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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended JULY 20, 1996
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Commission File Number 0-26602
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THE GRAND UNION COMPANY
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22 - 1518276
- --------------------------------------------- -------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer Identification
or organization) No.)
201 Willowbrook Boulevard, Wayne, New Jersey 07470 - 0966
-------------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
201-890-6000
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X . No .
----- ------
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X . No .
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As of September 3, 1996, there were issued and outstanding 10,000,000
shares, par value $1.00 per share, of the Registrant's common stock.
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THE GRAND UNION COMPANY
INDEX
PART I - FINANCIAL INFORMATION (UNAUDITED)
ITEM 1. FINANCIAL STATEMENTS. PAGE NO.
Consolidated Statement of Operations - 16 weeks ended July 20, 1996,
5 weeks ended July 22, 1995 (Successor Company) and 11 weeks ended
June 17, 1995 (Predecessor Company) 3
Consolidated Balance Sheet - July 20, 1996 and March 30, 1996 4
Consolidated Statement of Cash Flows - 16 weeks ended July 20, 1996,
5 weeks ended July 22, 1995 (Successor Company) and 11 weeks ended
June 17, 1995 (Predecessor Company) 5
Notes to Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS. 8
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K. 11
All items which are not applicable or to which the answer is negative have been
omitted from this report.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
THE GRAND UNION COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Predecessor
Successor Company Company
------------------------ ------------
16 Weeks 5 Weeks 11 Weeks
Ended Ended Ended
July 20, July 22, June 17,
1996 1995 1995
---------- ---------- ----------
Sales $ 726,823 $ 232,663 $ 487,882
Cost of sales (504,924) (159,583) (344,041)
---------- ---------- ----------
Gross profit 221,899 73,080 143,841
Operating and administrative expenses (180,878) (55,492) (117,544)
Depreciation and amortization (25,413) (6,955) (17,215)
Amortization of excess reorganization
value (31,572) (10,110) -
Reorganization items - - (18,627)
Interest expense, net (contractual
interest of $43,360 for the 11 weeks
ended July 17, 1995) (32,287) (9,546) (19,791)
---------- ---------- ----------
Loss before income tax benefit and
extraordinary gain on debt discharge (48,251) (9,023) (29,336)
Income tax benefit (provision) 4,439 (500) -
---------- ---------- ----------
Loss before extraordinary gain on debt
discharge (43,812) (9,523) (29,336)
Extraordinary gain on debt discharge - - 854,785
---------- ---------- ----------
Net (loss) income $ (43,812) $ (9,523) $ 825,449
---------- ---------- ----------
---------- ---------- ----------
Net loss per share $ (4.38) $ (0.95)
---------- ----------
---------- ----------
See accompanying notes to consolidated financial statements (unaudited).
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THE GRAND UNION COMPANY
CONSOLIDATED BALANCE SHEET
(in thousands)
(unaudited)
July 20, March 30,
1996 1996
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ASSETS
Current assets:
Cash and temporary investments $ 33,265 $ 39,425
Receivables 31,928 20,948
Inventories 134,914 133,506
Other current assets 13,659 13,709
---------- ----------
Total current assets 213,766 207,588
Property, net 475,260 473,726
Excess reorganization value, net 406,100 437,672
Deferred tax asset 58,355 53,916
Other assets 11,901 12,304
---------- ----------
$1,165,382 $1,185,206
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 1,613 $ 1,813
Current portion of obligations under capital
leases 7,356 7,080
Accounts payable and accrued liabilities 180,035 170,010
---------- ----------
Total current liabilities 189,004 178,903
---------- ----------
Long-term debt 743,835 738,067
---------- ----------
Obligations under capital leases 136,413 128,114
---------- ----------
Other noncurrent liabilities 95,798 95,978
---------- ----------
Stockholders' equity:
Common stock, $1.00 par value, 30,000,000 shares
authorized, 10,000,000 shares issued and
outstanding 10,000 10,000
Preferred stock, $1.00 par value, 10,000,000
shares authorized, no shares issued and
outstanding - -
Capital in excess of par value 144,000 144,000
Accumulated deficit (153,668) (109,856)
---------- ----------
Total stockholders' equity 332 44,144
---------- ----------
$1,165,382 $1,185,206
---------- ----------
---------- ----------
See accompanying notes to consolidated financial statements (unaudited).
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THE GRAND UNION COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
Predecessor
Successor Company Company
------------------------ ------------
16 Weeks 5 Weeks 11 Weeks
Ended Ended Ended
July 20, July 22, June 17,
1996 1995 1995
---------- ---------- ----------
OPERATING ACTIVITIES:
Net (loss) income $(43,812) $(9,523) $825,449
Adjustments to reconcile net (loss)
income to net cash provided by (used
for) operating activities before
reorganization items paid:
Depreciation and amortization 25,413 6,955 17,215
Amortization of excess reorganization
value 31,572 10,110 -
LIFO charge 400 100 300
Deferred taxes (4,439) - -
Noncash interest - 6,961 1,126
Extraordinary gain on debt discharge - - (854,785)
Net changes in assets and liabilities:
Receivables (10,980) (8,481) 1,769
Inventories (1,808) 15,693 12,646
Accounts payable and accrued
liabilities 10,025 (15,726) (34,928)
Other current assets 50 (946) 2,776
Other 888 (1,568) 4,493
---------- ---------- ----------
Net cash provided by (used for)
operating activities before
reorganization items paid 7,309 3,575 (23,939)
Reorganization items paid (2,511) (250) (4,913)
---------- ---------- ----------
Net cash provided by (used for)
operating activities 4,798 3,325 (28,852)
---------- ---------- ----------
INVESTMENT ACTIVITIES:
Capital expenditures (14,535) (2,414) (3,301)
Disposals of property 421 - 5,452
---------- ---------- ----------
Net cash (used for) provided by
investment activities (14,114) (2,414) 2,151
---------- ---------- ----------
FINANCING ACTIVITIES:
Proceeds from New Bank agreement - - 104,144
Net proceeds from long-term debt 6,000 - -
Payment of Old Bank debt - - (93,144)
Obligations under capital leases
discharged (2,607) (647) (1,707)
Loan placement fees - - (3,125)
Retirement of long-term debt (237) (84) (239)
---------- ---------- ----------
Net cash provided by (used for)
financing activities 3,156 (731) 5,929
---------- ---------- ----------
(Decrease) increase in cash and
temporary investments (6,160) 180 (20,772)
Cash and temporary investments at
beginning of period 39,425 68,651 89,423
---------- ---------- ----------
Cash and temporary investments at
end of period $ 33,265 $ 68,831 $ 68,651
---------- ---------- ----------
---------- ---------- ----------
Supplemental disclosure of cash flow
information:
Interest payments $ 11,189 $ 1,973 $ 9,515
Capital lease obligations incurred 11,182 201 20,072
See accompanying notes to consolidated financial statements (unaudited).
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THE GRAND UNION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - BASIS OF ACCOUNTING
The accompanying interim consolidated financial statements of The Grand
Union Company (the "Company") include the accounts of the Company and its
subsidiaries, all of which are wholly-owned. These consolidated financial
statements as of and for the periods subsequent to June 17, 1995 were prepared
in accordance with the principles of fresh-start reporting contained within the
American Institute of Certified Public Accountants Statement of Position 90-7,
"Financial Reporting By Entities In Reorganization Under The Bankruptcy Code"
("Fresh-Start Reporting"). Therefore, in connection with the implementation of
Fresh-Start Reporting, a new entity was deemed created for financial reporting
purposes and, where applicable, the consolidated financial statements for the
"Successor Company" have been separately identified from those of the
"Predecessor Company". In the opinion of management, the consolidated financial
statements include all adjustments, which, except for fresh-start adjustments,
consist only of normal recurring adjustments necessary for a fair presentation
of operating results for the interim periods.
These consolidated financial statements should be read in conjunction with
the consolidated financial statements and related notes contained in the
Company's Annual Report on Form 10-K for the 52 weeks ended March 30, 1996.
Operating results for the periods presented are not necessarily indicative of
the results for the full fiscal year.
NOTE 2 - NET LOSS PER SHARE
Net loss per share for the 16 weeks ended July 20, 1996 and 5 weeks ended
July 22, 1995 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. In addition, the earnings per share calculation does not include
the effect of options issued under The Grand Union Company 1995 Equity Incentive
Plan, which provides for issuance of options to purchase up to 950,000 shares of
the Company's common stock, and The Grand Union Company 1995 Non-Employee
Directors' Stock Option Plan, which provides for the issuance of options to
purchase up to 50,000 shares of the Company's common stock, as both plans are
subject to stockholders' approval.
Earnings (loss) per common share data is not meaningful for periods prior
to June 17, 1995 due to the significant change in the capital structure of the
Company.
NOTE 3 - SUBSEQUENT EVENT
On July 30, 1996, the Company entered into a definitive agreement (the
"Stock Purchase Agreement") to sell $100 million of 8.5% class A convertible
preferred stock, $1.00 par value per share (the "Preferred Stock") to an
investment group comprised of Trefoil Capital Investors II, L. P., a Delaware
limited partnership, and GE Investment Private Placement Partners II, A Limited
Partnership, a Delaware limited partnership (collectively, the "Purchasers").
Pursuant to the Stock Purchase Agreement, the Company will sell to the
Purchasers an aggregate of 2,000,000 shares of Preferred Stock (the "Shares") at
a purchase price of $50 per share (the "Stated Value") in stages through
February 25, 1998.
The Company will sell to the Purchasers, at the Purchasers' option, at
any time after July 30, 1996, an aggregate of 299,998 shares of Preferred
Stock (the "First Closing"). The Purchasers have agreed to purchase, and the
Company has agreed to sell, at any time after July 30, 1996, an aggregate of
800,000 shares of Preferred Stock, less any amount of Preferred Stock
purchased at the First Closing (the "Principal Closing"). The Purchasers
have further agreed to purchase, and the Company has further agreed to sell,
an additional 400,000 shares of Preferred Stock on each of February 25, 1997,
August 25, 1997 and February 25, 1998. Any or all of the purchases referred
to in the preceding sentence may be accelerated by the Purchasers, with or
without the approval of the Company. Each of the purchases is subject to the
satisfaction or waiver of certain closing conditions as specified in the
Stock Purchase Agreement. The Principal Closing, which must occur prior to
December 31, 1996, is subject to satisfaction or waiver of all of the
conditions set forth in the Stock Purchase Agreement, including without
limitation the termination or expiration of any required waiting period
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, stockholder approval (or waiver of such approval by the NASD) and
consent of the Company's lenders.
