-----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, EV6yb6v5XlUke/QFAWnvpcfvQJefYLF+jTmragvZxncfdtNak8aQlPSjUcHvlboG wYZZAjO6zENS1vfwH3QoDA== 0000912057-97-022278.txt : 19970630 0000912057-97-022278.hdr.sgml : 19970630 ACCESSION NUMBER: 0000912057-97-022278 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 22 CONFORMED PERIOD OF REPORT: 19970329 FILED AS OF DATE: 19970627 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-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-07824 FILM NUMBER: 97631977 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-K405 1 10-K405 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 29, 1997 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 (I.R.S. Employer of incorporation or organization) Identification No.) 201 Willowbrook Boulevard, Wayne, New Jersey 07470-0966 - --------------------------------------------- -------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 973-890-6000 -------------------- Securities registered pursuant to Section 12 (b) of the Act: Title of each class Name of each exchange on which registered - ---------------------------------- ----------------------------------------- Common Stock, Par Value $0.01 National Market System of NASD - ---------------------------------- ----------------------------------------- Securities registered pursuant to Section 12 (g) of the Act: None -------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days. Yes X No ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / X / The aggregate market value of the voting stock held by nonaffiliates of the registrant as of June 24, 1997 is approximately $16,200,000, based upon the closing sales price of the Common Stock on such date. Voting stock includes the Class A Cumulative Convertible Preferred Stock and the Class B Cumulative Convertible Preferred Stock. For the purpose of this calculation, all members of the Board of Directors and all stockholders with sole or shared voting power over 10% or more of the Company's Common Stock are presumed to be affiliates. 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 June 24, 1997 there were issued and outstanding 10,000,000 shares, par value $0.01 per share, of the Registrant's Common Stock. Documents Incorporated by Reference: The Proxy Statement for the 1997 Annual Meeting of Shareholders has been incorporated by reference partially in Part III hereof. 1 THE GRAND UNION COMPANY Other than historical information, statements in this report may be deemed to be forward-looking statements within the meaning of the federal securities laws. Actual results and the timing of certain events could differ materially from those projected in the forward-looking statements due to a number of factors, including those set forth in this report. See "Special Note Concerning Forward-Looking Statements" in Part II of this report. PART I ITEM 1. BUSINESS GENERAL The Grand Union Company, a Delaware corporation ("Grand Union" or the "Company"), currently operates 225 retail food stores under the "Grand Union" name in six northeastern states. Grand Union's common stock is listed on the NASDAQ National Market under the symbol GUCO. The Grand Union Company's greatest challenge is to increase sales and margins in an intensely competitive and consolidating retail food industry. To address this challenge, the Company has adopted strategies over the past two fiscal years to build on its strengths and reduce its expenses. During the fiscal year ended March 29, 1997 ("Fiscal 1997"), the Company adopted organizational restructuring measures which substantially eliminated its regional offices and consolidated its management functions, thereby reducing the number of employees and associated expenses. After the end of Fiscal 1997, the Company announced additional restructuring measures to significantly further reduce the number of its administrative employees. The Company anticipates that these measures collectively should reduce expenses by more than $8 million per year. During Fiscal 1997, the Company continued to renovate and replace its stores with stores designed under its MASTERS (Maximize All Space, Totally Expand the Right Stuff) format, designed to significantly increase the number and variety of product offerings. During Fiscal 1997, six stores were renovated to this format and two stores were completed during the fiscal year ended March 30, 1996 ("Fiscal 1996"). The Company anticipates, however, that the number of store projects completed over the next two fiscal years, including conversion of stores to the M.A.S.T.E.R.S. format, the renovation and replacement of existing stores, and the completion of new stores, will be significantly reduced compared to previous estimates. During Fiscal 1997, the Company continued to operate under and improve the strategic initiatives adopted during Fiscal 1996, calculated to enhance its image as a high-quality, price-conscious operator in the Northeastern retail food industry, and to improve the efficiency and profitability of its operations. In connection with that plan, the Company adopted newspaper, television and radio advertising to introduce and support its "More Lower Prices" campaign, and to emphasize the superior quality of its produce departments. In addition, the Company expanded and emphasized its "Best Take-Out Restaurant in Town" prepared and ready-to-serve food offerings, and took measures to improve its in-stock position, the cleanliness and safety of its stores, and the speed and convenience of the service offered in each department and in its check-out areas. In connection with the Company's 1996 strategic plan, the Company also discontinued operating its internal warehousing and distribution functions, by replacing its distribution activities with third-party wholesale supply arrangements. (See "Item 1 -Business - Distribution and Supply and Management Information Systems.") The Company also completed voluntary resignation programs which resulted in a reduction in the Company's number of employees and associated costs. STORE FORMATS Grand Union's store sizes and formats vary depending upon the demographics and competitive conditions in each location it operates, as well as the availability of real estate. Grand Union supermarkets offer a wide selection of national brand and private label grocery and general merchandise products as well as high-quality perishables and service departments. The majority of the Company's sales are generated from stores which include high margin specialty and service areas. Selected stores feature in-store kitchens and pharmacies. Liquor, beer and wine departments are included in many locations, subject to the limitations of state and local law. Grand Union's supermarkets range in size from 7,000 to 64,000 square feet. Newly constructed stores are typically in excess of 40,000 square feet. 2 SELECTED DATA The table below sets forth certain statistical information with respect to Grand Union retail stores for the past three years.
Fiscal Fiscal Fiscal 1997 1996 1995 ---------- ---------- ---------- Number of stores (at end of year) 226 229 231 Total selling square feet at end of year (in thousands) 4,312 4,305 4,276 Average sales per selling square foot per week $10.28 $10.28 $10.29
SUMMARY OF OPERATIONS AND COMPETITION The food retailing business is highly competitive. The Company competes with numerous national, regional and local supermarket chains. The Company also competes with convenience stores, stores owned and operated or otherwise affiliated with large food wholesalers, unaffiliated independent food stores, warehouse/merchandise clubs, discount drugstore chains and discount general merchandise chains. Some of the Company's competitors have greater financial resources than the Company and could use those resources to take steps which would adversely affect the Company's competitive position. (See also "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations"). Grand Union currently operates 225 stores, including 81 in northeastern New York, 41 in Vermont, 41 in central and northern New Jersey, 28 in Westchester, Orange, Rockland, Dutchess and Putnam Counties of New York, 14 on Long Island, New York, 12 in Fairfield County, Connecticut, 3 in New Hampshire, 3 in New York City, and 2 in Pennsylvania. In upstate New York, Grand Union generally operates in small cities and rural communities. The Company's main competitors are Golub Corporation ("Price Chopper") and Hannaford Brothers, Inc. ("Hannaford"). Commercial development in areas north of Albany is limited and constrained by zoning and environmental restrictions, particularly in areas regulated by the Adirondack Park Commission. In the more urban Albany, New York metropolitan area, Price Chopper and Hannaford have each opened a number of new stores in the last five years, which are generally larger than the Company's stores. In the Mid-Hudson Valley area of New York, the Company's principal competitors are Big V Supermarkets Inc. (a member of the Wakefern ("ShopRite") cooperative), Price Chopper, Hannaford and The Great Atlantic & Pacific Tea Company, Inc. ("A&P"). Continuing weak economic conditions in the Mid-Hudson Valley have constrained business in recent years. In addition, the Company's results in this region have also been adversely affected by recent store openings by competitors. In Vermont, Grand Union's principal competitors are Price Chopper, Hannaford and A&P. Zoning and environmental regulations in the state restrict commercial development (including supermarkets which might be competitors of the Company). Shaws Supermarkets recently opened two stores in the state. A number of stores in upstate New York and Vermont are in resort areas. These generally experience significant increases in sales in the summer months and in some cases during the winter ski season. The Company's stores in downstate New York, Connecticut, and New Jersey serve densely populated communities with demographics particularly well-suited for store formats emphasizing specialty departments. Accordingly, the sales mix in these stores includes a larger percentage of higher margin perishable items. In addition, the high population density as well as the geographic concentration of stores provide substantial economy of scale opportunities. In New Jersey, the Company competes primarily against A&P, Pathmark Stores, Inc. ("Pathmark"), Ahold Supermarkets, Inc. ("Edwards" and "Stop and Shop"), ShopRite and various supermarkets supplied by the Twin County ("Foodtown") cooperative. In Westchester, Orange, Rockland, Dutchess and Putnam Counties in New York, the Company generally competes with A&P, Edwards and ShopRite. On Long Island, the Company's principal competitors are A&P, Waldbaums, Pathmark, and King Kullen Grocery Co., Inc. Grand Union's main competitors in Fairfield County, Connecticut are Stop & Shop and A&P. CAPITAL INVESTMENT The Company's capital spending is directed towards renovating and upgrading existing Grand Union stores and opening new and replacement stores in existing marketing areas. Cash capital expenditures for Fiscal 1997 and 1996 were approximately $55,000,000 and $44,000,000, respectively, excluding capital lease additions of $23,000,000 and $29,000,000. 3 The Company continues to renovate certain locations using its MASTERS prototype. DISTRIBUTION AND SUPPLY AND MANAGEMENT INFORMATION SYSTEMS DISTRIBUTION AND SUPPLY. The majority of the Company's merchandise is stocked and distributed to Grand Union stores by C&S Wholesale Grocers, Inc. ("C&S") pursuant to supply and distribution agreements between the Company and C&S. Under the agreements, C&S stocks and supplies grocery and perishable products from its own warehouses, and health and beauty care and general merchandise products from the Company's Montgomery, New York warehouse. Grand Union also contracts with a third party for frozen food distribution. Management believes that the agreements with C&S enhance the Company's ability to offer consistently fresh and high quality products to its customers at a favorable cost. MANAGEMENT INFORMATION SYSTEMS. Financial, purchasing and operating system requirements are supported through a central computer system located in Wayne, New Jersey. As of March 29, 1997, Grand Union utilized scanning systems in 181 stores (representing approximately 94% of total sales) and intends to continue investing in scanning and other store systems in the future where economically justified. COMMISSARY. Grand Union operates a 20,000 square foot commissary located in Newburgh, New York, in which high quality cooked meat products, salads, salad ingredients and soups are prepared for sale in the Company's delicatessen departments. MANAGEMENT Between January and May 1997, four of the Company's five Executive officers retired or resigned, leaving certain positions temporarily vacant, including, among others, Chief Executive Officer, and Executive Vice Presidents for Store Operations and Merchandising. Roger Stangeland, the Company's Chairman and a member of the Board of Directors, has been named interim Chief Executive Officer, and Jeffrey P. Friemark has been hired to serve as Executive Vice President, Chief Financial and Administrative Officer. As an interim measure, the Company is being managed by an Office of the Chairman comprised of Mr. Stangeland, Mr. Josephs, Director, Mr. Freimark, and Mr. Vuolo, Senior Vice President, Human Resources, and Labor Relations. The Company is continuing to identify and interview appropriate candidates to fill the position of Chief Executive Officer. Upon selecting a new Chief Executive Officer, the Company anticipates that such person will seek to fill some or all of the remaining vacancies. EMPLOYEES As of March 29, 1997, Grand Union had approximately 15,000 employees, of whom approximately 67% were employed on a part-time basis. Approximately 50% of Grand Union's employees are covered by 13 collective bargaining agreements with 9 different union locals. On April 13, 1997, the Company entered into a new labor agreement with United Food and Commercial Workers Local 1262 covering approximately 3,550 clerks in 56 of the Company's stores in New Jersey, Pennsylvania and Rockland and Orange counties in New York. The agreement expires in April 2001. The Company's other labor agreements expire between June 1997 and January 2001. As of March 29, 1997, all employees covered by collective bargaining agreements were employed at store locations or in the Company's remaining warehouse. From December 1996 through May 1997, the Company effected a corporate reduction in workforce, terminating or reassigning approximately 130 employees at its headquarters and in its operating areas. The Company provided severance payments to those employees who were terminated, in accordance with its severance policy, based on each employee's position and length of service. The Company believes that its relationship with its employees is generally satisfactory. TRADE NAMES, SERVICE MARKS AND TRADEMARKS Grand Union owns and actively uses over 20 trade names, service marks and trademarks (collectively, "Marks"). Among these Marks are "Grand Union"-Registered Trademark-, the symbol of a red dot, "Grand Classics"-Registered Trademark-, "Big Gold Top"-Registered Trademark-, "Holland Hall"-Registered Trademark-, and "Red Dot Special"-Registered Trademark-, all of which are significant to the Company's business. The Company also has common law rights in, has filed for, or intends to file for various other Marks. RECENT HISTORY CHANGE IN CONTROL TRANSACTION In a series of transactions pursuant to a Stock Purchase Agreement (the "Stock Purchase Agreement") dated as of July 30, 1996, between the Company and Trefoil Capital Investors II, L.P. ("Trefoil") and GE Investment Private Placement Partners, A Limited Partnership ("GEI" and, collectively with Trefoil, the "Purchasers"), and an Acceleration and Exchange Agreement dated as of June 5, 1997, among the Company and the Purchasers, the Purchasers acquired, for aggregate consideration of $100,000,000, an aggregate of 4 1,200,000 shares of the Company's Class A Convertible Preferred Stock (the "Class A Stock") and an aggregate of 800,000 shares of the Company's Class B Convertible Preferred Stock (the "Class B Stock" and, collectively with the Class A Stock, the "Preferred Stock"). In March 1997, the Company's Chairman and interim Chief Executive Officer also acquired 600,000 shares of the Class A Stock, for a purchase price of $3,000,000. VOTING CONTROL Pursuant to the Certificates of Designation of Preferred Stock setting forth the powers, preferences, rights, qualifications, limitations and restrictions of each class of preferred stock (the "Certificates of Designation"), the holders of the preferred stock have the right to vote together with the holders of the Company's common stock (the "Common Stock"), as a single class, on all matters submitted to the Company's stockholders for a vote, including the election of directors. The number of votes entitled to be cast by the holder of Preferred Stock is equal to the number of whole votes which could be cast in such vote by a holder of the shares of Common Stock into which such shares of Preferred Stock are convertible on the record date for such vote. Each share of Class A Stock currently is convertible into 6.8966 shares of Common Stock, and each share of Class B Stock currently is convertible into 20.8333 shares of Common Stock. The conversion prices of the Preferred Stock are subject to certain customary anti-dilution adjustments, and the terms of the Class B Stock provide that the conversion price of the Class B Stock will be reset during March 1998 to a conversion price based on a 20% premium to the average trading price of the Common Stock during a twenty-day period during February 1998. Based on current conversion prices and including dividends that have been paid in respect of the outstanding shares of Class A Stock, as of June 24, 1997 the Purchasers owned an aggregate of 1,240,424 shares of Class A Stock, and 800,000 shares of Class B Stock, which together were convertible into an aggregate of 25,221,348 shares of Common Stock. Such shares of Common Stock would represent approximately 70.77% of the aggregate voting power outstanding. The Preferred Stock entitles the holders to quarterly dividends, when, as and if declared by the Company's Board of Directors, in an amount equal to 8.5% per annum of the stated value of the preferred stock. Unpaid dividends shall cumulate, and shall bear additional dividends at such rate. Until September 17, 1999, such dividends are payable, at the option of the Company, in additional shares of Preferred Stock or in shares of Common Stock. From September 18, 1999 to September 17, 2001, dividends are payable in cash, unless the Company's bank credit agreement or the indenture governing its 12% Senior Notes due 2004 shall prohibit such cash payments, in which case such dividends on the Preferred Stock are payable, at the option of the Company, in shares of Preferred Stock or shares of Common Stock. To the 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. After September 17, 2001, all dividends are payable in cash. The Stock Purchase Agreement provides that, for so long as the Purchasers own at least 50% of the total number of shares purchased by them pursuant to the Stock Purchase Agreement, the Purchasers shall have pre-emptive rights with respect to any sale by the Company of any shares of its Common Stock or securities convertible into or exchangeable for shares of its Common Stock (with certain limited exceptions) in proportion to the shares of Preferred Stock then held by the Purchasers. The Stock Purchase Agreement also provides that, until the third anniversary of September 17, 1996 (the "Principal Closing"), the Purchasers will not sell more than one-third of the Class A Stock (or shares of Common Stock issued upon conversion of such shares (the "Conversion Shares")). CHAPTER 11 REORGANIZATION On January 25, 1995, in connection with a capital restructuring plan reached with its bank lenders and with members of informal committees of certain holders of Grand Union notes, the Company filed a voluntary petition for relief under Chapter 11 of the Code in Bankruptcy Court. The Bankruptcy Court confirmed the Second Amended Chapter 11 Plan of The Grand Union Company, dated as of April 19, 1995, on May 31, 1995 and the Company emerged from Chapter 11 on June 15, 1995. Significant provisions of the Plan included: 1. Payment in full of all allowed administrative claims and all allowed general unsecured and priority claims. 2. Payment in full of obligations under the Company's existing bank credit agreement (the "Bank Credit Agreement"), including principal and accrued interest. Concurrently, the Company entered into an Amended and Restated Credit Agreement (the "New Bank Facility") providing for a five-year revolving credit facility of $100,000,000 and a seven-year term loan facility of $104,144,371, secured by a lien on substantially all of the assets of Grand Union and its subsidiaries. 3. Cancellation of obligations under the Company's 11.375% Senior Notes due 1999 and 11.25% Senior Notes due 2000 (collectively, the "Old Senior Notes"), with an aggregate principal amount of $525,000,000 plus accrued interest, in exchange 5 for the issuance of $595,421,000 aggregate principal amount of 12% Senior Notes due 2004 (the "Senior Notes") and cash payments of $54,922 for fractional shares. 4. Cancellation of obligations under the Company's 12.25% Senior Subordinated Notes due 2002, 12.25% Senior Subordinated Notes due 2002, Series A and 13% Senior Subordinated Notes due 1998 (collectively, the "Subordinated Notes"), with an aggregate principal amount of $566,150,000, in exchange for a pro rata share of an aggregate of 10,000,000 shares of new common stock (the "Common Stock"). 5. Issuance of warrants, which expire June 15, 2000, to purchase an aggregate of 900,000 shares of Common Stock to holders of 15% Senior Zero Coupon Notes due 2004 and 16.5% Senior Subordinated Zero Coupon Notes due 2007 (collectively, the "Capital Notes") pursuant to the terms of a settlement reached among the Company, its then indirect parent companies, the Official Committee of Unsecured Creditors of its then parent company, and certain holders of Capital Notes. The warrants are comprised of 300,000 Series 1 Warrants to purchase shares of Common Stock at a purchase price of $30 per share and 600,000 Series 2 Warrants to purchase shares of Common Stock at a purchase price of $42 per share. The Plan made no provision for the holders of the remaining long-term debt, redeemable preferred stock, common stock, or warrants to purchase common stock of the Company's then indirect parent. FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES Grand Union has no foreign operations or export sales. ITEM 2. PROPERTIES Grand Union conducts its operations primarily in leased stores and offices. The following table indicates the location and number of stores as of March 29, 1997. Number of Locations Stores --------- ------ New York 126 New Jersey 42 Vermont 41 Connecticut 12 New Hampshire 3 Pennsylvania 2 --- Total 226 --- --- As of March 29, 1997, Grand Union owned 13 and leased 213 of its store sites pursuant to commercial leases. Management believes no store lease is individually material to Grand Union. Most store leases contain several renewal options. Nine store leases do not contain renewal options and will expire over the next five years. Management anticipates that it will be able to renegotiate favorable lease terms for most of these locations, if so desired. Grand Union currently operates one distribution center in Montgomery, New York, which is leased, and a commissary, which is housed in a building owned by the Company on a ground-leased site in Newburgh, New York. Grand Union owns a 101,000 square foot warehouse in Waverly, New York that is currently vacant. Grand Union's lease on its distribution center has 32 years remaining, including options. See Note 9 to the Consolidated Financial Statements, Property Leases, for information on leases and annual rents. ITEM 3. LEGAL PROCEEDINGS CHAPTER 11 PROCEEDINGS. Reference is made to "Item 1 - Business - Recent History" for information regarding the Company's Chapter 11 proceedings. The Company does not believe that lingering Chapter 11 proceedings will result in any modification or revocation of the order. ENVIRONMENTAL -- CONNECTICUT. Soil and ground-water contamination has been detected at a shopping center owned by Grand Union which is located in Connecticut. The Company is investigating whether such contamination was caused by improper disposal of perchloroethylene wastes by a dry cleaner previously operating at this location or by an off-site source. Grand Union has undertaken, under approval by the Connecticut Department of Environmental Protection, a proposal for a remedial investigation designed to identify the sources of such soil and ground-water contamination and to determine the length, depth and breadth of the contamination on and off-site. Sampling analyses for the ground-water at the shopping center and for drinking water in private residences located in the 6 immediately surrounding area confirm that the source of the on-site contamination, in part, is an off-site shopping center and a gasoline station located nearby. A Remedial Action and Investigation Report was submitted to the Connecticut Department of Environmental Protection on May 21, 1993. The Company is awaiting a response from the Connecticut Department of Environmental Protection. The Company's potential responsibility does not arise from any aspect of its operation of a supermarket at the shopping center but from the actions of a former tenant. Any contamination caused on-site by a source located off-site would be the responsibility of another party. The Company believes that the current intention of the Connecticut Department of Environmental Protection is to seek reimbursement of past costs and clean-up costs from some or all of these other parties. The Company is unable to determine the amount of its potential liability arising from the on-site contamination, but does not believe, based upon the results of investigations made to date, that the amount of potential liability is likely to be materially adverse to the Company's financial condition. Management presently estimates, based upon investigations made by the Company's environmental consultant to date, that such liability should not exceed $2,000,000. Investigations are continuing, and there can be no assurance that the amount of such liability will not exceed $2,000,000. ENVIRONMENTAL -- NEW YORK. In 1991, Grand Union's landlord brought an action against Grand Union, two other tenants at the Apple Valley Shopping Center in LaGrange, New York, and a supplier of hazardous substances to one of the tenants, seeking approximately $1,600,000 in response costs within the meaning of the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA") and consequential damages (pursuant to the court's supplemental jurisdiction). The plaintiff claims that Grand Union and other tenants discharged hazardous substances from their premises which caused the plaintiff to incur response costs. The gravamen of the plaintiff's claim is that Grand Union placed household cleaning products containing volatile organic substances in a compactor situated at the rear of its premises and that such substances were released into the environment. In connection with the Company's Chapter 11 proceedings, the plaintiff filed a proof of claim in the amount of $4,389,518. The U.S. Environmental Protection Agency carried out a removal action at this site and recently notified the Company that it was a potentially responsible party within the meaning of Section 107(a) of CERCLA. Subsequent to the end of the fiscal year, the Company settled this action under terms not materially adverse to the Company's financial condition. FTC ORDER. At the time of the acquisition of Grand Union by Holdings in July 1989, Grand Union and P&C Foods, then a subsidiary and currently a division of Penn Traffic, operated stores in some of the same geographic areas in Vermont and upstate New York. In order to satisfy the concerns of federal antitrust authorities arising therefrom in connection with the acquisition of Grand Union by Holdings, prior to consummation thereof MTH Holdings, Inc. ("MTH Holdings"), which indirectly controlled Grand Union and Penn Traffic, an affiliate of Miller Tabak Hirsch + Co., a New York Limited Partnership, and GUAC entered into an Agreement to Hold Separate with Salomon Inc. and the Federal Trade Commission ("FTC") and an Agreement Containing Consent Order (the "Order") with the FTC, which Order was subsequently modified on February 16, 1996 (collectively, the "FTC Agreements"). The FTC Agreements required the divestiture by MTH Holdings and/or Grand Union (including in each case their respective subsidiaries and affiliates) of sixteen stores located in Vermont and upstate New York. Such divestitures were completed on July 30, 1990. Thirteen of the sixteen stores divested were P&C Foods stores and three of the sixteen stores divested were Grand Union stores. In a related transaction, Grand Union and P&C Foods entered into an operating agreement (the "Operating Agreement"), pursuant to which Grand Union acquired the right to operate P&C Foods' thirteen remaining stores in New England under the Grand Union name until July 2000, for an average annual rent of approximately $10,700,000 with an option to extend the term of such operation for an additional five years. Grand Union paid P&C Foods $7,500,000 for an option to purchase the stores at an amount defined in the Operating Agreement. Pursuant to the terms of the Operating Agreement, the 1992 Recapitalization triggered a $15,000,000 prepayment obligation to P&C Foods. The Operating Agreement was assumed during the Chapter 11 case and continues on its then current terms. The FTC Agreements also provide, among other things, that MTH Holdings and Grand Union (including in each case their respective subsidiaries and affiliates) shall not acquire, for a period of ten years, any retail grocery stores in Vermont and certain specified counties in New York without the prior notification to, and concurrence of, the FTC. As required by the FTC Agreements, following commencement of the Chapter 11 proceedings, Grand Union notified the FTC that a change of control of the Company would occur upon completion of the reorganization. The Agreement to Hold Separate was, by its terms, applicable only until certain stores identified therein could be divested. All required divestitures have occurred and, as of the Effective Date, there is no longer any control affiliation between Penn Traffic and Grand Union, which may in the future be direct competitors in certain market areas. The consummation of the Plan did not result in any change in the applicability of the FTC Agreements. OTHER PROCEEDINGS. The Company is also subject to certain other legal proceedings and claims arising in connection with its business. It is management's opinion that the ultimate resolution of such claims will not have a material adverse effect on the Company's consolidated results of operations or its financial position. 7 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the Company's securityholders during the fourth quarter of Fiscal 1997. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS' MATTERS The Common Stock of the Company is listed on the NASDAQ National Market under the symbol GUCO. At the close of business on June 24, 1997, there were 10,000,000 shares of Common Stock, $0.01 par value outstanding and entitled to vote. There were approximately 3,000 holders of record as of June 25, 1997. The quarterly market value of the Company's stock is discussed in Note 16 to the Consolidated Financial Statements. No cash dividends were declared or paid during each of the three fiscal years ended March 29, 1997. Payment of dividends to holders of Common Stock is restricted by the Bank Facility and by the terms of the Senior Notes and the Preferred Stock. 8 ITEM 6. SELECTED FINANCIAL DATA As discussed in Item 1, the Company emerged from its Chapter 11 proceedings effective June 15, 1995 (the "Effective Date"). For financial reporting purposes, the Company accounted for the consummation of the Plan effective June 17, 1995. In accordance with the American Institute of Certified Public Accountants Statement of Position 90-7, "Financial Reporting By Entities In Reorganization Under The Bankruptcy Code", the Company has applied Fresh-Start Reporting as of the Effective Date which has resulted in significant changes to the valuation of certain of the Company's assets and liabilities, and to its stockholders' equity. In connection with the adoption of Fresh-Start Reporting, a new entity has been deemed created for financial reporting purposes. The periods prior to the Effective Date have been designated "Predecessor Company" and the periods subsequent to the Effective Date have been designated "Successor Company". All information is derived from the consolidated financial statements of the Company. This information should be read in conjunction with the historical financial statements of the Company, including the notes thereto, included elsewhere herein. The financial statements prior to the Effective Date reflect the accounts of Holdings pushed down to the accounts of Grand Union. All dollars are in millions, except per share data.
Successor Company Predecessor Company ------------------------------------------------------------------------------ 52 Weeks 41 Weeks 11 Weeks 52 Weeks 52 Weeks 53 Weeks Ended Ended Ended Ended Ended Ended March 29, March 30, June 17, April 1, April 2, April 3, 1997 1996 1995 1995 1994 1993 ---- ---- ---- ---- ---- ---- STATEMENT OF OPERATIONS DATA: Sales $ 2,312.7 $ 1,819.9 $ 487.9 $ 2,391.7 $ 2,477.3 $ 2,834.0 Gross profit 705.7 569.9 143.8 708.3 731.7 822.3 Operating and administrative expenses 582.9 453.7 117.5 571.6 552.5 627.0 Depreciation and amortization 188.1 143.8 17.2 87.1 78.6 80.6 Unusual items 9.8 22.0 18.6 27.4 4.5 201.5 Interest expense 105.8 79.2 19.8 182.0 183.8 174.5 Loss before income taxes, extraordinary items and cumulative effect of accounting change 180.8 128.8 29.3 159.8 87.6 261.2 Income tax (provision) benefit (2.5) 18.9 - - - (4.5) Extraordinary items - - 854.8 - - (47.7) Cumulative effect of accounting change - - - - 30.3 - Net (loss) income (183.4) (109.9) 825.5 (159.8) (118.0) (313.4) Net loss applicable to common stock 185.4 - - - - - Net loss per common share (3) 18.54 10.99 - - - - Ratio of earnings to fixed charges (1) - - - - - - Deficiency in earnings available to cover fixed charges 180.8 128.8 29.3 159.8 87.6 261.2 BALANCE SHEET DATA: Total assets $ 1,060.8 $ 1,178.2 (2) $ 1,394.8 $ 1,394.2 $1,418.2 Total debt and capital lease obligations 888.4 875.1 (2) 1,614.9 1,532.2 1,402.5 Redeemable stock 65.0 - (2) 174.2 154.7 139.8 Nonredeemable stock and stockholders' equity (deficit) (153.2) 44.1 (2) (824.3) (644.8) (510.3) OPERATING AND OTHER DATA: Capital expenditures $ 55.1 $ 43.0 $ 3.0 $ 70.8 $ 86.2 $ 66.2 Number of stores at year end 226 229 N/A 231 254 250
(1) The ratio of earnings to fixed charges is computed by dividing (i) earnings before income taxes, extraordinary items, the cumulative effect of accounting change and fixed charges by (ii) fixed charges. Fixed charges consist of total interest expense plus the estimated interest component of operating leases. No ratio is indicated where the ratio is less than one. (2) Balance sheet data is not applicable at this date. (3) Loss per share data is not meaningful for periods prior to the Effective Date due to the significant changes in the capital structure of the Company. 9 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL: As discussed in Item 1, the Company emerged from its Chapter 11 proceedings effective June 15, 1995 (the "Effective Date"). For financial reporting purposes, the Company accounted for the consummation of the Plan effective June 17, 1995. In accordance with the American Institute of Certified Public Accountants Statement of Position 90-7, "Financial Reporting By Entities In Reorganization Under The Bankruptcy Code", the Company has applied Fresh-Start Reporting as of the Effective Date which has resulted in significant changes to the valuation of certain of the Company's assets and liabilities, and to its stockholders' equity. In connection with the adoption of Fresh-Start Reporting, a new entity has been deemed created for financial reporting purposes. The periods prior to the Effective Date have been designated "Predecessor Company" and the periods subsequent to the Effective Date have been designated "Successor Company". For purposes of the discussion of Results of Operations and Liquidity and Capital Resources, the results of the Predecessor Company and Successor Company for the 52 weeks ended March 30, 1996, 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):
Fiscal Fiscal Fiscal 1997 1996 1995 ---- ---- ---- Sales $ 2,312.7 $ 2,307.8 $ 2,391.7 Gross profit 705.7 713.7 708.3 Operating and administrative expenses 582.9 571.2 571.6 Depreciation and amortization 85.5 77.1 87.1 Amortization of excess reorganization value 102.6 84.0 - Unusual items 9.8 40.6 27.4 Interest expense 105.8 99.0 182.0 Income tax (provision) benefit (2.5) 18.9 - Extraordinary credit - 854.8 - Net (loss) income (183.4) 715.6 (159.8) Net (loss) income applicable to common stock (185.4) 715.6 (179.3) Sales percentage increase (decrease) 0.2% (3.5)% (3.5)% Gross profit as a percentage of sales 30.5 30.9 29.6 Operating and administrative expenses as a percentage of sales 25.2 24.7 23.9
Sales for Fiscal 1997 increased $4.9 million or 0.2% compared to Fiscal 1996. The sales increase in Fiscal 1997 was comprised of 0.9% in sales from new stores, and 0.5% in sales from same store sales (sales of stores which were operated during the comparable periods of both fiscal years, including stores replaced during the year), offset by 1.2% from sales lost as a result of store closures. Same store sales changes, by quarter for Fiscal 1997, beginning with the first quarter, were 1.0%, 2.0%, (0.8)% and (0.4)%. Same store sales comparisons were positively influenced by the Company's marketing and customer service programs implemented during the year including "More Lower Prices" and Green Team Produce and the inclusion of two Easter periods compared to one in the prior year. Same store sales comparisons were negatively influenced by intensified competition, the overall economic climate in the Company's operating areas, short term disruptions associated with the store renovation programs, a generally milder winter, and the shorter than normal holiday season this year. During Fiscal 1997, the Company opened one new store, two replacement stores, and completed six major renovations, and closed four stores. Sales for Fiscal 1996 decreased $83.9 million or 3.5% compared to Fiscal 1995. The sales decline in Fiscal 1996 was a result of the sale or closure of 24 stores during Fiscal 1995 which were not replaced and from same store sales decreases, partially offset by sales of new stores. Same store sales declined .9% for the year. Same store sales changes, by quarter for Fiscal 1996, beginning with the first quarter, were 0.1%, (2.8)%, (1.3)% and 0.4%. Same store sales comparisons were negatively influenced by strong promotional programming during the second and third quarters of Fiscal 1995 and the effects of closing two distribution centers servicing the metropolitan New York area stores. Same store sales were positively influenced by the positive impact of the "More Lower Prices" price repositioning program implemented in most of the Company's stores during the year, by additional marketing, and store service programs introduced in the second quarter of this year in the Albany, New York and Bergen County, New Jersey areas and by a relatively harsh winter. During Fiscal 1996, the Company opened two new stores, two replacement stores, and completed three enlargements and four major renovations. 10 Gross profit, as a percentage of sales, was 30.5% in Fiscal 1997 compared to 30.9% in Fiscal 1996. The decreased gross profit is attributable to the "More Lower Prices" program and higher promotional activity, offset by savings from the outsourcing of certain distribution functions to C&S Wholesale Grocers, Inc. ("C&S"). Gross margin (defined as gross profit as a percent of sales) was 30.9% in Fiscal 1996, compared to 29.6% in Fiscal 1995. The gross profit percentage in Fiscal 1996 was impacted favorably by savings generated by replacing the Company's distribution network with a wholesaler arrangement and the restoration of vendor promotional allowances and other vendor support not generally available to the Company during the bankruptcy proceedings in Fiscal 1995. Gross margin was negatively affected by the "More Lower Prices" price repositioning program implemented in certain of the Company's stores during Fiscal 1996. Operating and administrative expenses, as a percentage of sales, were 25.2% during Fiscal 1997, compared to 24.7% during Fiscal 1996. The increase in operating and administrative expenses, as a percentage of sales, resulted from investments in store labor and advertising expense to support key elements of the Company's strategic plan such as "The Green Team", "Best Takeout Restaurant in Town" and "Fresh at Five" Programs. Operating and administrative expenses, as a percentage of sales, were 24.7% during Fiscal 1996, compared to 23.9% during Fiscal 1995. Store labor increased, as a percentage of sales, as a result of the Company's Albany, New York and Bergen County, New Jersey marketing and customer service programs, offset by the benefits of the voluntary resignation programs. Advertising costs increased in Fiscal 1996 in connection with the "More Lower Prices" price repositioning program and the Albany and Bergen County marketing and customer service programs. Occupancy costs increased, as a percentage of sales, principally as a result of decreased sales in Fiscal 1996. Included in operating and administrative expenses were gains from the sale of stores totaling $5.4 million in Fiscal 1996 and $2.5 million in Fiscal 1995. The increase in depreciation and amortization expense during Fiscal 1997 was largely attributable to the application of Financial Accounting Standard No. 121 ("FAS No. 121"), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"; whereby $6.4 million of an impairment loss was recorded to reduce the estimated fair value of certain store assets. See Note 4 of the consolidated financial statements for a discussion of this charge. The decrease in depreciation and amortization expense during Fiscal 1996 compared to Fiscal 1995 resulted principally from the absence of amortization of goodwill after the Effective Date. In accordance with Fresh-Start Reporting, the Company valued its assets and liabilities at fair values and eliminated its retained earnings as of the Effective Date. The total reorganization value as of the Effective Date was determined to be $1,334.0 million which is $521.7 million in excess of the aggregated fair value of the Company's tangible and identified intangible assets. Such excess is being amortized on a straight-line basis over a five-year period. See Note 1 of the consolidated financial statements for a more comprehensive discussion. Unusual items in Fiscal 1997 consisted of (a) a $7.8 million provision for restructuring which principally relates to severance costs in connection with a reduction of administrative overhead and (b) a $2.0 million adjustment of inventory valuation. Unusual items in Fiscal 1996 consisted of (a) a $2.5 million organizational restructuring provision, (b) a $15.0 million provision related to the closure of the Company's two New York metropolitan area warehouses, (c) a $4.5 million provision relating to a voluntary resignation program and (d) $18.6 million of restructuring charges incurred in connection with the Chapter 11 proceedings. Unusual items in Fiscal 1995 consisted of (a) a store closure provision totaling $16.9 million offset by $4.0 million of proceeds from the termination of a warehouse sublease, (b) a charge of $3.7 million for an early retirement program offered to certain employees, and (c) $10.8 million of restructuring charges incurred in connection with the Chapter 11 proceedings. The increase in interest expense in Fiscal 1997 compared to Fiscal 1996 is principally a result of higher capitalized lease costs and renegotiated debt related to the Company's emergence from bankruptcy. Interest expense was substantially less in Fiscal 1996 than Fiscal 1995 as a result of the decreased level of debt of the Successor Company. As a result of the Chapter 11 proceedings, the Company did not accrue interest expense on its Subordinated Notes, or on the debt of its then parent companies, subsequent to January 25, 1995 and prior to the Effective Date. During Fiscal 1997, the Company recorded an income tax provision of $2.5 million. As a result of lower than anticipated earnings and net operating loss carryforward limitations as a result of the change in control of the Company, the Company wrote down $8.5 million of the previously recorded income tax benefits and recorded a valuation allowance for the balance of the previously recorded benefits relating to the use of operating loss carryforwards. During Fiscal 1996, the Company recorded an income tax benefit of $18.9 million consisting of federal and state income taxes. Operating loss and credit carryforwards of the Predecessor Company have been offset by taxable gains realized on the debt discharged in connection with the Plan. There are no remaining operating loss or credit carryforwards of the Predecessor Company and there was no change in the tax basis of the Company's assets as of the Effective Date. No income taxes were provided in Fiscal 1995. 11 During Fiscal 1996, in connection with the Company's emergence from Chapter 11, the Company recorded an extraordinary gain on debt discharge of $854.8 million. LIQUIDITY AND CAPITAL RESOURCES On July 30, 1996, the Company entered into an agreement (the "Stock Purchase Agreement") to sell $100 million of its 8.5% convertible preferred stock, $1.00 par value per share (the "Class A Preferred Stock") to an investment group composed 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"). On September 17, 1996 and February 25, 1997, the Company sold 800,000 and 400,000 shares of Class A Preferred Stock, respectively, to the Purchasers for an aggregate price of $60 million. On March 20, 1997, the Company sold 60,000 shares of the Class A Preferred Stock to the Chairman of its Board of Directors for a purchase price of $3 million. The Company incurred $12 million of costs related to the sale of Class A Preferred Stock, including one-time fees totaling approximately $9.2 million. On June 12, 1997, through an acceleration of the original Stock Purchase Agreement, the Company sold the remaining 800,000 shares of Class A Preferred Stock to the Purchasers. These shares were immediately converted to 800,000 shares of Class B Stock. The Company continues to be highly leveraged. Interest payments during Fiscal 1997 totaled approximately $105 million. Capital expenditures, including capitalized leases, totaled approximately $79 million in Fiscal 1997. Capital expenditures during Fiscal 1997 were dedicated to remodels, new and replacement stores, store systems and maintenance. Fiscal 1998 capital expenditures will also principally be dedicated to remodels, new and replacement stores, store systems and maintenance, although at a slower pace than previous estimates. During Fiscal 1997, the Company opened one new and two replacement stores. The Company has completed a total of twelve M.A.S.T.E.R.S. ("Maximize All Space, Totally Expand the Right Stuff") renovations, six of which were reopened during the fiscal year. There are no significant scheduled debt principal repayments prior to June 2000. The Company plans to finance its working capital, interest expense, and capital expenditure requirements from its operating cash flow, proceeds received from the sale of the Class A Preferred Stock, its Amended and Restated Credit Agreement (the "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 primarily dependent on cash generated from its operations, net of cash capital expenditures. The Company's ability to continue to pursue its expanded capital expenditure program is dependent on operating performance. There can be no assurance as to when, or whether, the Company will have sufficient funds from operations available to complete the 78 store projects originally contemplated in its previously announced capital expenditure program. The Company intends to continue to renovate, remodel and replace its stores if, as and when funds become available. The Company's bank lenders waived the EBITDA and interest coverage covenants of the Bank Facility for the fourth quarter. The Company also amended the agreements for the 1998 Fiscal year to reduce the EBITDA requirement to $120 million, changed interest coverage requirements to 1.0, and lowered the required amount of capital expenditures to $30 million. The Company is currently in compliance with these amended debt agreements. If results from operations do not meet management's expectations, the Company will need to obtain additional amendments to such covenants. There can be no assurance the Company will be able to obtain such amendments. As of March 29, 1997, the Company had $36 million of borrowings and approximately $44 million of letters of credit outstanding under its $100 million revolving credit facility. Significant expenditures and resources used to finance such expenditures for the three fiscal years ended March 29, 1997 are reflected in the following table (in millions):
Fiscal Fiscal Fiscal 1997 1996 1995 ------------- ------------- ------------- Resources used: Debt and capital lease repayments $ 18.5 $ 102.0 $ 11.3 Capital expenditures 55.1 43.7 63.0 Loan placement fees - 3.1 - Other - - - ============= ============= ============= $ 73.6 $ 148.8 $ 74.3 ============= ============= ============= Financed by: Net proceeds from sale of Class A Preferred Stock $ 51.0 $ - $ - Net proceeds from long-term debt 9.0 - - Proceeds from New Bank Facility - 137.2 - Property disposals 8.0 11.0 2.1 Operating activities, including cash and temporary investments 5.6 0.6 43.2 Debt incurred - - 29.0 ------------- ------------- ------------- $ 73.6 $ 148.8 $ 74.3 ============= ============= =============
12 IMPACT OF NEW ACCOUNTING STANDARDS In February 1997, the FASB issued FAS No. 128, "Earnings per Share," which is effective for year end periods ending after December 15, 1997. This Statement requires entities to present, on the face of the income statement for all periods presented, basic and diluted per share amounts for income from continuing operations and for net income. Basic earnings per share ("EPS") is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding. Fully-diluted EPS has been renamed diluted EPS with a few changes in the computation methodology. Diluted EPS gives effect to all dilutive potential common shares that were outstanding during the reporting period. The computation excludes security conversions that have an antidilutive effect on EPS. FAS No. 128 currently has no impact upon the Company's reported per share results as all common stock equivalents are anti-dilutive. FUTURE OUTLOOK The Company has adopted a number of strategies in Fiscal 1997 and the preceding fiscal years intended to increase sales and to reduce expenses. The Company anticipates that it will continue to pursue such strategies during Fiscal 1998, and will explore additional opportunities to increase sales and further reduce expenses, including, among other things, improving and expanding its marketing and promotional activities, and reviewing its operations to enhance efficiency and productivity. There can be no assurance, however, as to when, or whether, such measures will be successful in restoring the Company to profitability. The Company anticipates, in any event, that improvements, if achieved, will not begin to be significantly reflected in its operating results until the second half of Fiscal 1998, due to continued adverse effects on its operating results and margins resulting from, among other things, continuing competitive pressures on its pricing, fluctuations in the amount and timing of receipt and recognition of certain promotional allowances, a continuing high level of advertising expenses until the Company is able to fully implement new marketing programs, and continuing weak economic conditions in certain of the regions in which the Company operates. SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS Except for historical information, statements by the Company under the caption "Future Outlook" and elsewhere in this report may be considered "forward-looking statements" within the meaning of federal securities law. Such forward-looking statements are subject to risks, uncertainties and other factors that 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 ability of the Company to maintain and improve its gross sales and margins, the liquidity of the Company on a cash flow basis (including the Company's ability to comply with the financial covenants of its credit agreement and to fund the Company's capital expenditure program), the Company's ability to complete its capital expenditures on a timely basis, the success of operating initiatives, the viability of the Company's strategic plan, regional weather conditions, and the general economic conditions in the geographic areas in which the Company operates. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Financial Statements and Supplementary Data listed below are included in this report on the page indicated. INDEX TO FINANCIAL STATEMENTS:
DOCUMENT PAGE - -------- ---- Reports of Independent Accountants F-1 Consolidated Statement of Operations for the 52 weeks ended March 29, 1997 and the 41 weeks ended March 30, 1996 (Successor Company) and the 11 weeks ended June 17, 1995 and the 52 weeks ended April 1, 1995 (Predecessor Company) F-3 Consolidated Balance Sheet at March 29, 1997 and March 30, 1996 F-4 Consolidated Statement of Cash Flows for the 52 weeks ended March 29, 1997 and the 41 weeks ended March 30, 1996 (Successor Company) and the 11 weeks ended June 17, 1995 and the 52 weeks ended April 1, 1995 (Predecessor Company) F-5 Notes to Consolidated Financial Statements F-6
All other schedules are omitted either because they are not applicable or the required information is disclosed in the consolidated financial statements or notes thereto. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 13 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required in this item is incorporated by reference to "Directors and Executive Officers of the Registrant" and "Compliance with Section 16(a) of the Securities Exchange Act of 1934" contained in the Proxy Statement, which will be filed with the Commission within 120 days of the end of the fiscal year covered by this report. ITEM 11. EXECUTIVE COMPENSATION The information required in this item is incorporated by reference to "Executive Compensation", "Compensation of Directors", "Severance Policy", "Change in Control Provisions", and "Compensation Committee Interlocks and Insider Participation" contained in the Proxy Statement, which will be filed with the Commission within 120 days of the end of the fiscal year covered by this report. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required in this item is incorporated by reference to "Security Ownership Of Management And Certain Beneficial Owners" contained in the Proxy Statement, which will be filed with the Commission within 120 days of the end of the fiscal year covered by this report. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required in this item is incorporated by reference to "Certain Relationships and Related Transactions" contained in the Proxy Statement, which will be filed with the Commission within 120 days of the end of the fiscal year covered by this report. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORT ON FORM 8-K THE FOLLOWING DOCUMENTS ARE FILED AS A PART OF THIS REPORT: (a) FINANCIAL STATEMENTS All financial statements as set forth under Item 8. (b) REPORT ON FORM 8-K No reports on Form 8-K were filed during the fourth quarter of Fiscal 1997. (c) EXHIBITS
Exhibit Number Description of Document - ----- ----------------------- 2.1 Second Amended Chapter 11 Plan of Reorganization of The Grand Union Company ("Grand Union"), filed with the United States Bankruptcy Court, District of Delaware, on April 19, 1995, incorporated by reference to Exhibit T3E1 to Grand Union's Form T-3 dated May 8, 1995. 2.2 Findings of Fact, Conclusions of Law and Order Confirming the Second Amended Plan of Reorganization proposed by Grand Union, dated May 31, 1995, incorporated by reference to Exhibit 2.2 to Grand Union's Annual Report on Form 10-K for the fiscal year ended April 1, 1995 ("Fiscal 1995"). 2.3 Minute Order Clarifying Findings of Fact, Conclusions of Law and Order Confirming Second Amended Plan of Reorganization proposed by Grand Union, dated June 14, 1995, incorporated by reference to Exhibit 2.3 to Grand Union's Annual Report on Form 10-K for Fiscal 1995.
14
3.1 Certificate of Incorporation of Grand Union, as amended through January 6, 1997. 3.2 Certificate of Designation of Class A Convertible Preferred Stock, incorporated by reference to Exhibit 10.4 to Grand Union's Quarterly Report on Form 10-Q for the period ended October 12, 1996. 3.3 Certificate of Designation of Class B Convertible Preferred Stock, dated as of June 11, 1997. 3.4 By-laws of The Grand Union Company, as amended through September 12, 1996, incorporated by reference to Exhibit 3.1 to Grand Union's Quarterly Report on Form 10-Q for the period ended October 12, 1996. 4.1 Form of New Common Stock Certificate of Grand Union, incorporated by reference to Exhibit 4.1 to Grand Union's Annual Report on Form 10-K for Fiscal 1995. 4.2 Warrant Agreement dated as of June 15, 1995, between Grand Union and American Stock Transfer & Trust Company, as Warrant Agent for 300,000 Series 1 Warrants and 600,000 Series 2 Warrants, incorporated by reference to Exhibit 4.5 to Grand Union's Annual Report on Form 10-K for Fiscal 1995. 4.3 Registration Rights Agreement dated as of June 15, 1995, among Grand Union and Each of the Persons Named in Schedule A thereto for the New Common Stock, incorporated by reference to Exhibit 4.6 to Grand Union's Annual Report on Form 10-K for Fiscal 1995. 4.4 Registration Rights Agreement dated as of June 15, 1995, by and among Grand Union and The Holders Named therein for the Registrable Notes, incorporated by reference to Exhibit 4.7 to Grand Union's Annual Report on Form 10-K for Fiscal 1995. 4.5 Indenture dated as of June 15, 1995, between Grand Union, as Issuer and IBJ Schroeder Bank & Trust Company, as Trustee for the 12% Senior Notes due September 1, 2004, including form of the 12% Senior Notes due 2004, incorporated by reference to Exhibit 4.2 to Grand Union's Annual Report on Form 10-K for Fiscal 1995. 4.6 First Supplement Indenture, dated September 9, 1996, to the Indenture dated as of June 15, 1995, between Grand Union, as Issuer, and IBJ Schroeder Bank & Trust Company, as Trustee for the 12% Senior Notes due September 1, 2004, incorporated by reference to Exhibit 10.3 to Grand Union's Quarterly Report on Form 10-Q for the period ended October 12, 1996. 4.7 Amended and Restated Borrower Pledge Agreement dated as of June 15, 1995, made by Grand Union to Bankers Trust Company ("Bankers Trust"), as Collateral Agent, incorporated by reference to Exhibit 4.3 to Grand Union's Annual Report on Form 10-K for Fiscal 1995. 4.8 Amended and Restated Borrower Security Agreement dated as of June 15, 1995, between Grand Union and Bankers Trust, as Collateral Agent, incorporated by reference to Exhibit 4.4 to Grand Union's Annual Report on Form 10-K for Fiscal 1995. 10.1 Agreement to Hold Separate dated July 17, 1989, by and among MTH Holdings Inc. ("MTH Holdings"), GU Acquisition Corporation ("GUAC"), Salomon Inc. and the Federal Trade Commission (the "FTC") entered into in the matter of MTH Holdings and GUAC before the FTC, incorporated by reference to Exhibit No. 10.5 to Grand Union's Registration Statement on Form S-1 (Registration No. 33-29707) (the "1989 Grand Union Registration Statement"). 10.2 Agreement containing Consent Order among MTH Holdings, GUAC and the FTC entered into in the matter of MTH Holdings and GUAC before the FTC, incorporated by reference to Exhibit No. 10.6 to the 1989 Grand Union Registration Statement. 10.3 Asset Purchase Agreement, dated as of January 25, 1990, by and between Grand Union and Price Chopper Operating Co. of Vermont, Inc., incorporated by reference to Exhibit No. 10.15 to Holdings Registration Statement on Form S-1 (Registration No. 33-32879).
15
10.4 Asset Purchase Agreement, dated as of February 9, 1990, by and between Grand Union and Price Chopper Operating Co., Inc., incorporated by reference to Exhibit No. 10.49 to GUAC's Registration Statement on Form S-1 (Registration No. 33-22398). 10.5 Agreement and Master Sublease dated as of July 30, 1990, by and between Grand Union and P&C Food Markets, Inc. ("P&C Foods"), incorporated by reference to Exhibit No.10.18 to Holdings' Report on Form 10-Q dated July 21, 1990 (Commission File No. 33-29707). 10.6 Asset Purchase Agreement dated as of February 4, 1993, between The Great Atlantic & Pacific Tea Company, Inc. and Grand Union, incorporated by reference to Exhibit No. 2.1 to Grand Union's Report on Form 8-K dated February 4, 1993. 10.7 Asset Purchase Agreement dated as of September 20, 1993 among Foodarama Supermarkets, Inc., ShopRite of Malverne, Inc. and Grand Union, incorporated by reference to Exhibit No. 10.19 to Grand Union's Registration Statement on Form S-1 (Registration No. 33-70956). 10.8 Letter dated June 15, 1995, containing MTH Settlement Agreement between Miller Tabak Hirsch + Co. ("MTH") and Grand Union in connection with (i) the termination of the Agreement, dated July 22, 1992, between MTH and Grand Union, and (ii) the Second Amended Plan of Reorganization, dated April 19, 1995, of Grand Union, incorporated by reference to Exhibit 10.15 to Grand Union's Annual Report on Form 10-K for Fiscal 1995. 10.9 Agreement dated as of April, 1995, among Grand Union, Grand Union Capital Corporation ("Capital"), Holdings, the Official Committee of Unsecured Creditors of Capital and certain holders of Zero Coupon Notes issued by Capital and guaranteed by Holdings named therein, incorporated by reference to Exhibit 10.16 to Grand Union's Annual Report on Form 10-K for Fiscal 1995. 10.10 Waiver dated June 14, 1995, with respect to the Second Amended Chapter 11 Plan of Grand Union, among Grand Union, Bankers Trust, the Official Committee of Unsecured Creditors of Grand Union and the Informal Committee of Senior Noteholders, incorporated by reference to Exhibit 10.17 to Grand Union's Annual Report on Form 10-K for Fiscal 1995. 10.11 Amended and Restated Borrower Pledge Agreement dated as of June 15, 1995, made by Grand Union to Bankers Trust, as Collateral Agent incorporated by reference to Exhibit 10.10 to Grand Union's Annual Report on Form 10-K for Fiscal 1995. 10.12 Amended and Restated Borrower Security Agreement dated as of June 15, 1995, between Grand Union and Bankers Trust, as Collateral Agent (included in Exhibit 4.4), incorporated by reference to Exhibit 10.11 to Grand Union's Annual Report on Form 10-K for Fiscal 1995. 10.13 Subsidiary Security Agreement dated as of June 15, 1995, among the corporations listed on Schedule 1 thereto and Bankers Trust, as Collateral Agent, incorporated by reference to Exhibit 10.12 to Grand Union's Annual Report on Form 10-K for Fiscal 1995. 10.14 Subsidiary Guaranty dated as of June 15, 1995, made by each of the corporations from time to time listed on Annex A attached thereto in favor of the Banks and the Agent from time to time party to the Credit Agreement, incorporated by reference to Exhibit 10.13 to Grand Union's Annual Report on Form 10-K for Fiscal 1995. 10.15 Form of Indenture of Open-End Mortgage, Deed of Trust, Deed to Secure Debt, Security Agreement, Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing, dated as of June 15, 1995, made by Grand Union to Bankers Trust, as Collateral Agent, incorporated by reference to Exhibit 10.14 to Grand Union's Annual Report on Form 10-K for Fiscal 1995. 10.16 Amended and Restated Credit Agreement dated as of June 15, 1995, (the "Credit Agreement"), among Grand Union, the lending institutions listed from time to time on Schedule 1 thereto, and
16
Bankers Trust, as Agent, including Exhibits A-1, A-2 and A-3, and various Schedules thereto, incorporated by reference to Exhibit 10.9 to Grand Union's Annual Report on Form 10-K for Fiscal 1995. 10.18 Second Amendment to the Credit Agreement, incorporated by reference to Exhibit 10.1 to Grand Union's Quarterly Report on Form 10-Q for the period ended July 20, 1996. 10.19 Third Amendment to the Credit Agreement, incorporated by reference to Exhibit 10.2 to Grand Union's Quarterly Report on Form 10-Q for the period ended October 12, 1996. 10.20 Fourth Amendment to the Amended and Restated Credit Agreement incorporated by reference to Exhibit 10.1 to Grand Union's Quarterly Report on Form 10-Q for the period ended January 4, 1997. 10.21 Fifth Amendment to the Credit Agreement. 10.22 Sixth Amendment to the Credit Agreement. 10.23 Seventh Amendment to the Credit Agreement. 10.24 Eighth Amendment to the Credit Agreement. 10.25** Supply and Distribution Agreement between The Grand Union Company and C&S Wholesalers, dated June 15, 1995, incorporated by reference to Exhibit 10.3 to Grand Union's Quarterly Report on Form 10-QA for the period ended January 6, 1996. 10.26** First Amendment to the Supply and Distribution Agreement between The Grand Union Company and C&S Wholesalers, dated June 15, 1995, incorporated by reference to Exhibit 10.4 to Grand Union's Quarterly Report on Form 10-QA for the period ended January 6, 1996. 10.27** Supply and Distribution Agreement between The Grand Union Company and C&S Wholesalers, dated January 2, 1996, incorporated by reference to Exhibit 10.5 to Grand Union's Quarterly Report on Form 10-QA for the period ended January 6, 1996. 10.28** Agreement with C&S Wholesalers Inc. dated January 21, 1996. 10.29* Third Amendment and Restatement of The Grand Union Company Supplemental Retirement Program for Key Executives effective as of June 15, 1995, incorporated by reference to Exhibit 10.8 to Grand Union's Annual Report on Form 10-K for the fiscal year ended March 30, 1996. 10.30 Executive Severance Policy, incorporated by reference to Exhibit 10.2 to Grand Union's Quarterly Report on Form 10-Q for the period ended July 20, 1996. 10.31* The Grand Union Company 1995 Equity Incentive Plan, incorporated by reference to Exhibit 10.1 to Grand Union's Quarterly Report on Form 10-Q for the period ended January 6, 1996. 10.32* First Amendment to the 1995 Equity Incentive Plan of the Grand Union Company, incorporated by reference to Exhibit 10.4 to Grand Union's Quarterly Report on Form 10-Q for the period ended July 20, 1996. 10.33* Second Amendment to the 1995 Equity Incentive Plan. 10.34* Resolution amending the number of shares issuable under the 1995 Equity Incentive Plan. 10.35* Letters dated December 14, 1995, with respect to the 1995 Equity Incentive Plan, incorporated by reference to Exhibit 10.3 to Grand Union's Quarterly Report on Form 10-Q for the period ended July 20, 1996. 10.36* Option Agreement with Jeffrey P. Freimark.
17
10.37 The Grand Union Company 1995 Non-Employee Directors Stock Option Plan, incorporated by reference to Exhibit 10.2 to Grand Union's Quarterly Report on Form 10-Q for the period ended January 6, 1996. 10.38* First Amendment to the 1995 Non-Employee Directors' Stock Option Plan of The Grand Union Company, incorporated by reference to Exhibit 10.6 to Grand Union's Quarterly Report on Form 10-Q for the period ended July 20, 1996. 10.39* Resolution amending the number of shares issuable under the 1995 Non-Employee Directors' Stock Option Plan. 10.40* Letters dated April 3, 1996, with respect to the 1995 Non-Employee Directors' Stock Option Plan, incorporated by reference to Exhibit 10.5 to Grand Union's Quarterly Report on Form 10-Q for the period ended July 20, 1996. 10.41 Non-competition Agreement between The Grand Union Company and Joseph J. McCaig, incorporated by reference to Exhibit 10.23 of Grand Union's Annual Report on Form 10-K for the fiscal year ended March 30, 1996. 10.42 Non-competition Agreement between The Grand Union Company and William A. Louttit, incorporated by reference to Exhibit 10.24 of Grand Union's Annual Report on Form 10-K for the fiscal year ended March 30, 1996. 10.43 Non-competition Agreement between The Grand Union Company and Kenneth R. Baum, Jr., incorporated by reference to Exhibit 10.25 of Grand Union's Annual Report on Form 10-K for the fiscal year ended March 30, 1996. 10.44 Non-competition Agreement between The Grand Union Company and Darrell W. Stine, incorporated by reference to Exhibit 10.26 of Grand Union's Annual Report on Form 10-K for the fiscal year ended March 30, 1996. 10.45 Non-competition Agreement between The Grand Union Company and Gilbert C. Vuolo, incorporated by reference to Exhibit 10.27 of Grand Union's Annual Report on Form 10-K for the fiscal year ended March 30, 1996. 10.46 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, incorporated by reference to Exhibit 10.7 to Grand Union's Quarterly Report on Form 10-Q for the period ended July 20, 1996. 10.47 Form of Indemnification Agreement between the Company and J. Costello, C. Miller, G. Moore and J.R. Stonesifer, incorporated by reference to Exhibit 10.1 to Grand Union's Quarterly Report on Form 10-Q for the period ended October 12, 1996. 10.48 Investment Banking Agreement between The Grand Union Company and Donaldson, Lufkin & Jenrette, incorporated by reference to Exhibit 10.28 of Grand Union's Annual Report on Form 10-K for the fiscal year ended March 30, 1996. 10.49 Stock Purchase Agreement dated July 30, 1996, among The Grand Union Company, Trefoil Capital Investors II, L.P. and GE Investment Private Placement Partners II, A Limited Partnership incorporated by reference to Exhibit 10.1 to The Grand Union Company report filed on Form 8-K dated July 30, 1996. 10.50 Amendment No. 1 to the Stock Purchase Agreement dated July 30, 1996, among the Grand Union Company, Trefoil Capital Investors II, L.P., and GE Investment Private Placement Partners II, a Limited Partnership. 10.51 Management Agreement between The Grand Union Company and Shamrock Capital Advisors, Inc., dated July 30, 1996, incorporated by reference to Exhibit 10.7 to Grand Union's Quarterly Report on Form 10-Q for the period ended October 12, 1996.
18
10.52 Stock Purchase Agreement by and between The Grand Union Company and Roger Stangeland, dated as of February 25, 1997. 10.53 Amendment No. 1, dated March 20, 1997, to the Stock Purchase Agreement between The Grand Union Company and Roger Stangeland, dated as of February 25, 1997. 10.54 Assignment and Assumption Agreement by and between Roger Stangeland and The Stangeland Family Limited Partnership, dated March 20, 1997. 10.55 Stockholder Agreement between Trefoil Capital Investors II, L.P., a Delaware limited partnership, GE Investment Private Placement Partners II, A Limited Partnership, a Delaware limited partnership, Roger Stangeland, an individual, and The Grand Union Company, a Delaware corporation. 10.56 Addendum to Stockholder Agreement among Trefoil Capital Investors II, L.P., a Delaware limited partnership, GE Investment Private Placement Partners II, A Limited Partnership, a Delaware limited partnership, Roger Stangeland, an individual, and The Grand Union Company, a Delaware corporation. 10.57 Acceleration and Exchange Agreement, dated as of June 5, 1997, by and among The Grand Union Company, Trefoil Capital Investors II, L.P., a Delaware limited partnership, and GE Investments Private Placement Partners II, A Limited Partnership, a Delaware limited partnership, including Exhibits thereto. 10.58 Amendment No. 1, dated as of June 5, 1997, to the Registration Rights Agreement dated as of July 30, 1996, by and among The Grand Union Company, Trefoil Capital Investors II, L.P., a Delaware limited partnership, and GE Investments Private Placement Partners II, A Limited Partnership, a Delaware limited partnership. 21.1 Subsidiaries of Grand Union. 27.1 Financial Data Schedule.
