<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended January 6, 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 .
------- -------
As of February 20, 1996, there were issued and outstanding 10,000,000
shares, par value $1.00 per share, of the Registrant's common stock.
1
<PAGE>
THE GRAND UNION COMPANY
INDEX
PART I - FINANCIAL INFORMATION (UNAUDITED)
ITEM 1. FINANCIAL STATEMENTS. PAGE NO.
Consolidated Statement of Operations - 12 weeks ended January 6, 1996
(Successor Company), and 12 weeks ended January 7, 1995
(Predecessor Company) 3
Consolidated Statement of Operations - 29 weeks ended January 6, 1996
(Successor Company), 11 weeks ended June 17, 1995 and 40 weeks ended
January 7, 1995 (Predecessor Company) 4
Consolidated Balance Sheet - January 6, 1996 (Successor Company) and
April 1, 1995 (Predecessor Company) 5
Consolidated Statement of Cash Flows - 29 weeks ended January 6, 1996
(Successor Company), 11 weeks ended June 17, 1995 and 40 weeks
ended January 7, 1995 (Predecessor Company) 6
Notes to Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. 11
PART II - OTHER INFORMATION
Item 6 - Exhibits 15
All items which are not applicable or to which the answer is negative have been
omitted from this report.
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
THE GRAND UNION COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Successor Predecessor
Company Company
----------- -----------
12 Weeks 12 Weeks
Ended Ended
January 6, January 7,
1996 1995
----------- -----------
<S> <C> <C>
Sales $ 543,617 $ 563,281
Cost of sales (376,754) (408,814)
----------- -----------
Gross profit 166,863 154,467
Operating and administrative expenses (136,035) (132,890)
Depreciation and amortization (16,547) (21,204)
Amortization of excess reorganization value (24,578) -
Unusual items (15,000) (12,512)
Interest expense, net (23,537) (47,379)
----------- -----------
Loss before income tax benefit (48,834) (59,518)
Income tax benefit 7,840 -
----------- -----------
Net loss (40,994) (59,518)
Accrued dividends on old preferred stock - (6,469)
----------- -----------
Net loss applicable to common stock $ (40,994) $ (65,987)
----------- -----------
----------- -----------
Net loss per common share $ (4.10)
-----------
-----------
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
3
<PAGE>
THE GRAND UNION COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Successor
Company Predecessor Company
------------ ---------------------------
29 Weeks 11 Weeks 40 Weeks
Ended Ended Ended
January 6, June 17, January 7,
1996 1995 1995
------------ ------------ ------------
<S> <C> <C> <C>
Sales $ 1,299,991 $ 487,882 $ 1,867,636
Cost of sales (897,411) (344,041) (1,311,457)
------------ ------------ ------------
Gross profit 402,580 143,841 556,179
Operating and administrative expenses (321,459) (117,544) (436,250)
Depreciation and amortization (40,504) (17,215) (67,224)
Amortization of excess reorganization value (59,405) - -
Unusual items (19,500) (18,627) (12,512)
Interest expense, net (contractual interest totaled $29,085
for the 11 weeks ended June 17, 1995 -See Note 2) (55,516) (19,791) (154,158)
------------ ------------ ------------
Loss before income taxes and extraordinary
gain on debt discharge (93,804) (29,336) (113,965)
Income tax benefit 13,212 - -
------------ ------------ ------------
Loss before extraordinary gain on debt discharge (80,592) (29,336) (113,965)
Extraordinary gain on debt discharge - 854,785 -
------------ ------------ ------------
Net (loss) income (80,592) 825,449 (113,965)
Accrued dividends on old preferred stock - - (18,173)
------------ ------------ ------------
Net (loss) income applicable to common stock $ (80,592) $ 825,449 $ (132,138)
------------ ------------ ------------
------------ ------------ ------------
Net loss per common share $ (8.06)
------------
------------
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
4
<PAGE>
THE GRAND UNION COMPANY
CONSOLIDATED BALANCE SHEET
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Successor Predecessor
Company Company
------------ ------------
January 6, April 1,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and temporary investments $ 34,838 $ 89,423
Receivables 19,161 18,592
Inventories 172,389 189,467
Other current assets 14,934 16,787
------------ ------------
Total current assets 241,322 314,269
Property, net 477,522 454,180
Goodwill, net - 545,451
Excess reorganization value, net 473,169 -
Deferred financing fees, net 2,872 44,069
Deferred tax asset 37,284 -
Other assets 11,511 36,787
------------ ------------
$ 1,243,680 $ 1,394,756
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt $ 1,921 $ -
Current portion of obligations under capital leases 6,610 -
Accounts payable and accrued liabilities 211,799 174,126
------------ ------------
Total current liabilities 220,330 174,126
------------ ------------
Long-term debt 723,328 -
------------ ------------
Obligations under capital leases 123,194 -
------------ ------------
Other noncurrent liabilities 103,420 53,072
------------ ------------
Liabilities subject to compromise - 1,817,698
------------ ------------
Commitments and contingencies
Redeemable stock subject to compromise:
Old common stock - 9,407
Old preferred stock - 164,792
------------ ------------
- 174,199
------------ ------------
Stockholders' equity (deficit):
New Common Stock, $1.00 par value, 30,000,000 shares authorized,
10,000,000 shares issued and outstanding 10,000 -
New Preferred Stock, $1.00 par value, 10,000,000 shares
authorized, no shares issued and outstanding - -
Old common stock - 1
Old treasury stock - (156)
Capital in excess of par value 144,000 -
Accumulated deficit (80,592) (824,184)
------------ ------------
Total stockholders' equity (deficit) 73,408 (824,339)
------------ ------------
$ 1,243,680 $ 1,394,756
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
5
<PAGE>
THE GRAND UNION COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Successor
Company Predecessor Company
------------ ---------------------------
29 Weeks 11 Weeks 40 Weeks
Ended Ended Ended
January 6, June 17, January 7,
1996 1995 1995
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income $ (80,592) $ 825,449 $ (113,965)
Adjustments to reconcile net (loss) income to
net cash provided by (used for) operating
activities before reorganization items paid:
Depreciation and amortization 40,504 17,215 67,224
Amortization of excess reorganization value 59,405 - -
Deferred taxes (12,787) - -
Noncash interest 14,595 1,126 35,068
Extraordinary gain on debt discharge - (854,785) -
Net changes in assets and liabilities:
Receivables (10,865) 1,769 16,421
Inventories 11,489 12,946 18,392
Accounts payable and accrued liabilities (17,720) (34,928) 25,638
Other current assets (1,102) 2,776 579
Other (3,176) 4,493 1,660
------------ ------------ ------------
Net cash (used for) provided by operating
activities before reorganization items paid (249) (23,939) 51,017
Reorganization items paid (19,609) (4,913) -
------------ ------------ ------------
Net cash (used for) provided by operating
activities (19,858) (28,852) 51,017
------------ ------------ ------------
INVESTMENT ACTIVITIES:
Capital expenditures (27,304) (3,301) (56,777)
Disposals of property - 5,452 2,016
------------ ------------ ------------
Net cash (used for) provided by investment
activities (27,304) 2,151 (54,761)
------------ ------------ ------------
FINANCING ACTIVITIES:
Proceeds from New Bank agreement - 104,144 -
Net proceeds from long-term debt 18,089 - 10,000
Payment of Old Bank debt - (93,144) -
Obligations under capital leases discharged (4,155) (1,707) (6,532)
Loan placement fees - (3,125) -
Retirement of long-term debt (585) (239) (718)
------------ ------------ ------------
Net cash provided by financing activities 13,349 5,929 2,750
------------ ------------ ------------
Decrease in cash and temporary investments (33,813) (20,772) (994)
Cash and temporary investments at beginning of
period 68,651 89,423 44,294
------------ ------------ ------------
Cash and temporary investments at end of period $ 34,838 $ 68,651 $ 43,300
------------ ------------ ------------
------------ ------------ ------------
Supplemental disclosure of cash flow information:
Interest payments $ 15,169 $ 9,515 $ 84,226
Capital lease obligations incurred 1,168 20,072 28,838
Accrued dividends on old preferred stock - - 18,173
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
6
<PAGE>
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 ("Grand Union" or the "Company") include the accounts of the
Company and its subsidiaries, all of which are wholly-owned. In the opinion of
management, the consolidated financial statements include all adjustments,
which, except for fresh-start adjustments (see Note 3), 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 April 1, 1995.
Operating results for the periods presented are not necessarily indicative of
the results for the full fiscal year.
Certain amounts have been reclassified in the prior period financial
statements to conform to current year presentation.
NOTE 2 - REORGANIZATION
On January 25, 1995 (the "Filing Date"), as part of the implementation of
an agreement with the Company's bank lenders and with members of informal
committees of certain holders of Grand Union's long-term debt on the terms of a
restructuring of Grand Union's capital structure, Grand Union filed a voluntary
petition for relief under chapter 11 ("Chapter 11") of Title 11 of the United
States Code (the "Code") in the United States Bankruptcy Court for the District
of Delaware (the "Bankruptcy Court"). From the Filing Date through June 15, 1995
(the "Effective Date"), Grand Union operated as a debtor-in-possession under
Chapter 11 of the Code and was subject to the supervision of the Bankruptcy
Court in accordance with the Code.
On May 31, 1995, the Bankruptcy Court confirmed the Second Amended Chapter
11 Plan, dated April 19, 1995 (as confirmed, the "Plan"), and the Company
emerged from Chapter 11 on the Effective Date. One proceeding challenging the
order confirming the Plan is pending. The Company does not believe that this
proceeding will result in any modification or revocation of the order.
On the Effective Date, Grand Union adopted a restated certificate of
incorporation, the principal effects of which were to authorize 30,000,000
shares of new common stock (the "New Common Stock") (of which 10,000,000 shares
were issued under the Plan) and to prohibit the issuance of non-voting equity
securities. The Plan provided for full payment of all allowed administrative
expenses and all allowed general unsecured and priority claims. On the Effective
Date, obligations relating to the Company's existing bank credit agreement were
paid in full and the Company entered into an Amended and Restated Credit
Agreement (the "New Bank Facility") with its bank lending group which provides
for a five-year revolving credit facility of $100,000,000 and a seven-year term
loan facility of $104,144,371. The New Bank Facility is secured by a lien on
substantially all of the assets of Grand Union and its subsidiaries.
As of the Effective Date, two series of long-term debt having an aggregate
principal amount of $525,000,000 plus accrued interest (the "Senior Notes") were
deemed cancelled and each holder of Senior Notes became entitled to receive its
pro rata share of Grand Union's new 12% Senior Notes due 2004 (the "New Senior
Notes") having an aggregate principal amount of $595,475,922 issued pursuant to
the Plan. Subsequent to the Effective Date, the Company issued $595,421,000
aggregate principal amount of New Senior Notes and made cash payments of $54,922
for fractional shares to the holders of the Senior Notes. The New Senior Notes
accrue interest beginning on September 1, 1995. Accordingly, the New Senior
Notes have been discounted at 12% for the period from June 15, 1995 to September
1, 1995 and imputed interest was charged at 12% during that period. In addition,
the difference between such discounted value and the fair value of the New
Senior Notes at the Effective Date was recorded as a debt premium totaling
$5,779,000 which is being amortized over the life of the New Senior Notes.
7
<PAGE>
As of the Effective Date, three other series of long-term debt having an
aggregate principal amount of $566,150,000 (the "Subordinated Notes") and the
old capital stock of Grand Union were deemed cancelled and each holder of
Subordinated Notes became entitled to receive its pro rata share of an aggregate
of 10,000,000 shares of New Common Stock issued pursuant to the Plan. Interest
expense was not accrued on the Subordinated Notes subsequent to the Filing Date.
