<PAGE>
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
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
August 17, 2000
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 Hanover Marriott Hotel, 1401 Route 10 East,
Whippany, New Jersey 07981, beginning at 10:00 a.m. on Thursday, August 17,
2000, for the following purposes, as more fully described in the accompanying
Proxy Statement:
(1) To elect the following seven (7) nominees to serve as directors:
Michael J. Embler, Jeffrey P. Freimark, David M. Green, Charles M.
Masson, Stephen M. Peck, Gary M. Philbin, and Scott M. Tepper.
(2) To approve amendments to the Company's 1995 Non-Employee Directors'
Stock Option Plan ("NEDSOP") to increase the number of shares
issuable under the NEDSOP to an aggregate of 250,000 and to increase
the number of initial and annual option grants issuable under the
NEDSOP to 10,000 and 5,000, respectively.
(3) To ratify the appointment of PricewaterhouseCoopers LLP as
independent accountants of the Company for the fiscal year ending
March 31, 2001.
(4) 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 June 26, 2000,
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. 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
Glenn J. Smith
Senior Vice President, General
Counsel and Corporate Secretary
July 7, 2000
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 Hanover
Marriott Hotel, 1401 Route 10 East, Whippany, New Jersey, beginning at 10:00
a.m. on August 17, 2000, 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 April 1, 2000 ("Fiscal 2000"), including financial
statements, are being first mailed on or about July 7, 2000, 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, June
26, 2000, are entitled to notice of and to vote at the Annual Meeting. The
Company has one class of voting equity securities outstanding: Common Stock,
$.01 par value ("Common Stock"). At the close of business on the record date,
29,992,098 shares of Common Stock 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 amendments to the 1995
Non-Employee Director Stock Option Plan, as amended (the "NEDSOP"), "FOR" the
ratification of the appointment of PricewaterhouseCoopers 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. Members of the
Board of Directors shall be elected by a plurality of the votes cast. The
affirmative vote of a majority of the shares of Common Stock present at the
meeting in person or by proxy shall be necessary to approve the amendments to
the NEDSOP 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 will generally have the
rights described above.
The presence in person or by proxy of holders of a majority of the
outstanding shares of Common Stock is necessary to establish a quorum at the
Annual Meeting. Abstentions are counted for purposes of determining the presence
or absence of a quorum, but since they are not affirmative votes for the
particular matter, they have the same effect as a vote against the matter.
Broker non-votes are not considered present at the meeting for the particular
matter as to which the vote is withheld. Consequently, broker non-votes are not
counted in respect of such matter, but they do have the practical effect of
reducing the number of affirmative votes required to achieve a majority for such
matter.
1
<PAGE>
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 Innisfree - New York, New York to assist in the
solicitation of proxies for a fee of $4,000, 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.
Security Ownership By Certain Beneficial Owners and Management
Set forth below is certain information as of June 26, 2000 (except as
otherwise indicated), regarding the beneficial ownership of the Company's Common
Stock by (i) any person known by the Company to beneficially own more than 5% of
the Common Stock; (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 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.
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial Percent
Name of Beneficial Owner Ownership(1) of Class(1)
------------------------ ------------ -----------
Five Percent (5%) Holders
-------------------------
<S> <C> <C> <C>
Morgens, Waterfall, Vintiadis & Co., Inc. 2,924,375 (2) 9.75%
10 East 50th Street
NY, NY 10022
Chilton Investment Co., Inc.............. 2,900,100 (3) 9.67%
65 Locust Avenue, 2nd Floor
New Canaan, CT 06840
Paul Tudor Jones II...................... 2,473,747 (4) 8.25%
C/O Tudor Investment Corporation
600 Steamboat Road
Greenwich, CT 06830
UBS AG, London Branch.................... 2,434,564 (5) 8.12%
C/O Swiss Bank Corp
299 Park Ave
NY, NY 10171
Appaloosa Management L.P................. 1,889,400 (6) 6.30%
26 Main Street
Chatham, NJ 07928
Boston Partners Asset Management, L.P.... 1,645,100 (7) 5.49%
28 State Street, 20th Floor
Boston, MA 02109
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial Percent
Name of Beneficial Owner Ownership(1) of Class(1)
------------------------ ------------ -----------
Directors, Nominees and Executive Officers
<S> <C> <C>
Gary M. Philbin........................... 213,924 (8) *
Jeffrey P. Freimark....................... 119,300 (8) *
Manouchehr Moslemi........................ 31,250 (8) *
Glenn J. Smith............................ 31,250 (8) *
Gary B. Duncan............................ 2,500 (8) *
Neil A. Augustine......................... 3,333 (9) *
Martin Bernstein.......................... 5,834 (9) *
Thomas R. Cochill......................... 3,834 (9) *
Joseph Colonnetta......................... 3,834 (9) *
Jacob W. Doft............................. 4,834 (9) *
Michael J. Embler......................... 3,333 (9) *
David M. Green............................ 3,834 (9) *
Joseph V. Lash............................ 3,834 (9) *
Charles M. Masson......................... 0 (9) *
Stephen M. Peck........................... 3,333 (9) *
Anthony Petrillo.......................... 3,334 (9) *
Herbert E. Seif........................... 3,333 (9) *
Scott M. Tepper........................... 3,834 (9) *
All Directors and Executive Officers as a group
(18 persons) 444,728 (10) 1.46%
</TABLE>
-----------
* 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) Based on information contained in a Schedule 13G dated March 31, 1999, filed
by Morgens, Waterfall, Vintiadis & Co., Inc. ("MWVCI") and the June 1, 2000
response of MWVCI to Grand Union's questionnaire to 5% holders of the
Company's Common Stock. The shares of the Company's Common Stock are
beneficially owned by MWVCI.
(3) Based on information contained in a Schedule 13G/A dated February 15, 2000,
filed by Chilton Investment Co., Inc. ("CICI") and on the May 17, 2000
response of CICI to Grand Union's questionnaire to 5% holders of the
Company's Common Stock. The shares of the Company's Common Stock are
beneficially owned by CICI.
(4) Based upon the May 22, 2000 response on behalf of Tudor Investment
Corporation ("TIC") to Grand Union's questionnaire to 5% holders of the
Company's Common Stock. The shares reported as beneficially owned by Paul
Tudor Jones II ("Mr. P. Jones") are beneficially owned by the Altar Rock
Fund Ltd. ("Altar Rock") (8,512 shares), The Tudor BVI Global Portfolio Ltd.
("Tudor BVI") (537,305 shares), The Raptor Global Portfolio Ltd. ("Raptor")
(1,798,219 shares) and Tudor Proprietary Trading, LLC ("TPT") (129,711
shares). Because TIC is the investment advisor to each of Altar Rock, Tudor
BVI, and Raptor, TIC may be deemed to be the beneficial owner of shares
beneficially owned by each of such entities. TIC disclaims beneficial
ownership of such shares. Because Mr. Jones is the Chairman and controlling
equity owner of TIC, and the Chairman and indirect controlling equity owner
of TPT, Mr. Jones may be deemed to be the beneficial owner of the shares
beneficially owned, or deemed to be beneficially owned, by each of such
entities. Mr. Jones disclaims beneficial ownership of such shares.
(5) Based on information contained in a Schedule 13G dated February 14, 2000,
filed by UBS AG, London Branch and on the May 31, 2000 response of UBS AG to
Grand Union's questionnaire to 5% holders of the Company's Common Stock. The
shares of the Company's Common Stock are beneficially owned by UBS AG,
London Branch.
3
<PAGE>
(6) Based on information contained in a Schedule 13G dated February 4, 2000,
filed on behalf of Appaloosa Management L.P. ("AMLP"). AMLP is the
general partner of Appaloosa Investment Limited Partnership I ("AILP"), the
investment advisor to Palomino Fund, Ltd. ("PFL"), and the managing member
of Tersk, LLC ("TLLC"), which are the holders of record of 828,501, 924,862,
and 136,037 shares, respectively. David A. Tepper ("Mr. D. Tepper") is the
sole stockholder and president of Appaloosa Partners, Inc. ("API"). API is
the general partner of AMLP and Mr. D. Tepper owns a majority of the limited
partnership interests of AMLP.
(7) Based on information contained in a Schedule 13 G dated February 7, 2000,
jointly filed by Boston Partners Asset Management, L.P. ("BPAM"), Boston
Partners Inc. ("Boston Partners"), and Desmond John Heathwood ("Mr. D.
Heathwood"). Boston Partners is the sole general partner of BPAM and Mr. D.
Heathwood is the principal stockholder of Boston Partners.
(8) Represents shares subject to acquisition pursuant to options exercisable
under the 1995 Equity Incentive Plan, as amended May 14, 1998 ("EIP"), and
for Mr. Philbin, 1,000 shares that he owns directly and 424 shares subject
to acquisition pursuant to the Series 1 Warrant Agreement, and for Mr.
Freimark, 300 shares that he owns directly and 250 that are owned directly
by his minor son.
(9) Represents shares subject to acquisition pursuant to options exercisable
under the 1995 Non-Employee Directors' Stock Option Plan, as amended
December 9, 1999 ("NEDSOP"), and for Mr. Bernstein, 2,000 shares that he
owns directly, and for Mr. Doft, 1,000 shares that he owns directly.
(10)Includes 396,250 shares subject to acquisition pursuant to options
exercisable under the EIP and 43,504 shares subject to acquisition pursuant
to options exercisable under the NEDSOP.
4
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
Director Nominees and Executive Officers
The names, ages and present principal occupations of the director nominees
and executive officers of Grand Union as of June 26, 2000, are set forth below.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Gary M. Philbin.................. 43 Director, President and Chief Executive Officer - Director Nominee
Jeffrey P. Freimark.............. 45 Director, Executive Vice President, Chief Financial
and Administrative Officer and Treasurer - Director Nominee
Manouchehr Moslemi............... 55 Senior Vice President and Chief Information Officer
Glenn J. Smith................... 36 Senior Vice President, General Counsel and
Corporate Secretary
Timothy J. Carnahan.............. 46 Corporate Vice President and Controller
Gary B. Duncan................... 48 Corporate Vice President, Human Resources
Richard D. Skelly, Jr............ 40 Corporate Vice President of Finance and Assistant
Treasurer
Robert F. Smith.................. 55 Corporate Vice President, Merchandising
Michael J. Embler................ 36 Director - Director Nominee
David M. Green................... 45 Director - Director Nominee
Charles M. Masson................ 47 Director Nominee
Stephen M. Peck.................. 65 Director and Chairman of the Board - Director Nominee
Scott Tepper..................... 40 Director - Director Nominee
</TABLE>
Mr. Philbin was elected President and Chief Executive Officer of the
Company on February 13, 2000 and has been a director of the Company since
October 1997. Mr. Philbin had served as the Company's President and Chief
Merchandising Officer since joining the Company in October 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.,
Minnesota. Before joining Cub Foods, Mr. Philbin was Vice President of
Merchandising with the Waldbaum's Division, New York, of the Great Atlantic &
Pacific Tea Company ("A&P"), a leading supermarket chain based in New Jersey,
from July 1993. Prior to his employment with Waldbaum's, Mr. Philbin served in
merchandising and operations capacities with Kroger commencing in January 1990.