Dividends are cumulative and payable quarterly at the rate of 8.5% of
the Stated Value per annum. Dividends are payable, at the option of the
Company, in additional shares of Preferred Stock or Common Stock through the
third anniversary of the Principal Closing. From the third anniversary
through the fifth anniversary of the Principal Closing, dividends are payable
in cash, unless the terms of the Company's bank credit agreement or 12%
senior note indenture prohibit cash dividends, in which case dividends may be
paid in Preferred Stock or Common Stock. Beyond the fifth anniversary of the
Principal Closing, dividends are payable in cash. To the
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extent that any dividends on the Preferred Stock are paid in shares of Common
Stock, the Company is required to pay a premium in additional shares of Common
Stock equal to 33 1/3% of the total number of shares of Common Stock that would
otherwise be paid as the dividend.
The initial conversion price of the Shares is $6.375. At the Principal
Closing, the conversion price is adjusted to 120% of the volume-weighted
average of the closing price of the Common Stock for a 30-day trading period
ending on a specified date prior to the Principal Closing, but not lower than
$6.50 nor greater than $7.25 (the "Conversion Price").
The Preferred Stock is subject to mandatory redemption on June 1, 2005.
The Preferred Stock may also be redeemed at the Company's option, after the
second anniversary of the Principal Closing under certain conditions. If the
price of the Company's Common Stock exceeds, for a specified period of time
prior to the call for redemption, 180% of the Conversion Price of the
Preferred Stock (if the redemption occurs between the second and third
anniversaries of the Principal Closing) or 200% of the Conversion Price (if
the redemption occurs between the third and fifth anniversaries of the
Principal Closing), the Preferred Stock may be redeemed for $50 per share
plus all accrued and unpaid dividends. After the fifth anniversary, the
Preferred Stock may be redeemed at prices beginning at approximately $51.60
per share (plus all accrued and unpaid dividends), decreasing ratably to
$50.00 per share (plus all accrued and unpaid dividends) beginning after the
eighth anniversary. In the event shares of Preferred Stock are converted,
accrued and unpaid dividends on these shares are also converted into Common
Stock at the same Conversion Price.
The Stock Purchase Agreement and Certificate of Designation of
Preferred Stock setting forth the powers, preferences, rights,
qualifications, limitations and restrictions of such class of preferred stock
also contain provisions with respect to the rights of the Purchaser to elect
a specified number of directors, the number of disinterested directors, as
defined in the Stock Purchase Agreement, voting rights and pre-emptive rights
with respect to any sale by the Company of shares of Common Stock or
securities convertible into, or exchangeable for, Common Stock.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
GENERAL:
As discussed in Note 1, as of June 17, 1995, in accordance with the
American Institute of Certified Public Accountants Statement of Position 90-7,
"Financial Reporting By Entities In Reorganization Under The Bankruptcy Code",
the Company applied Fresh-Start Reporting. In connection with the adoption of
Fresh-Start Reporting, a new entity was deemed created for financial reporting
purposes. For purposes of the discussion of Results of Operations for the 16
weeks ended July 22, 1995, the results of the Predecessor Company and Successor
Company have been combined.
RESULTS OF OPERATIONS
The following table sets forth certain statement of operations data
reflecting the combination discussed above (all dollars in millions):
16 Weeks Ended
--------------------
July 20, July 22,
1996 1995
--------------------
Sales $ 726.8 $ 720.5
Gross profit 221.9 216.9
Operating and administrative expenses 180.9 173.0
Depreciation and amortization 25.4 24.2
Amortization of excess reorganization value 31.6 10.1
Reorganization items - 18.6
Interest expense, net 32.3 29.3
Income tax benefit (provision) 4.4 (0.5)
Extraordinary gain on debt discharge - 854.8
Net (loss) income (43.8) 815.9
EBITDA 41.0 25.3
Adjusted EBITDA 41.4 44.3
LIFO provision 0.4 0.4
Sales percentage increase (decrease) 0.9% (3.6)%
Gross profit as a percentage of sales 30.5 30.1
Operating and administrative
expenses as a percentage of sales 24.9 24.0
EBITDA as a percentage of sales 5.6 3.5
Adjusted EBITDA as a percentage of sales 5.7 6.1
Sales for the 16 weeks ended July 20, 1996 (the "1997 first quarter")
increased $6.3 million, or 0.9%, as compared to the 16 week period ended July
22, 1995 (the "1996 first quarter"). Same store sales (sales of stores which
were operated during the comparable periods of both fiscal years) increased
1.0% as a result of the positive impact of the "More Lower Prices" program
implemented beginning in May 1995 and completed in May 1996, and by the
marketing and customer service programs which continue to be rolled out
across the Company. During the 1997 first quarter, the Company opened one
new store and one replacement store and closed two stores.
Gross profit, as a percentage of sales, was 30.5% for the 1997 first
quarter, compared to 30.1% for the 1996 first quarter. The gross profit
percentage increase resulted from (a) savings in distribution expense from
outsourcing warehouse distribution and (b) restoration of vendor promotional
allowances and other vendor support to normal levels this year from
bankruptcy impacted levels experienced in the 1996 first quarter, offset by
(c) the negative effect of the price repositioning program implemented last
year and completed this year.
Operating and administrative expenses, as a percentage of sales, were 24.9%
for the 1997 first quarter, compared to 24.0% for the 1996 first quarter.
Exclusive of gains on sales of stores, which totaled $1.1 million in the 1997
first quarter and $3.6 million in the 1996 first quarter, operating expenses
were 25.0% for the 1997 first quarter and 24.5% for the 1996 first quarter. The
increase in the adjusted operating expense percentage resulted from (a)
increased store labor hours in support of the Company's marketing and customer
service programs and (b) increased advertising costs offset by (c) savings in
store average
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hourly pay from the store voluntary resignation incentive programs completed
last year and (d) savings from the reorganization of the Company's
organizational structure.
Depreciation and amortization totaled $25.4 million for the 1997 first
quarter, compared to $24.2 million for the 1996 first quarter. The increase
results from the Company's capital spending program.
The amortization of the excess reorganization value began to be amortized
upon the Company's emergence from bankruptcy last year.
During the 11 week period ended June 17, 1995, the Company recorded $18.6
million of reorganization expenses which included professional fees, Fresh-Start
Reporting adjustments and interest income on accumulated cash resulting from the
Chapter 11 proceedings.
Interest expense totaled $32.3 million for the 1997 first quarter, compared
with $29.3 million for the 1996 first quarter. The increase in interest is
principally a result of the finalization of debt levels upon emergence from
bankruptcy.
The Company recorded an income tax benefit of $4.4 million during the 1997
first quarter representing federal and state income taxes.
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 reorganization 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.
LIQUIDITY AND CAPITAL RESOURCES
On July 30, 1996, the Company entered into a definitive agreement (the
"Stock Purchase Agreement") to sell $100 million of 8.5% class A convertible
preferred stock, $1.00 par value per share (the "Preferred Stock") to an
investment group comprised of Trefoil Capital Investors II, L. P., a Delaware
limited partnership, and GE Investment Private Placement Partners II, A Limited
Partnership, a Delaware limited partnership (collectively, the "Purchasers").
Pursuant to the Stock Purchase Agreement, the Company will sell to the
Purchasers an aggregate of 2,000,000 shares of Preferred Stock (the "Shares") at
a purchase price of $50 per share (the "Stated Value") in stages through
February 25, 1998.
The Company will sell to the Purchasers, at the Purchasers' option, at any
time after July 30, 1996, an aggregate of 299,998 shares of Preferred Stock (the
"First Closing"). The Purchasers have agreed to purchase, and the Company has
agreed to sell, at any time after July 30, 1996, an aggregate of 800,000 shares
of Preferred Stock, less any amount of Preferred Stock purchased at the First
Closing (the "Principal Closing"). The Purchasers have further agreed to
purchase, and the Company has further agreed to sell, an additional 400,000
shares of Preferred Stock on each of February 25, 1997, August 25, 1997 and
February 25, 1998. Any or all of the purchases referred to in the preceding
sentence may be accelerated by the Purchasers, with or without the approval of
the Company.
Proceeds from the sale of the preferred stock will be used to accelerate
Grand Union's capital spending program over the next three years. The Company
anticipates capital spending, including capitalized leases other than real
estate leases, of approximately $250 million over the period ending March 1999.
Closing of the investment is subject to customary conditions, including
support by a majority of the Company's shareholders. The Company is also
seeking consents from its bank lenders to permit the sale of convertible
preferred stock and to provide the Company additional operating flexibility
consistent with its expanded capital spending plan. The Company is seeking
similar consents from its 12% Senior Noteholders.
The Company is and will continue to be highly leveraged. Interest
payments totaled approximately $11 million for the 1997 first quarter and
will be approximately $100 million for the full year. Capital expenditures,
including capitalized leases other than real estate leases, totaled
approximately $17 million for the 1997 first quarter and are expected to
total between $65 and $70 million for the full year. Fiscal 1997 capital
expenditures will principally be dedicated to new and replacement stores,
remodels, store systems and maintenance capital. The Company expects to open
one new store and three replacement stores, and complete ten M.A.S.T.E.R.S.
("Maximize All Space, Totally Expand the Right Stuff") renovations. In the
event that the sale of Preferred Stock was not completed, capital
expenditures in Fiscal 1997 would total between $40 and $50 million. There
are no
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significant scheduled debt principal repayments prior to June 2000.
The Company plans to finance its working capital, interest expense and
capital expenditure requirements from proceeds received from the sale of
convertible preferred stock, operations, its Amended and Restated Credit
Agreement (the "New Bank Facility"), and, to a limited extent, equipment
leases or purchase money mortgages. The Company's ability to fund the
payment of interest and other obligations when due is dependent on cash
generated from its operations, net of cash capital expenditures. The
Company's ability to complete its expanded capital expenditure program is
dependent on its operating performance and the sale of Preferred Stock.
