-----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, NdatbIZyiAgN4xcKHqB2jR+uit/I1S3QtjATAOf1hSOix8ThqKeJXIJh0wJYo1GM XiEiCmTI6tDuuuV2oWktLw== 0000912057-96-002798.txt : 19960221 0000912057-96-002798.hdr.sgml : 19960221 ACCESSION NUMBER: 0000912057-96-002798 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19960106 FILED AS OF DATE: 19960220 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GRAND UNION CO /DE/ CENTRAL INDEX KEY: 0000316236 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 251518276 STATE OF INCORPORATION: DE FISCAL YEAR END: 0325 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07824 FILM NUMBER: 96523427 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 FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended January 6, 1996 --------------- 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) 201-890-6000 ------------ (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 filing requirements for the past 90 days. Yes X . No . ------- ------- Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes X . No . ------- ------- As of February 20, 1996, there were issued and outstanding 10,000,000 shares, par value $1.00 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 - 12 weeks ended January 6, 1996 (Successor Company), and 12 weeks ended January 7, 1995 (Predecessor Company) 3 Consolidated Statement of Operations - 29 weeks ended January 6, 1996 (Successor Company), 11 weeks ended June 17, 1995 and 40 weeks ended January 7, 1995 (Predecessor Company) 4 Consolidated Balance Sheet - January 6, 1996 (Successor Company) and April 1, 1995 (Predecessor Company) 5 Consolidated Statement of Cash Flows - 29 weeks ended January 6, 1996 (Successor Company), 11 weeks ended June 17, 1995 and 40 weeks ended January 7, 1995 (Predecessor Company) 6 Notes to Consolidated Financial Statements 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 11 PART II - OTHER INFORMATION Item 6 - Exhibits 15 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 (in thousands, except per share data) (unaudited)
Successor Predecessor Company Company ----------- ----------- 12 Weeks 12 Weeks Ended Ended January 6, January 7, 1996 1995 ----------- ----------- Sales $ 543,617 $ 563,281 Cost of sales (376,754) (408,814) ----------- ----------- Gross profit 166,863 154,467 Operating and administrative expenses (136,035) (132,890) Depreciation and amortization (16,547) (21,204) Amortization of excess reorganization value (24,578) - Unusual items (15,000) (12,512) Interest expense, net (23,537) (47,379) ----------- ----------- Loss before income tax benefit (48,834) (59,518) Income tax benefit 7,840 - ----------- ----------- Net loss (40,994) (59,518) Accrued dividends on old preferred stock - (6,469) ----------- ----------- Net loss applicable to common stock $ (40,994) $ (65,987) ----------- ----------- ----------- ----------- Net loss per common share $ (4.10) ----------- -----------
See accompanying notes to consolidated financial statements (unaudited). 3 THE GRAND UNION COMPANY CONSOLIDATED STATEMENT OF OPERATIONS (in thousands, except per share data) (unaudited)
Successor Company Predecessor Company ------------ --------------------------- 29 Weeks 11 Weeks 40 Weeks Ended Ended Ended January 6, June 17, January 7, 1996 1995 1995 ------------ ------------ ------------ Sales $ 1,299,991 $ 487,882 $ 1,867,636 Cost of sales (897,411) (344,041) (1,311,457) ------------ ------------ ------------ Gross profit 402,580 143,841 556,179 Operating and administrative expenses (321,459) (117,544) (436,250) Depreciation and amortization (40,504) (17,215) (67,224) Amortization of excess reorganization value (59,405) - - Unusual items (19,500) (18,627) (12,512) Interest expense, net (contractual interest totaled $29,085 for the 11 weeks ended June 17, 1995 -See Note 2) (55,516) (19,791) (154,158) ------------ ------------ ------------ Loss before income taxes and extraordinary gain on debt discharge (93,804) (29,336) (113,965) Income tax benefit 13,212 - - ------------ ------------ ------------ Loss before extraordinary gain on debt discharge (80,592) (29,336) (113,965) Extraordinary gain on debt discharge - 854,785 - ------------ ------------ ------------ Net (loss) income (80,592) 825,449 (113,965) Accrued dividends on old preferred stock - - (18,173) ------------ ------------ ------------ Net (loss) income applicable to common stock $ (80,592) $ 825,449 $ (132,138) ------------ ------------ ------------ ------------ ------------ ------------ Net loss per common share $ (8.06) ------------ ------------
See accompanying notes to consolidated financial statements (unaudited). 4 THE GRAND UNION COMPANY CONSOLIDATED BALANCE SHEET (in thousands) (unaudited)
Successor Predecessor Company Company ------------ ------------ January 6, April 1, 1996 1995 ------------ ------------ ASSETS Current assets: Cash and temporary investments $ 34,838 $ 89,423 Receivables 19,161 18,592 Inventories 172,389 189,467 Other current assets 14,934 16,787 ------------ ------------ Total current assets 241,322 314,269 Property, net 477,522 454,180 Goodwill, net - 545,451 Excess reorganization value, net 473,169 - Deferred financing fees, net 2,872 44,069 Deferred tax asset 37,284 - Other assets 11,511 36,787 ------------ ------------ $ 1,243,680 $ 1,394,756 ------------ ------------ ------------ ------------ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Current maturities of long-term debt $ 1,921 $ - Current portion of obligations under capital leases 6,610 - Accounts payable and accrued liabilities 211,799 174,126 ------------ ------------ Total current liabilities 220,330 174,126 ------------ ------------ Long-term debt 723,328 - ------------ ------------ Obligations under capital leases 123,194 - ------------ ------------ Other noncurrent liabilities 103,420 53,072 ------------ ------------ Liabilities subject to compromise - 1,817,698 ------------ ------------ Commitments and contingencies Redeemable stock subject to compromise: Old common stock - 9,407 Old preferred stock - 164,792 ------------ ------------ - 174,199 ------------ ------------ Stockholders' equity (deficit): New Common Stock, $1.00 par value, 30,000,000 shares authorized, 10,000,000 shares issued and outstanding 10,000 - New Preferred Stock, $1.00 par value, 10,000,000 shares authorized, no shares issued and outstanding - - Old common stock - 1 Old treasury stock - (156) Capital in excess of par value 144,000 - Accumulated deficit (80,592) (824,184) ------------ ------------ Total stockholders' equity (deficit) 73,408 (824,339) ------------ ------------ $ 1,243,680 $ 1,394,756 ------------ ------------ ------------ ------------
See accompanying notes to consolidated financial statements (unaudited). 5 THE GRAND UNION COMPANY CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands) (unaudited)
Successor Company Predecessor Company ------------ --------------------------- 29 Weeks 11 Weeks 40 Weeks Ended Ended Ended January 6, June 17, January 7, 1996 1995 1995 ------------ ------------ ------------ OPERATING ACTIVITIES: Net (loss) income $ (80,592) $ 825,449 $ (113,965) Adjustments to reconcile net (loss) income to net cash provided by (used for) operating activities before reorganization items paid: Depreciation and amortization 40,504 17,215 67,224 Amortization of excess reorganization value 59,405 - - Deferred taxes (12,787) - - Noncash interest 14,595 1,126 35,068 Extraordinary gain on debt discharge - (854,785) - Net changes in assets and liabilities: Receivables (10,865) 1,769 16,421 Inventories 11,489 12,946 18,392 Accounts payable and accrued liabilities (17,720) (34,928) 25,638 Other current assets (1,102) 2,776 579 Other (3,176) 4,493 1,660 ------------ ------------ ------------ Net cash (used for) provided by operating activities before reorganization items paid (249) (23,939) 51,017 Reorganization items paid (19,609) (4,913) - ------------ ------------ ------------ Net cash (used for) provided by operating activities (19,858) (28,852) 51,017 ------------ ------------ ------------ INVESTMENT ACTIVITIES: Capital expenditures (27,304) (3,301) (56,777) Disposals of property - 5,452 2,016 ------------ ------------ ------------ Net cash (used for) provided by investment activities (27,304) 2,151 (54,761) ------------ ------------ ------------ FINANCING ACTIVITIES: Proceeds from New Bank agreement - 104,144 - Net proceeds from long-term debt 18,089 - 10,000 Payment of Old Bank debt - (93,144) - Obligations under capital leases discharged (4,155) (1,707) (6,532) Loan placement fees - (3,125) - Retirement of long-term debt (585) (239) (718) ------------ ------------ ------------ Net cash provided by financing activities 13,349 5,929 2,750 ------------ ------------ ------------ Decrease in cash and temporary investments (33,813) (20,772) (994) Cash and temporary investments at beginning of period 68,651 89,423 44,294 ------------ ------------ ------------ Cash and temporary investments at end of period $ 34,838 $ 68,651 $ 43,300 ------------ ------------ ------------ ------------ ------------ ------------ Supplemental disclosure of cash flow information: Interest payments $ 15,169 $ 9,515 $ 84,226 Capital lease obligations incurred 1,168 20,072 28,838 Accrued dividends on old preferred stock - - 18,173
See accompanying notes to consolidated financial statements (unaudited). 6 THE GRAND UNION COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) NOTE 1 - BASIS OF ACCOUNTING The accompanying interim consolidated financial statements of The Grand Union Company ("Grand Union" or 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 adjustments necessary for a fair presentation of operating results for the interim periods. These consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company's Annual Report on Form 10-K for the 52 weeks ended April 1, 1995. Operating results for the periods presented are not necessarily indicative of the results for the full fiscal year. Certain amounts have been reclassified in the prior period financial statements to conform to current year presentation. NOTE 2 - REORGANIZATION On January 25, 1995 (the "Filing Date"), as part of the implementation of an agreement with the Company's bank lenders and with members of informal committees of certain holders of Grand Union's long-term debt on the terms of a restructuring of Grand Union's capital structure, Grand Union filed a voluntary petition for relief under chapter 11 ("Chapter 11") of Title 11 of the United States Code (the "Code") in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"). From the Filing Date through June 15, 1995 (the "Effective Date"), Grand Union operated as a debtor-in-possession under Chapter 11 of the Code and was subject to the supervision of the Bankruptcy Court in accordance with the Code. On May 31, 1995, the Bankruptcy Court confirmed the Second Amended Chapter 11 Plan, dated April 19, 1995 (as confirmed, the "Plan"), and the Company emerged from Chapter 11 on the Effective Date. One proceeding challenging the order confirming the Plan is pending. The Company does not believe that this proceeding will result in any modification or revocation of the order. On the Effective Date, Grand Union adopted a restated certificate of incorporation, the principal effects of which were to authorize 30,000,000 shares of new common stock (the "New Common Stock") (of which 10,000,000 shares were issued under the Plan) and to prohibit the issuance of non-voting equity securities. The Plan provided for full payment of all allowed administrative expenses and all allowed general unsecured and priority claims. On the Effective Date, obligations relating to the Company's existing bank credit agreement were paid in full and the Company entered into an Amended and Restated Credit Agreement (the "New Bank Facility") with its bank lending group which provides for a five-year revolving credit facility of $100,000,000 and a seven-year term loan facility of $104,144,371. The New Bank Facility is secured by a lien on substantially all of the assets of Grand Union and its subsidiaries. As of the Effective Date, two series of long-term debt having an aggregate principal amount of $525,000,000 plus accrued interest (the "Senior Notes") were deemed cancelled and each holder of Senior Notes became entitled to receive its pro rata share of Grand Union's new 12% Senior Notes due 2004 (the "New Senior Notes") having an aggregate principal amount of $595,475,922 issued pursuant to the Plan. Subsequent to the Effective Date, the Company issued $595,421,000 aggregate principal amount of New Senior Notes and made cash payments of $54,922 for fractional shares to the holders of the Senior Notes. The New Senior Notes accrue interest beginning on September 1, 1995. Accordingly, the New Senior Notes have been discounted at 12% for the period from June 15, 1995 to September 1, 1995 and imputed interest was charged at 12% during that period. In addition, the difference between such discounted value and the fair value of the New Senior Notes at the Effective Date was recorded as a debt premium totaling $5,779,000 which is being amortized over the life of the New Senior Notes. 7 As of the Effective Date, three other series of long-term debt having an aggregate principal amount of $566,150,000 (the "Subordinated Notes") and the old capital stock of Grand Union were deemed cancelled and each holder of Subordinated Notes became entitled to receive its pro rata share of an aggregate of 10,000,000 shares of New Common Stock issued pursuant to the Plan. Interest expense was not accrued on the Subordinated Notes subsequent to the Filing Date. Accordingly, interest expense for the 11 weeks ended June 17, 1995 excludes contractual interest expense of $9,294,000. The Plan also provided for the issuance of warrants to purchase an aggregate of 900,000 shares of New Common Stock to holders of several other series of long-term debt of its then parent company (the "Capital Notes") pursuant to the terms of a settlement reached among the Company, its then direct and indirect parent companies, the Official Committee of Unsecured Creditors of its then parent company and certain holders of the Capital Notes. Such warrants are comprised of 300,000 Series 1 Warrants to purchase shares of New Common Stock at a purchase price of $30 per share and of 600,000 Series 2 Warrants to purchase shares of New Common Stock at a purchase price of $42 per share. The warrants expire on June 15, 2000. The Plan made no provision for the holders of the remaining long-term debt, Redeemable Preferred Stock, common shares or warrants to purchase common shares of the Company's then indirect parent. NOTE 3 - FRESH-START REPORTING As of the Effective Date, 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 periods subsequent to the Effective Date have been designated "Successor Company". For financial reporting purposes, the Company accounted for the consummation of the Plan effective June 17, 1995. In accordance with Fresh-Start Reporting, the Company valued its assets and liabilities at fair values and eliminated its retained earnings at the Effective Date. The reorganization value of the Company was determined utilizing several methods which yielded similar results including (a) the trading value of the Company's New Common Stock for a representative number of days subsequent to the Effective Date and the fair value of the Company's obligations as of the Effective Date, (b) discounted cash flows and (c) a multiple of adjusted trailing year operating cash flow. The total reorganization value as of the Effective Date was determined to be $1,334,000,000 which was $532,574,000 in excess of the aggregate fair value of the Company's tangible and identified intangible assets. Such excess, net of accumulated amortization of $59,405,000, is classified as "Excess reorganization value, net" in the accompanying consolidated balance sheet and is being amortized on a straight-line basis over a five-year period. The components of reorganization items included as unusual items in the consolidated statement of operations for the 11 weeks ended June 17, 1995 are as follows (in thousands): Fresh-Start Reporting Establish excess reorganization value $ 532,574 Eliminate existing goodwill (540,434) Revalue property, net 40,633 Establish deferred tax asset 24,497 Revalue pension assets and liabilities and postretirement obligations (23,653) Record lease rejection liability (19,734) Provide for warehouse closing (10,450) Eliminate LIFO inventory reserve 7,757 Provide for other reorganization liabilities (5,400) Record liability for fair value of interest rate protection agreement (3,500) Other (1,905) --------- Total Fresh-Start 385 Professional fees incurred in connection with the reorganization (20,000) Interest earned on accumulated cash resulting from the Chapter 11 proceedings 988 --------- Total reorganization items $ (18,627) --------- ---------