Mr. Freimark has been a director of the Company and was elected Chief
Administrative Officer and Treasurer effective February 13, 2000 and has been
the Company's Executive Vice President and Chief Financial Officer since March
3, 1997. Mr. Freimark also served as the Company's Chief Administrative Officer
from March 3, 1997 to January 5, 1998. 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. Moslemi has been the Senior Vice President and Chief Information
Officer of the Company since February 13, 2000. Preceding that, Mr. Moslemi
served as Corporate Vice President and Chief Information Officer since July 6,
1998. Prior to joining the Company, Mr. Moslemi served as Corporate Vice
President of Information Technology for the Cub Food Store Division of
SuperValu, Inc. from 1995. Prior to that he was Vice President of Information
Technology with American Stores, a supermarket chain based in Utah.
Mr. G. Smith has been Senior Vice President, General Counsel and Corporate
Secretary since February 13, 2000. Prior to that, Mr. G. Smith served as
Corporate Vice President, General Counsel and Assistant Secretary dating from
February 1998. Mr. G. Smith commenced his employment with Grand Union in August
1995 as Director of Labor Relations and Employment Practices. He was appointed
Vice President, Labor and Employment Counsel in May 1997 and Vice President,
General Counsel and Assistant Secretary in August 1997. Prior to joining Grand
Union, Mr. G. Smith was an Associate with the law firm of Grotta, Glassman and
Hoffman, P.A., in Roseland, New Jersey from September 1991 to August 1995.
5
<PAGE>
Mr. Carnahan has been Corporate Vice President and Controller since
February 13, 2000. Mr. Carnahan commenced his employment with Grand Union in May
1997 as Vice President of Process Improvement. He was appointed Vice President
and Controller in August 1997. From August 1994 until joining Grand Union, Mr.
Carnahan served as Director of Inventory Control for Office Depot Inc., Florida,
a leading supplier of office products and services.
Mr. Duncan has been the Corporate Vice President in charge of Human
Resources since January 11, 1999. From 1997 until joining the Company, Mr.
Duncan served as Vice President of Human Resources for the Genuardi's Family
Markets, a supermarket chain in Pennsylvania. Prior to that he was employed by
The Vons Companies division of Safeway Stores, a supermarket chain in
California, from 1969 where he held a variety of positions, most recently as
Director of Compensation Management and Training from 1994 to 1997.
Mr. Skelly has been Corporate Vice President, Finance and Assistant
Treasurer since February 13, 2000. Mr. Skelly commenced his employment with
Grand Union in May 1997 as Vice President of Financial Planning and Budgeting.
Prior to joining Grand Union, Mr. Skelly was employed by Pueblo Xtra
International since 1990, serving as Assistant Treasurer and Assistant Secretary
since March 1997.
Mr. R. Smith has been the Corporate Vice President in charge of
Merchandising since May 2000. Prior to joining the Company, Mr. R. Smith was
Senior Vice President - Store Operations for the Vons Companies division of
Safeway Stores Inc. from 1997 to 1998. Mr. R. Smith also served as Group VP -
Perishables from 1996 to 1997 and VP - Meat/Seafood from 1995 to 1996. Prior
to that, Mr. R. Smith held positions as VP - Drugstore and VP - Grocery/Frozen
Foods. Mr. R. Smith spent the first 20 years of his career in store operations
as a Store Manager, District Manager and Director of Store Operations.
Mr. Embler has been a director since December 17, 1999. Since April 1,
2000, Mr. Embler has been a Managing Director and Portfolio Manager at Long
Drive Management Trust, New York, New York, an investment management firm. Prior
to that and from August 1998, Mr. Embler was a Vice President at Long Drive.
Preceding that, Mr. Embler was employed by Long Drive's affiliate, Nomura
Holdings America, Inc., New York, New York, an investment management firm, since
1992, and, from 1994, served as a Vice President.
Mr. Green has been a director since August 17, 1998. Since 1998, Mr. Green
has been a private investor and consultant. Mr. Green was the Chairman, Chief
Executive Officer and President of Southwest Supermarkets, Arizona, from
January 1997 to February 1998. Mr. Green was with Smitty's Super Valu, Inc., an
Arizona supermarket chain, from 1991 to 1996, serving as its President from 1992
to 1996, its Chief Executive Officer from 1995 to 1996, and its Senior Vice
President of Marketing, Merchandising and Procurement from 1991 to 1992.
Mr. Masson is a nominee for director. Since November 1999, he has been a
partner at Leary, Masson & Associates, an advisory firm for distressed
companies, in New York, New York. Prior to that and since 1993, Mr. Masson was
President of McCloud Partners, a private turnaround consulting company in New
York, New York. Mr. Masson is a Director of Maidenform, Inc.
Mr. Peck was elected Chairman of the Board on February 13, 2000 and has
been a director since December 17, 1999. Since 1989, he has been a general
partner of Wilderness Partners, L.P., a private investment partnership in New
York, New York. Mr. Peck is Chairman of the Board of Trustees and the Executive
Committee of Mount Sinai-NYU Health, New York. He is a member of the Board of
Directors of Harnischfeger, Inc., Fresenius Medical Care, OFFIT Investment Funds
and Banyan Strategic Realty Trust and also serves on the Advisory Boards of The
Torrey Funds and Brown Simpson Asset Management.
Mr. Tepper has been a director since August 17, 1998. Mr. Tepper is the
founder and lead integration consultant for KST Consulting, a healthcare and
healthcare technology consulting firm, since July 1994. Prior to that, Mr.
Tepper served as the Senior Vice President for Medisolution Ltd., a healthcare
company in Canada from August 1994 to June 1998. From 1992 to 1994, Mr. Tepper
was a Senior Director for Foxmeyer Health, a pharmaceutical distribution and
product logistics firm. Mr. Tepper is a Director of BioPlexus, a Connecticut
manufacturer of medical equipment.
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 or her successor is duly
elected and qualified.
In addition, the following individuals were directors as of April 1, 2000,
are currently directors, and will not stand for re-election at the 2000 Annual
Meeting of Stockholders: Neil A. Augustine, Martin Bernstein, Thomas R. Cochill,
Joseph Colonnetta, Jacob W. Doft, Joseph V. Lash, Anthony Petrillo and Herbert
E. Seif.
6
<PAGE>
Nominees
Seven (7) 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 seven (7) nominees named below, all of whom, except for
Mr. Masson, 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 and until his successor has been elected and qualified.
The election of directors shall be by the affirmative vote of a plurality
of the votes cast at the Annual Meeting. The seven (7) 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: Michael J. Embler, Jeffrey P.
Freimark, David M. Green, Charles M. Masson, Stephen M. Peck, Gary M. Philbin
and Scott M. Tepper.
Board Meetings and Committees
From February 13, 2000 through the present, the Board has been composed of
Messrs. Augustine, Bernstein, Cochill, Colonnetta, Doft, Embler, Freimark,
Green, Lash, Peck, Petrillo, Philbin, Seif and Tepper. From December 17, 1999
until February 13, 2000, the Board was composed of Messrs. Harris, Partridge,
plus the current Board Members except Mr. Freimark. From August 17, 1998 through
December 17, 1999, the Board was composed of J. Wayne Harris, Jack W. Partridge,
Bernstein, Cochill, Colonnetta, Doft, Green, Lash, Petrillo, Philbin and Tepper.
Since the end of the fiscal year ended April 3, 1999, Mr. Harris has been
removed from the Board and Mr. Partridge has resigned from the Board, both
effective February 13, 2000. Each Director serves until the next annual meeting
of stockholders and until his or her successor is duly elected and qualified or
until his/her earlier death, resignation or removal.
The Board of Directors of the Company held fourteen (14) meetings during
the fiscal year ended April 1, 2000. During the fiscal year ended April 1, 2000,
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 or she served.
The Board of Directors has a number of standing committees, including an
Audit Committee, a Compensation Committee, and a Corporate Governance Committee.
The Audit Committee reviews the results and scope of audits and other
services provided by the Company's independent accountants and considers other
matters related to the financial condition of the Company. During the fiscal
year ended April 1, 2000, the Audit Committee held a total of three (3)
meetings. The members of the Audit Committee are Mr. Bernstein (Chair), Mr.
Doft, Mr. Lash and Mr. Seif.
The Compensation Committee, among other things, sets the compensation for
the President and Chief Executive Officer; Executive Vice President, Chief
Financial and Administrative Officer and Treasurer; Senior Vice President,
General Counsel and Corporate Secretary; and Senior Vice President and Chief
Information Officer (together the "Senior Managers"), makes recommendations
concerning salaries and incentive compensation for executive officers and key
personnel, and administers the EIP and the Executive Annual Incentive Bonus Plan
("EAIBP"). Members of the Compensation Committee are eligible to receive
formula-based awards made under the terms of the NEDSOP. During the fiscal year
ended April 1, 2000, the Compensation Committee held a total of thirteen (13)
meetings. The members of the Compensation Committee are Mr. Augustine (chair),
Mr. Cochill, Mr. Green and Mr. Tepper.
In addition to other functions, the Corporate Governance Committee
identifies and screens candidates for membership on the Company's Board of
Directors, consults with the Chairman regarding the Board's various committees,
and coordinates meetings of the non-employee directors. During Fiscal 2000, the
Corporate Governance Committee held a total of four (4) meetings. The members of
the Corporate Governance Committee are Mr. Tepper (chair), Mr. Green, Mr. Lash
and Mr. Peck.
