temporary investments 10.7 9.4
Loan placement fees - 3.1
-------------- ------------
$ 41.9 $ 127.7
-------------- ------------
-------------- ------------
Financed by:
Net proceeds from sale of Class A
Preferred Stock $ 28.0 $ -
Property disposals 7.9 5.5
Net proceeds from long-term debt 6.0 -
Proceeds from New Bank Facility - 122.2
-------------- ------------
$ 41.9 $ 127.7
-------------- ------------
-------------- ------------
During the 28 weeks ended October 12, 1996, funds for capital expenditures,
debt repayments and operating activities were obtained from net proceeds from
the sale of Class A Preferred Stock, property disposals and borrowings under the
Company's bank agreement. During the 28 weeks ended October 14, 1995, funds for
debt and capital lease repayments, capital expenditures, operating activities
and loan placement fees were principally obtained from cash provided by the New
Bank Facility.
As of October 12, 1996, the Company had $33.0 million of borrowings and
approximately $44.4 million of letters of credit outstanding under its $100
million revolving credit facility.
As a result of the Stock Purchase Agreement, the Company sought and
obtained from its banks a waiver and amendment to its credit agreement. The
amendment was principally designed to allow the Company the flexibility to
utilize proceeds from the Stock Purchase Agreement to accelerate capital
spending. During the 28 weeks ended October 12, 1996, the Company was in
compliance with the covenants of its debt instruments, as amended.
With the exception of historical information, the matters discussed herein
are "forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are subject to
risks, uncertainties and other factors which could cause actual results to
differ materially from future results expressed or implied by such
forward-looking statements. Potential risks and uncertainties include, but are
not limited to, the competitive environment in which the Company operates, the
Company's ability to complete its capital expenditure program on a timely basis
and the general economic conditions in the geographic areas in which the Company
operates.
11
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PART II - OTHER INFORMATION
ITEM 2. CHANGE IN SECURITIES
On September 17, 1996, the Company sold 800,000 shares of Class A
Convertible Preferred Stock ("Class A Preferred Stock") to Trefoil Capital
Investors II, L.P. and GE Investment Private Placement Partners II, A
Limited Partnership (the "Investors") for an aggregate cash consideration
of $40 million. With respect to this sale and expected future sales of an
additional $60 million of Preferred Stock, the Company paid transaction
fees of $2 million each to Shamrock Capital Advisors, Inc. and GE
Investment Management Incorporated, and a total transaction fee (including
a fairness fee) of $4,753,400 to Donaldson, Lufkin & Jenrette Securities
Corporation. The transaction is exempt from registration under Section
4(2) of the Securities Act of 1933, as a private offering. Neither the
Company nor any person acting on the Company's behalf offered to sell the
securities by any form of general solicitation or general advertising. The
Investors have represented that the shares were acquired for the purpose of
investment and not with a view to or for sale in connection with any
distribution thereof, and that each Investor is an "accredited investor"
within the meaning of Rule 501(a) under the Securities Act of 1933. The
shares carry a legend restricting transfer, and may not be resold without
registration under the Securities Act of 1933 or an exemption therefrom.
Each share of Class A Preferred Stock is convertible at the option of
the holder, at any time, into 6.8966 shares of Common Stock. If more than
one share is surrendered for conversion by the same holder at the same
time, the number of shares of Common Stock issuable to that holder shall be
computed based on the total number of shares of Class A Preferred Stock
surrendered, with either a cash payment or issuance of a full share of
Common Stock in lieu of any then remaining fractional share. Dividends
continue to accrue until the conversion date. As to any shares to be
redeemed, the conversion right terminates on the fifth business day
preceding the redemption date. The conversion ratio is subject to
adjustment if the Company subdivides, combines or reclassifies the
outstanding shares of Common Stock, pays a dividend on Common Stock, or
(subject to certain exceptions) issues shares of Common Stock, rights or
warrants at less than current market price. In the case of a capital
reorganization, reclassification of outstanding shares of Common Stock,
merger of the Company, or sale of all or substantially all the assets of
the Company, the Class A Preferred Stock is generally convertible into the
kind and amount of securities receivable by the holders of Common Stock, in
the same amount as if such Class A Preferred Stock had been converted to
Common Stock.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
EXHIBIT NUMBER
3.1 Amendment to the By-laws of The Grand Union Company, dated
September 12, 1996.
10.1 Form of Indemnification Agreement between the Company and J.
Costello, C. Miller, G. Moore and J.R. Stonesifer.
10.2 Third Amendment to the Amended and Restated Credit Agreement,
dated September 12, 1996.
10.3 First Supplemental Indenture to the 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, dated September 9, 1996.
10.4 Certificate of Designation of Class A Convertible Preferred Stock
setting forth the Powers, Preferences, Rights, Qualifications,
Limitations and Restriction of such class of Preferred Stock.
10.5 Amended and Restated 1995 Equity Incentive Plan of The Grand
Union Company.
10.6 Amended and Restated 1995 Non-Employee Directors' Stock Option
Plan.
10.7 Management Agreement between The Grand Union Company and Shamrock
Capital Advisors, Inc., dated July 30, 1996.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
(1) Report on Form 8-K dated July 30, 1996 as filed with the Commission on
August 14, 1996.
(2) Report on Form 8-K dated September 17, 1996 as filed with the
Commission on October 1, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE GRAND UNION COMPANY
----------------------------------
(Registrant)
Date NOVEMBER 26, 1996 /s/ KENNETH R. BAUM
----------------- ----------------------------------
Kenneth R. Baum
Senior Vice President, Chief
Financial Officer and Secretary
(Principal Financial Officer and
Principal Accounting Officer)
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EXHIBIT 3.1
THE GRAND UNION COMPANY
BY-LAWS
As amended through September 12, 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.
To be properly brought before the annual meeting, business must be either
(a) specified in the notice of meeting (or any supplement thereto) given by or
at the direction of the Board of Directors, (b) otherwise properly brought
before the meeting by or at the direction of the Board of Directors, or (c)
otherwise properly brought before the meeting by a stockholder. In addition to
any other applicable requirements, for business to be properly brought before
the annual meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation, addressed to the attention of
the Secretary of the Corporation, within the time specified in the federal proxy
rules for timely submission of a stockholder proposal or, if not within such
time, then not less than sixty days nor more than ninety days prior to the
meeting; PROVIDED, HOWEVER, that in the event that less than fifty days' notice
or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received by the
earlier of (a) the close of business on the fifteenth day following the day on
which such notice of the date of the annual meeting was mailed or such public
disclosure was made, whichever first occurs, and (b) two days prior to the date
of the meeting. A stockholder's notice to the Secretary shall set forth as to
each matter the stockholder proposes to bring before the annual meeting (i) a
brief description of the business desired to be brought before the annual
meeting, (ii) the name and record address of the stockholder proposing such
business, (iii) the class and number of shares of the Corporation which are
beneficially owned by the stockholder, and (iv) any material interest of the
stockholder in such business. Notwithstanding anything in these by-laws to the
contrary, no business shall be conducted at the annual meeting except in
accordance with the procedures set forth in this paragraph; PROVIDED, HOWEVER,
that nothing in this paragraph shall be deemed to preclude discussion by any
stockholder of any business properly brought before the annual meeting.
The Chairman of the Board of Directors shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section I, and if
he should so determine, he shall
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so declare to the meeting and any such business not properly brought before the
meeting shall not be transacted.
SECTION II. Special meetings of the stockholders may be held upon call of
the Board of Directors or of the Executive Committee or of the Chairman of the
Board (and shall be called by the Chairman of the Board at the request in
writing of stockholders owning a majority of the outstanding shares of the
Corporation entitled to vote at the meeting) at such time and at such place
within or without the State of Delaware, as may be fixed by the Board of
Directors or by the Executive Committee or the Chairman of the Board or by the
stockholders owning a majority of the outstanding stock of the Corporation
entitled to vote, as the case may be, and as may be stated in the notice setting
forth such call.
SECTION III. Notice of the time and place of every meeting of stockholders
shall be delivered personally or mailed at least ten days previous thereto to
each stockholder of record entitled to vote at the meeting, who shall have
furnished a written address to the Secretary of the Corporation for the purpose.
Such further notice shall be given as may be required by law. Meetings may be
held without notice if all stockholders entitled to vote at the meeting are
present, or if notice is waived by those not present.
SECTION IV. The holders of record of a majority of the issued and
outstanding shares of the Corporation, which are entitled to vote at the
meeting, shall, except as otherwise provided by law, constitute a quorum at all
meetings of the stockholders. If there be no such quorum present in person or by
proxy, the holders of a majority of such shares so present or represented may
adjourn the meeting from time to time.
SECTION V. Meetings of the stockholders shall be presided over by the
Chairman of the Board or, if the Chairman is not present, by the President or a
Vice-President or, if no such officer is present, by a chairman to be chosen at
the meeting. The Secretary of the Corporation, or in his absence, an Assistant
Secretary shall act as secretary of the meeting, if present.
SECTION VI. Each stockholder entitled to vote at any meeting shall have one
vote in person or by proxy for each share of stock held by him which has voting
power upon the matter in question at the time; but no proxy shall be voted after
three years from its date, unless such proxy expressly provides for a longer
period.
SECTION VII. When a quorum is present at any meeting, a plurality of the
votes properly cast for election to any office shall elect to such office and a
majority of the votes properly cast upon any question other than election to an
office shall decide the question, except when a larger vote is required by law,
by the certificate of incorporation or by these by-laws. No ballot shall be
required for any election unless requested by a stockholder present or
represented at the meeting and entitled to vote in the election. In the event a
ballot shall be required, the chairman of each meeting at which directors are to
be elected shall appoint two inspectors of election, unless such appointment
shall be unanimously waived by those stockholders present 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
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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.
SECTION IX. Only persons who are nominated in accordance with the
following procedures shall be eligible for election as directors. Nominations
of persons for election to the Board of Directors at the annual meeting or by
the written consent of the shareholders, by or at the direction of the Board of
Directors, may be made by any Nominating Committee or person appointed by the
Board of Directors; nominations may also be made by any shareholder of the
Corporation entitled to vote for the election of directors at the meeting who
complies with the notice procedures set forth in this Section IX. Such
nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation. To be timely, a shareholder's notice shall be delivered to
or mailed and received at the principal executive offices of the corporation
addressed to the attention of the Secretary of the Corporation not less than
sixty days prior to the meeting or the date the shareholders are first solicited
for their consents as the case may be; PROVIDED, HOWEVER, that, in the case of
an annual meeting and in the event that less than fifty days' notice or prior
public disclosure of the date of the meeting is given or made to shareholders,
notice by the shareholder to be timely must be so received not later than the
earlier of (a) the close of business on the fifteenth day following the day on
which such notice of the date of the meeting was mailed or such public
disclosure was made, whichever first occurs, or (b) two days prior to the date
of the meeting. Such shareholder's notice to the Secretary shall set forth (a)
as to each person whom the shareholder proposes to nominate for election or
reelection as a director, (i) the name, age, business address and residence
address of the person, (ii) the principal occupation or employment of the
person, (iii) the class and number of shares of capital stock of the Corporation
which are beneficially owned by the person, (iv) a statement as to the person's
citizenship, and (v) any other information relating to the person that is
required
3
<PAGE>
to be disclosed in solicitations for proxies for election of directors pursuant
to Section 14 of the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder, and (b) as to the shareholder giving the
notice, (i) the name and record address of the shareholder and (ii) the class,
series and number of shares of capital stock of the Corporation which are
beneficially owned by the shareholder. The Corporation may require any proposed
nominee to furnish such other information as may reasonably be required by the
Corporation to determine the eligibility of such proposed nominee to serve as a
director of the Corporation. No person shall be eligible as a director of the
Corporation unless nominated in accordance with the procedures set forth herein.
In connection with any annual meeting, the Chairman of the Board of
Directors shall, if the facts warrant, determine and declare to the meeting that
a nomination was not made in accordance with the foregoing procedure, and if he
should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
ARTICLE II.
BOARD OF DIRECTORS
SECTION I. The Board of Directors of the Corporation shall consist of nine
persons, subject to increase as provided in Section VIII of this Article II.
Directors shall hold office until the annual meeting of the stockholders next
ensuing after their election and until their respective successors are elected
and shall qualify. Within the limits above specified, the number of directors
shall be determined by resolutions of the Board of Directors or by the
stockholders at an annual meeting. Newly created directorships resulting from
any increase in the authorized number of Directors shall be filled in the same
manner and with the same effect prescribed in Section 2 of this Article II with
respect to vacancies. A majority of the Board of Directors shall constitute a
quorum.
SECTION II. Vacancies in the Board of Directors shall be filled by a
majority of the remaining directors, though less than a quorum, and the
directors so chosen shall hold office until the next annual election and until
their successors shall be duly elected and qualified, unless sooner displaced
pursuant to law.
SECTION III. Meetings of the Board of Directors shall be held at such place
within or without the State of Delaware as may from time to time be fixed by
resolution of the Board or as may be specified in the call of any meeting.
Regular meetings of the Board of Directors shall be held at such times as may
from time to time be fixed by resolution of the Board; and special meetings may
be held at any time upon the call of the Executive Committee or the Chairman of
the Board, by oral, telegraphic or written notice, duly served on or sent or
mailed to each director not less than two days before the meeting. A meeting of
the Board may be held without notice immediately after the annual meeting of
stockholders at the same place at which such meeting is held. Notice need not be
given of regular meetings of the Board held at times fixed by resolutions of the
Board. Meetings may be held at any time without notice if all the directors are
present or if those not present waive notice of the meeting in writing.
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SECTION IV. Except as may be otherwise provided by law, by the certificate
of incorporation or by these by-laws, when a quorum is present at any meeting
the vote of a majority of the directors present shall be the act of the Board of
Directors.
SECTION V. Any action required or permitted to be taken at any meeting of
the Board of Directors or a committee thereof may be taken without a meeting if
all the members of the Board or of such committee, as the case may be, consent
thereto in writing, and such writing or writings are filed with the records of
the meetings of the Board or of such committee. Such consent shall be treated
for all purposes as the act of the Board or of such committee, as the case may
be.
SECTION VI. Members of the Board of directors, or any committee designated
by such Board, may participate in a meeting of such Board or committee by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other or by any other
means permitted by law. Such participation shall constitute presence in person
at such meeting.
SECTION VII. The Board of Directors may also, by resolution or resolutions,
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of two or more of the directors of the Corporation, which,
to the extent provided in said resolution or resolutions, shall have and may
exercise the powers of the Board of Directors in the management of the business
and affairs of the Corporation, and may have power to authorize the seal of the
Corporation to be affixed to all papers which may require it. Such committee or
committees shall have such name or names as may be determined from time to time
by resolution adopted by the Board of Directors. A majority of the members of
any such committee may determine its action and fix the time and place of its
meetings unless the Board of Directors shall otherwise provide. The Board of
Directors shall have power at any time to fill vacancies in, to change the
membership of, or to dissolve any such committee.
SECTION VIII. The provisions of Sections I and II of this Article are
subject to the rights, if any, of the holders of shares of any series of the
Class A Preferred Stock of the Company with respect to the election of directors
in the event the Company defaults in the payment of dividends, the term of
office of any director so elected and the filling of any vacancy in the office
of any director so elected. In connection therewith, so long as any shares of
such class are outstanding, the number of directors authorized by resolution of
the Board of Directors or by the stockholders at the annual meeting pursuant to
Section I of this Article shall be such that upon the exercise by the holders of
shares of any such class of any right to elect a specified number of directors
the number of directors of the Company would be increased by such specified
number.
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.
5
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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 accordance with general resolutions.
ARTICLE V.
CORPORATE BOOKS
The books of the Corporation, except the original or duplicate stock
ledger, may be kept outside of the State of Delaware, at the office of the
Corporation in Wayne, New Jersey or at such other place or places as the Board
of Directors may from time to time determine.
6
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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
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 10.1
AGREEMENT
This Agreement, made and entered into this ___ day of _________, 1996
("Agreement"), by and between The Grand Union Company, a Delaware corporation
("Company"), and _______________ ("Indemnitee"):
WHEREAS, highly competent persons have become more reluctant to serve
publicly-held corporations as directors or in other capacities unless they are
provided with adequate protection through insurance and adequate indemnification
against inordinate risks of claims and actions against them arising out of their
service to and activities on behalf of the corporation; and
WHEREAS, the Board of Directors of the Company (the "Board") has determined
that, in order to attract and retain qualified individuals, the Company will
attempt to maintain on an ongoing basis, at its sole expense, liability
insurance to protect persons serving the Company and its subsidiaries from
certain liabilities. Although the furnishing of such insurance has been a
customary and widespread practice among United States-based corporations and
other business enterprises, the Company believes that, given current market
conditions and trends, such insurance may be available to it in the future only
at higher premiums and with more exclusions. At the same time, directors,
officers, and other persons in service to corporations or business enterprises
are being increasingly subjected to expensive and time-consuming litigation
relating to, among other things, matters that traditionally would have been
brought only against the Company or business enterprise itself; and
WHEREAS, the uncertainties relating to such insurance and to
indemnification have increased the difficulty of attracting and retaining such
persons; and
WHEREAS, the Board has determined that the increased difficulty in
attracting and retaining such persons is detrimental to the best interests of
the Company's stockholders and that the Company should act to assure such
persons that there will be increased certainty of such protection in the future;
and
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest extent
permitted by applicable law so that they will serve or continue to serve the
Company free from undue concern that they will not be so indemnified; and
WHEREAS, this Agreement is a supplement to and in furtherance of the
By-laws of the Company and any resolutions adopted pursuant thereto, and shall
not be deemed a substitute therefore, nor to diminish or abrogate any rights of
Indemnitee thereunder; and
<PAGE>
WHEREAS, the By-laws and the Delaware director indemnification statute each
is nonexclusive, and therefore contemplates that contracts may be entered into
with respect to indemnification of directors, officers and employees; and
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify, and to advance expenses on behalf
of, such persons to the fullest extent permitted by applicable law so that they
will serve or continue to serve the Company free from undue concern that they
will not be so indemnified; and
WHEREAS, Indemnitee is willing to serve, continue to serve and to take on
additional service for or on behalf of the Company on the condition that he be
so indemnified;
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
Section 1. SERVICES BY INDEMNITEE. Indemnitee agrees to serve as a
director and/or officer of the Company. Indemnitee may at any time and for any
reason resign from such position (subject to any other contractual obligation or
any obligation imposed by operation of law), in which event the Company shall
have no obligation under this Agreement to continue Indemnitee in such position.
This Agreement shall not be deemed an employment contract between the Company
(or any of its subsidiaries) and Indemnitee. Indemnitee specifically
acknowledges that Indemnitee's employment with the Company (or any of its
subsidiaries), if any, is at will, and the Indemnitee may be discharged at any
time for any reason, with or without cause, except as may be otherwise provided
in any written employment contract between Indemnitee and the Company (or any of
its subsidiaries), other applicable formal severance policies duly adopted by
the Board, or, with respect to service as a director or officer of the Company,
by the Company's Certificate of Incorporation, By-laws, and the General
Corporation Law of the State of Delaware. The foregoing notwithstanding, this
Agreement shall continue in force after Indemnitee has ceased to serve as a
director and/or officer of the Company.
Section 2. INDEMNIFICATION - GENERAL. The Company shall indemnify, and
advance Expenses (as hereinafter defined) to, Indemnitee (a) as provided in this
Agreement and (b) (subject to the provisions of this Agreement) to the fullest
extent permitted by applicable law in effect on the date hereof and as amended
from time to time. The rights of Indemnitee provided under the preceding
sentence shall include, but shall not be limited to, the rights set forth in the
other Sections of this Agreement.
Section 3. PROCEEDINGS OTHER THAN PROCEEDINGS BY OR IN THE RIGHT OF THE
COMPANY. Indemnitee shall be entitled to the rights of indemnification provided
2
<PAGE>
in this Section 3 if, by reason of his Corporate Status (as hereinafter
defined), he is, or is threatened to be made, a party to or a participant in any
threatened, pending or completed Proceeding (as hereinafter defined), other than
a Proceeding by or in the right of the Company. Pursuant to this Section 3,
Indemnitee shall be indemnified against all Expenses, judgments, penalties,
fines and amounts paid in settlement (including all interest, assessments and
other charges paid or payable in connection with or in respect of such Expenses,
judgments, penalties, fines and amounts paid in settlement) actually and
reasonably incurred by him or on his behalf in connection with such Proceeding
or any claim, issue or matter therein, if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Company and, with respect to any criminal Proceeding, had no reasonable cause to
believe his conduct was unlawful.
Section 4. PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. Indemnitee
shall be entitled to the rights of indemnification provided in this Section 4
if, by reason of his Corporate Status, he is, or is threatened to be made, a
party to or a participant in any threatened, pending or completed Proceeding
brought by or in the right of the Company to procure a judgment in its favor.
Pursuant to this Section, Indemnitee shall be indemnified against all Expenses
(including all interest, assessments and other charges paid or payable in
connection with or in respect of such Expenses) actually and reasonably incurred
by him or on his behalf in connection with such Proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company; PROVIDED, HOWEVER, that, if applicable law so
provides, no indemnification against such Expenses shall be made in respect of
any claim, issue or matter in such Proceeding as to which Indemnitee shall have
been adjudged to be liable to the Company unless and to the extent that the
Court of Chancery of the State of Delaware, or the court in which such
Proceeding shall have been brought or is pending, shall determine that such
indemnification may be made.
Section 5. PARTIAL INDEMNIFICATION. Notwithstanding any other provision
of this Agreement, to the extent that Indemnitee is, by reason of his Corporate
Status, a party to (or a participant in) and is successful, on the merits or
otherwise, in defense of any Proceeding, he shall be indemnified against all
Expenses actually and reasonably incurred by him or on his behalf in connection
therewith. If Indemnitee is not wholly successful in defense of such Proceeding
but is successful, on the merits or otherwise, as to one or more but less than
all claims, issues or matters in such Proceeding, the Company shall indemnify
Indemnitee against all Expenses actually and reasonably incurred by him or on
his behalf in connection with each successfully resolved claim, issue or matter.
For purposes of this Section and without limitation, the termination of any
claim, issue or matter in such a Proceeding by dismissal, with or without
prejudice, shall be deemed to be a successful result as to such claim, issue or
matter. If Indemnitee is entitled under any provision of this agreement to
indemnification
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by the Company for some or a portion of the Expenses, judgments, penalties,
fines and amounts paid in settlement (including all interest, assessments and
other charges paid or payable in connection with or in respect of such Expenses,
judgments, penalties, fines and amounts paid in settlement) actually and
reasonably incurred by him or on his behalf in connection with such Proceeding
or any claim, issue or matter therein, but not, however, for the total amount
thereof, the Company shall nevertheless indemnify Indemnitee for the portion to
which the Indemnitee is entitled.
Section 6. INDEMNIFICATION FOR ADDITIONAL EXPENSES.
(a) The Company shall indemnify Indemnitee against any and all Expenses
and, if requested by Indemnitee, shall (within seven (7) business days of such
request) advance such Expenses to Indemnitee, which are incurred by Indemnitee
in connection with any action brought by Indemnitee for (i) indemnification or
advance payment of Expenses by the Company under this Agreement or any other
agreement or by-law of the Company now or hereafter in effect; or (ii) recovery
under any directors' and officers' liability insurance policies maintained by
the Company, regardless of whether Indemnitee ultimately is determined to be
entitled to such indemnification, advance expense payment or insurance recovery,
as the case may be.
(b) Notwithstanding any other provision of this Agreement, to the extent
that Indemnitee is, by reason of his Corporate Status, a witness in any
Proceeding to which Indemnitee is not a party, he shall be indemnified against
all Expenses actually and reasonably incurred by him or on his behalf in
connection therewith.
Section 7. ADVANCEMENT OF EXPENSES. The Company shall advance all
reasonable Expenses incurred by or on behalf of Indemnitee in connection with
any Proceeding within seven (7) days after the receipt by the Company of a
statement or statements from Indemnitee requesting such advance or advances from
time to time, whether prior to or after final disposition of such Proceeding.
Such statement or statements shall reasonably evidence the Expenses incurred by
Indemnitee and shall include or be preceded or accompanied by an undertaking by
or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately
be determined that Indemnitee is not entitled to be indemnified against such
Expenses. Notwithstanding the foregoing, the obligation of the Company to
advance Expenses pursuant to this Section 7 shall be subject to the condition
that, if, when and to the extent that the Company determines that Indemnitee
would not be permitted to be indemnified under applicable law, the Company shall
be entitled to be reimbursed, within thirty (30) days of such determination, by
Indemnitee (who hereby agrees to reimburse the Company) for all such amounts
theretofore paid; PROVIDED, HOWEVER, that if Indemnitee has commenced or
thereafter commences legal proceedings in a court of competent jurisdiction to
secure a determination that Indemnitee should be indemnified
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under applicable law, any determination made by the Company that Indemnitee
would not be permitted to be indemnified under applicable law shall not be
binding and Indemnitee shall not be required to reimburse the Company for any
advance of Expenses until a final judicial determination is made with respect
thereto (as to which all rights of appeal therefrom have been exhausted or
lapsed).
Section 8. PROCEDURE FOR DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION.
(a) To obtain indemnification under this Agreement, Indemnitee shall
submit to the Company a written request, including therein or therewith such
documentation and information as is reasonably available to Indemnitee and is
reasonably necessary to determine whether and to what extent Indemnitee is
entitled to indemnification. The Secretary of the Company shall, promptly upon
receipt of such a request for indemnification, advise the Board in writing that
Indemnitee has requested indemnification.