During the 12 weeks ended January 7, 1995, the Company recorded $1,882,000 of professional fees and expenses incurred in connection with the restructuring of its debt. 8 As a result of the debt restructuring, the Company recorded an extraordinary gain on debt discharge as follows (in thousands): Elimination of Old Debt, deferred financing fees and accrued interest discharged $1,589,506 Issuance of New Senior Notes (580,721) Issuance of New Common Stock (154,000) ---------- Extraordinary gain on debt discharge $ 854,785 ---------- ----------
In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long- Lived Assets and for Long-Term Assets to be Disposed of" ("SFAS No. 121"), which establishes accounting standards for the impairment of long-lived assets, certain identifiable intangibles, and goodwill related to those assets to be held and used and for long-lived assets and certain identifiable intangibles to be disposed of. As of the Effective Date, the Company adopted SFAS No. 121. NOTE 4 - UNUSUAL ITEMS Unusual items consist of the following (in thousands):
Successor Company Predecessor Company --------------------------- ------------------------------------------- 12 Weeks 29 Weeks 11 Weeks 12 Weeks 40 Weeks Ended Ended Ended Ended Ended January 6, January 6, June 17, January 7, January 7, 1996 1996 1995 1995 1995 ------------ ------------ ------------ ----------- ----------- Provision for warehouse closures $ 15,000 $ 15,000 $ - $ - $ - Charges relating to voluntary resignation incentive programs - 4,500 - - - Reorganization items (See Note 3) - - 18,627 1,882 1,882 Provision for store closures - - - 10,630 10,630 ------------ ------------ ------------ ----------- ----------- $ 15,000 $ 19,500 $ 18,627 $ 12,512 $ 12,512 ------------ ------------ ------------ ----------- ----------- ------------ ------------ ------------ ----------- -----------
During the third quarter of Fiscal 1996, the Company reached a decision to outsource the distribution of grocery and perishable products to its metropolitan New York stores. Accordingly, the Company recorded a provision relating to the closure of its Mt. Kisco and Carlstadt warehouses totaling $15,000,000 consisting of severance, pension withdrawal liability, security and other expenses directly related to the closing of the warehouses. During the second quarter of Fiscal 1996, the Company established a provision of $4,500,000 relating to voluntary resignation incentive programs under which certain classes of store employees accepted monetary incentives to voluntarily resign from their positions. During the third quarter of Fiscal 1995, the Company established a provision for store closings, net of a non-recurring item. The provision included a charge of $14,630,000 relating to the closure of sixteen stores principally consisting of the remaining net book value of store fixed assets, store closing costs and estimated carrying costs through expected dates of disposition. Additionally, the Company realized $4,000,000 of proceeds from the termination of a warehouse sublease. NOTE 5 - EQUITY COMPENSATION PLANS During the third quarter of Fiscal 1996, the Board of Directors of the Company adopted The Grand Union Company 1995 Equity Incentive Plan ("Employee Plan"), which provides for the issuance of up to 950,000 options to purchase shares of the Company's common stock, and The Grand Union Company 1995 Non- Employee Directors' Stock Option Plan ("Directors' Plan"), which provides for the issuance of up to 50,000 options to purchase shares of the Company's common stock. Both Plans are subject to stockholder approval and will be administered by a committee of the Board of Directors. 9 During the third quarter of Fiscal 1996, options to purchase 210,680 and 25,000 shares were granted under the Employee Plan and Directors' Plan, respectively. Options granted under the Employee Plan and Directors' Plan were at prices of $6.625 and $5.75, respectively, which was the fair market value on the grant dates. All options expire in December, 2005, and no options may be exercised prior to approval by the Shareholders. NOTE 6 - INCOME TAXES The Company recorded an income tax benefit of $7,840,000 and $13,212,000 for the 12 and 29 week periods ended January 6, 1996, respectively. Operating loss carryforwards of the Predecessor Company have been offset by taxable gains realized on the debt discharged in connection with the Plan. There are no remaining operating loss or credit carryforwards of the Predecessor Company and there was no change in the tax basis of the Company's assets as of the Effective Date. NOTE 7 - EARNINGS PER SHARE Earnings per share for the 12 and 29 week periods ended January 6, 1996 has been calculated on the basis of 10,000,000 shares outstanding. Warrants were excluded from the calculation because their inclusion would be anti-dilutive. Earnings (loss) per common share data is not meaningful for periods prior to June 17, 1995 due to the significant change in the capital structure of the Company. 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. GENERAL: As discussed in Note 2 to the accompanying Consolidated Financial Statements of Grand Union, the Company emerged from its Chapter 11 proceedings effective June 15, 1995. For financial reporting purposes, the Company accounted for the consummation of the Plan effective June 17, 1995. In accordance with the American Institute of Certified Public Accountants Statement of Position 90-7, "Financial Reporting By Entities In Reorganization Under The Bankruptcy Code", the Company 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 periods subsequent to the Effective Date have been designated "Successor Company". For purposes of the discussion of Results of Operations for the 40 weeks ended January 6, 1996, the results of the Predecessor Company and Successor Company have been combined. RESULTS OF OPERATIONS The following table sets forth certain statement of operations data reflecting the combination discussed above (in millions):
12 Weeks Ended 40 Weeks Ended ---------------------- ----------------------- Jan. 6, Jan. 7, Jan. 6, Jan. 7, 1996 1995 1996 1995 ---------------------- ----------------------- Sales $ 543.6 $ 563.3 $1,787.9 $1,867.6 Gross profit 166.9 154.5 546.4 556.2 Operating and administrative expenses 136.0 132.9 439.0 436.3 Depreciation and amortization 16.5 21.2 57.7 67.2 Amortization of excess reorganization value 24.6 - 59.4 - Unusual items 15.0 12.5 38.1 12.5 Interest expense, net 23.5 47.4 75.3 154.2 Income tax benefit 7.8 - 13.2 - Extraordinary gain on debt discharge - - 854.8 - Net (loss) income (41.0) (59.5) 744.9 (114.0) EBITDA 15.8 9.1 69.3 107.4 Adjusted EBITDA 31.1 21.8 108.4 120.7 LIFO provision 0.3 0.2 1.0 0.8 Sales percentage decrease 3.5% 3.5% 4.3% 1.9% Gross profit as a percentage of sales 30.7 27.4 30.6 29.8 Operating and administrative expenses as a percentage of sales 25.0 23.6 24.6 23.4 EBITDA as a percentage of sales 2.9 1.6 3.9 5.8 Adjusted EBITDA as a percentage of sales 5.7 3.9 6.1 6.5
Sales for the 12 and 40 weeks ended January 6, 1996 decreased $19.7 million and $79.8 million, or 3.5% and 4.3%, as compared to the 12 and 40 week periods ended January 7, 1995, respectively. The sales decline for each of the 12 and 40 week periods was comprised of 3.4% and 4.1% from the sale or closure of 24 stores last year which were not replaced and 1.3% and 1.2% from decreased same store sales, offset by 1.2% and 1.0% from increases relating to incremental new stores. Same store sales comparisons were negatively influenced by (a) the Company's own strong promotional programs during last year's second and third quarters, and (b) the temporary effects of the Company's previously announced decision to close two distribution centers servicing its Metropolitan New York area stores. Same store sales were positively influenced by (a) the Northern Region marketing program, which includes both lower everyday shelf prices and stronger sales promotion programs, begun on a limited basis last year and fully implemented on May 1, 1995, (b) additional marketing and store service programs introduced in the second quarter of this year in the metropolitan Albany, NY and Bergen County, NJ areas which particularly emphasize the Company's strengths in 11 perishable merchandising and (c) the severe snowstorms which struck the New York metropolitan area in late December and early January. Additionally, the 40 week period was positively influenced by the timing of the pre-Easter holiday shopping period which was included in this year's first quarter but not in last year's first quarter. Gross profit, as a percentage of sales, was 30.7% and 30.6% for the 12 and 40 week periods ended January 6, 1996, compared to 27.4% and 29.8% for the comparable periods of the prior year. Gross profit percentages were impacted favorably by (a) the savings generated by the closing of the Company's Northern Region Distribution Center and contracting with a wholesaler to perform all functions associated with the supply of product to the Northern Region stores, and (b) the restoration this year of vendor promotional allowances and other vendor support which were not available to the Company last year subsequent to the Company's announcement on November 29, 1994 that it would pursue a capital restructuring, and, unfavorably by reduced margins associated with the Northern Region marketing program. In addition, gross profit was impacted for the 40 weeks ended January 6, 1996 by bankruptcy related items including the Company's inability to be fully invested in forward buy inventory throughout most of last year's fourth quarter, which negatively impacted gross margin in the first quarter, and by lower vendor promotional allowances in the early part of the first quarter. Both the 12 and 40 week periods benefited by proportionately greater sales of higher margin produce and service department products. Operating and administrative expenses, as a percentage of sales, were 25.0% and 24.6% for the 12 and 40 week periods ended January 6, 1996, compared to 23.6% and 23.4% for the comparable periods of the prior year. The increased rate in both periods resulted from increases as a percentage of sales in (a) store labor relating to the Company's metropolitan Albany, NY and Bergen County, NJ marketing and store service programs, offset by the benefits of the Company's special voluntary resignation incentive programs completed during the second quarter, (b) advertising expense, principally to support the marketing programs, (c) occupancy costs, and (d) wrapping supply expense. Depreciation and amortization totaled $16.5 million and $57.7 million for the 12 and 40 week periods ended January 6, 1996 compared to $21.2 million and $67.2 million for the comparable periods of the prior year. The decrease principally results from the absence of amortization of goodwill after the Effective Date. The excess reorganization value is being amortized over a five-year life. During the 11 week period ended July 17, 1995, the Company recorded $18.6 million of reorganization expenses which includes professional fees, Fresh-Start Reporting adjustments and interest income on accumulated cash resulting from the Chapter 11 proceedings. Interest expense totaled $23.5 million and $75.3 million for the 12 and 40 week periods ended January 6, 1996, compared with $47.4 million and $154.2 million for the comparable periods of the prior year. The decline in interest is principally related to the cessation of interest accruals on a significant portion of the Company's debt during the bankruptcy proceedings and the decreased level of debt of the Successor Company. The Company recorded an income tax benefit of $7.8 million and $13.2 million during the 12 and 40 weeks ended January 6, 1996, representing federal and state income taxes. Operating loss carryforwards of the Predecessor Company have been offset by taxable gains realized on the debt discharged in connection with the Plan. There are no remaining operating loss or credit carryforwards of the Predecessor Company and there was no change in the tax basis of the Company's assets as of the Effective Date. In connection with the Company's emergence from Chapter 11, the Company recognized an extraordinary gain of $854.8 million related to the discharge of debt. EBITDA totaled $15.8 million, or 2.9% of sales, and $69.3 million, or 3.9% of sales, for the 12 and 40 week periods ended January 6, 1996, compared to $9.1 million, or 1.6% of sales, and $107.4 million, or 5.8% of sales, for the comparable periods of the prior year. Adjusted EBITDA totaled $31.1 million, or 5.7% of sales, and $108.4 million, or 6.1% of sales, for the 12 and 40 week periods ended January 6, 1996, respectively, compared to $21.8 million, or 3.9% of sales, and $120.7 million, or 6.5% of sales, for the comparable period of the prior year. EBITDA is defined as earnings before income tax benefit, interest expense, extraordinary gain on debt discharge, depreciation and amortization. Adjusted EBITDA is defined as EBITDA before LIFO provision and unusual items. The Company believes that both EBITDA and Adjusted EBITDA are useful supplemental disclosures but recognizes that both EBITDA and Adjusted EBITDA are not substitutes for earnings or cash flow data required by generally accepted accounting principles. 12 LIQUIDITY AND CAPITAL RESOURCES The following table combines the cash flows of the Predecessor Company and the Successor Company for the 40 weeks ended January 6, 1996. Resources used to finance significant expenditures for the 40 weeks ended January 6, 1996 and January 7, 1995 are as follows:
40 Weeks Ended ----------------------- January 6, January 7, 1996 1995 --------- --------- (in millions) Resources used for: Debt and capital lease repayments $ 99.8 $ 7.3 Capital expenditures 30.6 56.8 Loan placement fees 3.1 - --------- --------- $ 133.5 $ 64.1 --------- --------- --------- --------- Financed by: Proceeds from New Bank agreement $ 122.2 $ - Operating activities, including cash and temporary investments 5.8 52.1 Property disposals 5.5 2.0 Net proceeds from long-term debt - 10.0 --------- --------- $ 133.5 $ 64.1 --------- --------- --------- ---------
During the 40 weeks ended January 6, 1996, funds for debt and capital lease repayments (primarily the repayment of obligations outstanding under the Old Bank agreement), capital expenditures, and loan placement fees were principally obtained from cash provided by the New Bank Facility ($104.1 million from the New Term Loan and $18.0 million from the New Revolver - see Note 2). During the 40 weeks ended January 7, 1995, funds for capital expenditures and debt and capital lease repayments were principally obtained from cash provided by operating activities and from $10 million borrowed under the revolving credit facility. On the Filing Date, as part of the implementation of an agreement with the Company's bank lenders and with members of informal committees of certain holders of Grand Union's long-term debt on the terms of a restructuring of Grand Union's capital structure, Grand Union filed a voluntary petition for relief under Chapter 11 of the Code in the Bankruptcy Court. From the Filing Date through the Effective Date, Grand Union operated as a debtor-in-possession under Chapter 11 of the Code and was subject to the supervision of the Bankruptcy Court in accordance with the Code. On May 31, 1995, the Bankruptcy Court confirmed the Plan, and the Company emerged from Chapter 11 on the Effective Date. One proceeding challenging the order confirming the Plan is pending. The Company does not believe that this proceeding will result in any modification or revocation of the order. On the Effective Date, Grand Union adopted a restated certificate of incorporation, the principal effects of which were to authorize 30,000,000 shares of New Common Stock (of which 10,000,000 shares were issued under the Plan) and to prohibit the issuance of non-voting equity securities. The Plan provided for full payment of all allowed administrative expenses and all allowed general unsecured and priority claims. On the Effective Date, obligations relating to the Company's existing bank credit agreement were paid in full and the Company entered into the New Bank Facility with its bank lending group which provides for a five-year revolving credit facility of $100 million and a seven-year term loan facility of $104.1 million. The New Bank Facility is secured by a lien on substantially all of the assets of Grand Union and its subsidiaries. As of the Effective Date, the Senior Notes were deemed cancelled and each holder of Senior Notes became entitled to receive its pro rata share of the New Senior Notes having an aggregate principal amount of $595.5 million issued pursuant to