Accordingly, interest expense for the 11 weeks ended June 17, 1995 excludes
contractual interest expense of $9,294,000.
The Plan also provided for the issuance of warrants to purchase an
aggregate of 900,000 shares of New Common Stock to holders of several other
series of long-term debt of its then parent company (the "Capital Notes")
pursuant to the terms of a settlement reached among the Company, its then direct
and indirect parent companies, the Official Committee of Unsecured Creditors of
its then parent company and certain holders of the Capital Notes. Such warrants
are comprised of 300,000 Series 1 Warrants to purchase shares of New Common
Stock at a purchase price of $30 per share and of 600,000 Series 2 Warrants to
purchase shares of New Common Stock at a purchase price of $42 per share. The
warrants expire on June 15, 2000.
The Plan made no provision for the holders of the remaining long-term debt,
Redeemable Preferred Stock, common shares or warrants to purchase common shares
of the Company's then indirect parent.
NOTE 3 - FRESH-START REPORTING
As of the Effective Date, the Company adopted fresh-start reporting in
accordance with American Institute of Certified Public Accountants Statement of
Position 90-7, "Financial Reporting By Entities in Reorganization Under The
Bankruptcy Code" ("Fresh-Start Reporting"). In connection with the adoption of
Fresh-Start Reporting, a new entity has been deemed created for financial
reporting purposes. The periods presented prior to the Effective Date have been
designated "Predecessor Company" and the periods subsequent to the Effective
Date have been designated "Successor Company". For financial reporting purposes,
the Company accounted for the consummation of the Plan effective June 17, 1995.
In accordance with Fresh-Start Reporting, the Company valued its assets and
liabilities at fair values and eliminated its retained earnings at the Effective
Date. The reorganization value of the Company was determined utilizing several
methods which yielded similar results including (a) the trading value of the
Company's New Common Stock for a representative number of days subsequent to the
Effective Date and the fair value of the Company's obligations as of the
Effective Date, (b) discounted cash flows and (c) a multiple of adjusted
trailing year operating cash flow. The total reorganization value as of the
Effective Date was determined to be $1,334,000,000 which was $532,574,000 in
excess of the aggregate fair value of the Company's tangible and identified
intangible assets. Such excess, net of accumulated amortization of $59,405,000,
is classified as "Excess reorganization value, net" in the accompanying
consolidated balance sheet and is being amortized on a straight-line basis over
a five-year period.
The components of reorganization items included as unusual items in the
consolidated statement of operations for the 11 weeks ended June 17, 1995 are as
follows (in thousands):
<TABLE>
<S> <C>
Fresh-Start Reporting
Establish excess reorganization value $ 532,574
Eliminate existing goodwill (540,434)
Revalue property, net 40,633
Establish deferred tax asset 24,497
Revalue pension assets and liabilities and postretirement obligations (23,653)
Record lease rejection liability (19,734)
Provide for warehouse closing (10,450)
Eliminate LIFO inventory reserve 7,757
Provide for other reorganization liabilities (5,400)
Record liability for fair value of interest rate protection agreement (3,500)
Other (1,905)
---------
Total Fresh-Start 385
Professional fees incurred in connection with the reorganization (20,000)
Interest earned on accumulated cash resulting from the Chapter 11 proceedings 988
---------
Total reorganization items $ (18,627)
---------
---------
</TABLE>
During the 12 weeks ended January 7, 1995, the Company recorded $1,882,000
of professional fees and expenses incurred in connection with the restructuring
of its debt.
8
<PAGE>
As a result of the debt restructuring, the Company recorded an
extraordinary gain on debt discharge as follows (in thousands):
<TABLE>
<S> <C>
Elimination of Old Debt, deferred financing fees and
accrued interest discharged $1,589,506
Issuance of New Senior Notes (580,721)
Issuance of New Common Stock (154,000)
----------
Extraordinary gain on debt discharge $ 854,785
----------
----------
</TABLE>
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Term Assets to be Disposed of" ("SFAS No. 121"), which
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used and for long-lived assets and certain identifiable intangibles to
be disposed of. As of the Effective Date, the Company adopted SFAS No. 121.
NOTE 4 - UNUSUAL ITEMS
Unusual items consist of the following (in thousands):
<TABLE>
<CAPTION>
Successor Company Predecessor Company
--------------------------- -------------------------------------------
12 Weeks 29 Weeks 11 Weeks 12 Weeks 40 Weeks
Ended Ended Ended Ended Ended
January 6, January 6, June 17, January 7, January 7,
1996 1996 1995 1995 1995
------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Provision for warehouse closures $ 15,000 $ 15,000 $ - $ - $ -
Charges relating to voluntary
resignation incentive programs - 4,500 - - -
Reorganization items (See Note 3) - - 18,627 1,882 1,882
Provision for store closures - - - 10,630 10,630
------------ ------------ ------------ ----------- -----------
$ 15,000 $ 19,500 $ 18,627 $ 12,512 $ 12,512
------------ ------------ ------------ ----------- -----------
------------ ------------ ------------ ----------- -----------
</TABLE>
During the third quarter of Fiscal 1996, the Company reached a decision to
outsource the distribution of grocery and perishable products to its
metropolitan New York stores. Accordingly, the Company recorded a provision
relating to the closure of its Mt. Kisco and Carlstadt warehouses totaling
$15,000,000 consisting of severance, pension withdrawal liability, security and
other expenses directly related to the closing of the warehouses.
During the second quarter of Fiscal 1996, the Company established a
provision of $4,500,000 relating to voluntary resignation incentive programs
under which certain classes of store employees accepted monetary incentives to
voluntarily resign from their positions.
During the third quarter of Fiscal 1995, the Company established a
provision for store closings, net of a non-recurring item. The provision
included a charge of $14,630,000 relating to the closure of sixteen stores
principally consisting of the remaining net book value of store fixed assets,
store closing costs and estimated carrying costs through expected dates of
disposition. Additionally, the Company realized $4,000,000 of proceeds from the
termination of a warehouse sublease.
NOTE 5 - EQUITY COMPENSATION PLANS
During the third quarter of Fiscal 1996, the Board of Directors of the
Company adopted The Grand Union Company 1995 Equity Incentive Plan ("Employee
Plan"), which provides for the issuance of up to 950,000 options to purchase
shares of the Company's common stock, and The Grand Union Company 1995 Non-
Employee Directors' Stock Option Plan ("Directors' Plan"), which provides for
the issuance of up to 50,000 options to purchase shares of the Company's common
stock. Both Plans are subject to stockholder approval and will be administered
by a committee of the Board of Directors.
9
<PAGE>
During the third quarter of Fiscal 1996, options to purchase 210,680 and
25,000 shares were granted under the Employee Plan and Directors' Plan,
respectively. Options granted under the Employee Plan and Directors' Plan
were at prices of $6.625 and $5.75, respectively, which was the fair market
value on the grant dates. All options expire in December, 2005, and no
options may be exercised prior to approval by the Shareholders.
NOTE 6 - INCOME TAXES
The Company recorded an income tax benefit of $7,840,000 and $13,212,000
for the 12 and 29 week periods ended January 6, 1996, respectively. Operating
loss carryforwards of the Predecessor Company have been offset by taxable gains
realized on the debt discharged in connection with the Plan. There are no
remaining operating loss or credit carryforwards of the Predecessor Company and
there was no change in the tax basis of the Company's assets as of the
Effective Date.
NOTE 7 - EARNINGS PER SHARE
Earnings per share for the 12 and 29 week periods ended January 6, 1996 has
been calculated on the basis of 10,000,000 shares outstanding. Warrants were
excluded from the calculation because their inclusion would be anti-dilutive.
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.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
GENERAL:
As discussed in Note 2 to the accompanying Consolidated Financial
Statements of Grand Union, the Company emerged from its Chapter 11 proceedings
effective June 15, 1995. For financial reporting purposes, the Company accounted
for the consummation of the Plan effective June 17, 1995. In accordance with the
American Institute of Certified Public Accountants Statement of Position 90-7,
"Financial Reporting By Entities In Reorganization Under The Bankruptcy Code",
the Company has applied Fresh-Start Reporting as of the Effective Date which has
resulted in significant changes to the valuation of certain of the Company's
assets and liabilities, and to its stockholders' equity. In connection with the
adoption of Fresh-Start Reporting, a new entity has been deemed created for
financial reporting purposes. The periods prior to the Effective Date have been
designated "Predecessor Company" and the periods subsequent to the Effective
Date have been designated "Successor Company". For purposes of the discussion of
Results of Operations for the 40 weeks ended January 6, 1996, 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 (in millions):
<TABLE>
<CAPTION>
12 Weeks Ended 40 Weeks Ended
---------------------- -----------------------
Jan. 6, Jan. 7, Jan. 6, Jan. 7,
1996 1995 1996 1995
---------------------- -----------------------
<S> <C> <C> <C> <C>
Sales $ 543.6 $ 563.3 $1,787.9 $1,867.6
Gross profit 166.9 154.5 546.4 556.2
Operating and administrative expenses 136.0 132.9 439.0 436.3
Depreciation and amortization 16.5 21.2 57.7 67.2
Amortization of excess reorganization value 24.6 - 59.4 -
Unusual items 15.0 12.5 38.1 12.5
Interest expense, net 23.5 47.4 75.3 154.2
Income tax benefit 7.8 - 13.2 -
Extraordinary gain on debt discharge - - 854.8 -
Net (loss) income (41.0) (59.5) 744.9 (114.0)
EBITDA 15.8 9.1 69.3 107.4
Adjusted EBITDA 31.1 21.8 108.4 120.7
LIFO provision 0.3 0.2 1.0 0.8
Sales percentage decrease 3.5% 3.5% 4.3% 1.9%
Gross profit as a percentage of sales 30.7 27.4 30.6 29.8
Operating and administrative
expenses as a percentage of sales 25.0 23.6 24.6 23.4
EBITDA as a percentage of sales 2.9 1.6 3.9 5.8
Adjusted EBITDA as a percentage of sales 5.7 3.9 6.1 6.5
</TABLE>
Sales for the 12 and 40 weeks ended January 6, 1996 decreased $19.7 million
and $79.8 million, or 3.5% and 4.3%, as compared to the 12 and 40 week periods
ended January 7, 1995, respectively. The sales decline for each of the 12 and 40
week periods was comprised of 3.4% and 4.1% from the sale or closure of 24
stores last year which were not replaced and 1.3% and 1.2% from decreased same
store sales, offset by 1.2% and 1.0% from increases relating to incremental new
stores. Same store sales comparisons were negatively influenced by (a) the
Company's own strong promotional programs during last year's second and third
quarters, and (b) the temporary effects of the Company's previously announced
decision to close two distribution centers servicing its Metropolitan New York
area stores. Same store sales were positively influenced by (a) the Northern
Region marketing program, which includes both lower everyday shelf prices and
stronger sales promotion programs, begun on a limited basis last year and fully
implemented on May 1, 1995, (b) additional marketing and store service programs
introduced in the second quarter of this year in the metropolitan Albany, NY and
Bergen County, NJ areas which particularly emphasize the Company's strengths in
11
<PAGE>
perishable merchandising and (c) the severe snowstorms which struck the New York
metropolitan area in late December and early January. Additionally, the 40 week
period was positively influenced by the timing of the pre-Easter holiday
shopping period which was included in this year's first quarter but not in last
year's first quarter.
