SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. 1)
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
THE GRAND UNION COMPANY
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
The Grand Union Company
201 Willowbrook Boulevard
Wayne, New Jersey 07470-0966
November 3, 1997
To our Stockholders:
You are cordially invited to attend the 1997 Annual Meeting of Stockholders
of The Grand Union Company, to be held Thursday, November 20, 1997, at 10:00
a.m. at the Sheraton Crossroads Hotel, One International Boulevard, Mahwah, New
Jersey 07495. The formal notice and proxy statement for the Annual Meeting are
attached to this letter.
It is important that your shares be represented at the Annual Meeting.
Accordingly, whether or not you plan to attend the meeting, we urge you to
complete, date and sign the enclosed proxy card as soon as possible and return
it in the envelope provided.
On behalf of the Board of Directors, I would like to thank you for your
continued support and look forward to seeing you on November 20th.
Sincerely,
J. Wayne Harris
Chairman of the Board and Chief Executive Officer
<PAGE>
The Grand Union Company
201 Willowbrook Boulevard
Wayne, New Jersey 07470-0966
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
November 20, 1997
TO THE STOCKHOLDERS OF THE GRAND UNION COMPANY:
The Annual Meeting of Stockholders of The Grand Union Company (the
"Company") will be held at the Sheraton Crossroads Hotel, One International
Boulevard, Mahwah, New Jersey 07495, beginning at 10:00 a.m. on Thursday,
November 20, 1997, for the following purposes, as more fully described in the
accompanying Proxy Statement:
(1) To elect the following ten (10) nominees to serve as directors: J.
Wayne Harris, Roger E. Stangeland, James J. Costello, Jordan H. Krimstein,
Mark H. Manski, Clifford A. Miller, Geoffrey T. Moore, Gary M. Philbin,
Martha A. Pritchard, J. Richard Stonesifer.
(2) To approve the Associate Stock Purchase Plan (the "ASPP") which
will allow Company associates an opportunity to purchase common stock of
the Company through payroll deduction and direct purchase.
(3) To approve the Executive Annual Incentive Bonus Plan (the "Bonus
Plan") in order to qualify certain incentive compensation under Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), and
the regulations promulgated thereunder.
(4) To approve amendments to the Company's 1995 Equity Incentive Plan
(the "Employee Plan") to increase the number of shares issuable under the
Employee Plan to an aggregate of 6,000,000 and to increase the number of
shares and stock appreciation rights issuable under the Employee Plan to
any individual to an aggregate of 2,000,000.
(5) To ratify the appointment of Price Waterhouse LLP as independent
accountants of the Company for the fiscal year ending March 28, 1998.
(6) To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
Only stockholders of record at the close of business on October 28, 1997,
will be entitled to notice of and to vote at the meeting or any adjournment or
postponement thereof. A list of such stockholders will be available for
examination by any stockholder for purposes germane to the meeting, during
ordinary business hours, for ten (10) days prior to the meeting at the Company's
offices, 201 Willowbrook Boulevard, Wayne, New Jersey, and at the place of the
meeting for the ten (10) days prior to the meeting. The meeting will be open to
all stockholders of record and proxyholders, and to others by invitation only.
Beneficial owners of shares held by a broker or nominee must bring with them or
have delivered to the Company an appropriate proxy from their broker to vote
such shares.
By Order of the Board of Directors
Donald C. Vaillancourt
Corporate Vice President and Secretary
November 3, 1997
<PAGE>
PLEASE USE THE ENCLOSED STAMPED ENVELOPE TO RETURN YOUR PROXY. RETURNING
YOUR PROXY WILL NOT PREVENT YOU FROM VOTING IN PERSON AT THE ANNUAL MEETING.
<PAGE>
THE GRAND UNION COMPANY
201 Willowbrook Boulevard
Wayne, New Jersey 07470
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed Proxy is solicited on behalf of the Board of Directors of The
Grand Union Company, a Delaware corporation (the "Company"), for use at the
Annual Meeting of Stockholders (the "Annual Meeting") to be held at the Sheraton
Crossroads Hotel, One International Place, Mahwah, New Jersey, beginning at
10:00 a.m. on November 20, 1997, and at any adjournment or postponement thereof,
for the purposes set forth herein and in the accompanying Notice of Annual
Meeting of Stockholders.
These proxy solicitation materials, and the Annual Report to Stockholders
for the fiscal year ended March 29, 1997, including financial statements, are
being first mailed on or about November 3, 1997, to all stockholders entitled to
vote at the Annual Meeting.
Record Date and Shares Outstanding
Stockholders of record at the close of business on the record date, October
28, 1997, are entitled to notice of and to vote at the Annual Meeting. The
Company has three classes of voting equity securities outstanding: Common Stock,
$.01 par value ("Common Stock"), Class A Convertible Preferred Stock, $1.00 par
value ("Preferred Stock A"), and Class B Convertible Preferred Stock, $1.00 par
value ("Preferred Stock B" and collectively with the Preferred Stock A, the
"Preferred Stock"). At the close of business on the record date, 10,000,000
shares of Common Stock, 1,300,566 shares of Preferred Stock A and 800,000 shares
of Preferred Stock B were issued and outstanding.
Voting and Revocability of Proxies
Any proxy given in the form accompanying this proxy statement may be
revoked or superseded by the person giving it prior to exercise. A proxy may be
revoked by delivering to the Secretary of the Company a later dated proxy or a
written notice of revocation, or by attending the Annual Meeting and voting in
person. A proxy, when executed and not so revoked, will be voted in accordance
with the instructions given in the proxy. If a choice is not specified in the
proxy, the proxy will be voted "FOR" the nominees for election of directors
named in this Proxy Statement, "FOR" approval of the Associate Stock Purchase
Plan (the "ASPP"), "FOR" approval of the Executive Annual Incentive Bonus Plan
(the "Bonus Plan"), "FOR" the amendments to the 1995 Equity Incentive Plan (the
"Employee Plan"), "FOR" the ratification of the appointment of Price Waterhouse
LLP as the Company's accountants for the current fiscal year, and according to
the discretion of the proxyholders on any other matters that properly come
before the meeting.
Any stockholder present at the meeting may withdraw his or her proxy and
vote in person on each matter brought before the meeting. Stockholders attending
the meeting whose shares are held in the name of a broker or other nominee must
bring with them or cause to be delivered to the Company a proxy from that broker
or nominee in order to vote those shares.
Each holder of shares of Common Stock outstanding at the record date will
be entitled to one vote for each share of Common Stock held, and each holder of
shares of Preferred Stock outstanding on the record date will be entitled to the
number of votes equal to the number of shares of Common Stock into which all
shares of Preferred Stock A or Preferred Stock B held by the same holder are
convertible. Shares of Preferred Stock outstanding on the record date are
convertible
<PAGE>
at a conversion ratio of 6.8966 shares of Common Stock for each share of
Preferred Stock A and at a conversion ratio of 20.8333 shares of Common Stock
for each share of Preferred Stock B. If more than one share of Preferred Stock
is held by any holder of Preferred Stock, the total number of votes which such
holder shall be entitled to cast shall be computed on the basis of conversion of
the total number of shares of Preferred Stock held by such holder, with any then
remaining fractional share disregarded. Any such disregarded fractional shares
will also be disregarded for purposes of determining a quorum, and for purposes
of determining the number of votes necessary to approve a proposal and whether
such proposal has been approved. With respect to the shares outstanding at the
close of business on the record date, holders of the Common Stock are entitled
to an aggregate of 10,000,000 votes, holders of Preferred Stock A are entitled
to an aggregate of 8,969,483 votes and holders of Preferred Stock B are entitled
to an aggregate of 16,666,640 votes for a combined aggregate of 35,636,123 votes
entitled to be cast with respect to matters presented at the Annual Meeting.
Members of the Board of Directors shall be elected by a plurality of the
votes cast, with all shares of Common Stock and Preferred Stock voting together.
The affirmative vote of a majority of the votes cast on the matter by holders of
shares of Common Stock, Preferred Stock A and Preferred Stock B, voting
together, shall be necessary to approve and adopt the ASPP and the Bonus Plan,
to approve and adopt the amendments to the Employee Plan, and to ratify the
appointment of the Company's independent accountants. With respect to any other
matter that may properly come before the Annual Meeting, each holder of shares
of Common Stock or Preferred Stock will generally have the rights described
above, except where applicable law or the Company's Certificate of Designation
of Preferred Stock provide otherwise.
The presence in person or by proxy of shares entitled to cast a majority of
the votes of all outstanding shares is necessary to establish a quorum at the
Annual Meeting. Abstentions and broker non-votes are counted for purposes of
determining the presence or absence of a quorum for the transaction of business.
The effect of abstentions and broker non-votes on the calculation of the
required vote on specific proposals to be brought before the Annual Meeting is
discussed under each proposal, where applicable.
Solicitation of Proxies
The Company will bear the entire cost of solicitation of proxies, including
costs incurred in connection with the preparation, assembly, printing and
mailing of this Proxy Statement, the proxy and any additional information
furnished to the Company's stockholders in relation to the Annual Meeting. The
Company has retained Corporate Investors Communications, Inc. to assist in the
solicitation of proxies for a fee of $4,500, plus reimbursement of out-of-pocket
expenses. In addition, the Company may reimburse brokerage firms and other
persons representing beneficial owners of shares for their expenses in
forwarding solicitation materials to such beneficial owners. Proxies also may be
solicited by certain of the Company's directors, officers and regular employees,
without additional compensation, personally or by telephone, facsimile, telegram
or any other means of communication.
2
<PAGE>
Security Ownership By Certain Beneficial Owners and Management
Set forth below is certain information as of October 15, 1997 (except as
otherwise indicated), regarding the beneficial ownership of the Company's
Preferred Stock and Common Stock by (i) any person known by the Company to
beneficially own more than 5% of any class of voting securities of the Company;
(ii) each director and nominee for director; (iii) each of the Named Executive
Officers (as defined below) identified in the Summary Compensation Table; and
(iv) all directors and executive officers as a group. Included in the table are
shares that the holder has the right to acquire within 60 days from the date
above. Except as indicated otherwise, the Company believes, based on information
furnished by such owners, that the beneficial owners of the Company's Common
Stock and Preferred Stock listed below have sole investment and voting power
with respect to such shares, subject to applicable community property laws.
Unless otherwise indicated, the address for all natural persons listed in the
table below is c/o The Grand Union Company, 201 Willowbrook Boulevard, Wayne,
New Jersey 07470.
Name of Beneficial Owner Amount and
Nature of
Beneficial Percent
Ownership(1) of Class(1)
------------ -----------
Preferred Stock A
- -----------------
Trefoil Capital Investors II, L.P. .......... 620,212(2)(3) 47.69%
GE Investment Private Placement Partners II,
A Limited Partnership ........................ 620,212(3)(4) 47.69%
The Stangeland Family Limited Partnership ...... 60,142(5) 4.62%
Preferred Stock B
- -----------------
Trefoil Capital Investors II, L.P. .......... 400,000(2)(3) 50.00%
GE Investment Private Placement Partners II, 400,000(3)(4) 50.00%
A Limited Partnership
Common Stock
- ------------
Trefoil Capital Investors II, L.P. .......... 12,610,674(2)(3) 35.81%
GE Investment Private Placement Partners II, 12,610,674(3)(4) 35.81%
A Limited Partnership
Zurich Kemper Investments .................. 922,683(6) 9.23%
Putnam Investments, Inc. .................... 3,111,694(7) 31.12%
Putnam Investment Management, Inc. .......... 3,069,741(7) 30.70%
Putnam Diversified Income Trust (High Yield) 539,505(7) 5.40%
Putnam High Yield Trust (Equity Convertible) 1,688,770(7) 16.89%
Merrill Lynch & Co., Inc. ................... 768,827(8) 7.69%
Merrill Lynch Group, Inc. ................... 768,827(8) 7.69%
Princeton Services, Inc. .................... 768,827(8) 7.69%
Fund Asset Management, L.P. ................. 627,434(8) 6.27%
Merrill Lynch Corporate Bond Fund, Inc. ..... 521,389(8) 5.21%
Roger E. Stangeland ......................... 435,775(5)(9) 4.18%
James J. Costello ........................... 8,733(10) *
3
<PAGE>
Clifford A. Miller .......................... 3,333(10) *
Geoffrey T. Moore ........................... 3,333(10) *
J. Richard Stonesifer ....................... 3,333(10) *
J. Wayne Harris ............................. 650,000(11) 6.10%
Gary M. Philbin ............................. 150,000(11) 1.48%
Gilbert C. Vuolo ............................ 26,560(11) *
Francis E. Nicastro ......................... 9,800(11) *
Donald C. Vaillancourt ...................... 13,300(11) *
William E. Kinslow .......................... 5,800(11) *
Joseph J. McCaig ............................ 57,800(12) *
William A. Louttit .......................... 12,906(11) *
Darrell W. Stine ............................ 6,906(13) *
Kenneth R. Baum ............................. 11,720(11) *
All Directors and Executive Officers as a
group (11 persons) .......................... 1,304,167(14) 11.61%
- -----------
* Less than 1%.
(1) Beneficial ownership is determined pursuant to Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") as
applied by Item 403 of Regulation S-K. Pursuant to these rules,
percentage ownership is calculated by including in the numerator and
the denominator for a beneficial owner shares which such owner has the
right to acquire within 60 days.
(2) The general partners of Trefoil Capital Investors II, L.P. ("Trefoil")
are Trefoil Investors II, Inc., a Delaware corporation ("Trefoil II"),
and Sigma Hedge Partners, G.P., a Delaware partnership ("Sigma").
Trefoil II is the managing general partner of Trefoil. The general
partners of Sigma are Delta PT Investors Corporation, a Delaware
corporation ("Delta"), and Epsilon Equities, Inc., a Delaware
corporation ("Epsilon"), each of which is wholly owned by the General
Electric Pension Trust, a New York common law trust ("GEPT"). The
principal executive offices of Trefoil and Trefoil II are located at
4444 Lakeside Drive, Burbank, California 91505. The principal
executive offices of Sigma, Delta, Epsilon and GEPT are located at
3003 Summer Street, P.O. 7900, Stamford, Connecticut 06904. Sigma,
Delta, Epsilon and the Trustees of GEPT each holds shared dispositive
power over the shares of Preferred Stock held by Trefoil and the
shares of Common Stock into which such shares of Preferred Stock are
convertible. Trefoil II holds sole voting power, and Sigma, Delta,
Epsilon and GEPT hold no voting power, with respect to the shares of
Preferred Stock held by Trefoil and the shares of Common Stock into
which such shares of Preferred Stock are convertible.
(3) Trefoil and GE Investment Private Placement Partners II, A Limited
Partnership, a Delaware limited partnership ("GEI" and, collectively
with Trefoil, the "Investors") may be deemed to beneficially own all
of the shares of Preferred Stock held by the Investors due to a
Stockholders Agreement between the Investors pursuant to which the
Investors have each agreed to certain joint action relating to voting
and disposition of the Preferred Stock and the Common Stock issuable
on conversion of the Preferred Stock. Each share of Preferred Stock A
is convertible into 6.8966 shares of Common Stock, and each share of
Preferred Stock B is convertible into 20.8333 shares of Common Stock.
(4) GE Investment Management Incorporated, a Delaware corporation
("GEIM"), serves as the managing general partner of GEI. GEIM is a
wholly owned subsidiary of General Electric Company and a registered
investment advisor. The principal executive offices of GEI, GEIM and
General Electric Company are located at
4
<PAGE>
3003 Summer Street, P.O. Box 7900, Stamford, Connecticut 06904. GEIM
is the managing general partner of GEI and holds sole voting power.
(5) The Roger and Lilah Stangeland Living Trust (the "Trust") serves as
general partner for The Stangeland Family Limited Partnership, a
limited partnership for the benefit of Roger and Lilah Stangeland (the
"Stangeland Partnership"). Mr. Stangeland and his wife serve as
co-trustees of the Trust. Pursuant to a stockholder agreement among
the Company, the Investors and the Stangeland Partnership, the
Stangeland Partnership has granted to the Investors certain take-along
rights, and the Investors have granted to the Stangeland Partnership
certain tag-along rights, with respect to such shares. Solely to the
extent any of such take-along or tag-along rights may be exercised,
the Stangeland Partnership and the Investors share dispositive power
with respect to such shares. Mr. Stangeland shares with his wife
voting and dispositive power with respect to all shares held by the
Stangeland Partnership.
(6) Such information is as of December 31, 1996 and is based upon the
information provided in the Schedule 13G filed by Zurich Kemper
Investments, Inc. on February 12, 1997.
(7) Such information is as of December 31, 1996 and is based upon the
information provided in the Schedule 13G filed by Putnam Investments,
Inc., Putnam Investment Management, Inc., Putnam Diversified Income
Trust, and Putnam High Yield Trust (Equity Convertible) on January 29,
1997. Putnam Investments, Inc. wholly owns the registered investment
adviser Putnam Investment Management, Inc. Shares of Common Stock
beneficially owned by Putnam Investments, Inc. consist of shares held
by various investment funds and other institutional investors for
which Putnam Investment Management, Inc., or affiliated entities act
as investment advisers, including but not limited to shares held by
Putnam Diversified Income Trust, whose holdings are also separately
reported in the table. The address for each of the Putnam entities is
One Post Office Square, Boston, MA 02109. All of such shares are held
with shared dispositive power and no voting power.
(8) Such information is as of December 31, 1996 and is based upon the
information provided in the Schedule 13G filed by Merrill Lynch & Co.,
Inc., Merrill Lynch Group, Inc., Princeton Services, Inc., Fund Asset
Management, L.P. and Merrill Lynch Corporate Bond Fund, Inc. on
January 31, 1997. Merrill Lynch & Co., Inc. ("ML&Co.") and Merrill
Lynch Group, Inc. ("ML Group") are parent holding companies, Fund
Asset Management, L.P., ("FAM") is a registered investment advisor and
Merrill Lynch Corporate Bond Fund, Inc. (the "Fund") is a registered
investment company. Shares of Common Stock beneficially owned by
ML&Co. and ML Group consist of shares held by holdings of the Fund and
various other investment funds and investment companies for which FAM
and other entities affiliated with ML&Co. and ML Group act as
investment advisors. The address of each of ML&Co. and ML Group is
World Financial Center, North Tower, 250 Vesey Street, New York, New
York 10281, and the address of each of FAM, Princeton Services, Inc.,
and the Fund is 800 Scudders Mill Road, Plainsboro, New Jersey 08536.
All of such shares are held with shared voting and dispositive power.
(9) Such shares consist of (i) 6,000 shares subject to acquisition by Mr.
Stangeland pursuant to options exercisable under the 1995 Non-Employee
Directors' Stock Option Plan, (ii) 10,000 shares of Common Stock owned
by the Stangeland Partnership, (iii) 414,775 shares of Common Stock
into which the shares of Preferred Stock A owned by the Stangeland
Partnership are convertible, and (iv) 5,000 shares of Common Stock
owned by The Roger E. and Lilah M. Stangeland Foundation (the
"Foundation"). Mr. Stangeland has sole voting and dispositive power
with respect to the shares held by the Foundation.
(10) Represents shares subject to acquisition pursuant to options
exercisable under the 1995 Non-Employee Directors' Stock Option Plan,
and, for Mr. Costello, 5,400 additional shares that he purchased
outright.
5
<PAGE>
(11) Represents shares subject to acquisition pursuant to options
exercisable under the Employee Plan, and, for Mr. Harris, 50,000
additional shares that he purchased outright.
(12) Includes 47,800 shares subject to acquisition pursuant to options
exercisable under the Employee Plan.
(13) Includes 3,906 shares subject to acquisition pursuant to options
exercisable under the Employee Plan.
(14) Includes 799,660 shares subject to acquisition pursuant to options
exercisable under the Employee Plan and 19,332 shares subject to
acquisition pursuant to options exercisable under the 1995
Non-Employee Directors' Stock Option Plan.
PROPOSAL ONE
ELECTION OF DIRECTORS
Director Nominees and Executive Officers
The names, ages and present principal occupations of the directors and
executive officers of Grand Union as of October 15, 1997, are set forth below.
<TABLE>
<CAPTION>
Name Age Positions
- ---- --- ---------
<S> <C> <C>
J. Wayne Harris...................... 58 Director, Chairman and Chief Executive Officer
Gary M. Philbin...................... 40 Director, President and Chief Merchandising Officer
Jeffrey P. Freimark.................. 42 Executive Vice President, Chief Financial and Administrative
Officer
Gilbert C. Vuolo..................... 53 Senior Vice President, Human Resources and Labor Relations
Francis E. Nicastro.................. 55 Corporate Vice President and Treasurer
Donald C. Vaillancourt............... 53 Corporate Vice President, Public Affairs Counsel and
Secretary
Roger E. Stangeland.................. 68 Director
James J. Costello.................... 67 Director
Jordan H. Krimstein.................. 67 Director
Mark H. Manski....................... 46 Director
Clifford A. Miller................... 68 Director
Geoffrey T. Moore.................... 40 Director
Martha A. Pritchard.................. 42 Director
J. Richard Stonesifer................ 61 Director
</TABLE>
Mr. Harris has been a Director, Chairman and Chief Executive Officer of the
Company since August 1, 1997. From September, 1992 until joining the Company,
Mr. Harris served as: Senior Vice President, North East Operations, The Great
Atlantic and Pacific Tea Company ("A&P"), a leading supermarket chain; Executive
Vice President and Chief Operating Officer for A&P's US Operations; and, most
recently, Chairman and Chief Executive Officer of A&P Canada, Ltd. Between 1986
and 1992, Mr. Harris was President of the Cincinnati/Dayton Division of the
Kroger Company.
6
<PAGE>
Mr. Philbin has been a Director of the Company since October 30, 1997, and
was elected President and Chief Merchandising Officer of the Company on October
3, 1997. From June, 1996 until joining the Company, Mr. Philbin was Executive
Vice President in charge of Merchandising and Operations for the Cub Food Store
Division of SuperValu, Inc. Before joining Cub Foods, Mr. Philbin was Vice
President of Merchandising with the Waldbaum's Division of A&P from July, 1993.
Prior to his employment with Waldbaum's, Mr. Philbin served in merchandising and
operations capacities with the Kroger Company commencing in January, 1990.
Mr. Freimark was named Executive Vice President, Chief Financial and
Administrative Officer of the Company on March 3, 1997. Prior to joining the
Company, Mr. Freimark served as Executive Vice President and Chief Financial
Officer of Pueblo Xtra International, Inc., a leading supermarket chain in the
Commonwealth of Puerto Rico and the Territory of the U.S. Virgin Islands, from
1992 and as Senior Vice President, Finance, Administration and Treasurer
beginning in 1986. Prior to that he was Vice President-Finance and Corporate
Secretary of Kings Super Markets, Inc., a New Jersey supermarket chain.