7
<PAGE>
Executive Compensation
The following table sets forth compensation ("Summary Compensation Table")
paid or accrued by the Company during the three fiscal years ended April 1, 2000
("Fiscal 2000"), April 3, 1999 ("Fiscal 1999") and March 28, 1998 ("Fiscal
1998") to the Company's Chief Executive Officer and the next four most highly
compensated executive officers (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 All Other
Other Annual Underlying Compensation
Name and Principal Position Year Salary ($) Bonus ($)(1) Compensation Options/SARs (#) ($)(2)
--------------------------- ---- ---------- ------------ ------------ ---------------- ------
<S> <C> <C> <C> <C> <C> <C>
Gary M. Philbin................. 2000 360,096 -- -- (3) -- 32,190
President and Chief 1999 356,731 437,500 -- (3) 427,737 77,250
Executive Officer 1998 168,347 168,269 73,307 (4) 450,000 22,183
Jeffrey P. Freimark............. 2000 331,731 -- -- (3) -- 138,875
Executive Vice President, Chief 1999 331,250 325,000 -- (3) 213,870 54,748
Financial and Administrative 1998 325,257 222,000 95,201 (5) 95,000 683,267
Officer and Treasurer
Manouchehr Moslemi............... 2000 203,365 -- 65,659 (6) 15,000 4,917
Senior Vice President and Chief 1999 153,846 144,340 55,300 (6) 15,000 7,963
Information Officer
Glenn J. Smith................... 2000 150,144 -- 15,197 (7) 12,000 2,658
Senior Vice President, General 1999 130,317 88,750 -- (3) 10,000 3,200
Counsel and Corporate Secretary 1998 102,996 21,231 -- (3) 15,000 44
Gary B. Duncan................... 2000 145,000 55,000 -- (3) 12,000 217,621
Corporate Vice President, 1999 33,750 15,865 18,369 (8) 10,000 1,250
Human Resources
Former Executives
J. Wayne Harris................. 2000 565,385 -- 163,154 (9) -- 2,009,711
Chairman and Chief Executive 1999 611,539 750,000 330,908 (9) 1,069,346 16,619
Officer 1998 392,461 415,384 163,331 (9) 1,250,000 35,637
Jack W. Partridge, Jr............ 2000 302,885 -- 133,525 (10) -- 2,339,052
Vice Chairman and Chief 1999 356,731 437,500 86,524 (10) 427,738 74,827
Administrative Officer 1998 80,772 155,769 56,096 (10) 450,000 676
</TABLE>
(1) Included in the "Bonus" column for Fiscal 1999 are amounts paid
during Fiscal 2000 for performance in Fiscal 1999. For Fiscal 1998 the
amounts in the "Bonus" column represent payments made during Fiscal 1999
for performance and discretionary amounts in Fiscal 1998.
(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 2000 for each of the Named Executive Officers as follows: $1,600,
$1,600, $1,600, $1,600, $156 and $1,573 for Messrs. Philbin, Freimark,
Moslemi, Smith, Duncan and Partridge; the Fiscal 1999 401(k) contribution
amounts were $538, $1,250, $308, $1,373 and $538 for Messrs. Philbin,
Freimark, Moslemi, Smith and Partridge; the Fiscal 1998 401(k)
contribution amounts were $625 and
8
<PAGE>
$44 for Messrs. Freimark and Smith; (ii) premium payments for life
insurance made by the Company in Fiscal 2000 for each of the Named
Executive Officers were as follows: $7,232, $8,458, $3,317, $1,058,
$1,771, $9,711 and $15,755 for Messrs. Philbin, Freimark, Moslemi, Smith,
Duncan, Harris and Partridge; the amounts for premiums in Fiscal 1999 for
each of the Named Executive Officers were as follows: $7,673, $9,567,
$4,939, $1,827, $16,619 and $18,772 for Messrs. Philbin, Freimark,
Moslemi, Smith, Harris and Partridge; the amounts for premiums in Fiscal
1998 were as follows: $2,818, $3,708 and $10,887 for Messrs. Philbin,
Freimark and Harris; ; (iii) payments made by the Company in Fiscal 2000
for relocation/moving costs in connection with joining the Company
including tax gross-ups were as follows: $128,817, $215,694 and $1,724 for
Messrs. Freimark, Duncan and Partridge; the Fiscal 1999 amounts for
relocation/moving costs including tax gross-ups were: $47,647, $43,931,
$2,716, $1,250 and $55,517 for Messrs. Philbin, Freimark, Moslemi, Duncan
and Partridge; the Fiscal 1998 amounts for relocation/moving costs
including tax gross-ups were $11,843, $678,934, $24,750 and $676 for
Messrs. Philbin, Freimark, Harris and Partridge; (iv) the Fiscal 2000,
Fiscal 1999 and Fiscal 1998 amounts for Mr. Philbin include interest
imputed on a loan to Mr. Philbin for $23,359, $21,392 and $7,522,
respectively, including tax gross-ups for his benefits and (v) the Fiscal
2000 amounts for Messrs. Harris and Partridge include separation pay of
$2,000,000 and $2,320,000, respectively. These amounts for Messrs. Harris
and Partridge have been partially paid and are further payable through
February 2001 and August 2002, respectively.
(3) No "Other Annual Compensation" was reported since the aggregate
amount of perquisites and other personal benefits in the respective fiscal
year is less than the lower of $50,000 or 10% of the total annual salary
and bonus reported for the Named Executive Officers and no other
compensation of the type required to be described in the "Other Annual
Compensation" column was paid in that year.
(4) This includes the following personal benefits or perquisites that
exceed 25% of all personal benefits or perquisites made available to Mr.
Philbin in Fiscal 1998: (a) $39,285 in local residence costs and (b)
$34,022 in covered travel expenses, both as provided in the Company's
employment agreement with Mr. Philbin.
(5) This includes the following personal benefits or perquisites that
exceed 25% of all personal benefits or perquisites made available to Mr.
Freimark in Fiscal 1998: $66,700 in local residence costs as provided in
the Company's employment arrangements with Mr. Freimark.
(6) This includes the following personal benefits or perquisites that
exceed 25% of all personal benefits or perquisites made available to Mr.
Moslemi: $46,183 and $47,039 in Fiscal 2000 and Fiscal 1999, respectively,
in local residence costs as provided in the Company's employment
arrangements with Mr. Moslemi.
(7) This includes the following personal benefits or perquisites that
exceed 25% of all personal benefits or perquisites made available to Mr.
Smith in Fiscal 2000: $15,197 in company car allowance as provided in the
Company's employment agreement with Mr. Smith.
(8) This includes the following personal benefits or perquisites that
exceed 25% of all personal benefits or perquisites made available to Mr.
Duncan in Fiscal 1999: $15,976 in local residence costs as provided in the
Company's employment arrangements with Mr. Duncan.
(9) This includes the following personal benefits or perquisites that
exceed 25% of all personal benefits or perquisites made available to Mr.
Harris: $116,005, $267,159 and $127,865 in Fiscal 2000, Fiscal 1999 and
Fiscal 1998, respectively, in local residence costs as provided in the
Company's employment agreement with Mr. Harris.
(10) This includes the following personal benefits or perquisites that
exceed 25% of all personal benefits or perquisites made available to Mr.
Partridge: (a) $79,816, $37,656 and $43,701 in Fiscal 2000, Fiscal 1999
and Fiscal 1998, respectively, in local residence costs and (b) $26,471 in
Fiscal 1999 in covered travel expenses to Mr. Partridge's permanent
residence, both as provided in the Company's employment agreement with Mr.
Partridge.
9
<PAGE>
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
Individual Grants Potential Realizable
---------------------------------------------------------- Value at Assumed
Number of Percent of Annual Rates of Stock
Securities Total Options Price Appreciation for
Underlying Granted to Exercise Price Option Term (3)
Options Employees in ($/Share) Expiration ------------------------
Name Granted(#) (1) Fiscal Year (2) Date 5%($) 10%($)
---- -------------- ----------- --- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
G. Philbin............ 0 N/A N/A N/A 0 0
J. Freimark........... 0 N/A N/A N/A 0 0
M. Moslemi............ 15,000 (4) 2.4% $12.00 11/05/09 $113,201 $286,874
G. Smith............... 12,000 (4) 2.0% $12.00 11/05/09 $90,561 $229,499
G. Duncan.............. 12,000 (4) 2.0% $12.00 11/05/09 $90,561 $229,499
</TABLE>
(1) Unless otherwise noted, options vest 25% annually for the first four
anniversaries of the award.
(2) Unless otherwise noted, all options were granted at the fair market
value on the date of grant, based on the closing price of the Common
Stock as reported on the Nasdaq National Market on the date of grant.
(3) The dollar amounts under these columns are the result of calculations at
the 5% and 10% rates required by applicable regulations of the SEC and,
therefore, are not intended to forecast possible future appreciation, if
any, of the Common Stock price.
(4) After the end of Fiscal 2000, each of Messrs. Philbin, Freimark,
Moslemi, and Smith were granted options in connection with the execution
of their employment agreements on April 13, 2000 and their existing
stock options at Fiscal 2000 year end were cancelled. Additionally, Mr.
Duncan was granted 50,000 additional stock options to those listed above
on May 11, 2000. See description of Employment Agreements below for
additional information.
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
<TABLE>
<CAPTION>
Number of Securities Value of
Underlying Unexercised Unexercised In-the-Money
Options/SARs at FY-End(#) Options/SARs at FY-End ($)
------------------------- --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
G. Philbin (1).............................. 24,490 403,248 0 0
J. Freimark (1)............................. 12,245 201,625 0 0
M. Moslemi (1).............................. 3,750 26,250 0 0
G. Smith (1)................................. 2,500 19,500 0 0
G. Duncan (1)................................ 2,500 19,500 0 0
</TABLE>
(1) After the end of Fiscal 2000, each of Messrs. Philbin, Freimark,
Moslemi, and Smith were granted options in connection with the execution
of their employment agreements on April 13, 2000 and their existing
stock options at Fiscal 2000 year end were cancelled. Additionally, Mr.
Duncan was granted 50,000 additional stock options to those listed above
on May 11, 2000. See description of Employment Agreements below for
additional information.
10
<PAGE>
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, Fourth Amendment and
Restatement as of November 20, 1997 (the "SERP"), 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 as defined by the SERP.
Base Compensation Years of Service
----------------- ----------------
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........................... 140,833 281,667 422,500
The credited years of service under the SERP for Messrs. Philbin,
Freimark, Moslemi and Smith are 2 years, 3 years, 2 years, and 4 years,
respectively. Mr. Duncan is not eligible for any SERP benefits. 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.
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 the Company's 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 years
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 Internal
Revenue Code of 1986, as amended (the "Code"), places certain limits on pension
benefits, which may be paid under qualified plans.
The estimated 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. None
of the Named Executive Officers had any vested accrued benefit under the
Qualified Retirement Plan as of April 1, 2000.
11
<PAGE>
Estimated annual benefits payable upon retirement at normal retirement
age:
Annual
------
Officer Benefit
------- -------
G. Philbin $42,000
J. Freimark 41,000
M. Moslemi 24,000
G. Smith 51,000
These are based on the assumption that the IRS imposed limits (under IRS
Section 401(a)(17)) on pensionable earnings remain unchanged at $170,000 for the
remainder of the executive officer's respective career.
Supplemental Retirement Plan For Key Executives
The SERP 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 SERP 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 SERP 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 SERP. "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. SERP 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 SERP benefits will be paid to a Participant whose employment with the Company
terminates prior to the Participant's attaining age 50.
Pursuant to their employment agreements, as detailed below, Messrs.
Philbin and Freimark were granted additional credited service under the terms of
the SERP. In no event, however, will any executive receive a SERP benefit that
is based on more than 15 years of service (i.e., 65% of final pay rate). The
following exhibit illustrates the credited service as defined in the SERP and
the additional service grants for each active executive who is a Participant in
the SERP.