Gross profit, as a percentage of sales, was 30.7% and 30.6% for the 12 and
40 week periods ended January 6, 1996, compared to 27.4% and 29.8% for the
comparable periods of the prior year. Gross profit percentages were impacted
favorably by (a) the savings generated by the closing of the Company's Northern
Region Distribution Center and contracting with a wholesaler to perform all
functions associated with the supply of product to the Northern Region stores,
and (b) the restoration this year of vendor promotional allowances and other
vendor support which were not available to the Company last year subsequent to
the Company's announcement on November 29, 1994 that it would pursue a capital
restructuring, and, unfavorably by reduced margins associated with the
Northern Region marketing program. In addition, gross profit was impacted for
the 40 weeks ended January 6, 1996 by bankruptcy related items including the
Company's inability to be fully invested in forward buy inventory
throughout most of last year's fourth quarter, which negatively impacted gross
margin in the first quarter, and by lower vendor promotional allowances in the
early part of the first quarter. Both the 12 and 40 week periods benefited by
proportionately greater sales of higher margin produce and service department
products.
Operating and administrative expenses, as a percentage of sales, were 25.0%
and 24.6% for the 12 and 40 week periods ended January 6, 1996, compared to
23.6% and 23.4% for the comparable periods of the prior year. The increased
rate in both periods resulted from increases as a percentage of sales in (a)
store labor relating to the Company's metropolitan Albany, NY and Bergen County,
NJ marketing and store service programs, offset by the benefits of the Company's
special voluntary resignation incentive programs completed during the second
quarter, (b) advertising expense, principally to support the marketing programs,
(c) occupancy costs, and (d) wrapping supply expense.
Depreciation and amortization totaled $16.5 million and $57.7 million for
the 12 and 40 week periods ended January 6, 1996 compared to $21.2 million and
$67.2 million for the comparable periods of the prior year. The decrease
principally results from the absence of amortization of goodwill after the
Effective Date.
The excess reorganization value is being amortized over a five-year life.
During the 11 week period ended July 17, 1995, the Company recorded $18.6
million of reorganization expenses which includes professional fees, Fresh-Start
Reporting adjustments and interest income on accumulated cash resulting from the
Chapter 11 proceedings.
Interest expense totaled $23.5 million and $75.3 million for the 12 and 40
week periods ended January 6, 1996, compared with $47.4 million and $154.2
million for the comparable periods of the prior year. The decline in interest
is principally related to the cessation of interest accruals on a significant
portion of the Company's debt during the bankruptcy proceedings and the
decreased level of debt of the Successor Company.
The Company recorded an income tax benefit of $7.8 million and $13.2
million during the 12 and 40 weeks ended January 6, 1996, representing federal
and state income taxes. Operating loss carryforwards of the Predecessor Company
have been offset by taxable gains realized on the debt discharged in connection
with the Plan. There are no remaining operating loss or credit carryforwards of
the Predecessor Company and there was no change in the tax basis of the
Company's assets as of the Effective Date.
In connection with the Company's emergence from Chapter 11, the Company
recognized an extraordinary gain of $854.8 million related to the discharge of
debt.
EBITDA totaled $15.8 million, or 2.9% of sales, and $69.3 million, or 3.9%
of sales, for the 12 and 40 week periods ended January 6, 1996, compared to $9.1
million, or 1.6% of sales, and $107.4 million, or 5.8% of sales, for the
comparable periods of the prior year. Adjusted EBITDA totaled $31.1 million, or
5.7% of sales, and $108.4 million, or 6.1% of sales, for the 12 and 40 week
periods ended January 6, 1996, respectively, compared to $21.8 million, or 3.9%
of sales, and $120.7 million, or 6.5% of sales, for the comparable period of the
prior year.
EBITDA is defined as earnings before income tax benefit, interest expense,
extraordinary gain on debt discharge, depreciation and amortization. Adjusted
EBITDA is defined as EBITDA before LIFO provision and unusual items. The
Company believes that both EBITDA and Adjusted EBITDA are useful supplemental
disclosures but recognizes that both EBITDA and Adjusted EBITDA are not
substitutes for earnings or cash flow data required by generally accepted
accounting principles.
12
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The following table combines the cash flows of the Predecessor Company and
the Successor Company for the 40 weeks ended January 6, 1996. Resources used to
finance significant expenditures for the 40 weeks ended January 6, 1996 and
January 7, 1995 are as follows:
<TABLE>
<CAPTION>
40 Weeks Ended
-----------------------
January 6, January 7,
1996 1995
--------- ---------
(in millions)
<S> <C> <C>
Resources used for:
Debt and capital lease repayments $ 99.8 $ 7.3
Capital expenditures 30.6 56.8
Loan placement fees 3.1 -
--------- ---------
$ 133.5 $ 64.1
--------- ---------
--------- ---------
Financed by:
Proceeds from New Bank agreement $ 122.2 $ -
Operating activities, including cash and temporary
investments 5.8 52.1
Property disposals 5.5 2.0
Net proceeds from long-term debt - 10.0
--------- ---------
$ 133.5 $ 64.1
--------- ---------
--------- ---------
</TABLE>
During the 40 weeks ended January 6, 1996, funds for debt and capital lease
repayments (primarily the repayment of obligations outstanding under the Old
Bank agreement), capital expenditures, and loan placement fees were principally
obtained from cash provided by the New Bank Facility ($104.1 million from the
New Term Loan and $18.0 million from the New Revolver - see Note 2). During the
40 weeks ended January 7, 1995, funds for capital expenditures and debt and
capital lease repayments were principally obtained from cash provided by
operating activities and from $10 million borrowed under the revolving credit
facility.
On the Filing Date, as part of the implementation of an agreement with the
Company's bank lenders and with members of informal committees of certain
holders of Grand Union's long-term debt on the terms of a restructuring of Grand
Union's capital structure, Grand Union filed a voluntary petition for relief
under Chapter 11 of the Code in the Bankruptcy Court. From the Filing Date
through the Effective Date, Grand Union operated as a debtor-in-possession under
Chapter 11 of the Code and was subject to the supervision of the Bankruptcy
Court in accordance with the Code.
On May 31, 1995, the Bankruptcy Court confirmed the Plan, and the Company
emerged from Chapter 11 on the Effective Date. One proceeding challenging the
order confirming the Plan is pending. The Company does not believe that this
proceeding will result in any modification or revocation of the order.
On the Effective Date, Grand Union adopted a restated certificate of
incorporation, the principal effects of which were to authorize 30,000,000
shares of New Common Stock (of which 10,000,000 shares were issued under the
Plan) and to prohibit the issuance of non-voting equity securities. The Plan
provided for full payment of all allowed administrative expenses and all allowed
general unsecured and priority claims. On the Effective Date, obligations
relating to the Company's existing bank credit agreement were paid in full and
the Company entered into the New Bank Facility with its bank lending group which
provides for a five-year revolving credit facility of $100 million and a
seven-year term loan facility of $104.1 million. The New Bank Facility is
secured by a lien on substantially all of the assets of Grand Union and its
subsidiaries.
As of the Effective Date, the Senior Notes were deemed cancelled and each
holder of Senior Notes became entitled to receive its pro rata share of the New
Senior Notes having an aggregate principal amount of $595.5 million issued
pursuant to the Plan. Subsequent to the Effective Date, the Company issued
$595.4 million aggregate principal amount of New Senior Notes and made cash
payments of $54,922 for fractional shares to the holders of the Senior Notes.
The New Senior Notes accrue interest beginning on September 1, 1995.
Accordingly, the New Senior Notes have been discounted at 12% for the period
from June 15, 1995 to September 1, 1995 and imputed interest was charged at
13
<PAGE>
12% during that period. In addition, the difference between such discounted
value and the fair value of the New Senior Notes at the Effective Date has
been recorded as a debt premium totaling $5.8 million which amount will be
amortized over the life of the New Senior Notes.
As of the Effective Date, the Subordinated Notes and the old capital stock
of Grand Union were deemed cancelled and each holder of Subordinated Notes
became entitled to receive its pro rata share of an aggregate of 10,000,000
shares of New Common Stock issued pursuant to the Plan.
The Plan also provided for the issuance of warrants to purchase an
aggregate of 900,000 shares of New Common Stock to holders of the Capital Notes
pursuant to the terms of a settlement reached among the Company, its then direct
and indirect parent companies, the Official Committee of Unsecured Creditors of
its then parent company and certain holders of the Capital Notes. Such warrants
are comprised of 300,000 Series 1 Warrants to purchase shares of New Common
Stock at a purchase price of $30 per share and of 600,000 Series 2 Warrants to
purchase shares of New Common Stock at a purchase price of $42 per share. The
warrants expire on June 15, 2000.
The Plan made no provision for the holders of the remaining long-term debt,
Redeemable Preferred Stock, common shares or warrants to purchase common shares
of the Company's then indirect parent.
In the second quarter of Fiscal 1996, the Company terminated a joint
buying arrangement with the Penn Traffic Company ("Penn Traffic") for health and
beauty care and general merchandise products. Under the termination agreement,
the Company repurchased approximately $11 million of inventory which had
previously been owned by Penn Traffic.
Late in the third quarter and early in the fourth quarter of Fiscal 1996,
the Company entered into two supply agreements with C&S Wholesale Grocers, Inc.
("C&S"), supplementing a third agreement entered into with C&S as of June 15,
1995. Under the three C&S agreements, C&S will stock and distribute to all
Grand Union stores substantially all of the merchandise formerly owned and
warehoused by Grand Union. Under two of the agreements, C&S will stock and
supply grocery and perishable products from its own warehouses. Under the most
recent agreement, C&S will stock and supply health and beauty care and general
merchandise products from the Company's Montgomery, New York warehouse. As a
result of the three agreements with C&S, the Company's liquidity is expected to
increase by approximately $10 million.
As a result of the transactions with C&S, the Company sought and has
obtained from its banks a waiver and amendment to the revolving credit
agreement. The waiver and amendment relieves the Company from the agreement's
EBITDA requirements to the extent of (a) $15 million in charges relating to the
closure of certain warehouse operations and (b) a provision, to be recorded in
the fourth quarter of the current year, related to the centralization of
regional operations. The waiver and amendment also provides relief from other
technical requirements related to the two most recent C&S transactions.
The Company continues to be highly leveraged. Interest payments during the
40 weeks ended January 6, 1996 totaled approximately $25 million and are
expected to total approximately $69 million for the current fiscal year ($100
million on an annualized basis). Capital expenditures, including capitalized
leases other than real estate leases, totaled approximately $31 million for the
40 weeks ended January 6, 1996 and are expected to total $45 to $50 million for
the current fiscal year. Capital expenditures for the current fiscal year will
be related to new, enlarged or remodeled stores, store systems and maintenance
capital. Bankruptcy related obligations, principally lease rejection
liabilities, totaling $4 million (included in accounts payable and accrued
liabilities at January 6, 1996) are expected to be paid during the remainder of
the current fiscal year. There are no significant scheduled debt principal
repayments prior to June, 2000. The Company plans to finance its working
capital, interest expense and capital expenditure requirements from operations,
from its revolving credit facility and, to a limited extent, from equipment
leases or purchase money mortgages. The Company's ability to fund the payment
of interest and other obligations when due is dependent on cash generated from
its operations, net of cash capital expenditures. The Company's ability to
complete its planned capital expenditure program is dependent on its operating
performance.
As of January 6, 1996, the Company had $18 million of borrowings and
approximately $43 million of letters of credit outstanding under its $100
million revolving credit facility.
14
<PAGE>
PART II - OTHER INFORMATION
ITEM 6.
(a) Exhibits
EXHIBIT NUMBER
10.1 The Grand Union Company 1995 Equity Incentive Plan.
10.2 The Grand Union Company 1995 Non-Employee Director's Stock
Option Plan.
10.3 Supply and Distribution Agreement between The Grand Union
Company and C&S Wholesalers, dated June 15, 1995.
