-----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, NLPxZy00FKyesgSKVAxxAYgjffL2b77d/9nFF9JaSqCDaO1xuV4l+x4bCyO7yvBk uv5aCNytkAlA31Mptp+ECg== 0000912057-96-019422.txt : 19960904 0000912057-96-019422.hdr.sgml : 19960904 ACCESSION NUMBER: 0000912057-96-019422 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19960720 FILED AS OF DATE: 19960903 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: 96624951 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 JULY 20, 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 incorporation (I.R.S. Employer Identification or organization) No.) 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 September 3, 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 - 16 weeks ended July 20, 1996, 5 weeks ended July 22, 1995 (Successor Company) and 11 weeks ended June 17, 1995 (Predecessor Company) 3 Consolidated Balance Sheet - July 20, 1996 and March 30, 1996 4 Consolidated Statement of Cash Flows - 16 weeks ended July 20, 1996, 5 weeks ended July 22, 1995 (Successor Company) and 11 weeks ended June 17, 1995 (Predecessor Company) 5 Notes to Consolidated Financial Statements 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 8 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORT ON FORM 8-K. 11 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) Predecessor Successor Company Company ------------------------ ------------ 16 Weeks 5 Weeks 11 Weeks Ended Ended Ended July 20, July 22, June 17, 1996 1995 1995 ---------- ---------- ---------- Sales $ 726,823 $ 232,663 $ 487,882 Cost of sales (504,924) (159,583) (344,041) ---------- ---------- ---------- Gross profit 221,899 73,080 143,841 Operating and administrative expenses (180,878) (55,492) (117,544) Depreciation and amortization (25,413) (6,955) (17,215) Amortization of excess reorganization value (31,572) (10,110) - Reorganization items - - (18,627) Interest expense, net (contractual interest of $43,360 for the 11 weeks ended July 17, 1995) (32,287) (9,546) (19,791) ---------- ---------- ---------- Loss before income tax benefit and extraordinary gain on debt discharge (48,251) (9,023) (29,336) Income tax benefit (provision) 4,439 (500) - ---------- ---------- ---------- Loss before extraordinary gain on debt discharge (43,812) (9,523) (29,336) Extraordinary gain on debt discharge - - 854,785 ---------- ---------- ---------- Net (loss) income $ (43,812) $ (9,523) $ 825,449 ---------- ---------- ---------- ---------- ---------- ---------- Net loss per share $ (4.38) $ (0.95) ---------- ---------- ---------- ---------- See accompanying notes to consolidated financial statements (unaudited). 3 THE GRAND UNION COMPANY CONSOLIDATED BALANCE SHEET (in thousands) (unaudited) July 20, March 30, 1996 1996 ---------- ---------- ASSETS Current assets: Cash and temporary investments $ 33,265 $ 39,425 Receivables 31,928 20,948 Inventories 134,914 133,506 Other current assets 13,659 13,709 ---------- ---------- Total current assets 213,766 207,588 Property, net 475,260 473,726 Excess reorganization value, net 406,100 437,672 Deferred tax asset 58,355 53,916 Other assets 11,901 12,304 ---------- ---------- $1,165,382 $1,185,206 ---------- ---------- ---------- ---------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 1,613 $ 1,813 Current portion of obligations under capital leases 7,356 7,080 Accounts payable and accrued liabilities 180,035 170,010 ---------- ---------- Total current liabilities 189,004 178,903 ---------- ---------- Long-term debt 743,835 738,067 ---------- ---------- Obligations under capital leases 136,413 128,114 ---------- ---------- Other noncurrent liabilities 95,798 95,978 ---------- ---------- Stockholders' equity: Common stock, $1.00 par value, 30,000,000 shares authorized, 10,000,000 shares issued and outstanding 10,000 10,000 Preferred stock, $1.00 par value, 10,000,000 shares authorized, no shares issued and outstanding - - Capital in excess of par value 144,000 144,000 Accumulated deficit (153,668) (109,856) ---------- ---------- Total stockholders' equity 332 44,144 ---------- ---------- $1,165,382 $1,185,206 ---------- ---------- ---------- ---------- See accompanying notes to consolidated financial statements (unaudited). 4 THE GRAND UNION COMPANY CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands) (unaudited) Predecessor Successor Company Company ------------------------ ------------ 16 Weeks 5 Weeks 11 Weeks Ended Ended Ended July 20, July 22, June 17, 1996 1995 1995 ---------- ---------- ---------- OPERATING ACTIVITIES: Net (loss) income $(43,812) $(9,523) $825,449 Adjustments to reconcile net (loss) income to net cash provided by (used for) operating activities before reorganization items paid: Depreciation and amortization 25,413 6,955 17,215 Amortization of excess reorganization value 31,572 10,110 - LIFO charge 400 100 300 Deferred taxes (4,439) - - Noncash interest - 6,961 1,126 Extraordinary gain on debt discharge - - (854,785) Net changes in assets and liabilities: Receivables (10,980) (8,481) 1,769 Inventories (1,808) 15,693 12,646 Accounts payable and accrued liabilities 10,025 (15,726) (34,928) Other current assets 50 (946) 2,776 Other 888 (1,568) 4,493 ---------- ---------- ---------- Net cash provided by (used for) operating activities before reorganization items paid 7,309 3,575 (23,939) Reorganization items paid (2,511) (250) (4,913) ---------- ---------- ---------- Net cash provided by (used for) operating activities 4,798 3,325 (28,852) ---------- ---------- ---------- INVESTMENT ACTIVITIES: Capital expenditures (14,535) (2,414) (3,301) Disposals of property 421 - 5,452 ---------- ---------- ---------- Net cash (used for) provided by investment activities (14,114) (2,414) 2,151 ---------- ---------- ---------- FINANCING ACTIVITIES: Proceeds from New Bank agreement - - 104,144 Net proceeds from long-term debt 6,000 - - Payment of Old Bank debt - - (93,144) Obligations under capital leases discharged (2,607) (647) (1,707) Loan placement fees - - (3,125) Retirement of long-term debt (237) (84) (239) ---------- ---------- ---------- Net cash provided by (used for) financing activities 3,156 (731) 5,929 ---------- ---------- ---------- (Decrease) increase in cash and temporary investments (6,160) 180 (20,772) Cash and temporary investments at beginning of period 39,425 68,651 89,423 ---------- ---------- ---------- Cash and temporary investments at end of period $ 33,265 $ 68,831 $ 68,651 ---------- ---------- ---------- ---------- ---------- ---------- Supplemental disclosure of cash flow information: Interest payments $ 11,189 $ 1,973 $ 9,515 Capital lease obligations incurred 11,182 201 20,072 See accompanying notes to consolidated financial statements (unaudited). 5 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 (the "Company") include the accounts of the Company and its subsidiaries, all of which are wholly-owned. These consolidated financial statements as of and for the periods subsequent to June 17, 1995 were prepared in accordance with the principles of fresh-start reporting contained within the American Institute of Certified Public Accountants Statement of Position 90-7, "Financial Reporting By Entities In Reorganization Under The Bankruptcy Code" ("Fresh-Start Reporting"). Therefore, in connection with the implementation of Fresh-Start Reporting, a new entity was deemed created for financial reporting purposes and, where applicable, the consolidated financial statements for the "Successor Company" have been separately identified from those of the "Predecessor Company". In the opinion of management, the consolidated financial statements include all adjustments, which, except for fresh-start adjustments, 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 March 30, 1996. Operating results for the periods presented are not necessarily indicative of the results for the full fiscal year. NOTE 2 - NET LOSS PER SHARE Net loss per share for the 16 weeks ended July 20, 1996 and 5 weeks ended July 22, 1995 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. In addition, the earnings per share calculation does not include the effect of options issued under The Grand Union Company 1995 Equity Incentive Plan, which provides for issuance of options to purchase up to 950,000 shares of the Company's common stock, and The Grand Union Company 1995 Non-Employee Directors' Stock Option Plan, which provides for the issuance of options to purchase up to 50,000 shares of the Company's common stock, as both plans are subject to stockholders' approval. 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. NOTE 3 - SUBSEQUENT EVENT On July 30, 1996, the Company entered into a definitive agreement (the "Stock Purchase Agreement") to sell $100 million of 8.5% class A convertible preferred stock, $1.00 par value per share (the "Preferred Stock") to an investment group comprised of Trefoil Capital Investors II, L. P., a Delaware limited partnership, and GE Investment Private Placement Partners II, A Limited Partnership, a Delaware limited partnership (collectively, the "Purchasers"). Pursuant to the Stock Purchase Agreement, the Company will sell to the Purchasers an aggregate of 2,000,000 shares of Preferred Stock (the "Shares") at a purchase price of $50 per share (the "Stated Value") in stages through February 25, 1998. The Company will sell to the Purchasers, at the Purchasers' option, at any time after July 30, 1996, an aggregate of 299,998 shares of Preferred Stock (the "First Closing"). The Purchasers have agreed to purchase, and the Company has agreed to sell, at any time after July 30, 1996, an aggregate of 800,000 shares of Preferred Stock, less any amount of Preferred Stock purchased at the First Closing (the "Principal Closing"). The Purchasers have further agreed to purchase, and the Company has further agreed to sell, an additional 400,000 shares of Preferred Stock on each of February 25, 1997, August 25, 1997 and February 25, 1998. Any or all of the purchases referred to in the preceding sentence may be accelerated by the Purchasers, with or without the approval of the