Years of Credited Service
-------------------------------------------------------
Additional Recognized
Under Terms of
Employment Agreement
--------------------
Nondiscretionary Good Reason Separation
Name As of 4/13/00 Pre 4/13/04 Post 4/13/04
---- ------------- ----------- ------------
G. Philbin 2 6 6
J. Freimark 3 4 4
M. Moslemi 2 0 0
G. Smith 4 0 0
12
<PAGE>
Under the terms of the employment agreements dated April 13, 2000, with
Messrs. Philbin and Freimark, additional service is recognized for the purpose
of determining the target benefit under the following set of circumstances: (1)
separation from the Company for Good Reason prior to April 13, 2004, or (2)
retirement on or after April 13, 2004. If the Participant terminates his
employment with the Company other than for Good Reason prior to April 13, 2004,
the additional amounts are not recognized. Messrs. Moslemi and Smith receive one
(1) year per year of service under their employment agreements dated April 13,
2000.
Pursuant to the Harris Settlement and Partridge Settlement (as both are
detailed below), Mr. Harris and Mr. Partridge are to receive payments over time
of $2,000,000 and $2,320,000, respectively. Of these amounts, and for purposes
of FAS 88, Mr. Harris was deemed to have received the entire $2,000,000
settlement from the SERP, and Mr. Partridge was deemed to have received
$1,383,828 of his settlement from the SERP.
Compensation of Directors
Each non-employee director receives a quarterly retainer of $6,125 (paid
in advance) 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 Chair of each of the committees
receives $500 for each committee meeting they attend in person as Chair and $250
for each telephonic committee meeting they attend as Chair. Effective March 2,
2000, an Executive Committee of the Board was established. The Executive
Committee receives no meeting fees. However, effective March 2, 2000, the four
non-management Directors on the Executive Committee receive a supplemental
quarterly retainer for each quarter they serve on the Executive Committee (paid
in advance) in the following amounts: Mr. Peck as Chairman - $31,250; Mr. Tepper
- $89,000; Mr. Cochill - $63,000; and Mr. Green - $63,000. In addition, Mr. Peck
was granted 50,000 stock options from the EIP on March 13, 2000 in connection
with being elected Chairman. Directors receive reimbursement of reasonable
expenses incidental to attendance at meetings of the Board of Directors or its
committees.
Under the amendments to the NEDSOP adopted December 9, 1999, each
non-employee director also receives an automatic initial grant of options to
purchase 10,000 shares of common stock, and additional grants to purchase 5,000
shares with each re-election by the stockholders. All options have a 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.
On December 9, 1999, all directors, with the exception of Mr. Petrillo who
declined his options, were granted 8,500 stock options from the EIP. This
supplemental stock option grant was made at the same time the Board of Directors
amended the NEDSOP and was intended to provide the Directors with the same
number of shares as would have been granted them if the amendments to the NEDSOP
had been in place since their first election to the Board of Directors.
Employment Agreements, Termination of Employment and Change-in-Control
Arrangements
Philbin Employment Agreement
Gary M. Philbin is currently a member of the Board of Directors and is
employed as Grand Union's President and Chief Executive Officer. On April 13,
2000 and effective February 13, 2000, Grand Union and Mr. Philbin executed a new
employment agreement ("Philbin Agreement") replacing his August 17, 1998
employment agreement. Under the terms of the Philbin Agreement, Mr. Philbin will
be employed by Grand Union for a four-year term of employment beginning on
February 13, 2000 and will receive: (a) an annual salary of $425,000; (b) annual
bonus compensation determined in accordance with the EAIBP up to a maximum bonus
equal to 125% of his base salary paid for such period, subject to the
achievement by Grand Union of specified performance targets determined by the
Compensation Committee; 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 throughout the term of
employment. Effective April 13, 2000 and in connection with the execution of the
Philbin Agreement, Mr. Philbin was granted a stock option pursuant to which he
may acquire 850,000 shares of Common Stock. The shares are exercisable pursuant
to the following strike prices: Tranche 1 - 20% of the shares at a strike price
of $4.65; Tranche 2 - 30% of the shares at a strike price of $5.72; Tranche 3 -
30% of the shares at a strike price of $7.72; and Tranche 4 - 20% of the shares
at a strike price of $9.72. The
13
<PAGE>
shares vest ratably across each Tranche pursuant to the following schedule: 25%
on the Grant Date; 25% on February 14, 2001; 25% on February 14, 2002; and 25%
on February 14, 2003.
Pursuant to the Philbin Agreement, for purposes of the SERP, Mr. Philbin
will be credited with 6 additional years of service, plus one year for each year
of service with Grand Union. The Philbin Agreement also contains provisions
concerning other employee benefits, rights of termination, payments and other
benefits on termination under certain circumstances, confidentiality, and
non-competition, in each case which Grand Union believes to be customary for
agreements with executives in Mr. Philbin's position. In connection with Mr.
Philbin's prior employment arrangements, the Company loaned Mr. Philbin
$225,000, all of which remains outstanding. Such loan bears no interest and,
pursuant to the Philbin Agreement, is repayable on April 13, 2004.
Freimark Employment Agreement
Jeffrey P. Freimark is currently a member of the Board of Directors and
Grand Union's Executive Vice President, Chief Financial and Administrative
Officer, and Treasurer. On April 13, 2000 and effective February 13, 2000, Grand
Union and Mr. Freimark executed a new employment agreement ("Freimark
Agreement") replacing his August 17, 1998 employment agreement. Under the terms
of the Freimark Agreement, Mr. Freimark will be employed by Grand Union for a
four-year term of employment beginning February 13, 2000, and will receive: (a)
an annual salary of $375,000; and (b) annual bonus compensation determined in
accordance with the EAIBP, up to a maximum bonus of 125% of his base salary paid
for such period, subject to the achievement by Grand Union of specified
performance targets determined by the Compensation Committee. Effective April
13, 2000 and in connection with the execution of the Freimark Agreement, Mr.
Freimark was granted a stock option pursuant to which he may acquire 475,000
shares of Common Stock. The shares are exercisable pursuant to the following
strike prices: Tranche 1 - 20% of the shares at a strike price of $4.65; Tranche
2 - 30% of the shares at a strike price of $5.72; Tranche 3 - 30% of the shares
at a strike price of $7.72; and Tranche 4 - 20% of the shares at a strike price
of $9.72. The shares vest ratably across each Tranche pursuant to the following
schedule: 25% on the Grant Date; 25% on February 14, 2001; 25% on February 14,
2002; and 25% on February 14, 2003.
Pursuant to the Freimark Agreement, for purposes of the SERP, Mr. Freimark
will be credited with 4 additional years of service, plus one year for each year
of service with Grand Union. The Freimark Agreement also contains provisions
concerning other employee benefits, rights of termination, payments and other
benefits on termination under certain circumstances, confidentiality, and
non-competition, in each case which Grand Union believes to be customary for
agreements with executives in Mr. Freimark's position.
Moslemi Employment Agreement
Manouchehr Moslemi is currently Grand Union's Senior Vice President, Chief
Information Officer. On April 13, 2000 and effective February 13, 2000, Grand
Union and Mr. Moslemi executed an employment agreement ("Moslemi Agreement").
Under the terms of the Moslemi Agreement, Mr. Moslemi will be employed by Grand
Union for a four-year term of employment beginning February 13, 2000, and will
receive: (a) an annual salary of $225,000; and (b) annual bonus compensation
determined in accordance with the EAIBP, up to a maximum bonus of 75% of his
base salary paid for such period, subject to the achievement by Grand Union of
specified performance targets determined by the Compensation Committee.
Effective April 13, 2000 and in connection with the execution of the Moslemi
Agreement, Mr. Moslemi was granted a stock option pursuant to which he may
acquire 125,000 shares of Common Stock. The shares are exercisable pursuant to
the following strike prices: Tranche 1 - 20% of the shares at a strike price of
$4.65; Tranche 2 - 30% of the shares at a strike price of $5.72; Tranche 3 - 30%
of the shares at a strike price of $7.72; and Tranche 4 - 20% of the shares at a
strike price of $9.72. The shares vest ratably across each Tranche pursuant to
the following schedule: 25% on the Grant Date; 25% on February 14, 2001; 25% on
February 14, 2002; and 25% on February 14, 2003.
Pursuant to the Moslemi Agreement, for purposes of the SERP, Mr. Moslemi
will be credited with one year for each year of service with Grand Union. If Mr.
Moslemi chooses not to relocate his principal residence to an area within normal
commuting distance of the Company's Headquarters during the first two years of
the Moslemi Agreement, Mr. Moslemi will be reimbursed for: (a) reasonable living
expenses for a local residence near the Company's Headquarters and (b)
reasonable air travel between the local residence and his principal residence in
Minnesota. In addition, if Mr. Moslemi does relocate his principal residence to
an area within normal commuting distance of the Company's Headquarters, he will
be eligible for coverage under The Grand Union Company Moving Policy. The
Moslemi Agreement also contains provisions concerning other employee benefits,
rights of termination, payments and other benefits on termination under certain
14
<PAGE>
circumstances, confidentiality, and non-competition, in each case which Grand
Union believes to be customary for agreements with executives in Mr. Moslemi's
position.
Smith Employment Agreement
Glenn J. Smith is currently Grand Union's Senior Vice President, General
Counsel and Corporte Secretary. On April 13, 2000 and effective February 13,
2000, Grand Union and Mr. G. Smith executed an employment agreement ("Smith
Agreement"). Under the terms of the Smith Agreement, Mr. Smith will be employed
by Grand Union for a four-year term of employment beginning February 13, 2000,
and will receive: (a) an annual salary of $225,000; and (b) annual bonus
compensation determined in accordance with the EAIBP, up to a maximum bonus of
75% of his base salary paid for such period, subject to the achievement by Grand
Union of specified performance targets determined by the Compensation Committee.
Effective April 13, 2000 and in connection with the execution of the Smith
Agreement, Mr. G. Smith was granted a stock option pursuant to which he may
acquire 125,000 shares of Common Stock. The shares are exercisable pursuant to
the following strike prices: Tranche 1 - 20% of the shares at a strike price of
$4.65; Tranche 2 - 30% of the shares at a strike price of $5.72; Tranche 3 - 30%
of the shares at a strike price of $7.72; and Tranche 4 - 20% of the shares at a
strike price of $9.72. The shares vest ratably across each Tranche pursuant to
the following schedule: 25% on the Grant Date; 25% on February 14, 2001; 25% on
February 14, 2002; and 25% on February 14, 2003.
Pursuant to the Smith Agreement, for purposes of the SERP, Mr. G. Smith
will be credited with one year for each year of service with Grand Union. The
Smith Agreement also contains provisions concerning other employee benefits,
rights of termination, payments and other benefits on termination under certain
circumstances, confidentiality, and non-competition, in each case which Grand
Union believes to be customary for agreements with executives in Mr. G. Smith's
position.
Employment Arrangements with Robert Smith
Effective May 8, 2000, the Company hired Robert Smith to serve as the
Company's Corporate Vice President - Merchandising. Pursuant to the terms of an
offer letter dated April 26, 2000, the Company agreed to pay Mr. R. Smith an
initial annual base salary in the amount of $200,000, and a signing bonus in the
amount of $50,000. In addition, Mr. R. Smith will participate in the Company's
Bonus Plan, with a target bonus of $100,000 and a maximum bonus of 125% of the
target bonus, based on achievement by the Company of certain financial and/or
sales performance targets; provided, however, that for the fiscal year ending
March 31, 2001, the Company guaranteed Mr. R. Smith a minimum bonus payment of
$75,000 pro-rated for his actual period of employment during the fiscal year.