10.4 First Amendment to the Supply and Distribution Agreement
between The Grand Union Company and C&S Wholesalers, dated
June 15, 1995.
10.5 Supply and Distribution Agreement between The Grand Union
Company and C&S Wholesalers, dated January 2, 1996.
27.1 Financial Data Schedule.
There were no reports on Form 8-K during the period.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE GRAND UNION COMPANY
-----------------------
(Registrant)
Date: February 20, 1996 /s/ Kenneth R, Baum
----------------- ----------------------------------
Kenneth R. Baum
Senior Vice President,
Chief Financial Officer and
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
16
<PAGE>
Exhibit 10.1
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 will be administered by a committee (the "Committee") of the Board
of Directors (the "Board") of the Company. The Committee shall consist of at
least two directors, all of which shall be disinterested persons within the
meaning of Rule 16b-3 under the 1934 Act and "outside directors" within the
meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"). 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,
-1-
<PAGE>
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.
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
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
-2-
<PAGE>
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 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
-3-
<PAGE>
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.
(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,
-4-
<PAGE>
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
-5-
<PAGE>
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.
(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.
-6-
<PAGE>
(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 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
-7-
<PAGE>
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).
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:
-8-
<PAGE>
(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 Options or Rights that were exercisable immediately prior to the
Status Change will continue to be exercisable for a period of three months (or
such longer 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 approved for purposes of
the Plan by the Committee, so long as the Employee's right to reemployment is
guaranteed either by statute or by contract, 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.
In the event of a consolidation or merger in which the Company is not the
surviving corporation or which results in the acquisition of substantially all
the Company's outstanding Stock by a single person or entity or by a group of
persons and/or entities acting in concert, or in the event of the sale or
transfer of substantially all the Company's assets or a dissolution or
liquidation of the Company (a "covered transaction"), all outstanding Awards
will terminate as of the effective date of the covered transaction, and the
following rules shall apply:
(a) Subject to paragraphs (b) and (c) below, the Committee may in its sole
discretion, prior to the effective date of the covered transaction, (1) make
each outstanding Option and Stock Appreciation Right exercisable in full, (2)
remove the restrictions from each outstanding share of Restricted Stock, (3)
cause the Company to make any payment and provide any benefit under each
outstanding Deferred Stock Award, Performance Award, and Supplemental Grant
which
-9-
<PAGE>
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), and (4)
forgive all or any portion of the principal of or interest on a Loan. If the
Committee does not do so with respect to any Award, however, such award will
terminate as of the date of the covered transaction.
(b) If an outstanding Award is subject to performance or other conditions
(other than conditions relating only to the passage of time and continued
employment) which will not have been satisfied at the time of the covered
transaction, the Committee may in its sole discretion remove such conditions.
If it does not do so, however, such Award will terminate as of the date of the
covered transaction notwithstanding paragraph (a) above.
(c) With respect to an outstanding award held by a Participant who,
following the covered transaction, will be employed by or otherwise providing
services to a corporation which is a surviving or acquiring corporation in such
transaction or an affiliate of such a corporation, the Committee may, in lieu of
the action described in paragraph (a) above, arrange to have such surviving or
acquiring corporation or affiliate grant to the Participant a replacement award
which, in the judgment of the Committee, is substantially equivalent to the
Award.
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
-10-
<PAGE>
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 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.
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
-11-
<PAGE>
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.
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.
-12-
<PAGE>
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.
-13-
<PAGE>
Exhibit 10.2
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.
-1-
<PAGE>
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.
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 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.
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
-2-
<PAGE>
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:
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)
three months 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 consolidation or
merger in which the Company is not the surviving corporation or which results in
the acquisition of substantially all the Company's outstanding Stock by a single
person or entity or by a group of persons and/or entities acting in concert, or
in the event of the sale or transfer of substantially all the Company's assets
or a dissolution or liquidation of the Company (a "covered transaction"), all
outstanding Options under the Plan will terminate as of the effective date of
the covered transaction, provided that each such outstanding Option not
otherwise exercisable shall become immediately exercisable in full 20 days prior
to the effective date thereof.
9. GENERAL PROVISIONS
-3-
<PAGE>
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.
-4-
<PAGE>
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.
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.
-5-
<PAGE>
EXHIBIT 10.3
EXECUTION COPY
SUPPLY AND DISTRIBUTION AGREEMENT
BETWEEN
THE GRAND UNION COMPANY
AND
C&S WHOLESALE GROCERS, INC.
DATED AS OF JUNE 15, 1995
Portions of this Agreement have been omitted and filed separately with the
Commission. Omitted portions have been replaced with the word CONFIDENTIAL.
<PAGE>
SUPPLY AND DISTRIBUTION AGREEMENT, dated as of June 15, 1995 (this
"AGREEMENT"), between THE GRAND UNION COMPANY, a Delaware corporation ("GRAND
UNION"), and C&S WHOLESALE GROCERS, INC., a Vermont corporation ("C&S");
W I T N E S S E T H :
WHEREAS, Grand Union operates supermarkets and food stores in the
States of New York, Vermont and New Hampshire; and
WHEREAS, certain of such stores are presently supplied through a
facility leased by Grand Union in Waterford, New York (the "Waterford
Facility"); and
WHEREAS, C&S is a wholesale supplier of food products and other
merchandise sold in supermarkets and food stores; and
WHEREAS, Grand Union intends to terminate its use of the Waterford
Facility, and Grand Union and C&S desire to enter into an arrangement pursuant
to which C&S will supply Grand Union with substantially all merchandise
heretofore provided through the Waterford Facility;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter set forth, Grand Union and C&S hereby agree
as follows:
ARTICLE I
CERTAIN DEFINITIONS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings:
"AGREEMENT" has the meaning specified in the preamble to this
Agreement.
"CONTRACT YEAR" means any consecutive twelve-month period during
the Term commencing on July 25 and ending the following July 24, the first
such Contract Year to commence July 25, 1995.
"DELIVERY SCHEDULES" means the store delivery schedules as
mutually agreed to by C&S and Grand Union from time to time. The initial
Delivery Schedules are attached to this Agreement as EXHIBIT A.
"EVENT OF FORCE MAJEURE" means any event, circumstance or
condition described in any of clauses (a) through (d) below that is beyond
the control of C&S, and is not the result of negligence or failure of C&S
to act with due care, and that prevents C&S from performing, in whole or in
part, its obligations under this Agreement. The following occurrences
shall be deemed to be Events of Force Majeure: (a) Acts of God, fire,
explosion, accident, flood, storm or other natural phenomenon; (b) war
(whether declared or undeclared), riot, blockade, sabotage or acts of
public enemies; (c) national defense
<PAGE>
requirements; (d) compliance with any law, rule, regulation or
governmental order that (x) becomes effective after the date hereof and (y)
is binding on C&S, and compliance therewith by C&S is not voluntary or
optional; and (e) producers or manufacturers establish industry-wide
allocations or restrictions on quantities of products available to C&S.
"EVENT OF INSOLVENCY" means that, with respect to any Person,
such Person shall admit in writing its inability to pay its debts
generally or shall make a general assignment for the benefit of creditors;
or any proceeding shall be instituted by or against such Person seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, relief or composition of it or its
debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other similar official for
it or for any substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it), either such
proceeding shall remain undismissed or unstayed for a period of 60 days,
or any of the actions sought in such proceeding (including, without
limitation, the entry of an order for relief against, or the appointment of
a receiver, trustee, custodian or other similar official for, it or for any
substantial part of its property) shall occur; or such Person shall take
any corporate action to authorize any of the actions set forth above in
this definition.
"FORWARD BUY RESERVE" has the meaning specified in Section 4.02.
"GRAND UNION STORES" shall mean (i) all existing Grand Union
stores currently supplied by the Waterford Facility as itemized on EXHIBIT
B and (ii) all new Grand Union stores operated in the Northern Region.
"MERCHANDISE" means products in the following categories
currently carried by Grand Union at the Waterford Facility and which are to
be sold by Grand Union through Grand Union Stores: grocery, candy (full
case), meat and deli, dairy, produce, frozen and ice cream and select
supply items. "Merchandise" shall not include health or beauty products,
general merchandise, cigarettes, baby food, light bulbs, select candy,
spices, aerosol products, supplies and other merchandise supplied through
Grand Union's Montgomery, New York facility, unless C&S and Grand Union
mutually agree to change the source of items currently supplied from Grand
Union's Montgomery, New York Facility.
"NORTHERN REGION" means the States of Vermont and New Hampshire,
and New York State from Wappingers Falls north to the Canadian border.
"PERSON" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity or any
government or governmental authority or agency.
-2-
<PAGE>
"SERVICE LEVEL" means at any time a percentage reflecting the
ratio of (i) the number of cases of Merchandise actually delivered by C&S
to Grand Union Stores within the delivery periods required hereunder to
(ii) the total number of cases of such Merchandise ordered by Grand Union
for delivery by C&S during such delivery periods, less unauthorized
Merchandise and manufacturers' out-of-stock Merchandise.
"TERM" has the meaning specified in Section 2.02.
"WATERFORD FACILITY" has the meaning specified in the second
recital to this Agreement.
ARTICLE II
SCOPE OF AGREEMENT; TERM
SECTION 2.01. AGREEMENT.
[CONFIDENTIAL]
SECTION 2.02. TERM. Implementation will begin on June
18, 1995, and the term of this Agreement (the "Term") will be
[CONFIDENTIAL]; PROVIDED, HOWEVER, that if the Term has not been extended by
written agreement entered [CONFIDENTIAL], the Term shall be extended,
without any action of the parties hereto [CONFIDENTIAL]. Notwithstanding the
foregoing provisions, if the date on which Grand Union commences purchasing
substantially all of its requirements of Merchandise from C&S occurs after July
25, 1995, the Term will commence on the first Sunday after such date, and the
other dates provided for in this Section 2.02 will be adjusted accordingly.
ARTICLE III
PURCHASE, SALE AND DISTRIBUTION
SECTION 3.01. AGREEMENT. [CONFIDENTIAL]
SECTION 3.02. DELIVERY. All Merchandise ordered by Grand Union
hereunder shall be delivered by C&S F.O.B. destination to the applicable Grand
Union Store dock in accordance with the Delivery Schedules, and title to, and
risk of loss with respect to, such Merchandise shall remain with C&S until such
delivery. C&S will be in breach of this Agreement if for any reason, other than
a material default by Grand Union under this Agreement, picketing or other labor
disputes at Grand Union Stores or an Event of Force Majeure, C&S fails, during
any period of two consecutive weeks, to deliver [CONFIDENTIAL] scheduled
deliveries within the delivery windows as provided for in the Delivery
Schedules. If Grand Union believes that a
-3-
<PAGE>
breach has occurred, Grand Union shall give notice to C&S and C&S shall use
its best efforts to immediately restore the delivery service. If the on-time
delivery level is not immediately restored, C&S and Grand Union agree to meet
to seek to resolve the issue, PROVIDED that Grand Union's rights and remedies
hereunder shall remain in effect if such issue is not resolved.
SECTION 3.03. BASE PRICE.
[CONFIDENTIAL]
SECTION 3.04. OTHER PRICING PROVISIONS.
[CONFIDENTIAL]
SECTION 3.05. PAYMENTS.
[CONFIDENTIAL]
SECTION 3.06. SERVICE LEVEL. [CONFIDENTIAL]
-4-
<PAGE>
ARTICLE IV
FEES; OTHER PAYMENTS
SECTION 4.01. FEES.
[CONFIDENTIAL]
SECTION 4.02. FORWARD BUY RESERVE.
[CONFIDENTIAL]
SECTION 4.03. VOLUME INCENTIVES.