* Compensatory plan or arrangement ** Confidential treatment requested 19 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. THE GRAND UNION COMPANY (Registrant) /s/ Jeffrey P. Freimark Date: June 27, 1997 ---------------------------------------- Jeffrey P. Freimark Executive Vice President-Chief Financial and Administrative Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Roger E. Stangeland Director, Chairman, and interim June 27, 1997 - ---------- -------------- Chief Executive Officer Roger E. Stangeland (Principal Executive Officer) /s/ James J. Costello Director June 27, 1997 - ------------------------- James J. Costello /s/ Daniel E. Josephs Director June 27, 1997 - ------------------------- Daniel E. Josephs /s/ William G. Kagler Director June 27, 1997 - ------------------------- William G. Kagler /s/ Clifford A. Miller Director June 27, 1997 - ------------------------- Clifford A. Miller /s/ Geoffrey T. Moore Director June 27, 1997 - ------------------------- Geoffrey T. Moore Director June 27, 1997 - -------------------------- J. Richard Stonesifer /s/ David Y. Ying Director June 27, 1997 - ------------------------- David Y. Ying /s/ Jeffrey P. Freimark Executive Vice President June 27, 1997 - ------------------------- Chief Financial and Jeffrey P. Freimark Administrative Officer (Principal Financial Officer and Principal Accounting Officer) 20 REPORT OF INDEPENDENT ACCOUNTANTS (Post-Emergence) To the Shareholders and the Board of Directors of The Grand Union Company In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations and cash flows present fairly, in all material respects, the financial position of The Grand Union Company and its subsidiaries (the "Company") at March 29, 1997 and March 30, 1996 and the results of their operations and their cash flows for the 52 weeks ended March 29, 1997 and the 41 weeks ended March 30, 1996 in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Note 1 to the consolidated financial statements, on May 31, 1995, the United States Bankruptcy Court for the District of Delaware confirmed the Company's Plan of Reorganization, as amended (the "Plan"). Confirmation of the Plan resulted in the discharge of all claims against the Company that arose before January 25, 1995 and terminated all rights and interests of equity shareholders as provided for in the Plan. The Plan became effective on June 15, 1995 and the Company emerged from Chapter 11 of Title 11 of the United States Code ("Chapter 11"). In connection with its emergence from Chapter 11, the Company adopted Fresh-Start Reporting as of June 18, 1995. PRICE WATERHOUSE LLP New York, New York May 29, 1997, except as to the second, fourth, fifth and sixth paragraphs of Note 8, which are as of June 12, 1997 F-1 REPORT OF INDEPENDENT ACCOUNTANTS (Pre-Emergence) To the Shareholders and the Board of Directors of The Grand Union Company In our opinion, the accompanying consolidated statements of operations and cash flows present fairly, in all material respects, the results of operations and cash flows of The Grand Union Company and its subsidiaries (the "Company") for the 11 weeks ended June 17, 1995 and the 52 weeks ended April 1, 1995 in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Note 1 to the consolidated financial statements, on January 25, 1995, the Company filed a voluntary petition for relief under Chapter 11 of Title 11 of the United States Code ("Chapter 11") in the United States Bankruptcy Court for the District of Delaware. The Company's Plan of Reorganization, as amended, became effective on June 15, 1995 and the Company emerged from Chapter 11. In connection with its emergence from Chapter 11, the Company adopted Fresh-Start Reporting as of June 18, 1995. PRICE WATERHOUSE LLP New York, New York May 17, 1996 F-2 THE GRAND UNION COMPANY CONSOLIDATED STATEMENT OF OPERATIONS (dollars in thousands, except per share data)
SUCCESSOR COMPANY PREDECESSOR COMPANY -------------------------- ------------------------ 52 WEEKS 41 WEEKS 11 WEEKS 52 WEEKS ENDED ENDED ENDED ENDED MARCH 29, MARCH 30, JUNE 17, APRIL 1, 1997 1996 1995 1995 ------------ ------------ ---------- ------------ Sales...................................................... $ 2,312,673 $ 1,819,928 $ 487,882 $ 2,391,696 Cost of sales.............................................. (1,606,926) (1,250,072) (344,041) (1,683,355) ------------ ------------ ---------- ------------ Gross profit............................................... 705,747 569,856 143,841 708,341 Operating and administrative expenses...................... (582,889) (453,620) (117,544) (571,640) Depreciation and amortization.............................. (85,459) (59,840) (17,215) (87,098) Amortization of excess reorganization value................ (102,607) (83,985) -- -- Unusual items.............................................. (9,800) (22,000) (18,627) (27,417) Interest expense, net (contractual interest totaled $43,360 and $203,285 for the 11 weeks ended June 17, 1995 and the 52 weeks ended April 1, 1995, respectively-- See Note 2).............................................. (105,823) (79,194) (19,791) (182,016) ------------ ------------ ---------- ------------ Loss before income taxes and extraordinary gain on debt discharge................................................ (180,831) (128,783) (29,336) (159,830) Income tax (provision) benefit............................. (2,523) 18,927 -- -- ------------ ------------ ---------- ------------ Loss before extraordinary gain on debt discharge........... (183,354) (109,856) (29,336) (159,830) Extraordinary gain on debt discharge....................... -- -- 854,785 -- ------------ ------------ ---------- ------------ Net (loss) income.......................................... (183,354) (109,856) 825,449 (159,830) Accrued dividends on preferred stock....................... (2,000) -- -- -- Accrued dividends on old preferred stock................... -- -- -- (19,480) ------------ ------------ ---------- ------------ Net (loss) income applicable to common stock............... $ (185,354) $ (109,856) $ 825,449 $ (179,310) ------------ ------------ ---------- ------------ ------------ ------------ ---------- ------------ Net (loss) per common share................................ $ (18.54) $ (10.99) ------------ ------------ ------------ ------------
See accompanying notes to consolidated financial statements. F-3 THE GRAND UNION COMPANY CONSOLIDATED BALANCE SHEET (dollars in thousands, except par value and liquidation preference) MARCH 29, MARCH 30, 1997 1996 ---------- ----------- ASSETS Current assets: Cash and temporary investments........... $ 34,119 $ 39,425 Receivables.............................. 17,975 20,948 Inventories.............................. 131,409 133,506 Other current assets..................... 14,326 13,709 ---------- ---------- Total current assets................... 197,829 207,588 Property, net.............................. 411,911 405,579 Excess reorganization value, net........... 335,065 437,672 Beneficial leases, net..................... 52,266 68,147 Deferred tax asset......................... 51,393 53,916 Other assets............................... 12,375 12,304 ---------- ---------- $1,060,839 $1,185,206 ---------- ---------- ---------- ---------- LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY Current liabilities: Current maturities of long-term debt....... $ 46 $ 1,813 Current portion of obligations under capital leases........................... 8,045 7,080 Accounts payable and accrued liabilities... 164,549 170,010 ---------- ---------- Total current liabilities.................. 172,640 178,903 Long-term debt............................. 740,207 738,067 Obligations under capital leases........... 140,058 128,114 Other noncurrent liabilities............... 96,144 95,978 ---------- ---------- Total liabilities.......................... 1,149,049 1,141,062 ---------- ---------- Redeemable Class A preferred stock, $1.00 par value, 3,500,000 shares authorized, 1,279,700 shares issued and outstanding; liquidation preference $65,000,000....... 65,000 -- ---------- ---------- Stockholders' (deficit) equity: Common Stock, $.01 and $1.00 par value at March 29, 1997 and March 30, 1996, respectively; 60,000,000 shares authorized, 10,000,000 shares issued and outstanding......................... 100 10,000 Preferred Stock, $1.00 par value; 10,000,000 shares authorized, less amount authorized as Class A preferred stock, no shares issued and outstanding............................. -- -- Capital in excess of par value........... 139,900 144,000 Accumulated deficit...................... (293,210) (109,856) ---------- ---------- Total stockholders' (deficit) equity....... (153,210) 44,144 ---------- ---------- $1,060,839 $1,185,206 ---------- ---------- ---------- ---------- See accompanying notes to consolidated financial statements. F-4 THE GRAND UNION COMPANY CONSOLIDATED STATEMENT OF CASH FLOWS (dollars in thousands)
SUCCESSOR COMPANY PREDECESSOR COMPANY ------------------------ ----------------------- 52 WEEKS 41 WEEKS 11 WEEKS 52 WEEKS ENDED ENDED ENDED ENDED MARCH 29, MARCH 30, JUNE 17, APRIL 1, 1997 1996 1995 1995 ----------- ----------- ---------- ----------- OPERATING ACTIVITIES: Net (loss) income............................................. $ (183,354) $ (109,856) $ 825,449 $ (159,830) Adjustments to reconcile net (loss) income to net cash provided by (used for) operating activities before reorganization items paid: Extraordinary gain on debt discharge......................... -- -- (854,785) -- Depreciation and amortization................................ 188,066 143,825 17,215 87,098 Deferred taxes............................................... 2,523 (18,927) -- -- Charges relating to pension settlement....................... -- -- -- 3,747 Noncash interest............................................. (188) 14,552 1,126 38,418 Net changes in assets and liabilities: Receivables.................................................. 2,973 (12,652) 1,769 18,480 Inventories.................................................. 2,097 50,372 12,946 16,596 Other current assets......................................... (617) 123 2,776 657 Accounts payable and accrued liabilities..................... (2,783) (59,509) (34,928) 86,550 Other........................................................ (2,867) (7,733) 4,493 7,330 ----------- ----------- ---------- ----------- Net cash provided by (used for) operating activities before reorganization items........................................ 5,850 195 (23,939) 99,046 Reorganization items.......................................... (5,484) (20,729) (4,913) (10,770) ----------- ----------- ---------- ----------- Net cash provided by (used for) operating activities.......... 366 (20,534) (28,852) 88,276 ----------- ----------- ---------- ----------- INVESTMENT ACTIVITIES: Capital expenditures.......................................... (55,147) (40,402) (3,301) (62,973) Disposals of property......................................... 8,011 5,555 5,452 2,128 ----------- ----------- ---------- ----------- Net cash (used for) provided by investment activities......... (47,136) (34,847) 2,151 (60,845) ----------- ----------- ---------- ----------- FINANCING ACTIVITIES: Net proceeds from sale of preferred stock..................... 51,000 -- -- -- Proceeds from New Bank debt................................... -- -- 104,144 -- Payment of old bank debt...................................... -- -- (93,144) -- Net proceeds from long-term debt.............................. 9,000 33,089 -- 29,000 Obligations under capital leases discharged................... (10,543) (6,126) (1,707) (10,339) Loan placement fees........................................... -- -- (3,125) -- Payment of long-term debt..................................... (7,993) (808) (239) (963) ----------- ----------- ---------- ----------- Net cash provided by financing activities..................... 41,464 26,155 5,929 17,698 ----------- ----------- ---------- ----------- (Decrease) increase in cash and temporary investments......... (5,306) (29,226) (20,772) 45,129 Cash and temporary investments at beginning of period......... 39,425 68,651 89,423 44,294 ----------- ----------- ---------- ----------- Cash and temporary investments at end of period............... $ 34,119 $ 39,425 $ 68,651 $ 89,423 ----------- ----------- ---------- ----------- ----------- ----------- ---------- ----------- Supplemental disclosure of cash flow information: Interest payments............................................. $ 105,045 $ 57,565 $ 9,515 $ 89,985 Capital lease obligations incurred............................ 23,452 8,529 20,072 31,686 Accrued dividends on preferred stock.......................... 2,000 -- -- -- Accrued dividends on old preferred stock...................... -- -- -- 19,480 Decrease in common stock par value............................ 9,900 -- -- --
See accompanying notes to consolidated financial statements. F-5 THE GRAND UNION COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1--BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Grand Union Company, a Delaware corporation, ("Grand Union" or the "Company") is a regional food retailer which currently operates stores in six northeastern states. The Company has been publicly owned since June 15, 1995 and its Common Stock is traded on the NASDAQ Stock Market. Prior to June 15, 1995, Grand Union Capital Corporation ("Capital"), a wholly owned subsidiary of Grand Union Holdings Corporation ("Holdings"), owned all of Grand Union's Common Stock. Basis of Presentation. As of the Company's emergence from Chapter 11 ("Chapter 11") of Title 11 of the United States Code (the "Code") on June 15, 1995 (the "Effective Date", see Note 2), the Company adopted fresh-start reporting in accordance with American Institute of Certified Public Accountants Statement of Position 90-7, "Financial Reporting By Entities in Reorganization Under the Bankruptcy Code" ("Fresh-Start Reporting"). In connection with the adoption of Fresh-Start Reporting, a new entity was deemed created for financial reporting purposes. The periods presented prior to the Effective Date have been designated "Predecessor Company" and the periods subsequent to the Effective Date have been designated "Successor Company". Principles of Consolidation. The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. Intercompany transactions and balances have been eliminated. Fiscal Year. The Company's fiscal year ends on the Saturday nearest the last day of March. The years ended March 29, 1997 ("Fiscal 1997"), March 30, 1996 ("Fiscal 1996") and April 1, 1995 ("Fiscal 1995") each comprises 52 weeks. Fiscal 1996 includes the 11 weeks prior to the Effective Date, which have been designated "Predecessor Company," and the 41 weeks subsequent to the Effective Date, which have been designated "Successor Company". Temporary Cash Investments. Temporary cash investments consist of short-term investments in highly liquid securities with initial maturities of three months or less. Inventory Valuation. Grocery and general merchandise inventories are all valued at the lower of last-in, first-out ("LIFO") cost or market. At March 29, 1997 and March 30, 1996, approximately $111,923,000 and $111,327,000, respectively, of grocery and general merchandise inventories were valued using the LIFO method. Replacement cost exceeded the LIFO cost of these inventories by approximately $3,800,000 and $1,500,000 at March 29, 1997 and March 30, 1996, respectively. During Fiscal 1995, inventory levels were reduced resulting in a liquidation of LIFO inventories that had been carried at a value lower than current cost. Net loss was decreased by approximately $1,628,000 as a result of the liquidation. Perishable inventories are valued at the lower of average cost or market, which adequately provides for the matching of costs and related revenues due to the rapid turnover of such inventories. Property. Land, buildings, fixtures and equipment, and leasehold improvements are recorded at cost and include interest on the funds borrowed to finance construction. Depreciation and amortization of buildings and fixtures and equipment is computed using the straight-line method over estimated useful lives ranging from three to forty years. Depreciation of leasehold improvements is computed over the life of the asset or life of the lease, net of options, whichever is shorter. Properties held under capital leases are capitalized net of gains on sale leaseback transactions and are amortized on a straight-line basis over the life of each lease. Excess Reorganization Value. Excess Reorganization Value, established in connection with Fresh-Start Reporting, is being amortized on a straight-line basis over five years. Accumulated amortization was $186,592,000 and $83,985,000 at March 29, 1997 and March 30, 1996, respectively. Beneficial Leases. Amortization of beneficial leases is computed on a straight-line basis over the lease life. At March 29, 1997 and March 30, 1996, accumulated amortization was $27,682,000 and $14,275,000, respectively. F-6 Amortization of Debt Premium. The Company amortizes premiums in connection with the issuance of long-term debt over the life of the respective issue. Deferred Financing Fees. Financing fees are deferred and amortized over the expected life of the related loan. At March 29, 1997 and March 30, 1996, accumulated amortization was $802,000 and $356,000, respectively. Income Taxes. The Company follows the provisions of Financial Accounting Standard ("FAS") No. 109, "Accounting for Income Taxes", whereby deferred taxes represent differences between the financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates expected to be in effect when differences reverse. Valuation allowances are recorded to the extent that it is more likely than not that future tax benefits will not be realized. Retirement Plans. The Company maintains a noncontributory, trusteed pension plan covering eligible employees and a supplemental nonqualified, nontrusteed plan for certain executives. The Company's policy is to fund pension amounts which satisfy the requirements of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The Company also maintains a saving plan in which eligible employees may contribute up to a total of 14% of their salary, the allowable percentage of pre- and post-tax contributions vary depending upon the earnings of a particular employee. The Company provides a match of 25% on the dollar up to the first 4% of employee contributions. Postretirement Benefits other than Pension. The Company accrues the estimated cost of retiree benefit payments, other than pension, during the years each employee provides services. Stock-Based Compensation. The Company accounts for stock-based compensation using the intrinsic value method under which compensation cost is measured as the excess, if any, of the quoted market price of the Company's stock at the date of grant over the exercise price of the option granted. Compensation cost for stock options, if any, is recognized ratably over the vesting period. The Company provides additional pro forma disclosures as required under FAS No. 123, "Accounting for Stock-Based Compensation". See Note 13. Self Insurance. The Company self insures workers' compensation, automobile liability, general liability, and non-union employee medical costs to varying deductible limits, and with the exception of medical costs, carries third party insurance in excess of such limits. Reserves are provided for the estimated settlement value up to the deductible limit of all claims incurred during each policy year. Advertising Costs. Advertising costs are expensed as incurred. Advertising expense for Fiscal 1997, the 41 weeks ended March 30, 1996, the 11 weeks ended June 17, 1995 and Fiscal 1995 was $37,481,000, $28,084,000, $7,383,000 and $31,691,000, respectively. Store Closure Expense. Estimated net costs of holding and disposing of closed stores are provided as of the later of the date the decision is made to close the store or the date such costs are reasonably estimable. Pre-opening Costs. Store pre-opening costs are charged to expense as incurred. Fair Value of Financial Instruments. The carrying amount of cash, temporary cash investments, receivables, accounts payable, accrued liabilities and debt, other than the Senior Notes, approximates fair value. The fair value of the Senior Notes, based upon published trading values, is $592,444,000 and $519,505,000 at March 29, 1997 and March 30, 1996, respectively. Use of Estimates. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues, costs and expenses during the reporting period. Actual results could differ from those estimates. Areas of significant estimates include self insurance reserves, realization of deferred tax assets and retirement benefit reserves. F-7 Net Loss Per Share. Net loss per share for Fiscal 1997 and the 41 weeks ended March 30, 1996 has been calculated on the basis of 10,000,000 shares outstanding. The effect of exercising warrants and options and the conversion of Class A Preferred Stock are excluded from the calculation of earnings per share because their inclusion would be anti-dilutive. Net loss per common share data is not meaningful for periods prior to the Effective Date due to the significant change in the capital structure of the Company. Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. In March 1995, the Financial Accounting Standards Board issued FAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", which establishes accounting standards for the impairment of long-lived assets, certain identifiable intangibles and goodwill related to those assets to be held and used and for long-lived assets and certain identifiable intangibles to be disposed. The Company adopted FAS No. 121 as of the Effective Date. NOTE 2--REORGANIZATION On November 29, 1994, the Company announced that it was not likely to be able to fund cash interest payments due in early calendar 1995, and that it intended to develop a capital restructuring plan. Beginning on January 16, 1995, the Company did not make interest payments required under its outstanding debt obligations. On January 24, 1995, the Company announced that it had reached an agreement in principle with its bank lenders and with members of informal committees of certain holders of its 11.375% Senior Notes due 1999 (the "11.375% Senior Notes") and 11.25% Senior Notes due 2000 (the "11.25% Senior Notes" and, collectively with the 11.375% Senior Notes, the "Old Senior Notes") and certain holders of its 12.25% Senior Subordinated Notes due 2002 (the "12.25% Subordinated Notes"), 12.25% Senior Subordinated Notes due 2002, Series A (the "Series A 12.25% Subordinated Notes") and 13% Senior Subordinated Notes due 1998 (the "13% Subordinated Notes" and, collectively with the 12.25% Subordinated Notes and the Series A 12.25% Subordinated Notes, the "Subordinated Notes") on the terms of a capital restructuring. Chapter 11 Bankruptcy Filings--On January 25, 1995 (the "Filing Date"), as part of the implementation of such agreement, the Company filed a voluntary petition for relief under Chapter 11 of the Code in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"). From the Filing Date through the Effective Date, the Company operated as a debtor-in-possession under Chapter 11 of the Code and was subject to the supervision of the Bankruptcy Court in accordance with the Code. During this period, the Company's business was operated under a series of "first day orders" which, among other things, permitted it to retain certain financial and legal advisors and which authorized payment of certain pre-petition employee costs, including worker's compensation benefits, and pre-petition trade claims, subject to the satisfaction of various requirements. On January 30, 1995, the Company (as debtor and as debtor-in-possession) entered into a credit agreement (the "DIP Facility") with the banks party thereto providing for borrowings of up to $150 million on a revolving credit basis. On February 16, 1995, final approval of the DIP Facility was granted and the Bankruptcy Court also issued a Final Cash Collateral Order which allowed the Company to use cash collateral to pay operating expenses in the ordinary course of business. The DIP Facility provided for a commitment fee equal to .5% of the average unused portion. There were no borrowings made under the DIP Facility during the Chapter 11 proceedings and it was terminated on the Effective Date. On February 16, 1995, Capital consented to the entry of an order for relief in respect of an involuntary Chapter 11 petition filed in the Bankruptcy Court on February 6, 1995 by entities purporting to be holders of Capital's 15% Senior Zero Coupon Notes due 2004 (the "Capital Senior Zero Notes") and 16.5% Senior Subordinated Zero Coupon Notes due 2007 (the "Capital Subordinated Zero Notes" and, collectively with the Capital Senior Zero Notes, the "Capital Notes"). On February 16, 1995, Holdings, of which Capital was a wholly owned subsidiary, filed a voluntary Chapter 11 petition in the Bankruptcy Court. Plan of Reorganization--The Bankruptcy Court confirmed the Second Amended Chapter 11 Plan of The Grand Union Company, dated April 19, 1995, (the "Plan") on May 31, 1995 (the "Confirmation Date") and the Company emerged from Chapter 11 on the Effective Date. On the Effective Date, Grand Union adopted a restated certificate of incorporation (the "New Certificate"), the principal effects of which were: (i) to authorize 30,000,000 shares of new common stock (the "Common Stock") (of which 10,000,000 shares were issued under the Plan) and (ii) to prohibit the issuance of non-voting equity securities. The Plan provided for full payment of all allowed administrative expenses and all allowed general unsecured and priority claims. On the Effective Date, obligations relating to the Company's existing bank credit agreement (the "Old Bank Credit Agreement") were paid in full and the Company entered into an Amended and Restated Credit Agreement (the "Bank Facility") with its bank lending group which provides for a five- F-8 year revolving credit facility of $100,000,000 (the "Revolving Credit Facility") and a seven-year term loan facility of $104,144,371 (the "Term Loan"). The Bank Facility is secured by a lien on substantially all of the assets of the Company and its subsidiaries. As of the Effective Date, the Old Senior Notes, which had an aggregate principal amount of $525,000,000 plus accrued interest, were deemed cancelled and each holder of Old Senior Notes became entitled to receive its pro rata share of the Company's new 12% Senior Notes due 2004 (the "Senior Notes"), having an aggregate principal amount of $595,475,922, issued pursuant to the Plan. Subsequent to the Effective Date, the Company issued $595,421,000, aggregate principal amount of Senior Notes and made cash payments of $54,922 for fractional amounts to the holders of the Old Senior Notes. The Senior Notes began to accrue interest beginning on September 1, 1995. Accordingly, the Senior Notes have been discounted at 12% for the period from June 15, 1995 to September 1, 1995 and imputed interest was charged at 12% during that period. In addition, the difference between such discounted value and the fair value of the Senior Notes at the Effective Date was recorded as a debt premium totaling $5,779,000 which is being amortized over the life of the Senior Notes. As of the Effective Date, the Subordinated Notes, which had an aggregate principal amount of $566,150,000, and the old capital stock of Grand Union were deemed cancelled and each holder of Subordinated Notes became entitled to receive its pro rata share of an aggregate of 10,000,000 shares of Common Stock issued pursuant to the Plan. The Plan also provided for the issuance of warrants to purchase an aggregate of 900,000 shares of Common Stock to holders of several other series of long-term debt of its then parent company (the "Capital Notes") pursuant to the terms of a settlement reached among the Company, its then direct and indirect parent companies, the Official Committee of Unsecured Creditors of its then parent company and certain holders of the Capital Notes. Such warrants are comprised of 300,000 Series 1 Warrants to purchase shares of Common Stock at a purchase price of $30 per share and of 600,000 Series 2 Warrants to purchase shares of Common Stock at a purchase price of $42 per share. The warrants expire on June 15, 2000. The Plan made no provision for the holders of the remaining long-term debt, Redeemable Preferred Stock, common shares or warrants to purchase common shares of the Company's then indirect parent. Holdings and Capital were dissolved on March 28, 1996 and March 27, 1996, respectively. Interest expense was not accrued on the Subordinated Notes, Capital Notes and Holdings Junior Notes subsequent to the Filing Date. Accordingly, interest expense for the 11 weeks ended June 17, 1995 and the 52 weeks ended April 1, 1995 excludes contractual interest expense of $23,569,000 and $21,269,000, respectively. For financial reporting purposes, the Company accounted for the consummation of the Plan effective June 17, 1995. In accordance with Fresh-Start Reporting, the Company valued its assets and liabilities at fair values and eliminated its retained earnings at the Effective Date. The reorganization value of the Company was determined utilizing several methods which yielded similar results, including (a) the trading value of the Company's Common Stock for a representative number of days subsequent to the Effective Date and the fair value of the Company's obligations as of the Effective Date, (b) discounted cash flows and (c) a multiple of adjusted trailing year operating cash flow. The total reorganization value as of the Effective Date was determined to be $1,334,000,000, which was $521,657,000 in excess of the aggregate fair value of the Company's tangible and identified intangible assets. Such excess is classified as "Excess reorganization value, net" in the accompanying consolidated balance sheet. F-9 The components of reorganization items included as unusual items in the consolidated statement of operations are as follows (in thousands):
11 WEEKS 52 WEEKS ENDED ENDED JUNE 17, APRIL 1, 1995 1995 ---------- ---------- Fresh-Start Reporting: Establish excess reorganization value............................... $ 521,657 $ -- Eliminate existing goodwill......................................... (540,434) -- Revalue beneficial leases........................................... 40,633 -- Establish deferred tax asset........................................ 35,414 -- Revalue pension assets and liabilities and postretirement obligations......................................................... (23,653) -- Record lease rejection liability.................................... (19,734) -- Provide for warehouse closing....................................... (10,450) -- Eliminate LIFO inventory reserve.................................... 7,757 -- Provide for other reorganization liabilities........................ (5,400) -- Record liability for fair value of interest rate protection agreement........................................................... (3,500) -- Other............................................................... (1,905) -- ---------- ---------- Total Fresh-Start Reporting.......................................... 385 -- Professional fees incurred in connection with the reorganization...... (20,000) (5,704) Interest earned on accumulated cash resulting from the Chapter 11 proceedings......................................................... 988 173 Debtor-in-possession financing fees................................... -- (3,740) Other................................................................. -- (1,499) ---------- ---------- Total reorganization items....................................... $ (18,627) $ (10,770) ---------- ---------- ---------- ----------
At June 17, 1995, as a result of the debt restructuring, the Company recorded an extraordinary gain on debt discharge as follows (in thousands): Elimination of Old Debt, deferred financing fees and accrued interest discharged............................... $1,589,506 Issuance of Senior Notes........................................ (580,721) Issuance of Common Stock........................................ (154,000) ----------- Extraordinary gain on debt discharge.......................... $ 854,785 ----------- -----------
NOTE 3--UNUSUAL ITEMS Unusual items included in the consolidated statement of operations consist of the following (in thousands): SUCCESSOR COMPANY PREDECESSOR COMPANY ------------------------ -------------------- 52 WEEKS 41 WEEKS 11 WEEKS 52 WEEKS ENDED ENDED ENDED ENDED MARCH 29, MARCH 30, JUNE 17, APRIL 1, 1997 1996 1995 1995 ----------- ----------- --------- --------- Charges relating to severance....................................... $ 7,800 $ -- $ -- $ -- Inventory valuation reserve......................................... 2,000 -- -- -- Provision for warehouse closures.................................... -- 15,000 -- -- Charges relating to voluntary resignation programs.................. -- 4,500 -- -- Provision for organizational restructuring.......................... -- 2,500 -- -- Reorganization items (See Note 2)................................... -- -- 18,627 10,770 Provision for store closures........................................ -- -- -- 12,900 Charges relating to pension settlement (See Note 11)................ -- -- -- 3,747 ----------- ----------- --------- --------- $ 9,800 $ 22,000 $ 18,627 $ 27,417 ----------- ----------- --------- --------- ----------- ----------- --------- ---------
F-10 During the fourth quarter of Fiscal 1997, the Company recorded $9,800,000 of unusual charges including $7,800,000 of severance and $2,000,000 of an inventory valuation reserve. In Fiscal 1996, the Company entered into several supply agreements with C&S Wholesale Grocers, Inc. ("C&S"), pursuant to which C&S stocks and distributes to all Grand Union stores substantially all of the merchandise formerly owned and warehoused by Grand Union. Under the agreements, C&S stocks and supplies grocery and perishable products from its own warehouses and stocks and supplies health and beauty care and general merchandise products from the Company's Montgomery, New York warehouse. Accordingly, the Company recorded a provision relating to the closure of two metropolitan New York warehouses consisting principally of the cash costs of severance, pension withdrawal liability, security, and other expenses directly related to the closing of the warehouses. Substantially all of the net costs of closing these facilities were paid prior to March 30, 1996. During the 41 weeks ended March 30, 1996, the Company made cash payments of $4,500,000 relating to voluntary resignation programs under which certain classes of store employees accepted monetary incentives to voluntarily resign from their positions. The provision for organizational restructuring of $2,500,000 is principally comprised of the cash cost of severance, all of which was paid at March 29, 1997, and future lease payments. During Fiscal 1995, the Company established a provision for store closings, net of a non-recurring item. The provision included a charge of $16,900,000 ($8,200,000 of which required cash outlays) relating to the closure of sixteen stores principally consisting of store closing costs, estimated carrying costs through expected dates of disposition and the remaining net book value of store fixed assets. Additionally, the Company realized $4,000,000 of proceeds from the termination of a warehouse sublease. All stores were closed prior to April 1, 1995. Substantially all of the costs of closing these facilities were paid by March 30, 1996. NOTE 4--PROPERTY Property, at cost, consists of the following (in thousands):
MARCH 29, 1997 MARCH 30, 1996 -------------- -------------- Property owned: Land....................................................... $ 19,196 $ 18,776 Buildings.................................................. 60,422 57,309 Fixtures and equipment..................................... 168,053 144,268 Leasehold improvements..................................... 126,002 107,220 -------------- -------------- 373,673 327,573 Less: accumulated depreciation and amortization.............. 81,098 32,493 -------------- -------------- Property owned, net.......................................... 292,575 295,080 -------------- -------------- Property held under capital leases: Land and buildings......................................... 112,056 97,801 Equipment.................................................. 18,081 18,184 -------------- -------------- 130,137 115,985 Less: accumulated amortization............................... 10,801 5,486 -------------- -------------- Property held under capital leases, net...................... 119,336 110,499 -------------- -------------- Property..................................................... $ 411,911 $ 405,579 -------------- -------------- -------------- --------------
Depreciation and amortization of owned and leased property for Fiscal 1997, the 41 weeks ended March 30, 1996, the 11 weeks ended June 17, 1995 and Fiscal 1995 was $64,256,000, $42,706,000, $11,246,000 and $57,089,000, respectively. As discussed in Note 1, the Company adopted FAS No. 121 as of the Effective Date. This statement requires companies to record impairments of long-lived assets, certain identifiable intangibles, and associated goodwill when there is evidence that events or changes in circumstances have made recovery of an asset's carrying value unlikely. In accordance with this statement, during Fiscal 1997 the Company performed an evaluation of its assets for impairment considering the present value of estimated net future operating cash flows (which includes the estimated fair value that would be received upon sublease or disposition). The result of such review was that an impairment loss of $6,362,000 was recorded through depreciation in order to write down certain store impaired assets. F-11 NOTE 5--RECEIVABLES AND ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Receivables at March 29, 1997 and March 30, 1996 are net of allowances for doubtful accounts of $930,000 and $1,146,000, respectively. Accounts payable and accrued liabilities consist of the following (in thousands):
MARCH 29, MARCH 30, 1997 1996 ------------ ------------ Accounts payable............................................. $ 89,798 $ 86,638 Accrued liabilities: Payroll...................................................... 16,294 18,179 Interest..................................................... 9,405 8,740 Insurance.................................................... 16,070 12,098 Other........................................................ 32,982 44,355 ------------ ------------ $ 164,549 $ 170,010 ------------ ------------ ------------ ------------
NOTE 6--INCOME TAXES The components of the deferred income tax (provision) benefit are as follows (in thousands):
SUCCESSOR COMPANY PREDECESSOR COMPANY ------------------------ -------------------------- 52 WEEKS 41 WEEKS 11 WEEKS 52 WEEKS ENDED ENDED ENDED ENDED MARCH 29, MARCH 30, JUNE 17, APRIL 1, 1997 1996 1995 1995 ----------- ----------- ------------ ------------ Federal............................................. $ (2,154) $ 16,157 $ -- -- State............................................... (369) 2,770 -- -- ----------- ----------- ------------ ------------ Income tax (provision) benefit...................... $ (2,523) $ 18,927 $ -- $ -- ----------- ----------- ------------ ------------ ----------- ----------- ------------ ------------
The reconciliation of the income tax (provision) benefit computed at the federal statutory rate to the reported income tax (provision) benefit is as follows (in thousands):
SUCCESSOR COMPANY PREDECESSOR COMPANY ------------------------ ------------------------- 52 WEEKS 41 WEEKS 11 WEEKS 52 WEEKS ENDED ENDED ENDED ENDED MARCH 29, MARCH 30, JUNE 17, APRIL 1, 1997 1996 1995 1995 ----------- ----------- ---------- ----------- Benefit computed at federal statutory tax rate.............. $ 63,291 $ 45,074 $ 10,268 $ 55,941 Increase (decrease) in the benefit resulting from: Amortization of excess reorganization value............... (35,429) (28,992) -- -- Amortization of goodwill.................................. -- -- (6,295) (5,379) State and local taxes, net of federal tax benefit......... 5,242 2,770 -- -- Deferred tax asset valuation allowance.................... (29,841) -- (3,948) (51,014) Write-down of unrealizable deferred tax asset............. (8,500) -- -- -- Other..................................................... 2,714 75 (25) 452 ----------- ----------- ---------- ----------- Income tax (provision) benefit.............................. $ (2,523) $ 18,927 $ -- $ -- ----------- ----------- ---------- ----------- ----------- ----------- ---------- -----------
F-12 The components of the net deferred tax asset are as follows (in thousands):
MARCH 29, MARCH 30, 1997 1996 ------------ ------------ Deferred tax assets: Non-cash interest....................................... $ 2,111 $ 5,727 Insurance reserve....................................... 19,597 19,300 Pension................................................. 5,419 4,077 Post retirement benefit liability....................... 14,671 14,676 Other miscellaneous reserves............................ 23,505 25,477 Net operating loss carryfoward.......................... 29,841 15,246 ------------ ----------- Total deferred tax assets................................. 95,144 84,503 ------------ ----------- Deferred tax liabilities: Depreciable assets...................................... 9,299 26,016 Other................................................... 4,611 4,571 ------------ ----------- Total deferred tax liabilities............................ 13,910 30,587 ------------ ----------- Net deferred tax asset before valuation allowance......... 81,234 53,916 Valuation allowance....................................... (29,841) -- ------------ ----------- Net deferred tax asset.................................... $ 51,393 $ 53,916 ------------ ----------- ------------ -----------
During the fourth quarter of Fiscal 1997, the Company determined that the likelihood of realizing its entire deferred tax asset had diminished as a result of the application of Internal Revenue Code Section 382 as well as other long-term financial prospects. Section 382, which was triggered by the sale of Class A Preferred Stock (see Note 8), limits the amount of future annual net operating loss carryforwards which may be utilized subsequent to a change in control. Consequently, during the fourth quarter of Fiscal 1997, the Company wrote off $8,500,000 of its deferred tax asset that related to net operating loss carryforwards expected to expire due to Section 382 limitations and established a valuation allowance to fully reserve for the portion of its deferred tax asset related to its remaining net operating loss carryforwards. As of March 29, 1997, the Company had net operating loss carryforwards of approximately $73,000,000 for tax purposes, expiring in the years 2011 and 2012. Due to Section 382, there will be a limitation on the amount of annual net operating loss carryforwards which can be utilized. Under existing income tax laws, the Company is not required to include in its taxable income any cancellation of debt income as a result of the debt forgiven pursuant to the Plan. Accordingly, no income taxes were provided on the extraordinary gain on debt discharge in the statement of operations for the 11 weeks ended June 17, 1995. There are no remaining operating loss or credit carryforwards of the Predecessor Company and there was no change in the tax basis of the Company's assets as of the Effective Date. NOTE 7--DEBT Components of the Company's debt are as follows (in thousands):
MARCH 29, MARCH 30, 1997 1996 ----------- ----------- Equipment mortgage notes.......................... $ 46 $ 2,039 Bank Credit Agreements: Term Loan....................................... 104,144 104,144 Revolving Credit Facility....................... 36,000 33,000 12% Senior Notes due September 1, 2004 (includes $4,642 and $5,276 of unamortized debt premium at March 29, 1997 and March 30, 1996, respectively)......................... 600,063 600,697 ----------- ----------- 740,253 739,880 Less: current maturities of long-term debt........ 46 1,813 ----------- ----------- Long-term debt............................ $ 740,207 $ 738,067 ----------- ----------- ----------- -----------
On the Effective Date, obligations relating to the Predecessor Company's Old Bank Credit Agreement were paid in full and the Company entered into the Bank Facility with a group of lenders. The Bank Facility consists of the Revolving Credit Facility, expiring F-13 June 15, 2000, that provides borrowings and letters of credit aggregating $100,000,000, and the Term Loan totaling $104,144,000. The Bank Facility is secured by substantially all of the assets of the Company and its subsidiaries, whether in existence at the Effective Date or acquired thereafter, excluding those assets permitted to be financed by third parties. Outstanding borrowings bear interest at a rate equal to the applicable margin (1.5% and 2% for the Revolving Credit Facility and Term Loan, respectively) plus the higher of (a) the prime rate, as defined, (b) the adjusted certificate of deposit rate, as defined, plus 0.5% or (c) the federal funds rate, as defined, plus 0.25%. Alternatively, the Company may borrow, at its option, at the LIBOR rate, as defined, plus the applicable margin (3.0% and 3.5% for the Revolving Credit Facility and Term Loan, respectively). At March 29, 1997, borrowings under the Revolving Credit Facility and the Term Loan were at weighted interest rates of 8.77% and 9.11%, respectively. At March 30, 1996, borrowings under the Revolving Credit Facility and the Term Loan were at weighted interest rates of 9.75% and 9.00%, respectively. The Company is charged a commitment fee of one half of one percent per annum on the average unused portion of the Revolving Credit Facility. The Term Loan requires quarterly principal payments of $13,018,000 from September 30, 2000 through June 15, 2002. The Bank Facility provides for mandatory prepayments based on the occurrence of certain specified transactions. As of March 29, 1997, the Company had issued $44,169,000 of letters of credit. The Bank Facility contains certain restrictions and financial covenants relating to, among other things, minimum financial performance and limitations on the incurrence of additional indebtedness, asset sales, dividends, capital expenditures and prepayment of other indebtedness. During the fourth quarter of Fiscal 1997, the Company received a waiver for certain financial covenants as of March 29, 1997 and certain covenants for future periods were amended. The Company was in compliance with the remaining terms and restrictive covenants of the Bank Facility, as amended, as of March 29, 1997. The Old Term Loan and Old Revolving Credit Facility provided for interest at either a floating rate of 2% and 1.5%, respectively, per annum above the prime rate, as defined, or 3.5% and 3%, respectively, per annum above the LIBOR rate, as defined, at the option of the Predecessor Company. Pursuant to the Plan, on the Effective Date, the Old Senior Notes were deemed cancelled and each holder became entitled to receive his pro rata share of the Successor Company's Senior Notes having an aggregate principal amount of $595,421,000. Interest on the Senior Notes is payable semi-annually each March 1 and September 1. During the next five years, maturities of long-term debt are $46,000 in Fiscal 1998, $75,054,000 in Fiscal 2001 and $39,054,000 in 2002. There are no payments scheduled in Fiscal 1999 or 2000. NOTE 8--ISSUANCE OF PREFERRED STOCK On July 30, 1996, the Company entered into an agreement (the "Stock Purchase Agreement") to sell $100 million of 8.5% convertible preferred stock, $1.00 par value per share, (the "Class A Preferred Stock") to an investment group composed 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, on September 17, 1996, the Company sold 800,000 shares of Class A Preferred Stock to the Purchasers for aggregate proceeds of $40,000,000 (the "Principal Closing"). On February 25, 1997, the Company sold an additional 400,000 shares of Class A Preferred Stock to the Purchasers for aggregate proceeds of $20,000,000. Under the terms of the Stock Purchase Agreement, the Company sold to the Purchasers an additional 800,000 shares of Class A Preferred Stock at a purchase price of $50 per share (the "Stated Value") on June 12, 1997, which represents an acceleration of the original transaction dates, and immediately converted the shares to the new Class B Preferred Stock. The Class B Preferred Stock ranks PARI PASSU with the Class A Preferred Stock and has substantially the same terms as the Class A Preferred Stock. Dividends are cumulative and payable quarterly at 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 September 17, 1999. From September 17, 1999 through September 17, 2001, dividends are payable in cash, unless the terms of the Company's Bank Facility or 12% Senior Notes prohibit cash dividends, in which case dividends may be paid in Preferred Stock or Common Stock. After September 17, 2001, dividends are payable in cash. To the 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 number of shares of Common Stock that would otherwise be paid as the dividend. On December 31, 1996 and September 30, 1996, the Company paid dividends on the Class A Preferred Stock through the issuance of 17,056 and 2,644 shares, respectively, of Class A Preferred Stock. The aggregate Stated Value of the dividends at December 31, 1996 and September 30, 1996 was $852,800 and $132,200, respectively. Each share of Class A Preferred Stock is convertible at the option of the holder, at any time, into 6.8966 shares of Common Stock. At March 29, 1997, the 1,279,700 outstanding shares of Class A Preferred Stock were convertible into an aggregate 8,825,579 shares of Common Stock. Each share of Class B Preferred Stock is convertible at the option of the holder, at any time, into 20.8333 F-14 shares of Common Stock, to be reset during February 1998 to a conversion price based upon a 20% premium to the average trading price of Common Stock during a twenty-day period during February 1998. The Company is required to redeem the Class A Preferred Stock and the Class B Preferred Stock no later than June 1, 2005. Additionally, the Class A Preferred Stock and the Class B Preferred Stock may be redeemed at the Company's option at $50 per share plus all accrued and unpaid dividends if the volume-weighted average price of the Company's Common Stock over a 60-day period exceeds $13.05 per share after September 17, 1998, or $14.50 per share after September 17, 1999. After September 17, 2001, the Company's right to redeem is not contingent on the price of the Common Stock and the redemption price is approximately $51.60 per share plus all accrued and unpaid dividends, declining ratably to $50 per share plus all accrued and unpaid dividends after September 17, 2004. The Stock Purchase Agreement and the Certificates of Designation of Preferred Stock, setting forth the powers, preferences, rights, qualifications, limitations and restrictions of such class of preferred stock (the "Certificates of Designation"), also contain provisions with respect to the rights of the Purchasers to elect a specified number of directors, the number of disinterested directors, 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. The liquidation preference of Class A Preferred Stock and Class B Preferred Stock is equal to its Stated Value plus any accrued and unpaid dividends. The Class A Preferred Stock has been classified as Redeemable Class A Preferred Stock in the accompanying Consolidated Balance Sheet. The dividends on the Class A Preferred Stock and the accrued and unpaid dividends through March 29, 1997 have been accounted for by a charge against Capital in Excess of Par Value and a corresponding increase in the value of the Class A Preferred Stock. During Fiscal 1997, the Company recorded, as a charge to Capital in Excess of Par Value, costs of $12,000,000 directly related to the sale of Class A Preferred Stock. The costs included transaction fees paid to Shamrock Capital Advisors, Inc. and GE Investment Management Corporation of $2,000,000 each, fees paid to Donaldson, Lufkin and Jenrette, the Company's financial advisor and a then related party, of approximately $5,200,000, and other expenses, including legal and other professional fees, of $2,800,000. On March 20, 1997, the Company sold 60,000 shares of Class A Preferred Stock to the Chairman of the Company's Board of Directors for $3,000,000. NOTE 9--PROPERTY LEASES The Company operates principally in leased stores and offices, and in most cases holds renewal options with varying terms. Many of the leases contain clauses which provide for increased rentals based upon increases in real estate taxes and lessors' operating expenses. Future minimum payments under capital and non-cancelable operating leases, net of minimum sublease income, as of March 29, 1997 are as follows (in thousands):
CAPITAL OPERATING ------------ ----------- Fiscal 1998.......................................................................... $ 26,503 $ 33,510 1999.......................................................................... 24,150 33,089 2000.......................................................................... 22,456 30,888 2001.......................................................................... 20,597 24,076 2002.......................................................................... 19,619 20,082 Later years................................................................... 282,526 143,436 ------------ ---------- Total minimum lease payments.................................................. 395,851 285,081 Less: estimated executory costs included in total minimum lease payments...... (250) -- Less: sublease rental income.................................................. (2,139) (18,608) ------------ ---------- Net minimum lease payments.................................................... 393,462 $ 266,473 ---------- ---------- Less: portion representing interest........................................... 247,498 ------------ Present value of net minimum lease payments................................... 145,964 Less: current portion of obligations under capital leases..................... 8,045 ------------ Non-current portion of obligations under capital leases (net of sublease rental income)............................................. $ 137,919 ------------ ------------
F-15 Contingent rentals incurred on capital leases for Fiscal 1997, the 41 weeks ended March 30, 1996, the 11 weeks ended June 17, 1995 and Fiscal 1995 were $106,000, $130,000, $39,000 and $253,000, respectively. The rental expense for all operating leases was $45,847,000, $33,923,000, $8,696,000 and $31,900,000 during Fiscal 1997, the 41 weeks ended March 30, 1996, the 11 weeks ended June 17, 1995 and Fiscal 1995, respectively. Contingent rental expense included in total rental expense was $2,870,000, $2,127,000, $638,000 and $3,114,000 during Fiscal 1997, the 41 weeks ended March 30, 1996, the 11 weeks ended June 17, 1995 and Fiscal 1995, respectively. NOTE 10--Stockholders' (Deficit) Equity and Redeemable Stock Changes in Stockholders' (Deficit) Equity and Redeemable Stock were as follows (in thousands):
REDEEMABLE OLD CAPITAL IN COMMON OLD COMMON COMMON EXCESS OF ACCUMULATED STOCK STOCK (A) STOCK PAR VALUE DEFICIT --------------- ----------- ------------- ------------- -------------- Predecessor Company Balance at April 2, 1994........................... $ -- $ 9,407 $ 1 $ -- $ (644,617) Net loss........................................... -- -- -- -- (159,830) Accrued preferred stock dividends of Predecessor Company.......................................... -- -- -- -- (19,480) Pension adjustment................................. -- -- -- -- (257) --------------- ----------- ------------- ------------- -------------- Balance at April 1, 1995........................... -- 9,407 1 -- (824,184) Net income for the 11 weeks ended June 17, 1995.... -- -- -- -- 825,449 Extinguishment of stockholders' equity in connection with bankruptcy....................... -- (9,407) (1) -- (1,265) --------------- ----------- ------------- ------------- -------------- Balance at June 17, 1995........................... $ -- $ -- $ -- $ -- $ -- --------------- ----------- ------------- ------------- -------------- --------------- ----------- ------------- ------------- --------------
(a) The Redeemable Old Common Stock represents shares of Holdings held by management investors, which were redeemable under certain limited circumstances at the option of the holder.
STOCKHOLDERS' (DEFICIT) EQUITY ------------------------------------------------------------ REDEEMABLE CLASS A CAPITAL IN PREFERRED COMMON PREFERRED EXCESS OF ACCUMULATED STOCK STOCK STOCK PAR VALUE DEFICIT ---------- ----------- ------------- ------------ ------------ Successor Company Balance at June 17, 1995........................ $ -- $ -- $ -- $ -- $ -- Issuance of Common Stock........................ -- 10,000 -- 144,000 -- Net loss for the 41 weeks ended March 30, 1996.. -- -- -- -- (109,856) ---------- ----------- ------------- ------------ ------------ Balance at March 30, 1996....................... -- 10,000 -- 144,000 (109,856) Preferred stock issuance charges (see Note 8)... -- -- -- (12,000) -- Decrease in Common Stock par value.............. -- (9,900) -- 9,900 -- Issuance of Class A Preferred Stock............. 63,000 -- -- -- -- Accrued preferred stock dividends............... 2,000 -- -- (2,000) -- Net loss for Fiscal 1997........................ -- -- -- -- (183,354) ---------- ----------- ------------- ------------ ------------ Balance at March 29, 1997....................... $ 65,000 $ 100 $ -- $ 139,900 $ (293,210) ---------- ----------- ------------- ------------ ------------ ---------- ----------- ------------- ------------ ------------
F-16 The Company's Certificate of Incorporation and Bylaws were restated as of the Effective Date and subsequently amended. The Certificate of Incorporation as amended authorizes the issuance of 60,000,000 shares of Common Stock and 10,000,000 shares of preferred stock. On November 7, 1996, the Company's shareholders approved a decrease in the par value of Common Stock from $1.00 to $0.01 per share. Under the Plan, on the Effective Date, the Old Common Stock was cancelled and, as described in Note 2, holders of the Subordinated Notes became entitled to receive their pro rata share of 10,000,000 shares of Common Stock. In addition, on the Effective Date, holders of Capital Senior Zero Notes and Capital Subordinated Zero Notes who executed releases became entitled to receive Series 1 Warrants to purchase an aggregate of 300,000 shares of Common Stock at an exercise price of $30 per share and Series 2 Warrants to purchase an aggregate of 600,000 shares of Common Stock at an exercise price of $42 per share. Both the Series 1 Warrants and the Series 2 Warrants expire five years after the Effective Date. As of March 29, 1997, no warrants have been exercised. The Common Stock and all other equity securities issued under the Certificate of Incorporation as amended are voting securities (although the voting rights of any new preferred stock issued may differ from those of Common Stock) and do not have any preemptive rights to subscribe for additional shares. Changes in Redeemable Old Preferred Stock of the Predecessor Company were as follows (in thousands):
SERIES A SERIES B SERIES C TOTAL --------- ----------- --------- ---------- Balance at April 2, 1994.............................................. $ 61,030 $ 7,911 $ 76,371 $ 145,312 Accrued preferred stock dividends..................................... 8,152 1,099 10,229 19,480 --------- ----------- --------- ---------- Balance at April 1, 1995.............................................. 69,182 9,010 86,600 164,792 Extinguishment of Predecessor Company Stock in connection with bankruptcy.......................................................... (69,182) (9,010) (86,600) (164,792) --------- ----------- --------- ---------- Balance at June 17, 1995.............................................. $ -- $ -- $ -- $ -- --------- ----------- --------- ---------- --------- ----------- --------- ----------
The Series A cumulative exchangeable redeemable preferred stock ("Series A old preferred stock") had a $.01 par value, 500,000 shares authorized and 351,745 shares issued and outstanding. The Series B cumulative redeemable convertible preferred stock ("Series B old preferred stock") had a $.01 par value, 500,000 shares authorized and 78,256 shares issued and outstanding. The Series C cumulative redeemable convertible preferred stock ("Series C old preferred stock") had a $.01 par value, 500,000 shares authorized and 440,771 shares issued and outstanding. Through July 23, 1994, dividends accrued on the old preferred stock at a rate of 12% per annum, reflecting management's estimate that the old preferred stock would be redeemed prior to the July 14, 1996 dividend step-up date. As of July 24, 1994, the Company changed its estimate of the date on which the old preferred stock was expected to be redeemed from on or before the date of the dividend step-up to an indeterminate date. Accordingly, from July 24, 1994 through the Filing Date, the Company accrued dividends recognizing a yield to redemption rate of 18.2% per annum for the Series A old preferred stock, 19.3% for the Series B old preferred stock and 18.3% for the Series C old preferred stock. Accrued undeclared dividends were recorded as an increase of stockholders' deficit and as an increase in the respective preferred stock carrying value. NOTE 11--PENSION PLANS The components of net periodic pension expense for the Company's defined benefit pension plans are as follows (in thousands):
FISCAL FISCAL FISCAL 1997 1996 1995 --------- --------- --------- Service cost--benefits earned during the period................................... $ 4,351 $ 4,317 $ 4,715 Interest costs on projected benefit obligations................................... 12,700 12,523 13,706 Return on plan assets............................................................. (16,993) (32,921) (12,179) Net amortization and deferral..................................................... 3,690 17,877 (4,042) Charges relating to pension settlement............................................ -- -- 3,747 --------- --------- --------- Net periodic pension expense...................................................... $ 3,748 $ 1,796 $ 5,947 --------- --------- --------- --------- --------- ---------
The Company has not segregated the respective Successor and Predecessor Company pension expense for Fiscal 1996 because it is impractical to do so. F-17 During Fiscal 1995, the Company incurred charges totaling $3,747,000 relating to pension settlements, under both its qualified and nonqualified pension plans, principally as a result of early retirement programs offered to certain employees. The actuarial present value of benefit obligations and the funded status of the Company's pension plans are as follows (in thousands):
QUALIFIED NONQUALIFIED ------------------------ ------------------------ MARCH 29, MARCH 30, MARCH 29, MARCH 30, 1997 1996 1997 1996 ----------- ----------- ----------- ----------- Actuarial present value of benefit obligations: Vested benefits................................................. $ 159,438 $ 146,821 $ 4,715 $ 3,968 Nonvested benefits.............................................. 4,038 3,948 -- -- ----------- ----------- ----------- ----------- Total benefits.................................................. $ 163,476 $ 150,769 $ 4,715 $ 3,968 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Projected benefit obligations................................... $ (186,207) $ (167,010) $ (5,364) $ (4,618) Plan assets, primarily stocks and bonds, at fair value.......... 169,707 170,684 -- -- ----------- ----------- ----------- ----------- Funded (unfunded) status........................................ (16,500) 3,674 (5,364) (4,618) Unrecognized net (loss) gain.................................... 8,674 (8,259) 2,073 1,364 Unrecognized prior service cost................................. -- -- (20) (25) Adjustment required to recognize minimum liability.............. -- -- (1,404) (689) ----------- ----------- ----------- ----------- Pension liability............................................... $ (7,826) $ (4,585) $ (4,715) $ (3,968) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Significant actuarial assumptions used in all Company sponsored plans were as follows:
FISCAL 1997 FISCAL 1996 FISCAL 1995 ------------- ----------- ------------ Discount rates............................................................. 7.25% 8.0% 7.5% Rates of increase in future compensation................................... 3.50% 4.0%-5.0% 3.5%-3.9% Long-term rate of return on plan assets.................................... 8.75% 9.75% 9.5%
NOTE 12--POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS The Company provides certain health care and life insurance benefits for substantially all of its full-time non-union employees and union employee groups. The Company's postretirement plans currently are not funded. The Company's union employee groups are participants in multi-employer plans which require monthly contributions and which are not subject to the provisions of FAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions". Net postretirement benefit cost consisted of the following (in thousands):
FISCAL 1997 FISCAL 1996 FISCAL 1995 ----------- ----------- ----------- Service cost--benefits earned during the period............................. $ 728 $ 591 $ 695 Interest cost on accumulated postretirement benefit obligation.............. 2,668 2,594 2,604 ----------- ----------- ----------- $ 3,396 $ 3,185 $ 3,299 ----------- ----------- ----------- ----------- ----------- -----------
The Company has not segregated the respective Successor and Predecessor Company postretirement benefit expense for Fiscal 1996 because it is impractical to do so. F-18 The unfunded accumulated postretirement benefit obligation consists of the following (in thousands):
MARCH 29, MARCH 30, 1997 1996 -------------- -------------- Retirees..................................................... $ 20,660 $ 17,761 Fully eligible active plan participants...................... 2,482 2,613 Other active plan participants............................... 15,189 16,194 Unrecognized net loss........................................ (2,521) (832) ---------- ---------- $ 35,810 $ 35,736 ---------- ---------- ---------- ----------
The assumed health care cost trend rate used in measuring the accumulated postretirement obligation as of March 29, 1997 and March 30, 1996 was 11.0% and 12.0%, respectively, for participants pre-age 65 and 8.0% and 9.0%, respectively, for participants post-age 65, decreasing each successive year by 1% until the respective trend rates reach 4.75% after which the trend rate remains constant. An increase of 1% in the assumed health care cost trend rate for the current year would increase the annual net post retirement health care cost by approximately $16,000 and the accumulated postretirement benefit obligation by approximately $226,000. The Company provides benefits for all future retirees based on a service related flat dollar premium allowance. Accordingly, the health care cost trend rate will not be a significant factor in determining Grand Union's liability for future retirees under its postretirement health care arrangements. The assumed discount rate used in determining the accumulated postretirement benefit obligation was 7.25% for Fiscal 1997 and Fiscal 1996 and 8.0% for Fiscal 1995. NOTE 13--EQUITY COMPENSATION PLANS During the 41 weeks ended March 30, 1996, the Board of Directors of the Company adopted The Grand Union Company 1995 Equity Incentive Plan ("Employees' Plan"), which provides for issuance of stock options to purchase up to 900,000 shares of the Company's Common Stock, and The Grand Union Company 1995 Non-Employee Directors' Stock Option Plan ("Directors' Plan"), which provides for the issuance of options to purchase up to 100,000 shares of the Company's Common Stock. The shareholders approved the plans on November 7, 1996. Both plans are administered by the Board of Directors. Options granted to date under both plans expire no later than ten years after the grant date. Activity with Respect to the Employees' Plan was as follows:
NUMBER OF WEIGHTED AVERAGE OPTIONS OPTION PRICE ----------- ----------------- Grants.......................................................... 230,680 $ 6.370 Expirations..................................................... 4,400 6.625 ----------- ------ March 29, 1997.................................................. 226,280 $ 6.365 ----------- ------ ----------- ------
At March 29, 1997, 206,280 shares were vested under the Employees' Plan. The range of exercise prices for options outstanding under the Employees' Plan at March 29, 1997 was $3.688 to $6.625. These options will expire if not exercised at specific dates ranging from April 3, 1997 to March 3, 2007. The Directors' Plan included grants of 51,000 shares with a weighted average option price of $5.941. No options were exercised or expired during the year. At March 29, 1997, 51,000 shares were exercisable under the Directors' Plan at exercise prices of $5.750 and $6.125. These options will expire if not exercised at specific dates ranging from September 16, 1997 to November 7, 2006. The following table summarizes information about options outstanding at March 29, 1997 for both stock option plans:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE -------------------------------------------- ------------------------------ WEIGHTED-AVERAGE RANGE OF NUMBER REMAINING CONTRACTUAL WEIGHTED-AVERAGE NUMBER WEIGHTED-AVERAGE EXERCISE PRICES OUTSTANDING LIFE (IN YEARS) EXERCISE PRICE EXERCISABLE EXERCISE PRICE - ------------------ ----------- ------------------------- ----------------- ----------- ----------------- $3.688 to $6.625 226,280 6.3 $ 6.365 206,280 $ 6.625 $5.750 to $6.125 51,000 8.4 5.941 51,000 5.941 ------- ------- 277,280 257,280 ------- ------- ------- -------
F-19 The Company adopted the disclosure only option under FAS No. 123, "Accounting for Stock-Based Compensation", as of March 29, 1997. If the accounting provisions of FAS No. 123 had been adopted as of the beginning of Fiscal 1997, the effect on Fiscal 1997 net loss would have been less than $100,000. NOTE 14--RELATED PARTY TRANSACTIONS In connection with the Stock Purchase Agreement (see Note 8), the Company paid transaction fees to Shamrock Capital Advisors, Inc. ("SCA"), the investment managers for Trefoil Capital Advisors II, L.P., and GE Investment Management Corporation of $2,000,000 each, and the Company paid Donaldson, Lufkin and Jenrette ("DLJ"), a managing director of which served on the Company's Board of Directors, approximately $5,200,000 for advisory services, a fairness opinion, and other miscellaneous expenses. Also in connection with the Stock Purchase Agreement, the Company entered into a management contract with SCA pursuant to which the Company paid $300,000 during Fiscal 1997 and is scheduled to pay additional fees of $400,000 and $500,000 in fiscal years ending in 1998 and 1999, respectively, plus related expenses. Also during Fiscal 1997, the Chairman of the Board of Directors purchased through a family trust 60,000 shares of Class A Convertible Preferred Stock from the Company for an aggregate price of $3,000,000. DLJ was paid $1,278,000 in Fiscal 1996 for consulting services in connection with the bankruptcy proceedings. Prior to the Effective Date, the Company was party to a financial advisory agreement with Miller Tabak Hirsch + Co. (the "MTH Agreement") pursuant to which MTH, which indirectly controlled the Company and Penn Traffic Company ("Penn Traffic"), was to have provided certain financial consulting and business management services to the Company through July 1997. In accordance with the Plan, the MTH Agreement was terminated on the Effective Date and Grand Union executed a settlement agreement with MTH (the "MTH Settlement Agreement") which provides for the termination of the MTH Agreement, payment by Grand Union of accrued and unpaid fees under the MTH Agreement through the Effective Date and the indemnification of MTH and certain entities related to MTH from certain claims and liabilities, subject to the terms and limitations set forth in the MTH Settlement Agreement. The Company deposited $3,000,000 relating to the indemnification in escrow on the Effective Date. This amount is included in other assets in the Consolidated Balance Sheet. During the 11 weeks ended June 17, 1995 and Fiscal 1995, the Company paid $315,000 and $750,000, respectively, to MTH pursuant to the MTH Agreement. From September 1993 until September 1995, Grand Union and Penn Traffic were parties to a combined purchasing and distribution agreement relating to general merchandise and health and beauty care products. In September 1995, Grand Union purchased from Penn Traffic approximately $12,821,000 of merchandise which had been owned by Penn Traffic under the joint buying arrangement. NOTE 15--CONTINGENCIES The Company is subject to certain legal proceedings and claims arising in connection with its business. It is management's opinion that the ultimate resolution of such legal proceedings and claims will not have a material adverse effect on the Company's consolidated results of operations or its financial position. F-20 NOTE 16--Quarterly Financial Information (Unaudited) (in thousands, except loss per share and market price)
SUCCESSOR COMPANY --------------------------------------------- 1ST (a) 2ND 3RD 4TH ---------- ---------- ---------- --------- Fiscal 1997: Sales............................................................. $ 726,823 $ 533,412 $ 537,151 515,287 Gross profit...................................................... 221,899 162,158 164,335 157,355 Unusual items..................................................... -- -- -- (9,800) Loss before income taxes.......................................... (48,251) (37,635) (38,364) (56,581) Net loss.......................................................... (43,812) (30,653) (31,677) (77,212) Net loss applicable to common stock............................... (43,812) (30,896) (32,465) (78,181) Net loss per common share......................................... (4.38) (3.09) (3.25) (7.82) Market Price-high................................................ 7 9/16 6 7/8 7 3/16 5 3/16 Market Price-low................................................. 5 7/8 5 4 1/12 3
PREDECESSOR COMPANY SUCCESSOR COMPANY ----------------------------------------------------------- 1ST (a) 2ND 3RD 4TH ---------------------------------------------------------- 11 WEEKS 5 WEEKS ENDED ENDED JUNE 17, JULY 22, Fiscal 1996 1995 1995 ---------------------------------------------------------- Sales............................................... $ 487,882 $ 232,663 $ 523,711 $ 543,617 $ 519,937 Gross profit........................................ 143,841 73,080 162,637 166,863 167,276 Unusual items....................................... (18,627) -- (4,500) (15,000) (2,500) Loss before income taxes and extraordinary gain on debt discharge.................................... (29,336) (9,023) (35,947) (48,834) (34,979) Extraordinary gain on debt discharge................ 854,785 -- -- -- -- Net income (loss)................................... 825,449 (9,523) (30,075) (40,994) (29,264) Net loss per share.................................. -- (0.95) (3.01) (4.10) (2.93) Market Price-high.................................. -- -- 15 1/8 12 1/4 8 9/16 Market Price-low................................... -- -- 10 4 7/8 5 13/16