Mr. Vuolo was appointed Senior Vice President, Human Resources and Labor
Relations, effective April 1, 1996. Prior to that, he served as Corporate Vice
President, Personnel and Labor Relations, and Vice President, Labor Relations,
from 1989 to 1994. Mr. Vuolo has been with the Company for 35 years.
Mr. Nicastro has been Corporate Vice President and Treasurer of the Company
since September 1989. Prior to that, he spent 20 years with the Singer Company,
the last three of which were as Treasurer.
Mr. Vaillancourt has been Corporate Vice President, Public Affairs Counsel
and Secretary since June, 1997. Prior to that he served in the following
capacities with the Company: effective January, 1985 - Corporate Vice President,
Corporate Communications and Consumer Affairs; effective February, 1980 - Vice
President, Corporate Communications and Consumer Affairs; effective October,
1976 - Director, Corporate Communications and Consumer Affairs; and effective
December, 1971 - Assistant to the Director of Public Relations.
Mr. Costello has been a Director of the Company since September 17, 1996.
Mr. Costello was employed with the General Electric Company, a conglomerate, for
35 years, and as Comptroller (Chief Accounting Officer) for 12 years prior to
his retirement in 1992.
Mr. Krimstein has been a Director since October 30, 1997. Mr. Krimstein
currently serves as the National President of the School of the Art Institute of
Chicago Alumni Association and is a member of the School's Board of Governors.
In 1995, Mr. Krimstein retired from his position as Executive Vice President and
Executive Creative Director for the Chicago office of Campbell, Mithun, Esty,
Inc., a large advertising agency headquartered in Minneapolis, Minnesota. Mr.
Krimstein was with Campbell, Mithun, Esty, Inc. for 38 years in a variety of
positions.
Mr. Manski has been Director since October 30, 1997. Mr. Manski has been
President and Founder of the RoundHill Group, Ltd., since 1994. The firm
specializes in strategic, operational, management and financial advisory
services to middle market companies. From 1993 to 1994, Mr. Manski was President
and Chief Executive Officer of The Direct Marketing Group, Inc. ("DMG"), a large
independent full service direct response marketing firm. From 1983 until joining
DMG, Mr. Manski was with IBJ Schroder Bank & Trust Company, where he was a
Senior Vice President and deputy head of the bank's Credit Division.
Mr. Miller has been a Director of the Company since September 17, 1996. Mr.
Miller has served as a Senior Consultant to Shamrock Holdings, Inc. since 1978.
From December 1986 through December 1991, Mr. Miller served as an Executive Vice
President and a Director of Great Western Financial Corporation and Great
Western Bank, both financial institutions. Mr. Miller currently serves as a
Director of First American Corporation.
7
<PAGE>
Mr. Moore has been a Director of the Company since September 17, 1996. Mr.
Moore has been a Managing Director of Shamrock Capital Advisors, Inc., an
investment management company, since March 1992. From 1985 to 1992 he was an
investment banker with PaineWebber Incorporated. He currently serves as a
Director of Cascadian Farms, Inc., an organic foods manufacturer.
Ms. Pritchard has been a Director since October 30, 1997. Ms. Pritchard is
a Principal of Bick Capital Advisors, Inc., a financial advisory firm. From 1995
to 1997, Ms. Pritchard was a founding partner and Managing Director, Head of
High Yield Bond Sales for Toronto Dominion Securities (USA), Inc. From 1991 to
1994, Ms. Pritchard was Vice President, High Yield Bond Sales with Salomon
Brothers, Inc. Prior to that , Ms. Pritchard worked with Dillon, Read & Co.,
Inc., Salomon Brothers, Inc, and The Bank of New York.
Mr. Stangeland has been Chairman Emeritus since August 1, 1997, and a
Director of the Company since June 15, 1995. Mr. Stangeland also served as
Chairman of the Company from June 15, 1995 until August 1, 1997 and as the
Company's interim Chief Executive Officer from May 1997 until August 1, 1997.
From May 1994 to April 1997, Mr. Stangeland was a Director and Chairman Emeritus
of The Vons Companies, Inc. ("Vons"), a large supermarket chain based in
Southern California. From January 1986 through May 1994, he was Chief Executive
Officer and Chairman of the Board of Vons. Mr. Stangeland is a past Chairman of
the Board of the Food Marketing Institute, a national supermarket trade
organization.
Mr. Stonesifer has been a Director of the Company since September 17, 1996.
Mr. Stonesifer was employed with the General Electric Company, a conglomerate,
for 37 years, serving most recently as President and Chief Executive Officer of
GE Appliances, and an executive officer and Senior Vice President of the General
Electric Company, from January 1992 until his retirement in 1996.
Executive officers of the Company are appointed and serve at the discretion
of the Board of Directors. Each director of the Company is elected for a period
of one year and will serve until his successor is duly elected and qualified.
In addition, the following individuals served as directors or executive
officers of the Company during Fiscal 1997:
<TABLE>
<CAPTION>
Name Positions Served through
- ---- --------- --------------
<S> <C> <C>
William E. Kinslow......................... Corporate Vice President, Management Information Systems October 3, 1997
William G. Kagler........................... Director August 26, 1997
Daniel E. Josephs. Director August 8, 1997
David Y. Ying............................... Director July 28, 1997
John W. Schroeder........................... Vice President, General Counsel and Secretary May 15, 1997
Joseph J. McCaig........................... Director, President and Chief Executive Officer May 7, 1997
Darrell W. Stine........................... Executive Vice President-Operations March 29, 1997
William A. Louttit......................... Executive Vice President and Chief Operating Officer February 18, 1997
Director September 17, 1996
Kenneth R. Baum............................ Senior Vice President, Chief Financial Officer and Secretary January 3, 1997
Douglas T. McClure, Jr..................... Director September 17, 1996
</TABLE>
8
<PAGE>
Nominees
Ten (10) directors have been nominated for election at the Annual Meeting.
Unless otherwise instructed, the proxy holders will vote the proxies received by
them for the ten (10) nominees named below, all of whom are currently directors
of the Company. If any such nominee is unable or declines to serve as a director
at the time of the Annual Meeting, the proxies will be voted for any nominee who
the proxy holders in their discretion may designate to fill the vacancy. The
Company is not aware of any nominee who will be unable or will decline to serve
as a director. The term of office for each person elected as a director will
continue until the next Annual Meeting of Stockholders or until his successor
has been elected and qualified.
The election of directors shall be by the affirmative vote of the votes
represented by shares present in person or represented by proxy at the Annual
Meeting, with Common Stock and Preferred Stock voting together. The ten persons
receiving the greatest number of votes will be elected as directors. There is no
cumulative voting. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION
OF ALL THE FOLLOWING NOMINEES FOR ELECTION AS DIRECTOR: J. Wayne Harris, Roger
E. Stangeland, James J. Costello, Jordan H. Krimstein, Mark Manski, Clifford A.
Miller, Geoffrey T. Moore, Gary M. Philbin, Martha A. Pritchard, J. Richard
Stonesifer.
Board Meetings and Committees
From June 15, 1996 until September 17, 1996, the Board was composed of
Messrs. Stangeland, McCaig, Josephs, Kagler, Louttit, Ying and McClure. Pursuant
to the Stock Purchase Agreement (as defined below) Mr. Louttit and Mr. McClure
resigned from the Board effective September 17, 1996, and Messrs. Costello,
Miller, Moore, and Stonesifer were elected by the remaining directors. Since the
end of the fiscal year ended March 29, 1997, Messrs. McCaig, Ying, Josephs and
Kagler have each resigned from the Board, effective May 7, 1997, July 28, 1997,
August 8, 1997, and August 26, 1997, respectively. Each director serves until
the next annual meeting of stockholders or until his successor is duly elected
and qualified or until his earlier death, resignation or removal.
The Board of Directors of the Company held sixteen (16) meetings during the
fiscal year ended March 29, 1997. During the fiscal year ended March 29, 1997,
each incumbent director attended at least 75% of the aggregate of the number of
meetings of the Board and the number of meetings held by all committees of the
Board on which he served.
The Board of Directors has a Compensation Committee and an Audit Committee,
but does not have a nominating committee. Instead, the Board of Directors, as a
whole, identifies and screens candidates for membership on the Company's Board
of Directors.
The Audit Committee reviews the results and scope of audits and other
services provided by the Company's independent auditors and considers other
matters related to the financial condition of the Company. During the fiscal
year ended March 29, 1997, the Audit Committee held a total of three (3)
meetings. At the close of the fiscal year ended March 29, 1997, the Audit
Committee consisted of Mr. Costello (chairman), Mr. Josephs, and Mr. Ying. The
Company anticipates that, if elected, Mr. Costello (chairman), Mr. Krimstein and
Ms. Pritchard will serve on the Audit Committee.
The Compensation Committee sets the compensation for the chief executive
officer, makes recommendations concerning salaries and incentive compensation
for executive officers and key personnel and administers the Employee Plan and,
if approved, the Bonus Plan. Members of the Compensation Committee are eligible
to receive formula-based awards made under the terms of the 1995 Non-Employee
Directors' Stock Option Plan. During the fiscal year ended March 29, 1997, the
Compensation Committee held a total of four (4) meetings. At the close of the
fiscal year ended March 29, 1997, the Compensation Committee consisted of Mr.
Kagler (chairman), Mr. Miller and Mr. Stonesifer. The
9
<PAGE>
Company anticipates that, if elected, Mr. Miller (chairman), Mr. Stonesifer, and
Ms. Pritchard will serve on the Compensation Committee.
Executive Compensation
The following table sets forth compensation paid or accrued by the Company
during the three fiscal years ended March 29, 1997 ("Fiscal 1997"), March 30,
1996 ("Fiscal 1996") and April 1, 1995 ("Fiscal 1995"), to the Company's Chief
Executive Officer, four other executive officers, and two other executive
officers who separated from the Company during Fiscal 1997, whose salary and
bonus exceeded $100,000 for Fiscal 1997 (collectively, the "Named Executive
Officers"), for services rendered to the Company and its subsidiaries in all
capacities during such three fiscal year period:
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
Securities
Underlying All Other
Name and Principal Position Year Salary($) Bonus ($)(1) Options/SARs(#) Compensation ($)(2)
- --------------------------- ---- --------- ------------ --------------- -------------------
<S> <C> <C> <C> <C> <C>
Joseph J. McCaig........... 1997 538,462 39,939 0 13,221
President and Chief 1996 454,310 90,000 47,800 181,786
Executive Officer 1995 502,165 22,493 0 980,968
Darrell W. Stine........... 1997 305,927 8,314 0 8,028
Executive Vice President- 1996 281,142 56,780 19,000 40,070
Operations 1995 257,077 18,000 0 621,911
Gilbert C. Vuolo........... 1997 188,715 0 0 4,920
Senior Vice President, 1996 145,792 29,440 6,560 4,244
Human Resources 1995 132,885 6,231 0 4,450
Francis E. Nicastro........ 1997 160,484 0 0 6,355
Corporate Vice 1996 149,858 36,838 5,800 4,411
President and 1995 133,018 22,011 0 5,090
Treasurer
</TABLE>
10
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
William E. Kinslow......... 1997 147,691 11,062 0 5,821
Corporate Vice 1996 134,399 40,182 5,800 5,460
President, 1995 129,992 25,963 0 5,096
Management Information
Systems
William A. Louttit......... 1997 371,950 13,888 0 590,993
Executive Vice President 1996 354,019 71,540 28,000 82,742
and Chief Operating 1995 335,669 15,037 0 437,355
Officer
Kenneth R. Baum............ 1997 177,931 0 0 224,052
Senior Vice President, 1996 203,654 42,000 11,720 9,392
Chief Financial Officer 1995 152,769 7,154 0 31,691
and Secretary
</TABLE>
- -----------
The "Other Annual Compensation" column was omitted since the aggregate amount of
perquisites and other personal benefits in respect of Fiscal 1997, Fiscal 1996,
and Fiscal 1995 is less than the lower of $50,000 or 10% of the total annual
salary and bonus reported for each of the Named Executive Officers and no other
compensation of the type required to be described in the "Other Annual
Compensation" column was paid in Fiscal 1997, Fiscal 1996, or Fiscal 1995.
(1) Included in the "Bonus" column for Fiscal 1995 are amounts paid during
Fiscal 1996 for performance in Fiscal 1995. All amounts included in the
"Bonus" column for Fiscal 1996 are retention payments paid to the Named
Executive Officers for their remaining in the Company's employ from the
bankruptcy through the end of Fiscal 1996. Included in the "Bonus" column
for Fiscal 1997 are amounts paid during the fiscal year ending March 28,
1998 for performance in Fiscal 1997.
(2) "All Other Compensation" includes the following: (i) contributions to the
Company's Savings Plan under Section 401(k) made by the Company in Fiscal
1997, Fiscal 1996, and Fiscal 1995, respectively, for each of the named
executive officers as follows: Mr. McCaig - $1,875, $1,414, and $1,455; Mr.
Stine - $1,587, $1,563, and $1,547; Mr. Vuolo - $1,598, $1,516, and $1,526;
Mr. Nicastro -$1,543, $520, and $1,482; Mr. Kinslow-$1,506, $1,470, and
$1,486; Mr. Louttit - $1,668, $1,526, and $765; and Mr. Baum - $3,480,
$1,546, and $1,525; and (ii) premium payments for life insurance made by
the Company in Fiscal 1997, Fiscal 1996, and Fiscal 1995, respectively, for
each of the named executive officers as follows: Mr. McCaig - $11,346,
$10,843, and $31,090; Mr. Stine - $6,441, $7,795, and $13,522; Mr. Vuolo -
$3,322, $2,416, and $2,612; Mr. Nicastro - $4,812, $4,811, and $3,891; Mr.
Kinslow-$4,526, $4,315, and $3,990; Mr. Louttit - $3,325, $4,795, and
$10,013; and Mr. Baum - $2,172, $2,741, and $3,302. The Fiscal 1997 amounts
for Messrs. Louttit and Baum include payments connected with their
separation from the Company, in the following amounts: Mr. Louttit-$586,000
and Mr. Baum- $218,400. The Fiscal 1996 and Fiscal 1995 amounts for Messrs.
McCaig, Stine, Louttit, and Baum also include the value of securities
distributed from custodial accounts established pursuant to non-competition
and confidentiality agreements entered into by Messrs. McCaig, Stine,
Louttit, and Baum in August 1993. Such amounts were distributed as a result
of the Company's filing for bankruptcy in 1995, and offset the Company's
obligations to such executives under The Grand Union Company Supplemental
Retirement Program for Key Executives. Such distributions were made in
Fiscal 1996 and Fiscal 1995, respectively, in the following amounts:
11
<PAGE>
Mr. McCaig - $169,217 and $948,423; Mr. Stine - $30,401 and $606,842; Mr.
Louttit - $76,109 and $426,577; and Mr. Baum - $4,793 and $26,864.
Harris Employment Agreement
Mr. Harris, the Company's Chairman and Chief Executive Officer, is employed
by the Company pursuant to a four-year employment agreement dated as of August
1, 1997 (the "Harris Employment Agreement"). Pursuant to the Harris Employment
Agreement, Mr. Harris is entitled to receive (a) an annual salary of $600,000
(prorated during the first and last fiscal years during the term of the
agreement); (b) bonus compensation determined in accordance with the Company's
Bonus Plan (i) for the fiscal year ended March 28, 1998, up to a maximum bonus
equal to 120% of his base salary paid for such period, and subject to a
guaranteed minimum bonus for such period equal to 75% of the base salary
actually paid to him during such period and (ii) during the remaining term of
the Harris Employment Agreement, with a bonus of at least 100% of Mr. Harris's
base salary, subject to achievement by the Company of performance targets
determined by the Compensation Committee of the Company's Board of Directors;
and (c) payment or reimbursement of the costs of maintaining a residence near
the Company's principal executive offices (and/or relocation expenses if Mr.
Harris relocates to a permanent residence near the Company's principal executive
offices) and weekly roundtrip airfare for travel between such residence and
another residence maintained by Mr. Harris.
In connection with the execution of the Harris Employment Agreement, Mr.
Harris was also granted options under the Employee Plan (subject to approval of
an amendment to the Employee Plan hereinafter described in this Proxy Statement)
to purchase an aggregate of 1,250,000 shares of the Company's Common Stock at
the prices and on the terms described herein and in the Employee Plan. Except as
otherwise noted, all of the options are exercisable for ten years from the date
of grant, unless earlier terminated. Such options become exercisable as follows:
(i) options to purchase 500,000 shares at an exercise price equal to $1.375 (the
closing price as reported by NASDAQ-National Market on August 1, 1997), which
became exercisable immediately; (ii) options to purchase 100,000 shares at an
exercise price equal to $1.375, which become exercisable immediately upon
approval by stockholders of the Company of an amendment to the Employee Plan as
described in this Proxy Statement as Proposal Four; (iii) options to purchase
200,000 shares at an exercise price equal to $1.375, which shall become
exercisable if and when the Company shall have earnings before interest, tax,
depreciation and amortization expense ("EBITDA") of an aggregate of at least
$147 million for any 13 continuous 4 week fiscal reporting periods commencing
after August 1, 1997 and ending on or before the end of the Company's fiscal
year ending in 2000; (iv) options to purchase 150,000 shares at an exercise
price equal to $2.375, which become exercisable on and after August 1, 1998; (v)
options to purchase 150,000 shares at an exercise price equal to $3.375, which
become exercisable on and after August 1, 1999; and (vi) options to purchase
150,000 shares at an exercise price equal to $4.375, which become exercisable on
and after August 1, 2000.
Pursuant to the Harris Employment Agreement, Mr. Harris will be credited
with 11 additional years of service for purposes of the Company's Supplemental
Retirement Plan for Key Executives, if he retires at age 62 from the Company. If
Mr. Harris does not complete the term of the Harris Employment Agreement or if
he works additional years after completing the term of the Harris Employment
Agreement, he will be credited with a different number of years of additional
service. Mr. Harris is also entitled to other employee benefits which the
Company believes to be customary for executives in Mr. Harris's position, and he
and the Company have agreed to rights of termination, payments and other
benefits on termination under certain circumstances, confidentiality, and
non-competition, in each case which the Company believes to be customary for
agreements with executives in Mr. Harris's position.
Philbin Employment Agreement
Mr. Philbin, the Company's President and Chief Merchandising Officer,
is employed by the Company pursuant to a four-year employment agreement dated as
of October 3, 1997 (the "Philbin Employment Agreement"). Pursuant to the Philbin
Employment Agreement, Mr. Philbin is entitled to receive (a) an annual salary of
$350,000 (prorated during
12
<PAGE>
the first and last fiscal years during the term of the agreement); (b) bonus
compensation determined in accordance with the Company's Bonus Plan (i) for the
fiscal year ended March 28, 1998 subject to a guaranteed minimum bonus for such
period equal to 100% of the base salary actually paid to him during such period
and (ii) during the remaining term of the Philbin Employment Agreement, with a
bonus target of up to 100% of Mr. Philbin's base salary if the Company achieves
the performance targets determined by the Compensation Committee of the
Company's Board of Directors; and (c) payment or reimbursement of the costs of
travel by Mr. Philbin and his immediate family between the New York/New Jersey
metropolitan area and the Midwestern United States. In connection with the
execution of the Philbin Employment Agreement, Mr. Philbin received an
interest-free loan from the Company in the amount of $225,000, repayable upon
the expiration or earlier termination of the Philbin Employment Agreement.
In connection with the execution of the Philbin Employment Agreement, Mr.
Philbin was also granted options under the Employee Plan (subject to approval of
an amendment to the Employee Plan hereinafter described in this Proxy Statement)
to purchase an aggregate of 450,000 shares of the Company's Common Stock at the
prices and on the terms described herein and in the Employee Plan. Except as
otherwise noted, all of the options are exercisable for ten years from the date
of grant, unless earlier terminated. Such options become exercisable as follows:
(i) options to purchase 150,000 shares at an exercise price equal to $2.125 (the
closing price as reported by NASDAQ-SmallCap Market on October 3, 1997), which
became exercisable immediately; (ii) options to purchase 50,000 shares at an
exercise price equal to $2.125, which shall become exercisable if and when the
Company shall have EBITDA of an aggregate of at least $147 million for any 13
continuous 4 week fiscal reporting periods commencing after October 3, 1997 and
ending on or before the end of the Company's fiscal year ending in 2000; (iii)
options to purchase 100,000 shares at an exercise price equal to $2.875, which
become exercisable on and after October 3, 1998; (iv) options to purchase 75,000
shares at an exercise price equal to $3.625, which become exercisable on and
after October 3, 1999; and (v) options to purchase 75,000 shares at an exercise
price equal to $4.315, which become exercisable on and after October 3, 2000.
Pursuant to the Philbin Employment Agreement, Mr. Philbin is entitled to be
credited with 6 additional years of service for purposes of the Company's
Supplemental Retirement Plan for Key Executives if he is employed by the Company
on October 3, 2001, and is entitled to other employee benefits which the Company
believes to be customary for executives in Mr. Philbin's position, and he and
the Company have agreed to rights of termination, payments and other benefits on
termination under certain circumstances, confidentiality, and non-competition,
in each case which the Company believes to be customary for agreements with
executives in Mr. Philbin's position.
Employment Arrangements with Mr. Freimark
Effective March 3, 1997, the Company hired Jeffrey P. Freimark to serve as
the Company's Executive Vice President, Chief Financial and Administrative
Officer. Pursuant to the terms of a letter dated January 29, 1997, the Company
agreed to pay Mr. Freimark an initial annual base salary in the amount of
$325,000, and a signing bonus in the amount of $150,000. In addition, the
Company agreed that Mr. Freimark will participate in the Company's Bonus Plan,
with a maximum bonus of 48% of his base salary, based on achievement by the
Company of certain financial and/or sales performance targets; provided,
however, that for the fiscal year ending March 28, 1998, the Company guaranteed
Mr. Freimark a minimum bonus payment of $25,000. Mr. Freimark has also been
granted options to purchase 20,000 shares, vesting in equal increments over a
four year period, all exercisable at a price of $3.688. Mr. Freimark is also
eligible for other standard benefits provided to the Company's executive
officers, including participation in the Company's Supplemental Retirement Plan
for Key Executives and the Company's Employee Plan.