Company. Each of the purchases is subject to the satisfaction or waiver of certain closing conditions as specified in the Stock Purchase Agreement. The Principal Closing, which must occur prior to December 31, 1996, is subject to satisfaction or waiver of all of the conditions set forth in the Stock Purchase Agreement, including without limitation the termination or expiration of any required waiting period pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, stockholder approval (or waiver of such approval by the NASD) and consent of the Company's lenders. Dividends are cumulative and payable quarterly at the rate of 8.5% of the Stated Value per annum. Dividends are payable, at the option of the Company, in additional shares of Preferred Stock or Common Stock through the third anniversary of the Principal Closing. From the third anniversary through the fifth anniversary of the Principal Closing, dividends are payable in cash, unless the terms of the Company's bank credit agreement or 12% senior note indenture prohibit cash dividends, in which case dividends may be paid in Preferred Stock or Common Stock. Beyond the fifth anniversary of the Principal Closing, dividends are payable in cash. To the 6 extent that any dividends on the Preferred Stock are paid in shares of Common Stock, the Company is required to pay a premium in additional shares of Common Stock equal to 33 1/3% of the total number of shares of Common Stock that would otherwise be paid as the dividend. The initial conversion price of the Shares is $6.375. At the Principal Closing, the conversion price is adjusted to 120% of the volume-weighted average of the closing price of the Common Stock for a 30-day trading period ending on a specified date prior to the Principal Closing, but not lower than $6.50 nor greater than $7.25 (the "Conversion Price"). The Preferred Stock is subject to mandatory redemption on June 1, 2005. The Preferred Stock may also be redeemed at the Company's option, after the second anniversary of the Principal Closing under certain conditions. If the price of the Company's Common Stock exceeds, for a specified period of time prior to the call for redemption, 180% of the Conversion Price of the Preferred Stock (if the redemption occurs between the second and third anniversaries of the Principal Closing) or 200% of the Conversion Price (if the redemption occurs between the third and fifth anniversaries of the Principal Closing), the Preferred Stock may be redeemed for $50 per share plus all accrued and unpaid dividends. After the fifth anniversary, the Preferred Stock may be redeemed at prices beginning at approximately $51.60 per share (plus all accrued and unpaid dividends), decreasing ratably to $50.00 per share (plus all accrued and unpaid dividends) beginning after the eighth anniversary. In the event shares of Preferred Stock are converted, accrued and unpaid dividends on these shares are also converted into Common Stock at the same Conversion Price. The Stock Purchase Agreement and Certificate of Designation of Preferred Stock setting forth the powers, preferences, rights, qualifications, limitations and restrictions of such class of preferred stock also contain provisions with respect to the rights of the Purchaser to elect a specified number of directors, the number of disinterested directors, as defined in the Stock Purchase Agreement, voting rights and pre-emptive rights with respect to any sale by the Company of shares of Common Stock or securities convertible into, or exchangeable for, Common Stock. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. GENERAL: As discussed in Note 1, as of 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 applied Fresh-Start Reporting. In connection with the adoption of Fresh-Start Reporting, a new entity was deemed created for financial reporting purposes. For purposes of the discussion of Results of Operations for the 16 weeks ended July 22, 1995, 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 (all dollars in millions): 16 Weeks Ended -------------------- July 20, July 22, 1996 1995 -------------------- Sales $ 726.8 $ 720.5 Gross profit 221.9 216.9 Operating and administrative expenses 180.9 173.0 Depreciation and amortization 25.4 24.2 Amortization of excess reorganization value 31.6 10.1 Reorganization items - 18.6 Interest expense, net 32.3 29.3 Income tax benefit (provision) 4.4 (0.5) Extraordinary gain on debt discharge - 854.8 Net (loss) income (43.8) 815.9 EBITDA 41.0 25.3 Adjusted EBITDA 41.4 44.3 LIFO provision 0.4 0.4 Sales percentage increase (decrease) 0.9% (3.6)% Gross profit as a percentage of sales 30.5 30.1 Operating and administrative expenses as a percentage of sales 24.9 24.0 EBITDA as a percentage of sales 5.6 3.5 Adjusted EBITDA as a percentage of sales 5.7 6.1 Sales for the 16 weeks ended July 20, 1996 (the "1997 first quarter") increased $6.3 million, or 0.9%, as compared to the 16 week period ended July 22, 1995 (the "1996 first quarter"). Same store sales (sales of stores which were operated during the comparable periods of both fiscal years) increased 1.0% as a result of the positive impact of the "More Lower Prices" program implemented beginning in May 1995 and completed in May 1996, and by the marketing and customer service programs which continue to be rolled out across the Company. During the 1997 first quarter, the Company opened one new store and one replacement store and closed two stores. Gross profit, as a percentage of sales, was 30.5% for the 1997 first quarter, compared to 30.1% for the 1996 first quarter. The gross profit percentage increase resulted from (a) savings in distribution expense from outsourcing warehouse distribution and (b) restoration of vendor promotional allowances and other vendor support to normal levels this year from bankruptcy impacted levels experienced in the 1996 first quarter, offset by (c) the negative effect of the price repositioning program implemented last year and completed this year. Operating and administrative expenses, as a percentage of sales, were 24.9% for the 1997 first quarter, compared to 24.0% for the 1996 first quarter. Exclusive of gains on sales of stores, which totaled $1.1 million in the 1997 first quarter and $3.6 million in the 1996 first quarter, operating expenses were 25.0% for the 1997 first quarter and 24.5% for the 1996 first quarter. The increase in the adjusted operating expense percentage resulted from (a) increased store labor hours in support of the Company's marketing and customer service programs and (b) increased advertising costs offset by (c) savings in store average 8 hourly pay from the store voluntary resignation incentive programs completed last year and (d) savings from the reorganization of the Company's organizational structure. Depreciation and amortization totaled $25.4 million for the 1997 first quarter, compared to $24.2 million for the 1996 first quarter. The increase results from the Company's capital spending program. The amortization of the excess reorganization value began to be amortized upon the Company's emergence from bankruptcy last year. During the 11 week period ended June 17, 1995, the Company recorded $18.6 million of reorganization expenses which included professional fees, Fresh-Start Reporting adjustments and interest income on accumulated cash resulting from the Chapter 11 proceedings. Interest expense totaled $32.3 million for the 1997 first quarter, compared with $29.3 million for the 1996 first quarter. The increase in interest is principally a result of the finalization of debt levels upon emergence from bankruptcy. The Company recorded an income tax benefit of $4.4 million during the 1997 first quarter representing federal and state income taxes. 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 reorganization 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. LIQUIDITY AND CAPITAL RESOURCES On July 30, 1996, the Company entered into a definitive agreement (the "Stock Purchase Agreement") to sell $100 million of 8.5% class A convertible preferred stock, $1.00 par value per share (the "Preferred Stock") to an investment group comprised of Trefoil Capital Investors II, L. P., a Delaware limited partnership, and GE Investment Private Placement Partners II, A Limited Partnership, a Delaware limited partnership (collectively, the "Purchasers"). Pursuant to the Stock Purchase Agreement, the Company will sell to the Purchasers an aggregate of 2,000,000 shares of Preferred Stock (the "Shares") at a purchase price of $50 per share (the "Stated Value") in stages through February 25, 1998. The Company will sell to the Purchasers, at the Purchasers' option, at any time after July 30, 1996, an aggregate of 299,998 shares of Preferred Stock (the "First Closing"). The Purchasers have agreed to purchase, and the Company has agreed to sell, at any time after July 30, 1996, an aggregate of 800,000 shares of Preferred Stock, less any amount of Preferred Stock purchased at the First Closing (the "Principal Closing"). The Purchasers have further agreed to purchase, and the Company has further agreed to sell, an additional 400,000 shares of Preferred Stock on each of February 25, 1997, August 25, 1997 and February 25, 1998. Any or all of the purchases referred to in the preceding sentence may be accelerated by the Purchasers, with or without the approval of the Company. Proceeds from the sale of the preferred stock will be used to accelerate Grand Union's capital spending program over the next three years. The Company anticipates capital spending, including capitalized leases other than real estate leases, of approximately $250 million over the period ending March 1999. Closing of the investment is subject to customary conditions, including support by a majority of the Company's shareholders. The Company is also seeking consents from its bank lenders to permit the sale of convertible preferred stock and to provide the Company additional operating flexibility consistent with its expanded capital spending plan. The Company is seeking similar consents from its 12% Senior