(a) Represents 16 weeks, all other quarters are 12 weeks. Loss per common share data is not meaningful for the period prior to the Effective Date due to the significant change in the capital structure of the Company. F-21 EX-3.1 2 EX-3.1 Exhibit 3.1 CERTIFICATE OF AMENDMENT of the RESTATED CERTIFICATE OF INCORPORATION of THE GRAND UNION COMPANY Pursuant to Section 242 of the General Corporation Law of the State of Delaware, The Grand Union Company (the "Corporation"), a corporation organized and existing under the General Corporation Law of the State of Delaware, in accordance with the provisions of Section 103 of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: 1. By unanimous vote of the Board of Directors of the Corporation, resolutions were duly adopted, pursuant to Section 242 of the General Corporation Law of the State of Delaware, approving the following amendments to the Certificate of Incorporation of the Corporation, declaring said amendments to be advisable, and directing that said amendments be submitted to the stockholders of the Corporation for their approval or disapproval. The amendments are as follows: Article FOURTH is amended to read as follows: FOURTH: (A) The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is 70,000,000, of which 10,000,000 shares shall be Preferred Stock of the par value of $1.00 per share and 60,000,000 shares shall be Common Stock of the par value of $.01 per share. (B) The Board of Directors is expressly authorized, by resolution or resolutions, to provide for the issue of all or any shares of the Preferred Stock, in a one or more series, and to fix for each such series such voting powers, full or limited, and such designations, preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereon, as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors providing for the issue of such series (a "Preferred Stock Designation") and as may be permitted by the DGCL and as are consistent with paragraph (C) of this Article FOURTH. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of a majority of the holders of the voting power of all the then outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors (the "Voting Stock") voting together as a single class, without a separate vote of the holders of the Preferred Stock, or any series thereof, unless a vote of any such holders is required pursuant to any Preferred Stock Designation. (C) The Corporation is subject to the requirements of Section 1123(a)(6) of the United States Bankruptcy Code (11 U.S.C. 1123(a)(6)) ("Section 1123(a)(6)") and shall be prohibited from issuing any nonvoting equity securities, and shall, at all times, provide, as to the several classes of securities from time-to-time possessing voting power, an appropriate distribution of power among such classes. A Preferred Stock Designation shall not authorize the issuance of such nonvoting equity securities, and shall include in its provisions, if the class designated by such Preferred Stock Designation has a preference in respect of dividends, adequate provisions for the election of directors representing such preferred class in the event of default in the payment of such dividends consistent with the requirements of Section 1123(a)(6). Article SEVENTH is hereby deleted in its entirety and replaced by new Article SEVENTH to read as follows: SEVENTH: (1) In addition to any affirmative vote required by law or this Certificate of Incorporation or the By-laws of the Corporation, and except as otherwise expressly provided in Section 2 of this Article, a Business Combination (as hereinafter defined) with, or proposed by or on behalf of, any Interested Stockholder (as hereinafter defined) or any Affiliate or Associate (as hereinafter defined) of any Interested Stockholder or any person who thereafter would be an Affiliate or Associate of such Interested Stockholder shall require the affirmative vote of not less than seventy-five percent (75%) of the votes entitled to be cast by the holders of all the then outstanding shares of Voting Stock, voting together as a single class, excluding Voting Stock beneficially owned by such Interested Stockholder. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage or separate class vote may be specified, by law or in any agreement with any national securities exchange or otherwise. (2) The provisions of Section 1 of this Article shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote, if any, as is required by law or by any other provision of this Certificate of Incorporation or the By-laws of the Corporation, or any agreement with any national securities exchange or the Nasdaq National Market, if all of the conditions specified in either of the following Paragraphs (a) or (b) are met, or in the case of a Business Combination not involving the payment of consideration to the holders of the Corporation's outstanding Capital Stock (as hereinafter defined), if the conditions specified in the following Paragraph (a) are met: (a) The Business Combination shall have been approved, either specifically or as a transaction which is within an approved category of transactions, by a majority (whether such approval is made prior to or subsequent to the acquisition of, or announcement or public disclosure of the intention to acquire, beneficial ownership of the Voting Stock that caused the Interested Stockholder to become an Interested Stockholder) of the Continuing Directors (as hereinafter defined). (b) All of the following conditions shall have been met; provided, however, that for purposes of all calculations set forth in this Section 2(b), all acquisitions of Preferred Stock or Common Stock by Trefoil Capital Investors II, L.P. and GE Investment Private Placement Partners II, A Limited Partnership (collectively, the "Purchasers") pursuant to the Stock Purchase Agreement dated July 30, 1996 (the "Stock Purchase Agreement") and all acquisitions of Common Stock by the Purchasers upon the conversion of such Preferred Stock will be excluded: (i) The aggregate amount of cash and the Fair Market Value (as hereinafter defined), as of the date of the consummation of the Business Combination, of consideration other than cash to be received per share by holders of Common Stock in such Business Combination shall be at least equal to the amount determined under clause (A) below: (A) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by or on behalf of the Interested Stockholder for any share of Common Stock in connection with the acquisition by the Interested Stockholder of beneficial ownership of shares of Common Stock (x) within the two-year period immediately prior to the first public announcement of the proposed Business Combination (the "Announcement Date") or (y) in the transaction in which it became an Interested Stockholder, whichever is higher, in either case as adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to the Common Stock. (ii) The aggregate amount of cash and the Fair Market Value, as of the date of the consummation of the Business Combination, of consideration other than cash to be received per share by holders of shares of any class or series of outstanding Capital Stock, other than Common Stock, shall be at least equal to the amount determined under clause (A) below: (A) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by or on behalf of the Interested Stockholder for any share of such class or series of Capital Stock in connection with the acquisition by the Interested Stockholder of beneficial ownership of shares of such class or series of Capital Stock (x) within the two-year period immediately prior to the Announcement Date or (y) in the transaction in which it became an Interested Stockholder, whichever is higher, in either case as adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to such class or series of Capital Stock. (iii) The consideration to be received by holders of a particular class or series of outstanding Capital Stock shall be in cash or in the same form as previously has been paid by or on behalf of the Interested Stockholder in connection with its direct or indirect acquisition of beneficial ownership of shares of such class or series of Capital Stock. If the consideration so paid for shares of any class or series of Capital Stock varied as to form, the form of consideration for such class or series of Capital Stock shall be either cash or the form used to acquire beneficial ownership of the largest number of shares of such class or series of Capital Stock previously acquired by the Interested Stockholder. (iv) If a proxy or information statement is required to be mailed pursuant to the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (the "Exchange Act") (or any subsequent provisions replacing such Exchange Act, rules or regulations), a proxy or information statement describing the proposed Business Combination and complying with the requirements of the Exchange Act shall be mailed to all stockholders of the Corporation at least 30 days prior to the consummation of such Business Combination. (3) The following definitions shall apply with respect to this Article: (a) The term "Business Combination" shall mean, with respect to any particular Interested Stockholder, any event described in clauses (i), (ii) or (iii) of this Section 3(a) which occurs during the two-year period commencing on the date on which the Interested Stockholder becomes an Interested Stockholder: (i) any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with (x) any Interested Stockholder or (y) any other corporation (whether or not itself an Interested Stockholder) which is or after such merger or consolidation would be an Affiliate or Associate of an Interested Stockholder; or (ii) any merger or consolidation of the Corporation with any of its Subsidiaries that has the effect, directly or indirectly, of increasing the proportionate share of any class or series of Capital Stock, or any securities convertible into Capital Stock or into equity securities of any Subsidiary, that is beneficially owned by any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder; or (iii) any agreement, contract or other arrangement providing for any one or more of the actions specified in the foregoing clauses (i) or (ii). (b) The term "Capital Stock" shall mean all capital stock of the Corporation authorized to be issued from time to time under Article Fourth of this Certificate of Incorporation, and the term "Voting Stock" shall mean all Capital Stock which by its terms may be voted on all matters submitted to stockholders of the Corporation generally. (c) The term "person" shall mean any individual, firm, corporation or other entity and shall include any group comprised of any person and any other person with whom such person or any Affiliate or Associate of such person has any agreement arrangement or understanding, directly or indirectly, for the purpose of acquiring, holding, voting or disposing of Capital Stock. (d) The term "Interested Stockholder" shall mean any person (other than the Corporation or any Subsidiary and other than any profit-sharing, employee stock ownership or other employee benefit plan of the Corporation or any Subsidiary or any trustee of or fiduciary with respect to any such plan when acting in such capacity) who is or has announced or publicly disclosed a plan or intention to become the beneficial owner of Voting Stock representing fifty percent (50%) or more of the votes entitled to be cast by the holders of all then outstanding shares of Voting Stock. For purposes of this Article, the Purchasers will not be considered an Interested Stockholder with respect to any acquisition of Preferred Stock pursuant to the Stock Purchase Agreement or with respect to the acquisition of Common Stock by the Purchasers upon the conversion of such Preferred Stock. (e) A person shall be a "beneficial owner" of any Capital Stock (i) which such person or any of its Affiliates or Associates beneficially owns, directly or indirectly; (ii) which such person or any of its Affiliates or Associates has, directly or indirectly, (A) the right to acquire (whether such right is exercisable immediately or subject only to the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (B) the right to vote pursuant to any agreement, arrangement or understanding; or (iii) which is beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Capital Stock. For the purpose of determining whether a person is an Interested Stockholder pursuant to Paragraph (d) of this Section (3), the number of shares of Capital Stock deemed to be outstanding shall include shares deemed beneficially owned by such person through application of this Paragraph (e) of Section (3), but shall not include any other shares of Capital Stock that may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. (f) The terms "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 under the Exchange Act as in effect on the date of filing of this Certificate of Incorporation with the Secretary of State of the State of Delaware (the term "registrant" in said Rule 12b-2 meaning in this case the Corporation). (g) The term "Subsidiary" means any company of which a majority of any class of equity security is beneficially owned by the Corporation; provided, however, that for the purposes of the definition of Interested Stockholder set forth in Paragraph (d) of this Section (3), the term "Subsidiary" shall mean only a company of which a majority of each class of equity security is beneficially owned by the Corporation. (h) The term "Continuing Director" means any member of the Board of Directors, while such person is a member of the Board of Directors, who is not an Affiliate or Associate or representative of the Interested Stockholder and was a member of the Board of Directors prior to the time that an Interested Stockholder became an Interested Stockholder, and any successor of a Continuing Director while such successor is a member of the Board of Directors, who is not an Affiliate or Associate or representative of the Interested Stockholder and is recommended or elected to succeed the Continuing Director by a majority of Continuing Directors. For purposes of this Article, Roger Stangeland will be considered a Continuing Director. (i) "Fair Market Value" means (i) in the case of cash, the amount of such cash; (ii) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Exchange Act on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any similar system then in use, or, if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by a majority of the Continuing Directors in good faith; and (iii) in the case of property other than cash or stock, the Fair Market Value of such property on the date in question as determined in good faith by a majority of the Continuing Directors. (j) In the event of any Business Combination in which the Corporation survives, the phrase "consideration other than cash to be received" as used in Paragraphs (b)(i) and (b)(ii) of Section (2) of this Article shall include the shares of Common Stock and/or the shares of any other class or series of Capital Stock retained by the holders of such shares. (4) A majority of the Continuing Directors shall have the power and duty to determine for the purpose of this Article, on the basis of information known to them after reasonable inquiry, all questions arising under this Article, including, without limitation, (i) whether a person is an Interested Stockholder, (ii) the number of shares of Capital Stock or other securities beneficially owned by any person, (iii) whether a person is an Affiliate or Associate of another, and (iv) whether a proposed action is with, or proposed by, or on behalf of an Interested Stockholder or an Affiliate or Associate of an Interested Stockholder. Any such determination made in good faith shall be binding and conclusive on all parties. (5) Nothing contained in this Article shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by law. (6) The fact that any Business Combination complies with the provisions of Section (2) of this Article shall not be construed to impose any fiduciary duty, obligation or responsibility on the Board of Directors, or any member thereof, to approve such Business Combination or recommend its adoption or approval to the stockholders of the Corporation, nor shall such compliance limit, prohibit or otherwise restrict in any manner the Board of Directors, or any member thereof, with respect to evaluations of, or actions and responses taken with respect to, such Business Combination. (7) For the purposes of this Article, a Business Combination is presumed to have been proposed by, or on behalf of, an Interested Stockholder or an Affiliate or Associate of an Interested Stockholder or a person who thereafter would become such if (i) after the Interested Stockholder became such, the Business Combination is proposed following the election of any director of the Corporation who, with respect to such Interested Stockholder, would not qualify to serve as a Continuing Director or (ii) such Interested Stockholder, Affiliate, Associate or person votes for or consents to the adoption of any such Business Combination, unless as to such Interested Stockholder, Affiliate, Associate or person, a majority of the Continuing Directors makes a good-faith determination that such Business Combination is not proposed by or on behalf of such Interested Stockholder, Affiliate, Associate or person, based on information known to them after reasonable inquiry. (8) Notwithstanding any other provisions of this Certificate of Incorporation or the By-laws of the Corporation (and notwithstanding the fact that a lesser percentage or separate class vote may be specified by law, this Certificate of Incorporation or the By-laws of the Corporation), the affirmative vote of the holders of not less than seventy-five percent (75%) of the votes entitled to be cast by the holders of all the then outstanding shares of Voting Stock, voting together as a single class, excluding Voting Stock beneficially owned by such Interested Stockholder, shall be required to amend or repeal, or adopt any provisions inconsistent with, this Article; provided, however, that this Section (8) shall not apply to, and such seventy-five percent (75%) vote shall not be required for, any amendment, repeal or adoption unanimously recommended by the Board of Directors if all of such directors are persons who would be eligible to serve as Continuing Directors within the meaning of Section (3), Paragraph (h) of this Article. 2. At a meeting duly called and held upon notice in accordance with section 222 of the General Corporation Law of the State of Delaware, the amendments were duly approved by a majority of the outstanding stock entitled to vote thereon, and by a majority of the outstanding stock of each class entitled to vote thereon as a class. 3. Such amendments were adopted in accordance with Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be executed in its corporate name by its Chief Executive Officer and attested by its Secretary this 21st day of November, 1996. /s/ Joseph J. McCaig -------------------------- Joseph J. McCaig President ATTEST: /s/ Kenneth R. Baum - ---------------------- Kenneth R. Baum Secretary EX-3.3 3 EX-3-3 EXHIBIT 3.3 STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 09:00 AM 06/11/1997 971191643 - 0236404 THE GRAND UNION COMPANY CERTIFICATE OF DESIGNATION OF CLASS B CONVERTIBLE PREFERRED STOCK SETTING FORTH THE POWERS, PREFERENCES, RIGHTS, QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS OF SUCH CLASS OF PREFERRED STOCK Pursuant to Section 151 of the General Corporation Law of the State of Delaware, The Grand Union Company (the "Corporation"), a corporation organized and existing under the General Corporation Law of the State of Delaware, in accordance with the provisions of Section 103 thereof, DOES HEREBY CERTIFY: That pursuant to the authority conferred upon the Board of Directors of the Corporation by Article Fourth of the Certificate of Incorporation of the Corporation (the "Certificate of Incorporation"), and in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware, the Board of Directors of the Corporation on June 5th, 1997, adopted the following resolution creating a series of Preferred Stock designated as Class B Convertible Preferred Stock (the "Class B Stock"): RESOLVED that, pursuant to the authority vested in the Board of Directors of the Corporation in accordance with the General Corporation Law of the State of Delaware and the provisions of the Certificate of Incorporation, a class of authorized Preferred Stock, par value $1.00 per share, of the Corporation is hereby created and that the designation and number of shares thereof and the voting powers, preferences and relative participating, optional and other special rights of the shares of such class, and the qualifications, limitations and restrictions thereof, are as follows: SECTION 1. STATED VALUE. The Class B Stock shall consist of 1,400,000 shares par value $1.00 per share, each of which shall have a stated value of $50 per share (the "Stated Value"). SECTION 2. DIVIDENDS AND DISTRIBUTIONS. (a) The holders of shares of Class B Stock, in preference to the holders of shares of Junior Dividend Stock (as defined in Section 11 hereof), shall be entitled to receive, when, as and if declared by the Board of Directors, out of the assets of the Corporation legally available therefor, dividends at an annual rate of 8.50% of the Stated Value from and after the Issue Date (as defined in Section 11 hereof) of such shares as long as shares of Class B Stock remain outstanding. Dividends shall be payable in cash, or additional shares of Class B Stock, as provided in paragraph (c) of this Section 2, or shares of Common Stock, as provided in paragraph (c) of this Section 2. Dividends shall be computed on the basis of the Stated Value, and shall accrue and be payable quarterly, in arrears, on the last Business Day (as defined in Section 11) of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the Issue Date of such shares. To the extent that dividends on the Class B Stock are payable in cash, such dividends shall be cumulative. Accrued dividends not paid on any Quarterly Dividend Payment Date shall accrue additional dividends at an annual dividend rate of 8.50% until paid in full. (b) Dividends payable pursuant to paragraph (a) of this Section 2 shall begin to accrue and be cumulative from the Issue Date of each share of Class B Stock, whether or not earned or declared. The amount of dividends so payable shall be determined on the basis of twelve 30-day months and a 360-day year. Dividends paid on the shares of Class B Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Class B Stock entitled to receive payment of a dividend declared thereon, which record date shall be no more than sixty days prior to the date fixed for the payment thereof. (c) With respect to dividends paid on or prior to the third anniversary of the Principal Issue Date (as defined in Section 11), the Corporation shall have the option to pay such dividends in shares of Class B Stock valued at $50 per share or in whole shares of Common Stock valued at Fair Market Value determined as of the close of business on the third Business Day immediately preceding the date of payment, instead of in cash. With respect to dividends paid after the third anniversary of the Principal Issue Date but on or prior to the fifth anniversary of the Principal Issue Date, the Corporation shall have the option to pay such dividends in shares of Class B Stock valued at $50 per share or in whole shares of Common Stock valued at Fair Market Value determined as of the close of business on the third Business Day immediately preceding the date of payment, instead of in cash, but only if the Corporation is prohibited from paying such dividends in cash under the terms of its Bank Credit Agreement on its Senior Notes. To the extent that the Corporation elects to pay any dividends in shares of Common Stock, it shall 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. After the fifth anniversary of the Principal Issue Date, all dividends shall be paid in cash. The Corporation shall only have the right to pay dividends in shares of Common Stock if, on the Quarterly Dividend Payment Date in question, the Common Stock is listed and traded on the New York Stock Exchange, the American Stock Exchange or the Nasdaq National Market System. In connection with any payment of dividends in shares of Common Stock pursuant to this Section 2(c), no fractions of shares of Common Stock shall be issued, but in lieu thereof the Corporation shall either (i) deliver a whole share of Common Stock in respect of the fractional share which the holder would otherwise have been entitled to upon such dividend payment or (ii) pay a cash adjustment in respect of such fractional interest in an amount equal to such fractional interest multiplied by the Fair Market Value of a share of Common Stock determined as of the close of business on the third Business Day immediately preceding the date of payment. 2 (d) The holders of shares of Class B Stock shall not be entitled to receive any dividends or other distributions except as provided herein. SECTION 3. VOTING RIGHTS. In addition to any voting rights provided by law, the holders of shares of Class B Stock shall have the following voting rights: (a) In addition to voting rights provided elsewhere in this Section 3, and as long as any of the Class B Stock is outstanding, each share of Class B Stock shall entitle the holder thereof to vote on all matters, including with respect to the election of directors, voted on by holders of Common Stock voting together as a single class with other shares entitled to vote at all meetings of the stockholders of the Corporation. With respect to any such vote, each share of Class B Stock shall entitle the holder thereof to cast the number of votes determined pursuant to the next sentence; PROVIDED, HOWEVER, that if more than one share of Class B Stock shall be held by any holder of shares of Class B Stock, the total number of votes which such holder shall be entitled to cast pursuant to this Section 3(a) shall be computed on the basis of the total number of shares of Class B Stock held by such holder, with any then remaining fractional share disregarded for the purposes of this Section 3(a). The number of votes which each share of the Class B Stock shall entitle the holder thereof to cast shall be equal to (i) 6.8966 from the First Issue Date until the Approval Date (as defined herein), and (ii) from and after the Approval Date, the number of whole votes which could be cast in such vote by a holder of the shares of capital stock of the Corporation into which such share of Class B Stock is convertible on the record date for such vote. (b) In addition to the voting rights provided elsewhere in this Section 3, the affirmative vote of the holders of at least a majority of the outstanding shares of Class B Stock, voting separately as a single class, in person or by proxy, at a special or annual meeting of stockholders called for the purpose, shall be necessary to (A) except as contemplated by Section 2(c), authorize, increase the authorized number of shares of, or issue (including on conversion or exchange of any convertible or exchangeable securities or by reclassification), any shares of any class or classes, or any series of any class or classes, of the Corporation's capital stock ranking pari passu with or prior to (either as to dividends or upon a change in control of the Corporation, voluntary or involuntary liquidation, dissolution or winding up) the Class B Stock, (B) except as contemplated pursuant to Section 2(c) or as permitted pursuant to Section 10(a), increase the authorized number of shares of, or issue (including on conversion or exchange of any convertible or exchangeable securities or by reclassification) any shares of, Class B Stock, (C) alter, amend or repeal any of the provisions of the Certificate of Incorporation of the Corporation which in any manner would alter, change or otherwise adversely affect in any way the powers, preferences or rights of the Class B Stock, (D) approve the sale, lease or other disposition of all or substantially all of the assets of the Corporation and its Subsidiaries (as defined in Section 11), or (E) approve any merger of the Corporation with or into any other entity or any reorganization, recapitalization, liquidation or other similar "transaction" (including any issuance of equity securities, or securities convertible into equity securities by the Corporation, to any person (other 3 than the Purchasers and their Affiliates) who would then own on a fully diluted basis more than 50% of the total number of votes entitled to be cast (giving effect to such issuance) by holders of the Corporation's capital stock on all matters, including the election of directors) involving the Corporation; PROVIDED, HOWEVER, that the holders of the outstanding shares of Class B Stock shall only have a class vote on the transactions described in clauses (D) and (E) prior to the earlier of the effectiveness of a registration statement under the Securities Act of 1933 relating to all such shares and the date on which less than half of the total shares of Class B Stock originally issued (not including any shares issued in payment of dividends pursuant to Section 2(c)) remain outstanding. Notwithstanding the proviso to the preceding sentence, the affirmative vote of the holders of at least a majority of the outstanding shares of Class B Stock, voting separately as a single class, in person or by proxy, at a special or annual meeting of stockholders called for the purpose, shall be necessary to approve any merger of the Corporation with or into any other entity or any reorganization, recapitalization, liquidation or other similar transaction involving the Corporation where (i) the Class B Stock is not remaining outstanding after such transaction under substantially the same powers, preferences, rights, qualifications, limitations and restrictions as are set forth in this Certificate of Designation or (ii) the cash, stock, securities or other property to be received on conversion of one share of Class B Stock following such transaction and the application of Section 8(h) has a Fair Market Value at the closing of such transaction less than 150% of the Conversion Price. In addition, if the Corporation shall have failed to pay in full dividends on the Class B Stock for six consecutive quarters, then the size of the Board of Directors of the Corporation shall be increased by two, and the holders of shares of Class B Stock, voting together as a single class, shall have the right to elect such two directors. The right to elect such two directors under this Section 3(b) shall terminate upon payment in full of all dividends payable on the Class B Stock, at which time the Board of Directors shall return to its previous size and the directors elected by the holders of the Class B Stock shall be removed. (c) (1) The rights of holders of shares of Class B Stock to take any actions as provided in this Section 3 may be exercised, subject to the DGCL (as defined in Section 11 hereof), at any annual meeting of stockholders or at a special meeting of stockholders held for such purpose as hereinafter provided or at any adjournment or postponement thereof, or by the written consent, delivered to the Secretary of the Corporation, of the holders of the minimum number of shares required to take such action. As long as such right to vote continues (and unless such right has been exercised by written consent of not less than the minimum number of shares required to take such action), the Chairman of the Board of the Corporation may call, and upon the written request of holders of record of 20% of the outstanding shares of Class B Stock, addressed to the Secretary of the Corporation at the principal office of the Corporation, shall call, a special meeting of the holders of shares of Class B Stock entitled to vote as provided herein. The Corporation shall use its best efforts to hold such meeting as promptly as practicable, but in any event not later than 120 days after delivery of such request to the Secretary of the Corporation, at the place and upon the notice provided by law and in the Bylaws of the Corporation for the holding of meetings of stockholders. 4 (2) At each meeting of stockholders at which the holders of shares of Class B Stock shall have the right, voting separately as a single series, to take any action, the presence in person or by proxy of the holders of record of a majority of the total number of shares of Class B Stock then outstanding and entitled to vote on the matter shall be necessary and sufficient to constitute a quorum. At any such meeting or at any adjournment or postponement thereof, in the absence of a quorum of the holders of shares of Class B Stock, holders of a majority of such shares present in person or by proxy shall have the power to adjourn the meeting as to the actions to be taken by the holders of shares of Class B Stock from time to time and place to place without notice other than announcement at the meeting until a quorum shall be present. For the taking of any action as provided in Section 3(b) by the holders of shares of Class B Stock, each such holder shall have one vote for each share of Class B Stock standing in his name on the transfer books of the Corporation as of any record date fixed for such purpose or, if no such date be fixed, at the close of business on the Business Day next preceding the day on which notice is given, or if notice is waived, at the close of business on the Business Day next preceding the day on which the meeting is held. SECTION 4. CERTAIN RESTRICTIONS. (a) As long as any shares of Class B Stock remain outstanding, the Corporation shall not (A) declare or pay dividends, or make any other distributions, on any shares of Junior Dividend Stock other than dividends or distributions payable in Junior Dividend Stock; or (B) declare or pay dividends, or make any other distributions, on any shares of Parity Dividend Stock (as defined in Section 11 hereof), except (1) dividends or distributions payable in Junior Dividend Stock and (2) dividends or distributions paid ratably on the Class B Stock and all Parity Dividend Stock on which dividends are payable or in arrears, in proportion to the total amounts to which the holders of all shares of the Class B Stock and such Parity Dividend Stock are than entitled. (b) As long as any shares of Class B Stock remain outstanding, the Corporation shall not redeem, purchase or otherwise acquire for consideration any shares of Junior Dividend Stock or Junior Liquidation Stock (as defined in Section 11 hereof) or Parity Dividend Stock or Parity Liquidation Stock (as defined in Section 11 hereof); PROVIDED, HOWEVER, that (1) the Corporation may at any time redeem, purchase or otherwise acquire shares of Junior Liquidation Stock or Parity Liquidation Stock in exchange for any shares of capital stock of the Corporation that rank junior to the Class B Stock as to dividends and upon liquidation, dissolution and winding up; (2) the Corporation may accept shares of any Parity Liquidation Stock for conversion into shares of capital stock of the Corporation that rank junior to the Class B Stock as to dividends and upon liquidation, dissolution and winding up; and (3) the Corporation may at any time redeem, purchase or otherwise acquire shares as may be required pursuant to the Corporation's employee and non-employee director stock plans, as they may be amended from time to time, or similar employee stock plans hereafter adopted; AND PROVIDED FURTHER, HOWEVER, that the Corporation (A) may accept shares of Class B Stock surrendered for conversion into shares of capital stock of the Corporation pursuant to Section 8 hereof, and (B) may redeem outstanding shares of Class B Stock pursuant to Section 5 hereof. Whenever quarterly dividends payable on shares of Class B 5 Stock as provided in Section 2 hereof are not paid in full, thereafter and until all unpaid dividends payable, whether or not declared, on the outstanding shares of Class B Stock shall have been paid in full, the Corporation shall not redeem or purchase or otherwise acquire for consideration any shares of Class B Stock; PROVIDED, HOWEVER, that the Corporation (A) may accept shares of Class B Stock surrendered for conversion into shares of capital stock of the Corporation pursuant to Section 8 hereof, and (B) may elect to redeem outstanding shares of Class B Stock pursuant to Section 5(a) hereof. (c) The Corporation shall not permit any Subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of capital stock of the Corporation unless the Corporation could, pursuant to Section 4(b), purchase such shares at such time and in such manner. SECTION 5. REDEMPTION. (a) On and after the second anniversary of the Principal Issue Date, the Corporation shall have the right, at its sole option and election made in accordance with Section 5(c), to redeem, out of funds legally available therefor, shares of Class B Stock, in whole or in part, at any time and from time to time, at a redemption price equal to the Stated Value (except as described below), plus an amount per share equal to all accrued and unpaid dividends, whether or not declared, to the date of redemption (the "Redemption Price"); PROVIDED, HOWEVER, that the Corporation shall not have any such right unless (A) if the redemption is to occur between the second and third anniversary of the Principal Issue Date, the Redemption Fair Market Value (as defined in Section 11 hereof) of the Common Stock, as of the close of business on the third Business Day immediately preceding the date on which notice of redemption is given, is equal to at least 180% of the Conversion Price (as defined in Section 11 hereof), and (B) if the redemption is to occur between the third and fifth anniversary of the Principal Issue Date, the Redemption Fair Market Value (as defined in Section 11 hereof) of the Common Stock, as of the close of business on the third Business Day immediately preceding the date on which notice of redemption is given, is equal to at least 200% of the Conversion Price (as defined in Section 11 hereof). Notwithstanding the foregoing, if the redemption is to occur between the fifth and sixth anniversaries of the Principal Issue Date, the Redemption Price shall be $51.5938; if the redemption is to occur between the sixth and seventh anniversaries of the Principal Issue Date, the Redemption Price shall be $51.0628; and if the redemption is to occur between the seventh and eighth anniversaries of the Principal Issue Date, the Redemption Price shall be $50.5313; in each case plus an amount per share equal to all accrued and unpaid dividends, whether or not declared, to the date of redemption. If less than all shares of Class B Stock at the time outstanding are to be redeemed, the shares to be redeemed shall be selected pro rata. (b) The Corporation shall redeem, at the Redemption Price, all outstanding shares of Class B Stock on June 1, 2005. (c) Notice of any redemption of shares of Class B Stock pursuant to this Section 5 shall be mailed at least 30, but not more than 60, days prior to the date fixed for redemption to each holder of shares of Class B Stock to be redeemed, at such holder's address as it appears on 6 the transfer books of the Corporation. Any such notice shall be irrevocable when given. In order to facilitate the redemption of shares of Class B Stock, the Board of Directors may fix a record date for the determination of Class B Stock to be redeemed, or may cause the transfer books of the Corporation for the Class B Stock to be closed, not more than sixty days or less than thirty days prior to the date fixed fo such redemption. (d) On the date of any redemption being made pursuant to this Section 5 which is specified in a notice given pursuant to Section 5(c), the Corporation shall, and at any time after such notice shall have been mailed and before the date of redemption the Corporation may deposit for the benefit of the holders of shares of Class B Stock to be redeemed the funds necessary for such redemption, including the amount necessary to pay all accrued and unpaid dividends to the date of redemption, with a bank or trust company in the City of New York having a capital and surplus of at least $1,000,000,000. Any moneys so deposited by the Corporation and unclaimed at the end of one year from the date designated for such redemption shall revert to the general funds of the Corporation. After such reversion, any such bank or trust company shall, upon demand, pay over to the Corporation such unclaimed amounts and thereupon such bank or trust company shall be relieved of all responsibility in respect thereof and any holder of shares of Class B Stock to be redeemed shall look only to the Corporation for the payment of the Redemption Price. In the event that moneys are deposited pursuant to this paragraph (d) in respect of shares of Class B Stock that are converted in accordance with the provisions of Section 8, such moneys shall, upon such conversion, revert to the general funds of the Corporation and, upon demand, such bank or trust company shall pay over to the Corporation such moneys and shall be relieved of all responsibility to the holders of such converted shares in respect thereof. Any interest accrued on funds deposited pursuant to this paragraph (d) shall be paid from time to time to the Corporation for its own account. (e) Notice of redemption having been given as aforesaid, upon the deposit of funds pursuant to Section 5(d) in respect of shares of Class B Stock to be redeemed pursuant to this Section 5, notwithstanding that any certificates for such shares shall not have been surrendered for cancellation, from and after the date of redemption designated in the notice of redemption (i) the shares represented thereby shall no longer be deemed outstanding, (ii) the rights to receive dividends thereon shall cease to accrue, and (iii) all rights of the holders of shares of Class B Stock to be redeemed shall cease and terminate, excepting only the right to receive the Redemption Price therefor, and the right to convert such shares into shares of Common Stock until the close of business on the Fifth Business Day next preceding the date of redemption, in accordance with Section 8 hereof. 7 SECTION 6. REACQUIRED SHARES. Any shares of Class B Stock converted, redeemed, purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares of Class B Stock shall upon their cancellation, in accordance with the DGCL, become authorized but unissued shares of Preferred Stock of the Corporation and may be reissued as part of another series of Preferrred Stock of the Corporation, subject to the conditions or restrictions on issuance set forth herein. SECTION 7. LIQUIDATION, DISSOLUTION OR WINDING UP. (a) If the Corporation shall commence a voluntary case under the Federal bankruptcy laws or any other applicable Federal or state bankruptcy, insolvency or similar law, or consent to the entry of an order for relief in an involuntary case under such law or to the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or make an assignment for the benefit of its creditors, or admit in writing its inability to pay its debts generally as they become due, or if a decree or order for relief in respect of the Corporation shall be entered by a court having jurisdiction in the premises in an involuntary case under the Federal bankruptcy laws or any other applicable Federal or state bankruptcy, insolvency or similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order shall be unstayed and in effect for a period of ninety consecutive days and on account of any such event the Corporation shall liquidate, dissolve or wind up, or if the Corporation shall otherwise liquidate, dissolve or wind up, no distribution shall be made (i) to the holders of shares of Junior Liquidation Stock unless, prior thereto, the holders of shares of Class B Stock, subject to Section 8, shall have received the Liquidation Preference (as defined in Section 11 hereof) with respect to each share, or (ii) to the holders of shares of Parity Liquidation Stock, except distributions made ratably to the holders of the Class B Stock and the Parity Liquidation Stock in proportion to the total amounts to which the holders of all such shares of Class B Stock and Parity Liquidation Stock would be entitled upon such liquidation, dissolution or winding up. Upon any such liquidation, dissolution or winding up, the holders of shares of Class B Stock shall be entitled to receive the Liquidation Preference with respect to each such share and no more. (b) Neither the merger or other business combination of the Corporation with or into any other Person (as defined in Section 11 hereof) or Persons nor the sale of all or substantially all the assets of the Corporation shall be deemed to be a liquidation, dissolution or winding up of the Corporation for purposes of this Section 7. SECTION 8. CONVERSION. (a) Subject to the provisions for adjustment hereinafter set forth, each share of Class B Stock shall be convertible at the option of the holder thereof into fully paid and nonassessable shares of Common Stock. The number of shares of Common Stock deliverable upon conversion 8 of a share of Class B Stock, adjusted as hereinafter provided, is referred to herein as the "Conversion Ratio." The Conversion Ratio shall initially be 20.8333 and the Conversion Price shall initially be $2.40. Upon the Reset Date, the Conversion Price shall be adjusted to equal 120% of the Reset Market Value and the Conversion Ratio shall be adjusted to equal 50 divided by 120% of the Reset Market Value; PROVIDED, HOWEVER, if the Reset Market Value is (i) $2.71 or greater, the Conversion Price shall be adjusted to equal $3.25 and the Conversion Ratio shall be adjusted to equal 15.3846 or (ii) $1.25 or less, the Conversion Price shall be adjusted to equal $1.50 and the Conversion Ratio shall be adjusted to equal 33.3333. The Conversion Ratio and the Conversion Price are subject to further adjustment from time to time pursuant to Section 8(g). (b) Conversion of the Class B Stock may be effected by any such holder upon the surrender to the Corporation at the principal office of the Corporation in the State of Delaware (the "Transfer Agent") or at the office of any agent or agents of the Corporation, as may be designated by the Board of Directors of the Corporation, of the certificate for such Class B Stock to be converted accompanied by a written notice stating that such holder elects to convert all or a specified whole number of such shares in accordance with the provisions of this Section 8 and specifying the name or names in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. In case such notice shall specify a name or names other than that of such holder, such notice shall be accompanied by payment of all transfer taxes payable upon the issuance of shares of Common Stock in such name or names. Other than such taxes, the Corporation will pay any and all issue and other taxes (other than taxes based on income) that may be payable in respect of any issue or delivery of shares of Common Stock on conversion of Class B Stock pursuant hereto. As promptly as practicable, and in any event within five Business Days after the surrender of such certificate or certificates and the receipt of such notice relating thereto and, if applicable, payment of all transfer taxes (or the demonstration to the satisfaction of the Corporation that such taxes have been paid), the Corporation shall deliver or cause to be delivered (i) certificates representing the number of validly issued, fully paid and nonassessable full shares of Common Stock to which the holder of shares of Class B Stock being converted shall be entitled and (ii) if less than the full number of shares of Class B Stock evidenced by the surrendered certificate or certificates is being converted, a new certificate or certificates, of like tenor, for the number of shares evidenced by such surrendered certificate or certificates less the number of shares being converted. Such conversion shall be deemed to have been made at the close of business on the date of giving such notice and of such surrender of the certificate or certificates representing the shares of Class B Stock to be converted (the "Conversion Date") so that the rights of the holder thereof as to the shares being converted shall cease except for the right to receive shares of Common Stock in accordance herewith, and the Person entitled to receive the shares of Common Stock shall be treated for all purposes as having become the record holder of such shares of Common Stock at such time. The Corporation shall not be required to convert, and no surrender of shares of Class B Stock shall be effective for that purpose, while the transfer books of the Corporation for the Common Stock are closed for any purpose (but not for any period in excess of five days); but the surrender of shares of Class B Stock for conversion during any period while such books are so closed shall become effective for conversion immediately upon the reopening of such books, as if the conversion had been made on the date such shares of Class B Stock were surrendered, and at the Conversion Ratio in effect at the date of such surrender. 9 (c) In case any shares of Class B Stock are to be redeemed pursuant to Section 5, such right of conversion shall cease and terminate as to the shares of Class B Stock to be redeemed at the close of business on the fifth Business Day next preceding the date fixed for redemption unless the Corporation shall default in the payment of the Redemption Price. (d) The Conversion Ratio shall be subject to adjustment from time to time in certain instances as hereinafter provided. Upon conversion, the holder of shares of Class B Stock shall be entitled to receive any accrued and unpaid dividends on the shares of Class B Stock surrendered for conversion to the Conversion Date. Such accrued and unpaid dividends shall be payable by the Corporation, at its option, in cash (to the extent funds are legally available therefor) or in shares of Common Stock valued at the Fair Market Value as of the third Business Day prior to the Conversion Date, instead of in cash. (e) In connection with the conversion of any shares of Class B Stock, no fractions of shares of Common Stock shall be issued, but in lieu thereof the Corporation shall either (i) deliver a whole share of Common Stock in respect of the fractional share to which the holder would otherwise have been entitled upon such conversion or (ii) pay a cash adjustment in respect of such fractional interest in an amount equal to such fractional interest multiplied by the Current Market Price per share of Common Stock on the Trading Day on which such shares of Class B Stock are deemed to have been converted. If more than one share of Class B Stock shall be surrendered for conversion by the same holder at the same time, the number of full shares of Common Stock issuable on conversion thereof shall be computed on the basis of the total number of shares of Class B Stock so surrendered. (f) The Corporation shall at all times reserve and keep available for issuance upon the conversion of the Class B Stock, free from any preemptive rights, such number of its authorized but unissued shares of Common Stock as will from time to time be sufficient to permit the conversion of all outstanding shares of Class B Stock, and shall take all action required to increase the authorized number of shares of Common Stock if necessary to permit the conversion of all outstanding shares of Class B Stock. (g) The Conversion Ratio will be subject to adjustment from time to time as follows: (1) In case the Corporation shall at any time or from time to time after the First Issue Date (A) pay a dividend, or make a distribution, on the outstanding shares of Common Stock in shares of Common Stock, (B) subdivide the outstanding shares of Common Stock, (C) combine the outstanding shares of Common Stock into a smaller number of shares or (D) issue by reclassification of the shares of Common Stock any shares of capital stock of the Corporation, then, and in each such case, the Conversion Ratio in effect immediately prior to such event or the record date therefor, whichever is earlier, shall be adjusted so that the holder of any shares of Class B Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock or other securities of the Corporation which such holder would have owned or have been entitled to receive after the happening of any of the events described above, had such shares of Class B Stock been surrendered for conversion immediately 10 prior to the happening of such event or the record date therefor, whichever is earlier. An adjustment made pursuant to this clause (i) shall become effective (x) in the case of any such dividend or distribution, immediately after the close of business on the record date for the determination of holders of shares of Common Stock entitled to receive such dividend or distribution, or (y) in the case of such subdivision, reclassification or combination, at the close of business on the day upon which such corporate action becomes effective. No adjustment shall be made pursuant to this clause (i) in connection with any transaction to which paragraph (h) applies. (2) In case the Corporation shall at any time or from time to time after the First Issue Date declare, order, pay or make a dividend or other distribution (including, without limitation, any distribution of stock or other securities or property or rights or warrants to subscribe for securities of the Corporation or any of its Subsidiaries by way of dividend or spinoff), on its Common Stock, other than dividends or distributions of shares of Common Stock which are referred to in clause (1) of this paragraph (g), then the Conversion Ratio shall be adjusted so that the holder of each share of Class B Stock shall be entitled to receive, upon the conversion thereof, the number of shares of Common Stock determined by multiplying (1) the applicable Conversion Ratio on the day immediately prior to the record date fixed for the determination of stockholders entitled to receive such dividend or distribution by (2) a fraction, the numerator of which shall be the Current Market Price per share of Common Stock for the period of 20 Trading Days preceding such record date, and the denominator of which shall be such Current Market Price per share of Common Stock less the Fair Market Value (as defined in Section 11 hereof) per share of Common Stock (as determined in good faith by the Board of Directors of the Corporation, a certified resolution with respect to which shall be mailed to each holder of shares of Class B Stock) of such dividend or distribution; PROVIDED, HOWEVER, that in the event of a distribution of capital stock of a Subsidiary of the Corporation (a "Spin-Off") made to holders of shares of Common Stock, the numerator of such fraction shall be the sum of the Current Market Price per share of Common Stock for the period of 20 Trading Days preceding the 35th Trading Day after the effective date of such Spin-Off and the Current Market Price of the number of shares (or the fraction of a share) of capital stock of the Subsidiary which is distributed in such Spin-Off in respect of one share of Common Stock for the period of 20 Trading Days preceding such 35th Trading Day and the denominator of which shall be the Current Market Price per share of Common Stock for the period of 20 Trading Days preceding such 35th Trading Day. An adjustment made pursuant to this clause (2) shall be made upon the opening of business on the next Business Day following the date on which any such dividend or distribution is made and shall be effective retroactively immediately after the close of business on the record date fixed for the determination of stockholders entitled to receive such dividend or distribution; PROVIDED, HOWEVER, that if the proviso to the preceding sentence applies, then such adjustment shall be made and be effective as of such 35th Trading Day after the effective date of such Spin-Off. No adjustment shall be made pursuant to this clause (2) in connection with any transaction to which paragraph (h) applies. (3) For purposes of this paragraph (g), the number of shares of Common Stock at any time outstanding shall not include any shares of Common Stock then owned or held by or for the account of the Corporation. 11 (4) The term "dividend," as used in this paragraph (g) shall mean a dividend or other distribution upon Common Stock of the Corporation. (5) Anything in this paragraph (g) to the contrary notwithstanding, the Corporation shall not be required to give effect to any adjustment in the Conversion Ratio unless and until the net effect of one or more adjustments (each of which shall be carried forward), determined as above provided, shall have resulted in a change of the Conversion Ratio by at least one one-hundredth of one share of Common Stock, and when the cumulative net effect of more than one adjustment so determined shall be to change the Conversion Ratio by at least one one-hundredth of one share of Common Stock, such change in Conversion Ratio shall thereupon be given effect. (6) The certificate of any firm of independent public accountants of recognized standing selected by the Board of Directors of the Corporation (which may be the firm of independent public accountants regularly employed by the Corporation) shall be presumptively correct for any computation made under this paragraph (g). (7) If the Corporation shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, and shall thereafter and before the distribution to stockholders thereof legally abandon its plan to pay or deliver such dividend or distribution, then thereafter no adjustment in the number of shares of Common Stock issuable upon exercise of the right of conversion granted by this paragraph (g) or in the Conversion Ratio then in effect shall be required by reason of the taking of such record. (8) There shall be no adjustment of the Conversion Ratio in case of the issuance of any stock of the Corporation in a merger, reorganization, acquisition or other similar transaction except as set forth in paragraphs (g)(1) and (h) of this Section 8. (h) In case of any capital reorganization or reclassification of outstanding shares of Common Stock (other than a reclassification covered by Section 8(g)(1)), or in the case of any merger of the Corporation with or into another Corporation, or in case of any sale or conveyance to another Corporation of all or substantially all of the assets or property of the Corporation (each of the foregoing being referred to as a "Transaction"), each share of Class B Stock then outstanding shall thereafter be convertible into, in lieu of the Common Stock issuable upon such conversion prior to consummation of such Transaction, the kind and amount of shares of stock and other securities and property receivable (including cash or securities of the Surviving Person (as defined in Section 11 hereof) upon the consummation of such Transaction by a holder of that number of shares of Common Stock into which one share of Class B Stock was convertible immediately prior to such Transaction (including, on a pro rata basis, the cash, securities or property received by holders of Common Stock in any tender or exchange offer that is a step in such Transaction). In any such case, if necessary, appropriate adjustment (as determined by the Board of Directors) shall be made in the application of the provisions set forth in this Section 8 with respect to rights and interests thereafter of the holders of shares of Class B Stock to the end that the provisions set forth herein for the protection of the conversion rights of the Class B Stock 12 shall thereafter be applicable, as nearly as reasonably may be, to any such other shares of stock and other securities and property deliverable upon conversion of the shares of Class B Stock remaining outstanding (with such adjustments in the conversion price and number of shares issuable upon conversion and such other adjustments in the provisions hereof as the Board of Directors shall determine to be appropriate). In case securities or property other than Common Stock shall be issuable or deliverable upon conversion as aforesaid, then all references in this Section 8 shall be deemed to apply, so far as appropriate and as nearly as may be, to such other securities or property. Notwithstanding anything contained herein to the contrary, the Corporation will not effect any Transaction unless, prior to the consummation thereof, the Surviving Person thereof shall assume, by written instrument mailed to each holder of shares of Class B Stock, the obligation to deliver to such holder such cash, property or securities to which, in accordance with the foregoing provisions, such holder is entitled. (i) In case at any time or from time to time the Corporation shall pay any dividend or make any other distribution to the holders of its Common Stock, or shall offer for subscription pro rata to the holders of its Common Stock any additional shares of stock of any class or any other right, or there shall be any capital reorganization or reclassification of the Common Stock of the Corporation or merger of the Corporation with or into another Corporation, or any sale or conveyance to another Corporation of the property of the Corporation as an entirety or substantially as an entirety, or there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Corporation, then, in any one or more of said cases the Corporation shall give at least 20 days prior written notice (the time of mailing of such notice shall be deemed to be the time of giving thereof) to the registered holders of Class B Stock at the addresses of each as shown on the books of the Corporation maintained by the transfer agent thereof as of the date on which (i) the books of the Corporation shall close or a record shall be taken for such stock dividend, distribution or subscription rights or (ii) such reorganization, reclassification, merger, sale or conveyance, dissolution, liquidation or winding up shall take place, as the case may be, provided that in the case of any Transaction to which paragraph (h) applies the Corporation shall give at least thirty days prior written notice as aforesaid. Such notice shall also specify the date as of which the holders of the Common Stock of record shall participate in said dividend, distribution or subscription rights or shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, merger, sale or conveyance or participate in such dissolution, liquidation or winding up, as the case may be. Failure to give such notice shall not invalidate any action so taken. SECTION 9. REPORTS AS TO ADJUSTMENTS. Upon any adjustment of the Conversion Ratio then in effect and any increase or decrease in the number of shares of Common Stock issuable upon the operation of the conversion set forth in Section 8 hereof, then, and in each such case, the Corporation shall promptly deliver to the transfer agent of the Class B Stock and Common Stock, a certificate signed by the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Corporation setting forth in reasonable detail the event requiring the adjustment 13 and the method by which such adjustment was calculated and specifying the Conversion Ratio then in effect following such adjustment and the increased or decreased number of shares issuable upon the conversion set forth in Section 8 hereof. The Corporation shall also promptly after the making of such adjustment give written notice to the registered holders of the Class B Stock at the address of each holder as shown on the books of the Corporation maintained by the Transfer Agent thereof, which notice shall state the Conversion Ratio then in effect, as adjusted, and the increased or decreased number of shares issuable upon the exercise of the right of conversion granted by Section 8 hereof, and shall set forth in reasonable detail the method of calculation of each and a brief statement of the facts requiring such adjustment. Where appropriate, such notice to holders of the Class B Stock may be given in advance and included as part of the notice required under the provisions of Section 8(i) hereof. SECTION 10. CERTAIN COVENANTS (a) Following the First Issue Date, and except in payment of dividends pursuant to Section 2(c), the Corporation shall not issue additional shares of Class B Stock. (b) Any registered holder of Class B Stock may proceed to protect and enforce its rights and the rights of such holders by any available remedy by proceeding at law or in equity to protect and enforce any such rights, whether for the specific enforcement of any provision in this Certificate of Designation, or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. SECTION 11. DEFINITIONS. The following terms shall have the meanings indicated: "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities or by agreement or otherwise. "Approval Date" shall mean the earlier of (i) the tenth day following the mailing by the Company of a notice to stockholders of receipt by the Company of written confirmation of waiver by the NASDAQ of its shareholder voting requirements with respect to the right of the holders of the Class B Stock to vote such shares on an as-converted basis, or (ii) the date of approval by the Company's stockholders of the right of the holders of the Class B Stock to vote such shares on an as converted basis. "Bank Credit Agreement" shall mean the Credit Agreement, dated as of June 15, 1995, among the Company, the banks party thereto, and Bankers Trust Company as Agent for the bank 14 parties thereto, as amended from time to time, and any refinancings, renewals and replacements thereof. "Business Day" shall mean any day other than Saturday, Sunday or a day on which banking institutions in the State of Delaware are authorized or obligated by law or executive order to close. "Class A Stock" shall mean the Class A Convertible Preferred Stock, par value $1.00 per share, of the Corporation. "Conversion Price" shall mean an amount equal to the Stated Value divided by the Conversion Ratio (as adjusted pursuant to paragraph (g) of Section 8 hereof). "Current Market Price," when used with reference to shares of Common Stock or other securities on any date, shall mean the volume weighted average of the sales prices for shares of Common Stock or other such securities on such date and, when used with reference to shares of Common Stock or other securities for any period shall mean the volume weighted average of the sale prices for shares of Common Stock or such other securities for such period. If the Common Stock is not listed or admitted to trading on a national securities exchange or an automated quotation system that permits determination of weighted average sale prices over a period of time, then "Current Market Price" for any period shall mean the average of the last quoted sale price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or such other system then in use, or, if on any such date the Common Stock or such other securities are not quoted by any such organization, the average of the closing bid and asked prices are furnished by a professional market maker making a market in the Common Stock or such other securities selected by the Board of Directors of the Corporation. If the Common Stock or such other securities are not publicly held or so listed or publicly traded, "Current Market Price" shall mean the fair market value per share of Common Stock or such other securities as determined in good faith by the Board of Directors of the Corporation based on an opinion of an independent investment banking firm with an established national reputation as a valuer of securities, which opinion may be based on such assumptions as such firm shall deem to be necessary and appropriate. "DGCL" shall mean the Delaware General Corporation Law, as amended. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar Federal statute, and the rules and regulations of the Securities and Exchange Commission thereunder, all as the same shall be in effect at the time. References to a particular section of the Exchange Act shall include reference to the comparable section, if any, of any such similar Federal statute. "Fair Market Value" shall mean, as to shares of Common Stock or any other class of capital stock or securities of the Corporation or any other issuer which are publicly traded, the Current Market Price of such shares or securities for the 30 Trading Day period preceding the 15 date as of which the Fair Market Value is to be determined. The "Fair Market Value" of any security which is not publicly traded or of any other property shall mean the fair value thereof as determined by an independent investment banking or appraisal firm experienced in the valuation of such securities or property selected in good faith by the Board of Directors of the Corporation or a committee thereof, or, if no such investment banking or appraisal firm is in the good faith judgment of the Board of Directors or such committee available to make such determination, as determined in good faith by the Board of Directors of the Corporation or such committee. "First Issue Date" shall mean the first date that any shares of Class B Stock are issued. "Issue Date" shall mean, with respect to any share of Class B Stock, the date on which such share of Class B Stock is issued. "Junior Dividend Stock" shall mean (i) the Common Stock and (ii) any other capital stock of the Corporation which ranks junior as to dividends to the Class B Stock. "Junior Liquidation Stock" shall mean (i) the Common Stock and (ii) any other capital stock of the Corporation which ranks junior upon liquidation, dissolution or winding up to the Class B Stock. "Liquidation Preference" with respect to a share of Class B Stock shall mean the Stated Value per share, plus an amount equal to all accrued but unpaid dividends. "NASDAQ" shall mean the NASDAQ Stock Market. "NASDAQ Rules" shall mean Rule 4460(i) of the NASDAQ Stock Market Rules of the NASDAQ Stock Market. "Parity Dividend Stock" shall mean (i) the Class A Stock and (ii) any other capital stock of the Corporation ranking on a parity as to dividends with the Class B Stock. "Parity Liquidation Stock" shall mean (i) the Class A Stock and (ii) any other capital stock of the Corporation ranking on a parity upon liquidation, dissolution or winding up with the Class B Stock. "Person" shall mean any individual, firm, corporation or other entity, and shall include any successor (by merger or otherwise) of such entity. "Principal Issue Date" shall mean September 17, 1996. "Purchasers" shall mean Trefoil Capital Investors II, L.P., a Delaware limited partnership, and GE Investment Private Placement Partners II, A Limited Partnership, a Delaware limited partnership. 16 "Qualified Person" shall mean any person that, immediately after giving effect to the applicable Transaction, (i) is a solvent corporation or other entity organized under the laws of any State of the United States of America having its common stock or, in case of an entity other than a corporation, equivalent equity securities, listed on the New York Stock Exchange or the American Stock Exchange or quoted by the Nasdaq National Market System or any successor thereto or comparable system, and such common stock or equivalent equity security continues to meet the requirements for such listing or quotation and (ii) is required to file, and in each of its three fiscal years immediately preceding the consummation of the applicable Transaction (or since its inception) has filed, reports with the Securities and Exchange Commission pursuant to Section 13 or 15(d) of the Exchange Act. "Redemption Fair Market Value" shall mean, as to shares of Common Stock, the Current Market Price of such shares or securities for the 60-day period preceding the date as of which the Redemption Fair Market Value is to be determined. The "Redemption Fair Market Value" of the Common Stock if it is not publicly traded shall mean its Fair Market Value. "Required Issue Date" shall mean December 31, 1996. "Reset Date" shall mean the first Trading Day after the end of the 20 Trading Day period utilized to determine the Reset Market Value. "Reset Market Value" shall mean the Current Market Price of Common Stock for the 20 Trading Day period following the earlier of (i) the date which three Trading Days after public announcement of the Corporation's results for its fiscal quarter ending January 3, 1998 and (ii) February 2, 1998. "Senior Notes" shall mean the Corporation's 12% Senior Notes due 2004 and any other senior indebtedness of the Corporation the net proceeds of which are used in full to pay principal, prepayment penalty and accrued interest on such principal, the incurrence of which is approved by the vote of the holders of a majority of the outstanding shares of Class B Stock. "Subsidiary" of any Person means any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person. "Surviving Person" shall mean the continuing or surviving Person of a merger or other business combination, the Person receiving a transfer of all or a substantial part of the properties and assets of the Corporation, or the Person merging into the Corporation in a merger or other business combination in which the Corporation is the continuing or surviving Person, but in connection with which the Class B Stock or Common Stock of the Corporation is exchanged or converted into the securities of any other Person or cash or any other property; PROVIDED, HOWEVER, if such surviving Person is a direct or indirect Subsidiary of a Qualified Person, the parent entity that is a Qualified Person shall be the Surviving Person. 17 "Survivor Common Stock" with respect to any Surviving Person shall mean any shares of such Surviving Person of any class or series which has no preference or priority in the payment of dividends or in the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of such Surviving Person and which is not subject to redemption by such Surviving Person; PROVIDED, HOWEVER, that if at any time there shall be more than one such class or series, the shares of each such class and series issuable upon conversion of the Class B Stock then being converted shall be substantially in the proportion to the total number of shares of each such class and series. "Trading Day" means a day on which the principal national securities exchange (including, if applicable, the Nasdaq Stock Market) on which the Common Stock is listed or admitted to trading is open for the transaction of business or, if the Common Stock is not listed or admitted to trading on any national securities exchange, a Business Day. 18 IN WITNESS WHEREOF, the officers set forth below, acting for and on behalf of the Grand Union Company, have hereunto subscribed their names on this 11th day of June 1997. THE GRAND UNION COMPANY By: /s/ Jeffrey Freimark --------------------------- Name: Jeffrey Freimark Title: Executive Vice President By: /s/ Donald C. Vaillancourt ------------------------------- Name: Donald C. Vaillancourt Title: Secretary EX-10.21 4 EX-10.21 Exhibit 10.21 FIFTH AMENDMENT TO THE AMENDED AND RESTATED CREDIT AGREEMENT ------------------------------------- FIFTH AMENDMENT dated as of March 7, 1997 (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 Second Amendment thereto dated as of May 10, 1996, the Third Amendment thereto dated as of September 11, 1996 and the Fourth Amendment thereto dated as of January 13, 1997, 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 desires to issue and sell to Roger E. Stangeland, the Chairman of its Board of Directors, 60,000 shares of its Class A Convertible Preferred Stock, stated value $50.00 per share, for an aggregate purchase price of $3,000,000 (such transaction, the "Stangeland Convertible Preferred Stock Sale"); WHEREAS, in connection therewith, the Borrower has requested that the Credit Agreement be amended to, among other things: (a) permit the Stangeland Convertible Preferred Stock Sale; and (b) make the mandatory prepayment obligations of the Borrower under Section 4.2(A)(e) of the Credit Agreement inapplicable to the Net Equity Issuance Proceeds received by the Borrower pursuant to the Stangeland Convertible Preferred Stock Sale; and WHEREAS, subject to and upon the terms and conditions hereinafter set forth and in the Credit Agreement as amended hereby, the Banks party hereto are agreeable to the foregoing; NOW, THEREFORE, the parties hereto hereby agree as follows: Section 1. Amendments. Subject to the satisfaction of the conditions precedent set forth in Section 3 hereof, the Credit Agreement is hereby amended effective as of the date hereof (the "Effective Date") as follows: (a) Section 4.2(A)(e) of the Credit Agreement is amended by replacing clause (z) thereof with the following: ", and (z) issuances of convertible preferred stock of the Borrower and issuances of common stock of the Borrower on conversion of such convertible preferred stock (but only so long as no consideration (other than the preferred stock being converted) is received by the Borrower or any of its Subsidiaries in connection with such conversion), in each case pursuant to the Convertible Preferred Stock Documents". (b) Section 8.7 of the Credit Agreement is amended by inserting the phrase "or the Stangeland Stockholder Agreement" at the end of clause (iv) thereof. (c) Section 8.13 of the Credit Agreement is amended by replacing the parenthetical at the end of clause (iv) thereof with the following: 2 "(other than issuances of convertible preferred stock of the Borrower pursuant to the Convertible Preferred Stock Documents)". (d) Section 9.12 of the Credit Agreement is amended by replacing the term "Convertible Preferred Stock Documents" each place it appears in clauses (ii) and (iv) thereof with the term "Convertible Preferred Stock Purchase Agreement". (e) The definition of the term "Convertible Preferred Stock Documents" contained in Section 10 of the Credit Agreement is amended in its entirety to read as follows: "'Convertible Preferred Stock Documents' shall mean (a) the Convertible Preferred Stock Purchase Agreement, (b) the Stangeland Convertible Preferred Stock Purchase Agreement and (c) the Certificate of Designation of Class A Convertible Preferred Stock, stated value $50.00 per share, of the Borrower (the "Class A Certificate of Designation"); as each of the same may from time to time be amended, supplemented or otherwise modified from time to time in accordance with the terms hereof and thereof. For purposes of this Agreement, 'issuance of convertible preferred stock of the Borrower pursuant to the Convertible Preferred 3 Stock Documents', 'sales of convertible preferred stock of the Borrower pursuant to the Convertible Preferred Stock Documents', 'Net Equity Issuance Proceeds received by the Borrower pursuant to the Convertible Preferred Stock Documents' and words of similar import do not include any sales or issuances of convertible preferred stock or any Net Equity Issuance Proceeds other than, as applicable: (i) the sale and issuance of (and Net Equity Issuance Proceeds received by the Borrower in respect of) up to 2,000,000 shares of the Borrower's Class A Convertible Preferred Stock for $50.00 per share in cash pursuant to the Convertible Preferred Stock Purchase Agreement, (ii) the sale and issuance of (and Net Equity Issuance Proceeds received by the Borrower in respect of) up to 60,000 shares of the Borrower's Class A Convertible Preferred Stock for $50.00 per share in cash pursuant to the Stangeland Convertible Preferred Stock Purchase Agreement, and (iii) issuances, for no consideration, pursuant to the terms of the Class A Certificate of Designation as in effect on the Amendment No. 3 Effective Date of shares of the Borrower's Class A Convertible Preferred Stock or common stock as dividends on, and of common stock upon conversion of, outstanding shares of convertible preferred stock of the Borrower permitted by this Agreement." (f) The definition of the term "Cumulative EBITDA Minus Adjusted Cumulative Consolidated Capital Expenditures" contained in Section 10 of the Credit Agreement is amended by deleting the phrase "as in effect on the Amendment No. 3 Effective Date" in clause (iii) thereof. (g) The definition of the term "Fixed Charge Coverage Ratio" contained in Section 10 of the Credit Agreement is amended by deleting the phrase "as in effect on the Amendment No. 3 Effective Date" in clause (i)(C) thereof. (h) The definition of the term "Net Equity Proceeds Carryover Amount" contained in Section 10 of the Credit Agreement is amended by deleting the phrase "as in effect on the Amendment No. 3 Effective Date" each place such phrase appears therein. (i) The following definitions of new terms are inserted in Section 10 of the Credit Agreement in alphabetical order: 4 "'Stangeland Convertible Preferred Stock Purchase Agreement' shall mean the Stock Purchase Agreement dated as of February 25, 1997 between the Borrower and Roger Stangeland." "'Stangeland Stockholder Agreement' shall mean the Stockholder Agreement dated as of February 25, 1997 by and among the Convertible Preferred Stock Purchasers, Roger Stangeland and the Borrower." Section 2. Representations and Warranties. The Borrower hereby represents and warrants to the Agent and each Bank that on and as of the Effective Date: (a) no Default or Event of Default has occurred and is continuing; and (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 such date as if made on and as of such date after giving effect to the amendments contemplated hereby, except to the extent such representations and warranties expressly relate to a different specific date. Section 3. Effectiveness. The amendments to the Credit Agreement set forth in Section 1 hereof shall become effective as of the Effective Date when: (a) 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" or the "Required Class Creditors", as the case may be; and 5 (b) the Borrower shall have delivered to the Agent an executed certificate of the Borrower, dated as of the later of the Effective Date and the date the condition in paragraph (a) above has been satisfied, stating that attached thereto is a true and complete copy of (i) the Stangeland Convertible Preferred Stock Purchase Agreement and (ii) the Stangeland Stockholder Agreement (as defined in the Credit Agreement after giving effect to this Amendment), in each case as in effect on the date of such certificate, and that, except as noted in such certificate or otherwise disclosed to the Agent in writing, such agreements do not vary in any material respect from the execution versions thereof provided to the Agent prior to its execution hereof. Section 4. Status of Credit Documents. (a) This Amendment is limited solely for the purposes and to the extent expressly set forth herein, and, except as expressly modified hereby, (i) the terms, provisions and conditions of the Credit Documents, (ii) the terms and provisions of the Further Assurances Agreement dated as of June 15, 1995, as modified in writing prior to the date hereof, between the Borrower and the Agent, and (iii) the Liens granted under the Credit Documents shall continue in full force and effect and are hereby ratified and confirmed in all respects. (b) Without limiting the foregoing, this Amendment (including, without limitation, the confirmations made pursuant to paragraph (c) below) shall not be construed in any respect as, and is not intended to be: (i) a consent by the Agent or any Bank to the consummation by the Borrower of any of the transactions contemplated by the Convertible Preferred Stock Documents (as used in this Section 4, such term has the meaning specified in the Credit Agreement after giving effect to this Amendment) or the performance by the Borrower of any term 6 or provision of any Convertible Preferred Stock Document (including, without limitation, the Certificate of Designation for the Class A Preferred Stock of the Borrower, stated value $50.00 per share), in any such case that is prohibited by the Credit Agreement, as expressly amended hereby, or (ii) a waiver by the Agent or any Bank of (A) any violation of the Credit Agreement, as expressly amended hereby, or any Default or Event of Default thereunder that in any such case arises as a result of the performance or observance by the Borrower of any of its covenants, agreements and obligations under, or the consummation of any transaction contemplated by, any Convertible Preferred Stock Document (including, without limitation, any such violation, Default or Event of Default that would arise under Section 8.6 of the Credit Agreement as a result of the performance by the Borrower of any obligation of the Borrower under the Convertible Preferred Stock Documents to pay cash dividends on, or redeem, any shares of stock issued and/or sold pursuant thereto), or (B) any rights and remedies arising in favor of the Agent or any Bank under the Credit Documents or otherwise as a result of the occurrence of any such violation, Default or Event of Default. (c) The Borrower acknowledges that the performance by the Borrower of its following obligations under the Convertible Preferred Stock Documents will, unless consented to in writing by the requisite Banks after the Effective Date, result in a violation of, and constitute an Event of Default under, the Credit Agreement as amended hereby: (i) any obligation of the Borrower under the Convertible Preferred Stock Documents to pay cash dividends (in whole or in part) on, or purchase, redeem or otherwise acquire (in whole or in part) for cash, any shares of convertible preferred stock issued from time to time pursuant to the Convertible Preferred Stock Documents, and (ii) any obligation of the Borrower under the Convertible Preferred Stock Documents to pay to any pur- 7 chaser of its Class A Convertible Preferred Stock, stated value $50.00 per share, or any of their respective Affiliates any management or similar fee at any time that a Default or an Event of Default has occurred and is continuing. Each of the Agent and the Borrower confirms to each other on the terms set forth in paragraph (b) above that it does not have any actual knowledge that any other term or provisions of the Convertible Preferred Stock Documents conflicts (or that the performance thereof could conflict) with the terms and provisions of the Credit Agreement as amended hereby. (d) No amendment made to the Credit Agreement pursuant to this Amendment shall relieve the Borrower from complying with any other term or provision of the Credit Agreement as amended hereby. 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. 8 IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized officers to execute and deliver this Fifth Amendment to the Amended and Restated Credit Agreement as of the date first above written. THE GRAND UNION COMPANY By: /s/ Francis E. Nicastro -------------------------- Name: Francis E. 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/ Richard Levenson ------------------------------ Name: Richard Levenson Title: VP BANK POLSKA KASA OPIEKI, SA By: ------------------------------ Name: 9 Title: 10 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/ Timothy M. Barns ----------------------------- Name: Timothy M. Barns Title: Division Executive FLEET CAPITAL CORPORATION By: /s/ Eric Rubin ------------------------------ Name: Eric Rubin Title: Vice President HELLER FINANCIAL, INC. By: /s/ Salvatore Salzillo ------------------------------ Name: Salvatore Salzillo Title: AVP 11 LEHMAN COMMERCIAL PAPER INC. By: /s/ Michele Swanson ------------------------------ Name: Michele Swanson Title: Authorized Signatory ML CBO IV (CAYMAN) LTD By: Protective Asset Management, L.L.C. as Collateral Manager By: /s/ James Dondero ------------------------------ Name: James Dondero CPA, CFA Title: President Protective Asset Management, L.L.C. QUANTUM PARTNERS LDC By: ------------------------------ Name: Title: SENIOR DEBT PORTFOLIO By: Boston Management and Research, as Investment Advisor By: /s/ Barbara Campbell ------------------------------ Name: Title: 12 TRANSAMERICA BUSINESS CREDIT CORPORATION By: /s/ Steven Fischer ------------------------------ Name: Steven Fischer Title: Senior Vice Pres. VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST By: /s/ Jeffrey W. Maillet ------------------------------- Name: Jeffrey W. Maillet Title: Senior Vice President & Director The foregoing Fifth 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. SPECIALTY MERCHANDISING SERVICES, INC. By: /s/ Francis E. Nicastro --------------------------------------- Name: Francis E. Nicastro Title: Vice President and Treasurer of each of the above listed entities 13 EX-10.22 5 EX-10-22 Exhibit 10.22 WAIVER AND SIXTH AMENDMENT TO THE AMENDED AND RESTATED CREDIT AGREEMENT ------------------------------------- WAIVER AND SIXTH AMENDMENT dated as of April 4, 1997 (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 Second Amendment thereto dated as of May 10, 1996, the Third Amendment thereto dated as of September 11, 1996, the Fourth Amendment thereto dated as of January 13, 1997 and the Fifth Amendment thereto dated as of March 7, 1997, 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 requested that the EBITDA and interest expense covenants in the Credit Agreement for the period of four consecutive fiscal quarters of the Borrower ending in March 1997 be waived; and WHEREAS, subject to and upon the terms and conditions hereinafter set forth, the Banks party hereto are agreeable to the foregoing; NOW, THEREFORE, the parties hereto hereby agree as follows: Section 1. Waiver. The undersigned Banks hereby waive compliance by the Borrower with Sections 8.9 and 8.11 of the Credit Agreement solely with respect to the period of four consecutive fiscal quarters of the Borrower ending in March 1997. Section 2. Amendment. The Credit Agreement is hereby amended by inserting the following after Section 8.16 thereof as a new Section 8.17: "8.17 Additional Financial Covenants. The Borrower will not permit: (a) EBITDA for the 13 consecutive fiscal periods of the Borrower (as set forth on Schedule XII hereto) ending on May 24, 1997 (taken as one accounting period) to be less than $130,000,000; or (b) the ratio of EBITDA to Total Cash Interest Expense for the 13 consecutive fiscal periods of the Borrower (as set forth on Schedule XII hereto) ending on May 24, 1997 (taken as one accounting period) to be less than 1.22:1." Section 3. Representations and Warranties. The Borrower hereby represents and warrants to the Agent and each Bank that: (a) after giving effect this Amendment, no Default or Event of Default has occurred and is continuing on and as of the date hereof; and (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 after giving effect to this Amendment, except to the extent such representations and warranties expressly relate to a different specific date. Section 4. Effectiveness. This Amendment shall become effective, as of March 30, 1997, 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" or the "Required Class Creditors", as the case may be. Section 5. Status of Credit Documents. (a) This Amendment is limited solely for the purposes and to the extent expressly set forth herein, and, except as expressly modified hereby, (i) the terms, provisions and conditions of the Credit Documents, (ii) the terms and provisions of the Further Assurances Agreement dated as of June 15, 1995, as modified in writing prior to the date hereof, between the Borrower and the Agent, and (iii) the Liens granted under the Credit Documents shall continue in full force and effect and are hereby ratified 2 and confirmed in all respects. (b) No modification made to the Credit Agreement pursuant to this Amendment shall relieve the Borrower from complying with any other term or provision of the Credit Agreement as modified hereby. Section 6. 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 7. Governing Law. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK. 3 The foregoing Waiver and Sixth Amendment 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. SPECIALTY MERCHANDISING SERVICES, INC. By: /s/ Francis E. Nicastro ----------------------- Name: Francis E. Nicastro Title: Vice President and Treasurer of each of the above listed entities IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized officers to execute and deliver this Waiver and Sixth Amendment to the Amended and Restated Credit Agreement as of the date first above written. THE GRAND UNION COMPANY By: /s/ Francis E. Nicastro ----------------------- Name: Francis E. 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/ ----------------------- Name: Title: BANK POLSKA KASA OPIEKI, SA By: /s/ William A. Shea ------------------- Name: William A. Shea Title: Vice President Senior Lending Officer 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/ William M. Clark ------------------- Name: William M. Clark Title: Managing Director FLEET CAPITAL CORPORATION By: /s/ Eric Rubin -------------- Name: Eric Rubin Title: Vice President HELLER FINANCIAL, INC. By: /s/ Salvatore Salzillo ---------------------- Name: Salvatore Salzillo Title: AVP LEHMAN COMMERCIAL PAPER INC. By: /s/ Michelle Swanson -------------------- Name: Michelle Swanson Title: Authorized Signatory ML CBO IV (CAYMAN) LTD, LLC By: Protective Asset Management, as Collateral Manager By: /s/ James Dondero ----------------- Name: James Dondero CPA, CFA Title: President Protective Asset Management, L.L.C. SENIOR DEBT PORTFOLIO By: Boston Management and Research, as Investment Advisor By: /s/ Scott H. Page ----------------- Name: Scott H. Page Title: Vice President TRANSAMERICA BUSINESS CREDIT CORPORATION By: /s/ Perry Vavoules ------------------ Name: Perry Vavoules Title: Senior Vice President VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST By: /s/ Kathleen A. Zarn ------------------ Name: Kathleen A. Zarn Title: Vice President EX-10.23 6 EX-10-23 Exhibit 10.23 SEVENTH AMENDMENT TO THE AMENDED AND RESTATED CREDIT AGREEMENT SEVENTH AMENDMENT dated as of May 6, 1997 (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 Second Amendment thereto dated as of May 10, 1996, the Third Amendment thereto dated as of September 11, 1996, the Fourth Amendment thereto dated as of January 13, 1997, the Fifth Amendment thereto dated as of March 7, 1997, and the Waiver and Sixth Amendment thereto dated as of April 4, 1997, 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 requested that the Credit Agreement be amended to, among other things, (a) make the clean-down requirements of the Credit Agreement inapplicable during the 1997 calendar year, (b) lower the minimum amount of capital expenditures the Borrower is required by the Credit Agreement to make during the Borrower's fiscal year ending in March 1998 (the "1998 Fiscal Year"), and (c) change the EBITDA and interest coverage requirements of the Credit Agreement that are applicable during the 1998 Fiscal Year; and WHEREAS, subject to and upon the terms and conditions hereinafter set forth and in the Credit Agreement as amended hereby, the Banks party hereto are agreeable to the foregoing; NOW, THEREFORE, the parties hereto hereby agree as follows: Section 1. Amendments. The Credit Agreement is hereby amended effective as of the date hereof as follows: (a) Section 4.2(A)(i) of the Credit Agreement is amended by inserting "(other than August 31, 1997 unless a Default or an Event of Default has occurred and is then continuing)" at such time after the word "year" in the first line thereof. (b) Section 7.14 of the Credit Agreement is amended by replacing the amount "$87,100,000" appearing in the second line of the table contained therein with the amount "$30,000,000". (c) Section 8.3 of the Credit Agreement is amended by inserting the following as a new last paragraph of such Section: "In respect of any Capitalized Lease Obligations (Equipment) incurred by the Borrower or any of its Subsidiaries pursuant to clause (b) of this Section 8.3, the Agent, at the request of the Borrower, may pursuant to documentation satisfactory to the Agent in its sole discretion either, at the Agent's option, release or subordinate the Liens under the Security Documents on the equipment to which such obligations relate." (d) Section 8.9 of the Credit Agreement is amended by deleting such section in its entirety and replacing it with the following: "8.9 EBITDA. The Borrower will not permit EBITDA (i) for the fiscal quarter ending in July 1997 (taken as one accounting period) to be less than $23,000,000, (ii) for the period of two consecutive fiscal quarters ending in October 1997 (taken as one accounting period) to be less than $54,000,000, (iii) for the period of three consecutive fiscal quarters ending in January 1998 (taken as one accounting period) to be less than $87,000,000 and (iv) for any period of four consecutive fiscal quarters (taken as one accounting period) ending on the last day of any fiscal quarter set forth below to be less than the amount set forth opposite such fiscal quarter below: 2
