-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RmSDqiegqpRvAPXKIzMuLnB/LKM+WMkuZllAL8NBJgI4BV7S9uxcyYw9owN3ckUv YpcpxJGj5PHSgdtu0ukvEQ== 0000889812-98-002795.txt : 19981125 0000889812-98-002795.hdr.sgml : 19981125 ACCESSION NUMBER: 0000889812-98-002795 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19981010 FILED AS OF DATE: 19981124 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GRAND UNION CO /DE/ CENTRAL INDEX KEY: 0000316236 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 221518276 STATE OF INCORPORATION: DE FISCAL YEAR END: 0328 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-07824 FILM NUMBER: 98758301 BUSINESS ADDRESS: STREET 1: 201 WILLOWBROOK BLVD CITY: WAYNE STATE: NJ ZIP: 07470-0966 BUSINESS PHONE: 2018906000 MAIL ADDRESS: STREET 1: 201 WILLOWBROOK BLVD CITY: WAYNE STATE: NJ ZIP: 07470 FORMER COMPANY: FORMER CONFORMED NAME: SUCCESSOR TO GRAND UNION CO/VA/ DATE OF NAME CHANGE: 19600201 10-Q 1 QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 10, 1998 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to ________________ Commission File Number 0-26602 THE GRAND UNION COMPANY - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 22-1518276 -------- ---------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 201 Willowbrook Boulevard, Wayne, New Jersey 07470-0966 - -------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) 973-890-6000 ------------ Registrant's telephone number, including area code Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days. Yes /X/ No / / Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes /X/ No / / As of November 24, 1998, there were issued and outstanding 30,000,000 shares, par value $0.01 per share, of the Registrant's common stock. -1- THE GRAND UNION COMPANY INDEX PART I - FINANCIAL INFORMATION (Unaudited) Item 1. Financial Statements. Page No. Consolidated Statement of Operations - 8 weeks ended October 10, 1998 (Successor Company), 4 weeks ended August 15, 1998 and 12 weeks ended October 11, 1997 (Predecessor Company) 3 Consolidated Statement of Operations - 8 weeks ended October 10, 1998 (Successor Company), 20 weeks ended August 15, 1998 and 28 weeks ended October 11, 1997 (Predecessor Company) 4 Consolidated Balance Sheet - October 10, 1998 (Successor Company) and March 28, 1998 (Predecessor Company) 5 Consolidated Statement of Cash Flows - 8 weeks ended October 10, 1998 (Successor Company), 20 weeks ended August 15, 1998 and 28 weeks ended October 11, 1997 (Predecessor Company) 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 10 PART II - OTHER INFORMATION Item 2. Change in Securities. 13 Item 5. Other Information. 13 Item 6. Exhibits and Reports on Form 8-K. 14 All items which are not applicable or to which the answer is negative have been omitted from this report. -2- PART I - FINANCIAL INFORMATION Item 1. Financial Statements. THE GRAND UNION COMPANY CONSOLIDATED STATEMENT OF OPERATIONS (dollars in thousands, except per share data) (unaudited)
Successor Company Predecessor Company ---------------- ------------------------------- 8 Weeks 4 Weeks 12 Weeks Ended Ended Ended October 10, August 15, October 11, 1998 1998 1997 ---------------- -------------- --------------- Sales $ 342,471 $ 177,054 $ 518,910 Cost of sales 239,657 124,207 370,246 ---------------- -------------- --------------- Gross profit 102,814 52,847 148,664 Operating and administrative expenses 84,716 43,642 135,193 Depreciation and amortization 10,190 5,142 20,309 Amortization of excess reorganization value 20,242 8,026 24,076 Interest expense, net 6,619 4,050 26,012 Income tax (benefit) (176) - - Unusual items 647 280 - ---------------- -------------- --------------- Net (loss) before extraordinary item (19,424) (8,293) (56,926) Extraordinary item - 260,784 - ---------------- -------------- --------------- Net income (loss) (19,424) 252,491 (56,926) Accrued dividends on preferred stock - - 2,074 ---------------- -------------- --------------- Net income (loss) applicable to common stock $ (19,424) $ 252,491 $ (59,000) ================ ============== =============== Basic and diluted net (loss) per common share $ (0.65) ================ Weighted average number of shares outstanding 30,000,000 ================
See accompanying notes to consolidated financial statements (unaudited). -3- THE GRAND UNION COMPANY CONSOLIDATED STATEMENT OF OPERATIONS (dollars in thousands, except per share data) (unaudited)
Successor Company Predecessor Company --------------- ----------------------------- 8 Weeks 20 Weeks 28 Weeks Ended Ended Ended October 10, August 15, October 11, 1998 1998 1997 --------------- ------------- -------------- Sales $ 342,471 $ 868,962 $ 1,226,893 Cost of sales 239,657 610,930 888,760 --------------- ------------- --------------- Gross profit 102,814 258,032 338,133 Operating and administrative expenses 84,716 217,683 315,015 Depreciation and amortization 10,190 26,081 44,776 Amortization of excess reorganization value 20,242 40,128 56,178 Interest expense, net 6,619 36,509 58,332 Income tax (benefit) (176) - - Unusual items 647 4,789 - --------------- ------------- --------------- Net (loss) before extraordinary item (19,424) (67,158) (136,168) Extraordinary item - 259,045 - --------------- ------------- --------------- Net income (loss) (19,424) 191,887 (136,168) Accrued dividends on preferred stock - 2,305 4,131 --------------- ------------- --------------- Net income (loss) applicable to common stock $ (19,424) $ 189,582 $ (140,299) =============== ============= =============== Basic and diluted net (loss) per common share $ (0.65) =============== Weighted average number of shares outstanding 30,000,000 ===============
See accompanying notes to consolidated financial statements (unaudited). -4- THE GRAND UNION COMPANY CONSOLIDATED BALANCE SHEET (dollars in thousands, except par value and liquidation preference data) (unaudited)
Successor Predecessor Company Company ----------------- ----------------- October 10, March 28, 1998 1998 ----------------- ----------------- ASSETS Current assets: Cash and temporary investments $ 65,318 $ 44,745 Receivables 28,033 21,378 Inventories 146,124 128,370 Other current assets 5,709 14,787 ----------------- ----------------- Total current assets 245,184 209,280 Property, net 331,790 389,637 Excess reorganization value, net 372,252 230,734 Beneficial leases, net 75,597 39,531 Deferred tax asset 115,172 - Other assets 15,774 23,049 ----------------- ----------------- $ 1,155,769 $ 892,231 ================= ================= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Current maturities of long-term debt $ - $ 798,551 Current portion of obligations under capital leases 6,481 7,562 Accounts payable and accrued liabilities 181,333 189,439 ----------------- ----------------- Total current liabilities 187,814 995,552 Long-term debt 230,000 - Obligations under capital leases 150,131 153,425 Adverse leases, net 77,035 Other noncurrent liabilities 145,113 96,458 ----------------- ----------------- Total liabilities 790,093 1,245,435 ----------------- ----------------- Redeemable Class A Preferred Stock (Predecessor Company), $1.00 par value, 3,500,000 shares authorized, 1,300,566 shares issued and outstanding, liquidation preference $70,685,000 at March 28, 1998 - 70,685 ----------------- ----------------- Redeemable Class B Preferred Stock (Predecessor Company), $1.00 par value, 1,400,000 shares authorized, 800,000 shares issued and outstanding, liquidation preference $42,746,000 at March 28, 1998 - 42,746 ----------------- ----------------- Stockholders' equity (deficit): Common stock (Predecessor Company), $.01 par value; 60,000,000 shares authorized, 10,202,018 shares issued and outstanding at March 28, 1998 102 Common stock (Successor Company), $.01 par value; 60,000,000 shares authorized, 30,000,000 shares issued and outstanding at October 10, 1998 300 Preferred stock (Predecessor Company), $1.00 par value; 10,000,000 shares authorized, no shares issued and outstanding - Preferred stock (Successor Company), $1.00 par value; 10,000,000 shares authorized, no shares issued and outstanding - Capital in excess of par value 384,800 132,006 Accumulated deficit (19,424) (597,193) Accumulated other comprehensive income (loss) (1,550) ----------------- ----------------- Total stockholders' equity (deficit) 365,676 (466,635) ================= ================= $ 1,155,769 $ 892,231 ================= =================