(b) Upon written request by Indemnitee for indemnification pursuant to the
first sentence of Section 8(a) hereof, a determination, if required by
applicable law, with respect to Indemnitee's entitlement thereto shall be made
in the specific case: (i) if a Change in Control (as hereinafter defined) shall
have occurred, by Independent Counsel (as hereinafter defined) in a written
opinion to the Board of Directors, a copy of which shall be delivered to
Indemnitee; or (ii) if a Change of Control shall not have occurred, (A) by a
majority vote of the Disinterested Directors (as hereinafter defined), even
though less than a quorum of the Board, or (B) if there are no such
Disinterested Directors or, if such Disinterested Directors so direct, by
Independent Counsel in a written opinion to the Board, a copy of which shall be
delivered to Indemnitee or (C) if so directed by the Board, by the stockholders
of the Company; and, if it is so determined that Indemnitee is entitled to
indemnification, payment to Indemnitee shall be made within seven (7) days after
such determination. Indemnitee shall cooperate with the person, persons or
entity making such determination with respect to Indemnitee's entitlement to
indemnification, including providing to such person, persons or entity upon
reasonable advance request any documentation or information which is not
privileged or otherwise protected from disclosure and which is reasonably
available to Indemnitee and reasonably necessary to such determination. Any
costs or expenses (including attorneys' fees and disbursements) incurred by
Indemnitee in so cooperating with the person, persons or entity making such
determination shall be borne by the Company (irrespective of the determination
as to Indemnitee's entitlement to indemnification) and the Company hereby
indemnifies and agrees to hold Indemnitee harmless therefrom.
(c) In the event the determination of entitlement to indemnification is to
be made by Independent Counsel pursuant to Section 8(b) hereof, the Independent
Counsel shall be selected as provided in this Section
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8(c). If a Change of Control shall not have occurred, the Independent Counsel
shall be selected by the Board of Directors, and the Company shall give written
notice to Indemnitee advising him of the identity of the Independent Counsel so
selected. If a Change of Control shall have occurred, the Independent Counsel
shall be selected by Indemnitee (unless Indemnitee shall request that such
selection be made by the Board of Directors, in which event the preceding
sentence shall apply), and Indemnitee shall give written notice to the Company
advising it of the identity of the Independent Counsel so selected. In either
event, Indemnitee or the Company, as the case may be, may, within 10 days after
such written notice of selection shall have been given, deliver to the Company
or to Indemnitee, as the case may be, a written objection to such selection;
PROVIDED, HOWEVER, that such objection may be asserted only on the ground that
the Independent Counsel so selected does not meet the requirements of
"Independent Counsel" as defined in Section 17 of this Agreement, and the
objection shall set forth with particularity the factual basis of such
assertion. If such written objection is so made and substantiated, the
Independent Counsel so selected may not serve as Independent Counsel unless and
until such objection is withdrawn or a court has determined that such objection
is without merit. If, within 20 days after submission by Indemnitee of a
written request for indemnification pursuant to Section 8(a) hereof, no
Independent Counsel shall have been selected and not objected to, either the
Company or Indemnitee may petition the Court of Chancery of the State of
Delaware for resolution of any objection which shall have been made by the
Company or Indemnitee to the other's selection of Independent Counsel and/or for
the appointment as Independent Counsel of a person selected by the Court or by
such other person as the Court shall designate, and the person with respect to
whom all objections are so resolved or the person so appointed shall act as
Independent Counsel under Section 8(b) hereof. The Company shall pay any and
all reasonable fees and expenses of Independent Counsel incurred by such
Independent Counsel in connection with acting pursuant to Section 8(b) hereof,
and the Company shall pay all reasonable fees and expenses incident to the
procedures of this Section 8(c), regardless of the manner in which such
Independent Counsel was selected or appointed. Upon the due commencement of any
judicial proceeding or arbitration pursuant to Section 10(a)(iii) of this
Agreement, Independent Counsel shall be discharged and relieved of any further
responsibility in such capacity (subject to the applicable standards of
professional conduct then prevailing).
(d) The Company shall not be required to obtain the consent of the
Indemnitee to the settlement of any Proceeding which the Company has undertaken
to defend if the Company assumes full and sole responsibility for such
settlement and the settlement grants the Indemnitee a complete and unqualified
release in respect of the potential liability. The Company shall not be liable
for any amount paid by the Indemnitee in settlement of any Proceeding that is
not defended by the Company, unless the Company has consented to such
settlement, which consent shall not be unreasonably withheld.
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Section 9. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS.
(a) In making a determination with respect to entitlement to
indemnification or the advancement of expenses hereunder, the person or persons
or entity making such determination shall presume that Indemnitee is entitled to
indemnification or advancement of expenses under this Agreement if Indemnitee
has submitted a request for indemnification or the advancement of expenses in
accordance with Section 8(a) of this Agreement, and the Company shall have the
burden of proof to overcome that presumption in connection with the making by
any person, persons or entity of any determination contrary to that presumption.
Neither the failure of the Company (including its board of directors or
independent legal counsel) to have made a determination prior to the
commencement of any action pursuant to this Agreement that indemnification is
proper in the circumstances because Indemnitee has met the applicable standard
of conduct, nor an actual determination by the Company (including its board of
directors or independent legal counsel) that Indemnitee has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that Indemnitee has not met the applicable standard of conduct.
(b) If the person, persons or entity empowered or selected under Section 8
of this Agreement to determine whether Indemnitee is entitled to indemnification
shall not have made a determination within sixty (60) days after receipt by the
Company of the request therefor, the requisite determination of entitlement to
indemnification shall be deemed to have been made and Indemnitee shall be
entitled to such indemnification, absent (i) a misstatement by Indemnitee of a
material fact, or an omission of a material fact necessary to make Indemnitee's
statement not materially misleading, in connection with the request for
indemnification, or (ii) a prohibition of such indemnification under applicable
law; PROVIDED, HOWEVER, that such 60-day period may be extended for a reasonable
time, not to exceed an additional thirty (30) days, if the person, persons or
entity making the determination with respect to entitlement to indemnification
in good faith requires such additional time for the obtaining or evaluating of
documentation and/or information relating thereto; and provided, further, that
the foregoing provisions of this Section 9(b) shall not apply (i) if the
determination of entitlement to indemnification is to be made by the
stockholders pursuant to Section 8(b) of this Agreement and if (A) within
fifteen (15) days after receipt by the Company of the request for such
determination the Board of Directors has resolved to submit such determination
to the stockholders for their consideration at an annual meeting thereof to be
held within seventy-five (75) days after such receipt and such determination is
made thereat, or (B) a special meeting of stockholders is called within fifteen
(15) days after such receipt for the purpose of making such determination, such
meeting is held for such purpose within sixty (60) days after having been so
called and such determination is made thereat, or (ii) if the determination of
entitlement to indemnification is to be made by Independent Counsel pursuant to
Section 8(b) of this Agreement.
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(c) The termination of any Proceeding or of any claim, issue or matter
therein, by judgment, order, settlement or conviction, or upon a plea of NOLO
CONTENDERE or its equivalent, shall not (except as otherwise expressly provided
in this Agreement) of itself adversely affect the right of Indemnitee to
indemnification or create a presumption that Indemnitee did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Company or, with respect to any criminal Proceeding,
that Indemnitee had reasonable cause to believe that his conduct was unlawful.
(d) RELIANCE AS SAFE HARBOR. For purposes of any determination of Good
Faith, Indemnitee shall be deemed to have acted in Good Faith if Indemnitee's
action is based on the records or books of account of the Company or relevant
enterprise, including financial statements, or on information supplied to
Indemnitee by the officers of the Company or relevant enterprise in the course
of their duties, or on the advice of legal counsel for the Company or relevant
enterprise or on information or records given to reports made to the Company or
relevant enterprise by an independent certified public accountant or by an
appraiser or other expert selected with reasonable care by the Company or
relevant enterprise. The provisions of this Section 9(d) shall not be deemed to
be exclusive or to limit in any way the other circumstances in which the
Indemnitee may be deemed to have met the applicable standard of conduct set
forth in this Agreement.
(e) ACTIONS OF OTHERS. The knowledge and/or actions, or failure to act,
of any director, officer, agent or employee of the Company or relevant
enterprise shall not be imputed to Indemnitee for purposes of determining the
right to indemnification under this Agreement.
Section 10. REMEDIES OF INDEMNITEE.
(a) In the event that (i) a determination is made pursuant to Section 8 of
this Agreement that Indemnitee is not entitled to indemnification under this
Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 7
of this Agreement, (iii) no determination of entitlement to indemnification
shall have been made pursuant to Section 8(b) of this Agreement within 90 days
after receipt by the Company of the request for indemnification, (iv) payment of
indemnification is not made pursuant to Section 5 or 6 of this Agreement within
ten (10) days after receipt by the Company of a written request therefor, or (v)
payment of indemnification is not made within ten (10) days after a
determination has been made that Indemnitee is entitled to indemnification,
Indemnitee shall be entitled to an adjudication by the Court of Chancery of the
State of Delaware of his entitlement to such indemnification or advancement of
Expenses. Alternatively, Indemnitee, at his option, may seek an award in
arbitration to be conducted by a single arbitrator pursuant to the Commercial
Arbitration Rules of the American Arbitration Association. Indemnitee shall
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commence such proceeding seeking an adjudication or an award in arbitration
within 180 days following the date on which Indemnitee first has the right to
commence such proceeding pursuant to this Section 10(a); PROVIDED, HOWEVER, that
the foregoing clause shall not apply in respect of a proceeding brought by
Indemnitee to enforce his rights under Section 5 of this Agreement.
(b) In the event that a determination shall have been made pursuant to
Section 8(b) of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant to
this Section 10 shall be conducted in all respects as a DE NOVO trial, or
arbitration, on the merits and Indemnitee shall not be prejudiced by reason of
that adverse determination. If a Change of Control shall have occurred, in any
judicial proceeding or arbitration commenced pursuant to this Section 10, the
Company shall have the burden of proving that Indemnitee is not entitled to
indemnification or advancement of Expenses, as the case may be.
(c) If a determination shall have been made pursuant to Section 8(b) of
this Agreement that Indemnitee is entitled to indemnification, the Company shall
be bound by such determination in any judicial proceeding or arbitration
commenced pursuant to this Section 10, absent (i) a misstatement by Indemnitee
of a material fact, or an omission of a material fact necessary to make
Indemnitee's statement not materially misleading in connection with the request
for indemnification, or (ii) a prohibition of such indemnification under
applicable law.
(d) In the event that Indemnitee, pursuant to this Section 10, seeks a
judicial adjudication of or an award in arbitration to enforce his rights under,
or to recover damages for breach of, this Agreement, Indemnitee shall be
entitled to recover from the Company, and shall be indemnified by the Company
against, any and all expenses (of the types described in the definition of
Expenses in Section 17 of this Agreement) actually and reasonably incurred by
him in such judicial adjudication or arbitration, but only if he prevails
therein. If it shall be determined in said judicial adjudication or arbitration
that Indemnitee is entitled to receive part but not all of the indemnification
or advancement of expenses sought, the expenses incurred by Indemnitee in
connection with such judicial adjudication or arbitration shall be appropriately
prorated. The Company shall indemnify Indemnitee against any and all Expenses
and, if requested by Indemnitee, shall (within ten (10) days after receipt by
the Company of a written request therefor) advance such expenses to Indemnitee,
which are incurred by Indemnitee in connection with any action brought by
Indemnitee for indemnification or advance of Expenses from the Company under
this Agreement or under any directors' or officers' liability insurance policies
maintained by the Company, regardless of whether Indemnitee ultimately is
determined to be entitled to such indemnification, advancement of Expenses or
insurance recovery, as the case may be.
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(e) The Company shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 10 that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such arbitrator
that the Company is bound by all the provisions of this Agreement.
Section 11. NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE; SUBROGATION.
(a) The rights of indemnification and to receive advancement of Expenses
as provided by this Agreement shall not be deemed exclusive of any other rights
to which Indemnitee may at any time be entitled under applicable law, the
Certificate of Incorporation, the By-Laws, any agreement, a vote of stockholders
or a resolution of directors, or otherwise. No amendment, alteration or repeal
of this Agreement or of any provision hereof shall limit or restrict any right
of Indemnitee under this Agreement in respect of any action taken or omitted by
such Indemnitee in his Corporate Status prior to such amendment, alteration or
repeal. To the extent that a change in the General Corporation Law of the State
of Delaware, whether by statute or judicial decision, permits greater
indemnification or advancement of Expenses than would be afforded currently
under the Company's By-Laws and this Agreement, it is the intent of the parties
hereto that Indemnitee shall enjoy by this Agreement the greater benefits so
afforded by such change. No right or remedy herein conferred is intended to be
exclusive of any other right or remedy, and every other right and remedy shall
be cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other right or remedy.
(b) To the extent that the Company maintains an insurance policy or
policies providing liability insurance for directors, officers, employees or
agents of the Company or of any other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise which such person serves at the
request of the Company, Indemnitee shall be covered by such policy or policies
in accordance with its or their terms to the maximum extent of the coverage
available for any such director, officer, employee or agent under such policy or
policies.
(c) In the event of any payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and take all action necessary
to secure such rights, including execution of such documents as are necessary to
enable the Company to bring suit or enforce such rights.
(d) The Company shall not be liable under this Agreement to make any
payment of amounts otherwise indemnifiable hereunder if and to the extent that
Indemnitee has otherwise actually received such payment under any
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insurance policy, contract, agreement or otherwise.
(e) The Company's obligation to indemnify or advance expenses hereunder to
Indemnitee who is or was serving at the request of the Company as a director,
officer, employee or agent of any other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise shall be reduced by any amount
Indemnitee has actually received as indemnification or advancement of expenses
from such other corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise.
Section 12. DURATION OF AGREEMENT. This Agreement shall continue until
and terminate upon the later of: (a) 10 years after the date that Indemnitee
shall have ceased to serve as a director and/or officer of the Company (or of
any other corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise which Indemnitee served at the request of the Company); or
(b) the final termination of any Proceeding then pending in respect of which
Indemnitee is granted rights of indemnification or advancement of expenses
hereunder and of any proceeding commenced by Indemnitee pursuant to Section 10
of this Agreement relating thereto. This Agreement shall be binding upon the
Company and its successors and assigns and shall inure to the benefit of
Indemnitee and his heirs, executors and administrators.
Section 13. SEVERABILITY. If any provision or provisions of this
Agreement shall be held to be invalid, illegal or unenforceable for any reason
whatsoever: (a) the validity, legality and enforceability of the remaining
provisions of this Agreement (including without limitation, each portion of any
Section of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that is not itself invalid, illegal or unenforceable)
shall not in any way be affected or impaired thereby; (b) such provision or
provisions shall be deemed reformed to the extent necessary to conform to
applicable law and to give the maximum effect to the intent of the parties
hereto; and (c) to the fullest extent possible, the provisions of this Agreement
(including, without limitation, each portion of any Section of this Agreement
containing any such provision held to be invalid, illegal or unenforceable, that
is not itself invalid, illegal or unenforceable) shall be construed so as to
give effect to the intent manifested thereby.
Section 14. EXCEPTION TO RIGHT OF INDEMNIFICATION OR ADVANCEMENT OF
EXPENSES. Except as provided in Section 6(a) of this Agreement, Indemnitee
shall not be entitled to indemnification or advancement of Expenses under this
Agreement with respect to any Proceeding brought by Indemnitee (other than a
Proceeding by Indemnitee to enforce his rights under this Agreement), or any
claim therein prior to a Change in Control, unless the bringing of such
Proceeding or making of such claim shall have been approved by the Board of
Directors.
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Section 15. IDENTICAL COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute one and the same Agreement.
Only one such counterpart signed by the party against whom enforceability is
sought needs to be produced to evidence the existence of this Agreement.
Section 16. HEADINGS. The headings of the paragraphs of this Agreement
are inserted for convenience only and shall not be deemed to constitute part of
this Agreement or to affect the construction thereof.
Section 17. DEFINITIONS. For purposes of this Agreement:
(a) "Change in Control" means a change in control of the Company occurring
after the Effective Date of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any
similar item on any similar schedule or form) promulgated under the Securities
Exchange Act of 1934 (the "Act"), whether or not the Company is then subject to
such reporting requirement; PROVIDED, HOWEVER, that, without limitation, such a
Change in Control shall be deemed to have occurred if after the Effective Date
(i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Act)
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Act),
directly or indirectly, of securities of the Company representing 20% or more of
the combined voting power of the Company's then outstanding securities without
the prior approval of at least two-thirds of the members of the Board in office
immediately prior to such person attaining such percentage interest; (ii) there
occurs a proxy contest, or the Company is a party to a merger, consolidation,
sale of assets, plan of liquidation or other reorganization not approved by at
least two-thirds of the members of the Board then in office, as a consequence of
which members of the Board in office immediately prior to such transaction or
event constitute less than a majority of the Board thereafter; or (iii) during
any period of two consecutive years, other than as a result of an event
described in clause (a)(ii) of this Section 17, individuals who at the beginning
of such period constituted the Board (including for this purpose any new
director whose election or nomination for election by the Company's stockholders
was approved by a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of such period) cease for any reason
to constitute at least a majority of the Board.
(b) "Corporate Status" describes the status of a person who is or was a
director, officer, employee, fiduciary or agent of the Company or of any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise which such person is or was serving at the request of the Company.
(c) "Disinterested Director" means a director of the company who is not
and was not a party to the Proceeding in respect of which
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indemnification is sought by Indemnitee.
(d) "Effective Date" means September 17, 1996.
(e) "Expenses" shall include all reasonable attorneys' fees, retainers,
court costs, transcript costs, fees of experts, witness fees, travel expenses,
duplicating costs, printing and binding costs, telephone charges, postage,
delivery service fees, and all other disbursements or expenses of the types
customarily incurred in connection with prosecuting, defending, preparing to
prosecute or defend, investigating, being or preparing to be a witness, in, or
otherwise participating in, a Proceeding.
(f) "Independent Counsel" means a law firm, or a member of a law firm,
that is experienced in matters of corporation law and neither presently is, nor
in the past five years has been, retained to represent: (i) the Company or
Indemnitee in any matter material to either such party, or (ii) any other party
to the Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall not include
any person who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the Company
or Indemnitee in an action to determine Indemnitee's rights under this
Agreement. The Company agrees to pay the reasonable fees of the Independent
Counsel referred to above and to fully indemnify such counsel against any and
all Expenses, claims, liabilities and damages arising out of or relating to this
Agreement or its engagement pursuant hereto.
(g) "Proceeding" includes any threatened, pending or completed action,
suit, arbitration, alternate dispute resolution mechanism, investigation,
inquiry, administrative hearing or any other actual, threatened or completed
proceeding, whether brought by or in the right of the Corporation or otherwise
and whether civil, criminal, administrative or investigative, in which
Indemnitee was, is, may be or will be involved as a party or otherwise, by
reason of the fact that Indemnitee is or was a director or officer of the
Company, by reason of any action taken by him or of any inaction on his part
while acting as director or officer of the Company, or by reason of the fact
that he is or was serving at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise; in each case whether or not he is acting or serving in any
such capacity at the time any liability or expense is incurred for which
indemnification or advancement of expenses can be provided under this Agreement;
except one (i) initiated by an Indemnitee pursuant to Section 10 of this
Agreement to enforce his right under this Agreement or (ii) pending on or before
the Effective Date.
Section 18. ENFORCEMENT.
(a) The Company expressly confirms and agrees that it has
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entered into this Agreement and assumed the obligations imposed on it hereby in
order to induce Indemnitee to serve as a director and/or officer of the Company,
and the Company acknowledges that Indemnitee is relying upon this Agreement in
serving as a director and/or officer of the Company.
(b) This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements and understandings, oral, written and implied, between the parties
hereto with respect to the subject matter hereof.
Section 19. MODIFICATION AND WAIVER. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
Section 20. NOTICE BY INDEMNITEE. Indemnitee agrees promptly to notify
the Company in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any Proceeding
or matter which may be subject to indemnification or advancement of Expenses
covered hereunder. The failure of Indemnitee to so notify the Company shall not
relieve the Company of any obligation which it may have to the Indemnitee under
this Agreement or otherwise.
Section 21. NOTICES. All notices, requests, demands or other
communications hereunder shall be in writing and shall be deemed to have been
duly given if (i) delivered by hand and receipted for by the party to whom said
notice or other communication shall have been direct, or (ii) mailed by
certified or registered mail with postage prepaid, on the third business day
after the date on which it is so mailed:
(a) If to Indemnitee to:
Address set forth below Indemnitee's signature.
(b) If to the Company to:
The Grand Union Company
Attn: General Counsel
201 Willowbrook Blvd., 9th Floor
Wayne, New Jersey 07470-0966
or to such other address as may have been furnished to Indemnitee by the Company
or to the Company by Indemnitee, as the case may be.
Section 22. CONTRIBUTION. To the fullest extent permissible under
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applicable law, if the indemnification provided for in this Agreement is
unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of
indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee,
whether for judgments, fines, penalties, excise taxes, amounts paid or to be
paid in settlement and/or for Expenses, in connection with any claim relating to
an indemnifiable event under this Agreement, in such proportion as is deemed
fair and reasonable in light of all of the circumstances of such Proceeding in
order to reflect (i) the relative benefits received by the Company and
Indemnitee as a result of the event(s) and/or transaction(s) giving cause to
such Proceeding; and/or (ii) the relative fault of the Company (and its
directors, officers, employees and agents) and Indemnitee in connection with
such event(s) and/or transaction(s).
Section 23. GOVERNING LAW; SUBMISSION TO JURISDICTION; APPOINTMENT OF
AGENT FOR SERVICE OF PROCESS. This Agreement and the legal relations among the
parties shall be governed by, and construed and enforced in accordance with, the
laws of the State of Delaware, without regard to its conflict of laws rules.
Except with respect to any arbitration commenced by Indemnitee pursuant to
Section 10(a) of this Agreement, the Company and Indemnitee hereby irrevocably
and unconditionally (i) agree that any action or proceeding arising out of or in
connection with this Agreement shall be brought only in the Chancery Court of
the State of Delaware (the "Delaware Court"), and not in any other state or
federal court in the United States of America or any court in any other country,
(ii) consent to submit to the exclusive jurisdiction of the Delaware Court for
purposes of any action or proceeding arising out of or in connection with this
Agreement, (iii) appoint, to the extent such party is not a resident of the
State of Delaware, irrevocably RL&F Service Corp., One Rodney Square, 10th
Floor, 10th and King Streets, Wilmington, Delaware 19801 as its agent in the
State of Delaware for acceptance of legal process in connection with any such
action or proceeding against such party with the same legal force and validity
as if served upon such party personally within the State of Delaware, (iv) waive
any objection to the laying of venue of any such action or proceeding in the
Delaware Court, and (v) waive, and agree not to plead or to make, any claim that
any such action or proceeding brought in the Delaware Court has been brought in
an improper or otherwise inconvenient forum.
Section 24. MISCELLANEOUS. Use of the masculine pronoun shall be deemed
to include usage of the feminine pronoun where appropriate.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
ATTEST: THE GRAND UNION COMPANY
_________________________ By:_________________________
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John W. Schroeder Name: Kenneth R. Baum
Title: Senior Vice President,
Chief Financial Officer,
and Secretary
ATTEST: INDEMNITEE
_________________________ By: _______________________
Name: Name:
Title:
Address:
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EXHIBIT 10.2
THIRD AMENDMENT
TO THE
AMENDED AND RESTATED CREDIT AGREEMENT
THIRD AMENDMENT dated as of September 11, 1996 (this "Amendment")
to the AMENDED AND RESTATED CREDIT AGREEMENT dated as of June 15, 1995 (as
modified by the Waiver and First Amendment thereto dated as of February 16,
1996 and by the Second Amendment thereto dated as of May 10, 1996, 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, the Borrower, Trefoil Capital Investors II, L.P., a
Delaware limited partnership ("Trefoil"), and GE Investment Private Placement
Partners II, A Limited Partnership, a Delaware limited partnership (together
with Trefoil, the "Purchasers") have entered into a Stock Purchase Agreement
dated as of July 30, 1996 (the "Stock Purchase Agreement"), pursuant to which
the Borrower desires to issue and sell from time to time to the Purchasers,
on the terms and conditions set forth therein and the exhibits thereto,
convertible preferred stock of the Borrower for an aggregate purchase price
of $100,000,000 (such transaction, the "Convertible Preferred Stock Sale");
WHEREAS, in connection therewith, the Borrower has requested that
the Credit Agreement be amended to, among other things:
(a) make the mandatory prepayment obligations of the Borrower
under Section 4.2(A)(e) of the Credit Agreement inapplicable to the Net
Equity Issuance Proceeds received from time to time by the Borrower
pursuant to the Convertible Preferred Stock Sale (Section 1(a) hereof);
(b) modify certain of the obligations of the Borrower under the
Further Assurances Agreement dated as of June 15, 1995, as amended,
supplemented or otherwise modified, between the Borrower and the Agent, and
the consequences of the failure of the
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Borrower to comply with such obligations (Sections 1(c), (d) and (z)
hereof);
(c) clarify certain possible ambiguities in the Credit Agreement
relating to (i) the number of stores the Borrower is permitted to close in
connection with the opening of Replacement Stores (Section 1(f) hereof),
(ii) the Borrower's ability to obtain releases of liens on sold assets
(Section 1(g) hereof), and (iii) the definitions of the terms "Additional
Mortgage" and "Additional Security Documents" (Section 1(s) hereof);
(d) increase the amount of Consolidated Capital Expenditures that
the Borrower is permitted to make from time to time pursuant to Section
8.4(a) of the Credit Agreement (Section 1(h) hereof);
(e) increase (i) the amount of advances the Borrower can make to
developers of stores (Section 1(j) hereof), and (ii) the amount of notes
the Borrower can receive in connection with dispositions of stores (Section
1(k) hereof);
(f) permit the Borrower to make certain payments to the
Convertible Preferred Stock Purchasers (as defined in the Credit Agreement
after giving effect to this Amendment) and their Affiliates (Section 1(l)
hereof);
(g) adjust certain of the financial covenants of the Borrower
contained in the Credit Agreement and the method of calculating the
Borrower's compliance with the same (Sections 1(m), (n), (t), (v), (w), (x)
and (y) hereof);
(h) permit the Borrower to issue convertible preferred stock to
the Convertible Preferred Stock Purchasers pursuant to the Stock Purchase
Agreement (Section 1(o) hereof);
(i) make the mandatory prepayment obligations of the Borrower
under Section 4.2(A)(g) of the Credit Agreement and the Event of Default
described in Section 9.10 (iii) of the Credit Agreement inapplicable to any
Change of Control Event resulting from the Convertible Preferred Stock Sale
(Sections 1(q) & (u) hereof); and
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(j) permit the Borrower to make certain amendments to its
Certificate of Incorporation and By-Laws and to the Senior Note Documents
(Section 2 hereof); and
WHEREAS, subject to and upon the terms and conditions hereinafter set
forth and in the Credit Agreement as amended hereby (including Sections 1(b),
(e), (i), (p), & (r), 3, 4, 5 & 6 hereof), the Banks party hereto are agreeable
to the foregoing;
NOW, THEREFORE, the parties hereto hereby agree as follows:
Section 1. AMENDMENTS. Subject to the satisfaction of the conditions
precedent set forth in Section 4 hereof, the Credit Agreement is hereby amended
effective as of the date hereof as follows:
(a) Section 4.2(A)(e) of the Credit Agreement is amended by (i)
deleting the word "and" before clause (y) of the parenthetical commencing in the
fifth line of such Section; and (ii) inserting the following at the end of such
clause (y):
", and (z) issuances of convertible preferred stock and issuances of common
stock on conversion of such convertible preferred stock (but only so long
as no consideration (other than the preferred stock being converted) is
received by the Company or any of its Subsidiaries in connection with such
conversion), in each case pursuant to the Convertible Preferred Stock
Documents as in effect on the Amendment No. 3 Effective Date".