13
<PAGE>
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
<TABLE>
<CAPTION>
Name
- ----
Number of Securities Value of
Underlying Unexercised Unexercised In-the-Money
Options/SARs at FY-End(#) Options/SARs at FY-End ($)
------------------------------- -------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
J. McCaig............................................ 47,800 0 0 0
D. Stine............................................. 19,000 0 0 0
G. Vuolo............................................. 6,560 0 0 0
F. Nicastro.......................................... 5,800 0 0 0
W. Kinslow........................................... 5,800 0 0 0
W. Louttit........................................... 28,000 0 0 0
K. Baum.............................................. 11,720 0 0 0
</TABLE>
Pension Plan Table
The table below shows, on a combined basis for The Grand Union Company
Employees' Retirement Plan (the "Retirement Plan"), and The Grand Union Company
Supplemental Retirement Program for Key Executives (the "Supplemental Plan"),
the estimated annual benefit payable upon retirement to specified compensation
and years of service classifications of 5, 10 and 15 or more years of service.
The credited years of service under these plans for Messrs. McCaig, Louttit,
Stine, Baum and Vuolo are 22 years, 20 years, 28 years, 13 years and 22 years,
respectively. The current base compensation set forth in the "salary" column of
the Summary Compensation Table does not differ substantially from covered
compensation under these Plans. The retirement benefits shown are based upon
retirement at age 62 and the payment of a single-life annuity to the employee.
Final Average Years of Service
------------------------------------------
Compensation 5 10 15 or more
------------ -------- -------- ----------
$100,000 .................... $ 21,667 $ 43,333 $ 65,000
150,000 .................... 32,500 65,000 97,500
200,000 .................... 43,333 86,667 130,000
250,000 .................... 54,167 108,333 162,500
300,000 .................... 65,000 130,000 195,000
350,000 .................... 75,833 151,667 227,500
400,000 .................... 86,667 173,333 260,000
450,000 .................... 97,500 195,000 292,500
500,000 .................... 108,333 216,667 325,000
550,000 .................... 119,167 238,333 357,500
600,000 .................... 130,000 260,000 390,000
650,000 .................... 140,833 281,687 422,500
During the fiscal year ending March 29, 1997, Messrs. Louttit, and Baum
separated from the Company and each is eligible for benefits under the terms of
the Retirement Plan. Of the two, only Mr. Louttit was eligible to receive a
Supplemental Plan benefit at retirement. Mr. Louttit received three Supplemental
Plan payments of $178,333.33 on May
14
<PAGE>
1, 1997, July 1, 1997 and September 1, 1997. Mr. Stine retired from the Company
on March 29, 1997, and received a single lump sum payment from the Supplemental
Plan in the amount of $275,601 on April 1, 1997. The Retirement Benefits shown
below are expressed in the form of an annuity commencing at age 65. Note that
the actual Retirement Benefit that each participant eventually receives from the
Retirement Plan may be lower upon application of the statutory benefit
limitations under Section 415 of the Code. In addition, each participant may
elect to receive his Retirement Benefit as early as age 55 (provided the
participant has ten years of service) in an actuarially reduced amount, or under
one of the optional forms of payment.
Retirement Plan
Age 65 Annual
Accrued Benefit
---------------
W. Louttit $141,008
D. Stine $135,145
K. Baum $84,293
F. Nicastro $14,800
W. Kinslow $23,400
The benefits actually payable to an individual executive are reduced, in
some cases substantially, through offsets for primary Social Security benefits
and the actuarial equivalent of the value of securities received by those
executives who received distributions in 1995 and 1994. Below, for each Named
Executive Officer, is the total estimated offset in each case expressed as a
single life annuity payable beginning at age 62 based on the Supplemental Plan's
definition of actuarial equivalence and a 7% interest rate conversion
assumption.
Prior Estimated Annual
Distributions Payment Offset
------------- Amounts
----------------------
Social Total
Security Offset
-------- ------
J. McCaig ................... $209,000 $ 18,000 $227,000
G. Vuolo .................... 0 18,000 18,000
The Grand Union Company Employees' Retirement Plan
The Retirement Plan is a tax-qualified, noncontributory retirement plan,
providing retirement benefits for the Company's eligible salaried and hourly
non-union employees, union employees not covered by other pension plans, and all
of its officers. Under the Retirement Plan, a participant's benefit is generally
1.5% of the average of his or her five consecutive years of highest annual
compensation multiplied by years of service not in excess of 35 minus primary
social security benefits. Benefits under the plan are paid under several
alternatives, including monthly or lump sum payments at the employee's election.
Benefits are normally payable at age 65; however, the plan provides for early
retirement with reduced benefits commencing at age 55. The Code places certain
limits on pension benefits which may be paid under plans qualified under the
Code.
15
<PAGE>
Supplemental Retirement Plan For Key Executives
The Supplemental Plan is a non-qualified pension plan pursuant to which
certain key employees of the Company and its affiliates ("Participants") earn a
supplemental pension in addition to the pension benefit to which they are
entitled under the Retirement Plan. The pension benefit formula under the
Supplemental Plan is expressed as an annual pension, payable monthly (i) if the
Participant is not married on his retirement date, for the Participant's life,
or (ii) if the Participant is married on his retirement date, the same amount as
described in clause (i) for the duration of the Participant's life and
thereafter 50% of such amount for the duration of the life of the Participant's
surviving spouse. The amount of the annual pension payable upon retirement at
age 62 or later is determined as the "target benefit" minus the "plan offsets".
The "target benefit" is an annual pension equal to the product of 4-1/3% of the
Participant's final year's base salary rate in effect immediately prior to his
separation or as may be adjusted by the committee administering the Supplemental
Plan in its sole discretion, multiplied by the Participant's number of years of
actual or deemed credited service (in most cases, up to 15 years) under the
Supplemental Plan. "Plan offsets" for Participants retiring at age 62 or later
are equal to the sum of the Participant's (i) primary Social Security benefits
payable at the later of age 62 or the Participant's actual retirement age, (ii)
benefits under the Retirement Plan payable at the later of age 62 or the
Participant's actual retirement age in the form of a single life annuity, and
(iii) benefits, if any, payable from the qualified retirement plan(s) of the
Participant's previous employer(s). Participants may also retire early (i) at or
after attaining age 50 but prior to attaining age 55, with the consent of the
Company (the consent requirement is waived for a Participant who becomes
disabled or is involuntarily terminated other than for cause), or (ii) at or
after age 55, without any requirement for consent by the Company. For
Participants who retire early, the "target benefit" is reduced by 5% per year
for each year the Participant is under age 62. Supplemental Plan benefits are
payable in an actuarially determined single sum no later than 30 days following
the Participant's date of retirement or other termination of employment. In
general, no Supplemental Plan benefits will be paid to a Participant whose
employment with the Company terminates prior to the Participant's attaining age
50. In May 1995, the Supplemental Plan was modified to provide that (x) in the
case of Mr. McCaig, the base salary would be deemed to be an amount not less
than $500,000 and (y) notwithstanding the general requirement of the
Supplemental Plan, benefits will not be paid to persons who retire prior to age
50, except persons who were participants in the Supplemental Plan prior to April
1, 1995, who will be eligible for early retirement without forfeiture of
benefits under the Supplemental Plan from and after age 47 with Company consent.
Compensation of Directors
Each non-employee director other than Mr. Stangeland receives an annual fee
of $25,000 for serving on the Board, and meeting fees of $1,500 for each Board
meeting attended in person, $750 for each committee meeting attended in person
and each telephonic Board meeting attended, and $375 for each telephonic
committee meeting attended. In addition, the Chairman of the each Committee,
receives $500 for each Committee meeting attended in person as Chairman and $250
for each telephonic committee meeting attended as Chairman. Effective July 1,
1997, Directors other than Mr. Stangeland will receive at least 50% of their
Director fees in Common Stock and, at their election, may receive all such fees
in Common Stock. Directors receive reimbursement of reasonable expenses
incidental to attendance at meetings of the Board of Directors or its
committees.
During the fiscal year ended March 29, 1997, Mr. Stangeland received an
annual retainer of $100,000 for serving as Chairman of the Board (now Chairman
Emeritus). In addition, Mr. Stangeland received a $4,000 daily fee for days
spent at the Company and when undertaking substantial travel on the Company's
behalf, 25% of which is payable in Common Stock. Mr. Stangeland absorbs
incidental expenses incurred when working on the Company's behalf from his
office in California. Mr. Stangeland was paid $351,000 in daily fees with
respect to services performed during Fiscal 1997.
Each non-employee director also receives an automatic initial grant of
options to purchase 5,000 shares of Common Stock, and additional grants to
purchase 1,500 shares with each re-election by stockholders. All options have a
16
<PAGE>
term of ten years and generally become exercisable (i) six months after the
grant date as to one-third of the shares, (ii) 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 (iii) 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. All directors are
reimbursed for expenses incurred on the Company's behalf.
Indemnification Agreements
The Company has entered into indemnification agreements with each of its
directors and executive officers pursuant to which the Company has agreed to
indemnify such persons to the fullest extent permitted by law against expenses,
judgments, fines, penalties or amounts paid in settlement actually and
reasonably incurred by such person in connection with legal proceedings in which
the person was involved by reason of being a director or officer of the Company.
Under current law, such indemnification generally is available if such person
acted in good faith and in a manner he or she reasonably believed to be in the
best interests of the Company and, with respect to criminal proceedings, had no
reasonable cause to believe his or her conduct was unlawful. Under current law,
such person is not indemnified in respect of matters as to which he or she has
been adjudged liable to the Company unless a court determines that, under the
circumstances, he or she is reasonably entitled to such indemnification.
Comparable indemnification rights are also provided pursuant to the Company's
Certificate of Incorporation.
Severance Policy
In May 1995, the Company adopted a severance policy with respect to its
salaried employees whereby a salaried employee whose employment is terminated
without cause or whose employment is constructively terminated is entitled,
except to the extent an employee's employment agreement provides for other
severance arrangements, to receive a lump-sum severance payment equal to (i) in
the case of salaried employees holding the office of President, Executive Vice
President or Senior Vice President (which includes all of the Named Executive
Officers), 18 months' base salary; (ii) in the case of salaried employees
holding the office of Corporate Vice President, 12 months' base salary; (iii) in
the case of salaried employees holding the office of appointed vice president or
director, 6 months' base salary; and (iv) in the case of all other salaried
employees, one week's base salary for each year of service to the Company up to
a maximum of 26 weeks. Constructive termination is defined under the policy to
mean an involuntary transfer that would require relocation outside the Company's
current operating area or (x) with respect to persons holding the position of
chief executive officer, chief operating officer or chief financial officer,
either removal from such position or a reduction in salary of 5% or more in any
year and (y) with respect to any other salaried employee, either a reduction in
salary of 10% or more in any year or a reduction in grade level of more than two
grades in any year.
Change-in-Control Provisions
Under the Company's Employee Plan and 1995 Non-Employee Directors' Stock
Option Plan, certain provisions take effect on a change in control of the
Company. Under both plans, on the twentieth (20th) trading day prior to the
effective date of the change in control, all stock options not otherwise vested
become fully vested, and any restrictions or other conditions applicable to
restricted stock or other incentives awarded under the Employee Plan lapse or
are deemed satisfied and such awards become fully vested and/or immediately
payable. In addition, the value of any canceled award is paid out in cash unless
the award holder receives either (i) the right to acquire the same basket of
cash and securities available to holders of Common Stock, or (ii) if pooling of
interests is a condition of the transaction, an equivalent right in a successor
security which would enable the transaction to qualify for pooling of interests.
Under both plans, a change in control is defined to include: (1) any person,
entity or Group (persons or entities acting together) is or becomes the
beneficial owner of more than 50% of the Voting Stock of the Company (as defined
below); (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)
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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 of Directors or nomination
for election by stockholders was approved by 66-2/3% 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 of Directors then in
office; or (4) any order, judgment or decree of dissolution or split-up of the
Company, and such order remains undischarged or unstayed for a period in excess
of 60 days. For purposes of determining whether a change in control has
occurred, "more than 50% of the Voting Stock" means more than 50% of one or more
classes of stock pursuant to which the holders have the general power to vote
for the election of members of the Board of Directors, and the aggregate of such
classes for which the person, entity or Group holds more than 50% has the power
to elect more than 50% of the members of the Board of Directors.
Stock Price Performance Graph
The following graph shows a comparison of cumulative total returns for
the Company, the Standard & Poors 500 ("S&P 500"), and the Standard & Poors
Retail (Food Chains) Index, for the period that commenced on June 15, 1995, and
ended on March 29, 1997, with data points for June 15, 1995, March 30, 1996, and
March 29, 1997. The graph assumes that all dividends have been reinvested.
Comparison Of Cumulative Total Return
(The Grand Union Company, S&P 500, S&P Retail (Food Chains) Index)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL]
June 15, 1995 March 30, 1996 March 29, 1997
------------- -------------- --------------
The Grand Union Company 100 39 23
S&P 500 100 123 144
S&P Retail (Food Chains) 100 129 137
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Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended (the "Securities
Act"), or the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
that might incorporate future filings, including this Proxy Statement, in whole
or in part, the following report and the above Performance Graph shall not be
incorporated by reference into any such filings, nor shall they be deemed to be
soliciting material or deemed filed with the Securities and Exchange Commission
under the Securities Act, or under the Exchange Act.
Report of the Compensation Committee
During the fiscal year ended March 29, 1997, the Compensation Committee
("Committee") was composed of William Kagler (Chairman), Clifford A. Miller and
J. Richard Stonesifer, three non-employee Directors of the Company and "outside
directors" within the meaning of Section 162(m) of the Code. Presently the
Committee is composed of Mr. Miller (Chairman), Mr. Stonesifer and Ms.
Pritchard. The Committee's primary duties include (i) reviewing the compensation
levels of the Company's officers, including the Chief Executive Officer and
certain other members of management, (ii) administering the Company's incentive
bonus plans, (iii) administering the Employee Plan and, if approved, the Bonus
Plan and (iv) related matters.
Compensation Philosophy and Policies
Historically, the compensation philosophy of the Company has been to
provide a balanced mix of base compensation, annual incentives, and retirement
income, to attract and retain top-quality people who will contribute to the
long-term performance and long-term growth of the Company. Annual and long-term
incentives have been designed to link compensation to corporate and individual
performance, and to align employee interests with stockholder interests. Special
incentives and awards have been provided as circumstances warrant.
During the past several years, the Company has sought to minimize
incremental compensation expense while remaining sufficiently commensurate with
comparable companies to attract and retain key personnel.
During the first two fiscal years following the effective date of the
Company's bankruptcy reorganization plan (i.e., June 15, 1995) the Company's
incentive compensation has been designed to maximize management's efforts in
connection with the Company's organizational restructuring measures and efforts
to secure a significant equity capital infusion.
During the 1997 fiscal year, the Company adopted organizational
restructuring measures which substantially eliminated its regional offices and
consolidated its management functions, thereby reducing the number of employees.
After the end of fiscal 1997, the Company announced additional restructuring
measures designed to significantly further reduce the number of the Company's
administrative employees.
Accordingly, from the effective date of the reorganization through the
latter part of the 1997 fiscal year, the compensation of the Company's executive
officers was intended to reflect the assumption of increased responsibilities by
the executives and the achievement of various financial and managerial
objectives and personal development goals, while maintaining the Company's
ability to attract and retain key personnel and securing management's commitment
to preserving and improving the Company's performance through the transition
period.
Annual Salary
Historically, the annual salaries of the CEO and other executive officers
have been determined by reference to the mid-range of a varying mix of other
supermarket retailers with comparable revenues and/or geographic coverage. In
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July 1994, the CEO, all officers and vice presidents of the Company accepted a
ten percent (10%) reduction in annual salary on the basis of the Company's poor
performance. In May 1995, as part of the Company's Chapter 11 reorganization
proceedings, the CEO's salary/bonus mix was further adjusted, reducing his
annual salary by nearly eight percent (8%) in exchange for opportunities for an
increased bonus. In 1996, the CEO received a $100,000 increase to bring his base
salary to $550,000, thereby restoring his salary to approximately the level paid
to him prior to the July 1994 reductions. The CEO resigned on May 7, 1997,
without receiving a 1997 salary adjustment, although he did receive an annual
performance incentive bonus based on the achievement of certain sales goals for
the 1996/97 fiscal year.
The annual salaries of other executive officers were similarly reduced by
ten percent (10%) in July 1994. In May 1995, as part of the Company's
reorganization proceedings, the annual salaries of the other four Named
Executive Officers were increased by amounts which reflected restoration of
one-half of the prior year's reduction, plus an additional four percent (4%)
market adjustment. The market adjustment was determined based on the average
increases by other large food retailers and manufacturers headquartered in the
same geographic area as the Company. In addition, two executive officers
received promotions which were accompanied by more substantial increases. In May
1996, the executive officers received the remaining one-half restoration of
their 1994 salary reductions as well as an additional four percent (4%) market
adjustment.
Annual Performance Incentives
Annual bonuses are directly dependent on corporate performance, and are
paid semi-annually, based on performance during each half of the fiscal year.
Potential bonuses for the fiscal year ending March 29, 1997, generally were
based on the Company achieving specific measurable financial targets,
principally with respect to the achievement of specified levels of EBITDA
(Earnings Before Interest, Taxes, Depreciation and Amortization) during each of
the two half-year periods. Other elements of performance as to which bonuses
could be achieved by certain officers included specified amounts of net sales
and the results of individual operating units.
The following annual incentive bonuses were earned by and paid to executive
officers with respect to the Company's achievement of certain sales performance
targets for the fiscal year ended March 29, 1997: Mr. McCaig, the Company's
former CEO: $39,938; Mr. Louttit, the Company's former Executive Vice President
and Chief Operating Officer: $13,888; and Mr. Stine, the Company's former
Executive Vice President-Operations: $8,314. No annual incentive bonuses were
paid to executive officers based on the Company's achievement of financial
EBITDA targets for the fiscal year ended March 29, 1997.
Long-Term Incentives
The Company maintains two equity incentive plans, one for non-employee
directors and the other for employees. Grants under these plans provide an
immediate and direct link to stockholder interests. The Company and its
stockholders benefit from the increased morale and productivity that the Company
believes are associated with these grants, as well as the ability to retain key
employees through the vesting provisions contained in the plans. Option grants
to executive officers have been based on the executive's corporate level of
responsibility. To date, executive officers and other employees of the Company
have been granted an aggregate of approximately 3,720,000 stock options, net of
canceled options, since the adoption of the Employee Plan in 1995.
Other Compensation
Executive officers, along with all other eligible employees, participate in
the Company's pension plan, 401(k) plan, and other health and life insurance
benefits. Senior executives, including those individuals who hold the positions
of CEO, Executive Vice President and Senior Vice President, participate in the
Supplemental Plan, which generally
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provides a lump sum retirement benefit of up to 65% of the final year's salary,
reduced by amounts payable through social security, under the company-wide
pension plan and under a predecessor to the Supplemental Plan.
During the 1995/96 fiscal year and during and immediately after the
Company's reorganization, the Company was concerned with retaining key personnel
who might otherwise have been attracted by incentives offered by competitors, or
other business opportunities. Accordingly, prior to the tenure of the current
Compensation Committee, certain executives were promised retention payments,
payable to those executives who remained in the Company's employ through April
1, 1996. Such bonuses were paid on April 4, 1996. The Committee believes these
payments were a material element in securing executive management's commitment
to preserving and improving the Company's performance throughout the bankruptcy
process, and to repositioning the Company during Fiscal 1996. No special bonus
arrangements were in effect during the fiscal year ended March 29, 1997.
Tax Policy
Section 162(m) of the Code ("Section 162(m)") generally limits deductions
for certain executive compensation paid to a "covered employee" (as defined in
Section 162(m) during a taxable year) in excess of $1 million per executive per
taxable year. Certain types of compensation are exempt from such limits on
deductibility if they satisfy the requirements for the performance-based
compensation exemption to Section 162(m).
Compensation paid to executive officers during the last fiscal year did not
exceed the deductibility threshold. The Compensation Committee believes it is
more likely than not that the Company will be able to fully deduct all
compensation paid in the foreseeable future.
The Company has endeavored to structure its long-term and other incentives
to achieve maximum deductibility under Section 162(m) with minimal sacrifices in
flexibility and corporate objectives. To that end, options and stock
appreciation rights granted under the Employee Plan should qualify for the
performance-based compensation exemption to Section 162(m). However, because
long-term incentives allow an individual to concentrate significant compensation
in a single year, and because corporate objectives may not always be consistent
with the requirements for full deductibility, it is conceivable that
circumstances might arise under which some payments will not be deductible under
Section 162(m).
Conclusion
The Compensation Committee believes that long-term stockholder value is
enhanced by corporate and individual performance achievements. Through the plans
described above, during the past fiscal year a significant portion of the
Company's executive compensation was based on corporate performance, with
industry-competitive pay practices establishing a baseline. The Committee
believes equity compensation, in the form of stock options and restricted stock,
is vital to the long-term success of the Company. The Company remains committed
to this policy, recognizing the competitive market for talented executives may
result in highly variable compensation for a particular time period.
Clifford A. Miller
J. Richard Stonesifer
Compensation Committee Interlocks And Insider Participation
The Board of Directors maintains a compensation committee (the
"Compensation Committee") currently consisting of Mr. Miller, Mr. Stonesifer,
and Ms. Pritchard, with Mr. Miller acting as Chairman. Messrs. Miller
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and Stonesifer have served on the Compensation Committee since September 1996.
Messrs. Stangeland and Josephs served on the Compensation Committee from June
1995 until September 1996, and Mr. Kagler served on the Compensation Committee
from June 1995 until August 26, 1997.
No member of the Board participates in decisions regarding his own
compensation as an executive officer of the Company.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and persons who beneficially own more than 10% of a
registered class of the Company's equity securities to file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company on Forms 3,
4, and 5. Officers, directors and greater than 10% beneficial stockholders are
required by rules promulgated by the Securities and Exchange Commission to
furnish the Company with copies of all Section 16(a) reports they file. Based
solely on its review of the copies of reporting forms furnished to the Company,
or written representations of reporting persons, the Company believes that all
filing requirements under Section 16(a) of the Exchange Act applicable to its
directors, officers and any persons holding 10% or more of the Company's Common
Stock with respect to the Company's fiscal year ended March 29, 1997, were
satisfied.
Certain Relationships and Related Transactions
Pre-Bankruptcy Relationships and Transactions
On January 25, 1995, the Company filed a petition under Chapter 11 of the
federal bankruptcy laws. The Company emerged from bankruptcy on June 15, 1995,
the effective date of the bankruptcy court's approval of the Company's
reorganization plan. Prior to June 15, 1995, the Company was a wholly owned
subsidiary of Grand Union Capital Corporation ("Capital"), which in turn was a
wholly owned subsidiary of Grand Union Holdings Corporation ("Holdings").