See accompanying notes to consolidated financial statements (unaudited). -5- THE GRAND UNION COMPANY CONSOLIDATED STATEMENT OF CASH FLOWS (dollars in thousands) (unaudited)
Successor Company Predecessor Company ------------------ --------------------------------------- 8 Weeks 20 Weeks 28 Weeks Ended Ended Ended October 10, August 15, October 11, 1998 1998 1997 ---------------- ---------------- ---------------- OPERATING ACTIVITIES: Net income (loss) $ (19,424) $ 191,887 $ (136,168) Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities before reorganization items paid: Unusual items 647 4,789 - Extraordinary items - (259,045) - Depreciation and amortization 30,432 66,209 100,954 Deferred taxes (176) - - Noncash interest 244 626 158 Net changes in assets and liabilities: Receivables (5,466) (1,506) 17,682 Inventories (17,766) (5,586) 1,561 Other current assets (89) (99) 1,560 Other assets (180) 29 (388) Accounts payable and accrued liabilities 9,583 22,347 (23,702) Other noncurrent liabilities (701) (517) (6,565) ---------------- --------------- --------------- Net cash provided by (used for) operating activities before reorganization items paid (2,896) 19,134 (44,908) Reorganization items paid (647) (9,102) (3,431) ---------------- --------------- --------------- Net cash provided by (used for) operating activities (3,543) 10,032 (48,339) ---------------- --------------- --------------- INVESTMENT ACTIVITIES: Capital expenditures (1,387) (3,413) (28,712) Disposals of property 122 49 60 ---------------- --------------- --------------- Net cash (used for) investment activities (1,265) (3,364) (28,652) ---------------- --------------- --------------- FINANCING ACTIVITIES: Net proceeds from sale of preferred stock - - 40,000 Proceeds from long-term debt - 230,000 77,978 Proceeds from DIP facility - 108,000 - Repayment of DIP facility - (108,000) - Financing fees - (7,895) (9,446) Retirement of old bank debt - (182,122) - Obligations under capital leases discharged (1,176) (3,094) (4,926) Net repayment of long-term debt - (17,000) (31,046) --------------- --------------- --------------- Net cash provided by (used for) financing activities (1,176) 19,889 72,560 --------------- --------------- --------------- Net increase (decrease) in cash and temporary investments (5,984) 26,557 (4,431) Cash and temporary investments at beginning of period 71,302 44,745 34,119 --------------- --------------- --------------- Cash and temporary investments at end of period $ 65,318 $ 71,302 $ 29,688 =============== =============== =============== Supplemental disclosure of cash flow information: Interest payments $ 4,097 $ 21,358 $ 55,644 Capital lease obligations incurred - - 12,268 Accrued dividends - 2,305 4,131
See accompanying notes to consolidated financial statements (unaudited). -6- THE GRAND UNION COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) NOTE 1 - Reorganization On August 17, 1998 (the "Effective Date"), The Grand Union Company (the "Company") consummated its plan of reorganization under Chapter 11 of the Bankruptcy Code (the "Plan of Reorganization") pursuant to the August 5, 1998 Confirmation Order of the United States Bankruptcy Court for the District of New Jersey. Consummation of the Plan of Reorganization has resulted in a capital restructuring of the Company, whereby approximately $600 million in Old Senior Notes has been eliminated from the Company's balance sheet, reducing annual interest expense by approximately $72 million. Consummation of the Plan of Reorganization has resulted in (i) the issuance of 30,000,000 shares of New Common Stock to the holders of the Company's Old Senior Notes; (ii) the issuance of New Series 1, Series 2 and Series 3 Warrants to the holders of the Company's Old Preferred Stock; (iii) the issuance of New Series 1 Warrants to holders of the Company's Old Common Stock; and (iv) cancellation of the Company's Old Senior Notes, Old Preferred Stock, Old Common Stock, Old Series 1 and Series 2 Warrants and Old Stock Options. As of October 1, 1998, the Company's new common stock began trading on the NASDAQ National Market under the ticker symbol GUCO. On August 17, 1998, in connection with the consummation of the Plan of Reorganization, the Company entered into a $300 million credit agreement (the "Credit Agreement") with UBS AG, Stamford Branch and Lehman Commercial Paper Inc. ("LCPI"), as agents for a syndicate of lenders, which is secured by substantially all of the assets of the Company and its subsidiaries and is guaranteed by the Company's subsidiaries. Some of the proceeds of the Credit Agreement were used to pay off the Company's obligation under its debtor-in-possession credit agreement (the "DIP Facility"), which had provided the Company operating liquidity during the Chapter 11 case. Consummation of the Plan of Reorganization has resulted in the election of a new Board of Directors for the Company (the "Board"). Effective August 17, 1998, the Board is comprised of eleven members. The three management Directors are: J. Wayne Harris, Chairman and Chief Executive Officer; Jack W. Partridge Jr., Vice Chairman and Chief Administrative Officer, and Gary M. Philbin, President and Chief Merchandising Officer. The eight additional members of the Board are: Martin Bernstein, Thomas R. Cochill, Joseph Colonnetta, Jacob W. Doft, David M. Green, Joseph V. Lash, Anthony Petrillo and Scott Tepper. For more information about the Plan of Reorganization, reference is made to Exhibit 2.1 to Grand Union's report on Form 8-K dated August 19, 1998. For more information about the Credit Agreement, reference is made to Exhibit 10.6 of the Company's Quarterly Report on Form 10-Q for the 16 weeks ended July 18, 1998. For more information about members of the Board, reference is made to Exhibit 99.2 to Grand Union's report on Form 8-K dated August 19, 1998. Reference is also made to Part II of this report on Form 10-Q. NOTE 2 - Basis of Presentation The accompanying interim consolidated financial statements of the Company include the accounts of the Company and its subsidiaries, all of which are wholly owned. In the opinion of management, the consolidated financial statements include all adjustments which, except for Fresh-Start adjustments (see note 3), consist only of normal recurring items, necessary for a fair presentation of operating results for the interim periods. These consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company's Annual Report on Form 10-K for the 52 weeks ended March 28, 1998, the Company's Quarterly Report on Form 10-Q for the 16 weeks ended July 18, 1998, and the Form 8-K dated May 27, 1998 and the Company's Disclosure Statement attached thereto as Exhibit 2.1. Operating results for the periods presented are not necessarily indicative of results for the full fiscal year. Certain reclassifications have been made to prior year amounts to conform to current period presentation. -7- NOTE 3 - Fresh-Start Reporting Upon emergence from its Chapter 11 proceedings, the Company adopted fresh-start reporting in accordance with American Institute of Certified Public Accountants Statement of Position 90-7, "Financial Reporting By Entities in Reorganization Under The Bankruptcy Code" ("Fresh-Start Reporting"). In