(b) Section 7.1 of the Credit Agreement is amended by (i) relettering
paragraph (j) thereof as paragraph "(l)"; and (ii) inserting the following after
paragraph (i) thereof as new paragraphs (j) and (k):
"(j) CONVERTIBLE PREFERRED STOCK DOCUMENTS. Promptly upon, but in
any event within three Business Days of, obtaining knowledge thereof,
copies of (i) each notice received or delivered by the Borrower after the
Amendment No. 3 Effective Date pursuant to the Convertible Preferred Stock
Documents, and (ii) each amendment or other modification entered into
after the Amendment No. 3 Effective Date to any Convertible Preferred
Stock Document and each agree-
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<PAGE>
ment or other instrument entered into by the Borrower after the Amendment
No. 3 Effective Date with or for the benefit of any Convertible Preferred
Stock Purchaser or any Affiliate thereof (other than any product or
similar agreement entered into in the ordinary course of business).
(k) ADDITIONAL MONTHLY REPORTS. As soon as practicable, and in any
event within 30 days, after the end of each fiscal month of the Borrower, a
certificate of an Authorized Officer of the Borrower setting forth (i) a
complete list of each Additional Mortgage delivered to the Collateral Agent
during such fiscal month, (ii) a complete list of each Leasehold and other
Real Property acquired by the Borrower or any of its Subsidiaries during
such fiscal month, together with a description of the proposed use of each
such Leasehold and other Real Property, (iii) the respective aggregate
amounts of Adjusted Consolidated Capital Expenditures made during such
fiscal month and during the period from the beginning of the fiscal year in
which such fiscal month occurs to the end of such fiscal month, and (iv)
the respective aggregate amounts of Consolidated Capital Expenditures made
and incurred during the period from the Amendment No. 3 Effective Date
through the end of such fiscal month (A) in total pursuant to Section
8.4(a), and (B) in reliance on the proviso to Section 8.4(h)."
(c) Section 7.11(a) of the Credit Agreement is amended by replacing
the first sentence thereof with the following:
"The Borrower shall (i) by no later than December 31, 1996, grant the
Collateral Agent security interests in and mortgages on its Leaseholds,
fixtures and improvements relating to the Berlin, VT store (Store #1923),
the Malta, NY store (Store #1990) and the Sommerville, NJ store (Store
#3197), and take all actions with respect thereto required by this Section
7.11(a); (ii) by no later than August 31, 1997, grant the Collateral Agent
security interests in and mortgages on its Leaseholds, fixtures and
improvements relating to the Designated Stores, and take all actions with
respect thereto required by this Section 7.11(a); and (iii) within 30 days
of a request therefor from the Agent, grant, or cause its Subsidiaries to
grant, as the case may be, to the
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Collateral Agent security interests in and mortgages on such other assets
and properties of the Borrower or its Subsidiaries as are not covered by
original Security Documents."
(d) Section 7.11(b) of the Credit Agreement is amended by inserting
"the validity, perfection, priority or enforcement of the Liens on" after the
words "relating to" in the ninth line of such section; and Section 7.11(d) of
the Credit Agreement is amended in its entirety to read as follows:
"(d) The Borrower agrees that each action required by this Section
7.11 shall be completed as soon as possible, but in no event later than (i)
in the case of paragraph (a) hereof, the applicable dates set forth
therein, (ii) in the case of clause (b) hereof, 30 days after such action
is requested to be taken by the Agent or the Required Banks, and (iii) in
the case of clause (c) hereof, 60 days after such action is requested to be
taken by the Agent or the Required Banks; PROVIDED that in no event shall
the Borrower be required to take any action, other than using commercially
reasonable efforts, to obtain consents from third-parties with respect to
its compliance with clause (iii) of paragraph (a) of this Section 7.11 or
paragraph (b) of this Section 7.11. Until August 31, 1997 and thereafter
if the Borrower complies with clauses (i) and (ii) of paragraph (a) of this
Section 7.11 within the applicable time periods required thereby, and
notwithstanding anything to the contrary contained herein or in the Further
Assurances Agreement dated as of June 15, 1995 (as amended, supplemented or
otherwise modified from time to time, the "Further Assurances Agreement")
between the Borrower and the Agent, but without excusing or otherwise
minimizing the obligations of the Borrower to comply therewith, the failure
of the Borrower to comply with clause (iii) or the last sentence of
paragraph (a) of this Section 7.11 or Section 1(a), (b) or (c) of the
Further Assurances Agreement shall not constitute a Default or Event of
Default."
(e) Section 7 of the Credit Agreement is further amended by inserting
the following after Section 7.13 thereof as new Section 7.14:
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<PAGE>
"7.14 MINIMUM ADJUSTED CONSOLIDATED CAPITAL EXPENDITURES. During
each period specified below, the Borrower shall cause store-related
Adjusted Consolidated Capital Expenditures to be made in an aggregate
amount that is at least equal to 85% of the amount set forth below opposite
such period:
Fiscal Year ending 1997 $62,964,000
Fiscal Year ending 1998 $87,100,000
Fiscal Year ending 1999 $70,400,000
Fiscal Year ending 2000 $64,000,000
Fiscal Year ending 2001 $74,000,000;
PROVIDED that: (a) with respect to the fiscal year of the Borrower
ending in 1997 only, the percentage specified above shall be reduced to (i)
75% if the Borrower has not received at least $40,000,000 of gross proceeds
from the sale of convertible preferred stock of the Borrower pursuant to
the Convertible Preferred Stock Documents on or prior to September 30,
1996, (ii) 65% if the Borrower has not received such proceeds on or prior
to October 31, 1996, and (iii) 55% if the Borrower has not received such
proceeds on or prior to November 30, 1996; and (b) the aggregate amount of
Adjusted Consolidated Capital Expenditures that are otherwise required to
be made during any fiscal year of the Borrower pursuant to this Section
7.14 shall be reduced by the Section 7.14 Credit Amount, if any, for such
fiscal year."
(f) Section 8.1(d) of the Credit Agreement is amended by substituting
the proviso thereto with the following:
"; PROVIDED that no more than 13 stores in any fiscal year of the
Borrower, and 69 stores in the aggregate, will be permitted to be closed
under this clause (d); and, PROVIDED FURTHER, that the number of stores
that are permitted to be closed under this clause (d) other than in
connection with the replacement of such stores with Replacement Stores
shall be limited to 8 stores in any fiscal year of the Borrower, and 45
stores in the aggregate;".
(g) Section 8.1 of the Credit Agreement is further amended by
substituting the parenthetical commencing in the fourth line, and ending in the
sixth line, of the last sentence of such Section with the following:
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<PAGE>
"(and all requirements, if any, of such waiver and/or the Credit Documents,
as the case may be, to a release of such Collateral from the Liens created
by the respective Security Document are satisfied)".
(h) Section 8.4(a) of the Credit Agreement is amended by substituting
the table of allowable Consolidated Capital Expenditures contained therein (but
not the proviso following such table) with the following:
"Period Amount
------ ------
Fiscal Year ending 1996 $53,500,000
Fiscal Year ending 1997 $75,000,000
Fiscal Year ending 1998 $95,000,000
Fiscal Year ending 1999 $90,000,000
Fiscal Year ending 2000 $90,000,000
Fiscal Year ending 2001 $100,000,000
Fiscal Year ending 2002 $90,000,000
Thereafter to and including
the Final Maturity Date $25,000,000".
(i) Section 8.4 of the Credit Agreement is further amended by
inserting the following after paragraph (g) thereof as a new paragraph (h):
"(h) Notwithstanding anything to the contrary contained herein, from
and after the Amendment No. 3 Effective Date, no Consolidated Capital
Expenditures (other than Consolidated Capital Expenditures effected through
the incurrence of Capitalized Lease Obligations (Equipment) or Indebtedness
secured by Liens permitted pursuant to Section 8.2(i) or (j)) may be made
in respect of any existing, replacement or new store or committed to be
made in respect of any store then owned or leased by the Borrower or any of
its Subsidiaries unless, in each such case, to the extent the following
have not been waived by the Agent with respect thereto (which waiver may be
given or withheld by the Agent in its sole discretion): (i) the Collateral
Agent has been granted, for the benefit of the Secured Parties, security
interests and mortgages, as applicable, in respect of such store and all
real and personal property owned or leased by the Borrower or any of its
Subsidiaries that is related thereto, and (ii) in the case of any such
mortgages and security interests granted on or after the Amendment No. 3
Effective
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<PAGE>
Date, (A) such security interests and mortgages, and the documentation
evidencing the same, meet the requirements set forth in Section 7.11(a)
(other than the first sentence thereof) to the same extent as if such
store was a Designated Store, and (B) all other actions that must be
taken pursuant to Section 7.11(a) (other than the first sentence thereof)
in respect of security interests, mortgages and related documentation for
Designated Stores and assets related thereto shall have been taken with
respect to such security interests, mortgages and documentations; PROVIDED
that Consolidated Capital Expenditures may be made or committed to be made
in respect of existing (but not replacement or new) stores on which the
Collateral Agent does not have a Mortgage or Additional Mortgage in an
aggregate amount for all such Consolidated Capital Expenditures made or
committed to be made after the Amendment No. 3 Effective Date not to
exceed $40,000,000 at any time prior to April 3, 1999 or $60,000,000
at any time."
(j) Section 8.5(g) of the Credit Agreement is amended by substituting
the following for the phrase "not exceeding $10,000,000 at any time outstanding"
contained therein:
"not exceeding $20,000,000 at any time outstanding; PROVIDED that such
advances are evidenced by notes in favor of the Borrower and such notes are
pledged to the Collateral Agent for the benefit of the Secured Parties
pursuant to the Security Documents".
(k) Section 8.5(i) of the Credit Agreement is amended by substituting
the following for the phrase "shall not exceed $500,000 and (y) the aggregate
amounts of all such notes hereunder shall not exceed $4,000,000" contained
therein:
"shall not exceed $1,000,000, (y) the aggregate amounts of all such notes
hereunder shall not exceed $8,000,000, and (z) all such notes are pledged
to the Collateral Agent for the benefit of the Secured Parties pursuant to
the Security Documents".
(l) Section 8.7 of the Credit Agreement is amended by inserting the
following at the end of such Section:
"; PROVIDED that (i) the Borrower may reimburse the Convertible
Preferred Stock Purchasers for
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<PAGE>
up to $1,000,000 of costs and expenses incurred by the Convertible
Preferred Stock Purchasers in connection with the consummation of the
transactions contemplated by the Convertible Preferred Stock Purchase
Agreement as in effect on the Amendment No. 3 Effective Date, (ii) to the
extent the payment of any transaction fee by the Borrower to Shamrock
Capital Advisors, Inc. or GE Investment Management Incorporated is a
condition precedent under the Convertible Preferred Stock Purchase
Agreement as in effect on the Amendment No. 3 Effective Date to the
closing of any sale of convertible preferred stock of the Borrower
pursuant thereto, the Borrower may pay such fee in connection with the
consummation of such sale if, after giving effect to such payment, the
aggregate amount of all such fees paid by the Borrower does not exceed
$4,000,000, (iii) so long as no Default or Event of Default has occurred
and is continuing at the time of the payment thereof, the Borrower may
pay management fees to Shamrock Capital Advisors, Inc. from time to time
on and after the Principal Closing Date (as defined below) in accordance
with the terms of the Management Agreement (as defined in the Convertible
Preferred Stock Purchase Agreement) as in effect on the Amendment No. 3
Effective Date in an aggregate amount not to exceed (A) $300,000 at any
time prior to the first anniversary of the Principal Closing Date, (B)
$700,000 at any time prior to the second anniversary of the Principal
Closing Date or (C) $1,200,000 at any time, and (iv) the Borrower may pay
the costs and expenses from time to time required to be paid by it under
the terms of the Registration Rights Agreement (as defined in the
Convertible Preferred Stock Purchase Agreement) as in effect on the
Amendment No. 3 Effective Date. For purposes of this Section 8.7,
"Principal Closing Date" shall mean the first date on which the Borrower
has received at least $40,000,000 of gross proceeds from the sale of
convertible preferred stock of the Borrower pursuant to the Convertible
Preferred Stock Purchase Agreement."
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(m) Section 8.9 of the Credit Agreement is amended by
substituting the following table of minimum EBITDA for the table contained
therein:
Fiscal Quarter Amount
-----------------------------------------
October 1996 $135,000,000
January 1997 135,000,000
March 1997 140,000,000
July 1997 140,000,000
October 1997 140,000,000
January 1998 140,000,000
March 1998 150,000,000
July 1998 150,000,000
October 1998 150,000,000
January 1999 150,000,000
March 1999 165,000,000
July 1999 165,000,000
October 1999 165,000,000
January 2000 165,000,000
March 2000 165,000,000
July 2000 165,000,000
October 2000 165,000,000
January 2001 165,000,000
March 2001 165,000,000
July 2001 165,000,000
October 2001 165,000,000
January 2002 165,000,000
March 2002 165,000,000
(n) Section 8.11 of the Credit Agreement is amended by substituting
the following table of minimum ratio of EBITDA to Total Cash Interest Expense
for the table contained therein:
Period Ratio
---------------------------------------------
Fiscal Quarter ending in October 1996 to and including Fiscal Quarter ending in
January 1997
1.3:1
Fiscal Quarter ending in March 1997 to and including Fiscal Quarter ending in
January 1998
1.3:1
Fiscal Quarter ending in March 1998 to and including Fiscal Quarter ending in
January 1999
1.4:1
Fiscal Quarter ending in March 1999 to and including Fiscal
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Quarter ending in January 2000
1.5:1
Fiscal Quarter ending in March 2000 to and including Fiscal Quarter ending in
January 2001
1.7:1
Fiscal Quarter ending in March 2001 to and including Fiscal Quarter ending in
January 2002
1.7:1
Thereafter
1.7:1
(o) Section 8.13 of the Credit Agreement is amended by (i) deleting
the word "or" before the beginning of clause (iv) thereof, and (ii) inserting
the following at the end of such clause (iv):
"(other than convertible preferred stock of the Borrower issued
pursuant to the Convertible Preferred Stock Documents as in effect on the
Amendment No. 3 Effective Date), (v) at any time on or after the Amendment
No. 3 Effective Date, amend or otherwise modify (including, without
limitation, by granting any consent or waiver under, or entering into any
agreement with the Convertible Preferred Stock Purchasers or any of their
Affiliates that is inconsistent with), or permit the amendment or other
modification of, any Convertible Preferred Stock Document or consent or
otherwise agree to the termination of any Convertible Preferred Stock
Document if such amendment, modification or termination would in the
reasonable judgment of the Agent be adverse to the Banks (it being
understood that a termination of the Convertible Preferred Stock Purchase
Agreement or a modification of the obligations of the Convertible Preferred
Stock Purchasers to purchase convertible preferred stock pursuant thereto
would be adverse to the Banks) or (vi) make any payment pursuant to Article
VII ('Termination') of the Convertible Preferred Stock Purchase Agreement
in cash to the extent such agreement permits the same to be paid in a form
other than cash. Promptly, but in any event within two Business Days of
each sale of convertible preferred stock of the Borrower pursuant to the
Convertible Preferred Stock Documents, the Borrower shall deliver to the
Agent (i) a
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notice of such sale setting forth the number of shares sold and
the aggregate gross proceeds received by the Borrower in connection
therewith, and (ii) a copy of each certificate and legal opinion delivered
to or by or on behalf of the Borrower in connection therewith".
(p) Section 9.3 of the Credit Agreement is amended by (i) inserting
"or (c)" after "clause (a)" in the parenthetical contained in clause (b) of such
Section; and (ii) inserting the following before the word "or" ending such
Section as a new clause (c) thereof:
"or (c) default for more than 60 consecutive days in the due
performance and observance by it of Section 7.14 and the Agent or the
Required Banks shall have delivered a notice of such default to the
Borrower;".
(q) Section 9.10 of the Credit Agreement is amended by (i) deleting
the word "or" at the end of clause (iii) thereof; and (ii) inserting the
following at the end of clause (iv) thereof:
"or (v) the failure at any time of at least 200,000 shares of Borrower
Common Stock or Borrower Common Stock having an aggregate market value of
at least $1,000,000 to be held by Persons who are neither an officer or
director of the Borrower or a beneficial owner of more than 10% of the
total outstanding shares of Borrower Common Stock; PROVIDED that the
occurrence of any event described in the foregoing clause (ii) or (iii)
shall not constitute an Event of Default so long as such event arises
solely as a direct result of the acquisition of Voting Stock by the
Convertible Preferred Stock Purchasers pursuant to the Convertible
Preferred Stock Documents as in effect on the Amendment No. 3 Effective
Date;".
(r) Section 9 of the Credit Agreement is further amended by inserting
the following at the end of Section 9.11 thereof:
"or
9.12 CONVERTIBLE PREFERRED STOCK DOCUMENT RELATED MATTERS. (i) The
Borrower shall fail to receive on or prior to December 31, 1996 at least
$40,000,000 of gross proceeds from sales pursuant to
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the Convertible Preferred Stock Documents of convertible preferred stock
of the Borrower, (ii) the Borrower shall fail to receive from sales
pursuant to the Convertible Preferred Stock Documents of convertible
preferred stock of the Borrower gross proceeds (A) of at least
$60,000,000 on or prior to February 25, 1997, (B) of at least $80,000,000
on or prior to August 25, 1997, or (C) of at least $ 100,000,000 on or
prior to February 25, 1998, and the Agent or the Required Banks shall
have delivered a notice to the Borrower that such failure constitutes an
Event of Default, (iii) unless otherwise consented to by the Required
Banks, any holder of Senior Notes shall be paid or required to be paid
any fee or other amounts in connection with any consent or waiver under,
or other modification to, any provision of any Senior Note Document that,
in any such case, relates to (or is entered into in contemplation of) the
Convertible Preferred Stock Documents or any of the transactions
contemplated thereby, or (iv) the Board of Directors of the Borrower
shall fail, at any time prior to the receipt by the Borrower of at least
$100,000,000 of gross proceeds from the sale of convertible preferred
stock of the Borrower pursuant to the Convertible Preferred Stock
Documents, to include at least three individuals (other than Mr. Roger E.
Stangeland) that are Disinterested Directors (as such term is defined in
the Convertible Preferred Stock Purchase Agreement as in effect on the
Amendment No. 3 Effective Date); PROVIDED that the occurrence of any
failure described in the foregoing clause (iv) shall not constitute an
Event of Default so long as such Default is cured within 90 days after
the later of the occurrence thereof or the Borrower's discovery thereof;".
(s) The respective definitions of the terms "Additional Mortgage" and
"Additional Security Documents" contained in Section 10 of the Credit Agreement
are hereby amended in their entirety to read as follows:
"'Additional Mortgages' shall mean each mortgage entered into by the
Borrower or any of its Subsidiaries after the Closing Date purporting to
grant a Lien in favor of the Collateral Agent on any Leasehold or other
Real Property of the Borrower or any of its Subsidiaries."
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"'Additional Security Documents' shall mean each security agreement or
similar document (including any Additional Mortgage) entered into by the
Borrower or any of its Subsidiaries after the Closing Date purporting to
grant a Lien in favor of the Collateral Agent on any asset of the Borrower
or any of its Subsidiaries."
(t) The definition of the term "Adjusted Capitalized Lease
Obligations (Other)" contained in Section 10 of the Credit Agreement is amended
by substituting the following for the phrase "(i) $8,000,000 for each of the
fiscal years ending in 1996 and 1997 and (ii) $10,000,000 for each of the fiscal
years ending thereafter" contained therein:
"(i) $8,000,000 for the fiscal year ending in 1996, (ii) $15,000,000 for
the fiscal year ending in 1997 and (iii) $25,000,000 for each of the fiscal
years ending thereafter".
(u) The definition of the term "Change of Control Event" contained in
Section 10 of the Credit Agreement is amended by:
(i) inserting the following at the end of clause (i) of such
definition:
"(other than solely as a direct result of any such acquisition of
Voting Stock by the Convertible Preferred Stock Purchasers pursuant to the
Convertible Preferred Stock Documents as in effect on the Amendment No. 3
Effective Date or the execution and delivery of the Ratification and Voting
Agreements (as defined in the Convertible Preferred Stock Purchase
Agreement as in effect on the Amendment No. 3 Effective Date))"; and
(ii) modifying clause (ii) of such definition to read as follows:
"(ii) any Change of Control under and as defined in the Senior Note
Documents shall occur (including, without limitation, any such Change of
Control which occurs as a result of the consummation of any of the
transactions contemplated by the Convertible Preferred Stock Documents),
except to the extent, and only for so long as, there is an effective waiver
by the requisite holders of the Senior Notes of the
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obligations and rights of the Borrower and the holders of the Senior Notes
arising as a result thereof under the Indenture for the Senior Notes".
(v) The definition of the term "Cumulative EBITDA Minus Adjusted
Cumulative Consolidated Capital Expenditures" contained in Section 10 of the
Credit Agreement is amended by adding the following after the phrase "(ii)
Adjusted Consolidated Capital Expenditures made during such period" contained
therein:
"plus (iii) Net Equity Issuance Proceeds received by the Borrower during
such period from sales of convertible preferred stock of the Borrower
pursuant to the Convertible Preferred Stock Documents as in effect on the
Amendment No. 3 Effective Date".
(w) The definition of the term "EBITDA" contained in Section 10 of
the Credit Agreement is amended by (i) inserting "(a)" before the word "adding"
in the second line of such definition, and (ii) inserting the following before
the first proviso to such definition:
", and (b) (i) to the extent included as a deduction in calculating
Consolidated Net Income for such period, adding back the aggregate amount
of fees, costs and expenses paid by the Borrower during such period in
connection with the consummation of the transactions contemplated by the
Convertible Preferred Stock Documents; PROVIDED that the aggregate amount
of such fees, costs and expenses which may be so added back during the term
of this Agreement shall be limited to $11,500,000; and (ii) to the extent
not included as a deduction in calculating Consolidated Net Income for such
period or any prior period, deducting an amount equal to the excess, if
any, of the aggregate amount of all such fees, costs and expenses paid by
the Borrower prior to or during such period over $11,500,000;".
(x) The definition of the term "Fixed Charge Coverage Ratio"
contained in Section 10 of the Credit Agreement is amended by substituting the
following for the phrase "(i) EBITDA for such period" contained therein:
"(i) the sum of (A) EBITDA for such period, plus (B) the Net Equity
Proceeds Carryover Amount for such period plus (C) Net Equity Issuance
Proceeds re-
14
<PAGE>
ceived by the Borrower during such period from sales of convertible
preferred stock of the Borrower pursuant to the Convertible Preferred
Stock Documents as in effect on the Amendment No. 3 Effective Date".
(y) The following definitions of new terms are inserted in Section 10
of the Credit Agreement in alphabetical order:
"'Amendment No. 3 Effective Date' shall mean the 'Effective Date', as
such term is defined in Section 4 of Amendment No. 3 dated as of September
11, 1996 to this Agreement."
"'Convertible Preferred Stock Documents' shall mean (a) the
Convertible Preferred Stock Purchase Agreement, and (b) the Certificate of
Designation of Class A Convertible Preferred Stock, stated value $50.00 per
share, of the Borrower; as each of the same may from time to time be
amended, supplemented or otherwise modified from time to time in accordance
with the terms hereof and thereof."
"'Convertible Preferred Stock Purchase Agreement' shall mean the Stock
Purchase Agreement dated as of July 30, 1996 among the Borrower and the
Convertible Preferred Stock Purchasers."
"'Convertible Preferred Stock Purchasers' shall mean Trefoil Capital
Investors II, L.P., a Delaware limited partnership, GE Investment Private
Placement Partners II, A Limited Partnership, a Delaware limited
partnership, and any affiliate of either of the foregoing Persons, as
permitted under Section 5.12(iii) of the Convertible Preferred Stock
Purchase Agreement."
"'Designated Stores' shall mean the stores identified on Schedule XV
hereto, as any such store may from time to time be substituted by a
different store that is designated by the Borrower with the consent of the
Agent (such consent not to be unreasonably withheld)."