[CONFIDENTIAL]
SECTION 4.04
[CONFIDENTIAL]
[CONFIDENTIAL]
-5-
<PAGE>
ARTICLE V
CERTAIN COVENANTS
SECTION 5.01. INFORMATION. C&S agrees to provide Grand Union
with such information as Grand Union may reasonably request from time to time
in order to monitor compliance by C&S with the provisions of, and to carry
out the transactions contemplated by, this Agreement. C&S further agrees
that Grand Union will be allowed to conduct, twice during any twelve-month
period, in-depth audits [CONFIDENTIAL].
SECTION 5.02. RECLAMATION.
[CONFIDENTIAL]
SECTION 5.03.
[CONFIDENTIAL]
SECTION 5.04. QUALITY CONTROL. (a) C&S will provide to Grand Union
certain products, [CONFIDENTIAL] in accordance with the standards set forth in
Grand Union's Product Specification Manual (the "Standards Manual"), a copy of
which has been provided to C&S (such standards to include, without limitation,
those relating to temperature controls, sanitation standards, storage controls,
date code reviews and packaging inspections). All dairy merchandise to be
shipped to Grand Union will be received at store level with a minimum shelf life
stipulated in Grand Union's receiving specifications as set forth in the
Standards Manual.
All standards and specifications referred to above, together with such
other reasonable and practicable standards and specifications of a nature
similar to and not more onerous to C&S than those referred to above, as may be
agreed to by Grand Union and C&S in writing from time to time, are referred to
herein as the "Standards".
(b) Grand Union shall not be required to accept Merchandise that
does not meet the Standards, and any such Merchandise shall be returned on the
next C&S delivery and Grand Union will be credited on the C&S billing statement.
If Grand Union, in its sole judgment, determines that C&S is not in compliance
with the Standards, Grand Union will notify C&S in writing. If C&S has not
cured the problem within 45 days of notification, Grand Union and C&S will meet
to seek to resolve the problem. If the problem is not cured within 30 days
after this meeting, Grand Union will be entitled to use one or more secondary
suppliers for that category or department, until such time as C&S cures the
problem.
SECTION 5.05. COMPLIANCE WITH LAW. Each of Grand Union and C&S
covenants and agrees that in performing its obligations hereunder, it will
comply with all applicable laws, rules, regulations and orders and will have and
maintain all permits, licenses and authorizations necessary for the conduct of
its business and the performance of its obligations hereunder.
SECTION 5.06. INSURANCE. C&S agrees that all material properties and
risks of C&S shall at all times be covered by valid and currently effective
insurance policies or binders of insurance or programs of self-insurance in such
types and amounts as are consistent with customary practices and standards of
-6-
<PAGE>
companies engaged in businesses and operations similar to those of C&S. Grand
Union agrees that all material properties and risks of Grand Union shall at all
times be covered by valid and currently effective insurance policies or binders
of insurance or programs of self-insurance in such types and amounts as are
consistent with customary practices and standards of companies engaged in
businesses and operations similar to those of Grand Union.
ARTICLE VI
WATERFORD INVENTORY
SECTION 6.01. PURCHASE OF INVENTORY. C&S agrees to work with Grand
Union to maintain service levels to Grand Union Stores while Grand Union is
reducing inventory at The Waterford Facility in accordance with the Inventory
Reduction Plan and Timetable mutually agreed upon by C&S and Grand Union. C&S
agrees to purchase from Grand Union any such Inventory remaining after such
reduction program, other than out-of-code, discontinued or unsalable
Merchandise.
[CONFIDENTIAL]
ARTICLE VII
TERMINATION
SECTION 7.01. TERMINATION BY C&S. C&S may terminate this Agreement
(i) in the event of a default by Grand Union under Section 3.05 which remains
uncured [CONFIDENTIAL] receipt by Grand Union of written notice thereof from
C&S (subject, however,to the provisions of such Section for arbitration), (ii)
in the event that Grand Union materially breaches its other obligations under
this Agreement and such breach is curable and remains uncured after 90 days
following receipt by Grand Union of written notice of such breach from C&S or
(iii) upon the occurrence of an Event of Insolvency with respect to Grand Union.
SECTION 7.02. TERMINATION BY GRAND UNION. Grand Union may
terminate this Agreement (i) in the event that C&S materially breaches its
obligations under this Agreement and such breach is curable and remains
uncured [CONFIDENTIAL] following written notice of such breach from Grand
Union or (ii) upon the occurrence of an Event of Insolvency with respect to
C&S. Grand
-7-
<PAGE>
Union may also terminate this Agreement [CONFIDENTIAL] written notice
to C&S. In the event that Grand Union exercises its right to [CONFIDENTIAL]
written notice to C&S, Grand Union shall pay to C&S the applicable
Termination Fee set forth below as full and liquidated damages to C&S.
Termination Fees
[CONFIDENTIAL]
SECTION 7.03. NEGOTIATIONS; INTERIM PERIOD. (a) The parties shall
meet at least once within each 30 day time period during any 90 day time period
provided for in Section 7.01(ii) or Section 7.02(i) hereof to attempt to cure
any breach as provided in such Sections.
(b) During the period following delivery of any notice of termination
and prior to the termination of this Agreement, each party shall perform its
obligations under this Agreement in substantially the same manner as they were
performed prior to the date of delivery of such notice, with no disruption to
Grand Union's supply of Merchandise; PROVIDED, HOWEVER, that the parties shall
negotiate in good faith to agree to a "winding-up" schedule for such period.
SECTION 7.04. WAIVER. Either party to this Agreement may (a) extend the
time for the performance of any of the obligations or other acts of the other
party or (b) waive compliance with any of the agreements or conditions of the
other party contained herein. Any such extension or waiver shall be valid only
if set forth in an instrument in writing signed by the party to be bound
thereby. Any waiver of any term or condition shall not be construed as a waiver
of any subsequent breach or a subsequent waiver of the same term or condition,
or a waiver of any other term or condition, of this Agreement. The failure of
any party to assert any of its rights hereunder shall not constitute a waiver of
any of such rights.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
SECTION 8.01. REPRESENTATIONS AND WARRANTIES OF C&S.
C&S hereby represents and warrants to Grand Union as follows:
(a) CORPORATE ORGANIZATION AND AUTHORITY. C&S (i) is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Vermont and is authorized to transact business in the States of New
Hampshire and New York;
-8-
<PAGE>
and (ii) has the corporate power and authority to own and operate
its properties and to carry on its business as now conducted and
as proposed to be conducted.
(b) AUTHORIZATION. C&S has the corporate power and authority to
execute, deliver and perform its obligations under this Agreement and has taken
all necessary corporate action to authorize its execution, delivery and
performance of this Agreement. This Agreement has been duly executed and
delivered on behalf of C&S and constitutes the legal, valid and binding
obligation of C&S, enforceable in accordance with its terms.
(c) NO CONSENTS; CONFLICTS. No consent, authorization by, approval
of or other action by, and no notice to, or filing or registration with, any
governmental authority, agency, regulatory body, lender, lessor, franchisee or
other Person is required for the execution, delivery or performance of this
Agreement by C&S, other than those that have been obtained and are in full force
and effect. The execution, delivery and performance of this Agreement will not
result in any violation or breach of any provision of the charter or by-laws of
C&S, any judgment, decree or order to which C&S is a party or by which it is
bound, any indenture, mortgage or other agreement or instrument to which C&S is
a party or by which it is bound or any statute, rule or regulation applicable to
C&S.
SECTION 8.02. REPRESENTATIONS AND WARRANTIES OF GRAND UNION. Grand
Union hereby represents and warrants to C&S as follows:
(a) CORPORATE ORGANIZATION AND AUTHORITY. Grand Union (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and is authorized to transact business in the States of
New Hampshire, Vermont and New York; and (ii) has the corporate power and
authority to own and operate its properties and to carry on its business as now
conducted and as proposed to be conducted.
(b) AUTHORIZATION. Grand Union has the corporate power and authority
to execute, deliver and perform its obligations under this Agreement and has
taken all necessary corporate action to authorize the execution, delivery and
performance of this Agreement. This Agreement has been duly executed and
delivered on behalf of Grand Union and constitutes the legal, valid and binding
obligation of Grand Union, enforceable in accordance with its terms.
(c) NO CONSENTS; CONFLICTS. No consent, authorization by, approval of
or other action by, and no notice to, or filing or registration with, any
governmental authority, agency, regulatory body, lender, lessor, franchisee or
other Person is required for the execution, delivery or performance of this
Agreement by Grand Union. The execution, delivery and performance of this
Agreement will not result in any violation or breach of any provision of the
charter or by-laws of Grand Union,
-9-
<PAGE>
any judgment, decree or order to which Grand Union is a party or by which it is
bound, any indenture, mortgage or other agreement or instrument to which Grand
Union is a party or by which it is bound or any statute, rule or regulation
applicable to Grand Union.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. ENTIRE AGREEMENT. This Agreement, together with the
documents referred to herein, constitutes the entire agreement of the parties
with respect to the subject matter hereof and supersedes all prior agreements
and undertakings, both written and oral, between the parties hereto with respect
to the subject matter hereof.
SECTION 9.02. EXPENSES. Except as otherwise specified in this
Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall be
borne by the party incurring the same.
SECTION 9.03. AMENDMENTS. This Agreement may not be amended or
modified except (i) by an instrument in writing signed by, or on behalf of, each
of Grand Union and C&S or (ii) by a waiver in accordance with Section 7.04.
SECTION 9.04. NOTICES. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, by courier service, by telecopy or telex or by registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 9.04):
(a) If to Grand Union:
William A. Louttit
Executive Vice President
and Chief Operating Officer
The Grand Union Company
201 Willowbrook Boulevard
Wayne, New Jersey 07470-0966
Telephone: (201) 890-6000
[CONFIDENTIAL]
(b) If to C&S:
Richard B. Cohen
President and Chief Executive Officer
-10-
<PAGE>
C&S Wholesale Grocers, Inc.
Old Ferry Road
Brattleboro, Vermont 05301
Telephone: (802) 257-6700
[CONFIDENTIAL]
SECTION 9.05. BINDING EFFECT; ASSIGNMENT. This
Agreement shall be binding upon and inure to the benefit of Grand Union and C&S
and their respective successors and assigns; PROVIDED that (i) C&S shall not
have the right to assign or subcontract its rights or obligations hereunder or
any interest herein (excluding the transportation of Merchandise) without the
prior written consent of Grand Union, which consent shall not be unreasonably
withheld, conditioned or delayed and (ii) Grand Union may assign its rights and
delegate its obligations hereunder only so long as (x) Grand Union shall assign,
and the assignee shall assume, all such rights and obligations, (y) the
assignment is to a Person or Persons who are acquiring all or substantially all
of Grand Union's business or assets in the Northern Region, and (z) Grand Union
demonstrates, to the reasonable satisfaction of C&S, that such Person has the
financial capability to perform the obligations of Grand Union hereunder. C&S
agrees that it shall respond, in respect of clause (z) above, promptly, and in
any event within 10 business days of receipt of notice from Grand Union of any
such proposed assignment. Failure by C&S to respond to Grand Union within such
10 business day period shall be deemed to be a confirmation by C&S to Grand
Union of its reasonable satisfaction with the financial capability of the
proposed assignee.