Effective May 8, 2000, Mr. R. Smith has also been granted an option to purchase
50,000 shares of the Company's Common Stock, vesting in equal increments over a
four year period, all exercisable at a strike price of $1.8125. Mr. R. Smith is
not eligible for benefits under the Grand Union Severance Plan for Exempt
Associates. Instead, if his employment is terminated for any reason other than
his death, disability, voluntary resignation or because of his misconduct, Mr.
R. Smith will be eligible to receive 18 months of his then present annual salary
as a severance payment. For the first six months of his employment, Mr. R. Smith
will be provided with: (a) a local residence near the Company's Headquarters and
(b) reimbursement for one round trip airfare per month for him or his spouse
between the local residence and his principal residence in upstate New York. In
addition, if Mr. R. Smith does relocate his principal residence to an area
within normal commuting distance of the Company's Headquarters, he will be
eligible for coverage under The Grand Union Company Moving Policy. Mr. R. Smith
is also eligible for other standard benefits provided to the Company's Corporate
Vice Presidents.
Employment Arrangements with William Roth
Effective June 13, 2000, the Company hired William Roth to serve as the
Company's Vice President - Grocery/Private Label Merchandising. Pursuant to the
terms of an offer letter dated May 26, 2000, the Company agreed to pay Mr. Roth
an initial annual base salary in the amount of $125,000, and a signing bonus in
the amount of $10,000. In addition, Mr. Roth will participate in the Company's
Bonus Plan, with a target bonus of $50,000 and a maximum bonus of 125% of the
target bonus, based on achievement by the Company of certain financial and/or
sales performance targets; provided, however, that for the fiscal year ending
March 31, 2001, the Company guaranteed Mr. Roth a minimum bonus payment of
$25,000 pro-rated for his actual period of employment during the fiscal year.
Effective June 13, 2000, Mr. Roth has also been granted an option to purchase
20,000 shares of the Company's Common Stock, vesting in equal increments over a
four year period, all exercisable at a strike price of $0.84375. Mr. Roth is not
eligible for benefits under the Grand Union Severance Plan for Exempt
Associates. Instead, if his employment is terminated for any reason other than
15
<PAGE>
his death, disability, voluntary resignation or because of his misconduct, Mr.
Roth will be eligible to receive 12 months of his then present annual salary as
a severance payment. For a reasonable period of time, Mr. Roth will be provided
with a local residence near the Company's Headquarter. If Mr. Roth does relocate
his principal residence to an area within normal commuting distance of the
Company's Headquarters, he will be eligible for coverage under The Grand Union
Company Moving Policy. Mr. Roth is also eligible for other standard benefits
provided to the Company's Vice Presidents.
Separation Agreement and General Release with J. Wayne Harris
Effective February 13, 2000, J. Wayne Harris was removed from his
positions as a Director, Chairman of the Board and Chief Executive Officer of
The Grand Union Company. On April 6, 2000, the Company and Mr. Harris entered
into a Settlement Agreement and General Release ("Harris Settlement") resolving
any and all issues between the parties. The Harris Settlement provides for the
payment of $2,000,000 to Mr. Harris (four installments of $500,000 each on April
6, 2000, June 5, 2000, November 13, 2000 and February 13, 2001). In addition to
other provisions, the Harris Settlement contains a mutual release between the
parties, as well as confidentiality, non-disclosure, and non-solicitation
provisions, all of which Grand Union believes to be customary for agreements of
this nature.
Separation Agreement and General Release with Jack W. Partridge, Jr.
Effective February 13, 2000, Jack W. Partridge, Jr. resigned his position
as a Director, Vice Chairman and Chief Administrative Officer of The Grand Union
Company. On February 13, 2000, the Company and Mr. Partridge entered into a
Settlement Agreement and General Release ("Partridge Settlement") resolving any
and all issues between the parties. The Partridge Settlement provides for the
payment of $2,320,000 to Mr. Partridge (four installments - $420,000 on February
21, 2000, $750,000 on January 15, 2001, $750,000 on January 15, 2002, and
$400,000 on August 1, 2002). In addition to other provisions, the Partridge
Settlement contains a mutual release between the parties, as well as
confidentiality, non-disclosure, and non-solicitation provisions, all of which
Grand Union believes to be customary for agreements of this nature.
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 Plans
On and effective April 14, 1998, the Board of Directors adopted (i) The
Grand Union Company Discretionary Severance Plan for Non-Union Associates (the
"Discretionary Severance Plan") and (ii) The Grand Union Company Severance Plan
for Exempt Personnel (the "Exempt Severance Plan"). The Discretionary Severance
Plan and the Exempt Severance Plan supercede any prior severance plan or policy
which may have existed prior to April 14, 1998. Generally, the Discretionary
Severance Plan applies to all non-union, non-salaried, hourly associates working
in the Company's stores and non-union hourly personnel who work in the Company's
offices. Under the Discretionary Severance Plan, eligible terminated associates
of the Company are generally eligible to receive the equivalent of one week's
regular pay for each two years of service to a maximum of 26 weeks of total
severance benefits. However, the Plan Administrator retains the absolute right
and discretion to determine whether an employee will be offered severance
benefits and the terms and amount of the severance benefits to be paid, if any.
Subject to all of the terms and conditions of the Exempt Severance Plan, all
salaried personnel at the Company's headquarters and salaried store personnel
who are actively employed and working may be eligible to receive a severance
benefit under the Exempt Severance Plan. Severance benefits under the Exempt
Severance Plan will generally be payable to eligible employees terminated due to
a job elimination, a reduction in force for economic reasons, a decision to
outsource work performed by Company employees to
16
<PAGE>
a third party service provider, or another Company initiated event (other than
the sale of a major business unit of the Company). Under the Exempt Severance
Plan, eligible employees will receive a lump sum severance benefit of one week's
pay. Additionally, the Exempt Severance Plan provides for a lump-sum severance
payment equal to (i) in the case of salaried employees holding the office of
Senior Vice President or above, 18 months' base salary less the one week base
severance benefit; (ii) in the case of salaried employees holding the office of
Corporate Vice President, 12 months' base salary less the one week base
severance benefit; (iii) in the case of salaried employees holding the office of
appointed vice president or director, 6 months' base salary less the one week
base severance benefit; and (iv) in the case of all other salaried employees,
one week's base salary for each year of service with the Company up to a maximum
of 26 weeks less the one week base severance benefit. Any employee of the
Company who has a separate written agreement with the Company, which provides
for payment of severance benefits, will receive no severance benefit under
either the Discretionary Severance Plan or the Exempt Severance Plan. Each of
the Senior Managers employment agreements and the employment arrangements with
Messrs. R. Smith and Roth provide for termination payments that render them
ineligible for severance benefits under the Discretionary Severance Plan and/or
Exempt Severance Plan.
Change-in-Control Provisions
Under the EIP and NEDSOP, certain provisions become effective upon a
change in control of the Company. Under both plans, unless otherwise specified
in a particular award, 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 EIP 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) 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. Under the Senior Managers' Employment Agreements, upon the event of a
Change of Control or upon a Senior Manager's termination within 180 of a Change
of Control, all options granted to said Senior Manager shall immediately vest
and remain exercisable 90 days following such Change of Control.
Each Senior Manager's employment agreement provides that if Grand Union
terminates a Senior Manager without "Cause," or if such Senior Manager resigns
for "Good Reason" (each as defined in their employment agreements), within
twelve months following a "Change of Control" (as defined below), such Senior
Manager shall be entitled to severance pay equal to the following, to be paid
within 30 days of such termination: 1) for Mr. Philbin - $1,255,800; 2) for Mr.
Freimark - $1,166,100; 3) for Mr. Moslemi - 24 months pay at his then current
salary ; and 4) for Mr. Smith - 24 months at his then current salary, plus an
additional amount sufficient to purchase his then current Company-provided
automobile. In addition, each Senior manager will receive his accrued and unpaid
bonus based on the ratable portion of EBITDA, as defined below, or other
performance factor through the date of termination pursuant to such Senior
Manager's existing employment agreement and the continuation of certain other
benefits as set forth in the agreements. "Change of Control" shall mean, the
acquisition by any person or entity, directly or indirectly, of more than 50% of
the common stock. The employment agreements for the Senior Managers and the EIP
provide for certain other termination obligations for events not covered under
this change of control provision.
17
<PAGE>
Stock Price Performance Graph
The following graph shows a comparison of cumulative total returns for the
Company, the Standard & Poor's 500 ("S&P 500"), and the Standard & Poor's Retail
(Food Chains) Index, for the period that commenced on September 9, 1998, and
ended on April 1, 2000, with data points for September 9, 1998 (the first day of
over the counter trading following emergence from Chapter 11 proceedings,
December 31, 1998, April 3, 1999 (the last day of Fiscal 1999), December 31,
1999, and April 1, 2000 (the last day of Fiscal 2000). The graph assumes: 1)
$100 invested at the close of trading on September 9, 1998, and 2) that all
dividends have been reinvested. Periods prior to August 17, 1998 are irrelevant
given the Company's significant change in capital structure.
Comparison of Cumulative Total Return
(The Grand Union Company, S&P 500 Index, S&P Retail (Food Chains) Index)
(Performance Results Through April 1, 2000)
[OBJECT OMITTED]
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
September 9, December 31, April 3, December 31, April 1,
1998 1998 1999 1999 2000
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
The Grand Union Company 100.00 137.06 125.18 109.58 31.55
("GUCO")
-------------------------------------------------------------------------------------------
S&P 500 100.00 122.74 129.59 148.57 151.98
-------------------------------------------------------------------------------------------
S&P Retail (Food Chains) 100.00 121.17 108.03 70.57 73.89
-------------------------------------------------------------------------------------------
</TABLE>
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.
18
<PAGE>
Report of the Compensation Committee
Currently, and since December 21, 1999, the Compensation Committee has
been composed of Neil Augustine (Chair), Thomas Cochill, David Green and Scott
Tepper, four non-employee directors of the Company and "outside directors"
within the meaning of Section 162(m) of the Code. From the beginning of the
fiscal year through December 20, 1999, the Compensation Committee was composed
of Thomas Cochill (Chair), David Green and Scott Tepper, also "outside
directors." The Compensation Committee's primary duties include (i) reviewing
the compensation levels of the Company's officers, including the Senior Managers
and certain other members of executive management, (ii) administering the
Company's incentive bonus plans, (iii) administering the EIP, (iv) administering
the EAIBP and (v) 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.
As part of the Company's 1998 Reorganization under Chapter 11 of the
Bankruptcy Code (the "1998 Reorganization") and as approved by the Compensation
Committee sitting from April 22, 1998 to August 17, 1998, new employment
agreements were negotiated and entered into with each of the Messrs. Harris,
Partridge, Philbin and Freimark, with the intent being to stabilize and secure
the executive management of the Company.