"'Net Equity Proceeds Carryover Amount' shall mean (a) for the fiscal
years of the Borrower ending in 1995 and 1996, zero, and (b) for any fiscal
year of the Borrower to occur thereafter, the lesser of
15
<PAGE>
(i) the amount by which the sum of (A) the EBITDA for the immediately
preceding fiscal year, (B) the Net Equity Proceeds Carryover Amount for
the immediately preceding fiscal year and (C) the aggregate amount of Net
Equity Issuance Proceeds received by the Borrower during the immediately
preceding fiscal year pursuant to the Convertible Preferred Stock
Documents as in effect on the Amendment No. 3 Effective Date exceeds the
Fixed Charges for the immediately preceding fiscal year, and (ii) the sum
of (A) the aggregate amount of Net Equity Issuance Proceeds received by
the Borrower during the immediately preceding fiscal year pursuant to the
Convertible Preferred Stock Documents as in effect on the Amendment No. 3
Effective Date and (B) the Net Equity Proceeds Carryover Amount for the
immediately preceding fiscal year."
"'Section 7.14 Credit Amount' shall mean, for any fiscal year of the
Borrower ending in 1998 or thereafter, the excess, if any, of (a) the
aggregate amount of Adjusted Consolidated Capital Expenditures made during
the immediately preceding fiscal year, over (b) the sum of (i) the amount
set forth opposite the immediately preceding fiscal year in Section 7.14,
plus (ii) the Cure Amount (as defined below), if any, for such fiscal year.
"Cure Amount" shall mean, for any fiscal year of the Borrower, the excess,
if any, of (a) the sum of (i) the aggregate amount of Adjusted
Consolidated Capital Expenditures required to be made pursuant to Section
7.14 (after giving effect to the proviso thereto) during the immediately
preceding fiscal year of the Borrower, plus (ii) the aggregate amount of
Adjusted Consolidated Capital Expenditures required to be made during such
immediately preceding fiscal year in order to cure Defaults or Events of
Defaults under Section 7.14 that existed as of the beginning of such
immediately preceding fiscal year, over (b) the aggregate amount of
Adjusted Consolidated Capital Expenditures actually made during the
immediately preceding fiscal year."
(z) The Credit Agreement is further amended by making Annex I hereto
Schedule XV to the Credit Agreement.
Section 2. CONSENT TO AMENDMENTS TO CERTAIN DOCUMENTS.
Notwithstanding anything to the contrary con-
16
<PAGE>
tained in clause (iii) of Section 8.13 of the Credit Agreement, but subject
to the satisfaction of the conditions precedent set forth in Section 4
hereof, in connection with the initial closing under the Stock Purchase
Agreement: (a) the Certificate of Incorporation and By-Laws of the Borrower
may be amended as set forth in the forms of amendments thereto previously
delivered to the Agent; (b) the Borrower may file with the Secretary of State
of the State of Delaware a Certificate of Designation in respect of the
convertible preferred stock to be issued and sold pursuant to the Stock
Purchase Agreement that is in form and substance substantially similar to the
form thereof previously delivered to the Agent; and (c) the indenture
governing the Senior Notes may be amended pursuant to a Supplemental
Indenture that is in form and substance substantially similar to the form
thereof previously delivered to the Agent.
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;
(b) the Stock Purchase Agreement constitutes the valid and binding
agreement of the Purchasers enforceable against the Purchasers in accordance
with the terms thereof, except that (i) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights, and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought; and
(c) 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 after giving effect to the amendments contemplated hereby, except to
the extent such representations and warranties expressly relate to a different
specific date.
Section 4. EFFECTIVENESS. The amendments to the Credit Agreement set
forth in Section 1 hereof and the consents set forth in Section 2 hereof shall
become
17
<PAGE>
effective on the date (the "Effective Date") that each of the following
conditions precedent has been satisfied:
(a) the Agent shall have executed and delivered a counterpart of this
Amendment and received duly executed counterparts of this Amendment from the
Borrower, each Subsidiary of the Borrower that is a party to any Credit Document
and as many of the Banks as shall be necessary to comprise the "Required Banks"
or the "Required Class Creditors", as the case may be;
(b) (i) the Stock Purchase Agreement and all agreements, instruments
and other documents entered into by the Borrower and/or the Purchasers in
connection therewith (including, without limitation, the Certificate of
Designation for the preferred stock to be issued pursuant to the Stock Purchase
Agreement, collectively, the "Equity Documents"), and all amendments to, and
other deviations in the Equity Documents from, the execution copies of the
Equity Documents delivered to the Agent prior to the Agent's execution of this
Amendment either shall not have an adverse effect on the Banks in any way or
shall be reasonably satisfactory in form and substance to the Agent; (ii) the
Stock Purchase Agreement and all of the other Equity Documents shall be in full
force and effect; (iii) the aggregate amount of fees (other than termination and
management fees and reimbursements of costs and expenses) required to be paid
from time to time by the Borrower to investment banks, brokers, finders, the
Purchasers and the Purchasers' respective Affiliates in connection with the
consummation of the Convertible Preferred Stock Sale shall not exceed
$9,250,000; (iv) the Purchasers shall have executed and delivered to the
Borrower a written consent, in the form thereof previously approved by the
Agent, to the payment by the Borrower of the fees described in clause (f) below;
and (v) an initial sale of convertible preferred stock of the Borrower pursuant
to the Stock Purchase Agreement shall have occurred, and the Borrower shall have
received gross proceeds of at least $14,999,900 from such sale;
(c) the Borrower shall have delivered to the Agent an executed
certificate of the Borrower, dated as of the Effective Date, stating that: (i)
the representations and warranties of the Borrower set forth in Section 3 hereof
and in the Stock Purchase Agreement and the other Equity Documents were true and
correct when made and, subject to the qualifications contained in Section 6.4(a)
of the Stock Purchase Agreement in the case of the
18
<PAGE>
representations and warranties contained therein, are true and correct on and
as of the Effective Date as if made on the Effective Date; (ii) all
projections and pro forma financial information provided by the Borrower to
the Agent or any Bank in connection with this Amendment, the Convertible
Preferred Stock Sale and the other transactions contemplated hereby and by
the Equity Documents are based on good faith estimates and assumptions
believed by the Borrower to be reasonable at the time made; (iii) the
conditions precedent set forth in clause (b) above are satisfied on and as of
the Effective Date; (iv) attached thereto are true and complete copies of
each of the Equity Documents as in effect on the Effective Date, and, except
as noted in such certificate or otherwise disclosed to the Agent in writing,
such documents do not vary in any material respect from the execution
versions thereof provided to the Agent prior to its execution hereof; and (v)
attached thereto is a true and complete copy of the consent referred to in
paragraph (b)(iv) above, and such consent is in full force and effect;
(d) the Agent shall have received from Ropes & Gray, special counsel
to the Borrower, a legal opinion, dated the Effective Date, substantially in the
form thereof provided by the Agent to the Borrower prior to the Agent's
execution hereof;
(e) the Borrower shall have delivered to the Agent a copy of each
certificate and legal opinion delivered to, or by or on behalf of, the Borrower
pursuant to the Stock Purchase Agreement in connection with the initial closing
thereunder;
(f) the Borrower shall have paid to the Agent, for the account of the
applicable Banks, in immediately available funds: (i) the fees required by
Section 5 hereof, and (ii) for each Bank that holds any outstanding Term Loans,
an extension fee in an amount equal to 15 basis points on the product of (A)
$65,000,000, and (B) a fraction, the numerator of which is the aggregate
outstanding principal amount of Term Loans held by such Bank and the denominator
of which is the aggregate outstanding principal amount of all of the Term Loans;
(g) the Agent shall have received a letter, addressed to the Agent
and the Banks and dated the Effective Date, from the Purchasers, substantially
similar to the form thereof provided to the Borrower by the Agent
19
<PAGE>
prior to the date hereof, and containing: (i) a consent of the Purchasers to
the collateral assignment to the Collateral Agent pursuant to the Borrower
Security Agreement of all of the Borrower's rights under the Stock Purchase
Agreement; and (ii) an agreement of the Purchasers that, until such time as
the Borrower has received gross proceeds of $100,000,000 pursuant to the
Convertible Preferred Stock Sale, the Purchasers will not, without the
consent of at least two Disinterested Directors (as defined in the Stock
Purchase Agreement) other than Mr. Roger E. Stangeland, cause or permit the
Borrower to commence a voluntary case concerning itself under the Bankruptcy
Code or commence any other proceeding relating to the Borrower under any
reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction;
(h) the Borrower shall have executed and/or delivered to the Agent
such other certificates and documents, and shall have furnished such other legal
opinions, as the Agent may reasonably request prior to the Effective Date as a
result of the existence of any facts or the occurrence of any condition or event
that, in any such case, was unknown to the Agent prior to August 30, 1996 or
occurred after August 30, 1996 and which, in the reasonable judgment of the
Agent, did or could have an adverse effect on the Banks, the Borrower or the
transactions contemplated hereby; and
(i) the Agent shall have delivered a certificate to the Borrower and
the Banks (which the Agent shall be obligated to do if the foregoing conditions
have been satisfied) stating that the Effective Date has occurred and specifying
the calendar date thereof, it being understood that the delivery of such
certificate shall not in any manner be deemed to be a representation or other
certification by the Agent as to the satisfaction of paragraph (a) of this
Section 4.
Section 5. AMENDMENT FEES. The Borrower shall pay to the Agent, in
immediately available funds, for the account of each Bank that executes and
delivers (by facsimile or otherwise) a signature page to this Amendment on or
prior to the date of this Amendment, an amendment fee equal to 12.5 basis points
on the sum of (a) such Bank's Revolving Loan Commitment, and (b) the aggregate
outstanding principal amount of Term Loans held by
20
<PAGE>
such Bank. Each such fee shall be paid by the Borrower within five Business
Days of the date of this Amendment.
Section 6. STATUS OF CREDIT DOCUMENTS. (a) This Amendment is limited
solely for the purposes and to the extent expressly set forth herein, and,
except as expressly modified hereby, (i) the terms, provisions and conditions of
the Credit Documents, (ii) the terms and provisions of the Further Assurances
Agreement dated as of June 15, 1995, as modified in writing prior to the date
hereof and herein, between the Borrower and the Agent, and (iii) the Liens
granted under the Credit Documents shall continue in full force and effect and
are hereby ratified and confirmed in all respects.
(b) Without limiting the foregoing, neither this Amendment
(including, without limitation, the consents granted in Section 2 hereof and the
confirmations made pursuant to paragraph (c) below) nor the deeming by the Agent
pursuant hereto of any Equity Document as being satisfactory to it shall be
construed in any respect as, and is not intended to be: (i) a consent by the
Agent or any Bank to the consummation by the Borrower of any of the transactions
contemplated by the Equity Documents (other than the entering into or filing, as
applicable, by the Borrower of the documents referred to in Section 2 hereof) or
the performance by the Borrower of any term or provision of any Equity Document
(including, without limitation, the Certificate of Designation for the preferred
stock to be issued and/or sold pursuant to the Equity Documents), in any such
case that is prohibited by the Credit Agreement, as expressly amended hereby, or
(ii) a waiver by the Agent or any Bank of (A) any violation of the Credit
Agreement, as expressly amended hereby, or any Default or Event of Default
thereunder that in any such case arises as a result of the performance or
observance by the Borrower of any of its covenants, agreements and obligations
under, or the consummation of any transaction (other than those expressly
consented to pursuant Section 2 hereof) contemplated by, any Equity Document
(including, without limitation, any such violation, Default or Event of Default
that would arise under Section 8.6 of the Credit Agreement, as expressly amended
hereby, as a result of the performance by the Borrower of any obligation of the
Borrower under the Equity Documents to pay cash dividends on, or redeem, any
shares of stock issued and/or sold pursuant to the Equity Documents), or (B) any
rights and remedies arising in favor of the Agent or any Bank under the Credit
Documents or otherwise as a
21
<PAGE>
result of the occurrence of any such violation, Default or Event of Default.
(c) The Borrower acknowledges that the performance by the Borrower of
its following obligations under the Equity Documents will, unless consented to
in writing by the requisite Banks after the Effective Date, result in a
violation of, and constitute an Event of Default under, the Credit Agreement as
amended hereby: (i) any obligation of the Borrower under the Equity Documents to
pay cash dividends (in whole or in part) on, or purchase, redeem or otherwise
acquire (in whole or in part) for cash, any shares of convertible preferred
stock issued from time to time pursuant to the Equity Documents, and (ii) any
obligation of the Borrower under the Equity Documents to pay to any Purchaser or
any of their respective Affiliates any management or similar fee at any time
that a Default or an Event of Default has occurred and is continuing. Each of
the Agent and the Borrower confirms to each other on the terms set forth in
paragraph (b) above that it does not have any actual knowledge that any other
term or provisions of the Equity Documents conflicts (or that the performance
thereof could conflict) with the terms and provisions of the Credit Agreement as
amended hereby.
(d) No amendment made to the Credit Agreement pursuant to this
Amendment shall relieve the Borrower from complying with any other term or
provision of the Credit Agreement as amended hereby.
Section 7. COUNTERPARTS. This Amendment may be executed and
delivered in any number of counterparts and by the different parties hereto on
separate counterparts, 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 8. GOVERNING LAW. THIS AMENDMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH, AND SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK.
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their respective
duly authorized officers to execute and deliver this Waiver and Third Amendment
to the Amended and Restated Credit Agreement as of the date first above written.
THE GRAND UNION COMPANY
By: /s/ Francis E. Nicastro
----------------------------
Name: Francis E. Nicastro
Title: Vice President and
Treasurer
BANKERS TRUST COMPANY,
Individually and as Agent
By: /s/ Mary Kay Coyle
----------------------------
Name: Mary Kay Coyle
Title: Managing Director
BANKAMERICA BUSINESS CREDIT, INC.
By: /s/ Richard Levenson
----------------------------
Name: Richard Levenson
Title: VP
BANK POLSKA KASA OPIEKI, SA
By: /s/ William A. Shea
----------------------------
Name: William A. Shea
Title: Vice President
Senior Lending Officer
23
<PAGE>
COMPAGNIE FINANCIERE DE CIC ET
DE L'UNION EUROPEENNE
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/ Tim H.Barns
----------------------------
Name: Tim H. Barns
Title: Division Executive
FLEET BANK N.A.
By: /s/ Eric Rubin
----------------------------
Name: Eric Rubin
Title: Vice President
HELLER FINANCIAL, INC.
By: /s/ Salvatore Salzillo
----------------------------
Name: Salvatore Salzillo
Title: AVP
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION
By:________________________
Name:
Title:
24
<PAGE>
LEHMAN COMMERCIAL PAPER INC.
By: /s/ Michele Swanson
----------------------------
Name: Michele Swanson
Title: Authorized Signatry
Nations Banc Capital Markets, Inc. as Agent for
NATIONSBANK, N.A.
By: /s/ Peter Santry
----------------------------
Name: Peter Santry
Title: Director
PROTECTIVE LIFE INSURANCE CO.
By: /s/ Mark K. Okada CFA
----------------------------
Name: Mark K. Okada CFA
Title: Principal Protective Asset
Management Co.
QUANTUM PARTNERS LDC
By: /s/ Mark Sonnino
----------------------------
Name: Mark Sonnino
Title: Attorney-in-fact
SENIOR DEBT PORTFOLIO
By: Boston Management and Research,
as Investment Advisor
By: /s/ Barbara Campbell
----------------------------
Name: Barbara Campbell
Title: Assistant Treasurer
25
<PAGE>
TRANSAMERICA BUSINESS CREDIT
CORPORATION
By: /s/ Perry Vavoules
----------------------------
Name: Perry Vavoules
Title: Senior Vice President
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By: /s/ Jeffrey W. Maillet
----------------------------
Name: Jeffrey W. Maillet
Title: Senior Vice President and
Director
The foregoing Third Amendment 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.
SPECIALTY MERCHANDISING SERVICES, INC.
By: /s/ Francis E. Nicastro
----------------------------
Name: Francis E. Nicastro
Title: Vice President and Treasurer
of each of the above listed
entities
26
<PAGE>
ANNEX I
to
THIRD AMENDMENT
SCHEDULE XV
to
CREDIT AGREEMENT
DESIGNATED STORES
1. Sayville, NY (Store #82)
2. New Canaan, CT (Store #207)
3. Newtown, CT (Store #231)
4. Port Henry, NY (Store #1153)
5. Brattleboro, VT (Store #1861)
6. Bolton Landing, NY (Store #1941)
7. Willsboro, NY (Store #1942)
8. Highland Falls, NY (Store #3277)
9. Mt. Ivy, NY (Store #3491)
10. Flemington, NJ (Store #3563)
27
<PAGE>
EXHIBIT 10.3
EXHIBIT A
FIRST SUPPLEMENTAL INDENTURE
This FIRST SUPPLEMENTAL INDENTURE, dated as of September 9, 1996, is
between The Grand Union Company, a corporation duly organized and existing under
the laws of the State of Delaware, and IBJ Schroder Bank & Trust Company, a
banking company organized under the laws of the State of New York, as Trustee
(the "Trustee").
RECITALS OF THE COMPANY
The Company and the Trustee have entered into an Indenture dated as of June
15, 1995 (the "Indenture").
The Company has duly authorized certain amendments to the Indenture.
All things necessary to make this First Supplemental Indenture and the
Indenture as supplemented by this First Supplemental Indenture a valid and
binding agreement of the Company, enforceable in accordance with their
respective terms, have been done.
The Company desires to supplement the Indenture as provided herein.
The Board of Directors of the Company has duly authorized the execution and
delivery by the Company of this First Supplemental Indenture.
The Trustee has received the consent of at least a majority in principal
amount of the Holders of the Securities (each as defined in the Indenture) to
this First Supplemental Indenture.
NOW THEREFORE, each party hereto mutually covenants and agrees as follows
for the benefit of the other party and for the equal and ratable benefit of the
Holders:
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises, for the equal and proportionate
benefit of all Holders of the Securities, as follows:
1. DEFINITIONS. Terms defined in the Indenture as amended hereby and not
otherwise defined herein are used herein with the meanings so defined.
2. SUPPLEMENT TO INDENTURE. Pursuant to Section 8.02 of the Indenture,
the Indenture is hereby supplemented as follows:
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<PAGE>
2.1. AMENDMENT TO SECTION 1.01(a). The definition of "CONSOLIDATED NET
INCOME" set forth in Section 1.01(a) of the Indenture is hereby amended to read
in its entirety as follows:
" CONSOLIDATED NET INCOME' means, for any period, the aggregate net
income of the Company and its Subsidiaries for such period on a
consolidated basis, determined in accordance with GAAP; PROVIDED, HOWEVER,
that there shall be excluded therefrom, after giving effect to any related
tax effect, (i) gains and losses from Asset Sales or reserves relating
thereto, (ii) items classified as extraordinary or nonrecurring, including
without limitation income relating to the cancellation of Indebtedness
resulting from the Restructuring, (iii) non-cash charges consisting of
amortization of excess reorganization value resulting from the
Restructuring, (iv) the income (or loss) of any Joint Venture, except to
the extent of the amount of cash dividends or other distributions in
respect of its capital stock or interest in the Joint Venture actually paid
to, and received by, the Company or any of its Subsidiaries during such
period by such Joint Venture out of funds legally available therefor, (v)
except to the extent includable pursuant to clause (iv), the income (or
loss) of any Person accrued or attributable to any period prior to the date
it becomes a Subsidiary of the Company or any of its Subsidiaries or that
Person's assets (or a portion thereof) are acquired by the Company or any
of its Subsidiaries and (vi) the cumulative effect of changes in accounting
principles in the year of adoption of such change."
2.2. AMENDMENT TO SECTION 3.02(a). The first paragraph of Section
3.02(a) of the Indenture is hereby amended to read in its entirety as follows:
"(a) The Company shall not, nor shall it permit any of its
Subsidiaries to, make any Restricted Payment (other than (i) Investments in
Affiliates which are not wholly-owned Subsidiaries in an aggregate amount
not to exceed $20 million at any time outstanding; (ii) Investments in
Borrowing Subsidiaries in an aggregate amount at any time outstanding not
to exceed the sum of (x) $30 million less (y) the aggregate amount of
outstanding Investments in Affiliates which are not wholly-owned
Subsidiaries permitted by clause (i) hereof; (iii) so long as, after giving
effect thereto, no Default shall have occurred and be continuing, payments
of dividends due and payable on the Company's 8.5% Class A
Convertible Preferred Stock, $1.00 par value, but only to the extent to
which such dividends are paid solely from the proceeds of issuances of
equity securities of the Company within 180 days prior to the date of such
dividend payment and (iv) so long as, after giving effect thereto, no
Default shall have occurred and be continuing, payments made in redemption
of shares of the Company's 8.5% Class A
-1-
<PAGE>
Convertible Preferred Stock, $1.00 par value, tendered for redemption
pursuant to an offer by the Company to redeem such securities, but only
to the extent to which such payments are paid solely from the proceeds
of issuances of equity securities of the Company in connection with such
redemption) if, after giving effect thereto:"
2.3. AMENDMENT TO SECTION 3.02(a)(C). Section 3.02(a)(C) of the
Indenture is hereby amended to read in its entirety as follows:
"(C) the aggregate amount of Restricted Payments made subsequent to
the date of this Indenture by the Company and its Subsidiaries (other than
Restricted Payments permitted by the parenthetical in the first paragraph
of this Section 3.02(a)) would exceed the sum of (a) 50% (or minus 100% in
the event of a deficit) of aggregate Consolidated Net Income (which is
defined to exclude income relating to cancellation of indebtedness and
charges consisting of amortization of excess reorganization value, in each
case resulting from the Restructuring) of the Company for the period
commencing on June 18, 1995 and ending on the last day of the fiscal
quarter immediately preceding the date of such payment, less $10.7 million,
and (b) the aggregate Net Proceeds, including cash and the Fair Market
Value of Property other than cash, received by the Company subsequent to
the Issue Date from capital contributions (less the amount of any Net
Proceeds which are applied to pay cash dividends on or redeem the Company's
8.5% Class A Convertible Preferred Stock, $1.00 par value, as permitted by
clauses (iii) and (iv) of paragraph (a) above), from any of its
stockholders or from the issuance or sale (other than to a Subsidiary)
subsequent to the Issue Date of shares of its Capital Stock (other than
Redeemable Stock) of any class (or rights or warrants to subscribe for or
purchase shares of such capital stock) or of any convertible securities or
debt obligations which have been converted into, exchanged for or satisfied
by the issuance of shares of the Company's Capital Stock (other than
Redeemable Stock)."
2.4. AMENDMENT TO SECTION 3.03(b)(i). Clause (i) of Section 3.03(b)
of the Indenture is hereby amended to read in its entirety as follows:
"(i) Indebtedness evidenced by the Securities, and Indebtedness under
the Bank Credit Agreement (including any refinancings thereof) in a maximum
principal amount at the time of execution of such Bank Credit Agreement or
refinancing (or, in the case of any amendment or modification increasing
available credit, at the time of execution of such amendment or
modification) not to exceed the greater of (x) $250 million or (y) the sum
of $100 million plus 65% of the total inventory of the Company and
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<PAGE>
its Subsidiaries then outstanding (calculated on a "first-in" "first-out"
basis) plus 85% of the total accounts receivable of the Company and its
Subsidiaries then outstanding, subject to one or more permanent reductions
of both (x) and (y) as provided in clause (iii) of Section 3.05 and the
proviso set forth in the second paragraph of Section 3.06(a);"
2.5. AMENDMENT TO SECTION 3.03(b)(ii). Clause (ii) of Section 3.03(b)
of the Indenture is hereby amended by deleting subclause (y) thereof and
relettering subclause (z) as subclause (y).
2.6. AMENDMENT TO SECTION 3.04. Section 3.04 of the Indenture is
hereby amended as follows: (a) Clause (i) of Section 3.04 is amended to read in
its entirety as follows: "(i) any Lien existing as of the date of this
Indenture and any Lien securing Indebtedness permitted by Section 3.03(b)(i);"
and (b) the final paragraph of Section 3.04 is amended to delete the reference
to clause (i) therein.
3. GENERAL. This First Supplemental Indenture is a supplemental
indenture within the meaning of the Indenture and may be executed in any number
of counterparts, each of which so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same First
Supplemental Indenture. All provisions of this First Supplemental Indenture
shall be deemed to be incorporated in, and made a part of, the Indenture and the
Indenture, as supplemented by this First Supplemental Indenture, shall be read,
taken and construed as one and the same instrument. Except as amended by this
First Supplemental Indenture, the terms and provisions of the Indenture shall
remain in full force and effect. This First Supplemental Indenture shall be
governed by and construed in accordance with the law of the State of New York
without regard to conflicts of laws principles.
4. TRUSTEE. The Trustee hereby accepts a trust declared and provided by
this First Supplemental Indenture, and agrees to perform the same upon the terms
and conditions contained in the Indenture, including the terms and provisions
defining and limiting the liabilities and responsibilities of the Trustee, which
terms and provisions shall in like manner define and limit its liabilities in
the performance of the trust created by the Indenture as hereby amended, and,
without limiting the generality of the foregoing, the Trustee has no
responsibility for the correctness of the recitals of fact herein contained
which shall be taken as the statements of the Company, and makes no
representations as to the validity or sufficiency of this First Supplemental
Indenture and shall incur no liability or responsibility in respect of the
validity thereof.