SECTION 9.06. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
SECTION 9.07. CONFIDENTIALITY. Each of Grand Union and C&S agrees to
and will cause its respective authorized agents, representatives, affiliates,
employees, officers, directors, accountants, counsel and other designated
representatives (collectively, "Representatives") to (i) treat and hold as
confidential (and not disclose or provide access to any Person to) all records,
books, contracts, instruments, computer data and other data and information
(collectively, "Information") concerning the other in its possession or
furnished by the other or the other's Representatives pursuant to this
Agreement, (ii) in the event that either party or its Representatives become
legally compelled to disclose any such Information, provide the other party with
prompt written notice of such requirement so that such other party may seek a
protective order or other remedy or waive compliance with this Section 9.07 and
(iii) in the event that such protective order or other remedy is not obtained,
or the other party waives compliance with this Section 9.07, furnish only that
portion of such Information which is legally required to be provided and
-11-
<PAGE>
exercise its best efforts to obtain assurances that confidential treatment will
be accorded such Information; PROVIDED, HOWEVER, that this sentence shall not
apply to any Information that, at the time of disclosure, is available publicly
and was not disclosed in breach of this Agreement by such party or its
Representatives; and PROVIDED FURTHER, HOWEVER, that C&S agrees that Grand Union
is the owner of all Information relating to Grand Union's purchasing practices
and that Grand Union may in its sole discretion sell such purchasing related
Information to third parties. Each party agrees and acknowledges that remedies
at law for any breach of its obligations under this Section 9.07 are inadequate
and that in addition thereto the other party shall be entitled to seek equitable
relief, including injunction and specific performance, in the event of any such
breach, without the necessity of demonstrating the inadequacy of monetary
damages.
SECTION 9.08. RELATIONSHIP OF PARTIES. In all matters relating to
this Agreement, both parties shall be acting solely as independent contractors
and shall be solely responsible for the acts of their employees, officers,
directors and agents. Employees, agents or contractors of one party shall not
be considered employees, agents or contractors of the other party.
SECTION 9.09. NO THIRD-PARTY BENEFICIARIES. This Agreement shall be
binding upon and inure solely to the benefit of the parties hereto and their
permitted assigns, and nothing herein, express or implied, is intended to or
shall confer upon any other Person any legal or equitable right, benefit or
remedy of any nature whatsoever.
SECTION 9.10. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION 9.11. HEADINGS. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 9.12. GOVERNING LAW. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York, without
regard to the principles of conflicts of laws thereof.
-12-
<PAGE>
SECTION 9.13. ARBITRATION. (a) Any matter required to be submitted
to arbitration pursuant to Section 3.05 of this Agreement shall be subject to
this Section 9.13. Any such matter shall be submitted to binding arbitration in
Springfield, Massachusetts (or another location agreed to by the parties) in
accordance with the rules and procedures of the American Arbitration Association
(or another organization agreed to by the parties). The arbitration shall be
conducted in accordance with (i) the terms of this Section 9.13; (ii) the
commercial arbitration rules of the American Arbitration Association (or the
corresponding rules of any such other organization); (iii) the Federal
Arbitration Act (Title 9 of the United States Code); and (iv) to the extent the
foregoing are inapplicable, unenforceable or invalid, the laws of the State of
New York. Judgment upon any award rendered hereunder may be entered in any
court having jurisdiction.
(b) A single arbitrator shall be selected by mutual agreement of the
parties, or, if the parties fail to reach such agreement within ten days after
either party has requested arbitration hereunder in writing, by, or in a manner
provided by, the American Arbitration Association (or such other organization
referred to above).
(c) The arbitrator is empowered to resolve the matter in dispute by
summary ruling substantially similar to a summary judgment and motion to
dismiss. The arbitrator shall resolve all disputes in accordance with
applicable substantive law. The determination of the arbitrator shall be
binding on all parties and shall not be subject to further review or appeal
except as allowed by applicable law. The costs and expenses of the arbitrator
shall be apportioned between the parties hereto as determined by the arbitrator
in such manner as the arbitrator deems reasonable.
(d) The arbitrator and the parties shall take all actions necessary
to the end that the arbitration proceeding shall be concluded as promptly as
practicable.
(e) The provisions of this Section 9.13 shall not preclude a party
from exercising any right or remedy with respect to any matter that is not
expressly required to be submitted to arbitration pursuant to Section 3.05 of
this Agreement.
-13-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
date first written above.
THE GRAND UNION COMPANY
By
---------------------------
Name: William A. Louttit
Title: Executive Vice President,
Chief Operating Officer
C&S WHOLESALE GROCERS, INC.
By
---------------------------
Name: Richard B. Cohen
Title: President
-14-
<PAGE>
EXHIBIT A
DELIVERY SCHEDULES
[CONFIDENTIAL]
EXHIBIT B
STORE LOCATIONS
[CONFIDENTIAL]
EXHIBIT C
CREDIT POLICY AND STANDARD CREDIT AGREEMENT
[CONFIDENTIAL]
EXHIBIT D
VOLUME INCENTIVES
[CONFIDENTIAL]
EXHIBIT E
QUALITY STANDARDS
[CONFIDENTIAL]
<PAGE>
EXHIBIT 10.4
FIRST AMENDMENT TO THE SUPPLY AND DISTRIBUTION AGREEMENT
BETWEEN
THE GRAND UNION COMPANY
AND
C&S WHOLSALE GROCERS, INC.
DATED AS OF JUNE 15, 1995
This entire exhibit is considered CONFIDENTIAL and has been omitted and filed
separately with the Commission.
<PAGE>
EXHIBIT 10.5
SUPPLY AND DISTRIBUTION AGREEMENT
BETWEEN
THE GRAND UNION COMPANY
AND
C&S WHOLESALE GROCERS, INC.
DATED AS OF JANUARY 2, 1996
Portions of this Agreement have been omitted and filed seperately with the
Commission. Omitted portions have been replaced with the word CONFIDENTIAL.
SUPPLY AND DISTRIBUTION AGREEMENT, dated as of January 2, 1996 (this
"Agreement"), between THE GRAND UNION COMPANY, a Delaware corporation ("Grand
Union"), and C&S WHOLESALE GROCERS, INC., a Vermont corporation ("C&S");
W I T N E S S E T H :
WHEREAS, Grand Union operates supermarkets and food stores in the States of
Connecticut, New Hampshire, New Jersey, New York, Pennsylvania and Vermont, and
has grouped its stores into a "Northern Region" and a "New York Region"; and
WHEREAS, C&S is a wholesale supplier of food products and other merchandise
sold in
Page 1
<PAGE>
supermarkets and food stores; and
WHEREAS, pursuant to the Supply and Distribution Agreement between Grand
Union and C&S dated June 15, 1995, and amended contemporaneously with execution
of this Agreement, C&S has agreed to supply the stores in Grand Union's Northern
Region; and
WHEREAS, Grand Union and C&S desire to enter into an arrangement pursuant
to which C&S will supply merchandise to stores in Grand Union's New York Region;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter set forth, Grand Union and C&S hereby agree
as follows:
ARTICLE I
CERTAIN DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Agreement" has the meaning specified in the preamble to this Agreement.
"Base Price" has the meaning specified in Section 3.03.
"Contract Year" means any consecutive twelve-month period during the Term
commencing on February 25 and ending the following February 24, the first such
Contract Year to commence February 25, 1996.
"Delivery Schedules" means the store delivery schedules as mutually agreed
to by C&S and Grand Union from time to time. The initial Delivery Schedules are
attached to this Agreement as Exhibit A.
"Event of Force Majeure" means any event, circumstance or condition
described in any of clauses (a) through (e) below that is beyond the control of
C&S, and
Page 2
<PAGE>
is not the result of negligence or failure of C&S to act with due care, and that
prevents C&S from performing, in whole or in part, its obligations under this
Agreement. The following occurrences shall be deemed to be Events of Force
Majeure: (a) Acts of God, fire, explosion, accident, flood, storm or other
natural phenomenon; (b) war (whether declared or undeclared); (c) national
defense requirements; (d) compliance with any law, rule, regulation or
governmental order that (x) becomes effective after the date hereof and (y) is
binding on C&S, and compliance therewith by C&S is not voluntary or optional;
and (e) producers or manufacturers establish industry-wide allocations or
restrictions on quantities of products available to C&S.
"Event of Insolvency" means that, with respect to any Person, such Person
shall admit in writing its inability to pay its debts generally or shall make a
general assignment for the benefit of creditors; or any proceeding shall be
instituted by or against such Person seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, relief or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for it or for any substantial part of its
property and, in the case of any such proceeding instituted against it (but not
instituted by it), either such proceeding shall remain undismissed or unstayed
for a period of 60 days, or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for relief against, or the
appointment of a receiver, trustee, custodian or other similar official for, it
or for any substantial part of its property) shall occur; or such Person shall
take any corporate action to authorize any of the actions set forth above in
this definition.
"Forward Buy Reserve" has the meaning specified in Section 4.02.
Page 3
<PAGE>
"Grand Union Stores" shall mean (i) all existing Grand Union stores in the
New York Region as itemized on Exhibit B and (ii) all new Grand Union stores
operated in the New York Region.
"Merchandise" means products in the following categories which are to be
sold by Grand Union through Grand Union Stores: grocery, candy (full case),
meat and deli, produce, and all store supply items. Commencing October 31,
1997, "Merchandise" includes products in the dairy category. Commencing March
31, 2001, "Merchandise" also includes products in the frozen food category.
"Merchandise" shall not include health or beauty products, general merchandise,
cigarettes, baby food, light bulbs, select candy, spices, aerosol products, and
other merchandise supplied through Grand Union's Montgomery, New York facility,
unless C&S and Grand Union mutually agree to change the source of these items
currently supplied from Grand Union's Montgomery, New York Facility.
"New York Region" means the States of Connecticut, Pennsylvania, New Jersey
and New York State south of Wappingers Falls.
"Northern Region Agreement" means the Supply and Distribution Agreement
between Grand Union and C&S dated June 15, 1995, as amended from time to time.
"Person" means any individual, partnership, firm, corporation, association,
trust, unincorporated organization or other entity or any government or
governmental authority or agency.
"Service Level" means at any time a percentage reflecting the ratio of (i)
the number of cases of Merchandise actually delivered by C&S to Grand Union
Stores within the delivery periods required hereunder to (ii) the total number
of cases of such Merchandise ordered by
Page 4
<PAGE>
Grand Union for delivery by C&S during such delivery periods, less unauthorized
Merchandise and manufacturers' out-of-stock Merchandise.
"Term" has the meaning specified in Section 2.02.
ARTICLE II
SCOPE OF AGREEMENT; TERM
SECTION 2.01. Agreement.
[CONFIDENTIAL]
SECTION 2.02. Term.
(a) Implementation will begin on January 2, 1996, and the term
of this Agreement (the "Term") will be [CONFIDENTIAL], beginning February 25,
1996; provided, however, that if the Term has not been extended by written
agreement entered into [CONFIDENTIAL], the Term shall be extended, without any
action of the parties hereto, for an additional Contract Year, to expire
[CONFIDENTIAL].
(b) C&S has the right, which may be exercised by giving notice
to Grand Union at any time [CONFIDENTIAL], to extend the Term for two additional
Contract Years so that the Term is extended to [CONFIDENTIAL]. Grand Union shall
also have the right, which may be exercised by giving notice to C&S at any time
[CONFIDENTIAL], to extend the Term for two additional Contract Years so that
the Term is extended to [CONFIDENTIAL].
(c) Notwithstanding the foregoing provisions, if the date on
which Grand Union commences purchasing substantially all of its requirements of
Merchandise
Page 5
<PAGE>
from C&S occurs after February 25, 1996, the Term will commence on the first
Sunday after such date, and the other dates provided for in this Section 2.02
will be adjusted accordingly.
ARTICLE III
PURCHASE, SALE AND DISTRIBUTION
SECTION 3.01. Agreement.