Holdings was controlled by Miller Tabak Hirsch & Co. ("MTH") and its affiliates,
which also control Penn Traffic.
The following applies to relationships that existed prior to June 15, 1995.
Mr. Gary D. Hirsch served as Chairman and a Director of the Company and also as
Chairman and a Director of Penn Traffic. Mr. Martin A. Fox served as a Director,
Vice President and Assistant Secretary of the Company and Vice Chairman-Finance
and Assistant Secretary of Penn Traffic. Messrs. Hirsch and Fox received
compensation from MTH, of which Mr. Hirsch is a general partner of the managing
partner, and Mr. Fox is Executive Vice President. Messrs. Hirsch and Fox did not
receive salaries from Penn Traffic and did not participate in cash bonus plans
of Penn Traffic, and received no compensation in their capacities as executive
officers or directors of the Company.
Mr. McCaig served as a director of the Company from June 15, 1995 until May
7, 1997. Until May 31, 1995, Mr. McCaig was a member of the Board of Directors
of Penn Traffic, for which he received compensation of $10,000 per annum and
$1,000 per Board of Directors meeting attended. Mr. McCaig became a Director of
Holdings in July 1989 and a Director of Capital in July 1992. He became
President of Holdings and Capital in May 1993. Mr. McCaig served as a Director
of Penn Traffic from September 1992 until May 1995.
Mr. Hirsch is no longer a director of the Company. While he was a director,
he was an indirect beneficiary of the following transactions. Prior to June 15,
1995, MTH was engaged as financial advisor to Penn Traffic and as a financial
advisor to the Company, in the latter case pursuant to an agreement (the "MTH
Agreement"), under which MTH was to have provided certain financial consulting
and business management services to the Company through July 1997. In accordance
with the Company's post-bankruptcy Reorganization Plan, the MTH Agreement was
terminated on June 15, 1995 and the
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Company executed a settlement agreement (the "MTH Settlement Agreement"). The
MTH Settlement Agreement provides for the termination of the MTH Agreement,
payment by the Company of accrued and unpaid fees under the MTH Agreement
through June 15, 1995, and for the indemnification of MTH and certain entities
related to MTH (the "MTH Entities") from certain claims and liabilities, subject
to the terms and limitations set forth in the MTH Settlement Agreement. The
Company deposited $3.0 million relating to the indemnification in escrow on June
15, 1995. During Fiscal 1996, the Company paid $315,000 to MTH, pursuant to the
MTH Agreement. On July 30, 1990, P&C Foods, which is indirectly controlled by
MTH, and the Company entered into an Operating Agreement pursuant to which the
Company acquired the right to operate 13 P&C Foods' stores in New England under
the Grand Union name until July 2000. Pursuant to the Operating Agreement, the
Company agreed to pay P&C Foods a minimum annual fee which will average $10.7
million per year during the ten-year lease term. Pursuant to the terms of the
Operating Agreement, a $15 million prepayment of the annual fee was made to P&C
Foods in connection with the recapitalization of the Company in 1992. The
Operating Agreement was assumed during the Chapter 11 bankruptcy case and will
continue on its current terms. From September 1993 until September 1995, the
Company participated in a program to consolidate the purchasing, storage and
distribution of health and beauty care and general merchandise product with Penn
Traffic. During Fiscal 1996, the Company purchased from Penn Traffic's inventory
of health and beauty care and general merchandise products at cost approximately
$30.1 million for store operations and approximately $12.8 million at the
termination of the agreement.
Post-Bankruptcy Relationships.
Mr. Ying, a director of the Company from June 15, 1995 until July 28, 1997,
was a managing director of Donaldson Lufkin & Jenrette Securities Corporation
("DLJ") from January 1993 to June 1997. During Fiscal 1995 and Fiscal 1996, DLJ
acted as financial advisor to the Informal Committee of certain holders of
Subordinated Notes in connection with the restructuring of the Company and
received compensation from the Company of $1,278,000 for such services.
Near the end of Fiscal 1996, the Company entered into an agreement with DLJ
to provide investment banking services and advice to the Company. During the
term of DLJ's engagement, it had the exclusive right to act as sole managing
underwriter, exclusive placement agent, sole dealer manager or exclusive
solicitation agent with respect to any public offering of the Company's
securities, any private offering of any of the Company's debt securities, or any
exchange offer or refinancing transaction relating to the Company's Senior Notes
or other securities of the Company. The agreement also contains various other
provisions, including an obligation by DLJ to keep confidential certain
information provided to it by the Company, and an obligation by the Company to
indemnify and hold harmless DLJ, its parent and its affiliates, and the
directors, officers, agents, and employees of DLJ, its parent and its affiliates
("Indemnified Persons"), from and against various potential losses and
liabilities arising out of or in connection with misstatements or omissions in
disclosure documents or in connection with advice or services rendered by an
Indemnified Person. In Fiscal 1997, the Company entered into the Stock Purchase
Agreement (referred to below) in connection with which DLJ rendered various
services pursuant to the agreement, including a Fairness opinion. In connection
with the agreement DLJ received aggregate payments of $4,838,000, reflecting a
Transaction Fee of $3,753,000, a Fairness Fee of $1,000,000 (for a fairness
opinion), and reimbursement of expenses in the amount of $85,000. DLJ received
an additional fee of $250,000 for services rendered in connection with
solicitation of consents and waivers from the holders of the Company's Senior
Notes.
In May 1997, the Company entered into an agreement with DLJ to advise a
Committee of Independent Directors (the "Committee") with advice in respect to
the restructuring of obligations under the Stock Purchase Agreement. As
compensation for the services provided to the Committee, the Company paid DLJ
$500,000 in connection with a fairness opinion with respect to the transactions
contemplated by the Acceleration and Exchange Agreement described under "1996
Preferred Stock Purchase" below.
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Mr. Geoffrey T. Moore, a director, is a managing director and executive
officer of Shamrock Capital Advisors, Inc. ("SCA"). Pursuant to a three-year
management services agreement (the "Services Agreement") dated July 30, 1996
between the Company and SCA, SCA shall consult with and provide advice to the
officers and management employees of the Company concerning matters (i) relating
to the Company's financial policies and the development and implementation of
the Company's business plans and (ii) generally arising out of the business
affairs of the Company. The Services Agreement expires by its terms in September
1999. SCA's compensation for such management and consulting services under the
Services Agreement was $300,000 in the fiscal year ending in 1997 and will be
$400,000 for the fiscal year ending in 1998. The Company also reimburses SCA for
its reasonable out-of-pocket costs and expenses incurred in connection with the
performance of its services under the Services Agreement. The Company has agreed
to indemnify SCA against all claims, liabilities, expenses, losses or damages
(or actions in respect thereof) related to or arising out of actions taken (or
omitted to be taken) by SCA pursuant to the terms of the Services Agreement;
provided that such liabilities did not result primarily from actions taken, or
omitted to be taken, by SCA in bad faith or due to SCA's gross negligence or
officers and any persons holding 10% or more of the Company's Common Stock with
respect to the Company's fiscal year ended March 30, 1996, were satisfied.
1996 Preferred Stock Purchase
In a series of related transactions commencing on July 30, 1996, the
Investors have acquired beneficial ownership of an aggregate of approximately
71.61% of the Company's outstanding voting stock. On July 30, 1996, the Company
entered into a definitive agreement (the "Stock Purchase Agreement") to sell
$100 million of Preferred Stock A to the Investors. Each share of the Preferred
Stock A was to be convertible at the option of the holder, at any time, into
6.8966 shares of Common Stock. Pursuant to the Stock Purchase Agreement, the
Investors agreed to purchase, and the Company agreed to sell, an aggregate of
2,000,000 shares of Preferred Stock A at a purchase price of $50 per share in
stages through February 25, 1998. On September 17, 1996, the first stage of the
transaction was closed, and the Investors acquired 800,000 shares of Preferred
Stock A for an aggregate purchase price of $40 million.
At a subsequent closing held on February 25, 1997, the Investors purchased
an additional 400,000 shares of Preferred Stock A for an aggregate purchase
price of $20 million. Additional subsequent closings were scheduled for August
25, 1997 and February 25, 1998 (the "Subsequent Closings"). At the Subsequent
Closings, the Investors would have been required to purchase an additional
800,000 shares of Preferred Stock A for an aggregate purchase price of $40
million.
Pursuant to an Acceleration and Exchange Agreement (the "Acceleration
Agreement"), dated June 12, 1997, among the Company and the Investors, the
Company and the Investors agreed to accelerate the purchase and sale of the
800,000 shares of Preferred Stock A to have occurred at the Subsequent Closings
(the "Accelerated Shares") to June 12, 1997 (the "Accelerated Closing") and to
exchange the Accelerated Shares for 800,000 shares of Preferred Stock B (the
"Exchange"). At the Accelerated Closing, the Company received the $40 million
purchase price for the sale of the Accelerated Shares. Immediately following the
Accelerated Closing, the Investors completed the Exchange pursuant to which they
received an aggregate of 800,000 shares of the Preferred Stock B, in
consideration for their surrender of the Accelerated Shares. Each share of
Preferred Stock B is convertible at the option of the holder, at any time, into
20.8333 shares of Common Stock. This conversion price is to be reset to a
conversion price based upon a 20% premium to the average trading price of Common
Stock during a twenty-day period following the earlier of: (i) three days after
the release of the January 3, 1998 quarterly results, or (ii) February 20, 1998.
Trefoil and GEI obtained the necessary funds to purchase the Preferred Stock
from capital contributions from their respective partners.
At November 3, 1997, the 1,300,566 outstanding shares of Preferred Stock A
were convertible into an aggregate of 8,969,483 shares of Common Stock, and the
800,000 outstanding shares of Preferred Stock B were convertible into an
aggregate of 16,666,640 shares of Common Stock.
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In connection with the closing of the initial purchase by the Investors of
Preferred Stock A, the Company paid to each of SCA (as investment manager for
Trefoil) and GEIM (as investment manager for GEI) a $2,000,000 transaction fee.
The Company has also paid directly, or reimbursed the Investors for, all fees
and expenses incurred by the Investors in connection with the Stock Purchase
Agreement and the transactions contemplated thereby, up to the maximum agreed
amount of $1 million.
Stangeland Preferred Stock Purchase
On March 20, 1997, the Company consummated the sale to The Roger Stangeland
Family Limited Partnership (the "Partnership"), of 60,000 shares of Preferred
Stock A at a purchase price of $50.00 per share (the "Stangeland Shares"),
pursuant to the terms of a Stock Purchase Agreement, dated February 25, 1997, as
amended by Amendment No. 1 thereto dated as of March 20, 1997 (as so amended,
the "Stangeland Stock Purchase Agreement"), between the Company and Mr.
Stangeland. Pursuant to a Stockholder Agreement, dated February 25, 1997 (the
"Stangeland Stockholder Agreement"), among the Investors, Mr. Stangeland and the
Company, Mr. Stangeland has granted to the Investors certain take-along rights,
the Investors have granted to Mr. Stangeland certain tag-along rights, and the
Investors and the Company have granted to Mr. Stangeland certain registration
rights related to the Stangeland Shares and any shares of Preferred Stock A, and
Common Stock, if any, paid as dividends with respect to the Preferred Stock A
(collectively, "Securities"). Pursuant to an Addendum, dated as of March 20,
1997, to the Stangeland Stockholder Agreement, the Partnership has succeeded to
all of the rights, and has assumed all of the obligations, of Mr. Stangeland
pursuant to the Stangeland Stockholder Agreement. The Investors disclaim any and
all beneficial ownership of the Stangeland Shares or any additional Securities
acquired by the Partnership in respect of the Stangeland Shares.
PROPOSAL TWO
ADOPTION OF ASSOCIATE STOCK PURCHASE PLAN
On June 19, 1997, the Board of Directors approved (subject to stockholder
approval at the Annual Meeting) the Company's Associate Stock Purchase Plan (the
"ASPP") covering 1,000,000 shares of Common Stock. The following summary
description of the principal terms of the ASPP does not purport to be complete
and is qualified in its entirety by the full text of the ASPP, a copy of which
is annexed as Appendix A annexed to this Proxy Statement. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE THE ADOPTION OF THE ASSOCIATE
STOCK PURCHASE PLAN.
Purpose
The purpose of the ASPP is to align the interests of the employees of the
Company more closely with the interests of the Company's stockholders, to foster
continued cordial relations with the employees of the Company and to provide
additional compensation to employees in exchange for future service by providing
employees of the Company with an opportunity to purchase shares of Common Stock.
Offering Periods; Investment Limitations
With the exception of the initial offering period, which commences November
1, 1997 and concludes December 31, 1997, employee purchases generally will be
made on a quarterly basis (the initial offering period and each calendar
quarter, an "Offering Period"). Employees who elect to participate in the ASPP
will authorize the Company to withhold a specific amount from each paycheck. In
addition, participants may make additional contributions to purchase shares
pursuant to the ASPP. All contributions, whether made by payroll deduction or by
additional contribution, are subject to the following limitations: (i) no
participant may contribute less than $4 or more than $400 per weekly pay period;
(ii) the sum of all payroll contributions and additional contributions per
participant during an Offering Period shall not exceed
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$5,200; (iii) no participant may purchase shares in excess of $5,200 divided by
85% of the "Fair Market Value" (as defined in the ASPP) of a share of the
Company's Common Stock on the first day of the Offering Period on which the
stock exchange trading the Company's Common Stock is open for trading; (iv) no
contributions may be made after the Participant's employment terminates for any
reason; and (v) no participant may purchase shares at a rate which exceeds
$25,000 of the Fair Market Value of such shares (determined at the time such
option is granted) during each calendar year. If, during a particular Offering
Period, a participant makes contributions in excess of the foregoing
limitations, then the Company will credit such participant for excess
contributions either through the Company's payroll process or by check payable
directly to such participant. In addition, no participant will be permitted to
purchase shares pursuant to the ASPP if, immediately thereafter, such
participant will own stock having five percent or more of the voting power or
value of all classes of stock of the Company or any parent or subsidiary of the
Company.
Eligibility
In order to be eligible to participate in the ASPP for any Offering Period,
an employee must have been continuously employed by the Company during the six
months immediately preceding the commencement of the Offering Period and must
not be on a leave of absence at the beginning of the Offering Period. For
purposes of the ASPP, any eligible employee who is already a participant in the
ASPP and takes a leave of absence shall remain eligible to participate in the
ASPP for a period of ninety (90) days from the date such leave begins. If
otherwise eligible, members of the Board of Directors shall be permitted to
participate in the ASPP. Non-employee Directors and non-employee officers shall
not be permitted to participate in the ASPP.
Purchase Price; Payment
For any Offering Period, shares of Common Stock will be purchased under the
ASPP at a price equal to 85% of the lesser of (i) the Fair Market Value of the
Common Stock on the first day of such Offering Period on which the stock
exchange trading the Company's Common Stock is open for trading and (ii) the
Fair Market Value of the Common Stock on the last day of such Offering Period on
which the stock exchange trading the Company's Common Stock is open for trading.
The Company will maintain an account for each participant to record all
payroll deductions made by such participant during the Offering Period. No
interest shall accrue on such accounts. At the end of each Offering Period, the
Company will utilize the amounts invested by participants both through payroll
deductions and additional contributions to purchase Common Stock (whole and
fractional shares) at the purchase price determined in accordance with the
formula described above, subject in all instances to the purchase limitations
also described above.
Enrollment
In order to participate in the ASPP with respect to an Offering Period, an
employee must enroll in the ASPP not less than fifteen (15) days (seven (7) days
with respect to the initial Offering Period) prior to, and must satisfy all
eligibility requirements as of the first day of the Offering Period. Enrollment
forms will be made available by, and must be returned to, the Company's Benefits
Department or other office designated by the Company. Unless a participant or
the Company terminates a participant's enrollment, enrollment will automatically
carry over from one Offering Period to the next; employees need not re-enroll
with respect to each Offering Period in order to continue participating in the
ASPP.
Termination of Participation and Changes in Contributions
A participant who has enrolled in the ASPP for any Offering Period may
terminate participation in the ASPP by notifying in writing the Company's
Benefits Department or other office designated by the Company not less than
fifteen
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(15) days prior to the effective date of the proposed termination. If a
participant terminates participation in the ASPP during an Offering Period, such
participant's accumulated payroll contributions and additional contributions
will be used to purchase shares at the end of the Offering Period. An employee
shall automatically be deemed to have terminated participation in the ASPP upon
termination of employment for any reason (other than retirement), and the
Company will return to the participant any payroll deductions/contributions made
by such participant during the then-current Offering Period. Any leave of
absence in excess of ninety (90) days shall be considered a termination of
employment for purposes of the ASPP. Upon termination of employment as a result
of retirement (in accordance with the Company's retirement policy), a
participant may withdraw all or a portion of any payroll
deductions/contributions made by such participant during the then-current
Offering Period by notifying in writing the Company's Personnel Benefits
Department or other office designated by the Company not less than fifteen (15)
days prior to the last day of such Offering Period, and any amounts not
withdrawn in such a manner shall be utilized to purchase shares of Common Stock
in accordance with the general terms of the ASPP. An employee who terminates
participation in the ASPP during an Offering Period may not re-enter the ASPP
until the following Offering Period.
Participants may increase or decrease the amount of their payroll
deductions by notifying in writing the Company's Benefits Department or other
office designated by the Company. Such changes must be received by the Company
no later than fifteen (15) days prior to the proposed effective date of the
change.
Shares Covered by the ASPP
A total of 1,000,000 shares of Common Stock may be purchased pursuant to
the ASPP. Such shares may either be treasury or authorized but unissued shares.
In addition, the ASPP authorizes the Company to purchase shares of the Company's
Common Stock in the open market for resale under the ASPP. The number of shares
subject to the ASPP may be subject to adjustment as a result of certain changes
in the capitalization of the Company.
Administration
The ASPP will be administered by the Compensation Committee of the
Company's Board of Directors (the "Committee"). The Committee is authorized to
make, administer and interpret rules and regulations determined by the Committee
to be necessary to administer the ASPP. Any determination, decision or action
made or taken by the Committee in connection with the administration,
interpretation or application of the ASPP will be binding upon all participants.
Pursuant to the ASPP, the Company shall indemnify the members of its Board
of Directors, the members of the Committee, and the participants in the ASPP for
any actions taken or determinations made in good faith by such persons in
connection with the defense of any action, suit or proceedings, or in connection
with any appeal therein resulting from the performance of such persons'
respective duties under the ASPP.
Amendment or Termination
The Board of Directors of the Company may amend or terminate the ASPP at
any time; however, no such amendment or termination shall adversely affect the
rights of any participant with respect to a previously granted option without
such participant's consent. Unless sooner terminated by the Board of Directors,
the ASPP shall terminate upon the first of the following to occur: (i) September
30, 2007 or (ii) the date on which all of the shares reserved for issuance under
the ASPP have been purchased. In the event that the ASPP is terminated prior to
the last day of an Offering Period, such Offering Period shall be deemed to have
ended on the effective date of such termination.
The Board may terminate the ASPP as of the effective date of any "Change of
Control" (as defined by the ASPP) and if the ASPP is so terminated, the Company
will (i) return all contributions that were contributed during the Offering
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Period in which the Change of Control occurred and (ii) pay an amount ("Award
Value") to each participant to compensate for any options that terminated as a
result of the Change of Control equal to (a) the amount by which the average
market price of the Company's Common Stock over the twenty (20) days preceding
the Change of Control exceeds the option price, times (b) the total amount of
contributions made by the participant during the Offering Period in which the
Change of Control occurs divided by the option price. No options will be
terminated and no Award Value will be paid, however, if the participant receives
qualified replacement options or the acquiring company assumes the ASPP and all
outstanding options.
Certain Federal Income Tax Consequences
The statements in the following paragraphs of the principal federal income
tax consequences of options granted under the ASPP are based on statutory
authority and judicial and administrative interpretations, as of the date of
this Proxy Statement, which are subject to change at any time (possibly with
retroactive effect). The law is technical and complex and the discussion below
represents only a general summary.
Federal Income Tax Consequences to Participating Employees. The ASPP is
intended to qualify as an "employee stock purchase plan" within the meaning of
Section 423 of the Code.
Participating employees are subject to current taxation with respect to
amounts withheld from their paychecks pursuant to the ASPP.
A participating employee will realize no taxable income on the Option Grant
Date (as defined in the ASPP) when options are granted under the ASPP. A
participating employee will realize no taxable income on the Purchase Date (as
defined in the ASPP) upon the purchase of shares of Common Stock pursuant to the
exercise of such options. A participating employee's tax basis in such shares of
Common Stock acquired upon exercise of the options will equal the purchase price
for the shares under the terms of the options. A participating employee's
holding period in the shares of Common Stock will begin the day after the date
of exercise of the options.
Upon the sale or other disposition by a participating employee of shares of
Common Stock more than two years after the Option Grant Date of the options and
more than one year after the transfer of shares of Common Stock to such
participating employee (a "qualifying disposition") (or upon the death of a
participating employee at any time while owning the shares of Common Stock), the
participating employee is required to realize ordinary income equal to the
lesser of (i) the excess of (a) the fair market value of the shares of Common
Stock at the time of such disposition or death over (b) the purchase price for
the shares of Common Stock pursuant to the options, or (ii) the excess of (a)
the fair market value of the shares of Common Stock on the Option Grant Date
over (b) the purchase price for the shares of Common Stock pursuant to the
options. To the extent that the participating employee's amount realized on a
qualifying disposition of such shares of Common Stock exceeds the sum of the
participating employee's tax basis in the shares and the amount treated as
ordinary income by the preceding sentence, then that excess will be treated as
long-term capital gain. If the participating employee's amount realized on the
sale of the shares is less than such participating employee's tax basis in the
shares, then the participating employee will recognize a long-term capital loss
on the sale of the shares.
To illustrate the foregoing, assume a participating employee purchases a
share of Common Stock for $4, the fair market value of such share of Common
Stock on the Option Grant Date was $5, and the fair market value of such share
of Common Stock on the Purchase Date was $6. If the share is sold in a
qualifying disposition for $7, the participating employee has ordinary income of
$1 and long-term capital gains of $2. If the share is sold in a qualifying
disposition for $5, the participating employee has $1 of ordinary income and no
long-term capital gains. If the share is sold in a qualifying disposition for
$4.50, the participating employee has ordinary income of $.50 and no long-term
capital gains. If the share is sold in a qualifying disposition for $3.50, the
participating employee has a $.50 long-term capital loss.