Noteholders. The Company is and will continue to be highly leveraged. Interest payments totaled approximately $11 million for the 1997 first quarter and will be approximately $100 million for the full year. Capital expenditures, including capitalized leases other than real estate leases, totaled approximately $17 million for the 1997 first quarter and are expected to total between $65 and $70 million for the full year. Fiscal 1997 capital expenditures will principally be dedicated to new and replacement stores, remodels, store systems and maintenance capital. The Company expects to open one new store and three replacement stores, and complete ten M.A.S.T.E.R.S. ("Maximize All Space, Totally Expand the Right Stuff") renovations. In the event that the sale of Preferred Stock was not completed, capital expenditures in Fiscal 1997 would total between $40 and $50 million. There are no 9 significant scheduled debt principal repayments prior to June 2000. The Company plans to finance its working capital, interest expense and capital expenditure requirements from proceeds received from the sale of convertible preferred stock, operations, its Amended and Restated Credit Agreement (the "New Bank Facility"), and, to a limited extent, 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 expanded capital expenditure program is dependent on its operating performance and the sale of Preferred Stock. During Fiscal 1996 and the 1997 first quarter, the Company implemented certain price repositioning and marketing and customer service programs. The Company intends to extend these programs to additional stores in Fiscal 1997. Although these programs tend to adversely affect gross profit and operating expenses in periods in which they are made, and there is no assurance that such programs will lead to improved sales and profits over the long term, Grand Union believes that they are necessary in order to improve future sales and profits. The following table combines the cash flows of the Successor Company and Predecessor Company for the 1996 first quarter. Resources used to finance significant expenditures for the 1997 first quarter and 1996 first quarter, are as follows (in millions): 16 Weeks Ended -------------------- July 20, July 22, 1996 1995 -------- --------- Resources used for: Capital expenditures $ 14.5 $ 5.7 Debt and capital lease repayments 2.9 95.8 Operating activities, including cash and temporary investments - 5.0 Loan placement fees - 3.1 -------- -------- $ 17.4 $ 109.6 -------- -------- -------- -------- Financed by: Operating activities, including cash and temporary investments $ 11.0 $ - Net proceeds from long-term debt 6.0 - Property disposals 0.4 5.5 Proceeds from New Bank Facility - 104.1 -------- -------- $ 17.4 $ 109.6 -------- -------- -------- -------- During the 1997 first quarter, funds for capital expenditures and debt and capital lease repayments were principally obtained from operations and borrowings under the revolving credit facility. During the 1996 first quarter, funds for debt and capital lease repayments, capital expenditures, operating activities and loan placement fees were principally obtained from cash provided by the New Bank Facility. As of July 20, 1996, the Company had $39 million of borrowings and approximately $43 million of letters of credit outstanding under its $100 million revolving credit facility. As of the end of the 1997 first quarter, the Company was in compliance with the covenants of its debt instruments, as amended. With the exception of historical information, the matters discussed herein are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, the competitive environment in which the Company operates, the Company's ability to complete its capital expenditure program on a timely basis and the general economic conditions in the geographic areas in which the Company operates. 10 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORT ON FORM 8-K. (a) Exhibits EXHIBIT NUMBER -------------- 10.1 Second Amendment to the Amended and Restated Credit Agreement, dated as of May 10, 1996. 10.2 Executive Severance Policy. 10.3 Letters dated December 14, 1995, with respect to the 1995 Equity Incentive Plan. 10.4 First Amendment to the 1995 Equity Incentive Plan of The Grand Union Company. 10.5 Letters dated April 3, 1996, with respect to the 1995 Non- Employee Directors' Stock Option Plan. 10.6 First Amendment to the 1995 Non-Employee Directors' Stock Option Plan of The Grand Union Company. 10.7 Form of Indemnification Agreement between the Company and R. Stangeland, D. Josephs, W. Kagler, D. McClure, Jr., D. Ying, J. McCaig, W. Louttit, K. Baum, D. Stine, G. Vuolo and J. Schroeder. *10.8 Agreement with C&S Wholesalers Inc., dated January 21, 1996. 27.1 Financial Data Schedule. * Confidential treatment requested (b) Report on Form 8-K dated July 30, 1996 as filed with the Commission on August 14, 1996. 11 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 September 3, 1996 /s/ Kenneth R. Baum ------------------ ---------------------------------------------------- Kenneth R. Baum Senior Vice President, Chief Financial Officer and Secretary (Principal Financial Officer and Principal Accounting Officer) 12 EX-10.1 2 EXHIBIT 10.1 Exhibit 10.1 SECOND AMENDMENT TO THE AMENDED AND RESTATED CREDIT AGREEMENT SECOND AMENDMENT dated as of May 10, 1996 (this "Amendment") to the AMENDED AND RESTATED CREDIT AGREEMENT dated as of June 15, 1995 (as modified by the Waiver and First Amendment thereto dated as of February 16, 1996, the "Credit Agreement"), each among THE GRAND UNION COMPANY, a Delaware corporation (the "Borrower"), the institutions from time to time party thereto as lenders (the "Banks") and BANKERS TRUST COMPANY, as agent (the "Agent"). Capitalized terms used herein and not defined herein shall have the respective meanings set forth for such terms in the Credit Agreement. W I T N E S S E T H : WHEREAS, the Borrower has determined that, as a result of the transfer to C&S Wholesale Grocers, Inc. of the Borrower's supply and distribution operations, the Borrower's Carlstadt facility and fleet of vehicles are no longer necessary for the conduct of its business; and WHEREAS, the Borrower has requested that the Credit Agreement be amended in order to permit the Borrower to sell the Carlstadt facility and such vehicles and to retain the proceeds thereof in order to offset certain one time cash expenditures associated with the closing of the Borrower's Mount Kisco and Carlstadt facilities; NOW, THEREFORE, the parties hereto hereby agree as follows: SECTION 1. AMENDMENTS. The Credit Agreement is hereby amended as follows: (a) Section 4.2(c) of the Credit Agreement is amended by inserting the following after the term "Permitted Dispositions" at the end of the first sentence of such Section: "and up to an aggregate of $3,500,000 of cash and non-cash proceeds arising from Supplemental Permitted Dispositions". (b) Section 8.1 of the Credit Agreement is amended by inserting the words "Supplemental Permitted Dispositions and" at the beginning of clause (g) of such Section. (c) Section 10 of the Credit Agreement is amended by inserting the following after the definition contained therein of the term "Subsidiary Security Agreement": "'Supplemental Permitted Dispositions' shall mean the sale by the Borrower in compliance with all of the requirements of Section 12.15(b) hereof of the portion of the Carlstadt facility owned by the Borrower and the trucks and other vehicles owned by the Borrower that are no longer needed in the conduct of the Borrower's business as a result of the transfer of the operation of the Borrower's distribution and supply system to C&S Wholesale Grocers, Inc." (d) Section 12.15 of the Credit Agreement is amended by (i) inserting the words "and Supplemental Permitted Disposition" after the term "Permitted Disposition" in each of the second and seventh lines of paragraph (b) of such Section, (ii) re-lettering such paragraph (b) as paragraph "(c)", and (iii) inserting the following after paragraph (a) of such Section as a new paragraph (b): "(b) The Borrower may effect one or more Supplemental Permitted Dispositions so long as (i) each such Supplemental Permitted Disposition is effected solely for cash; (ii) cash received in connection with all such Supplemental Permitted Dispositions in excess of $3,500,000 is used to repay Term Loans, Swingline Loans and Revolving Loans pursuant to Sections 4.1 and 4.2; (iii) no Event of Default is in existence at the time of the consummation of a Supplemental Permitted Disposition or would exist after giving effect thereto; (iv) each Supplemental Permitted Disposition shall be an arm's-length transaction for fair market value (as determined by the management of the Borrower in good faith) and shall involve a purchaser who is not an Affiliate of the Borrower; (v) the Borrower shall have given the Agent and the Banks at least three Business Days prior written notice of each Supplemental Permitted Disposition generating more than $1,000,000 of cash proceeds; and (vi) the Borrower shall have delivered to the Agent an officer's certificate, executed by the chief financial officer of the Borrower, certifying as to compliance with the requirements of the preceding clauses (i), (ii), (iii) and (iv). The consummation of a Supplemental Permitted Disposition shall be deemed to be a representation and warranty by the Borrower that all conditions thereto have been satisfied and that the same is permitted in accordance with the terms of this Agreement, which representation and warranty shall be deemed to be a representation and warranty for all purposes hereunder, including, without limitation, Sections 6 and 9." SECTION 2. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents and warrants to the Agent and each Bank that: (a) no Default or Event of Default has occurred and is continuing on and as of the date hereof; and 2 (b) the representations and warranties of the Borrower and the other Credit Parties contained in the Credit Agreement and the other Credit Documents are true and correct on and as of the date hereof as if made on and as of the date hereof, except to the extent such representations and warranties expressly relate to a different specific date. SECTION 3. EFFECTIVENESS. This Amendment shall become effective when the Agent shall have executed and delivered a counterpart of this Amendment and received duly executed counterparts of this Amendment from the Borrower, each Subsidiary of the Borrower that is a party to any Credit Document and as many of the Banks as shall be necessary to comprise the "Required Banks". SECTION 4. STATUS OF CREDIT DOCUMENTS. This Amendment is limited solely for the purposes and to the extent expressly set forth herein, and, except as expressly modified hereby, the terms, provisions and conditions of the Credit Documents and the Liens granted thereunder shall continue in full force and effect and are hereby ratified and confirmed in all respects. SECTION 5. COUNTERPARTS. This Amendment may be executed and delivered in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A complete set of counterparts shall be lodged with the Borrower and the Agent. SECTION 6. GOVERNING LAW. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF). 3 IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized officers to execute and deliver this Waiver and Second Amendment to the Amended and Restated Credit Agreement as of the date first above written. THE GRAND UNION COMPANY By:/s/ Frank Nicastro ------------------ Name: Frank Nicastro Title: Vice President and Treasurer BANKERS TRUST COMPANY, Individually and as Agent By:/s/ Mary Kay Coyle ------------------ Name: Mary Kay Coyle Title: Managing Director BANKAMERICA BUSINESS CREDIT, INC. By:/s/ Louis Alexander ------------------- Name: Louis Alexander Title: VP BANK POLSKA KASA OPIEKI, SA By:/s/ William A. Shea ------------------- Name: William A. Shea Title: Vice President Senior Lending Officer 4 CITIBANK, N.A. By:/s/ Hans L. Christensen ----------------------- Name: Hans L. Christensen Title: Vice President COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE By:/s/ Sean Mounier ---------------- Name: Sean Mounier Title:First Vice President By:/s/ Brian O'Leary ----------------- Name: Brian O'Leary Title: Vice President THE FIRST NATIONAL BANK OF BOSTON By:/s/ Gretchen Bergstressa ------------------------ Name: Gretchen Bergstressa Title: V. P. HELLER FINANCIAL, INC. By:/s/ T. Bukarski --------------- Name: T. Bukarski Title: V. P. LEHMAN COMMERCIAL PAPER INC. By:/s/ Michele Swanson ------------------- Name: Michele Swanson Title:Authorized Signatary MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By:/s/ Victor Ichosia ------------------ Name: Victor Ichosia Title:Managing Director 5 FLEET BANK N. A. By:/s/ Eric Rubin -------------- Name: Eric Rubin Title:Vice President QUANTUM PARTNERS LDC By: ----------------------- Name: Title: SENIOR DEBT PORTFOLIO By: Boston Management and Research, as Investment Advisor By:/s/ Jeffrey S. Garner --------------------- Name: Jeffrey S. Garner Title: Vice President TRANSAMERICA BUSINESS CREDIT CORPORATION By:/s/ Michael Burn ---------------- Name: Michael Burn Title: Vice President VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST By:/s/ Jeffrey W. Maillet ---------------------- Name: Jeffrey W. Maillet Title: Sr.Vice Pres.-Portfolio Mgr. 6 The foregoing Second Amendment to the Amended and Restated Credit Agreement is hereby consented and agreed to, and the Liens and guaranties under the Credit Documents are hereby confirmed, by: MERCHANDISING SERVICES, INC. GRAND UNION STORES, INC. OF VERMONT GRAND UNION STORES OF NEW HAMPSHIRE, INC. By:/s/ Frank Nicastro ------------------ Name:Frank Nicastro Title:VP and Treasurer of each of the above listed entities 7 EX-10.2 3 EXHIBIT 10.2 Exhibit 10.2 EXECUTIVE SEVERANCE POLICY PURPOSE: To define the severance pay policy of The Grand Union Company (the "Company"). POLICY: Severance pay will be provided to an individual in the event: 1. The individual is terminated involuntarily by the Company without "Cause" (as defined below); or 2. The individual voluntarily terminates employment on account of a "Constructive Termination" (as defined below). Severance payments will be based upon position level or a combination of length of service and position level, as shown in the schedule below: President, Exec. V.P. 18 months Senior V.P. 18 months Corporate V.P. 1 year Appointed V.P. 6 months Director 6 months All other Exempt Personnel 1 week's pay for each year's service, up to a maximum of 26 weeks In addition to severance pay, individuals will be entitled to payment on account of all vacation earned, but not utilized during the applicable year. GENERAL ADMINISTRATION: 1. "Cause" shall mean (i) a refusal by an individual to perform his or her duties, (ii) proven dishonesty or the commission by an individual of an act or acts constituting a felony or (iii) other willful misconduct inimical to the best interests of the Company. 2. "Constructive Termination" shall mean after June 15, 1995 (i) with respect to an individual holding the unique positions of Chief Executive Officer, Chief Operating Officer or Chief Financial Officer, either an involuntary reduction in base pay that exceeds 5% in any year, or an involuntary removal from sole possession of said position, or (ii) with respect to any other covered employee, either an involuntary reduction in base pay that exceeds 10% in any year, or an involuntary reduction in grade level of more than two grades in any year, or (iii) with respect to any employee, any involuntary transfer that would require relocation outside of the current operating area of the Company. 3. Notwithstanding the above, no payments of severance pay will be made to an individual terminated as a result of the sale or closing of a major business unit of the Company, if such individual is offered employment by the buyer of or other successor to such business unit. 4. Payments will be made in one lump sum; Federal and State taxes will be withheld as necessary. 5. Levels of severance indicated above may be modified by individual agreements made at the time of hire or later. All such agreements must have the final approval of the President and Chief Executive Officer. Any person with an individual agreement which addresses the person's right to, and amount of, severance pay, will not be eligible for severance pay under this Policy unless such agreement specifically states otherwise. 6. PERQUISITES a. Benefits - In the event of termination of an individual, the individual will be entitled to elect continuation of Company medical coverage under COBRA, at the rates applicable at that time and otherwise in accordance with COBRA. b. If a company automobile is provided as part of compensation to a terminated individual, the individual will be provided the opportunity to purchase his or her automobile at, if owned by Grand Union, the average of book and fair market value or, if leased by Grand Union, at the then current lease buyout cost, at the time of termination. 2 7. Any exceptions to this policy must be approved by the President and Chief Executive Officer. The Company reserves the right to amend, revise or terminate this Policy at any time; PROVIDED, HOWEVER, that no such action taken after June 15, 1995 and prior to March 30, 1997 may adversely affect the right to or amount of severance pay with respect to Appointed V.P.s and persons more senior in position. 3 EX-10.3 4 EXHIBIT 10.3 Exhibit 10.3 December 14, 1995 Dear I am pleased to inform you that the Grand Union Board of Directors has this week granted you options to purchase shares of Grand Union common stock at a price of $6.625 ($6 5/8) per share. These options may be exercised partially or fully once formal approval of the Plan by the stockholders is received at the Annual Stockholders Meeting (August or September, 1996) through December, 2005. You have worked hard to earn this award. It's great to see you get this recognition. Thanks for your help. Sincerely, \s\ Joseph J. McCaig -------------------- Joseph J. McCaig EX-10.4 5 EXHIBIT 10.4 Exhibit 10.4 FIRST AMENDMENT to the 1995 EQUITY INCENTIVE PLAN of the Grand Union Company 1. Amend the first paragraph of section 3 to read as follows: The Plan will be administered by a committee (the "Committee") of the Board of Directors (the "Board") of the Company. The Committee shall consist of at least two directors, all of whom shall be disinterested persons within the meaning of Rule 16b-3 under the 1934 Act. A majority of the members of the Committee shall constitute a quorum, and all determinations of the Committee shall be made by a majority of its members. Any determination of the Committee under the Plan may be made without notice or meeting of the Committee by a writing signed by a majority of the Committee members. 2. Amend the last paragraph of section 4 to read as follows: 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 Internal Revenue Code of 1986, as amended (the "Code"), any repricing of an Option or Stock Appreciation Right shall be treated as an original grant. 