the Plan. Subsequent to the Effective Date, the Company issued $595.4 million aggregate principal amount of New Senior Notes and made cash payments of $54,922 for fractional shares to the holders of the Senior Notes. The New Senior Notes accrue interest beginning on September 1, 1995. Accordingly, the New Senior Notes have been discounted at 12% for the period from June 15, 1995 to September 1, 1995 and imputed interest was charged at 13 12% during that period. In addition, the difference between such discounted value and the fair value of the New Senior Notes at the Effective Date has been recorded as a debt premium totaling $5.8 million which amount will be amortized over the life of the New Senior Notes. As of the Effective Date, the Subordinated Notes and the old capital stock of Grand Union were deemed cancelled and each holder of Subordinated Notes became entitled to receive its pro rata share of an aggregate of 10,000,000 shares of New Common Stock issued pursuant to the Plan. The Plan also provided for the issuance of warrants to purchase an aggregate of 900,000 shares of New Common Stock to holders of the Capital Notes pursuant to the terms of a settlement reached among the Company, its then direct and indirect parent companies, the Official Committee of Unsecured Creditors of its then parent company and certain holders of the Capital Notes. Such warrants are comprised of 300,000 Series 1 Warrants to purchase shares of New Common Stock at a purchase price of $30 per share and of 600,000 Series 2 Warrants to purchase shares of New Common Stock at a purchase price of $42 per share. The warrants expire on June 15, 2000. The Plan made no provision for the holders of the remaining long-term debt, Redeemable Preferred Stock, common shares or warrants to purchase common shares of the Company's then indirect parent. In the second quarter of Fiscal 1996, the Company terminated a joint buying arrangement with the Penn Traffic Company ("Penn Traffic") for health and beauty care and general merchandise products. Under the termination agreement, the Company repurchased approximately $11 million of inventory which had previously been owned by Penn Traffic. Late in the third quarter and early in the fourth quarter of Fiscal 1996, the Company entered into two supply agreements with C&S Wholesale Grocers, Inc. ("C&S"), supplementing a third agreement entered into with C&S as of June 15, 1995. Under the three C&S agreements, C&S will stock and distribute to all Grand Union stores substantially all of the merchandise formerly owned and warehoused by Grand Union. Under two of the agreements, C&S will stock and supply grocery and perishable products from its own warehouses. Under the most recent agreement, C&S will stock and supply health and beauty care and general merchandise products from the Company's Montgomery, New York warehouse. As a result of the three agreements with C&S, the Company's liquidity is expected to increase by approximately $10 million. As a result of the transactions with C&S, the Company sought and has obtained from its banks a waiver and amendment to the revolving credit agreement. The waiver and amendment relieves the Company from the agreement's EBITDA requirements to the extent of (a) $15 million in charges relating to the closure of certain warehouse operations and (b) a provision, to be recorded in the fourth quarter of the current year, related to the centralization of regional operations. The waiver and amendment also provides relief from other technical requirements related to the two most recent C&S transactions. The Company continues to be highly leveraged. Interest payments during the 40 weeks ended January 6, 1996 totaled approximately $25 million and are expected to total approximately $69 million for the current fiscal year ($100 million on an annualized basis). Capital expenditures, including capitalized leases other than real estate leases, totaled approximately $31 million for the 40 weeks ended January 6, 1996 and are expected to total $45 to $50 million for the current fiscal year. Capital expenditures for the current fiscal year will be related to new, enlarged or remodeled stores, store systems and maintenance capital. Bankruptcy related obligations, principally lease rejection liabilities, totaling $4 million (included in accounts payable and accrued liabilities at January 6, 1996) are expected to be paid during the remainder of the current fiscal year. There are no significant scheduled debt principal repayments prior to June, 2000. The Company plans to finance its working capital, interest expense and capital expenditure requirements from operations, from its revolving credit facility and, to a limited extent, from equipment leases or purchase money mortgages. The Company's ability to fund the payment of interest and other obligations when due is dependent on cash generated from its operations, net of cash capital expenditures. The Company's ability to complete its planned capital expenditure program is dependent on its operating performance. As of January 6, 1996, the Company had $18 million of borrowings and approximately $43 million of letters of credit outstanding under its $100 million revolving credit facility. 14 PART II - OTHER INFORMATION ITEM 6. (a) Exhibits EXHIBIT NUMBER 10.1 The Grand Union Company 1995 Equity Incentive Plan. 10.2 The Grand Union Company 1995 Non-Employee Director's Stock Option Plan. 10.3 Supply and Distribution Agreement between The Grand Union Company and C&S Wholesalers, dated June 15, 1995. 10.4 First Amendment to the Supply and Distribution Agreement between The Grand Union Company and C&S Wholesalers, dated June 15, 1995. 10.5 Supply and Distribution Agreement between The Grand Union Company and C&S Wholesalers, dated January 2, 1996. 27.1 Financial Data Schedule. There were no reports on Form 8-K during the period. 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE GRAND UNION COMPANY ----------------------- (Registrant) Date: February 20, 1996 /s/ Kenneth R, Baum ----------------- ---------------------------------- Kenneth R. Baum Senior Vice President, Chief Financial Officer and Secretary (Principal Financial Officer and Principal Accounting Officer) 16 EX-10.1 2 EXHIBIT 10.1 Exhibit 10.1 THE GRAND UNION COMPANY 1995 EQUITY INCENTIVE PLAN 1. PURPOSE The purpose of this Equity Incentive Plan (the "Plan") is to advance the interests of The Grand Union Company (the "Company") by enhancing its ability to attract and retain employees and other persons or entities who are in a position to make significant contributions to the success of the Company and its subsidiaries through ownership of shares of the Company's common stock ("Stock"). The Plan is intended to accomplish these goals by enabling the Company to grant Awards in the form of Options, Stock Appreciation Rights, Restricted Stock or Unrestricted Stock Awards, Deferred Stock Awards, Performance Awards, Loans or Supplemental Grants, or combinations thereof, all as more fully described below. 2. ADMINISTRATION The Plan will be administered by a committee (the "Committee") of the Board of Directors (the "Board") of the Company. The Committee shall consist of at least two directors, all of which shall be disinterested persons within the meaning of Rule 16b-3 under the 1934 Act and "outside directors" within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). A majority of the members of the Committee shall constitute a quorum, and all determinations of the Committee shall be made by a majority of its members. Any determination of the Committee under the Plan may be made without notice or meeting of the Committee by a writing signed by a majority of the Committee members. The Committee will have authority, not inconsistent with the express provisions of the Plan and in addition to other authority granted under the Plan, to (a) grant Awards at such time or times as it may choose; (b) determine the size of each Award, including the number of shares of Stock subject to the Award; (c) determine the type or types of each Award; (d) determine the terms and conditions of each Award; (e) waive compliance by a Participant (as defined below) with any obligations to be performed by the Participant under an Award and waive any term or condition of an Award; (f) amend or cancel an existing Award in whole or in part (and if an Award is canceled, grant another award in its place on such terms as the Committee shall specify), except that the Committee may not, without the consent of the holder of an Award, take any action under this clause with respect to such Award if such action would adversely affect the rights of such holder; (g) prescribe the form or forms of instruments that are required or deemed appropriate under the Plan, including any written notices and elections required of Participants, -1- and change such forms from time to time; (h) adopt, amend and rescind rules and regulations for the administration of the Plan; and (i) interpret the Plan and decide any questions and settle all controversies and disputes that may arise in connection with the Plan. Such determinations and actions of the Committee, and all other determinations and actions of the Committee made or taken under authority granted by any provision of the Plan, will be conclusive and will bind all parties. Nothing in this paragraph shall be construed as limiting the power of the Committee to make adjustments under Section 7.3 or Section 8.6. 3. EFFECTIVE DATE AND TERM OF PLAN The Plan will become effective on the date on which it is approved by the stockholders of the Company. Grants of Awards under the plan may be made prior to that date (but after Board adoption of the Plan), subject to such approval of the Plan. No Award may be granted under the Plan after October 26, 2005, but Awards previously granted may extend beyond that date. 4. SHARES SUBJECT TO THE PLAN Subject to the adjustment as provided in Section 8.6 below, the aggregate number of shares of Stock that may be delivered under the Plan will be 950,000. If any Award requiring exercise by the Participant for delivery of Stock terminates without having been exercised in full, or if any Award payable in Stock or cash is satisfied in cash rather than Stock, the number of shares of Stock as to which such Award was not exercised or for which cash was substituted will be available for future grants. Stock delivered under the Plan may be either authorized but unissued Stock or previously issued Stock acquired by the Company and held in treasury. No fractional shares of Stock will be delivered under the Plan. Subject to Section 8.6(a), the maximum number of shares of Stock as to which Options or Stock Appreciation Rights may be granted under the Plan to any Participant is 500,000. For purposes of this paragraph, except as otherwise provided in regulations or other guidelines issued under Section 162(m) of the Code, any repricing of an Option or Stock Appreciation Right shall be treated as an original grant. 5. ELIGIBILITY AND PARTICIPATION Those eligible to receive Awards under the Plan ("Participants") will be "employees" or "salaried employees" of the Company or any of its subsidiaries ("Employees") and other persons or entities (including without limitation non- Employee directors of the Company or a subsidiary -2- of the Company) who, in the opinion of the Committee, are in a position to make a significant contribution to the success of the Company or its subsidiaries. A "subsidiary" for purposes of the Plan will be a corporation in which the Company owns, directly or indirectly, stock possessing 50% or more of the total combined voting power of all classes of stock. 6. TYPES OF AWARDS 6.1. OPTIONS. (a) NATURE OF OPTIONS. An Option is an Award entitling the recipient on exercise thereof to purchase Stock at a specified exercise price. Both "incentive stock options," as defined in Section 422 of the Code (any Option intended to qualify as an incentive stock option being hereinafter referred to as an "ISO"), and Options that are not incentive stock options, may be granted under the Plan. ISOs shall be awarded only to Employees. (b) EXERCISE PRICE. The exercise price of an Option will be determined by the Committee subject to the following: (1) The exercise price of an ISO shall not be less than 100% (110% in the case of an ISO granted to a ten-percent shareholder) of the fair market value of the Stock subject to the Option, determined as of the time the Option is granted. A "ten-percent shareholder" is any person who at the time of grant owns, directly or indirectly, or is deemed to own by reason of the attribution rules of Section 424(d) of the Code, stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of any of its subsidiaries. (2) In no case may the exercise price paid for Stock which is part of an original issue of authorized Stock be less than the par value per share of the Stock. (3) The Committee may reduce the exercise price of an Option at any time after the time of grant, but in the case of an Option originally awarded as an ISO, only with the consent of the Participant. (c) DURATION OF OPTIONS. The latest date on which an Option may be exercised will be the tenth anniversary (fifth anniversary, in the case of an ISO granted to a ten-percent shareholder) of the day immediately preceding the date the Option was granted, or such earlier date as may have been specified by the Committee at the time the Option was granted. (d) EXERCISE OF OPTIONS. Options granted under any single Award will become exercisable at such time or times, and on such conditions, as the Committee may specify; PROVIDED, HOWEVER, that if the Committee does not so specify, 25% of the shares subject to the -3- Award may be purchased commencing one year after the date of grant, and an additional 25% of such shares may be purchased commencing on the second, third and fourth anniversaries of the grant. The Committee may at any time and from time to time accelerate the time at which all or any part of the Option may be exercised. Any exercise of an Option must be in writing, signed by the proper person and delivered or mailed to the Company, accompanied by (1) any documents required by the Committee and (2) payment in full in accordance with paragraph (e) below for the number of shares for which the Option is exercised. (e) PAYMENT FOR STOCK. Stock purchased on exercise of an Option must be paid for as follows: (1) in cash or by check (acceptable to the Company in accordance with guidelines established for this purpose), bank draft or money order payable to the order of the Company or (2) if so permitted by the instrument evidencing the Option (or in the case of an Option which is not an ISO, by the Committee at or after grant of the Option), (i) through the delivery of shares of Stock which have been outstanding for at least six months (unless the Committee expressly approves a shorter period) and which have a fair market value on the last business day preceding the date of exercise equal to the exercise price, or (ii) by delivery of a promissory note of the Option holder to the Company, payable on such terms as are specified by the Committee, or (iii) by delivery of an unconditional and irrevocable undertaking by a broker to deliver promptly to the Company sufficient funds to pay the exercise price, or (iv) by any combination of the permissible forms of payment; PROVIDED, that if the Stock delivered upon exercise of the Option is an original issue of authorized Stock, at least so much of the exercise price as represents the par value of such Stock must be paid other than by the Option holder's promissory note or personal check. (f) DISCRETIONARY PAYMENTS. If the market price of shares of Stock subject to an Option (other than an Option which is in tandem with a Stock Appreciation Right as described in Section 6.2 below) exceeds the exercise price of the Option at the time of its exercise, the Committee may cancel the Option and cause the Company to pay in cash or in shares of Common Stock (at a price per share equal to the fair market value per share) to the person exercising the Option an amount equal to the difference between the fair market value of the Stock which would have been purchased pursuant to the exercise (determined on the date the Option is canceled) and the aggregate exercise price which would have been paid. The Committee may exercise its discretion to take such action only if it has received a written request from the person exercising the Option, but such a request will not be binding on the Committee. 