During Fiscal 1996 and the 1997 first quarter, the Company implemented
certain price repositioning and marketing and customer service programs. The
Company intends to extend these programs to additional stores in Fiscal 1997.
Although these programs tend to adversely affect gross profit and operating
expenses in periods in which they are made, and there is no assurance that
such programs will lead to improved sales and profits over the long term,
Grand Union believes that they are necessary in order to improve future sales
and profits.
The following table combines the cash flows of the Successor Company and
Predecessor Company for the 1996 first quarter. Resources used to finance
significant expenditures for the 1997 first quarter and 1996 first quarter, are
as follows (in millions):
16 Weeks Ended
--------------------
July 20, July 22,
1996 1995
-------- ---------
Resources used for:
Capital expenditures $ 14.5 $ 5.7
Debt and capital lease repayments 2.9 95.8
Operating activities, including cash and temporary
investments - 5.0
Loan placement fees - 3.1
-------- --------
$ 17.4 $ 109.6
-------- --------
-------- --------
Financed by:
Operating activities, including cash and temporary
investments $ 11.0 $ -
Net proceeds from long-term debt 6.0 -
Property disposals 0.4 5.5
Proceeds from New Bank Facility - 104.1
-------- --------
$ 17.4 $ 109.6
-------- --------
-------- --------
During the 1997 first quarter, funds for capital expenditures and debt and
capital lease repayments were principally obtained from operations and
borrowings under the revolving credit facility. During the 1996 first quarter,
funds for debt and capital lease repayments, capital expenditures, operating
activities and loan placement fees were principally obtained from cash provided
by the New Bank Facility.
As of July 20, 1996, the Company had $39 million of borrowings and
approximately $43 million of letters of credit outstanding under its $100
million revolving credit facility.
As of the end of the 1997 first quarter, the Company was in compliance
with the covenants of its debt instruments, as amended.
With the exception of historical information, the matters discussed
herein are "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
are subject to risks, uncertainties and other factors which could cause
actual results to differ materially from future results expressed or implied
by such forward-looking statements. Potential risks and uncertainties
include, but are not limited to, the competitive environment in which the
Company operates, the Company's ability to complete its capital expenditure
program on a timely basis and the general economic conditions in the
geographic areas in which the Company operates.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K.
(a) Exhibits
EXHIBIT NUMBER
--------------
10.1 Second Amendment to the Amended and Restated Credit
Agreement, dated as of May 10, 1996.
10.2 Executive Severance Policy.
10.3 Letters dated December 14, 1995, with respect to the 1995
Equity Incentive Plan.
10.4 First Amendment to the 1995 Equity Incentive Plan of The
Grand Union Company.
10.5 Letters dated April 3, 1996, with respect to the 1995 Non-
Employee Directors' Stock Option Plan.
10.6 First Amendment to the 1995 Non-Employee Directors' Stock
Option Plan of The Grand Union Company.
10.7 Form of Indemnification Agreement between the Company and
R. Stangeland, D. Josephs, W. Kagler, D. McClure, Jr., D.
Ying, J. McCaig, W. Louttit, K. Baum, D. Stine, G. Vuolo
and J. Schroeder.
*10.8 Agreement with C&S Wholesalers Inc., dated January 21,
1996.
27.1 Financial Data Schedule.
* Confidential treatment requested
(b) Report on Form 8-K dated July 30, 1996 as filed with the Commission on
August 14, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE GRAND UNION COMPANY
---------------------------------------------------
(Registrant)
Date September 3, 1996 /s/ Kenneth R. Baum
------------------ ----------------------------------------------------
Kenneth R. Baum
Senior Vice President, Chief Financial Officer and
Secretary (Principal Financial Officer and Principal
Accounting Officer)
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Exhibit 10.1
SECOND AMENDMENT
TO THE
AMENDED AND RESTATED CREDIT AGREEMENT
SECOND AMENDMENT dated as of May 10, 1996 (this "Amendment") to the
AMENDED AND RESTATED CREDIT AGREEMENT dated as of June 15, 1995 (as modified by
the Waiver and First Amendment thereto dated as of February 16, 1996, the
"Credit Agreement"), each among THE GRAND UNION COMPANY, a Delaware corporation
(the "Borrower"), the institutions from time to time party thereto as lenders
(the "Banks") and BANKERS TRUST COMPANY, as agent (the "Agent"). Capitalized
terms used herein and not defined herein shall have the respective meanings set
forth for such terms in the Credit Agreement.
W I T N E S S E T H :
WHEREAS, the Borrower has determined that, as a result of the transfer
to C&S Wholesale Grocers, Inc. of the Borrower's supply and distribution
operations, the Borrower's Carlstadt facility and fleet of vehicles are no
longer necessary for the conduct of its business; and
WHEREAS, the Borrower has requested that the Credit Agreement be
amended in order to permit the Borrower to sell the Carlstadt facility and such
vehicles and to retain the proceeds thereof in order to offset certain one time
cash expenditures associated with the closing of the Borrower's Mount Kisco and
Carlstadt facilities;
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION 1. AMENDMENTS. The Credit Agreement is hereby amended as follows:
(a) Section 4.2(c) of the Credit Agreement is amended by
inserting the following after the term "Permitted Dispositions" at the end of
the first sentence of such Section:
"and up to an aggregate of $3,500,000 of cash and non-cash proceeds arising
from Supplemental Permitted Dispositions".
(b) Section 8.1 of the Credit Agreement is amended by inserting the
words "Supplemental Permitted Dispositions and" at the beginning of clause (g)
of such Section.
(c) Section 10 of the Credit Agreement is amended by inserting the
following after the definition contained therein of the term "Subsidiary
Security Agreement":
"'Supplemental Permitted Dispositions' shall mean the sale by the
Borrower in compliance with all of the
<PAGE>
requirements of Section 12.15(b) hereof of the portion of the Carlstadt
facility owned by the Borrower and the trucks and other vehicles owned by
the Borrower that are no longer needed in the conduct of the Borrower's
business as a result of the transfer of the operation of the Borrower's
distribution and supply system to C&S Wholesale Grocers, Inc."
(d) Section 12.15 of the Credit Agreement is amended by (i)
inserting the words "and Supplemental Permitted Disposition" after the term
"Permitted Disposition" in each of the second and seventh lines of paragraph (b)
of such Section, (ii) re-lettering such paragraph (b) as paragraph "(c)", and
(iii) inserting the following after paragraph (a) of such Section as a new
paragraph (b):
"(b) The Borrower may effect one or more Supplemental Permitted
Dispositions so long as (i) each such Supplemental Permitted Disposition
is effected solely for cash; (ii) cash received in connection with all such
Supplemental Permitted Dispositions in excess of $3,500,000 is used to
repay Term Loans, Swingline Loans and Revolving Loans pursuant to Sections
4.1 and 4.2; (iii) no Event of Default is in existence at the time of the
consummation of a Supplemental Permitted Disposition or would exist after
giving effect thereto; (iv) each Supplemental Permitted Disposition shall
be an arm's-length transaction for fair market value (as determined by the
management of the Borrower in good faith) and shall involve a purchaser who
is not an Affiliate of the Borrower; (v) the Borrower shall have given the
Agent and the Banks at least three Business Days prior written notice of
each Supplemental Permitted Disposition generating more than $1,000,000 of
cash proceeds; and (vi) the Borrower shall have delivered to the Agent an
officer's certificate, executed by the chief financial officer of the
Borrower, certifying as to compliance with the requirements of the
preceding clauses (i), (ii), (iii) and (iv). The consummation of a
Supplemental Permitted Disposition shall be deemed to be a representation
and warranty by the Borrower that all conditions thereto have been
satisfied and that the same is permitted in accordance with the terms of
this Agreement, which representation and warranty shall be deemed to be a
representation and warranty for all purposes hereunder, including, without
limitation, Sections 6 and 9."
SECTION 2. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents and
warrants to the Agent and each Bank that:
(a) no Default or Event of Default has occurred and is continuing
on and as of the date hereof; and
2
<PAGE>
(b) the representations and warranties of the Borrower and the other
Credit Parties contained in the Credit Agreement and the other Credit Documents
are true and correct on and as of the date hereof as if made on and as of the
date hereof, except to the extent such representations and warranties expressly
relate to a different specific date.
SECTION 3. EFFECTIVENESS. This Amendment shall become effective when the
Agent shall have executed and delivered a counterpart of this Amendment and
received duly executed counterparts of this Amendment from the Borrower, each
Subsidiary of the Borrower that is a party to any Credit Document and as many of
the Banks as shall be necessary to comprise the "Required Banks".
SECTION 4. STATUS OF CREDIT DOCUMENTS. This Amendment is limited solely for
the purposes and to the extent expressly set forth herein, and, except as
expressly modified hereby, the terms, provisions and conditions of the Credit
Documents and the Liens granted thereunder shall continue in full force and
effect and are hereby ratified and confirmed in all respects.
SECTION 5. COUNTERPARTS. This Amendment may be executed and delivered in
any number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. A
complete set of counterparts shall be lodged with the Borrower and the Agent.
SECTION 6. GOVERNING LAW. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH, AND SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK (WITHOUT
GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF).
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their respective
duly authorized officers to execute and deliver this Waiver and Second Amendment
to the Amended and Restated Credit Agreement as of the date first above written.
THE GRAND UNION COMPANY
By:/s/ Frank Nicastro
------------------
Name: Frank Nicastro
Title: Vice President and
Treasurer
BANKERS TRUST COMPANY,
Individually and as Agent
By:/s/ Mary Kay Coyle
------------------
Name: Mary Kay Coyle
Title: Managing Director
BANKAMERICA BUSINESS CREDIT, INC.
By:/s/ Louis Alexander
-------------------
Name: Louis Alexander
Title: VP
BANK POLSKA KASA OPIEKI, SA
By:/s/ William A. Shea
-------------------
Name: William A. Shea
Title: Vice President
Senior Lending Officer
4
<PAGE>
CITIBANK, N.A.
By:/s/ Hans L. Christensen
-----------------------
Name: Hans L. Christensen
Title: Vice President
COMPAGNIE FINANCIERE DE CIC ET
DE L'UNION EUROPEENNE
By:/s/ Sean Mounier
----------------
Name: Sean Mounier
Title:First Vice President
By:/s/ Brian O'Leary
-----------------
Name: Brian O'Leary
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By:/s/ Gretchen Bergstressa
------------------------
Name: Gretchen Bergstressa
Title: V. P.