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<PAGE>
5. EFFECTIVENESS AND TERMINATION. This First Supplemental Indenture
shall become effective upon execution by the Company and the Trustee, but shall
terminate on January 1, 1997 unless the Principal Closing (as defined) under the
Stock Purchase Agreement dated as of July 30, 1996 by and among the Company,
Trefoil Capital Investors II, L.P. and GE Investment Private Placement Partners
II, A Limited Partnership, shall have occurred prior to such date.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
THE GRAND UNION COMPANY
By: /s/ Kenneth R. Baum
------------------------------------
Name: Kenneth R. Baum
Title: Senior Vice President
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Nancy R. Besse
------------------------------------
Name: Nancy R. Besse
Title: Vice President
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<PAGE>
EXHIBIT 10.4
THE GRAND UNION COMPANY
CERTIFICATE OF DESIGNATION
OF CLASS A CONVERTIBLE PREFERRED STOCK
SETTING FORTH THE POWERS, PREFERENCES, RIGHTS,
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS OF
SUCH CLASS OF PREFERRED STOCK
Pursuant to Section 151 of the General Corporation Law of the State of
Delaware, The Grand Union Company (the "Corporation"), a corporation organized
and existing under the General Corporation Law of the State of Delaware, in
accordance with the provisions of Section 103 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors of
the Corporation by Article Fourth of the Certificate of Incorporation of the
Corporation (the "Certificate of Incorporation"), and in accordance with the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, the Board of Directors of the Corporation on August 15, 1996,
adopted the following resolution creating a series of Preferred Stock
designated as Class A Convertible Preferred Stock (the "Class A Stock"):
RESOLVED that, pursuant to the authority vested in the Board of Directors
of the Corporation in accordance with the General Corporation Law of the State
of Delaware and the provisions of the Certificate of Incorporation, a class of
authorized Preferred Stock, par value $1.00 per share, of the Corporation is
hereby created and that the designation and number of shares thereof and the
voting powers, preferences and relative participating, optional and other
special rights of the shares of such class, and the qualifications, limitations
and restrictions thereof, are as follows:
Section 1. Stated Value.
The Class A Stock shall consist of 3,500,000 shares, par value $1.00 per
share, each of which shall have a stated value of $50 per share (the "Stated
Value").
Section 2. Dividends and Distributions.
(a) The holders of shares of Class A Stock, in preference to the holders of
shares of Junior Dividend Stock (as defined in Section 11 hereof), shall be
entitled to receive, when, as and if declared by the Board of Directors, out of
the assets of the Corporation legally available therefor, dividends at an annual
rate of 8.50% of the Stated Value from and after the Issue Date (as defined in
Section 11 hereof) of such shares as long as shares of Class A Stock remain
outstanding. Dividends shall be payable in cash, or additional shares of Class A
Stock, as provided in paragraph (c) of this Section 2, or shares of Common
Stock, as provided in paragraph (c) of this Section 2. Dividends shall be
computed on the basis of the Stated Value, and shall accrue and be payable
quarterly, in arrears, on the last Business Day (as
<PAGE>
defined in Section 11) of March, June, September and December in each year (each
such date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the Issue Date of
such shares. To the extent that dividends on the Class A Stock are payable in
cash, such dividends shall be cumulative. Accrued dividends not paid on any
Quarterly Dividend Payment Date shall accrue additional dividends at an annual
dividend rate of 8.50% until paid in full.
(b) Dividends payable pursuant to paragraph (a) of this Section 2 shall
begin to accrue and be cumulative from the Issue Date of each share of Class A
Stock, whether or not earned or declared. The amount of dividends so payable
shall be determined on the basis of twelve 30-day months and a 360-day year.
Dividends paid on the shares of Class A Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Class A Stock entitled to receive payment of a dividend
declared thereon, which record date shall be no more than sixty days prior to
the date fixed for the payment thereof.
(c) With respect to dividends paid on or prior to the third anniversary of
the Principal Issue Date (as defined in Section 11), the Corporation shall have
the option to pay such dividends in shares of Class A Stock valued at $50 per
share or in whole shares of Common Stock valued at Fair Market Value determined
as of the close of business on the third Business Day immediately preceding the
date of payment, instead of in cash. With respect to dividends paid after the
third anniversary of the Principal Issue Date but on or prior to the fifth
anniversary of the Principal Issue Date, the Corporation shall have the option
to pay such dividends in shares of Class A Stock valued at $50 per share or in
whole shares of Common Stock valued at Fair Market Value determined as of the
close of business on the third Business Day immediately preceding the date of
payment, instead of in cash, but only if the Corporation is prohibited from
paying such dividends in cash under the terms of its Bank Credit Agreement or
its Senior Notes. To the extent that the Corporation elects to pay any dividends
in shares of Common Stock, it shall pay a premium in additional shares of Common
Stock equal to 33-1/3% of the total number of shares of Common Stock that would
otherwise be paid as the dividend. After the fifth anniversary, all dividends
shall be paid in cash. The Corporation shall only have the right to pay
dividends in shares of Common Stock if, on the Quarterly Dividend Payment Date
in question, the Common Stock is listed and traded on the New York Stock
Exchange, the American Stock Exchange or the Nasdaq National Market System. In
connection with any payment of dividends in shares of Common Stock pursuant to
this Section 2(c), no fractions of shares of Common Stock shall be issued, but
in lieu thereof the Corporation shall either (i) deliver a whole share of Common
Stock in respect of the fractional share which the holder would otherwise have
been entitled to upon such dividend payment or (ii) pay a cash adjustment in
respect of such fractional interest in an amount equal to such fractional
interest multiplied by the Fair Market Value of a share of Common Stock
determined as of the close of business on the third Business Day immediately
preceding the date of payment.
(d) Prior to the Principal Issue Date, all dividends on the Class A Stock
shall be paid in cash. Such dividends may be cumulated and not paid, without
<PAGE>
penalty or other adverse consequence (including additional dividends on the
accrued and unpaid dividends), prior to the Required Issue Date, with all such
cumulated dividends to be paid in accordance with Sections 2(a) and 2(c) and the
first sentence of this Section 2(d) on the first Quarterly Dividend Payment Date
after the earlier of the Principal Issue Date and the Required Issue Date.
(e) The holders of shares of Class A Stock shall not be entitled to receive
any dividends or other distributions except as provided herein.
Section 3. Voting Rights.
In addition to any voting rights provided by law, the holders of shares of
Class A Stock shall have the following voting rights:
(a) In addition to voting rights provided elsewhere in this Section 3, and
as long as any of the Class A Stock is outstanding, each share of Class A Stock
shall entitle the holder thereof to vote on all matters, including with respect
to the election of directors, voted on by holders of Common Stock voting
together as a single class with other shares entitled to vote at all meetings of
the stockholders of the Corporation. With respect to any such vote, each share
of Class A Stock shall entitle the holder thereof to cast the number of votes
equal to the number of whole votes which could be cast in such vote by a holder
of the shares of capital stock of the Corporation into which such share of Class
A Stock is convertible on the record date for such vote; PROVIDED, HOWEVER, that
if more than one share of Class A Stock shall be held by any holder of shares of
Class A Stock, the total number of votes which such holder shall be entitled to
cast pursuant to this Section 3(a) shall be computed on the basis of conversion
of the total number of shares of Class A Stock held by such holder, with any
then remaining fractional share disregarded for the purposes of this Section
3(a).
(b) In addition to the voting rights provided elsewhere in this Section 3,
the affirmative vote of the holders of at least a majority of the outstanding
shares of Class A Stock, voting separately as a single class, in person or by
proxy, at a special or annual meeting of stockholders called for the purpose,
shall be necessary to (A) except as contemplated by Section 2(c), authorize,
increase the authorized number of shares of, or issue (including on conversion
or exchange of any convertible or exchangeable securities or by
reclassification), any shares of any class or classes, or any series of any
class or classes, of the Corporation's capital stock ranking pari passu with or
prior to (either as to dividends or upon a change in control of the Corporation,
voluntary or involuntary liquidation, dissolution or winding up) the Class A
Stock, (B) except as contemplated pursuant to Section 2(c) or as permitted
pursuant to Section 10(a), increase the authorized number of shares of, or issue
(including on conversion or exchange of any convertible or exchangeable
securities or by reclassification) any shares of, Class A Stock, (C) alter,
amend or repeal any of the provisions of the Certificate of Incorporation of the
Corporation which in any manner would alter, change or otherwise adversely
affect in any way the powers, preferences or rights of the Class A Stock, (D)
approve the sale, lease or other disposition of all or substantially all of the
assets of the Corporation and its Subsidiaries (as defined in Section 11), or
(E) approve any merger of the Corporation with or into any other entity or any
reorganization, recapitalization, liquidation or other similar transaction
(including any issuance of equity securities, or securities convertible into
<PAGE>
equity securities by the Corporation, to any person (other than the Purchasers
and their Affiliates) who would then own on a fully diluted basis more than 50%
of the total number of votes entitled to be cast (giving effect to such
issuance) by holders of the Corporation's capital stock on all matters,
including the election of directors, involving the Corporation; PROVIDED,
HOWEVER, that the holders of the outstanding shares of Class A Stock shall only
have a class vote on the transactions described in clauses (D) and (E) prior to
the earlier of the effectiveness of a registration statement under the
Securities Act of 1933 relating to all such shares and, following the Principal
Issue Date, the date on which less than half of the total shares of Class A
Stock originally issued (not including any shares issued in payment of dividends
pursuant to Section 2(c)) remain outstanding. Notwithstanding the proviso to the
preceding sentence, the affirmative vote of the holders of at least a majority
of the outstanding shares of Class A Stock, voting separately as a single class,
in person or by proxy, at a special or annual meeting of stockholders called for
the purpose, shall be necessary to approve any merger of the Corporation with or
into any other entity or any reorganization, recapitalization, liquidation or
other similar transaction involving the Corporation where (i) the Class A Stock
is not remaining outstanding after such transaction under substantially the same
powers, preferences, rights, qualifications, limitations and restrictions as are
set forth in this Certificate of Designation or (ii) the cash, stock, securities
or other property to be received on conversion of one share of Class A Stock
following such transaction and the application of Section 8(h) has a Fair Market
Value at the closing of such transaction less than 150% of the Conversion Price.
If the Principal Issue Date has not occurred on or before the Required Issue
Date, then, for one year following the Required Issue Date, the Corporation may
complete any of the transactions described in clauses (D) and (E) without any
class vote of the Class A Stock so long as (i) the Corporation shall redeem, at
the option of the holder thereof, any shares of Class A Stock, at a redemption
price equal to 108.5% of the Stated Value thereof, in accordance with the
provisions of Section 5(f), and (ii) prior to consummating such transaction, the
other party or parties to such transaction (including any parent entity thereof)
agrees in writing for the benefit of the holders of the Class A Stock to provide
or cause to be provided the funds for such redemption and to guarantee the
Corporation's performance of its obligations pursuant to Section 5(f) and
provides reasonable evidence of its ability to provide such funds. In addition,
if the Corporation shall have failed to pay in full dividends on the Class A
Stock for six consecutive quarters, then the size of the Board of Directors of
the Corporation shall be increased by two, and the holders of shares of Class A
Stock, voting together as a single class, shall have the right to elect such two
directors. The right to elect such two directors under this Section 3(b) shall
terminate upon payment in full of all dividends payable on the Class A Stock, at
which time the Board of Directors shall return to its previous size and the
directors elected by the holders of the Class A Stock shall be removed.
(c) In addition to the voting rights provided elsewhere in this Section 3,
between the First Issue Date and the Principal Issue Date, the size of the Board
of Directors of the Corporation shall be increased by two, and the holders of
shares of Class A Stock, voting together as a single class, shall have the right
to elect two directors to fill such positions. While the holders of shares of
Class A Stock are entitled to elect such two directors under this Section 3(c),
they shall not be entitled to elect any directors under the penultimate sentence
of Section 3(b). On and after the Principal Issue Date, the voting rights under
this Section 3(c) shall terminate, and thereafter the provisions of Sections
3(a) and 3(b) shall apply to the election of directors.
<PAGE>
(d) (1) The rights of holders of shares of Class A Stock to take any
actions as provided in this Section 3 may be exercised, subject to the DGCL (as
defined in Section 11 hereof), at any annual meeting of stockholders or at a
special meeting of stockholders held for such purpose as hereinafter provided or
at any adjournment or postponement thereof, or by the written consent, delivered
to the Secretary of the Corporation, of the holders of the minimum number of
shares required to take such action.
As long as such right to vote continues (and unless such right has been
exercised by written consent of not less than the minimum number of shares
required to take such action), the Chairman of the Board of the Corporation may
call, and upon the written request of holders of record of 20% of the
outstanding shares of Class A Stock, addressed to the Secretary of the
Corporation at the principal office of the Corporation, shall call, a special
meeting of the holders of shares of Class A Stock entitled to vote as provided
herein. The Corporation shall use its best efforts to hold such meeting as
promptly as practicable, but in any event not later than 120 days after delivery
of such request to the Secretary of the Corporation, at the place and upon the
notice provided by law and in the Bylaws of the Corporation for the holding of
meetings of stockholders.
(2) At each meeting of stockholders at which the holders of shares of Class
A Stock shall have the right, voting separately as a single series, to take any
action, the presence in person or by proxy of the holders of record of a
majority of the total number of shares of Class A Stock then outstanding and
entitled to vote on the matter shall be necessary and sufficient to constitute a
quorum. At any such meeting or at any adjournment or postponement thereof, in
the absence of a quorum of the holders of shares of Class A Stock, holders of a
majority of such shares present in person or by proxy shall have the power to
adjourn the meeting as to the actions to be taken by the holders of shares of
Class A Stock from time to time and place to place without notice other than
announcement at the meeting until a quorum shall be present.
For the taking of any action as provided in Section 3(b) or (c) by the
holders of shares of Class A Stock, each such holder shall have one vote for
each share of Class A Stock standing in his name on the transfer books of the
Corporation as of any record date fixed for such purpose or, if no such date be
fixed, at the close of business on the Business Day next preceding the day on
which notice is given, or if notice is waived, at the close of business on the
Business Day next preceding the day on which the meeting is held.
Section 4. Certain Restrictions.
(a) As long as any shares of Class A Stock remain outstanding, the
Corporation shall not: (A) declare or pay dividends, or make any other
distributions, on any shares of Junior Dividend Stock other than dividends or
<PAGE>
distributions payable in Junior Dividend Stock; or (B) declare or pay dividends,
or make any other distributions, on any shares of Parity Dividend Stock (as
defined in Section 11 hereof), except (1) dividends or distributions payable in
Junior Dividend Stock and (2) dividends or distributions paid ratably on the
Class A Stock and all Parity Dividend Stock on which dividends are payable or in
arrears, in proportion to the total amounts to which the holders of all shares
of the Class A Stock and such Parity Dividend Stock are then entitled.
(b) As long as any shares of Class A Stock remain outstanding, the
Corporation shall not redeem, purchase or otherwise acquire for consideration
any shares of Junior Dividend Stock or Junior Liquidation Stock (as defined in
Section 11 hereof) or Parity Dividend Stock or Parity Liquidation Stock (as
defined in Section 11 hereof); PROVIDED, HOWEVER, that (1) the Corporation may
at any time redeem, purchase or otherwise acquire shares of Junior Liquidation
Stock or Parity Liquidation Stock in exchange for any shares of capital stock of
the Corporation that rank junior to the Class A Stock as to dividends and upon
liquidation, dissolution and winding up; (2) the Corporation may accept shares
of any Parity Liquidation Stock for conversion into shares of capital stock of
the Corporation that rank junior to the Class A Stock as to dividends and upon
liquidation, dissolution and winding up; and (3) the Corporation may at any time
redeem, purchase or otherwise acquire shares as may be required pursuant to the
Corporation's employee and non-employee director stock plans, as they may be
amended from time to time, or similar employee stock plans hereafter adopted;
and provided further, however, that the Corporation (A) may accept shares of
Class A Stock surrendered for conversion into shares of capital stock of the
Corporation pursuant to Section 8 hereof, and (B) may redeem outstanding shares
of Class A Stock pursuant to Section 5 hereof. Whenever quarterly dividends
payable on shares of Class A Stock as provided in Section 2 hereof are not paid
in full, thereafter and until all unpaid dividends payable, whether or not
declared, on the outstanding shares of Class A Stock shall have been paid in
full, the Corporation shall not redeem or purchase or otherwise acquire for
consideration any shares of Class A Stock; PROVIDED, HOWEVER, that the
Corporation (A) may accept shares of Class A Stock surrendered for conversion
into shares of capital stock of the Corporation pursuant to Section 8 hereof,
and (B) may elect to redeem outstanding shares of Class A Stock pursuant to
Section 5(a) hereof.
(c) The Corporation shall not permit any Subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of capital stock of
the Corporation unless the Corporation could, pursuant to Section 4(b), purchase
such shares at such time and in such manner.
Section 5. Redemption.
(a) On and after the second anniversary of the Principal Issue Date, the
Corporation shall have the right, at its sole option and election made in
accordance with Section 5(c), to redeem, out of funds legally available
therefor, shares of Class A Stock, in whole or in part, at any time and from
time to time, at a redemption price equal to the Stated Value (except as
described below), plus an amount per share equal to all accrued and unpaid
dividends, whether or not declared, to the date of redemption (the "Redemption
Price"); PROVIDED, HOWEVER, that the Corporation shall not have any such right
unless (A) if the redemption is to occur between
<PAGE>
the second and third anniversary of the Principal Issue Date, the Redemption
Fair Market Value (as defined in Section 11 hereof) of the Common Stock, as of
the close of business on the third Business Day immediately preceding the date
on which notice of redemption is given, is equal to at least 180% of the
Conversion Price (as defined in Section 11 hereof), and (B) if the redemption is
to occur between the third and fifth anniversary of the Principal Issue Date,
the Redemption Fair Market Value (as defined in Section 11 hereof) of the Common
Stock, as of the close of business on the third Business Day immediately
preceding the date on which notice of redemption is given, is equal to at least
200% of the Conversion Price (as defined in Section 11 hereof). Notwithstanding
the foregoing, if the redemption is to occur between the fifth and sixth
anniversaries of the Principal Issue Date, the Redemption Price shall be
$51.5938; if the redemption is to occur between the sixth and seventh
anniversaries of the Principal Issue Date, the Redemption Price shall be
$51.0625; and if the redemption is to occur between the seventh and eighth
anniversaries of the Principal Issue Date, the Redemption Price shall be
$50.5313; in each case plus an amount per share equal to all accrued and unpaid
dividends, whether or not declared, to the date of redemption. If less than all
shares of Class A Stock at the time outstanding are to be redeemed, the shares
to be redeemed shall be selected pro rata.
(b) The Corporation shall redeem, at the Redemption Price, all outstanding
shares of Class A Stock on June 1, 2005.
(c) Notice of any redemption of shares of Class A Stock pursuant to this
Section 5 shall be mailed at least 30, but not more than 60, days prior to the
date fixed for redemption to each holder of shares of Class A Stock to be
redeemed, at such holder's address as it appears on the transfer books of the
Corporation. Any such notice shall be irrevocable when given. In order to
facilitate the redemption of shares of Class A Stock, the Board of Directors may
fix a record date for the determination of Class A Stock to be redeemed, or may
cause the transfer books of the Corporation for the Class A Stock to be closed,
not more than sixty days or less than thirty days prior to the date fixed for
such redemption.
(d) On the date of any redemption being made pursuant to this Section 5
which is specified in a notice given pursuant to Section 5(c), the Corporation
shall, and at any time after such notice shall have been mailed and before the
date of redemption the Corporation may deposit for the benefit of the holders of
shares of Class A Stock to be redeemed the funds necessary for such redemption,
including the amount necessary to pay all accrued and unpaid dividends to the
date of redemption, with a bank or trust company in the City of New York having
a capital and surplus of at least $1,000,000,000. Any moneys so deposited by the
Corporation and unclaimed at the end of one year from the date designated for
such redemption shall revert to the general funds of the Corporation. After such
reversion, any such bank or trust company shall, upon demand, pay over to the
Corporation such unclaimed amounts and thereupon such bank or trust company
shall be relieved of all responsibility in respect thereof and
any holder of shares of Class A Stock to be redeemed shall look only to the
Corporation for the payment of the Redemption Price. In the event that moneys
are deposited pursuant to this paragraph (d) in respect of shares of Class A
Stock that are converted in accordance with the provisions of Section 8, such
moneys shall, upon such conversion, revert to the general funds of the
Corporation and, upon demand, such bank or trust company shall pay over to the
Corporation such moneys and shall be relieved of all responsibility to the
<PAGE>
holders of such converted shares in respect thereof. Any interest accrued on
funds deposited pursuant to this paragraph (d) shall be paid from time to time
to the Corporation for its own account.
(e) Notice of redemption having been given as aforesaid, upon the deposit
of funds pursuant to Section 5(d) in respect of shares of Class A Stock to be
redeemed pursuant to this Section 5, notwithstanding that any certificates for
such shares shall not have been surrendered for cancellation, from and after the
date of redemption designated in the notice of redemption (i) the shares
represented thereby shall no longer be deemed outstanding, (ii) the rights to
receive dividends thereon shall cease to accrue, and (iii) all rights of the
holders of shares of Class A Stock to be redeemed shall cease and terminate,
excepting only the right to receive the Redemption Price therefor, and the right
to convert such shares into shares of Common Stock until the close of business
on the Fifth Business Day next preceding the date of redemption, in accordance
with Section 8 hereof.
(f) (i) If, at the option of any holder of Class A Stock, the Corporation
is obligated to redeem any shares of Class A Stock pursuant to the provisions of
the third sentence of Section 3(b), then, within three Business Days after the
completion of any transaction described in clause (D) or (E) of Section 3(b),
the Corporation shall mail notice of the completion of such transaction to each
holder of shares of Class A Stock, at such holder's address as it appears on the
transfer books of the Corporation. Such notice shall specify the circumstances
of the completed transaction, the Repurchase Date (as defined in clause (ii)
below), the price at which the Corporation shall be obligated to redeem the
shares of Class A Stock, that the holder shall have the right, prior to the
Repurchase Date, to withdraw any shares of Class A Stock surrendered, a
description of the procedure which the holder must follow to exercise such
redemption right and to withdraw any surrendered shares, the place or places
where the holder is to surrender shares to be redeemed, and the amount of all
accrued and unpaid dividends on such shares to, but excluding, the Repurchase
Date. Together with such notice, the Corporation shall also mail a redemption
election form for the holder to complete in order to elect redemption of its
shares of Class A Stock.
(ii) Upon the circumstances contemplated in clause (i) of this Section
5(f), each holder of shares of Class A Stock shall have the right, at such
holder's option, to require the Corporation to redeem its shares of Class A
Stock on the date (the "Repurchase Date") that is thirty days after the date of
the completion of the relevant transaction described in clause (D) or (E) of
Section 3(b) (or, if such thirtieth day is not a Business Day, the next
succeeding Business Day). No failure of the Corporation to give the notice
required under clause (i) above and no defect therein shall limit any holder's
redemption rights or affect the validity of the proceedings for the repurchase
of shares of Class A Stock pursuant to this Section 5(f).
(iii) For a holder's shares of Class A Stock to be redeemed pursuant to
this Section 5(f), the Corporation must receive by the Repurchase Date, at a
place where the holder is to surrender such shares (as set forth in the
Corporation's notice mailed pursuant to clause (i) above), such shares, together
with the redemption election form provided to the holder pursuant to clause (i)
above, with such form completed to elect redemption.
(iv) Unless otherwise specified in the notice to be provided by the
<PAGE>
Corporation pursuant to clause (i) above, the record date for the determination
of Class A Stock to be redeemed pursuant to this Section 5(f) shall be ten days
prior to the Repurchase Date. The Board of Directors may fix a different record
date in its notice provided pursuant to clause (i) above, provided that the
record date so fixed shall be not more than twenty days or less than ten days
prior to the Repurchase Date.
(v) On the Repurchase Date, the Corporation shall, and at any time before
the Repurchase Date may, deposit for the benefit of the holders of shares of
Class A Stock to be redeemed the funds necessary for such redemption, including
the amount necessary to pay all accrued and unpaid dividends to the Repurchase
Date, with a bank or trust corporation in the City of New York having a capital
and surplus of at least $1,000,000,000. Any moneys so deposited by the
Corporation shall be treated in accordance with the provisions of Section 5(d).
(vi) On the Repurchase Date, the Corporation shall redeem all outstanding
shares of Class A Stock submitted in accordance with the provisions of clause
(ii) above and not withdrawn by any holder thereof prior to the Repurchase Date.
The Corporation shall redeem each such share for an amount equal to (i) the
redemption price set forth in the third sentence of Section 3(b) plus (ii) all
accrued and unpaid dividends whether or not declared on such share. Such payment
will be made promptly (but in no event more than three Business Days) following
the Repurchase Date by mailing checks for the amount payable to the holders of
such shares entitled thereto. From and after the Repurchase Date (i) the shares
redeemed on such date shall no longer be deemed outstanding, (ii) the rights to
receive dividends thereon shall cease to accrue, and (iii) all rights of the
holders of such shares shall cease and terminate with respect to such shares
(including any right to convert such shares into shares of Common Stock in
accordance with Section 8 hereof), excepting only the right to receive the
amounts set forth in the second sentence of this clause (vi).
(vii) If, on the Repurchase Date, the Corporation shall fail to satisfy its
obligation to redeem shares of Class A Stock pursuant to this Section 5(f) by
reason of the absence of legally available funds therefor, the shares otherwise
to be redeemed pursuant to this Section 5(f) shall not be redeemed. In such
event and in addition to any other remedies available to the holders of Class A
Stock under law, the liquidation preference on each such share shall increase to
be equal to the amount set forth in the second sentence of clause (vi) above,
which such amount shall thereafter increase daily at the rate of 8.5% per annum
until such share has been redeemed by the Corporation for an amount equal to
such increased liquidation preference. Upon the Company obtaining sufficient
funds to legally redeem the shares submitted for redemption on or before the
Repurchase Date pursuant to this Section 5(f), the holders of such shares shall
have the right, upon thirty days' prior written notice to the Company, to have
such shares redeemed by the Company for an amount equal to the liquidation
preference on such shares, increased in accordance with the provisions of the
preceding sentence.
(viii) The Corporation shall comply with the tender offer rules under the
Exchange Act which may then be applicable and will file Schedule 13E-4 or any
other schedule required thereunder in connection with any offer by the
Corporation to purchase shares at the option of holders pursuant to this Section
5(f). To the extent any provisions of the Exchange Act shall conflict with the
<PAGE>
procedures set forth in this Section 5, the provisions of the Exchange Act shall
govern.
Section 6. Reacquired Shares.
Any shares of Class A Stock converted, redeemed, purchased or otherwise
acquired by the Corporation in any manner whatsoever shall be retired and
canceled promptly after the acquisition thereof. All such shares of Class A
Stock shall upon their cancellation, in accordance with the DGCL, become
authorized but unissued shares of Preferred Stock of the Corporation and may be
reissued as part of another series of Preferred Stock of the Corporation,
subject to the conditions or restrictions on issuance set forth herein.