6.2. STOCK APPRECIATION RIGHTS. (a) NATURE OF STOCK APPRECIATION RIGHTS. A Stock Appreciation Right is an Award entitling the recipient on exercise of the Right to receive an amount, in cash or Stock or a combination thereof (such form to be determined by the Committee), determined in whole or in part by reference to appreciation in Stock value. Except as provided below, a Stock Appreciation Right entitles the Participant to receive, -4- with respect to each share of Stock as to which the Right is exercised, the excess of the share's fair market value on the date of exercise over its fair market value on the date the Right was granted. The Committee may provide at the time of grant that the amount the recipient is entitled to receive will be adjusted upward or downward under rules established by the Committee to take into account the performance of the Stock in comparison with the performance of other stocks or an index or indices of other stocks. The Committee may also grant Stock Appreciation Rights providing that following a change in control of the Company, as determined by the Committee, the holder of such Right will be entitled to receive, with respect to each share of Stock subject to the Right, an amount equal to the excess of a specified value (which may include an average of values) for a share of Stock during a period preceding such change in control over the fair market value of a share of Stock on the date the Right was granted. (b) GRANT OF STOCK APPRECIATION RIGHTS. Stock Appreciation Rights may be granted in tandem with, or independently of, Options granted under the Plan. A Stock Appreciation Right granted in tandem with an Option which is not an ISO may be granted either at or after the time the Option is granted. A Stock Appreciation Right granted in tandem with an ISO may be granted only at the time the Option is granted. (c) RULES APPLICABLE TO TANDEM AWARDS. When Stock Appreciation Rights are granted in tandem with Options, the following will apply: (1) The Stock Appreciation Right will be exercisable only at such time or times, and to the extent, that the related Option is exercisable and will be exercisable in accordance with the procedure required for exercise of the related Option. (2) The Stock Appreciation Right will terminate and no longer be exercisable upon the termination or exercise of the related Option, except that a Stock Appreciation Right granted with respect to less than the full number of shares covered by an Option will not be reduced until the number of shares as to which the related Option has been exercised or has terminated exceeds the number of shares not covered by the Stock Appreciation Right. (3) The Option will terminate and no longer be exercisable upon the exercise of the related Stock Appreciation Right. (4) The Stock Appreciation Right will be transferable only with the related Option. (5) A Stock Appreciation Right granted in tandem with an ISO may be exercised only when the market price of the Stock subject to the Option exceeds the exercise price of such option. (d) EXERCISE OF INDEPENDENT STOCK APPRECIATION RIGHTS. A Stock Appreciation Right not granted in tandem with an Option will become exercisable at such time or times, and on such -5- conditions, as the Committee may specify. The Committee may at any time accelerate the time at which all or any part of the Right may be exercised. Any exercise of an independent Stock Appreciation Right must be in writing, signed by the proper person and delivered or mailed to the Company, accompanied by any other documents required by the Committee. 6.3. RESTRICTED AND UNRESTRICTED STOCK. (a) NATURE OF RESTRICTED STOCK AWARD. A Restricted Stock Award entitles the recipient to acquire, for a purchase price equal to par value, shares of Stock subject to the restrictions described in paragraph (d) below ("Restricted Stock"). (b) ACCEPTANCE OF AWARD. A Participant who is granted a Restricted Stock Award will have no rights with respect to such Award unless the Participant accepts the Award by written instrument delivered or mailed to the Company accompanied by payment in full of the specified purchase price, if any, of the shares covered by the award. Payment may be by certified or bank check or other instrument acceptable to the Committee. (c) RIGHTS AS A STOCKHOLDER. A Participant who receives Restricted Stock will have all the rights of a stockholder with respect to the Stock, including voting and dividend rights, subject to the restrictions described in paragraph (d) below and any other conditions imposed by the Committee at the time of grant. Unless the Committee otherwise determines, certificates evidencing shares of Restricted Stock will remain in the possession of the Company until such shares are free of all restrictions under the Plan. (d) RESTRICTIONS. Except as otherwise specifically provided by the Plan, Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of, and if the Participant ceases to be an Employee or otherwise suffers a Status Change (as defined at Section 7.2(a) below) for any reason, must be offered to the Company for purchase for the amount of cash paid for the Stock, or forfeited to the Company if no cash was paid. These restrictions will lapse at such time or times, and on such conditions, as the Committee may specify. Upon lapse of all restrictions, Stock will cease to be restricted for purposes of the Plan. The Committee may at any time accelerate the time at which the restrictions on all or any part of the shares will lapse. (e) NOTICE OF ELECTION. Any Participant making an election under Section 83(b) of the Code with respect to Restricted Stock must provide a copy thereof to the Company within 10 days of the filing of such election with the Internal Revenue Service. (f) OTHER AWARDS SETTLED WITH RESTRICTED STOCK. The Committee may, at the time any award described in this Section 6 is granted, provide that any or all the Stock delivered pursuant to the Award will be Restricted Stock. -6- (g) UNRESTRICTED STOCK. The Committee may, in its sole discretion, approve the sale to any Participant of shares of Stock free of restrictions under the Plan for a price which is not less than the par value of the Stock. 6.4. DEFERRED STOCK. A Deferred Stock Award entitles the recipient to receive shares of Stock to be delivered in the future. Delivery of the Stock will take place at such time or times, and on such conditions, as the Committee may specify. The Committee may at any time accelerate the time at which delivery of all or any part of the Stock will take place. At the time any award described in this Section 6 is granted, the Committee may provide that, at the time Stock would otherwise be delivered pursuant to the Award, the Participant will instead receive an instrument evidencing the Participant's right to future delivery of Deferred Stock. 6.5. PERFORMANCE AWARDS; PERFORMANCE GOALS. (a) NATURE OF PERFORMANCE AWARDS. A Performance Award entitles the recipient to receive, without payment, an amount in cash or Stock or a combination thereof (such form to be determined by the Committee) following the attainment of Performance Goals. "Performance Goals" are goals which may be related to personal performance, corporate performance, departmental performance or any other category of performance deemed by the Committee to be important to the success of the Company. The Committee will determine the Performance Goals, the period or periods during which performance is to be measured and all other terms and conditions applicable to the award. (b) OTHER AWARDS SUBJECT TO PERFORMANCE CONDITIONS. The Committee may, at the time any Award described in this Section 6 is granted, impose the condition (in addition to any conditions specified or authorized in this Section 6 or any other provision of the Plan) that Performance Goals be met prior to the Participant's realization of any payment or benefit under the Award. 6.6. LOANS AND SUPPLEMENTAL GRANTS. (a) LOANS. The Company may make a loan to a Participant ("Loan"), either on the date of or after the grant of any Award to the Participant. A Loan may be made either in connection with the purchase of Stock under the Award or with the payment of any Federal, state and local income tax with respect to income recognized as a result of the Award. The Committee will have full authority to decide whether to make a Loan and to determine the amount, terms and conditions of the Loan, including the interest rate (which may be zero), whether the Loan is to be secured or unsecured or with or without recourse against the borrower, the terms on which the Loan is to be repaid and the conditions, if any, under which it may be forgiven. However, no Loan may have a term (including extensions) exceeding ten years in duration. (b) SUPPLEMENTAL GRANTS. In connection with any award, the Committee may at the time -7- such Award is made or at a later date, provide for and grant a cash award to the Participant ("Supplemental Grant") not to exceed an amount equal to (1) the amount of any federal, state and local income tax on ordinary income for which the Participant may be liable with respect to the Award, determined by assuming taxation at the highest marginal rate, plus (2) an additional amount on a grossed-up basis intended to make the Participant whole on an after-tax basis after discharging all the Participant's income tax liabilities arising from all payments under this Section 6. Any payments under this subsection (b) will be made at the time the Participant incurs Federal income tax liability with respect to the Award. 7. EVENTS AFFECTING OUTSTANDING AWARDS 7.1. DEATH. If a Participant dies, the following will apply: (a) All Options and Stock Appreciation Rights held by the Participant immediately prior to death, to the extent then exercisable, may be exercised by the Participant's executor or administrator or the person or persons to whom the Option or Right is transferred by will or the applicable laws of descent and distribution, at any time within the one year period ending with the first anniversary of the Participant's death (or such shorter or longer period as the Committee may determine), and shall thereupon terminate. In no event, however, shall an Option or Stock Appreciation Right remain exercisable beyond the latest date on which it could have been exercised without regard to this Section 7. Except as otherwise determined by the Committee, all Options and Stock Appreciation Rights held by a Participant immediately prior to death that are not then exercisable shall terminate at death. (b) Except as otherwise determined by the Committee, all Restricted Stock held by the Participant must be transferred to the Company (and, in the event the certificates representing such Restricted Stock are held by the Company, such Restricted Stock will be so transferred without any further action by the Participant) in accordance with Section 6.3 above. (c) Any payment or benefit under a Deferred Stock Award, Performance Award, or Supplemental Grant to which the Participant was not irrevocably entitled prior to death will be forfeited and the Award canceled as of the time of death, unless otherwise determined by the Committee. 7.2. TERMINATION OF SERVICE (OTHER THAN BY DEATH). If a Participant who is an Employee ceases to be an Employee for any reason other than death, or if there is a termination (other than by reason of death) of the consulting, service or similar relationship in respect of which a non- Employee Participant was granted an Award hereunder (such termination of the employment or other relationship being herein referred to as a "Status Change"), the following will apply: -8- (a) Except as otherwise determined by the Committee, all Options and Stock Appreciation Rights held by the Participant that were not exercisable immediately prior to the Status Change shall terminate at the time of the Status Change. Any Options or Rights that were exercisable immediately prior to the Status Change will continue to be exercisable for a period of three months (or such longer period as the Committee may determine), and shall thereupon terminate, unless the Award provides by its terms for immediate termination in the event of a Status Change or unless the Status Change results from discharge for cause which in the opinion of the Committee casts such discredit on the Participant as to justify immediate termination of the Award. In no event, however, shall an Option or Stock Appreciation Right remain exercisable beyond the latest date on which it could have been exercised without regard to this Section 7. For purposes of this paragraph, in the case of a Participant who is an Employee, a Status Change shall not be deemed to have resulted by reason of (i) a sick leave or other bona fide leave of absence approved for purposes of the Plan by the Committee, so long as the Employee's right to reemployment is guaranteed either by statute or by contract, or (ii) a transfer of employment between the Company and a subsidiary or between subsidiaries, or to the employment of a corporation (or a parent or subsidiary corporation of such corporation) issuing or assuming an option in a transaction to which section 424(a) of the Code applies. (b) Except as otherwise determined by the Committee, all Restricted Stock held by the Participant at the time of the Status Change must be transferred to the Company (and, in the event the certificates representing such Restricted Stock are held by the Company, such Restricted Stock will be so transferred without any further action by the Participant) in accordance with Section 6.3 above. (c) Any payment or benefit under a Deferred Stock Award, Performance Award, or Supplemental Grant to which the Participant was not irrevocably entitled prior to the Status Change will be forfeited and the Award canceled as of the date of such Status Change unless otherwise determined by the Committee. 7.3. CERTAIN CORPORATE TRANSACTIONS. In the event of a consolidation or merger in which the Company is not the surviving corporation or which results in the acquisition of substantially all the Company's outstanding Stock by a single person or entity or by a group of persons and/or entities acting in concert, or in the event of the sale or transfer of substantially all the Company's assets or a dissolution or liquidation of the Company (a "covered transaction"), all outstanding Awards will terminate as of the effective date of the covered transaction, and the following rules shall apply: (a) Subject to paragraphs (b) and (c) below, the Committee may in its sole discretion, prior to the effective date of the covered transaction, (1) make each outstanding Option and Stock Appreciation Right exercisable in full, (2) remove the restrictions from each outstanding share of Restricted Stock, (3) cause the Company to make any payment and provide any benefit under each outstanding Deferred Stock Award, Performance Award, and Supplemental Grant which -9- would have been made or provided with the passage of time had the transaction not occurred and the Participant not suffered a Status Change (or died), and (4) forgive all or any portion of the principal of or interest on a Loan. If the Committee does not do so with respect to any Award, however, such award will terminate as of the date of the covered transaction. (b) If an outstanding Award is subject to performance or other conditions (other than conditions relating only to the passage of time and continued employment) which will not have been satisfied at the time of the covered transaction, the Committee may in its sole discretion remove such conditions. If it does not do so, however, such Award will terminate as of the date of the covered transaction notwithstanding paragraph (a) above. (c) With respect to an outstanding award held by a Participant who, following the covered transaction, will be employed by or otherwise providing services to a corporation which is a surviving or acquiring corporation in such transaction or an affiliate of such a corporation, the Committee may, in lieu of the action described in paragraph (a) above, arrange to have such surviving or acquiring corporation or affiliate grant to the Participant a replacement award which, in the judgment of the Committee, is substantially equivalent to the Award. 8. GENERAL PROVISIONS 8.1. DOCUMENTATION OF AWARDS. Awards will be evidenced by such written instruments, if any, as may be prescribed by the Committee from time to time. Such instruments may be in the form of agreements to be executed by both the Participant and the Company, or certificates, letters or similar instruments, which need not be executed by the Participant but acceptance of which will evidence agreement to the terms thereof. 