connection with the adoption of Fresh-Start Reporting, a new entity has been deemed created for financial reporting purposes. The periods presented prior to the Effective Date have been designated "Predecessor Company" and the period subsequent to the Effective Date has been designated "Successor Company". For financial reporting purposes, the Company accounted for the consummation of the Plan of Reorganization effective August 15, 1998. In accordance with Fresh-Start Reporting, the Company valued its assets and liabilities at fair values and eliminated its accumulated deficit at the Effective Date. The reorganization value of the Company's common equity of approximately $385,100,000 was determined by the Company with the assistance of financial advisors in reliance upon various valuation methods, including discounted projected cash flows analyses, price/earnings ratios, and other applicable ratios and economic industry information relevant to the operations of the Company, and through negotiations with the various parties in interest. The total reorganization value as of the Effective Date was approximately $730,000,000, which was $392,494,000 in excess of the aggregate fair value of the Company's tangible and identified intangible assets. Such excess is classified as "Excess reorganization value, net" in the accompanying consolidated balance sheet and is being amortized on a straight-line basis over a three-year period. As a result of the consummation of the Plan of Reorganization, the Company recognized an extraordinary gain on debt discharge as follows (in thousands): Elimination of Old Debt, deferred financing fees and accrued interest $ 645,884 Issuance of New Common Stock (385,100) ------------- Extraordinary gain on debt discharge $ 260,784 ============= NOTE 4 - Income Taxes The Company recorded a benefit for income taxes of $176,000 for the 12 weeks ended October 10, 1998, representing federal and state income taxes. All operating loss and credit carryforwards of the Company have been offset by the cancellation of indebtedness income recorded in connection with the Plan of Reorganization. The tax basis of the Company's assets were reduced by $11.2 million, representing the Company's cancellation of indebtedness income in excess of its operating loss and credit carryforwards as of the Effective Date. NOTE 5 - Unusual Items Unusual items recognized consist of $9.3 million in connection with legal, advisory and bank fees associated with the Plan of Reorganization and $3.9 million as a net gain resulting from the elimination of debt premiums. NOTE 6 - Extraordinary Items The Company recognized a net extraordinary gain of $260.8 million for the 12 weeks ended October 10, 1998 as a result of the discharge of debt in connection with the consummation of the Plan of Reorganization. An extraordinary expense of $1.7 million was recorded during the 16 weeks ended July 18, 1998 for the write-off of deferred financing costs associated with a term loan refinanced by the DIP facility. -8- NOTE 7 - Debt The components of the Company's debt are as follows (in thousands):
Successor Predecessor Company Company ------------------ ----------------- October 10, March 28, 1998 1998 ------------------ ----------------- Bank Credit Agreements Term Loans $ 230,000 $ 182,122 Revolving Credit Facility - 17,000 12% Senior Notes due September 1, 2004 (includes $4,008 of unamortized debt premium at March 28, 1998) - 599,429 ------------------ ----------------- 230,000 798,551 Less: current maturities of long-term debt - 798,551 ================== ================= Long-term debt $ 230,000 $ - ================== =================
In connection with the Chapter 11 filing, the Company entered into the DIP Facility, a $172,022,020 revolving credit agreement with Swiss Bank Corporation ("SBC") and LCPI, as agents for a syndicate of lenders. The DIP Facility included a $50 million letter of credit sub-facility. The DIP facility matured on August 17, 1998, the consummation date of the Plan of Reorganization. The proceeds of the DIP Facility were used (i) to finance the working capital needs of the Company and its subsidiaries in the ordinary course of business, (ii) to finance the payment of Chapter 11 expenses, (iii) for general corporate purposes and (iv) to refinance the revolving credit facility and term loan under the pre-Chapter 11 Credit Agreement (the "Old Credit Agreement") and to replace or backstop letters of credit outstanding under an existing credit agreement. The DIP Facility was secured by substantially all of the assets of Grand Union and its subsidiaries and was guaranteed by the Company's subsidiaries. On August 17, 1998, in connection with the consummation of the Plan of Reorganization, the Company entered into the Credit Agreement. The Credit Agreement is comprised of: (i) a $230 million term loan facility (the "Term Loan") and (ii) a $70 million revolving credit facility (the "Revolving Credit"). The Term Loan and Revolving Credit will mature on August 18, 2003. The proceeds of the Credit Agreement have been used to refinance the obligations under the DIP Facility and supplemental term loan claims under the Old Credit Agreement, and the excess portion will be used for the working capital needs of Grand Union and its subsidiaries, including capital expenditures. Up to $50 million of Revolving Credit will be available for the issuance of letters of credit. As of October 10, 1998, an aggregate of $36 million of letters of credit were issued and outstanding under the Credit Agreement. NOTE 8 - Net Loss Per Share The net loss per share is computed in accordance with SFAS No. 128, "Earnings Per Share." This statement requires that entities present, on the face of the income statement for all periods reflected, basic and diluted per share amounts. Basic earnings per share is computed using the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed using the weighted average number of common shares outstanding for the period adjusted for dilutive potential common shares. There were 30 million weighted average shares outstanding for both basic and diluted earnings per share for the 8 weeks ended October 10, 1998. All potential common shares were excluded from the computation of the Company's diluted earnings per share because the effect would have been anti-dilutive. Net loss per share data is not meaningful for periods prior to August 15, 1998 due to the significant change in the capital structure. -9- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. General: As discussed in Note 1 to the accompanying Consolidated Financial Statements of Grand Union, the Company emerged from its Chapter 11 proceedings effective August 17, 1998. For financial reporting purposes, the Company accounted for the consummation of the Plan of Reorganization effective August 15, 1998. In accordance with the American Institute of Certified Public Accountants Statement of Position 90-7, "Financial Reporting By Entities in Reorganization Under The Bankruptcy Code", the Company has applied Fresh-Start Reporting as of the Effective Date which has resulted in significant changes to the valuation of certain of the Company's assets and liabilities, and to its stockholders' equity. In connection with the adoption of Fresh-Start Reporting, a new entity has been deemed created for financial reporting purposes. The periods prior to the Effective Date have been designated "Predecessor Company" and the period subsequent to the Effective Date has been designated "Successor Company". For purposes of the discussion of Results of Operations for the 12 and 28 weeks ended October 10, 1998, the results of the Predecessor Company and Successor Company have been combined. Results of Operations The following table sets forth certain statement of operations and other data (all dollars in millions).