Section 7. Liquidation, Dissolution or Winding Up.
(a) If the Corporation shall commence a voluntary case under the Federal
bankruptcy laws or any other applicable Federal or state bankruptcy, insolvency
or similar law, or consent to the entry of an order for relief in an involuntary
case under such law or to the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar official) of the Corporation
or of any substantial part of its property, or make an assignment for the
benefit of its creditors, or admit in writing its inability to pay its debts
generally as they become due, or if a decree or order for relief in respect of
the Corporation shall be entered by a court having jurisdiction in the premises
in an involuntary case under the Federal bankruptcy laws or any other applicable
Federal or state bankruptcy, insolvency or similar law, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and any such decree or
order shall be unstayed and in effect for a period of ninety consecutive days
and on account of any such event the Corporation shall liquidate, dissolve or
wind up, or if the Corporation shall otherwise liquidate, dissolve or wind up,
no distribution shall be made (i) to the holders of shares of Junior Liquidation
Stock unless, prior thereto, the holders of shares of Class A Stock, subject to
Section 8, shall have received the Liquidation Preference (as defined in Section
11 hereof) with respect to each share, or (ii) to the holders of shares of
Parity Liquidation Stock, except distributions made ratably to the holders of
the Class A Stock and the Parity Liquidation Stock in proportion to the total
amounts to which the holders of all such shares of Class A Stock and Parity
Liquidation Stock would be entitled upon such liquidation, dissolution or
winding up. Upon any such liquidation, dissolution or winding up, the holders of
shares of Class A Stock shall be entitled to receive the Liquidation Preference
with respect to each such share and no more.
(b) Neither the merger or other business combination of the Corporation
with or into any other Person (as defined in Section 11 hereof) or Persons nor
the sale of all or substantially all the assets of the Corporation shall be
deemed to be a liquidation, dissolution or winding up of the Corporation for
purposes of this Section 7.
Section 8. Conversion.
(a) Subject to the provisions for adjustment hereinafter set forth, each
share of Class A Stock shall be convertible at the option of the holder thereof
<PAGE>
into fully paid and nonassessable shares of Common Stock. The number of shares
of Common Stock deliverable upon conversion of a share of Class A Stock,
adjusted as hereinafter provided, is referred to herein as the "Conversion
Ratio." The Conversion Ratio shall initially be 7.8431 and the Conversion Price
shall initially be $6.375. Upon the Principal Issue Date, the Conversion Price
shall be adjusted to equal the lower of (i) $7.25 and (ii) the greater of (x)
$6.50 and (y) 120% of the then applicable Fair Market Value (determined as of
the earlier of (1) the fifth Business day prior to the Principal Issue Date or
(2) the second Business Day prior to the final vote of stockholders, if any,
approving the issuance of the Class A Stock contemplated to be issued on the
Principal Issue Date) and the Conversion Ratio shall be adjusted to equal the
greater of (A) 6.8966 and (B) 50 divided by the greater of (x) $6.50 and (y)
120% of the then applicable Fair Market Value (determined as of the earlier of
(1) the fifth Business Day prior to the Principal Issue Date or (2) the second
Business Day prior to the final vote of stockholders, if any, approving the
issuance of the Class A Stock contemplated to be issued on the Principal Issue
Date). The Conversion Ratio and the Conversion Price are subject to further
adjustment from time to time pursuant to Section 8(g).
(b) Conversion of the Class A Stock may be effected by any such holder upon
the surrender to the Corporation at the principal office of the Corporation in
the State of Delaware (the "Transfer Agent") or at the office of any agent or
agents of the Corporation, as may be designated by the Board of Directors of the
Corporation, of the certificate for such Class A Stock to be converted
accompanied by a written notice stating that such holder elects to convert all
or a specified whole number of such shares in accordance with the provisions of
this Section 8 and specifying the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued. In case
such notice shall specify a name or names other than that of such holder, such
notice shall be accompanied by payment of all transfer taxes payable upon the
issuance of shares of Common Stock in such name or names. Other than such taxes,
the Corporation will pay any and all issue and other taxes (other than taxes
based on income) that may be payable in respect of any issue or delivery of
shares of Common Stock on conversion of Class A Stock pursuant hereto. As
promptly as practicable, and in any event within five Business Days after the
surrender of such certificate or certificates and the receipt of such notice
relating thereto and, if applicable, payment of all transfer taxes (or the
demonstration to the satisfaction of the Corporation that such taxes have been
paid), the Corporation shall deliver or cause to be delivered (i) certificates
representing the number of validly issued, fully paid and nonassessable full
shares of Common Stock to which the holder of shares of Class A Stock being
converted shall be entitled and (ii) if less than the full number of shares of
Class A Stock evidenced by the surrendered certificate or certificates is being
converted, a new certificate or certificates, of like tenor, for the number
of shares evidenced by such surrendered certificate or certificates less the
number of shares being converted. Such conversion shall be deemed to have
been made at the close of business on the date of giving such notice and of
such surrender of the certificate or certificates representing the shares of
Class A Stock to be converted (the "Conversion Date") so that the rights of
the holder thereof as to the shares being converted shall cease except for
the right to receive shares of Common Stock in accordance herewith, and the
Person entitled to receive the shares of Common Stock shall be treated for
all purposes as having become the record holder of such shares of Common
Stock at such time. The Corporation shall not be required to convert, and no
surrender of shares of Class A Stock shall be
<PAGE>
effective for that purpose, while the transfer books of the Corporation for the
Common Stock are closed for any purpose (but not for any period in excess of
five days); but the surrender of shares of Class A Stock for conversion during
any period while such books are so closed shall become effective for conversion
immediately upon the reopening of such books, as if the conversion had been made
on the date such shares of Class A Stock were surrendered, and at the Conversion
Ratio in effect at the date of such surrender.
(c) In case any shares of Class A Stock are to be redeemed pursuant to
Section 5 (with the exception of Section 5(f)), such right of conversion shall
cease and terminate as to the shares of Class A Stock to be redeemed at the
close of business on the fifth Business Day next preceding the date fixed for
redemption unless the Corporation shall default in the payment of the Redemption
Price.
(d) The Conversion Ratio shall be subject to adjustment from time to time
in certain instances as hereinafter provided. Upon conversion, the holder of
shares of Class A Stock shall be entitled to receive any accrued and unpaid
dividends on the shares of Class A Stock surrendered for conversion to the
Conversion Date. Such accrued and unpaid dividends shall be payable by the
Corporation, at its option, in cash (to the extent funds are legally available
therefor) or in shares of Common Stock valued at the Fair Market Value as of the
third Business Day prior to the Conversion Date, instead of in cash.
(e) In connection with the conversion of any shares of Class A Stock, no
fractions of shares of Common Stock shall be issued, but in lieu thereof the
Corporation shall either (i) deliver a whole share of Common Stock in respect of
the fractional share to which the holder would otherwise have been entitled upon
such conversion or (ii) pay a cash adjustment in respect of such fractional
interest in an amount equal to such fractional interest multiplied by the
Current Market Price per share of Common Stock on the Trading Day on which such
shares of Class A Stock are deemed to have been converted. If more than one
share of Class A Stock shall be surrendered for conversion by the same holder at
the same time, the number of full shares of Common Stock issuable on conversion
thereof shall be computed on the basis of the total number of shares of Class A
Stock so surrendered.
(f) The Corporation shall at all times reserve and keep available for
issuance upon the conversion of the Class A Stock, free from any preemptive
rights, such number of its authorized but unissued shares of Common Stock as
will from time to time be sufficient to permit the conversion of all outstanding
shares of Class A Stock, and shall take all action required to increase the
authorized number of shares of Common Stock if necessary to permit the
conversion of all outstanding shares of Class A Stock.
(g) The Conversion Ratio will be subject to adjustment from time to time as
follows:
(1) In case the Corporation shall at any time or from time to time
after the FIRST ISSUE DATE (A) pay a dividend, or make a distribution, on
the outstanding shares of Common Stock in shares of Common Stock, (B)
subdivide the outstanding shares of Common Stock, (C) combine the
outstanding shares of Common Stock into a smaller number of shares or (D)
issue by reclassification of the shares of Common Stock any shares of
<PAGE>
capital stock of the Corporation, then, and in each such case, the
Conversion Ratio in effect immediately prior to such event or the record
date therefor, whichever is earlier, shall be adjusted so that the holder
of any shares of Class A Stock thereafter surrendered for conversion shall
be entitled to receive the number of shares of Common Stock or other
securities of the Corporation which such holder would have owned or have
been entitled to receive after the happening of any of the events described
above, had such shares of Class A Stock been surrendered for conversion
immediately prior to the happening of such event or the record date
therefor, whichever is earlier. An adjustment made pursuant to this clause
(i) shall become effective (x) in the case of any such dividend or
distribution, immediately after the close of business on the record date
for the determination of holders of shares of Common Stock entitled to
receive such dividend or distribution, or (y) in the case of such
subdivision, reclassification or combination, at the close of business on
the day upon which such corporate action becomes effective. No adjustment
shall be made pursuant to this clause (i) in connection with any
transaction to which paragraph (h) applies.
(2) In case the Corporation shall at any time or from time to time
after the First Issue Date declare, order, pay or make a dividend or other
distribution (including, without limitation, any distribution of stock or
other securities or property or rights or warrants to subscribe for
securities of the Corporation or any of its Subsidiaries by way of dividend
or spinoff), on its Common Stock, other than dividends or distributions of
shares of Common Stock which are referred to in clause (1) of this
paragraph (g), then the Conversion Ratio shall be adjusted so that the
holder of each share of Class A Stock shall be entitled to receive, upon
the conversion thereof, the number of shares of Common Stock determined by
multiplying (1) the applicable Conversion Ratio on the day immediately
prior to the record date fixed for the determination of stockholders
entitled to receive such dividend or distribution by (2) a fraction, the
numerator of which shall be the Current Market Price per share of Common
Stock for the period of 20 Trading Days preceding such record date, and the
denominator of which shall be such Current Market Price per share of Common
Stock less the Fair Market Value (as defined in Section 11 hereof) per
share of Common Stock (as determined in good faith by the Board of
Directors of the Corporation, a certified resolution with respect to which
shall be mailed to each holder of shares of Class A Stock) of such dividend
or distribution; PROVIDED, HOWEVER, that in the event of a distribution of
capital stock of a Subsidiary of the Corporation (a "Spin-Off") made to
holders of shares of Common Stock, the numerator of such fraction shall be
the sum of the Current Market Price per share of Common Stock for the
period of 20 Trading Days preceding the 35th Trading Day after the
effective date of such Spin-Off and the Current Market Price of
the number of shares (or the fraction of a share) of capital stock of the
Subsidiary which is distributed in such Spin-Off in respect of one share of
Common Stock for the period of 20 Trading Days preceding such 35th Trading
Day and the denominator of which shall be the Current Market Price per
share of Common Stock for the period of 20 Trading Days preceding such 35th
Trading Day. An adjustment made pursuant to this clause (2) shall be made
upon the opening of business on the next Business Day following the date on
which any such dividend or distribution is made and shall be effective
retroactively immediately after the close of business on the record date
fixed for the determination of stockholders entitled to receive such
<PAGE>
dividend or distribution; PROVIDED, HOWEVER, that if the proviso to the
preceding sentence applies, then such adjustment shall be made and be
effective as of such 35th Trading Day after the effective date of such
Spin-Off. No adjustment shall be made pursuant to this clause (2) in
connection with any transaction to which paragraph (h) applies.
(3) In case the Corporation shall issue shares of Common Stock (or
rights, warrants or other securities convertible into or exchangeable for
shares of Common Stock) after the First Issue Date and before the Principal
Issue Date at a price per share (or having a conversion price per share)
less than the Current Market Price as of the date of issuance of such
shares or of such convertible securities, then, and in each such case, the
Conversion Ratio shall be adjusted so that the holder of each share of
Class A Stock shall be entitled to receive, upon the conversion thereof,
the number of shares of Common Stock determined by multiplying (A) the
applicable Conversion Ratio on the day immediately prior to such date by
(B) a fraction, the numerator of which shall be the sum of (1) the number
of shares of Common Stock outstanding on such date and (2) the number of
additional shares of Common Stock issued (or into which the convertible
securities may convert), and the denominator of which shall be the sum of
(x) the number of shares of Common Stock outstanding on such date and (y)
the number of shares of Common Stock which the aggregate consideration
receivable by the Corporation for the total number of shares of Common
Stock so issued (or into which the rights, warrants or other convertible
securities may convert) would purchase at the Current Market Price on such
date. An adjustment made pursuant to this clause (3) shall be made on the
next Business Day following the date on which any such issuance is made and
shall be effective retroactively immediately after the close of business on
such date. For purposes of this clause (3), the aggregate consideration
receivable by the Corporation in connection with the issuance of shares of
Common Stock or of rights, warrants or other securities convertible into
shares of Common Stock shall be deemed to be equal to the sum of the
aggregate offering price (before deduction of underwriting discounts or
commissions and expenses payable to third parties) of all such Common
Stock, rights, warrants and convertible securities plus the minimum
aggregate amount, if any, payable upon exercise or conversion of any such,
rights, warrants and convertible securities into shares of Common Stock.
The issuance of any shares of Common Stock pursuant to (a) a dividend or
distribution on, or subdivision, combination or reclassification of, the
outstanding shares of Common Stock requiring an adjustment in the
Conversion Ratio pursuant to clause (1) of this paragraph (g), or (b) any
employee benefit or stock option plan or program of the Corporation, or (c)
any employment or option agreement with an officer of the Corporation (or
any of its Subsidiaries) and approved by the Board of Directors or (d) any
option, warrant, right, or convertible security, shall not be deemed to
constitute an issuance of Common Stock or convertible securities by the
Corporation to which this clause (3) applies. In addition, (A) Common
Stock or convertible securities issued to acquire, or in the
acquisition of, all or any portion of a business as a going concern, in an
arm's length transaction between the Company and a third party which is not
an Affiliate of the Company, whether such acquisition shall be effected by
purchase of assets, exchange of securities, merger, consolidation or
otherwise, or (B) Common Stock or convertible securities issued in a bona
fide public offering pursuant to a firm commitment underwriting, shall not
<PAGE>
be deemed to constitute an issuance of Common Stock or convertible
securities by the Corporation to which this clause (3) applies. Upon the
expiration unexercised of any options, warrants or rights to convert any
convertible securities for which an adjustment has been made pursuant to
this clause (3), the adjustments shall forthwith be reversed to effect such
rate of conversion as would have been in effect at the time of such
expiration or termination had such options, warrants or rights or
convertible securities, to the extent outstanding immediately prior to such
expiration or termination, never been issued. No adjustment shall be made
pursuant to this clause (3) in connection with any transaction to which
paragraph (h) applies.
(4) For purposes of this paragraph (g), the number of shares of Common
Stock at any time outstanding shall not include any shares of Common Stock
then owned or held by or for the account of the Corporation.
(5) The term "dividend," as used in this paragraph (g) shall mean a
dividend or other distribution upon Common Stock of the Corporation.
(6) Anything in this paragraph (g) to the contrary notwithstanding,
the Corporation shall not be required to give effect to any adjustment in
the Conversion Ratio unless and until the net effect of one or more
adjustments (each of which shall be carried forward), determined as above
provided, shall have resulted in a change of the Conversion Ratio by at
least one one-hundredth of one share of Common Stock, and when the
cumulative net effect of more than one adjustment so determined shall be to
change the Conversion Ratio by a least one one-hundredth of one share of
common Stock, such change in Conversion Ratio shall thereupon be given
effect.
(7) The certificate of any firm of independent public accountants of
recognized standing selected by the Board of Directors of the Corporation
(which may be the firm of independent public accountants regularly employed
by the Corporation) shall be presumptively correct for any computation made
under this paragraph (g).
(8) If the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or
other distribution, and shall thereafter and before the distribution to
stockholders thereof legally abandon its plan to pay or deliver such
dividend or distribution, then thereafter no adjustment in the number of
shares of Common Stock issuable upon exercise of the right of conversion
granted by this paragraph (g) or in the Conversion Ratio then in effect
shall be required by reason of the taking of such record.
(9) There shall be no adjustment of the Conversion Ratio in case of
the issuance of any stock of the Corporation in a merger, reorganization,
acquisition or other similar transaction except as set forth in paragraphs
(g)(1) and (3) and (h) of this Section 8.
(h) In case of any capital reorganization or reclassification of
outstanding shares of Common Stock (other than a reclassification covered by
Section 8(g)(1)), or in case of any merger of the Corporation with or into
another Corporation, or in case of any sale or conveyance to another Corporation
<PAGE>
of all or substantially all of the assets or property of the Corporation (each
of the foregoing being referred to as a "Transaction"), each share of Class A
Stock then outstanding shall thereafter be convertible into, in lieu of the
Common Stock issuable upon such conversion prior to consummation of such
Transaction, the kind and amount of shares of stock and other securities and
property receivable (including cash or securities of the Surviving Person (as
defined in Section 11 hereof)) upon the consummation of such Transaction by a
holder of that number of shares of Common Stock into which one share of Class A
Stock was convertible immediately prior to such Transaction (including, on a pro
rata basis, the cash, securities or property received by holders of Common Stock
in any tender or exchange offer that is a step in such Transaction). In any such
case, if necessary, appropriate adjustment (as determined by the Board of
Directors) shall be made in the application of the provisions set forth in this
Section 8 with respect to rights and interests thereafter of the holders of
shares of Class A Stock to the end that the provisions set forth herein for the
protection of the conversion rights of the Class A Stock shall thereafter be
applicable, as nearly as reasonably may be, to any such other shares of stock
and other securities and property deliverable upon conversion of the shares of
Class A Stock remaining outstanding (with such adjustments in the conversion
price and number of shares issuable upon conversion and such other adjustments
in the provisions hereof as the Board of Directors shall determine to be
appropriate). In case securities or property other than Common Stock shall be
issuable or deliverable upon conversion as aforesaid, then all references in
this Section 8 shall be deemed to apply, so far as appropriate and as nearly as
may be, to such other securities or property.
Notwithstanding anything contained herein to the contrary, the Corporation
will not effect any Transaction unless, prior to the consummation thereof, the
Surviving Person thereof shall assume, by written instrument mailed to each
holder of shares of Class A Stock, the obligation to deliver to such holder such
cash, property or securities to which, in accordance with the foregoing
provisions, such holder is entitled.
(i) In case at any time or from time to time the Corporation shall pay
any dividend or make any other distribution to the holders of its Common
Stock, or shall offer for subscription pro rata to the holders of its Common
Stock any additional shares of stock of any class or any other right, or
there shall by any capital reorganization or reclassification of the Common
Stock of the Corporation or merger of the Corporation with or into another
Corporation, or any sale or conveyance to another Corporation of the property
of the Corporation as an entirety or substantially as an entirety, or there
shall be a voluntary or involuntary dissolution, liquidation or winding up of
the Corporation, then, in any one or more of said cases the Corporation shall
give at least 20 days prior written notice (the time of mailing of such
notice shall be deemed to be the time of giving thereof) to the registered
holders of the Class A Stock at the addresses of each as shown on the books
of the Corporation maintained by the transfer agent thereof as of the date on
which (i) the books of the Corporation shall close or a record shall be taken
for such stock dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, merger, sale or conveyance, dissolution,
liquidation or winding up shall take place, as the case may be, provided that
in the case of any Transaction to which paragraph (h) applies the Corporation
shall give at least thirty days prior written notice as aforesaid. Such
notice shall also specify the date as of which the holders of the Common
Stock of record shall participate in said dividend, distribution or
subscription rights or shall be entitled to exchange their Common Stock for
securities or
<PAGE>
other property deliverable upon such reorganization, reclassification, merger,
sale or conveyance or participate in such dissolution, liquidation or winding
up, as the case may be. Failure to give such notice shall not invalidate any
action so taken.
Section 9. Reports As to Adjustments.
Upon any adjustment of the Conversion Ratio then in effect and any increase
or decrease in the number of shares of Common Stock issuable upon the operation
of the conversion set forth in Section 8 hereof, then, and in each such case,
the Corporation shall promptly deliver to the transfer agent of the Class A
Stock and Common Stock, a certificate signed by the President or a Vice
President and by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary of the Corporation setting forth in reasonable detail the
event requiring the adjustment and the method by which such adjustment was
calculated and specifying the Conversion Ratio then in effect following such
adjustment and the increased or decreased number of shares issuable upon the
conversion set forth in Section 8 hereof. The Corporation shall also promptly
after the making of such adjustment give written notice to the registered
holders of the Class A Stock at the address of each holder as shown on the books
of the Corporation maintained by the Transfer Agent thereof, which notice shall
state the Conversion Ratio then in effect, as adjusted, and the increased or
decreased number of shares issuable upon the exercise of the right of conversion
granted by Section 8 hereof, and shall set forth in reasonable detail the method
of calculation of each and a brief statement of the facts requiring such
adjustment. Where appropriate, such notice to holders of the Class A Stock may
be given in advance and included as part of the notice required under the
provisions of Section 8(i) hereof.
Section 10. Certain Covenants.
(a) Following the First Issue Date, and except in payment of dividends
pursuant to Section 2(c), the Corporation shall only issue additional shares of
Class A Stock pursuant to the terms of the Stock Purchase Agreement dated as of
July 30, 1996, by and among the Corporation, Trefoil Capital Investors, II, L.P.
and GE Investment Private Placement Partners II, A Limited Partnership, a
Delaware limited partnership, as it may be amended from time to time.
(b) Any registered holder of Class A Stock may proceed to protect and
enforce its rights and the rights of such holders by any available remedy by
proceeding at law or in equity to protect and enforce any such rights, whether
for the specific enforcement of any provision in this Certificate of
Designation, or in aid of the exercise of any power granted herein, or to
enforce any other proper remedy.
Section 11. Definitions.
The following terms shall have the meanings indicated:
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlled by" and
<PAGE>
"under common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities or by agreement or otherwise.
"Bank Credit Agreement" shall mean the Credit Agreement, dated as of June
15, 1995, among the Company, the banks party thereto, and Bankers Trust Company
as Agent for the bank parties thereto, as amended from time to time, and any
refinancings, renewals and replacements thereof.
"Business Day" shall mean any day other than Saturday, Sunday or a day on
which banking institutions in the State of Delaware are authorized or obligated
by law or executive order to close.
"Conversion Price" shall mean an amount equal to the Stated Value divided
by the Conversion Ratio (as adjusted pursuant to paragraph (g) of Section 8
hereof).
"Current Market Price," when used with reference to shares of Common Stock
or other securities on any date, shall mean the volume weighted average of the
sales prices for shares of Common Stock or such other securities on such date
and, when used with reference to shares of Common Stock or other securities for
any period shall mean the volume weighted average of the sale prices for shares
of Common Stock or such other securities for such period. If the Common Stock is
not listed or admitted to trading on a national securities exchange or an
automated quotation system that permits determination of weighted average sale
prices over a period of time, then "Current Market Price" for any period shall
mean the average of the last quoted sale price or, if not so quoted, the average
of the high bid and low asked prices in the over-the-counter market, as reported
by the National Association of Securities Dealers, Inc. Automated Quotation
System or such other system then in use, or, if on any such date the Common
Stock or such other securities are not quoted by any such organization, the
average of the closing bid and asked prices are furnished by a professional
market maker making a market in the Common Stock or such other securities
selected by the Board of Directors of the Corporation. If the Common Stock or
such other securities are not publicly held or so listed or publicly traded,
"Current Market Price" shall mean the fair market value per share of Common
Stock or of such other securities as determined in good faith by the Board of
Directors of the Corporation based on an opinion of an independent investment
banking firm with an established national reputation as a valuer of securities,
which opinion may be based on such assumptions as such firm shall deem to be
necessary and appropriate.
"DGCL" shall mean the Delaware General Corporation Law, as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
or any similar Federal statute, and the rules and regulations of the Securities
and Exchange Commission thereunder, all as the same shall be in effect at the
time. Reference to a particular section of the Exchange Act shall include
reference to the comparable section, if any, of any such similar Federal
statute.
"Fair Market Value" shall mean, as to shares of Common Stock or any other
class of capital stock or securities of the Corporation or any other issuer
<PAGE>
which are publicly traded, the Current Market Price of such shares or securities
for the 30 Trading Day period preceding the date as of which the Fair Market
Value is to be determined. The "Fair Market Value" of any security which is not
publicly traded or of any other property shall mean the fair value thereof as
determined by an independent investment banking or appraisal firm experienced in
the valuation of such securities or property selected in good faith by the Board
of Directors of the Corporation or a committee thereof, or, if no such
investment banking or appraisal firm is in the good faith judgment of the Board
of Directors or such committee available to make such determination, as
determined in good faith by the Board of Directors of the Corporation or such
committee.
"First Issue Date" shall mean the first date that any shares of Class A
Stock are issued.
"Issue Date" shall mean, with respect to any share of Class A Stock, the
date on which such share of Class A Stock is issued.
"Junior Dividend Stock" shall mean (i) the Common Stock and (ii) any other
capital stock of the Corporation which ranks junior as to dividends to the Class
A Stock.
"Junior Liquidation Stock" shall mean (i) the Common Stock and (ii) any
other capital stock of the Corporation which ranks junior upon liquidation,
dissolution or winding up to the Class A Stock.
"Liquidation Preference" with respect to a share of Class A Stock shall
mean the Stated Value per share, plus an amount equal to all accrued but unpaid
dividends.
"Parity Dividend Stock" shall mean any capital stock of the Corporation
ranking on a parity as to dividends with the Class A Stock.
"Parity Liquidation Stock" shall mean any capital stock of the Corporation
ranking on a parity upon liquidation, dissolution or winding up with the Class A
Stock.
"Person" shall mean any individual, firm, corporation or other entity, and
shall include any successor (by merger or otherwise) of such entity.