3. Amend Sections 7.3 in its entirety to read as follows: (a) Subject to paragraph (c) below, as of the twentieth (20th) trading day prior to the effective date of a Change of Control, (1) each outstanding Option and each outstanding Stock Appreciation Right shall become exercisable in full, (2) the restrictions shall be removed from each outstanding share of Restricted Stock, (3) the Company shall make all payments and provide all benefits under each outstanding Deferred Stock Award, Performance Award, and Supplemental Grant which would have been made or provided with the passage of time had the transaction not occurred and the Participant not suffered a Status Change (or died), (4) subject to paragraph (c) of this section, the Company shall pay to each holder of Options and Restricted Stock whose Options (other than ISOs granted prior to July 1, 1996) and Restricted Stock have been terminated, an amount equal to the Award Value with respect to such Options or Restricted Stock, such payment to be made by cash or certified check within 30 days after the Change in Control, and (5) the Committee may, in its sole discretion, forgive all or any portion of the principal of or interest on a Loan. For purposes of this section, the Award Value shall be determined as the difference between (i) the exercise price of the Option or the purchase price of the Restricted Stock and (ii) the Market Price, times (iii) the number of shares covered by the Option or the Restricted Stock award, as the case may be. The Market Price shall be determined as the average of the fair market value of the Stock for the period of twenty (20) trading days ending on the effective date of the covered transaction. (b) "Change of Control" means any of the following: (1) any person, entity or Group (persons or entities acting together) is or becomes the beneficial owner of more than 50% of the Voting Stock of the Company; (2) a consolidation, merger, or sale of substantially all of the assets of the Company, with the effect that any person, entity or Group becomes the beneficial owner of more than 50% of the Voting Stock of the Company or the Company is not the surviving entity; (3) during any consecutive two-year period commencing July 1, 1996, individuals who constituted the Board of Directors at the beginning of such period, together with any new directors whose election by the Board or nomination for election by stockholders was approved by 2/3 of the directors who were in office at the beginning of the period or whose election or nomination was so approved, cease to constitute a majority of the Board then in office; or (4) any order, judgment or decree of dissolution or split-up of the Company, and such order remains undischarged or unstayed for a period in excess of 60 days. For purposes of this provision, "more than 50% of the Voting Stock" means more than 50% of one or more classes of stock pursuant to which the holders have the general power to vote for the election of members of the Board of Directors, and the aggregate of such classes for which the person, entity or Group holds more than 50% has the power to elect more than 50% of the members of the Board of Directors. (c) Notwithstanding the foregoing, the termination of Options and the payment of Option Values described in paragraph (a) of this section shall not apply with respect to any transaction in which the holder of an Option or Restricted Stock receives either: (i) replacement options or restricted stock, as the case may be, allowing the holder to receive, on the same terms as in the original Option or Restricted Stock, the greatest amount of securities, cash or other property to which such holder would have been entitled as a holder of Common Stock upon consummation of the transaction if such holder had exercised the rights represented by the Option or restricted stock held by such holder immediately prior to the transaction, or (ii) if pooling of interests is a condition of the transaction, a replacement equity interest which enables the transaction to qualify for pooling of interests. 2 4. Amend the second sentence of section 7.2(a) to read as follows: Any ISOs granted prior to July 1, 1996 that were immediately exercisable prior to the Status Change will continue to be exercisable for a period of three months from the date of the Status Change and shall thereupon terminate unless the Status Change results from a discharge for cause which in the opinion of the Committee casts such discredit on the Participant as to justify immediate termination of the Option. Any other Options or Rights that were exercisable immediately prior to the Status Change will continue to be exercisable for a period of one year from the date of the Status Change (or such other period as the Committee may determine), and shall thereupon terminate, unless the Award provides by its terms for immediate termination in the event of a Status Change or unless the Status Change results from discharge for cause which in the opinion of the Committee casts such discredit on the Participant as to justify immediate termination of the Award. 5. Amend section 8.5 to read as follows: Unless otherwise provided in the Participant's agreement, no Award (other than an Award in the form of an outright transfer of cash or Unrestricted Stock) may be transferred other than by will or by the laws of descent and distribution, and during a Participant's lifetime an Award requiring exercise may be exercised only by him or her (or in the event of the Participant's incapacity, the person or persons legally appointed to act on the Participant's behalf). 6. Amend the last sentence of section 7.2(a) to read as follows: For purposes of this paragraph, in the case of a Participant who is an Employee, a Status Change shall not be deemed to have resulted by reason of (i) a sick leave or other bona fide leave of absence of one year or less or approved for purposes of the Plan by the Committee, or (ii) a transfer of employment between the Company and a subsidiary or between subsidiaries, or to the employment of a corporation (or a parent or subsidiary corporation of such corporation) issuing or assuming an option in a transaction to which section 424(a) of the Code applies. THE GRAND UNION COMPANY by action of the Board of Directors Dated: ------------------ --------------------------- John W. Schroeder Assistant Secretary 3 EX-10.5 6 EXHIBIT 10-5 Exhibit 10.5 April 3,1996 [name] [address] [address] RE: STOCK OPTIONS Dear [name]: This is to confirm for you that, by action of the Board of Directors of the Grand Union Company, on December 12, 1995, you were granted a stock option giving you the right to purchase Five Thousand (5,000) shares of Grand Union Common Stock at an exercise price of $5.75 per share. This stock option will become fully exercisable following stockholder approval of the 1995 Non-employee Directors' Stock Option Plan (the Directors' Plan), according to the following schedule: No. of Shares Vesting Date ------------- ------------ 1,666 on stockholder approval 1,667 December 12, 1996 1,667 December 12, 1997 The terms of your option, including exercise provisions and expiration terms, are all set forth in the Directors' Plan, a copy of which is attached for your convenience. To acknowledge your receipt and acceptance of this letter, please sign the enclosed copy and return it to my attention. If you have any questions, please do not hesitate to contact either me (201-890-6340) or John Schroeder (201-890-6761). Sincerely, /s/ Kenneth R. Baum ------------------- Kenneth R. Baum Senior Vice President, Chief Financial Officer and Secretary Acknowledged and Accepted _______________________ EX-10.6 7 EXHIBIT 10.6 Exhibit 10.6 FIRST AMENDMENT to the 1995 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN of the Grand Union Company 1. Amend the second sentence of section 5 to read as follows: Thereafter, on each date that an Eligible Director is re-elected, 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. 2. Revise the first paragraph of section 7 to read as follows: All Options granted under the Plan prior to July 1, 1996, shall, subject to initial stockholder approval of the Plan, become exercisable immediately as to one-third of the shares, on the first anniversary of the grant date as to the second third of the shares and as to one share of any remainder, and on the second anniversary of the grant date as to the last third of the shares and the second share of any two-share remainder. 3. Insert a new second paragraph in section seven to read as follows: All Options granted under the Plan on or after July 1, 1996, shall, subject to initial stockholder approval of the Plan, become exercisable six months after the grant date as to one-third of the shares, on the earlier of the first anniversary of the grant date or the annual meeting of stockholders closest thereto as to the second third of the shares and as to one share of any remainder, and on the earlier of the second anniversary of the grant date or the annual meeting of stockholders closest thereto as to the last third of the shares and the second share of any two-share remainder. 4. Amend Section 8.c. to read as follows: c. CERTAIN CORPORATE TRANSACTIONS. In the event of a Change of Control of the Company, each outstanding Option not otherwise exercisable shall become immediately exercisable in full on the twentieth (20th) trading day prior to the effective date of the Change of Control. Subject to the last paragraph of this section, the Company shall pay to those Option holders whose Options have been terminated, an amount equal to the Option Value, such payment to be made by cash or certified check within 30 days after the Change in Control. The Option Value shall be determined as the difference between the exercise price of the Option and the Market Price times the number of shares covered by the Option. The Market Price shall be determined as the average of the Fair Market Value, as determined under section 11, for the period of twenty (20) trading days ending on the effective date of the Change of Control. "Change of Control" means any of the following: (1) any person, entity or Group (persons or entities acting together) is or becomes the beneficial owner of more than 50% of the Voting Stock of the Company; (2) a consolidation, merger, or sale of substantially all of the assets of the Company, with the effect that any person, entity or Group becomes the beneficial owner of more than 50% of the Voting Stock of the Company or the Company is not the surviving entity; (3) during any consecutive two-year period commencing July 1, 1996, individuals who constituted the Board of Directors at the beginning of such period, together with any new directors whose election by the Board or nomination for election by stockholders was approved by 2/3 of the directors who were in office at the beginning of the period or whose election or nomination was so approved, cease to constitute a majority of the Board then in office; or (4) any order, judgment or decree of dissolution or split-up of the Company, and such order remains undischarged or unstayed for a period in excess of 60 days. For purposes of this provision, "more than 50% of the Voting Stock" means more than 50% of one or more classes of stock pursuant to which the holders have the general power to vote for the election of members of the Board of Directors, and the aggregate of such classes for which the person, entity or Group holds more than 50% has the power to elect more than 50% of the members of the Board of Directors. Notwithstanding the foregoing, the termination of Options and the payment of Option Values described in the first paragraph of this section shall not apply with respect to any transaction in which the Option Holder receives either: (i) a replacement option allowing the Option Holder to receive, on the same terms as in the original Option, the greatest amount of securities, cash or other property to which such holder would have been entitled as a holder of Common Stock upon consummation of the transaction if such holder had exercised the rights represented by the Option held by such holder immediately prior to the transaction, or (ii) if pooling of interests is a condition of the transaction, a replacement equity interest which enables the transaction to qualify for pooling of interests. 