8.2. RIGHTS AS A STOCKHOLDER, DIVIDEND EQUIVALENTS. Except as specifically provided by the Plan, the receipt of an Award will not give a Participant rights as a stockholder; the Participant will obtain such rights, subject to any limitations imposed by the Plan or the instrument evidencing the Award, upon actual receipt of Stock. However, the Committee may, on such conditions as it deems appropriate, provide that a Participant will receive a benefit in lieu of cash dividends that would have been payable on any or all Stock subject to the Participant's Award had such Stock been outstanding. Without limitation, the Committee may provide for payment to the Participant of amounts representing such dividends, either currently or in the future, or for investment of such amounts on behalf of the Participant. 8.3. CONDITIONS ON DELIVERY OF STOCK. The Company will not be obligated to deliver any shares of Stock pursuant to the Plan or -10- to remove restriction from shares previously delivered under the Plan (a) until all conditions of the Award have been satisfied or removed, (b) until, in the opinion of the Company's counsel, all applicable federal and state laws and regulations have been complied with, (c) if the outstanding Stock is at the time listed on any stock exchange, until the shares to be delivered have been listed or authorized to be listed on such exchange upon official notice of issuance, and (d) until all other legal matters in connection with the issuance and delivery of such shares have been approved by the Company's counsel. If the sale of Stock has not been registered under the Securities Act of 1933, as amended, the Company may require, as a condition to exercise of the Award, such representations or agreements as counsel for the Company may consider appropriate to avoid violation of such Act and may require that the certificates evidencing such Stock bear an appropriate legend restricting transfer. If an Award is exercised by the Participant's legal representative, the Company will be under no obligation to deliver Stock pursuant to such exercise until the company is satisfied as to the authority of such representative. 8.4. TAX WITHHOLDING, The Company will withhold from any cash payment made pursuant to an Award an amount sufficient to satisfy all federal, state and local withholding tax requirements (the "withholding requirements"). In the case of an Award pursuant to which Stock may be delivered, the Committee will have the right to require that the Participant or other appropriate person remit to the Company an amount sufficient to satisfy the withholding requirements, or make other arrangements satisfactory to the Committee with regard to such requirements, prior to the delivery of any Stock. If and to the extent that such withholding is required, the Committee may permit the Participant or such other person to elect at such time and in such manner as the Committee provides to have the Company hold back from the shares to be delivered, or to deliver to the Company, Stock having a value calculated to satisfy the withholding requirement. If at the time an ISO is exercised, the Committee determines that the Company could be liable for withholding requirements with respect to a disposition of the Stock received upon exercise, the Committee may require as a condition of exercise that the person exercising the ISO agree (a) to inform the Company promptly of any disposition (within the meaning of section 424(c) of the Code) of Stock receiving upon exercise, and (b) to give such security as the Committee deems adequate to meet the potential liability of the Company for the withholding requirements and to augment such security from time to time in any amount reasonably deemed necessary by the Committee to preserve the adequacy of such security. 8.5. NONTRANSFERABILITY OF AWARDS. No Award (other than an Award in the form of an outright transfer of cash or Unrestricted Stock) may be transferred other than by will or by the laws of descent and distribution, and during -11- a Participant's lifetime an Award requiring exercise may be exercised only by him or her (or in the event of the Participant's incapacity, the person or persons legally appointed to act on the Participant's behalf). 8.6. ADJUSTMENTS IN THE EVENT OF CERTAIN TRANSACTIONS. (a) In the event of a stock dividend, stock split or combination of shares, recapitalization or other change in the Company's capitalization, or other distribution to common stockholders other than normal cash dividends, after the effective date of the Plan, the Committee will make any appropriate adjustments to the maximum number of shares that may be delivered under the Plan under Section 4 above . (b) In any event referred to in paragraph (a), the Committee will also make any appropriate adjustments to the number and kind of shares of stock or securities subject to Awards then outstanding or subsequently granted, any exercise prices relating to Awards and any other provision of Awards affected by such change. The Committee may also make such adjustments to take into account material changes in law or in accounting practices or principles, mergers, consolidations, acquisitions, dispositions or similar corporate transactions, or any other event, if it is determined by the Committee that adjustments are appropriate to avoid distortion in the operation of the Plan. 8.7. EMPLOYMENT RIGHTS, ETC. Neither the adoption of the Plan nor the grant of Awards will confer upon any person any right to continued retention by the Company or any subsidiary as an Employee or otherwise, or affect in any way the right of the Company or any subsidiary to terminate an employment, service or similar relationship at any time. Except as specifically provided by the Committee in any particular case, the loss of existing or potential profit in Awards granted under the Plan will not constitute an element of damages in the event of termination of an employment, service or similar relationship event if the termination is in violation of an obligation of the Company to the Participant. 8.8. DEFERRAL OF PAYMENTS. The Committee may agree at any time, upon request of the Participant, to defer the date on which any payment under an Award will be made. 8.9. PAST SERVICES AS CONSIDERATION. Where a Participant purchases Stock under an Award for a price equal to the par value of the Stock the Committee may determine that such price has been satisfied by past services rendered by the Participant. -12- 9. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION Neither adoption of the Plan nor the grant of Awards to a Participant will affect the Company's right to grant to such Participant awards that are not subject to the Plan, to issue to such Participant Stock as a bonus or otherwise, or to adopt other plans or arrangements under which Stock be issued to Employees. The Committee may at any time or times amend the Plan or any outstanding Award for any purpose which may at the time be permitted by law, or may at any time terminate the Plan as to any further grants of Awards, provided that (except to the extent expressly required or permitted by the Plan) no such amendment will, without the approval of the stockholders of the Company, effectuate a change for which stockholder approval is required in order for the Plan to continue to qualify for the award of ISOs under Section 422 of the Code or for the award of performance-based compensation under Section 162(m) of the Code and to continue to qualify under Rule 16b-3 promulgated under Section 16 of the 1934 Act. -13- EX-10.2 3 EXHIBIT 10.2 Exhibit 10.2 THE GRAND UNION COMPANY 1995 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN 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 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 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. -1- 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 50,000 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 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 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. 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 -2- 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. 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) three months 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 consolidation or merger in which the Company is not the surviving corporation or which results in the acquisition of substantially all the Company's outstanding Stock by a single person or entity or by a group of persons and/or entities acting in concert, or in the event of the sale or transfer of substantially all the Company's assets or a dissolution or liquidation of the Company (a "covered transaction"), all outstanding Options under the Plan will terminate as of the effective date of the covered transaction, provided that each such outstanding Option not otherwise exercisable shall become immediately exercisable in full 20 days prior to the effective date thereof. 9. GENERAL PROVISIONS -3- 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). 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. -4- 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. -5- EX-10.3 4 EXHIBIT 10.3 EXHIBIT 10.3 EXECUTION COPY SUPPLY AND DISTRIBUTION AGREEMENT BETWEEN THE GRAND UNION COMPANY AND C&S WHOLESALE GROCERS, INC. DATED AS OF JUNE 15, 1995 Portions of this Agreement have been omitted and filed separately with the Commission. Omitted portions have been replaced with the word CONFIDENTIAL. SUPPLY AND DISTRIBUTION AGREEMENT, dated as of June 15, 1995 (this "AGREEMENT"), between THE GRAND UNION COMPANY, a Delaware corporation ("GRAND UNION"), and C&S WHOLESALE GROCERS, INC., a Vermont corporation ("C&S"); W I T N E S S E T H : WHEREAS, Grand Union operates supermarkets and food stores in the States of New York, Vermont and New Hampshire; and WHEREAS, certain of such stores are presently supplied through a facility leased by Grand Union in Waterford, New York (the "Waterford Facility"); and WHEREAS, C&S is a wholesale supplier of food products and other merchandise sold in supermarkets and food stores; and WHEREAS, Grand Union intends to terminate its use of the Waterford Facility, and Grand Union and C&S desire to enter into an arrangement pursuant to which C&S will supply Grand Union with substantially all merchandise heretofore provided through the Waterford Facility; NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements hereinafter set forth, Grand Union and C&S hereby agree as follows: ARTICLE I CERTAIN DEFINITIONS SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the following terms shall have the following meanings: "AGREEMENT" has the meaning specified in the preamble to this Agreement. "CONTRACT YEAR" means any consecutive twelve-month period during the Term commencing on July 25 and ending the following July 24, the first such Contract Year to commence July 25, 1995. "DELIVERY SCHEDULES" means the store delivery schedules as mutually agreed to by C&S and Grand Union from time to time. The initial Delivery Schedules are attached to this Agreement as EXHIBIT A. "EVENT OF FORCE MAJEURE" means any event, circumstance or condition described in any of clauses (a) through (d) below that is beyond the control of C&S, and is not the result of negligence or failure of C&S to act with due care, and that prevents C&S from performing, in whole or in part, its obligations under this Agreement. The following occurrences shall be deemed to be Events of Force Majeure: (a) Acts of God, fire, explosion, accident, flood, storm or other natural phenomenon; (b) war (whether declared or undeclared), riot, blockade, sabotage or acts of public enemies; (c) national defense requirements; (d) compliance with any law, rule, regulation or governmental order that (x) becomes effective after the date hereof and (y) is binding on C&S, and compliance therewith by C&S is not voluntary or optional; and (e) producers or manufacturers establish industry-wide allocations or restrictions on quantities of products available to C&S. "EVENT OF INSOLVENCY" means that, with respect to any Person, such Person shall admit in writing its inability to pay its debts generally or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against such Person seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 60 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or such Person shall take any corporate action to authorize any of the actions set forth above in this definition. "FORWARD BUY RESERVE" has the meaning specified in Section 4.02. "GRAND UNION STORES" shall mean (i) all existing Grand Union stores currently supplied by the Waterford Facility as itemized on EXHIBIT B and (ii) all new Grand Union stores operated in the Northern Region. "MERCHANDISE" means products in the following categories currently carried by Grand Union at the Waterford Facility and which are to be sold by Grand Union through Grand Union Stores: grocery, candy (full case), meat and deli, dairy, produce, frozen and ice cream and select supply items. "Merchandise" shall not include health or beauty products, general merchandise, cigarettes, baby food, light bulbs, select candy, spices, aerosol products, supplies and other merchandise supplied through Grand Union's Montgomery, New York facility, unless C&S and Grand Union mutually agree to change the source of items currently supplied from Grand Union's Montgomery, New York Facility. "NORTHERN REGION" means the States of Vermont and New Hampshire, and New York State from Wappingers Falls north to the Canadian border. "PERSON" means any individual, partnership, firm, corporation, association, trust, unincorporated organization or other entity or any government or governmental authority or agency. -2- "SERVICE LEVEL" means at any time a percentage reflecting the ratio of (i) the number of cases of Merchandise actually delivered by C&S to Grand Union Stores within the delivery periods required hereunder to (ii) the total number of cases of such Merchandise ordered by Grand Union for delivery by C&S during such delivery periods, less unauthorized Merchandise and manufacturers' out-of-stock Merchandise. "TERM" has the meaning specified in Section 2.02. "WATERFORD FACILITY" has the meaning specified in the second recital to this Agreement. ARTICLE II SCOPE OF AGREEMENT; TERM SECTION 2.01. AGREEMENT. [CONFIDENTIAL] SECTION 2.02. TERM. Implementation will begin on June 18, 1995, and the term of this Agreement (the "Term") will be [CONFIDENTIAL]; PROVIDED, HOWEVER, that if the Term has not been extended by written agreement entered [CONFIDENTIAL], the Term shall be extended, without any action of the parties hereto [CONFIDENTIAL]. Notwithstanding the foregoing provisions, if the date on which Grand Union commences purchasing substantially all of its requirements of Merchandise from C&S occurs after July 25, 1995, the Term will commence on the first Sunday after such date, and the other dates provided for in this Section 2.02 will be adjusted accordingly. ARTICLE III PURCHASE, SALE AND DISTRIBUTION SECTION 3.01. AGREEMENT. [CONFIDENTIAL] SECTION 3.02. DELIVERY. All Merchandise ordered by Grand Union hereunder shall be delivered by C&S F.O.B. destination to the applicable Grand Union Store dock in accordance with the Delivery Schedules, and title to, and risk of loss with respect to, such Merchandise shall remain with C&S until such delivery. C&S will be in breach of this Agreement if for any reason, other than a material default by Grand Union under this Agreement, picketing or other labor disputes at Grand Union Stores or an Event of Force Majeure, C&S fails, during any period of two consecutive weeks, to deliver [CONFIDENTIAL] scheduled deliveries within the delivery windows as provided for in the Delivery Schedules. If Grand Union believes that a -3- breach has occurred, Grand Union shall give notice to C&S and C&S shall use its best efforts to immediately restore the delivery service. If the on-time delivery level is not immediately restored, C&S and Grand Union agree to meet to seek to resolve the issue, PROVIDED that Grand Union's rights and remedies hereunder shall remain in effect if such issue is not resolved. SECTION 3.03. BASE PRICE. [CONFIDENTIAL] SECTION 3.04. OTHER PRICING PROVISIONS. [CONFIDENTIAL] SECTION 3.05. PAYMENTS. [CONFIDENTIAL] SECTION 3.06. SERVICE LEVEL. [CONFIDENTIAL] -4- ARTICLE IV FEES; OTHER PAYMENTS SECTION 4.01. FEES. [CONFIDENTIAL] SECTION 4.02. FORWARD BUY RESERVE. [CONFIDENTIAL] SECTION 4.03. VOLUME INCENTIVES. [CONFIDENTIAL] SECTION 4.04 [CONFIDENTIAL] [CONFIDENTIAL] -5- ARTICLE V CERTAIN COVENANTS SECTION 5.01. INFORMATION. C&S agrees to provide Grand Union with such information as Grand Union may reasonably request from time to time in order to monitor compliance by C&S with the provisions of, and to carry out the transactions contemplated by, this Agreement. C&S further agrees that Grand Union will be allowed to conduct, twice during any twelve-month period, in-depth audits [CONFIDENTIAL]. SECTION 5.02. RECLAMATION. [CONFIDENTIAL] SECTION 5.03. [CONFIDENTIAL] SECTION 5.04. QUALITY CONTROL. (a) C&S will provide to Grand Union certain products, [CONFIDENTIAL] in accordance with the standards set forth