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Upon the disposition by a participating employee of shares of Common Stock
within two years after an Option Grant Date or within one year after the
transfer of such shares of Common Stock to such participating employee (a
"disqualifying disposition"), a participating employee will realize ordinary
income equal to the excess of the fair market value of the shares of Common
Stock on the Purchase Date over the purchase price for such shares of Common
Stock. This amount is taxable in the year of the disqualifying disposition even
if the shares of Common Stock are sold at a loss. Any difference between the
amount realized in a disqualifying disposition and the sum of the purchase price
for the shares of Common Stock and the amount required to be treated as ordinary
income from the disqualifying disposition gives rise to capital gain or loss, as
the case may be, which gain or loss will be long-term if the shares have been
held for more than one year at the time of sale.
To illustrate a disqualifying disposition, assume the share of Common Stock
was purchased for $4, its fair market value on the Option Grant Date was $5, and
its fair market value on the Purchase Date was $6. If there is a disqualifying
disposition in which such share of Common Stock is sold for $7, then the
participating employee has ordinary income of $2 and capital gain of $1. If the
disqualifying disposition is a sale for $5, then the participating employee has
ordinary income of $2 and a capital loss of $1. If the disqualifying disposition
is a sale for $4.50, then the participating employee has ordinary income of $2
and a $1.50 capital loss. If the disqualifying disposition is a sale for $3.50,
then the participating employee has ordinary income of $2 and a capital loss of
$2.50.
Federal Income Tax Consequences to the Company. The Company is not entitled
to any deduction in connection with the purchase or sale of shares of Common
Stock, other than in connection with a disqualifying disposition. Upon a
disqualifying disposition of shares of Common Stock, the Company generally is
entitled to a deduction equal to the amount of ordinary income required to be
realized by the participating employee
Administrative Matters
The Company will receive no consideration from the grant of options under
the ASPP. The amounts received by the Company upon the purchase of shares of its
Common Stock pursuant to the ASPP will be considered part of the general assets
of the Company and will be used for general corporate purposes.
No current directors who are not employees will receive any benefit as a
result of adoption of the ASPP. The benefits that will be received as a result
of the adoption of the ASPP by the current executive officers of the Company and
by all eligible employees are not currently determinable. As of October 1, 1997,
approximately 15,000 employees of the Company would be eligible to participate
in the ASPP had it been implemented on that date.
PROPOSAL THREE
APPROVAL OF EXECUTIVE ANNUAL INCENTIVE BONUS PLAN
The Board of Directors adopted The Grand Union Company Executive Annual
Incentive Bonus Plan (the "Bonus Plan") on July 31, 1997 subject to approval by
the Company's stockholders. The Company is seeking stockholder approval of the
Executive Bonus Plan to qualify compensation paid under it with respect to
fiscal years beginning after August 1, 1997 as "qualified performance-based
compensation," as defined in Section 162(m) of the Code and thereby retain its
tax deductibility. The following summary description of the principal terms of
the Executive Bonus Plan does not purport to be complete and is qualified in its
entirety by the full text of the Executive Bonus Plan, a copy of which is
annexed as Appendix B annexed to this Proxy Statement. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE THE EXECUTIVE ANNUAL INCENTIVE
BONUS PLAN.
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Eligibility; Administration.
Eligibility for participation in the Bonus Plan is limited to the executive
officers of the Company or its subsidiaries designated as participants in the
Bonus Plan by a committee composed of two or more "outside directors" (as
defined under Section 162(m)) (the "Committee"). The Bonus Plan will be
administered by the Committee. Prior to, or within the first 25% of each
performance period (which generally will coincide with the Company's fiscal
year), the Committee will designate those executive officers who will
participate in the Bonus Plan during such performance period, establish the
targeted bonus percentage for each participant and establish the Performance
Thresholds (as described below) for such performance period.
Bonus Formula; Limitations.
Bonuses under the Bonus Plan will be determined in accordance with a
pre-established formula. For each performance period, each participant will
receive a bonus in an amount not greater than his or her base pay, multiplied by
the participant's targeted bonus percentage, multiplied by the participant's
Performance Factor. A participant's Performance Factor will be a percentage that
is directly and specifically tied to one or more of the following business
criteria (the "Performance Criteria"), determined with respect to the
participant, a business unit of the Company or the Company and its subsidiaries:
consolidated pre-tax earnings; net revenues; net earnings; operating income;
earnings before interest and taxes; cash flow; return on equity; return on net
assets employed; earnings per share stock price; market share; earnings before
interest, taxes, depreciation and amortization; pre-tax income before allocation
of corporate overhead and bonus; budget; division, group or corporate financial
goals; attainment of strategic and operational initiatives; appreciation in
and/or maintenance of the price of the Common Stock or any other publicly traded
securities of the Company; gross profits; economic value-added models;
comparisons with various stock market indices or peer-company groups; and/or
reductions in cost -- for the applicable performance period, all as computed
(where applicable) in accordance with generally accepted accounting principles.
The Performance Factor will equal 50% if the minimum Performance Threshold set
by the Committee is met, 100% if the target Performance Threshold is met and
125% if the maximum Performance Threshold is met or exceeded. The Performance
Factor will be interpolated on a straight line basis for performance between the
minimum and target, and target and maximum Performance Thresholds. The
Performance Thresholds will be established by the Committee based on the
Performance Criteria for the applicable Performance Period.
No participant will receive a bonus for any performance period in which the
applicable minimum Performance Threshold is not met. The Committee has the
authority to reduce the amount of or eliminate any bonus otherwise payable under
the Bonus Plan, but does not have the power to increase the amount of an award
as determined pursuant to the pre-established formula. The maximum bonus that a
participant can receive under the Bonus Plan for any performance period is
$1,000,000. The Bonus Plan is in addition to, not in lieu of, any other employee
benefit plan or program in which any participant may be or become eligible to
participate.
Time and Form of Payment.
Following the close of each performance period and prior to payment of any
bonus under the Bonus Plan, the Committee must certify in writing the
Performance Factor based on the actual performance for that performance period.
Benefits will be paid to participants within thirty days after the Committee has
certified in writing the Performance Factor for that performance period.
Amendment and Termination.
The Committee may amend the Bonus Plan at any time and may terminate or
curtail the benefits thereunder with regard to persons expecting to receive
benefits in the future and with regard to persons already receiving benefits at
the time of such action.
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PROPOSAL FOUR
APPROVAL OF AMENDMENTS TO THE 1995 EQUITY INCENTIVE PLAN
The Board of Directors has adopted amendments (the "Amendments") to the
1995 Equity Incentive Plan of The Grand Union Company (as amended in the 1996
Proxy Statement, the "Employee Plan"). The Company is seeking stockholder
approval of the Amendments so that (i) compensation attributable to a stock
option or stock appreciation right will be considered "qualified
performance-based compensation" as defined in Section 162(m) and thereby retain
its tax deductibility , (ii) to permit future options granted under the Employee
Plan to qualify as incentive stock options (as defined below), (iii) to increase
the aggregate number of shares issuable under the Employee Plan and (iv) to
increase the number of shares subject to options and stock appreciation rights
that can be granted to any individual under the Employee Plan. A copy of the
Employee Plan, as amended and restated, is annexed as Appendix C to this Proxy
Statement and is marked to show additions and deletions to the Employee Plan
that appeared in the 1996 Proxy Statement. THE BOARD OF DIRECTORS RECOMMENDS A
VOTE "FOR" THE PROPOSAL TO AMEND THE 1995 EQUITY INCENTIVE PLAN.
The purpose of the Employee Plan is to advance the interests of the Company
by enhancing its ability to attract and retain employees and other persons or
entities who are in a position to make significant contributions to the success
of the Company and its subsidiaries through ownership of shares of the Company's
common stock.
Summary of the Employee Plan
The following summary description of the principal terms of the Employee
Plan does not purport to be complete and is qualified in its entirety by the
full text of the Employee Plan, a copy of which has been filed as Appendix C to
this Proxy Statement.
The Employee Plan provides for the grant by the Company of options and/or
rights to acquire up to an aggregate of nine hundred thousand (900,000) shares
of Common Stock of the Company (prior to the Amendments) to its officers,
employees, or other persons or entities who are in a position to make a
significant contribution to the success of the Company or its subsidiaries. All
employees of the Company are eligible to participate in the Plan. The purpose of
the Employee Plan is to enable the Company to attract and retain persons of
ability as employees, officers and consultants and to motivate such persons by
providing them with an equity participation in the Company. The authorization to
grant Awards (as defined below) under the Employee Plan expires October 26,
2005, unless terminated earlier by the Board of Directors. Awards outstanding
prior to that date continue to be governed by the Employee Plan until they are
exercised, canceled, or expire by their terms. As of the end of Fiscal 1997,
options to purchase an aggregate of 230,680 shares of Common Stock (net of
canceled options) have been granted under the Employee Plan.
The Employee Plan permits the grant of stock options, restricted stock,
stock appreciation rights, unrestricted stock awards, deferred stock awards,
performance awards, supplemental grants and other incentive awards
(collectively, "Awards") to employees of the Company.
Options granted under the Employee Plan may be either "incentive stock
options," within the meaning of Section 422 of the Code, or "nonqualified stock
options." The exercise price of options that are intended to be incentive stock
options must be at least equal to the fair market value of the Common Stock of
the Company as of the date of grant.
No optionee may be granted incentive stock options under the Employee Plan
to the extent that the aggregate fair market value (determined as of the date of
grant) of the shares of Common Stock with respect to which incentive options are
exercisable for the first time by the optionee during any calendar year would
exceed $100,000. No optionee may
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receive under the Employee Plan an aggregate of options and stock appreciation
rights covering more than 500,000 shares.
Employees may only exercise vested options. Unless specified otherwise in
the option agreement, options granted under the Employee Plan become vested in
increments of 25% each on the first, second, third and fourth anniversaries of
the date of grant. Options also become vested in certain circumstances involving
a change in control (see below).
Unless otherwise specified, options granted under the Employee Plan expire
ten years after the date of grant, or earlier in the event of death, disability,
or termination of service. In general, options expire no later than one year
after an optionee dies or becomes disabled, and no later than one year after
termination of service. An employee on leave of absence is deemed to have
terminated service six months after the leave commences, unless the leave is
approved by the Committee (as defined below) administering the Employee Plan or
the employee has received a written guarantee of right of reemployment. Except
as otherwise determined by the Committee, all options which are not vested
immediately prior to death, disability, last day of employment or date of a
change in status are terminated.
Payment for shares must be made in full at the time of exercise with
respect to a stock option. The form of consideration payable under exercise of
an option shall, at the discretion of the Committee, be (i) by tender of United
States dollars in cash, check or bank draft; (ii) subject to certain
restrictions, by delivery of shares of Common Stock, which shall be deemed to
have a value equal to the aggregate fair market value of such shares determined
on the date of exercise as described in the Employee Plan; (iii) by the issuance
of a promissory note acceptable to the Committee administering the Employee
Plan; (iv) by the issuance by a broker of an undertaking to deliver the exercise
price; or (v) pursuant to any combination of the above methods or such other
methods as may be provided for in the Employee Plan from time to time.
Stock Appreciation Rights ("SARs") allow an individual to receive cash or
stock (or a combination thereof) based on stock price appreciation. Generally,
on exercise of an SAR, the holder receives cash or stock (or a combination
thereof) in the amount by which the fair market value on the date of exercise
exceeds the fair market value on the date the SAR was awarded, times the number
of shares to which the SAR is exercised, although the amount payable under an
SAR may also be linked to or adjusted for changes in a stock index or indices of
one or more other stocks. SARs may be granted alone or in tandem with stock
options. In the event the SAR is granted in tandem with an option, the exercise
of the SAR will reduce the number of shares exercisable under the option. SARs
have the same exercise periods following death, disability or termination of
service as are applicable to stock options.
Restricted Stock Awards are shares of stock purchased by an individual at
par value, but which may not be sold, transferred, pledged, assigned or
otherwise encumbered until certain conditions are satisfied. The holder of
restricted stock has voting rights and the right to receive dividends with
respect to the shares. If the individual terminates service with the Company
before the conditions are satisfied and the restrictions lapse, whether by
reason of death, disability or otherwise, the restricted stock must be resold to
the Company at par value.
Deferred Stock Awards are rights to receive future delivery of unrestricted
shares of stock. Such delivery may be contingent on satisfaction of specified
conditions. If the individual terminates service with the Company before the
Award is vested, whether by reason of death, disability or otherwise, the Award
terminates.
Performance Awards are rights to receive cash or stock on the satisfaction
of certain performance conditions or goals, whether corporate, individual,
industry, or some other goal or combination of goals. If the individual
terminates service with the Company before the Award is vested, whether by
reason of death, disability or otherwise, the Award terminates.
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Participants may also receive, at the discretion of the Committee, a loan
to purchase stock under an Award or to pay federal, state and local income taxes
with respect to income recognized as a result of an Award. Such loans may not
exceed ten years in duration.
Supplemental Grants are cash amounts designed to make a participant whole
with respect to tax liabilities, by providing for payment to the participant of
a tax gross-up payment in an amount which, net of taxes, does not exceed the tax
liability with respect to an Award (assuming the highest marginal rate for
federal, state and local income taxes). If the individual terminates service
with the Company before the Award is vested, whether by reason of death,
disability or otherwise, the Award terminates.
The Employee Plan provides that it is to be administered by a committee of
the Board of Directors, which committee shall consist of at least two directors,
all of whom shall be "Non-Employee Directors" within the meaning of Rule 16b-3
under the Exchange Act (the "Committee"). The Committee has broad discretion to
determine the persons entitled to receive options and/or other Awards under the
Employee Plan, the terms and conditions on which options and/or Awards are
granted and the number of shares subject thereto. The Committee also has
discretion to determine the nature of the consideration to be paid upon the
exercise of an option and/or right to purchase granted under the Employee Plan.
The Committee may at any time or times amend the Employee Plan or any
outstanding Award for any purpose which may at the time be permitted by law, or
may at any time terminate the Employee Plan as to any further grants of Awards,
provided that (except to the extent expressly required or permitted by the
Employee Plan) no such amendment will, without the approval of the stockholders
of the Company, effectuate a change for which stockholder approval is required
in order for the Employee Plan to continue to qualify for the award of incentive
stock options under Section 422 of the Code or for the award of
performance-based compensation under Section 162(m) or for the Plan to continue
to qualify under Rule 16b-3 promulgated under Section 16 of the Exchange Act.
In the event of a change in control of the Company, certain provisions take
effect to accelerate the vesting of outstanding options and SARs and to provide
for cash payment in settlement of unexercised options. On the twentieth (20th)
trading day prior to the effective date of a change in control all stock options
and SARs not otherwise vested become fully vested, and any restrictions or other
conditions applicable to restricted stock or other incentives awarded lapse or
are deemed satisfied and such awards become fully vested and/or immediately
payable. In addition, the value of any canceled award is paid out in cash unless
the award holder receives either (i) the right to acquire the same basket of
cash and securities available to holders of Common Stock, or (ii) if pooling of
interests is a condition of the transaction, an equivalent right in a successor
security which would enable the transaction to qualify for pooling of interests.
A change-in-control is defined to include: (1) any person, entity or Group
(persons or entities acting together) is or becomes the beneficial owner of more
than 50% of the Voting Stock of the Company (as defined below); (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 66 2/3% of the directors
who were in office at the beginning of the period or whose election or
nomination was so approved, cease to constitute a majority of the Board then in
office; or (4) any order, judgment or decree of dissolution or split-up of the
Company, and such order remains undischarged or unstayed for a period in excess
of 60 days. For purposes of determining whether a change in control has
occurred, "more than 50% of the Voting Stock" means more than 50% of one or more
classes of stock pursuant to which the holders have the general power to vote
for the election of members of the Board of Directors, and the aggregate of such
classes for which the person, entity or Group holds more than 50% has the power
to elect more than 50% of the members of the Board of Directors.
In the event of a stock dividend, stock split or combination of shares,
recapitalization or other change in the Company's capitalization, or other
distribution to common stockholders other than normal cash dividends, after the
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effective date of the Employee Plan, the Committee will make any appropriate
adjustments to the maximum number of shares that may be delivered under an Award
granted pursuant to the Employee Plan.
Proposed Amendments to the Employee Plan
If the Amendments to the Employee Plan are approved by the stockholders (i)
compensation attributable to future stock options or future stock appreciation
rights granted under the Employee Plan should constitute "qualified
performance-based compensation" as defined in Section 162(m) and thereby retain
its tax deductibility, (ii) future options granted under the Employee Plan will
qualify as incentive stock options (as defined below) and the aggregate number
of shares of Common Stock that may be delivered under the Employee Plan will be
increased from 900,000 shares to 6,000,000 shares and (iii) the aggregate number
of shares issuable under the Employee Plan and (iv) the number of shares subject
to options and SARs that can be granted to any individual will be increased from
500,000 to 2,000,000.
Employee Plan Benefits
The Company cannot currently determine the exact number of shares subject
to Awards that may be granted in the future to executive officers and key
employees generally under the Employee Plan. Subject to stockholder approval of
the Amendments, the Company has granted pursuant to the Employee Plan to J.
Wayne Harris options to purchase 500,000 shares at an exercise price equal to
$1.375, which are immediately exercisable; (ii) options to purchase 100,000
shares at an exercise price equal to $1.375, which become exercisable
immediately upon approval by stockholders of the Amendments; (iii) options to
purchase 200,000 shares at an exercise price equal to $1.375, which shall become
exercisable subject to the Company's achievement of certain earnings targets;
(iv) options to purchase 150,000 shares at an exercise price equal to $2.375,
which become exercisable on and after August 1, 1998; (v) options to purchase
150,000 shares at an exercise price equal to $3.375, which become exercisable on
and after August 1, 1999; and (vi) options to purchase 150,000 shares at an
exercise price equal to $4.375, which become exercisable on and after August 1,
2000. See "Compensation of Executive Officers - Harris Employment Agreement."
Options to purchase an aggregate of 1.8 million shares of Common Stock at an
exercise price of $1.85 were granted to each of the Company's salaried exempt
employees and store mangers, as indicated in the New Plan Benefits table shown
below. The Company granted to Gary Philbin, subject to shareholder approval (i)
options to purchase 150,000 shares at an exercise price equal to $2.125, which
became exercisable immediately; (ii) options to purchase 50,000 shares at an
exercise price equal to $2.125, which shall become exercisable subject to the
Company's achievement of certain earnings targets; (iii) options to purchase
100,000 shares at an exercise price equal to $2.875, which become exercisable on
and after October 3, 1998; (v) options to purchase 75,000 shares at an exercise
price equal to $3.625, which become exercisable on and after October 3, 1999;
and (vi) options to purchase 75,000 shares at an exercise price equal to $4.315,
which become exercisable on and after October 3, 2000. See "Compensation of
Executive Officers - Philbin Employment Agreement."
NEW PLAN BENEFITS
1995 Equity Incentive Plan
Name and Position Number of Units
----------------- ---------------
Executive Group 31,500
Non-Executive Officer Employee Group 1,768,500
Federal Tax Consequences
The statements in the following paragraphs of the principal federal income
tax consequences of options and SARs granted under the Employee Plan are based
on statutory authority and judicial and administrative interpretations, as of
the date of this Proxy Statement, which are subject to change at any time
(possibly with retroactive
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effect). Because only options and SARs are currently outstanding under the
Employee Plan and there is no current intention to grant awards other than
options and SARs, the discussion set forth below only addresses the principal
federal income tax consequences of options and SARs. The law is technical and
complex and the discussion below represents only a general summary.
Incentive Stock Options. Incentive stock options ("ISOs") granted under the
Employee Plan are intended to meet the definitional requirements of Section
422(b) for "incentive stock options."
An employee who receives an ISO does not recognize any taxable income upon
the grant of such ISO. Similarly, the exercise of an ISO generally does not give
rise to federal income tax to the employee, provided that (i) the federal
"alternative minimum tax," which depends on the employee's particular tax
situation, does not apply and (ii) the employee is employed by the Company from
the date of grant of the option until 3 months prior to the exercise thereof,
except where such employment terminates by reason of disability (where the 3
month period is extended to 1 year) or death (where this requirement does not
apply). If an employee exercises an ISO after these requisite periods, the ISO
will be treated as an NSO (as defined below) and will be subject to the rules
set forth below under the caption "Non-qualified Options and Stock Appreciation
Rights."
Further, if after exercising an ISO, an employee disposes of the Common
Stock so acquired more than two years from the date of grant and more than one
year from the date of transfer of the Common Stock pursuant to the exercise of
such ISO (the "applicable holding period"), the employee will normally recognize
a capital gain or loss equal to the difference, if any, between the amount
received for the shares and the exercise price. If, however, an employee does
not hold the shares so acquired for the applicable holding period -- thereby
making a "disqualifying disposition" -- the employee would realize ordinary
income on the excess of the fair market value of the shares at the time the ISO
was exercised over the exercise price and the balance, if any, income would be
long-term capital gain (provided the holding period for the shares exceeded 18
months and the employee held such shares as a capital asset at such time).
The Company will not be allowed a federal income tax deduction upon the
grant or exercise of an ISO or the disposition, after the applicable holding
period, of the Common Stock acquired upon exercise of an ISO. In the event of a
disqualifying disposition, the Company generally will be entitled to a deduction
in an amount equal to the ordinary income included by the employee, provided
that such amount constitutes an ordinary and necessary business expense to the
Company and is reasonable and the limitations of Sections 280G and 162(m) of the
Code (described below) do not apply.
Non-Qualified Options and Stock Appreciation Rights. Non-qualified stock
options ("NSOs") granted under the Employee Plan are options that do not qualify
as ISOs. An employee who receives an NSO or an SAR will not recognize any
taxable income upon the grant of such NSO or SAR. However, the employee
generally will recognize ordinary income upon exercise of an NSO in an amount
equal to the excess of (i) the fair market value of the shares of Common Stock
at the time of exercise over (ii) the exercise price. Similarly, upon the
receipt of cash or shares pursuant to the exercise of an SAR, the individual
generally will recognize ordinary income in an amount equal to the sum of the
cash and the fair market value of the shares received.
The ordinary income recognized with respect to the receipt of shares or
cash upon exercise of a NSO or an SAR will be subject to both wage withholding
and employment taxes. In addition to the customary methods of satisfying the
withholding tax liabilities that arise upon the exercise of an SAR for shares or
upon the exercise of a NSO, the Company may satisfy the liability in whole or in
part by withholding shares of Common Stock from those that otherwise would be
issuable to the individual or by the employee tendering other shares owned by
him or her, valued at their fair market value as of the date that the tax
withholding obligation arises.