12 Weeks Ended 28 Weeks Ended ---------------------------------- --------------------------------- October 10, October 11, October 10, October 11, 1998 1997 1998 1997 ---------------- ---------------- ---------------- --------------- Sales $ 519.5 $ 518.9 $ 1,211.4 $ 1,226.9 Gross profit 155.7 148.7 360.8 338.1 Operating and administrative expenses 128.4 135.2 302.4 315.0 Depreciation and amortization 15.3 20.3 36.3 44.8 Amortization of excess reorganization value 28.3 24.1 60.4 56.2 Interest expense, net 10.7 26.0 43.1 58.3 Income tax (benefit) (0.2) - (0.2) - Unusual item .9 - 5.4 - Net (loss) before extraordinary item (27.7) (56.9) (86.6) (136.2) Extraordinary item 260.8 - 259.0 - Net income (loss) 233.1 (56.9) 172.5 (136.2) Net income (loss) applicable to common stock 233.1 (59.0) 170.2 (140.3) Sales percentage increase (decrease) 0.1% (2.7%) (1.3%) (2.6%) Gross profit as a percentage of sales 30.0% 28.7% 29.8% 27.6% Operating and administrative expenses as a percentage of sales 24.7% 26.1% 25.0% 25.7%
Sales for the 12 weeks ended October 10, 1998 (the "1999 second quarter") increased $0.6 million, or 0.1% as compared to the 12 weeks ended October 11, 1997 (the "1998 second quarter"). Comparable store sales, including replacement stores, increased 0.61% during the 1999 second quarter. The Company continues to invest in marketing and promotional programs to successfully increase sales. For the 1999 second quarter, the Company closed one store. Sales for the 28 weeks ended October 10, 1998 (the "1999 year to date") decreased $15.5 million or 1.3% as compared to the 28 weeks ended October 11, 1997 (the "1998 year to date"). Comparable store sales, including replacement stores, decreased 0.55% during the 1999 year to date. Adverse weather conditions, increased competition, and historic deferral of capital expenditures were primarily responsible for decreased sales in the 16 (the "1999 first quarter") weeks ended July 18, 1998. For the 1999 year to date, the Company has opened one replacement store and closed two stores. -10- Gross profit, as a percentage of sales, increased to 30.0% in the 1999 second quarter compared to 28.7% for the 1998 second quarter. This is primarily due to an increase in allowance and promotional income as well as new marketing initiatives. Gross profit, as a percentage of sales, increased to 29.8% for the 1999 year to date, compared to 27.6% for the 1998 year to date. Operating and administrative expenses, as a percentage of sales, decreased to 24.7% from 26.1% for the 1999 second quarter compared to the 1998 second quarter. This reflects continued progress in expense reduction in all areas of the business. Operating and administrative expenses, as a percentage of sales, decreased to 25.0% for the 28 weeks ended October 10, 1998, compared to 25.7% for the 1998 year to date. Depreciation and amortization decreased to $15.3 million from $20.3 million for the 1999 second quarter compared to the 1998 second quarter, and has decreased $8.5 million for the 1999 year to date, compared to the 1998 year to date. This decrease is mainly the result of impairment losses on assets recorded in the fiscal 1998 fourth quarter and the historical deferral of capital expenditures. Interest expense, net decreased to $10.7 million and $43.1 million for the 1999 second quarter and the 1999 year to date periods, respectively. The 1999-second quarter and year to date decrease is principally an effect of the Company's reduced debt burden as a result of the reorganization. The Company recorded federal and state income tax benefits of $0.2 million during the 1999 second quarter and 1999 year to date periods. The Company recorded no net income tax provision or benefit during the 1998 second quarter and 1998 year to date periods. Unusual items recorded during the 1999 second quarter and 1999 year to date periods consisted of $9.3 million in connection with legal, advisory and bank fees associated with the Plan of Reorganization and $3.9 million as a net gain resulting from the elimination of debt premiums. The Company recognized an extraordinary gain of $260.8 million during the 1999 second quarter resulting from the discharge of debt in connection with the consummation of the Plan of Reorganization. Extraordinary item expense of $1.7 million recorded in the 1999 first quarter is related to the write-off of deferred financing costs associated with a term loan refinanced by the DIP facility. The Company recognized no extraordinary gains or losses during the 1998 second quarter and year to date periods. Liquidity and Capital Resources In connection with the Chapter 11 filing, the Company entered into the DIP Facility, a $172,022,020 revolving credit agreement with SBC and LCPI as agents for a syndicate of lenders. The DIP Facility included a $50 million letter of credit sub-facility. The DIP facility matured on August 17, 1998, the effective date of the Plan of Reorganization. The proceeds of the DIP Facility were used (i) to finance the working capital needs of the Company and its subsidiaries in the ordinary course of business, (ii) to finance the payment of Chapter 11 expenses, (iii) for general corporate purposes and (iv) to refinance the revolving credit and term loan under the Old Credit Agreement and to replace or backstop letters of credit outstanding under the Old Credit Agreement. The DIP Facility was secured by substantially all of the assets of Grand Union and its subsidiaries and was guaranteed by the Company's subsidiaries. On August 17, 1998, in connection with the consummation of the Plan of Reorganization, the Company entered into the Credit Agreement. The Credit Agreement is comprised of: (i) a $230 million Term Loan and (ii) a $70 million Revolving Credit Facility. The Term Loan and Revolving Credit Facility will mature on August 18, 2003. The proceeds of the Credit Agreement have been used to refinance the obligations under the DIP Facility and supplemental term loan claims under the Old Credit Agreement. The excess will be used for working capital and capital expenditures. Up to $50 million of the Revolving Credit Facility will be available for the issuance of letters of credit. As of October 10, 1998, an aggregate of $36 million of letters of credit were issued and outstanding under the Credit Agreement. -11- Year 2000 Compliance Disclosure In May 1998, the Company established a Year 2000 Task Force (the "Task Force") to address the issues that may occur as a result of the two digit year change associated with the new millenium. The Task Force consists of a chairman, plus three staff members. The Task Force works in conjunction with the Information Technology Department, the Company's newly appointed Chief Information Officer, outside information technology consultants, outside counsel and the Company's Executive Committee, which is comprised of all of the Company's executive officers. The Task Force believes it has identified all computer-based systems and applications, including embedded systems, used by the Company in its operations. The Task Force has categorized these systems and applications according to the end-user department within the Company, based upon how critical the function is to the Company's operations. The Task Force is determining and implementing the modifications or replacements necessary to achieve compliance; conducting tests to verify that the modified systems are operational and compliant; and once completed, reinstating the compliant systems into the normal operations of the Company. The systems and applications with the greatest level of importance to the Company's operations are being assessed and modified or replaced first. Management estimates that approximately 90% of all internally developed systems and applications are currently Year 2000 ("Y2K") compatible. The Company estimates that all critical systems and applications will be Y2K compliant by June 1, 1999. The Task Force is also examining the Company's relationships with certain key outside vendors and others with whom the Company has significant