<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended October 10, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to ________________
Commission File Number 0-26602
THE GRAND UNION COMPANY
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-1518276
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
201 Willowbrook Boulevard, Wayne, New Jersey 07470-0966
- -------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
973-890-6000
------------
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such requirements for the past 90 days.
Yes /X/ No / /
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes /X/ No / /
As of November 24, 1998, there were issued and outstanding 30,000,000 shares,
par value $0.01 per share, of the Registrant's common stock.
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<PAGE>
THE GRAND UNION COMPANY
INDEX
PART I - FINANCIAL INFORMATION (Unaudited)
Item 1. Financial Statements. Page No.
Consolidated Statement of Operations - 8 weeks ended October 10, 1998
(Successor Company), 4 weeks ended August 15, 1998 and 12 weeks ended
October 11, 1997 (Predecessor Company) 3
Consolidated Statement of Operations - 8 weeks ended October 10, 1998
(Successor Company), 20 weeks ended August 15, 1998 and 28 weeks ended
October 11, 1997 (Predecessor Company) 4
Consolidated Balance Sheet - October 10, 1998 (Successor Company)
and March 28, 1998 (Predecessor Company) 5
Consolidated Statement of Cash Flows - 8 weeks ended October
10, 1998 (Successor Company), 20 weeks ended August 15, 1998 and
28 weeks ended October 11, 1997 (Predecessor Company) 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 10
PART II - OTHER INFORMATION
Item 2. Change in Securities. 13
Item 5. Other Information. 13
Item 6. Exhibits and Reports on Form 8-K. 14
All items which are not applicable or to which the answer is negative have
been omitted from this report.
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<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
THE GRAND UNION COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
(dollars in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Successor
Company Predecessor Company
---------------- -------------------------------
8 Weeks 4 Weeks 12 Weeks
Ended Ended Ended
October 10, August 15, October 11,
1998 1998 1997
---------------- -------------- ---------------
<S> <C> <C> <C>
Sales $ 342,471 $ 177,054 $ 518,910
Cost of sales 239,657 124,207 370,246
---------------- -------------- ---------------
Gross profit 102,814 52,847 148,664
Operating and administrative expenses 84,716 43,642 135,193
Depreciation and amortization 10,190 5,142 20,309
Amortization of excess reorganization value 20,242 8,026 24,076
Interest expense, net 6,619 4,050 26,012
Income tax (benefit) (176) - -
Unusual items 647 280 -
---------------- -------------- ---------------
Net (loss) before extraordinary item (19,424) (8,293) (56,926)
Extraordinary item - 260,784 -
---------------- -------------- ---------------
Net income (loss) (19,424) 252,491 (56,926)
Accrued dividends on preferred stock - - 2,074
---------------- -------------- ---------------
Net income (loss) applicable to common stock $ (19,424) $ 252,491 $ (59,000)
================ ============== ===============
Basic and diluted net (loss) per common share $ (0.65)
================
Weighted average number of shares outstanding 30,000,000
================
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
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<PAGE>
THE GRAND UNION COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
(dollars in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Successor
Company Predecessor Company
--------------- -----------------------------
8 Weeks 20 Weeks 28 Weeks
Ended Ended Ended
October 10, August 15, October 11,
1998 1998 1997
--------------- ------------- --------------
<S> <C> <C> <C>
Sales $ 342,471 $ 868,962 $ 1,226,893
Cost of sales 239,657 610,930 888,760
--------------- ------------- ---------------
Gross profit 102,814 258,032 338,133
Operating and administrative expenses 84,716 217,683 315,015
Depreciation and amortization 10,190 26,081 44,776
Amortization of excess reorganization value 20,242 40,128 56,178
Interest expense, net 6,619 36,509 58,332
Income tax (benefit) (176) - -
Unusual items 647 4,789 -
--------------- ------------- ---------------
Net (loss) before extraordinary item (19,424) (67,158) (136,168)
Extraordinary item - 259,045 -
--------------- ------------- ---------------
Net income (loss) (19,424) 191,887 (136,168)
Accrued dividends on preferred stock - 2,305 4,131
--------------- ------------- ---------------
Net income (loss) applicable to common stock $ (19,424) $ 189,582 $ (140,299)
=============== ============= ===============
Basic and diluted net (loss) per common share $ (0.65)
===============
Weighted average number of shares outstanding 30,000,000
===============
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
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<PAGE>
THE GRAND UNION COMPANY
CONSOLIDATED BALANCE SHEET
(dollars in thousands, except par value and liquidation preference data)
(unaudited)
<TABLE>
<CAPTION>
Successor Predecessor
Company Company
----------------- -----------------
October 10, March 28,
1998 1998
----------------- -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and temporary investments $ 65,318 $ 44,745
Receivables 28,033 21,378
Inventories 146,124 128,370
Other current assets 5,709 14,787
----------------- -----------------
Total current assets 245,184 209,280
Property, net 331,790 389,637
Excess reorganization value, net 372,252 230,734
Beneficial leases, net 75,597 39,531
Deferred tax asset 115,172 -
Other assets 15,774 23,049
----------------- -----------------
$ 1,155,769 $ 892,231
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt $ - $ 798,551
Current portion of obligations under capital leases 6,481 7,562
Accounts payable and accrued liabilities 181,333 189,439
----------------- -----------------
Total current liabilities 187,814 995,552
Long-term debt 230,000 -
Obligations under capital leases 150,131 153,425
Adverse leases, net 77,035
Other noncurrent liabilities 145,113 96,458
----------------- -----------------
Total liabilities 790,093 1,245,435
----------------- -----------------
Redeemable Class A Preferred Stock (Predecessor Company), $1.00 par
value, 3,500,000 shares authorized, 1,300,566 shares issued and
outstanding, liquidation preference $70,685,000 at March 28, 1998 - 70,685
----------------- -----------------
Redeemable Class B Preferred Stock (Predecessor Company), $1.00 par
value, 1,400,000 shares authorized, 800,000 shares issued and
outstanding, liquidation preference $42,746,000 at March 28, 1998 - 42,746
----------------- -----------------
Stockholders' equity (deficit):
Common stock (Predecessor Company), $.01 par value; 60,000,000 shares
authorized, 10,202,018 shares issued and outstanding at March 28, 1998 102
Common stock (Successor Company), $.01 par value; 60,000,000 shares
authorized, 30,000,000 shares issued and outstanding at
October 10, 1998 300
Preferred stock (Predecessor Company), $1.00 par value; 10,000,000
shares authorized, no shares issued and outstanding -
Preferred stock (Successor Company), $1.00 par value;
10,000,000 shares authorized, no shares issued and outstanding -
Capital in excess of par value 384,800 132,006
Accumulated deficit (19,424) (597,193)
Accumulated other comprehensive income (loss) (1,550)
----------------- -----------------
Total stockholders' equity (deficit) 365,676 (466,635)
================= =================
$ 1,155,769 $ 892,231
================= =================
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
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<PAGE>