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A federal income tax deduction generally will be allowed to the Company in
an amount equal to the ordinary income included by the individual with respect
to his or her NSO or SAR, provided that such amount constitutes an ordinary and
necessary business expense to the Company and is reasonable and the limitations
of Sections 280G and 162(m) of the Code (described below) do not apply.
Change in Control. As described above, upon a "change in control" of the
Company, all the then outstanding stock options and SARs will immediately become
exercisable. In general, if the total amount of payments to an individual that
are contingent upon a "change of control" of the Company (as defined in Section
280G of the Code), including payments under the Employee Plan that vest upon a
"change in control" equals or exceeds three times the individual's "base amount"
(generally, such individual's average annual compensation for the five complete
years preceding the change in control), then, subject to certain exceptions, the
payments may be treated as "parachute payments" under the Code, in which case a
portion of such payments would be non-deductible to the Company and the
individual would be subject to a 20% excise tax on such portion of the payments.
Certain Limitations on Deductibility of Executive Compensation. With
certain exceptions, Section 162(m) denies a deduction to publicly held
corporations for compensation paid to certain executive officers in excess of $1
million per executive per taxable year (including any deduction with respect to
the exercise of an NSO or SAR or the disqualifying disposition of stock
purchased pursuant to an ISO). One such exception applies to certain
performance-based compensation provided that such compensation has been approved
by stockholders in a separate vote and certain other requirements are met. The
Company believes that options and SARs granted under the Employee Plan should
qualify for the performance-based compensation exception to Section 162(m).
Accounting Treatment
Generally, for an option granted with an exercise price at fair market
value at the time of grant, the Company will not incur a compensation charge.
For options outstanding at the time of stockholder approval, the Company will
incur a charge based on the amount by which the fair market value of shares
subject to the option, determined on the date of stockholder approval, exceeds
the exercise price of the option. For restricted stock, the Company will incur a
charge taken ratably over the vesting period of the stock, based on the fair
market at the time of the award. For other Awards, generally the Company will
incur a charge taken ratably over the vesting period, and increased or decreased
each quarter to take into account changes in market value.
PROPOSAL FIVE
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Price Waterhouse LLP, independent
accountants, to audit the financial statements of the Company for the fiscal
year ending March 28, 1998. THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS
VOTE "FOR" RATIFICATION OF SUCH APPOINTMENT. In the event of a negative vote on
such ratification, the Board of Directors will reconsider its selection.
Representatives of Price Waterhouse LLP are expected to be present at the
Annual Meeting with the opportunity to make a statement if they desire to do so
and are expected to be available to respond to appropriate questions.
OTHER MATTERS TO COME BEFORE THE ANNUAL MEETING
The Company knows of no other matters to come before the Annual Meeting. If
any other matter not mentioned in this Proxy Statement properly comes before the
Annual Meeting, it is the intention of the proxy holders named in the enclosed
Proxy to vote the shares they represent as the Board of Directors may recommend.
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STOCKHOLDER NOMINATIONS FOR ELECTION OF DIRECTORS
Nominations of persons for election to the Board of Directors at an annual
meeting or by the written consent of the stockholders may be made by any
stockholder of the Company entitled to vote for the election of directors at the
meeting who complies with certain notice procedures. A stockholder's nomination
of a person for election to the Board of Directors must be delivered to or
mailed and received at the principal executive offices of the Company, addressed
to the attention of the Secretary of the Company, not less than sixty days prior
to the meeting or the date the stockholders are first solicited for their
consents as the case may be; provided, however, that, in the case of an annual
meeting and in the event that less than fifty days' notice or prior public
disclosure of the date of the meeting is given or made to stockholders, notice
by the stockholder to be timely must be so received not later than the earlier
of (a) the close of business on the fifteenth day following the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made, whichever first occurs, or (b) two days prior to the date of the meeting.
Such stockholder's notice to the Secretary shall set forth (a) as to each person
whom the stockholder proposes to nominate for election or reelection as a
director, (i) the name, age, business address and residence address of the
person, (ii) the principal occupation or employment of the person, (iii) the
class and number of shares of capital stock of the Company which are
beneficially owned by the person, (iv) a statement as to the person's
citizenship, and (v) any other information relating to the person that is
required to be disclosed in solicitations for proxies for election of directors
pursuant to Section 14 of the Exchange Act and the rules and regulations
promulgated thereunder, and (b) as to the stockholder giving the notice, (i) the
name and record address of the stockholder and (ii) the class, series and number
of shares of capital stock of the Company which are beneficially owned by the
stockholder. The Company may require any proposed nominee to furnish such other
information as may reasonably be required by the Company to determine the
eligibility of such proposed nominee to serve as a director of the Company. In
connection with any annual meeting, the Chairman of the Board of Directors
shall, if the facts warrant, determine and declare to the meeting that a
nomination not made in accordance with the foregoing procedure, or otherwise
properly made by the Board of Directors, was defective and shall be disregarded.
STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT MEETING
Federal proxy rules specify what constitutes timely submission for a
stockholder proposal to be included in a subsequent proxy statement. Proposals
of stockholders that are intended to be presented by such stockholders at the
Company's 1998 Annual Meeting of Stockholders generally must be received by the
Company at its principal executive offices no later than July 6, 1998, in order
to be considered for inclusion in the Company's proxy statement relating to that
meeting. In addition, to be properly brought before the meeting under the
Company's Bylaws, a stockholder's notice must be received at the principal
executive offices of the Company, addressed to the attention of the Secretary of
the Company, within the time specified in the federal proxy rules for timely
submission of a stockholder proposal or, if not within such time, then not less
than sixty days nor more than ninety days prior to the meeting; provided,
however, that in the event that less than fifty days' notice or prior public
disclosure of the date of the meeting is given or made to stockholders, notice
by the stockholder to be timely must be so received by the earlier of (a) the
close of business on the fifteenth day following the day on which such notice of
the date of the annual meeting was mailed or such public disclosure was made,
whichever first occurs, and (b) two days prior to the date of the meeting. A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting (i) a brief description
of the business desired to be brought before the annual meeting, (ii) the name
and record address of the stockholder proposing such business, (iii) the class
and number of shares of the Company which are beneficially owned by the
stockholder, and (iv) any material interest of the stockholder in such business.
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The Chairman of the Board of Directors shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of the Company's Bylaws,
and if he should so determine, he is required to so declare to the meeting and
any such business not properly brought before the meeting shall not be
transacted.
The Board of Directors
The Annual Report to Stockholders of the Company for the fiscal year ended
March 29, 1997 is being mailed concurrently with this proxy statement to all
stockholders of record. The Annual Report is not to be regarded as proxy
soliciting material or as a communication by means of which any solicitation is
to be made.
COPIES OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K FOR THE FISCAL YEAR ENDED MARCH 29, 1997, INCLUDING
FINANCIAL STATEMENTS AND SCHEDULES, BUT WITHOUT EXHIBITS, WILL BE PROVIDED TO
STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO THE SECRETARY, THE GRAND
UNION COMPANY, 201 WILLOWBROOK BOULEVARD, WAYNE, NEW JERSEY 07470
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APPENDIX A
THE GRAND UNION COMPANY
ASSOCIATE STOCK PURCHASE PLAN
Table of Contents
1. Purpose............................................................ 2
2. Definitions........................................................ 2
3. Eligibility........................................................ 3
4. Offering Period.................................................... 3
5. Participation...................................................... 3
6. Contributions...................................................... 4
7. Grant of Option.................................................... 4
8. Exercise of Option................................................. 5
9. Delivery........................................................... 5
10. Withdrawal; Termination of Employment.............................. 6
11. Stock.............................................................. 6
12. Administration..................................................... 7
13. Non-transferability................................................ 7
14. Statements......................................................... 7
15. Changes in Capitalization.......................................... 7
16. Certain Corporate Transactions..................................... 8
17. Amendment.......................................................... 8
18. Stockholder Approval............................................... 8
19. Termination........................................................ 9
20. Employment Relationship............................................ 9
21. Notices............................................................ 9
22. Government and Other Regulations................................... 9
23. Applicable Law..................................................... 9
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THE GRAND UNION COMPANY
ASSOCIATE STOCK PURCHASE PLAN
The following constitutes the provisions of The Grand Union Company
Associate Stock Purchase Plan (herein called the "Plan"). As used herein the
terms "Company" and "Grand Union" refer to The Grand Union Company and, where
appropriate, any Participating Company of The Grand Union Company.
1. Purpose.
The purpose of the Plan is to align Associate interests more closely with
stockholder interests, foster continued cordial Associate relations, and provide
additional compensation in exchange for the future services of Associates, all
by providing Associates of the Company with an opportunity to purchase Common
Stock of the Company. It is the intention of the Company that the Plan qualify
as an "employee stock purchase plan" under Section 423 of the Code. The
provisions of the Plan shall be construed in a manner consistent with the
requirements of that section of the Code and the regulations promulgated
thereunder.
2. Definitions.
(a) "Associate" means an employee of The Grand Union Company or a
Participating Company.
(b) "Board" means the Board of Directors of The Grand Union Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the Compensation Committee of the Board, or such
other committee as may be designated by the Board to administer this Plan.
(e) "Common Stock" means the Company's common stock, par value of $0.01 per
share.
(f) "Deduction Account" means a bookkeeping account maintained by the
Company to keep track of a Participant's payroll contributions within a
particular Offering Period prior to the Purchase Date.
(g) "Eligible Associate" has the meaning specified in Section 3.
(h) "Fair Market Value" means, with respect to the Company's Common Stock
as of a specific date, the last sale price on that date as reported by the
principal exchange on which the Company has listed its Common Stock for trading
or by the National Association of Securities Dealers, Inc. Automated Quotations
System or such other similar system then in use (each, a "nationally recognized
exchange"), or if no sale is made on such date, the corresponding last sale
price on the first preceding date on which the Company's Common Stock was sold.
If the Company's Common Stock is not listed for trading on any nationally
recognized exchange, then "Fair Market Value" means the average of the closing
bid and asked prices with respect to such Stock, as furnished by a professional
market maker making a market in such Stock selected by the Committee; or if such
prices are not available, the Fair Market Value of such Stock as of such date as
determined in good faith by the Committee.
(i) "Offering Period" has the meaning specified in Section 4.
(j) "Option Grant Date" means the first Trading Day of each Offering Period
of the Plan.
(k) "Option Price" has the meaning specified in Section 7.
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(l) "Participant" means an Eligible Associate who has become a Participant
in the Plan pursuant to Section 5.
(m) "Participating Company" means any present or future parent or
subsidiary of the Company (determined by reference to Section 424 of the
Internal Revenue Code) designated by the Board to be a Participating Company.
(n) "Plan Agent" means a third party selected by the Company to hold
shares, maintain records and provide administrative services with respect to the
Plan.
(o) "Purchase Account" means an account in the Participant's name
maintained by the Plan Agent, which reflects the number of shares purchased
under the Plan by the Participant and credited pursuant to Section 9.
(p) "Purchase Date" means the last Trading Day of each Offering Period of
the Plan.
(q) "Trading Day" means a day on which the stock exchange, which trades
Grand Union Common Stock, is open for trading.
3. Eligibility.
Any Associate who has been continuously employed with the Company for a
period of at least six months ending on or prior to the first day of an Offering
Period shall be an Eligible Associate with respect to such Offering Period,
unless the Associate is on a leave of absence at the beginning of the Offering
Period. An Associate who has been continuously employed shall be an Eligible
Associate as of the date in the sixth month after the Associate's employment
commencement date, which corresponds numerically with the Associate's employment
commencement date. Members of the Board or the Committee who are Eligible
Associates are permitted to participate in the Plan.
4. Offering Period.
Absent action by the Board, each Offering Period, with the exception of the
initial Offering Period, shall be for a period of three calendar months,
commencing on the first day of January, April, July and October and ending,
respectively, on the last day of March, June, September and December. The Board
may, without shareholder approval, (i) change the commencement date and duration
of Offering Periods with respect to future offerings, if such change is
announced at least thirty (30) days prior to the scheduled beginning of the
first Offering Period to be affected by such change or (ii) cancel an offering
at any time prior to the commencement date. The Board has established that the
initial Offering Period under the Plan shall be for a period of two (2) months
commencing November 1, 1997 and concluding December 31, 1997. An Offering Period
shall be deemed to have ended on the effective date upon which the Plan is
terminated in accordance with the provisions of Section 19.
5. Participation.
An Associate may become a Participant by completing an enrollment form
provided by the Company and filing that form with the designated Company office
not later than the fifteenth (15th) day prior to the commencement of an Offering
Period with respect to which he or she is an Eligible Associate, subject to the
limitations imposed by the Plan. Enrollment forms for the initial Offering
Period must be received by the designated Company office not later than seven
(7) days prior to the commencement of the initial Offering Period. An Associate
who becomes an Eligible Associate after the first day of an Offering Period may
not participate in the Plan until the next Offering Period.
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6. Contributions.
(a) At the time a Participant files his or her enrollment form, he or she
shall elect to have payroll contributions deducted on each payday during the
Offering Period, subject to the maximum prescribed in Section 6(e). Unless the
Committee provides otherwise, the amount to be deducted from each Participant's
pay is to be designated as a specific dollar amount, with a minimum deduction of
Four Dollars ($4) per weekly payroll period and a maximum deduction of Four
Hundred Dollars ($400) per weekly payroll period. All payroll contributions
authorized by a Participant shall be withheld by the Company from the
Participant's pay and the Company shall maintain a Deduction Account in the name
of the Participant until such amounts are credited to the Participant's Purchase
Account as of the next Purchase Date.
(b) A Participant's payroll deduction election shall remain in effect until
changed or revoked or participation is otherwise terminated as provided in
Section 10, or by the Company. Payroll contributions shall be made for each
payroll period ending during a particular Offering Period.
(c) A Participant may make additional contributions, subject to the limits
of Section 6(e), by making payment in the manner specified by the Company at
least fifteen (15) days prior to the end of the Offering Period.
(d) A Participant may discontinue his or her participation in the Plan as
provided in Section 10, and may decrease or increase the rate of his or her
payroll contributions during the Offering Period by completing and filing with
the Company a new authorization for payroll deduction. The new authorization
must be received by the Company at least fifteen (15) days prior to the proposed
effective date of the change.
(e) The aggregate of all payroll contributions and additional contributions
per Eligible Associate during an Offering Period shall not exceed Five Thousand
Two Hundred Dollars ($5,200), unless the Offering Period is other than a period
of three calendar months, in which case such aggregate deductions and
contributions shall not exceed the product of Four Hundred Dollars ($400) times
the number of weeks during the Offering Period with respect to which such
amounts are accumulated, rounded to the nearest full week.
(f) All payroll contributions or additional contributions received or held
by the Company or the Plan Agent under the Plan are general corporate assets of
the Company and may be used by the Company for any corporate purpose. The
Company shall not be obligated to segregate such amounts.
(g) No interest shall accrue on amounts held in a Participant's Deduction
Account or Purchase Account.
(h) Contributions and deductions during a particular Offering Period may
not be withdrawn prior to the Purchase Date, except as provided under Section
10.
(i) No further contributions may be made by a Participant after the date on
which his or her employment with the Company, or any Participating Company,
terminates for any reason.
7. Grant of Option.
(a) On each Option Grant Date, each Participant in the Plan shall be deemed
to have been granted an option to purchase (at the per share Option Price) a
maximum number of shares of the Company's Common Stock, rounded to the nearest
ten thousandth of a share, determined by dividing: (i) Five Thousand Two Hundred
Dollars ($5,200), by (ii) eighty-five percent (85%) of the Fair Market Value of
a share of the Company's Common Stock on such Option Grant Date; but in no event
shall such number be greater than the amount permitted under Section 7(b) of
this Plan. For any Offering Period which is not a calendar quarter, the amount
determined under (i) above shall be no greater than Four Hundred Dollars ($400)
times the number of weeks during the Offering Period.
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(b) Exceptions. Any provisions of the Plan to the contrary notwithstanding,
any option granted to a Participant shall be limited so that:
(i) immediately after the grant, such Participant would not own stock
possessing five percent (5%) or more of the total combined voting power or
value of all classes of stock of the Company or of any parent or subsidiary
of the Company (including stock which the Participant may purchase under
outstanding options and stock the ownership of which is attributed to the
Participant under Section 424(d) of the Code), and
(ii) the Participant's rights to purchase shares under all employee
stock purchase plans of the Company and its parent or subsidiaries shall
not accrue (i.e., first become exercisable) at a rate which exceeds
twenty-five thousand dollars ($25,000) of the Fair Market Value of such
shares (determined at the time such option is granted) for each calendar
year in which such option is exercisable and outstanding at any time.
(c) The Option Price per share of such shares shall be the lower of: (i)
85% of the Fair Market Value of a share of the Company's Common Stock on the
Option Grant Date; or (ii) 85% of the Fair Market Value of a share of the
Company's Common Stock on the Purchase Date. In each case, the per share Option
Price shall be rounded to the nearest ten thousandth of a dollar.
8. Exercise of Option.
(a) Automatic Exercise. Unless a Participant withdraws from the Plan as
provided in Section 10, his or her option for the purchase of shares will be
exercised automatically for the number of whole and fractional shares (rounded
to the nearest ten-thousandth) which the amount in the Participant's Purchase
Account on the Purchase Date could purchase at the Option Price, but not in
excess of the number of shares determined in Section 7(a). An option is
exercisable only on the Purchase Date and only to the extent of the amount in
the Participant's Purchase Account. A Participant's option to purchase shares
hereunder is exercisable only by the Participant or, in the event of the
Participant's death or incompetence, by the Participant's legal representative.
No options shall be exercisable unless and until stockholders approve this Plan
within twelve months before or after its adoption by the Board of Directors.
(b) Withholding Taxes. The Company may prescribe procedures under which the
amount of federal, state or local taxes required to be withheld must be paid to
the Company by a Participant before shares are issued to that Participant, or
may be deducted, either at the time of exercise or following disposition of
shares purchased, from a Participant's pay, the Participant's Deduction Account
or the Participant's Purchase Account.
(c) Excess Contributions. Any excess contributions remaining in the
Participant's Purchase Account after each purchase of the shares on the Purchase
Date will be credited to the Participant through the Company payroll or
otherwise be paid directly to the Participant by check, at the Company's
discretion.
9. Delivery.
As promptly as practicable after each Purchase Date of each offering, the
Company shall arrange to have credited to the Participant's Purchase Account the
number of whole and fractional shares purchased by the Participant. Shares
issued under the Plan may be issued only in the name of the Participant or in
the street name for the company holding shares for the Plan Agent. Shares held
in a Participant's Purchase Account may be transferred from that account at any
time by sale, gift, will, operation of the laws of descent and distribution, or
domestic relations order. Shares may not be issued to the Participant in
certificate form or transferred (other than by sale, gift, will, operation of
the laws of descent and distribution, or domestic relations order) within two
years from the Option Grant Date applicable to the shares being transferred,
without the written consent of the Company. In the event shares are distributed
to the Participant in certificate form, the Participant shall receive a
certificate for the number of whole shares requested, and if no other whole
shares remain, shall receive cash in lieu of any fractional share, based on the
selling price of shares sold to cover the fractional share.
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10. Withdrawal; Termination of Employment.
(a) Retirement. On termination of the Participant's employment by reason of
retirement, in accordance with Company policy, the Participant may withdraw any
or all amounts held in his or her Deduction Account and shares credited to his
or her Purchase Account by filing a written request with the designated office
of the Company at least fifteen (15) days prior to the end of the Offering
Period. Amounts not withdrawn from the Participant's Deduction Account will be
applied to purchase shares at the end of the Offering Period.
(b) Termination. If the Participant's employment is terminated prior to the
end of an Offering Period for any reason other than retirement, including
permanent disability or death, and such termination is recorded on Company
records prior to the end of the Offering Period, the payroll contributions and
additional contributions credited to the Participant's Deduction Account will be
returned to him or her, or in the case of his or her death, to the executor or
administrator of his or her estate, and his or her option will be canceled.
(c) Leave of Absence. An Eligible Associate or a Participant who has been
granted a leave of absence shall, for purposes of the Plan, be deemed an
Associate for the first 90 days of such leave of absence, and thereafter shall,
for the purposes of the Plan, be deemed to have terminated employment on the
91st day of such leave of absence. Payroll contributions for a Participant who
has been on a leave of absence will resume at the same rate as in effect prior
to such leave upon return to work unless changed by such Participant, unless the
Participant has been on a leave of absence for more than ninety (90) days, or
unless the Participant was on leave at the beginning of the Offering Period, in
which cases the Participant shall not be permitted to re-enter the Plan until an
enrollment form is filed by the Participant with respect to a subsequent
Offering Period which commences after such Participant has returned to work from
the leave of absence.
(d) Cessation of Participation. A Participant may terminate participation
in the Plan as of any date during an Offering Period by giving written notice
thereof (on a form approved by the Committee) to an office designated by the
Company at least fifteen (15) days in advance of the proposed effective date of
such termination. Nevertheless, if the revocation becomes effective during an
Offering Period, any accumulated payroll contributions and additional
contributions will be used to purchase shares at the end of the Offering Period.
A Participant who terminates participation in the Plan during an Offering Period
may not re-enter the Plan until the following Offering Period.
(e) Involuntary Closure of Account. At the Company's discretion, a
Participant's Purchase Account may be closed at any time by distributing
directly to the Participant a certificate representing the number of whole
shares in the Purchase Account and paying out any fractional shares in cash. A
Participant's Purchase Account shall be closed upon or after the Participant's
termination of employment if the Participant's Purchase Account consists solely
of shares that were purchased as of the end of an Offering Period the first day
of which is more than two (2) years prior to the date of the termination of the
Participant's employment with the Company or any Participating Company.
11. Stock.
(a) The maximum number of shares of the Company's Common Stock which may be
sold pursuant to all options exercised under the Plan shall be One Million
(1,000,000) shares, subject to adjustment upon changes in capitalization of the
Company as provided in Section 15. The shares to be sold to Participants in the
Plan may be, at the election of the Company, either treasury shares or
authorized but unissued shares. In addition, the Company may acquire shares of
the Company's Common Stock in the open market for resale under this Plan. If the
total number of shares which would otherwise be subject to purchase pursuant to
Section 8 hereof exceeds the number of shares then available under the Plan
(after deduction of all shares for which options have been exercised or are then
outstanding), the Company shall make a pro rata allocation of the shares
remaining available for purchase in as uniform and equitable a manner as is
practicable. In such event, the Company may reduce the rate of payroll
contributions as appropriate.