HELLER FINANCIAL, INC.
By:/s/ T. Bukarski
---------------
Name: T. Bukarski
Title: V. P.
LEHMAN COMMERCIAL PAPER INC.
By:/s/ Michele Swanson
-------------------
Name: Michele Swanson
Title:Authorized Signatary
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED
By:/s/ Victor Ichosia
------------------
Name: Victor Ichosia
Title:Managing Director
5
<PAGE>
FLEET BANK N. A.
By:/s/ Eric Rubin
--------------
Name: Eric Rubin
Title:Vice President
QUANTUM PARTNERS LDC
By:
-----------------------
Name:
Title:
SENIOR DEBT PORTFOLIO
By: Boston Management and Research,
as Investment Advisor
By:/s/ Jeffrey S. Garner
---------------------
Name: Jeffrey S. Garner
Title: Vice President
TRANSAMERICA BUSINESS CREDIT
CORPORATION
By:/s/ Michael Burn
----------------
Name: Michael Burn
Title: Vice President
VAN KAMPEN AMERICAN CAPITAL PRIME RATE
INCOME TRUST
By:/s/ Jeffrey W. Maillet
----------------------
Name: Jeffrey W. Maillet
Title: Sr.Vice Pres.-Portfolio Mgr.
6
<PAGE>
The foregoing Second Amendment to the Amended and
Restated Credit Agreement is hereby consented and agreed to, and the Liens and
guaranties under the Credit Documents are hereby confirmed, by:
MERCHANDISING SERVICES, INC.
GRAND UNION STORES, INC. OF VERMONT
GRAND UNION STORES OF NEW
HAMPSHIRE, INC.
By:/s/ Frank Nicastro
------------------
Name:Frank Nicastro
Title:VP and Treasurer
of each of the above
listed entities
7
<PAGE>
Exhibit 10.2
EXECUTIVE SEVERANCE POLICY
PURPOSE:
To define the severance pay policy of The Grand Union Company (the
"Company").
POLICY:
Severance pay will be provided to an individual in the event:
1. The individual is terminated involuntarily by the Company without
"Cause" (as defined below); or
2. The individual voluntarily terminates employment on account of a
"Constructive Termination" (as defined below).
Severance payments will be based upon position level or a combination of
length of service and position level, as shown in the schedule below:
President, Exec. V.P. 18 months
Senior V.P. 18 months
Corporate V.P. 1 year
Appointed V.P. 6 months
Director 6 months
All other
Exempt Personnel 1 week's pay for each year's service, up
to a maximum of 26 weeks
In addition to severance pay, individuals will be entitled to payment on
account of all vacation earned, but not utilized during the applicable
year.
GENERAL ADMINISTRATION:
1. "Cause" shall mean (i) a refusal by an individual to perform his or her
duties, (ii) proven dishonesty or the commission by an individual of an
act or acts constituting a felony or (iii) other willful misconduct
inimical to the best interests of the Company.
2. "Constructive Termination" shall mean after June 15, 1995 (i) with
respect to an individual holding the unique positions of Chief Executive
Officer, Chief Operating Officer or Chief Financial Officer, either an
<PAGE>
involuntary reduction in base pay that exceeds 5% in any year, or an
involuntary removal from sole possession of said position, or (ii) with
respect to any other covered employee, either an involuntary reduction
in base pay that exceeds 10% in any year, or an involuntary reduction in
grade level of more than two grades in any year, or (iii) with respect
to any employee, any involuntary transfer that would require relocation
outside of the current operating area of the Company.
3. Notwithstanding the above, no payments of severance pay will be made to
an individual terminated as a result of the sale or closing of a major
business unit of the Company, if such individual is offered employment
by the buyer of or other successor to such business unit.
4. Payments will be made in one lump sum; Federal and State taxes will be
withheld as necessary.
5. Levels of severance indicated above may be modified by individual
agreements made at the time of hire or later. All such agreements must
have the final approval of the President and Chief Executive Officer.
Any person with an individual agreement which addresses the person's
right to, and amount of, severance pay, will not be eligible for
severance pay under this Policy unless such agreement specifically
states otherwise.
6. PERQUISITES
a. Benefits - In the event of termination of an individual, the
individual will be entitled to elect continuation of Company
medical coverage under COBRA, at the rates applicable at that time
and otherwise in accordance with COBRA.
b. If a company automobile is provided as part of compensation to a
terminated individual, the individual will be provided the
opportunity to purchase his or her automobile at, if owned by Grand
Union, the average of book and fair market value or, if leased by
Grand Union, at the then current lease buyout cost, at the time of
termination.
2
<PAGE>
7. Any exceptions to this policy must be approved by the President and
Chief Executive Officer. The Company reserves the right to amend,
revise or terminate this Policy at any time; PROVIDED, HOWEVER, that no
such action taken after June 15, 1995 and prior to March 30, 1997 may
adversely affect the right to or amount of severance pay with respect to
Appointed V.P.s and persons more senior in position.
3
<PAGE>
Exhibit 10.3
December 14, 1995
Dear
I am pleased to inform you that the Grand Union Board of Directors has this week
granted you options to purchase shares of Grand Union common stock at a
price of $6.625 ($6 5/8) per share.
These options may be exercised partially or fully once formal approval of the
Plan by the stockholders is received at the Annual Stockholders Meeting (August
or September, 1996) through December, 2005.
You have worked hard to earn this award. It's great to see you get this
recognition. Thanks for your help.
Sincerely,
\s\ Joseph J. McCaig
--------------------
Joseph J. McCaig
<PAGE>
Exhibit 10.4
FIRST AMENDMENT
to the
1995 EQUITY INCENTIVE PLAN
of the Grand Union Company
1. Amend the first paragraph of section 3 to read as follows:
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 whom shall be disinterested persons within
the meaning of Rule 16b-3 under the 1934 Act. 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.
2. Amend the last paragraph of section 4 to read as follows:
Subject to Section 8.6(a), the maximum number of shares of Stock as to
which Options or Stock Appreciation Rights may be granted under the Plan to
any Participant is 500,000. For purposes of this paragraph, except as
otherwise provided in regulations or other guidelines issued under Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), any
repricing of an Option or Stock Appreciation Right shall be treated as an
original grant.
3. Amend Sections 7.3 in its entirety to read as follows:
(a) Subject to paragraph (c) below, as of the twentieth (20th)
trading day prior to the effective date of a Change of Control, (1) each
outstanding Option and each outstanding Stock Appreciation Right shall
become exercisable in full, (2) the restrictions shall be removed from each
outstanding share of Restricted Stock, (3) the Company shall make all
payments and provide all benefits under each outstanding Deferred Stock
Award, Performance Award, and Supplemental Grant which would have been made
or provided with the passage of time had the transaction not occurred and
the Participant not suffered a Status Change (or died), (4) subject to
paragraph (c) of this section, the Company shall pay to each holder of
Options and Restricted Stock whose Options (other than ISOs granted prior
to July 1, 1996) and Restricted Stock have been terminated, an amount equal
to the Award Value with respect to such Options or Restricted Stock, such
payment
<PAGE>
to be made by cash or certified check within 30 days after the Change in
Control, and (5) the Committee may, in its sole discretion, forgive all or
any portion of the principal of or interest on a Loan. For purposes of
this section, the Award Value shall be determined as the difference between
(i) the exercise price of the Option or the purchase price of the
Restricted Stock and (ii) the Market Price, times (iii) the number of
shares covered by the Option or the Restricted Stock award, as the case may
be. The Market Price shall be determined as the average of the fair market
value of the Stock for the period of twenty (20) trading days ending on the
effective date of the covered transaction.
(b) "Change of Control" means any of the following: (1) any person,
entity or Group (persons or entities acting together) is or becomes the
beneficial owner of more than 50% of the Voting Stock of the Company; (2) a
consolidation, merger, or sale of substantially all of the assets of the
Company, with the effect that any person, entity or Group becomes the
beneficial owner of more than 50% of the Voting Stock of the Company or the
Company is not the surviving entity; (3) during any consecutive two-year
period commencing July 1, 1996, individuals who constituted the Board of
Directors at the beginning of such period, together with any new directors
whose election by the Board or nomination for election by stockholders was
approved by 2/3 of the directors who were in office at the beginning of the
period or whose election or nomination was so approved, cease to constitute
a majority of the Board then in office; or (4) any order, judgment or
decree of dissolution or split-up of the Company, and such order remains
undischarged or unstayed for a period in excess of 60 days. For purposes
of this provision, "more than 50% of the Voting Stock" means more than 50%
of one or more classes of stock pursuant to which the holders have the
general power to vote for the election of members of the Board of
Directors, and the aggregate of such classes for which the person, entity
or Group holds more than 50% has the power to elect more than 50% of the
members of the Board of Directors.
(c) Notwithstanding the foregoing, the termination of Options and the
payment of Option Values described in paragraph (a) of this section shall
not apply with respect to any transaction in which the holder of an Option
or Restricted Stock receives either: (i) replacement options or restricted
stock, as the case may be, allowing the holder to receive, on the same
terms as in the original Option or Restricted Stock, the greatest amount of
securities, cash or other property to which such holder would have been
entitled as a holder of Common Stock upon consummation of the transaction
if such holder had exercised the rights represented by the Option or
restricted stock held by such holder immediately prior to the transaction,
or (ii) if pooling of interests is a condition of the transaction, a
replacement equity interest which enables the transaction to qualify for
pooling of interests.
2
<PAGE>
4. Amend the second sentence of section 7.2(a) to read as follows:
Any ISOs granted prior to July 1, 1996 that were immediately exercisable
prior to the Status Change will continue to be exercisable for a period of
three months from the date of the Status Change and shall thereupon
terminate unless the Status Change results from a discharge for cause which
in the opinion of the Committee casts such discredit on the Participant as
to justify immediate termination of the Option. Any other Options or
Rights that were exercisable immediately prior to the Status Change will
continue to be exercisable for a period of one year from the date of the
Status Change (or such other period as the Committee may determine), and
shall thereupon terminate, unless the Award provides by its terms for
immediate termination in the event of a Status Change or unless the Status
Change results from discharge for cause which in the opinion of the
Committee casts such discredit on the Participant as to justify immediate
termination of the Award.