THE GRAND UNION COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Successor Company Predecessor Company
------------------ ---------------------------------------
8 Weeks 20 Weeks 28 Weeks
Ended Ended Ended
October 10, August 15, October 11,
1998 1998 1997
---------------- ---------------- ----------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (19,424) $ 191,887 $ (136,168)
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities before
reorganization items paid:
Unusual items 647 4,789 -
Extraordinary items - (259,045) -
Depreciation and amortization 30,432 66,209 100,954
Deferred taxes (176) - -
Noncash interest 244 626 158
Net changes in assets and liabilities:
Receivables (5,466) (1,506) 17,682
Inventories (17,766) (5,586) 1,561
Other current assets (89) (99) 1,560
Other assets (180) 29 (388)
Accounts payable and accrued liabilities 9,583 22,347 (23,702)
Other noncurrent liabilities (701) (517) (6,565)
---------------- --------------- ---------------
Net cash provided by (used for) operating activities before
reorganization items paid (2,896) 19,134 (44,908)
Reorganization items paid (647) (9,102) (3,431)
---------------- --------------- ---------------
Net cash provided by (used for) operating activities (3,543) 10,032 (48,339)
---------------- --------------- ---------------
INVESTMENT ACTIVITIES:
Capital expenditures (1,387) (3,413) (28,712)
Disposals of property 122 49 60
---------------- --------------- ---------------
Net cash (used for) investment activities (1,265) (3,364) (28,652)
---------------- --------------- ---------------
FINANCING ACTIVITIES:
Net proceeds from sale of preferred stock - - 40,000
Proceeds from long-term debt - 230,000 77,978
Proceeds from DIP facility - 108,000 -
Repayment of DIP facility - (108,000) -
Financing fees - (7,895) (9,446)
Retirement of old bank debt - (182,122) -
Obligations under capital leases discharged (1,176) (3,094) (4,926)
Net repayment of long-term debt - (17,000) (31,046)
--------------- --------------- ---------------
Net cash provided by (used for) financing activities (1,176) 19,889 72,560
--------------- --------------- ---------------
Net increase (decrease) in cash and temporary investments (5,984) 26,557 (4,431)
Cash and temporary investments at beginning of period 71,302 44,745 34,119
--------------- --------------- ---------------
Cash and temporary investments at end of period $ 65,318 $ 71,302 $ 29,688
=============== =============== ===============
Supplemental disclosure of cash flow information:
Interest payments $ 4,097 $ 21,358 $ 55,644
Capital lease obligations incurred - - 12,268
Accrued dividends - 2,305 4,131
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
-6-
<PAGE>
THE GRAND UNION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - Reorganization
On August 17, 1998 (the "Effective Date"), The Grand Union Company
(the "Company") consummated its plan of reorganization under Chapter 11 of the
Bankruptcy Code (the "Plan of Reorganization") pursuant to the August 5, 1998
Confirmation Order of the United States Bankruptcy Court for the District of
New Jersey. Consummation of the Plan of Reorganization has resulted in a
capital restructuring of the Company, whereby approximately $600 million in
Old Senior Notes has been eliminated from the Company's balance sheet,
reducing annual interest expense by approximately $72 million.
Consummation of the Plan of Reorganization has resulted in (i) the
issuance of 30,000,000 shares of New Common Stock to the holders of the
Company's Old Senior Notes; (ii) the issuance of New Series 1, Series 2 and
Series 3 Warrants to the holders of the Company's Old Preferred Stock; (iii)
the issuance of New Series 1 Warrants to holders of the Company's Old Common
Stock; and (iv) cancellation of the Company's Old Senior Notes, Old Preferred
Stock, Old Common Stock, Old Series 1 and Series 2 Warrants and Old Stock
Options. As of October 1, 1998, the Company's new common stock began trading
on the NASDAQ National Market under the ticker symbol GUCO.
On August 17, 1998, in connection with the consummation of the Plan
of Reorganization, the Company entered into a $300 million credit agreement
(the "Credit Agreement") with UBS AG, Stamford Branch and Lehman
Commercial Paper Inc. ("LCPI"), as agents for a syndicate of lenders, which is
secured by substantially all of the assets of the Company and its subsidiaries
and is guaranteed by the Company's subsidiaries. Some of the proceeds of the
Credit Agreement were used to pay off the Company's obligation under its
debtor-in-possession credit agreement (the "DIP Facility"), which had provided
the Company operating liquidity during the Chapter 11 case.
Consummation of the Plan of Reorganization has resulted in the election
of a new Board of Directors for the Company (the "Board"). Effective August
17, 1998, the Board is comprised of eleven members. The three management
Directors are: J. Wayne Harris, Chairman and Chief Executive Officer; Jack W.
Partridge Jr., Vice Chairman and Chief Administrative Officer, and Gary M.
Philbin, President and Chief Merchandising Officer. The eight additional
members of the Board are: Martin Bernstein, Thomas R. Cochill, Joseph
Colonnetta, Jacob W. Doft, David M. Green, Joseph V. Lash, Anthony Petrillo
and Scott Tepper.
For more information about the Plan of Reorganization, reference is
made to Exhibit 2.1 to Grand Union's report on Form 8-K dated August 19, 1998.
For more information about the Credit Agreement, reference is made to Exhibit
10.6 of the Company's Quarterly Report on Form 10-Q for the 16 weeks ended
July 18, 1998. For more information about members of the Board, reference is
made to Exhibit 99.2 to Grand Union's report on Form 8-K dated August 19, 1998.
Reference is also made to Part II of this report on Form 10-Q.
NOTE 2 - Basis of Presentation
The accompanying interim consolidated financial statements of the
Company include the accounts of the Company and its subsidiaries, all of which
are wholly owned. In the opinion of management, the consolidated financial
statements include all adjustments which, except for Fresh-Start adjustments
(see note 3), consist only of normal recurring items, necessary for a fair
presentation of operating results for the interim periods.
These consolidated financial statements should be read in conjunction
with the consolidated financial statements and related notes contained in the
Company's Annual Report on Form 10-K for the 52 weeks ended March 28, 1998,
the Company's Quarterly Report on Form 10-Q for the 16 weeks ended July 18,
1998, and the Form 8-K dated May 27, 1998 and the Company's Disclosure
Statement attached thereto as Exhibit 2.1. Operating results for the periods
presented are not necessarily indicative of results for the full fiscal year.
Certain reclassifications have been made to prior year amounts to
conform to current period presentation.
-7-
<PAGE>
NOTE 3 - Fresh-Start Reporting
Upon emergence from its Chapter 11 proceedings, the Company adopted
fresh-start reporting in accordance with American Institute of Certified
Public Accountants Statement of Position 90-7, "Financial Reporting By
Entities in Reorganization Under The Bankruptcy Code" ("Fresh-Start
Reporting"). In connection with the adoption of Fresh-Start Reporting, a new
entity has been deemed created for financial reporting purposes. The periods
presented prior to the Effective Date have been designated "Predecessor
Company" and the period subsequent to the Effective Date has been designated
"Successor Company". For financial reporting purposes, the Company accounted
for the consummation of the Plan of Reorganization effective August 15, 1998.
In accordance with Fresh-Start Reporting, the Company valued its assets and
liabilities at fair values and eliminated its accumulated deficit at the
Effective Date.