in Grand Union's Product Specification Manual (the "Standards Manual"), a copy of which has been provided to C&S (such standards to include, without limitation, those relating to temperature controls, sanitation standards, storage controls, date code reviews and packaging inspections). All dairy merchandise to be shipped to Grand Union will be received at store level with a minimum shelf life stipulated in Grand Union's receiving specifications as set forth in the Standards Manual. All standards and specifications referred to above, together with such other reasonable and practicable standards and specifications of a nature similar to and not more onerous to C&S than those referred to above, as may be agreed to by Grand Union and C&S in writing from time to time, are referred to herein as the "Standards". (b) Grand Union shall not be required to accept Merchandise that does not meet the Standards, and any such Merchandise shall be returned on the next C&S delivery and Grand Union will be credited on the C&S billing statement. If Grand Union, in its sole judgment, determines that C&S is not in compliance with the Standards, Grand Union will notify C&S in writing. If C&S has not cured the problem within 45 days of notification, Grand Union and C&S will meet to seek to resolve the problem. If the problem is not cured within 30 days after this meeting, Grand Union will be entitled to use one or more secondary suppliers for that category or department, until such time as C&S cures the problem. SECTION 5.05. COMPLIANCE WITH LAW. Each of Grand Union and C&S covenants and agrees that in performing its obligations hereunder, it will comply with all applicable laws, rules, regulations and orders and will have and maintain all permits, licenses and authorizations necessary for the conduct of its business and the performance of its obligations hereunder. SECTION 5.06. INSURANCE. C&S agrees that all material properties and risks of C&S shall at all times be covered by valid and currently effective insurance policies or binders of insurance or programs of self-insurance in such types and amounts as are consistent with customary practices and standards of -6- companies engaged in businesses and operations similar to those of C&S. Grand Union agrees that all material properties and risks of Grand Union shall at all times be covered by valid and currently effective insurance policies or binders of insurance or programs of self-insurance in such types and amounts as are consistent with customary practices and standards of companies engaged in businesses and operations similar to those of Grand Union. ARTICLE VI WATERFORD INVENTORY SECTION 6.01. PURCHASE OF INVENTORY. C&S agrees to work with Grand Union to maintain service levels to Grand Union Stores while Grand Union is reducing inventory at The Waterford Facility in accordance with the Inventory Reduction Plan and Timetable mutually agreed upon by C&S and Grand Union. C&S agrees to purchase from Grand Union any such Inventory remaining after such reduction program, other than out-of-code, discontinued or unsalable Merchandise. [CONFIDENTIAL] ARTICLE VII TERMINATION SECTION 7.01. TERMINATION BY C&S. C&S may terminate this Agreement (i) in the event of a default by Grand Union under Section 3.05 which remains uncured [CONFIDENTIAL] receipt by Grand Union of written notice thereof from C&S (subject, however,to the provisions of such Section for arbitration), (ii) in the event that Grand Union materially breaches its other obligations under this Agreement and such breach is curable and remains uncured after 90 days following receipt by Grand Union of written notice of such breach from C&S or (iii) upon the occurrence of an Event of Insolvency with respect to Grand Union. SECTION 7.02. TERMINATION BY GRAND UNION. Grand Union may terminate this Agreement (i) in the event that C&S materially breaches its obligations under this Agreement and such breach is curable and remains uncured [CONFIDENTIAL] following written notice of such breach from Grand Union or (ii) upon the occurrence of an Event of Insolvency with respect to C&S. Grand -7- Union may also terminate this Agreement [CONFIDENTIAL] written notice to C&S. In the event that Grand Union exercises its right to [CONFIDENTIAL] written notice to C&S, Grand Union shall pay to C&S the applicable Termination Fee set forth below as full and liquidated damages to C&S. Termination Fees [CONFIDENTIAL] SECTION 7.03. NEGOTIATIONS; INTERIM PERIOD. (a) The parties shall meet at least once within each 30 day time period during any 90 day time period provided for in Section 7.01(ii) or Section 7.02(i) hereof to attempt to cure any breach as provided in such Sections. (b) During the period following delivery of any notice of termination and prior to the termination of this Agreement, each party shall perform its obligations under this Agreement in substantially the same manner as they were performed prior to the date of delivery of such notice, with no disruption to Grand Union's supply of Merchandise; PROVIDED, HOWEVER, that the parties shall negotiate in good faith to agree to a "winding-up" schedule for such period. SECTION 7.04. WAIVER. Either party to this Agreement may (a) extend the time for the performance of any of the obligations or other acts of the other party or (b) waive compliance with any of the agreements or conditions of the other party contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party to be bound thereby. Any waiver of any term or condition shall not be construed as a waiver of any subsequent breach or a subsequent waiver of the same term or condition, or a waiver of any other term or condition, of this Agreement. The failure of any party to assert any of its rights hereunder shall not constitute a waiver of any of such rights. ARTICLE VIII REPRESENTATIONS AND WARRANTIES SECTION 8.01. REPRESENTATIONS AND WARRANTIES OF C&S. C&S hereby represents and warrants to Grand Union as follows: (a) CORPORATE ORGANIZATION AND AUTHORITY. C&S (i) is a corporation duly organized, validly existing and in good standing under the laws of the State of Vermont and is authorized to transact business in the States of New Hampshire and New York; -8- and (ii) has the corporate power and authority to own and operate its properties and to carry on its business as now conducted and as proposed to be conducted. (b) AUTHORIZATION. C&S has the corporate power and authority to execute, deliver and perform its obligations under this Agreement and has taken all necessary corporate action to authorize its execution, delivery and performance of this Agreement. This Agreement has been duly executed and delivered on behalf of C&S and constitutes the legal, valid and binding obligation of C&S, enforceable in accordance with its terms. (c) NO CONSENTS; CONFLICTS. No consent, authorization by, approval of or other action by, and no notice to, or filing or registration with, any governmental authority, agency, regulatory body, lender, lessor, franchisee or other Person is required for the execution, delivery or performance of this Agreement by C&S, other than those that have been obtained and are in full force and effect. The execution, delivery and performance of this Agreement will not result in any violation or breach of any provision of the charter or by-laws of C&S, any judgment, decree or order to which C&S is a party or by which it is bound, any indenture, mortgage or other agreement or instrument to which C&S is a party or by which it is bound or any statute, rule or regulation applicable to C&S. SECTION 8.02. REPRESENTATIONS AND WARRANTIES OF GRAND UNION. Grand Union hereby represents and warrants to C&S as follows: (a) CORPORATE ORGANIZATION AND AUTHORITY. Grand Union (i) is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and is authorized to transact business in the States of New Hampshire, Vermont and New York; and (ii) has the corporate power and authority to own and operate its properties and to carry on its business as now conducted and as proposed to be conducted. (b) AUTHORIZATION. Grand Union has the corporate power and authority to execute, deliver and perform its obligations under this Agreement and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement. This Agreement has been duly executed and delivered on behalf of Grand Union and constitutes the legal, valid and binding obligation of Grand Union, enforceable in accordance with its terms. (c) NO CONSENTS; CONFLICTS. No consent, authorization by, approval of or other action by, and no notice to, or filing or registration with, any governmental authority, agency, regulatory body, lender, lessor, franchisee or other Person is required for the execution, delivery or performance of this Agreement by Grand Union. The execution, delivery and performance of this Agreement will not result in any violation or breach of any provision of the charter or by-laws of Grand Union, -9- any judgment, decree or order to which Grand Union is a party or by which it is bound, any indenture, mortgage or other agreement or instrument to which Grand Union is a party or by which it is bound or any statute, rule or regulation applicable to Grand Union. ARTICLE IX GENERAL PROVISIONS SECTION 9.01. ENTIRE AGREEMENT. This Agreement, together with the documents referred to herein, constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral, between the parties hereto with respect to the subject matter hereof. SECTION 9.02. EXPENSES. Except as otherwise specified in this Agreement, all costs and expenses, including, without limitation, fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by the party incurring the same. SECTION 9.03. AMENDMENTS. This Agreement may not be amended or modified except (i) by an instrument in writing signed by, or on behalf of, each of Grand Union and C&S or (ii) by a waiver in accordance with Section 7.04. SECTION 9.04. NOTICES. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by courier service, by telecopy or telex or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 9.04): (a) If to Grand Union: William A. Louttit Executive Vice President and Chief Operating Officer The Grand Union Company 201 Willowbrook Boulevard Wayne, New Jersey 07470-0966 Telephone: (201) 890-6000 [CONFIDENTIAL] (b) If to C&S: Richard B. Cohen President and Chief Executive Officer -10- C&S Wholesale Grocers, Inc. Old Ferry Road Brattleboro, Vermont 05301 Telephone: (802) 257-6700 [CONFIDENTIAL] SECTION 9.05. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of Grand Union and C&S and their respective successors and assigns; PROVIDED that (i) C&S shall not have the right to assign or subcontract its rights or obligations hereunder or any interest herein (excluding the transportation of Merchandise) without the prior written consent of Grand Union, which consent shall not be unreasonably withheld, conditioned or delayed and (ii) Grand Union may assign its rights and delegate its obligations hereunder only so long as (x) Grand Union shall assign, and the assignee shall assume, all such rights and obligations, (y) the assignment is to a Person or Persons who are acquiring all or substantially all of Grand Union's business or assets in the Northern Region, and (z) Grand Union demonstrates, to the reasonable satisfaction of C&S, that such Person has the financial capability to perform the obligations of Grand Union hereunder. C&S agrees that it shall respond, in respect of clause (z) above, promptly, and in any event within 10 business days of receipt of notice from Grand Union of any such proposed assignment. Failure by C&S to respond to Grand Union within such 10 business day period shall be deemed to be a confirmation by C&S to Grand Union of its reasonable satisfaction with the financial capability of the proposed assignee. SECTION 9.06. COUNTERPARTS. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. SECTION 9.07. CONFIDENTIALITY. Each of Grand Union and C&S agrees to and will cause its respective authorized agents, representatives, affiliates, employees, officers, directors, accountants, counsel and other designated representatives (collectively, "Representatives") to (i) treat and hold as confidential (and not disclose or provide access to any Person to) all records, books, contracts, instruments, computer data and other data and information (collectively, "Information") concerning the other in its possession or furnished by the other or the other's Representatives pursuant to this Agreement, (ii) in the event that either party or its Representatives become legally compelled to disclose any such Information, provide the other party with prompt written notice of such requirement so that such other party may seek a protective order or other remedy or waive compliance with this Section 9.07 and (iii) in the event that such protective order or other remedy is not obtained, or the other party waives compliance with this Section 9.07, furnish only that portion of such Information which is legally required to be provided and -11- exercise its best efforts to obtain assurances that confidential treatment will be accorded such Information; PROVIDED, HOWEVER, that this sentence shall not apply to any Information that, at the time of disclosure, is available publicly and was not disclosed in breach of this Agreement by such party or its Representatives; and PROVIDED FURTHER, HOWEVER, that C&S agrees that Grand Union is the owner of all Information relating to Grand Union's purchasing practices and that Grand Union may in its sole discretion sell such purchasing related Information to third parties. Each party agrees and acknowledges that remedies at law for any breach of its obligations under this Section 9.07 are inadequate and that in addition thereto the other party shall be entitled to seek equitable relief, including injunction and specific performance, in the event of any such breach, without the necessity of demonstrating the inadequacy of monetary damages. SECTION 9.08. RELATIONSHIP OF PARTIES. In all matters relating to this Agreement, both parties shall be acting solely as independent contractors and shall be solely responsible for the acts of their employees, officers, directors and agents. Employees, agents or contractors of one party shall not be considered employees, agents or contractors of the other party. SECTION 9.09. NO THIRD-PARTY BENEFICIARIES. This Agreement shall be binding upon and inure solely to the benefit of the parties hereto and their permitted assigns, and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever. SECTION 9.10. SEVERABILITY. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible. SECTION 9.11. HEADINGS. The descriptive headings contained in this Agreement are for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. SECTION 9.12. GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to the principles of conflicts of laws thereof. -12- SECTION 9.13. ARBITRATION. (a) Any matter required to be submitted to arbitration pursuant to Section 3.05 of this Agreement shall be subject to this Section 9.13. Any such matter shall be submitted to binding arbitration in Springfield, Massachusetts (or another location agreed to by the parties) in accordance with the rules and procedures of the American Arbitration Association (or another organization agreed to by the parties). The arbitration shall be conducted in accordance with (i) the terms of this Section 9.13; (ii) the commercial arbitration rules of the American Arbitration Association (or the corresponding rules of any such other organization); (iii) the Federal Arbitration Act (Title 9 of the United States Code); and (iv) to the extent the foregoing are inapplicable, unenforceable or invalid, the laws of the State of New York. Judgment upon any award rendered hereunder may be entered in any court having jurisdiction. (b) A single arbitrator shall be selected by mutual agreement of the parties, or, if the parties fail to reach such agreement within ten days after either party has requested arbitration hereunder in writing, by, or in a manner provided by, the American Arbitration Association (or such other organization referred to above). (c) The arbitrator is empowered to resolve the matter in dispute by summary ruling substantially similar to a summary judgment and motion to dismiss. The arbitrator shall resolve all disputes in accordance with applicable substantive law. The determination of the arbitrator shall be binding on all parties and shall not be subject to further review or appeal except as allowed by applicable law. The costs and expenses of the arbitrator shall be apportioned between the parties hereto as determined by the arbitrator in such manner as the arbitrator deems reasonable. (d) The arbitrator and the parties shall take all actions necessary to the end that the arbitration proceeding shall be concluded as promptly as practicable. (e) The provisions of this Section 9.13 shall not preclude a party from exercising any right or remedy with respect to any matter that is not expressly required to be submitted to arbitration pursuant to Section 3.05 of this Agreement. -13- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date first written above. THE GRAND UNION COMPANY By --------------------------- Name: William A. Louttit Title: Executive Vice President, Chief Operating Officer C&S WHOLESALE GROCERS, INC. By --------------------------- Name: Richard B. Cohen Title: President -14- EXHIBIT A DELIVERY SCHEDULES [CONFIDENTIAL] EXHIBIT B STORE LOCATIONS [CONFIDENTIAL] EXHIBIT C CREDIT POLICY AND STANDARD CREDIT AGREEMENT [CONFIDENTIAL] EXHIBIT D VOLUME INCENTIVES [CONFIDENTIAL] EXHIBIT E QUALITY STANDARDS [CONFIDENTIAL] EX-10.4 5 EXHIBIT 10.4 EXHIBIT 10.4 FIRST AMENDMENT TO THE SUPPLY AND DISTRIBUTION AGREEMENT BETWEEN THE GRAND UNION COMPANY AND C&S WHOLSALE GROCERS, INC. DATED AS OF JUNE 15, 1995 This entire exhibit is considered CONFIDENTIAL and has been omitted and filed separately with the Commission. EX-10.5 6 EXHIBIT 10.5 EXHIBIT 10.5 SUPPLY AND DISTRIBUTION AGREEMENT BETWEEN THE GRAND UNION COMPANY AND C&S WHOLESALE GROCERS, INC. DATED AS OF JANUARY 2, 1996 Portions of this Agreement have been omitted and filed seperately with the Commission. Omitted portions have been replaced with the word CONFIDENTIAL. SUPPLY AND DISTRIBUTION AGREEMENT, dated as of January 2, 1996 (this "Agreement"), between THE GRAND UNION COMPANY, a Delaware corporation ("Grand Union"), and C&S WHOLESALE GROCERS, INC., a Vermont corporation ("C&S"); W I T N E S S E T H : WHEREAS, Grand Union operates supermarkets and food stores in the States of Connecticut, New Hampshire, New Jersey, New York, Pennsylvania and Vermont, and has grouped its stores into a "Northern Region" and a "New York Region"; and WHEREAS, C&S is a wholesale supplier of food products and other merchandise sold in Page 1 supermarkets and food stores; and WHEREAS, pursuant to the Supply and Distribution Agreement between Grand Union and C&S dated June 15, 1995, and amended contemporaneously with execution of this Agreement, C&S has agreed to supply the stores in Grand Union's Northern Region; and WHEREAS, Grand Union and C&S desire to enter into an arrangement pursuant to which C&S will supply merchandise to stores in Grand Union's New York Region; NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements hereinafter set forth, Grand Union and C&S hereby agree as follows: ARTICLE I CERTAIN DEFINITIONS SECTION 1.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings: "Agreement" has the meaning specified in the preamble to this Agreement. "Base Price" has the meaning specified in Section 3.03. "Contract Year" means any consecutive twelve-month period during the Term commencing on February 25 and ending the following February 24, the first such Contract Year to commence February 25, 1996. "Delivery Schedules" means the store delivery schedules as mutually agreed to by C&S and Grand Union from time to time. The initial Delivery Schedules are attached to this Agreement as Exhibit A. "Event of Force Majeure" means any event, circumstance or condition described in any of clauses (a) through (e) below that is beyond the control of C&S, and Page 2 is not the result of negligence or failure of C&S to act with due care, and that prevents C&S from performing, in whole or in part, its obligations under this Agreement. The following occurrences shall be deemed to be Events of Force Majeure: (a) Acts of God, fire, explosion, accident, flood, storm or other natural phenomenon; (b) war (whether declared or undeclared); (c) national defense requirements; (d) compliance with any law, rule, regulation or governmental order that (x) becomes effective after the date hereof and (y) is binding on C&S, and compliance therewith by C&S is not voluntary or optional; and (e) producers or manufacturers establish industry-wide allocations or restrictions on quantities of products available to C&S. "Event of Insolvency" means that, with respect to any Person, such Person shall admit in writing its inability to pay its debts generally or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against such Person seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 60 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or such Person shall take any corporate action to authorize any of the actions set forth above in this definition. "Forward Buy Reserve" has the meaning specified in Section 4.02. Page 3 "Grand Union Stores" shall mean (i) all existing Grand Union stores in the New York Region as itemized on Exhibit B and (ii) all new Grand Union stores operated in the New York Region. "Merchandise" means products in the following categories which are to be sold by Grand Union through Grand Union Stores: grocery, candy (full case), meat and deli, produce, and all store supply items. Commencing October 31, 1997, "Merchandise" includes products in the dairy category. Commencing March 31, 2001, "Merchandise" also includes products in the frozen food category. "Merchandise" shall not include health or beauty products, general merchandise, cigarettes, baby food, light bulbs, select candy, spices, aerosol products, and other merchandise supplied through Grand Union's Montgomery, New York facility, unless C&S and Grand Union mutually agree to change the source of these items currently supplied from Grand Union's Montgomery, New York Facility. "New York Region" means the States of Connecticut, Pennsylvania, New Jersey and New York State south of Wappingers Falls. "Northern Region Agreement" means the Supply and Distribution Agreement between Grand Union and C&S dated June 15, 1995, as amended from time to time. "Person" means any individual, partnership, firm, corporation, association, trust, unincorporated organization or other entity or any government or governmental authority or agency. "Service Level" means at any time a percentage reflecting the ratio of (i) the number of cases of Merchandise actually delivered by C&S to Grand Union Stores within the delivery periods required hereunder to (ii) the total number of cases of such Merchandise ordered by Page 4 Grand Union for delivery by C&S during such delivery periods, less unauthorized Merchandise and manufacturers' out-of-stock Merchandise. "Term" has the meaning specified in Section 2.02. ARTICLE II SCOPE OF AGREEMENT; TERM SECTION 2.01. Agreement. [CONFIDENTIAL] SECTION 2.02. Term. (a) Implementation will begin on January 2, 1996, and the term of this Agreement (the "Term") will be [CONFIDENTIAL], beginning February 25, 1996; provided, however, that if the Term has not been extended by written agreement entered into [CONFIDENTIAL], the Term shall be extended, without any action of the parties hereto, for an additional Contract Year, to expire [CONFIDENTIAL]. (b) C&S has the right, which may be exercised by giving notice to Grand Union at any time [CONFIDENTIAL], to extend the Term for two additional Contract Years so that the Term is extended to [CONFIDENTIAL]. Grand Union shall also have the right, which may be exercised by giving notice to C&S at any time [CONFIDENTIAL], to extend the Term for two additional Contract Years so that the Term is extended to [CONFIDENTIAL]. (c) Notwithstanding the foregoing provisions, if the date on which Grand Union commences purchasing substantially all of its requirements of Merchandise Page 5 from C&S occurs after February 25, 1996, the Term will commence on the first Sunday after such date, and the other dates provided for in this Section 2.02 will be adjusted accordingly. ARTICLE III PURCHASE, SALE AND DISTRIBUTION SECTION 3.01. Agreement. [CONFIDENTIAL] SECTION 3.02. Delivery. All Merchandise ordered by Grand Union hereunder shall be delivered by C&S F.O.B. destination to the applicable Grand Union Store dock in accordance with the Delivery Schedules, and title to, and risk of loss with respect to, such Merchandise shall remain with C&S until such delivery. C&S will be in breach of this Agreement if for any reason, other than a material default by Grand Union under this Agreement, picketing or other labor disputes at Grand Union Stores or an Event of Force Majeure, C&S fails, during any period of two consecutive weeks, to deliver [CONFIDENTIAL] scheduled deliveries within the delivery windows as provide for in the Delivery Schedules. If Grand Union believes that a breach has occurred, Grand Union shall give notice to C&S and C&S shall use its best efforts to immediately restore the delivery service. If the on-time delivery level is not immediately restored, C&S and Grand Union agree to meet to seek to resolve the issue, PROVIDED that Grand Union's rights and remedies hereunder shall remain in effect if such issue is not resolved. SECTION 3.03. Base Price. [CONFIDENTIAL] Page 6 SECTION 3.04. Other Pricing Provisions. [CONFIDENTIAL] SECTION 3.05. Payments. [CONFIDENTIAL] SECTION 3.06. Service Level. [CONFIDENTIAL] ARTICLE IV FEES; OTHER PAYMENTS [CONFIDENTIAL] Page 7 ARTICLE V CERTAIN COVENANTS SECTION 5.01. Information. C&S agrees to provide Grand Union with such information as Grand Union may reasonably request from time to time in order to monitor compliance by C&S with the provisions of, and to carry out the transactions contemplated by, this Agreement. C&S further agrees that Grand Union will be allowed to conduct, twice during any twelve-month period, in-depth audits of [CONFIDENTIAL]. Such audits will be conducted by no more than two auditors, and Grand Union will use its best efforts to complete each such audit within a one-week period. C&S shall cooperate with Grand Union and its representatives in connection with any such audit. SECTION 5.02. Reclamation. [CONFIDENTIAL]. SECTION 5.03. Quality Control. (a) C&S will provide to Grand Union certain products, [CONFIDENTIAL], in accordance with the standards set forth in Grand Union's Product Specification Manual (the "Standards Manual"), a copy of which has been provided to C&S (such standards to include, without limitation, those relating to temperature controls, sanitation standards, storage controls, date code reviews and packaging inspection). All dairy merchandise to be shipped to Grand Union will be received at store level with a minimum shelf life stipulated in Grand Union's receiving specifications as set forth in the Standards Manual. Page 8 All standards and specifications referred to above, together with such other reasonable and practicable standards and specifications of a nature similar to and not more onerous to C&S than those referred to above, as may be agreed to by Grand Union and C&S in writing from time to time, are referred to herein as the "Standards." (b) Grand Union shall not be required to accept Merchandise that does not meet the Standards, and any such Merchandise shall be returned on the next C&S delivery and Grand Union will be credited on the C&S billing statement. If Grand Union, in its sole judgment, determines that C&S is not in compliance with the Standards, Grand Union will notify C&S in writing. If C&S has not cured the problem within 45 days of notification, Grand Union and C&S will meet to seek to resolve the problem. If the problem is not cured within 30 days after this meeting, Grand Union will be entitled to use one or more secondary suppliers for that category or department, until such time as C&S cures the problem. SECTION 5.04 Compliance with Law. Each of Grand Union and C&S covenants and agrees that in performing its obligations hereunder, it will comply with all applicable laws, rules, regulations and orders and will have and maintain all permits, licenses and authorizations necessary for the conduct of its business and the performance of its obligations hereunder. SECTION 5.05. Insurance. C&S agrees that all material properties and risks of C&S shall at all times be covered by valid and currently effective insurance policies or binders of insurance or programs of self-insurance in such types and amounts as are consistent with customary practices and standards of C&S. Grand Union agrees that all material properties and risks of Grand Union shall at all times be covered by valid and currently effective insurance Page 9 policies or binders of insurance or programs of self-insurance in such types and amounts as are consistent with customary practices and standards of companies engaged in businesses and operations similar to those of Grand Union. SECTION 5.06. Certain Financial Information. Grand Union shall immediately give notice to C&S, in the form of a Certificate signed by Grand Union's Chief Financial Officer, of any defaults occurring under either the Credit Agreement between Grand Union and its lending institutions or the Indenture and other documentation with respect to the notes issued by Grand Union to its senior noteholders. In addition, Grand Union shall immediately give notice to C&S, in the form of a Certificate signed by Grand Union's Chief Financial Officer, in the event that the remaining amounts of credit available to Grand Union under its lines of credit falls below $20,000,000. SECTION 5.07. Certain Leases. C&S understands that Grand Union is the lessee under certain equipment leases as set forth on Exhibit G. Grand Union represents that it has furnished C&S with a true and correct copy of each such lease and that there are currently no defaults under such leases. C&S agrees to use its best efforts to eliminate or minimize any losses due to the termination of such leases. SECTION 5.08. Affirmation and Acknowledgment. Grand Union affirms and acknowledges that (i) upon a failure by Grand Union to make any payment when due pursuant to Section 3.05(b) of this Agreement, C&S may fully enforce against Grand Union any and all rights that C&S may possess pursuant to the Perishable Agricultural Commodities Act, 1930, as amended, codified at 7 U.S.C.A. ' 499a et seq. ("PACA"), (ii) upon an Event of Insolvency with respect to Grand Union or a failure by Grand Union to make any payment when due pursuant to Section 3.05 of this Agreement, C&S may fully enforce against Grand Page 10 Union any and all rights that C&S may possess pursuant to Section 2-702 of the Uniform Commercial Code as enacted in the State of New York ("Section 2-702"), including without limitation, the right to reclaim goods delivered to Grand Union upon the terms and conditions set forth in Section 2-702, and (iii)upon a failure of Grand Union to make any payment when due under this Agreement or the Northern Region Agreement (a "Grand Union Payment Obligation"), including without limitation, those payment obligations arising under each of Sections 3.05, 4.01, 4.05 and 7.04 of either such agreement, C&S may, and is hereby authorized by Grand Union, at any time and from time to time, to the fullest extent permitted by applicable law, without advance notice to Grand Union (any such notice being expressly waived by Grand Union), set off and apply any and all amounts owed by C&S to Grand Union under this Agreement, including without limitation, amounts payable by C&S as volume incentives pursuant to Section 4.03 of this Agreement, against any or all of the Grand Union Payment Obligations that have not been paid when due and remain unpaid, irrespective of whether or not C&S has exercised any other rights that it has or may have with respect to such Grand Union Payment Obligations. Grand Union shall execute and deliver to C&S, from time to time during the term of this Agreement, such documents as C&S may reasonably request to create, maintain, acknowledge or confirm the rights of C&S affirmed and acknowledged by Grand Union pursuant to this Section 5.08. ARTICLE VI GRAND UNION INVENTORY SECTION 6.01. Purchase of Inventory. C&S agrees to work with Grand Union to maintain service levels to Grand Union Stores while Grand Union is reducing inventory at the facilities used by Grand Union to service the New York Region in accordance with the Inventory Reduction Plan and Timetable mutually agreed upon by C&S and Grand Union. C&S agrees to Page 11 purchase from Grand Union any such inventory remaining after such reduction program, other than out-of-code, discontinued or unsalable Merchandise; [CONFIDENTIAL] ARTICLE VII TERMINATION SECTION 7.01. Termination by C&S. C&S may terminate this Agreement for cause (i) in the event of a default by Grand Union under Section 3.05 which remains uncured [CONFIDENTIAL] by Grand Union of written notice thereof from C&S (subject, however, to the provisions of such Section for arbitration), (ii) in the event that Grand Union breaches any other material obligation under this Agreement and such breach is curable and remains uncured after [CONFIDENTIAL] receipt by Grand Union of written notice of such breach from C&S, (iii) upon the occurrence