2 5. Amend section 8.b. to read as follows: 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) one year thereafter or (2) the date on which the Option would have terminated had the director remained an Eligible Director, and after completion of that period, such Options shall terminate to the extent not previously exercised, expired or terminated. THE GRAND UNION COMPANY by action of the Board of Directors Dated: __________________ ___________________________ John W. Schroeder Assistant Secretary 3 EX-10.7 8 EXHIBIT 10.7 EXHIBIT 10.7 INDEMNIFICATION AGREEMENT This Agreement, made and entered into this __ day of _______, 1996 ("Agreement"), by and between The Grand Union Company, a Delaware corporation ("Company"), and ______________ ("Indemnitee"): WHEREAS, highly competent persons have become more reluctant to serve publicly-held corporations as directors or in other capacities unless they are provided with adequate protection through insurance and adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation; and WHEREAS, the Board of Directors of the Company (the "Board") has determined that, in order to attract and retain qualified individuals, the Company will attempt to maintain on an ongoing basis, at its sole expense, liability insurance to protect persons serving the Company and its subsidiaries from certain liabilities. Although the furnishing of such insurance has been a customary and widespread practice among United States-based corporations and other business enterprises, the Company believes that, given current market conditions and trends, such insurance may be available to it in the future only at higher premiums and with more exclusions. At the same time, directors, officers, and other persons in service to corporations or business enterprises are being increasingly subjected to expensive and time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the Company or business enterprise itself; and WHEREAS, the uncertainties relating to such insurance and to indemnification have increased the difficulty of attracting and retaining such persons; and WHEREAS, the Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company's stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future; and WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified; and WHEREAS, this Agreement is a supplement to and in furtherance of the By- laws of the Company and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefore, nor to diminish or abrogate any rights of Indemnitee thereunder; and WHEREAS, the By-laws and the Delaware director indemnification statute each is nonexclusive, and therefore contemplates that contracts may be entered into with respect to indemnification of directors, officers and employees; and WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified; and WHEREAS, Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that he be so indemnified; NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows: Section 1. SERVICES BY INDEMNITEE. Indemnitee agrees to serve as a director and/or officer of the Company. Indemnitee may at any time and for any reason resign from such position (subject to any other contractual obligation or any obligation imposed by operation of law), in which event the Company shall have no obligation under this Agreement to continue Indemnitee in such position. This Agreement shall not be deemed an employment contract between the Company (or any of its subsidiaries) and Indemnitee. Indemnitee specifically acknowledges that Indemnitee's employment with the Company (or any of its subsidiaries), if any, is at will, and the Indemnitee may be discharged at any time for any reason, with or without cause, except as may be otherwise provided in any written employment contract between Indemnitee and the Company (or any of its subsidiaries), other applicable formal severance policies duly adopted by the Board, or, with respect to service as a director or officer of the Company, by the Company's Certificate of Incorporation, By-laws, and the General Corporation Law of the State of Delaware. The foregoing notwithstanding, this Agreement shall continue in force after Indemnitee has ceased to serve as a director and/or officer of the Company. Section 2. INDEMNIFICATION - GENERAL. The Company shall indemnify, and advance Expenses (as hereinafter defined) to, Indemnitee (a) as provided in this Agreement and (b) (subject to the provisions of this Agreement) to the fullest extent permitted by applicable law in effect on the date hereof and as amended from time to time. The rights of Indemnitee provided under the preceding sentence shall include, but shall not be limited to, the rights set forth in the other Sections of this Agreement. Section 3. PROCEEDINGS OTHER THAN PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. Indemnitee shall be entitled to the rights of indemnification provided in this Section 3 if, by reason of his Corporate Status (as hereinafter defined), he is, or is threatened to be made, a party to or a participant in any threatened, pending or completed Proceeding (as hereinafter defined), other than a Proceeding by or in the right of the Company. Pursuant to this Section 3, Indemnitee shall be indemnified against all Expenses, judgments, penalties, fines and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, penalties, fines and amounts paid in -2- settlement) actually and reasonably incurred by him or on his behalf in connection with such Proceeding or any claim, issue or matter therein, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal Proceeding, had no reasonable cause to believe his conduct was unlawful. Section 4. PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. Indemnitee shall be entitled to the rights of indemnification provided in this Section 4 if, by reason of his Corporate Status, he is, or is threatened to be made, a party to or a participant in any threatened, pending or completed Proceeding brought by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section, Indemnitee shall be indemnified against all Expenses (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses) actually and reasonably incurred by him or on his behalf in connection with such Proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company; PROVIDED, HOWEVER, that, if applicable law so provides, no indemnification against such Expenses shall be made in respect of any claim, issue or matter in such Proceeding as to which Indemnitee shall have been adjudged to be liable to the Company unless and to the extent that the Court of Chancery of the State of Delaware, or the court in which such Proceeding shall have been brought or is pending, shall determine that such indemnification may be made. Section 5. PARTIAL INDEMNIFICATION. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a party to (or a participant in) and is successful, on the merits or otherwise, in defense of any Proceeding, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. If Indemnitee is not wholly successful in defense of such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter. If Indemnitee is entitled under any provision of this agreement to indemnification by the Company for some or a portion of the Expenses, judgments, penalties, fines and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, penalties, fines and amounts paid in settlement) actually and reasonably incurred by him or on his behalf in connection with such Proceeding or any claim, issue or matter therein, but not, however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion to which the Indemnitee is entitled. Section 6. INDEMNIFICATION FOR ADDITIONAL EXPENSES. (a) The Company shall indemnify Indemnitee against any and all Expenses and, if requested by Indemnitee, shall (within seven (7) business days of such request) advance -3- such Expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for (i) indemnification or advance payment of Expenses by the Company under this Agreement or any other agreement or by-law of the Company now or hereafter in effect; or (ii) recovery under any directors' and officers' liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advance expense payment or insurance recovery, as the case may be. (b) Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a witness in any Proceeding to which Indemnitee is not a party, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. Section 7. ADVANCEMENT OF EXPENSES. The Company shall advance all reasonable Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding within seven (7) days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee and shall include or be preceded or accompanied by an undertaking by or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately be determined that Indemnitee is not entitled to be indemnified against such Expenses. Notwithstanding the foregoing, the obligation of the Company to advance Expenses pursuant to this Section 7 shall be subject to the condition that, if, when and to the extent that the Company determines that Indemnitee would not be permitted to be indemnified under applicable law, the Company shall be entitled to be reimbursed, within thirty (30) days of such determination, by Indemnitee (who hereby agrees to reimburse the Company) for all such amounts theretofore paid; PROVIDED, HOWEVER, that if Indemnitee has commenced or thereafter commences legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee should be indemnified under applicable law, any determination made by the Company that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any advance of Expenses until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed). Section 8. PROCEDURE FOR DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION. (a) To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification. (b) Upon written request by Indemnitee for indemnification pursuant to the -4- first sentence of Section 8(a) hereof, a determination, if required by applicable law, with respect to Indemnitee's entitlement thereto shall be made in the specific case: (i) if a Change in Control (as hereinafter defined) shall have occurred, by Independent Counsel (as hereinafter defined) in a written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee; or (ii) if a Change of Control shall not have occurred, (A) by a majority vote of the Disinterested Directors (as hereinafter defined), even though less than a quorum of the Board, or (B) if there are no such Disinterested Directors or, if such Disinterested Directors so direct, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee or (C) if so directed by the Board, by the stockholders of the Company; and, if it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within seven (7) days after such determination. Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee's entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or expenses (including attorneys' fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee's entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom. (c) In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 8(b) hereof, the Independent Counsel shall be selected as provided in this Section 8(c). If a Change of Control shall not have occurred, the Independent Counsel shall be selected by the Board of Directors, and the Company shall give written notice to Indemnitee advising him of the identity of the Independent Counsel so selected. If a Change of Control shall have occurred, the Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board of Directors, in which event the preceding sentence shall apply), and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either event, Indemnitee or the Company, as the case may be, may, within 10 days after such written notice of selection shall have been given, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; PROVIDED, HOWEVER, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of "Independent Counsel" as defined in Section 17 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within 20 days after submission by Indemnitee of a written request for indemnification pursuant to Section 8(a) hereof, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware for resolution of any objection which shall have been made by the Company or Indemnitee to the other's selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the Court or by such other person as -5- the Court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 8(b) hereof. The Company shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 8(b) hereof, and the Company shall pay all reasonable fees and expenses incident to the procedures of this Section 8(c), regardless of the manner in which such Independent Counsel was selected or appointed. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 10(a)(iii) of this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing). (d) The Company shall not be required to obtain the consent of the Indemnitee to the settlement of any Proceeding which the Company has undertaken to defend if the Company assumes full and sole responsibility for such settlement and the settlement grants the Indemnitee a complete and unqualified release in respect of the potential liability. The Company shall not be liable for any amount paid by the Indemnitee in settlement of any Proceeding that is not defended by the Company, unless the Company has consented to such settlement, which consent shall not be unreasonably withheld. Section 9. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS. (a) In making a determination with respect to entitlement to indemnification or the advancement of expenses hereunder, the person or persons or entity making such determination shall presume that Indemnitee is entitled to indemnification or advancement of expenses under this Agreement if Indemnitee has submitted a request for indemnification or the advancement of expenses in accordance with Section 8(a) of this Agreement, and the Company shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. Neither the failure of the Company (including its board of directors or independent legal counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including its board of directors or independent legal counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct. (b) If the person, persons or entity empowered or selected under Section 8 of this Agreement to determine whether Indemnitee is entitled to indemnification shall not have made a determination within sixty (60) days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee's statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of -6- such indemnification under applicable law; PROVIDED, HOWEVER, that such 60-day period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluating of documentation and/or information relating thereto; and provided, further, that the foregoing provisions of this Section 9(b) shall not apply (i) if the determination of entitlement to indemnification is to be made by the stockholders pursuant to Section 8(b) of this Agreement and if (A) within fifteen (15) days after receipt by the Company of the request for such determination the Board of Directors has resolved to submit such determination to the stockholders for their consideration at an annual meeting thereof to be held within seventy-five (75) days after such receipt and such determination is made thereat, or (B) a special meeting of stockholders is called within fifteen (15) days after such receipt for the purpose of making such determination, such meeting is held for such purpose within sixty (60) days after having been so called and such determination is made thereat, or (ii) if the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 8(b) of this Agreement. (c) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his conduct was unlawful. (d) RELIANCE AS SAFE HARBOR. For purposes of any determination of Good Faith, Indemnitee shall be deemed to have acted in Good Faith if Indemnitee's action is based on the records or books of account of the Company or relevant enterprise, including financial statements, or on information supplied to Indemnitee by the officers of the Company or relevant enterprise in the course of their duties, or on the advice of legal counsel for the Company or relevant enterprise or on information or records given to reports made to the Company or relevant enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Company or relevant enterprise. The provisions of this Section 9(d) shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement. (e) ACTIONS OF OTHERS. The knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the Company or relevant enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement. Section 10. REMEDIES OF INDEMNITEE. (a) In the event that (i) a determination is made pursuant to Section 8 of this -7- Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 7 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 8(b) of this Agreement within 90 days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Section 5 or 6 of this Agreement within ten (10) days after receipt by the Company of a written request therefor, or (v) payment of indemnification is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification, Indemnitee shall be entitled to an adjudication by the Court of Chancery of the State of Delaware of his entitlement to such indemnification or advancement of Expenses. Alternatively, Indemnitee, at his option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 10(a); PROVIDED, HOWEVER, that the foregoing clause shall not apply in respect of a proceeding brought by Indemnitee to enforce his rights under Section 5 of this Agreement. (b) In the event that a determination shall have been made pursuant to Section 8(b) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 10 shall be conducted in all respects as a DE NOVO trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. If a Change of Control shall have occurred, in any judicial proceeding or arbitration commenced pursuant to this Section 10, the Company shall have the burden of proving that Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be. (c) If a determination shall have been made pursuant to Section 8(b) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 10, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee's statement not materially misleading in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law. (d) In the event that Indemnitee, pursuant to this Section 10, seeks a judicial adjudication of or an award in arbitration to enforce his rights under, or to recover damages for breach of, this Agreement, Indemnitee shall be entitled to recover from the Company, and shall be indemnified by the Company against, any and all expenses (of the types described in the definition of Expenses in Section 17 