The reorganization value of the Company's common equity of
approximately $385,100,000 was determined by the Company with the assistance of
financial advisors in reliance upon various valuation methods, including
discounted projected cash flows analyses, price/earnings ratios, and other
applicable ratios and economic industry information relevant to the operations
of the Company, and through negotiations with the various parties in interest.
The total reorganization value as of the Effective Date was approximately
$730,000,000, which was $392,494,000 in excess of the aggregate fair value of
the Company's tangible and identified intangible assets. Such excess is
classified as "Excess reorganization value, net" in the accompanying
consolidated balance sheet and is being amortized on a straight-line basis over
a three-year period.
As a result of the consummation of the Plan of Reorganization, the
Company recognized an extraordinary gain on debt discharge as follows (in
thousands):
Elimination of Old Debt, deferred financing fees
and accrued interest $ 645,884
Issuance of New Common Stock (385,100)
-------------
Extraordinary gain on debt discharge $ 260,784
=============
NOTE 4 - Income Taxes
The Company recorded a benefit for income taxes of $176,000 for the 12
weeks ended October 10, 1998, representing federal and state income taxes. All
operating loss and credit carryforwards of the Company have been offset by the
cancellation of indebtedness income recorded in connection with the Plan of
Reorganization. The tax basis of the Company's assets were reduced by $11.2
million, representing the Company's cancellation of indebtedness income in
excess of its operating loss and credit carryforwards as of the Effective Date.
NOTE 5 - Unusual Items
Unusual items recognized consist of $9.3 million in connection with
legal, advisory and bank fees associated with the Plan of Reorganization and
$3.9 million as a net gain resulting from the elimination of debt premiums.
NOTE 6 - Extraordinary Items
The Company recognized a net extraordinary gain of $260.8 million for
the 12 weeks ended October 10, 1998 as a result of the discharge of debt in
connection with the consummation of the Plan of Reorganization. An
extraordinary expense of $1.7 million was recorded during the 16 weeks ended
July 18, 1998 for the write-off of deferred financing costs associated with a
term loan refinanced by the DIP facility.
-8-
<PAGE>
NOTE 7 - Debt
The components of the Company's debt are as follows (in thousands):
<TABLE>
<CAPTION>
Successor Predecessor
Company Company
------------------ -----------------
October 10, March 28,
1998 1998
------------------ -----------------
<S> <C> <C>
Bank Credit Agreements
Term Loans $ 230,000 $ 182,122
Revolving Credit Facility - 17,000
12% Senior Notes due September 1, 2004
(includes $4,008 of unamortized debt
premium at March 28, 1998) - 599,429
------------------ -----------------
230,000 798,551
Less: current maturities of long-term debt - 798,551
================== =================
Long-term debt $ 230,000 $ -
================== =================
</TABLE>
In connection with the Chapter 11 filing, the Company entered into
the DIP Facility, a $172,022,020 revolving credit agreement with Swiss Bank
Corporation ("SBC") and LCPI, as agents for a syndicate of lenders. The DIP
Facility included a $50 million letter of credit sub-facility. The DIP
facility matured on August 17, 1998, the consummation date of the Plan of
Reorganization.
The proceeds of the DIP Facility were used (i) to finance the working
capital needs of the Company and its subsidiaries in the ordinary course of
business, (ii) to finance the payment of Chapter 11 expenses, (iii) for
general corporate purposes and (iv) to refinance the revolving credit facility
and term loan under the pre-Chapter 11 Credit Agreement (the "Old Credit
Agreement") and to replace or backstop letters of credit outstanding under an
existing credit agreement. The DIP Facility was secured by substantially all
of the assets of Grand Union and its subsidiaries and was guaranteed by the
Company's subsidiaries.
On August 17, 1998, in connection with the consummation of the Plan
of Reorganization, the Company entered into the Credit Agreement. The Credit
Agreement is comprised of: (i) a $230 million term loan facility (the "Term
Loan") and (ii) a $70 million revolving credit facility (the "Revolving
Credit"). The Term Loan and Revolving Credit will mature on August 18, 2003. The
proceeds of the Credit Agreement have been used to refinance the obligations
under the DIP Facility and supplemental term loan claims under the Old Credit
Agreement, and the excess portion will be used for the working capital needs of
Grand Union and its subsidiaries, including capital expenditures. Up to $50
million of Revolving Credit will be available for the issuance of letters of
credit. As of October 10, 1998, an aggregate of $36 million of letters of credit
were issued and outstanding under the Credit Agreement.
NOTE 8 - Net Loss Per Share
The net loss per share is computed in accordance with SFAS No. 128,
"Earnings Per Share." This statement requires that entities present, on the
face of the income statement for all periods reflected, basic and diluted per
share amounts. Basic earnings per share is computed using the weighted average
number of common shares outstanding for the period. Diluted earnings per share
is computed using the weighted average number of common shares outstanding for
the period adjusted for dilutive potential common shares. There were 30
million weighted average shares outstanding for both basic and diluted
earnings per share for the 8 weeks ended October 10, 1998. All potential
common shares were excluded from the computation of the Company's diluted
earnings per share because the effect would have been anti-dilutive. Net loss
per share data is not meaningful for periods prior to August 15, 1998 due to
the significant change in the capital structure.
-9-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
General:
As discussed in Note 1 to the accompanying Consolidated Financial
Statements of Grand Union, the Company emerged from its Chapter 11 proceedings
effective August 17, 1998. For financial reporting purposes, the Company
accounted for the consummation of the Plan of Reorganization effective August
15, 1998. In accordance with the American Institute of Certified Public
Accountants Statement of Position 90-7, "Financial Reporting By Entities in
Reorganization Under The Bankruptcy Code", the Company has applied Fresh-Start
Reporting as of the Effective Date which has resulted in significant changes to
the valuation of certain of the Company's assets and liabilities, and to its
stockholders' equity. In connection with the adoption of Fresh-Start Reporting,
a new entity has been deemed created for financial reporting purposes. The
periods prior to the Effective Date have been designated "Predecessor Company"
and the period subsequent to the Effective Date has been designated "Successor
Company". For purposes of the discussion of Results of Operations for the 12 and
28 weeks ended October 10, 1998, the results of the Predecessor Company and
Successor Company have been combined.
Results of Operations
The following table sets forth certain statement of operations and
other data (all dollars in millions).
<TABLE>
<CAPTION>
12 Weeks Ended 28 Weeks Ended
---------------------------------- ---------------------------------
October 10, October 11, October 10, October 11,
1998 1997 1998 1997
---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Sales $ 519.5 $ 518.9 $ 1,211.4 $ 1,226.9
Gross profit 155.7 148.7 360.8 338.1
Operating and administrative expenses 128.4 135.2 302.4 315.0
Depreciation and amortization 15.3 20.3 36.3 44.8
Amortization of excess reorganization value 28.3 24.1 60.4 56.2
Interest expense, net 10.7 26.0 43.1 58.3
Income tax (benefit) (0.2) - (0.2) -
Unusual item .9 - 5.4 -
Net (loss) before extraordinary item (27.7) (56.9) (86.6) (136.2)
Extraordinary item 260.8 - 259.0 -
Net income (loss) 233.1 (56.9) 172.5 (136.2)
Net income (loss) applicable to common stock 233.1 (59.0) 170.2 (140.3)
Sales percentage increase (decrease) 0.1% (2.7%) (1.3%) (2.6%)
Gross profit as a percentage of sales 30.0% 28.7% 29.8% 27.6%
Operating and administrative expenses as a
percentage of sales 24.7% 26.1% 25.0% 25.7%
</TABLE>
Sales for the 12 weeks ended October 10, 1998 (the "1999 second
quarter") increased $0.6 million, or 0.1% as compared to the 12 weeks ended
October 11, 1997 (the "1998 second quarter"). Comparable store sales,
including replacement stores, increased 0.61% during the 1999 second quarter.