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(b) The Participant will have no interest or voting right in shares covered
by his or her option until such option has been exercised.
12. Administration.
(a) The Plan shall be administered by the Committee. The Board may from
time to time remove members from or add members to the Committee. Vacancies on
the Committee, however caused, shall be filled by the Board. Acts taken or
approved by a majority of the Committee at which a quorum is present, or acts
approved in writing by a majority of the members of the Committee, shall be the
valid acts of the Committee. The Committee may delegate part or all of its
responsibilities, other than the authority to amend the Plan, subject to the
limitations of law and of the Plan. In the absence of any specific delegation,
such responsibilities shall be deemed delegated to the Company.
(b) The Plan shall be administered in a manner that assures all
Participants the same rights and privileges. The Committee shall have the final
authority to interpret the Plan, and any decision by the Committee in connection
therewith shall be final, conclusive and binding upon all Participants and other
persons.
(c) No member of the Board or the Committee, and no Associate of the
Company, shall be liable for any action or determination made in good faith with
respect to the Plan or any option granted under it. In addition to such other
rights of indemnification as they may have, members of the Board, members of the
Committee and Associates shall be indemnified by the Company against the
reasonable expenses, including attorney's fees actually and necessarily incurred
in connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with the
performance of duties under the Plan, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, except in relation to matters as to
which it shall be adjudged in such action, suit or proceeding that the person
seeking indemnification is liable for gross negligence or willful misconduct in
the performance of his or her duties; provided that within sixty (60) days after
institution of any such action, suit or proceeding the person seeking
indemnification shall in writing offer the Company the opportunity, at its own
expense, to handle and defend the same.
(d) All costs and expenses incurred in administering the Plan not
chargeable to the Participant's Deduction and/or Purchase Account shall be paid
by the Company. The Board or the Committee may request advice or assistance or
employ such other persons as are necessary for proper administration of the
Plan.
13. Non-transferability.
Any option to purchase shares under the Plan may not be assigned,
transferred, pledged or otherwise disposed of in any way. Any such attempt at
assignment, transfer, pledge or other disposition, shall be void and without
effect.
14. Statements.
Statements of account will be delivered to Participants promptly following
each Purchase Date, which statements will set forth the amounts of payroll
contributions and additional contributions, the per share purchase price, the
number of shares purchased and any excess contributions.
15. Changes in Capitalization.
In the event of any stock dividend, stock split, spin-off,
recapitalization, merger, consolidation, exchange of shares or the like, the
number of shares then subject to option and the number of authorized shares
remaining available to be sold shall be increased or decreased appropriately.
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16. Certain Corporate Transactions.
(a) Cash-Out of Options. Subject to paragraph (c) below, the Board of
Directors may elect to terminate this Plan and any pending Offering Period as of
the effective date of a Change of Control, in which case the Company shall (1)
pay to each Participant whose options have been terminated an amount equal to
the Award Value with respect to such options, such payment to be made within 30
days after the Change of Control, and (2) the Company and the Plan Agent shall
return to each Participant all payroll contributions withheld and additional
contributions credited during the Offering Period in which the Change of Control
occurred. For purposes of this section, the Award Value shall be determined as
(i) the amount by which the Market Price exceeds the Option Price, times (ii)
the aggregate of payroll contributions and additional contributions so returned
to the Participant, divided by the Option Price. The Market Price shall be
determined as the average of the Fair Market Value of the Company's Common Stock
for the period of twenty (20) trading days ending on the effective date of the
Change of Control.
(b) Property in Lieu of Option. Notwithstanding the foregoing, the
termination of options and the payment of Award Values described in paragraph
(a) of this section shall not apply with respect to any transaction in which any
of the following occur: (i) the holder of an option receives replacement
options, as the case may be, allowing the 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) the Plan and all options outstanding thereunder are assumed
by the acquiring company, or (iii) the Participant receives a replacement option
that satisfies the requirements of Code Section 424(a).
(c) "Change of Control" means any of the following: (1) any person, entity
or Group (defined as 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) entry of any order, judgment or decree of dissolution or split-up of the
Company, which remains in effect 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, 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. Beneficial ownership
will be determined by applying the rules applicable under Section 13(d) of the
Securities Exchange Act of 1934, as amended.
17. Amendment.
The Board of Directors may at any time amend the Plan. No such amendment
may make any change in any option previously granted which adversely affects the
rights of any Participant without such Participant's consent. No amendment for
which stockholder approval is required shall be effective unless such approval
is obtained within the required time period. Whether stockholder approval is
required shall be determined by the Board and shall be consistent with the rules
of the Securities Exchange Commission, the Code and the rules of the stock
exchange(s) on which the Company's shares are listed, as such rules are in
effect at the time the Plan amendment becomes effective.
18. Stockholder Approval.
Approval of the stockholders may be obtained either by favorable vote of a
majority of the voting stock present or represented and entitled to vote on the
matter at a stockholder's meeting at which a quorum representing a majority of
the
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outstanding voting stock is present and voting on the Plan, either in person or
by proxy, or by the written consent of the holders of a majority of the
outstanding voting stock, in either case with Common Stock and other voting
shares convertible into Common Stock being considered together for the purpose
of determining a majority of the outstanding voting stock or a majority of the
voting stock present or represented and entitled to vote.
19. Termination.
The Board may terminate the Plan at any time. Unless sooner terminated by
the Board, or extended by a vote of stockholders in the manner provided for in
Section 18, this Plan shall terminate on the earlier of September 30, 2007, or
the date on which all shares authorized to be issued under the Plan have been
purchased. No such termination shall adversely affect options previously granted
without the consent of the affected Participants.
20. Employment Relationship.
Nothing in this Plan shall confer on any person the right to continue in
the employ of the Company, or shall interfere with or restrict the rights of the
Company, which are hereby expressly reserved, to terminate or modify the
employment of any person at any time, with or without cause, subject to the
terms and conditions of any applicable collective bargaining agreement.
21. Notices.
All notices or other communications by a Participant to the Company in
connection with the Plan shall be deemed to have been duly given when received
in the form specified by the Company at the location, or by the person,
designated by the Company for the receipt thereof.
22. Government and Other Regulations.
The Plan, and the grant and exercise of the rights to purchase shares
hereunder, and Grand Union's obligation to sell and deliver shares upon the
exercise of rights to purchase shares, shall be subject to all applicable
Federal, State and foreign laws, rules and regulations, and to such approvals by
any regulatory or government agency as may, in the opinion of counsel for Grand
Union, be required.
23. Applicable Law.
This Plan shall be interpreted in a manner intended to give full effect to
the provisions of the Plan, except where to do so would conflict with the laws
of the State of Delaware.
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APPENDIX B
THE GRAND UNION COMPANY
EXECUTIVE ANNUAL INCENTIVE BONUS PLAN
1. Definitions. The following terms when used herein shall have the
following meanings:
1.1. "Base Pay" means a Participant's base salary at the rate in effect at
the beginning of the applicable Performance Period.
1.2. "Committee" means a committee comprised solely of two or more "outside
directors" of the Company (as defined in the regulations promulgated under
Section 162(m) of the Code).
1.3. "Code" means the Internal Revenue Code of 1986, as it may be amended
from time to time, and any proposed, temporary or final Treasury Regulations
promulgated thereunder.
1.4. "Company" means the Grand Union Company, a Delaware corporation, and
any of its subsidiaries that adopt this Plan.
1.5. "Participant" means any executive officer of the Company or its
subsidiaries who is designated by the Committee at any time during each
Performance Period as a Participant in this Plan for that Performance Period;
provided, however, that on the date the executive officer becomes a Participant,
it is substantially uncertain whether the Performance Threshold with respect to
the applicable Performance Period has been achieved.
1.6. "Performance Criteria" means one or more of the following business
criteria applied to a Participant, a business unit of the Company or the Company
and its subsidiaries: consolidated pre-tax earnings; net revenues; net earnings;
operating income; earnings before interest and taxes; cash flow; return on
equity; return on net assets employed; earnings per share; stock price; market
share ; earnings before interest, taxes, depreciation and amortization; pre-tax
income before allocation of corporate overhead and bonus; budget; division,
group or corporate financial goals; attainment of strategic and operational
initiatives; appreciation in and/or maintenance of the price of the Common Stock
or any other publicly traded securities of the Company; gross profits; economic
value-added models; comparisons with various stock market indices or
peer-company groups; and/or reductions in cost -- for the applicable Performance
Period, all as computed in accordance with generally accepted accounting
principles (where applicable) as in effect from time to time and as applied by
the Company in the preparation of its financial statements.
1.7. "Performance Factor" means the percentages, determined based on the
actual performance as measured by the Performance Criteria for a Performance
Period as follows:
Performance Factor Actual Performance
------------------ ------------------
0% Below Minimum Performance Threshold
50% Equal to Minimum Performance Threshold
100% Equal to Target Performance Threshold
125% Equal to or above Maximum Performance Threshold
The Performance Factor shall be interpolated on a straight line basis (i) for
actual performance between the Minimum Performance Threshold and the Target
Performance Threshold and (ii) for actual performance between the Target
Performance Threshold and the Maximum Performance Threshold.
1.8. "Performance Thresholds" means the performance thresholds established
by the Committee pursuant to Section 2.2(c) based on the Performance Criteria
for the applicable Performance Period. The Committee shall establish
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minimum, target and maximum performance thresholds for each Performance Period.
In determining the extent to which the Performance Thresholds have been
satisfied for a Performance Period, the Performance Thresholds shall be adjusted
to reflect any change in accounting standards occurring after the Performance
Threshold is established. At the time the Performance Thresholds are
established, the Committee shall specify the extent to which, if any, the actual
performance shall be determined without regard to acquisitions, dispositions, or
other extraordinary events; provided that the exclusion of the impact of such
events can be effected under Section 162(m) of the Code.
1.9. "Performance Period" means the twelve consecutive month period which
coincides with the Company's fiscal year or any other period which the
Committee, in its sole discretion, selects.
1.10. "Plan" means The Grand Union Company Executive Annual Incentive Bonus
Plan.
1.11. "Target Bonus Percentage" means the percentage established by the
Committee with respect to a Participant pursuant to Section 2.2(b).
2. Administration.
2.1. The Plan shall be administered by the Committee.
2.2. At any time on or before the 90th day of each Performance Period that
is twelve months long, or at any time on or before the end of the first 25% of
any Performance Period, the Committee shall:
(a) designate the Participants for that Performance Period;
(b) establish Targeted Bonus Percentages for the Performance Period
for each Participant; and
(c) establish Performance Thresholds for the Performance Period
(which may be different for different Participants) for that
Performance Period.
2.3. Following the close of each Performance Period and prior to payment of
any bonus under the Plan for that Performance Period, the Committee shall
certify in writing the Performance Factor based on the actual performance for
that Performance Period.
3. Bonus Payment.
3.1. Formula. Each Participant shall receive a bonus payment for each
Performance Period in an amount not greater than:
(a) the Participant's Base Pay for the Performance Period, multiplied
by,
(b) the Participant's Targeted Bonus Percentage for the Performance
Period, multiplied by,
(c) the Participant's Performance Factor for the Performance Period.
3.2. Limitations.
(a) No Payment If Performance Factor Not Achieved. In no event shall
any Participant receive a bonus payment hereunder for any
Performance Period if the Minimum Performance Threshold for that
Performance Period is not achieved.
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(b) Maximum Limit. No Participant shall receive a payment under this
Plan for any Performance Period in excess of $1,000,000.
(c) Committee May Reduce Bonus Payment. The Committee may, in its
sole discretion, determine to reduce the amount of or eliminate
any bonus otherwise payable under this Plan.
4. Benefit Payments.
4.1. Time and Form of Payments. Subject to any deferred compensation
election pursuant to any such plans, if any, of the Company, benefits shall be
paid to a Participant within 30 days after the Committee has certified in
writing the Performance Factor for that Performance Period.
4.2. Nontransferability. Participants and their beneficiaries shall have no
right to assign, encumber or otherwise anticipate the payments to be made under
this Plan, and the benefits provided hereunder shall not be subject to seizure
for payment of any debts or judgments against any Participant or any
beneficiary.
4.3. Tax Withholding. The Company shall withhold from all payments made to
participants hereunder all applicable federal, state and/or local taxes which it
is required by law to withhold.
5. Amendment and Termination. The Committee may amend this Plan at any time and
for any reason deemed sufficient by it without notice to any person affected by
this Plan and may likewise terminate or curtail the benefits of this Plan both
with regard to persons expecting to receive benefits hereunder in the future and
persons already receiving benefits at the time of such action.
6. Miscellaneous.
6.1. Effective Date. The Plan shall become effective on August 1, 1997,
subject to Section 6.9 hereof.
6.2. Headings. Headings shall not be deemed in any ways material or
relevant to the construction or interpretation of the Plan or any provision
thereof.
6.3. Applicability to Successors. The Plan shall be binding upon and inure
to the benefit of the Company and each Participant, the successors and assigns
of the Company, and the beneficiaries, personal representatives and heirs of
each Participant. If the Company becomes a party to any merger, consolidation or
reorganization, the Plan shall remain in full force and effect as an obligation
of the Company or its successors in interest.
6.4. Employment Rights. The provisions of this Plan shall not give any
Participant any rights to be retained in the employment of the Company. In the
absence of any specific agreement to the contrary, this Plan shall not affect
any right of the Company, or of any affiliate of the Company, to terminate, with
or without cause, the participant's employment at any time. This Plan shall not
replace any contract of employment, whether oral or written, between the Company
and any Participant, but shall be considered a supplement thereto.
6.5. No Trust Fund Created. This Plan shall not create or be construed to
create a trust or separate fund of any kind or a fiduciary relationship between
the Company or any affiliate and a Participant or any other person. To the
extent that any person acquires a right to receive payments from the Company or
any affiliate pursuant to this Plan, such right shall be no greater than the
right of any unsecured general creditor of the Company or of any affiliate.
6.6. Governing Law. The validity, construction and effect of the Plan or
any bonus payable under the Plan shall be determined in accordance with the laws
of the State of New Jersey.
6.7. Severability. If any provision of the Plan is deemed to be invalid,
illegal or unenforceable in any jurisdiction such provision shall be construed
or deemed amended to conform to applicable laws, or if it cannot be so
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construed or deemed amended without, in the determination of the Committee,
materially altering the purpose or intent of the Plan, such provision shall be
stricken as to such jurisdiction, and the remainder of the Plan shall remain in
full force and effect.
6.8 Qualified Performance-Based Compensation. All of the terms and
conditions of the Plan shall be interpreted in such a manner to qualify all
compensation paid hereunder as qualified performance-based compensation within
the meaning of Section 162(m) of the Code.
6.9. Stockholder Approval. The effectiveness of the Plan shall be subject
to approval by a majority of the stockholders of the Company and no bonus shall
be paid under the Plan unless such stockholder approval has been obtained.
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APPENDIX C
THE GRAND UNION COMPANY
1995 EQUITY INCENTIVE PLAN, AS PROPOSED TO BE AMENDED(1)
1. PURPOSE
The purpose of this Equity Incentive Plan (the "Plan") is to advance the
interests of The Grand Union Company (the "Company") by enhancing its ability to
attract and retain employees and other persons or entities who are in a position
to make significant contributions to the success of the Company and its
subsidiaries through ownership of shares of the Company's common stock
("Stock").
The Plan is intended to accomplish these goals by enabling the Company to
grant Awards in the form of Options, Stock Appreciation Rights, Restricted Stock
or Unrestricted Stock Awards, Deferred Stock Awards, Performance Awards, Loans
or Supplemental Grants, or combinations thereof, all as more fully described
below.
2. ADMINISTRATION
The Plan shall be administered by a committee (the "Committee") of the
Board of Directors (the "Board") of the Company designated by the Board for that
purpose. Unless and until a Committee is appointed, the Plan shall be
administered by the entire Board, and references in the Plan to the "Committee"
shall be deemed references to the Board. A majority of the members of the
Committee shall constitute a quorum, and all determinations of the Committee
shall be made by a majority of its members. Any determination of the Committee
under the Plan may be made without notice or meeting of the Committee by a
writing signed by a majority of the Committee members.
The Committee will have authority, not inconsistent with the express
provisions of the Plan and in addition to other authority granted under the
Plan, to (a) grant Awards at such time or times as it may choose; (b) determine
the size of each Award, including the number of shares of Stock subject to the
Award; (c) determine the type or types of each Award; (d) determine the terms
and conditions of each Award; (e) waive compliance by a Participant (as defined
below) with any obligations to be performed by the Participant under an Award
and waive any term or condition of an Award; (f) amend or cancel an existing
Award in whole or in part (and if an Award is canceled, grant another award in
its place on such terms as the Committee shall specify), except that the
Committee may not, without the consent of the holder of an Award, take any
action under this clause with respect to such Award if such action would
adversely affect the rights of such holder; (g) prescribe the form or forms of
instruments that are required or deemed appropriate under the Plan, including
any written notices and elections required of Participants, and change such
forms from time to time; (h) adopt, amend and rescind rules and regulations for
the administration of the Plan; and (i) interpret the Plan and decide any
questions and settle all controversies and disputes that may arise in connection
with the Plan. Such determinations and actions of the Committee, and all other
determinations and actions of the Committee made or taken under authority
granted by any provision of the Plan, will be conclusive and will bind all
parties.
- --------
(1) The amendments which are being submitted for stockholder approval are
indicated herein as double-underlined text for proposed insertions and
struck-through text for proposed deletions as compared to the text included
in the 1996 Proxy Statement.
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Nothing in this paragraph shall be construed as limiting the power of the
Committee to make adjustments under Section 7.3 or Section 8.6.
3. EFFECTIVE DATE AND TERM OF PLAN
The Plan will 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 "Non-Employee Directors" within the meaning
of Rule 16b-3 under 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.
No Award may be granted under the Plan after October 26, 2005, but Awards
previously granted may extend beyond that date.
4. SHARES SUBJECT TO THE PLAN
Subject to the adjustment as provided in Section 8.6 below, the aggregate
number of shares of Stock that may be delivered under the Plan will be
6,000,000. If any Award requiring exercise by the Participant for delivery of
Stock terminates without having been exercised in full, or if any Award payable
in Stock or cash is satisfied in cash rather than Stock, the number of shares of
Stock as to which such Award was not exercised or for which cash was substituted
will be available for future grants.
Stock delivered under the Plan may be either authorized but unissued Stock
or previously issued Stock acquired by the Company and held in treasury. No
fractional shares of Stock will be delivered under the Plan.
Subject to Section 8.6(a), the maximum number of shares of Stock as to
which Options or Stock Appreciation Rights may be granted under the Plan to any
Participant is 2,000,000. For purposes of this paragraph, except as otherwise
provided in regulations or other guidelines issued under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), any repricing of an
Option or Stock Appreciation Right shall be treated as an original grant.
5. ELIGIBILITY AND PARTICIPATION
Those eligible to receive Awards under the Plan ("Participants") will be
"employees" or "salaried employees" of the Company or any of its subsidiaries
("Employees") and other persons or entities (including without limitation
non-Employee directors of the Company or a subsidiary of the Company) who, in
the opinion of the Committee, are in a position to make a significant
contribution to the success of the Company or its subsidiaries. A "subsidiary"
for purposes of the Plan will be a corporation in which the Company owns,
directly or indirectly, stock possessing 50% or more of the total combined
voting power of all classes of stock.
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6. TYPES OF AWARDS
6.1. Options.
(a) Nature of Options. An Option is an Award entitling the recipient on
exercise thereof to purchase Stock at a specified exercise price.
Both "incentive stock options," as defined in Section 422 of the Code (any
Option intended to qualify as an incentive stock option being hereinafter
referred to as an "ISO"), and Options that are not incentive stock options, may
be granted under the Plan. ISOs shall be awarded only to Employees.
(b) Exercise Price. The exercise price of an Option will be determined by
the Committee subject to the following:
(1) The exercise price of an ISO shall not be less than 100% (110% in
the case of an ISO granted to a ten-percent shareholder) of the fair market
value of the Stock subject to the Option, determined as of the time the
Option is granted. A "ten-percent shareholder" is any person who at the
time of grant owns, directly or indirectly, or is deemed to own by reason
of the attribution rules of Section 424(d) of the Code, stock possessing
more than 10% of the total combined voting power of all classes of stock of
the Company or of any of its subsidiaries.
(2) In no case may the exercise price paid for Stock which is part of
an original issue of authorized Stock be less than the par value per share
of the Stock.
(3) The Committee may reduce the exercise price of an Option at any
time after the time of grant, but in the case of an Option originally
awarded as an ISO, only with the consent of the Participant.
(c) Duration of Options. The latest date on which an Option may be
exercised will be the tenth anniversary (fifth anniversary, in the case of an
ISO granted to a ten-percent shareholder) of the day immediately preceding the
date the Option was granted, or such earlier date as may have been specified by
the Committee at the time the Option was granted.
(d) Exercise of Options. Options granted under any single Award will become
exercisable at such time or times, and on such conditions, as the Committee may
specify; provided, however, that if the Committee does not so specify, 25% of
the shares subject to the Award may be purchased commencing one year after the
date of grant, and an additional 25% of such shares may be purchased commencing
on the second, third and fourth anniversaries of the grant. The Committee may at
any time and from time to time accelerate the time at which all or any part of
the Option may be exercised.
Any exercise of an Option must be in writing, signed by the proper person
and delivered or mailed to the Company, accompanied by (1) any documents
required by the Committee and (2) payment in full in accordance with paragraph
(e) below for the number of shares for which the Option is exercised.
(e) Payment for Stock. Stock purchased on exercise of an Option must be
paid for as follows: (1) in cash or by check (acceptable to the Company in
accordance with guidelines established for this purpose), bank draft or money
order payable to the order of the Company or (2) if so permitted by the
instrument evidencing the Option (or in the case of an Option which is not an
ISO, by the Committee at or after grant of the Option), (i) through the delivery
of shares of Stock which have been outstanding for at least six months (unless
the Committee expressly approves a shorter period) and which have a fair market
value on the last business day preceding the date of exercise equal to the
exercise price, or (ii) by
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delivery of a promissory note of the Option holder to the Company, payable on
such terms as are specified by the Committee, or (iii) by delivery of an
unconditional and irrevocable undertaking by a broker to deliver promptly to the
Company sufficient funds to pay the exercise price, or (iv) by any combination
of the permissible forms of payment; provided, that if the Stock delivered upon
exercise of the Option is an original issue of authorized Stock, at least so
much of the exercise price as represents the par value of such Stock must be
paid other than by the Option holder's promissory note or personal check.