business relationships to determine, to the extent practical, the degree of such outside parties' Y2K compliance. The Task Force has distributed Y2K compliance questionnaires to vendors and suppliers who do business with the Company. Particular attention has been focused on C&S Wholesale Grocers, Inc., ("C&S"), which supplies the majority of inventory to the Company's stores. The Task Force, senior management, members of IT and outside counsel have met with C&S to understand their Y2K compliance efforts. The Task Force has also begun testing procedures with vendors to determine Y2K compliance. Management is of the opinion that the Company's continued relationship with C&S is the only material vendor relationship that could significantly impact the Company's operations in the event of Y2K noncompliance and does not believe that any other particular third party's failure to be Y2K compliant would have a material adverse effect on the Company. The Task Force is in the process of establishing and implementing a contingency plan to provide for viable alternatives to ensure that the Company's core business operations are able to continue in the event of Y2K-related systems failure. Management expects to have a comprehensive contingency plan established by June 1, 1999. Through September 30, 1998, the Company has expended approximately $2 million to address Y2K compliance issues. The Company estimates that it will incur additional expenses of $3-8 million, for a total of approximately $5-10 million, to address and resolve Y2K compliance issues, which includes the estimated costs of all modifications, testing and consultants' fees. Management believes that should the Company or C&S have a Y2K-related systems failure, the most significant impact would likely be the temporary inability, with respect to individual stores or a group of stores, to conduct operations due to a power failure, to distribute inventory in a timely fashion, to receive certain products from vendors or to electronically process customer sales at store level. The Company does not anticipate that any such temporary impact would be material to the Company's liquidity or the Company's results of operations. With the exception of historical information, some matters discussed herein, including, but not limited to, the Year 2000 Compliance Disclosure, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, the competitive environment in which the Company operates, and the general economic conditions in the geographic areas in which the Company operates, and the timely resolution of Year 2000 Compliance issues by the Company, its vendors and others with whom the Company has significant business relationships. For additional information about the Company and its operating and financial condition, please see the Company's most recent Form 10-K for the year ended March 28, 1998, and other documents as filed with the SEC. -12- PART II - OTHER INFORMATION Item 2. Change in Securities. On August 17, 1998, the Company consummated its Plan of Reorganization. In connection with the Plan of Reorganization, the Company cancelled its Old Senior Notes, Old Preferred Stock, Old Common Stock, Old Series 1 and Series 2 Warrants and Old Stock Options. There are 60,000,000 shares of New Common Stock authorized under Grand Union's Certificate of Incorporation. Of such authorized shares, 30,000,000 shares, representing 100% of the issued and outstanding shares of New Common Stock, have been distributed to the holders of the Old Senior Notes. Reorganized Grand Union issued (i) Series 1 Warrants to purchase 4,324,015 shares of New Common Stock, representing approximately 12% of the shares of New Common Stock at a price equal to $19.82 per share; (ii) Series 2 Warrants to purchase 942,971 share of New Common Stock, representing approximately 2.5% of the shares of the New Common Stock, at a price equal to $23.15 per share and (iii) Series 3 Warrants to purchase 306,122 shares of New Common Stock, representing approximately 1% of the shares of New Common Stock at a price equal to $12.32 per share. The Series 1 Warrants and the Series 2 Warrants will expire on August 17, 2003. The Series 3 Warrants will expire on August 17, 2002. The Company's new securities were issued pursuant to an exemption from registration under the Securities Act of 1933, as amended, pursuant to Section 1145 of the Bankruptcy Code. For further information concerning the issuance of the new securities, reference is made to Note 1 accompanying the financial statements. Item 5. Other Information. On October 1, 1998, the Company's new common stock began trading on the NASDAQ National Market under the ticker symbol GUCO. The Company's Series 1 Warrants trade on the OTC Market under the ticker symbol GUCOL. -13- Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits Exhibit Number -------------- 3.1 Restated Certificate of Incorporation of The Grand Union Company as restated through September 10, 1998. 4.1 Form of Common Stock Certificate of The Grand Union Company. 27.1 Financial Data Schedule, for the 8 weeks ended October 10, 1998. 27.2 Financial Data Schedule, for the 20 weeks ended August 15, 1998. (b) Reports on Form 8-K 1. Relating to the confirmation of the Plan of Reorganization -- Dated August 5, 1998. 2. Relating to the consummation of the Plan of Reorganization -- Dated August 19, 1998. -14- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. THE GRAND UNION COMPANY ----------------------- (Registrant) /s/ Jeffrey P. Freimark ----------------------- Jeffrey P. Freimark, Executive Vice President Chief Financial Officer Date: November 24, 1998 -15- EX-3.1 2 RESTATED CERTIFICATE OF INCORPORATION RESTATED CERTIFICATE OF INCORPORATION OF THE GRAND UNION COMPANY Pursuant to Section 245 of the General Corporation Law of the State of Delaware THE GRAND UNION COMPANY, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (hereinafter called the "Corporation"), DOES HEREBY CERTIFY: 1. The name of the Corporation is The Grand Union Company and the date of filing of its original Certificate of Incorporation in the office of the Secretary of State was May 17, 1928. 2. This Restated Certificate of Incorporation only restates and integrates and does not further amend the provisions of the Certificate of Incorporation of this corporation as heretofore amended or supplemented and there is no discrepancy between those provisions and the provisions of this Restated Certificate of Incorporation. 3. The text of the Certificate of Incorporation as amended or supplemented heretofore is hereby restated without further amendments or changes to read as herein set forth in full: FIRST: The name of the Corporation is THE GRAND UNION COMPANY (hereinafter called the "Corporation"). SECOND: The address of the registered office of the Corporation in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which a Corporation may be organized under the General Corporation Law of the State of Delaware (the "DGCL"). FOURTH: (A) The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is 70,000,000, of which 10,000,000 shares shall be Preferred Stock of the par value of $1.00 per share and 60,000,000 shares shall be Common Stock of the par value of $.01 per share. (B) The Board of Directors is expressly authorized, by resolution or resolutions, to provide for the issue of all or any shares of the Preferred Stock, in one or more series, and to fix for each such series such voting powers, full or limited, and such designations, preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereon, as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors providing for the issue of such series (a "Preferred Stock Designation") and as may be permitted by the DGCL and as are consistent with paragraph (C) of this Article FOURTH. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of a majority of the holders of the voting power of all the then outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors (the "Voting Stock") voting together as a single class, without a separate vote of the holders of the Preferred Stock, or any series thereof, unless a vote of any such holders is required pursuant to any Preferred Stock Designation. (C) The Corporation is subject to the requirements of Section 1123(a)(6) of the United States Bankruptcy Code (11 U.S.C. 1123(a)(6)) ("Section 1123(a)(6)") and shall be prohibited from issuing any nonvoting equity securities, and shall, at all times, provide, as to the several classes of securities from time-to-time possessing voting power, an appropriate distribution of power among such classes. A Preferred Stock Designation shall not authorize the issuance of such nonvoting equity securities, and shall include in its provisions, if the class designated by such Preferred Stock Designation has a preference in respect of dividends, adequate provisions for the election of directors representing such preferred class in the event of default in the payment of such dividends consistent with the requirements of Section 1123(a)(6). 2 FIFTH: The following provisions are inserted for the management of the business and the conduct of the affairs of the Corporation: (1) Election of directors of the Corporation need not be by written ballot unless the By-Laws so provide. (2) All the powers of this Corporation, insofar as the same may be lawfully vested by this Restated Certificate of Incorporation in the Board of Directors, are hereby conferred upon the Board of Directors of this Corporation. In furtherance and not in limitation of that power the Board of Directors is authorized to make, adopt, alter, amend and repeal from time to time the By-Laws of the Corporation, by vote of a majority of the directors present at any regular meeting of the Board, or at any special meeting of the Board, provided that notice of such proposed alternation, amendment, repeal or adoption of new By-Laws is given in the notice of such special meeting, or by written consent without a meeting signed by all directors. The power of the Board of Directors to adopt, amend or repeal By-Laws is subject to the right of stockholders entitled to vote with respect thereto to alter and repeal By-Laws made by the Board of Directors. (3) The Corporation shall, to the maximum extent permitted from time to time under the DGCL, indemnify and upon request shall advance expenses to any person who is or was a party or is threatened to be made a party to any threatened, pending, or completed action, suit, proceeding or claim, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was or has agreed to be a director or officer of the Corporation or while a director or officer is or was serving at the request of the Corporation as a director, officer partner, trustee, employee or agent of any corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, against expenses (including attorney's fees and expenses), judgment, fines, penalties and amounts paid in settlement incurred in connection with the investigation, preparation to defend or defense of such action, suit proceeding or claim; provided, however, that the foregoing shall not require the Corporation to indemnify or advance expenses to any person in connection with any action, suit, proceeding, claim or counterclaim initiated by or on behalf of such person. Such indemnification shall not be exclusive of other indemnification rights arising under any by-law, 3 agreement, vote of directors or stockholders or otherwise and shall inure to the benefit of the heirs and legal representatives of such person. Any person seeking indemnification under this paragraph (3) of ARTICLE FIFTH shall be deemed to have met the standard of conduct required for such indemnification unless the contrary shall be established. Any repeal or modification of the foregoing provisions of this paragraph (3) of ARTICLE FIFTH shall not adversely affect any right or protection of a director or officer of the Corporation with respect to any acts or omissions of such director or officer occurring prior to such repeal or modification. (4) A director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent that exculpation from liability is not permitted under the DGCL at the time such liability is determined. No amendment or repeal of this paragraph (4) of ARTICLE FIFTH shall apply to or have any effect on the liability or alleged liability to any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal. SIXTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights preferences and privileges of whatever nature conferred upon stockholders, directors or any other persons whomsoever, by and pursuant to this Restated Certificate of Incorporation in its present form or as amended are granted subject to this reservation. SEVENTH: (1) In addition to any affirmative vote required by law or this Certificate of Incorporation or the By-laws of the Corporation, and except as otherwise expressly provided in Section 2 of this Article, a Business Combination (as hereinafter defined) with, or proposed by or on behalf of, any Interested Stockholder (as hereinafter defined) or any Affiliate or Associate (as hereinafter defined) of any Interested Stockholder or any person who thereafter would be an Affiliate or Associate of such Interested Stockholder shall require the affirmative vote of not less than seventy-five percent (75%) of the votes entitled to be cast by the holders of all the then outstanding shares of Voting Stock, voting together as a single class, excluding Voting Stock beneficially owned by 4 such Interested Stockholder. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage or separate class vote may be specified, by law or in any agreement with any national securities exchange or otherwise. (2) The provisions of Section 1 of this Article shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote, if any, as is required by law or by any other provision of this Certificate of Incorporation or the By-laws of the Corporation, or any agreement with any national securities exchange or the Nasdaq National Market, if all of the conditions specified in either of the following Paragraphs (a) or (b) are met, or in the case of a Business Combination not involving the payment of consideration to the holders of the Corporation's outstanding Capital Stock (as hereinafter defined), if the conditions specified in the following Paragraph (a) are met: (a) The Business Combination shall have been approved, either specifically or as a transaction which is within an approved category of transactions, by a majority (whether such approval is made prior to or subsequent to the acquisition of, or announcement or public disclosure of the intention to acquire, beneficial ownership of the Voting Stock that caused the Interested Stockholder to become an Interested Stockholder) of the Continuing Directors (as hereinafter defined). (b) All of the following conditions shall have been met; provided, however, that for purposes of all calculations set forth in this Section 2(b), all acquisitions of Preferred Stock or Common Stock by Trefoil Capital Investors II, L.P. and GE Investment Private Placement Partners II, A Limited Partnership (collectively, the "Purchasers") pursuant to the Stock Purchase Agreement dated July 30, 1996 (the "Stock Purchase Agreement") and all acquisitions of Common Stock by the Purchasers upon the conversion of such Preferred Stock will be excluded: (i) The aggregate amount of cash and the Fair Market Value (as hereinafter defined), as of the date of the consummation 5 of the Business Combination, of consideration other than cash to be received per share by holders of Common Stock in such Business Combination shall be at least equal to the amount determined under clause (A) below: (A) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by or on behalf of the Interested Stockholder for any share of Common Stock in connection with the acquisition by the Interested Stockholder of beneficial ownership of shares of Common Stock (x) within the two-year period immediately prior to the first public announcement of the proposed Business Combination (the "Announcement