The Company continues to invest in marketing and promotional programs to
successfully increase sales. For the 1999 second quarter, the Company closed
one store. Sales for the 28 weeks ended October 10, 1998 (the "1999 year to
date") decreased $15.5 million or 1.3% as compared to the 28 weeks ended
October 11, 1997 (the "1998 year to date"). Comparable store sales, including
replacement stores, decreased 0.55% during the 1999 year to date. Adverse
weather conditions, increased competition, and historic deferral of capital
expenditures were primarily responsible for decreased sales in the 16 (the
"1999 first quarter") weeks ended July 18, 1998. For the 1999 year to date,
the Company has opened one replacement store and closed two stores.
-10-
<PAGE>
Gross profit, as a percentage of sales, increased to 30.0% in the
1999 second quarter compared to 28.7% for the 1998 second quarter. This is
primarily due to an increase in allowance and promotional income as well as
new marketing initiatives. Gross profit, as a percentage of sales, increased
to 29.8% for the 1999 year to date, compared to 27.6% for the 1998 year to
date.
Operating and administrative expenses, as a percentage of sales,
decreased to 24.7% from 26.1% for the 1999 second quarter compared to the 1998
second quarter. This reflects continued progress in expense reduction in all
areas of the business. Operating and administrative expenses, as a percentage
of sales, decreased to 25.0% for the 28 weeks ended October 10, 1998, compared
to 25.7% for the 1998 year to date.
Depreciation and amortization decreased to $15.3 million from $20.3
million for the 1999 second quarter compared to the 1998 second quarter, and has
decreased $8.5 million for the 1999 year to date, compared to the 1998 year to
date. This decrease is mainly the result of impairment losses on assets
recorded in the fiscal 1998 fourth quarter and the historical deferral of
capital expenditures.
Interest expense, net decreased to $10.7 million and $43.1 million for
the 1999 second quarter and the 1999 year to date periods, respectively. The
1999-second quarter and year to date decrease is principally an effect of
the Company's reduced debt burden as a result of the reorganization.
The Company recorded federal and state income tax benefits of $0.2
million during the 1999 second quarter and 1999 year to date periods. The
Company recorded no net income tax provision or benefit during the 1998 second
quarter and 1998 year to date periods.
Unusual items recorded during the 1999 second quarter and 1999 year
to date periods consisted of $9.3 million in connection with legal, advisory
and bank fees associated with the Plan of Reorganization and $3.9 million as a
net gain resulting from the elimination of debt premiums.
The Company recognized an extraordinary gain of $260.8 million during
the 1999 second quarter resulting from the discharge of debt in connection
with the consummation of the Plan of Reorganization. Extraordinary item
expense of $1.7 million recorded in the 1999 first quarter is related to the
write-off of deferred financing costs associated with a term loan refinanced
by the DIP facility. The Company recognized no extraordinary gains or losses
during the 1998 second quarter and year to date periods.
Liquidity and Capital Resources
In connection with the Chapter 11 filing, the Company entered into
the DIP Facility, a $172,022,020 revolving credit agreement
with SBC and LCPI as agents for a syndicate of lenders. The DIP Facility
included a $50 million letter of credit sub-facility. The DIP facility matured
on August 17, 1998, the effective date of the Plan of Reorganization.
The proceeds of the DIP Facility were used (i) to finance the working
capital needs of the Company and its subsidiaries in the ordinary course of
business, (ii) to finance the payment of Chapter 11 expenses, (iii) for
general corporate purposes and (iv) to refinance the revolving credit and term
loan under the Old Credit Agreement and to replace or backstop letters of
credit outstanding under the Old Credit Agreement. The DIP Facility was
secured by substantially all of the assets of Grand Union and its subsidiaries
and was guaranteed by the Company's subsidiaries.
On August 17, 1998, in connection with the consummation of the Plan
of Reorganization, the Company entered into the Credit Agreement. The Credit
Agreement is comprised of: (i) a $230 million Term Loan and (ii) a $70 million
Revolving Credit Facility. The Term Loan and Revolving Credit Facility will
mature on August 18, 2003. The proceeds of the Credit Agreement have been
used to refinance the obligations under the DIP Facility and supplemental term
loan claims under the Old Credit Agreement. The excess will be used for
working capital and capital expenditures. Up to $50 million of the Revolving
Credit Facility will be available for the issuance of letters of credit. As of
October 10, 1998, an aggregate of $36 million of letters of credit were issued
and outstanding under the Credit Agreement.
-11-
<PAGE>
Year 2000 Compliance Disclosure
In May 1998, the Company established a Year 2000 Task Force (the "Task
Force") to address the issues that may occur as a result of the two digit year
change associated with the new millenium. The Task Force consists of a chairman,
plus three staff members. The Task Force works in conjunction with the
Information Technology Department, the Company's newly appointed Chief
Information Officer, outside information technology consultants, outside counsel
and the Company's Executive Committee, which is comprised of all of the
Company's executive officers. The Task Force believes it has identified all
computer-based systems and applications, including embedded systems, used by the
Company in its operations. The Task Force has categorized these systems and
applications according to the end-user department within the Company, based upon
how critical the function is to the Company's operations. The Task Force is
determining and implementing the modifications or replacements necessary to
achieve compliance; conducting tests to verify that the modified systems are
operational and compliant; and once completed, reinstating the compliant systems
into the normal operations of the Company. The systems and applications with the
greatest level of importance to the Company's operations are being assessed and
modified or replaced first. Management estimates that approximately 90% of all
internally developed systems and applications are currently Year 2000 ("Y2K")
compatible. The Company estimates that all critical systems and applications
will be Y2K compliant by June 1, 1999.
The Task Force is also examining the Company's relationships with
certain key outside vendors and others with whom the Company has significant
business relationships to determine, to the extent practical, the degree of such
outside parties' Y2K compliance. The Task Force has distributed Y2K compliance
questionnaires to vendors and suppliers who do business with the Company.
Particular attention has been focused on C&S Wholesale Grocers, Inc., ("C&S"),
which supplies the majority of inventory to the Company's stores. The Task
Force, senior management, members of IT and outside counsel have met with C&S to
understand their Y2K compliance efforts. The Task Force has also begun testing
procedures with vendors to determine Y2K compliance. Management is of the
opinion that the Company's continued relationship with C&S is the only material
vendor relationship that could significantly impact the Company's operations in
the event of Y2K noncompliance and does not believe that any other particular
third party's failure to be Y2K compliant would have a material adverse effect
on the Company.