5. Amend section 8.5 to read as follows:
Unless otherwise provided in the Participant's agreement, no Award
(other than an Award in the form of an outright transfer of cash or
Unrestricted Stock) may be transferred other than by will or by the laws of
descent and distribution, and during a Participant's lifetime an Award
requiring exercise may be exercised only by him or her (or in the event of
the Participant's incapacity, the person or persons legally appointed to
act on the Participant's behalf).
6. Amend the last sentence of section 7.2(a) to read as follows:
For purposes of this paragraph, in the case of a Participant who is an
Employee, a Status Change shall not be deemed to have resulted by reason of
(i) a sick leave or other bona fide leave of absence of one year or less or
approved for purposes of the Plan by the Committee, or (ii) a transfer of
employment between the Company and a subsidiary or between subsidiaries, or
to the employment of a corporation (or a parent or subsidiary corporation
of such corporation) issuing or assuming an option in a transaction to
which section 424(a) of the Code applies.
THE GRAND UNION COMPANY
by action of the Board of Directors
Dated:
------------------ ---------------------------
John W. Schroeder
Assistant Secretary
3
<PAGE>
Exhibit 10.5
April 3,1996
[name]
[address]
[address]
RE: STOCK OPTIONS
Dear [name]:
This is to confirm for you that, by action of the Board of Directors of the
Grand Union Company, on December 12, 1995, you were granted a stock option
giving you the right to purchase Five Thousand (5,000) shares of Grand Union
Common Stock at an exercise price of $5.75 per share. This stock option will
become fully exercisable following stockholder approval of the 1995 Non-employee
Directors' Stock Option Plan (the Directors' Plan), according to the following
schedule:
No. of Shares Vesting Date
------------- ------------
1,666 on stockholder approval
1,667 December 12, 1996
1,667 December 12, 1997
The terms of your option, including exercise provisions and expiration
terms, are all set forth in the Directors' Plan, a copy of which is attached for
your convenience. To acknowledge your receipt and acceptance of this letter,
please sign the enclosed copy and return it to my attention.
If you have any questions, please do not hesitate to contact either me
(201-890-6340) or John Schroeder (201-890-6761).
Sincerely,
/s/ Kenneth R. Baum
-------------------
Kenneth R. Baum
Senior Vice President, Chief
Financial Officer and Secretary
Acknowledged and Accepted
_______________________
<PAGE>
Exhibit 10.6
FIRST AMENDMENT
to the
1995 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
of the Grand Union Company
1. Amend the second sentence of section 5 to read as follows:
Thereafter, on each date that an Eligible Director is re-elected, 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.
2. Revise the first paragraph of section 7 to read as follows:
All Options granted under the Plan prior to July 1, 1996, shall, subject to
initial stockholder approval of the Plan, become exercisable immediately as
to one-third of the shares, on the first anniversary of the grant date as
to the second third of the shares and as to one share of any remainder, and
on the second anniversary of the grant date as to the last third of the
shares and the second share of any two-share remainder.
3. Insert a new second paragraph in section seven to read as follows:
All Options granted under the Plan on or after July 1, 1996, shall, subject
to initial stockholder approval of the Plan, become exercisable six months
after the grant date as to one-third of the shares, on the earlier of the
first anniversary of the grant date or the annual meeting of stockholders
closest thereto as to the second third of the shares and as to one share of
any remainder, and on the earlier of the second anniversary of the grant
date or the annual meeting of stockholders closest thereto as to the last
third of the shares and the second share of any two-share remainder.
4. Amend Section 8.c. to read as follows:
c. CERTAIN CORPORATE TRANSACTIONS. In the event of a Change of
Control of the Company, each outstanding Option not otherwise exercisable
shall become immediately exercisable in full on the twentieth (20th)
trading day prior to the effective date of the Change of Control. Subject
to the last
<PAGE>
paragraph of this section, the Company shall pay to those Option holders
whose Options have been terminated, an amount equal to the Option Value,
such payment to be made by cash or certified check within 30 days after the
Change in Control. The Option Value shall be determined as the difference
between the exercise price of the Option and the Market Price times the
number of shares covered by the Option. The Market Price shall be
determined as the average of the Fair Market Value, as determined under
section 11, for the period of twenty (20) trading days ending on the
effective date of the Change of Control.
"Change of Control" means any of the following: (1) any person, entity
or Group (persons or entities acting together) is or becomes the beneficial
owner of more than 50% of the Voting Stock of the Company; (2) a
consolidation, merger, or sale of substantially all of the assets of the
Company, with the effect that any person, entity or Group becomes the
beneficial owner of more than 50% of the Voting Stock of the Company or the
Company is not the surviving entity; (3) during any consecutive two-year
period commencing July 1, 1996, individuals who constituted the Board of
Directors at the beginning of such period, together with any new directors
whose election by the Board or nomination for election by stockholders was
approved by 2/3 of the directors who were in office at the beginning of the
period or whose election or nomination was so approved, cease to constitute
a majority of the Board then in office; or (4) any order, judgment or
decree of dissolution or split-up of the Company, and such order remains
undischarged or unstayed for a period in excess of 60 days. For purposes
of this provision, "more than 50% of the Voting Stock" means more than 50%
of one or more classes of stock pursuant to which the holders have the
general power to vote for the election of members of the Board of
Directors, and the aggregate of such classes for which the person, entity
or Group holds more than 50% has the power to elect more than 50% of the
members of the Board of Directors.
Notwithstanding the foregoing, the termination of Options and the
payment of Option Values described in the first paragraph of this section
shall not apply with respect to any transaction in which the Option Holder
receives either: (i) a replacement option allowing the Option Holder to
receive, on the same terms as in the original Option, the greatest amount
of securities, cash or other property to which such holder would have been
entitled as a holder of Common Stock upon consummation of the transaction
if such holder had exercised the rights represented by the Option held by
such holder immediately prior to the transaction, or (ii) if pooling of
interests is a condition of the transaction, a replacement equity interest
which enables the transaction to qualify for pooling of interests.
2
<PAGE>
5. Amend section 8.b. to read as follows:
b. OTHER TERMINATION. If an Eligible Director's service with the
Company terminates for any reason other than death or incapacity as
provided above, all Options held by the director that are not then
exercisable shall terminate. Options that are exercisable on the date of
such termination (other than termination upon a removal for cause, in which
event all Options shall immediately terminate) shall continue to be
exercisable until the earlier of (1) one year thereafter or (2) the date on
which the Option would have terminated had the director remained an
Eligible Director, and after completion of that period, such Options shall
terminate to the extent not previously exercised, expired or terminated.
THE GRAND UNION COMPANY
by action of the Board of Directors
Dated: __________________ ___________________________
John W. Schroeder
Assistant Secretary
3
<PAGE>
EXHIBIT 10.7
INDEMNIFICATION AGREEMENT
This Agreement, made and entered into this __ day of _______, 1996
("Agreement"), by and between The Grand Union Company, a Delaware corporation
("Company"), and ______________ ("Indemnitee"):
WHEREAS, highly competent persons have become more reluctant to serve
publicly-held corporations as directors or in other capacities unless they are
provided with adequate protection through insurance and adequate indemnification
against inordinate risks of claims and actions against them arising out of their
service to and activities on behalf of the corporation; and
WHEREAS, the Board of Directors of the Company (the "Board") has determined
that, in order to attract and retain qualified individuals, the Company will
attempt to maintain on an ongoing basis, at its sole expense, liability
insurance to protect persons serving the Company and its subsidiaries from
certain liabilities. Although the furnishing of such insurance has been a
customary and widespread practice among United States-based corporations and
other business enterprises, the Company believes that, given current market
conditions and trends, such insurance may be available to it in the future only
at higher premiums and with more exclusions. At the same time, directors,
officers, and other persons in service to corporations or business enterprises
are being increasingly subjected to expensive and time-consuming litigation
relating to, among other things, matters that traditionally would have been
brought only against the Company or business enterprise itself; and
WHEREAS, the uncertainties relating to such insurance and to
indemnification have increased the difficulty of attracting and retaining such
persons; and
WHEREAS, the Board has determined that the increased difficulty in
attracting and retaining such persons is detrimental to the best interests of
the Company's stockholders and that the Company should act to assure such
persons that there will be increased certainty of such protection in the future;
and
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest extent
permitted by applicable law so that they will serve or continue to serve the
Company free from undue concern that they will not be so indemnified; and
WHEREAS, this Agreement is a supplement to and in furtherance of the By-
laws of the Company and any resolutions adopted pursuant thereto, and shall not
be deemed a substitute therefore, nor to diminish or abrogate any rights of
Indemnitee thereunder; and
WHEREAS, the By-laws and the Delaware director indemnification statute each
is nonexclusive, and therefore contemplates that contracts may be entered into
with respect to indemnification of directors, officers and employees; and
<PAGE>
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify, and to advance expenses on behalf
of, such persons to the fullest extent permitted by applicable law so that they
will serve or continue to serve the Company free from undue concern that they
will not be so indemnified; and
WHEREAS, Indemnitee is willing to serve, continue to serve and to take on
additional service for or on behalf of the Company on the condition that he be
so indemnified;
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
Section 1. SERVICES BY INDEMNITEE. Indemnitee agrees to serve as a
director and/or officer of the Company. Indemnitee may at any time and for any
reason resign from such position (subject to any other contractual obligation or
any obligation imposed by operation of law), in which event the Company shall
have no obligation under this Agreement to continue Indemnitee in such position.
This Agreement shall not be deemed an employment contract between the Company
(or any of its subsidiaries) and Indemnitee. Indemnitee specifically
acknowledges that Indemnitee's employment with the Company (or any of its
subsidiaries), if any, is at will, and the Indemnitee may be discharged at any
time for any reason, with or without cause, except as may be otherwise provided
in any written employment contract between Indemnitee and the Company (or any of
its subsidiaries), other applicable formal severance policies duly adopted by
the Board, or, with respect to service as a director or officer of the Company,
by the Company's Certificate of Incorporation, By-laws, and the General
Corporation Law of the State of Delaware. The foregoing notwithstanding, this
Agreement shall continue in force after Indemnitee has ceased to serve as a
director and/or officer of the Company.