(f) Discretionary Payments. If the market price of shares of Stock subject
to an Option (other than an Option which is in tandem with a Stock Appreciation
Right as described in Section 6.2 below) exceeds the exercise price of the
Option at the time of its exercise, the Committee may cancel the Option and
cause the Company to pay in cash or in shares of Common Stock (at a price per
share equal to the fair market value per share) to the person exercising the
Option an amount equal to the difference between the fair market value of the
Stock which would have been purchased pursuant to the exercise (determined on
the date the Option is canceled) and the aggregate exercise price which would
have been paid. The Committee may exercise its discretion to take such action
only if it has received a written request from the person exercising the Option,
but such a request will not be binding on the Committee.
6.2. Stock Appreciation Rights.
(a) Nature of Stock Appreciation Rights. A Stock Appreciation Right is an
Award entitling the recipient on exercise of the Right to receive an amount, in
cash or Stock or a combination thereof (such form to be determined by the
Committee), determined in whole or in part by reference to appreciation in Stock
value.
Except as provided below, a Stock Appreciation Right entitles the
Participant to receive, with respect to each share of Stock as to which the
Right is exercised, the excess of the share's fair market value on the date of
exercise over its fair market value on the date the Right was granted. The
Committee may provide at the time of grant that the amount the recipient is
entitled to receive will be adjusted upward or downward under rules established
by the Committee to take into account the performance of the Stock in comparison
with the performance of other stocks or an index or indices of other stocks. The
Committee may also grant Stock Appreciation Rights providing that following a
change in control of the Company, as determined by the Committee, the holder of
such Right will be entitled to receive, with respect to each share of Stock
subject to the Right, an amount equal to the excess of a specified value (which
may include an average of values) for a share of Stock during a period preceding
such change in control over the fair market value of a share of Stock on the
date the Right was granted.
(b) Grant of Stock Appreciation Rights. Stock Appreciation Rights may be
granted in tandem with, or independently of, Options granted under the Plan. A
Stock Appreciation Right granted in tandem with an Option which is not an ISO
may be granted either at or after the time the Option is granted. A Stock
Appreciation Right granted in tandem with an ISO may be granted only at the time
the Option is granted.
(c) Rules Applicable to Tandem Awards. When Stock Appreciation Rights are
granted in tandem with Options, the following will apply:
(1) The Stock Appreciation Right will be exercisable only at such time
or times, and to the extent, that the related Option is exercisable and
will be exercisable in accordance with the procedure required for exercise
of the related Option.
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(2) The Stock Appreciation Right will terminate and no longer be
exercisable upon the termination or exercise of the related Option, except
that a Stock Appreciation Right granted with respect to less than the full
number of shares covered by an Option will not be reduced until the number
of shares as to which the related Option has been exercised or has
terminated exceeds the number of shares not covered by the Stock
Appreciation Right.
(3) The Option will terminate and no longer be exercisable upon the
exercise of the related Stock Appreciation Right.
(4) The Stock Appreciation Right will be transferable only with the
related Option.
(5) A Stock Appreciation Right granted in tandem with an ISO may be
exercised only when the market price of the Stock subject to the Option
exceeds the exercise price of such option.
(d) Exercise of Independent Stock Appreciation Rights. A Stock Appreciation
Right not granted in tandem with an Option will become exercisable at such time
or times, and on such conditions, as the Committee may specify. The Committee
may at any time accelerate the time at which all or any part of the Right may be
exercised.
Any exercise of an independent Stock Appreciation Right must be in writing,
signed by the proper person and delivered or mailed to the Company, accompanied
by any other documents required by the Committee.
6.3. Restricted and Unrestricted Stock.
(a) Nature of Restricted Stock Award. A Restricted Stock Award entitles the
recipient to acquire, for a purchase price equal to par value, shares of Stock
subject to the restrictions described in paragraph (d) below ("Restricted
Stock").
(b) Acceptance of Award. A Participant who is granted a Restricted Stock
Award will have no rights with respect to such Award unless the Participant
accepts the Award by written instrument delivered or mailed to the Company
accompanied by payment in full of the specified purchase price, if any, of the
shares covered by the award. Payment may be by certified or bank check or other
instrument acceptable to the Committee.
(c) Rights as a Stockholder. A Participant who receives Restricted Stock
will have all the rights of a stockholder with respect to the Stock, including
voting and dividend rights, subject to the restrictions described in paragraph
(d) below and any other conditions imposed by the Committee at the time of
grant. Unless the Committee otherwise determines, certificates evidencing shares
of Restricted Stock will remain in the possession of the Company until such
shares are free of all restrictions under the Plan.
(d) Restrictions. Except as otherwise specifically provided by the Plan,
Restricted Stock may not be sold, assigned, transferred, pledged or otherwise
encumbered or disposed of, and if the Participant ceases to be an Employee or
otherwise suffers a Status Change (as defined at Section 7.2(a) below) for any
reason, must be offered to the Company for purchase for the amount of cash paid
for the Stock, or forfeited to the Company if no cash was paid. These
restrictions will lapse at such time or times, and on such conditions, as the
Committee may specify. Upon lapse of all restrictions, Stock will cease to be
restricted for purposes of the Plan. The Committee may at any time accelerate
the time at which the restrictions on all or any part of the shares will lapse.
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(e) Notice of Election. Any Participant making an election under Section
83(b) of the Code with respect to Restricted Stock must provide a copy thereof
to the Company within 10 days of the filing of such election with the Internal
Revenue Service.
(f) Other Awards Settled with Restricted Stock. The Committee may, at the
time any award described in this Section 6 is granted, provide that any or all
the Stock delivered pursuant to the Award will be Restricted Stock.
(g) Unrestricted Stock. The Committee may, in its sole discretion, approve
the sale to any Participant of shares of Stock free of restrictions under the
Plan for a price which is not less than the par value of the Stock.
6.4. Deferred Stock.
A Deferred Stock Award entitles the recipient to receive shares of Stock to
be delivered in the future. Delivery of the Stock will take place at such time
or times, and on such conditions, as the Committee may specify. The Committee
may at any time accelerate the time at which delivery of all or any part of the
Stock will take place. At the time any award described in this Section 6 is
granted, the Committee may provide that, at the time Stock would otherwise be
delivered pursuant to the Award, the Participant will instead receive an
instrument evidencing the Participant's right to future delivery of Deferred
Stock.
6.5. Performance Awards; Performance Goals.
(a) Nature of Performance Awards. A Performance Award entitles the
recipient to receive, without payment, an amount in cash or Stock or a
combination thereof (such form to be determined by the Committee) following the
attainment of Performance Goals. "Performance Goals" are goals which may be
related to personal performance, corporate performance, departmental performance
or any other category of performance deemed by the Committee to be important to
the success of the Company. The Committee will determine the Performance Goals,
the period or periods during which performance is to be measured and all other
terms and conditions applicable to the award.
(b) Other Awards Subject to Performance Conditions. The Committee may, at
the time any Award described in this Section 6 is granted, impose the condition
(in addition to any conditions specified or authorized in this Section 6 or any
other provision of the Plan) that Performance Goals be met prior to the
Participant's realization of any payment or benefit under the Award.
6.6. Loans and Supplemental Grants.
(a) Loans. The Company may make a loan to a Participant ("Loan"), either on
the date of or after the grant of any Award to the Participant. A Loan may be
made either in connection with the purchase of Stock under the Award or with the
payment of any Federal, state and local income tax with respect to income
recognized as a result of the Award. The Committee will have full authority to
decide whether to make a Loan and to determine the amount, terms and conditions
of the Loan, including the interest rate (which may be zero), whether the Loan
is to be secured or unsecured or with or without recourse against the borrower,
the terms on which the Loan is to be repaid and the conditions, if any, under
which it may be forgiven. However, no Loan may have a term (including
extensions) exceeding ten years in duration.
(b) Supplemental Grants. In connection with any award, the Committee may at
the time such Award is made or at a later date, provide for and grant a cash
award to the Participant ("Supplemental Grant") not to exceed an amount equal to
(1) the amount of any federal, state and local income tax on
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ordinary income for which the Participant may be liable with respect to the
Award, determined by assuming taxation at the highest marginal rate, plus (2) an
additional amount on a grossed-up basis intended to make the Participant whole
on an after-tax basis after discharging all the Participant's income tax
liabilities arising from all payments under this Section 6. Any payments under
this subsection (b) will be made at the time the Participant incurs Federal
income tax liability with respect to the Award.
7. EVENTS AFFECTING OUTSTANDING AWARDS
7.1. Death.
If a Participant dies, the following will apply:
(a) All Options and Stock Appreciation Rights held by the Participant
immediately prior to death, to the extent then exercisable, may be exercised by
the Participant's executor or administrator or the person or persons to whom the
Option or Right is transferred by will or the applicable laws of descent and
distribution, at any time within the one year period ending with the first
anniversary of the Participant's death (or such shorter or longer period as the
Committee may determine), and shall thereupon terminate. In no event, however,
shall an Option or Stock Appreciation Right remain exercisable beyond the latest
date on which it could have been exercised without regard to this Section 7.
Except as otherwise determined by the Committee, all Options and Stock
Appreciation Rights held by a Participant immediately prior to death that are
not then exercisable shall terminate at death.
(b) Except as otherwise determined by the Committee, all Restricted Stock
held by the Participant must be transferred to the Company (and, in the event
the certificates representing such Restricted Stock are held by the Company,
such Restricted Stock will be so transferred without any further action by the
Participant) in accordance with Section 6.3 above.
(c) Any payment or benefit under a Deferred Stock Award, Performance Award,
or Supplemental Grant to which the Participant was not irrevocably entitled
prior to death will be forfeited and the Award canceled as of the time of death,
unless otherwise determined by the Committee.
7.2. Termination of Service (Other Than By Death).
If a Participant who is an Employee ceases to be an Employee for any reason
other than death, or if there is a termination (other than by reason of death)
of the consulting, service or similar relationship in respect of which a
non-Employee Participant was granted an Award hereunder (such termination of the
employment or other relationship being herein referred to as a "Status Change"),
the following will apply:
(a) Except as otherwise determined by the Committee: (i) all Options and
Stock Appreciation Rights held by the Participant that were not exercisable
immediately prior to the Status Change shall terminate at the time of the Status
Change, (ii) any ISOs 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, and (iii) 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
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termination of the Award. In no event, however, shall an Option or Stock
Appreciation Right remain exercisable beyond the latest date on which it could
have been exercised without regard to this Section 7. For purposes of this
paragraph, in the case of a Participant who is an Employee, a Status Change
shall not be deemed to have resulted by reason of (i) a sick leave or other bona
fide leave of absence of one year or less or approved for purposes of the Plan
by the Committee, or (ii) a transfer of employment between the Company and a
subsidiary or between subsidiaries, or to the employment of a corporation (or a
parent or subsidiary corporation of such corporation) issuing or assuming an
option in a transaction to which Section 424(a) of the Code applies.
(b) Except as otherwise determined by the Committee, all Restricted Stock
held by the Participant at the time of the Status Change must be transferred to
the Company (and, in the event the certificates representing such Restricted
Stock are held by the Company, such Restricted Stock will be so transferred
without any further action by the Participant) in accordance with Section 6.3
above.
(c) Any payment or benefit under a Deferred Stock Award, Performance Award,
or Supplemental Grant to which the Participant was not irrevocably entitled
prior to the Status Change will be forfeited and the Award canceled as of the
date of such Status Change unless otherwise determined by the Committee.
7.3. Certain Corporate Transactions.
(a) Subject to paragraph (c) below, as of the twentieth (20th) trading day
prior to the effective date of a Change of Control, (1) each outstanding Option
and each outstanding Stock Appreciation Right shall become exercisable in full,
(2) the restrictions shall be removed from each outstanding share of Restricted
Stock, (3) the Company shall make all payments and provide all benefits under
each outstanding Deferred Stock Award, Performance Award, and Supplemental Grant
which would have been made or provided with the passage of time had the
transaction not occurred and the Participant not suffered a Status Change (or
died), (4) subject to paragraph (c) of this section, the Company shall pay to
each holder of Options and Restricted Stock whose Options (other than ISOs
granted prior to July 1, 1996) and Restricted Stock have been terminated, an
amount equal to the Award Value with respect to such Options or Restricted
Stock, such payment to be made by cash or certified check within 30 days after
the Change in Control, and (5) the Committee may, in its sole discretion,
forgive all or any portion of the principal of or interest on a Loan. For
purposes of this section, the Award Value shall be determined as the difference
between (i) the exercise price of the Option or the purchase price of the
Restricted Stock and (ii) the Market Price, times (iii) the number of shares
covered by the Option or the Restricted Stock award, as the case may be. The
Market Price shall be determined as the average of the fair market value of the
Stock for the period of twenty (20) trading days ending on the effective date of
the covered transaction.
(b) "Change of Control" means any of the following: (1) any person, entity
or Group (persons or 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
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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.
8. GENERAL PROVISIONS
8.1. Documentation of Awards.
Awards will be evidenced by such written instruments, if any, as may be
prescribed by the Committee from time to time. Such instruments may be in the
form of agreements to be executed by both the Participant and the Company, or
certificates, letters or similar instruments, which need not be executed by the
Participant but acceptance of which will evidence agreement to the terms
thereof.
8.2. Rights as a Stockholder, Dividend Equivalents.
Except as specifically provided by the Plan, the receipt of an Award will
not give a Participant rights as a stockholder; the Participant will obtain such
rights, subject to any limitations imposed by the Plan or the instrument
evidencing the Award, upon actual receipt of Stock. However, the Committee may,
on such conditions as it deems appropriate, provide that a Participant will
receive a benefit in lieu of cash dividends that would have been payable on any
or all Stock subject to the Participant's Award had such Stock been outstanding.
Without limitation, the Committee may provide for payment to the Participant of
amounts representing such dividends, either currently or in the future, or for
investment of such amounts on behalf of the Participant.
8.3. Conditions on Delivery of Stock.
The Company will not be obligated to deliver any shares of Stock pursuant
to the Plan or to remove restriction from shares previously delivered under the
Plan (a) until all conditions of the Award have been satisfied or removed, (b)
until, in the opinion of the Company's counsel, all applicable federal and state
laws and regulations have been complied with, (c) if the outstanding Stock is at
the time listed on any stock exchange, until the shares to be delivered have
been listed or authorized to be listed on such exchange upon official notice of
issuance, and (d) until all other legal matters in connection with the issuance
and delivery of such shares have been approved by the Company's counsel. If the
sale of Stock has not been registered under the Securities Act of 1933, as
amended, the Company may require, as a condition to exercise of the Award, such
representations or agreements as counsel for the Company may consider
appropriate to avoid violation of such Act and may require that the certificates
evidencing such Stock bear an appropriate legend restricting transfer.
If an Award is exercised by the Participant's legal representative, the
Company will be under no obligation to deliver Stock pursuant to such exercise
until the company is satisfied as to the authority of such representative.
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8.4. Tax Withholding,
The Company will withhold from any cash payment made pursuant to an Award
an amount sufficient to satisfy all federal, state and local withholding tax
requirements (the "withholding requirements").
In the case of an Award pursuant to which Stock may be delivered, the
Committee will have the right to require that the Participant or other
appropriate person remit to the Company an amount sufficient to satisfy the
withholding requirements, or make other arrangements satisfactory to the
Committee with regard to such requirements, prior to the delivery of any Stock.
If and to the extent that such withholding is required, the Committee may permit
the Participant or such other person to elect at such time and in such manner as
the Committee provides to have the Company hold back from the shares to be
delivered, or to deliver to the Company, Stock having a value calculated to
satisfy the withholding requirement.
If at the time an ISO is exercised, the Committee determines that the
Company could be liable for withholding requirements with respect to a
disposition of the Stock received upon exercise, the Committee may require as a
condition of exercise that the person exercising the ISO agree (a) to inform the
Company promptly of any disposition (within the meaning of section 424(c) of the
Code) of Stock receiving upon exercise, and (b) to give such security as the
Committee deems adequate to meet the potential liability of the Company for the
withholding requirements and to augment such security from time to time in any
amount reasonably deemed necessary by the Committee to preserve the adequacy of
such security.
8.5. Nontransferability of Awards.
Unless otherwise provided in the Participant's agreement, no Award (other
than an Award in the form of an outright transfer of cash or Unrestricted Stock)
may be transferred other than by will or by the laws of descent and
distribution, and during a Participant's lifetime an Award requiring exercise
may be exercised only by him or her (or in the event of the Participant's
incapacity, the person or persons legally appointed to act on the Participant's
behalf).
8.6. Adjustments in the Event of Certain Transactions.
(a) In the event of a stock dividend, stock split or combination of shares,
recapitalization or other change in the Company's capitalization, or other
distribution to common stockholders other than normal cash dividends, after the
effective date of the Plan, the Committee will make any appropriate adjustments
to the maximum number of shares that may be delivered under the Plan under
Section 4 above .
(b) In any event referred to in paragraph (a), the Committee will also make
any appropriate adjustments to the number and kind of shares of stock or
securities subject to Awards then outstanding or subsequently granted, any
exercise prices relating to Awards and any other provision of Awards affected by
such change. The Committee may also make such adjustments to take into account
material changes in law or in accounting practices or principles, mergers,
consolidations, acquisitions, dispositions or similar corporate transactions, or
any other event, if it is determined by the Committee that adjustments are
appropriate to avoid distortion in the operation of the Plan.
8.7. Employment Rights, Etc.
Neither the adoption of the Plan nor the grant of Awards will confer upon
any person any right to continued retention by the Company or any subsidiary as
an Employee or otherwise, or affect in any way
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the right of the Company or any subsidiary to terminate an employment, service
or similar relationship at any time. Except as specifically provided by the
Committee in any particular case, the loss of existing or potential profit in
Awards granted under the Plan will not constitute an element of damages in the
event of termination of an employment, service or similar relationship event if
the termination is in violation of an obligation of the Company to the
Participant.
8.8. Deferral of Payments.
The Committee may agree at any time, upon request of the Participant, to
defer the date on which any payment under an Award will be made.
8.9. Past Services as Consideration.
Where a Participant purchases Stock under an Award for a price equal to the
par value of the Stock the Committee may determine that such price has been
satisfied by past services rendered by the Participant.
8.10 Applicable Law
This Employee Plan, all options granted hereunder and all actions taken in
connection herewith shall be governed by and construed in accordance with the
laws of the State of Delaware without reference to principles of conflict of
laws, except as superseded by applicable federal law.
9. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION
Neither adoption of the Plan nor the grant of Awards to a Participant will
affect the Company's right to grant to such Participant awards that are not
subject to the Plan, to issue to such Participant Stock as a bonus or otherwise,
or to adopt other plans or arrangements under which Stock be issued to
Employees.
The Committee may at any time or times amend the Plan or any outstanding
Award for any purpose which may at the time be permitted by law, or may at any
time terminate the Plan as to any further grants of Awards, provided that
(except to the extent expressly required or permitted by the Plan) no such
amendment will, without the approval of the stockholders of the Company,
effectuate a change for which stockholder approval is required in order for the
Plan to continue to qualify for the award of ISOs under Section 422 of the Code
or for the award of performance-based compensation under Section 162(m) of the
Code and to continue to qualify under Rule 16b-3 promulgated under Section 16 of
the 1934 Act.
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THE GRAND UNION COMPANY
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
NOVEMBER 20, 1997
The undersigned hereby nominates, constitutes and appoints J. Wayne Harris
and Jeffrey P. Freimark, and each of them individually, the attorney, agent and
proxy of the undersigned, with full power of substitution, to vote all stock of
THE GRAND UNION COMPANY which the undersigned is entitled to represent and vote
at the Annual Meeting of Stockholders of the Company to be held at the Sheraton
Crossroads Hotel, One International Boulevard, Mahwah, New Jersey, 07495, at
10:00 a.m. on November 20, 1997, and at any and all adjournments or
postponements thereof, as fully as if the undersigned were present and voting at
the meeting, as follows:
THE DIRECTORS RECOMMEND A VOTE "FOR" ITEMS 1, 2, 3, 4 AND 5.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
STOCKHOLDER ON THE REVERSE SIDE. WHERE NO DIRECTION IS GIVEN, SUCH SHARES WILL
BE VOTED "FOR" THE ELECTION OF THE DIRECTORS NAMED ON THE REVERSE SIDE OF THIS
PROXY, "FOR" APPROVAL OF THE ASSOCIATE STOCK PURCHASE PLAN, "FOR" APPROVAL OF
THE EXECUTIVE ANNUAL INCENTIVE BONUS PLAN, "FOR" APPROVAL OF THE AMENDMENTS TO
THE 1995 EQUITY INCENTIVE PLAN, "FOR" RATIFICATION OF PRICE WATERHOUSE LLP AS
THE COMPANY'S INDEPENDENT ACCOUNTANTS, AND IN THE DISCRETION OF THE PROXYHOLDERS
ON ANY OTHER MATTER WHICH MAY PROPERLY COME BEFORE THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO SIGN AND
RETURN THIS PROXY, WHICH MAY BE REVOKED AT ANY TIME PRIOR TO ITS USE.
IMPORTANT -- PLEASE SIGN AND DATE ON OTHER SIDE AND RETURN PROMPTLY.
<PAGE>
PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE USING DARK INK ONLY /X/
1. ELECTION OF DIRECTORS
/ / FOR / / WITHHELD
Election of the following nominees as directors: J. Wayne Harris, Roger E.
Stangeland, James J. Costello, Jordan H. Krimstein, Mark H. Manski, Clifford A.
Miller, Geoffrey T. Moore, Gary M. Philbin, Martha A. Pritchard and J. Richard
Stonesifer and.
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES, MARK THE BOX
ABOVE. TO WITHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE THROUGH
THAT NOMINEE'S NAME IN THE LIST ABOVE.
2. APPROVAL OF THE ASSOCIATE STOCK PURCHASE PLAN:
/ / FOR / / AGAINST / / ABSTAIN
3. APPROVAL OF THE EXECUTIVE ANNUAL INCENTIVE BONUS PLAN
/ / FOR / / AGAINST / / ABSTAIN
4. APPROVAL OF THE AMENDMENTS TO THE 1995 EQUITY INCENTIVE PLAN
/ / FOR / / AGAINST / / ABSTAIN
5. RATIFICATION OF PRICE WATERHOUSE LLP AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS:
/ / FOR / / AGAINST / / ABSTAIN
6. IN THEIR DISCRETION, ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENT THEREOF.
Signature(s) __________________________
Date ____________________________, 1997
Please date and sign your name exactly as it appears hereon. Executors,
administrators, guardians, officers of corporations, and others signing in a
fiduciary capacity should state their full titles as such. Joint owners each
sould sign personally,