[CONFIDENTIAL]
SECTION 3.02. Delivery. All Merchandise ordered by Grand Union
hereunder shall be delivered by C&S F.O.B. destination to the applicable Grand
Union Store dock in accordance with the Delivery Schedules, and title to, and
risk of loss with respect to, such Merchandise shall remain with C&S until such
delivery. C&S will be in breach of this Agreement if for any reason, other than
a material default by Grand Union under this Agreement, picketing or other labor
disputes at Grand Union Stores or an Event of Force Majeure, C&S fails, during
any period of two consecutive weeks, to deliver [CONFIDENTIAL] scheduled
deliveries within the delivery windows as provide for in the Delivery Schedules.
If Grand Union believes that a breach has occurred, Grand Union shall give
notice to C&S and C&S shall use its best efforts to immediately restore the
delivery service. If the on-time delivery level is not immediately restored, C&S
and Grand Union agree to meet to seek to resolve the issue, PROVIDED that Grand
Union's rights and remedies hereunder shall remain in effect if such issue is
not resolved.
SECTION 3.03. Base Price.
[CONFIDENTIAL]
Page 6
<PAGE>
SECTION 3.04. Other Pricing Provisions.
[CONFIDENTIAL]
SECTION 3.05. Payments.
[CONFIDENTIAL]
SECTION 3.06. Service Level.
[CONFIDENTIAL]
ARTICLE IV
FEES; OTHER PAYMENTS
[CONFIDENTIAL]
Page 7
<PAGE>
ARTICLE V
CERTAIN COVENANTS
SECTION 5.01. Information. C&S agrees to provide Grand Union with
such information as Grand Union may reasonably request from time to time in
order to monitor compliance by C&S with the provisions of, and to carry out the
transactions contemplated by, this Agreement. C&S further agrees that Grand
Union will be allowed to conduct, twice during any twelve-month period, in-depth
audits of [CONFIDENTIAL]. Such audits will be conducted by no more than two
auditors, and Grand Union will use its best efforts to complete each such audit
within a one-week period. C&S shall cooperate with Grand Union and its
representatives in connection with any such audit.
SECTION 5.02. Reclamation. [CONFIDENTIAL].
SECTION 5.03. Quality Control.
(a) C&S will provide to Grand Union certain products, [CONFIDENTIAL],
in accordance with the standards set forth in Grand Union's Product
Specification Manual (the "Standards Manual"), a copy of which has been provided
to C&S (such standards to include, without limitation, those relating to
temperature controls, sanitation standards, storage controls, date code reviews
and packaging inspection). All dairy merchandise to be shipped to Grand Union
will be received at store level with a minimum shelf life stipulated in Grand
Union's receiving specifications as set forth in the Standards Manual.
Page 8
<PAGE>
All standards and specifications referred to above, together with such
other reasonable and practicable standards and specifications of a nature
similar to and not more onerous to C&S than those referred to above, as may be
agreed to by Grand Union and C&S in writing from time to time, are referred to
herein as the "Standards."
(b) Grand Union shall not be required to accept Merchandise that does
not meet the Standards, and any such Merchandise shall be returned on the next
C&S delivery and Grand Union will be credited on the C&S billing statement. If
Grand Union, in its sole judgment, determines that C&S is not in compliance with
the Standards, Grand Union will notify C&S in writing. If C&S has not cured the
problem within 45 days of notification, Grand Union and C&S will meet to seek to
resolve the problem. If the problem is not cured within 30 days after this
meeting, Grand Union will be entitled to use one or more secondary suppliers for
that category or department, until such time as C&S cures the problem.
SECTION 5.04 Compliance with Law. Each of Grand Union and C&S
covenants and agrees that in performing its obligations hereunder, it will
comply with all applicable laws, rules, regulations and orders and will have and
maintain all permits, licenses and authorizations necessary for the conduct of
its business and the performance of its obligations hereunder.
SECTION 5.05. Insurance. C&S agrees that all material properties and
risks of C&S shall at all times be covered by valid and currently effective
insurance policies or binders of insurance or programs of self-insurance in such
types and amounts as are consistent with customary practices and standards of
C&S. Grand Union agrees that all material properties and risks of Grand Union
shall at all times be covered by valid and currently effective insurance
Page 9
<PAGE>
policies or binders of insurance or programs of self-insurance in such types and
amounts as are consistent with customary practices and standards of companies
engaged in businesses and operations similar to those of Grand Union.
SECTION 5.06. Certain Financial Information. Grand Union shall
immediately give notice to C&S, in the form of a Certificate signed by Grand
Union's Chief Financial Officer, of any defaults occurring under either the
Credit Agreement between Grand Union and its lending institutions or the
Indenture and other documentation with respect to the notes issued by Grand
Union to its senior noteholders. In addition, Grand Union shall immediately
give notice to C&S, in the form of a Certificate signed by Grand Union's Chief
Financial Officer, in the event that the remaining amounts of credit available
to Grand Union under its lines of credit falls below $20,000,000.
SECTION 5.07. Certain Leases. C&S understands that Grand Union is
the lessee under certain equipment leases as set forth on Exhibit G. Grand
Union represents that it has furnished C&S with a true and correct copy of each
such lease and that there are currently no defaults under such leases. C&S
agrees to use its best efforts to eliminate or minimize any losses due to the
termination of such leases.
SECTION 5.08. Affirmation and Acknowledgment. Grand Union affirms
and acknowledges that (i) upon a failure by Grand Union to make any payment when
due pursuant to Section 3.05(b) of this Agreement, C&S may fully enforce against
Grand Union any and all rights that C&S may possess pursuant to the Perishable
Agricultural Commodities Act, 1930, as amended, codified at 7 U.S.C.A. ' 499a et
seq. ("PACA"), (ii) upon an Event of Insolvency with respect to Grand Union or a
failure by Grand Union to make any payment when due pursuant to Section 3.05 of
this Agreement, C&S may fully enforce against Grand
Page 10
<PAGE>
Union any and all rights that C&S may possess pursuant to Section 2-702 of the
Uniform Commercial Code as enacted in the State of New York ("Section 2-702"),
including without limitation, the right to reclaim goods delivered to Grand
Union upon the terms and conditions set forth in Section 2-702, and (iii)upon a
failure of Grand Union to make any payment when due under this Agreement or the
Northern Region Agreement (a "Grand Union Payment Obligation"), including
without limitation, those payment obligations arising under each of Sections
3.05, 4.01, 4.05 and 7.04 of either such agreement, C&S may, and is hereby
authorized by Grand Union, at any time and from time to time, to the fullest
extent permitted by applicable law, without advance notice to Grand Union (any
such notice being expressly waived by Grand Union), set off and apply any and
all amounts owed by C&S to Grand Union under this Agreement, including without
limitation, amounts payable by C&S as volume incentives pursuant to Section 4.03
of this Agreement, against any or all of the Grand Union Payment Obligations
that have not been paid when due and remain unpaid, irrespective of whether or
not C&S has exercised any other rights that it has or may have with respect to
such Grand Union Payment Obligations. Grand Union shall execute and deliver to
C&S, from time to time during the term of this Agreement, such documents as C&S
may reasonably request to create, maintain, acknowledge or confirm the rights of
C&S affirmed and acknowledged by Grand Union pursuant to this Section 5.08.
ARTICLE VI
GRAND UNION INVENTORY
SECTION 6.01. Purchase of Inventory. C&S agrees to work with Grand
Union to maintain service levels to Grand Union Stores while Grand Union is
reducing inventory at the facilities used by Grand Union to service the New York
Region in accordance with the Inventory Reduction Plan and Timetable mutually
agreed upon by C&S and Grand Union. C&S agrees to
Page 11
<PAGE>
purchase from Grand Union any such inventory remaining after such reduction
program, other than out-of-code, discontinued or unsalable Merchandise;
[CONFIDENTIAL]
ARTICLE VII
TERMINATION
SECTION 7.01. Termination by C&S. C&S may terminate this Agreement
for cause (i) in the event of a default by Grand Union under Section 3.05 which
remains uncured [CONFIDENTIAL] by Grand Union of written notice
thereof from C&S (subject, however, to the provisions of such Section for
arbitration), (ii) in the event that Grand Union breaches any other material
obligation under this Agreement and such breach is curable and remains uncured
after [CONFIDENTIAL] receipt by Grand Union of written notice of such breach
from C&S, (iii) upon the occurrence of an Event of Insolvency with respect to
Grand Union (provided, however, that C&S shall not terminate this Agreement upon
the occurrence of an Event of Insolvency in the event that Grand Union is
otherwise in compliance with the terms of this Agreement and Grand Union
provides adequate assurance of future performance under this Agreement), or (iv)
upon termination of the Northern Region Agreement pursuant to Section 7.01
thereof. Notwithstanding the foregoing, in the event that Grand Union defaults
under section 3.05 on two occasions in any Contract Year and thereafter cures
its default within the 72 hour period set forth above, C&S may, on the
occurrence of any subsequent default under Section 3.05 occurring in the same
Contract Year, terminate this agreement immediately upon notice to Grand Union.
In the event of termination by C&S under this Section 7.01, Grand Union
Page 12
<PAGE>
shall pay to C&S, as full and liquidated damages (including damages for lost
profits), the applicable termination fee set forth in Section 7.04 below.
SECTION 7.02. Termination by Grand Union. Grand Union may terminate
this Agreement for cause (i) in the event that C&S breaches any material
obligation under this Agreement and such breach is curable and remains uncured
[CONFIDENTIAL] written notice of such breach from Grand Union, (ii) upon the
occurrence of an Event of Insolvency with respect to C&S, or (iii) upon
termination of the Northern Region Agreement pursuant to Section 7.02 thereof.
Grand Union may also terminate this Agreement [CONFIDENTIAL] written notice to
C&S; provided, however, that in the event Grand Union exercises such right to
terminate for convenience Grand Union shall pay to C&S, as full and liquidated
damages (including damages for lost profits), the applicable termination fee set
forth in Section 7.04 below.
SECTION 7.03. Negotiations; Interim Period
(a) The parties shall meet at least once within each 30 day time
period during any 90 day time period provided for in Section 7.01(ii) or Section
7.02(i) hereto to attempt to cure any breach as provided in such Sections.
(b) During the period following delivery of any notice of termination
and prior to the termination of this Agreement, each party shall perform its
obligations under this Agreement in substantially the same manner as they were
performed prior to the date of delivery of such notice, with no disruption to
Grand Union's supply of Merchandise; provided, however, that the parties shall
negotiate in good faith to agree to a "winding-up" schedule for such period.
Page 13
<PAGE>
SECTION 7.04. Termination Fees. In the event C&S terminates this
Agreement for cause pursuant to Section 7.01 above, or Grand Union terminates
this Agreement for convenience pursuant to Section 7.02 above, Grand Union shall
pay to C&S a termination fee calculated in accordance with the following
schedule:
Contract Year
During which Termination Occurs Termination Fee
------------------------------- ---------------
[CONFIDENTIAL]
The parties acknowledge that it would be difficult and costly to assess and
establish C&S' losses arising out of termination of this Agreement on account of
Grand Union's breach or Grand Union's early termination for its convenience.
Nonetheless, the parties believe that the termination fee schedule set forth
above is reasonable in light of the costs C&S will incur to perform its
obligations under this Agreement and the damages C&S will suffer in the event of
such termination (including but not limited to damages for lost profits,
incidental damages and other consequential damages).