of this Agreement) actually and reasonably incurred by him in such judicial adjudication or arbitration, but only if he prevails therein. If it shall be determined in said judicial adjudication or arbitration that Indemnitee is entitled to receive part but not all of the indemnification or advancement of expenses sought, the expenses incurred by Indemnitee in connection with such judicial adjudication or arbitration shall be appropriately prorated. The Company shall indemnify Indemnitee against any and all Expenses and, if -8- requested by Indemnitee, shall (within ten (10) days after receipt by the Company of a written request therefor) advance such expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for indemnification or advance of Expenses from the Company under this Agreement or under any directors' or officers' liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement of Expenses or insurance recovery, as the case may be. (e) The Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 10 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement. Section 11. NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE; SUBROGATION. (a) The rights of indemnification and to receive advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Certificate of Incorporation, the By-Laws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in the General Corporation Law of the State of Delaware, whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under the Company's By-Laws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy. (b) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees or agents of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person serves at the request of the Company, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee or agent under such policy or policies. (c) In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit or enforce -9- such rights. (d) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise. (e) The Company's obligation to indemnify or advance expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer, employee or agent of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of expenses from such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise. Section 12. DURATION OF AGREEMENT. This Agreement shall continue until and terminate upon the later of: (a) 10 years after the date that Indemnitee shall have ceased to serve as a director and/or officer of the Company (or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which Indemnitee served at the request of the Company); or (b) the final termination of any Proceeding then pending in respect of which Indemnitee is granted rights of indemnification or advancement of expenses hereunder and of any proceeding commenced by Indemnitee pursuant to Section 10 of this Agreement relating thereto. This Agreement shall be binding upon the Company and its successors and assigns and shall inure to the benefit of Indemnitee and his heirs, executors and administrators. Section 13. SEVERABILITY. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby. Section 14. EXCEPTION TO RIGHT OF INDEMNIFICATION OR ADVANCEMENT OF EXPENSES. Except as provided in Section 6(a) of this Agreement, Indemnitee shall not be entitled to indemnification or advancement of Expenses under this Agreement with respect to any Proceeding brought by Indemnitee (other than a Proceeding by Indemnitee to enforce his rights under this Agreement), or any claim therein prior to a Change in Control, unless the bringing of such Proceeding or making of such claim shall have been approved by the Board of Directors. -10- Section 15. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement. Section 16. HEADINGS. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof. Section 17. DEFINITIONS. For purposes of this Agreement: (a) "Change in Control" means a change in control of the Company occurring after the Effective Date of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the Securities Exchange Act of 1934 (the "Act"), whether or not the Company is then subject to such reporting requirement; PROVIDED, HOWEVER, that, without limitation, such a Change in Control shall be deemed to have occurred if after the Effective Date (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities without the prior approval of at least two-thirds of the members of the Board in office immediately prior to such person attaining such percentage interest; (ii) there occurs a proxy contest, or the Company is a party to a merger, consolidation, sale of assets, plan of liquidation or other reorganization not approved by at least two-thirds of the members of the Board then in office, as a consequence of which members of the Board in office immediately prior to such transaction or event constitute less than a majority of the Board thereafter; or (iii) during any period of two consecutive years, other than as a result of an event described in clause (a)(ii) of this Section 17, individuals who at the beginning of such period constituted the Board (including for this purpose any new director whose election or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board. (b) "Corporate Status" describes the status of a person who is or was a director, officer, employee, fiduciary or agent of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person is or was serving at the request of the Company. (c) "Disinterested Director" means a director of the company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee. (d) "Effective Date" means July 11, 1996. -11- (e) "Expenses" shall include all reasonable attorneys' fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness, in, or otherwise participating in, a Proceeding. (f) "Independent Counsel" means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party, or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee's rights under this Agreement. The Company agrees to pay the reasonable fees of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto. (g) "Proceeding" includes any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought by or in the right of the Corporation or otherwise and whether civil, criminal, administrative or investigative, in which Indemnitee was, is, may be or will be involved as a party or otherwise, by reason of the fact that Indemnitee is or was a director or officer of the Company, by reason of any action taken by him or of any inaction on his part while acting as director or officer of the Company, or by reason of the fact that he is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise; in each case whether or not he is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification or advancement of expenses can be provided under this Agreement; except one (i) initiated by an Indemnitee pursuant to Section 10 of this Agreement to enforce his right under this Agreement or (ii) pending on or before the Effective Date. Section 18. ENFORCEMENT. (a) The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as a director and/or officer of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director and/or officer of the Company. (b) This Agreement constitutes the entire agreement between the parties -12- hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof. Section 19. MODIFICATION AND WAIVER. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. Section 20. NOTICE BY INDEMNITEE. Indemnitee agrees promptly to notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification or advancement of Expenses covered hereunder. The failure of Indemnitee to so notify the Company shall not relieve the Company of any obligation which it may have to the Indemnitee under this Agreement or otherwise. Section 21. NOTICES. All notices, requests, demands or other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been direct, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed: (a) If to Indemnitee to: Address set forth below Indemnitee's signature. (b) If to the Company to: The Grand Union Company Attn: General Counsel 201 Willowbrook Blvd., 9th Floor Wayne, New Jersey 07470-0966 or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be. Section 22. CONTRIBUTION. To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in -13- light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s). Section 23. GOVERNING LAW; SUBMISSION TO JURISDICTION; APPOINTMENT OF AGENT FOR SERVICE OF PROCESS. This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. Except with respect to any arbitration commenced by Indemnitee pursuant to Section 10(a) of this Agreement, the Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Chancery Court of the State of Delaware (the "Delaware Court"), and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) appoint, to the extent such party is not a resident of the State of Delaware, irrevocably [RL&F Service Corp., One Rodney Square, 10th Floor, 10th and King Streets, Wilmington, Delaware 19801] as its agent in the State of Delaware for acceptance of legal process in connection with any such action or proceeding against such party with the same legal force and validity as if served upon such party personally within the State of Delaware, (iv) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court, and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or otherwise inconvenient forum. Section 24. MISCELLANEOUS. Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. ATTEST: THE GRAND UNION COMPANY ____________________________________ By: ________________________________ Name: Name: Title: ATTEST: INDEMNITEE ____________________________________ By: ________________________________ -14- Name: Name: Title: Address: -15- EX-27.1 9 EXHIBIT 27 FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S INTERIM CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 OTHER MAR-29-1997 MAR-31-1996 JUL-20-1996 33,265 0 31,928 0 134,914 213,766 827,886 352,626 1,165,382 189,004 743,835 0 0 10,000 (9,668) 1,165,382 726,823 726,823 504,924 504,924 237,863 0 32,287 (48,251) (4,439) (43,812) 0 0 0 (43,812) (4.38) 0
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