Section 2. INDEMNIFICATION - GENERAL. The Company shall indemnify, and
advance Expenses (as hereinafter defined) to, Indemnitee (a) as provided in this
Agreement and (b) (subject to the provisions of this Agreement) to the fullest
extent permitted by applicable law in effect on the date hereof and as amended
from time to time. The rights of Indemnitee provided under the preceding
sentence shall include, but shall not be limited to, the rights set forth in the
other Sections of this Agreement.
Section 3. PROCEEDINGS OTHER THAN PROCEEDINGS BY OR IN THE RIGHT OF THE
COMPANY. Indemnitee shall be entitled to the rights of indemnification provided
in this Section 3 if, by reason of his Corporate Status (as hereinafter
defined), he is, or is threatened to be made, a party to or a participant in any
threatened, pending or completed Proceeding (as hereinafter defined), other than
a Proceeding by or in the right of the Company. Pursuant to this Section 3,
Indemnitee shall be indemnified against all Expenses, judgments, penalties,
fines and amounts paid in settlement (including all interest, assessments and
other charges paid or payable in connection with or in respect of such Expenses,
judgments, penalties, fines and amounts paid in
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settlement) actually and reasonably incurred by him or on his behalf in
connection with such Proceeding or any claim, issue or matter therein, if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company and, with respect to any criminal
Proceeding, had no reasonable cause to believe his conduct was unlawful.
Section 4. PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. Indemnitee
shall be entitled to the rights of indemnification provided in this Section 4
if, by reason of his Corporate Status, he is, or is threatened to be made, a
party to or a participant in any threatened, pending or completed Proceeding
brought by or in the right of the Company to procure a judgment in its favor.
Pursuant to this Section, Indemnitee shall be indemnified against all Expenses
(including all interest, assessments and other charges paid or payable in
connection with or in respect of such Expenses) actually and reasonably incurred
by him or on his behalf in connection with such Proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company; PROVIDED, HOWEVER, that, if applicable law so
provides, no indemnification against such Expenses shall be made in respect of
any claim, issue or matter in such Proceeding as to which Indemnitee shall have
been adjudged to be liable to the Company unless and to the extent that the
Court of Chancery of the State of Delaware, or the court in which such
Proceeding shall have been brought or is pending, shall determine that such
indemnification may be made.
Section 5. PARTIAL INDEMNIFICATION. Notwithstanding any other provision
of this Agreement, to the extent that Indemnitee is, by reason of his Corporate
Status, a party to (or a participant in) and is successful, on the merits or
otherwise, in defense of any Proceeding, he shall be indemnified against all
Expenses actually and reasonably incurred by him or on his behalf in connection
therewith. If Indemnitee is not wholly successful in defense of such Proceeding
but is successful, on the merits or otherwise, as to one or more but less than
all claims, issues or matters in such Proceeding, the Company shall indemnify
Indemnitee against all Expenses actually and reasonably incurred by him or on
his behalf in connection with each successfully resolved claim, issue or matter.
For purposes of this Section and without limitation, the termination of any
claim, issue or matter in such a Proceeding by dismissal, with or without
prejudice, shall be deemed to be a successful result as to such claim, issue or
matter. If Indemnitee is entitled under any provision of this agreement to
indemnification by the Company for some or a portion of the Expenses, judgments,
penalties, fines and amounts paid in settlement (including all interest,
assessments and other charges paid or payable in connection with or in respect
of such Expenses, judgments, penalties, fines and amounts paid in settlement)
actually and reasonably incurred by him or on his behalf in connection with such
Proceeding or any claim, issue or matter therein, but not, however, for the
total amount thereof, the Company shall nevertheless indemnify Indemnitee for
the portion to which the Indemnitee is entitled.
Section 6. INDEMNIFICATION FOR ADDITIONAL EXPENSES.
(a) The Company shall indemnify Indemnitee against any and all
Expenses and, if requested by Indemnitee, shall (within seven (7) business days
of such request) advance
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such Expenses to Indemnitee, which are incurred by Indemnitee in connection with
any action brought by Indemnitee for (i) indemnification or advance payment of
Expenses by the Company under this Agreement or any other agreement or by-law of
the Company now or hereafter in effect; or (ii) recovery under any directors'
and officers' liability insurance policies maintained by the Company, regardless
of whether Indemnitee ultimately is determined to be entitled to such
indemnification, advance expense payment or insurance recovery, as the case may
be.
(b) Notwithstanding any other provision of this Agreement, to the
extent that Indemnitee is, by reason of his Corporate Status, a witness in any
Proceeding to which Indemnitee is not a party, he shall be indemnified against
all Expenses actually and reasonably incurred by him or on his behalf in
connection therewith.
Section 7. ADVANCEMENT OF EXPENSES. The Company shall advance all
reasonable Expenses incurred by or on behalf of Indemnitee in connection with
any Proceeding within seven (7) days after the receipt by the Company of a
statement or statements from Indemnitee requesting such advance or advances from
time to time, whether prior to or after final disposition of such Proceeding.
Such statement or statements shall reasonably evidence the Expenses incurred by
Indemnitee and shall include or be preceded or accompanied by an undertaking by
or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately
be determined that Indemnitee is not entitled to be indemnified against such
Expenses. Notwithstanding the foregoing, the obligation of the Company to
advance Expenses pursuant to this Section 7 shall be subject to the condition
that, if, when and to the extent that the Company determines that Indemnitee
would not be permitted to be indemnified under applicable law, the Company shall
be entitled to be reimbursed, within thirty (30) days of such determination, by
Indemnitee (who hereby agrees to reimburse the Company) for all such amounts
theretofore paid; PROVIDED, HOWEVER, that if Indemnitee has commenced or
thereafter commences legal proceedings in a court of competent jurisdiction to
secure a determination that Indemnitee should be indemnified under applicable
law, any determination made by the Company that Indemnitee would not be
permitted to be indemnified under applicable law shall not be binding and
Indemnitee shall not be required to reimburse the Company for any advance of
Expenses until a final judicial determination is made with respect thereto (as
to which all rights of appeal therefrom have been exhausted or lapsed).
Section 8. PROCEDURE FOR DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION.
(a) To obtain indemnification under this Agreement, Indemnitee shall
submit to the Company a written request, including therein or therewith such
documentation and information as is reasonably available to Indemnitee and is
reasonably necessary to determine whether and to what extent Indemnitee is
entitled to indemnification. The Secretary of the Company shall, promptly upon
receipt of such a request for indemnification, advise the Board in writing that
Indemnitee has requested indemnification.
(b) Upon written request by Indemnitee for indemnification pursuant
to the
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first sentence of Section 8(a) hereof, a determination, if required by
applicable law, with respect to Indemnitee's entitlement thereto shall be made
in the specific case: (i) if a Change in Control (as hereinafter defined) shall
have occurred, by Independent Counsel (as hereinafter defined) in a written
opinion to the Board of Directors, a copy of which shall be delivered to
Indemnitee; or (ii) if a Change of Control shall not have occurred, (A) by a
majority vote of the Disinterested Directors (as hereinafter defined), even
though less than a quorum of the Board, or (B) if there are no such
Disinterested Directors or, if such Disinterested Directors so direct, by
Independent Counsel in a written opinion to the Board, a copy of which shall be
delivered to Indemnitee or (C) if so directed by the Board, by the stockholders
of the Company; and, if it is so determined that Indemnitee is entitled to
indemnification, payment to Indemnitee shall be made within seven (7) days after
such determination. Indemnitee shall cooperate with the person, persons or
entity making such determination with respect to Indemnitee's entitlement to
indemnification, including providing to such person, persons or entity upon
reasonable advance request any documentation or information which is not
privileged or otherwise protected from disclosure and which is reasonably
available to Indemnitee and reasonably necessary to such determination. Any
costs or expenses (including attorneys' fees and disbursements) incurred by
Indemnitee in so cooperating with the person, persons or entity making such
determination shall be borne by the Company (irrespective of the determination
as to Indemnitee's entitlement to indemnification) and the Company hereby
indemnifies and agrees to hold Indemnitee harmless therefrom.
(c) In the event the determination of entitlement to indemnification
is to be made by Independent Counsel pursuant to Section 8(b) hereof, the
Independent Counsel shall be selected as provided in this Section 8(c). If a
Change of Control shall not have occurred, the Independent Counsel shall be
selected by the Board of Directors, and the Company shall give written notice to
Indemnitee advising him of the identity of the Independent Counsel so selected.
If a Change of Control shall have occurred, the Independent Counsel shall be
selected by Indemnitee (unless Indemnitee shall request that such selection be
made by the Board of Directors, in which event the preceding sentence shall
apply), and Indemnitee shall give written notice to the Company advising it of
the identity of the Independent Counsel so selected. In either event,
Indemnitee or the Company, as the case may be, may, within 10 days after such
written notice of selection shall have been given, deliver to the Company or to
Indemnitee, as the case may be, a written objection to such selection; PROVIDED,
HOWEVER, that such objection may be asserted only on the ground that the
Independent Counsel so selected does not meet the requirements of "Independent
Counsel" as defined in Section 17 of this Agreement, and the objection shall set
forth with particularity the factual basis of such assertion. If such written
objection is so made and substantiated, the Independent Counsel so selected may
not serve as Independent Counsel unless and until such objection is withdrawn or
a court has determined that such objection is without merit. If, within 20 days
after submission by Indemnitee of a written request for indemnification pursuant
to Section 8(a) hereof, no Independent Counsel shall have been selected and not
objected to, either the Company or Indemnitee may petition the Court of Chancery
of the State of Delaware for resolution of any objection which shall have been
made by the Company or Indemnitee to the other's selection of Independent
Counsel and/or for the appointment as Independent Counsel of a person selected
by the Court or by such other person as
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the Court shall designate, and the person with respect to whom all objections
are so resolved or the person so appointed shall act as Independent Counsel
under Section 8(b) hereof. The Company shall pay any and all reasonable fees
and expenses of Independent Counsel incurred by such Independent Counsel in
connection with acting pursuant to Section 8(b) hereof, and the Company shall
pay all reasonable fees and expenses incident to the procedures of this Section
8(c), regardless of the manner in which such Independent Counsel was selected or
appointed. Upon the due commencement of any judicial proceeding or arbitration
pursuant to Section 10(a)(iii) of this Agreement, Independent Counsel shall be
discharged and relieved of any further responsibility in such capacity (subject
to the applicable standards of professional conduct then prevailing).