On April 13, 2000, following the removal of Mr. Harris and the resignation
of Mr. Partridge on February 13, 2000, the Compensation Committee approved new
employment agreements for each of Messrs. Philbin, Freimark, Moslemi, and G.
Smith.
Annual Salary
Historically, the annual salaries of the executive officers of the Company
have been determined by reference to the mid-range of a varying mix of other
supermarket retailers with comparable revenues and/or geographic coverage. The
annual salaries of the Senior Managers are as set forth in their respective
employment agreements. In determining the annual base salaries for each of
Messrs. Philbin, Freimark, Moslemi and G. Smith, the Compensation Committee
sought the advice of compensation consultants and considered the salaries of
similar executives, the Senior Managers' then-current rates of pay, and the
additional duties and responsibilities added to each Senior Manager. With regard
to the salaries of the Senior Managers, other executives, and managerial
associates of the Company, it is the Compensation Committee's continuing
objective to maintain the competitive level of such salaries.
Annual Performance Incentives
Annual bonus levels and performance targets are established each fiscal
year and are based upon corporate performance during the fiscal year. Potential
bonuses for the fiscal year ending April 1, 2000 were established in May 1999
and were based on the Company achieving specified levels of EBITDA (earnings
before interest, taxes, depreciation, amortization, unusual and extraordinary
items and non-cash pension and LIFO charges) during the fiscal year. The
incentive targets for the Senior Managers are established pursuant to the EAIBP.
All other managerial associates, including store general managers and assistant
managers, are eligible for annual bonus payments, also based upon the
achievement of certain corporate or, in the case of store personnel, store
financial objectives.
For the fiscal year ended April 1, 2000, no Senior Managers or other
eligible participants, with the exception of certain store personnel and other
associates who had guaranteed bonuses, received bonus payments based upon EBITDA
performance target achievement.
Long-Term Incentives
The Company maintains two equity incentive plans, one for non-employee
directors (the "NEDSOP") and the other for employees (the "EIP"). Grants under
these plans provide an immediate and direct link to stockholder interests.
19
<PAGE>
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. No option grants were made to Messrs. Philbin or Freimark during
the fiscal year ended April 1, 2000. Messrs. Moslemi and G. Smith were granted
15,000 and 12,000 respectively, during the fiscal year, priced at fair market
value on the date of the grant. However, in connection with the execution of
their employment agreements on April 13, 2000, each of Messrs. Philbin,
Freimark, Moslemi and G. Smith were granted options totaling 1,575,000 shares
(850,000, 475,000, 125,000 and 125,000 respectively). Effective April 13, 2000,
each of the Senior Managers' existing options were cancelled (427,738, 213,870,
30,000 and 22,000 respectively). During Fiscal 2000, additional option grants
representing 585,500 to other executive officers, managerial associates and
Directors were issued based upon the recipient's level of responsibility. To
date, executive officers, other employees and Directors of the Company have been
granted an aggregate of approximately 2,553,750 stock options, net of canceled
options, that remains outstanding under the EIP, since its adoption in 1995.
Other Compensation
Executive officers, along with all other eligible employees, participate
in the Company's Retirement Plan, Savings Plan, and other health and life
insurance benefits. Senior executives, including those individuals who hold the
positions of Senior Vice President and above, participate in the SERP, which
generally 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
Retirement Plan and under a predecessor plan to the SERP.
Tax Policy
Section 162(m) of the Internal Revenue 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 granted under the EIP
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 each
executive's potential compensation was based on overall corporate financial
performance. The Committee believes equity compensation, in the form of stock
options, is beneficial 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.
Neil Augustine, Chair
Thomas R. Cochill
David M.Green
Scott M. Tepper
20
<PAGE>
Compensation Committee Interlocks and Insider Participation
The Board of Directors maintains a Compensation Committee consisting of
four directors. The Compensation Committee currently consists of Mr. Augustine,
Mr. Cochill, Mr. Green and Mr. Tepper, with Mr. Augustine acting as Chair.
Effective December 9, 1999, Messrs. Cochill, Green and Tepper, along with all
other directors at such time, were each issued a stock option to acquire 8,500
shares of Common Stock under the EIP. This supplemental stock option grant was
made at the same time that the Board of Directors amended the NEDSOP and was
intended to provide the directors with the same number of shares as would have
been granted them if the amendments to the NEDSOP had been in place since their
date of first election to the Board of Directors.
No member of the Board participates in decisions regarding his own
compensation as an executive officer of the Company. However, Compensation
Committee members are eligible for certain automatic, annual option grants under
the NEDSOP.
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 April 1, 2000, were
satisfied, with the exception of late Form 3 filings for Messrs. Carnahan and
Skelly and a late Form 4 filing for Mr. Harris.
21
<PAGE>
PROPOSAL TWO
APPROVAL OF AMENDMENTS TO THE 1995 NON-EMPLOYEE DIRECTORS'
STOCK OPTION PLAN
1995 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
The Board of Directors has adopted amendments to the 1995 Non-Employee
Directors' Stock Option Plan, as amended and restated in the 1996 Proxy
Statement (the "NEDSOP"). The NEDSOP was originally approved by the Board of
Directors on December 12, 1995, and amended thereafter on June 13, 1996. The
Board amended the NEDSOP again on December 9, 1999. The authorization to issue
stock options pursuant to the NEDSOP expires December 12, 2005, unless
terminated earlier by the Board of Directors. The NEDSOP is the Company's
primary stock option plan for non-employee directors of the Company. The Company
believes the NEDSOP is essential to recruit and retain high-caliber personnel to
serve as members of the Board of Directors.
The Company is seeking stockholder approval of the December 9, 1999,
amendments to the NEDSOP which would (i) increase the aggregate number of shares
issuable under the NEDSOP from 100,000 to 250,000, (ii) increase the number of
initial stock option shares granted to directors under the NEDSOP from 5,000
shares to 10,000 shares; and (iii) increase the number of annual stock option
shares granted to directors under the NEDSOP from 1,500 shares to 5,000 shares.
Your Board recommends a vote "FOR" the amendments to the NEDSOP. The NEDSOP must
be approved by the affirmative vote of a majority of the votes present in person
or represented by proxy and entitled to be cast on the matter by holders of
Common Stock. Abstentions are counted in tabulating the total votes cast, but
broker non-votes are not. Brokers who have not received instructions from their
beneficial owners are not authorized to vote such shares on the proposal.
The principal features of the NEDSOP are summarized below, but the summary
is qualified in its entirety by reference to the NEDSOP itself, attached hereto
as Appendix A, with highlighted text for the proposed amendments. The Company
cannot currently determine the exact number of shares subject to awards that may
be granted in the future to directors under the NEDSOP. However, below is a
summary table setting forth the new plan benefits for the NEDSOP.
NEW PLAN BENEFITS
1995 Non-Employee Directors' Stock Option Plan, as amended
<TABLE>
<CAPTION>
--------------------------------------------------------- ------------------------------------------------------
Name and Position Number of Units (options)
----------------- -------------------------
--------------------------------------------------------- ------------------------------------------------------
--------------------------------------------------------- ------------------------------------------------------
<S> <C>
Gary M. Philbin, President and Chief Executive Officer 0
--------------------------------------------------------- ------------------------------------------------------
Jeffrey P. Freimark, Executive Vice President, Chief 0
Financial and Administrative Officer and Treasurer
--------------------------------------------------------- ------------------------------------------------------
Manouchehr Moslemi, Senior Vice President, Chief 0
Informatiion Officer
--------------------------------------------------------- ------------------------------------------------------
Glenn J. Smith, Senior Vice President, General Counsel 0
and Corporate Secretary
--------------------------------------------------------- ------------------------------------------------------
Gary M. Duncan, Corporate Vice President, Human 0
Resources
--------------------------------------------------------- ------------------------------------------------------
Executive Group 0
--------------------------------------------------------- ------------------------------------------------------
Non-Executive Director Group 90,500
--------------------------------------------------------- ------------------------------------------------------
Non-Executive Officer Employee Group 0
--------------------------------------------------------- ------------------------------------------------------
</TABLE>
22
<PAGE>
Eligibility and Purpose
As amended, the NEDSOP provides for the grant by the Company of options to
purchase up to an aggregate of two hundred fifty thousand (250,000) shares of
Common Stock of the Company to those members of the Board of Directors who are
not also employees of the Company. As of the record date, twelve (12) current
non-employee directors and no former directors were eligible to participate in
the NEDSOP. The purpose of the NEDSOP is to enable the Company to attract and
retain persons who can make significant contributions to the success of the
Company by serving as members of the Board of Directors, and to reward and
motivate such persons by providing them with an equity participation in the
Company.
Number of Shares Granted
Effective October 1, 1998 and as of the record date, the Company's Common
Stock has been quoted on the NASDAQ National Market System under the symbol
GUCO. The Common Stock is, however, subject to a NASDAQ delisting hearing for
failing to satisfy all of NASDAQ's continued listing criteria. On the record
date, the last reported sale price for the Common Stock was $0.5625 per share.
As of the record date, options to purchase an aggregate of 90,500 shares of
Common Stock (net of canceled options) have been granted under the NEDSOP, to
the Directors indicated below. No shares under the NEDSOP have been issued to
any employees of the Company. The following table shows the options granted and
currently outstanding under the NEDSOP, as well the number of shares vested and
their strike prices.