Fiscal Quarter Ending in Amount -------------- ------ March 1998 120,000,000 July 1998 150,000,000 October 1998 150,000,000 January 1999 150,000,000 April 1999 165,000,000 July 1999 165,000,000 October 1999 165,000,000 January 2000 165,000,000 April 2000 165,000,000 July 2000 165,000,000 October 2000 165,000,000 January 2001 165,000,000 March 2001 165,000,000 July 2001 165,000,000 October 2001 165,000,000 January 2002 165,000,000 March 2002 165,000,000"
(e) Section 8.11 of the Credit Agreement is amended by deleting such section in its entirety and replacing it with the following: "8.11 EBITDA to Total Cash Interest Expense. The Borrower will not permit the ratio of (i) EBITDA to (ii) Total Cash Interest Expense (x) for the period of three consecutive fiscal quarters (taken as one accounting period) ending in January 1998 to be less than 1.0:1, (y) for the period of four consecutive fiscal quarters (taken as one accounting period) ending in March 1998 to be less than 1.0:1, and (z) for any period of four consecutive fiscal quarters (taken as one accounting period) ending during any period set forth below to be less than the amount set forth opposite such period below:
Period Ratio ------ ----- Fiscal Quarter ending in July 1.4:1 1998 to and including Fiscal Quarter ending in January 1999 Fiscal Quarter ending in April 1.5:1 3 1999 to and including Fiscal Quarter ending in January 2000 Fiscal Quarter ending in April 1.7:1 2000 to and including Fiscal Quarter ending in January 2001 Fiscal Quarter ending in March 1.7:1 2001 to and including Fiscal Quarter ending in January 2002 Thereafter 1.7:1"
(f) Section 8.17 ("Additional Financial Covenants") of the Credit Agreement is deleted in its entirety. (g) The definition of the term "EBITDA" contained in Section 10 of the Credit Agreement is amended by inserting the following at the end of such definition: "; and provided further that, for purposes of calculating EBITDA for any period, the following shall be added back to EBIT for such period to the extent deducted from Consolidated Net Income for such period: one-time restructuring charges arising from employee terminations and administrative cost reductions and one or a series of related charges arising from inventory valuation adjustments, in each case that are taken by the Borrower during its fiscal year ending in March 1998, but only to the extent (y) such charges were decided to be taken by the Borrower prior to the finalization of the Borrower's financial statements for its fiscal year ending in March 1997, and (z) the aggregate amount of such charges, when taken together with any similar or other restructuring charges taken by the Borrower and its Subsidiaries in the last quarter of its fiscal year ending in March 1997, do not exceed $10,000,000." (h) The definition of the term "Section 7.14 Credit Amount" is amended by replacing the reference to the year "1998" with the following: 4 "or prior to 1999, zero, and for any fiscal year of the Borrower ending in 2000". Section 2. Representations and Warranties. The Borrower hereby represents and warrants to the Agent and each Bank that: (a) after giving effect to this Amendment, no Default or Event of Default has occurred and is continuing on and as of the date hereof; and (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 after giving effect to the amendments contemplated hereby, except to the extent such representations and warranties expressly relate to a different specific date. Section 3. Effectiveness. This Amendment shall become effective as of the date specified in Section 1 hereof 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" or the "Required Class Creditors", as the case may be; provided that this Amendment shall cease immediately to be of any further force and effect if (i) the Borrower fails to comply with Section 4 hereof, or (ii) the aggregate amount of charges relating to employee terminations, administrative cost reductions and inventory valuation adjustments and other restructuring charges taken by the Borrower and its Subsidiaries during the Borrower's fiscal quarter ending in March 1997 exceeds $10,000,000. Section 4. Amendment Fee. In the event this Amendment is executed and delivered by the Agent and the Required Banks, the Borrower shall pay to the Agent on or prior to May 13, 1997, in immediately available funds, for the account of each Bank that executes and delivers a signature page to this Amendment on or prior to May 6, 1997, an amendment fee equal to 12.5 basis points on the sum of (a) such Bank's Revolving Loan Commitment, and (b) 5 the aggregate outstanding principal amount of Term Loans held by such Bank. Section 5. Status of Credit Documents. (a) This Amendment is limited solely for the purposes and to the extent expressly set forth herein, and, except as expressly modified hereby, (i) the terms, provisions and conditions of the Credit Documents, (ii) the terms and provisions of the Further Assurances Agreement dated as of June 15, 1995, as modified in writing prior to the date hereof, between the Borrower and the Agent, and (iii) the Liens granted under the Credit Documents shall continue in full force and effect and are hereby ratified and confirmed in all respects. (b) No amendment made to the Credit Agreement pursuant to this Amendment shall relieve the Borrower from complying with any other term or provision of the Credit Agreement as amended hereby. Section 6. 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 7. Governing Law. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK. 6 IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized officers to execute and deliver this Seventh Amendment to the Amended and Restated Credit Agreement as of the date first above written. THE GRAND UNION COMPANY By: /s/ Francis E. Nicastro ------------------------ Name: Francis E. 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/ Richard Levenson ------------------------ Name: Richard Levenson Title: VP BANK POLSKA KASA OPIEKI, SA By: /s/ William A. Shea ------------------------ Name: William A. Shea Title: Vice President Senior Lending Officer 7 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/ Timothy M. Barns ------------------------ Name: Timothy M. Barns Title: Division Executive FLEET CAPITAL CORPORATION By: /s/ Eric Rubin ------------------------ Name: Eric Rubin Title: Vice President HELLER FINANCIAL, INC. By: /s/ Salvatore Salzillo ------------------------ Name: Salvatore Salzillo Title: AVP LEHMAN COMMERCIAL PAPER INC. By: /s/ Michele Swanson ------------------------ Name: Michele Swanson Title: Authorized Signatory 8 ML CBO IV (CAYMAN) LTD, LLC By: Protective Asset Management, as Collateral Manager By: /s/ James Dondero CPA, CFA ---------------------------- Name: James Dondero CPA, CFA Title: President Protective Asset Management, L.L.C. SENIOR DEBT PORTFOLIO By: Boston Management and Research, as Investment Advisor By: /s/ Payson F. Swaffield ------------------------ Name: Payson F. Swaffield Title: Vice President TRANSAMERICA BUSINESS CREDIT CORPORATION By: /s/ Steven Fischer ------------------------ Name: Steven Fischer Title: Sr. Vice Pres VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST By: /s/ Jeffrey W. Maillet ------------------------ Name: Jeffrey W. Maillet Title: Senior Vice President & Director 9 The foregoing Seventh Amendment 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. SPECIALTY MERCHANDISING SERVICES, INC. By: /s/ Francis E. Nicastro --------------------------------- Name: Francis E. Nicastro Title: Vice President and Treasurer of each of the above listed entities 10 EX-10.24 7 EXHIBIT 10.24 Exhibit 10.24 EIGHTH AMENDMENT TO THE AMENDED AND RESTATED CREDIT AGREEMENT ------------------------------------- EIGHTH AMENDMENT dated as of June 9, 1997 (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 Second Amendment thereto dated as of May 10, 1996, the Third Amendment thereto dated as of September 11, 1996, the Fourth Amendment thereto dated as of January 13, 1997, the Fifth Amendment thereto dated as of March 7, 1997, the Waiver and Sixth Amendment thereto dated as of April 4, 1997, and the Seventh Amendment thereto dated as of May 6, 1997, 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, Trefoil Capital Investors II, L.P., a Delaware limited partnership ("Trefoil"), and GE Investment Private Placement Partners II, A Limited Partnership, a Delaware limited partnership (together with Trefoil, the "Purchasers") have entered into a Stock Purchase Agreement dated as of July 30, 1996 (the "Stock Purchase Agreement") as amended, pursuant to which the Purchasers agreed to purchase, in up to five installments, 2,000,000 shares of the Borrower's Class A Convertible Preferred Stock (the "Class A Stock") for an aggregate purchase price of $100,000,000; WHEREAS, the Purchasers have purchased 1,200,000 shares of Class A Stock for $60,000,000 prior to the date hereof, and, under the Stock Purchase Agreement, are required to purchase an additional 400,000 shares of such stock for $20,000,000 on each of August 25, 1997 and February 25, 1998; WHEREAS, the Borrower and the Purchasers have entered into an Acceleration and Exchange Agreement dated June 5, 1997 (the "Exchange Agreement"), pursuant to which (a) the Purchasers have agreed to accelerate their obligations under the Stock Purchase Agreement to purchase the remaining 800,000 shares of Class A Stock to June, 1997, (b) the Borrower and the Purchasers have agreed to immediately thereafter exchange such shares of Class A Stock for 800,000 shares of the Borrower's Class B Convertible Preferred Stock, and (c) the Company has agreed to issue up to 2 million shares of its common stock to the Purchasers on or about March 1998 (the "Reset Shares"), in each case on the terms and conditions set forth therein and the exhibits thereto (such transaction, the "Exchange"); WHEREAS, in connection therewith, the Borrower has requested that the Credit Agreement be amended to, among other things: (a)permit the Borrower to redeem shares of Class A Stock from the Purchasers in exchange for the Borrower's Class B Convertible Preferred Stock pursuant to the Exchange Agreement (Section 1(a) hereof); (b)permit the Borrower to pay certain costs and expenses of the Purchasers and their Affiliates (Section 1(b)) hereof); and (c)permit the Borrower to file a Certificate of Designation in respect of its Class B Convertible Preferred Stock (Section 2 hereof); and WHEREAS, subject to and upon the terms and conditions hereinafter set forth and in the Credit Agreement as amended hereby, the Banks party hereto are agreeable to the foregoing; NOW, THEREFORE, the parties hereto hereby agree as follows: Section 1. AMENDMENTS. Subject to the satisfaction of the conditions precedent set forth in Section 4 hereof, the Credit Agreement is hereby amended effective as of the date hereof as follows: (a) Section 8.6 of the Credit Agreement is amended by inserting the following at the end of such section: 2 "; PROVIDED that the Borrower may redeem or retire shares of its Class A Convertible Preferred Stock solely in exchange for shares of the Borrower's Class B Convertible Preferred Stock pursuant to the Convertible Preferred Stock Documents as in effect on the Amendment No. 8 Effective Date". (b) Section 8.7 of the Credit Agreement is amended by (i) deleting the word "and" before clause (iv) of the proviso to the first sentence of Section 8.7; and (ii) inserting the following at the end of such clause (iv): ", and (v) the Borrower may reimburse the Convertible Preferred Stock Purchasers for up to $400,000 of costs and expenses incurred by the Convertible Preferred Stock Purchasers in connection with the consummation of the transactions contemplated by the Exchange Agreement." (c) Section 9.10 of the Credit Agreement is amended by replacing the proviso at the end of such section with the following: "; PROVIDED that the occurrence of any event described in the foregoing clause (ii) or (iii) shall not constitute an Event of Default under this Section 9.10 so long as such event arises solely as a direct result of the acquisition of Voting Stock by the Convertible Preferred Stock Purchasers pursuant to the Convertible Preferred Stock Documents as in effect on the Amendment No. 8 Effective Date; or" (d) The definition of the term "Change of Control Event" contained in Section 10 of the Credit Agreement is amended by replacing the term "Amendment No. 3 Effective Date" contained in clause (i) thereof with the term "Amendment No. 8 Effective Date." (e) The definition of the term "Convertible Preferred Stock Documents" contained in Section 10 of the Credit Agreement is hereby amended in its entirety to read as follows: "'Convertible Preferred Stock Documents'" shall mean (a) the Convertible Preferred Stock Purchase Agreement, (b) the Stangeland Convertible Preferred 3 Stock Purchase Agreement, (c) the Certificate of Designation of Class A Convertible Preferred Stock, stated value $50.00 per share, of the Borrower (the "Class A Certificate of Designation"), (d) the Exchange Agreement, and (e) the Certificate of Designation of Class B Convertible Preferred Stock, stated value $50 per share, of the Borrower (the "Class B Certificate of Designation"); as each of the same may from time to time be amended, supplemented or otherwise modified from time to time in accordance with the terms hereof and thereof. For purposes of this Agreement, 'issuance of convertible preferred stock of the Borrower pursuant to the Convertible Preferred Stock Documents', 'sales of convertible preferred stock of the Borrower pursuant to the Convertible Preferred Stock Documents', 'Net Equity Issuance Proceeds received by the Borrower pursuant to the Convertible Preferred Stock Documents' and words of similar import do not include any sales or issuances of convertible preferred stock or any Net Equity Issuance Proceeds other than, as applicable: (i) the sale and issuance of (and Net Equity Issuance Proceeds received by the Borrower in respect of) up to 2,000,000 shares of the Borrower's Class A Convertible Preferred Stock for $50.00 per share in cash pursuant to the Convertible Preferred Stock Purchase Agreement, as modified by the Exchange Agreement, (ii) the sale and issuance of (and Net Equity Issuance Proceeds received by the Borrower in respect of) up to 60,000 shares of the Borrower's Class A Convertible Preferred Stock for $50.00 per share in cash pursuant to the Stangeland Convertible Preferred Stock Purchase Agreement, (iii) issuances, for no consideration, pursuant to the terms of the Class A Certificate of Designation and the Class B Certificate of Designation (each as in effect on the Amendment No. 8 Effective Date) of shares of the Borrower's Class A Convertible Preferred Stock, Class B Convertible Preferred Stock or common stock, as applicable, as dividends on, and issuances, for no consideration (other than the preferred stock being converted), of common stock upon conversion of, outstanding shares of convertible preferred stock of the Borrower permitted by this Agreement, (iv) the exchange of the Borrower's Class A Convertible Preferred Stock for the Borrower's Class B Convertible Preferred Stock 4 pursuant to the Exchange Agreement, (v) the issuance of the Class B Convertible Preferred Stock in the Exchange, and (vi) the issuance of the Reset Shares pursuant to the Exchange Agreement." (f) The following definitions of new terms are inserted in Section 10 of the Credit Agreement in alphabetical order: "'Amendment No. 8 Effective Date' shall mean the 'Effective Date', as such term is defined in Section 4 of Amendment No. 8 dated as of June __, 1997 to this Agreement." "'Exchange Agreement' shall mean the Acceleration and Exchange Agreement dated as of June 5, 1997 among the Borrower and the Convertible Preferred Stock Purchasers." Section 2. CONSENT TO AMENDMENTS TO CERTAIN DOCUMENTS. Notwithstanding anything to the contrary contained in Section 8.13 of the Credit Agreement, but subject to the satisfaction of the conditions precedent set forth in Section 4 hereof, the Agent and the Banks party hereto hereby consent to: (a) the acceleration, pursuant to the Exchange Agreement, of the Purchasers' obligations under the Stock Purchase Agreement; and (b) the filing by the Borrower with the Secretary of State of the State of Delaware of a Certificate of Designation in respect of the Borrower's Class B Convertible Preferred Stock that is in form and substance substantially similar to the form thereof previously delivered to the Agent. Section 3. 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; (b) the Exchange Agreement constitutes the valid and binding agreement of the Purchasers enforceable against the Purchasers in accordance with the terms thereof, except that (i) such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights, and (ii) the remedy of specific per- 5 formance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought; and (c) 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 after giving effect to the amendments contemplated hereby, except to the extent such representations and warranties expressly relate to a different specific date. Section 4. EFFECTIVENESS. The amendments to the Credit Agreement set forth in Section 1 hereof and the consents set forth in Section 2 hereof shall become effective on the date (the "Effective Date") that each of the following conditions precedent has been satisfied: (a) 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" or the "Required Class Creditors", as the case may be; (b) (i) the Exchange Agreement and all agreements, instruments and other documents entered into by the Borrower and/or the Purchasers in connection therewith (including, without limitation, the Certificate of Designation for the Class B Convertible Preferred Stock to be issued pursuant to the Exchange Agreement, collectively, the "New Equity Documents"), and all amendments to, and other deviations in the New Equity Documents from, the execution copies of the New Equity Documents delivered to the Agent prior to the New Agent's execution of this Amendment either shall not have an adverse effect on the Banks in any way or shall be reasonably satisfactory in form and substance to the Agent; (ii) the Exchange Agreement and all of the other New Equity Documents shall be in full force and effect; and (iii) the aggregate amount of fees (other than reimbursements of costs and expenses, including legal fees) required to be paid from time to time by the Borrower to investment banks, brokers, finders, the Purchasers and the 6 Purchasers' respective Affiliates in connection with the consummation of the transactions contemplated by the Exchange Agreement shall not exceed $500,000; (c) the Borrower shall have delivered to the Agent an executed certificate of the Borrower, dated as of the Effective Date, stating that: (i) the representations and warranties of the Borrower set forth in Section 3 hereof and in the Exchange Agreement and the other New Equity Documents were true and correct when made and are true and correct on and as of the Effective Date as if made on the Effective Date; (ii) the conditions precedent set forth in clause (b) above are satisfied on and as of the Effective Date; and (iii) attached thereto are true and complete copies of each of the New Equity Documents and the other Convertible Preferred Stock Documents as in effect on the Effective Date, and, except as noted in such certificate or otherwise disclosed to the Agent in writing, such documents do not vary in any material respect from the execution versions thereof provided to the Agent prior to its execution hereof; and (d) the Borrower shall have delivered to the Agent a copy of each certificate and legal opinion delivered to, or by or on behalf of, the Borrower pursuant to the Exchange Agreement in connection with the initial closing thereunder, and the Agent and the Banks shall be addresses of (or otherwise entitled to rely upon) each such opinion delivered by counsel for the Borrower. Section 5. STATUS OF CREDIT DOCUMENTS. (a) This Amendment is limited solely for the purposes and to the extent expressly set forth herein, and, except as expressly modified hereby, (i) the terms, provisions and conditions of the Credit Documents, (ii) the terms and provisions of the Further Assurances Agreement dated as of June 15, 1995, as modified in writing prior to the date hereof and herein, between the Borrower and the Agent, and (iii) the Liens granted under the Credit Documents shall continue in full force and effect and are hereby ratified and confirmed in all respects. (b) Without limiting the foregoing, neither this Amendment (including, without limitation, the consents granted in Section 2 hereof and the confirmations made pursuant to paragraph (c) below) nor the deeming by the Agent pursuant hereto of any New Equity Document as 7 being satisfactory to it shall be construed in any respect as, and is not intended to be: (i) a consent by the Agent or any Bank to the consummation by the Borrower of any of the transactions contemplated by the New Equity Documents (other than the entering into or filing, as applicable, by the Borrower of the documents referred to in Section 2 hereof) or the performance by the Borrower of any term or provision of any New Equity Document (including, without limitation, the Certificate of Designation for the Borrower's Class B Convertible Preferred Stock), in any such case that is prohibited by the Credit Agreement, as expressly amended hereby, or (ii) a waiver by the Agent or any Bank of (A) any violation of the Credit Agreement, as expressly amended hereby, or any Default or Event of Default thereunder that in any such case arises as a result of the performance or observance by the Borrower of any of its covenants, agreements and obligations under, or the consummation of any transaction (other than those expressly consented to pursuant to Section 2 hereof) contemplated by, any New Equity Document (including, without limitation, any such violation, Default or Event of Default that would arise under Section 8.6 of the Credit Agreement, as expressly amended hereby, as a result of the performance by the Borrower of any obligation of the Borrower under the New Equity Documents to pay cash dividends on, or redeem (other than pursuant to the Exchange Agreement), any shares of stock issued, sold and/or exchanged pursuant to the New Equity Documents), or (B) any rights and remedies arising in favor of the Agent or any Bank under the Credit Documents or otherwise as a result of the occurrence of any such violation, Default or Event of Default. (c) The Borrower acknowledges that the performance by the Borrower of its following obligations under the New Equity Documents will, unless consented to in writing by the requisite Banks after the Effective Date, result in a violation of, and constitute an Event of Default under, the Credit Agreement as amended hereby: (i) any obligation of the Borrower under the New Equity Documents to pay cash dividends (in whole or in part) on, or purchase, redeem or otherwise acquire (in whole or in part) for cash or stock, any shares of convertible preferred stock issued from time to time pursuant to the New Equity Documents, and (ii) any obligation of the Borrower under the New Equity Documents to pay to any Purchaser or any of their respective Affiliates any management or 8 similar fee at any time that a Default or an Event of Default has occurred and is continuing. Each of the Agent and the Borrower confirms to each other on the terms set forth in paragraph (b) above that it does not have any actual knowledge that any other term or provisions of the New Equity Documents conflicts (or that the performance thereof could conflict) with the terms and provisions of the Credit Agreement as amended hereby. (d) No amendment made to the Credit Agreement pursuant to this Amendment shall relieve the Borrower from complying with any other term or provision of the Credit Agreement as amended hereby. Section 6. 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 7. GOVERNING LAW. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK. 9 IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized officers to execute and deliver this Eighth Amendment to the Amended and Restated Credit Agreement as of the date first above written. THE GRAND UNION COMPANY By: /s/ Francis E. Nicastro -------------------------- Name: Francis E. 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/ Richard Levenson -------------------------- Name: Richard Levenson Title: VP BANK POLSKA KASA OPIEKI, SA Pekao S.A. Group By: /s/ William A. Shea -------------------------- Name: William A. Shea Title: Vice President Senior Lending Officer 10 COMPAGNIE FINANCI RE 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 DLJ CAPITAL FUNDING, INC. By: /s/ Stephen -------------------------- Name: Stephen Title: THE FIRST NATIONAL BANK OF BOSTON By: /s/ Timothy M. Barns -------------------------- Name: Timothy M. Barns Title: Division Executive FIRST UNION BANK OF NORTH CAROLINA By: /s/ Jeanette W. Bumgarner -------------------------- Name: Jeanette W. Bumgarner Title: Assistant Vice President FLEET CAPITAL CORPORATION By: /s/ Eric Rubin -------------------------- Name: Eric Rubin Title: Vice President 11 HELLER FINANCIAL, INC. By: /s/ Salvatore Salzalto -------------------------- Name: Salvatore Salzalto Title: AVP LEHMAN COMMERCIAL PAPER INC. By: /s/ Michele Swanson -------------------------- Name: Michele Swanson Title: Authorized Signatory ML CBO IV (CAYMAN) LTD, LLC By: Protective Asset Management, as Collateral Manager By: /s/ James Dondero -------------------------- Name: James Dondero Title: CPA, CFA President Protective Asset Management, L.L.C. SENIOR DEBT PORTFOLIO By: Boston Management and Research, as Investment Advisor By: /s/ Scott H. Page -------------------------- Name: Scott H. Page Title: Vice President TRANSAMERICA BUSINESS CREDIT CORPORATION By: /s/ Perry Vavoules -------------------------- Name: Perry Vavoules Title: Senior Vice President 12 The foregoing Eighth 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. SPECIALTY MERCHANDISING SERVICES, INC. By: /s/ Francis E. Nicastro --------------------------------- Name: Francis E. Nicastro Title: Vice President and Treasurer of each of the above listed entities 13 EX-10.28 8 EXHIBIT 10.28 Exhibit 10.28 SUPPLY AND OPERATING AGREEMENT BETWEEN THE GRAND UNION COMPANY AND C&S WHOLESALE GROCERS, INC. DATED AS OF JANUARY 21, 1996 TABLE OF CONTENTS Page ---- ARTICLE I. CERTAIN DEFINITIONS ......................................... 1 SECTION 1.1. Certain Defined Terms ....................................... 1 ARTICLE II. SCOPE AND TERM AGREEMENT, CHANGEOVER PROVISIONS, MERCHANDISE ..................................... 5 SECTION 2.1. Agreement ................................................... 5 SECTION 2.2. Term ........................................................ 5 SECTION 2.3. Changeover Provisions ....................................... 6 SECTION 2.4. Provisions Relating to Merchandise .......................... 6 ARTICLE III. PURCHASE, SALE AND DISTRIBUTION ............................. 8 SECTION 3.1. Agreement ................................................... 8 SECTION 3.2. Delivery .................................................... 8 SECTION 3.3. Price ....................................................... 9 SECTION 3.4. Other Pricing Provisions .................................... 9 SECTION 3.5. Payments .................................................... 10 SECTION 3.6. Service Level ............................................... 11 ARTICLE IV. OPERATION AND FEES .......................................... 12 SECTION 4.1. Operation of Facility ....................................... 12 SECTION 4.2. Non-Merchandise Inventory ................................... 12 SECTION 4.3. Use of Slots; Storage ....................................... 13 SECTION 4.4. Payment of Costs and Fees ................................... 13 SECTION 4.5. Determination of Operating Expense Amount and Other Costs ............................................. 13 SECTION 4.6. Cooperation ................................................. 14 SECTION 4.7. Maintenance of Fees ......................................... 14 * ARTICLE V. CERTAIN COVENANTS ........................................... 15 SECTION 5.1. Information ................................................. 15 * SECTION 5.3. Sublease; Assignment ........................................ 15 * SECTION 5.5. Compliance with Law ......................................... 16 SECTION 5.6. Insurance ................................................... 16 * SECTION 5.8. Affirmation and Acknowledgment .............................. 17 ARTICLE VI. MONTGOMERY INVENTORY ........................................ 17 SECTION 6.1. Initial Inventory ........................................... 17 SECTION 6.2. Inventory Administrative Charge ............................. 18 SECTION 6.3. Inventory Limits ............................................ 18 ARTICLE VII. ADDITIONAL BUSINESS ......................................... 19 SECTION 7.1. Additional Business ......................................... 19 ARTICLE VIII. TERMINATION ................................................. 20 SECTION 8.1. Termination by C&S .......................................... 20 *Material omitted and filed separately with the SEC pursuant to a request for Confidential Treatment. i SECTION 8.2. Termination by Grand ........................................ 21 SECTION 8.3. Termination of Sublease ..................................... 22 SECTION 8.4. Negotiations, Interim Period ................................ 22 SECTION 8.5. Waiver ...................................................... 23 ARTICLE IX. REPRESENTATIONS AND WARRANTIES .............................. 23 SECTION 9.1. Representations and Warranties of C&S ....................... 23 SECTION 9.2. Representation and Warranties of Grand Union ................ 24 ARTICLE X. GENERAL PROVISIONS .......................................... 24 SECTION 10.1. Entire Agreement ............................................ 24 SECTION 10.2. Expenses .................................................... 24 SECTION 10.3. Amendments .................................................. 25 SECTION 10.4. Notices ..................................................... 25 SECTION 10.5. Binding Effect; Assignment .................................. 25 SECTION 10.6. Counterparts ................................................ 26 SECTION 10.7. Confidentiality ............................................. 26 SECTION 10.8. Relationship of Parties ..................................... 27 SECTION 10.9. No Third-Party Beneficiaries ................................ 27 SECTION 10.l0.Severability ................................................ 27 SECTION 10.11.Headings .................................................... 28 SECTION 10.12.Governing Law ............................................... 28 SECTION 10.13.Arbitration ................................................. 28 Exhibit A - Montgomery Lease Agreement dated September 29, 1989 Exhibit B - Existing Grand Union Stores Exhibit C - Merchandise * Exhibit E - Forms of Notices Exhibit F - Form of Landlord Consent * Exhibit H - Montgomery Facility Slots Exhibit I - Montgomery Facility Storage * Exhibit K - Terms of Sublease * *Material omitted and filed separately with the SEC pursuant to a request for Confidential Treatment. ii SUPPLY AND OPERATING AGREEMENT, dated as of January 21, 1996 (this "Agreement"), between THE GRAND UNION COMPANY, a Delaware corporation ("Grand Union"), and C&S WHOLESALE GROCERS, INC., a Vermont corporation ("C&S"). W I T N E S S E T H: WHEREAS, Grand Union operates supermarkets and food stores in the States of New York, Vermont, New Jersey, Connecticut, Pennsylvania and New Hampshire; and WHEREAS, certain of such stores are presently supplied through a facility leased by Grand Union in Montgomery, New York, pursuant to that certain lease agreement attached hereto as Exhibit A (the "Montgomery Facility"); and WHEREAS, C&S is a wholesale supplier of food products and other merchandise sold in supermarkets and food stores; and WHEREAS, Grand Union intends to retain possession of the Montgomery Facility (except as otherwise provided herein), and Grand Union and C&S desire to enter into an agreement relating to Merchandise to be provided to Grand Union through the Montgomery Facility; NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements hereinafter set forth, Grand Union and C&S hereby agree as follows: ARTICLE I. CERTAIN DEFINITIONS SECTION 1.1. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings: "Agreement" has the meaning specified in the preamble to this Agreement. "Assignment" has the meaning specified in Section 5.3. * "Bank Agreement" shall mean the Amended and Restated Credit Agreement dated as of June 15, 1995 among Grand Union, Bankers Trust Company, as agent, and the lending institutions *Material omitted and filed separately with the SEC pursuant to a request for Confidential Treatment. party thereto, as amended from time to time, and any other revolving credit agreement that provides for the refinancing or replacement of the revolving credit obligations of Grand Union under such Credit Agreement. "Base Costs" has the meaning specified in section 8.2. * "Business Day" means a day on which banks in New York, New York and Boston, Massachusetts are open for business. "Changeover Date" means the date specified in the Changeover Election Notice as the date on which the C&S Purchase Period shall commence. "Changeover Election Notice" has the meaning specified in Section 2.3 "Contract Year" means any consecutive twelve-month period during the Term commencing on January 21 and ending the following January 20, the first such Contract Year to commence January 21, 1996. "C&S Purchase Period" means the period commencing on the Changeover Date and ending on the date on which this Agreement expires or otherwise terminates. "C&S Supply Agreements" means the two Supply and Distribution Agreements between C&S and Grand Union dated as of June 15, 1995 and January 2, 1996, as amended from time to time. "Employee Costs" means payroll, fringe benefits and other amounts payable to employees of Grand Union, pursuant to the Labor Service Agreement or otherwise, for their services in connection with the operation of the Montgomery Facility. "Event of Force Majeure" means, with respect to any Person, any event, circumstance or condition described in any of clauses (a) through (e) below that is beyond the control of such Person, and is not the result of negligence or failure of such Person to act with due care, and that prevents such Person from performing, in whole or in part, its obligations under this Agreement. The following occurrences shall be deemed to be Events of Force Majeure: (a) Acts of God, fire, explosion, accident, flood, storm or other natural phenomenon; (b) war (whether declared or undeclared); (c) national defense requirements; (d) compliance with any law, rule, regulation or governmental order that (x) becomes effective after the date hereof and (y) is binding on such Person, and compliance therewith by such Person is not voluntary or optional; and (e) producers or manufacturers establish industry-wide allocations or restrictions on quantities of products available to such Person. *Material omitted and filed separately with the SEC pursuant to a request for Confidential Treatment. 2 "Event of Insolvency" means that, with respect to any Person, such Person shall admit in writing its inability to pay its debts generally or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against such Person seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 60 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur, or such Person shall take any corporate action to authorize any of the actions set forth above in this definition. * "Grand Union Merchandise" means Merchandise owned by Grand Union and held at the Montgomery Facility as of the commencement date of this Agreement. "Grand Union Purchase Period" means the period commencing on the first day of the Term and ending on the day prior to the Changeover Date. "Grand Union Stores" shall mean (i) all existing Grand Union stores currently supplied by the Montgomery Facility as itemized on Exhibit B and (ii) all new Grand Union stores hereafter acquired. "Indenture" means the Indenture dated as of June 15, 1995 between Grand Union and IBJ Schroder Bank & Trust Company, as Trustee, as amended from time to time, and any indenture or other agreement that provides for the refinancing or replacement of the Notes issued by Grand Union under such Indenture. "Labor Service Agreement" means the agreement referred to in Section 5.4. "Lease" has the meaning specified in Section 5.3(a). "Liquidity Amount" means at any time of determination hereunder, the amount then available for borrowing by Grand Union under the Bank Agreement. *Material omitted and filed separately with the SEC pursuant to a request for Confidential Treatment. 3 "Merchandise" means products in the following categories currently carried by Grand Union at the Montgomery Facility and which are to be sold by Grand Union through Grand Union Stores: health, beauty care and cosmetics products and general merchandise supplied through the Montgomery Facility. The Merchandise is more particularly described in Exhibit C hereto. "Montgomery Facility" has the meaning specified in the second recital to this Agreement. "Non-Merchandise Inventory" has the meaning specified in Section 4.2. "Operating Expense Amount" has the meaning provided in Section 4.5(a). "Operating Expenses" means the * "Order and Polling Schedules" means the order and polling schedules as mutually agreed to by C&S and Grand Union from time to time. "Other Costs" means costs incurred by C&S in connection with the Montgomery Facility of the kinds specified in Part II of Exhibit D hereto. "Person" means any individual, partnership, firm, corporation, association, trust, unincorporated organization or other entity or any government or governmental authority or agency. "Service Level" means at any time during the C&S Purchase Period a percentage reflecting the ratio of (i) the number of cases of Merchandise actually delivered or available for pick-up within the delivery windows as provided in the applicable delivery schedules and in accordance with the requirements of Section 3.2 hereof to (ii) the total number of cases of such Merchandise ordered by Grand Union for delivery or pick-up, as the case may be, during the same period, less unauthorized Merchandise and manufacturers' out-of-stock Merchandise, and as otherwise determined in accordance with the provisions of Section 3.6. "Service Level Breach" has the meaning specified in Section 3.6. "Sublease" has the meaning specified in section 5.3. "Sublease Effective Date" has the meaning specified in Section 5.3. *Material omitted and filed separately with the SEC pursuant to a request for Confidential Treatment. 4 "Term" has the meaning specified in Section 2.2. "Termination Fee" has the meaning specified in section 8.2. "Weekly Fee" has the meaning specified in section 4.4. ARTICLE II. SCOPE AND TERM OF AGREEMENT; CHANGEOVER PROVISIONS; MERCHANDISE SECTION 2.1. Agreement. Grand Union hereby agrees to purchase from C&S, subsequent to the shipment of the Grand Union Merchandise to Grand Union Stores, substantially all of Grand Union's requirements for Merchandise, and C&S hereby agrees to supply to Grand Union all merchandise ordered by Grand Union hereunder, upon the terms and subject to the conditions herein set forth. (a) Grand Union Purchase Period. C&S authorizes Grand Union, during the Grand Union Purchase Period, to act as agent of C&S for the procurement of Merchandise. Grand Union shall negotiate, procure, process, purchase and pay for such Merchandise, which shall be delivered to the Montgomery Facility. C&S shall reimburse Grand Union for such purchases based on the provisions of section 3.5. At all times during the Grand Union Purchase Period, Grand Union shall purchase Merchandise only in such amounts and on such terms as may be permitted under Article VI of this Agreement. Grand Union shall not hold itself out as an agent for C&S except for the limited purpose set forth in this Section 2.1(a). (b) Direct-to-Store Purchases. Subject to the provisions of the first paragraph of this Section 2.1, Grand Union shall have the right to supply Merchandise to Grand Union Stores on a "direct-to-store" basis, rather than through purchases from the Montgomery Facility as provided herein. Subject to such provisions, Grand Union may supply Merchandise on a direct-to-store basis at any time and from time to time and notwithstanding that Merchandise of any particular kind had previously been, or may thereafter be, supplied through purchase from the Montgomery Facility. Merchandise supplied on a direct-to-store basis may be delivered for cross-docking at the Montgomery Facility. SECTION 2.2. Term. (a) Implementation will begin on January 21, 1996, and the term of this Agreement (the "Term") will begin on January 21, 1996 and end on *; provided, however, that if the Term has not been extended by written agreement *Material omitted and filed separately with the SEC pursuant to a request for Confidential Treatment. 5 entered into prior to * the Term shall be extended, without any action of the parties hereto, for an additional year, to expire *. Notwithstanding the foregoing provisions, if the date on which Grand Union commences purchasing substantially all of its requirements of Merchandise from C&S occurs after January 21, 1996, the Term will commence on the first Sunday after such date. (b) C&S has the right, which may be exercised by giving notice to Grand Union at any time prior to * to extend the Term for two additional Contract Years and a portion of a third additional Contract Year so that the Term is extended to *. Grand Union shall also have the right, which may be exercised by giving notice to C&S at any time prior to * to extend the Term for two additional Contract Years and a portion of a third additional Contract Year so that the Term is extended to *. All fees set forth in this Agreement shall remain unchanged during such extension, except as otherwise expressly provided herein. SECTION 2.3. Changeover Provisions. During the Grand Union Purchase Period, Grand Union will purchase Merchandise directly from vendors as provided in Section 2.1(a), and certain provisions of this Agreement, as specified herein, are applicable only during the Grand Union Purchase Period. C&S shall have the right, by written notice given to Grand Union at any time, to elect that C&S shall purchase Merchandise hereunder directly from vendors. Such notice shall state that C&S elects to have the C&S Purchase Period commence, stating the commencement date of such Period, which shall be not earlier than 90 days after the date of such notice. Certain provisions of this Agreement, as specified herein, shall be applicable only during the C&S Purchase Period. All provisions of this Agreement that do not by their terms apply only to the Grand Union Purchase Period or the C&S Purchase Period shall apply to both such Periods. SECTION 2.4. Provisions Relating to Merchandise. (a) At all times during the Term, Grand Union agrees to take all reasonable measures to assure that the Merchandise (other than Grand Union Merchandise) is deemed for all purposes to be the property of C&S. Such measures shall include, but not be limited to, segregating such Merchandise from Non-Merchandise Inventory and other property of Grand Union; posting signs identifying such Merchandise as property of C&S; and correctly identifying the ownership of such Merchandise in all relevant communications with third parties, including any collateral certificates furnished by Grand Union to its lenders. If so requested by C&S, Grand Union agrees to execute and deliver appropriate UCC-1 financing statements or other documentation for filing in public records. (b) Promptly upon commencement of the Term, Grand Union shall give written notice (the forms of which are appended *Material omitted and filed separately with the SEC pursuant to a request for Confidential Treatment. 6 to this Agreement as Exhibit E) (i) to all vendors of Merchandise, that Grand Union is making purchases of Merchandise in its capacity as agent for C&S and (ii) to its bank agent and the landlord under the Lease, that Merchandise (other than Grand Union Merchandise) in the Montgomery Facility is the property of C&S. Upon commencement of the C&S Purchase Period, Grand Union shall give notice to such vendors that Grand Union's authority to act as C&S' agent has terminated. Grand Union shall deliver copies of each such notice to C&S. (c) Within 30 days following commencement of the Term, Grand Union shall obtain from each holder of a security interest in inventory at the Montgomery Facility that filed a UCC-1 financing statement with respect to such inventory UCC-3s suitable for filing in all locations where such holders have filed UCC-1 financing statements, acknowledging C&S' rights with respect to Merchandise, such UCC-3s to be in form and substance reasonably satisfactory to C&S. Further, within 60 days following commencement of the Term, Grand Union shall furnish C&S with a search report from a recognized search firm identifying all holders of security interests in inventory at the Montgomery Facility with filed UCC-1 financing statements with respect to such inventory. Such search report shall be conducted for filings during the period from October 15, 1995 through the date of the search. Grand Union shall, within 30 days after delivery of such search report to C&S, deliver appropriate UCC-3s suitable for filing in all locations where such holders have filed UCC-1 financing statements if UCC-3s were not previously delivered with respect to such holders pursuant to this subsection (c). (d) On Friday of each week during the Grand Union Purchase Period, Grand Union agrees to furnish to C&S a certificate, signed by its Chief Financial Officer (or his designee), certifying the quantity of Merchandise in the Montgomery Facility (by shopkeeping unit) and that payments to vendors are being made in accordance with normal terms. (e) To provide C&S collateral security for Grand Union's obligation to act as C&S' agent to pay for Merchandise, as well as to provide collateral security for the payment and performance of all other obligations owing from Grand Union to C&S under this Agreement and the C&S Supply Agreements, Grand Union agrees to provide a stand-by, irrevocable letter of credit in favor of C&S in the amount of $2,625,000. Such letter of credit shall be issued by a bank reasonably satisfactory to C&S and shall be delivered to C&S no later than February 15, 1996. The letter of credit shall provide that it may be drawn upon (i) the occurrence of any event permitting C&S to terminate this Agreement or either of the C&S Supply Agreements; or (ii) failure by Grand Union to provide C&S a replacement letter of credit not less than thirty days prior to the expiration date of the existing letter of credit. Grand Union shall have the right to require that C&S release and return to Grand Union any such letter of credit and any proceeds of any drawing on such letter 7 of credit obtained pursuant to clause (ii) if, as of any date within 30 days after any interest payment date under the Indenture on which Grand Union shall have paid the full amount of the interest then due on the Notes outstanding under the Indenture, the Liquidity Amount is at least $40 million and Grand Union shall have delivered to C&S a certificate of the Chief Financial Officer (or his designee) of Grand Union setting forth such Liquidity Amount and the calculation thereof. Thereafter, the Chief Financial Officer of Grand Union (or his designee) shall provide quarterly certificates setting forth the Liquidity Amount and the calculation thereof. If at any time following the release and return of any such letter of credit the Liquidity Amount falls below $40 million, Grand Union shall deliver to C&S another letter of credit on the same terms and conditions set forth above. ARTICLE III. PURCHASE, SALE AND DISTRIBUTION SECTION 3.1. Agreement. During the C&S Purchase Period, C&S shall negotiate, procure, process, purchase and pay for Merchandise from vendors thereof, and shall maintain stock and inventory thereof at the Montgomery Facility, at such times and in such amounts as shall be necessary to provide Merchandise to Grand Union pursuant to section 2.1. SECTION 3.2. Delivery. (a) All Merchandise and Non-Merchandise Inventory ordered hereunder for Grand Union Stores whose grocery and perishable inventory requirements are serviced by C&S pursuant to the C&S Supply Agreements shall be delivered by C&S F.O.B. destination to the C&S distribution center applicable to each such Grand Union Store where such Merchandise shall be "cross-docked" in accordance with the C&S Supply Agreements (or any future agreements) and delivered to such Grand Union Stores in accordance with the C&S Supply Agreements (or future agreements). Title to, and risk of loss with respect to, such Merchandise shall remain with C&S until delivery to the respective Grand Union Store. (b) All Merchandise and Non-Merchandise Inventory ordered hereunder for Grand Union Stores that are not serviced by C&S pursuant to the C&S Supply Agreements shall be picked up at the Montgomery Facility by Grand Union in accordance with schedules to be agreed to by the parties from time to time. Title to, and risk of loss with respect to, such Merchandise shall pass to Grand Union upon pick-up from the Montgomery Facility. 8 SECTION 3.3. Price. (a) Grand Union Purchase Period. During the Grand Union Purchase Period, C&S will sell Merchandise to Grand Union based on * (b) C&S Purchase Period. During the C&S Purchase Period, C&S will sell Merchandise to Grand Union at * SECTION 3.4. Other Pricing Provisions. In addition to the provisions of Section 3.3(b), the following provisions shall be applicable to the purchase and supply by C&S of Merchandise hereunder during the C&S Purchase Period: * *Material omitted and filed separately with the SEC pursuant to a request for Confidential Treatment. 9 (d) C&S will carry Grand Union's full assortment of private label Merchandise and will treat private label Merchandise as it does any other product. (e) Grand Union will be responsible for providing C&S with ad quantity requirements. * SECTION 3.5. Payments. (a) During the Grand Union Purchase Period, C&S will pay Grand Union * the purchase price of the Merchandise purchased by Grand Union as C&S' agent * (b) During the Grand Union Purchase Period, Grand Union will pay C&S * the Merchandise shipped to Grand Union Stores during the preceding week. * (c) During the C&S Purchase Period, Grand Union will pay C&S * Merchandise shipped to Grand Union Stores, based on * *Material omitted and filed separately with the SEC pursuant to a request for Confidential Treatment. 10 (d) Grand Union will pay C&S * for fees and charges, other than Merchandise payments, under this Agreement. (e) Grand Union will provide to C&S * C&S will pay Grand Union by wire transfer * (f) In the event Grand Union or C&S fails to make any payment as provided in this Section 3.5, C&S or Grand Union will immediately provide written notice to the counterparty that payment has not been received and the counterparty will have *. If the payment is not received within * C&S shall have the right *. If payment is not received within * from receipt by Grand Union or C&S of such notice, C&S or Grand Union shall have the right to terminate this Agreement as provided in Section 8.1 or 8.2. Notwithstanding the foregoing, each party agrees to notify the other promptly if it believes there is an error. The parties agree to use their best efforts to resolve any disputes * of such notice. If any such dispute is not resolved *, the parties will submit the dispute to binding arbitration as provided in Section 10.13. For purposes of this Section 3.5, time is of the essence, subject to the express provisions hereof. (g) The parties agree to establish jointly an overage/shortage policy, attached hereto as Exhibit G (the "Credit Policy"), which will provide for a shortage adjustment factor on all shipments based on actual audits performed by C&S personnel and witnessed by Grand Union representatives. The Credit Policy will also provide for store delivery documentation and remedy procedures in the event of a "missing pallet." SECTION 3.6. Service Level. C&S agrees that, during the C&S Purchase Period, the Service Level for all Merchandise ordered by Grand Union hereunder will be maintained at a minimum *. C&S will provide Grand Union, during such Period, a weekly Service Level Reconciliation Report showing, with respect to each invoice, the number of cases ordered, the number of cases shipped or available for pick-up, as the case may be, the number of cases that are out of stock (including "warehouse scratches") and the number of cases that are unauthorized. Service Level percentages will not be adversely affected by any error by Grand Union in booking advertising and feature items, including sales levels of feature items in excess of projections made by Grand Union. If the Service Level for any week falls below the level *Material omitted and filed separately with the SEC pursuant to a request for Confidential Treatment. 11 required by the first sentence of this Section 3.6 (a "Service Level Breach"), Grand Union shall give notice to C&S and C&S shall use its best efforts to immediately restore the required Service Level. If, during * following the occurrence of a Service Level Breach the required Service Level is achieved, then the Service Level Breach shall be cured. Failure to achieve the required Service Level during * shall constitute a breach of this Agreement by C&S, * Notwithstanding the foregoing provisions, C&S will not be in breach of this Section 3.6 if its failure to maintain the Service Level as provided herein is a result of a material default by Grand Union under this Agreement, picketing or other labor disputes at Grand Union Stores or an Event of Force Majeure. ARTICLE IV. OPERATION AND FEES SECTION 4.1. Operation of Facility. (a) Prior to the Sublease Effective Date, Grand Union shall operate and manage the Montgomery Facility in accordance with normal operating procedures and subject to the provisions of this Agreement. From and after the Sublease Effective Date, C&S shall operate and manage the Montgomery Facility in accordance with normal operating procedures and subject to the provisions of the Sublease, the Assignment, if entered into, and this Agreement, provided that Grand Union shall provide employees for such operation in accordance with the Labor Service Agreement. The provisions of Section 3.2 hereof with respect to title to, and risk of loss with respect to, Merchandise will be applicable both before and after the Sublease Effective Date. SECTION 4.2. Non-Merchandise Inventory. The parties acknowledge that Grand Union currently utilizes, and will continue to utilize, the Montgomery Facility for cigarettes and certain grocery and other products that do not constitute Merchandise and that C&S will have no rights hereunder in respect of such inventory ("Non-Merchandise Inventory"). The parties agree to cooperate in establishing procedures for segregation, handling and recordkeeping, and for other administrative matters, relating to Non-Merchandise Inventory. Physical inventories with respect to Non-Merchandise Inventory and with respect to inventory acquired by or through C&S hereunder will be taken on the same date as agreed to by the parties. Costs solely and exclusively relating to Non-Merchandise Inventory shall be allocated solely and exclusively to Grand Union, and C&S shall bear none of such costs. Costs that relate to both Non-Merchandise Inventory and Merchandise inventory * *Material omitted and filed separately with the SEC pursuant to a request for Confidential Treatment. 12 * C&S agrees that, if the Sublease or the Assignment is entered into, C&S will enter into or will provide such agreements as shall be necessary so that Grand Union may continue to utilize the Montgomery Facility for Non-Merchandise Inventory as referred to above. SECTION 4.3. Use of Slots; Storage. (a) Grand Union and C&S acknowledge that Exhibit H hereto reflects the current numbers of in-use and open slots in the "quick-pick" portion of the Montgomery Facility. Grand Union and C&S further acknowledge that Grand Union will have the right, in its sole discretion, to add selected single items to the products for which such slots are used, but that Grand Union will use reasonable efforts, consistent with business requirements, to maintain slot counts generally at current levels in order to accommodate C&S' needs as contemplated by Section 7.1. (b) Grand Union and C&S will segregate the storage section of the Montgomery Facility based on the diagram set forth as Exhibit I hereto. SECTION 4.4. Payment of Costs and Fees. (a) Prior to the Sublease Effective Date, Grand Union shall pay (i) to the Persons entitled thereto, * (ii) to C&S for its provision of Merchandise hereunder, * the amount determined pursuant to Section 4.5(b) hereof. (b) Prior to the Sublease Effective Date, C&S shall pay to Grand Union, * (c) From and after the Sublease Effective Date: (i) C&S shall pay, to the Persons entitled thereto (or to Grand Union, for the purpose of making such payments),*; and (ii) Grand Union shall pay to C&S * SECTION 4.5. * (a) * shall consist of the amount determined in accordance with the following provisions of this Section, as adjusted on an annual basis to reflect * *Material omitted and filed separately with the SEC pursuant to a request for Confidential Treatment. 13 * (c) Notwithstanding the foregoing provisions, determinations with respect to * (d) Notwithstanding any other provision of this Agreement to the contrary, *. SECTION 4.6. Cooperation. The parties agree to cooperate and negotiate in good faith in the determination of the amounts and adjustments provided for in Sections 4.4 and 4.5. SECTION 4.7. Maintenance of Fees. * *Material omitted and filed separately with the SEC pursuant to a request for Confidential Treatment. 14 ARTICLE V. CERTAIN COVENANTS SECTION 5.1. Information. During the C&S Purchase Period, C&S agrees to provide Grand Union, in addition to the pricing reports provided for in Section 3.3, with such information as Grand Union may reasonably request from time to time in order to monitor compliance by C&S with the provisions of, and to carry out the transactions contemplated by, this Agreement. C&S further agrees that Grand Union will be allowed to conduct, * Grand Union agrees to provide C&S with such information and with such access to the Montgomery Facility as C&S may reasonably request in order to monitor compliance by Grand Union with the provisions of, and to carry out the transactions contemplated by, this Agreement. SECTION 5.2. Reclamation. * SECTION 5.3. Sublease; Assignment. (a) C&S shall have the right to request that Grand Union enter into a sublease of the Montgomery Facility (the "Sublease") upon the terms set forth in Exhibit K. Grand Union will agree to indemnify C&S against any environmental liabilities with respect to the leased premises arising out of a release of hazardous substances occurring prior to the effective date of the Sublease. The Sublease shall take effect no later than 90 days following the date of C&S' request that the parties enter into a Sublease. Grand Union represents and warrants to C&S that a true and correct copy of the Lease for the Montgomery Facility (the "Lease"), as in effect on the date of this Agreement, is appended to this Agreement as Exhibit A. During the Term, Grand Union agrees to comply with the terms of the Lease (except for any non-compliance that would not materially affect C&S' rights or obligations hereunder) and agrees not to amend, modify or extend that Lease without the prior written consent of C&S, which consent shall not be unreasonably withheld, delayed or conditioned. (b) C&S shall have the right to request that Grand Union's rights, interests and obligations under the Lease (including for this purpose the Sublease) be assigned to C&S, effective as of a date not earlier than the fourth anniversary of *Material omitted and filed separately with the SEC pursuant to a request for Confidential Treatment. 15 the date of this Agreement. C&S shall give Grand Union notice of such request not later than 90 days prior to the date on which such assignment (the "Assignment") is to be effective as aforesaid, specifying such date, provided that no such notice shall be given, and no assignment shall be effective, unless the Sublease is in effect at each such time. Grand Union and C&S agree to negotiate in good faith with respect to the terms of the Assignment, taking into consideration the purposes of this Agreement and the terms of the Sublease. (c) Within 45 days following the commencement of the Term, Grand Union shall obtain (i) from the landlord under the Lease a Consent and Waiver in substantially the form appended to this Agreement as Exhibit F and (ii) all lender approvals to the Sublease and the Assignment. The Sublease and the Assignment shall by their terms be subject to the provisions of this Agreement. (d) C&S agrees that, if the Assignment becomes effective, C&S will not (i) further assign its rights or interests in and to the Assignment or the Lease, (ii) cease operations at or otherwise close the Montgomery Facility or (iii) enter into any agreement providing for any action referred to in clauses (i) or (ii), unless it shall have offered Grand Union the right to re-acquire the Lease upon the terms upon which the Assignment was made. SECTION 5.4. * SECTION 5.5. Compliance with Law. Each of Grand Union and C&S covenants and agrees that in performing its obligations hereunder, it will comply with all applicable laws, rules, regulations and orders and will have and maintain all permits, licenses and authorizations necessary for the conduct of its business and the performance of its obligations hereunder. SECTION 5.6. Insurance. C&S agrees that all material properties and risks of C&S shall at all times be covered by valid and currently effective insurance policies or binders of insurance or programs of self-insurance in such types and amounts as are consistent with customary practices and standards of companies engaged in businesses and operations similar to those of C&S. Grand Union agrees that all material properties and risks of Grand Union shall at all times be covered by valid and currently effective insurance policies or binders of insurance or programs of self-insurance in such types and amounts as are consistent with customary practices and standards of companies engaged in businesses and operations similar to those of Grand Union. *Material omitted and filed separately with the SEC pursuant to a request for Confidential Treatment. 16 SECTION 5.7. * SECTION 5.8. Affirmation and Acknowledgment. Grand Union affirms and acknowledges that (i) upon an Event of Insolvency with respect to Grand Union or a failure by Grand Union to make any payment when due pursuant to Section 3.5 of this Agreement, C&S may fully enforce against Grand Union any and all rights that C&S may possess pursuant to Section 2-702 of the Uniform Commercial Code as enacted in the State of New York ("Section 2-702"), including without limitation, the right to reclaim goods delivered to Grand Union upon the terms and conditions set forth in Section 2-702, and (ii) upon a failure of Grand Union to make any payment when due under this Agreement or either of the C&S Supply Agreements (a "Grand Union Payment Obligation"), including without limitation, those payment obligations arising under each of Sections 3.05, 4.01, 4.05 and 7.04 of either of the C&S Supply Agreements, C&S may, and is hereby authorized by Grand Union, at any time and from time to time, to the fullest extent permitted by applicable law, without advance notice to Grand Union (any such notice being expressly waived by Grand Union), to set off and apply any and all amounts owed by C&S to Grand Union under this Agreement, including without limitation against any or all of the Grand Union Payment Obligations that have not been paid when due and remain unpaid, irrespective of whether or not C&S has exercised any other rights that it has or may have with respect to such Grand Union Payment Obligations. Grand Union shall execute and deliver to C&S, from time to time during the term of this Agreement, such documents as C&S may reasonably request to create, maintain, acknowledge or confirm the rights of C&S affirmed and acknowledged by Grand Union pursuant to this Section 5.8. ARTICLE VI. MONTGOMERY INVENTORY SECTION 6.1. Initial Inventory. Grand Union Merchandise will be shipped to Grand Union Stores *. In the event that any portion of such Merchandise is identified as being unsalable *. The parties agree that for purposes of payment and *Material omitted and filed separately with the SEC pursuant to a request for Confidential Treatment. 17 purchase terms under this Agreement, shipments of Merchandise to Grand Union Stores from the date of commencement of this Agreement * SECTION 6.2. Inventory Administrative Charge. Grand Union agrees to minimize excess inventory under this Agreement at all times. Grand Union will pay an annual inventory administrative charge at a rate per annum equal to * In determining charges under this Section 6.2, appropriate allocations will be made to reflect proportionate inventory drawn in the event that C&S is serving other Persons at the Montgomery Facility pursuant to Section 7.1 hereof. SECTION 6.3. Inventory Limits. During the Grand Union Purchase Period, C&S shall not be required to reimburse Grand Union, pursuant to Section 2.1(a), for purchases of inventory by Grand Union to the extent the respective week's C&S inventory balance exceeds *. During the C&S Purchase Period, the inventory purchased and kept for Grand Union will not exceed *. For purposes of this Section 6.3, inventory shall be measured as of *. Prior to commencement of the Term, Grand Union and C&S shall analyze the categories of inventory at the Montgomery Facility and measure each of the following categories: (i) "turn" inventory, (ii) "all other" inventory, *. Based upon this analysis, Grand Union and C&S shall establish the amount of inventory in each category required by Grand Union for its everyday business needs and its seasonal business needs. The parties will measure "all other" inventory on a weekly basis, and * The following example illustrates this analysis: * *Material omitted and filed separately with the SEC pursuant to a request for Confidential Treatment. 18 * Grand Union will communicate to C&S its requirements and needs in these areas on a basis consistent with the practices established in the C&S Supply Agreement dated June 15, 1995. Grand Union has advised C&S that as of December 1995, "turn" inventory amounts to * and "all other" inventory amounts to *. Within 90 days of commencement of the Term, the parties shall recalculate the levels of "turn" inventory and "all other" inventory and adjust such inventory levels accordingly. The inventory levels are based upon annual estimated inventory purchases by Grand Union of *. If the annual level of inventory purchases by Grand Union changes during the Term of the Agreement, the inventory levels provided for in Section 6.3 shall change by mutual agreement of the parties. C&S agrees that, upon delivery of the Merchandise, it will *. Notwithstanding the foregoing, the provisions of this Section 6.3 shall be reevaluated and adjusted as appropriate and on a periodic basis to take into account other business serviced by C&S pursuant to Section 7.1. ARTICLE VII. ADDITIONAL BUSINESS SECTION 7.1. Additional Business. (a) Grand Union agrees that, if the Changeover Date has occurred, C&S may utilize the Montgomery Facility to supply food products and other merchandise to supermarkets and food stores other than Grand Union. C&S agrees that any such increase in the utilization of the Montgomery Facility shall not interfere *Material omitted and filed separately with the SEC pursuant to a request for Confidential Treatment. 19 in any significant respect with C&S' obligations to Grand Union under this Agreement. In the event of any conflict (as to, for example, scheduling or allocation of employees) between the requirements of Grand Union under this Agreement and the requirements of or relating to other business serviced by C&S pursuant to this Section 7.1, the * (b) Physical inventories shall be taken *. The costs of such physical inventories shall be allocated to Grand Union and C&S based upon the respective amounts of inventory held for Grand Union and for such other customers. (c) During the C&S Purchase Period, for purposes of Grand Union's annual store LIFO calculation, C&S will supply Grand Union * ARTICLE VIII. TERMINATION SECTION 8.1. Termination by C&S. C&S may terminate this Agreement (i) in the event of a default by Grand Union under Section 3.5 which remains uncured * receipt by Grand Union of written notice thereof from C&S (subject, however, to the provisions of such Section for arbitration), (ii) in the event that Grand Union materially breaches its other obligations under this Agreement and such breach is curable and remains uncured after * receipt by Grand Union of written notice of such breach from C&S, (iii) upon the occurrence of an Event of Insolvency with respect to Grand Union (provided, however, that C&S shall not terminate this Agreement upon the occurrence of an Event of Insolvency in the event that Grand Union is otherwise in compliance with the terms of this Agreement and Grand Union provides adequate assurance of future performance under this Agreement) or (iv) upon termination of either of the C&S Supply Agreements pursuant to Section 7.01 thereof. Notwithstanding the foregoing, in the event that Grand Union defaults under Section 3.5 * C&S may, on the occurrence of * terminate this Agreement immediately upon notice to Grand Union. In the event of termination by C&S under this Section 8.1, Grand Union shall pay to C&S, as full and liquidated damages (including damages for lost profits), the applicable termination fee set forth in this Article VIII. *Material omitted and filed separately with the SEC pursuant to a request for Confidential Treatment. 20 SECTION 8.2. Termination by Grand Union. Grand Union may terminate this Agreement (i) in the event of a default by C&S under Section 3.5 which remains uncured for * of written notice thereof from Grand Union (subject to the provisions of such Section for arbitration), (ii) in the event that C&S materially breaches its other obligations under this Agreement and such breach is curable and remains uncured after * written notice of such breach from Grand Union, (iii) upon the occurrence of an Event of Insolvency with respect to C&S (provided, however that Grand Union shall not terminate this Agreement upon the occurrence of an Event of Insolvency in the event that C&S is otherwise in compliance with the terms of this Agreement and C&S provides adequate assurance of future performance under this Agreement) or (iv) upon the termination of either of the C&S Supply Agreements pursuant to Section 7.02 thereof. Notwithstanding the foregoing, in the event that C&S defaults under Section *, or if a Service Level Breach occurs under Section *, Grand Union may, on the occurrence of any subsequent default under Section 3.5 or any subsequent Service Level Breach, as the case may be, occurring in the same Contract Year, terminate this Agreement immediately upon notice to C&S. Grand Union may also terminate this Agreement *. In the event that Grand Union exercises its rights to terminate *, Grand Union * shall pay to C&S the applicable Termination Fee as full and liquidated damages to C&S. Grand Union shall pay the Termination Fee and all amounts due and owing C&S resulting from the inventory repurchase upon the expiration of the *. As used herein, "Termination Fee" shall mean that amount equal to * The following example illustrates the calculation of the Termination Fee: * *Material omitted and filed separately with the SEC pursuant to a request for Confidential Treatment. 21 * The parties acknowledge that it would be difficult and costly to assess and establish C&S' losses arising out of termination of this Agreement on account of Grand Union's breach or Grand Union's early termination *. Nonetheless, the parties believe that the termination fee provisions set forth above are reasonable in light of the costs C&S will incur to perform its obligations under this Agreement and the damages C&S will suffer in the event of such termination (including but not limited to damages for lost profits, incidental damages and other consequential damages). Notwithstanding any of the foregoing provisions of this Article VIII or any other provision of this Agreement to the contrary, (i) no Termination Fee (or any damages) shall be payable by Grand Union as a result of or in connection with any termination of this Agreement (x) as a result of the failure of Grand Union to obtain any consent or other document provided for in Section 2.4(c) or 5.3(c) or the failure to obtain any such consent or document within the period required therefor or (y) pursuant to clause (iv) of Section 8.1 and (ii) no damages shall be payable by either party hereto on account of any breach of this Agreement (other than breach of a payment obligation) that results from an Event of Force Majeure. SECTION 8.3. Termination of Sublease. Upon any termination of this Agreement pursuant to Section 8.1 or 8.2, the Sublease, if any, shall automatically terminate at the same time. SECTION 8.4. Negotiations; Interim Period. (a) The parties shall meet at least * provided for in Section 8.1(ii) or Section 8.2(ii) hereof to attempt to cure any breach as provided in such Sections. (b) During the period following delivery of any notice of termination and prior to the termination of this Agreement, each party shall perform its obligations under this Agreement in substantially the same manner as they were performed prior to the date of delivery of such notice, with no disruption to Grand Union's supply of Merchandise; provided, however, that the parties shall negotiate in good faith to agree to a "winding-up" schedule for such period. *Material omitted and filed separately with the SEC pursuant to a request for Confidential Treatment. 22 SECTION 8.5. Waiver. Either party to this Agreement may (a) extend the time for the performance of any of the obligations or other acts of the other party or (b) waive compliance with any of the agreements or conditions of the other party contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party to be bound thereby. Any waiver of any term or condition shall not be construed as a waiver of any subsequent breach or a subsequent waiver of the same term or condition, or a waiver of any other term or condition of this Agreement. The failure of any party to assert any of its rights hereunder shall not constitute a waiver of any of such rights. ARTICLE IX. REPRESENTATIONS AND WARRANTIES SECTION 9.1. Representations and Warranties of C&S. C&S hereby represents and warrants to Grand Union as follows: (a) Corporate Organization and Authority. C&S (i) is a corporation duly organized, validly existing and in good standing under the laws of the State of Vermont and is authorized to transact business in the States of New Hampshire and New York; and (ii) has the corporate power and authority to own and operate its properties and to carry on its business as now conducted and as proposed to be conducted. (b) Authorization. C&S has the corporate power and authority to execute, deliver and perform its obligations under this Agreement and has taken all necessary corporate action to authorize its execution, delivery and performance of this Agreement. This Agreement has been duly executed and delivered on behalf of C&S and constitutes the legal, valid and binding obligation of C&S, enforceable in accordance with its terms. (c) No Consents; Conflicts. No consent, authorization by, approval of or other action by, and no notice to, or filing or registration with, any governmental authority, agency, regulatory body, lender, lessor, franchisee or other Person is required for the execution, delivery or performance of this Agreement by C&S, other than those that have been obtained and are in full force and effect. The execution, delivery and performance of this Agreement will not result in any violation or breach of any provision of the charter or by-laws of C&S, any judgment, decree or order to which C&S is a party or by which it is bound, any indenture, mortgage or other agreement or instrument to which C&S is a party or by which it is bound or any statute, rule or regulation applicable to C&S. 23 SECTION 9.2. Representation and Warranties of Grand Union. Grand Union hereby represents and warrants to C&S as follows: (a) Corporate Organization and Authority. Grand Union (i) is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and is authorized to transact business in the States of New Hampshire, Vermont and New York; and (ii) has the corporate power and authority to own and operate its properties and to carry on its business as now conducted and as proposed to be conducted. (b) Authorization. Grand Union has the corporate power and authority to execute, deliver and perform its obligations under this Agreement and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement. This Agreement has been duly executed and delivered on behalf of Grand Union and constitutes the legal, valid and binding obligation of Grand Union, enforceable in accordance with its terms. (a) No Consents; Conflicts. No consent, authorization by, approval of or other action by, and no notice to, or filing or registration with, any governmental authority, agency, regulatory body, lender, lessor, franchisee or other Person is required for the execution, delivery or performance of this Agreement by Grand Union, other than any consents (including consent of any lender) necessary in connection with the Sublease and the Assignment, which consents will be obtained in accordance with Sections 2.4(c) and 5.3(c). The execution, delivery and performance of this Agreement will not result in any violation or breach of any provision of the charter or by-laws of Grand Union, any judgment, decree or order to which Grand Union is a party or by which it is bound, any indenture, mortgage or other agreement or instrument to which Grand Union is a party or by which it is bound or any statute, rule or regulation applicable to Grand Union. ARTICLE X. GENERAL PROVISIONS SECTION 10.1. Entire Agreement. This Agreement, together with the documents referred to herein, constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral, between the parties hereto with respect to the subject matter hereof. SECTION 10.2. Expenses. Except as otherwise specified in this Agreement, all costs and expenses, including, without limitation, fees and disbursements of counsel, financial advisors 24 and accountants, incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by the party incurring the same. SECTION 10.3. Amendments. This Agreement may not be amended or modified except (i) by an instrument in writing signed by, or on behalf of, each of Grand Union and C&S, or (ii) by a waiver in accordance with Section 8.5. SECTION 10.4. Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by courier service, by telecopy (such telecopy transmission to be effective only if made by confirmed transmission to the telecopier number set forth below for such party) or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this section 10.4); (a) If to Grand Union: William A. Louttit Executive Vice President and Chief Operating Officer The Grand Union Company 20 Willowbrook Boulevard Wayne, New Jersey 07470-0966 Telephone: (201) 890-6000 Telecopier: (201) 890-6012 (b) If to C&S: Richard B. Cohen President and Chief Executive Officer C&S Wholesale Grocers, Inc. Old Ferry Road Brattleboro, Vermont 05301 Telephone: (802) 275-6700 Telecopier: (802) 257-6620 SECTION 10.5. Binding Effect; Assignment. (a) This Agreement shall be binding upon and inure to the benefit of Grand Union and C&S and their respective successors and assigns; provided that (i) C&S shall not have the right to assign or subcontract its rights or obligations hereunder or any interest herein (excluding the transportation of Merchandise) without the prior written consent of Grand Union, which consent shall not be unreasonably withheld, conditioned or delayed, and (ii) Grand Union may assign its rights and delegate its obligations hereunder only so long as (w) Grand Union is not in default under this Agreement, (x) Grand Union shall assign, and the assignee shall assume, all such rights and obligations, 25 (y) the assignment is to a Person or Persons who are acquiring all or substantially all of Grand Union's business or assets, and (z) Grand Union demonstrates, to the reasonable satisfaction of C&S, that such Person has the financial capability to perform the obligations of Grand Union hereunder. C&S agrees that it shall respond, in respect of clause (z) above, promptly, and in any event with 10 business days of receipt of notice from Grand Union of any such proposed assignment. Failure by C&S to respond to Grand Union within such 10 business day period shall be deemed to be a confirmation by C&S to Grand Union of its reasonable satisfaction with the financial capability of the proposed assignee. (b) The provisions of subsection (a) of this Section 10.5 shall not prohibit the assignment by Grand Union of its duties, obligations, rights and interests under this Agreement to the lenders (or an agent therefor) under the Bank Agreement as security for obligations of Grand Union thereunder or under agreements or instruments provided for therein, and C&S hereby consents to any such assignment; provided, however, that such C&S consent is expressly conditioned upon the assignee's assumption of all of Grand Union's duties and obligations under this Agreement. C&S agrees to execute and deliver such further consents or other instruments as Grand Union or any such lender may reasonably request to confirm or implement any such assignment, provided that (i) the rights and interests of C&S hereunder are not thereby affected in any material respect and (ii) such other consent or instrument expressly acknowledges the assignee's assumption of Grand Union's duties and obligations under this Agreement. SECTION 10.6. Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. SECTION 10.7. Confidentiality. Each of Grand Union and C&S agrees to and will cause its respective authorized agents, representatives, affiliates, employees, officers, directors, accountants, counsel and other designated representatives (collectively, "Representatives") to (i) treat and hold as confidential (and not disclose or provide access to any Person to) all records, books, contracts, instruments, computer data and other data and information (collectively, "Information") concerning the other in its possession or furnished by the other or the other's Representatives pursuant to this Agreement, (ii) in the event that either party or its Representatives become legally compelled to disclose any such Information, provide the other party with prompt written notice of such requirement so that such other party may seek a protective order or other remedy or waive compliance with this Section 10.7, and (iii) in the event that such protective order or other remedy is not obtained, or the other party waives 26 compliance with this Section 10.7, furnish only that portion of such Information which is legally required to be provided and exercise its best efforts to obtain assurances that confidential treatment will be accorded such Information; provided, however, that this sentence shall not apply to any Information that, at the time of disclosure, is available publicly and was not disclosed in breach of this Agreement by such party or its Representatives; and provided further, however, that C&S agrees that Grand Union is the owner of all Information relating to Grand Union's purchasing practices and that Grand Union may in its sole discretion sell such purchasing related information to third parties. The provisions of clauses (i) and (ii) above shall not preclude a party from disclosing Information to its Representatives or to its lenders or their Representatives (provided that each such Representative shall be advised of the confidential nature of such Information) or from disclosing Information to or filing Information within any governmental authority or agency with jurisdiction over such party. Each party agrees and acknowledges that remedies at law for any breach of its obligations under this Section 10.7 are inadequate and that in addition thereto the other party shall be entitled to seek equitable relief, including injunction and specific performance, in the event of any such breach, without the necessity of demonstrating the inadequacy of monetary damages. SECTION 10.8. Relationship of Parties. In all matters relating to this Agreement, both parties shall be acting solely as independent contractors and shall be solely responsible for the acts of their employees, officers, directors and agents. Employees, agents or contractors of one party shall not be considered employees, agents (except for the limited purpose specified in Section 2.1(a)) or contractors of the other party. SECTION 10.9. No Third-Party Beneficiaries. This Agreement shall be binding upon and inure solely to the benefit of the parties thereto and their permitted assigns, and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever. SECTION 10.10. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible. 27 SECTION 10.11. Headings. The descriptive headings contained in this Agreement are for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. SECTION 10.12. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to the principles of conflicts of laws thereof. SECTION 10.13. Arbitration. (a) Any matter required to be submitted to arbitration pursuant to Section 3.5 of this Agreement shall be subject to this Section 10.13. Any such matter shall be submitted to binding arbitration in Springfield, Massachusetts (or another location agreed to by the parties) in accordance with the rules and procedures of the American Arbitration Association (or another organization agreed to by the parties). The arbitration shall be conducted in accordance with (i) the terms of this Section 10.13; (ii) the commercial arbitration rules of the American Arbitration Association (or the corresponding rules of any such other organization); (iii) the Federal Arbitration Act (Title 9 of the United States Code); and (iv) to the extent the foregoing are inapplicable, unenforceable or invalid, the laws of the State of New York. Judgment upon any award rendered hereunder may be entered in any court having jurisdiction. (b) A single arbitrator shall be selected by mutual agreement of the parties, or, if the parties fail to reach such agreement within ten days after either party has requested arbitration hereunder in writing, by, or in a manner provided by the American Arbitration Association (or such other organization referred to above). (c) The arbitrator is empowered to resolve the mater in dispute by summary ruling substantially similar to a summary judgment and motion to dismiss. The arbitrator shall resolve all disputes in accordance with applicable substantive law. The determination of the arbitrator shall be binding on all parties and shall not be subject to further review or appeal except as allowed by applicable law. The costs and expenses of the arbitrator shall be apportioned between the parties hereto as determined by the arbitrator in such manner as the arbitrator deems reasonable. (d) The arbitrator and the parties shall take all actions necessary to the end that the arbitration proceeding shall be conducted as promptly as practicable. (e) The provisions of this Section 10.13 shall not preclude a party from exercising any right or remedy with respect to any matter that is not expressly required to be submitted to arbitration pursuant to Section 3.5 of this Agreement. 28 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date first written above. THE GRAND UNION COMPANY By: /s/ William A. Louttit --------------------------------- Name: William A. Louttit Title: Executive Vice President Chief Operating Officer C&S WHOLESALE GROCERS, INC. By: /s/ William C. Hamlin --------------------------------- Name: William C. Hamlin Title: Senior Vice President 29 EXHIBITS Exhibit A - Montgomery Lease Agreement dated September 29, 1989 Exhibit B - Existing Grand Union Stores Exhibit C - Merchandise Exhibit D - Operating Expenses and Other Costs Exhibit E - Forms of Notices Exhibit F - Form of Landlord Consent Exhibit G - Overage/Shortage Policy (eliminated by agreement of the parties) Exhibit H - Montgomery Facility Slots Exhibit I - Montgomery Facility Storage (eliminated by agreement of the parties) Exhibit J - Assumptions and Information Relating to Operating Expenses and Other Costs Exhibit K - Terms of Sublease Exhibit L - * * Material omitted and filed separately with the SEC pursuant to a request for Confidential Treatment. EXHIBIT A THIS LEASE, dated the 29TH day of September 1989, between MACK BRACKEN ROAD PROPERTIES LIMITED and MONTGOMERY '89 ASSOCIATES L.P., doing business as BRACKEN '89 JOINT VENTURE, with offices at c/o The Mack Company, 370 West Passaic Street, Rochelle Park, New Jersey 07662 (hereinafter referred to as the "Landlord"); and THE GRAND UNION COMPANY, with offices at 201 Willowbrook Boulevard, Wayne, New Jersey 07470-0966 (hereinafter referred to as the "Tenant"). W I T N E S S E T H: ARTICLE I DEMISE OF PREMISES SECTION 1.01. The Landlord, for and in consideration of the rents to be paid and of the covenants and agreements hereinafter contained to be kept and performed by the Tenant, hereby demises and leases unto the Tenant, and the Tenant hereby hires and takes from the Landlord, for the term and the rent, and upon the covenants and agreements hereinafter set forth, the premises situated in the Town of Montgomery, County of Orange, State of New York, commonly known as Bracken Road, Montgomery, New York, and identified on the tax assessment map of said Town as Section 30, Lot 65.2 in Block 1, and about to be identified as Section 30, Lot 71 in Block 1, as more particularly described on Exhibit A attached hereto and made a part hereof (such premises together with the Building as hereinafter defined being hereinafter referred to as the "Demised Premises"). The Landlord and the Tenant covenant and agree as follows: ARTICLE II TERM OF LEASE SECTION 2.01. The term of this Lease and the demise of the Demised Premises shall be for twenty (20) years beginning on September 29, 1989 and ending at 12:00 midnight on September 28, 2009 or on such earlier or later termination as hereinafter set forth (which term is hereinafter called the "Term"). ARTICLE III RENT SECTION 3.01. The Tenant shall pay to the Landlord, during the Term without counterclaim, deduction or setoff, rent in the amount of Twenty-seven Million Nine Hundred Twelve Thousand Nine Hundred Twenty-five and 00/100 ($27,912,925.00) Dollars, payable in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. SECTION 3.02. The rent shall accrue at the following yearly and monthly rates: COPR. 1989 DOLLINGER & DOLLINGER, P.A. YEARS YEARLY RENT MONTHLY RENT 1-10 $1,292,000.00 $107,666.67 11-15 $1,428,260.00 $119,021.67 16-20 $1,570,325.00 $130,860.42 The aforesaid monthly rents shall be payable in advance on the first day of each calendar month during the Term, except that a proportionately lesser sum may be paid for the first and last months of the Term of this Lease if the Term commences on a date other than the first day of the month, in accordance with the provisions of this Lease hereinafter set forth. The rent shall be payable at the office of the Landlord, at the address above set forth, or as may otherwise be directed by notice from the Landlord to the Tenant. SECTION 3.03. The Tenant shall, and will, during the Term well and truly pay, or cause to be paid, to the Landlord, the monthly payments of rent as herein provided and all other sums that may become due and payable by the Tenant, hereunder, at the time and in the manner herein provided, without counterclaim, offset or deduction; and all other sums due and payable by the Tenant hereunder may, at the Landlord's option, be deemed to be, and treated as, additional rent, and added to any fixed rent due and payable by the Tenant hereunder, and, in the event of nonpayment of such other sums, the Landlord shall have all the rights and remedies herein provided for in the case of the nonpayment of rent, or of a breach of any covenant to be performed by the Tenant. SECTION 3.04. The rent payable by the Tenant pursuant to this Lease is intended to be net to the Landlord, and all other charges and expenses imposed upon the Demised Premises or incurred in connection with its use, occupancy, care, maintenance, operation and control, including but not limited to the charges and expenses payable pursuant to Articles VII and VIII of this Lease, shall be paid by the Tenant, excepting liens resulting from acts or omissions of the Landlord and other payments to be paid or obligations undertaken by the Landlord as specifically provided in this Lease. ARTICLE IV THE DEMISED PREMISES SECTION 4.01. The Demised Premises consists of a building of approximately 225,000 gross rentable square feet (which building is hereinafter called the "Building") previously erected thereon and approximately 12.066 acres of land, which the Tenant acknowledges that it has inspected and is fully familiar with its condition and is leasing the same in an "AS IS" condition. SECTION 4.02. The Demised Premises hereinabove described constitutes a self-contained unit and nothing in this Lease shall impose upon the Landlord any obligation to provide any services for the benefit of the Tenant, including but not limited to water, gas, electricity, heat or janitorial, unless and to the extent expressly provided in this Lease. PAGE 2 ARTICLE V USE SECTION 5.01. The Demised Premises may be used for any lawful use by the Tenant. SECTION 5.02. The aforesaid permitted use does not permit the stacking of merchandise and/or materials against walls or columns, nor does it permit the hanging of equipment from (or otherwise loading) the roof or structural members of the Building except in accordance with the standards set forth with respect to good and sound engineering practices. Notwithstanding anything contained herein to the contrary, any damage or wear and tear to the walls, columns, roof or structural members of the Building arising out of or in connection with any of the activities described in this Section 5.02 shall not be deemed to be ordinary wear and tear and shall be repaired, restored and/or replaced by Tenant at its sole cost and expense. ARTICLE VI QUIET ENJOYMENT SECTION 6.01. The Landlord covenants that if, and so long as, the Tenant pays the rent, and any additional rent as herein provided, and performs the covenants hereof, the Landlord shall do nothing to affect the Tenant's right to peaceably and quietly have, hold and enjoy the Demised Premises for the Term herein mentioned, subject to the provisions of this Lease. ARTICLE VII ADDITIONAL RENT, TAXES, ASSESSMENTS, WATER RATES, CHARGES, ETC. SECTION 7.01. The Tenant shall pay, before any interest or penalties accrue thereon, all real estate taxes, water and sewer rates and charges and all other governmental charges imposed during the Term on the Demised Premises or on the rents, as such, payable to the Landlord hereunder, and on request shall exhibit to the Landlord receipted bills or other proof of payment. There shall be apportioned any tax or charge relating to the fiscal year in which the Term of this Lease terminates. The Tenant shall be responsible for any tax or charge relating to the fiscal year in which the Term of this commenced. SECTION 7.02. The Tenant shall not be required to pay any estate, inheritance, devolution, succession, transfer, legacy or gift tax charged against the Landlord or the estate or interest of the Landlord in the Demised Premises or upon the right of any person to succeed to the same or any part thereof by inheritance, succession, transfer or gift, nor any capital stock tax or corporate franchise tax incurred by the Landlord, nor any income tax upon or against the income of the Landlord (including any rental income derived by the Landlord from the Demised Premises). SECTION 7.03. The Tenant shall pay all assessments that may be imposed upon the Demised Premises by reason of any specific public improvement (including but not limited to PAGE 3 assessments for street openings, grading, paving and sewer installations and improvements) except that if by law any such special assessment is payable, or may, at the option of the taxpayer, be paid, in installments, the Tenant may, whether or not interest accrues on the unpaid balance thereof, pay the same and any accrued interest on any unpaid balance thereof in installments as each installment becomes due and payable, but in any event before any penalty or cost may be added thereto for nonpayment of any installment or interest. Any such benefit, assessment or installment thereof relating to a fiscal period in which the Term of this Lease begins or ends shall be apportioned. SECTION 7.04. The Tenant, in its name or the Landlord's name shall have the right to contest, or review, by appropriate proceedings, in such manner as it may deem suitable, at its own expense, and without expense to the Landlord, any tax, assessment, water and sewer rents or charges, or other charges payable by the Tenant pursuant to this Lease, and upon the request of the Tenant, the Landlord will protest any tax, assessment, water or sewer rent or charge, or any other charge payable by the Tenant pursuant to this Lease, which shall be contested or reviewed by the Tenant. Any refund resulting from such contest or review shall be assigned to and belong to the Tenant and shall be paid to the Tenant promptly upon its receipt by the Landlord. If the refund relates to a tax year that is apportioned between the Landlord and the Tenant, the refund shall be apportioned between the Landlord and the Tenant. ARTICLE VIII INSURANCE SECTION 8.01. During the Term, Tenant shall maintain the following insurance, insuring the Landlord and ground lessor, if any, and any mortgagee(s), as their respective interests may appear: (A) Insurance against damage to the Building by all risks of direct physical loss (at Landlord's option to include earthquake and flood) with the policy to contain either the agreed amount endorsement or a replacement cost endorsement, in amounts sufficient to prevent the Landlord from becoming a co-insurer, but in no event less than one hundred (100%) percent of the Building's then replacement value. Policy to include a contingent liability endorsement and/or demolition and increased cost of construction endorsement in order for the Building to be constructed in accordance with all requirements and regulations which may be applicable at the time of loss or damage, of all governmental agencies having jurisdiction over the Building and construction of such Building. (B) If appropriate, boiler and machinery insurance coverage for all eligible objects, including pressure vessels and air conditioning equipment, with the electrical apparatus clause, with such limits as may be reasonably necessary to properly insure the values at risk in the Building. PAGE 4 (C) Plate glass insurance. At the option of the Tenant, Tenant may elect to self-insure for plate glass. (D) The policies of insurance provided for herein shall be from a company rated in the A.M. Best Key Rating Guide with a policyholder's service rating of A+ and a financial rating of XV. The company shall be licensed by the State of New York and a certificate (s) evidencing the existence of such policy shall be delivered to the Landlord, together with evidence of the payment of the premiums therefor, not less than fifteen (15) days prior to the commencement of the Term. At least fifteen (15) days prior to the expiration or termination date of any policy, the Tenant shall deliver a renewal or replacement policy, or certificate (s) evidencing the existence thereof, to Landlord together with proof of the payment of the premium therefor. All insurance maintained pursuant to this Article VIII may be effected by blanket insurance policies. SECTION 8.02. The Tenant shall provide and keep in force, during the Term of this Lease, for the benefit of the Landlord and ground lessor, if any, comprehensive general liability insurance policies in standard form (containing the so-called "occurrence clause"), insuring the Landlord and Landlord's managing agent as an additional named insured with respect to ownership, operation, maintenance, use and control against liability for injury or damage to persons or property in or upon the Demised Premises during the Term of this Lease, which shall include a contractual liability endorsement. Said policies shall be written by insurance companies licensed to do business in the State of New York and shall cover the entire Demised Premises as well as any sidewalk in front of the same, and shall be in the minimum amount of Three Million and 00/100 ($3,000,000.00) Dollars. SECTION 8.03. Tenant represents, said representation being specifically designed to induce the Landlord to execute this Lease, that Tenant's personal property, fixtures, betterments, improvements, goods and inventory at the Demised Premises and any other items which Tenant may bring to the Premises or which may be under Tenant's care, custody and control which may be subject to any claim for damages or destruction shall never exceed the amount of insurance which Tenant is required to carry pursuant to this Lease and for which Tenant shall name the Landlord as an additional named insured as its interest may appear. If at any time the value of the aforesaid exceeds the amount of such insurance, Tenant covenants to so notify Landlord and at the same time to immediately increase the amount of insurance required to be carried pursuant to Section 8.01 to an amount sufficient to cover the aforesaid to preclude any liability on Landlord's or Landlord's ground lessor's or mortgagee's part to Tenant. Should Tenant fail to do so, or fail to maintain insurance coverage adequate to cover the aforesaid, then Tenant shall not be in default hereunder unless Tenant makes a claim against Landlord for damages or destruction which would have been covered by insurance but for Tenant's failure to meet its obligations as set forth in this Article VIII. PAGE 5 SECTION 8.04. Tenant is and shall be in exclusive control and possession of the Demised Premises as provided herein, and Landlord shall not in any event whatsoever be liable for any injury or damage to any property or to any person happening on or about the Demised Premises, nor for any injury or damage to the Demised Premises, nor to any property of Tenant, or of any other person contained therein. Tenant shall indemnify and save Landlord harmless against and from all liabilities, claims, suits, fines, penalties, damages, losses, fees, costs and expenses (including reasonable attorneys' fees) which may be imposed upon, incurred by or asserted against Landlord by reason of: (A) Any work or thing done in, on or about the Demised Premises or any part thereof by or on behalf of Tenant; (B) Any use, occupation, condition, operation of the Demised Premises or any part thereof or of any street, alley, sidewalk, curb, vault, passageway or space adjacent thereto or any occurrence on any of the same on the part of Tenant; (C) Any act or omission on the part of Tenant or any subtenant or any employees, licensees or invitees; (D) Any accident, injury (including death) or damage to any person or property occurring in, on or about the Demised Premises, or any part thereof or in, on or about any street, alley, sidewalk, curb, vault, passageway or space adjacent thereto alleged to have been caused by Tenant's acts or omissions; and (E) Any failure on the part of Tenant to perform or comply with any of the covenants, agreements, terms or conditions contained in this Lease, or recording of this Lease. The provisions of this Paragraph shall survive the expiration or earlier termination thereof for as long as any applicable statute of limitations. SECTION 8.05. All losses paid under the policy or policies carried pursuant to Section 8.01 shall be adjusted by the Landlord and Tenant and the proceeds thereof shall be payable to the Landlord, to be held in trust to be used for repair and restoration of the Demised Premises by the Tenant. If the proceeds of insurance are not sufficient to cover the cost of restoration as required by Tenant, then Tenant shall be responsible for the cost of any deficiency. Each insurance policy carried by Tenant and insuring the Demised Premises and its fixtures and contents against loss by fire, water and causes covered by standard extended coverage, shall be written in a manner so as to provide that the insurance company waive all rights of recovery by way of subrogation against Landlord in connection with any loss or damage covered by such policies. Neither party shall be liable to the other for any loss or damage caused by fire, water or any of the risks enumerated in standard extended coverage insurance, provided such insurance was obtainable at the time of such loss or damage. If such insurance policies are obtainable only by the payment of an PAGE 6 additional premium charge, the same shall be obtained and such additional premium paid for by the Tenant. If the release of either Landlord or Tenant, as set forth in the third sentence of this Paragraph, shall contravene any law with respect to exculpatory agreements, the liability of the party in question shall be deemed not released but shall be deemed secondary to the latter's insurer. SECTION 8.06. The Tenant shall also furnish insurance for such other hazards and in such amounts as the Landlord may reasonably require and as at the time are commonly insured against with respect to buildings similar in character, general location and use and occupancy to the Demised Premises in relative amounts normally carried with respect thereto. The Landlord reserves the right at any time and from time to time to require that the limits for any of the insurance required pursuant to Article VIII be increased to limits as at the time are reasonable with respect to Tenant's use and to buildings similar in character, general location and use and occupancy to the Demised Premises. SECTION 8.07. Landlord shall maintain rent insurance against the loss of rent and additional rent for no less than one (1) year as provided herein, and Tenant shall reimburse Landlord for the entire cost of said rent insurance, promptly when billed, as additional rent. SECTION 8.08. All policies required pursuant to this Article VIII shall contain provision for thirty (30) days' written notice by registered mail to the Landlord of any change or cancellation of said policy. ARTICLE IX REPAIRS SECTION 9.01. The Tenant shall keep the Demised Premises in good condition and repair, and shall redecorate, paint and renovate the Demised Premises as may be necessary to keep them in good condition and repair and good appearance. The Tenant shall keep the Demised Premises and all parts thereof in a clean and sanitary condition and free from trash, inflammable material and other objectionable matter. The Tenant shall keep the sidewalks and roadways forming part of the Demised Premises clean and free of obstructions, snow and ice. Throughout the Term of this Lease, the Tenant, at its sole cost and expense, will take good care of the Demised Premises and the sidewalks and curbs adjoining the Demised Premises and will keep the same in good order and condition and make all necessary repairs thereto, structural and nonstructural, interior and exterior, ordinary and extraordinary, foreseen and unforeseen. The Tenant shall replace, at the Tenant's expense, all glass in and on the Demised Premises which may become broken after the date of Tenant's occupancy. When used in this Article, the term "repairs" shall include all necessary replacements and renewals. All repairs made by Tenant shall be equal in quality and class to the original work. The Tenant shall quit and surrender the Demised Premises at the end of the Term in as good condition as the reasonable use thereof will permit and in compliance with the requirements stated herein and in a "broom-clean" condition, and shall, by way of example and not by way of limitation, clean and reseal all concrete floors. PAGE 7 SECTION 9.02. The Tenant shall not make any alterations, additions or improvements to the Demised Premises without the prior written consent of the Landlord, which Landlord shall not unreasonably withhold. In making its determination, Landlord shall consider, among other considerations, the standards set forth with respect to good and sound engineering practices. Notwithstanding the provisions of this Section 9.02, Landlord's prior written consent shall not be required for any alterations, additions or improvements which, in the aggregate, do not exceed the cost of Five Hundred Thousand and 00/100 ($500,000.00) Dollars per lease year, and which do not adversely affect any structural portion of the Building or any Building mechanical, electrical, HVAC, or plumbing system. All erections, alterations, additions and improvements, whether temporary or permanent in character, which may be made upon or to the Demised Premises either by the Landlord or the Tenant, except furniture or movable trade fixtures installed at the expense of the Tenant, shall be the property of the Landlord and shall remain upon and be surrendered with the Demised Premises as a part thereof at the expiration or sooner termination of this Lease, without compensation to the Tenant; or, in the alternative and at the direction of Landlord, Tenant shall remove all or so much of the property therefrom as directed or such property shall be conclusively deemed abandoned and may be removed by Landlord, and Tenant shall reimburse Landlord for the cost of such removal. Landlord may have any such property stored at Tenant's risk and expense. Landlord, at Landlord's option, may require as a condition of its consent, that Tenant remove, at the expiration or sooner termination of the Lease Term, any erections, alterations, additions or improvements made by Tenant, and restore the Demised Premises to a substantially similar condition to that in existence as of the commencement date of the Lease, and that the Tenant use contractors approved by Landlord. ARTICLE X CASUALTY SECTION 10.01. If the Demised Premises or the Building is damaged or destroyed by fire, explosion, the elements or otherwise during the Term so as to render the Demised Premises wholly untenantable or unfit for occupancy, or should the Demised Premises be so badly injured that the same cannot be repaired within one hundred eighty (180) days from the happening of such injury, then, and in such case, the Term hereby created shall, at the option of either the Landlord or the Tenant, terminate upon the giving of a notice of termination. If a notice of termination is given, the Term of this Lease shall terminate effective as of the date of such damage or destruction, and the Tenant shall immediately surrender the Demised Premises and all the Tenant's interest therein to the Landlord, and pay rent to the time of such damage or destruction, and the Landlord may re-enter and repossess the Demised Premises discharged from this Lease and may remove all parties therefrom. SECTION 10.02. Should the Demised Premises be rendered untenantable and unfit for occupancy, but yet be repairable within one hundred eighty (180) days from the happening of said injury, the Landlord will make the proceeds of insurance available to Tenant so that Tenant may repair the Demised Premises with reasonable speed, and the rent shall not PAGE 8 accrue after said injury and while repairs are being made, provided Landlord receives the proceeds of rent insurance, but shall recommence immediately after such repairs shall be completed. SECTION 10.03. If the Demised Premises shall be so slightly injured as not to be rendered untenantable and unfit for occupancy, the Tenant shall repair the same with reasonable promptness and the rent accrued and accruing shall not cease or terminate. The Tenant shall immediately notify the Landlord in case of fire or other damage to the Demised Premises. SECTION 10.04. Notwithstanding anything to the contrary in Section 10.01, neither the Landlord nor the Tenant shall have any option to terminate this Lease upon the happening of an injury referred to in Section 10.01 provided that the happening of such injury occurs at a time when the unexpired Term of this Lease is one (1) year or more. In such event, the Landlord shall make the proceeds of insurance available to the Tenant and the Tenant shall repair the Demised Premises, even to the extent of rebuilding the Building if necessary. The Tenant shall promptly enter and repair the Demised Premises with reasonable speed, making due allowance for conditions beyond the Tenant's control, including, but not limited to time lost in adjusting insurance claims and strikes, and the rent shall not accrue after such injury and while repairs are being made, provided Landlord receives the proceeds of rent insurance, but shall recommence immediately after said repairs shall be completed. Landlord shall have no obligation to repair or restore Tenant's improvements. Notwithstanding anything contained herein to the contrary, in the event the happening of an injury referred to in Section 10.01 occurs when the unexpired Term of this Lease is less than one (1) year and Landlord exercises its option to terminate this Lease, then and in that event, Tenant can negate Landlord's termination by exercising its option to renew in accordance with Article XXXII. SECTION 10.05. Prior to the performance of any work by Tenant pursuant to the provisions of this Article X, Tenant shall first submit plans and specifications to Landlord and Landlord shall have the right to review and approve said plans and specifications and to require modifications thereto. All work shall be performed by Tenant in accordance with good and sound engineering practices and in compliance with all laws, ordinances and regulations. SECTION 10.06. Notwithstanding anything contained to the contrary in this Article X, in the event the proceeds of insurance are not sufficient to cover the cost of restoration, the Tenant shall be responsible for the cost of any deficiency. ARTICLE XI CONDEMNATION SECTION 11.01. If, during the Term, twenty-five (25%) percent or more of the area of the Demised Premises shall be taken under any power of eminent domain or condemnation then, at the option of the Tenant, to be exercised in writing within thirty (30) days of the taking of title thereto, this Lease shall expire within thirty (30) days of the date of such notice and the rent herein reserved shall be apportioned as of said date. However, if the Tenant does not exercise the afore- PAGE 9 mentioned option, or if the taking does not deprive the Tenant of at least twenty-five (25%) percent of the area of the Demised Premises, this Lease shall not expire but the rent shall be equitably apportioned. If the Landlord and the Tenant fail to agree upon an equitable apportionment, the rent for the Building, after such taking, shall be determined in accordance with the Commercial Rules of the American Arbitration Association, in the City of New York, New York, and the arbitrator shall be empowered to assess the costs and expenses of the proceedings as part of the determination. Pending such determination the Tenant shall pay, on account of the rent, such proportion of the rent reserved in this Lease as the total area of the Building after the taking bears to the total area of the Building before the taking, subject to adjustment in accordance with the arbitrator's award. If the Landlord can, after such taking, construct an addition to the remaining Building so as to restore all of the Building area and Building facilities theretofore taken, the Landlord shall, subject to the adequacy of the condemnation award and to the mortgagee making the same available to the Landlord, promptly construct such addition and restore such facilities so taken and upon the completion of such restoration, the full rent reserved by this Lease shall be reinstated, as of the date of such restoration, and, if the Tenant is able to occupy and use the Building, the proportionate rent shall be paid by the Tenant as herein provided, during the period between the taking and the restoration of the Building and facilities. No part of any award shall belong to the Tenant except that nothing contained herein is intended to affect or limit the Tenant's claim for fixtures or other improvements owned by Tenant provided the same does not diminish the Landlord's award. It is expressly understood and agreed that the provisions of this Article XI shall not be applicable to any condemnation or taking for governmental occupancy for a limited period of time. ARTICLE XII COMPLIANCE WITH LAWS, ETC. SECTION 12.01. The Tenant shall not do or permit anything to be done in the Demised Premises which shall constitute a public nuisance or which will conflict with the regulations of the Fire Department or with any insurance policy upon said improvements or any part thereof. SECTION 12.02. The Tenant shall, at its own expense, obtain all necessary environmental and operating permits and comply with all requirements of law and with all ordinance or orders, rules and regulations of any State, Municipal or other public authority affecting the Demised Premises and with all requirements of the Fire Insurance Exchange or similar body, and of any liability insurance company insuring the Landlord against liability for accidents in or connected with the Demised Premises including, but not limited to laws, ordinance, orders, rules and regulations which apply to the interior or exterior of the Demised Premises, the structural or nonstructural parts thereof, and to make all improvements and repairs required by such laws, ordinances, orders, rules and regulations, ordinary or extraordinary, foreseen or unforeseen. SECTION 12.03. Tenant acknowledges the existence of environmental laws, rules and regulations now or hereafter PAGE 10 enacted by any federal, state or municipal authority and Tenant agrees to comply therewith. Tenant agrees not to generate, store, manufacture, refine, transport, treat, dispose of, or otherwise permit to be present on or about the Demised Premises, any Hazardous Substances. As used herein, Hazardous Substances shall be defined as any "hazardous chemical," "hazardous substance" or similar term as defined in the Comprehensive Environmental Responsibility Compensation and Liability Act, as amended (42 U.S.C. 9601, ET SEQ.), any rules or regulations promulgated thereunder, or in any other applicable federal, state or local law, rule or regulation dealing with environmental protection. It is understood and agreed that the provisions contained in this Article shall be applicable notwithstanding the fact that any substance shall not be deemed to be a Hazardous Substance at the time of its use by the Tenant but shall thereafter be deemed to be a Hazardous Substance. Tenant agrees to indemnify and hold harmless the Landlord and each mortgagee of the Demised Premises from and against any and all liabilities, damages, claims, losses, judgments, causes of action, costs and expenses (including the reasonable fees and expenses of counsel) which may be incurred by the Landlord or any such mortgagee or threatened against the Landlord or such mortgagee, relating to or arising out of any breach by Tenant of the undertakings set forth in this Article, said indemnity to survive the Lease expiration or sooner termination. ARTICLE XIII SUBORDINATION SECTION 13.01. This Lease is and shall be subject and subordinate to all present and future first mortgages or deeds of trust affecting the Demised Premises, provided (i) that any such mortgage, deed of trust, or ground lease shall include therein a covenant on the part of the holder thereof or the landlord thereunder (as the case may be) substantially to the effect that it will not at any time join Tenant as a party defendant in any action which may be brought to foreclose said mortgage or deed of trust or terminate said ground lease (as the case may be), or disturb Tenant's possession of the Demised Premises, so long as Tenant is not in default under any provision of this Lease, or provided Landlord obtains a non-disturbance agreement in favor of Tenant from said first mortgagee or holder of any deed of trust or the landlord thereunder (as the case may be) providing the above, and provided further that in either event Tenant agrees, at the first mortgagee's option or at the option of the holder of any deed of trust or at the option of the landlord under the ground lease (as the case may be), to attorn to said mortgagee or holder of said trust deed or landlord (as the case may be), and (ii) that any such mortgagee shall agree to make the proceeds of casualty insurance available to Landlord for restoration. The Tenant shall execute, any instrument which may be deemed necessary or desirable by the Landlord to further effect or to evidence the subordination of this Lease to any such mortgage or deed of trust. The Landlord may assign this Lease to any such mortgagee or trust deed holder in connection with any such lien superior to this Lease, and the Tenant shall execute, at no expense to the Tenant, any instrument which may be necessary or desirable by the Landlord or the PAGE 11 holder of said lien in connection with said assignment. Any expense incurred in the preparing, executing or recording of such assignment to any such holder shall be without expense or cost to the Tenant. The Tenant further agrees, upon not less then ten (10) days' prior written request of the Landlord, to certify by written instrument duly executed and acknowledged to any mortgagee, trust deed holder or purchaser, or any proposed mortgage lender, trust deed holder or purchaser, that this Lease is in full force and effect, or if not, in what respect it is not, that this Lease has not been modified, or the extent to which it has been modified, that there are no existing defaults hereunder to the best of the knowledge of the party so certifying, or specifying the defaults, if any. Any such certification in connection with a mortgage shall be without prejudice as between the Landlord and the Tenant, it being agreed that any document required hereunder shall not be used in any litigation between the Landlord and the Tenant. ARTICLE XIV DEFAULTS, REMEDIES SECTION 14.01. If, during the Term, any one or more of the following acts or occurrences (any one of such occurrences or acts being hereinafter called an Event of Default) shall happen: (A) The Tenant shall default in making any payment of rent or any additional rent as and when the same shall become due and payable, and such default shall continue for a period of ten (10) days after notice from the Landlord that such payment is due and unpaid; or (B) The Tenant shall default in the performance of or compliance with any of the other covenants, agreements, terms or conditions of this Lease to be performed by the Tenant (other than any default curable by payment of money), and such default shall continue for a period of thirty (30) days after written notice thereof from the Landlord to the Tenant, or, in the case of a default which cannot with due diligence be cured within thirty (30) days, the Tenant shall fail to proceed promptly (except for unavoidable delays) after the giving of such notice and with all due diligence to cure such default and thereafter to prosecute the curing hereof with all due diligence (it being intended that as to a default not susceptible of being cured with due diligence within thirty (30) days, the time within which such default may be cured shall be extended for such period as may be reasonably necessary to permit the same to be cured with all due diligence); or (C) The Tenant or any guarantor of this Lease shall make an assignment for the benefit of creditors or file a voluntary petition in bankruptcy or shall be adjudicated a bankrupt or insolvent, or shall file any petition or answer seeking any reorganization, composition, readjustment or similar relief under any present or PAGE 12 future bankruptcy or other applicable law, or shall seek or consent to or acquiesce in the appointment of any trustee, receiver, or liquidator of the Tenant or any guarantor of this Lease or of all or any substantial part of its properties or of all or any part of the Demised Premises; or (D) If, within sixty (60) days after the filing of an involuntary petition in bankruptcy against the Tenant or any guarantor of this Lease, or the commencement of any proceeding against the Tenant or such guarantor seeking any reorganization, composition, readjustment or similar relief under any law, such proceeding shall not have been dismissed, or if, within sixty (60) days after the appointment, without the consent or acquiescence of the Tenant or such guarantor, of any trustee, receiver or liquidator of the Tenant or such guarantor, or of all or any part of the Demised Premises, such appointment shall not have been vacated or stayed on appeal or otherwise, or if, within sixty (60) days after the expiration of any such stay, such appointment shall have been vacated, or if, within sixty (60) days after the taking possession, without the consent or acquiescence of the Tenant or such guarantor, of the property of the Tenant, or of such guarantor by any governmental office or agency pursuant to statutory authority for the dissolution or liquidation of the Tenant or such guarantor, such taking shall not have been vacated or stayed on appeal or otherwise; or (E) If the Demised Premises shall be abandoned by the Tenant for a period of thirty (30) consecutive days, then, and in any such event, and during the continuance thereof, the Landlord may, at its option, then or thereafter while any such Event of Default shall continue and notwithstanding the fact that the Landlord may have any other remedy hereunder or at law or in equity, by notice to the Tenant, designate a date, not less than ten (10) days after the giving of such notice, on which this Lease shall terminate; and thereupon, on such date the Term of this Lease and the estate hereby granted shall expire and terminate upon the date specified in such notice with the same force and effect as if the date specified in such notice was the date hereinbefore fixed for the expiration of the Term of this Lease, and all rights of the Tenant hereunder shall expire and terminate, but the Tenant shall remain liable as hereinafter provided. Additionally, Tenant agrees to pay, as additional rent, all attorney's fees and other expenses incurred by the Landlord in enforcing any of the obligations under this Lease, this covenant to survive the expiration or sooner termination of this Lease. Notwithstanding anything contained herein to the contrary, the abandonment of the Demised Premises shall not be deemed to be a default hereunder so long as Tenant shall continue to pay rent and additional rent and shall otherwise comply with all of the terms and conditions of this Lease, including but not limited to repair, maintenance and insurance obligations. PAGE 13 SECTION 14.02. If this Lease is terminated as provided in Section 14.01, or as permitted by law, the Tenant shall peaceably quit and surrender the Demised Premises to the Landlord, and the Landlord may, without further notice, enter upon, re-enter, possess and repossess the same by summary proceedings, ejectment or other legal proceedings, and again have, repossess and enjoy the same as if this Lease had not been made, and in any such event neither the Tenant nor any person claiming through or under the Tenant by virtue of any law or an order of any court shall be entitled to possession or to remain in possession of the Demised Premises, and the Landlord, at its option, shall forthwith, notwithstanding any other provision of this Lease, be entitled to recover from the Tenant in lieu of all other claims for damages on account of such termination) as and for liquidated damages an amount equal to the excess of all rents reserved hereunder for the unexpired portion of the Term of this Lease discounted at the rate of six (6%) percent per annum to the then present worth, over the fair rental value of the Demised Premises at the time of termination for such unexpired portion of the Term (the rent received on a reletting shall be conclusively accepted as the fair rental value). Nothing herein contained shall limit or prejudice the right of the Landlord, in any bankruptcy or reorganization or insolvency proceeding, to prove for and obtain as liquidated damages by reason of such termination an amount equal to the maximum allowed by any bankruptcy or reorganization or insolvency proceedings, or to prove for and obtain as liquidated damages by reason of such termination, an amount equal to the maximum allowed by any statute or rule of law whether such amount shall be greater or less than the excess referred to above. SECTION 14.03. If the Landlord re-enters and obtains possession of the Demised Premises, as provided in Section 14.02 of this Lease, following an Event of Default, the Landlord shall have the right, without notice, to repair or alter the Demised Premises in such manner as the Landlord may deem necessary or advisable so as to put the Demised Premises in good order and to make the same rentable, and shall have the right, at the Landlord's option, to relet the Demised Premises or a part thereof, and the Tenant shall pay to the Landlord on demand all reasonable expenses incurred by the Landlord in obtaining possession, and in altering, repairing and putting the Demised Premises in good order and condition and in reletting the same, including reasonable fees of attorneys and architects, and all other reasonable expenses or commissions, and the Tenant shall pay to the Landlord upon the rent payment dates following the date of such re-entry and including the date for the expiration of the Term of this Lease in effect immediately prior to such re-entry, the sum of money which would have been payable by the Tenant as rent hereunder on such rent payment dates if the Landlord has not re-entered and resumed possession of the Demised Premises, deducting only the net amount of rent, if any, which the Landlord shall actually receive (after deducting from the gross receipts the expenses, costs and payments of the Landlord which in accordance with the terms of this Lease would have been borne by the Tenant) in the meantime from and by any reletting of the Demised Premises, and the Tenant shall remain liable for all sums otherwise payable by the Tenant under this Lease, including but not limited to the expense of the Landlord aforesaid, as well as for any deficiency aforesaid, and the Landlord shall have the right from time to time to begin and maintain successive actions or other legal proceedings against the Tenant for the recovery of such deficiency, expenses or damages or for a sum equal to any rent payment and additional PAGE 14 rent. As an alternative remedy, the Landlord shall be entitled to damages against the Tenant for breach of this Lease, at any time (whether or not the Landlord shall have become entitled to or shall have received any damages as hereinabove provided) in an amount equal to the excess, if any, of the rent and additional rent which would be payable under this Lease at the date of the expiration of the Term, less the amount of rent and additional rent received by the Landlord upon any reletting, both discounted to present worth at the rate of six (6%) percent per annum, semiannually. The obligation and liability of the Tenant to pay the rent and the additional rent shall survive the commencement, prosecution and termination of any action to secure possession of the Demised Premises. Nothing herein contained shall be deemed to require the Landlord to wait to begin such action or other legal proceedings until the date when this Lease would have expired had there not been an Event of Default. SECTION 14.04. The Tenant hereby waives all right of redemption to which the Tenant or any person under it may be entitled by any law now or hereafter in force. The Landlord's remedies hereunder are in additional to any remedy allowed by law. SECTION 14.05. In the event of any breach or threatened breach by Tenant of any of the agreements, terms, covenants or conditions contained in this Lease, Landlord shall be entitled to enjoin such breach or threatened breach and shall have the right to invoke any right or remedy allowed at law or in equity or by statute or otherwise as though re-entry, summary dispossess proceedings, and other remedies were not provided for in this Lease. During the pendency of any proceedings brought by Landlord to recover possession by reason of default, Tenant shall continue all money payments required to be made to Landlord, and Landlord may accept such payments for use and occupancy of the Demised Premises. In such event, Tenant waives its right in such proceedings to claim as a defense that the receipt of such money payments by Landlord constitutes a waiver by Landlord of such default. ARTICLE XV ASSIGNMENT AND SUBLEASE SECTION 15.01. (A) The Tenant may assign this Lease and sublet the whole or any part of the Demised Premises, with the consent of the Landlord which consent shall not be unreasonably withheld subject to the following conditions: (1) A copy of the assignment or sublease shall be furnished to the Landlord. (2) The assignee shall assume by written instrument all of the obligations of this Lease, and a copy of such assumption agreement shall be furnished to the Landlord within ten (10) days of its execution. (3) The Tenant and each assignee shall be and remain liable for the observance of all of the covenants and provisions of this Lease, including but not limited to the payment of the rent reserved herein, through the entire Term of PAGE 15 this Lease, as the same may be renewed, extended or otherwise modified. (4) The Tenant and any assignee shall promptly pay to Landlord one-half (1/2) of any net consideration received for any assignment or one-half (1/2) of the net rent, as and when received in excess of the rent required to be paid by Tenant for the area sublet, computed on the basis of an average square foot rent for the entire Building. As used herein, net consideration and/or net rent shall mean gross rent or gross consideration less any reasonable brokerage or tenant work paid by Tenant in connection with the assignment or sublet, said brokerage or tenant work to be amortized over the term of the assignment or sublet. (B) Notwithstanding anything herein contained, the Tenant may assign or sublet the whole or any part of the Demised Premises to an affiliated corporation, or to any corporation with which it shall be merged or which shall acquire the assets of the Tenant, all without notice to the Landlord. (C) In any event, the acceptance by the Landlord of any rent from the assignee, or of any of the subtenants, or the failure of the Landlord to insist upon a strict performance of any of the terms, conditions and covenants herein shall not release the Tenant herein, nor any assignee assuming this Lease, from any and all of the obligations herein during and for the entire Term of this Lease. (D) Notwithstanding anything herein contained, prior to any sublet of the whole or any portion of the Demised Premises or an assignment of the within Lease to any other party, other than sublets or assignments permitted by Subsection (B) hereof, the Tenant shall first offer, in writing, to surrender the Demised Premises to the Landlord, and the Landlord shall either accept or refuse to accept such surrender within ten (10) days after the receipt of such offer, failing which the offer shall automatically be deemed refused. In the event Landlord shall accept such surrender, the within tenant shall be released from any and all obligations hereunder. (E) The Landlord may require a payment to cover its handling charges for each request for consent to any sublet or assignment prior to its consideration of the same, which payment shall be equal to those charges, if any, assessed by Landlord's mortgagee. (F) The Tenant acknowledges that its sole remedy with respect to any assertion that the Landlord's failure to consent to any sublet or assignment is unreasonable shall be the remedy of specific performance and the Tenant shall have no other claim or cause of action against the Landlord as a result of the Landlord's actions in refusing to consent thereto. (G) Without limiting any of the provisions of Article XIV, if pursuant to the Federal Bankruptcy Code (or any similar Law hereafter enacted having the same general purpose), Tenant is permitted to assign this Lease, notwithstanding the restrictions contained in this Lease, adequate assurance of future performance by an assignee expressly permitted under such Code shall be deemed to mean the deposit of cash security in an PAGE 16 amount equal to the sum of one (1) year's fixed rent plus an amount equal to the sum of all other charges due and payable by Tenant hereunder for the Calendar Year preceding the year in which such assignment is intended to become effective, which deposit shall be held by Landlord for the balance of the Term, without interest, as security for the full performance of all of Tenant's obligations under this Lease, to be held and applied in the manner specified for security in Section 22.02. (H) Except as specifically set forth above, no portion of the Demised Premises or of Tenant's interest in this Lease may be acquired by any other person or entity, whether by assignment, mortgage, sublease, transfer, operation of law or act of the Tenant, nor shall Tenant pledge its interest in this Lease or in any security deposit required hereunder. ARTICLE XVI NOTICES SECTION 16.01. All notices, demands, consents, approvals, requests and instruments or documents by this Lease required or permitted to be given to or served upon the Landlord or the Tenant shall be in writing. Any such notice, demand, consent, approval, request, instrument or document shall be sufficiently given or served if sent by certified or registered mail, postage prepaid, addressed at the address set forth below, or at such other address as it shall designate by notice, as follows: If to the Landlord: MACK BRACKEN ROAD PROPERTIES LIMITED and MONTGOMERY '89 ASSOCIATES L.P. doing business as BRACKEN '89 JOINT VENTURE c/o The Mack Company 370 West Passaic Street Rochelle Park, NJ 07662 With Copy to: DOLLINGER & DOLLINGER, P.A. 365 West Passaic Street Rochelle Park, NJ 07662 Attn: Martin E. Dollinger If to the Tenant: THE GRAND UNION COMPANY 201 Willowbrook Boulevard Wayne, NJ 07470-0966 Attn: Vice President, Real Estate Any notice so sent shall be deemed given or served on the second (2nd) business day following the date mailed as aforesaid. ARTICLE XVII HOLDING OVER SECTION 17.01. If the Tenant shall remain in the Demised Premises after the expiration of the Term without having executed and delivered a new lease with the Landlord, such holding over shall not constitute a renewal or extension of this PAGE 17 Lease. The Landlord may, at its option, elect to treat the Tenant as one who has not removed at the end of its Term, and thereupon be entitled to all the remedies against the Tenant provided by law in that situation, or the Landlord may elect, at its option, to construe such holding over as a tenancy from month to month, subject to all the terms and conditions of this Lease, except as to duration thereof, and in that event the Tenant shall pay monthly rent in advance which is the greater of (i) two hundred (200%) percent of the fair rental value then being obtained for the Demised Premises or (ii) two hundred (200%) percent of the rent payable for the month immediately preceding such holdover. ARTICLE XVIII LIENS SECTION 18.01. This Lease may be cancelled by the Landlord if any mechanic's lien is filed against the Demised Premises as a result of alterations, additions or improvements made by the Tenant and not discharged by payment or bonding within thirty (30) days after notice by the Landlord to the Tenant. In addition, after thirty (30) days' written notice to the Tenant, the Landlord, at its option, may pay and discharge such lien, without inquiring into the validity thereof, and the Tenant shall, on demand of the Landlord, reimburse the Landlord as additional rent hereunder for the total expense incurred by the Landlord in discharging such lien. ARTICLE XIX CONDITION OF DEMISED PREMISES, LOSS, ETC. SECTION 19.01. After the commencement of the Tenant's occupancy, the Landlord shall not be responsible for the loss of, or damage to, property or injury to persons occurring in or about the Demised Premises, for any reason whatsoever, to include but not be limited to: any existing or future condition, defect, matter or thing in the Demised Premises; the acts, omissions or negligence of other persons or tenants in and about the Demised Premises; theft or burglary from the Demised Premises; the negligence of Landlord, its agents, servants or invitees; and defects, errors or omissions in the construction or design of the Demised Premises and/or the Building including the structural and nonstructural portions thereof. Tenant covenants and agrees to make no claim for any such loss, damage or injury at any time. ARTICLE XX INSPECTION, FOR SALE AND FOR RENT SIGNS SECTION 20.01. The Landlord, or its agents, shall have the right to enter the Demised Premises at reasonable hours to examine the same, or to exhibit the Demised Premises to prospective purchasers. For twelve (12) months prior to the expiration of the Term, the Landlord, or its agents, may exhibit the Demised Premises to prospective tenants and may place the usual "To Let" signs thereon. PAGE 18 ARTICLE XXI SIGNS SECTION 21.01. No sign, advertisement or notice shall be affixed to or placed upon any part of the Demised Premises by the Tenant, except in such manner of annexation as shall be in accordance with good and sound engineering practices, provided: (i) that Tenant shall comply with all applicable governmental ordinances and regulations and receives all necessary governmental approvals required for erection and maintenance of the sign and (ii) no later than the last day of the Term, Tenant shall, at Tenant's expense, remove the sign and repair all injury done by or in connection with the installation or removal of the sign. ARTICLE XXII ADVANCE RENT, SECURITY AND LATE CHARGE SECTION 22.01. Simultaneously herewith, the Tenant has deposited with the Landlord the sum of One Hundred Seven Thousand Six Hundred Sixty-six and 67/100 ($107,666.67) Dollars, as advance rent for the first month of the Tenant's rental obligation. SECTION 22.02. In the event of the insolvency of Tenant or in the event of the entry of a judgment in bankruptcy in any court against Tenant which is not discharged within thirty (30) days after entry, or in the event a petition is filed by or against Tenant under any chapter of the bankruptcy laws of the State of New York or the United States of America, then and in such event Landlord may require the Tenant to deposit security in an amount which in Landlord's sole judgment would be sufficient to adequately assure Tenant's performance of all of its obligations under this Lease, including all payments subsequently accruing. Failure of Tenant to deposit the security required by this Section within ten (10) days after Landlord's written demand shall constitute a material breach of this Lease by Tenant. SECTION 22.03. Anything in this Lease to the contrary notwithstanding, at Landlord's option, Tenant shall pay a "Late Charge" of eight (8%) percent of any installment of rent or additional rent paid more than ten (10) days after the due date thereof, to cover the extra expense involved in handling delinquent payments. Notwithstanding anything contained herein to the contrary, in the event that Landlord shall be charged a late charge on any mortgage, then and in that event, Tenant shall pay a Late Charge of eight (8%) percent of any installment of rent or additional rent paid after the due date thereof, provided, however, that the first time during any Lease year that Tenant shall be late in the payment of rent, Landlord shall not impose a Late Charge. ARTICLE XXIII FINANCIAL STATEMENTS SECTION 23.01. The Tenant agrees, within ninety (90) days after the end of the Tenant's accounting year, at the request of the Landlord, or at the request of the holder of any PAGE 19 first mortgage upon the Demised Premises, to furnish to the Landlord or mortgagee, a certified balance sheet and profit and loss statement for the last accounting year. ARTICLE XXIV BROKER SECTION 24.01. The Landlord and the Tenant represent and warrant one to the other that no broker brought about this transaction, and the Landlord and the Tenant agree to indemnify and hold each other harmless from any and all claims of any brokers arising out of or in connection with the negotiations of or the entering into this Lease by the Landlord and the Tenant. ARTICLE XXV SHORT FORM OR MEMORANDUM OF LEASE SECTION 25.01. At the request of either party the Landlord and the Tenant will execute and deliver, in duplicate original counterparts, a recordable memorandum of this Lease identifying the Demised Premises and stating the commencement and termination dates of the Term of this Lease. ARTICLE XXVI WAIVER OF TRIAL BY JURY SECTION 26.01. The Landlord and the Tenant waive trial by jury in any action, proceeding or counterclaim brought by either the Landlord or the Tenant against the other in any matters whatsoever arising out of or in any way connected with this Lease, the Tenant's use or occupancy of the Demised Premises, and/or any claim of injury or damage. ARTICLE XXVII WAIVER OF DISTRAINT SECTION 27.01. Landlord waives all lien, right, interest and claim it might otherwise have in and waives its right of distraint of, the machinery, fixtures and other property of the Tenant, and in any other property of any nature whether on or off the Demised Premises, belonging to the Tenant. The provisions of this section are intended to apply to the Landlord's common law (if any) and statutory right of distraint because of failure to pay rent. ARTICLE XXVIII MISCELLANEOUS SECTION 28.01. PARTIAL INVALIDITY. If any term or provision of this Lease or the application thereof to any party or circumstances shall to any extent be invalid or unenforceable, the remainder of this Lease or the application of such term or provision to parties or circumstances other than those to which it is held invalid or unenforceable, shall not be PAGE 20 affected thereby, and each term and provision of this Lease shall be valid and enforced to the fullest extent permitted by law. SECTION 28.02. WAIVERS. One or more waivers by either party of the obligation of the other to perform any covenant or condition shall not be construed as a waiver of a subsequent breach of the same or any other covenant or condition. The receipt of rent by the Landlord, with knowledge of any breach of this Lease by the Tenant or of any default on the part of the Tenant in the observance or performance of any of the conditions or covenants of this Lease, shall not be deemed to be a waiver of any provision of this Lease. Neither acceptance of the keys nor any other act or thing done by the Landlord or any agent or employee during the Term herein demised shall be deemed to be an acceptance of a surrender of said Demised Premises, excepting only an agreement in writing signed by the Landlord accepting or agreeing to accept such a surrender. SECTION 28.03. NUMBER, GENDER. Wherever herein the singular number is used, the same shall include the plural, and the masculine gender shall include the feminine and neuter genders. SECTION 28.04. SUCCESSORS, ASSIGNS. The terms, covenants and conditions herein contained shall be binding upon and inure to the benefit of the respective parties and their successors and assigns. SECTION 28.05. HEADINGS. The Article and marginal headings herein are intended for convenience in finding the subject matters, are not to be taken as part of this Lease and are not to be used in determining the intent of the parties to this Lease. SECTION 28.06. ENTIRE AGREEMENT. This instrument contains the entire and only agreement between the parties and no oral statements or representations or prior written matter not contained in this instrument shall have any force or effect. This Lease shall not be modified in any way or terminated except by a writing executed by both parties. SECTION 28.07. LANDLORD. The term "Landlord" as used in this Lease means only the holder, for the time being, of the Landlord's interest under this Lease so that in the event of any transfer of title to the Demised Premises the Landlord shall be and hereby is entirely freed and relieved of all obligations of the Landlord hereunder accruing after such transfer, and it shall be deemed without further agreement between the parties that such grantee, transferee or assignee has assumed and agreed to observe and perform all obligations of the Landlord hereunder arising during the period it is the holder of the Landlord's interest hereunder. SECTION 28.08. WORDS OF DUTY. Whenever in this Lease any words of obligation or duty are used, such words or expressions shall have the same force and effect as though made in the form of covenants. SECTION 28.09. CUMULATIVE REMEDIES. The specified remedies to which the Landlord or the Tenant may resort under PAGE 21 the terms of this Lease are cumulative and are not intended to be exclusive of any other remedies or means of redress to which the Landlord or the Tenant may lawfully be entitled in case of any breach or threatened breach of any provision of this Lease. SECTION 28.10. NO OPTION. The submission of this Lease Agreement for examination does not constitute a reservation of, or option for, the Demised Premises, and this Lease Agreement becomes effective as a Lease Agreement only upon execution and delivery thereof by Landlord and Tenant. SECTION 28.11. ACCORD AND SATISFACTION. No payment by Tenant or receipt by Landlord of a lesser amount than the rent and additional charges payable hereunder shall be deemed to be other than a payment on account of the earliest stipulated basic rent and additional rent, nor shall any endorsement or statement on any check or any letter accompanying any check or payment for rent or additional rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance of such rent and additional rent or pursue any other remedy provided herein or by law. SECTION 28.12. CORPORATE AUTHORITY. If Tenant is a corporation, Tenant represents and warrants that this Lease and the undersigned's execution of this Lease has been duly authorized and approved by the corporation's Board of Directors. The undersigned officers and representatives of the corporation executing this Lease on behalf of the corporation represent and warrant that they are officers of the corporation with authority to execute this Lease on behalf of the corporation, and within fifteen (15) days of execution hereof, Tenant will provide Landlord with a corporate resolution confirming the aforesaid. ARTICLE XXIX PERSONAL LIABILITY SECTION 29.01. Notwithstanding anything to the contrary provided in this Lease, it is specifically understood and agreed, such agreement being a primary consideration for the execution of this Lease by Landlord, that there shall be absolutely no personal liability on the part of Landlord, its successors, assigns or any mortgagee in possession (for the purposes of this Paragraph, collectively referred to as "Landlord"), with respect to any of the terms, covenants and conditions of this Lease, and that Tenant shall look solely to the equity of Landlord in the Building for the satisfaction of each and every remedy of Tenant in the event of any breach by Landlord of any of the terms, covenants and conditions of this Lease to be performed by Landlord, such exculpation of liability to be absolute and without any exceptions whatsoever. ARTICLE XXX GUARANTY SECTION 30.01. This Lease is expressly conditioned on the execution by CAVENHAM HOLDINGS and THE GRAND UNION ACQUISITION CORP. of the guaranty of the terms, covenants and conditions in this Lease to be performed and observed by Tenant PAGE 22 in the form and substance attached hereto and made a part hereof as Exhibit B. ARTICLE XXXI CROSS-COLLATERALIZATION SECTION 31.01. Tenant acknowledges that this Lease shall be cross-collateralized with its lease with Mack Waterford Properties Limited and Bells Lane '89 Associates L.P. doing business as Waterford '89 Joint Venture dated May 1, 1989 covering the property located in the Town of Waterford, Saratoga County, New York, so that a default under that lease shall be deemed a default under this Lease and, similarly, a default under this Lease shall be deemed a default under the aforesaid lease dated May 1, 1989. ARTICLE XXXII RENEWAL OPTIONS SECTION 32.01. Tenant is hereby granted four (4) options to renew this Lease upon the following terms and conditions: (A) At the time of each renewal, the Tenant shall not be in default in accordance with the terms and provisions of this Lease, and shall be in possession of the Demised Premises pursuant to this Lease. (B) Each of the renewal options shall be deemed automatically exercised unless Tenant notifies Landlord to the contrary, in writing, at least twelve (12) months before the expiration of the Term, or twelve (12) months before the expiration of the preceding renewal term, as the case may be. (C) The renewal terms shall be for the term of five (5) years each, the first renewal term to commence at the expiration of the Term of this Lease, the second renewal term to commence upon the expiration of the first renewal term, the third renewal term to commence upon the expiration of the second renewal term, and the fourth renewal term to commence upon the expiration of the third renewal term, and all of the terms and conditions of this Lease, other than the rent, shall apply during any such renewal terms. (D) The basic rent to be paid during the first renewal term shall be Eight Million Two Hundred Ninety-eight Thousand Nine Hundred Sixty-five and 00/100 ($8,298,965.00) Dollars; the basic rent to be paid during the second renewal term shall be Nine Million One Hundred Twenty-eight Thousand Eight Hundred Sixty and 00/100 ($9,128,860.00) Dollars; the basic rent to be paid during the third renewal term shall be Ten Million Forty-one Thousand Seven Hundred Fifty and 00/100 ($10,041,750.00) Dollars; and PAGE 23 the basic rent to be paid during the fourth renewal term shall be Eleven Million Forty-five Thousand Nine Hundred Twenty-five and 00/100 ($11,045,925.00) Dollars. The basic rent during each of the renewal terms shall be payable in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts and shall accrue at the following yearly and monthly rates: Renewal Term Yearly Rent Monthly Rent First (Years 21-25) $1,659,793.00 $138,316.08 Second (Years 26-30) $1,825,772.00 $152,147.67 Third (Years 31-35) $2,008,350.00 $167,362.50 Fourth (Years 36-40) $2,209,185.00 $184,098.75 The aforesaid monthly rents shall be payable in advance on the first day of each calendar month during the respective renewal term, except that a proportionately lesser sum may be paid for the first month of any of the renewal terms if said renewal term commences on a date other than the first of the month. ARTICLE XXXIII RIGHT OF FIRST OFFER TO PURCHASE SECTION 33.01. Tenant shall have the right of first offer to purchase the Demised Premises during the Term of this Lease as the same may be renewed. Landlord will advise the Tenant of the terms and conditions Landlord would be willing to accept with respect to the sale of the Demised Premises, and Tenant shall have thirty (30) days within which to respond to Landlord's offer. Should Tenant decline Landlord's offer or fail to respond, then, and in such event, Tenant shall lose any prospective rights of first offer and Landlord shall be free to sell to any other party upon substantially similar terms but at the basic price no less than that quoted to Tenant, provided that title closes within twelve (12) months from the date of Tenant's refusal or from the expiration of said thirty (30) day period should Tenant fail to respond. Any downward deviation from the basic price as quoted to Tenant or any proposed sale after the aforesaid twelve (12) month period will necessitate a PAGE 24 re-offer to the Tenant, upon the terms and conditions contained in this Article. IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals the day and year first above written. BRACKEN '89 JOINT VENTURE BY: MACK BRACKEN ROAD PROPERTIES LIMITED By:/S/ -------------------------------- BY: MONTGOMERY '89 ASSOCIATES L.P. BY: HAMPSHIRE MANAGEMENT COMPANY, General Partner By: /S/ James E. Hanson II ---------------------- JAMES E. HANSON II, PRESIDENT THE GRAND UNION COMPANY, Tenant By: /S/ Robert F. Catherman ----------------------------------- PAGE 25 Exhibit B GUARANTY OF LEASE WHEREAS, THE GRAND UNION COMPANY, with offices at 201 Willowbrook Boulevard, Wayne, New Jersey 07470-0966 (hereinafter referred to as "Tenant") is desirous of entering into the lease hereinafter mentioned; and WHEREAS, CAVENHAM HOLDINGS and THE GRAND UNION ACQUISITION CORP., with offices at 201 Willowbrook Boulevard, Wayne, New Jersey 07470-0966 (hereinafter, individually and collectively, referred to as "Guarantor") has requested MACK BRACKEN ROAD PROPERTIES LIMITED AND MONTGOMERY 89 ASSOCIATES L.P. DOING BUSINESS AS BRACKEN 89 JOINT VENTURE, WITH OFFICES AT C/O THE MACK COMPANY, 370 West Passaic Street, Rochelle Park, New Jersey 07662 (hereinafter referred to as "Landlord") to enter into a lease with the Tenant, for a Term of twenty (20) years with four (4), five (5) year renewal options, for a building situated in the Town of Montgomery, County of Orange, State of New York, commonly known as Bracken Road, Montgomery, New York (hereinafter referred to as "Lease"); and WHEREAS, the Landlord has refused to enter into the said Lease unless the Guarantor guarantees said Lease in the manner hereinafter set forth. NOW, THEREFORE, to induce the Landlord to enter into said Lease, which Lease is dated this day and is being executed simultaneously herewith, the Guarantor hereby agrees as follows: 1. (a) The Guarantor jointly and severally unconditionally guarantees to the Landlord and the successors and assigns of the Landlord the full and punctual performance and observance, by the Tenant, of all of the terms, covenants and conditions in said Lease contained on Tenant's part to be kept, performed or observed. (b) If, at any time, default shall be made by the Tenant in the performance or observance of any of the terms, covenants or conditions in said Lease contained on the Tenant's part to be kept, performed or observed, the Guarantor will keep, perform and observe the same, as the case may be, in place and stead of the Tenant. (c) The liability of the Guarantor hereunder shall be enforceable against the Guarantor without the necessity for any suit or proceedings on the Landlord's part of any kind or nature whatsoever against the Tenant. 2. Any act of the Landlord, or the successors or assigns of the Landlord, consisting of a waiver of any of the terms or conditions of said Lease, or the giving of any consent to any manner or thing relating to said Lease, or the granting of any indulgences or extensions of time, to the Tenant, may be done without notice to the Guarantor and without releasing the obligations of the Guarantor hereunder. 3. The obligations of the Guarantor hereunder shall not be released by Landlord's receipt, application or release of security given for the performance and observance of covenants and conditions in said Lease contained on the Tenant's part to be performed or observed; nor by any modification of such Lease, but in the case of any such modification the liability of the Guarantor shall be deemed modified in accordance with the terms of any such modification of the Lease. 4. The liability of the Guarantor hereunder shall in no way be affected by (a) the release or discharge of the Tenant in any creditors' receivership, bankruptcy or other proceedings; (b) the impairment, limitation or modification of the liability of the Tenant or the estate of the Tenant in bankruptcy, or of any remedy for the enforcement of the Tenant's said liability under the Lease, resulting from the operation of any present or future provision of the National Bankruptcy Act or other statute or from the decision in any court; (c) the rejection or disaffirmance of the Lease in any such proceedings; (d) the assignment or transfer of the Lease by the Tenant; (e) any disability or other defense of the Tenant, or (f) the cessation from any cause whatsoever of the liability of the Tenant. 5. Until all the covenants and conditions in said Lease on the Tenant's part to be performed and observed are fully performed and observed, the Guarantor: (a) shall have no right of subrogation against the Tenant by reasons of any payments or acts of performance by the Guarantor hereunder; (b) waives any right to enforce any remedy which the Guarantor now or hereafter shall have against the Tenant by reason of any one or more payment or acts of performance in compliance with the obligations of the Guarantor hereunder. 6. This Guaranty shall apply to the said Lease and to any renewal or extension thereof. 7. This instrument may not be changed, modified, discharged or terminated orally or in any manner other than by an agreement in writing signed by the Guarantor and the Landlord. IN WITNESS WHEREOF, the Guarantor has hereunto set his hands and seals the 29TH day of SEPTEMBER 1989. GUARANTOR: CAVENHAM HOLDINGS BY: /S/ Robert Terrence Galvin --------------------------- VICE PRESIDENT THE GRAND UNION ACQUISITION CORP. BY: /S/ Robert Terrence Galvin ------------------------- VICE PRESIDENT PAGE 2 GUARANTY OF LEASE WHEREAS, THE GRAND UNION COMPANY, with offices at 201 Willowbrook Boulevard, Wayne, New Jersey 07470-0966 (hereinafter referred to as "Tenant") is desirous of entering into the lease hereinafter mentioned; and WHEREAS, CAVENHAM HOLDINGS and THE GRAND UNION ACQUISITION CORP., with offices at 201 Willowbrook Boulevard, Wayne, New Jersey 07470-0966 (hereinafter, individually and collectively, referred to as "Guarantor") has requested MACK BRACKEN ROAD PROPERTIES LIMITED and MONTGOMERY 89 ASSOCIATES L.P. doing business as BRACKEN 89 JOINT VENTURE, with offices at c/o The Mack Company, 370 West Passaic Street, Rochelle Park, New Jersey 07662 (hereinafter referred to as "Landlord") to enter into a lease with the Tenant, for a Term of twenty (20) years with four (4), five (5) year renewal options, for a building situated in the Town of Montgomery, County of Orange, State of New York, commonly known as Bracken Road, Montgomery, New York (hereinafter referred to as "Lease"); and WHEREAS, the Landlord has refused to enter into the said Lease unless the Guarantor guarantees said Lease in the manner hereinafter set forth. NOW, THEREFORE, to induce the Landlord to enter into said Lease, which Lease is dated this day and is being executed simultaneously herewith, the Guarantor hereby agrees as follows: 1. (a) The Guarantor jointly and severally unconditionally guarantees to the Landlord and the successors and assigns of the Landlord the full and punctual performance and observance, by the Tenant, of all of the terms, covenants and conditions in said Lease contained on Tenant's part to be kept, performed or observed. (b) If, at any time, default shall be made by the Tenant in the performance or observance of any of the terms, covenants or conditions in said Lease contained on the Tenant's part to be kept, performed or observed, the Guarantor will keep, perform and observe the same, as the case may be, in place and stead of the Tenant. (c) The liability of the Guarantor hereunder shall be enforceable against the Guarantor without the necessity for any suit or proceedings on the Landlord's part of any kind or nature whatsoever against the Tenant. 2. Any act of the Landlord, or the successors or assigns of the Landlord, consisting of a waiver of any of the terms or conditions of said Lease, or the giving of any consent to any manner or thing relating to said Lease, or the granting of any indulgences or extensions of time, to the Tenant, may be done without notice to the Guarantor and without releasing the obligations of the Guarantor hereunder. 3. The obligations of the Guarantor hereunder shall not be released by Landlord's receipt, application or release of security given for the performance and observance of covenants and conditions in said Lease contained on the Tenant's part to be performed or observed; nor by any modification of such Lease, but in the case of any such modification the liability of the Guarantor shall be deemed modified in accordance with the terms of any such modification of the Lease. 4. The liability of the Guarantor hereunder shall in no way be affected by (a) the release or discharge of the Tenant in any creditors' receivership, bankruptcy or other proceedings; (b) the impairment, limitation or modification of the liability of the Tenant or the estate of the Tenant in bankruptcy, or of any remedy for the enforcement of the Tenant's said liability under the Lease, resulting from the operation of any present or future provision of the National Bankruptcy Act or other statute or from the decision in any court; (c) the rejection or disaffirmance of the Lease in any such proceedings; (d) the assignment or transfer of the Lease by the Tenant; (e) any disability or other defense of the Tenant, or (f) the cessation from any cause whatsoever of the liability of the Tenant. 5. Until all of the covenants and conditions in said Lease on the Tenant's part to be performed and observed are fully performed and observed, the Guarantor: (a) shall have no right of subrogation against the Tenant by reasons of any payments or acts of performance by the Guarantor hereunder; and (b) waives any right to enforce any remedy which the Guarantor now or hereafter shall have against the Tenant by reason of any one or more payment or acts of performance in compliance with the obligations of the Guarantor hereunder. 6. This Guaranty shall apply to the said Lease and to any renewal or extension thereof. 