(d) The Company shall not be required to obtain the consent of the
Indemnitee to the settlement of any Proceeding which the Company has undertaken
to defend if the Company assumes full and sole responsibility for such
settlement and the settlement grants the Indemnitee a complete and unqualified
release in respect of the potential liability. The Company shall not be liable
for any amount paid by the Indemnitee in settlement of any Proceeding that is
not defended by the Company, unless the Company has consented to such
settlement, which consent shall not be unreasonably withheld.
Section 9. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS.
(a) In making a determination with respect to entitlement to
indemnification or the advancement of expenses hereunder, the person or persons
or entity making such determination shall presume that Indemnitee is entitled to
indemnification or advancement of expenses under this Agreement if Indemnitee
has submitted a request for indemnification or the advancement of expenses in
accordance with Section 8(a) of this Agreement, and the Company shall have the
burden of proof to overcome that presumption in connection with the making by
any person, persons or entity of any determination contrary to that presumption.
Neither the failure of the Company (including its board of directors or
independent legal counsel) to have made a determination prior to the
commencement of any action pursuant to this Agreement that indemnification is
proper in the circumstances because Indemnitee has met the applicable standard
of conduct, nor an actual determination by the Company (including its board of
directors or independent legal counsel) that Indemnitee has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that Indemnitee has not met the applicable standard of conduct.
(b) If the person, persons or entity empowered or selected under
Section 8 of this Agreement to determine whether Indemnitee is entitled to
indemnification shall not have made a determination within sixty (60) days after
receipt by the Company of the request therefor, the requisite determination of
entitlement to indemnification shall be deemed to have been made and Indemnitee
shall be entitled to such indemnification, absent (i) a misstatement by
Indemnitee of a material fact, or an omission of a material fact necessary to
make Indemnitee's statement not materially misleading, in connection with the
request for indemnification, or (ii) a prohibition of
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such indemnification under applicable law; PROVIDED, HOWEVER, that such 60-day
period may be extended for a reasonable time, not to exceed an additional thirty
(30) days, if the person, persons or entity making the determination with
respect to entitlement to indemnification in good faith requires such additional
time for the obtaining or evaluating of documentation and/or information
relating thereto; and provided, further, that the foregoing provisions of this
Section 9(b) shall not apply (i) if the determination of entitlement to
indemnification is to be made by the stockholders pursuant to Section 8(b) of
this Agreement and if (A) within fifteen (15) days after receipt by the Company
of the request for such determination the Board of Directors has resolved to
submit such determination to the stockholders for their consideration at an
annual meeting thereof to be held within seventy-five (75) days after such
receipt and such determination is made thereat, or (B) a special meeting of
stockholders is called within fifteen (15) days after such receipt for the
purpose of making such determination, such meeting is held for such purpose
within sixty (60) days after having been so called and such determination is
made thereat, or (ii) if the determination of entitlement to indemnification is
to be made by Independent Counsel pursuant to Section 8(b) of this Agreement.
(c) The termination of any Proceeding or of any claim, issue or
matter therein, by judgment, order, settlement or conviction, or upon a plea of
NOLO CONTENDERE or its equivalent, shall not (except as otherwise expressly
provided in this Agreement) of itself adversely affect the right of Indemnitee
to indemnification or create a presumption that Indemnitee did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Company or, with respect to any criminal Proceeding,
that Indemnitee had reasonable cause to believe that his conduct was unlawful.
(d) RELIANCE AS SAFE HARBOR. For purposes of any determination of
Good Faith, Indemnitee shall be deemed to have acted in Good Faith if
Indemnitee's action is based on the records or books of account of the Company
or relevant enterprise, including financial statements, or on information
supplied to Indemnitee by the officers of the Company or relevant enterprise in
the course of their duties, or on the advice of legal counsel for the Company or
relevant enterprise or on information or records given to reports made to the
Company or relevant enterprise by an independent certified public accountant or
by an appraiser or other expert selected with reasonable care by the Company or
relevant enterprise. The provisions of this Section 9(d) shall not be deemed to
be exclusive or to limit in any way the other circumstances in which the
Indemnitee may be deemed to have met the applicable standard of conduct set
forth in this Agreement.
(e) ACTIONS OF OTHERS. The knowledge and/or actions, or failure to
act, of any director, officer, agent or employee of the Company or relevant
enterprise shall not be imputed to Indemnitee for purposes of determining the
right to indemnification under this Agreement.
Section 10. REMEDIES OF INDEMNITEE.
(a) In the event that (i) a determination is made pursuant to Section
8 of this
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Agreement that Indemnitee is not entitled to indemnification under this
Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 7
of this Agreement, (iii) no determination of entitlement to indemnification
shall have been made pursuant to Section 8(b) of this Agreement within 90 days
after receipt by the Company of the request for indemnification, (iv) payment of
indemnification is not made pursuant to Section 5 or 6 of this Agreement within
ten (10) days after receipt by the Company of a written request therefor, or (v)
payment of indemnification is not made within ten (10) days after a
determination has been made that Indemnitee is entitled to indemnification,
Indemnitee shall be entitled to an adjudication by the Court of Chancery of the
State of Delaware of his entitlement to such indemnification or advancement of
Expenses. Alternatively, Indemnitee, at his option, may seek an award in
arbitration to be conducted by a single arbitrator pursuant to the Commercial
Arbitration Rules of the American Arbitration Association. Indemnitee shall
commence such proceeding seeking an adjudication or an award in arbitration
within 180 days following the date on which Indemnitee first has the right to
commence such proceeding pursuant to this Section 10(a); PROVIDED, HOWEVER, that
the foregoing clause shall not apply in respect of a proceeding brought by
Indemnitee to enforce his rights under Section 5 of this Agreement.
(b) In the event that a determination shall have been made pursuant
to Section 8(b) of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant to
this Section 10 shall be conducted in all respects as a DE NOVO trial, or
arbitration, on the merits and Indemnitee shall not be prejudiced by reason of
that adverse determination. If a Change of Control shall have occurred, in any
judicial proceeding or arbitration commenced pursuant to this Section 10, the
Company shall have the burden of proving that Indemnitee is not entitled to
indemnification or advancement of Expenses, as the case may be.
(c) If a determination shall have been made pursuant to Section 8(b)
of this Agreement that Indemnitee is entitled to indemnification, the Company
shall be bound by such determination in any judicial proceeding or arbitration
commenced pursuant to this Section 10, absent (i) a misstatement by Indemnitee
of a material fact, or an omission of a material fact necessary to make
Indemnitee's statement not materially misleading in connection with the request
for indemnification, or (ii) a prohibition of such indemnification under
applicable law.
(d) In the event that Indemnitee, pursuant to this Section 10, seeks
a judicial adjudication of or an award in arbitration to enforce his rights
under, or to recover damages for breach of, this Agreement, Indemnitee shall be
entitled to recover from the Company, and shall be indemnified by the Company
against, any and all expenses (of the types described in the definition of
Expenses in Section 17 of this Agreement) actually and reasonably incurred by
him in such judicial adjudication or arbitration, but only if he prevails
therein. If it shall be determined in said judicial adjudication or arbitration
that Indemnitee is entitled to receive part but not all of the indemnification
or advancement of expenses sought, the expenses incurred by Indemnitee in
connection with such judicial adjudication or arbitration shall be appropriately
prorated. The Company shall indemnify Indemnitee against any and all Expenses
and, if
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requested by Indemnitee, shall (within ten (10) days after receipt by the
Company of a written request therefor) advance such expenses to Indemnitee,
which are incurred by Indemnitee in connection with any action brought by
Indemnitee for indemnification or advance of Expenses from the Company under
this Agreement or under any directors' or officers' liability insurance policies
maintained by the Company, regardless of whether Indemnitee ultimately is
determined to be entitled to such indemnification, advancement of Expenses or
insurance recovery, as the case may be.
(e) The Company shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 10 that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such arbitrator
that the Company is bound by all the provisions of this Agreement.
Section 11. NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE; SUBROGATION.
(a) The rights of indemnification and to receive advancement of
Expenses as provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may at any time be entitled under applicable
law, the Certificate of Incorporation, the By-Laws, any agreement, a vote of
stockholders or a resolution of directors, or otherwise. No amendment,
alteration or repeal of this Agreement or of any provision hereof shall limit or
restrict any right of Indemnitee under this Agreement in respect of any action
taken or omitted by such Indemnitee in his Corporate Status prior to such
amendment, alteration or repeal. To the extent that a change in the General
Corporation Law of the State of Delaware, whether by statute or judicial
decision, permits greater indemnification or advancement of Expenses than would
be afforded currently under the Company's By-Laws and this Agreement, it is the
intent of the parties hereto that Indemnitee shall enjoy by this Agreement the
greater benefits so afforded by such change. No right or remedy herein
conferred is intended to be exclusive of any other right or remedy, and every
other right and remedy shall be cumulative and in addition to every other right
and remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other
right or remedy.
(b) To the extent that the Company maintains an insurance policy or
policies providing liability insurance for directors, officers, employees or
agents of the Company or of any other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise which such person serves at the
request of the Company, Indemnitee shall be covered by such policy or policies
in accordance with its or their terms to the maximum extent of the coverage
available for any such director, officer, employee or agent under such policy or
policies.
(c) In the event of any payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such documents as
are necessary to enable the Company to bring suit or enforce
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such rights.
(d) The Company shall not be liable under this Agreement to make any
payment of amounts otherwise indemnifiable hereunder if and to the extent that
Indemnitee has otherwise actually received such payment under any insurance
policy, contract, agreement or otherwise.
(e) The Company's obligation to indemnify or advance expenses
hereunder to Indemnitee who is or was serving at the request of the Company as a
director, officer, employee or agent of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise shall be reduced
by any amount Indemnitee has actually received as indemnification or advancement
of expenses from such other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise.
Section 12. DURATION OF AGREEMENT. This Agreement shall continue until
and terminate upon the later of: (a) 10 years after the date that Indemnitee
shall have ceased to serve as a director and/or officer of the Company (or of
any other corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise which Indemnitee served at the request of the Company); or
(b) the final termination of any Proceeding then pending in respect of which
Indemnitee is granted rights of indemnification or advancement of expenses
hereunder and of any proceeding commenced by Indemnitee pursuant to Section 10
of this Agreement relating thereto. This Agreement shall be binding upon the
Company and its successors and assigns and shall inure to the benefit of
Indemnitee and his heirs, executors and administrators.