The Task Force is in the process of establishing and implementing a
contingency plan to provide for viable alternatives to ensure that the
Company's core business operations are able to continue in the event of
Y2K-related systems failure. Management expects to have a comprehensive
contingency plan established by June 1, 1999.
Through September 30, 1998, the Company has expended approximately $2
million to address Y2K compliance issues. The Company estimates that it will
incur additional expenses of $3-8 million, for a total of approximately $5-10
million, to address and resolve Y2K compliance issues, which includes the
estimated costs of all modifications, testing and consultants' fees.
Management believes that should the Company or C&S have a Y2K-related
systems failure, the most significant impact would likely be the temporary
inability, with respect to individual stores or a group of stores, to conduct
operations due to a power failure, to distribute inventory in a timely fashion,
to receive certain products from vendors or to electronically process customer
sales at store level. The Company does not anticipate that any such temporary
impact would be material to the Company's liquidity or the Company's results of
operations.
With the exception of historical information, some matters discussed
herein, including, but not limited to, the Year 2000 Compliance Disclosure,
are "forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are subject to
risks, uncertainties and other factors, which could cause actual results to
differ materially from future results expressed or implied by such
forward-looking statements. Potential risks and uncertainties include, but are
not limited to, the competitive environment in which the Company operates, and
the general economic conditions in the geographic areas in which the Company
operates, and the timely resolution of Year 2000 Compliance issues by the
Company, its vendors and others with whom the Company has significant business
relationships. For additional information about the Company and its operating
and financial condition, please see the Company's most recent Form 10-K for
the year ended March 28, 1998, and other documents as filed with the SEC.
-12-
<PAGE>
PART II - OTHER INFORMATION
Item 2. Change in Securities.
On August 17, 1998, the Company consummated its Plan of
Reorganization. In connection with the Plan of Reorganization, the Company
cancelled its Old Senior Notes, Old Preferred Stock, Old Common Stock, Old
Series 1 and Series 2 Warrants and Old Stock Options. There are 60,000,000
shares of New Common Stock authorized under Grand Union's Certificate of
Incorporation. Of such authorized shares, 30,000,000 shares, representing 100%
of the issued and outstanding shares of New Common Stock, have been
distributed to the holders of the Old Senior Notes. Reorganized Grand Union
issued (i) Series 1 Warrants to purchase 4,324,015 shares of New Common Stock,
representing approximately 12% of the shares of New Common Stock at a price
equal to $19.82 per share; (ii) Series 2 Warrants to purchase 942,971 share
of New Common Stock, representing approximately 2.5% of the shares of the New
Common Stock, at a price equal to $23.15 per share and (iii) Series 3 Warrants
to purchase 306,122 shares of New Common Stock, representing approximately 1% of
the shares of New Common Stock at a price equal to $12.32 per share. The Series
1 Warrants and the Series 2 Warrants will expire on August 17, 2003. The Series
3 Warrants will expire on August 17, 2002. The Company's new securities were
issued pursuant to an exemption from registration under the Securities Act of
1933, as amended, pursuant to Section 1145 of the Bankruptcy Code. For further
information concerning the issuance of the new securities, reference is made to
Note 1 accompanying the financial statements.
Item 5. Other Information.
On October 1, 1998, the Company's new common stock began trading on
the NASDAQ National Market under the ticker symbol GUCO. The Company's Series
1 Warrants trade on the OTC Market under the ticker symbol GUCOL.
-13-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit Number
--------------
3.1 Restated Certificate of Incorporation of The Grand Union
Company as restated through September 10, 1998.
4.1 Form of Common Stock Certificate of The Grand Union Company.
27.1 Financial Data Schedule, for the 8 weeks ended October 10,
1998.
27.2 Financial Data Schedule, for the 20 weeks ended August 15,
1998.
(b) Reports on Form 8-K
1. Relating to the confirmation of the Plan of Reorganization -- Dated
August 5, 1998.
2. Relating to the consummation of the Plan of Reorganization -- Dated
August 19, 1998.
-14-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE GRAND UNION COMPANY
-----------------------
(Registrant)
/s/ Jeffrey P. Freimark
-----------------------
Jeffrey P. Freimark,
Executive Vice President
Chief Financial Officer
Date: November 24, 1998
-15-
<PAGE>
RESTATED
CERTIFICATE OF INCORPORATION
OF
THE GRAND UNION COMPANY
Pursuant to Section 245 of the General Corporation Law
of the State of Delaware
THE GRAND UNION COMPANY, a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware
(hereinafter called the "Corporation"), DOES HEREBY CERTIFY:
1. The name of the Corporation is The Grand Union Company and the
date of filing of its original Certificate of Incorporation in the office of
the Secretary of State was May 17, 1928.
2. This Restated Certificate of Incorporation only restates and
integrates and does not further amend the provisions of the Certificate of
Incorporation of this corporation as heretofore amended or supplemented and
there is no discrepancy between those provisions and the provisions of this
Restated Certificate of Incorporation.
3. The text of the Certificate of Incorporation as amended or
supplemented heretofore is hereby restated without further amendments or
changes to read as herein set forth in full:
FIRST: The name of the Corporation is THE GRAND UNION COMPANY
(hereinafter called the "Corporation").
SECOND: The address of the registered office of the Corporation in
the State of Delaware is Corporation Trust Center, 1209 Orange Street, in
the City of Wilmington, County of New Castle. The name of its registered
agent at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful
act or activity for which a Corporation
<PAGE>
may be organized under the General Corporation Law of the State of Delaware
(the "DGCL").
FOURTH: (A) The total number of shares of all classes of capital
stock which the Corporation shall have authority to issue is 70,000,000, of
which 10,000,000 shares shall be Preferred Stock of the par value of $1.00
per share and 60,000,000 shares shall be Common Stock of the par value of
$.01 per share.
(B) The Board of Directors is expressly authorized, by resolution
or resolutions, to provide for the issue of all or any shares of the
Preferred Stock, in one or more series, and to fix for each such series such
voting powers, full or limited, and such designations, preferences and
relative, participating, optional or other special rights and such
qualifications, limitations or restrictions thereon, as shall be stated and
expressed in the resolution or resolutions adopted by the Board of Directors
providing for the issue of such series (a "Preferred Stock Designation") and
as may be permitted by the DGCL and as are consistent with paragraph (C) of
this Article FOURTH. The number of authorized shares of Preferred Stock may
be increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of a majority of the holders of the
voting power of all the then outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors (the
"Voting Stock") voting together as a single class, without a separate vote
of the holders of the Preferred Stock, or any series thereof, unless a vote
of any such holders is required pursuant to any Preferred Stock Designation.
(C) The Corporation is subject to the requirements of Section
1123(a)(6) of the United States Bankruptcy Code (11 U.S.C. 1123(a)(6))
("Section 1123(a)(6)") and shall be prohibited from issuing any nonvoting
equity securities, and shall, at all times, provide, as to the several
classes of securities from time-to-time possessing voting power, an
appropriate distribution of power among such classes. A Preferred Stock
Designation shall not authorize the issuance of such nonvoting equity
securities, and shall include in its provisions, if the class designated by
such Preferred Stock Designation has a preference in respect of dividends,
adequate provisions for the election of directors representing such
preferred class in the event of default in the payment of such dividends
consistent with the requirements of Section 1123(a)(6).