SECTION 7.05. Waiver. Either party to this Agreement may (a) extend
the time for the performance of any of the obligations or other acts of the
other party or (b) waive compliance with any of the agreements or conditions of
the other party contained herein. Any such extension or waiver shall be valid
only if set forth in an instrument in writing signed by the party to be bound
thereby. Any waiver of any term or condition shall not be construed as a waiver
of
Page 14
<PAGE>
any subsequent breach or a subsequent waiver of the same term or condition, or a
waiver of any other term or condition, of this Agreement. The failure of any
party to assert any of its rights hereunder shall not constitute a waiver of any
of such rights.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
SECTION 8.01. Representations and Warranties of C&S. C&S hereby
represents and warrants to Grand Union as follows:
(a) Corporate Organization and Authority. C&S (i) is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Vermont and is authorized to transact business in the States of
Connecticut, New Jersey, New York and Pennsylvania; and (ii) has the corporate
power and authority to own and operate its properties and to carry on its
business as now conducted and as proposed to be conducted.
(b) Authorization. C&S has the corporate power and authority to
execute, deliver and perform its obligations under this Agreement and has taken
all necessary corporate action to authorize its execution, delivery and
performance of this Agreement. This Agreement has been duly executed and
delivered on behalf of C&S and constitutes the legal, valid and binding
obligation of C&S, enforceable in accordance with its terms
(c) No Consents; Conflicts. No consent, authorization by, approval
of or other action by, and no notice to, or filing or registration with, any
governmental authority, agency, regulatory body, lender, lessor, franchisee or
other Person is required for the execution, delivery or performance of this
Agreement by C&S, other than those that have been obtained and are in full force
and effect. The execution, delivery
Page 15
<PAGE>
and performance of this Agreement will not result in any violation or breach of
any provision of the charter or by-laws of C&S, any judgment, decree or order to
which C&S is a party or by which it is bound, any indenture, mortgage or other
agreement or instrument to which C&S is a party or by which it is bound or any
statute, rule or regulation applicable to C&S.
SECTION 8.02. Representations and Warranties of Grand Union. Grand
Union hereby represents and warrants to C&S as follows:
(a) Corporate Organization and Authority. Grand Union (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and is authorized to transact business in the States of
Connecticut, New Jersey, New York and Pennsylvania; and (ii) has the corporate
power and authority to own and operate its properties and to carry on its
business as now conducted and as proposed to be conducted.
(b) Authorization. Grand Union has the corporate power and authority
to execute, deliver and perform its obligations under this Agreement and has
taken all necessary corporate action to authorize its execution, delivery and
performance of this Agreement. This Agreement has been duly executed and
delivered on behalf of Grand Union and constitutes the legal, valid and binding
obligation of Grand Union, enforceable in accordance with its terms.
(c) No Consents; Conflicts. No consent, authorization by, approval
of or other action by, and no notice to, or filing or registration with, any
governmental authority, agency, regulatory body, lender, lessor, franchisee or
other Person is required for the execution, delivery or performance of this
Agreement by Grand Union,
Page 16
<PAGE>
other than those that have been obtained and are in full force and effect. The
execution, delivery and performance of this Agreement will not result in any
violation or breach of any provision of the charter or by-laws of Grand Union,
any judgment, decree or order to which Grand Union is a party or by which it is
bound, any indenture, mortgage or other agreement or instrument to which Grand
Union is a party or by which it is bound or any statute, rule or regulation
applicable to Grand Union.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Entire Agreement. This Agreement, together with the
documents referred to herein, constitutes the entire agreement of the parties
with respect to the subject matter hereof and supersedes all prior agreements
and undertakings, both written and oral, between the parties hereto with respect
to the subject matter hereof.
SECTION 9.02. Expenses. Except as otherwise specified in this
Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall be
borne by the party incurring the same.
SECTION 9.03. Amendments. This Agreement may not be amended or
modified except (i) by an instrument in writing signed by, or on behalf of, each
of Grand Union and C&S or (ii) by a waiver in accordance with Section 7.05.
SECTION 9.04. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, by courier service, by telecopy or telex or by registered or
certified mail (postage prepaid,
Page 17
<PAGE>
return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified in a notice given in
accordance with this Section 9.04):
(a) If to Grand Union:
William A. Louttit
Executive Vice President
and Chief Operating Officer
The Grand Union Company
201 Willowbrook Boulevard
Wayne, New Jersey 07470-0966
Telephone: (201) 890-6000
[CONFIDENTIAL]
(b) If to C&S:
Richard B. Cohen
President and Chief Executive Officer
C&S Wholesale Grocers, Inc.
Old Ferry Road
Brattleboro, Vermont 05301
Telephone: (802) 257-6700
[CONFIDENTIAL]
SECTION 9.05. Binding Effect; Assignment. This Agreement shall be
binding upon and inure to the benefit of Grand Union and C&S and their
respective successors and assigns; provided that (i) C&S shall not have the
right to assign or subcontract its rights or obligations hereunder or any
interest herein (excluding the transportation of Merchandise) without the prior
written consent of Grand Union, which consent shall not be unreasonably
withheld, conditioned or delayed and (ii) Grand Union may assign its rights and
delegate its obligations hereunder only so long as (x) Grand Union shall assign,
and the assignee shall assume, all such rights and obligations, (y) the
assignment is to a Person or Persons who are acquiring all or substantially all
of Grand Union's business or assets in the New York Region, and (z) Grand Union
demonstrates, to the reasonable satisfaction of C&S, that such Person has the
financial
Page 18
<PAGE>
capability to perform the obligations of Grand Union hereunder. C&S agrees that
it shall respond, in respect of clause (z) above, promptly, and in any event
within 10 business days of receipt of notice from Grand Union of any such
proposed assignment. Failure by C&S to respond to Grand Union within such 10
business day period shall be deemed to be a confirmation by C&S to Grand Union
of its reasonable satisfaction with the financial capability of the proposed
assignee.
SECTION 9.06. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
SECTION 9.07. Confidentiality. Each of Grand Union and C&S agrees to
and will cause its respective authorized agents, representatives, affiliates,
employees, officers, directors, accountants, counsel and other designated
representatives (collectively, "Representatives") to (i) treat and hold as
confidential (and not disclose or provide access to any Person to) all records,
books, contracts, instruments, computer data and other data and information
(collectively, "Information") concerning the other in its possession or
furnished by the other or the other's Representatives pursuant to this
Agreement, (ii) in the event that either party or its Representatives become
legally compelled to disclose any such Information, provide the other party with
prompt written notice of such requirement so that such other party may seek a
protective order or other remedy or waive compliance with this Section 9.07, and
(iii) in the event that such protective order or other remedy is not obtained,
or the other party waives compliance with this Section 9.07, furnish only that
portion of such Information which is legally required to be provided and
exercise its best efforts to obtain assurances that confidential
Page 19
<PAGE>
treatment will be accorded such Information; provided, however, that this
sentence shall not apply to any Information that, at the time of disclosure, is
available publicly and was not disclosed in breach of this Agreement by such
party or its Representatives; and provided further, however, that C&S agrees
that Grand Union is the owner of all Information relating to Grand Union's
purchasing practices and that Grand Union may in its sole discretion sell such
purchasing related Information to third parties. Each party agrees and
acknowledges that remedies at law for any breach of its obligations under this
Section 9.07 are inadequate and that in addition thereto the other party shall
be entitled to seek equitable relief, including injunction and specific
performance, in the event of any such breach, without the necessity of
demonstrating the inadequacy of monetary damages.
SECTION 9.08. Relationship of Parties. In all matters relating to
this Agreement, both parties shall be acting solely as independent contractors
and shall be solely responsible for the acts of their employees, officers,
directors and agents. Employees, agents or contractors of one party shall not
be considered employees, agents or contractors of the other party.
SECTION 9.09. No Third-Party Beneficiaries. This Agreement shall be
binding upon and inure solely to the benefit of the parties thereto and their
permitted assigns, and nothing herein, express or implied, is intended to or
shall confer upon any other Person any legal or equitable right, benefit or
remedy of any nature whatsoever.
SECTION 9.10. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term
or other
Page 20
<PAGE>
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION 9.11. Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 9.12. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York, without
regard to the principles of conflicts of laws thereof.
SECTION 9.13. Arbitration.
(a) Any matter required to be submitted to arbitration pursuant to
Section 3.05 of this Agreement shall be subject to this Section 9.13. Any such
matter shall be submitted to binding arbitration in Springfield, Massachusetts
(or another location agreed to by the parties) in accordance with the rules and
procedures of the American Arbitration Association (or another organization
agreed to by the parties). The arbitration shall be conducted in accordance
with (i) the terms of this Section 9.13; (ii) the commercial arbitration rules
of the American Arbitration Association (or the corresponding rules of any such
other organization); (iii) the Federal Arbitration Act (Title 9 of the United
States Code); and (iv) to the extent the foregoing are inapplicable,
unenforceable or invalid, the laws of the State of New York. Judgment upon any
award rendered hereunder may be entered in any court having jurisdiction.
(b) A single arbitrator shall be selected by mutual agreement
Page 21
<PAGE>
of the parties, or, if the parties fail to reach such agreement within ten days
after either party has requested arbitration hereunder in writing, by, or in a
manner provided by the American Arbitration Association (or such other
organization referred to above).
(c) The arbitrator is empowered to resolve the matter in dispute by
summary ruling substantially similar to a summary judgment and motion to
dismiss. The arbitrator shall resolve all disputes in accordance with
applicable substantive law. The determination of the arbitrator shall be
binding on all parties and shall not be subject to further review or appeal
except as allowed by applicable law. The costs and expenses of the arbitrator
shall be apportioned between the parties hereto as determined by the arbitrator
in such manner as the arbitrator deems reasonable.
(d) The arbitrator and the parties shall take all actions necessary
to the end that the arbitration proceeding shall be concluded as promptly as
practicable.
(e) The provisions of this Section 9.13 shall not preclude a party
from exercising any right or remedy with respect to any matter that is not
expressly required to be submitted to arbitration pursuant to Section 3.05 of
this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
date first written above.
THE GRAND UNION COMPANY
By:
----------------------
Name: William A. Louttit
Page 22
<PAGE>
Title: Executive Vice President
Chief Operating Officer
C&S WHOLESALE GROCERS, INC.
By:
----------------------
Name: Richard B. Cohen
Title: President
EXHIBIT A
Delivery Schedules
[CONFIDENTIAL]
EXHIBIT B
Grand Union Stores
[CONFIDENTIAL]
EXHIBIT C
Net Upcharge Rate Per Category
[CONFIDENTIAL]
EXHIBIT D
Store Supply Categories
[CONFIDENTIAL]
EXHIBIT E
Credit Policy
[CONFIDENTIAL]
EXHIBIT F
Volume Incentive
[CONFIDENTIAL]
EXHIBIT G
Schedule of Equipment Leases
[CONFIDENTIAL]
Page 23
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The schedule contains summary 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-30-1996
<PERIOD-START> OCT-15-1995
<PERIOD-END> JAN-06-1996
<CASH> 34,838
<SECURITIES> 0
<RECEIVABLES> 19,161
<ALLOWANCES> 0
<INVENTORY> 172,389
<CURRENT-ASSETS> 14,934
<PP&E> 809,744
<DEPRECIATION> 332,222
<TOTAL-ASSETS> 1,243,680
<CURRENT-LIABILITIES> 220,330
<BONDS> 846,522
0
0
<COMMON> 10,000
<OTHER-SE> 63,408
<TOTAL-LIABILITY-AND-EQUITY> 1,243,680
<SALES> 1,787,873
<TOTAL-REVENUES> 1,787,873
<CGS> 1,241,452
<TOTAL-COSTS> 1,241,452
<OTHER-EXPENSES> 594,254
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 75,307
<INCOME-PRETAX> (123,140)
<INCOME-TAX> (13,212)
<INCOME-CONTINUING> (109,928)
<DISCONTINUED> 0
<EXTRAORDINARY> 854,785
<CHANGES> 0
<NET-INCOME> 744,857
<EPS-PRIMARY> (8.06)
<EPS-DILUTED> 0
</TABLE>