<TABLE>
<CAPTION>
----------------- ------------------- -------------- --------- -------------------- ----------- -------------
PERSON GRANT DATE NUMBER OF STRIKE EXPIRATION VESTED UNVESTED
SHARES PRICE
----------------- ------------------- -------------- --------- -------------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
N. Augustine December 17, 1999 10,000 $9.7500 December 17, 2009 3,333 6,667
----------------- ------------------- -------------- --------- -------------------- ----------- -------------
M. Bernstein September 10, 1998 5,000 $8.7590 September 10, 2008 3,334 1,666
----------------- ------------------- -------------- --------- -------------------- ----------- -------------
M. Bernstein August 19, 1999 1,500 $12.5000 August 19, 2009 500 1,000
----------------- ------------------- -------------- --------- -------------------- ----------- -------------
T. Cochill September 10, 1998 5,000 $8.7590 September 10, 2008 3,334 1,666
----------------- ------------------- -------------- --------- -------------------- ----------- -------------
T. Cochill August 19, 1999 1,500 $12.5000 August 19, 2009 500 1,000
----------------- ------------------- -------------- --------- -------------------- ----------- -------------
J. Colonnetta September 10, 1998 5,000 $8.7590 September 10, 2008 3,334 1,666
----------------- ------------------- -------------- --------- -------------------- ----------- -------------
J. Colonnetta August 19, 1999 1,500 $12.5000 August 19, 2009 500 1,000
----------------- ------------------- -------------- --------- -------------------- ----------- -------------
J. Doft September 10, 1998 5,000 $8.7590 September 10, 2008 3,334 1,666
----------------- ------------------- -------------- --------- -------------------- ----------- -------------
J. Doft August 19, 1999 1,500 $12.5000 August 19, 2009 500 1,000
----------------- ------------------- -------------- --------- -------------------- ----------- -------------
M. Embler December 17, 1999 10,000 $9.7500 December 17, 2009 3,333 6,667
----------------- ------------------- -------------- --------- -------------------- ----------- -------------
D. Green September 10, 1998 5,000 $8.7590 September 10, 2008 3,334 1,666
----------------- ------------------- -------------- --------- -------------------- ----------- -------------
D. Green August 19, 1999 1,500 $12.5000 August 19, 2009 500 1,000
----------------- ------------------- -------------- --------- -------------------- ----------- -------------
J. Lash September 10, 1998 5,000 $8.7590 September 10, 2008 3,334 1,666
----------------- ------------------- -------------- --------- -------------------- ----------- -------------
J. Lash August 19, 1999 1,500 $12.5000 August 19, 2009 500 1,000
----------------- ------------------- -------------- --------- -------------------- ----------- -------------
S. Peck December 17, 1999 10,000 $9.7500 December 17, 2009 3,333 6,667
----------------- ------------------- -------------- --------- -------------------- ----------- -------------
A. Petrillo September 10, 1998 5,000 $8.7590 September 10, 2008 3,334 1,666
----------------- ------------------- -------------- --------- -------------------- ----------- -------------
H. Seif December 17, 1999 10,000 $9.7500 December 17, 2009 3,333 6,667
----------------- ------------------- -------------- --------- -------------------- ----------- -------------
S. Tepper September 10, 1998 5,000 $8.7590 September 10, 2008 3,334 1,666
----------------- ------------------- -------------- --------- -------------------- ----------- -------------
S. Tepper August 19, 1999 1,500 $12.5000 August 19, 2009 500 1,000
----------------- ------------------- -------------- --------- -------------------- ----------- -------------
</TABLE>
If the amendments to the NEDSOP are adopted by the stockholders, future
new directors would receive, on their initial election by stockholders, stock
options covering 10,000 shares, and all directors would, on each re-election by
stockholders, receive future annual grants of stock options covering 5,000
shares. Each such grant becomes vested after six months as to one-third of the
shares, after no longer than one year as to an additional one-third of the
shares, and after no longer than two years as to the remaining one-third.
Plan Administration
The NEDSOP provides that it is to be administered by a committee appointed
by the Board of Directors, or in the absence of such appointment, by the Board
itself. Presently, the Corporate Governance Committee has been appointed by the
Board to administer the NEDSOP. The Corporate Governance Committee (or Board)
may at any time or times amend the Plan for any purpose which may at the time be
permitted by law, but in no event (except to comply with the provisions of the
Internal Revenue Code, the Employee Retirement Income Security Act or the rules
thereunder) more than once in any six-month period.
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Terms of Director Options
Number and Vesting. Under the NEDSOP as amended, each new director who is
not also an employee receives automatically a nonqualified option covering
10,000 shares, granted the date the director is first elected by the
stockholders. Each director also receives, on re-election by the stockholders,
an option covering 5,000 shares. The exercise price of each such director option
is fair market value on the date of election or re-election, as applicable.
director options vest in increments of approximately one-third each six months
after election, on the earlier of the first anniversary of election or the
stockholder meeting closest thereto, and on the earlier of the second
anniversary of election or the stockholder meeting closest thereto. Options also
vest in certain circumstances involving a change in control.
Expiration Date. Director options expire ten years after the date of
grant, or earlier in the event of termination of service as a director, death or
disability. Director options expire no later than one year after a director dies
or becomes disabled, and no later than one year after the person ceases to be a
director for any other reason. If a director dies or becomes disabled, all
options which are not vested within 30 days after the date of death or
disability are terminated. If a director terminates service as a director for
any reason other than death or disability, all options which are not vested on
the last day of his or her service are terminated and all vested options
terminate on the earlier of (i) the one year anniversary of the director's
termination of service or (ii) the termination date specified in the grant.
Payment. Payment for shares upon exercise of an option must be made in
full at the time of exercise. The form of consideration payable upon exercise of
an option shall, at the discretion of the Corporate Governance Committee, be (i)
by tender of United States dollars in cash, check, bank draft or money order;
(ii) subject to any legal restriction against the Company's acquisition or
purchase of the Company's shares of Common Stock, by delivery of shares of
Common Stock, which have been held by the optionee for at least six months and
which shall be deemed to have a value equal to the aggregate fair market value
of such shares determined on the date preceding the date of exercise or purchase
as described in the immediately preceding paragraph hereof; (iii) by the
issuance of a promissory note bearing an interest rate not less than the prime
rate as reported in the Wall Street Journal, plus two percent; (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 NEDSOP from time to time.
Change-in-Control Provisions
In the event of a change in control of the Company, certain provisions
take effect to accelerate the vesting of outstanding options and to provide for
cash payment in settlement of unexercised options. 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. In addition, the value of any
unexercised option 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; (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 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.
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Adjustments in Capitalization
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 NEDSOP, the Committee will make any appropriate
adjustments to the maximum number of shares that may be delivered under an
option granted pursuant to the NEDSOP.
Federal Tax Consequences
The following is a brief summary of the tax effects under the Internal
Revenue Code (the "Code") with respect to options granted under the NEDSOP.
Only nonqualified stock options are granted under the NEDSOP, i.e.,
options not qualified for favorable tax treatment under ss.422 of the Code. No
taxable income is recognized by an optionee upon the grant of a nonqualified
stock option. Upon exercise, the optionee will recognize ordinary income in the
amount by which the fair market value of the shares purchased, on the date of
exercise, exceeds the exercise price paid for such shares. The Company will be
entitled to a tax deduction equal to the amount of ordinary income recognized by
the optionee.
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.
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PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected PricewaterhouseCoopers LLP,
independent accountants, to audit the financial statements of the Company for
the fiscal year ending March 31, 2001. THE BOARD OF DIRECTORS recommends that
stockholders vote "FOR" ratification of such appointment. The affirmative vote
of a majority of the shares of Common Stock present at the meeting in person or
by proxy shall be necessary to ratify the appointment of the Company's
independent accountants. In the event of a negative vote on such ratification,
the Board of Directors will reconsider its selection.
Representatives of PricewaterhouseCoopers 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.
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 THE 2001 ANNUAL 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 2001 Annual Meeting of Stockholders generally must be received by the
Company at its principal executive offices no later than March 1, 2001, 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
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<PAGE>
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.
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 2000 Annual Report to Stockholders of the Company including its Annual
Report on Form 10-K for the fiscal year ended April 1, 2000 is attached to this
Proxy Statement. 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 ON FORM 10-K FOR THE FISCAL YEAR
ENDED APRIL 1, 2000, 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
1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN, AS PROPOSED TO BE AMENDED(1)
AMENDED AND RESTATED JULY 20, 1996 DECEMBER 9, 1999
1. Purpose. The purpose of this 1995 Non-Employee Directors' Stock Option
Plan (the "Plan") is to advance the interests of The Grand Union Company (the
"Company") by enhancing the ability of the Company to attract and retain
non-employee directors who are in a position to make significant contributions
to the success of the Company and to reward directors for such contributions
through ownership of shares of the Company's Common Stock (the "Stock").
2. Administration. The Plan shall be administered by a committee (the
"Committee") of the Board of Directors (the "Board") of the Company designated
by the Board for that purpose. Unless and until a Committee is appointed, the
Plan shall be administered by the entire Board, and references in the Plan to
the "Committee" shall be deemed references to the Board. The Committee shall
have authority, not inconsistent with the express provisions of the Plan (a) to
issue options granted in accordance with the formula set forth in this Plan to
Eligible Directors as defined below; (b) to prescribe the form or forms of
instruments evidencing awards and any other instruments required under the Plan
and to change such forms from time to time; (c) to adopt, amend and rescind
rules and regulations for the administration of the Plan; and (d) to interpret
the Plan and to decide any questions and settle all controversies and disputes
that may arise in connection with the Plan. Such determinations of the Committee
shall be conclusive and shall bind all parties.
3. Eligibility of Directors for Stock Options. Directors eligible to
receive options under the Plan ("Eligible Directors") shall be those directors,
who are not, at the time they become an Eligible Director, employees of the
Company or of any subsidiary of the Company and (i) who are directors on the
Effective Date of this Plan (which shall be the eligibility date for such
directors) or (ii) who are first elected a director of the Company after the
Effective Date of this Plan (which election date shall be the eligibility date
for any such director).
4. Grant of Options; Exercise Price. Each individual who is an Eligible
Director shall, on his or her eligibility date as determined under Section 3,
automatically be granted an option ("Option") to purchase 5,000 10,000 shares of
Stock of the Company (subject to adjustment as provided in Sections 5 and 10) at
an exercise price equal to the Fair Market Value of the Stock on the effective
date of grant. Thereafter, on each date that an Eligible Director is elected to
a new one-year term of office, such Eligible Director shall automatically be
granted an Option to purchase 1,500 5,000 shares of Stock of the Company
(subject to adjustment as provided in Sections 5 and 10) at an exercise price
equal to the Fair Market Value of the Stock on the effective date of grant. All
options shall expire ten years after the effective date of grant.
5. Number of Shares. The number of shares of Stock of the Company which
may be issued upon the exercise of Options granted under the Plan, including
shares forfeited pursuant to Section 7, shall not exceed 100,000 250,000 in the
aggregate, subject to increase under Section 10, which increases and appropriate
adjustments as a result thereof shall be made by the Committee, whose
determination shall be binding on all persons.
6. Stock to be Delivered. Shares of Stock to be delivered pursuant to an
Option granted under this Plan may constitute an original issue of authorized
Stock or may consist of previously issued Stock acquired by the Company, as
shall be determined by the Board. The Board and the proper officers of the
Company shall take any appropriate action required for such delivery. No
fractional shares shall be delivered under the Plan.
The Company will not be obligated to deliver any shares of Stock pursuant
to the Plan (a) until all conditions of the Option have been satisfied, (b)
until, in the opinion of the Company's counsel, all applicable federal and state
laws and
----------
(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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regulation have been complied with, (c) if the outstanding Stock is at
the time listed on the New York Stock Exchange or any other stock exchange,
until the shares to be delivered have been listed or authorized to be listed on
the New York Stock Exchange or such other exchange upon official notice of
notice of issuance, and (d) until all other legal matters in connection with the
issuance and delivery of such shares have been approved by the Company's
counsel. If the sale of Stock has not been registered under the Securities Act
of 1933, as amended, the Company may require, as a condition to exercise of the
Options, such representations or agreements as counsel for the Company may
consider appropriate to avoid violation of such Act and may require that the
certificates evidencing such Stock bear an appropriate legend restricting
transfer.
If an Option is exercised by the Eligible Director's legal representative,
the Company will be under no obligation to deliver Stock pursuant to such
exercise until the Company is satisfied as to the authority of such
representative.