2
<PAGE>
FIFTH: The following provisions are inserted for the management of
the business and the conduct of the affairs of the Corporation:
(1) Election of directors of the Corporation need not be by written
ballot unless the By-Laws so provide.
(2) All the powers of this Corporation, insofar as the same may be
lawfully vested by this Restated Certificate of Incorporation in the Board
of Directors, are hereby conferred upon the Board of Directors of this
Corporation. In furtherance and not in limitation of that power the Board of
Directors is authorized to make, adopt, alter, amend and repeal from time to
time the By-Laws of the Corporation, by vote of a majority of the directors
present at any regular meeting of the Board, or at any special meeting of
the Board, provided that notice of such proposed alternation, amendment,
repeal or adoption of new By-Laws is given in the notice of such special
meeting, or by written consent without a meeting signed by all directors.
The power of the Board of Directors to adopt, amend or repeal By-Laws is
subject to the right of stockholders entitled to vote with respect thereto
to alter and repeal By-Laws made by the Board of Directors.
(3) The Corporation shall, to the maximum extent permitted from
time to time under the DGCL, indemnify and upon request shall advance
expenses to any person who is or was a party or is threatened to be made a
party to any threatened, pending, or completed action, suit, proceeding or
claim, whether civil, criminal, administrative or investigative, by reason
of the fact that such person is or was or has agreed to be a director or
officer of the Corporation or while a director or officer is or was serving
at the request of the Corporation as a director, officer partner, trustee,
employee or agent of any corporation, partnership, joint venture, trust or
other enterprise, including service with respect to employee benefit plans,
against expenses (including attorney's fees and expenses), judgment, fines,
penalties and amounts paid in settlement incurred in connection with the
investigation, preparation to defend or defense of such action, suit
proceeding or claim; provided, however, that the foregoing shall not require
the Corporation to indemnify or advance expenses to any person in connection
with any action, suit, proceeding, claim or counterclaim initiated by or on
behalf of such person. Such indemnification shall not be exclusive of other
indemnification rights arising under any by-law,
3
<PAGE>
agreement, vote of directors or stockholders or otherwise and shall inure to
the benefit of the heirs and legal representatives of such person. Any
person seeking indemnification under this paragraph (3) of ARTICLE FIFTH
shall be deemed to have met the standard of conduct required for such
indemnification unless the contrary shall be established. Any repeal or
modification of the foregoing provisions of this paragraph (3) of ARTICLE
FIFTH shall not adversely affect any right or protection of a director or
officer of the Corporation with respect to any acts or omissions of such
director or officer occurring prior to such repeal or modification.
(4) A director of the Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent that exculpation from liability is
not permitted under the DGCL at the time such liability is determined. No
amendment or repeal of this paragraph (4) of ARTICLE FIFTH shall apply to or
have any effect on the liability or alleged liability to any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
SIXTH: The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights preferences and privileges of whatever nature conferred upon
stockholders, directors or any other persons whomsoever, by and pursuant to
this Restated Certificate of Incorporation in its present form or as amended
are granted subject to this reservation.
SEVENTH: (1) In addition to any affirmative vote required by law or
this Certificate of Incorporation or the By-laws of the Corporation, and
except as otherwise expressly provided in Section 2 of this Article, a
Business Combination (as hereinafter defined) with, or proposed by or on
behalf of, any Interested Stockholder (as hereinafter defined) or any
Affiliate or Associate (as hereinafter defined) of any Interested
Stockholder or any person who thereafter would be an Affiliate or Associate
of such Interested Stockholder shall require the affirmative vote of not
less than seventy-five percent (75%) of the votes entitled to be cast by the
holders of all the then outstanding shares of Voting Stock, voting together
as a single class, excluding Voting Stock beneficially owned by
4
<PAGE>
such Interested Stockholder. Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that a lesser
percentage or separate class vote may be specified, by law or in any
agreement with any national securities exchange or otherwise.
(2) The provisions of Section 1 of this Article shall not be
applicable to any particular Business Combination, and such Business
Combination shall require only such affirmative vote, if any, as is required
by law or by any other provision of this Certificate of Incorporation or the
By-laws of the Corporation, or any agreement with any national securities
exchange or the Nasdaq National Market, if all of the conditions specified
in either of the following Paragraphs (a) or (b) are met, or in the case of
a Business Combination not involving the payment of consideration to the
holders of the Corporation's outstanding Capital Stock (as hereinafter
defined), if the conditions specified in the following Paragraph (a) are
met:
(a) The Business Combination shall have been
approved, either specifically or as a transaction which is
within an approved category of transactions, by a majority
(whether such approval is made prior to or subsequent to
the acquisition of, or announcement or public disclosure
of the intention to acquire, beneficial ownership of the
Voting Stock that caused the Interested Stockholder to
become an Interested Stockholder) of the Continuing
Directors (as hereinafter defined).
(b) All of the following conditions shall have
been met; provided, however, that for purposes of all
calculations set forth in this Section 2(b), all
acquisitions of Preferred Stock or Common Stock by Trefoil
Capital Investors II, L.P. and GE Investment Private
Placement Partners II, A Limited Partnership
(collectively, the "Purchasers") pursuant to the Stock
Purchase Agreement dated July 30, 1996 (the "Stock
Purchase Agreement") and all acquisitions of Common Stock
by the Purchasers upon the conversion of such Preferred
Stock will be excluded:
(i) The aggregate amount of cash and the Fair
Market Value (as hereinafter defined), as of the date of
the consummation
5
<PAGE>
of the Business Combination, of consideration other than
cash to be received per share by holders of Common Stock
in such Business Combination shall be at least equal to
the amount determined under clause (A) below:
(A) (if applicable) the highest per
share price (including any brokerage commissions,
transfer taxes and soliciting dealers' fees) paid
by or on behalf of the Interested Stockholder for
any share of Common Stock in connection with the
acquisition by the Interested Stockholder of
beneficial ownership of shares of Common Stock
(x) within the two-year period immediately prior
to the first public announcement of the proposed
Business Combination (the "Announcement Date") or
(y) in the transaction in which it became an
Interested Stockholder, whichever is higher, in
either case as adjusted for any subsequent stock
split, stock dividend, subdivision or
reclassification with respect to the Common
Stock.
(ii) The aggregate amount of cash and the Fair
Market Value, as of the date of the consummation of the
Business Combination, of consideration other than cash to
be received per share by holders of shares of any class or
series of outstanding Capital Stock, other than Common
Stock, shall be at least equal to the amount determined
under clause (A) below:
(A) (if applicable) the highest per
share price (including any brokerage commissions,
transfer taxes and soliciting dealers' fees) paid
by or on behalf of the Interested Stockholder for
any share of such class or series of Capital
Stock in connection with the acquisition by the
Interested Stockholder of beneficial ownership of
shares of such class or series of Capital Stock
(x) within the two-year period immediately prior
to the
6
<PAGE>
Announcement Date or (y) in the transaction in
which it became an Interested Stockholder,
whichever is higher, in either case as adjusted
for any subsequent stock split, stock dividend,
subdivision or reclassification with respect to
such class or series of Capital Stock.