"Principal Issue Date" shall mean the first date on which shares of Class A
Stock are issued in an amount so that, following such issuance, the aggregate
stated value of all shares of Class A Stock issued through such date equals at
least $40 million.
"Purchasers" shall mean Trefoil Capital Investors, II, L.P., a Delaware
limited partnership, and GE Investment Private Placement Partners II, A Limited
Partnership, a Delaware limited partnership.
"Qualified Person" shall mean any Person that, immediately after giving
effect to the applicable Transaction, (i) is a solvent corporation or other
entity organized under the laws of any State of the United States of America
having its common stock or, in the case of an entity other than a corporation,
equivalent equity securities, listed on the New York Stock Exchange or the
American Stock Exchange or quoted by the Nasdaq National Market System or any
successor thereto or comparable system, and such common stock or equivalent
<PAGE>
equity security continues to meet the requirements for such listing or quotation
and (ii) is required to file, and in each of its three fiscal years immediately
preceding the consummation of the applicable Transaction (or since its
inception) has filed, reports with the Securities and Exchange Commission
pursuant to Section 13 or 15(d) of the Exchange Act.
"Redemption Fair Market Value" shall mean, as to shares of Common Stock,
the Current Market Price of such shares or securities for the 60-day period
preceding the date as of which the Redemption Fair Market Value is to be
determined. The "Redemption Fair Market Value" of the Common Stock if it is not
publicly traded shall mean its Fair Market Value.
"Required Issue Date" shall mean December 31, 1996.
"Senior Notes" shall mean the Corporation's 12% Senior Notes due 2004 and
any other senior indebtedness of the Corporation the net proceeds of which are
used in full to pay principal, prepayment penalty and accrued interest on such
principal, the incurrence of which is approved by the vote of the holders of a
majority of the outstanding shares of Class A Stock.
"Subsidiary" of any Person means any corporation or other entity of which a
majority of the voting power of the voting equity securities or equity interest
is owned, directly or indirectly, by such Person.
"Surviving Person" shall mean the continuing or surviving Person of a
merger or other business combination, the Person receiving a transfer of all or
a substantial part of the properties and assets of the Corporation, or the
Person merging into the Corporation in a merger or other business combination in
which the Corporation is the continuing or surviving Person, but in connection
with which the Class A Stock or Common Stock of the Corporation is exchanged or
converted into the securities of any other Person or cash or any other property;
PROVIDED, HOWEVER, if such surviving Person is a direct or indirect Subsidiary
of a Qualified Person, the parent entity that is a Qualified Person shall be the
Surviving Person.
"Survivor Common Stock" with respect to any Surviving Person shall mean any
shares of such Surviving Person of any class or series which has no preference
or priority in the payment of dividends or in the distribution of assets upon
any voluntary or involuntary liquidation, dissolution or winding up of such
Surviving Person and which is not subject to redemption by such Surviving
Person; PROVIDED, HOWEVER, that if at any time there shall be more than one such
class or series, the shares of each such class and series issuable upon
conversion of the Class A Stock then being converted shall be substantially in
the proportion to the total number of shares of each such class and series.
"Trading Day" means a day on which the principal national securities
exchange (including, if applicable, the Nasdaq Stock Market) on which the Common
Stock is listed or admitted to trading is open for the transaction of business
or, if the Common Stock is not listed or admitted to trading on any national
securities exchange, a Business Day.
IN WITNESS WHEREOF, the Company has caused this Certificate to be duly
executed on its behalf by its undersigned Senior Vice President, Chief Financial
Officer and Secretary and attested to by its Assistant Secretary this 30th day
of August, 1996.
/s/ Kenneth R. Baum
-------------------
<PAGE>
Kenneth R. Baum
Senior Vice President,
Chief Financial Officer & Secretary
ATTEST:
/s/ John W. Schroeder
- ---------------------
John W. Schroeder
Assistant Secretary
<PAGE>
EXHIBIT 10.5
THE GRAND UNION COMPANY
1995 EQUITY INCENTIVE PLAN
1. PURPOSE
The purpose of this Equity Incentive Plan (the "Plan") is to advance the
interests of The Grand Union Company (the "Company") by enhancing its ability to
attract and retain employees and other persons or entities who are in a position
to make significant contributions to the success of the Company and its
subsidiaries through ownership of shares of the Company's common stock
("Stock").
The Plan is intended to accomplish these goals by enabling the Company to
grant Awards in the form of Options, Stock Appreciation Rights, Restricted Stock
or Unrestricted Stock Awards, Deferred Stock Awards, Performance Awards, Loans
or Supplemental Grants, or combinations thereof, all as more fully described
below.
2. ADMINISTRATION
The Plan shall be administered by a committee (the "Committee") of the
Board of Directors (the "Board") of the Company designated by the Board for that
purpose. Unless and until a Committee is appointed, the Plan shall be
administered by the entire Board, and references in the Plan to the "Committee"
shall be deemed references to the Board. A majority of the members of the
Committee shall constitute a quorum, and all determinations of the Committee
shall be made by a majority of its members. Any determination of the Committee
under the Plan may be made without notice or meeting of the Committee by a
writing signed by a majority of the Committee members.
The Committee will have authority, not inconsistent with the express
provisions of the Plan and in addition to other authority granted under the
Plan, to (a) grant Awards at such time or times as it may choose; (b) determine
the size of each Award, including the number of shares of Stock subject to the
Award; (c) determine the type or types of each Award; (d) determine the terms
and conditions of each Award; (e) waive compliance by a Participant (as defined
below) with any obligations to be performed by the Participant under an Award
and waive any term or condition of an Award; (f) amend or cancel an existing
Award in whole or in part (and if an Award is canceled, grant another award in
its place on such terms as the Committee shall specify), except that the
Committee may not, without the consent of the holder of an Award, take any
action under this clause with respect to such Award if such action would
adversely affect the rights of such holder; (g) prescribe the form or forms of
instruments that are required or deemed appropriate under the Plan, including
any written notices and elections required of Participants, and change such
forms from time to time; (h) adopt, amend and rescind rules and regulations for
the administration of the Plan; and (i) interpret the Plan and decide any
questions and settle all controversies and disputes that may arise in connection
with the Plan. Such determinations and actions of the Committee, and all other
determinations and actions of the Committee made or taken under authority
granted by any provision of the Plan, will be conclusive and will bind all
parties. Nothing in this paragraph shall be construed as limiting the power of
the Committee to make adjustments under Section 7.3 or Section 8.6.
<PAGE>
3. EFFECTIVE DATE AND TERM OF PLAN
The Plan will become effective on the date on which it is approved by the
stockholders of the Company. Grants of Awards under the plan may be made prior
to that date (but after Board adoption of the Plan), subject to such approval of
the Plan.
No Award may be granted under the Plan after October 26, 2005, but Awards
previously granted may extend beyond that date.
4. SHARES SUBJECT TO THE PLAN
Subject to the adjustment as provided in Section 8.6 below, the aggregate
number of shares of Stock that may be delivered under the Plan will be 950,000.
If any Award requiring exercise by the Participant for delivery of Stock
terminates without having been exercised in full, or if any Award payable in
Stock or cash is satisfied in cash rather than Stock, the number of shares of
Stock as to which such Award was not exercised or for which cash was substituted
will be available for future grants.
Stock delivered under the Plan may be either authorized but unissued Stock
or previously issued Stock acquired by the Company and held in treasury. No
fractional shares of Stock will be delivered under the Plan.
Subject to Section 8.6(a), the maximum number of shares of Stock as to
which Options or Stock Appreciation Rights may be granted under the Plan to any
Participant is 500,000. For purposes of this paragraph, except as otherwise
provided in regulations or other guidelines issued under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), any repricing of an
Option or Stock Appreciation Right shall be treated as an original grant.
5. ELIGIBILITY AND PARTICIPATION
Those eligible to receive Awards under the Plan ("Participants") will be
"employees" or "salaried employees" of the Company or any of its subsidiaries
("Employees") and other persons or entities (including without limitation
non-Employee directors of the Company or a subsidiary of the Company) who, in
the opinion of the Committee, are in a position to make a significant
contribution to the success of the Company or its subsidiaries. A "subsidiary"
for purposes of the Plan will be a corporation in which the Company owns,
directly or indirectly, stock possessing 50% or more of the total combined
voting power of all classes of stock.
6. TYPES OF AWARDS
6.1. OPTIONS.
(a) NATURE OF OPTIONS. An Option is an Award entitling the recipient on
exercise thereof to purchase Stock at a specified exercise price.
Both "incentive stock options," as defined in Section 422 of the Code (any
Option intended to qualify as an incentive stock option being hereinafter
referred to as an "ISO"), and Options that are not incentive stock options, may
be granted under the Plan. ISOs shall be awarded only to Employees.
(b) EXERCISE PRICE. The exercise price of an Option will be determined
by the Committee subject to the following:
(1) The exercise price of an ISO shall not be less than 100% (110% in
the case of an ISO
<PAGE>
granted to a ten-percent shareholder) of the fair market value of the
Stock subject to the Option, determined as of the time the Option is
granted. A "ten-percent shareholder" is any person who at the time of
grant owns, directly or indirectly, or is deemed to own by reason of the
attribution rules of Section 424(d) of the Code, stock possessing more
than 10% of the total combined voting power of all classes of stock of
the Company or of any of its subsidiaries.
(2) In no case may the exercise price paid for Stock which is part of
an original issue of authorized Stock be less than the par value per share
of the Stock.
(3) The Committee may reduce the exercise price of an Option at any
time after the time of grant, but in the case of an Option originally
awarded as an ISO, only with the consent of the Participant.
(c) DURATION OF OPTIONS. The latest date on which an Option may be
exercised will be the tenth anniversary (fifth anniversary, in the case of an
ISO granted to a ten-percent shareholder) of the day immediately preceding the
date the Option was granted, or such earlier date as may have been specified by
the Committee at the time the Option was granted.
(d) EXERCISE OF OPTIONS. Options granted under any single Award will
become exercisable at such time or times, and on such conditions, as the
Committee may specify; PROVIDED, HOWEVER, that if the Committee does not so
specify, 25% of the shares subject to the Award may be purchased commencing one
year after the date of grant, and an additional 25% of such shares may be
purchased commencing on the second, third and fourth anniversaries of the grant.
The Committee may at any time and from time to time accelerate the time at which
all or any part of the Option may be exercised.
Any exercise of an Option must be in writing, signed by the proper person
and delivered or mailed to the Company, accompanied by (1) any documents
required by the Committee and (2) payment in full in accordance with paragraph
(e) below for the number of shares for which the Option is exercised.
(e) PAYMENT FOR STOCK. Stock purchased on exercise of an Option must be
paid for as follows: (1) in cash or by check (acceptable to the Company in
accordance with guidelines established for this purpose), bank draft or money
order payable to the order of the Company or (2) if so permitted by the
instrument evidencing the Option (or in the case of an Option which is not an
ISO, by the Committee at or after grant of the Option), (i) through the delivery
of shares of Stock which have been outstanding for at least six months (unless
the Committee expressly approves a shorter period) and which have a fair market
value on the last business day preceding the date of exercise equal to the
exercise price, or (ii) by delivery of a promissory note of the Option holder to
the Company, payable on such terms as are specified by the Committee, or (iii)
by delivery of an unconditional and irrevocable undertaking by a broker to
deliver promptly to the Company sufficient funds to pay the exercise price, or
(iv) by any combination of the permissible forms of payment; PROVIDED, that if
the Stock delivered upon exercise of the Option is an original issue of
authorized Stock, at least so much of the exercise price as represents the par
value of such Stock must be paid other than by the Option holder's promissory
note or personal check.
(f) DISCRETIONARY PAYMENTS. If the market price of shares of Stock
subject to an Option (other than an Option which is in tandem with a Stock
Appreciation Right as described in Section 6.2 below) exceeds the exercise price
of the Option at the time of its exercise, the Committee may cancel the Option
and cause the Company to pay in cash or in shares of Common Stock (at a price
per share equal to the fair market value per share) to the person exercising the
Option an amount equal to the difference between the fair market value of the
Stock which would have been purchased pursuant to the exercise (determined on
the date the Option is canceled) and the aggregate exercise price which would
have been paid. The Committee may exercise its discretion to take such action
only if it has received a written request from the person exercising the Option,
but such a request will not be binding on the Committee.
6.2. STOCK APPRECIATION RIGHTS.
<PAGE>
(a) NATURE OF STOCK APPRECIATION RIGHTS. A Stock Appreciation Right is
an Award entitling the recipient on exercise of the Right to receive an amount,
in cash or Stock or a combination thereof (such form to be determined by the
Committee), determined in whole or in part by reference to appreciation in Stock
value.
Except as provided below, a Stock Appreciation Right entitles the
Participant to receive, with respect to each share of Stock as to which the
Right is exercised, the excess of the share's fair market value on the date of
exercise over its fair market value on the date the Right was granted. The
Committee may provide at the time of grant that the amount the recipient is
entitled to receive will be adjusted upward or downward under rules established
by the Committee to take into account the performance of the Stock in comparison
with the performance of other stocks or an index or indices of other stocks.
The Committee may also grant Stock Appreciation Rights providing that following
a change in control of the Company, as determined by the Committee, the holder
of such Right will be entitled to receive, with respect to each share of Stock
subject to the Right, an amount equal to the excess of a specified value (which
may include an average of values) for a share of Stock during a period preceding
such change in control over the fair market value of a share of Stock on the
date the Right was granted.
(b) GRANT OF STOCK APPRECIATION RIGHTS. Stock Appreciation Rights may be
granted in tandem with, or independently of, Options granted under the Plan. A
Stock Appreciation Right granted in tandem with an Option which is not an ISO
may be granted either at or after the time the Option is granted. A Stock
Appreciation Right granted in tandem with an ISO may be granted only at the time
the Option is granted.
(c) RULES APPLICABLE TO TANDEM AWARDS. When Stock Appreciation Rights
are granted in tandem with Options, the following will apply:
(1) The Stock Appreciation Right will be exercisable only at such
time or times, and to the extent, that the related Option is exercisable
and will be exercisable in accordance with the procedure required for
exercise of the related Option.
(2) The Stock Appreciation Right will terminate and no longer be
exercisable upon the termination or exercise of the related Option,
except that a Stock Appreciation Right granted with respect to less than
the full number of shares covered by an Option will not be reduced until
the number of shares as to which the related Option has been exercised
or has terminated exceeds the number of shares not covered by the Stock
Appreciation Right.
(3) The Option will terminate and no longer be exercisable upon the
exercise of the related Stock Appreciation Right.
(4) The Stock Appreciation Right will be transferable only with the
related Option.
(5) A Stock Appreciation Right granted in tandem with an ISO may be
exercised only when the market price of the Stock subject to the Option
exceeds the exercise price of such option.
(d) EXERCISE OF INDEPENDENT STOCK APPRECIATION RIGHTS. A Stock
Appreciation Right not granted in tandem with an Option will become exercisable
at such time or times, and on such conditions, as the Committee may specify.
The Committee may at any time accelerate the time at which all or any part of
the Right may be exercised.
Any exercise of an independent Stock Appreciation Right must be in writing,
signed by the proper person and delivered or mailed to the Company, accompanied
by any other documents required by the Committee.
6.3. RESTRICTED AND UNRESTRICTED STOCK.
<PAGE>
(a) NATURE OF RESTRICTED STOCK AWARD. A Restricted Stock Award entitles
the recipient to acquire, for a purchase price equal to par value, shares of
Stock subject to the restrictions described in paragraph (d) below ("Restricted
Stock").
(b) ACCEPTANCE OF AWARD. A Participant who is granted a Restricted Stock
Award will have no rights with respect to such Award unless the Participant
accepts the Award by written instrument delivered or mailed to the Company
accompanied by payment in full of the specified purchase price, if any, of the
shares covered by the award. Payment may be by certified or bank check or other
instrument acceptable to the Committee.
(c) RIGHTS AS A STOCKHOLDER. A Participant who receives Restricted Stock
will have all the rights of a stockholder with respect to the Stock, including
voting and dividend rights, subject to the restrictions described in paragraph
(d) below and any other conditions imposed by the Committee at the time of
grant. Unless the Committee otherwise determines, certificates evidencing
shares of Restricted Stock will remain in the possession of the Company until
such shares are free of all restrictions under the Plan.
(d) RESTRICTIONS. Except as otherwise specifically provided by the Plan,
Restricted Stock may not be sold, assigned, transferred, pledged or otherwise
encumbered or disposed of, and if the Participant ceases to be an Employee or
otherwise suffers a Status Change (as defined at Section 7.2(a) below) for any
reason, must be offered to the Company for purchase for the amount of cash paid
for the Stock, or forfeited to the Company if no cash was paid. These
restrictions will lapse at such time or times, and on such conditions, as the
Committee may specify. Upon lapse of all restrictions, Stock will cease to be
restricted for purposes of the Plan. The Committee may at any time accelerate
the time at which the restrictions on all or any part of the shares will lapse.
(e) NOTICE OF ELECTION. Any Participant making an election under Section
83(b) of the Code with respect to Restricted Stock must provide a copy thereof
to the Company within 10 days of the filing of such election with the Internal
Revenue Service.
(f) OTHER AWARDS SETTLED WITH RESTRICTED STOCK. The Committee may, at the
time any award described in this Section 6 is granted, provide that any or all
the Stock delivered pursuant to the Award will be Restricted Stock.
(g) UNRESTRICTED STOCK. The Committee may, in its sole discretion,
approve the sale to any Participant of shares of Stock free of restrictions
under the Plan for a price which is not less than the par value of the Stock.
6.4. DEFERRED STOCK.
A Deferred Stock Award entitles the recipient to receive shares of Stock to
be delivered in the future. Delivery of the Stock will take place at such time
or times, and on such conditions, as the Committee may specify. The Committee
may at any time accelerate the time at which delivery of all or any part of the
Stock will take place. At the time any award described in this Section 6 is
granted, the Committee may provide that, at the time Stock would otherwise be
delivered pursuant to the Award, the Participant will instead receive an
instrument evidencing the Participant's right to future delivery of Deferred
Stock.
6.5. PERFORMANCE AWARDS; PERFORMANCE GOALS.
(a) NATURE OF PERFORMANCE AWARDS. A Performance Award entitles the
recipient to receive, without payment, an amount in cash or Stock or a
combination thereof (such form to be determined by the Committee) following the
attainment of Performance Goals. "Performance Goals" are goals which may be
related to personal performance, corporate performance, departmental performance
or any other category of performance deemed by the Committee to be important to
the success of the Company. The Committee will determine the Performance Goals,
the period or periods during which performance is to be measured and all
<PAGE>
other terms and conditions applicable to the award.
(b) OTHER AWARDS SUBJECT TO PERFORMANCE CONDITIONS. The Committee may, at
the time any Award described in this Section 6 is granted, impose the condition
(in addition to any conditions specified or authorized in this Section 6 or any
other provision of the Plan) that Performance Goals be met prior to the
Participant's realization of any payment or benefit under the Award.
6.6. LOANS AND SUPPLEMENTAL GRANTS.
(a) LOANS. The Company may make a loan to a Participant ("Loan"), either
on the date of or after the grant of any Award to the Participant. A Loan may
be made either in connection with the purchase of Stock under the Award or with
the payment of any Federal, state and local income tax with respect to income
recognized as a result of the Award. The Committee will have full authority to
decide whether to make a Loan and to determine the amount, terms and conditions
of the Loan, including the interest rate (which may be zero), whether the Loan
is to be secured or unsecured or with or without recourse against the borrower,
the terms on which the Loan is to be repaid and the conditions, if any, under
which it may be forgiven. However, no Loan may have a term (including
extensions) exceeding ten years in duration.
(b) SUPPLEMENTAL GRANTS. In connection with any award, the Committee may
at the time such Award is made or at a later date, provide for and grant a cash
award to the Participant ("Supplemental Grant") not to exceed an amount equal to
(1) the amount of any federal, state and local income tax on ordinary income for
which the Participant may be liable with respect to the Award, determined by
assuming taxation at the highest marginal rate, plus (2) an additional amount on
a grossed-up basis intended to make the Participant whole on an after-tax basis
after discharging all the Participant's income tax liabilities arising from all
payments under this Section 6. Any payments under this subsection (b) will be
made at the time the Participant incurs Federal income tax liability with
respect to the Award.
7. EVENTS AFFECTING OUTSTANDING AWARDS
7.1. DEATH.
If a Participant dies, the following will apply:
(a) All Options and Stock Appreciation Rights held by the Participant
immediately prior to death, to the extent then exercisable, may be exercised by
the Participant's executor or administrator or the person or persons to whom the
Option or Right is transferred by will or the applicable laws of descent and
distribution, at any time within the one year period ending with the first
anniversary of the Participant's death (or such shorter or longer period as the
Committee may determine), and shall thereupon terminate. In no event, however,
shall an Option or Stock Appreciation Right remain exercisable beyond the latest
date on which it could have been exercised without regard to this Section 7.
Except as otherwise determined by the Committee, all Options and Stock
Appreciation Rights held by a Participant immediately prior to death that are
not then exercisable shall terminate at death.
(b) Except as otherwise determined by the Committee, all Restricted Stock
held by the Participant must be transferred to the Company (and, in the event
the certificates representing such Restricted Stock are held by the Company,
such Restricted Stock will be so transferred without any further action by the
Participant) in accordance with Section 6.3 above.
(c) Any payment or benefit under a Deferred Stock Award, Performance
Award, or Supplemental Grant to which the Participant was not irrevocably
entitled prior to death will be forfeited and the Award canceled as of the time
of death, unless otherwise determined by the Committee.
7.2. TERMINATION OF SERVICE (OTHER THAN BY DEATH).
<PAGE>
If a Participant who is an Employee ceases to be an Employee for any reason
other than death, or if there is a termination (other than by reason of death)
of the consulting, service or similar relationship in respect of which a
non-Employee Participant was granted an Award hereunder (such termination of the
employment or other relationship being herein referred to as a "Status Change"),
the following will apply:
(a) Except as otherwise determined by the Committee, all Options
and Stock Appreciation Rights held by the Participant that were not exercisable
immediately prior to the Status Change shall terminate at the time of the Status
Change. Any ISOs granted prior to July 1, 1996 that were immediately exercisable
prior to the Status Change will continue to be exercisable for a period of one
year from the date of the Status Change and shall thereupon terminate unless the
Status Change results from a discharge for cause which in the opinion of the
Committee casts such discredit on the Participant as to justify immediate
termination of the Option. Any other Options or Rights that were exercisable
immediately prior to the Status Change will continue to be exercisable for a
period of one year from the date of the Status Change (or such other period as
the Committee may determine), and shall thereupon terminate, unless the Award
provides by its terms for immediate termination in the event of a Status Change
or unless the Status Change results from discharge for cause which in the
opinion of the Committee casts such discredit on the Participant as to justify
immediate termination of the Award. In no event, however, shall an Option or
Stock Appreciation Right remain exercisable beyond the latest date on which it
could have been exercised without regard to this Section 7. For purposes of
this paragraph, in the case of a Participant who is an Employee, a Status Change
shall not be deemed to have resulted by reason of (i) a sick leave or other bona
fide leave of absence of one year or less or approved for purposes of the Plan
by the Committee, or (ii) a transfer of employment between the Company and a
subsidiary or between subsidiaries, or to the employment of a corporation (or a
parent or subsidiary corporation of such corporation) issuing or assuming an
option in a transaction to which section 424(a) of the Code applies.
(b) Except as otherwise determined by the Committee, all Restricted Stock
held by the Participant at the time of the Status Change must be transferred to
the Company (and, in the event the certificates representing such Restricted
Stock are held by the Company, such Restricted Stock will be so transferred
without any further action by the Participant) in accordance with Section 6.3
above.
(c) Any payment or benefit under a Deferred Stock Award, Performance
Award, or Supplemental Grant to which the Participant was not irrevocably
entitled prior to the Status Change will be forfeited and the Award canceled as
of the date of such Status Change unless otherwise determined by the Committee.
7.3. CERTAIN CORPORATE TRANSACTIONS.
(a) Subject to paragraph (c) below, as of the twentieth (20th) trading day
prior to the effective date of a Change of Control, (1) each outstanding Option
and each outstanding Stock Appreciation Right shall become exercisable in full,
(2) the restrictions shall be removed from each outstanding share of Restricted
Stock, (3) the Company shall make all payments and provide all benefits under
each outstanding Deferred Stock Award, Performance Award, and Supplemental Grant
which would have been made or provided with the passage of time had the
transaction not occurred and the Participant not suffered a Status Change (or
died), (4) subject to paragraph (c) of this section, the Company shall pay to
each holder of Options and Restricted Stock whose Options (other than ISOs
granted prior to July 1, 1996) and Restricted Stock have been terminated, an
amount equal to the Award Value with respect to such Options or Restricted
Stock, such payment to be made by cash or certified check within 30 days after
the Change in Control, and (5) the Committee may, in its sole discretion,
forgive all or any portion of the principal of or interest on a Loan. For
purposes of this section, the Award Value shall be determined as the difference
between (i) the exercise price of the Option or the purchase price of the
Restricted Stock and (ii) the Market Price, times (iii) the number of shares
covered by the Option or the Restricted Stock award, as the case may be. The
Market Price shall be determined as the average of the fair market value of the
Stock for the period of twenty (20) trading days ending on the effective date of
the covered transaction.
(b) "Change of Control" means any of the following: (1) any person, entity
or Group (persons or
<PAGE>
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 this provision,
"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.
(c) Notwithstanding the foregoing, the termination of Options and the
payment of Award Values described in paragraph (a) of this section shall not
apply with respect to any transaction in which the holder of an Option or
Restricted Stock receives either: (i) replacement options or restricted stock,
as the case may be, allowing the holder to receive, on the same terms as in the
original Option or Restricted Stock, the greatest amount of securities, cash or
other property to which such holder would have been entitled as a holder of
Common Stock upon consummation of the transaction if such holder had exercised
the rights represented by the Option or restricted stock held by such holder
immediately prior to the transaction, or (ii) if pooling of interests is a
condition of the transaction, a replacement equity interest which enables the
transaction to qualify for pooling of interests.