of an Event of Insolvency with respect to Grand Union (provided, however, that C&S shall not terminate this Agreement upon the occurrence of an Event of Insolvency in the event that Grand Union is otherwise in compliance with the terms of this Agreement and Grand Union provides adequate assurance of future performance under this Agreement), or (iv) upon termination of the Northern Region Agreement pursuant to Section 7.01 thereof. Notwithstanding the foregoing, in the event that Grand Union defaults under section 3.05 on two occasions in any Contract Year and thereafter cures its default within the 72 hour period set forth above, C&S may, on the occurrence of any subsequent default under Section 3.05 occurring in the same Contract Year, terminate this agreement immediately upon notice to Grand Union. In the event of termination by C&S under this Section 7.01, Grand Union Page 12 shall pay to C&S, as full and liquidated damages (including damages for lost profits), the applicable termination fee set forth in Section 7.04 below. SECTION 7.02. Termination by Grand Union. Grand Union may terminate this Agreement for cause (i) in the event that C&S breaches any material obligation under this Agreement and such breach is curable and remains uncured [CONFIDENTIAL] written notice of such breach from Grand Union, (ii) upon the occurrence of an Event of Insolvency with respect to C&S, or (iii) upon termination of the Northern Region Agreement pursuant to Section 7.02 thereof. Grand Union may also terminate this Agreement [CONFIDENTIAL] written notice to C&S; provided, however, that in the event Grand Union exercises such right to terminate for convenience Grand Union shall pay to C&S, as full and liquidated damages (including damages for lost profits), the applicable termination fee set forth in Section 7.04 below. SECTION 7.03. Negotiations; Interim Period (a) The parties shall meet at least once within each 30 day time period during any 90 day time period provided for in Section 7.01(ii) or Section 7.02(i) hereto to attempt to cure any breach as provided in such Sections. (b) During the period following delivery of any notice of termination and prior to the termination of this Agreement, each party shall perform its obligations under this Agreement in substantially the same manner as they were performed prior to the date of delivery of such notice, with no disruption to Grand Union's supply of Merchandise; provided, however, that the parties shall negotiate in good faith to agree to a "winding-up" schedule for such period. Page 13 SECTION 7.04. Termination Fees. In the event C&S terminates this Agreement for cause pursuant to Section 7.01 above, or Grand Union terminates this Agreement for convenience pursuant to Section 7.02 above, Grand Union shall pay to C&S a termination fee calculated in accordance with the following schedule: Contract Year During which Termination Occurs Termination Fee ------------------------------- --------------- [CONFIDENTIAL] The parties acknowledge that it would be difficult and costly to assess and establish C&S' losses arising out of termination of this Agreement on account of Grand Union's breach or Grand Union's early termination for its convenience. Nonetheless, the parties believe that the termination fee schedule set forth above is reasonable in light of the costs C&S will incur to perform its obligations under this Agreement and the damages C&S will suffer in the event of such termination (including but not limited to damages for lost profits, incidental damages and other consequential damages). SECTION 7.05. Waiver. Either party to this Agreement may (a) extend the time for the performance of any of the obligations or other acts of the other party or (b) waive compliance with any of the agreements or conditions of the other party contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party to be bound thereby. Any waiver of any term or condition shall not be construed as a waiver of Page 14 any subsequent breach or a subsequent waiver of the same term or condition, or a waiver of any other term or condition, of this Agreement. The failure of any party to assert any of its rights hereunder shall not constitute a waiver of any of such rights. ARTICLE VIII REPRESENTATIONS AND WARRANTIES SECTION 8.01. Representations and Warranties of C&S. C&S hereby represents and warrants to Grand Union as follows: (a) Corporate Organization and Authority. C&S (i) is a corporation duly organized, validly existing and in good standing under the laws of the State of Vermont and is authorized to transact business in the States of Connecticut, New Jersey, New York and Pennsylvania; and (ii) has the corporate power and authority to own and operate its properties and to carry on its business as now conducted and as proposed to be conducted. (b) Authorization. C&S has the corporate power and authority to execute, deliver and perform its obligations under this Agreement and has taken all necessary corporate action to authorize its execution, delivery and performance of this Agreement. This Agreement has been duly executed and delivered on behalf of C&S and constitutes the legal, valid and binding obligation of C&S, enforceable in accordance with its terms (c) No Consents; Conflicts. No consent, authorization by, approval of or other action by, and no notice to, or filing or registration with, any governmental authority, agency, regulatory body, lender, lessor, franchisee or other Person is required for the execution, delivery or performance of this Agreement by C&S, other than those that have been obtained and are in full force and effect. The execution, delivery Page 15 and performance of this Agreement will not result in any violation or breach of any provision of the charter or by-laws of C&S, any judgment, decree or order to which C&S is a party or by which it is bound, any indenture, mortgage or other agreement or instrument to which C&S is a party or by which it is bound or any statute, rule or regulation applicable to C&S. SECTION 8.02. Representations and Warranties of Grand Union. Grand Union hereby represents and warrants to C&S as follows: (a) Corporate Organization and Authority. Grand Union (i) is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and is authorized to transact business in the States of Connecticut, New Jersey, New York and Pennsylvania; and (ii) has the corporate power and authority to own and operate its properties and to carry on its business as now conducted and as proposed to be conducted. (b) Authorization. Grand Union has the corporate power and authority to execute, deliver and perform its obligations under this Agreement and has taken all necessary corporate action to authorize its execution, delivery and performance of this Agreement. This Agreement has been duly executed and delivered on behalf of Grand Union and constitutes the legal, valid and binding obligation of Grand Union, enforceable in accordance with its terms. (c) No Consents; Conflicts. No consent, authorization by, approval of or other action by, and no notice to, or filing or registration with, any governmental authority, agency, regulatory body, lender, lessor, franchisee or other Person is required for the execution, delivery or performance of this Agreement by Grand Union, Page 16 other than those that have been obtained and are in full force and effect. The execution, delivery and performance of this Agreement will not result in any violation or breach of any provision of the charter or by-laws of Grand Union, any judgment, decree or order to which Grand Union is a party or by which it is bound, any indenture, mortgage or other agreement or instrument to which Grand Union is a party or by which it is bound or any statute, rule or regulation applicable to Grand Union. ARTICLE IX GENERAL PROVISIONS SECTION 9.01. Entire Agreement. This Agreement, together with the documents referred to herein, constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral, between the parties hereto with respect to the subject matter hereof. SECTION 9.02. Expenses. Except as otherwise specified in this Agreement, all costs and expenses, including, without limitation, fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by the party incurring the same. SECTION 9.03. Amendments. This Agreement may not be amended or modified except (i) by an instrument in writing signed by, or on behalf of, each of Grand Union and C&S or (ii) by a waiver in accordance with Section 7.05. SECTION 9.04. Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by courier service, by telecopy or telex or by registered or certified mail (postage prepaid, Page 17 return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 9.04): (a) If to Grand Union: William A. Louttit Executive Vice President and Chief Operating Officer The Grand Union Company 201 Willowbrook Boulevard Wayne, New Jersey 07470-0966 Telephone: (201) 890-6000 [CONFIDENTIAL] (b) If to C&S: Richard B. Cohen President and Chief Executive Officer C&S Wholesale Grocers, Inc. Old Ferry Road Brattleboro, Vermont 05301 Telephone: (802) 257-6700 [CONFIDENTIAL] SECTION 9.05. Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of Grand Union and C&S and their respective successors and assigns; provided that (i) C&S shall not have the right to assign or subcontract its rights or obligations hereunder or any interest herein (excluding the transportation of Merchandise) without the prior written consent of Grand Union, which consent shall not be unreasonably withheld, conditioned or delayed and (ii) Grand Union may assign its rights and delegate its obligations hereunder only so long as (x) Grand Union shall assign, and the assignee shall assume, all such rights and obligations, (y) the assignment is to a Person or Persons who are acquiring all or substantially all of Grand Union's business or assets in the New York Region, and (z) Grand Union demonstrates, to the reasonable satisfaction of C&S, that such Person has the financial Page 18 capability to perform the obligations of Grand Union hereunder. C&S agrees that it shall respond, in respect of clause (z) above, promptly, and in any event within 10 business days of receipt of notice from Grand Union of any such proposed assignment. Failure by C&S to respond to Grand Union within such 10 business day period shall be deemed to be a confirmation by C&S to Grand Union of its reasonable satisfaction with the financial capability of the proposed assignee. SECTION 9.06. Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. SECTION 9.07. Confidentiality. Each of Grand Union and C&S agrees to and will cause its respective authorized agents, representatives, affiliates, employees, officers, directors, accountants, counsel and other designated representatives (collectively, "Representatives") to (i) treat and hold as confidential (and not disclose or provide access to any Person to) all records, books, contracts, instruments, computer data and other data and information (collectively, "Information") concerning the other in its possession or furnished by the other or the other's Representatives pursuant to this Agreement, (ii) in the event that either party or its Representatives become legally compelled to disclose any such Information, provide the other party with prompt written notice of such requirement so that such other party may seek a protective order or other remedy or waive compliance with this Section 9.07, and (iii) in the event that such protective order or other remedy is not obtained, or the other party waives compliance with this Section 9.07, furnish only that portion of such Information which is legally required to be provided and exercise its best efforts to obtain assurances that confidential Page 19 treatment will be accorded such Information; provided, however, that this sentence shall not apply to any Information that, at the time of disclosure, is available publicly and was not disclosed in breach of this Agreement by such party or its Representatives; and provided further, however, that C&S agrees that Grand Union is the owner of all Information relating to Grand Union's purchasing practices and that Grand Union may in its sole discretion sell such purchasing related Information to third parties. Each party agrees and acknowledges that remedies at law for any breach of its obligations under this Section 9.07 are inadequate and that in addition thereto the other party shall be entitled to seek equitable relief, including injunction and specific performance, in the event of any such breach, without the necessity of demonstrating the inadequacy of monetary damages. SECTION 9.08. Relationship of Parties. In all matters relating to this Agreement, both parties shall be acting solely as independent contractors and shall be solely responsible for the acts of their employees, officers, directors and agents. Employees, agents or contractors of one party shall not be considered employees, agents or contractors of the other party. SECTION 9.09. No Third-Party Beneficiaries. This Agreement shall be binding upon and inure solely to the benefit of the parties thereto and their permitted assigns, and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever. SECTION 9.10. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other Page 20 provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible. SECTION 9.11. Headings. The descriptive headings contained in this Agreement are for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. SECTION 9.12. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to the principles of conflicts of laws thereof. SECTION 9.13. Arbitration. (a) Any matter required to be submitted to arbitration pursuant to Section 3.05 of this Agreement shall be subject to this Section 9.13. Any such matter shall be submitted to binding arbitration in Springfield, Massachusetts (or another location agreed to by the parties) in accordance with the rules and procedures of the American Arbitration Association (or another organization agreed to by the parties). The arbitration shall be conducted in accordance with (i) the terms of this Section 9.13; (ii) the commercial arbitration rules of the American Arbitration Association (or the corresponding rules of any such other organization); (iii) the Federal Arbitration Act (Title 9 of the United States Code); and (iv) to the extent the foregoing are inapplicable, unenforceable or invalid, the laws of the State of New York. Judgment upon any award rendered hereunder may be entered in any court having jurisdiction. (b) A single arbitrator shall be selected by mutual agreement Page 21 of the parties, or, if the parties fail to reach such agreement within ten days after either party has requested arbitration hereunder in writing, by, or in a manner provided by the American Arbitration Association (or such other organization referred to above). (c) The arbitrator is empowered to resolve the matter in dispute by summary ruling substantially similar to a summary judgment and motion to dismiss. The arbitrator shall resolve all disputes in accordance with applicable substantive law. The determination of the arbitrator shall be binding on all parties and shall not be subject to further review or appeal except as allowed by applicable law. The costs and expenses of the arbitrator shall be apportioned between the parties hereto as determined by the arbitrator in such manner as the arbitrator deems reasonable. (d) The arbitrator and the parties shall take all actions necessary to the end that the arbitration proceeding shall be concluded as promptly as practicable. (e) The provisions of this Section 9.13 shall not preclude a party from exercising any right or remedy with respect to any matter that is not expressly required to be submitted to arbitration pursuant to Section 3.05 of this Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date first written above. THE GRAND UNION COMPANY By: ---------------------- Name: William A. Louttit Page 22 Title: Executive Vice President Chief Operating Officer C&S WHOLESALE GROCERS, INC. By: ---------------------- Name: Richard B. Cohen Title: President EXHIBIT A Delivery Schedules [CONFIDENTIAL] EXHIBIT B Grand Union Stores [CONFIDENTIAL] EXHIBIT C Net Upcharge Rate Per Category [CONFIDENTIAL] EXHIBIT D Store Supply Categories [CONFIDENTIAL] EXHIBIT E Credit Policy [CONFIDENTIAL] EXHIBIT F Volume Incentive [CONFIDENTIAL] EXHIBIT G Schedule of Equipment Leases [CONFIDENTIAL] Page 23 EX-27.1 7 EXHIBIT 27.1
5 The 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. 1,000 OTHER MAR-30-1996 OCT-15-1995 JAN-06-1996 34,838 0 19,161 0 172,389 14,934 809,744 332,222 1,243,680 220,330 846,522 0 0 10,000 63,408 1,243,680 1,787,873 1,787,873 1,241,452 1,241,452 594,254 0 75,307 (123,140) (13,212) (109,928) 0 854,785 0 744,857 (8.06) 0
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