(iii) The consideration to be received by holders
of a particular class or series of outstanding Capital
Stock shall be in cash or in the same form as previously
has been paid by or on behalf of the Interested
Stockholder in connection with its direct or indirect
acquisition of beneficial ownership of shares of such
class or series of Capital Stock. If the consideration so
paid for shares of any class or series of Capital Stock
varied as to form, the form of consideration for such
class or series of Capital Stock shall be either cash or
the form used to acquire beneficial ownership of the
largest number of shares of such class or series of
Capital Stock previously acquired by the Interested
Stockholder.
(iv) If a proxy or information statement is
required to be mailed pursuant to the Securities Exchange
Act of 1934, as amended, and the rules and regulations
thereunder (the "Exchange Act") (or any subsequent
provisions replacing such Exchange Act, rules or
regulations), a proxy or information statement describing
the proposed Business Combination and complying with the
requirements of the Exchange Act shall be mailed to all
stockholders of the Corporation at least 30 days prior to
the consummation of such Business Combination.
(3) The following definitions shall apply with respect to this
Article:
(a) The term "Business Combination" shall mean, with
respect to any particular Interested Stockholder, any event
described in clauses (i), (ii) or (iii) of this Section 3(a) which
occurs
7
<PAGE>
during the two-year period commencing on the date on which the
Interested Stockholder becomes an Interested Stockholder:
(i) any merger or consolidation of the
Corporation or any Subsidiary (as hereinafter defined)
with (x) any Interested Stockholder or (y) any other
corporation (whether or not itself an Interested
Stockholder) which is or after such merger or
consolidation would be an Affiliate or Associate of an
Interested Stockholder; or
(ii) any merger or consolidation of the
Corporation with any of its Subsidiaries that has the
effect, directly or indirectly, of increasing the
proportionate share of any class or series of Capital
Stock, or any securities convertible into Capital Stock or
into equity securities of any Subsidiary, that is
beneficially owned by any Interested Stockholder or any
Affiliate or Associate of any Interested Stockholder; or
(iii) any agreement, contract or other
arrangement providing for any one or more of the actions
specified in the foregoing clauses (i) or (ii).
(b) The term "Capital Stock" shall mean all capital stock
of the Corporation authorized to be issued from time to time under
Article Fourth of this Certificate of Incorporation, and the term
"Voting Stock" shall mean all Capital Stock which by its terms may
be voted on all matters submitted to stockholders of the
Corporation generally.
(c) The term "person" shall mean any individual, firm,
corporation or other entity and shall include any group comprised
of any person and any other person with whom such person or any
Affiliate or Associate of such person has any agreement arrangement
or understanding, directly or indirectly, for the purpose of
acquiring, holding, voting or disposing of Capital Stock.
(d) The term "Interested Stockholder" shall mean any
person (other than the Corporation or any
8
<PAGE>
Subsidiary and other than any profit-sharing, employee stock
ownership or other employee benefit plan of the Corporation or any
Subsidiary or any trustee of or fiduciary with respect to any such
plan when acting in such capacity) who is or has announced or
publicly disclosed a plan or intention to become the beneficial
owner of Voting Stock representing fifty percent (50%) or more of
the votes entitled to be cast by the holders of all then
outstanding shares of Voting Stock. For purposes of this Article,
the Purchasers will not be considered an Interested Stockholder
with respect to any acquisition of Preferred Stock pursuant to the
Stock Purchase Agreement or with respect to the acquisition of
Common Stock by the Purchasers upon the conversion of such
Preferred Stock.
(e) A person shall be a "beneficial owner" of any Capital
Stock (i) which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly; (ii) which such person
or any of its Affiliates or Associates has, directly or indirectly,
(A) the right to acquire (whether such right is exercisable
immediately or subject only to the passage of time), pursuant to
any agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement,
arrangement or understanding; or (iii) which is beneficially owned,
directly or indirectly, by any other person with which such person
or any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of any shares of Capital Stock. For the purpose
of determining whether a person is an Interested Stockholder
pursuant to Paragraph (d) of this Section (3), the number of shares
of Capital Stock deemed to be outstanding shall include shares
deemed beneficially owned by such person through application of
this Paragraph (e) of Section (3), but shall not include any other
shares of Capital Stock that may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of
conversion rights, warrants or options, or otherwise.
9
<PAGE>
(f) The terms "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 under the
Exchange Act as in effect on the date of filing of this Certificate
of Incorporation with the Secretary of State of the State of
Delaware (the term "registrant" in said Rule 12b-2 meaning in this
case the Corporation).
(g) The term "Subsidiary" means any company of which a
majority of any class of equity security is beneficially owned by
the Corporation; provided, however, that for the purposes of the
definition of Interested Stockholder set forth in Paragraph (d) of
this Section (3), the term "Subsidiary" shall mean only a company
of which a majority of each class of equity security is
beneficially owned by the Corporation.
(h) The term "Continuing Director" means any member of the
Board of Directors, while such person is a member of the Board of
Directors, who is not an Affiliate or Associate or representative
of the Interested Stockholder and was a member of the Board of
Directors prior to the time that an Interested Stockholder became
an Interested Stockholder, and any successor of a Continuing
Director while such successor is a member of the Board of
Directors, who is not an Affiliate or Associate or representative
of the Interested Stockholder and is recommended or elected to
succeed the Continuing Director by a majority of Continuing
Directors. For purposes of this Article, Roger Stangeland will be
considered a Continuing Director.
(i) "Fair Market Value" means (i) in the case of cash, the
amount of such cash; (ii) in the case of stock, the highest closing
sale price during the 30-day period immediately preceding the date
in question of a share of such stock on the Composite Tape for New
York Stock Exchange-Listed Stocks, or, if such stock is not quoted
on the Composite Tape, on the New York Stock Exchange, or, if such
stock is not listed on such Exchange, on the principal United
States securities exchange registered under the Exchange Act on
which such stock is listed, or, if such stock is not listed
10
<PAGE>
on any such exchange, the highest closing bid quotation with
respect to a share of such stock during the 30-day period preceding
the date in question on the National Association of Securities
Dealers, Inc. Automated Quotations System or any similar system
then in use, or, if no such quotations are available, the fair
market value on the date in question of a share of such stock as
determined by a majority of the Continuing Directors in good faith;
and (iii) in the case of property other than cash or stock, the
Fair Market Value of such property on the date in question as
determined in good faith by a majority of the Continuing Directors.
(j) in the event of any Business Combination in which the
Corporation survives, the phrase "consideration other than cash to
be received" as used in Paragraphs (b)(i) and (b)(ii) of Section
(2) of this Article shall include the shares of Common Stock and/or
the shares of any other class or series of Capital Stock retained
by the holders of such shares.