Section 13. SEVERABILITY. If any provision or provisions of this
Agreement shall be held to be invalid, illegal or unenforceable for any reason
whatsoever: (a) the validity, legality and enforceability of the remaining
provisions of this Agreement (including without limitation, each portion of any
Section of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that is not itself invalid, illegal or unenforceable)
shall not in any way be affected or impaired thereby; (b) such provision or
provisions shall be deemed reformed to the extent necessary to conform to
applicable law and to give the maximum effect to the intent of the parties
hereto; and (c) to the fullest extent possible, the provisions of this Agreement
(including, without limitation, each portion of any Section of this Agreement
containing any such provision held to be invalid, illegal or unenforceable, that
is not itself invalid, illegal or unenforceable) shall be construed so as to
give effect to the intent manifested thereby.
Section 14. EXCEPTION TO RIGHT OF INDEMNIFICATION OR ADVANCEMENT OF
EXPENSES. Except as provided in Section 6(a) of this Agreement, Indemnitee
shall not be entitled to indemnification or advancement of Expenses under this
Agreement with respect to any Proceeding brought by Indemnitee (other than a
Proceeding by Indemnitee to enforce his rights under this Agreement), or any
claim therein prior to a Change in Control, unless the bringing of such
Proceeding or making of such claim shall have been approved by the Board of
Directors.
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Section 15. IDENTICAL COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute one and the same Agreement.
Only one such counterpart signed by the party against whom enforceability is
sought needs to be produced to evidence the existence of this Agreement.
Section 16. HEADINGS. The headings of the paragraphs of this Agreement
are inserted for convenience only and shall not be deemed to constitute part of
this Agreement or to affect the construction thereof.
Section 17. DEFINITIONS. For purposes of this Agreement:
(a) "Change in Control" means a change in control of the Company
occurring after the Effective Date of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in
response to any similar item on any similar schedule or form) promulgated under
the Securities Exchange Act of 1934 (the "Act"), whether or not the Company is
then subject to such reporting requirement; PROVIDED, HOWEVER, that, without
limitation, such a Change in Control shall be deemed to have occurred if after
the Effective Date (i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities without the prior approval of at least two-thirds of the
members of the Board in office immediately prior to such person attaining such
percentage interest; (ii) there occurs a proxy contest, or the Company is a
party to a merger, consolidation, sale of assets, plan of liquidation or other
reorganization not approved by at least two-thirds of the members of the Board
then in office, as a consequence of which members of the Board in office
immediately prior to such transaction or event constitute less than a majority
of the Board thereafter; or (iii) during any period of two consecutive years,
other than as a result of an event described in clause (a)(ii) of this
Section 17, individuals who at the beginning of such period constituted the
Board (including for this purpose any new director whose election or nomination
for election by the Company's stockholders was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of such period) cease for any reason to constitute at least a majority
of the Board.
(b) "Corporate Status" describes the status of a person who is or was
a director, officer, employee, fiduciary or agent of the Company or of any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise which such person is or was serving at the request of the Company.
(c) "Disinterested Director" means a director of the company who is
not and was not a party to the Proceeding in respect of which indemnification is
sought by Indemnitee.
(d) "Effective Date" means July 11, 1996.
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(e) "Expenses" shall include all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of experts, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees, and all other disbursements or expenses of the
types customarily incurred in connection with prosecuting, defending, preparing
to prosecute or defend, investigating, being or preparing to be a witness, in,
or otherwise participating in, a Proceeding.
(f) "Independent Counsel" means a law firm, or a member of a law
firm, that is experienced in matters of corporation law and neither presently
is, nor in the past five years has been, retained to represent: (i) the Company
or Indemnitee in any matter material to either such party, or (ii) any other
party to the Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall not include
any person who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the Company
or Indemnitee in an action to determine Indemnitee's rights under this
Agreement. The Company agrees to pay the reasonable fees of the Independent
Counsel referred to above and to fully indemnify such counsel against any and
all Expenses, claims, liabilities and damages arising out of or relating to this
Agreement or its engagement pursuant hereto.
(g) "Proceeding" includes any threatened, pending or completed
action, suit, arbitration, alternate dispute resolution mechanism,
investigation, inquiry, administrative hearing or any other actual, threatened
or completed proceeding, whether brought by or in the right of the Corporation
or otherwise and whether civil, criminal, administrative or investigative, in
which Indemnitee was, is, may be or will be involved as a party or otherwise, by
reason of the fact that Indemnitee is or was a director or officer of the
Company, by reason of any action taken by him or of any inaction on his part
while acting as director or officer of the Company, or by reason of the fact
that he is or was serving at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise; in each case whether or not he is acting or serving in any
such capacity at the time any liability or expense is incurred for which
indemnification or advancement of expenses can be provided under this Agreement;
except one (i) initiated by an Indemnitee pursuant to Section 10 of this
Agreement to enforce his right under this Agreement or (ii) pending on or before
the Effective Date.
Section 18. ENFORCEMENT.
(a) The Company expressly confirms and agrees that it has entered
into this Agreement and assumed the obligations imposed on it hereby in order to
induce Indemnitee to serve as a director and/or officer of the Company, and the
Company acknowledges that Indemnitee is relying upon this Agreement in serving
as a director and/or officer of the Company.
(b) This Agreement constitutes the entire agreement between the
parties
-12-
<PAGE>
hereto with respect to the subject matter hereof and supersedes all prior
agreements and understandings, oral, written and implied, between the parties
hereto with respect to the subject matter hereof.
Section 19. MODIFICATION AND WAIVER. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
Section 20. NOTICE BY INDEMNITEE. Indemnitee agrees promptly to notify
the Company in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any Proceeding
or matter which may be subject to indemnification or advancement of Expenses
covered hereunder. The failure of Indemnitee to so notify the Company shall not
relieve the Company of any obligation which it may have to the Indemnitee under
this Agreement or otherwise.
Section 21. NOTICES. All notices, requests, demands or other
communications hereunder shall be in writing and shall be deemed to have been
duly given if (i) delivered by hand and receipted for by the party to whom said
notice or other communication shall have been direct, or (ii) mailed by
certified or registered mail with postage prepaid, on the third business day
after the date on which it is so mailed:
(a) If to Indemnitee to:
Address set forth below Indemnitee's signature.
(b) If to the Company to:
The Grand Union Company
Attn: General Counsel
201 Willowbrook Blvd., 9th Floor
Wayne, New Jersey 07470-0966
or to such other address as may have been furnished to Indemnitee by the Company
or to the Company by Indemnitee, as the case may be.
Section 22. CONTRIBUTION. To the fullest extent permissible under
applicable law, if the indemnification provided for in this Agreement is
unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of
indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee,
whether for judgments, fines, penalties, excise taxes, amounts paid or to be
paid in settlement and/or for Expenses, in connection with any claim relating to
an indemnifiable event under this Agreement, in such proportion as is deemed
fair and reasonable in
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<PAGE>
light of all of the circumstances of such Proceeding in order to reflect (i) the
relative benefits received by the Company and Indemnitee as a result of the
event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the
relative fault of the Company (and its directors, officers, employees and
agents) and Indemnitee in connection with such event(s) and/or transaction(s).
Section 23. GOVERNING LAW; SUBMISSION TO JURISDICTION; APPOINTMENT OF
AGENT FOR SERVICE OF PROCESS. This Agreement and the legal relations among the
parties shall be governed by, and construed and enforced in accordance with, the
laws of the State of Delaware, without regard to its conflict of laws rules.
Except with respect to any arbitration commenced by Indemnitee pursuant to
Section 10(a) of this Agreement, the Company and Indemnitee hereby irrevocably
and unconditionally (i) agree that any action or proceeding arising out of or in
connection with this Agreement shall be brought only in the Chancery Court of
the State of Delaware (the "Delaware Court"), and not in any other state or
federal court in the United States of America or any court in any other country,
(ii) consent to submit to the exclusive jurisdiction of the Delaware Court for
purposes of any action or proceeding arising out of or in connection with this
Agreement, (iii) appoint, to the extent such party is not a resident of the
State of Delaware, irrevocably [RL&F Service Corp., One Rodney Square, 10th
Floor, 10th and King Streets, Wilmington, Delaware 19801] as its agent in the
State of Delaware for acceptance of legal process in connection with any such
action or proceeding against such party with the same legal force and validity
as if served upon such party personally within the State of Delaware, (iv) waive
any objection to the laying of venue of any such action or proceeding in the
Delaware Court, and (v) waive, and agree not to plead or to make, any claim that
any such action or proceeding brought in the Delaware Court has been brought in
an improper or otherwise inconvenient forum.
Section 24. MISCELLANEOUS. Use of the masculine pronoun shall be deemed
to include usage of the feminine pronoun where appropriate.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
ATTEST: THE GRAND UNION COMPANY
____________________________________ By: ________________________________
Name: Name:
Title:
ATTEST: INDEMNITEE
____________________________________ By: ________________________________
-14-
<PAGE>
Name: Name:
Title:
Address:
-15-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS 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-29-1997
<PERIOD-START> MAR-31-1996
<PERIOD-END> JUL-20-1996
<CASH> 33,265
<SECURITIES> 0
<RECEIVABLES> 31,928
<ALLOWANCES> 0
<INVENTORY> 134,914
<CURRENT-ASSETS> 213,766
<PP&E> 827,886
<DEPRECIATION> 352,626
<TOTAL-ASSETS> 1,165,382
<CURRENT-LIABILITIES> 189,004
<BONDS> 743,835
0
0
<COMMON> 10,000
<OTHER-SE> (9,668)
<TOTAL-LIABILITY-AND-EQUITY> 1,165,382
<SALES> 726,823
<TOTAL-REVENUES> 726,823
<CGS> 504,924
<TOTAL-COSTS> 504,924
<OTHER-EXPENSES> 237,863
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,287
<INCOME-PRETAX> (48,251)
<INCOME-TAX> (4,439)
<INCOME-CONTINUING> (43,812)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (43,812)
<EPS-PRIMARY> (4.38)
<EPS-DILUTED> 0
</TABLE>