Date") or (y) in the transaction in which it became an Interested Stockholder, whichever is higher, in either case as adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to the Common Stock. (ii) The aggregate amount of cash and the Fair Market Value, as of the date of the consummation of the Business Combination, of consideration other than cash to be received per share by holders of shares of any class or series of outstanding Capital Stock, other than Common Stock, shall be at least equal to the amount determined under clause (A) below: (A) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by or on behalf of the Interested Stockholder for any share of such class or series of Capital Stock in connection with the acquisition by the Interested Stockholder of beneficial ownership of shares of such class or series of Capital Stock (x) within the two-year period immediately prior to the 6 Announcement Date or (y) in the transaction in which it became an Interested Stockholder, whichever is higher, in either case as adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to such class or series of Capital Stock. (iii) The consideration to be received by holders of a particular class or series of outstanding Capital Stock shall be in cash or in the same form as previously has been paid by or on behalf of the Interested Stockholder in connection with its direct or indirect acquisition of beneficial ownership of shares of such class or series of Capital Stock. If the consideration so paid for shares of any class or series of Capital Stock varied as to form, the form of consideration for such class or series of Capital Stock shall be either cash or the form used to acquire beneficial ownership of the largest number of shares of such class or series of Capital Stock previously acquired by the Interested Stockholder. (iv) If a proxy or information statement is required to be mailed pursuant to the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (the "Exchange Act") (or any subsequent provisions replacing such Exchange Act, rules or regulations), a proxy or information statement describing the proposed Business Combination and complying with the requirements of the Exchange Act shall be mailed to all stockholders of the Corporation at least 30 days prior to the consummation of such Business Combination. (3) The following definitions shall apply with respect to this Article: (a) The term "Business Combination" shall mean, with respect to any particular Interested Stockholder, any event described in clauses (i), (ii) or (iii) of this Section 3(a) which occurs 7 during the two-year period commencing on the date on which the Interested Stockholder becomes an Interested Stockholder: (i) any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with (x) any Interested Stockholder or (y) any other corporation (whether or not itself an Interested Stockholder) which is or after such merger or consolidation would be an Affiliate or Associate of an Interested Stockholder; or (ii) any merger or consolidation of the Corporation with any of its Subsidiaries that has the effect, directly or indirectly, of increasing the proportionate share of any class or series of Capital Stock, or any securities convertible into Capital Stock or into equity securities of any Subsidiary, that is beneficially owned by any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder; or (iii) any agreement, contract or other arrangement providing for any one or more of the actions specified in the foregoing clauses (i) or (ii). (b) The term "Capital Stock" shall mean all capital stock of the Corporation authorized to be issued from time to time under Article Fourth of this Certificate of Incorporation, and the term "Voting Stock" shall mean all Capital Stock which by its terms may be voted on all matters submitted to stockholders of the Corporation generally. (c) The term "person" shall mean any individual, firm, corporation or other entity and shall include any group comprised of any person and any other person with whom such person or any Affiliate or Associate of such person has any agreement arrangement or understanding, directly or indirectly, for the purpose of acquiring, holding, voting or disposing of Capital Stock. (d) The term "Interested Stockholder" shall mean any person (other than the Corporation or any 8 Subsidiary and other than any profit-sharing, employee stock ownership or other employee benefit plan of the Corporation or any Subsidiary or any trustee of or fiduciary with respect to any such plan when acting in such capacity) who is or has announced or publicly disclosed a plan or intention to become the beneficial owner of Voting Stock representing fifty percent (50%) or more of the votes entitled to be cast by the holders of all then outstanding shares of Voting Stock. For purposes of this Article, the Purchasers will not be considered an Interested Stockholder with respect to any acquisition of Preferred Stock pursuant to the Stock Purchase Agreement or with respect to the acquisition of Common Stock by the Purchasers upon the conversion of such Preferred Stock. (e) A person shall be a "beneficial owner" of any Capital Stock (i) which such person or any of its Affiliates or Associates beneficially owns, directly or indirectly; (ii) which such person or any of its Affiliates or Associates has, directly or indirectly, (A) the right to acquire (whether such right is exercisable immediately or subject only to the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (B) the right to vote pursuant to any agreement, arrangement or understanding; or (iii) which is beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Capital Stock. For the purpose of determining whether a person is an Interested Stockholder pursuant to Paragraph (d) of this Section (3), the number of shares of Capital Stock deemed to be outstanding shall include shares deemed beneficially owned by such person through application of this Paragraph (e) of Section (3), but shall not include any other shares of Capital Stock that may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. 9 (f) The terms "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 under the Exchange Act as in effect on the date of filing of this Certificate of Incorporation with the Secretary of State of the State of Delaware (the term "registrant" in said Rule 12b-2 meaning in this case the Corporation). (g) The term "Subsidiary" means any company of which a majority of any class of equity security is beneficially owned by the Corporation; provided, however, that for the purposes of the definition of Interested Stockholder set forth in Paragraph (d) of this Section (3), the term "Subsidiary" shall mean only a company of which a majority of each class of equity security is beneficially owned by the Corporation. (h) The term "Continuing Director" means any member of the Board of Directors, while such person is a member of the Board of Directors, who is not an Affiliate or Associate or representative of the Interested Stockholder and was a member of the Board of Directors prior to the time that an Interested Stockholder became an Interested Stockholder, and any successor of a Continuing Director while such successor is a member of the Board of Directors, who is not an Affiliate or Associate or representative of the Interested Stockholder and is recommended or elected to succeed the Continuing Director by a majority of Continuing Directors. For purposes of this Article, Roger Stangeland will be considered a Continuing Director. (i) "Fair Market Value" means (i) in the case of cash, the amount of such cash; (ii) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Exchange Act on which such stock is listed, or, if such stock is not listed 10 on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any similar system then in use, or, if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by a majority of the Continuing Directors in good faith; and (iii) in the case of property other than cash or stock, the Fair Market Value of such property on