(4) A majority of the Continuing Directors shall have the power and
duty to determine for the purpose of this Article, on the basis of
information known to them after reasonable inquiry, all questions arising
under this Article, including, without limitation, (i) whether a person is
an Interested Stockholder, (ii) the number of shares of Capital Stock or
other securities beneficially owned by any person, (iii) whether a person is
an Affiliate or Associate of another, and (iv) whether a proposed action is
with, or proposed by, or on behalf of an Interested Stockholder or an
Affiliate or Associate of an Interested Stockholder. Any such determination
made in good faith shall be binding and conclusive on all parties.
(5) Nothing contained in this Article shall be construed to relieve
any Interested Stockholder from any fiduciary obligation imposed by law.
(6) The fact that any Business Combination complies with the
provisions of Section (2) of this Article shall not be construed to impose
any fiduciary duty, obligation or responsibility on the Board of Directors,
or any member thereof, to approve such Business Combination or recommend its
adoption or approval to the stockholders of
11
<PAGE>
the Corporation, nor shall such compliance limit, prohibit or otherwise
restrict in any manner the Board of Directors, or any member thereof, with
respect to evaluations of, or actions and responses taken with respect to,
such Business Combination.
(7) For the purposes of this Article, a Business Combination is
presumed to have been proposed by, or on behalf of, an Interested
Stockholder or an Affiliate or Associate of an Interested Stockholder or a
person who thereafter would become such if (i) after the Interested
Stockholder became such, the Business Combination is proposed following the
election of any director of the Corporation who, with respect to such
Interested Stockholder, would not qualify to serve as a Continuing Director
or (ii) such Interested Stockholder, Affiliate, Associate or person votes
for or consents to the adoption of any such Business Combination, unless as
to such Interested Stockholder, Affiliate, Associate or person, a majority
of the Continuing Directors makes a good faith determination that such
Business Combination is not proposed by or on behalf of such Interested
Stockholder, Affiliate, Associate or person, based on information known to
them after reasonable inquiry.
(8) Notwithstanding any other provisions of this Certificate of
Incorporation or the By-laws of the Corporation (and notwithstanding the
fact that a lesser percentage or separate class vote may be specified by
law, this Certificate of Incorporation or the By-laws of the Corporation),
the affirmative vote of the holders of not less than seventy-five percent
(75%) of the votes entitled to be cast by the holders of all the then
outstanding shares of Voting Stock, voting together as a single class,
excluding Voting Stock beneficially owned by such Interested Stockholder,
shall be required to amend or repeal, or adopt any provisions inconsistent
with, this Article; provided, however, that this Section (8) shall not apply
to, and such seventy-five percent (75%) vote shall not be required for, any
amendment, repeal or adoption unanimously recommended by the Board of
Directors if all of such directors are persons who would be eligible to
serve as Continuing Directors within the meaning of Section (3), Paragraph
(h) of this Article.
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4. This Restated Certificate of Incorporation was duly adopted by
the Board of Directors in accordance with Section 245 of the General
Corporation Law of the State of Delaware.
5. This Restated Certificate of Incorporation shall be effective
upon the filing hereof.
IN WITNESS WHEREOF, The Grand Union Company has caused this
Restated Certificate of Incorporation to be signed on its behalf by Jeffrey
P. Freimark, its Executive Vice President and Chief Financial Officer, and
attested to by Donald C. Vaillancourt, its Secretary, this 10th day of
September, 1998.
THE GRAND UNION COMPANY
By: /s/ Jeffrey P. Freimark
-------------------------------------
Jeffrey P. Freimark, Executive Vice
President and Chief Financial
Officer
Attest:
/s/ Donald C. Vaillancourt
- ---------------------------------
Donald C. Vaillancourt, Secretary
13
<PAGE>
NUMBER SHARES
GU
THE GRAND UNION COMPANY
INCORPORATED UNDER THE LAWS SEE REVERSE FOR
OF THE STATE OF DELAWARE CERTAIN DEFINITIONS
THIS CERTIFIES THAT CUSIP 386532 40 2
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
THE GRAND UNION COMPANY
C E R T I F I C A T E O F S T O C K
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney, upon surrender of this certificate properly
endorsed. This certificate and the shares represented hereby are issued and
shall be held subject to all of the provisions of the Certificate of
Incorporation and all amendments thereto, to all of which the holder by
acceptance thereof assents.
This certificate is not valid until countersigned and registered by the Transfer
Agent and Registrar.
<PAGE>
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated
SEAL
/s/ Jeffrey P. Freimark THE GRAND UNION COMPANY /s/ J. Wayne Harris
ASSISTANT SECRETARY CORPORATE SEAL CHAIRMAN OF THE BOARD AND
1928 CHIEF EXECUTIVE OFFICER
DELAWARE
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED SIGNATURE
80
The Corporation will furnish without charge to each Stockholder who so requests
the powers, designations, preferences and relative, participating, optional or
other special rights of each class of stock of the Corporation, or series
thereof, and the qualifications, limitations or restrictions of such preferences
and/or rights.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of survivorship and not as tenants
in common
UNIF GIFT MIN ACT -- _________ Custodian ___________
(Cust) (Minor)
Under Uniform Gifts to Minors
Act ___________
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received, ________________________ hereby sell, assign and
<PAGE>
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE) of
the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint ___________________ to transfer the said
stock on the books of the within named Corporation with full power of
substitution in the premises.
Dated: ___________________________
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the certificate in every particular without alteration
or enlargement or any change whatever. The signature of the person executing
this power must be guaranteed by an Eligible Guarantor institution such as a
Commercial Bank, Trust Company, Securities Broker/Dealer, Credit Union, or a
Savings Association participating in a Medallion program approved by the
Securities Transfer Association, Inc.
81
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
company's interim consolidated financial statements and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> APR-03-1999
<PERIOD-END> OCT-10-1998
<CASH> 65,318
<SECURITIES> 0
<RECEIVABLES> 28,033
<ALLOWANCES> 0
<INVENTORY> 146,124
<CURRENT-ASSETS> 245,184
<PP&E> 812,808
<DEPRECIATION> 481,018
<TOTAL-ASSETS> 1,155,769
<CURRENT-LIABILITIES> 187,814
<BONDS> 0
0
0
<COMMON> 300
<OTHER-SE> 365,376
<TOTAL-LIABILITY-AND-EQUITY> 1,155,769
<SALES> 342,471
<TOTAL-REVENUES> 342,471
<CGS> 239,657
<TOTAL-COSTS> 239,657
<OTHER-EXPENSES> 115,795
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,619
<INCOME-PRETAX> (19,600)
<INCOME-TAX> 176
<INCOME-CONTINUING> (19,424)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (19,424)
<EPS-PRIMARY> (0.65)
<EPS-DILUTED> (0.65)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
company's interim consolidated financial statements and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> APR-03-1999
<PERIOD-END> AUG-15-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 868,962
<TOTAL-REVENUES> 868,962
<CGS> 610,930
<TOTAL-COSTS> 610,930
<OTHER-EXPENSES> 288,681
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36,509
<INCOME-PRETAX> (67,158)
<INCOME-TAX> 0
<INCOME-CONTINUING> (67,158)
<DISCONTINUED> 0
<EXTRAORDINARY> 259,045
<CHANGES> 0
<NET-INCOME> 191,887
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