7. This instrument may not be changed, modified, discharged or terminated orally or in any manner other than by an agreement in writing signed by the Guarantor and the Landlord. IN WITNESS WHEREOF, the Guarantor has hereunto set his hands and seals the ____day of September 1989. GUARANTOR: CAVENHAM HOLDINGS BY:__________________________________ THE GRAND UNION ACQUISITION CORP. BY:__________________________________ PAGE 2 DESCRIPTION ALL THAT CERTAIN PLOT, piece or parcel of land situate, lying and being in the Town of Montgomery, County of Orange and State of New York, and being more particularly bounded and described as follows: BEGINNING at a point on the northerly side of Bracken Road, said point being the southeasterly corner of the premises, being marked by an iron pipe, being the southwesterly corner of the lands now or formerly of Toohey (Tax Lot 30-1-25 on the Town of Montgomery tax map) and running thence (1) North 84 32 22 West along the northerly side of Bracken Road 583.56 feet to the southwesterly corner of the premises and the southeasterly corner of lands to be retained by Anthonisen, thence; (2) northeasterly along the westerly line of the premises and the easterly line of those lands to be retained by Anthonisen the following two (2) courses and distances: (a) North 05 27 38 East 190.97 feet, thence; (b) North 21 43 58 East 636.85 feet to a point in the southerly line of lands now or formerly of Geraghty, being the northwesterly corner of the premises and the northeasterly corner of those lands to be retained by Anthonisen, thence; (3) South 68 16 02 East along the northerly line of the premises (and through a stone wall for a portion thereof) and the southerly line of lands now or formerly of Geraghty (Tax Lot 24-1-7.1), Yannone (Tax Lot 24-1-7.2), Compa (Tax Lot 24-1-18.1) and DeWitt (Tax Lot 24-1-13) the distance of 768.00 feet to a point in the westerly line of lands now or formerly of Bromberg, Jacobowitz and Kramer (Tax Lot 23-1-57.1) and being the northeasterly corner of the premises and the southeasterly corner of lands now or formerly of DeWitt, thence; (4) South 22 45 57 West along the westerly line of said lands now or formerly of Bromberg, Jacobowitz and Kramer 367.78 feet to an iron marking the southwesterly corner of said lands of Bromberg, Jacobowitz and Kramer and being the northwesterly corner of other lands to be retained by CONTINUED DESCRIPTION CONTINUED PAGE 2 Anthonisen, thence; (5) South 22 59 41 West along the westerly line of said others lands to be retained by Anthonisen 99.71 feet to an iron pipe marking the northeasterly corner of lands now or formerly of Toohey (as aforesaid), thence; (6) North 76 53 32 West along the northerly line of said lands now or formerly of Toohey 132.45 feet to the northwesterly corner of said lands now or formerly of Toohey, thence; (7) South 26 38 04 West along the westerly line of said lands now or formerly of Toohey 170.01 feet to an iron pipe on the northerly side of Bracken Road, being the southwesterly corner of said lands now or formerly of Toohey, the southeasterly corner of the premises and the point or place of beginning. October 2, 1989 The Grand Union Company 201 Willowbrook Boulevard Wayne, New Jersey 07470-0966 Re: Lease Agreement between Mack Bracken Road Properties Limited and Montgomery 89 Associates L.P., and The Grand Union Company; Bracken Road, Montgomery, NY Gentlemen: Notwithstanding anything contained in the above-referenced lease to the contrary, in the event our lender shall require the maintenance of an escrow reserve for the tax or insurance obligations of the Tenant or for any other reoccurring charges required pursuant to the lease, you agree to promptly pay to the escrowee appointed by the lender the required amount as same may be periodically adjusted from time to time. You shall be free to deal directly with said lender in an effort to obtain said lender's waiver of any such requirement or to arrange for the escrowee to maintain any such escrow reserve in an interest-bearing account for your benefit. If the foregoing accurately reflects our understanding, please sign and return a copy of this letter to the undersigned. Very truly yours, MACK BRACKEN ROAD PROPERTIES LIMITED BY: ------------------------- MONTGOMERY 89 ASSOCIATES L.P. BY: HAMPSHIRE MANAGEMENT COMPANY, General Partner By: /s/ James E. Hanson II ------------------------- JAMES E. HANSON II THE GRAND UNION COMPANY BY: Raymond H. Ayers ---------------------- Raymond H. Ayers Vice President October 2, 1989 The Grand Union Company 201 Willowbrook Boulevard Wayne, New Jersey 07470-0966 Re: Lease Agreement between Mack Bracken Road Properties Limited and Montgomery 89 Associates L.P. ("Landlord"), and The Grand Union Company ("Tenant"); Bracken Road, Montgomery, New York Gentlemen: Notwithstanding anything contained in the above-referenced lease to the contrary, in the event Landlord is unable to obtain a nondisturbance agreement from a future mortgagee as required by Section 13.01 of the Lease as a result of the requirements set forth in said Section 13.01 that said mortgagee must agree to make the proceeds of casualty insurance available to Landlord for restoration, then, and in that event, you hereby agree that said requirement obligating said mortgagee to make the proceeds of casualty insurance available to Landlord for restoration shall be deemed waived and eliminated from the provisions of said Section 13.01 with the express understanding that in the event of a casualty Landlord will make available to the Tenant for restoration of the Premises an amount equal to the proceeds of insurance, provided that at the time of the casualty there shall be at least ten (10) years remaining in the Term of the Lease, failing which you shall be required to exercise the next successive renewal option(s) such that the remaining term of the Lease shall be at least ten (10) years. In the event casualty occurs at any time after the expiration of the first year of the third renewal term and if Landlord does not elect to make available to the Tenant an amount equal to the insurance proceeds, then, and in that event, Tenant shall have the right to cancel and terminate the Lease provided that Tenant shall pay to Landlord any difference in the amount of insurance proceeds and the costs of restoration of the Premises, in the event the cost of restoration shall exceed the amount of insurance proceeds. The Grand Union Company October 2, 1989 Page Two If the foregoing accurately reflects our understanding, please sign and return a copy of this letter to the undersigned. Very truly yours, MACK BRACKEN ROAD PROPERTIES LIMITED BY: ------------------------- MONTGOMERY 89 ASSOCIATES L.P. BY: HAMPSHIRE MANAGEMENT COMPANY, General Partner By: /s/ James E. Hanson II ------------------------- JAMES E. HANSON II THE GRAND UNION COMPANY BY: Raymond H. Ayers ---------------------- Raymond H. Ayers Vice President New York Region EXHIBIT B KIM KOHLER as of 1/15/96 102 OPERATING STORE LOCATION STATE COUNTY OPERATING STORES 1 PORT JEFFERSON NY SUFFOLK 6 LITTLE NECK NY QUEENS 7 HERRICKS NY NASSAU 8 NORTH PORT WASHINGTON NY NASSAU 36 MASSAPEQUA NY NASSAU 38 SMITHTOWN NY SUFFOLK 39 WEST HEMPSTEAD NY NASSAU 52 GARDEN CITY NY NASSAU 64 NORTH BELLMORE NY NASSAU 65 WEST BABYLON NY SUFFOLK 68 DEER PARK NY SUFFOLK 82 SAYVILLE NY SUFFOLK 84 COMMACK NY SUFFOLK 95 NORTH PORT NY SUFFOLK 98 WEST ISLIP NY SUFFOLK 107 MAHOPAC NY PUTNAM 114 PEEKSKILL NY WESTCHESTER 130 TARRYTOWN NY WESTCHESTER 137 LARCHMONT NY WESTCHESTER 155 DARIEN CT FAIRFIELD 203 PLEASANTVILLE NY WESTCHESTER 207 NEW CANAAN CT FAIRFIELD 212 RIDGEFIELD CT FAIRFIELD 213 NORWALK CT FAIRFIELD 227 CROTON-ON-HUDSON NY WESTCHESTER 231 NEWTOWN CT FAIRFIELD 239 DOBBS FERRY NY WESTCHESTER 242 TRUMBULL CT FAIRFIELD 247 MT KISCO NY WESTCHESTER 248 CHAPPAQUA NY WESTCHESTER 416 BLEEKER ST. NY MANHATTAN 422 COLD SPRING NY PUTNAM 434 BRONX-TREMONT NY BRONX 437 GLENVILLE CT FAIRFIELD 801 BEACON NY DUTCHESS 805 EASTCHESTER NY WESTCHESTER 810 WESTPORT CT FAIRFIELD 811 GREENWICH CT FAIRFIELD 812 GLENBROOK CT FAIRFIELD 820 FISHKILL NY DUTCHESS 823 CARMEL NY PUTNAM 825 MONROE CT FAIRFIELD 827 NEW FAIRFIELD CT FAIRFIELD 828 SOUTHBURY CT NEW HAVEN 829 PAWLING NY DUTCHESS 3100 ELMWOOD PARK NJ BERGEN 3101 DOVER TOWNSHIP NJ OCEAN 3103 SUFFERN NY ROCKLAND 3109 HACKENSACK NJ BERGEN 3110 MATAMORAS PA PIKE 3112 WOODRIDGE NJ BERGEN EXHIBIT B KIM KOHLER as of 1/15/96 STORE LOCATION STATE COUNTY 3109 HACKENSACK NJ BERGEN 3110 MATAMORAS PA PIKE 3112 WOODBRIDGE NJ BERGEN 3114 MONROE NY ORANGE 3116 WASHINGTONVILLE NY ORANGE 3120 MANALAPAN NJ MONMOUTH 3122 LIVINGSTON NJ ESSEX 3150 GOSHEN NY ORANGE 3151 FAIRLAWN-RADBURN NJ BERGEN 3180 RIDGEWOOD NJ BERGEN 3197 SOMMERVILLE NJ SOMERSET 3250 BERKELEY HEIGHTS NJ UNION 3253 NORTH BRUNSWICK NJ MIDDLESEX 3269 CORNWALL NY ORANGE 3273 DENVILLE NJ MORRIS 3277 HIGHLAND FALLS NY ORANGE 3281 TENAFLY NJ BERGEN 3282 CLIFTON-LEXINGTON NJ PASSAIC 3286 CLOSTER NJ BERGEN 3291 TEANECK NJ BERGEN 3400 MILFORD PA PIKE 3451 CLIFTON-BROAD NJ PASSAIC 3457 WALDWICK NJ BERGEN 3463 RAMAPO NY ROCKLAND 3472 MONTVALE-CHESTNUT NJ BERGEN 3477 DUMONT NJ BERGEN 3480 LAKE HIAWATHA NJ MORRIS 3481 GREENWOOD LAKE NY ORANGE 3486 BUTLER NJ MORRIS 3489 BASKING RIDGE NJ SOMERSET 3491 MT IVY NY ROCKLAND 3492 POINT PLEASANT NJ OCEAN 3498 MONTVALE-KINDERKAMACK NJ BERGEN 3499 STONY POINT NY ROCKLAND 3545 SOUTH BRUNSWICK NJ MIDDLESEX 3551 WARWICK NY ORANGE 3552 OAKLAND NJ BERGEN 3553 PARAMUS NJ BERGEN 3554 SPARTA NJ SUSSEX 3556 LANDING NJ MORRIS 3558 HOWELL TOWNSHIP NJ MONMOUTH 3562 BRICKTOWNSHIP NJ OCEAN 3563 FLEMINGTON NJ HUNTERDON 3564 ROCKY HILL NJ SOMERSET 3565 RAMSEY NJ BERGEN 3568 MATAWAN NJ MONMOUTH 3570 WESTWOOD NJ BERGEN 3571 RINGWOOD NJ PASSAIC 3572 TOMS RIVER NJ OCEAN 3573 BELLEVILLE NJ ESSEX 3574 WYCKOFF NJ BERGEN 3575 WEST NYACK NY ROCKLAND 3576 FORT LEE NJ BERGEN 3580 MIDDLETOWN NJ MONMOUTH NORTHERN REGION - --------------- EXHIBIT B KIM KOHLER as of 1/15/96 128 OPERATING OPERATING STORES 1103 JOHNSON VT LAMOILLE 1106 FORT EDWARDS NY WASHINGTON 1107 ROUSES POINT NY CLINTON 1112 ALBANY-LIQUOR STORE NY ALBANY 1113 POULTNEY VT RUTLAND 1114 CORINTH NY SARATOGA 1134 BURLINGTON VT CHITTENDON 1135 KEESVILLE NY ESSEX 1139 WOODSTOCK NY ULSTER 1147 LA GRANGE NY DUTCHESS 1153 PORT HENRY NY ESSEX 1160 MANCHESTER VT BENNINGTON 1161 ENOSBURG FALLS VT FRANKLIN 1166 STOWE VT LAMOILLE 1167 SOUTH BURLINGTON VT CHITTENDEN 1169 RUTLAND VT RUTLAND 1171 SARANAC LAKE NY FRANKLIN 1175 WHITEHALL NY WASHINGTON 1183 PLATTSBURG-AIRBASE NY CLINTON 1195 SCHROON LAKE NY ESSEX 1197 ST. ALBANS VT FRANKLIN 1198 NORTHVILLE NY FULTON 1370 TUPPER LAKE NY FRANKLIN 1802 FORT PLAIN NY MONTGOMERY 1803 STAMFORD NY DELAWARE 1804 INDIAN LAKE NY HAMILTON 1805 SARANAC LAKE NY ESSEX 1810 LUDLOW VT WINDSOR 1811 WINDSOR VT WINDSOR 1812 BRUNSWICK-TROY NY RENSSLAER 1814 SOUTH BURLINGTON VT CHITTENDEN 1815 GRANVILLE NY WASHINGTON 1816 PLEASANT VALLEY NY DUTCHESS 1818 WAITSFIELD VT WASHINGTON 1819 ESSEX CENTER VT CHITTENDON 1820 NEWPORT VT ORLEANS 1821 ESSEX JUNCTION VT CHITTENDON 1823 BURNT HILLS NY SARATOGA 1824 RHINEBECK NY DUTCHESS 1825 ELIZABETHTOWN NY ESSEX 1826 CHESTERTOWN NY WARREN 1828 NORTHFILED VT WASHINGTON 1836 BENNINGTON VT BENNINGTON 1844 BALLSTON SPA NY SARATOGA 1845 CHAMPLAIN NY CLINTON 1852 HOOSICK FALLS NY RENSSELAER 1855 ELSMERE NY ALBANY 1859 PERU NY CLINTON 1861 BRATTLEBORO VT WINDHAM 1867 GREENWICH NY WASHINGTON EXHIBIT B KIM KOHLER as of 1/15/96 128 OPERATING STORE LOCATION STATE COUNTY 1870 BARRE VT WASHINGTON 1872 PALANTINE BRIDGE NY MONTGOMERY 1873 TICONDEROGA NY ESSEX 1874 HYDE PARK NY DUTCHESS 1876 MILTON VT CHITTENDON 1878 DOVER PLAIN NY DUTCHESS 1879 LOUDONVILLE NY ALBANY 1884 BRISTOL VT ADDISON 1885 HARDWICK VT ULSTER 1888 ELLENVILLE NY ULSTER 1892 MALTA NY SARATOGA 1893 WINOOSKI VT CHITTENDEN 1895 AMENIA NY DUTCHESS 1897 HUDSON FALLS NY WASHINGTON 1899 RAVENA NY ALBANY 1900 MIDDLEBURGH NY SCHOHARIE 1902 LAKE PLACID NY ESSEX 1903 COXSACKIE NY GREENE 1905 WATERVLIET NY ALBANY 1906 GLENMONT NY ALBANY 1907 HIGHLAND NY ULSTER 1908 FAIR HAVEN VT RUTLAND 1909 NORTH CREEK NY WARREN 1914 HANOVER NH GRAFTON 1915 WEST LEBANON NH GRAFTON 1922 MORRISVILLE VT LAMOILLE 1925 KINGSTON NY ULSTER 1928 SPRINGFIELD VT WINDSOR 1930 GUILDERLAND NY ALBANY 1933 MONTPELIER VT WASHINGTON 1935 SCHENECTADY NY SCHENECTADY 1937 AUSABLE FORKS NY ESSEX 1938 LINCOLN NH GRAFTON 1939 BRADFORD VT ORANGE 1940 NISKAYUNA NY SCHENECTADY 1941 BOLTON LANDING NY WARREN 1942 WILLSBORO NY ESSEX 1943 HOPEWELL JUNCTION NY DUTCHESS 1946 WATERFORD NY SARATOGA 1947 SCOTIA NY SCHENECTADY 1950 SAUGERTIES NY ULSTER 1951 WILMINGTON VT WINDHAM 1953 SCHODACK NY RENSSELAER 1954 WARRENSBURG NY WARREN 1955 CAMBRIDGE NY WASHINGTON 1957 MECHANICVILLE NY SARATOGA 1958 SWANTON VT FRANKLIN 1960 EAST GREENBUSH NY RENNSELAER 1962 BROADALBIN NY FULTON 1966 COLCHESTER VT CHITTENDON 1967 RANDOLPH VT ORANGE 1968 WATERBURY VT WASHINGTON 1969 WHITE RIVER VT WINDSOR 1973 TANNERSVILLE NY GREENE 1974 ROTTERDAM NY SCHENECTADY 1975 CLIFTON PARK NY SARATOGA EXHIBIT B KIM KOHLER as of 1/15/96 STORE LOCATION STATE COUNTY 1974 ROTTERDAM NY SCHENECTADY 1975 CLIFTON PARK NY SARATOGA 1977 VALATIE NY COLUMBIA 1979 WAPPINGERS FALLS NY DUTCHESS 1981 WOODSTOCK VT WINDSOR 1983 ST. JOHNSBURY VT CALEDONIA 1985 NORTH CLARENDON VT RUTLAND 1988 CHATHAM NY COLUMBIA 1989 SCHAGHTICOKE NY RENSSELAER 1992 BRANDON VT RUTLAND 1993 MIDDLEBURY VT ADDISON 1994 SOUTH GLENS FALLS NY SARATOGA 1996 PLATTSBURG NY CLINTON 1997 SARATOGA NY SARATOGA 2101 SIDNEY NY DELAWARE 2110 BINGHAMTON NY BROOME 2133 VESTAL NY BROOME 2150 HAMILTON NY MADISON 2312 VESTAL PLAZA NY BROOME 2356 HANCOCK NY DELAWARE 2359 NORWICH NY CHENAGO 2362 ONEONTA NY OTSEGO 2370 BINGHAMTON NY BROOME 2373 DELHI NY DELAWARE CGX080 GU Category Code Listing RUN DATE 11/03/95 RCG080 Exhibit C - -GU CATEGORY CODE- DESCRIPTION MAJ INT MIN 085 00 00 HEALTH & BEAUTY AIDS 085 01 00 ORAL HYGIENE 085 01 01 TOOTHPASTE - TUBE - TARTAR 085 01 02 TOOTHPASTE - TUBE - NON TARTAR 085 01 03 TOOTHPASTE - PUMP - TARTAR 085 01 04 TOOTHPASTE - PUMP - NON TARTAR 085 01 05 TOOTHPASTE - SMOKERS/MISC 085 01 06 TOOTH POLISH 085 01 10 DENTURE CLEANSERS 085 01 11 DENTURE ADHESIVES 085 01 12 ORAL HYGIENE MEDICATIONS 085 01 20 TOOTHBRUSHES 085 01 21 DENTAL FLOSS 085 01 30 MOUTHWASH 085 01 31 BREATH SPRAY/DROPS 085 01 98 ORAL HYGIENE PREPACKS 085 01 99 ORAL HYGIENE RACKS 085 02 00 HAIR CARE PREPARATIONS 085 02 01 HAIR CARE PREPARATIONS HAIR SPRAY AEROSOL 085 02 02 HAIR CARE PREPARATIONS HAIR SPRAY NON AEROSOL 085 02 03 HAIR CARE PREPARATIONS WIG ACCESSORIES 085 02 04 HAIR CARE PREPARATIONS WAVESET GEL & LOTIONS 085 02 05 HAIR CARE PREPARATIONS SHAMPOOS REG CGX080 GU Category Code Listing RUN DATE 11/03/95 RCG080 - -GU CATEGORY CODE- DESCRIPTION MAJ INT MIN 085 02 06 HAIR CARE PREPARATIONS DANDRUFF SHAMPOOS 085 02 07 HAIR CARE PREPARATIONS CREME RINSES 085 02 08 HAIR CARE PREPARATIONS CONDITIONERS 085 02 09 HAIR CARE PREPARATIONS HAIR COLORINGS 085 02 10 HAIR CARE PREPARATIONS HAIR COLORINGS ACCESSORIES 085 02 11 HAIR CARE PREPARATIONS HOME PERMANENTS 085 02 12 HAIR CARE PREPARATIONS MEN'S HAIR SPRAYS 085 02 13 HAIR CARE PREPARATIONS MEN'S TONIC & CREAMS 085 02 14 HAIR CARE PREPARATIONS STYLING SPRITZS 085 03 00 DEODORANTS & ANTI PERSPIRANTS 085 03 01 DEODORANTS CREAM & PAD 085 03 02 DEODORANTS STICK 085 03 03 ANTI PERSPIRANTS STICK 085 03 04 DEODORANTS ROLL ON 085 03 05 ANTI PERSPIRANTS ROLL ON 085 03 06 DEODORANTS SPRAYS 085 03 07 ANTI PERSPIRANTS SPRAYS 085 03 08 BODY SPRAYS (IMPULSE, ETC) 085 03 99 MISC DEOD & ANTI PERSPIRANTS 085 04 00 SHAVING SUPPLIES 085 04 01 SHAVING SUPPLIES RAZORS 085 04 02 SHAVING SUPPLIES BLADES 085 04 03 SHAVING SUPPLIES CREAMS & GELS 085 04 04 SHAVING SUPPLIES AFTER SHAVE & COLOGNE 085 04 99 SHAVING SUPPLIES, OTHERS 085 05 00 BABY PRODUCTS/BABY NEEDS NON-HBA 085 05 01 BABY PRODUCTS POWDER 085 05 02 BABY PRODUCTS BABY OILS 085 05 03 BABY PRODUCTS BABY LOTIONS & CREAMS 085 05 04 BABY PRODUCTS BABY OINTMENTS 085 05 05 BABY PRODUCTS BABY SHAMPOOS 085 05 06 BABY PRODUCTS BABY BOTTLES & ACCESSORIES 085 05 07 BABY PRODUCTS BABY WIPES & CLOTH 085 05 08 BABY PRODUCTS MISC. BABY 085 05 20 BABY NEEDS NON-HBA CLOTHING-EXCEPT PANTS 085 05 21 BABY NEEDS NON-HBA PANTS 085 05 22 BABY NEEDS NON-HBA FEEDING IMPLEMENTS TEETHERS & PACIF 085 05 23 BABY NEEDS NON-HBA MEDICAL ITEMS 085 05 24 BABY NEEDS NON-HBA BATH AND PERSONAL CARE 085 05 25 BABY NEEDS NON-HBA TOYS 085 05 29 BABY NEEDS NON-HBA MISCL 085 06 00 FIRST AID PRODUCTS 085 06 01 FIRST AID PRODUCTS PLASTIC STRIPS CGX080 GU Category Code Listing RUN DATE 11/03/95 RCG080 - -GU CATEGORY CODE- DESCRIPTION MAJ INT MIN 085 06 02 FIRST AID PRODUCTS TAPE BANDAGE GUAZE DRESSING 085 06 03 FIRST AID PRODUCTS COTTON BALLS 085 06 04 FIRST AID PRODUCTS COTTON SWABS 085 06 05 FIRST AID PRODUCTS PETROLEUM JELLY 085 06 06 FIRST AID PRODUCTS FIRST AID LIQUID CREAMS ANTISEPTI 085 06 07 FIRST AID PRODUCTS SUPPOSITORIES & OINTMENTS 085 06 08 FIRST AID - WRAPS/BRACES 085 07 00 SKIN PREPARATIONS 085 07 01 SKIN PREPARATIONS ACNE MEDICATIONS 085 07. 02 SKIN PREPARATIONS MEDICATED/SPECIAL SOAPS 085 07 03 SKIN PREPARATIONS FACE CREAMS & LOTIONS 085 07 04 SKIN PREPARATIONS HAND LOTIONS & CREAMS 085 07 05 SKIN PREPARATIONS BATH OILS & BEADS 085 07 06 SKIN PREPARATIONS TALC & DUSTING POWDERS 085 07 07 SKIN PREPARATIONS COLOGNES & PERFUMES 085 07 08 SKIN PREPARATIONS MISC SKIN PREPARATIONS 085 07 09 SKIN PREPARATIONS NAIL POLISH REMOVERS 085 07 10 SKIN PREPARATIONS-FACIAL SCRUBS, FRESHENERS ETC. 085 08 00 EYE & EAR PREPARATIONS 085 08 01 EYE DROPS & LOTIONS 085 08 02 CONTACT LENS PREPARATIONS 085 08 03 EAR ITEMS 085 08 04 READING GLASSES/ACCESSORIES 085 09 00 ANTACIDS & LAXATIVES 085 09 01 LIQUID ANTACIDS 085 09 02 ANTACID TABLETS 085 09 03 POWDER & GRANULE ANTACIDS 085 09 04 PILL TABLET & GRANULE LAXATIVES 085 09 05 LIQUID LAXATIVES 085 09 06 SUPPOSITORIES & ENEMAS 085 09 07 MISC ANTACIDS & LAXATIVES 085 10 00 COUGH & COLD REMEDIES 085 10 01 LIQUID COUGH & COLD MEDICINES 085 10 02 NASAL SPRAY-NOSE DROPS 085 10 03 THROAT LOZENGES 085 10 04 COLD TABLETS 085 10 05 DECONGESTANT TABLETS & CAPSULES 085 10 06 SINUS TABLETS & CAPSULES 085 10 07 BRONCHIAL SPRAYS & TABLETS 085 10 08 ALLERGY TABLETS & CAPSULES 085 10 09 MISC COUGH & COLD 085 11 00 ANALGESICS CGX080 GU Category Code Listing RUN DATE 11/03/95 RCG080 - -GU CATEGORY CODE- DESCRIPTION MAJ INT MIN 085 11 01 ASPIRIN TABLETS 085 11 02 ASPIRIN CAPSULES 085 11 03 NON ASPIRIN TABLETS 085 11 04 NON ASPIRIN CAPSULES 085 11 05 ARTHRITIS STRENGTH TABLETS & CAPSULES 085 11 06 SLEEP AIDS (DOWNERS) 085 11 07 NON SLEEP AIDS (UPPERS) 085 11 08 EXTERNAL ANALGESICS (BEN GAY, ABSORBINE JR, ETC) 085 11 09 MENSTRUAL ANALGESICS (PAMPRIN, MIDOL, ETC) 085 11 99 MISC ANALGESICS 085 12 00 VITAMINS 085 12 01 PRIVATE LABEL NATURAL 085 12 02 NATIONAL BRAND NATURAL 085 12 03 NATIONAL BRAND MULTIPLES 085 12 04 PRIVATE LABEL MULTIPLES 085 12 05 VITAMIN/DIETARY SUPPLEMENTS - ALL 085 13 00 FEMININE HYGIENE PRODUCTS 085 13 01 FEMININE HYGIENE PRODUCTS TAMPONS 085 13 02 FEMININE HYGIENE PRODUCTS SANITARY NAPKINS 085 13 03 FEMININE HYGIENE PRODUCTS SANITARY BELTS 085 13 04 FEMININE HYGIENE PRODUCTS FEMININE DEODORANTS 085 13 05 FEMININE HYGIENE PRODUCTS DOUCHE POWDERS & LIQUIDS 085 13 06 FEMININE HYGIENE PRODUCTS MISC 085 13 07 FEMININE HYGIENE PRODUCTS, PANTY LINERS 085 14 00 FOOT PRODUCTS 085 14 01 FOOT PRODUCTS DR. SCHOLLS 085 14 02 FOOT PRODUCTS, OTHERS 085 15 00 DIET AIDS - SUPPLEMENTS & BARS 085 15 01 DIET AIDS - SUPPLEMENTS & BARS - ALL 085 16 00 BIRTH CONTROL DEVICES 085 16 01 BIRTH CONTROL DEVICES, ALL 085 17 00 HOME HEALTH & SUPPLIES 085 17 01 HOME HEALTH & SUPPLIES, ALL 085 18 00 DIABETIC SUPPLIES 085 18 01 DIABETIC SUPPLIES, ALL 085 19 00 HEALTH APPLIANCES 085 19 01 HEALTH APPLIANCES, ALL 085 20 00 INCONTINENTS CGX080 GU Category Code Listing RUN DATE 11/03/95 RCG080 - -GU CATEGORY CODE- DESCRIPTION MAJ INT MIN 085 20 01 INCONTINENTS, ALL 085 70 00 HEALTH CARE 8 BEAUTY CARE (GREENHOUSE) 085 70 01 HEALTH CARE 085 70 02 BEAUTY CARE 085 80 00 SEASONAL & PROMOTIONAL H.B.A. 085 80 01 SUNTAN CREAMS, LOTIONS, SPRAYS 085 80 02 SUNGLASSES 085 90 00 WAREHOUSE BUYS GEN MDSE & H.B.A. 085 90 01 WAREHOUSE BUYS GEN MDSE & H.B.A. 085 99 00 MISCELLANEOUS H.B.A. 085 99 01 MISCELLANEOUS ALL 085 99 02 GENERAL MERCHANDISE PREPACK/ HBA PREPACK 085 99 03 HBC TEST 085 99 04 GM TEST 085 99 05 TRAIL SIZE 086 00 00 HAIR CARE & COSMETICS 086 03 00 HAIR CARE 086 03 01 HAIR CARE CURLERS & ROLLERS 086 03 02 HAIR CARE PINS & CLIPS 086 03 03 HAIR CARE NETS, PAPERS, TAPES, ACCOUTREMENTS 086 03 04 HAIR CARE COMBS 086 03 05 HAIR CARE BRUSHES 086 03 06 HAIR CARE BARRETTES 086 03 07 HAIR CARE HEADBANDS, PONYTAIL HOLDERS, ETC 086 03 08 HAIR CARE CAPS-SHOWER, SLUMBER, RAIN 086 03 09 HAIR IMPLEMENTS, TWEEZERS, OTHER TOOLS 086 03 99 MIRRORS 086 04 00 COSMETICS 086 04 01 MAYBELLINE EYE COSMETICS 086 04 02 MAYBELLINE LIPSTICKS, ETC 086 04 03 MAYBELLINE ROUGES, POWDERS, ETC 086 04 04 MAYBELLINE NAIL POLISHES 086 04 05 MAX FACTOR EYE COSMETICS 086 04 06 MAX FACTOR LIPSTICKS, ETC 086 04 07 MAX FACTOR ROUGE, POWDER, ETC 086 04 08 MAX FACTOR NAIL POLISHES 086 04 09 ANDREA EYE COSMETICS 086 04 10 ANDREA NAIL POLISHES 086 04 11 COVER GIRL EYE COSMETICS CGX080 GU Category Code Listing RUN DATE 11/03/95 RCG080 - -GU CATEGORY CODE- DESCRIPTION MAJ INT MIN 086 04 12 COVER GIRL LIPSTICKS, ETC 086 04 13 COVER GIRL ROUGES, POWDERS, ETC 086 04 14 COVER GIRL NAIL POLISHES 086 04 15 BONNE BELL EYE COSMETICS 086 04 16 BONNE BELL LIPSTICKS, ECT 086 04 17 BONNE BELL ROUGE, POWDERS, ECT 086 04 18 AZIZA EYE COSMETICS 086 04 19 AZIZA ROUGE, POWDERS, ECT 086 04 20 ALMAY EYE COSMETICS 086 04 21 ALMAY LIPSTICKS, ETC 086 04 22 ALMAY ROUGES, POWDERS, ETC 086 04 23 ALMAY NAIL POLISHES, ETC 086 04 28 CUTEX LIPSTICKS, ETC 086 04 29 CUTEX EYE COSMETICS 086 04 30 CUTEX NAIL POLISHES, ETC 086 04 37 POSNER LIPSTICKS, ALL 086 04 38 POSNER NAIL POLISHES, ETC 086 04 40 HONEY & SPICE LIPSTICKS 086 04 44 L'OREAL EYE COSMETICS 086 04 45 L'OREAL LIPSTICKS, ETC 086 04 46 L'OREAL ROUGES, POWDERS, ETC 086 04 47 L'OREAL NAIL POLISHES, ETC 086 04 51 QUENCHER LIPSTICKS, ETC 086 04 53 QUENCHER NAIL POLISHES, ETC 086 04 54 REVLON EYE COSMETICS 086 04 55 REVLON LIPSTICKS, ETC 086 04 56 REVLON ROUGES, POWDERS, ETC 086 04 57 REVLON NAIL POLISHES, ETC 086 04 61 SALLY HANSEN EYE COSMETICS 086 04 62 SALLY HANSEN LIPSTICKS, ETC 086 04 63 SALLY HANSEN ROUGE, POWDERS, ETC 086 04 64 SALLY HANSEN NAIL POLISH, ETC 086 04 66 ARTMATIC EYE COSMETICS 086 04 67 ARTMATIC LIPSTICKS, ETC 086 04 68 ARTMATIC ROUGE, POWDERS, ETC 086 04 69 ARTMATIC NAIL POLISHES, ETC 086 04 70 FLAME GLO EYE COSMETICS 086 04 71 FLAME GLO LIPSTICKS, ETC 086 04 72 FLAME GLO ROUGES, POWDERS, ETC 086 04 76 HAZEL BISHOP EYE COSMETICS 086 04 77 HAZEL BISHOP LIPSTICKS, ETC 086 04 78 HAZEL BISHOP ROUGES, POWDERS ETC 086 04 79 HAZEL BISHOP NAIL POLISHES, ETC 086 04 80 WET N WILD EYE COSMETICS 086 04 81 WET N WILD LIPSTICKS, ETC 086 04 82 WET N WILD ROUGES, PWDERS, ETC 086 04 83 WET N WILD NAIL POLISHES, ETC CGX080 GU Category Code Listing RUN DATE 11/03/95 RCG080 - -GU CATEGORY CODE- DESCRIPTION MAJ INT MIN 086 04 87 CORN SILK ROUGES, POWDERS, ETC 086 04 92 ULTRA SHEEN ROUGES, POWDERS ETC. 086 04 99 COSMETICS, OTHERS 087 00 00 HOSIERY 087 01 00 PRIVATE LABEL ASSTD PREPACKS 087 01 01 PRIVATE LABEL ASSTD PREPACKS, ALL 087 05 00 P/L THRIFTIES HOSIERY 087 05 01 THRIFTIES PANTY HOSE 087 05 02 THRIFTIES KNEE HIGH 087 06 00 P/L FASHION HOSIERY 087 06 01 P/L FASHION PANTY HOSE 087 06 02 P/L FASHION KNEE HIGHS 087 07 00 P/L DELUXE HOSIERY 087 07 03 DANCERS KNEE HIGH STOCKINGS 087 07 04 DANCERS SHEER TO WAIST P/H 087 07 06 DANCERS DELUXE P/H 087 07 07 DANCERS SHEER SUPPORT P/H 087 07 08 DANCERS CLASSIC EX LARGE P/H 087 07 09 DANCERS REAL P/H 087 07 10 DANCERS TRIM TOP P/H 087 07 11 ULTRA SHEER P/H 087 07 99 PRIVATE LABEL FIXTURES 087 08 00 NO NONSENSE - HOSIERY 087 08 01 NO NONSENSE - REGULAR 087 08 02 NO NONSENSE - SHEER TO WAIST 087 08 03 NO NONSENSE - KNEE HIGH 087 08 04 NO NONSENSE - CONTROL TOP 087 08 05 NO NONSENSE - LIGHT SUPPORT 087 08 06 NO NONSENSE - SHEER & SILKY 087 08 07 NO NONSENSE - FASHION COLORS 087 08 08 NO NONSENSE 2PACKS- 087 08 99 NO NONSENSE - RACKS 087 09 00 L`EGGS HOSIERY 087 09 01 L`EGGS REGULAR 087 09 02 L`EGGS SHEER ENERGY 087 09 03 L`EGGS SHEER ELEGANCE 087 09 04 L`EGGS KNEE HIGHS 087 09 05 L`EGGS CONTROL TOP 087 09 06 L`EGGS ACTIVE SUPPORT CGX080 GU Category Code Listing RUN DATE 11/03/95 RCG080 - -GU CATEGORY CODE- DESCRIPTION MAJ INT MIN 087 09 99 L`EGGS PREPACKS 087 99 00 HOSIERY, MISCELLANEOUS 087 99 01 AFRO-TIQUE HOSIERY 087 99 99 HOSIERY, MISCELLANEOUS 088 00 00 MISC GENERAL MERCHANDISE 088 01 00 FILM FLASH 088 01 01 NEGATIVE FILM 088 01 02 POSITIVE FILM 088 01 03 INSTANT FILM 088 01 10 PHOTO FINISHING 088 01 11 ENLARGING 088 01 20 CAMERAS 088 01 50 FLASH 088 01 99 FILM FLASH, MISC 088 02 00 BLANK VIDEO TAPES 088 02 01 VHS-REGULAR 088 02 02 VHS-HI GRADE 088 02 03 VHS-PREMIUM GRADE 088 02 04 BETA-HI GRADE 088 02 05 BETA-REGULAR 088 02 09 CLEANING KITS 088 02 98 TAPE LIBRARIES 088 02 99 VIDEO TAPE PREPACKS 088 03 00 VIDEO RENTALS 088 04 00 BLANK AUDIO TAPES 088 04 01 LOW NOISE/NORMAL BIAS (GOOD) 088 04 02 NORMAL BIAS (BETTER) 088 04 03 NORMAL BIAS (BEST) 088 04 04 HIGH BIAS (PREMIUM) 088 04 09 CLEANING KITS 088 04 98 AUDIO LIBRARY/CARRY CASES 088 05 00 PRE-RECORDED AUDIO CASSETTE TAPES 088 05 01 PRE-RECORDED AUDIO CASSETTE TAPES, ALL TITLES 088 10 00 MISC GENERAL MERCHANDISE TOYS, GAMES, OTHERS 088 10 01 MISC GENERAL MERCHANDISE TOYS 088 10 10 MISC GENERAL MERCHANDISE GAMES 088 10 99 MISC GENERAL MERCHANDISE, OTHERS 088 15 00 GENERAL MERCHANDISE SOUVENIRS CGX080 GU Category Code Listing RUN DATE 11/03/95 RCG080 - -GU CATEGORY CODE- DESCRIPTION MAJ INT MIN 088 15 01 GENERAL MERCHANDISE SOUVENIRS, ALL 088 20 00 SEWING NOTIONS 088 20 10 SEWING NOTIONS ALL 088 50 00 CIGARETTE LIGHTERS 088 50 01 CIGARETTE LIGHTERS, DISPOSABLE 088 60 00 CANDLES & ACCESSORIES 088 60 01 COLUMNS 088 60 02 VOTIVES 088 60 03 TAPERS 088 60 04 FEDERALS 088 60 05 SPIRALS 088 60 06 COUNTY PEGS 088 60 07 SPECIALTIES 088 60 08 HOUSEHOLD 088 60 97 VOTIVE CUPS 088 60 98 HOLDERS 088 60 99 MISCELLANEOUS 088 70 00 SEASONAL 088 70 01 FURNITURE 088 90 00 CONTINUITIES 088 90 01 NEWCOR KNIFE, CONTINUITY 088 90 02 COVINGTON STONEWARE, CONTINUITY 088 90 03 PLAYFOLD, CONTINUITY 088 90 04 READERS DIGEST, CONTINUITY 088 90 05 ENCYCLOPEDIA 088 90 06 SESAME STREET 088 90 07 PALMER COOKWARE 088 90 08 FRESH FLOWERS DINNERWARE 088 90 09 FRONT END PEG H.B.C. 089 00 00 CLEANING AIDS 089 01 00 STICK GOODS & REFILLS 089 01 01 BROOMS 089 01 02 SPONGE MOPS 089 01 03 SPONGE MOPS REFILLS 089 01 04 COTTON MOPS (DECK MOPS) 089 01 05 COTTON MOPS (DECK MOPS) REFILLS 089 01 06 DUST MOPS 089 01 07 DUST MOPS REFILLS 089 01 08 WAX APPLICATORS CGX080 GU Category Code Listing RUN DATE 11/03/95 RCG080 - -GU CATEGORY CODE- DESCRIPTION MAJ INT MIN 089 01 09 WAX APPLICATORS REFILLS 089 01 99 STICK GOODS & REFILLS, MISC. 089 10 00 BRUSHES 089 10 01 BOWL BRUSHES 089 10 02 BODY BRUSHES 089 10 03 HAND/NAIL BRUSHES 089 10 04 KITCHEN BRUSHES 089 10 06 DUST PAN BRUSHES 089 10 08 SCRUB BRUSHES 089 10 10 CLOTHES BRUSHES, DELINTERS 089 20 00 DISH/DUST CLOTHS, VAC BAGS, GLOVES 089 20 03 DISH, DUST, ALL PURPOSE CLOTHS 089 20 04 GLOVES, RUBBER 089 20 05 GLOVES, WORK 089 20 06 DUST PANS 089 20 07 VACUUM BAGS, BELTS, FRESHNERS ETC. 089 20 08 30 QT STEP BKT ALM 28581 089 20 09 11 QT NT/TIDY BKT AL 29631 089 30 00 CLOTHESPINS, CLOTHESLINE, MOTHBALLS 089 30 01 CLOTHESPINS 089 30 02 CLOTHESLINE 089 30 03 MOTHBALLS 089 30 04 CLOSET 089 99 00 MISC DEODORIZERS 089 99 01 TOILET BOWL DEODORIZERS 090 00 00 MAGAZINES, BOOKS, NEWSPAPERS 090 01 00 MAGAZINES, FAMILY CIRCLE 090 01 01 MAGAZINES, FAMILY CIRCLE, REGULAR ISSUES 090 01 02 MAGAZINES, FAMILY CIRCLE, SPECIAL ISSUES 090 02 00 MAGAZINES, WOMAN'S DAY 090 02 01 MAGAZINES, WOMAN'S DAY, REGULAR ISSUES 090 02 02 MAGAZINES, WOMAN'S DAY, SPECIAL ISSUES 090 03 00 MAGAZINES/COMIC BOOKS 090 03 01 MAGAZINES, ALL 090 03 02 COMIC BOOKS, ALL 090 05 00 HARDCOVER BOOK-BESTSELLER 090 05 01 HARDCOVER BOOKS-BESTSELLER CGX080 GU Category Code Listing RUN DATE 11/03/95 RCG080 - -GU CATEGORY CODE- DESCRIPTION MAJ INT MIN 090 10 00 PAPERBACK & HARDCOVER BOOKS (SUPERMART) 090 10 01 HARDCOVER BOOK, NEW RELEASE 090 10 02 PAPERBACK-MASS MARKET & TRADE PAPERBACK 090 10 03 PAPERBACK PROMO 090 10 04 HARDCOVER BOOK PROMO 090 10 05 HARDCOVER BOOK-BESTSELLER 090 10 06 PAPERBACK BOOK-BESTSELLER 090 10 07 PAPERBACK BOOKS, MISCELLANEOUS 090 20 00 HARDCOVER & PAPERBACK BOOKS (SHER) 090 20 01 PAPERBACK 090 20 02 PROMOTIONAL BOOKS 090 20 03 CHILDREN AND TRADE BOOKS 090 20 04 COLORING AND ACTIVITY BOOKS 090 20 05 NEW YORK TIMES BEST SELLERS HARDCOVER 090 20 06 PAPERBACK BEST SELLERS 090 20 09 FORMER BEST SELLERS 090 20 99 MISCELLANEOUS 090 50 00 NEWSPAPERS 090 50 01 NEWSPAPERS, ALL 090 60 00 MAPS 090 60 01 MAPS, ALL 091 00 00 PET SUPPLIES 091 01 00 DOG SUPPLIES 091 01 01 FLEA COLLARS 091 01 02 CHEMICALS 091 01 03 RAWHIDE CHEWABLES 091 01 04 TOYS (RUBBER, LATEX) 091 01 05 GROOMING AIDS 091 01 06 COLLARS, CHAINS 091 01 07 LEADS, LEASHES 091 01 08 TIE OUT CHAINS 091 01 09 FEEDING DISHES 091 01 10 PRESSED GELATIN (RAWHIDE) CHEWABLES 091 01 11 TREATS & EDIBLES 091 01 99 MISC DOG PET SUPPLIES 091 02 00 CAT SUPPLIES 091 02 01 CHEMICALS, FLEA COLLARS 091 02 02 TOYS 091 02 03 COLLARS (EXCEPT FLEA) 091 02 04 SNACKS, TREATS CGX080 GU Category Code Listing RUN DATE 11/03/95 RCG080 - -GU CATEGORY CODE- DESCRIPTION MAJ INT MIN 091 02 05 PANS, LINERS, SCOOPS, ETC 091 03 00 BIRD SUPPLIES 091 03 01 FOOD 091 03 02 BIRD TOYS & ACCESSORIES 091 03 03 CAGE SUPPLIES 091 04 00 FISH SUPPLIES 091 04 01 FOOD 091 04 99 FISH SUPPLIES, OTHERS 091 05 00 HAMSTER/GERBIL SUPPLIES 091 05 01 FOOD 091 05 03 CAGE SUPPLIES, LITTER, ETC 091 10 00 PET SUPPLIES, MISC 091 10 99 PET SUPPLIES-MISC 092 00 00 HOUSEWARES 092 01 00 BAKEWARE 092 01 01 FOIL BAKEWARE 092 01 99 FOIL, MISC 092 02 00 BAKEWARE/COOKWARE 092 02 01 COOKWARE ALUMINUM 092 02 02 COOKWARE COATED 092 02 03 BAKEWARE COATED 092 02 04 COOKWARE MICROWAVE 092 02 05 BAKEWARE/GLASS 092 02 06 BAKEWARE TIN 092 02 08 BAKEWARE ALUMINUM 092 02 10 BOXED COOKWARE/ACCESSORIES 092 02 99 COOKWARE/BAKEWARE, MISC 092 03 00 COOKING UTENSILS 092 03 01 COOKING TOOLS 092 03 02 COOKING GADGETS 092 03 99 COOKING UTENSILS, MISC 092 06 00 GADGETS 092 06 01 GADGETS CAN OPENER 092 06 02 GADGETS BOTTLE OPENER 092 06 03 GADGETS PEELERS 092 06 04 GADGETS CHEESE IMPLEMENTS 092 06 05 GADGETS MEASURING CGX080 GU Category Code Listing RUN DATE 11/03/95 RCG080 - -GU CATEGORY CODE- DESCRIPTION MAJ INT MIN 092 06 06 GADGETS GRATERS 092 06 07 GADGETS TIMERS 092 06 08 GADGETS SPATULAS 092 06 09 GADGETS WHISKS 092 06 10 GADGETS THERMOMETERS 092 06 11 GADGETS FUNNELS 092 06 12 GADGETS CUTTING/SERVING BOARDS 092 06 13 GADGETS TEA ITEMS 092 06 14 GADGETS STEAMERS 092 06 15 GADGETS BAKING ITEMS 092 06 16 GADGETS MAGNETS 092 06 99 GADGETS MISC 092 07 00 KITCHEN ACCESSORIES 092 07 01 K/A SINK ITEMS 092 07 02 K/A RANGE ITEMS 092 07 03 K/A CABINET ITEMS 092 07 04 KITCHEN ACCESSORIES, SHELF PAPER & LINERS 092 07 99 KITCHEN ACCESSORIES MISC 092 09 00 STORAGE CONTAINERS 092 09 01 STORAGE CONTAINERS DRY 092 09 02 STORAGE CONTAINERS FREEZER 092 09 03 STORAGE CONTAINERS REFRIGERATOR 092 09 04 STORAGE CONTAINERS ICE TRAYS 092 09 05 STORAGE CONTAINERS PITCHERS, WATER BOTTLES 092 09 06 STORAGE CONTAINERS HOT COLD 092 09 99 STORAGE CONTAINERS MISC 092 10 00 COFFEE FILTERS, SUPPLIES 092 10 03 COFFEE FILTERS, STAR 092 10 04 COFFEE FILTERS, MR. COFFEE 092 10 05 COFFEE FILTERS, MELITTA 092 10 06 COFFEE FILTERS, PRIVATE LABEL 092 10 07 COFFEE POT CLEANERS 092 10 08 COFFEE POTS 092 10 09 TEA POTS 092 10 10 THERMOS 092 10 11 COFFEE MUGS 092 10 12 OTHER MUGS 092 10 99 COFFEE SUPPLIES MISC 092 15 00 SMALL ELECTRICAL APPLIANCES 092 15 01 SMALL ELECTRICAL APPLIANCES, ALL 092 50 00 MISC SEASONAL GEN MDSE 092 50 01 MISC SEASONAL BARBECUE GRILLS CGX080 GU Category Code Listing RUN DATE 11/03/95 RCG080 - -GU CATEGORY CODE- DESCRIPTION MAJ INT MIN 092 50 02 MISC SEASONAL, COOLERS, CHESTS, ETC. 092 50 99 MISC SEASONAL, OTHERS 092 60 00 HARDWARE/TOOLS 092 60 01 HARDWARE, ALL 092 60 02 TOOLS, ALL 092 90 00 BATHROOM ACCESSORIES 092 90 01 BATHROOM ACCESSORIES WASTE 092 90 02 BATHROOM ACCESSORIES LAUNDRY 092 90 99 BATHROOM ACCESSORIES MISC 092 99 00 MISCELLANEOUS 092 99 01 MISCELLANEOUS OVEN MITTENS, POT HOLDERS 092 99 02 MISCELLANEOUS CLIP STRIP PROGRAM 092 99 11 MISCELLANEOUS CANDLES, TABLE/EMERG, STERNO 092 99 21 MISCELLANEOUS STRING (TWINE IN 0930503) 092 99 31 MISCELLANEOUS ASH TRAYS 092 99 99 MISCELLANEOUS, OTHERS 093 00 00 STATIONERY 093 02 00 WRITING IMPLEMENTS 093 02 01 WRITING IMPLEMENTS PENS 093 02 02 WRITING IMPLEMENTS PENCILS 093 02 03 WRITING IMPLEMENTS MARKERS 093 02 04 WRITING IMPLEMENTS CRAYONS 095 02 05 WRITING IMPLEMENTS CHALK 093 02 99 WRITING KITS, PENCILS BOXES 093 03 00 SCHOOL SUPPLIES 093 03 01 SCHOOL SUPPLIES FILLER PAPER 093 03 02 SCHOOL SUPPLIES WIRE BOUND NOTEBOOKS 093 03 03 SCHOOL SUPPLIES LOOSELEAF BINDERS, ETC 093 03 04 SCHOOL SUPPLIES TABLETS 093 03 99 SCHOOL SUPPLIES, OTHERS 093 04 00 HOME AND OFFICE SUPPLIES 093 04 01 HOME AND OFFICE SUPPLIES SUNDRIES 093 04 02 HOME AND OFFICE SUPPLIES SCRATCH/MEMO PADS, TABLETS 093 04 03 HOME AND OFFICE SUPPLIES ENVELOPES 093 04 04 TYPING & CARBON PAPER 093 04 99 HOME AND OFFICE SUPPLIES MISC DESK, ACCOUTREMENTS 093 05 00 TAPES, GLUES, ADHESIVES, TWINE 093 05 01 TGAT - TAPES CGX080 GU Category Code Listing RUN DATE 11/03/95 RCG080 - -GU CATEGORY CODE- DESCRIPTION MAJ INT MIN 093 05 02 TGAT - GLUE, ETC 093 05 03 TGAT - TWINE 093 20 00 ARTIST SUPPLIES 093 20 01 SKETCH PADS, DRAWING TABLETS, ETC 093 20 02 BROWSE, PENS, PENCILS 093 20 03 PAINTS, INKS 093 20 99 MISCELLANEOUS 093 30 00 CHILDRENS ITEMS 093 30 01 CONSTRUCTION PAPER 093 30 02 LEARNING CENTER CHILDRENS TOYS, GAMES, CARDS, ETC 093 30 03 LEARNING CENTER CHILDRENS BOOKS 093 30 99 MISCELLANEOUS 093 50 00 PLAYING CARDS 093 50 01 PLAYING CARDS, ALL TYPES 093 99 00 STATIONERY MISCELLANEOUS 093 99 01 STATIONERY MISCELLANEOUS 094 00 00 BATTERIES, ELECTRICAL, SHOE CARE 094 01 00 BATTERIES, FLASHLIGHTS, BULBS 094 01 01 BATTERIES, DURACELL ALKALINE 094 01 02 BATTERIES, ENERGIZER ALKALINE 094 01 03 BATTERIES, RAYOVAC ALKALINE 094 01 04 BATTERIES, KODAK 094 01 05 BATTERIES, PRIVATE LABEL 094 01 08 BATTERIES, CONDUCTOR 094 01 11 BATTERIES, HEAVY DUTY 094 01 21 BATTERIES, GENERAL PURPOSE 094 01 31 FLASHLIGHT 094 01 80 MARKUP SHIPPERS 3% 094 01 81 MARKUP SHIPPERS 5% 094 01 82 MARKUP SHIPPERS 10% 094 01 98 LIGHT BULBS 094 01 99 MISCELLANEOUS 094 02 00 ELECTRICAL EQUIPMENT 094 02 01 ELECTRICAL EQUIPMENT, ALL 094 02 02 TELEPHONE ACCESSORIES 094 03 00 ELECTRICAL EQUIPMENT RENTALS 094 03 01 ELECTRICAL EQUIPMENT RENTALS, ALL 094 50 00 SHOE BRUSHES, ACCESSORIES CGX080 GU Category Code Listing RUN DATE 11/03/95 RCG080 - -GU CATEGORY CODE- DESCRIPTION MAJ INT MIN 094 50 01 SHOE BRUSHES, ACCESSORIES 094 51 00 SHOE LACES 094 51 01 SHOE LACES, DRESS 094 51 02 SHOE LACES, CASUAL 094 51 03 SHOE LACES, ATHLETIC 094 51 04 SHOE LACES, BOOT/WORK 094 51 05 SHOE LACES, SPECIALTY 094 51 99 SHOE LACES, RACKS W/MDSE 094 52 00 SHOE POLISHES 094 52 01 SHOE POLISHES, PASTE, CREAM, KITS, ETC. 094 52 02 SHOE POLISHES, LIQUID 094 52 03 SHOE POLISHES, AEROSOL 094 52 04 SHOE POLISHES, WATERPROOF ITEMS 094 99 00 SHOE CARE RACKS/FIXTURES(NO CHARGE) 094 99 01 SHOE CARE RACKS/FIXTURES(NO CHARGE) 095 00 00 GREETING CARDS, PARTY SUPPLIES 095 10 00 GREETING CARDS 095 10 01 GREETING CARDS, SINGLES 095 10 02 GREETING CARDS HOLIDAY SINGLES 095 10 03 GREETING CARDS HOLIDAY TRAYS 095 10 99 GREETING CARDS, OTHERS 095 11 00 GIFT WRAP, TRIM, ENCL.CARDS 095 11 01 GIFT WRAP, TRIM, ENCL.CARDS 095 50 00 PARTY SUPPLIES 095 50 01 PARTY SUPPLIES CAKE DECORATIONS 095 50 02 PARTY SUPPLIES BIRTHDAY CANDLES 095 50 03 PARTY SUPPLIES, OTHER CANDLES 095 50 08 PARTY SUPPLIES, MISC PAPER, TOYS, ETC 096 00 00 VIDEO RENTALS/SELL THROUGH 096 01 00 VIDEO EQUIPMENT RENTALS 096 01 01 VIDEO EQUIPMENT RENTALS, ALL 096 02 00 VIDEO TAPE RENTALS 096 02 01 VIDEO TAPE RENTALS, ALL 096 03 00 VIDEO SELL THROUGH CGX080 GU Category Code Listing RUN DATE 11/03/95 RCG080 - -GU CATEGORY CODE- DESCRIPTION MAJ INT MIN 096 03 01 VIDEO SELL THROUGH, ALL 096 03 02 PRE-VIEWED VIDEOS, ALL 097 00 00 SOFT GOODS 097 01 00 SOFT GOODS KITCHEN 097 01 01 SOFT GOODS KITCHEN TOWELS 097 01 02 SOFT GOODS KITCHEN DISH CLOTHS 097 01 04 SOFT GOODS KITCHEN POT HOLDERS 097 01 05 SOFT GOODS KITCHEN MITTS 097 01 10 SOFT GOODS KITCHEN ASSTD SET 097 01 12 SOFT GOODS PLACE MATS/TABLECLOTHS 097 01 99 SOFT GOODS, MISC 097 10 00 MENS UNDERWEAR 097 10 01 MENS BRIEF 097 10 02 MENS FASHION BRIEF 097 10 03 MENS A-SHIRT 097 10 04 MENS V-SHIRT 097 10 05 MENS T-SHIRT 097 10 99 MENS MISCELLANEOUS 097 11 00 BOYS UNDERWEAR 097 11 01 BOYS BRIEF 097 11 02 BOYS FASHION BRIEF 097 11 99 BOYS MISCELLANEOUS 097 12 00 GIRLS UNDERWEAR 097 12 01 GIRLS BRIEF 097 12 02 GIRLS FASHION BRIEF 097 12 99 GIRLS MISCELLANEOUS EXHIBIT D OPERATING EXPENSES AND OTHER COSTS * *Material omitted and filed separately with the SEC pursuant to a request for Confidential Treatment. EXHIBIT E [Form of Notice to Vendors] TO: Grand Union Vendors FROM: ___________________ RE: Agreement with C&S Wholesale Grocers for Montgomery Facility DATED: January ___, 1996 - -------------------------------------------------------------------------------- Grand Union and C&S Wholesale Grocers, Inc. ("C&S") have entered into an agreement effective January 21, 1996 under which C&S will supply health and beauty care and general merchandise products to our Montgomery, New York distribution center. While this arrangement will not change the manner in which Grand Union does business with its vendors, please note that in purchasing merchandise on behalf of C&S under this arrangement, Grand Union will be acting as agent for C&S and C&S shall be the owner of title to the merchandise. Payments to vendors will continue to be made by Grand Union. Grand Union is not authorized to act as agent for C&S for any purpose other than the purchase of such merchandise. If you have any questions, please feel free to contact _______ at __________________. cc: C&S Wholesale Grocers, Inc. [Form of Notice to Bank Agent and Landlord] TO: _________________ FROM: _________________ RE: Agreement with C&S Wholesale Grocers for Montgomery Facility DATED: January ___, 1996 - -------------------------------------------------------------------------------- Grand Union has entered into an agreement with C&S Wholesale Grocers, Inc. ("C&S") effective January 21, 1996 pursuant to which C&S will supply health and beauty care and general merchandise to our Montgomery, New York distribution center. Such products will be acquired from vendors either by Grand Union acting as agent for C&S or by C&S directly. All such products to be held at the Montgomery facility will be owned by C&S and will not constitute property or inventory of Grand Union. Health and beauty care and general merchandise products that are presently owned by Grand Union and held at the Montgomery facility as of the effective date of the agreement, as well as other kinds of merchandise owned by Grand Union and held or to be held at such facility, will constitute Grand Union-owned inventory. If you have any questions, please contact _________ at _____________. cc: C&S Wholesale Grocers, Inc. EXHIBIT F CONSENT AND WAIVER THIS CONSENT AND WAIVER, dated the ______ day of _______________, 1996, is among MACK BRACKEN ROAD PROPERTIES LIMITED and MONTGOMERY '89 ASSOCIATES L.P., doing business as BRACKEN '89 JOINT VENTURE, with offices at c/o The Mack Company, 370 West Passaic Street, Rochelle Park, New Jersey 07662 ("Landlord"); THE GRAND UNION COMPANY, with offices at 201 Willowbrook Boulevard, Wayne, New Jersey 07470-0966 ("Tenant") and C&S WHOLESALE GROCERS, INC., with offices at Old Ferry Road, P.O. Box 821, Brattleboro, Vermont 05302 ("C&S"). WHEREAS, Tenant is the tenant under the following lease (together with any and all amendments thereto, the "Lease"): Lease between Landlord and Tenant dated September 29, 1989 with respect to land and improvements now or hereafter located thereon located at Bracken Road, Montgomery, New York (the "Leased Premises"); WHEREAS, C&S and Tenant have entered into a Supply and Operating Agreement dated as of January 21, 1996 (the "Supply Agreement") pursuant to which, during the "Grand Union Purchase Period" (as defined therein), Tenant purchases certain merchandise as the agent for C&S and receives delivery of such merchandise at the Leased Premises; WHEREAS, during the "C&S Purchase Period" (as defined in the Supply Agreement) C&S purchases certain merchandise and receives delivery of such merchandise at the Leased Premises; WHEREAS, at all times during the Grand Union Purchase Period and the C&S Purchase Period, C&S holds title to and is the owner of the merchandise purchased by Tenant in its capacity as agent for C&S, as well as merchandise purchased directly by C&S (all such merchandise being referred to in this Consent and Waiver as the "Merchandise"); WHEREAS, C&S and Tenant have requested Landlord to execute a Consent and Waiver with respect to certain aspects of such transactions and Landlord is prepared to do so on the terms and conditions set forth herein. NOW, THEREFORE, based on these premises and for good and valuable consideration, receipt of which is hereby acknowledged: 1. Landlord disclaims any title to or right in the Merchandise and subordinates to the interest of C&S any security interest, lien, encumbrance, attachment or other interest which Landlord may now or hereafter have or acquire in the Merchandise by statute, agreement or otherwise. 2. Landlord agrees that, on default of Tenant's obligations to C&S, C&S or its agents may remove the Merchandise from the Leased Premises and Landlord agrees that it will grant C&S or its agents the right of entry at all reasonable times and after reasonable notice, from time to time, to remove such property from the Leased Premises. In connection with such removal, however, C&S shall be required to use reasonable care, and to repair promptly any physical damage done to the Leased Premises caused by such removal. 3. Landlord agrees not to interfere with and to reasonably cooperate with C&S or its agents in the event of any foreclosure, assignment, taking of possession, sale (by auction or otherwise) or other enforcement by C&S of its rights as owner of the Merchandise and creditor of the Tenant, provided C&S and its agents shall use best efforts not to disrupt the ongoing business of other tenants or Landlord in the vicinity of the Leased Premises. 4. Landlord shall send to C&S expeditiously and concurrently with any default or termination notices sent to Tenant a copy of any such default or termination notice, and Landlord shall accept a cure of such default from C&S if C&S chooses to cure the default, as its option, on or before thirty days after the grace period provided for in the Lease. 5. Landlord and Tenant agree that they shall not materially alter or amend or and shall not cancel the Lease without C&S' prior written consent so long as C&S owns Merchandise located on or in the Leased Premises, which consent shall not be unreasonably withheld, delayed or conditioned. 6. Landlord acknowledges that true copies as executed of the Lease is annexed hereto and that, to Landlord's knowledge, Tenant is not now in default thereunder. 7. Landlord hereby consents to the assignment or subleasing to C&S of Tenant's rights, title and interest under the Lease. 8. This Consent and Waiver shall be binding upon the Landlord, Tenant, and C&S and shall inure to the benefit of Landlord and C&S, and their successors and assigns and transferees. IN WITNESS WHEREOF, Landlord, Tenent and C&S have hereby caused this Consent and Waiver to be executed under seal as of the date above first written. BRACKEN 89 JOINT VENTURE BY: MACK BRACKEN ROAD PROPERTIES LIMITED By: ----------------------------------------- Name: Title: BY: MONTGOMERY '89 ASSOCIATES L.P. By: HAMPSHIRE MANAGEMENT COMPANY, General Partner BY: ----------------------------------------- Name: Title: THE GRAND UNION COMPANY By: ----------------------------------------- Name: Title: C&S WHOLESALE GROCERS, INC. By: ----------------------------------------- Name: Title: EXHIBIT H January 18, 1996 To: Mr. J. Hinkel From: Jim O'Keefe Re: Slotting Information - Montgomery S & G Item count as of 11/95: Dept. 00 1473 items 422 Full Case 1051 S,T,U Dept. 01 1824 items 548 Quick Pick 298 Cigarettes 975 Full Case Dept. 02 7741 items 6583 Quick Pick 1161 Full Case Total Items: 11,038 2558 Full Case 7131 Quick Pick 298 Cigarettes 1051 S,T,U Quick Pick: 9011 slots 7131 items 1880 available slots Full Case: 3282 slots 2558 items 724 available slots Reserves: 13,570 total 4091 available Total Pick Slots Q.P. and F.C. 12,293 Available Pick Slots Q.P. and F.C. 2604 Exhibit J C&S Wholesale Grocers, Inc. Corporate Offices Old Ferry Road, P.O. Box 821 Brattleboro, Vermont 05302 (802) 257-4371 October 10, 1995 John Hinkel Corporate Vice President Distribution The Grand Union Company 201 Willowbrook Blvd. Wayne, N.J. 07470-0966 Dear John: Thanks for the time you and Jim O'Keefe spent with Duane and myself reviewing the Montgomery operation. Using Jack's proforma numbers and adding other expenses discussed, we should be able to agree on the methodology used in determining base operating cost in the near term and the future. Until the total effects of Penn Traffic's deletion have been completed, we both agree that it would be difficult to determine those base costs. We also agree that 90 days from the date you cease servicing Penn Traffic should be sufficient time to establish base operating expenses, after which we would meet again to review and agree upon any changes. Below you'll find a line by line review of the proforma a copy of which is enclosed. Montgomery Warehouse Expenses * Labor 1. Productive wages * Productivity using a 10 week average: * *Material omitted and filed separately with the SEC pursuant to a request for Confidential Treatment. 3. Fringe Salaries Vacation Pay - Contractual for union employees - need Grand Union vacation policy and what are the entitlements for non-union employees. Holiday Pay - same as vacation pay Sick Pay - Same as vacation pay 4. Fringe Tax Payroll Tax - Per state and federal schedules * 5. Other Department Expense * 6. Administrative Salary * 7. Administrative Expense * Walter: Tony needs to review detail confirm numbers or revise based on required modifications. Also need to establish replacement and upgrade policy. 8. Occupation Expenses Building Repair and Maintenance Outside Jim O'Keefe has supplied agreements covering Landscaping/snowplowing - V.V. Landscaping Inc. Plumbing - Capitol Plumbing/Heating Electrician - Castleberry Electrical Services Fencing - B.J. Fencing Contractors Security - S.E.M. Security Systems, Inc. Sanitation - BFI Time Clocks - Simplex *Material omitted and filed separately with the SEC pursuant to a request for Confidential Treatment. HVAC - Mechanical Construction Corp. Elevator - Otis Cigarette Stamp Machine - Meyercord Copy Machines - Pitney Bowes - lease held in Wayne corporate account Equipment Repair Outside - included above in building room outside Parts/Materials - parts or materials purchased to make building and equipment repairs. 9. Occupation Expenses Heat, power, water - Should be the actual cost for each Security/Protection - SEM Security Systems Telephone - Telephone - should be what actual cost is each month Rubbish Removal - BFI monthly invoices Rent - Per lease agreement Real Estate tax - Per current base (local/school) and any increases Insurance Charge back - With comp - need to get workmen's compensation history * Fixed Insurance/Liability * improvements based on insurance carrier coverage requirements. Aerosols, Class I, Class II, flammables, etc. Depreciation/Amortization - * Please review the enclosed and I'll call you next week to discuss it's content or answer any questions you may have. Thanks again. Very truly yours, C & S WHOLESALE GROCERS, INC. Steve Albanese Vice President Distribution Projects SA/tw Encs. cc: Ron Wright Bill Hamlin Duane Wilkes Paul Moshovetis *Material omitted and filed separately with the SEC pursuant to a request for Confidential Treatment. CROWN CREDIT #A * ________________________________________________________________________ EQUIPMENT COUNT * *Material omitted and filed separately with the SEC pursuant to a request for Confidential Treatment. #B August 28, 1995 To: Mr. J. Hinkel From: Jim O'Keefe Re: Crown Credit/Miscellaneous CROWN: We presently have an arrangement with Crown to provide service/maintenance known as a "Planned Maintenance Agreement." The arrangement works as follows: * MISCELLANEOUS: The items contained in this account are varied. Some examples are: * *Material omitted and filed separately with the SEC pursuant to a request for Confidential Treatment. September 17, 1995 To: Mr. S. Albanese Mr. D. Wilks From: Jim O'Keefe Re: Meeting 9/13/95 Below and attached are some of the items requested at our meeting on the 13th of this month: Number of Purchase Orders Received/Trucks/Pieces * List of Major Contractors: * Copy of last telephone bills, utility bills are also attached. You'll note a small cellular bill as well. This is a backup to the main telephone line in the event the lines are cut or out of service when the building is alarmed. Also attached please find a list of equipment leases covering forklifts, batteries the yard horse and the cigarette stamping machines. These figures are based on a per month payment. cc: Mr. J. Hinkel *Material omitted and filed separately with the SEC pursuant to a request for Confidential Treatment. MONTGOMERY WHSE EXPENSES ACTUAL WITH PENN TRAFFIC * *Material omitted and filed separately with the SEC pursuant to a request for Confidential Treatment. MONTGOMERY WHSE EXPENSES BUDGET GRAND UNION ONLY * *Material omitted and filed separately with the SEC pursuant to a request for Confidential Treatment. EXHIBIT K SUBLEASE TERMS AND CONDITIONS LESSEE: C&S Wholesale Grocers, Inc. LOCATION: Montgomery, Orange County, New York Bracken Road SIZE AND TYPE 215,000 square feet plus 10,000 square foot mezzanine warehouse RENT: 2/21/96-9/28/99 $1,292,000.00 p.a. ($107,666.67 p.m.) 9/29/99-9/28/04 $1,428,260.00 p.a. ($119,021.67 p.m.) 9/29/04-9/28/09 $1,570,325.00 p.a. ($130,860.42 p.m.) COMMENCEMENT DATE: Date of Sublease Effective Date through 9/29/2009 RENEWAL OPTIONS: 4 AT 5 YEARS EACH OPTION RENT: First $1,659,793.00 p.a. $138,316.08 p.m. Second $1,825,772.00 p.a. $152,147.67 p.m. Third $2,008,350.00 p.a. $167,362.50 p.m. Fourth $2,209,185.00 p.a. $184,098.75 p.m. LAST DATE FOR NOTICE TO CANCEL OPTIONS: 18 months prior to expirarion of initial term or renewal term, as the case may be. CO-OCCUPANCY: Changes to take into account that Grand Union will be a co-occupant of a portion of the premises. This will include acknowledging that Tenant will not have exclusive possession and control, and that each party will have liability for the portions they do possess and control. CROSS-INDEMNITIES: A provision requiring Grand Union and C&S to each indemnify the other for the negligent and intentional misconduct of their own employees, subject to the allocation of responsibilities in the Agreement. SUBSIDIARY: A provision permitting C&S to sublease and or assign to a wholly-owned subsidiary, limited liability company or similar entity. The Sublease shall contain the following clauses and such additional clauses as is customary and usual for this type of transaction. It is intended that C&S will Sublease on substantially the same terms and conditions as are in the underlying lease, but subject to the provisions of the Agreement. THE DEMISED PREMISES The Demised Premises consists of a building of approximately 215,000 gross rentable square feet (which building is hereinafter called the "Building") previously erected thereon and approximately 12.066 acres of land, which the Tenant acknowledges that it has inspected and is fully familiar with its condition and is leasing the same in an "AS IS" condition. The Demised Premises hereinabove described constitutes a self-contained unit and nothing in this Lease shall impose upon the Landlord any obligation to provide any services for the benefit of the Tenant, including but not limited to water, gas, electricity, heat or janitorial, unless and to the extent expressly provided in this Lease. USE The Demised Premises may be used for any lawful use by the Tenant. The aforesaid permitted use does not permit the stacking of merchandise and/or materials against walls or columns, nor does it permit the hanging of equipment from (or otherwise loading) the roof or structural members of the Building except in accordance with the standards set forth with respect to good and sound engineering practices. Notwithstanding anything contained herein to the contrary, any damage or wear and tear to the walls, columns, roof or structural members of the Building arising out of or in connection with any of the activities described in this Section 5.02 shall not be deemed to be ordinary wear and tear and shall be repaired, restored and/or replaced by Tenant at its sole cost and expense. QUIET ENJOYMENT The Landlord covenants that if, and so long as, the Tenant pays the rent, and any additional rent as herein provided, and performs the covenants hereof, the Landlord shall do nothing to affect the Tenant's right to peaceably and quietly have, hold and enjoy the Demised Premises for the Term herein mentioned, subject to the provisions of this Lease. ADDITIONAL RENT, TAXES, ASSESSMENTS, WATER RATES, CHARGES, ETC. The Tenant shall pay, before any interest or penalties accrue thereon, all real estate taxes, water and sewer rates and charges and all other governmental charges imposed during the Term on the Demised Premises or on the rents, as such, payable to the Landlord hereunder, and on request shall exhibit to the Landlord receipted bills or other proof of payment. There shall be apportioned any tax or charge relating to the fiscal year in which the Term of this Lease terminates. The Tenant shall be responsible for any tax or charge relating to the fiscal year in which the Term of this commenced. The Tenant shall pay all assessments that may be imposed upon the Demised Premises by reason of any specific public improvement (including but not limited to assessments for street openings, grading, paving and sewer installations and improvements) except that \if by law any such special assessment is payable, or may, at the option of the taxpayer, be paid, in installments, the Tenant may, whether or not interest accrues on the unpaid balance thereof, pay the same and any accrued interest on any unpaid balance thereof in installments as each installment becomes due and payable, but in any event before any penalty or cost may be added thereto for nonpayment of any installment or interest. Any such benefit, assessment or installment thereof relating to a fiscal period in which the Term of this Lease begins or ends shall be apportioned. The Tenant shall not be required to pay any estate, inheritance, devolution, succession, transfer, legacy or gift tax charged against the Landlord or the estate or interest of the Landlord in the Demised Premises or upon the right of any person to succeed to the same or any part thereof by inheritance, succession, transfer or gift, nor any capital stock tax or corporate franchise tax incurred by the Landlord, nor any income tax upon or against the income of the Landlord (including any rental income derived by the Landlord from the Demised Premises). The Tenant, in its name or the Landlord's name shall have the right to contest, or review, by appropriate proceedings, in such manner as it may deem suitable, at its own expense, and without expense to the Landlord, any tax, assessment, water and sewer rents or charges, or other charges payable by the Tenant pursuant to this Lease, and upon the request of the Tenant, the Landlord will protest any tax, assessment, water or sewer rent or charge, or any other charge payable by the Tenant pursuant to this Lease, which shall be contested or reviewed by the Tenant. Any refund resulting from such contest or review shall be assigned to and belong to the Tenant and shall be paid to the Tenant promptly upon its receipt by the Landlord. If the refund relates to a tax year that is apportioned between the Landlord and the Tenant, the refund shall be apportioned between the Landlord and the Tenant. INSURANCE During the Term, Tenant shall maintain the following insurance, insuring the Landlord and ground lessor, if any, and any mortgagee(s), as their respective interests may appear: (A) Insurance against damage to the Building by all risks of direct physical loss (at Landlord's option to include earthquake and flood) with the policy to contain either the agreed amount endorsement or a replacement cost endorsement, in amounts sufficient to prevent the Landlord from becoming a co-insurer, but in no event less than one hundred (100%) percent of the Building's then replacement value. Policy to include a contingent liability endorsement and/or demolition and increased cost of construction endorsement in order for the Building to be constructed in accordance with all requirements and regulations which may be applicable at the time of loss or damage, of all governmental agencies having jurisdiction over the Building and construction of such Building. (B) If appropriate, boiler and machinery insurance coverage for all eligible objects, including pressure vessels and air conditioning equipment, with the electrical apparatus clause, with such limits as may be reasonably necessary to properly insure the values at risk in the Building. (C) Plate glass insurance. At the option of the Tenant, Tenant may elect to self-insure for plate glass. (D) The policies of insurance provided for herein shall be from a company rated in the A.M. Best Key Rating Guide with a policyholder's service rating of A+ and a financial rating of XV. The company shall be licensed by the State of New York and a certificate(s) evidencing the existence of such policy shall be delivered to the Landlord, together with evidence of the payment of the premiums therefor, not less than fifteen (15) days prior to the commencement of the Term. At least fifteen (15) days prior to the expiration or termination date of any policy, the Tenant shall deliver a renewal or replacement policy, or certificate(s) evidencing the existence thereof, to Landlord together with proof of the payment of the premium therefor. All insurance maintained pursuant to this Article may be effected by blanket insurance policies. The Tenant shall provide and keep in force, during the Term of this Lease, for the benefit of the Landlord and ground lessor, if any, comprehensive general liability insurance policies in standard form (containing the so-called "occurrence clause"), insuring the Landlord and Landlord's managing agent as an additional named insured with respect to ownership, operation, maintenance, use and control against liability for injury or damage to persons or property in or upon the Demised Premises during the Term of this Lease, which shall include a contractual liability endorsement. Said policies shall be written by insurance companies licensed to do business in the State of New York and shall cover the entire Demised Premises as well as any sidewalk in front of the same, and shall be in the minimum amount of Three Million and 00/100 ($3,000,000.00) Dollars. Tenant represents, said representation being specifically designed to induce the Landlord to execute this Lease, that Tenant's personal property, fixtures, betterments, improvements, goods and inventory at the Demised Premises and any other items which Tenant may bring to the Premises or which may be under Tenant's care, custody and control which may be subject to any claim for damages or destruction shall never exceed the amount of insurance which Tenant is required to carry pursuant to this Lease and for which Tenant shall name the Landlord as an additional named insured as its interest may appear. If at any time the value of the aforesaid exceeds the amount of such insurance, Tenant covenants to so notify Landlord and at the same time to immediately increase the amount of insurance required to be carried pursuant to Section 3.01 to an amount sufficient to cover the aforesaid to preclude any liability on Landlord's or Landlord's ground lessor's or mortgagee's part to Tenant. Should Tenant fail to do so, or fail to maintain insurance coverage adequate to cover the aforesaid, then Tenant shall not be in default hereunder unless Tenant makes a claim against Landlord for damages or destruction which would have been covered by insurance but for Tenant's failure to meet its obligations as set forth in this Article. Tenant shall indemnify and save Landlord harmless against and from all liabilities, claims, suits, fines, penalties, damages, losses, fees, costs and expenses (including reasonable attorneys' fees) which may be imposed upon, incurred by or asserted against Landlord by reason of: (A) Any work or thing done in, on or about the Demised Premises or any part thereof by or on behalf of Tenant; (B) Any use, occupation, condition, operation of the Demised Premises or any part thereof or of any street, alley, sidewalk, curb, vault, passageway or space adjacent thereto or any occurrence on any of the same on the part of Tenant; (C) Any act or omission on the part of Tenant or any subtenant or any employees, licensees or invitees; (D) Any accident, injury (including death) or damage to any person or property occurring in, on or about the Demised Premises, or any part thereof or in, on or about any street, alley, sidewalk, curb, vault, passageway or space adjacent thereto alleged to have been caused by Tenant's acts or omissions; and (E) Any failure on the part of Tenant to perform or comply with any of the covenants, agreements, terms or conditions contained in this Lease, or recording of this Lease. The provisions of this Paragraph shall survive the expiration or earlier termination thereof for as long as any applicable statute of limitations. Providing, however, Tenant shall not be responsible for nor required to indemnify Landlord for any acts or omissions resulting in liability, fees, costs, etc., to Landlord arising from or in connection with Labor Services Agreement. All losses paid under the policy or policies carried pursuant to Section 8.01 shall be adjusted by the Landlord and Tenant and the proceeds thereof shall be payable to the Landlord, to be held in trust to be used for repair and restoration of the Demised Premises by the Tenant. If the proceeds of insurance are not sufficient to cover the cost of restoration as required by Tenant, then Tenant shall be responsible for the cost of any deficiency. Each insurance policy carried by Tenant and insuring the Demised Premises and its fixtures and contents against loss by fire, water and causes covered by standard extended coverage, shall be written in a manner so as to provide that the insurance company waive all rights of recovery by way of subrogation against Landlord in connection with any loss or damage covered by such policies, Neither party shall be liable to the other for any loss or damage caused by fire, water or any of the risks enumerated in standard extended coverage insurance, provided such insurance was obtainable at the time of such loss or damage. If such insurance policies are obtainable only by the payment of an additional premium charge, the same shall be obtained and such additional premium paid for by the Tenant. If the release of either Landlord or Tenant, as set forth in the third sentence of this Paragraph, shall contravene any law with respect to exculpatory agreements, the liability of the party in question shall be deemed not released but shall be deemed secondary to the latter's insurer. The Tenant shall also furnish insurance for such other hazards and in such amounts as the Landlord may reasonably require and as at the time are commonly insured against with respect to buildings similar in character, general location and use and occupancy to the Demised Premises in relative amounts normally carried with respect thereto. The Landlord reserves the right at any time and from time to time to require that the limits for any of the insurance required pursuant to Article VIII be increased to limits as at the time are reasonable with respect to Tenant's use and to buildings similar in character, general location and use and occupancy to the Demised Premises. Landlord shall maintain rent insurance against the loss of rent and additional rent for no less than one (1) year as provided herein, and Tenant shall reimburse Landlord for the entire cost of said rent insurance, promptly when billed, as additional rent. All policies required pursuant to this Article shall contain provision for thirty (30) days' written notice by registered mail to the Landlord of any change or cancellation of said policy. REPAIRS The Tenant shall keep the Demised Premises in good condition and repair, and shall redecorate, paint and renovate the Demised Premises as may be necessary to keep them in good condition and repair and good appearance. The Tenant shall keep the Demised Premises and all parts thereof in a clean and sanitary condition and free from trash, inflammable material and other objectionable matter. The Tenant shall keep the sidewalks and roadways forming part of the Demised Premises clean and free of obstructions, snow and ice. Throughout the Term of this Lease, the Tenant, at its sole cost and expense, will take good care of the Demised Premises and the sidewalks and curbs adjoining the Demised Premises and will keep the same in good order and condition and make all necessary repairs thereto, structural and nonstructural, interior and exterior, ordinary and extraordinary, foreseen and unforeseen. The Tenant shall replace, at the Tenant's expense, all glass in and on the Demised Premises which may become broken after the date of Tenant's occupancy. When used in this Article, the term "repairs" shall include all necessary replacements and renewals. All repairs made by Tenant shall be equal in quality and class to the original work. The Tenant shall quit and surrender the Demised Premises at the end of the Term in as good condition as the reasonable use thereof will permit and in compliance with the requirements stated herein and in a "broom-clean" condition, and shall, by way of example and not by way of limitation, clean and reseal all concrete floors. The Tenant shall not make any alterations, additions or improvements to the Demised Premises without the prior written consent of the Landlord, which Landlord shall not unreasonably withhold. In making its determination, Landlord shall consider, among other considerations, the standards set forth with respect to good and sound engineering practices. Notwithstanding the provisions of this Section 9.02, Landlord's prior written consent shall not be required for any alterations, additions or improvements which, in the aggregate, do not exceed the cost of Five Hundred Thousand and 00/100 ($500,000.00) Dollars per lease year, and which do not adversely affect any structural portion of the Building or any Building mechanical, electrical, HVAC, or plumbing system. All erections, alterations, additions and improvements, whether temporary or permanent in character, which may be made upon or to the Demised Premises either by the Landlord or the Tenant, except furniture or movable trade fixtures installed at the expense of the Tenant, shall be the property of the Landlord and shall remain upon and be surrendered with the Demised Premises as a part thereof at the expiration or sooner termination of this Lease, without compensation to the Tenant; or, in the alternative and at the direction of Landlord, Tenant shall remove all or so much of the property therefrom as directed or such property shall be conclusively deemed abandoned and may be removed by Landlord, and Tenant shall reimburse Landlord for the cost of such removal. Landlord may have any such property stored at Tenant's risk and expense. Landlord, at Landlord's option, may require as a condition of its consent, that Tenant remove, at the expiration or sooner termination of the Lease Term, any erections, alterations, additions or improvements made by Tenant, and restore the Demised Premises to a substantially similar condition to that in existence as of the commencement date of the Lease, and that the Tenant use contractors approved by Landlord. CASUALTY If the Demised Premises or the Building is damaged or destroyed by fire, explosion, the elements or otherwise during the Term so as to render the Demised Premises wholly untenantable or unfit for occupancy, or should the Demised Premises be so badly injured that the same cannot be repaired within one hundred eighty (180) days from the happening of such injury, then, and in such case, the Term hereby created shall, at the option of either the Landlord or the Tenant, terminate upon the giving of a notice of termination. If a notice of termination is given, the Term of this Lease shall terminate effective as of the date of such damage or destruction, and the Tenant shall immediately surrender the Demised Premises and all the Tenant's interest therein to the Landlord, and pay rent to the time of such damage or destruction, and the Landlord may re-enter and repossess the Demised Premises discharged from this Lease and may remove all parties therefrom. Should the Demised Premises be rendered untenantable and unfit for occupancy, but yet be repairable within one hundred eighty (180) days from the happening of said injury, the Landlord will make the proceeds of insurance available to Tenant so that Tenant may repair the Demised Premises with reasonable speed, and the rent shall not accrue after said injury and while repairs are being made, provided Landlord receives the proceeds of rent insurance, but shall recommence immediately after such repairs shall be completed. If the Demised Premises shall be so slightly injured as not to be rendered untenantable and unfit for occupancy, the Tenant shall repair the same with reasonable promptness and the rent accrued and accruing shall not cease or terminate. The Tenant shall immediately notify the Landlord in case of fire or other damage to the Demised Premises. Notwithstanding anything to the contrary in Section 10.01, neither the Landlord nor the Tenant shall have any option to terminate this Lease upon the happening of an injury referred to in Section 10.01 provided that the happening of such injury occurs at a time when the unexpired Term of this Lease is one (1) year or more. In such event, the Landlord shall make the proceeds of insurance available to the Tenant and the Tenant shall repair the Demised Premises, even to the extent of rebuilding the Building if necessary. The Tenant shall promptly enter and repair the Demised Premises with reasonable speed, making due allowance for conditions beyond the Tenant's control, including, but not limited to time lost in adjusting insurance claims and strikes, and the rent shall not accrue after such injury and while repairs are being made, provided Landlord receives the proceeds of rent insurance, but shall recommence immediately after said repairs shall be completed. Landlord shall have no obligation to repair or restore Tenant's improvements. Notwithstanding anything contained herein to the contrary, in the event the happening of an injury referred to in Section 10.01 occurs when the unexpired Term of this Lease is less than one (1) year and Landlord exercises its option to terminate this Lease, then and in that event, Tenant can negate Landlord's termination by exercising its option to renew in accordance with Article. Prior to the performance of any work by Tenant pursuant to the provisions of this Article, Tenant shall first submit plans and specifications to Landlord and Landlord shall have the right to review and approve said plans and specifications and to require modifications thereto. All work shall be performed by Tenant in accordance with good and sound engineering practices and in compliance with all laws, ordinances and regulations. Notwithstanding anything contained to the contrary in this Article, in the event the proceeds of insurance are not sufficient to cover the cost of restoration, the Tenant shall be responsible for the cost of any deficiency. CONDEMNATION Section 11.01. If, during the Term, twenty-five (25%) percent or more of the area of the Demised Premises shall be taken under any power of eminent domain or condemnation then, at the option of the Tenant, to be exercised in writing within thirty (30) days of the taking of title thereto, this Lease shall expire within thirty (30) days of the date of such notice and the rent herein reserved shall be apportioned as of said date. However, if the Tenant does not exercise the aforementioned option, or if the taking does not deprive the Tenant of at least twenty-five (25%) percent of the area of the Demised Premises, this Lease shall not expire but the rent shall be equitably apportioned. If the Landlord and the Tenant fail to agree upon an equitable apportionment, the rent for the Building, after such taking, shall be determined in accordance with the Commercial Rules of the American Arbitration Association, in the City of New York, New York, and the arbitrator shall be empowered to assess the costs and expenses of the proceedings as part of the determination. Pending such determination the Tenant shall pay, on account of the rent, such proportion of the rent reserved in this Lease as the total area of the Building after the taking bears to the total area of the Building before the taking, subject to adjustment in accordance with the arbitrator's award. If the Landlord can, after such taking, construct an addition to the remaining Building so as to restore all of the Building area and Building facilities theretofore taken, the Landlord shall, subject to the adequacy of the condemnation award and to the mortgagee making the same available to the Landlord, promptly construct such addition and restore such facilities so taken and upon the completion of such restoration, the full rent reserved by this Lease shall be reinstated, as of the date of such restoration, and, if the Tenant is able to occupy and use the Building, the proportionate rent shall be paid by the Tenant as herein provided, during the period between the taking and the restoration of the Building and facilities. No part of any award shall belong to the Tenant except that nothing contained herein is intended to affect or limit the Tenant's claim for fixtures or other improvements owned by Tenant provided the same does not diminish the Landlord's award. It is expressly understood and agreed that the provisions of this Article XI shall not be applicable to any condemnation or taking for governmental occupancy for a limited period of time. COMPLIANCE WITH LAWS, ETC. The Tenant shall not do or permit anything to be done in the Demised Premises which shall constitute a public nuisance or which will conflict with the regulations of the Fire Department or with any insurance policy upon said improvements or any part thereof. The Tenant shall, at its own expense, obtain all necessary environmental and operating permits and comply with all requirements of law and with all ordinance or orders, rules and regulations of any State, Municipal or other public authority affecting the Demised Premises and with all requirements of the Fire Insurance Exchange or similar body, and of any liability insurance company insuring the Landlord against liability for accidents in or connected with the Demised Premises including, but not limited to laws, ordinance, orders, rules and regulations which apply to the interior or exterior of the Demised Premises, the structural or nonstructural parts thereof, and to make all improvements and repairs required by such laws, ordinances, orders, rules and regulations, ordinary or extraordinary, foreseen or unforeseen. Tenant acknowledges the existence of environmental laws, rules and regulations now or hereafter enacted by any federal, state or municipal authority and Tenant agrees to comply therewith. Tenant agrees not to generate, store, manufacture, refine, transport, treat, dispose of, or otherwise permit to be present on or about the Demised Premises, any Hazardous Substances. As used herein, Hazardous Substances shall be defined as any "hazardous chemical", "hazardous substance" or similar term as defined in the Comprehensive Environmental Responsibility Compensation and Liability Act, as amended (42 U.S.C. 9601, ET SEQ.), any rules or regulations promulgated thereunder, or in any other applicable federal, state or local law, rule or regulation dealing with environmental protection. It is understood and agreed that the provisions contained in this Article shall be applicable notwithstanding the fact that any substance shall not be deemed to be a Hazardous Substance at the time of its use by the Tenant but shall thereafter be deemed to be a Hazardous Substance. Tenant agrees to indemnify and hold harmless the Landlord and each mortgagee of the Demised Premises from and against any and all liabilities, damages, claims, losses, judgments, causes of action, costs and expenses (including the reasonable fees and expenses of counsel) which may be incurred by the Landlord or any such mortgagee or threatened against the Landlord or such mortgagee, relating to or arising out of any breach by Tenant of the undertakings set forth in this Article, said indemnity to survive the Lease expiration or sooner termination. ASSIGNMENT AND SUBLEASE (A) The Tenant may assign this Lease and sublet the whole or any part of the Demised Premises, with the consent of the Landlord which consent shall not be unreasonably withheld subject to the following conditions: (1) A copy of the assignment or sublease shall be furnished to the Landlord. (2) The assignee shall assume by written instrument all of the obligations of this Lease, and a copy of such assumption agreement shall be furnished to the Landlord within ten (10) days of its execution. (3) The Tenant and each assignee shall be and remain liable for the observance of all of the covenants and provisions of this Lease, including but not limited to the payment of the rent reserved herein, through the entire Term of this Lease, as the same may be renewed, extended or otherwise modified. (4) The Tenant and any assignee shall promptly pay to Landlord one-half (1/2) of any net consideration received for any assignment or one-half (1/2) of the net rent, as and when received in excess of the rent required to be paid by Tenant for the area sublet, computed on the basis of an average square foot rent for the entire Building. As used herein, net consideration and/or net rent shall mean gross rent or gross consideration less any reasonable brokerage or tenant work paid by Tenant in connection with the assignment or sublet, said brokerage or tenant work to be amortized over the term of the assignment or sublet. (B) Notwithstanding anything herein contained, the Tenant may assign or sublet the whole or any part of the Demised Premises to an affiliated corporation, or to any corporation with which it shall be merged or which shall acquire the assets of the Tenant, all without notice to the Landlord. (C) In any event, the acceptance by the Landlord of any rent from the assignee, or of any of the subtenants, or the failure of the Landlord to insist upon a strict performance of any of the terms, conditions and covenants herein shall not release the Tenant herein, nor any assignee assuming this Lease, from any and all of the obligations herein during and for the entire Term of this Lease. (D) Notwithstanding anything herein contained, prior to any sublet of the whole or any portion of the Demised Premises or an assignment of the within Lease to any other party, other than sublets or assignments permitted by Subsection (B) hereof, the Tenant shall first offer, in writing, to surrender the Demised Premises to the Landlord, and the Landlord shall either accept or refuse to accept such surrender within ten (10) days after the receipt of such offer, failing which the offer shall automatically be deemed refused. In the event Landlord shall accept such surrender, the within tenant shall be released from any and all obligations hereunder. (E) The Landlord may require a payment to cover its handling charges for each request for consent to any sublet or assignment prior to its consideration of the same, which payment shall be equal to those charges, if any, assessed by Landlord's mortgagee. (F) The Tenant acknowledges that its sole remedy with respect to any assertion that the Landlord's failure to consent to any sublet or assignment is unreasonable shall be the remedy of specific performance and the Tenant shall have no other claim or cause of action against the Landlord as a result of the Landlord's actions in refusing to consent thereto. (G) Without limiting any of the provisions of Article XIV, if pursuant to the Federal Bankruptcy Code (or any similar Law hereafter enacted having the same general purpose), Tenant is permitted to assign this Lease, notwithstanding the restrictions contained in this Lease, adequate assurance of future performance by an assignee expressly permitted under such Code shall be deemed to mean the deposit of cash security in an amount equal to the sum of one (1) year's fixed rent plus an amount equal to the sum of all other charges due and payable by Tenant hereunder for the Calendar Year preceding the year in which such assignment is intended to become effective, which deposit shall be held by Landlord for the balance of the Term, without interest, as security for the full performance of all of Tenant's obligations under this Lease, to be held and applied in the manner specified for security in Section 22.02. (H) Except as specifically set forth above, no portion of the Demised Premises or of Tenant's interest in this Lease may be acquired by any other person or entity, whether by assignment, mortgage, sublease, transfer, operation of law or act of the Tenant, nor shall Tenant pledge its interest in this Lease or in any security deposit required hereunder. RENEWAL OPTIONS Tenant is hereby granted four (4) options to renew this Lease upon the following terms and conditions: (A) At the time of each renewal, the Tenant shall not be in default in accordance with the terms and provisions of this Lease, and shall be in possession of the Demised Premises pursuant to this Lease. (B) Each of the renewal options shall be deemed automatically exercised unless Tenant notifies Landlord to the contrary, in writing, at least eighteen (18) months before the expiration of the Term, or eighteen (18) months before the expiration of the preceding renewal term, as the case may be. (C) The renewal terms shall be for the term of five (5) years each, the first renewal term to commence at the expiration of the term of this Lease, the second renewal term to commence upon the expiration of the first renewal term, the third renewal term to commence upon the expiration of the second renewal term, and the fourth renewal term to commence upon the expiration of the third renewal term, and all of the terms and conditions of this Lease, other than the rent, shall apply during any such renewal terms. (D) The basic rent to be paid during the first renewal term shall be Eight Million Two Hundred Ninety-eight Thousand Nine Hundred Sixty-five and 00/100 ($8,298,965.00) Dollars; the basic rent to be paid during the second renewal term shall be Nine Million One Hundred Twenty-eight Thousand Eight Hundred Sixty and 00/100 ($9,128,860.00) Dollars; the basic rent to be paid during the third renewal term shall be Ten Million Forty-one Thousand Seven Hundred Fifty and 00/100 ($10,041,750.00) Dollars; and the basic rent to be paid during the fourth renewal term shall be Eleven Million Forty-five Thousand Nine Hundred Twenty-five and 00/100 ($11,045,925.00) Dollars. The basic rent during each of the renewal terms shall be payable in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts and shall accrue at the following yearly and monthly rates: Renewal Term Yearly Rent Monthly Rent First (Years 21-25) $1,659,793.00 $138,316.08 Second (Years 26-30) $1,825,772.00 $152,147.67 Third (Years 31-35) $2,008,350.00 $167,362.50 Fourth (Years 36-40) $2,209,185.00 $184,098.75 The aforesaid monthly rents shall be payable in advance on the first day of each calendar month during the respective renewal term, except that a proportionately lesser sum may be paid for the first month of any of the renewal terms if said renewal term commences on a date other than the first of the month. Exhibit L * *Material omitted and filed separately with the SEC pursuant to a request for Confidential Treatment. EX-10.33 9 EX-10.33 Exhibit 10.33 Second Amendment to the 1995 Equity Incentive Plan of the Grand Union Company 1. Amend the first paragraph of section 2 to read as follows: The Plan shall be administered by a committee (the "Committee") of the Board of Directors (the "Board") of the Company designated by the Board for that purpose. Unless and until a Committee is appointed, the Plan shall be administered by the entire Board, and references in the Plan to the "Committee" shall be deemed references to the Board. 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. This amendment shall take effect November 1, 1996. THE GRAND UNION COMPANY by action of the Board of Directors Dated: 4 Oct 1996 /s/ John W. Schroeder ------------------------------- John W. Schroeder Assistant Secretary EX-10.34 10 EX-10.34 EXHIBIT 10.34 THE GRAND UNION COMPANY MINUTES OF A MEETING OF THE BOARD OF DIRECTORS ---------------------------------------------- October 26, 1995 RESOLVED: THAT the 1995 Equity Incentive Plan for employees of The Grand Union Company presented to this Board of Directors be and it is hereby approved; that 950,000 shares of this Corporation's Common Stock be subject to such Plan; and that such Plan be submitted to the stockholders of this Corporation for their approval. -1- EX-10.36 11 EX-10.36 Exhibit 10.36 [Letterhead of Grand Union] - ------------------------------------------------------------------------------ March 3, 1997 Jeffrey P. Freimark 21180 Oakley Court Boca Raton, FL 33437 RE: Stock Option Grant Dear Jeff: This is to confirm for you that by action of the Board of Directors you have been granted an Incentive Stock Option (ISO) giving you the right to purchase Twenty Thousand (20,000) shares of Grand Union Common Stock at an exercise price of $3.6875 per share. Your option is subject to the terms and conditions, including exercise provisions and expiration terms, as set forth in the 1995 Equity Incentive Plan, except for such additional terms or modifications noted below. Your option will become fully exercisable according to the following schedule: No. of Shares Vesting Date ------------- ------------ 5,000 March 3, 1998 5,000 March 3, 1999 5,000 March 3, 2000 5,000 March 3, 2001 This Incentive Stock Option may be exercised in accordance with the terms of the 1995 Equity Incentive Plan and pursuant to regulations adopted by the Board of Directors, including exercise by delivery of previously owned shares or by a cashless exercise, as set forth in those regulations. Sincerely, /s/ John W. Schroeder John W. Schroeder Assistant Corporate Secretary Acknowledged and Accepted /s/ Jeffrey P. Freimark - --------------------------------- Jeffrey P. Freimark EX-10.39 12 EX-10.39 Exhibit 10.39 THE GRAND UNION COMPANY MINUTES OF A MEETING OF THE BOARD OF DIRECTORS ---------------------------------------------- December 12, 1995 RESOLVED: THAT the 1995 Non-Employee Directors' Stock Option Plan for non-employee directors of The Grand Union Company presented to this Board of Directors be and it is hereby approved; that 50,000 shares of this Corporation's Common Stock be subject to such Plan; and that such Plan be submitted to the stockholders of this Corporation for their approval. 1 EX-10.50 13 EX-10.50 Exhibit 10.50 AMENDMENT NO. 1 TO THE STOCK PURCHASE AGREEMENT DATED AS OF JULY 30, 1996, AMONG THE GRAND UNION COMPANY, TREFOIL CAPITAL INVESTORS II, L.P., AND GE INVESTMENT PRIVATE PLACEMENT PARTNERS II, A LIMITED PARTNERSHIP Amendment (this "Amendment"), dated as of March 20, 1997, to the Stock Purchase Agreement (the "July Stock Purchase Agreement"), dated as of July 30, 1996, among each of (i) The Grand Union Company, a Delaware corporation (the "Company"), and (ii) Trefoil Capital Investors II, L.P., a Delaware limited partnership ("Trefoil"), and GE Investment Private Placement Partners II, a Limited Partnership, a Delaware limited partnership ("GEI") (each, a "Purchaser" and, collectively, the "Purchasers"). Capitalized terms used herein without definitions shall have the meanings given them in the July Stock Purchase Agreement. WHEREAS, the Company has entered into a Stock Purchase Agreement, dated as of February 25, 1997, as amended as of the date hereof (the "Stangeland Stock Purchase Agreement"), between the Company and Roger Stangeland ("Stangeland") and the parties hereto have entered into a Stockholder Agreement (the "Stangeland Stockholder Agreement"), dated as of February 25, 1997, among Trefoil, GEI, Stangeland, and the Company; WHEREAS, the Purchasers desire to amend the July Stock Purchase Agreement for the purpose of permitting and facilitating the transactions contemplated by the Stangeland Stock Purchase Agreement and the Stangeland Stockholder Agreement; NOW, THEREFORE, in consideration of the foregoing, and the mutual agreements and covenants contained herein, the parties hereto agree as follows: Section 1. Amendment. The July Stock Purchase Agreement is hereby amended to add a new ARTICLE 9 - CONSENT AND WAIVER, to read in full as follows: "ARTICLE 9 - CONSENT AND WAIVER Section 9.1. February Transaction Documents. (a) Notwithstanding anything else herein to the contrary, the Purchasers hereby authorize, approve and consent to the issuance and sale by the Company to Roger Stangeland ("Stangeland") of 60,000 shares of the Preferred Stock (the "Stangeland Shares"), on the terms and subject to the conditions contained in the Stock Purchase Agreement, dated as of February 25, 1997, as amended as of March __, 1997 (the "Stangeland Stock Purchase Agreement"), between the Company and Stangeland and the Stockholder Agreement (the "Stangeland Stockholder Agreement" and collectively with the Stangeland Stock Purchase Agreement, the "February Transaction Documents"), dated as of February 25, 1997, between Trefoil, GEI, Stangeland, and the Company, and the issuance of additional shares of the Preferred Stock, or common stock of the Company, as dividends on outstanding shares of the Preferred Stock, as 1 provided in the Certificate of Designation filed with the Secretary of State of the State of Delaware on September 5, 1996, setting forth the terms of the Preferred Stock. (b) The Company shall issue and sell the Stangeland Shares as set forth in the preceding paragraph. The Purchasers hereby acknowledge and agree that the issuance and sale of the Stangeland Shares is made by the Company pursuant to and in accordance with this Agreement, as amended. (c) The issuance and sale of the Stangeland Shares shall be in addition to, and not in lieu of, the shares of Preferred Stock to be purchased by the Purchasers hereunder. Except as specifically set forth in this Amendment, Stangeland shall not be deemed to be a beneficiary of this Agreement in any respect, or a successor to, assignee of, or otherwise entitled to enforce any of the rights or obligations of any of the parties to this Agreement." Section 2. Miscellaneous. (a) Notices. Any notice under or relating to this Amendment shall be given in writing and shall be deemed sufficiently given when delivered by hand or by conformed facsimile transmission, on the second business day after a writing is consigned (freight prepaid) to a commercial overnight courier, and on the fifth business day after a writing is deposited in the mail, postage and other charges prepaid, addressed as follows: Trefoil II: 4444 Lakeside Drive Burbank, California 91505 Attention: Mr. Geoffrey T. Moore Telecopy: (818) 842-3142 with a copy to: Fried, Frank, Harris, Shriver & Jacobson 350 South Grand Avenue Los Angeles, California 90071 Attention: David K. Robbins, Esq. Telecopy: (213) 473-2222 GEIPPPII: GE Investment Management Incorporated 3003 Summer Street Stamford, Connecticut 06904 Attention: Michael Pastore, Esq. Telecopy: (203) 326-4177 2 with a copy to: Dewey Ballantine 1301 Avenue of the Americas New York, New York 10019 Attention: William J. Phillips, Esq. Telecopy: (212) 259-6333 the Company: Chief Executive Officer The Grand Union Company 201 Willowbrook Boulevard Wayne, NJ 07470-0966 Attention: Joseph J. McCaig Telecopy: (201) 890-6012 with a copy to: General Counsel The Grand Union Company 201 Willowbrook Boulevard Wayne, New Jersey 07470-0966 Attention: John W. Schroeder, Esq. Telecopy: (201) 890-6012 and Ropes & Gray One International Place Boston, MA 02110 Attention: Winthrop G. Minot, Esq. Telecopy: (617) 951-7050 and Fried, Frank, Harris, Shriver & Jacobson 350 South Grand Avenue Los Angeles, California 90071 Attention: David K. Robbins, Esq. Telecopy: (213) 473-2222 or to such other address or facsimile number as either party may, from time to time, designate in a written notice given in like manner. (b) Binding Effect. The provisions of this Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns, heirs, and personal representatives. (c) Modification. This Amendment may only be modified by a written instrument duly executed by each party hereto. 