7. Exercisability; Exercise; Payment of Exercise Price.
All Options granted under the Plan prior to July 1, 1996, shall, subject
to initial stockholder approval of the Plan, become exercisable immediately as
to one-third of the shares, on the first anniversary of the grant date as to the
second third of the shares and as to one share of any remainder, and on the
second anniversary of the grant date as to the last third of the shares and the
second share of any two-share remainder.
All Options granted under the Plan on or after July 1, 1996, shall,
subject to initial stockholder approval of the Plan, become exercisable six
months after the grant date as to one-third of the shares, on the earlier of the
first anniversary of the grant date or the annual meeting of stockholders
closest thereto as to the second third of the shares and as to one share of any
remainder, and on the earlier of the second anniversary of the grant date or the
annual meeting of stockholders closest thereto as to the last third of the
shares and the second share of any two-share remainder.
Any exercise of an Option must be in writing, signed by the proper person
and delivered or mailed to the Company, accompanied by (1) any documents
required by the Committee and (2) payment in full as provided below for the
number of shares for which the Option is exercised.
The exercise price of Stock purchased on exercise of an Option must be
paid for as follows: (1) in cash or by check (acceptable to the Company in
accordance with guidelines established for this purpose), bank draft or money
order payable to the order of the Company or (2) through the delivery of shares
of Stock which have been outstanding and held by the Option holder for at least
six months and which have a Fair Market Value on the last business day preceding
the date of exercise equal to the exercise price, or (3) by delivery of a two
year-term promissory note of the Eligible Director to the Company, bearing
interest on amounts outstanding at a rate equal to the prime rate as published
in The Wall Street Journal on the effective date of grant plus 2%, or (4) by
delivery of an unconditional and irrevocable undertaking by a broker to deliver
promptly to the Company sufficient funds to pay the exercise price, or (5) by
any combination of the permissible forms of payment.
To the extent shares of Stock covered under an Option are not delivered
because the Option lapses or is terminated, such forfeited shares may be
regranted in another Option within the limits set forth in Section 5.
8. Termination of Options.
a. Death or Disability. If an Eligible Director ceases to be a
director by reason of death or total and permanent disability (as determined
by the Committee), the following will apply:
All Options held by the Eligible Director that are not exercisable on the
thirtieth day after termination of the Eligible Director's status as a director
will terminate as of such date. All Options that are exercisable as of said
thirtieth day will continue to be exercisable until the earlier of (1) the first
anniversary of the date on which the Eligible Director's status as a director
ended or (2) the date on which the Option would have terminated had the Eligible
Director remained a director. If the Eligible Director has died or is totally or
permanently disabled, the Option may be exercised within such limits by the
Eligible Director's legal representative.
b. Other Termination. If an Eligible Director's service with the Company
terminates for any reason other than death or incapacity as provided above, all
Options held by the director that are not then exercisable shall terminate.
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<PAGE>
Options that are exercisable on the date of such termination (other than
termination upon a removal for cause, in which event all Options shall
immediately terminate) shall continue to be exercisable until the earlier of (1)
one year thereafter or (2) the date on which the Option would have terminated
had the director remained an Eligible Director, and after completion of that
period, such Options shall terminate to the extent not previously exercised,
expired or terminated.
c. Certain Corporate Transactions. In the event of a Change of Control of
the Company, each outstanding Option not otherwise exercisable shall become
immediately exercisable in full on the twentieth (20th) trading day prior to the
effective date of the Change of Control. Subject to the last paragraph of this
section, the Company shall pay to those Option holders whose Options have been
terminated, an amount equal to the Option Value, such payment to be made by cash
or certified check within 30 days after the Change in Control. The Option Value
shall be determined as the difference between the exercise price of the Option
and the Market Price times the number of shares covered by the Option. The
Market Price shall be determined as the average of the Fair Market Value, as
determined under section 11, for the period of twenty (20) trading days ending
on the effective date of the Change of Control.
"Change of Control" means any of the following: (1) any person, entity or
Group (persons or entities acting together) is or becomes the beneficial owner
of more than 50% of the Voting Stock of the Company; (2) a consolidation,
merger, or sale of substantially all of the assets of the Company, with the
effect that any person, entity or Group becomes the beneficial owner of more
than 50% of the Voting Stock of the Company or the Company is not the surviving
entity; (3) during any consecutive two-year period commencing July 1, 1996,
individuals who constituted the Board of Directors at the beginning of such
period, together with any new directors whose election by the Board or
nomination for election by stockholders was approved by 2/3 of the directors who
were in office at the beginning of the period or whose election or nomination
was so approved, cease to constitute a majority of the Board then in office; or
(4) any order, judgment or decree of dissolution or split-up of the Company, and
such order remains undischarged or unstayed for a period in excess of 60 days.
For purposes of this provision, "more than 50% of the Voting Stock" means more
than 50% of one or more classes of stock pursuant to which the holders have the
general power to vote for the election of members of the Board of Directors, and
the aggregate of such classes for which the person, entity or Group holds more
than 50% has the power to elect more than 50% of the members of the Board of
Directors.
Notwithstanding the foregoing, the termination of Options and the payment
of Option Values described in the first paragraph of this section shall not
apply with respect to any transaction in which the Option Holder receives either
(i) a replacement option allowing the Option Holder to receive, on the same
terms as in the original Option, the greatest amount of securities, cash or
other property to which such holder would have been entitled as a holder of
Common Stock upon consummation of the transaction if such holder had exercised
the rights represented by the Option held by such holder immediately prior to
the transaction, or (ii) if pooling of interests is a condition of the
transaction, a replacement equity interest which enables the transaction to
qualify for pooling of interests.
9. General Provisions
a. Documentation of Options. Options will be evidenced by written
instruments prescribed by the Committee from time to time. Such instruments may
be in the form of agreements, to be executed by both an Eligible Director and
the Company, or certificates, letters or similar instruments, which need not be
executed by an Eligible Director but acceptance of which will evidence agreement
to the terms thereof.
b. Rights as a Stockholder. An option holder shall not have the rights of
a stockholder with respect to Options under the Plan except as to Stock actually
received by him or her under the Plan.
c. Tax Withholding. The Eligible Director or other appropriate person
shall remit to the Company an amount sufficient to satisfy the withholding
requirements, or make other arrangements satisfactory to the Committee with
regard to such requirements, prior to the delivery of any Stock. If and to the
extent that such withholding is required, the Committee may permit the Eligible
Director such other person to elect at such time and in such manner as the
Committee provides to have the Company hold back from the shares to be
delivered, or to deliver to the Company, Stock having a value calculated to
satisfy the withholding requirement.
d. Nontransferability of Options. No Option may be transferred other than
by will or by the laws of descent and distribution, and during a director's
lifetime an Option may be exercised only by the director (or, in the event of
the director's incapacity, the person or persons legally appointed to act on the
director's behalf).
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<PAGE>
10. Adjustments in the Event of Certain Transactions.
a. In the event of a stock dividend, stock split or combination of shares,
recapitalization or other change in the Company's capitalization, or other
distribution to common stockholders other than normal cash dividends, the
Committee will make any appropriate adjustments to the maximum number of shares
that may be delivered under the Plan under Section 5 above.
b. In any event referred to in paragraph (a), the Committee will also make
any appropriate adjustments to the number and kind of shares of stock or
securities subject to Options then outstanding or subsequently granted, exercise
prices relating to Options and any other provision of Options affected by such
change. The Committee may also make such adjustments to take into account
material changes in law or in accounting practices or principles, mergers,
consolidations, acquisitions, dispositions or similar corporate transactions, or
any other event, if it is determined by the Committee that adjustments are
appropriate to avoid distortion in the operation of the Plan.
11. Fair Market Value. For purposes of the Plan, Fair Market Value of a
share of Stock on any date will be the last sale price as reported by the
principal exchange on which the Stock is traded or by the National Association
of Securities Dealers, Inc. Automated Quotations System or such other similar
system then in use, on that date; or, if on any such a date such Stock is not
quoted by any such organization, the average of the closing bid and asked prices
with respect to such Stock, as furnished by a professional market maker making a
market in such Stock selected by the Committee; or if such prices are not
available, the fair market value of such Stock as of such date as determined in
good faith by the Committee.
12. Effective Date and Term. This Plan, having been approved by the Board
of Directors on December 12, 1995, shall become, in accordance with the term of
the approving vote of the Board, effective on December 12, 1995 (the "Effective
Date"), subject to approval of this Plan by vote of a majority of the
shareholders of the Company present and eligible to vote on the question at an
annual or special meeting of stockholders held not later than December 12, 1996.
Options may be granted under the Plan prior to the date of stockholder approval,
and options so granted shall be effective on the effective date of grant subject
to stockholder approval of the Plan as provided in this Section. No Options may
be awarded under this Plan after December 12, 2005, but the Plan shall continue
thereafter while previously awarded Options remain subject to the Plan.
13. Effect of Termination, and Amendment. Neither adoption of the Plan nor
the grant of Options to an Eligible Director shall confer upon any person any
right to continued status as a director with the Company or any subsidiary or
affect in any way the right of the Company or subsidiary to terminate a director
relationship at any time or shall affect the Company's right to grant to such
director options or other stock awards that are not subject to the Plan, to
issue to such director stock as a bonus or otherwise, or to adopt other plans or
arrangements under which stock may be issued to directors. The Committee may at
any time terminate the Plan as to any further grants of Options. The Committee
may at any time or times amend the Plan for any purpose which may at the time be
permitted by law, but in no event (except to comply with the provisions of the
Internal Revenue Code, the Employee Retirement Income Security Act or the rules
thereunder) more than once in any six-month period.
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<PAGE>
THE GRAND UNION COMPANY
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
AUGUST 17, 2000
The undersigned hereby nominates, constitutes and appoints Gary M.
Philbin 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
Hanover Marriott Hotel, 1401 Route 10 East, Whippany, New Jersey, 07981, at
10:00 a.m. on August 17, 2000, 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, AND 3.
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 AMENDMENTS TO THE 1995 NON-EMPLOYEE DIRECTOR STOCK
OPTION PLAN, "FOR" RATIFICATION OF PRICEWATERHOUSECOOPERS 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: Michael J. Embler,
Jeffrey P. Freimark, David M. Green, Charles M. Masson, Stephen M. Peck, Gary M.
Philbin, and Scott M. Tepper.
(INSTRUCTIONS; TO WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES, MARK THE
BOX ABOVE. TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
THROUGH THAT NOMINEE'S NAME IN THE LIST ABOVE.)
2. APPROVAL OF THE AMENDMENTS TO THE 1995 NON-EMPLOYEE DIRECTOR
STOCK OPTION PLAN:
/ / FOR / / AGAINST / / ABSTAIN
3. RATIFICATION OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS:
/ / FOR / / AGAINST / / ABSTAIN
4. IN THEIR DISCRETION, ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE
THE MEETING OR ANY ADJOURNMENT THEREOF.
Signature(s) ______________________
Date _____________________, 2000
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
should sign personally.