the date in question as determined in good faith by a majority of the Continuing Directors. (j) in the event of any Business Combination in which the Corporation survives, the phrase "consideration other than cash to be received" as used in Paragraphs (b)(i) and (b)(ii) of Section (2) of this Article shall include the shares of Common Stock and/or the shares of any other class or series of Capital Stock retained by the holders of such shares. (4) A majority of the Continuing Directors shall have the power and duty to determine for the purpose of this Article, on the basis of information known to them after reasonable inquiry, all questions arising under this Article, including, without limitation, (i) whether a person is an Interested Stockholder, (ii) the number of shares of Capital Stock or other securities beneficially owned by any person, (iii) whether a person is an Affiliate or Associate of another, and (iv) whether a proposed action is with, or proposed by, or on behalf of an Interested Stockholder or an Affiliate or Associate of an Interested Stockholder. Any such determination made in good faith shall be binding and conclusive on all parties. (5) Nothing contained in this Article shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by law. (6) The fact that any Business Combination complies with the provisions of Section (2) of this Article shall not be construed to impose any fiduciary duty, obligation or responsibility on the Board of Directors, or any member thereof, to approve such Business Combination or recommend its adoption or approval to the stockholders of 11 the Corporation, nor shall such compliance limit, prohibit or otherwise restrict in any manner the Board of Directors, or any member thereof, with respect to evaluations of, or actions and responses taken with respect to, such Business Combination. (7) For the purposes of this Article, a Business Combination is presumed to have been proposed by, or on behalf of, an Interested Stockholder or an Affiliate or Associate of an Interested Stockholder or a person who thereafter would become such if (i) after the Interested Stockholder became such, the Business Combination is proposed following the election of any director of the Corporation who, with respect to such Interested Stockholder, would not qualify to serve as a Continuing Director or (ii) such Interested Stockholder, Affiliate, Associate or person votes for or consents to the adoption of any such Business Combination, unless as to such Interested Stockholder, Affiliate, Associate or person, a majority of the Continuing Directors makes a good faith determination that such Business Combination is not proposed by or on behalf of such Interested Stockholder, Affiliate, Associate or person, based on information known to them after reasonable inquiry. (8) Notwithstanding any other provisions of this Certificate of Incorporation or the By-laws of the Corporation (and notwithstanding the fact that a lesser percentage or separate class vote may be specified by law, this Certificate of Incorporation or the By-laws of the Corporation), the affirmative vote of the holders of not less than seventy-five percent (75%) of the votes entitled to be cast by the holders of all the then outstanding shares of Voting Stock, voting together as a single class, excluding Voting Stock beneficially owned by such Interested Stockholder, shall be required to amend or repeal, or adopt any provisions inconsistent with, this Article; provided, however, that this Section (8) shall not apply to, and such seventy-five percent (75%) vote shall not be required for, any amendment, repeal or adoption unanimously recommended by the Board of Directors if all of such directors are persons who would be eligible to serve as Continuing Directors within the meaning of Section (3), Paragraph (h) of this Article. 12 4. This Restated Certificate of Incorporation was duly adopted by the Board of Directors in accordance with Section 245 of the General Corporation Law of the State of Delaware. 5. This Restated Certificate of Incorporation shall be effective upon the filing hereof. IN WITNESS WHEREOF, The Grand Union Company has caused this Restated Certificate of Incorporation to be signed on its behalf by Jeffrey P. Freimark, its Executive Vice President and Chief Financial Officer, and attested to by Donald C. Vaillancourt, its Secretary, this 10th day of September, 1998. THE GRAND UNION COMPANY By: /s/ Jeffrey P. Freimark ------------------------------------- Jeffrey P. Freimark, Executive Vice President and Chief Financial Officer Attest: /s/ Donald C. Vaillancourt - --------------------------------- Donald C. Vaillancourt, Secretary 13 EX-4.1 3 FORM OF COMMON STOCK CERTIFICATE NUMBER SHARES GU THE GRAND UNION COMPANY INCORPORATED UNDER THE LAWS SEE REVERSE FOR OF THE STATE OF DELAWARE CERTAIN DEFINITIONS THIS CERTIFIES THAT CUSIP 386532 40 2 IS THE OWNER OF FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF THE GRAND UNION COMPANY C E R T I F I C A T E O F S T O C K transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney, upon surrender of this certificate properly endorsed. This certificate and the shares represented hereby are issued and shall be held subject to all of the provisions of the Certificate of Incorporation and all amendments thereto, to all of which the holder by acceptance thereof assents. This certificate is not valid until countersigned and registered by the Transfer Agent and Registrar. WITNESS the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. Dated SEAL /s/ Jeffrey P. Freimark THE GRAND UNION COMPANY /s/ J. Wayne Harris ASSISTANT SECRETARY CORPORATE SEAL CHAIRMAN OF THE BOARD AND 1928 CHIEF EXECUTIVE OFFICER DELAWARE COUNTERSIGNED AND REGISTERED: AMERICAN STOCK TRANSFER & TRUST COMPANY TRANSFER AGENT AND REGISTRAR BY AUTHORIZED SIGNATURE 80 The Corporation will furnish without charge to each Stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock of the Corporation, or series thereof, and the qualifications, limitations or restrictions of such preferences and/or rights. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM -- as tenants in common TEN ENT -- as tenants by the entireties JT TEN -- as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT -- _________ Custodian ___________ (Cust) (Minor) Under Uniform Gifts to Minors Act ___________ (State) Additional abbreviations may also be used though not in the above list. For Value Received, ________________________ hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE) of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint ___________________ to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises. Dated: ___________________________ NOTICE: The signature to this assignment must correspond with the name as written upon the face of the certificate in every particular without alteration or enlargement or any change whatever. The signature of the person executing this power must be guaranteed by an Eligible Guarantor institution such as a Commercial Bank, Trust Company, Securities Broker/Dealer, Credit Union, or a Savings Association participating in a Medallion program approved by the Securities Transfer Association, Inc. 81 EX-27.1 4 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the company's interim consolidated financial statements and is qualified in its entirety by reference to such financial statements. 1000 2-MOS APR-03-1999 OCT-10-1998 65,318 0 28,033 0 146,124 245,184 812,808 481,018 1,155,769 187,814 0 0 0 300 365,376 1,155,769 342,471 342,471 239,657 239,657 115,795 0 6,619 (19,600) 176 (19,424) 0 0 0 (19,424) (0.65) (0.65)
EX-27.2 5 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the company's interim consolidated financial statements and is qualified in its entirety by reference to such financial statements. 1000 5-MOS APR-03-1999 AUG-15-1998 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 868,962 868,962 610,930 610,930 288,681 0 36,509 (67,158) 0 (67,158) 0 259,045 0 191,887 0 0
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