8. GENERAL PROVISIONS
8.1. DOCUMENTATION OF AWARDS.
Awards will be evidenced by such written instruments, if any, as may be
prescribed by the Committee from time to time. Such instruments may be in the
form of agreements to be executed by both the Participant and the Company, or
certificates, letters or similar instruments, which need not be executed by the
Participant but acceptance of which will evidence agreement to the terms
thereof.
8.2. RIGHTS AS A STOCKHOLDER, DIVIDEND EQUIVALENTS.
Except as specifically provided by the Plan, the receipt of an Award will
not give a Participant rights as a stockholder; the Participant will obtain such
rights, subject to any limitations imposed by the Plan or the instrument
evidencing the Award, upon actual receipt of Stock. However, the Committee may,
on such conditions as it deems appropriate, provide that a Participant will
receive a benefit in lieu of cash dividends that would have been payable on any
or all Stock subject to the Participant's Award had such Stock been outstanding.
Without limitation, the Committee may provide for payment to the Participant of
amounts representing such dividends, either currently or in the future, or for
investment of such amounts on behalf of the Participant.
8.3. CONDITIONS ON DELIVERY OF STOCK.
The Company will not be obligated to deliver any shares of Stock pursuant
to the Plan or to remove restriction from shares previously delivered under the
Plan (a) until all conditions of the Award have been satisfied or removed, (b)
until, in the opinion of the Company's counsel, all applicable federal and state
laws and regulations have been complied with, (c) if the outstanding Stock is at
the time listed on any stock exchange, until the shares to be delivered have
been listed or authorized to be listed on such exchange upon official notice of
issuance, and (d) until all other legal matters in connection with the
<PAGE>
issuance and delivery of such shares have been approved by the Company's
counsel. If the sale of Stock has not been registered under the Securities Act
of 1933, as amended, the Company may require, as a condition to exercise of the
Award, such representations or agreements as counsel for the Company may
consider appropriate to avoid violation of such Act and may require that the
certificates evidencing such Stock bear an appropriate legend restricting
transfer.
If an Award is exercised by the Participant's legal representative, the
Company will be under no obligation to deliver Stock pursuant to such exercise
until the company is satisfied as to the authority of such representative.
8.4. TAX WITHHOLDING.
The Company will withhold from any cash payment made pursuant to an Award
an amount sufficient to satisfy all federal, state and local withholding tax
requirements (the "withholding requirements").
In the case of an Award pursuant to which Stock may be delivered, the
Committee will have the right to require that the Participant or other
appropriate person remit to the Company an amount sufficient to satisfy the
withholding requirements, or make other arrangements satisfactory to the
Committee with regard to such requirements, prior to the delivery of any Stock.
If and to the extent that such withholding is required, the Committee may permit
the Participant or such other person to elect at such time and in such manner as
the Committee provides to have the Company hold back from the shares to be
delivered, or to deliver to the Company, Stock having a value calculated to
satisfy the withholding requirement.
If at the time an ISO is exercised, the Committee determines that the
Company could be liable for withholding requirements with respect to a
disposition of the Stock received upon exercise, the Committee may require as a
condition of exercise that the person exercising the ISO agree (a) to inform the
Company promptly of any disposition (within the meaning of section 424(c) of the
Code) of Stock receiving upon exercise, and (b) to give such security as the
Committee deems adequate to meet the potential liability of the Company for the
withholding requirements and to augment such security from time to time in any
amount reasonably deemed necessary by the Committee to preserve the adequacy of
such security.
8.5. NONTRANSFERABILITY OF AWARDS.
Unless otherwise provided in the Participant's agreement, no Award (other
than an Award in the form of an outright transfer of cash or Unrestricted Stock)
may be transferred other than by will or by the laws of descent and
distribution, and during a Participant's lifetime an Award requiring exercise
may be exercised only by him or her (or in the event of the Participant's
incapacity, the person or persons legally appointed to act on the Participant's
behalf).
8.6. ADJUSTMENTS IN THE EVENT OF CERTAIN TRANSACTIONS.
(a) In the event of a stock dividend, stock split or combination of
shares, recapitalization or other change in the Company's capitalization, or
other distribution to common stockholders other than normal cash dividends,
after the effective date of the Plan, the Committee will make any appropriate
adjustments to the maximum number of shares that may be delivered under the Plan
under Section 4 above.
(b) In any event referred to in paragraph (a), the Committee will also
make any appropriate adjustments to the number and kind of shares of stock or
securities subject to Awards then outstanding or subsequently granted, any
exercise prices relating to Awards and any other provision of Awards affected by
such change. The Committee may also make such adjustments to take into account
material changes in law or in accounting practices or principles, mergers,
consolidations, acquisitions, dispositions or similar corporate transactions, or
any other event, if it is determined by the Committee that adjustments are
appropriate to avoid distortion in the operation of the Plan.
<PAGE>
8.7. EMPLOYMENT RIGHTS, ETC.
Neither the adoption of the Plan nor the grant of Awards will confer upon
any person any right to continued retention by the Company or any subsidiary as
an Employee or otherwise, or affect in any way the right of the Company or any
subsidiary to terminate an employment, service or similar relationship at any
time. Except as specifically provided by the Committee in any particular case,
the loss of existing or potential profit in Awards granted under the Plan will
not constitute an element of damages in the event of termination of an
employment, service or similar relationship event if the termination is in
violation of an obligation of the Company to the Participant.
8.8. DEFERRAL OF PAYMENTS.
The Committee may agree at any time, upon request of the Participant, to
defer the date on which any payment under an Award will be made.
8.9. PAST SERVICES AS CONSIDERATION.
Where a Participant purchases Stock under an Award for a price equal to the
par value of the Stock the Committee may determine that such price has been
satisfied by past services rendered by the Participant.
9. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION
Neither adoption of the Plan nor the grant of Awards to a Participant will
affect the Company's right to grant to such Participant awards that are not
subject to the Plan, to issue to such Participant Stock as a bonus or otherwise,
or to adopt other plans or arrangements under which Stock be issued to
Employees.
The Committee may at any time or times amend the Plan or any outstanding
Award for any purpose which may at the time be permitted by law, or may at any
time terminate the Plan as to any further grants of Awards, provided that
(except to the extent expressly required or permitted by the Plan) no such
amendment will, without the approval of the stockholders of the Company,
effectuate a change for which stockholder approval is required in order for the
Plan to continue to qualify for the award of ISOs under Section 422 of the Code
or for the award of performance-based compensation under Section 162(m) of the
Code and to continue to qualify under Rule 16b-3 promulgated under Section 16 of
the 1934 Act.
<PAGE>
EXHIBIT 10.6
THE GRAND UNION COMPANY
1995 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
1. PURPOSE. The purpose of this 1995 Non-Employee Directors' Stock
Option Plan (the "Plan") is to advance the interests of The Grand Union
Company (the "Company") by enhancing the ability of the Company to attract
and retain non-employee directors who are in a position to make significant
contributions to the success of the Company and to reward directors for such
contributions through ownership of shares of the Company's Common Stock (the
"Stock").
2. ADMINISTRATION. The Plan shall be administered by a committee (the
"Committee") of the Board of Directors (the "Board") of the Company designated
by the Board for that purpose. Unless and until a Committee is appointed, the
Plan shall be administered by the entire Board, and references in the Plan to
the "Committee" shall be deemed references to the Board. The Committee shall
have authority, not inconsistent with the express provisions of the Plan (a) to
issue options granted in accordance with the formula set forth in this Plan to
Eligible Directors as defined below; (b) to prescribe the form or forms of
instruments evidencing awards and any other instruments required under the Plan
and to change such forms from time to time; (c) to adopt, amend and rescind
rules and regulations for the administration of the Plan; and (d) to interpret
the Plan and to decide any questions and settle all controversies and disputes
that may arise in connection with the Plan. Such determinations of the
Committee shall be conclusive and shall bind all parties.
3. ELIGIBILITY OF DIRECTORS FOR STOCK OPTIONS. Directors eligible to
receive options under the Plan ("Eligible Directors") shall be those directors,
who are not, at the time they become an Eligible Director, employees of the
Company or of any subsidiary of the Company AND (i) who are directors on the
Effective Date of this Plan (which shall be the eligibility date for such
directors) or (ii) who are first elected a director of the Company after the
Effective Date of this Plan (which election date shall be the eligibility date
for any such director).
4. GRANT OF OPTIONS; EXERCISE PRICE. Each individual who is an Eligible
Director shall, on his or her eligibility date as determined under Section 3,
automatically be granted an option ("Option") to purchase 5,000 shares of Stock
of the Company (subject to adjustment as provided in Sections 5 and 10) at an
exercise price equal to the Fair Market Value of the Stock on the effective date
of grant. Thereafter, on each date that an Eligible Director is elected to a new
one-year term of office, such Eligible Director shall automatically be granted
an Option to purchase 1,500 shares of Stock of the Company (subject to
adjustment as provided in Sections 5 and 10) at an exercise price equal to the
Fair Market Value of the Stock on the effective date of grant. All options
shall expire ten years after the effective date of grant.
5. NUMBER OF SHARES. The number of shares of Stock of the Company which
may be issued upon the exercise of Options granted under the Plan, including
shares forfeited pursuant to Section 7, shall not exceed 50,000 in the
aggregate, subject to increase under Section 10, which increases and appropriate
adjustments as a result thereof shall be made by the Committee, whose
determination shall be binding on all persons.
6. STOCK TO BE DELIVERED. Shares of Stock to be delivered pursuant to an
Option granted under this Plan may constitute an original issue of authorized
Stock or may consist of previously issued Stock acquired by the Company, as
shall be determined by the Board. The Board and the proper officers of the
Company shall take any appropriate action required for such delivery. No
fractional shares shall be delivered under the Plan.
<PAGE>
The Company will not be obligated to deliver any shares of Stock pursuant
to the Plan (a) until all conditions of the Option have been satisfied, (b)
until, in the opinion of the Company's counsel, all applicable federal and state
laws and regulation have been complied with, (c) if the outstanding Stock is at
the time listed on the New York Stock Exchange or any other stock exchange,
until the shares to be delivered have been listed or authorized to be listed on
the New York Stock Exchange or such other exchange upon official notice of
notice of issuance, and (d) until all other legal matters in connection with the
issuance and delivery of such shares have been approved by the Company's
counsel. If the sale of Stock has not been registered under the Securities Act
of 1933, as amended, the Company may require, as a condition to exercise of the
Options, such representations or agreements as counsel for the Company may
consider appropriate to avoid violation of such Act and may require that the
certificates evidencing such Stock bear an appropriate legend restricting
transfer.
If an Option is exercised by the Eligible Director's legal representative,
the Company will be under no obligation to deliver Stock pursuant to such
exercise until the Company is satisfied as to the authority of such
representative.
7. EXERCISABILITY; EXERCISE; PAYMENT OF EXERCISE PRICE.
All Options granted under the Plan prior to July 1, 1996, shall, subject to
initial stockholder approval of the Plan, become exercisable immediately as to
one-third of the shares, on the first anniversary of the grant date as to the
second third of the shares and as to one share of any remainder, and on the
second anniversary of the grant date as to the last third of the shares and the
second share of any two-share remainder.
All Options granted under the Plan on or after July 1, 1996, shall, subject
to initial stockholder approval of the Plan, become exercisable six months after
the grant date as to one-third of the shares, on the earlier of the first
anniversary of the grant date or the annual meeting of stockholders closest
thereto as to the second third of the shares and as to one share of any
remainder, and on the earlier of the second anniversary of the grant date or the
annual meeting of stockholders closest thereto as to the last third of the
shares and the second share of any two-share remainder.
Any exercise of an Option must be in writing, signed by the proper person
and delivered or mailed to the Company, accompanied by (1) any documents
required by the Committee and (2) payment in full as provided below for the
number of shares for which the Option is exercised.
The exercise price of Stock purchased on exercise of an Option must be paid
for as follows: (1) in cash or by check (acceptable to the Company in
accordance with guidelines established for this purpose), bank draft or money
order payable to the order of the Company or (2) through the delivery of shares
of Stock which have been outstanding and held by the Option holder for at least
six months and which have a Fair Market Value on the last business day preceding
the date of exercise equal to the exercise price, or (3) by delivery of a two
year-term promissory note of the Eligible Director to the Company, bearing
interest on amounts outstanding at a rate equal to the prime rate as published
in THE WALL STREET JOURNAL on the effective date of grant plus 2%, or (4) by
delivery of an unconditional and irrevocable undertaking by a broker to deliver
promptly to the Company sufficient funds to pay the exercise price, or (5) by
any combination of the permissible forms of payment.
To the extent shares of Stock covered under an Option are not delivered
because the Option lapses or is terminated, such forfeited shares may be
regranted in another Option within the limits set forth in Section 5.
8. TERMINATION OF OPTIONS.
a. DEATH OR DISABILITY. If an Eligible Director ceases to be a director
by reason of death or total and permanent disability (as determined by the
Committee), the following will apply:
<PAGE>
All Options held by the Eligible Director that are not exercisable on the
thirtieth day after termination of the Eligible Director's status as a director
will terminate as of such date. All Options that are exercisable as of said
thirtieth day will continue to be exercisable until the earlier of (1) the first
anniversary of the date on which the Eligible Director's status as a director
ended or (2) the date on which the Option would have terminated had the Eligible
Director remained a director. If the Eligible Director has died or is totally
or permanently disabled, the Option may be exercised within such limits by the
Eligible Director's legal representative.
b. OTHER TERMINATION. If an Eligible Director's service with the Company
terminates for any reason other than death or incapacity as provided above, all
Options held by the director that are not then exercisable shall terminate.
Options that are exercisable on the date of such termination (other than
termination upon a removal for cause, in which event all Options shall
immediately terminate) shall continue to be exercisable until the earlier of (1)
one year thereafter or (2) the date on which the Option would have terminated
had the director remained an Eligible Director, and after completion of that
period, such Options shall terminate to the extent not previously exercised,
expired or terminated.
c. CERTAIN CORPORATE TRANSACTIONS. In the event of a Change of Control of
the Company, each outstanding Option not otherwise exercisable shall become
immediately exercisable in full on the twentieth (20th) trading day prior to the
effective date of the Change of Control. Subject to the last paragraph of this
section, the Company shall pay to those Option holders whose Options have been
terminated, an amount equal to the Option Value, such payment to be made by cash
or certified check within 30 days after the Change in Control. The Option Value
shall be determined as the difference between the exercise price of the Option
and the Market Price times the number of shares covered by the Option. The
Market Price shall be determined as the average of the Fair Market Value, as
determined under section 11, for the period of twenty (20) trading days ending
on the effective date of the Change of Control.
"Change of Control" means any of the following: (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 this provision, "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.
Notwithstanding the foregoing, the termination of Options and the payment
of Option Values described in the first paragraph of this section shall not
apply with respect to any transaction in which the Option Holder receives
either (i) a replacement option allowing the Option Holder to receive, on the
same terms as in the original Option, the greatest amount of securities, cash or
other property to which such holder would have been entitled as a holder of
Common Stock upon consummation of the transaction if such holder had exercised
the rights represented by the Option held by such holder immediately prior to
the transaction, or (ii) if pooling of interests is a condition of the
transaction, a replacement equity interest which enables the transaction to
qualify for pooling of interests.
<PAGE>
9. GENERAL PROVISIONS
a. DOCUMENTATION OF OPTIONS. Options will be evidenced by written
instruments prescribed by the Committee from time to time. Such instruments may
be in the form of agreements, to be executed by both an Eligible Director and
the Company, or certificates, letters or similar instruments, which need not be
executed by an Eligible Director but acceptance of which will evidence agreement
to the terms thereof.
b. RIGHTS AS A STOCKHOLDER. An option holder shall not have the rights of
a stockholder with respect to Options under the Plan except as to Stock actually
received by him or her under the Plan.
c. TAX WITHHOLDING. The Eligible Director or other appropriate person
shall remit to the Company an amount sufficient to satisfy the withholding
requirements, or make other arrangements satisfactory to the Committee with
regard to such requirements, prior to the delivery of any Stock. If and to the
extent that such withholding is required, the Committee may permit the Eligible
Director such other person to elect at such time and in such manner as the
Committee provides to have the Company hold back from the shares to be
delivered, or to deliver to the Company, Stock having a value calculated to
satisfy the withholding requirement.
d. NONTRANSFERABILITY OF OPTIONS. No Option may be transferred other than
by will or by the laws of descent and distribution, and during a director's
lifetime an Option may be exercised only by the director (or, in the event of
the director's incapacity, the person or persons legally appointed to act on the
director's behalf).
10. ADJUSTMENTS IN THE EVENT OF CERTAIN TRANSACTIONS.
a. In the event of a stock dividend, stock split or combination of shares,
recapitalization or other change in the Company's capitalization, or other
distribution to common stockholders other than normal cash dividends, the
Committee will make any appropriate adjustments to the maximum number of shares
that may be delivered under the Plan under Section 5 above.
b. In any event referred to in paragraph (a), the Committee will also make
any appropriate adjustments to the number and kind of shares of stock or
securities subject to Options then outstanding or subsequently granted, exercise
prices relating to Options and any other provision of Options affected by such
change. The Committee may also make such adjustments to take into account
material changes in law or in accounting practices or principles, mergers,
consolidations, acquisitions, dispositions or similar corporate transactions, or
any other event, if it is determined by the Committee that adjustments are
appropriate to avoid distortion in the operation of the Plan.
11. FAIR MARKET VALUE. For purposes of the Plan, Fair Market Value of a
share of Stock on any date will be the last sale price as reported by the
principal exchange on which the Stock is traded or by the National Association
of Securities Dealers, Inc. Automated Quotations System or such other similar
system then in use, on that date; or, if on any such a date such Stock is not
quoted by any such organization, the average of the closing bid and asked prices
with respect to such Stock, as furnished by a professional market maker making a
market in such Stock selected by the Committee; or if such prices are not
available, the fair market value of such Stock as of such date as determined in
good faith by the Committee.
12. EFFECTIVE DATE AND TERM. This Plan, having been approved by the Board
of Directors on December 12, 1995, shall become, in accordance with the term of
the approving vote of the Board, effective on December 12, 1995 (the "Effective
Date"), subject to approval of this Plan by vote of a majority of the
shareholders of the Company present and eligible to vote on the question at an
annual or special meeting of stockholders held not later than December 12, 1996.
Options may be granted under the Plan prior to the date of stockholder
approval, and options so granted shall be effective on the effective date of
grant subject to stockholder approval of the Plan as provided in this Section.
No Options may be awarded under this Plan after December 12, 2005, but the Plan
shall continue thereafter while previously awarded Options remain subject to the
Plan.
<PAGE>
13. EFFECT OF TERMINATION, AND AMENDMENT. Neither adoption of the Plan
nor the grant of Options to an Eligible Director shall confer upon any person
any right to continued status as a director with the Company or any subsidiary
or affect in any way the right of the Company or subsidiary to terminate a
director relationship at any time or shall affect the Company's right to grant
to such director options or other stock awards that are not subject to the Plan,
to issue to such director stock as a bonus or otherwise, or to adopt other plans
or arrangements under which stock may be issued to directors. The Committee may
at any time terminate the Plan as to any further grants of Options. The
Committee may at any time or times amend the Plan for any purpose which may at
the time be permitted by law, but in no event (except to comply with the
provisions of the Internal Revenue Code, the Employee Retirement Income Security
Act or the rules thereunder) more than once in any six-month period.
<PAGE>
Exhibit 10.7
THE GRAND UNION COMPANY
201 Willowbrook Boulevard
Wayne, NJ 07470
July 30, 1996
Shamrock Capital Advisors, Inc.
4444 Lakeside Drive
Burbank, California 91505
Attention: Geoffrey T. Moore
Gentlemen:
This letter will confirm our engagement of Shamrock Capital Advisors, Inc.,
a Delaware corporation ("SCA") to provide management and consulting services to
The Grand Union Company, a Delaware corporation (the "Company"), and its
subsidiaries for a period of three years commencing on the Principal Closing
Date (as that term is defined in the Purchase Agreement, defined below). We
understand that SCA is the investment manager for Trefoil Capital Investors II,
L.P., a Delaware limited partnership ("Trefoil"), which is a party to that Stock
Purchase Agreement, dated July 30, 1996 (the "Purchase Agreement"), by and among
the Company, Trefoil and GE Investment Private Placement Partners II, A Limited
Partnership, a Delaware limited partnership ("GEI") (Trefoil and GEI to be
referred to collectively as the "Purchasers").
1. SCA will consult with, and provide advice to, the officers and
management employees of the Company concerning matters (i) relating to the
Company's financial policies and the development and implementation of the
Company's business plans and (ii) generally arising out of the business affairs
of the Company. It is understood that the Company shall have no obligation to
follow any of SCA's advice. SCA shall devote such time as it deems is necessary
to perform the services to be rendered by it hereunder, and SCA shall not be
required to devote any minimum amount of time to the performance of such
services. SCA may also be retained to provide additional special services to the
Company as approved from time to time by the independent directors of the
Company (directors of the Company neither affiliated nor associated with any of
the Purchasers), upon such terms and conditions and for such compensation as
shall be negotiated in good faith by SCA and the Company.
2. SCA's compensation for management and consulting services hereunder will
be $300,000 in the first year of SCA's engagement to provide services hereunder
(each such year a "Service Year"), $400,000 in the second Service Year, and
$500,000 in the third Service Year, such amounts to be payable semiannually in
advance in equal installments each Service Year, with the initial semiannual
payment for the first Service Year to be made on the Principal Closing Date. The
Company shall also reimburse SCA (or cause SCA to be reimbursed) for all of its
reasonable out-of-pocket costs and expenses in connection with the performance
of its services hereunder, which shall include the reasonable fees and
disbursements of its counsel, upon documentation thereof. In addition to the
foregoing compensation, the officers, directors or employees of any of the
Purchasers or their respective affiliates serving as directors of the Company
will also be paid customary director fees paid to non-employee directors of the
Company and will be reimbursed for all of their reasonable out-of-pocket costs
<PAGE>
and expenses in connection therewith.
3. The Company has been advised that SCA (and its officers and directors)
provides consulting, management and other services to Trefoil, entities in which
Trefoil invests, Shamrock Holdings, Inc., a Texas corporation ("Shamrock"),
entities in which Shamrock invests, and others and that SCA anticipates it will
continue to provide such services and similar services to other persons and
entities. Accordingly, the Company acknowledges and agrees that SCA shall not be
prevented or restricted, in any manner whatsoever, by this letter agreement from
providing services (pursuant to a written agreement or otherwise) to any other
person or entity and will be supplying services to the Company on a
non-exclusive basis.
4. The Company agrees to indemnify SCA and its affiliates in accordance
with Schedule A, as attached hereto.
5. This letter agreement may be terminated at any time, with or without
cause, by SCA or the Company. Termination of this letter agreement by the
Company shall not relieve the Company from its obligations (i) to pay to SCA any
unpaid portion of the total amount of fees due to SCA during the entire stated
term of this letter agreement, without giving effect to such termination
(including any and all expenses incurred by SCA but not yet reimbursed by the
Company in connection with the performance of services hereunder), which may be
paid in one lump sum at the time of termination or in accordance with paragraph
2 hereof, at the Company's option, and (ii) to indemnify SCA in accordance with
the provisions of Schedule A hereto, which obligations shall survive any
termination of this letter agreement by the Company or SCA.
6. SCA hereby agrees that it will, and will use its best efforts to, cause
its directors, officers, employees, agents and advisors ("Representatives") to,
maintain the confidentiality of all information obtained by it or its
Representatives in connection with its services hereunder; will not disclose
such information to any third party (including any other company to which SCA
provides management services), except for information which (i) is or becomes
generally available to the public other than as a result of a disclosure by SCA
or its Representatives, (ii) was within SCA's possession prior to its being
furnished to you by or on behalf of the Company pursuant hereto, provided that
the source of such information was not known by SCA to be bound by a
confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to the Company or any other party with respect to
such information or (iii) becomes available to SCA on a nonconfidential basis
from a source other than the Company or any of its Representatives, provided
that such source is not bound by a confidentiality agreement with or other
contractual, legal or fiduciary obligation of confidentiality to the Company or
any other party with respect to such information.
<PAGE>
If this letter accurately sets forth our understanding with respect to the
subject matter hereof, please indicate that SCA will be bound hereby by
executing the enclosed copy of this letter in the space provided and return it
to us.
Very truly yours,
THE GRAND UNION COMPANY
By: /s/ Jospeh J. McCaig
Name: Joseph J. McCaig
Title: President and Chief Executive Officer
Agreed to and accepted
this 30th day of July, 1996
SHAMROCK CAPITAL ADVISORS, INC.
By: /s/ Geoffrey T. Moore
Managing Director
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The schedule contains financial information extracted from the Company's interim
consolidated financial statements and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAR-29-1997
<PERIOD-START> MAR-31-1996
<PERIOD-END> OCT-12-1996
<CASH> 31,539
<SECURITIES> 0
<RECEIVABLES> 26,055
<ALLOWANCES> 0
<INVENTORY> 138,072
<CURRENT-ASSETS> 209,217
<PP&E> 872,288
<DEPRECIATION> 414,503
<TOTAL-ASSETS> 1,126,569
<CURRENT-LIABILITIES> 159,846
<BONDS> 600,355
40,243
0
<COMMON> 10,000
<OTHER-SE> (52,564)
<TOTAL-LIABILITY-AND-EQUITY> 1,126,569
<SALES> 1,260,235
<TOTAL-REVENUES> 1,260,235
<CGS> 876,178
<TOTAL-COSTS> 876,178
<OTHER-EXPENSES> 413,082
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 56,861
<INCOME-PRETAX> (85,886)
<INCOME-TAX> (11,421)
<INCOME-CONTINUING> (74,465)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (74,708)
<EPS-PRIMARY> (7.47)
<EPS-DILUTED> 0
</TABLE>