3 (d) Waiver. Any waiver by either party of a breach of any provision of this Amendment shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Amendment. Any waiver of any provision of this Amendment must be in writing. (e) Headings. The headings to the sections of this Amendment are inserted for convenience only and shall not constitute a part hereof or affect in any way the meaning or interpretation of this Amendment. (f) Separability. If any provision of this Amendment is invalid, illegal or unenforceable, the balance of this Amendment shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances. (g) Counterparts. This Amendment may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (h) Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed and to be fully performed within the State of New York. 4 IN WITNESS WHEREOF, the parties have duly executed this Amendment as of the date first written above. TREFOIL CAPITAL INVESTORS II, L.P. By: Trefoil Investors II, Inc. its general partner By: /s/ Robert G. Moskowitz -------------------------------- Name: Robert G. Moskowitz Title: Vice President GE INVESTMENT PRIVATE PLACEMENT PARTNERS II, A LIMITED PARTNERSHIP By: GE Investment Management Incorporated By: /s/ Michael M. Pastore --------------------------------- Name: Michael M. Pastore Title: Vice President THE GRAND UNION COMPANY By: /s/ Joseph J. McCaig --------------------------------- Name: Joseph J. McCaig Title: President and Chief Executive Officer 5 EX-10.52 14 EX-10.52 Exhibit 10.52 Execution Copy - ------------------------------------------------------------------------------ STOCK PURCHASE AGREEMENT by and between THE GRAND UNION COMPANY and ROGER STANGELAND Dated as of February 25, 1997 - ------------------------------------------------------------------------------ TABLE OF CONTENTS Page ARTICLE I THE PURCHASE................................................................1 Section 1.1. Definitions.............................................1 Section 1.2. Sale and Purchase of Preferred Stock....................1 Section 1.3. Price for Shares........................................1 Section 1.4. The Closing.............................................1 ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............................2 Section 2.1. Organization and Qualification..........................2 Section 2.2. Certificate of Incorporation and By-Laws................2 Section 2.3. Capitalization..........................................2 Section 2.4. Authority Relative to this Agreement....................3 Section 2.5. No Conflicts............................................3 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.............................3 Section 3.1. Authority...............................................3 Section 3.2. No Conflicts............................................3 Section 3.3. Acquisition For Investment..............................4 Section 3.4. Speculative Investment..................................4 Section 3.5. Receipt of Reports......................................4 Section 3.6. Financial Condition.....................................4 Section 3.7. Financial Experience....................................4 Section 3.8. Review of Risk Factors..................................4 Section 3.9. Independent Investigation...............................4 Section 3.10. Examination of Documents................................5 Section 3.11. No Other Representations................................5 Section 3.12. Accredited Investor.....................................5 Section 3.13. Purchaser's Principal Residence.........................5 Section 3.14. Brokers or Finders......................................5 Section 3.15. Determination Not to Obtain Independent Counsel.........5 ARTICLE IV ADDITIONAL AGREEMENTS.......................................................5 Section 4.1. Waiver of Donaldson, Lufkin & Jenrette..................5 Section 4.2. Consent of Banks........................................6 Section 4.3. Consent of Trefoil II and GEIPPPII......................6 Section 4.4. Consents, Approvals.....................................6 Section 4.5. Notification of Certain Matters.........................6 Section 4.6. Public Announcements....................................6 i Section 4.7. Conveyance Taxes........................................7 Section 4.8. Consent of Board of Directors...........................7 Section 4.9. Election of Directors...................................7 ARTICLE V CONDITIONS TO THE STOCK PURCHASE............................................7 Section 5.1. Conditions to Obligation of Each Party to Effect Any Closing.............................................7 Section 5.2. Additional Conditions to Obligations of the Purchaser...8 Section 5.3. Additional Conditions to Obligation of the Company......8 ARTICLE VI GENERAL PROVISIONS..........................................................9 Section 6.1. Restrictive Legends.....................................9 Section 6.2. Notices.................................................10 Section 6.3. Certain Definitions.....................................11 Section 6.4. Amendment...............................................13 Section 6.5. Cooperation.............................................13 Section 6.6. Headings................................................13 Section 6.7. Severability............................................13 Section 6.8. Entire Agreement........................................13 Section 6.9. Assignment..............................................13 Section 6.10. Parties in Interest.....................................13 Section 6.11. Failure or Indulgence Not Waiver, Remedies Cumulative..............................................13 Section 6.12. Governing Law...........................................14 Section 6.13. Counterparts............................................14 ii Schedules and Exhibits Schedule I Wire Transfer Instructions Exhibit A Certificate of Designation Exhibit B Stockholder Agreement STOCK PURCHASE AGREEMENT This Stock Purchase Agreement, dated as of February 25, 1997 (this "Agreement"), is by and between The Grand Union Company, a Delaware corporation (the "Company"), and Roger Stangeland (the "Purchaser"). WITNESSETH: WHEREAS, the Purchaser wishes to purchase from the Company, and the Company wishes to sell and issue to the Purchaser (the "Stock Purchase"), an aggregate of Sixty Thousand (60,000) shares of the Company's Class A Convertible Preferred Stock, $1.00 par value per share (the "Preferred Stock"); and WHEREAS, the Purchaser and the Company are entering into this Agreement to provide for such purchase and sale and to establish various rights and obligations in connection therewith. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein set forth, the parties agree as follows: ARTICLE I THE PURCHASE Section 1.1. Definitions. Certain terms are used in this Agreement as specifically defined herein. These definitions are set forth or referred to in Section 7.4 hereof. Section 1.2. Sale and Purchase of Preferred Stock. Subject to the terms and conditions of this Agreement, and in reliance on the representations and warranties set forth in this Agreement, the Company hereby agrees to sell to the Purchaser, and the Purchaser hereby agrees to purchase from the Company, at a purchase price of $50.00 per share, Sixty-Thousand (60,000) shares of the Preferred Stock (such shares of Preferred Stock purchased hereunder, the "Shares") at the Closing as defined in Section 1.4 hereof. The terms and conditions of the Preferred Stock are set forth in the Certificate of Designation filed with the Secretary of State of Delaware on September 5, 1996, a copy of which is attached hereto as Exhibit A. Section 1.3. Price for Shares. The consideration for the purchase of the Shares shall be Three Million Dollars ($3,000,000) (the "Purchase Price"). The Purchase Price will be paid at the Closing by wire transfer of immediately available funds to the Company's account as set forth on Schedule I hereto. Section 1.4. The Closing. Subject to the satisfaction or waiver of the conditions applicable to such Closing set forth in Article V, the closing of the transactions contemplated by this Agreement (the "Closing"), at the offices of Fried, Frank, Harris, Shriver & Jacobson, 350 South Grand Avenue, 32nd Floor, Los Angeles, California, on March 10, 1997 (the "Closing Date"), unless another date, time or place is agreed to in writing by the parties hereto. At the Closing, the Company will deliver to the Purchaser a certificate (or, if requested in writing at least two business days prior to the Closing, certificates), registered in the Purchaser's name, representing the Shares, against payment of the Purchase Price therefor. ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby represents and warrants to the Purchaser that the statements contained in this Article II are true and correct as of the date hereof, and shall remain true and correct up to and including the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Article II). Section 2.1. Organization and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The Company has the requisite corporate power and authority to carry on its business as it is now being conducted. Section 2.2. Certificate of Incorporation and By-Laws. The Company has heretofore furnished to the Purchaser a complete and correct copy of its Certificate of Incorporation and By-Laws as most recently restated and subsequently amended to date. Section 2.3. Capitalization. The authorized capital stock of the Company consists of (A) 60,000,000 shares of Common Stock, par value $1.00 per share ("Common Stock"), and (B) 3,500,000 shares of the Preferred Stock, par value $1.00 per share. As of the date hereof, (i) 10,000,000 shares of Common Stock were issued and outstanding, all of which are validly issued, fully paid and nonassessable, and no shares of Common Stock were held in treasury, (ii) 1,219,701 shares of the Preferred Stock were issued and outstanding, all of which are validly issued, fully paid and nonassessable, and no shares of Preferred Stock were held in treasury, (iii) no shares of Common Stock were held by subsidiaries of the Company, (iv) 1,000,000 shares of Common Stock were reserved for future issuance pursuant to stock options granted or to be granted under the Company's 1995 Equity Incentive Option Plan or the Company's 1995 Non-Employee Directors' Stock Option Plan; (v) 900,000 shares of Common Stock were reserved for future issuance upon the exercise of certain warrants pursuant to that certain Warrant Agreement between the Company and American Stock Transfer & Trust Company, dated as of June 15, 1995; (vi) 8,411,787 shares of Common Stock were authorized for future issuance upon the conversion of shares of Preferred Stock outstanding on such date; (vii) 5,517,280 shares of Common Stock are authorized for future issuance upon conversion of shares of Preferred Stock to be sold pursuant to the Stock Purchase Agreement, dated as of July 30, 1996, among Trefoil Capital Investors II, L.P., a Delaware limited partnership ("Trefoil II"), and GE Investment Private Placement Partners II, A Limited Partnership, a Delaware limited partnership 2 ("GEIPPPII") (the "July 1996 Stock Purchase Agreement"); and (viii) 800,000 shares of Preferred Stock were authorized for future issuance pursuant to the terms of the July 1996 Stock Purchase Agreement. Section 2.4. Authority Relative to this Agreement. The Company has all necessary corporate power and authority to execute and deliver this Agreement, and the Stockholder Agreement (collectively, the "Transaction Documents") and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery of each of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated thereby have been duly and validly authorized by all necessary corporate action, and no other corporate proceedings on the part of the Company are necessary to authorize the Transaction Documents or to consummate the transactions so contemplated, other than as contemplated by Section 4.3 and 4.8. Section 2.5. No Conflicts. The execution and delivery of this Agreement by the Company does not, and the performance of this Agreement by the Company and the consummation of the transactions contemplated hereby will not: (i) conflict with or violate the Certificate of Incorporation or By-Laws of the Company; (ii) conflict with or violate any federal, foreign, state or provincial law, rule, regulation, order, judgment or decree applicable to the Company or by which its properties are bound or affected; or (iii) result in any breach of or constitute a default under any material contract, agreement, license, permit, franchise or other instrument or obligation, to which the Company is a party or by which the Company or its properties are bound or affected, except for any conflict or violation which would not have a material adverse effect on the Company and its subsidiaries, taken as a whole. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASER The Purchaser represents and warrants to the Company that the statements contained in this Article III are true and correct as of the date hereof, and shall remain true and correct up to and including the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Article III). Section 3.1. Authority. The Purchaser has all requisite authority and capacity to enter into this Agreement and to purchase the Shares. Section 3.2. No Conflicts. The execution and delivery of this Agreement by the Purchaser does not, and the performance of this Agreement by the Purchaser and the consummation of the transactions contemplated hereby will not (i) conflict with or violate any federal, foreign, state or provincial law, rule, regulation, order, judgment or decree applicable to the Purchaser or by which the Purchaser's properties are bound or affected; or (ii) result in any breach of or constitute a default under any material contract, agreement, license, permit, 3 franchise or other instrument or obligation, to which the Purchaser is a party or by which the Purchaser or his properties are bound or affected. Section 3.3. Acquisition For Investment. The Purchaser is acquiring the Shares solely for investment, for the Purchaser's own account and not with a view to, or for resale in connection with, the distribution or other disposition thereof, except for such distributions and dispositions which are (i) explicitly permitted or contemplated under the terms of the Transaction Documents, as well as (ii) effected in compliance with the Securities Act of 1933, as amended (the "Securities Act"), the rules and regulations of the Securities and Exchange Commission promulgated thereunder, and all applicable state securities and "blue sky" laws. Section 3.4. Speculative Investment. The Purchaser understands that there are substantial restrictions on the transferability of the Shares under the Securities Act, and the rules and regulations of the Securities and Exchange Commission (the "SEC") thereunder, and there may never be a public market for the Shares and, accordingly, it may be difficult to liquidate the Purchaser's investment in the Company in case of emergency or otherwise. Section 3.5. Receipt of Reports. The Purchaser currently serves as the Chairman and a member of the Board of Directors of the Company and, as such, has received reports from and other information concerning the Company. In connection with the transaction contemplated hereby, the Purchaser has not relied on financial information regarding the Company provided by the Company. Section 3.6. Financial Condition. The Purchaser's financial situation is such that the Purchaser can afford to bear the economic risk of holding the Shares for an indefinite period of time and suffer a complete loss of the Purchaser's investment in the Company. Section 3.7. Financial Experience. The Purchaser's knowledge and experience in financial and business matters are such that the Purchaser is capable of evaluating the merits and risks of the Purchaser's purchase of the Shares or the Purchaser has been advised by a representative possessing such knowledge and experience. Section 3.8. Review of Risk Factors. The Purchaser and the Purchaser's representatives as deemed necessary by the Purchaser, including the Purchaser's professional, tax and other advisors, have reviewed the purchase of the Shares and the Purchaser understands and has taken cognizance of (or has been advised by the Purchaser's representatives as to) all the risk factors related to the purchase of the Shares. Section 3.9. Independent Investigation. In making the Purchaser's decision to purchase the Shares, the Purchaser has relied upon independent investigations made by the Purchaser and, to the extent believed by the Purchaser to be appropriate, the Purchaser's representatives. 4 Section 3.10. Examination of Documents. The Purchaser and the Purchaser's representatives and advisors, if any, have been afforded the opportunity to examine all documents related to and, if applicable, executed in connection with, the Company and the transactions contemplated hereby, which the Purchaser or the Purchaser's representatives or advisors, if any, desire to examine. Section 3.11. No Other Representations. The Company or its representatives have provided the Purchaser with the opportunity to ask questions of, and to receive answers from, the Company and its representatives concerning the terms and conditions of the purchase of the Shares. No representations or warranties have been made to the Purchaser or the Purchaser's representatives concerning the Shares or the Company, its prospects or other matters, except as set forth in this Agreement. Section 3.12. Accredited Investor. The Purchaser is an "accredited investor" within the meaning of Rule 501(a) under the Securities Act. Section 3.13. Purchaser's Principal Residence. The Purchaser is an individual with a principal place of residence is located in the State of California. Section 3.14. Brokers or Finders. No agent, broker, investment banker or other firm or person acting on behalf of the Purchaser, including any of the foregoing that is an affiliate of the Purchaser, is or will be entitled to receive any broker's or finder's fee or any other commission or similar fee in connection with any of the transactions contemplated by this Agreement. Section 3.15. Determination Not to Obtain Independent Counsel. In connection with the Purchaser's execution of this Agreement, the Purchaser has been advised by the Company to obtain and consult with independent counsel of his choice regarding the terms and conditions of this Agreement and its consequences, as well as, the desirability of entering into this Agreement. Notwithstanding such advice, the Purchaser has determined not to be represented by counsel in connection with the Stock Purchase with full knowledge and understanding of the risks involved with such determination. ARTICLE IV ADDITIONAL AGREEMENTS Section 4.1. Waiver of Donaldson, Lufkin & Jenrette. The Company shall use all reasonable efforts to obtain a written waiver (the "DLJ Waiver") by Donaldson, Lufkin & Jenrette Securities Corporation, of any placement, brokerage, finder's or other fee or commission under the DLJ Engagement Letter, as defined in Section 7.4(i) hereof, in connection with the transactions contemplated by this Agreement. 5 Section 4.2. Consent of Banks. The Company shall use all reasonable efforts to obtain from Bankers Trust Company, as Agent for the banks party to the Company Credit Agreement, a written consent of the Required Banks (as defined in the Company Credit Agreement) (the "Bank Consent") to the transactions contemplated hereby and a waiver of any defaults or required prepayments under the Company Credit Agreement which may be caused hereby. Section 4.3. Consent of Trefoil II and GEIPPPII. The Company shall use all reasonable efforts to obtain the written consent of Trefoil II and GEIPPPII (the "Trefoil/GE Consent") to the Stock Purchase Agreement and the transactions contemplated thereby, in form and substance satisfactory to the Company. Section 4.4. Consents, Approvals. The Company shall use all reasonable efforts to obtain all consents, waivers, approvals, authorizations or orders (including, without limitation, all United States and foreign governmental and regulatory rulings and approvals), and the Company shall make all filings (including, without limitation, all filings with United States and foreign governmental or regulatory agencies) required in connection with the authorization, execution and delivery of this Agreement by the Company and the consummation by it of the transactions contemplated hereby, in each case as promptly as practicable. The Company also shall use its reasonable efforts to obtain all necessary state securities laws or blue sky permits and approvals required to carry out the transactions contemplated hereby and shall furnish all information as may be reasonably requested in connection with any such action. Section 4.5. Notification of Certain Matters. The Company shall give prompt notice to the Purchaser and the Purchaser shall give prompt notice to the Company, of (i) the occurrence or nonoccurrence of any event the occurrence or nonoccurrence of which would be likely to cause any representation or warranty contained in this Agreement to become untrue or inaccurate, or (ii) any failure of the Company or the Purchaser, as the case may be, materially to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the delivery of any notice pursuant to this Section shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice; and provided, further, that such notice shall be required only if the certificates referred to in Sections 5.2(a) or 5.2(b) would not be able to be given if the applicable Closing were to occur on such date. Section 4.6. Public Announcements. The Purchaser and the Company shall consult with each other before issuing any press release with respect to the Stock Purchase or this Agreement and shall not issue any such press release or make any such public statement without the prior consent of the other party, which consent shall not be unreasonably withheld; provided, however, that a party may, without the prior consent of the other party, issue such press release or make such public statement as may upon the advice of counsel be required by law or the rules and regulations of the NASDAQ National Market, if it has used all reasonable efforts to consult with the other party prior thereto, and shall promptly notify the other parties hereto thereof. 6 Section 4.7. Conveyance Taxes. The Purchaser and the Company shall cooperate in the preparation, execution and filing of all returns, questionnaires, applications, or other documents regarding any real property transfer or gains, sales, use, transfer, value added, stock transfer and stamp taxes, any transfer, recording, registration and other fees, and any similar taxes which become payable in connection with the transactions contemplated hereby that are required or permitted to be filed at or before the Closing. Section 4.8. Consent of Board of Directors. The Company shall obtain the consent of the Board of Directors of the Company (the "Board Consent") to the Stock Purchase Agreement and the transactions contemplated thereby. Section 4.9. Election of Directors. The Purchaser hereby agrees, for as long as a majority of the Board of Directors of the Company shall consist of directors designated (other than disinterested directors) by Trefoil II and GEIPPPII, that the Purchaser shall not exercise any right to which the Purchaser would otherwise be entitled pursuant to the Certificate of Designation to elect two directors voting separately as a class due to defaults in dividend payments. ARTICLE V CONDITIONS TO THE STOCK PURCHASE Section 5.1. Conditions to Obligation of Each Party to Effect Any Closing. The respective obligations of each party to effect any Closing of the Stock Purchase shall be subject to the satisfaction at or prior to the Closing Date of the following conditions: (a) No Injunctions or Restraints; Illegality. No temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Stock Purchase shall be in effect, nor shall any proceeding brought by any administrative agency or commission or other governmental authority or instrumentality, domestic or foreign, seeking any of the foregoing be pending; and there shall not be any action taken, or any statute, rule, regulation or order enacted, entered, enforced or deemed applicable to the Stock Purchase, which makes the consummation of the Stock Purchase illegal; and (b) Governmental Actions. There shall not have been instituted, pending or threatened any action or proceeding (or any investigation or other inquiry that might result in such an action or proceeding) by any governmental authority or administrative agency before any governmental authority, administrative agency or court of competent jurisdiction, nor shall there be in effect any judgment, decree or order of any governmental authority, administrative agency or court of competent jurisdiction, in either case, seeking to prohibit or limit the Purchaser from exercising all material rights and privileges pertaining to its ownership of the Common Stock, or seeking to compel the 7 Company or any of its subsidiaries to dispose of or hold separate all or any material portion of the business or assets of the Company or any of its subsidiaries, as a result of the Stock Purchase or the transactions contemplated by this Agreement. Section 5.2. Additional Conditions to Obligations of the Purchaser. The obligation of the Purchaser to effect the purchase of the Shares is also subject to the following conditions: (a) Representations and Warranties. All representations and warranties of the Company herein contained shall have been true and correct when made in all respects and shall be true and correct at and as of the Closing Date as if made at and as of such time, except for (i) changes not prohibited by this Agreement, and (ii) those representations and warranties which address matters only as of a particular date (which shall have been true and correct as of such date, subject to clause (iii)), or (iii) at and as of the Closing Date where the failure to be true and correct could not, if any qualification in such representations or warranties as to materiality were deleted therefrom (including dollar thresholds), individually or in the aggregate reasonably be expected to have a Material Adverse Effect and the Purchaser shall have received a certificate dated the Closing Date to such effect signed by the President and the Chief Financial Officer of the Company; (b) Agreements and Covenants. The Company shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it at or prior to the Closing Date and the Purchaser shall have received a certificate dated the Closing Date to such effect signed on behalf of the Company by the President and the Chief Financial Officer of the Company; (c) Consents Obtained. All consents, waivers, approvals, authorizations or orders required to be obtained, and all filings or notices required to be made, by the Company for the due authorization, execution and delivery of this Agreement and the consummation by it of the transactions contemplated hereby shall have been obtained and made by the Company, except for consents required to be obtained under contracts not material to the operation of the business of the Company; (d) Stockholders Agreement. The Company, the Purchaser, Trefoil II, and GEIPPPII shall have entered into a stockholder agreement substantially in the form of Exhibit B attached hereto; and (e) Delivery of Shares. The Company shall have delivered the Shares to be delivered pursuant to Section 1.4 hereof, against payment of the Purchase Price. Section 5.3. Additional Conditions to Obligation of the Company. The obligation of the Company to effect the Stock Purchase is also subject to the following conditions: 8 (a) Representations and Warranties. The representations and warranties of the Purchaser contained in this Agreement shall have been true and correct in all respects when made and shall be true and correct in all respects on and as of the Closing Date, except for (i) changes contemplated by this Agreement and (ii) those representations and warranties which address matters only as of a particular date (which shall have been true and correct in all material respects as of such date), with the same force and effect as if made on and as of the Closing Date and the Company shall have received a certificate dated the Closing Date to such effect signed by the Purchaser; (b) Agreements and Covenants. The Purchaser shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by the Purchaser on or prior to the Closing Date, and the Company shall have received a certificate to such effect dated the Closing Date signed by the Purchaser; (c) Consents Obtained. All consents, waivers, approvals, authorizations or orders required to be obtained, and all filings required to be made, by the Purchaser for the due authorization, execution and delivery of this Agreement and the consummation by it of the transactions contemplated hereby shall have been obtained and made by the Purchaser, and the Company shall have obtained, in form and substance satisfactory to the Company, the DLJ Waiver (referred to in Section 4.1 hereof), the Bank Consent (referred to in Section 4.2 hereof), the Trefoil/GE Consent (referred to in Section 4.3 hereof), and the Board Consent (referred to in Section 4.8 hereof), and the Company shall not have the right, nor be entitled to, waive the requirement of the DLJ Waiver as a closing condition without the prior written consent of Trefoil II and GEIPPPII; and (d) Payment of Purchase Price. The Purchaser shall have delivered payment of the Purchase Price in accordance with Section 1.3 hereof. ARTICLE VI GENERAL PROVISIONS Section 6.1. Restrictive Legends. Each certificate representing Shares and Conversion Shares shall bear legends in substantially the following form: The securities represented by this certificate have not been registered under the Securities Act of 1933 or the securities laws of any state and may not be sold or otherwise disposed of except pursuant to an effective registration statement under such Act and applicable state securities laws or an applicable exemption to the registration requirements of such Act or such laws. 9 The Grand Union Company (the "Company") will furnish without charge to each stockholder who so requests through the Company's principal office, a statement of the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. The securities represented by this certificate are subject to restrictions on transfer, as provided in: (i) a Stockholders Agreement dated as of February 25, 1997 among the Company and the purchasers executing the agreement (the "Agreement"); and (ii) the Company's Certificate of Designation of Class A Convertible Preferred Stock Setting Forth the Powers, Preferences, Rights, Qualifications, Limitations and Restrictions of Such Class of Preferred Stock (the "Certificate"). Copies of the Agreement and the Certificate are on file with the Secretary of the Company and, upon request of any stockholder of the Company, will be made available to said stockholder. The securities represented by this certificate were issued pursuant to, and the holder hereof is entitled to certain rights and subject to certain obligations contained in, a Stockholders Agreement dated as of February 25, 1997, a copy of which is available for inspection at the principal office of the issuer hereof, and will be furnished without charge to the holder of such securities upon written request. Section 6.2. Notices. All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed to have been duly given or made if and when delivered personally or by overnight courier to the parties at the following addresses or sent by electronic transmission, with confirmation received, to the telecopy numbers specified below (or at such other address or telecopy number for a party as shall be specified by like notice): (a) If to the Purchaser: Roger Stangeland c/o The Vons Companies, Inc. 300 North Lake Avenue Suite 925 Pasadena, CA 91101 Telecopier No.: (818) 304-2873 Telephone No.: (818) 304-2870 10 (b) If to the Company: Chief Executive Officer The Grand Union Company 201 Willowbrook Blvd. Wayne, NJ 07470-0966 Attn: Joseph J. McCaig Telecopier No.: (201) 890-6012 Telephone No.: (201) 890-6000 With a copy to: General Counsel The Grand Union Company 201 Willowbrook Boulevard Wayne, NJ 07470-0966 Attn: John W. Schroeder, Esq. Telecopier No.: (201) 890-6012 Telephone No.: (201) 890-6761 and Fried, Frank, Harris, Shriver & Jacobson 350 South Grand Avenue, 32nd Floor Los Angeles, CA 90071 Attn: David K. Robbins, Esq. Telecopier No.: (213) 473-2005 Telephone No.: (213) 473-2222 Section 6.3. Certain Definitions. For purposes of this Agreement, the term: (a) "affiliate" means a person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the first mentioned person; including, without limitation, any partnership or joint venture in which the first mentioned person (either alone, or through or together with any other subsidiary) has, directly or indirectly, an interest of 10% or more; (b) "business day" means any day other than a day on which banks in the State of New York are required or authorized to be closed; (c) "Company Credit Agreement" means that certain Amended and Restated Credit Agreement dated as of June 15, 1995, as from time to time in effect among the 11 Company, the banks party thereto, and Bankers Trust Company, as Agent for the banks party thereto, as filed in the Company's public filings with SEC, together with such related transaction documents, amendments, extensions and waivers in effect as of the date hereof, and the consent and waiver secured pursuant to Section 4.2 hereof. (d) "Conversion Shares" means the shares of Common Stock issuable upon conversation of the Shares; (e) "DLJ Engagement Letter" means the letter dated January 17, 1996 between DLJ and the Company, in the form filed as Exhibit 10.28 to the Company's annual report on Form 10-K for the fiscal year ended March 30, 1996. (f) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (g) "person" means an individual, corporation, partnership, association, trust, unincorporated organization, other entity or group (as defined in Section 13(d)(3) of the Exchange Act); (h) "subsidiary" or "subsidiaries" of the Company or any other person means any corporation, partnership, joint venture or other legal entity of which the Company, or such other person, as the case may be (either alone or through or together with any other subsidiary), owns, directly or indirectly, more dm 50% of the stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity. Each of the following terms shall have the meaning ascribed to it in the section set forth beside such term in the table below: Term Section "Agreement" Recitals "Bank Consent" 4.2 "Board Consent" 4.8 "Certificate of Designation" 1.2 "Closing" 1.4 "Closing Date" 1.4 "Common Stock" 2.3 "Company" Recitals "DLJ Engagement Letter" 7.4(i) "DLJ Waiver" 4.1 "GEIPPPII" 2.3 "July 1996 Stock Purchase Agreement" 2.3 "Preferred Stock" Recitals "Purchase Price" 1.2 12 "Purchaser" Recitals "SEC" 3.4 "Securities Act" 3.3 "Shares" 1.2 "Stock Purchase" Recitals "Transaction Documents" 2.4 "Trefoil II" 2.3 "Trefoil/GE Consent" 4.3 Section 6.4. Amendment. This Agreement may not be amended except by an instrument in writing signed by the Company and of the Purchaser. Section 6.5. Cooperation. The Purchaser and the Company agree to take, or to cause to be taken, all such reasonable and lawful action as may be necessary to make effective and consummate the transactions contemplated by this Agreement. Section 6.6. Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Section 6.7. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the fullest extent possible. Section 6.8. Entire Agreement. This Agreement constitutes the entire agreement and supersedes all prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof. Section 6.9. Assignment. This Agreement shall not be assigned by operation of law or otherwise. Section 6.10. Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement, including, without limitation, by way of subrogation. Section 6.11. Failure or Indulgence Not Waiver, Remedies Cumulative. No failure or delay on the part of any party hereto in the exercise of any right hereunder shall impair such right 13 or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty or agreement herein, nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or of any other right. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available. Section 6.12. Governing Law. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York applicable to contracts executed and fully performed within the State of New York. Section 6.13. Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. IN WITNESS WHEREOF, the Company and the Purchaser have executed this Stock Purchase Agreement as of the date first set forth above. THE COMPANY THE GRAND UNION COMPANY By: /s/ Joseph J. McCaig ---------------------------------------- Name: Joseph J. McCaig Title: President and Chief Executive Officer PURCHASER /s/ Roger Stangeland -------------------------------------------- Roger Stangeland 14 Schedule I Wire Transfer Instructions Account Name: The Grand Union Company Account Number: 00319409 ABA Number: 021001033 Bank Name: Banker's Trust Company 15 EX-10.53 15 EX-10.53 Exhibit 10.53 AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT This Amendment No. 1, dated as of March 20, 1997 (this "Amendment No. 1"), to Stock Purchase Agreement, dated as of February 25, 1997 (the "Agreement"), is by and between The Grand Union Company, a Delaware corporation (the "Company"), and Roger Stangeland (the "Purchaser"). WITNESSETH: WHEREAS, pursuant to the Agreement, the Purchaser agreed to purchase from the Company, and the Company agreed to sell and issue to the Purchaser (the "Stock Purchase"), an aggregate of Sixty Thousand (60,000) shares of the Company's Class A Convertible Preferred Stock, $1.00 par value per share (the "Preferred Stock"); and WHEREAS, the Purchaser desires to be permitted to assign his rights and obligations pursuant to the Agreement, and the Company is willing to permit such assignment, on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein set forth, the parties agree as follows: Section 1. Representations and Warranties of the Purchaser. Sections 3.5 and 3.13 of the Agreement are hereby amended to read as follows: "Section 3.5. Receipt of Reports. Roger Stangeland currently serves as the Chairman and a member of the Board of Directors of the Company and as co-trustee of the general partner of the Partnership and, as Chairman of the Board of Directors of the Company, has received reports from and other information concerning the Company, and the Partnership is aware of the contents of all of such reports and information. In connection with the transaction contemplated hereby, the Purchaser has not relied on financial information regarding the Company provided by the Company." "Section 3.13. Purchaser's Principal Residence. Roger Stangeland is an individual with a principal place of residence located in the State of California, and the Partnership is a limited partnership organized under the laws of the State of California." Section 2. Assignment. Section 6.9 of the Agreement is hereby amended to read as follows: "Section 6.9. Assignment. This Agreement shall not be assigned by operation of law or otherwise; provided, however, that the Purchaser's right and obligation to consummate the Stock Purchase may be assigned, on the terms and conditions set forth herein, pursuant to an assignment and assumption agreement substantially in the form set forth as Exhibit A hereto (the "Assignment") to The Stangeland Family Limited Partnership, a California limited partnership (the "Partnership") of which the general partner is The Roger and Lilah Stangeland Living Trust (the "Trust"), and it is acknowledged and agreed by the Company that the Purchaser may, and intends to, so assign his rights and obligations hereunder." Section 3. Binding Effect. Section 6.10 of the Agreement is hereby amended to read as follows: "Section 6.10. Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and, upon the Assignment, to the Partnership, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement, including, without limitation, by way of subrogation." Section 4. Additional Conditions to the Company's Obligation to Effect the Closing. In addition to the satisfaction or waiver of all of the conditions set forth in Section 5 of the Agreement, the Company's obligation to effect the Closing pursuant to the Agreement and the Assignment is subject to the following additional conditions: (a) Conditions to Obligations of Each Party to Effect the Closing. The conditions set forth in Section 5.1 of the Agreement shall be satisfied with respect to the Stock Purchase giving effect to the Assignment as applied to the Partnership. (b) Additional Conditions to Obligations of the Company. The conditions set forth in Section 5.3 of the Agreement shall be satisfied giving effect to the Assignment, as though the Partnership shall have been substituted for the Purchaser in such Agreement in all respects, including but not limited to the truth and accuracy of the representations and warranties of the Purchaser set forth in Article III of the Agreement as though the Partnership shall have made such representations and warranties as of the date of the Agreement and as of the Closing Date, and the Partnership shall have delivered to the Company a certificate, in form and substance satisfactory to the Company, to such effect. Section 5. Notices. Section 6.2(a) of the Agreement is hereby amended to add the following at the end of Section 6.2: "(c) If to the Partnership: The Stangeland Family Limited Partnership 300 North Lake Avenue Suite 925 Pasadena, CA 91101 Telecopier No.: (818) 304-2873 Telephone No.: (818) 304-2870 2 With a copy to: Munger, Tolles & Olson 355 S. Grand Avenue, 35th Floor Los Angeles, CA 90071 Attention: Steven L. Guise, Esq. Telecopy: (213) 683-3702" Section 6. Certain Definitions. Section 6.3 of the Agreement is hereby amended to add the following definitions: (a) "Amendment" means Amendment No. 1, dated as of March __, 1997, to this Agreement. (b) "Assignment" means the Assignment and Assumption Agreement, dated as of March __, 1997, between Roger Stangeland and the Partnership, and the transactions contemplated thereby; (c) "Partnership" means The Stangeland Family Limited Partnership, a California limited partnership, of which the general partner is The Roger and Lilah Stangeland Living Trust; and (d) "Purchaser" when used herein, shall have the definition set forth in the Preamble to the Agreement; provided, however, that from and after the date of the Assignment, as contemplated by the Amendment, shall mean the Partnership. Section 7. Entire Agreement. This Amendment, together with the Agreement, constitutes the entire agreement and supersedes all prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof. Section 8. Governing Law. This Amendment shall be governed by, and construed in accordance with, the internal laws of the State of New York applicable to contracts executed and fully performed within the State of New York. Section 9. Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. 3 IN WITNESS WHEREOF, the Company and the Purchaser have executed this Amendment No. 1 as of the date first set forth above. THE COMPANY THE GRAND UNION COMPANY By: /s/ Joseph J. McCaig ------------------------- Name: Joseph J. McCaig Title: President and Chief Executive Officer PURCHASER /s/ Roger Stangeland ---------------------------- Roger Stangeland 4 EX-10.54 16 EX-10.54 Exhibit 10.54 ASSIGNMENT AND ASSUMPTION AGREEMENT This Assignment and Assumption Agreement (the "Agreement"), dated as of March 20, 1997, by and between Roger Stangeland, an individual ("Stangeland"), and The Stangeland Family Limited Partnership, a California limited partnership (the "Partnership") of which the general partner is The Roger and Lilah Stangeland Living Trust (the "Trust"). WITNESSETH: WHEREAS, pursuant to the Stock Purchase Agreement, dated as of February 25, 1997, by and between The Grand Union Company, a Delaware corporation (the "Company"), and Stangeland, as amended by Amendment No. 1, dated as of March 20, 1997 (as so ameded, the "Purchase Agreement"), Stangeland agreed to purchase from the Company, and the Company agreed to sell and issue to Stangeland (the "Stock Purchase"), an aggregate of Sixty Thousand (60,000) shares (the "Stangeland Shares") of the Company's Class A Convertible Preferred Stock, $1.00 par value per share (the "Preferred Stock"); and WHEREAS, pursuant to the Purchase Agreement, Stangeland has acquired the right to assign its rights thereunder to the Partnership, and thereby cause the Partnership to purchase the Stangeland Shares; WHEREAS, Stangeland desires to assign to the Partnership his right to purchase the Stangeland Shares, and the Partnership desires to accept such right and assume all the obligations imposed on Stangeland pursuant to the Purchase Agreement with respect to the Stangeland Shares under the Purchase Agreement, in accordance with its terms. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein set forth, the parties agree as follows: Section 1. Effective as of the date hereof, Stangeland hereby assigns all of his rights to acquire the Stangeland Shares in accordance with the terms and conditions of the Purchase Agreement to the Partnership, which hereby agrees to, and hereby accepts, such assignment. Section 2. The Partnership hereby agrees to, and hereby does, assume any and all obligations of Stangeland pursuant to the Purchase Agreement, and hereby agrees to perform (and Stangeland hereby agrees to cause the Partnership to perform), such obligations subject to the terms and conditions of the Purchase Agreement. Section 3. The parties hereto hereby acknowledge and agree that the Company is entitle to enforce and rely on the provisions of this Agreement as third party beneficiary hereof. Section 4. This Agreement, together with the Purchase Agreement and the Addendum to the Stockholder Agreement by and among the Company, Trefoil Capital Investors II, L.P. and GE Investment Private Placement Partners II, a Limited Partnership, contains the entire understanding of the parties hereto with respect to the subject matter hereof. Section 5. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York applicable to contracts executed and fully performed within the State of New York. Section 6. This Agreement shall not be assignable. IN WITNESS WHEREOF, Stangeland and the Partnership have executed this Agreement as of the date first set forth above. STANGELAND /s/ Roger Stangeland ---------------------------------- Roger Stangeland THE STANGELAND FAMILY LIMITED PARTNERSHIP, a California limited partnership By: THE ROGER AND LILAH STANGELAND LIVING TRUST Its: General Partner /s/ Roger Stangeland ---------------------------------- By: Roger Stangeland, Co-Trustee /s/ Lilah Stangeland ---------------------------------- By: Lilah Stangeland, Co-Trustee 2 EX-10.55 17 EX-10.55 Exhibit 10.55 STOCKHOLDER AGREEMENT Stockholder Agreement (this "Agreement"), dated as of February 25, 1997, between Trefoil Capital Investors II, L.P., a Delaware limited partnership ("Trefoil II"), GE Investment Private Placement Partners II, A Limited Partnership, a Delaware limited partnership ("GEIPPPII" and, collectively with Trefoil II, the "Purchasers")), Roger Stangeland, an individual ("Stangeland" and, collectively with the Purchasers, the "Stockholders"), and The Grand Union Company, a Delaware corporation (the "Company"). W I T N E S S E T H: -------------------- WHEREAS, pursuant to a Stock Purchase Agreement of even date herewith (the "Purchase Agreement") by and among the Company and Stangeland, Stangeland will purchase an aggregate of 60,000 shares (the "Stangeland Shares") of Class A Convertible Preferred Stock, stated value $50.00 per share (the "Preferred Stock"), of the Company; WHEREAS, the Purchasers are parties to a Stockholder Agreement (the "Purchasers Stockholder Agreement"), and the Purchasers and the Company are parties to a Stock Purchase Agreement (the "Purchasers Stock Purchase Agreement") and a Registration Rights Agreement (the "Purchasers Registration Rights Agreement"), each dated as of July 30, 1996, creating certain rights and obligations among the parties thereto; and WHEREAS, in connection with the acquisition of the Stangeland Shares, and any other shares of the Preferred Stock and common stock, par value $1.00 per share, of the Company (the "Common Stock") paid as dividends on such Stangeland Shares (collectively with the Preferred Stock, the "Stangeland Securities"), Stangeland will have the right to participate in the registration by the Company of shares of Preferred Stock and Common Stock to be sold by the Purchasers to include all or any portion of the Stangeland Securities for public sale in the United States as provided herein (the "Stangeland Registration Rights"); and WHEREAS, the Stockholders wish to provide for certain arrangements with respect to their shares of Securities; NOW, THEREFORE, in consideration of the foregoing, and the mutual agreements and covenants contained herein, the parties hereto agree as follows: 1. Definitions. All terms defined herein in the plural form shall have correlative meanings in the singular form and vice versa. For purposes of this Agreement, the following terms shall have the respective meanings given below: "Securities" means shares of the Preferred Stock and Common Stock paid as dividends on shares of Preferred Stock owned by any Stockholder. "Voting Stock" means the Common Stock, the Preferred Stock and any other capital stock of the Company that is entitled to vote with the Common Stock on all matters submitted to the stockholders of the Company for voting; 2. Tag-Along Rights. (a) If, at any time, either Purchaser proposes to sell shares of Securities representing 50% or more of such Purchaser's aggregate Securities then held, in one transaction or in any series of transactions (other than through a sale of such shares in a public offering), then such party (the "Selling Party") shall notify Stangeland (the "Tag-Along Seller"), describing in such notification the material terms of the proposed sale. The Tag-Along Seller shall have the option, exercisable by written notice to the Selling Party, within ten business days after the Selling Party notifies the Tag-Along Seller of its intention to effect such sale, to require the Selling Party to provide as part of its proposed sale that the Tag-Along Seller be given the right to participate, pro rata in proportion to the respective number of shares of Securities owned by each party, in such transaction or series of transactions on the same terms and conditions (including but not limited to obligations with respect to indemnification) as the Selling Party, and, if such option is exercised by the Tag-Along Seller, the Selling Party shall not proceed with such sale unless the Tag-Along Seller is given the right so to participate. (b) The provisions of this Section 2 shall terminate on the earlier of (i) the date that Stangeland shall first own less than 30,000 shares of Preferred Stock, or (ii) date that the Purchasers shall first collectively own Securities (r) with a stated value, in the case of Preferred Stock, or (s) valued at $7.25 per share, in the case of shares of Common Stock, equal to less than an aggregate of $50,000,000; provided, however, that if on such date there shall be a sale of Securities previously commenced in which Stangeland shall have delivered written notice of his election to participate in such sale pursuant to this Section, then the provisions of this Section shall continue to apply and be enforceable until the earlier of (x) the sale of Stangeland Shares pursuant to such transaction, or (y) the termination of such transaction by the Selling Party prior to its consummation. 3. Take-Along Rights. (a) If, at any time, either Purchaser proposes to sell shares of Securities representing 50% or more of such Purchaser's aggregate Securities then held, in one transaction or in any series of transactions (other than through a sale of such shares in a public offering) to any third party (the "Buyer"), then such party (the "Selling Party") shall have the right (the "Take-Along Right") to require Stangeland to participate, pro rata in proportion to the respective number of shares of Securities owned by each party, in such transaction or series of transactions on the same terms and conditions (including but not limited to obligations with respect to indemnification) as the Selling Party. The Selling Party shall exercise the Take-Along Right by delivering written notice thereof to Stangeland, describing in such notification the material terms of the proposed sale. 2 (b) On the closing date of the sale of Securities to the Buyer, the Selling Party and Stangeland shall deliver the certificates representing the Securities owned by it and him, in proper form for transfer with appropriate stock powers executed in blank attached and all documentary and transfer tax stamps affixed, against payment of the purchase price therefor. By delivering such certificates, the Selling Party and Stangeland each shall be deemed to represent and warrant that the Buyer will receive good title to the Securities transferred by them represented by such certificates, free and clear of all liens, security interests, pledges, charges, encumbrances, stockholders agreements, and voting trusts. (c) The provisions of this Section 3 shall terminate on the date that the Purchasers shall first collectively own Securities (i) with a stated value, in the case of Preferred Stock, or (ii) valued at $7.25 per share, in the case of shares of Common Stock, equal to less than an aggregate of $50,000,000; provided, however, that if on such date there shall be a sale of Securities previously commenced in which a Selling Party shall have delivered written notice of its election to require Stangeland to participate in such sale pursuant to this Section, then the provisions of this Section shall continue to apply and be enforceable until the earlier of (i) the sale of Securities to the Buyer pursuant to such transaction, or (ii) the termination of such transaction by the Selling Party prior to its consummation. 4. Exercise of Demand Registration Rights. (a) If, at any time, either Purchaser elects to request or require the Company to register all or any of the Securities then owned by such Purchaser for public sale pursuant to the Purchasers Registration Rights Agreement (whether a Demand Registration, in connection with a registration of securities for sale by the Company, or a registration on Form S-3), such party (the "Registering Party") shall notify Stangeland (the "Tag-Along Registrant") and the Tag-Along Registrant shall have the option, exercisable by written notice to the Registering Party, within ten business days after the Registering Party notifies the Tag-Along Registrant of its intention to exercise such Demand Registration Right, to require the Registering Party to provide that the Tag-Along Registrant be given the right to participate in such registration, pro rata in proportion to the respective number of shares of Securities owned by the Registering Party, the other Purchaser, if such other Purchaser has elected to participate in such registration, and the Tag-Along Registrant, and, if such option is exercised by the Tag-Along Registrant, the Registering Party shall not proceed with such registration unless the Tag-Along Registrant is given the right so to participate. (b) The Company and Stangeland hereby agree that if the provisions of clause (a) of this Section 4 are complied with, that the Company will include the Securities of the Tag-Along Registrant in such registration on the same terms, and subject to the same conditions, including, among other things, delays in the filing and effectiveness of the registration, reductions and allocations of Securities among participants in the registration, and the payment of registration expenses, as the terms and conditions applicable to the Purchasers pursuant to the Purchaser Registration Rights Agreement, except as may be otherwise expressly set forth herein. 3 (c) The provisions of this Section 4 shall terminate on the date that Stangeland shall first own less than 30,000 shares of Preferred Stock; provided, however, that if on such date there shall be a registration of Securities previously commenced in which Stangeland shall have delivered written notice of his election to participate in such registration pursuant to this Section, then the provisions of this Section shall continue to apply and be enforceable until the earlier of (i) the sale of Stangeland Shares pursuant to such registration, or (ii) the withdrawal or abandonment of such registration prior to its effectiveness. 5. Legend on Certificates. Except as set forth herein to the contrary, the following legend shall be noted conspicuously on all certificates representing shares of Securities issued after the date hereof which are subject to the terms of this Agreement: The securities represented by this certificate have not been registered under the Securities Act of 1933 or the securities laws of any state and may not be sold or otherwise disposed of except pursuant to an effective registration statement under such Act and applicable state securities laws or an applicable exemption to the registration requirements of such Act or such laws. The Grand Union Company (the "Company") will furnish without charge to each stockholder who so requests through the Company's principal office, a statement of the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. The securities represented by this certificate are subject to restrictions on transfer, as provided in: (i) a Stockholders Agreement dated as of February 25, 1997 among the Company and the purchasers executing the agreement (the "Agreement"); and (ii) the Company's Certificate of Designation of Class A Convertible Preferred Stock Setting Forth the Powers, Preferences, Rights, Qualifications, Limitations and Restrictions of Such Class of Preferred Stock (the "Certificate"). Copies of the Agreement and the Certificate are on file with the Secretary of the Company and, upon request of any stockholder of the Company, will be made available to said stockholder. The securities represented by this certificate were issued pursuant to, and the holder hereof is entitled to certain rights and subject to certain obligations contained in, a Stockholders Agreement dated as of February 25, 1997, a copy of which is available for inspection at the principal office of the issuer hereof, and will be furnished without charge to the holder of such securities upon written request. 4 6. Consent of Purchasers. Each of the Purchasers agrees to provide its consent to Stangeland's acquisition of the Stangeland Shares on the terms and conditions set forth in the Purchase Agreement and this Agreement. 7. Election of Directors. Stangeland hereby agrees, for as long as a majority of the Board of Directors of the Company shall consist of directors designated (other than disinterested directors) by the Purchasers, that Stangeland shall not exercise any right to which Stangeland would otherwise be entitled pursuant to the Company's Certificate of Designation of Class A Convertible Preferred Stock Setting Forth the Powers, Preferences, Rights, Qualifications, Limitations and Restrictions of Such Class of Preferred Stock to elect two directors voting separately as a class due to defaults in dividend payments. 8. After Acquired Securities. The provisions of this Agreement shall apply with equal force to any additional shares of Common Stock or Preferred Stock acquired by any Stockholder during the term of this Agreement. 9. Binding Effect. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns, heirs, and personal representatives. Stangeland shall not sell, assign or otherwise transfer any interest in the Securities owned by him (other than pursuant to Sections 2, 3 or 4 hereof) unless each such transferee becomes a party to this Agreement and agrees to be bound by the terms hereof. 10. Entire Agreement. This Agreement sets forth the entire understanding between the parties with respect to the subject matter hereof, and supersedes any existing agreements between them concerning such subject matter. 11. Notices. Any notice under or relating to this Agreement shall be given in writing and shall be deemed sufficiently given when delivered by hand or by conformed facsimile transmission, on the second business day after a writing is consigned (freight prepaid) to a commercial overnight courier, and on the fifth business day after a writing is deposited in the mail, postage and other charges prepaid, addressed as follows: Trefoil II: 4444 Lakeside Drive Burbank, California 91505 Attention: Mr. Geoffrey T. Moore Telecopy: (818) 842-3142 with a copy to: Fried, Frank, Harris, Shriver & Jacobson 350 South Grand Avenue Los Angeles, California 90071 Attention: David K. Robbins, Esq. Telecopy: (213) 473-2222 5 GEIPPPII: GE Investment Management Incorporated 3003 Summer Street Stamford, Connecticut 06904 Attention: Michael Pastore, Esq. Telecopy: (203) 326-4177 with a copy to: Dewey Ballantine 1301 Avenue of the Americas New York, New York 10019 Attention: William J. Phillips, Esq. Telecopy: (212) 259-6333 Stangeland: Roger Stangeland c/o The Vons Companies, Inc. 300 North Lake Avenue Suite 925 Pasadena, CA 91101 Telecopy: (818) 304-2873 the Company: Chief Executive Officer The Grand Union Company 201 Willowbrook Boulevard Wayne, NJ 07470-0966 Attention: Joseph J. McCaig Telecopy: (201) 890-6012 with a copy to: Counsel General The Grand Union Company 201 Willowbrook Boulevard Wayne, New Jersey 07470-0966 Attention: John W. Schroeder, Esq. Telecopy: (201) 890-6012 and Fried, Frank, Harris, Shriver & Jacobson 350 South Grand Avenue Los Angeles, California 90071 Attention: David K. Robbins, Esq. Telecopy: (213) 473-2222 or to such other address or facsimile number as either party may, from time to time, designate in a written notice given in like manner. 6 12. Modification. This Agreement may only be modified by a written instrument duly executed by each party hereto. 13. Waiver. Any waiver by either party of a breach of any provision of this Agreement shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Agreement. Any waiver of any provision of this Agreement must be in writing. 14. Headings. The headings to the sections of this Agreement are inserted for convenience only and shall not constitute a part hereof or affect in any way the meaning or interpretation of this Agreement. 15. Separability. If any provision of this Agreement is invalid, illegal or unenforceable, the balance of this Agreement shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances. 16. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 17. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. 7 IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first written above. TREFOIL CAPITAL INVESTORS II, L.P. By: Trefoil Investors II, Inc. its general partner By: /s/ Geoffrey T. Moore ------------------------------------ Name: Geoffrey T. Moore Title: Managing Director GE INVESTMENT PRIVATE PLACEMENT PARTNERS II, A LIMITED PARTNERSHIP By: GE Investment Management Incorporated By: /s/ Michael M. Pastore -------------------------------------- Name: Michael M. Pastore Title: Vice President /s/ Roger Stangeland -------------------------------------- Roger Stangeland THE GRAND UNION COMPANY By: /s/ Joseph J. McCaig -------------------------------------- Name: Joseph J. McCaig Title: President and Chief Executive Officer 8 EX-10.56 18 EX-10.56 Exhibit 10.56 ADDENDUM TO STOCKHOLDER AGREEMENT This Addendum to Stockholder Agreement is made to that certain Stockholder Agreement, dated as of February 25, 1997 (the "Agreement"), among Trefoil Capital Investors II, L.P., a Delaware limited partnership, GE Investment Private Placement Partners II, A Limited Partnership, a Delaware limited partnership, Roger Stangeland, an individual, and The Grand Union Company, a Delaware corporation (the "Company"). The Stangeland Family Limited Partnership, a California limited partnership (the "Partnership") hereby acknowledges and agrees, in connection with its acquisition from the Company of 60,000 shares of the Class A Preferred Stock of the Company on the date hereof, as follows: 1. The Partnership has succeeded to all of the rights, and hereby assumes all of the obligations, of Stangeland set forth in the Agreement. 2. The Partnership hereby agrees to be bound by all of the terms of the Agreement formerly applicable to Stangeland, as contemplated by Section 9 of the Agreement. 3. The term "Stangeland", wherever used in the Agreement, shall hereafter be deemed to refer to the Partnership in all respects. 4. The address for notices to the Partnership pursuant to Section 11 of the Agreement is: Stangeland: The Stangeland Family Limited Partnership 300 North Lake Avenue Suite 925 Pasadena, CA 91101 Telecopy: (818) 304-2873 with a copy to: Munger, Tolles & Olson 355 S. Grand Avenue, 35th Floor Los Angeles, CA 90071 Attention: Steven L. Guise, Esq. Telecopy: (213) 683-3702 5. The Partnership has full partnership power and authority to execute, deliver and perform this Addendum and the Agreement, and the execution, delivery and performance of this Addendum and the Agreement will not violate or, with or without notice or the passage of time constitute a breach of or default under the terms of (a) any governing agreement, certificate or other similar document of the Partnership, (b) any law, rule or regulation to which the Partnership is subject, or (c) any document or instrument to which the Partnership is a party or by which the Partnership is bound. The undersigned, duly authorized, hereby execute this Addendum and, thereby, the Agreement, on behalf of the Partnership on this 20th day of March, 1997. THE STANGELAND FAMILY LIMITED PARTNERSHIP, a California limited partnership By: THE ROGER AND LILAH STANGELAND LIVING TRUST Its: General Partner /s/ Roger Stangeland --------------------------------- By: Roger Stangeland, Co-Trustee /s/ Lilah Stangeland --------------------------------- By: Lilah Stangeland, Co-Trustee Acknowledged and agreed as of the date set forth above: TREFOIL CAPITAL INVESTORS II, L.P. By: Trefoil Investors II, Inc. Its: General Partner By: /s/ Robert G. Moskowitz -------------------------- Name: Robert G. Moskowitz Title: Vice President GE INVESTMENT PRIVATE PLACEMENT PARTNERS II, A LIMITED PARTNERSHIP By: GE Investment Management Incorporated Its: General Partner By: /s/ Michael M. Pastore ------------------------- Name: Michael M. Pastore Title: Vice President 2 EX-10.57 19 EXHIBIT 10.57 ACCEL & EXH. AGREE Exhbit 10.57 ACCELERATION AND EXCHANGE AGREEMENT This ACCELERATION AND EXCHANGE AGREEMENT is made as of the 5th day of June, 1997 (this "Agreement"), among THE GRAND UNION COMPANY, a Delaware corporation (the "Company"), TREFOIL CAPITAL INVESTORS II, L.P., a Delaware limited partnership ("Trefoil"), and GE Investment Private Placement Partners II, A Limited Partnership, a Delaware limited partnership ("GEI") (GEI together with Trefoil, the "Purchasers"). WITNESSETH: WHEREAS, pursuant to a Stock Purchase Agreement, dated as of July 30, 1996, as amended by Amendment No. 1 thereto dated as of March 20, 1997, among the Company and the Purchasers (as so amended, the "Purchase Agreement"), the Company has agreed to sell to the Purchasers, and the Purchasers have agreed to purchase from the Company, 2,000,000 shares of the Company's Class A Convertible Preferred Stock, par value $1.00 per share, issuable in denominations of $50 stated value per share (the "Class A Preferred Shares"); WHEREAS, the Company and the Purchasers desire, on the terms and subject to the conditions set forth herein, to accelerate the Fourth Closing and the Fifth Closing (as such terms are defined in the Purchase Agreement); and WHEREAS, in order to induce the Purchasers to accelerate the Fourth Closing and the Fifth Closing, the Company and the Purchasers have agreed to certain other arrangements set forth herein; NOW, THEREFORE, in consideration of the premises, obligations and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and subject to and on the terms and conditions herein set forth, the parties hereto agree as follows: ARTICLE 1 ACCELERATION AND EXCHANGE; CLOSINGS Section 1.1 Definitions. Certain capitalized terms used in this Agreement have the meanings set forth, or referred to, in Sections 8.1 and 8.2 hereof. Section 1.2 Purchase and Sale of Class A Preferred Shares. On the terms and subject to the conditions set forth herein, the purchase and sale of the 800,000 Class A Preferred Shares to have occurred pursuant to the Purchase Agreement at the Fourth Closing and the Fifth Closing (the "Accelerated Shares") shall be accelerated, as contemplated pursuant to Section 5.15(b)(1) of the Purchase Agreement. At the Class A Closing (as hereinafter defined), the Company shall, in accordance with and pursuant to the Purchase Agreement, sell, assign, transfer, convey and deliver to each of the Purchasers, and each of the Purchasers shall purchase, acquire and accept, one-half of the Accelerated Shares. At the Class A Closing, the Company shall deliver to the Purchasers, against payment therefor as provided herein, certificates representing the Accelerated Shares, in such denominations as shall be requested by the Purchasers no less than one Business Day prior to the Class A Closing Date. Section 1.3 Purchase Price for Shares. The Purchase Price (as defined in the Purchase Agreement) shall be paid to the Company at the Class A Closing, against receipt of the Accelerated Shares, by wire transfer of immediately available funds to an account designated by the Company in writing at least two (2) days prior to the Class A Closing Date. Section 1.4 Other Deliveries. At the Class A Closing, the parties shall deliver executed copies of the other documents and instruments required by Article 5 and such other documents and instruments as shall be reasonably requested by any of the parties hereto. Section 1.5. The Exchange. On the terms and subject to the conditions set forth in this Agreement, at the Exchange Closing (as hereinafter defined): (a) the Company shall issue and deliver to each of the Purchasers four hundred thousand (400,000) Class B Preferred Shares. The Company shall deliver to the Purchasers certificates representing the Class B Preferred Shares to which the Purchasers are entitled in accordance with this Section, in such denominations as shall be requested by the Purchasers no less than one Business Day prior to the Exchange Closing Date; and (b) following delivery by the Company of certificates representing the number of shares of Class B Preferred Shares to which the Purchasers are entitled pursuant to clause (a) of this Section, each of the Purchasers shall assign, transfer, and convey to the Company the four hundred thousand (400,000) Class A Preferred Shares acquired at the Class A Closing. The Purchasers shall deliver at the Closing certificates representing such shares, duly endorsed in blank or accompanied by stock powers duly endorsed in blank. The transactions contemplated by this Section are referred to herein as the "Exchange." Section 1.6 Consummation of the Sale of the Accelerated Shares and the Exchange. The sale of the Accelerated Shares (the "Class A Closing") will be consummated at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York, on June 16, 1997, or such other date prior to July 1, 1997 as the parties hereto shall mutually agree (the "Class A Closing Date"), unless this Agreement has been earlier terminated in accordance with its terms. The Exchange (the "Exchange Closing") will be consummated at the same place as the Class A Closing, commencing immediately following the completion of the Class A Closing on the Class A Closing Date (the "Exchange Closing Date"). Section 1.7. The Reset Closing. On the Reset Date (as defined in the Certificate of Designation): (a) The Company shall issue to each of the Purchasers (the "Reset Shares") a number of shares of the Company's Common Stock, par value $1.00 per share (the "Common Stock") equal to one half of the aggregate number of Reset Shares, determined in accordance with the following formula, rounded, in the case of a fractional result, to the nearest whole share: Aggregate Number of = RCP - $1.50 X 2,000,000 shares ---------------- Reset Shares $3.25 - $1.50 of Common Stock where "RCP" means the Conversion Price of the Class B Preferred Shares on the Reset Date. (b) The delivery of the Reset Shares (the "Reset Closing") will be consummated at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York, on the Reset Date (the "Reset Closing Date"). At the Reset Closing, the Company shall deliver to the Purchasers certificates representing the Reset Shares to which the Purchasers are entitled in accordance with this Section, in such denominations as shall be requested by the Purchasers no less than one Business Day prior to the Reset Date. ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY Section 2.1. Organization and Qualification; Subsidiaries. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Each of the Company's subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. Section 2.2. Certificate of Incorporation and By-Laws. The Company's Certificate of Incorporation and By-Laws as most recently restated and subsequently amended to date are in full force and effect. The Company is not in violation of any of the provisions of its Certificate of Incorporation or By-Laws. Section 2.3. Capitalization. (a) On or prior to the Exchange Closing Date, the Certificate of Designation will have been duly adopted and filed with the Secretary of State of Delaware. The Class B Preferred Shares when issued on the Exchange Closing Date will be validly issued, fully paid and nonassessable. (b) On or prior to the Exchange Closing Date (i) the number of shares of Common Stock equal to the number of such shares issuable upon the conversion of all Class A Preferred Shares and Class B Preferred Shares (the "Conversion Shares"), subject to paragraph (c) of this Section 2.3, shall have been reserved for issuance upon such conversion and (ii) 2,000,000 shares of Common Stock shall have been reserved for issuance pursuant to Section 1.7 hereof. All shares of Common Stock, including the Conversion Shares and the Reset Shares, subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, subject to paragraph (c) of this Section 2.3, validly issued, fully paid and nonassessable. (c) The representations set forth in paragraph (b) of this Section 2.3 assume that if the total number of Common Shares reserved for issuance or issued as (i) Reset Shares, plus (ii) Conversion Shares (including Conversion Shares in respect of additional shares of Class A Preferred Shares and Class B Preferred Shares paid as dividends on the Class A Preferred Shares and Class B Preferred Shares), plus (iii) shares of Common Stock paid as dividends on the Class A Preferred Shares and Class B Preferred Shares, plus (iv) 900,000 shares of Common Stock issued or to be issued upon exercise of certain warrants pursuant to the Warrant Agreement, dated as of June 15, 1995, between the Company and American Stock Transfer & Trust Company, plus (v) 1,000,000 shares of Common Stock issued or to be issued upon exercise of options granted under the Company's 1995 Equity Incentive Option Plan or the Company's 1995 Non-Employee Directors' Stock Option Plan, shall exceed 50,000,000 (plus any shares of Common Stock reacquired by the Company and canceled), then the Company shall use its best efforts to cause an amendment to the Company's Certificate of Incorporation, increasing the number of authorized shares of authorized Common Stock pursuant to its Certificate of Incorporation at least to the extent of such excess, to be properly authorized, approved, adopted, filed, and made effective. Section 2.4. Authority Relative to this Agreement. The Company has all necessary corporate power and authority to execute and deliver this Agreement, the Certificate of Designation, and the Registration Rights Amendment (collectively, the "Transaction Documents") and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery of each of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated thereby have been duly and validly authorized by all necessary corporate action, and no other corporate proceedings on the part of the Company are necessary to authorize the Transaction Documents or to consummate the transactions so contemplated, other than as contemplated by Section 4.1. The Special Committee (the "Special Committee") of the Board of Directors (all of such committee members being Disinterested Directors) and the Board of Directors of the Company have each determined that it is advisable and in the best interest of the holders of the Company's Common Stock for the Company to consummate the transactions contemplated by this Agreement upon the terms and subject to the conditions herein. Each of this Agreement and each of the other Transaction Documents has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery by the Purchasers, constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except that (i) such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights, and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. Section 2.5. No Conflict; Required Filings and Consents. (a) The execution and delivery of the Transaction Documents by the Company do not, and the performance of the Transaction Documents by the Company and the consummation of the transactions contemplated hereby and thereby will not: (i) conflict with or violate the Certificate of Incorporation or By-Laws of the Company; (ii) conflict with or violate any federal, foreign, state or provincial law, rule, regulation, order, judgment or decree (collectively, "Laws") applicable to the Company or any of its subsidiaries or by which its or any of their respective properties are bound or affected; (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default under), or impair the Company's or any of its subsidiaries' rights or alter the rights or obligations of any third party under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on any of the properties or assets of the Company or any of its subsidiaries pursuant to, (x) any note, bond, mortgage, indenture, real property lease or other material lease, or (y) any material contract, agreement, license, permit, franchise or other instrument or obligation, to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or its or any of their respective properties are bound or affected or (iv) assuming compliance with Sections 4.4 and 4.5 hereof, conflict with or violate the Company's obligations under Rule 4460(i) of the NASDAQ Stock Market Rules (the "NASDAQ Rules") of the NASDAQ Stock Market (the "NASDAQ") or otherwise require the vote or consent of the holders of the Company's Common Stock, except as required by Section 3(a) of the Certificate of Designation. (b) The execution and delivery of the Transaction Documents by the Company does not, and the performance of the Transaction Documents by the Company will not, require any consent, approval, authorization or permit of, or filing with or notification to, any federal, foreign, state or provincial governmental or regulatory authority except (i) for applicable requirements, if any, of the Securities Act, the Exchange Act, and Blue Sky Laws, (ii) as contemplated by Section 4.2, and (iii) for any consent, approval, authorization or permit of, or filing with or notification to, any other federal, foreign, state or provincial governmental or regulatory authority which will be obtained, filed or provided, as the case may be, prior to the Exchange Closing. Section 2.6. Absence of Litigation. There are no claims, actions, suits, proceedings or investigations pending or, to the knowledge of the Company, threatened against the Company before any federal, foreign, state or provincial court, arbitrator or administrative, governmental or regulatory authority or body relating to this Agreement or the transactions contemplated by the Transaction Documents or the Purchase Agreement. Section 2.7. Opinion of Financial Advisor. The Special Committee has received from its financial advisor, Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), its written opinion (the "Fairness Opinion"), in the form previously delivered to the Purchasers. Section 2.8. Brokers. Except for fees payable to DLJ pursuant to the terms of that certain engagement letter dated May 22, 1997, between the Company and DLJ, a true and complete copy of which has been provided to the Purchasers prior to the date hereof, no broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company or its subsidiaries or affiliates, whether pursuant to the letter dated January 17, 1996 between DLJ and the Company, in the form filed as Exhibit 10.28 to the Company's annual report on Form 10-K for the fiscal year ended March 30, 1996 (the "DLJ Engagement Letter") or otherwise. The Company has obtained from DLJ an executed DLJ Waiver Letter and has delivered a true and complete copy thereof to the Purchasers. Section 2.9. Securities Laws. Assuming that the Purchasers' representations and warranties contained in Section 3 hereof are, and continue to be at each Closing hereunder, true and correct, the offer, issuance and sale of the Accelerated Shares, the Class B Preferred Shares, and the Reset Shares is, and will be as of each Closing hereunder, exempt from the registration and prospectus delivery requirements of the Securities Act, and have been registered or qualified (or are exempt from registration and qualification) under the registration, permit or qualification requirements of all applicable Blue Sky Laws. Section 2.10. NASDAQ Approval. Prior to the date hereof, the Company has prepared and filed with the NASDAQ a request for confirmation that the Company may consummate the Closings without approval by the Company's stockholders at a meeting without violating the NASDAQ Rules, except as required by Section 3(a) of the Certificate of Designation. ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS Each of the Purchasers severally represents and warrants to the Company that: Section 3.1. Organization. Such Purchaser is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. Section 3.2. Due Authorization. Such Purchaser has all right, power and authority to enter into the Transaction Documents to which it is a party and to consummate the transactions contemplated hereby and thereby. The execution and delivery of the Transaction Documents to which it is a party by such Purchaser and the consummation by such Purchaser of the transactions contemplated hereby have been duly authorized by all necessary action on behalf of such Purchaser. The Transaction Documents to which it is a party have been duly executed and delivered by such Purchaser and, assuming the due authorization, execution and delivery by the other parties thereto, constitutes the valid and binding agreement of such Purchaser enforceable in accordance with their respective terms, except that (i) such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights, and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. Section 3.3. Acquisition for Investment; Source of Funds. Such Purchaser is acquiring the Shares for its own account for the purpose of investment and not with a view to or for sale in connection with any distribution thereof, and such Purchaser has no present intention or plan to effect any distribution of Shares other than in an offering registered under the Securities Act or a disposition exempt from registration under the Securities Act. Section 3.4. Brokers or Finders. No agent, broker, investment banker or other firm or Person acting on behalf of such Purchaser, including any of the foregoing that is an affiliate of such Purchaser, is or will be entitled to receive any broker's or finder's fee or any other commission or similar fee in connection with any of the transactions contemplated by this Agreement, except for the fees to be paid to Shamrock Capital Advisors, Inc. ("SCA") pursuant to the Management Agreement. Section 3.5. Accredited Investor. Such Purchaser is an "accredited investor" within the meaning of Rule 501(a) under the Securities Act. ARTICLE 4 COVENANTS Section 4.1. Consent of Banks. The Company shall use its reasonable efforts to promptly obtain from Bankers Trust Company, as Agent for the banks party to the Company Credit Agreement, a consent of the Required Banks (as defined in the Company Credit Agreement) to the transactions contemplated hereby and a waiver of any defaults or required prepayments under the Company Credit Agreement caused hereby; provided, however, no payment or accommodation shall be made by the Company in connection with obtaining the foregoing without the Purchasers' consent. Section 4.2. Certificate of Designation. The Company shall, prior to the Class A Closing, cause the Certificate of Designation to be filed with the Secretary of State of Delaware. Section 4.3. Issuances of Common Stock. Prior to the Reset Date, the Company shall not (or set a record date in connection therewith) (i) pay a dividend or make a distribution on its Common Stock, (ii) subdivide or combine its Common Stock, (iii) issue shares of capital stock by reclassification of its Common Stock, (iv) issue rights, options or warrants to all holders of Common Stock entitling them to subscribe for or purchase Common Stock or any other securities of the Company, or (v) issue or distribute to all holders of its Common Stock any shares of its capital stock or securities convertible into capital stock or evidence of its indebtedness or assets. Section 4.4. Stockholder Notice . Upon delivery by the Purchasers to the Company of the Voting and Ratification Agreements described in Section 4.5 hereof at the completion of the Class A Closing, the Company shall send to each of its stockholders a Stockholder Notice, in form and substance satisfactory to the Purchasers. Section 4.5. Stockholder Approval. Immediately following the Class A Closing, the Purchasers shall deliver to the Company, Voting and Ratification Agreements, substantially in the form of Exhibit G hereto, approving the transactions contemplated hereby. Section 4.6. Company Action. The Company shall take all corporate actions necessary to amend its Certificate of Incorporation to the extent required as contemplated by Section 2.3(c) hereof. ARTICLE 5 CONDITIONS TO THE CLASS A CLOSING AND THE EXCHANGE CLOSING Section 5.1. Conditions to Obligation of Each Party to Effect the Class A Closing and the Exchange Closing. The respective obligations of each party to effect the Class A Closing and the Exchange Closing shall be subject to the satisfaction at or prior to the Class A Closing Date of the following conditions, unless waived by the Purchasers: (a) No Injunctions or Restraints; Illegality. No temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the sale of the Accelerated Shares, the Exchange or the issuance of the Reset Shares shall be in effect, nor shall any proceeding brought by any administrative agency or commission or other governmental authority or instrumentality, domestic or foreign, seeking any of the foregoing be pending; and there shall not be any action taken, or any statute, rule, regulation or order enacted, entered, enforced or deemed applicable to the sale of the Accelerated Shares, the Exchange, or the issuance of the Reset Shares, which makes the consummation of the sale of the Accelerated Shares, the Exchange, or the issuance of the Reset Shares, illegal. (b) Governmental Actions. There shall not have been instituted, pending or threatened any action or proceeding (or any investigation or other inquiry that might result in such an action or proceeding) by any governmental authority or administrative agency before any governmental authority, administrative agency or court of competent jurisdiction, nor shall there be in effect any judgment, decree or order of any governmental authority, administrative agency or court of competent jurisdiction, in either case, seeking to prohibit or limit the Purchaser from exercising all material rights and privileges pertaining to its ownership of the Shares. (c) NASDAQ Approval. The Company shall have received written confirmation from NASDAQ that the Company may consummate the Closings without approval by the Company's stockholders at a meeting without violating the Company's obligations under the NASDAQ Rules, and all conditions to such written confirmation, if any, shall have been satisfied. (d) Fairness Opinion. The Fairness Opinion shall not have been modified, amended, revoked or rescinded, and shall be in full force and effect. Section 5.2. Additional Conditions to Obligation of the Purchasers at the Class A Closing. The obligations of the Purchasers to effect the Class A Closing are also subject to the following conditions, unless waived by the Purchasers: (a) Representations and Warranties. The representations and warranties of the Company shall have been true and correct when made in all respects and shall be true and correct in all respects at and as of the Class A Closing Date as if made at and as of such time, except for (i) changes not prohibited by this Agreement, or (ii) those representations and warranties which address matters only as of a particular date (which shall have been true and correct as of such date), and the Purchasers shall have received a certificate to such effect signed by the President and the Chief Financial Officer of the Company. (b) Agreements and Covenants. The Company shall have performed or complied in all material respects with all agreements and covenants required by the Purchase Agreement, or this Agreement to be performed or complied with by it at or prior to the Class A Closing Date, and the Purchasers shall have received a certificate to such effect signed on behalf of the Company by the President and the Chief Financial Officer of the Company. (c) Consents Obtained. All consents, waivers, approvals, authorizations or orders required to be obtained, and all filings required to be made, by the Company for the due authorization, execution and delivery of this Agreement and the consummation by it of the transactions contemplated hereby shall have been obtained and made by the Company, including without limitation the consent referred to in Section 4.1, except for consents required to be obtained under contracts not material to the operation of the business of the Company; the Company shall have obtained all required approvals and consents, and shall have delivered all required notices, of the transfer of ownership or control of the Company as contemplated by the Purchase Agreement, with respect to material licenses and permits held by the Company or any of its subsidiaries pursuant to any federal, state or local laws governing the sale of alcoholic beverages, pharmaceutical products, and cigarettes. (d) Opinion of Counsel. The Purchasers shall have received a written opinion of each of Ropes & Gray and Davis Polk & Wardwell, in form and substance reasonably satisfactory to the Purchasers, substantially in the form of Exhibits B and C hereto, respectively. (e) Blue Sky Laws. The Company shall have received all permits and other authorizations necessary under the Blue Sky Laws to issue the Shares. (f) DLJ Waiver. The DLJ Waiver Letter shall be in full force and effect, and shall not have been amended, modified, revoked or rescinded. (g) Stangeland Waiver. The Stangeland Waiver shall be in full force and effect, and shall not have been amended, modified, revoked or rescinded. (h) Registration Rights Amendment. The Registration Rights Amendment shall be in full force and effect, and shall not have been amended, modified, revoked or rescinded. (i) Delivery of Shares. At the Class A Closing, the Company shall have delivered the Accelerated Shares against the payment of the Purchase Price. (j) Bankruptcy. The Company shall not on the Class A Closing Date be a party to any bankruptcy, insolvency, or reorganization proceedings, whether voluntary or involuntary (other than the proceeding pursuant to the Reorganization Plan), the Reorganization Plan shall not have been amended, modified or rescinded, and shall be in full force and effect. Section 5.3. Additional Conditions to Obligation of the Purchasers at the Exchange Closing. The obligation of the Purchasers to effect the Exchange at the Exchange Closing is also subject to the following condition: (a) Delivery of Shares. At the Exchange Closing, the Company shall have delivered the Class B Preferred Shares. (b) Stockholder Notice. Upon completion of the Class A Closing, the Company shall have mailed to its stockholders the Stockholder Notice described in Section 4.4 hereof. Section 5.4. Additional Conditions to Obligation of the Company at the Exchange Closing. The obligation of the Company to effect the Exchange at the Exchange Closing is also subject to the following conditions, unless waived by the Company: (a) Representations and Warranties. The representations and warranties of the Purchasers contained in this Agreement shall have been true and correct in all respects when made and shall be true and correct in all respects on and as of the Exchange Closing Date, except for (i) changes contemplated by this Agreement and (ii) those representations and warranties which address matters only as of a particular date (which shall have been true and correct in all material respects as of such date), with the same force and effect as if made on and as of the Closing Date, and the Company shall have received a certificate to such effect signed by the President and the Chief Financial Officer of the general partner of each of the Purchasers. (b) Agreements and Covenants. The Purchasers shall have performed or complied in all material respects with all agreements and covenants required by the Purchase Agreement or this Agreement to be performed or complied with by them on or prior to the Closing Date, and the Company shall have received a certificate to such effect signed by the President and the Chief Financial Officer of the general partner of each of the Purchasers. (c) Consents Obtained. All consents, waivers, approvals, authorizations or orders required to be obtained, and all filings required to be made, by the Purchasers for the due authorization, execution and delivery of this Agreement and the consummation by it of the transactions contemplated hereby shall have been obtained and made by the Purchasers. (d) Delivery of Class A Preferred Shares. After delivery to the Purchasers of the Class B Preferred Shares, the Purchasers shall have delivered the Class A Preferred Shares to be delivered by the Purchasers pursuant to Section 1.5 hereof. ARTICLE 6 TERMINATION; FEES AND EXPENSES Section 6.1. Termination. Subject to Section 6.2, this Agreement may be terminated at any time prior to the Class A Closing Date: (a) by mutual written consent duly authorized by the Disinterested Directors and the Purchasers; or (b) by either the Purchasers or the Disinterested Directors if the Class A Closing and Exchange Closing have not been consummated by June 30, 1997 (provided that the right to terminate this Agreement under this Section 6.1(b) shall not be available to any party whose failure to fulfill any obligation under the Purchase Agreement or this Agreement has been the cause of or resulted in the failure of the Class A Closing and Exchange Closing to occur on or before such date); or (c) by either the Purchasers or the Company if a court of competent jurisdiction or governmental, regulatory or administrative agency or commission shall have issued a nonappealable final order, decree or ruling or taken any other action having the effect of permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement. Section 6.2. Fees and Expenses. All reasonable fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the Company, whether or not the sale of the Accelerated Shares and the Exchange is consummated; provided, however, that with respect to the Purchasers, such reasonable fees and expenses of legal counsel shall not exceed $400,000. Notwithstanding anything to the contrary herein, this Section 6.2 shall survive any termination of this Agreement. ARTICLE 7 GENERAL PROVISIONS 7.1. Effectiveness of Representations and Warranties. The representations, warranties, and agreements of each party hereto in this Agreement and in any certificates delivered at or prior to any Closing hereunder shall survive indefinitely; provided, however, that all of such representations, warranties, and agreements shall terminate upon the termination of this agreement in accordance with Section 6.1 hereof except that the agreements set forth in Section 6.2 hereof shall survive such termination indefinitely. 7.2. Captions. The captions or headings in this Agreement are for convenience and reference only, and in no way define, describe, extend or limit the scope or intent of this Agreement. 7.3 Restrictive Legends. No restricted shares may be transferred without registration under the Securities Act and applicable state securities laws unless in the opinion of Davis Polk & Wardwell or other counsel to the Company such transfer may be effected without such registration. Each certificate representing restricted shares of Class B Preferred Shares or Common Stock issued pursuant to this Agreement shall bear legends in substantially the following form: The securities represented by this certificate have not been registered under the Securities Act of 1933 (the "Act") or the securities laws of any state and may not be sold or otherwise disposed of except pursuant to an effective registration statement under such Act and applicable state securities laws or an applicable exemption to the registration requirements of such Act or such laws. The securities represented by this certificate were issued pursuant to, and the holder hereof is entitled to certain rights and subject to certain obligations contained in, an Acceleration and Exchange Agreement, dated as of June 5, 1997, a copy of which is available for inspection at the principal office of the issuer hereof, and will be furnished without charge to the holder of such securities upon written request. 7.4. Further Assurances. The Purchasers and the Company agree to take, or cause to be taken, all reasonable actions as may be necessary to make effective and consummate the transactions contemplated by this Agreement. 7.5. Failure or Indulgence Not Waiver. No failure or delay on the part of any party hereto in the exercise of any right hereunder shall impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty, or agreement herein, nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or of any other right. 7.6. Modification and Amendment. This Agreement may not be changed, modified, discharged or amended, except by an instrument signed by all of the parties hereto. 7.7. Successors and Assigns. This Agreement shall be binding upon and inure solely to the benefit of each of the parties hereto. 7.8. Entire Agreement. The Purchase Agreement, the Exhibits and Schedules thereto, this Agreement and the Exhibits hereto, are intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein. There are no restrictions, premises, warranties or undertakings, other than those set forth or referred to in the Purchase Agreement or herein and the documents or instruments executed or delivered in connection therewith or herewith. This Agreement supersedes all prior agreements and understandings between the parties with respect to the acceleration of the purchase of Class A Preferred Shares, the exchange of Class A Preferred Shares for Class B Preferred Shares and the issuance of the Reset Shares. 7.9. Governing Law. This Agreement shall be construed and enforced in accordance with the laws of the State of New York. 7.10. Counterparts. This Agreement may be executed in counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument. 7.11. Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed to have been duly given or made if and when delivered personally, or by overnight courier to the parties at the following addresses or sent by electronic transmission, with confirmation received, to the telecopy numbers specified below (or such other address or telecopy number for a party as shall be specified by like notice): (a) If to the Purchasers: Trefoil Capital Investors II, L.P. c/o Shamrock Capital Advisors, Inc. 4444 Lakeside Drive Burbank, CA 91505 Attn: Stanley P. Gold, President Telecopier No.: (818) 845-9718 Telephone No.: (818) 845-4444 and GE Investment Private Placement Partners II, A Limited Partnership 3003 Summer Street Stamford, CT 06905 Attn: Michael Pastore Telecopier No.: (303) 326-4177 Telephone No.: (303) 326-2300 With copies to: Fried, Frank, Harris, Shriver & Jacobson 350 South Grand Avenue, Suite 3200 Los Angeles, CA 90071 Attn: David K. Robbins, Esq. Telecopier No.: (213) 473-2222 Telephone No.: (213) 473-2005 and Dewey Ballantine 1301 Avenue of the Americas New York, NY 10019 Attn: Sanford W. Morhouse, Esq. Telecopier No.: (212) 259-6333 Telephone No.: (212) 259-8000 (b) if to the Company, Chief Executive Officer The Grand Union Company 201 Willowbrook Boulevard Wayne, NJ 07470-0966 Telecopier No.: (201) 890-6012 Telephone No.: (201) 890-6000 With copies to: Davis Polk & Wardwell 450 Lexington Avenue New York, New York 10017 Attn: William L. Rosoff, Esq. Telecopier No.: (212) 450-4800 Telephone No.: (212) 450-4000 Section 7.12. The Purchase Agreement. The acceleration of the purchase and sale of the Class A Preferred Shares as contemplated herein shall for all purposes be deemed to be the purchase and sale of Class A Preferred Shares pursuant to the Purchase Agreement except that the Fourth and Fifth Closings have been accelerated. For purposes of the indemnification provisions contained in Section 8.1 of the Purchase Agreement, in determining damages sustained by the Purchasers, such damages shall include any diminution in value of the Class B Preferred Shares arising with respect to a breach of a representation, warranty, covenant or agreement in the Purchase Agreement. ARTICLE 8 CERTAIN DEFINITIONS 8.1. Definitions. As used herein, unless the context otherwise requires, the following terms have the following respective meanings: "Business Day" means any day other than a Saturday, Sunday or any other day on which commercial banks are authorized to close in New York, New York. "Certificate of Designation" means the Certificate of Designation of Class B Convertible Preferred Stock setting forth the Powers, Preferences, Rights, Qualifications, Limitations, and Restrictions of such Class of Preferred Stock, substantially in the form attached hereto as Exhibit A. "Class B Preferred Shares" means the Class B Convertible Preferred Stock having the Powers, Preferences, Rights, Qualifications, Limitations, and Restrictions set forth in the Certificate of Designation. "Closing" or "Closings" means one or all, as applicable, of the Class A Closing, the Class B Closing, and/or the "Reset Closing." "Company Credit Agreement" means the amended and restated Credit Agreement, dated as of June 15, 1995, as from time to time in effect among the Company, the banks party thereto, and Bankers Trust Company as Agent for the banks party thereto, and the consent and waiver secured pursuant to Section 4.1 hereof. "Disinterested Director" shall have the meaning given in the Purchase Agreement. "DLJ Waiver Letter" means a letter from DLJ substantially in the form attached hereto as Exhibit D. "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the SEC thereunder, all as the same shall be in effect from time to time, and a reference to a particular section thereof shall be deemed to include a reference to the comparable section, if any, of any such similar federal statute. "Management Agreement" has the meaning given in the Purchase Agreement. "Person" means an individual, a partnership (general or limited), corporation, joint venture, business trust, cooperative, association or other form of business organization, whether or not regarded as a legal entity under applicable law, a trust (inter vivos or testamentary), an estate of a deceased, insane or incompetent person, a quasi-governmental entity, a government or any agency, authority, political subdivision or other instrumentality thereof, or any other entity. "Registration Rights Amendment" means the Amendment No. 1, of even date herewith, to the Registration Rights Agreement, dated as of July 30, 1996, among the Company, Trefoil, and GEI, substantially in the form attached hereto as Exhibit E. "Reorganization Plan" has the meaning given in the Purchase Agreement. "SEC" means the Securities and Exchange Commission or its successor. "Securities Act" means the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the SEC thereunder, all as the same shall be in effect from time to time, and a reference to a particular section thereof shall be deemed to include a reference to the comparable section, if any, of any such similar federal statute. "Shares" means the Accelerated Shares, the Class B Preferred Shares, and/or the Reset Shares, as applicable. "Stangeland Partnership" means the Roger and Lilah Stangeland Family Limited Partnership. "Stangeland Waiver" means the waiver letter, of even date herewith, by the Stangeland Partnership to the Company and the Purchasers, relating to the Stockholder Agreement, dated as of February 25, 1997, as amended by the Amendment No. 1 thereto dated as of March 20, 1997, among Trefoil, GEI, the Stangeland Partnership and the Company, substantially in the form attached hereto as Exhibit F. "Stockholder Notice" means the form of notice to all stockholders of the Company describing the transactions contemplated hereby and announcing receipt of the written consent of the holders of at least a majority of the Company's total voting power outstanding, and the approval of the NASDAQ to consummate the transactions contemplated hereby, without the approval of the Company's stockholders at a meeting held for such purpose, substantially in the form attached hereto as Exhibit G. Section 8.2. Other Definitions. Each of the following terms shall have the meanings given them in the Section listed opposite such term below: Term Section "Accelerated Shares" 1.2 "Agreement" Preamble "Blue Sky Laws" 2.5(b) "Class A Closing" 1.6 "Class A Closing Date" 1.6 "Class A Preferred Shares" Preamble "Common Stock" 1.7(a) "Company" Preamble "Conversion Shares" 2.3 "DLJ" 2.7 "DLJ Engagement Letter" 2.8 "Exchange" 1.5 "Exchange Closing" 1.6 "Exchange Closing Date" 1.6 "Fairness Opinion" 2.7 "Fifth Closing" Preamble "Fourth Closing" Preamble "GEI" Preamble "Laws" 2.5(a) "NASDAQ" 2.5(a) "NASDAQ Rules" 2.5(a) "Purchase Agreement" Preamble "Purchase Price" 1.3 "Purchasers" Preamble "RCP" 1.7(a) "Reset Closing" 1.7(b) "Reset Closing Date" 1.7(b) "Reset Date" 1.7 "Reset Shares" 1.7(a) "SCA" 3.4 "Special Committee" 2.4 "Transaction Documents" 2.4 "Trefoil" Preamble * * * * IN WITNESS WHEREOF, the parties hereto have executed this Acceleration and Exchange Agreement or caused this Acceleration and Exchange Agreement to be executed as of the day and year first above written. TREFOIL CAPITAL INVESTORS II, L.P. By: TREFOIL INVESTORS II, INC., its managing general partner By: Michael J. McConnell --------------------------------- Name: Michael J. McConnell Title: Vice President GE INVESTMENT PRIVATE PLACEMENT PARTNERS II, A LIMITED PARTNERSHIP By: GE INVESTMENT MANAGEMENT INCORPORATED, its general partner By: Don W. Torey --------------------------------- Name: Don W. Torey Title: Executive Vice President THE GRAND UNION COMPANY By: Jeffrey P. Freimark ---------------------------------- Name: Jeffrey P. Freimark Title: Executive Vice President, Chief Financial Officer and Chief Administrator Officer List of Exhibits Exhibit A Certificate of Designation Exhibit B Form of Opinion of Ropes & Gray Exhibit C Form of Opinion of Davis Polk & Wardwell Exhibit D DLJ Waiver Letter Exhibit E Registration Rights Amendment Exhibit F Stangeland Waiver Exhibit G Form of Voting and Ratification Agreement Exhibit A THE GRAND UNION COMPANY CERTIFICATE OF DESIGNATION OF CLASS B CONVERTIBLE PREFERRED STOCK SETTING FORTH THE POWERS, PREFERENCES, RIGHTS, QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS OF SUCH CLASS OF PREFERRED STOCK Pursuant to Section 151 of the General Corporation Law of the State of Delaware, The Grand Union Company (the "Corporation"), a corporation organized and existing under the General Corporation Law of the State of Delaware, in accordance with the provisions of Section 103 thereof, DOES HEREBY CERTIFY: That pursuant to the authority conferred upon the Board of Directors of the Corporation by Article Fourth of the Certificate of Incorporation of the Corporation (the "Certificate of Incorporation"), and in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware, the Board of Directors of the Corporation on June 5, 1997, adopted the following resolution creating a series of Preferred Stock designated as Class B Convertible Preferred Stock (the "Class B Stock"): RESOLVED that, pursuant to the authority vested in the Board of Directors of the Corporation in accordance with the General Corporation Law of the State of Delaware and the provisions of the Certificate of Incorporation, a class of authorized Preferred Stock, par value $1.00 per share, of the Corporation is hereby created and that the designation and number of shares thereof and the voting powers, preferences and relative participating, optional and other special rights of the shares of such class, and the qualifications, limitations and restrictions thereof, are as follows: Section 1. Stated Value. The Class B Stock shall consist of 1,400,000 shares, par value $1.00 per share, each of which shall have a stated value of $50 per share (the "Stated Value"). Section 2. Dividends and Distributions. (a) The holders of shares of Class B Stock, in preference to the holders of shares of Junior Dividend Stock (as defined in Section 11 hereof), shall be entitled to receive, when, as and if declared by the Board of Directors, out of the assets of the Corporation legally available therefor, dividends at an annual rate of 8.50% of the Stated Value from and after the Issue Date (as defined in Section 11 hereof) of such shares as long as shares of Class B Stock remain outstanding. Dividends shall be payable in cash, or additional shares of Class B Stock, as provided in paragraph (c) of this Section 2, or shares of Common Stock, as provided in paragraph (c) of this Section 2. Dividends shall be computed on the basis of the Stated Value, and shall accrue and be payable quarterly, in arrears, on the last Business Day (as defined in Section 11) of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the Issue Date of such shares. To the extent that dividends on the Class B Stock are payable in cash, such dividends shall be cumulative. Accrued dividends not paid on any Quarterly Dividend Payment Date shall accrue additional dividends at an annual dividend rate of 8.50% until paid in full. (b) Dividends payable pursuant to paragraph (a) of this Section 2 shall begin to accrue and be cumulative from the Issue Date of each share of Class B Stock, whether or not earned or declared. The amount of dividends so payable shall be determined on the basis of twelve 30-day months and a 360-day year. Dividends paid on the shares of Class B Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Class B Stock entitled to receive payment of a dividend declared thereon, which record date shall be no more than sixty days prior to the date fixed for the payment thereof. (c) With respect to dividends paid on or prior to the third anniversary of the Principal Issue Date (as defined in Section 11), the Corporation shall have the option to pay such dividends in shares of Class B Stock valued at $50 per share or in whole shares of Common Stock valued at Fair Market Value determined as of the close of business on the third Business Day immediately preceding the date of payment, instead of in cash. With respect to dividends paid after the third anniversary of the Principal Issue Date but on or prior to the fifth anniversary of the Principal Issue Date, the Corporation shall have the option to pay such dividends in shares of Class B Stock valued at $50 per share or in whole shares of Common Stock valued at Fair Market Value determined as of the close of business on the third Business Day immediately preceding the date of payment, instead of in cash, but only if the Corporation is prohibited from paying such dividends in cash under the terms of its Bank Credit Agreement or its Senior Notes. To the extent that the Corporation elects to pay any dividends in shares of Common Stock, it shall 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. After the fifth anniversary of the Principal Issue Date, all dividends shall be paid in cash. The Corporation shall only have the right to pay dividends in shares of Common Stock if, on the Quarterly Dividend Payment Date in question, the Common Stock is listed and traded on the New York Stock Exchange, the American Stock Exchange or the Nasdaq National Market System. In connection with any payment of dividends in shares of Common Stock pursuant to this Section 2(c), no fractions of shares of Common Stock shall be issued, but in lieu thereof the Corporation shall either (i) deliver a whole share of Common Stock in respect of the fractional share which the holder would otherwise have been entitled to upon such dividend payment or (ii) pay a cash adjustment in respect of such fractional interest in an amount equal to such fractional interest multiplied by the Fair Market Value of a share of Common Stock determined as of the close of business on the third Business Day immediately preceding the date of payment. (d) The holders of shares of Class B Stock shall not be entitled to receive any dividends or other distributions except as provided herein. Section 3. Voting Rights. In addition to any voting rights provided by law, the holders of shares of Class B Stock shall have the following voting rights: (a) In addition to voting rights provided elsewhere in this Section 3, and as long as any of the Class B Stock is outstanding, each share of Class B Stock shall entitle the holder thereof to vote on all matters, including with respect to the election of directors, voted on by holders of Common Stock voting together as a single class with other shares entitled to vote at all meetings of the stockholders of the Corporation. With respect to any such vote, each share of Class B Stock shall entitle the holder thereof to cast the number of votes determined pursuant to the next sentence; provided, however, that if more than one share of Class B Stock shall be held by any holder of shares of Class B Stock, the total number of votes which such holder shall be entitled to cast pursuant to this Section 3(a) shall be computed on the basis of the total number of shares of Class B Stock held by such holder, with any then remaining fractional share disregarded for the purposes of this Section 3(a). The number of votes which each share of the Class B Stock shall entitle the holder thereof to cast shall be equal to (i) 6.8966 from the First Issue Date until the Approval Date (as defined herein), and (ii) from and after the Approval Date, the number of whole votes which could be cast in such vote by a holder of the shares of capital stock of the Corporation into which such share of Class B Stock is convertible on the record date for such vote. (b) In addition to the voting rights provided elsewhere in this Section 3, the affirmative vote of the holders of at least a majority of the outstanding shares of Class B Stock, voting separately as a single class, in person or by proxy, at a special or annual meeting of stockholders called for the purpose, shall be necessary to (A) except as contemplated by Section 2(c), authorize, increase the authorized number of shares of, or issue (including on conversion or exchange of any convertible or exchangeable securities or by reclassification), any shares of any class or classes, or any series of any class or classes, of the Corporation's capital stock ranking pari passu with or prior to (either as to dividends or upon a change in control of the Corporation, voluntary or involuntary liquidation, dissolution or winding up) the Class B Stock, (B) except as contemplated pursuant to Section 2(c) or as permitted pursuant to Section 10(a), increase the authorized number of shares of, or issue (including on conversion or exchange of any convertible or exchangeable securities or by reclassification) any shares of, Class B Stock, (C) alter, amend or repeal any of the provisions of the Certificate of Incorporation of the Corporation which in any manner would alter, change or otherwise adversely affect in any way the powers, preferences or rights of the Class B Stock, (D) approve the sale, lease or other disposition of all or substantially all of the assets of the Corporation and its Subsidiaries (as defined in Section 11), or (E) approve any merger of the Corporation with or into any other entity or any reorganization, recapitalization, liquidation or other similar transaction (including any issuance of equity securities, or securities convertible into equity securities by the Corporation, to any person (other than the Purchasers and their Affiliates) who would then own on a fully diluted basis more than 50% of the total number of votes entitled to be cast (giving effect to such issuance) by holders of the Corporation's capital stock on all matters, including the election of directors) involving the Corporation; provided, however, that the holders of the outstanding shares of Class B Stock shall only have a class vote on the transactions described in clauses (D) and (E) prior to the earlier of the effectiveness of a registration statement under the Securities Act of 1933 relating to all such shares and the date on which less than half of the total shares of Class B Stock originally issued (not including any shares issued in payment of dividends pursuant to Section 2(c)) remain outstanding. Notwithstanding the proviso to the preceding sentence, the affirmative vote of the holders of at least a majority of the outstanding shares of Class B Stock, voting separately as a single class, in person or by proxy, at a special or annual meeting of stockholders called for the purpose, shall be necessary to approve any merger of the Corporation with or into any other entity or any reorganization, recapitalization, liquidation or other similar transaction involving the Corporation where (i) the Class B Stock is not remaining outstanding after such transaction under substantially the same powers, preferences, rights, qualifications, limitations and restrictions as are set forth in this Certificate of Designation or (ii) the cash, stock, securities or other property to be received on conversion of one share of Class B Stock following such transaction and the application of Section 8(h) has a Fair Market Value at the closing of such transaction less than 150% of the Conversion Price. In addition, if the Corporation shall have failed to pay in full dividends on the Class B Stock for six consecutive quarters, then the size of the Board of Directors of the Corporation shall be increased by two, and the holders of shares of Class B Stock, voting together as a single class, shall have the right to elect such two directors. The right to elect such two directors under this Section 3(b) shall terminate upon payment in full of all dividends payable on the Class B Stock, at which time the Board of Directors shall return to its previous size and the directors elected by the holders of the Class B Stock shall be removed. (c) (1) The rights of holders of shares of Class B Stock to take any actions as provided in this Section 3 may be exercised, subject to the DGCL (as defined in Section 11 hereof), at any annual meeting of stockholders or at a special meeting of stockholders held for such purpose as hereinafter provided or at any adjournment or postponement thereof, or by the written consent, delivered to the Secretary of the Corporation, of the holders of the minimum number of shares required to take such action. As long as such right to vote continues (and unless such right has been exercised by written consent of not less than the minimum number of shares required to take such action), the Chairman of the Board of the Corporation may call, and upon the written request of holders of record of 20% of the outstanding shares of Class B Stock, addressed to the Secretary of the Corporation at the principal office of the Corporation, shall call, a special meeting of the holders of shares of Class B Stock entitled to vote as provided herein. The Corporation shall use its best efforts to hold such meeting as promptly as practicable, but in any event not later than 120 days after delivery of such request to the Secretary of the Corporation, at the place and upon the notice provided by law and in the Bylaws of the Corporation for the holding of meetings of stockholders. (2) At each meeting of stockholders at which the holders of shares of Class B Stock shall have the right, voting separately as a single series, to take any action, the presence in person or by proxy of the holders of record of a majority of the total number of shares of Class B Stock then outstanding and entitled to vote on the matter shall be necessary and sufficient to constitute a quorum. At any such meeting or at any adjournment or postponement thereof, in the absence of a quorum of the holders of shares of Class B Stock, holders of a majority of such shares present in person or by proxy shall have the power to adjourn the meeting as to the actions to be taken by the holders of shares of Class B Stock from time to time and place to place without notice other than announcement at the meeting until a quorum shall be present. For the taking of any action as provided in Section 3(b) by the holders of shares of Class B Stock, each such holder shall have one vote for each share of Class B Stock standing in his name on the transfer books of the Corporation as of any record date fixed for such purpose or, if no such date be fixed, at the close of business on the Business Day next preceding the day on which notice is given, or if notice is waived, at the close of business on the Business Day next preceding the day on which the meeting is held. Section 4. Certain Restrictions. (a) As long as any shares of Class B Stock remain outstanding, the Corporation shall not: (A) declare or pay dividends, or make any other distributions, on any shares of Junior Dividend Stock other than dividends or distributions payable in Junior Dividend Stock; or (B) declare or pay dividends, or make any other distributions, on any shares of Parity Dividend Stock (as defined in Section 11 hereof), except (1) dividends or distributions payable in Junior Dividend Stock and (2) dividends or distributions paid ratably on the Class B Stock and all Parity Dividend Stock on which dividends are payable or in arrears, in proportion to the total amounts to which the holders of all shares of the Class B Stock and such Parity Dividend Stock are then entitled. (b) As long as any shares of Class B Stock remain outstanding, the Corporation shall not redeem, purchase or otherwise acquire for consideration any shares of Junior Dividend Stock or Junior Liquidation Stock (as defined in Section 11 hereof) or Parity Dividend Stock or Parity Liquidation Stock (as defined in Section 11 hereof); provided, however, that (1) the Corporation may at any time redeem, purchase or otherwise acquire shares of Junior Liquidation Stock or Parity Liquidation Stock in exchange for any shares of capital stock of the Corporation that rank junior to the Class B Stock as to dividends and upon liquidation, dissolution and winding up; (2) the Corporation may accept shares of any Parity Liquidation Stock for conversion into shares of capital stock of the Corporation that rank junior to the Class B Stock as to dividends and upon liquidation, dissolution and winding up; and (3) the Corporation may at any time redeem, purchase or otherwise acquire shares as may be required pursuant to the Corporation's employee and non-employee director stock plans, as they may be amended from time to time, or similar employee stock plans hereafter adopted; and provided further, however, that the Corporation (A) may accept shares of Class B Stock surrendered for conversion into shares of capital stock of the Corporation pursuant to Section 8 hereof, and (B) may redeem outstanding shares of Class B Stock pursuant to Section 5 hereof. Whenever quarterly dividends payable on shares of Class B Stock as provided in Section 2 hereof are not paid in full, thereafter and until all unpaid dividends payable, whether or not declared, on the outstanding shares of Class B Stock shall have been paid in full, the Corporation shall not redeem or purchase or otherwise acquire for consideration any shares of Class B Stock; provided, however, that the Corporation (A) may accept shares of Class B Stock surrendered for conversion into shares of capital stock of the Corporation pursuant to Section 8 hereof, and (B) may elect to redeem outstanding shares of Class B Stock pursuant to Section 5(a) hereof. (c) The Corporation shall not permit any Subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of capital stock of the Corporation unless the Corporation could, pursuant to Section 4(b), purchase such shares at such time and in such manner. Section 5. Redemption. (a) On and after the second anniversary of the Principal Issue Date, the Corporation shall have the right, at its sole option and election made in accordance with Section 5(c), to redeem, out of funds legally available therefor, shares of Class B Stock, in whole or in part, at any time and from time to time, at a redemption price equal to the Stated Value (except as described below), plus an amount per share equal to all accrued and unpaid dividends, whether or not declared, to the date of redemption (the "Redemption Price"); provided, however, that the Corporation shall not have any such right unless (A) if the redemption is to occur between the second and third anniversary of the Principal Issue Date, the Redemption Fair Market Value (as defined in Section 11 hereof) of the Common Stock, as of the close of business on the third Business Day immediately preceding the date on which notice of redemption is given, is equal to at least 180% of the Conversion Price (as defined in Section 11 hereof), and (B) if the redemption is to occur between the third and fifth anniversary of the Principal Issue Date, the Redemption Fair Market Value (as defined in Section 11 hereof) of the Common Stock, as of the close of business on the third Business Day immediately preceding the date on which notice of redemption is given, is equal to at least 200% of the Conversion Price (as defined in Section 11 hereof). Notwithstanding the foregoing, if the redemption is to occur between the fifth and sixth anniversaries of the Principal Issue Date, the Redemption Price shall be $51.5938; if the redemption is to occur between the sixth and seventh anniversaries of the Principal Issue Date, the Redemption Price shall be $51.0625; and if the redemption is to occur between the seventh and eighth anniversaries of the Principal Issue Date, the Redemption Price shall be $50.5313; in each case plus an amount per share equal to all accrued and unpaid dividends, whether or not declared, to the date of redemption. If less than all shares of Class B Stock at the time outstanding are to be redeemed, the shares to be redeemed shall be selected pro rata. (b) The Corporation shall redeem, at the Redemption Price, all outstanding shares of Class B Stock on June 1, 2005. (c) Notice of any redemption of shares of Class B Stock pursuant to this Section 5 shall be mailed at least 30, but not more than 60, days prior to the date fixed for redemption to each holder of shares of Class B Stock to be redeemed, at such holder's address as it appears on the transfer books of the Corporation. Any such notice shall be irrevocable when given. In order to facilitate the redemption of shares of Class B Stock, the Board of Directors may fix a record date for the determination of Class B Stock to be redeemed, or may cause the transfer books of the Corporation for the Class B Stock to be closed, not more than sixty days or less than thirty days prior to the date fixed for such redemption. (d) On the date of any redemption being made pursuant to this Section 5 which is specified in a notice given pursuant to Section 5(c), the Corporation shall, and at any time after such notice shall have been mailed and before the date of redemption the Corporation may deposit for the benefit of the holders of shares of Class B Stock to be redeemed the funds necessary for such redemption, including the amount necessary to pay all accrued and unpaid dividends to the date of redemption, with a bank or trust company in the City of New York having a capital and surplus of at least $1,000,000,000. Any moneys so deposited by the Corporation and unclaimed at the end of one year from the date designated for such redemption shall revert to the general funds of the Corporation. After such reversion, any such bank or trust company shall, upon demand, pay over to the Corporation such unclaimed amounts and thereupon such bank or trust company shall be relieved of all responsibility in respect thereof and any holder of shares of Class B Stock to be redeemed shall look only to the Corporation for the payment of the Redemption Price. In the event that moneys are deposited pursuant to this paragraph (d) in respect of shares of Class B Stock that are converted in accordance with the provisions of Section 8, such moneys shall, upon such conversion, revert to the general funds of the Corporation and, upon demand, such bank or trust company shall pay over to the Corporation such moneys and shall be relieved of all responsibility to the holders of such converted shares in respect thereof. Any interest accrued on funds deposited pursuant to this paragraph (d) shall be paid from time to time to the Corporation for its own account. (e) Notice of redemption having been given as aforesaid, upon the deposit of funds pursuant to Section 5(d) in respect of shares of Class B Stock to be redeemed pursuant to this Section 5, notwithstanding that any certificates for such shares shall not have been surrendered for cancellation, from and after the date of redemption designated in the notice of redemption (i) the shares represented thereby shall no longer be deemed outstanding, (ii) the rights to receive dividends thereon shall cease to accrue, and (iii) all rights of the holders of shares of Class B Stock to be redeemed shall cease and terminate, excepting only the right to receive the Redemption Price therefor, and the right to convert such shares into shares of Common Stock until the close of business on the Fifth Business Day next preceding the date of redemption, in accordance with Section 8 hereof. Section 6. Reacquired Shares. Any shares of Class B Stock converted, redeemed, purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares of Class B Stock shall upon their cancellation, in accordance with the DGCL, become authorized but unissued shares of Preferred Stock of the Corporation and may be reissued as part of another series of Preferred Stock of the Corporation, subject to the conditions or restrictions on issuance set forth herein. Section 7. Liquidation, Dissolution or Winding Up. (a) If the Corporation shall commence a voluntary case under the Federal bankruptcy laws or any other applicable Federal or state bankruptcy, insolvency or similar law, or consent to the entry of an order for relief in an involuntary case under such law or to the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or make an assignment for the benefit of its creditors, or admit in writing its inability to pay its debts generally as they become due, or if a decree or order for relief in respect of the Corporation shall be entered by a court having jurisdiction in the premises in an involuntary case under the Federal bankruptcy laws or any other applicable Federal or state bankruptcy, insolvency or similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and any such decree or order shall be unstayed and in effect for a period of ninety consecutive days and on account of any such event the Corporation shall liquidate, dissolve or wind up, or if the Corporation shall otherwise liquidate, dissolve or wind up, no distribution shall be made (i) to the holders of shares of Junior Liquidation Stock unless, prior thereto, the holders of shares of Class B Stock, subject to Section 8, shall have received the Liquidation Preference (as defined in Section 11 hereof) with respect to each share, or (ii) to the holders of shares of Parity Liquidation Stock, except distributions made ratably to the holders of the Class B Stock and the Parity Liquidation Stock in proportion to the total amounts to which the holders of all such shares of Class B Stock and Parity Liquidation Stock would be entitled upon such liquidation, dissolution or winding up. Upon any such liquidation, dissolution or winding up, the holders of shares of Class B Stock shall be entitled to receive the Liquidation Preference with respect to each such share and no more. (b) Neither the merger or other business combination of the Corporation with or into any other Person (as defined in Section 11 hereof) or Persons nor the sale of all or substantially all the assets of the Corporation shall be deemed to be a liquidation, dissolution or winding up of the Corporation for purposes of this Section 7. Section 8. Conversion. (a) Subject to the provisions for adjustment hereinafter set forth, each share of Class B Stock shall be convertible at the option of the holder thereof into fully paid and nonassessable shares of Common Stock. The number of shares of Common Stock deliverable upon conversion of a share of Class B Stock, adjusted as hereinafter provided, is referred to herein as the "Conversion Ratio." The Conversion Ratio shall initially be 20.8333 and the Conversion Price shall initially be $2.40. Upon the Reset Date, the Conversion Price shall be adjusted to equal 120% of the Reset Market Value and the Conversion Ratio shall be adjusted to equal 50 divided by 120% of the Reset Market Value; provided, however, if the Reset Market Value is (i) $2.71 or greater, the Conversion Price shall be adjusted to equal $3.25 and the Conversion Ratio shall be adjusted to equal 15.3846 or (ii) $1.25 or less, the Conversion Price shall be adjusted to equal $1.50 and the Conversion Ratio shall be adjusted to equal 33.3333. The Conversion Ratio and the Conversion Price are subject to further adjustment from time to time pursuant to Section 8(g). (b) Conversion of the Class B Stock may be effected by any such holder upon the surrender to the Corporation at the principal office of the Corporation in the State of Delaware (the "Transfer Agent") or at the office of any agent or agents of the Corporation, as may be designated by the Board of Directors of the Corporation, of the certificate for such Class B Stock to be converted accompanied by a written notice stating that such holder elects to convert all or a specified whole number of such shares in accordance with the provisions of this Section 8 and specifying the name or names in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. In case such notice shall specify a name or names other than that of such holder, such notice shall be accompanied by payment of all transfer taxes payable upon the issuance of shares of Common Stock in such name or names. Other than such taxes, the Corporation will pay any and all issue and other taxes (other than taxes based on income) that may be payable in respect of any issue or delivery of shares of Common Stock on conversion of Class B Stock pursuant hereto. As promptly as practicable, and in any event within five Business Days after the surrender of such certificate or certificates and the receipt of such notice relating thereto and, if applicable, payment of all transfer taxes (or the demonstration to the satisfaction of the Corporation that such taxes have been paid), the Corporation shall deliver or cause to be delivered (i) certificates representing the number of validly issued, fully paid and nonassessable full shares of Common Stock to which the holder of shares of Class B Stock being converted shall be entitled and (ii) if less than the full number of shares of Class B Stock evidenced by the surrendered certificate or certificates is being converted, a new certificate or certificates, of like tenor, for the number of shares evidenced by such surrendered certificate or certificates less the number of shares being converted. Such conversion shall be deemed to have been made at the close of business on the date of giving such notice and of such surrender of the certificate or certificates representing the shares of Class B Stock to be converted (the "Conversion Date") so that the rights of the holder thereof as to the shares being converted shall cease except for the right to receive shares of Common Stock in accordance herewith, and the Person entitled to receive the shares of Common Stock shall be treated for all purposes as having become the record holder of such shares of Common Stock at such time. The Corporation shall not be required to convert, and no surrender of shares of Class B Stock shall be effective for that purpose, while the transfer books of the Corporation for the Common Stock are closed for any purpose (but not for any period in excess of five days); but the surrender of shares of Class B Stock for conversion during any period while such books are so closed shall become effective for conversion immediately upon the reopening of such books, as if the conversion had been made on the date such shares of Class B Stock were surrendered, and at the Conversion Ratio in effect at the date of such surrender. (c) In case any shares of Class B Stock are to be redeemed pursuant to Section 5, such right of conversion shall cease and terminate as to the shares of Class B Stock to be redeemed at the close of business on the fifth Business Day next preceding the date fixed for redemption unless the Corporation shall default in the payment of the Redemption Price. (d) The Conversion Ratio shall be subject to adjustment from time to time in certain instances as hereinafter provided. Upon conversion, the holder of shares of Class B Stock shall be entitled to receive any accrued and unpaid dividends on the shares of Class B Stock surrendered for conversion to the Conversion Date. Such accrued and unpaid dividends shall be payable by the Corporation, at its option, in cash (to the extent funds are legally available therefor) or in shares of Common Stock valued at the Fair Market Value as of the third Business Day prior to the Conversion Date, instead of in cash. (e) In connection with the conversion of any shares of Class B Stock, no fractions of shares of Common Stock shall be issued, but in lieu thereof the Corporation shall either (i) deliver a whole share of Common Stock in respect of the fractional share to which the holder would otherwise have been entitled upon such conversion or (ii) pay a cash adjustment in respect of such fractional interest in an amount equal to such fractional interest multiplied by the Current Market Price per share of Common Stock on the Trading Day on which such shares of Class B Stock are deemed to have been converted. If more than one share of Class B Stock shall be surrendered for conversion by the same holder at the same time, the number of full shares of Common Stock issuable on conversion thereof shall be computed on the basis of the total number of shares of Class B Stock so surrendered. (f) The Corporation shall at all times reserve and keep available for issuance upon the conversion of the Class B Stock, free from any preemptive rights, such number of its authorized but unissued shares of Common Stock as will from time to time be sufficient to permit the conversion of all outstanding shares of Class B Stock, and shall take all action required to increase the authorized number of shares of Common Stock if necessary to permit the conversion of all outstanding shares of Class B Stock. (g) The Conversion Ratio will be subject to adjustment from time to time as follows: (1) In case the Corporation shall at any time or from time to time after the First Issue Date (A) pay a dividend, or make a distribution, on the outstanding shares of Common Stock in shares of Common Stock, (B) subdivide the outstanding shares of Common Stock, (C) combine the outstanding shares of Common Stock into a smaller number of shares or (D) issue by reclassification of the shares of Common Stock any shares of capital stock of the Corporation, then, and in each such case, the Conversion Ratio in effect immediately prior to such event or the record date therefor, whichever is earlier, shall be adjusted so that the holder of any shares of Class B Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock or other securities of the Corporation which such holder would have owned or have been entitled to receive after the happening of any of the events described above, had such shares of Class B Stock been surrendered for conversion immediately prior to the happening of such event or the record date therefor, whichever is earlier. An adjustment made pursuant to this clause (i) shall become effective (x) in the case of any such dividend or distribution, immediately after the close of business on the record date for the determination of holders of shares of Common Stock entitled to receive such dividend or distribution, or (y) in the case of such subdivision, reclassification or combination, at the close of business on the day upon which such corporate action becomes effective. No adjustment shall be made pursuant to this clause (i) in connection with any transaction to which paragraph (h) applies. (2) In case the Corporation shall at any time or from time to time after the First Issue Date declare, order, pay or make a dividend or other distribution (including, without limitation, any distribution of stock or other securities or property or rights or warrants to subscribe for securities of the Corporation or any of its Subsidiaries by way of dividend or spinoff), on its Common Stock, other than dividends or distributions of shares of Common Stock which are referred to in clause (1) of this paragraph (g), then the Conversion Ratio shall be adjusted so that the holder of each share of Class B Stock shall be entitled to receive, upon the conversion thereof, the number of shares of Common Stock determined by multiplying (1) the applicable Conversion Ratio on the day immediately prior to the record date fixed for the determination of stockholders entitled to receive such dividend or distribution by (2) a fraction, the numerator of which shall be the Current Market Price per share of Common Stock for the period of 20 Trading Days preceding such record date, and the denominator of which shall be such Current Market Price per share of Common Stock less the Fair Market Value (as defined in Section 11 hereof) per share of Common Stock (as determined in good faith by the Board of Directors of the Corporation, a certified resolution with respect to which shall be mailed to each holder of shares of Class B Stock) of such dividend or distribution; provided, however, that in the event of a distribution of capital stock of a Subsidiary of the Corporation (a "Spin-Off") made to holders of shares of Common Stock, the numerator of such fraction shall be the sum of the Current Market Price per share of Common Stock for the period of 20 Trading Days preceding the 35th Trading Day after the effective date of such Spin-Off and the Current Market Price of the number of shares (or the fraction of a share) of capital stock of the Subsidiary which is distributed in such Spin-Off in respect of one share of Common Stock for the period of 20 Trading Days preceding such 35th Trading Day and the denominator of which shall be the Current Market Price per share of Common Stock for the period of 20 Trading Days preceding such 35th Trading Day. An adjustment made pursuant to this clause (2) shall be made upon the opening of business on the next Business Day following the date on which any such dividend or distribution is made and shall be effective retroactively immediately after the close of business on the record date fixed for the determination of stockholders entitled to receive such dividend or distribution; provided, however, that if the proviso to the preceding sentence applies, then such adjustment shall be made and be effective as of such 35th Trading Day after the effective date of such Spin-Off. No adjustment shall be made pursuant to this clause (2) in connection with any transaction to which paragraph (h) applies. (3) For purposes of this paragraph (g), the number of shares of Common Stock at any time outstanding shall not include any shares of Common Stock then owned or held by or for the account of the Corporation. (4) The term "dividend," as used in this paragraph (g) shall mean a dividend or other distribution upon Common Stock of the Corporation. (5) Anything in this paragraph (g) to the contrary notwithstanding, the Corporation shall not be required to give effect to any adjustment in the Conversion Ratio unless and until the net effect of one or more adjustments (each of which shall be carried forward), determined as above provided, shall have resulted in a change of the Conversion Ratio by at least one one-hundredth of one share of Common Stock, and when the cumulative net effect of more than one adjustment so determined shall be to change the Conversion Ratio by a least one one-hundredth of one share of common Stock, such change in Conversion Ratio shall thereupon be given effect. (6) The certificate of any firm of independent public accountants of recognized standing selected by the Board of Directors of the Corporation (which may be the firm of independent public accountants regularly employed by the Corporation) shall be presumptively correct for any computation made under this paragraph (g). (7) If the Corporation shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, and shall thereafter and before the distribution to stockholders thereof legally abandon its plan to pay or deliver such dividend or distribution, then thereafter no adjustment in the number of shares of Common Stock issuable upon exercise of the right of conversion granted by this paragraph (g) or in the Conversion Ratio then in effect shall be required by reason of the taking of such record. (8) There shall be no adjustment of the Conversion Ratio in case of the issuance of any stock of the Corporation in a merger, reorganization, acquisition or other similar transaction except as set forth in paragraphs (g)(1) and (h) of this Section 8. (h) In case of any capital reorganization or reclassification of outstanding shares of Common Stock (other than a reclassification covered by Section 8(g)(1)), or in case of any merger of the Corporation with or into another Corporation, or in case of any sale or conveyance to another Corporation of all or substantially all of the assets or property of the Corporation (each of the foregoing being referred to as a "Transaction"), each share of Class B Stock then outstanding shall thereafter be convertible into, in lieu of the Common Stock issuable upon such conversion prior to consummation of such Transaction, the kind and amount of shares of stock and other securities and property receivable (including cash or securities of the Surviving Person (as defined in Section 11 hereof)) upon the consummation of such Transaction by a holder of that number of shares of Common Stock into which one share of Class B Stock was convertible immediately prior to such Transaction (including, on a pro rata basis, the cash, securities or property received by holders of Common Stock in any tender or exchange offer that is a step in such Transaction). In any such case, if necessary, appropriate adjustment (as determined by the Board of Directors) shall be made in the application of the provisions set forth in this Section 8 with respect to rights and interests thereafter of the holders of shares of Class B Stock to the end that the provisions set forth herein for the protection of the conversion rights of the Class B Stock shall thereafter be applicable, as nearly as reasonably may be, to any such other shares of stock and other securities and property deliverable upon conversion of the shares of Class B Stock remaining outstanding (with such adjustments in the conversion price and number of shares issuable upon conversion and such other adjustments in the provisions hereof as the Board of Directors shall determine to be appropriate). In case securities or property other than Common Stock shall be issuable or deliverable upon conversion as aforesaid, then all references in this Section 8 shall be deemed to apply, so far as appropriate and as nearly as may be, to such other securities or property. Notwithstanding anything contained herein to the contrary, the Corporation will not effect any Transaction unless, prior to the consummation thereof, the Surviving Person thereof shall assume, by written instrument mailed to each holder of shares of Class B Stock, the obligation to deliver to such holder such cash, property or securities to which, in accordance with the foregoing provisions, such holder is entitled. (i) In case at any time or from time to time the Corporation shall pay any dividend or make any other distribution to the holders of its Common Stock, or shall offer for subscription pro rata to the holders of its Common Stock any additional shares of stock of any class or any other right, or there shall be any capital reorganization or reclassification of the Common Stock of the Corporation or merger of the Corporation with or into another Corporation, or any sale or conveyance to another Corporation of the property of the Corporation as an entirety or substantially as an entirety, or there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Corporation, then, in any one or more of said cases the Corporation shall give at least 20 days prior written notice (the time of mailing of such notice shall be deemed to be the time of giving thereof) to the registered holders of the Class B Stock at the addresses of each as shown on the books of the Corporation maintained by the transfer agent thereof as of the date on which (i) the books of the Corporation shall close or a record shall be taken for such stock dividend, distribution or subscription rights or (ii) such reorganization, reclassification, merger, sale or conveyance, dissolution, liquidation or winding up shall take place, as the case may be, provided that in the case of any Transaction to which paragraph (h) applies the Corporation shall give at least thirty days prior written notice as aforesaid. Such notice shall also specify the date as of which the holders of the Common Stock of record shall participate in said dividend, distribution or subscription rights or shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, merger, sale or conveyance or participate in such dissolution, liquidation or winding up, as the case may be. Failure to give such notice shall not invalidate any action so taken. Section 9. Reports As to Adjustments. Upon any adjustment of the Conversion Ratio then in effect and any increase or decrease in the number of shares of Common Stock issuable upon the operation of the conversion set forth in Section 8 hereof, then, and in each such case, the Corporation shall promptly deliver to the transfer agent of the Class B Stock and Common Stock, a certificate signed by the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Corporation setting forth in reasonable detail the event requiring the adjustment and the method by which such adjustment was calculated and specifying the Conversion Ratio then in effect following such adjustment and the increased or decreased number of shares issuable upon the conversion set forth in Section 8 hereof. The Corporation shall also promptly after the making of such adjustment give written notice to the registered holders of the Class B Stock at the address of each holder as shown on the books of the Corporation maintained by the Transfer Agent thereof, which notice shall state the Conversion Ratio then in effect, as adjusted, and the increased or decreased number of shares issuable upon the exercise of the right of conversion granted by Section 8 hereof, and shall set forth in reasonable detail the method of calculation of each and a brief statement of the facts requiring such adjustment. Where appropriate, such notice to holders of the Class B Stock may be given in advance and included as part of the notice required under the provisions of Section 8(i) hereof. Section 10. Certain Covenants. (a) Following the First Issue Date, and except in payment of dividends pursuant to Section 2(c), the Corporation shall not issue additional shares of Class B Stock. (b) Any registered holder of Class B Stock may proceed to protect and enforce its rights and the rights of such holders by any available remedy by proceeding at law or in equity to protect and enforce any such rights, whether for the specific enforcement of any provision in this Certificate of Designation, or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. Section 11. Definitions. The following terms shall have the meanings indicated: "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities or by agreement or otherwise. "Approval Date" shall mean the earlier of (i) the tenth day following the mailing by the Company of a notice to stockholders of receipt by the Company of written confirmation of waiver by the NASDAQ of its shareholder voting requirements with respect to the right of the holders of the Class B Stock to vote such shares on an as-converted basis, or (ii) the date of approval by the Company's stockholders of the right of the holders of the Class B Stock to vote such shares on an as converted basis. "Bank Credit Agreement" shall mean the Credit Agreement, dated as of June 15, 1995, among the Company, the banks party thereto, and Bankers Trust Company as Agent for the bank parties thereto, as amended from time to time, and any refinancings, renewals and replacements thereof. "Business Day" shall mean any day other than Saturday, Sunday or a day on which banking institutions in the State of Delaware are authorized or obligated by law or executive order to close. "Class A Stock" shall mean the Class A Convertible Preferred Stock, par value $1.00 per share, of the Corporation. "Conversion Price" shall mean an amount equal to the Stated Value divided by the Conversion Ratio (as adjusted pursuant to paragraph (g) of Section 8 hereof). "Current Market Price," when used with reference to shares of Common Stock or other securities on any date, shall mean the volume weighted average of the sales prices for shares of Common Stock or such other securities on such date and, when used with reference to shares of Common Stock or other securities for any period shall mean the volume weighted average of the sale prices for shares of Common Stock or such other securities for such period. If the Common Stock is not listed or admitted to trading on a national securities exchange or an automated quotation system that permits determination of weighted average sale prices over a period of time, then "Current Market Price" for any period shall mean the average of the last quoted sale price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or such other system then in use, or, if on any such date the Common Stock or such other securities are not quoted by any such organization, the average of the closing bid and asked prices are furnished by a professional market maker making a market in the Common Stock or such other securities selected by the Board of Directors of the Corporation. If the Common Stock or such other securities are not publicly held or so listed or publicly traded, "Current Market Price" shall mean the fair market value per share of Common Stock or of such other securities as determined in good faith by the Board of Directors of the Corporation based on an opinion of an independent investment banking firm with an established national reputation as a valuer of securities, which opinion may be based on such assumptions as such firm shall deem to be necessary and appropriate. "DGCL" shall mean the Delaware General Corporation Law, as amended. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar Federal statute, and the rules and regulations of the Securities and Exchange Commission thereunder, all as the same shall be in effect at the time. Reference to a particular section of the Exchange Act shall include reference to the comparable section, if any, of any such similar Federal statute. "Fair Market Value" shall mean, as to shares of Common Stock or any other class of capital stock or securities of the Corporation or any other issuer which are publicly traded, the Current Market Price of such shares or securities for the 30 Trading Day period preceding the date as of which the Fair Market Value is to be determined. The "Fair Market Value" of any security which is not publicly traded or of any other property shall mean the fair value thereof as determined by an independent investment banking or appraisal firm experienced in the valuation of such securities or property selected in good faith by the Board of Directors of the Corporation or a committee thereof, or, if no such investment banking or appraisal firm is in the good faith judgment of the Board of Directors or such committee available to make such determination, as determined in good faith by the Board of Directors of the Corporation or such committee. "First Issue Date" shall mean the first date that any shares of Class B Stock are issued. "Issue Date" shall mean, with respect to any share of Class B Stock, the date on which such share of Class B Stock is issued. "Junior Dividend Stock" shall mean (i) the Common Stock and (ii) any other capital stock of the Corporation which ranks junior as to dividends to the Class B Stock. "Junior Liquidation Stock" shall mean (i) the Common Stock and (ii) any other capital stock of the Corporation which ranks junior upon liquidation, dissolution or winding up to the Class B Stock. "Liquidation Preference" with respect to a share of Class B Stock shall mean the Stated Value per share, plus an amount equal to all accrued but unpaid dividends. "NASDAQ" shall mean the NASDAQ Stock Market. "NASDAQ Rules" shall mean Rule 4460(i) of the NASDAQ Stock Market Rules of the NASDAQ Stock Market. "Parity Dividend Stock" shall mean (i) the Class A Stock and (ii) any other capital stock of the Corporation ranking on a parity as to dividends with the Class B Stock. "Parity Liquidation Stock" shall mean (i) the Class A Stock and (ii) any other capital stock of the Corporation ranking on a parity upon liquidation, dissolution or winding up with the Class B Stock. "Person" shall mean any individual, firm, corporation or other entity, and shall include any successor (by merger or otherwise) of such entity. "Principal Issue Date" shall mean September 17, 1996. "Purchasers" shall mean Trefoil Capital Investors II, L.P., a Delaware limited partnership, and GE Investment Private Placement Partners II, A Limited Partnership, a Delaware limited partnership. "Qualified Person" shall mean any Person that, immediately after giving effect to the applicable Transaction, (i) is a solvent corporation or other entity organized under the laws of any State of the United States of America having its common stock or, in the case of an entity other than a corporation, equivalent equity securities, listed on the New York Stock Exchange or the American Stock Exchange or quoted by the Nasdaq National Market System or any successor thereto or comparable system, and such common stock or equivalent equity security continues to meet the requirements for such listing or quotation and (ii) is required to file, and in each of its three fiscal years immediately preceding the consummation of the applicable Transaction (or since its inception) has filed, reports with the Securities and Exchange Commission pursuant to Section 13 or 15(d) of the Exchange Act. "Redemption Fair Market Value" shall mean, as to shares of Common Stock, the Current Market Price of such shares or securities for the 60-day period preceding the date as of which the Redemption Fair Market Value is to be determined. The "Redemption Fair Market Value" of the Common Stock if it is not publicly traded shall mean its Fair Market Value. "Required Issue Date" shall mean December 31, 1996. "Reset Date" shall mean the first Trading Day after the end of the 20 Trading Day period utilized to determine the Reset Market Value. "Reset Market Value" shall mean the Current Market Price of Common Stock for the 20 Trading Day period following the earlier of (i) the date which is three Trading Days after public announcement of the Corporation's results for its fiscal quarter ending January 3, 1998 and (ii) February 2, 1998. "Senior Notes" shall mean the Corporation's 12% Senior Notes due 2004 and any other senior indebtedness of the Corporation the net proceeds of which are used in full to pay principal, prepayment penalty and accrued interest on such principal, the incurrence of which is approved by the vote of the holders of a majority of the outstanding shares of Class B Stock. "Subsidiary" of any Person means any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person. "Surviving Person" shall mean the continuing or surviving Person of a merger or other business combination, the Person receiving a transfer of all or a substantial part of the properties and assets of the Corporation, or the Person merging into the Corporation in a merger or other business combination in which the Corporation is the continuing or surviving Person, but in connection with which the Class B Stock or Common Stock of the Corporation is exchanged or converted into the securities of any other Person or cash or any other property; provided, however, if such surviving Person is a direct or indirect Subsidiary of a Qualified Person, the parent entity that is a Qualified Person shall be the Surviving Person. "Survivor Common Stock" with respect to any Surviving Person shall mean any shares of such Surviving Person of any class or series which has no preference or priority in the payment of dividends or in the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of such Surviving Person and which is not subject to redemption by such Surviving Person; provided, however, that if at any time there shall be more than one such class or series, the shares of each such class and series issuable upon conversion of the Class B Stock then being converted shall be substantially in the proportion to the total number of shares of each such class and series. "Trading Day" means a day on which the principal national securities exchange (including, if applicable, the Nasdaq Stock Market) on which the Common Stock is listed or admitted to trading is open for the transaction of business or, if the Common Stock is not listed or admitted to trading on any national securities exchange, a Business Day. IN WITNESS WHEREOF, the officers set forth below, acting for and on behalf of The Grand Union Company, have hereunto subscribed their names on this ___ day of June 1997. THE GRAND UNION COMPANY By: ------------------------- Name: Title: Attest: By: --------------------------- Name: Title: Exhibit B Form of Opinion to be rendered by Ropes & Gray in connection with the Fourth and Fifth Closings under the Stock Purchase Agreement, dated as of July 30, 1996 (the "Purchase Agreement"), among The Grand Union Company (the "Company"), Trefoil Capital Investors II, L.P. ("Trefoil") and GE Investment Private Placement Partners II, A Limited Partnership ("GEI" and, collectively with Trefoil, the "Purchasers"), as accelerated pursuant to the terms of the Acceleration and Exchange Agreement between the Company, Trefoil, and GEI. Capitalized terms used herein without definition have the meanings given in the Opinion Letter of Ropes & Gray delivered in connection with the Third Closing on February 25, 1997. 1. The Company is duly incorporated, validly existing and in good standing under the laws of the State of Delaware, with corporate power and authority under such laws perform its obligations under the Purchase Agreement, including without limitation to issue and sell the Shares and to issue the shares of Common Stock issuable upon conversion of the Shares. 2. The Shares delivered at this Closing (the "Accelerated Shares") have been duly authorized and validly issued and are fully paid and non-assessable; and the shares of Common Stock issuable upon the conversion of the Accelerated Shares (the "Conversion Shares") have been duly authorized and reserved for issuance and, when issued in accordance with the provisions of the Company's Certificate of Incorporation, will be validly issued, fully paid and nonassessable. Exhibit C Form of Opinion to be rendered by Davis Polk & Wardwell. Capitalized terms used herein without definition have the meanings given in the Acceleration and Exchange Agreement. 1. The Company is a validly existing corporation in good standing under the laws of the State of Delaware, with all requisite corporate power and authority to own its properties and assets and to carry on its business. 2. The Certificate of Designation has been duly authorized and adopted by the Company, has been filed with the Secretary of State for the State of Delaware and is in full force and effect. 3. The Company has all requisite corporate power and authority to execute and deliver the Transaction Documents to which it is a party and all other agreements therein contemplated to be executed by the Company, to perform its obligations thereunder, to consummate the transactions contemplated thereby and to sell, assign, transfer and deliver the Class B Preferred Shares and the Reset Shares to the Purchasers pursuant to the terms of the Acceleration and Exchange Agreement. 4. The Transaction Documents have been duly authorized, executed and delivered by the Company, and are the legal, valid and binding obligations of the Company and (subject to applicable bankruptcy, insolvency, and other laws affecting the enforceability of creditors' rights generally and general equitable principles) are enforceable against the Company in accordance with their respective terms. 5. The Class B Preferred Shares have been validly authorized and, upon delivery to Purchasers pursuant to the Exchange Agreement, will be validly issued, fully paid and nonassessable. 6. The shares of (A) Common Stock to be issued (i) on the Reset Date, (ii) upon the conversion of the Class B Preferred Stock, and (iii) as dividends on the Preferred Shares in accordance with the terms of the Certificate of Designation, and (B) Class B Preferred Stock to be issued as dividends on the Preferred Shares in accordance with the terms of the Certificate of Designation have been validly authorized and, when such (x) Reset Shares are issued in accordance with the Acceleration and Exchange Agreement, and (y) such shares of Common Stock are delivered in accordance with the terms of the Certificate of Designation upon the conversion of the Class B Preferred Stock or the payment of dividends on the Preferred Stock, or (z) shares of Class B Preferred Stock are delivered in accordance with the terms of the Certificate of Designation as payment of dividends thereon, such shares of Common Stock and shares of Preferred Stock will be validly issued, fully paid and non-assessable. Depending on a number of factors, including the time of the conversion of the Class B Preferred Stock and the form in which dividends thereon are paid, the number of shares of Common Stock currently authorized may be insufficient to permit the conversion of all securities of the Company convertible into or exercisable for shares of Common Stock and the payment of all dividends on the Preferred Shares in the form of shares of Common Stock. 7. The consummation of the Exchange and the issuance of the Reset Shares pursuant to the Acceleration and Exchange Agreement and the fulfillment of and compliance with the terms and conditions contained in the Acceleration and Exchange Agreement with respect to the Exchange and the issuance of the Reset Shares will not (a) conflict with any terms, conditions or provisions of the Certificate of Incorporation or Bylaws of the Company; (b) result in a termination or breach of, or constitute a default under, or accelerate or permit the acceleration of any performance required by, any of the agreements listed on Schedule A hereto; or (c) violate any federal law or laws of the state of New York or the state of Delaware. 8. To our knowledge after due inquiry, the Company is not a party to, subject to or bound by any judgment, award, judicial or administrative order, writ, prohibition, or decree (including a consent decree) of any court, governmental body or arbitrator, which would prevent the execution, delivery, or performance of the Transaction Documents by the Company and all other agreements therein contemplated to be entered into by the Company or the transfer, conveyance or sale of the Shares by the Company to the Purchasers pursuant to the Acceleration and Exchange Agreement. 9. After due inquiry, we have no knowledge of any litigation, arbitration, or governmental proceeding with respect to the Company that seeks to prohibit or otherwise challenge the consummation of the transactions contemplated by the Transaction Documents, or to obtain substantial damages with respect thereto. With respect to the opinions expressed in paragraph 8 hereof, "after due inquiry" means that we have made inquiry of Jeff Freimark of the Company. Exhibit D [Letterhead of Donaldson, Lufkin & Jenrette Securities Corporation] June 5, 1997 The Grand Union Company 201 Willowbrook Boulevard Wayne, NJ 07470-6799 Attention: Jeffrey P. Freimark Chief Financial Officer Re: Fee Waiver Gentlemen: This letter is written in connection with our engagement letter with The Grand Union Company (the "Company") dated January 17, 1996 (the "Engagement Letter") and the Company's proposed transaction (the "Proposed Transaction") to issue $40,000,000 of Class B Convertible Preferred Stock of the Company and, under certain circumstances, up to 2 million shares of Common Stock of the Company, pursuant to the Acceleration and Exchange Agreement dated June 5, 1997, by and between the Company and Trefoil Capital Investors II, L.P. and GE Investment Private Placement Partners II, A Limited Partnership. The purpose of this letter is to acknowledge and agree that Donaldson, Lufkin & Jenrette Securities Corporation hereby waives any additional fee or other payment to which it may be entitled in connection with the Proposed Transaction pursuant to the Engagement Letter. Sincerely, DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION By: ------------------------- Martin C. Murrer Managing Director EXHIBIT E AMENDMENT NO. 1 TO THE REGISTRATION RIGHTS AGREEMENT DATED AS OF JULY 30, 1996, AMONG THE GRAND UNION COMPANY, TREFOIL CAPITAL INVESTORS II, L.P., AND GE INVESTMENT PRIVATE PLACEMENT PARTNERS II, A LIMITED PARTNERSHIP Amendment (this "Amendment"), dated as of June 5, 1997, to the Registration Rights Agreement (the "Registration Rights Agreement"), dated as of July 30, 1996, among each of (i) The Grand Union Company, a Delaware corporation (the "Company"), and (ii) Trefoil Capital Investors II, L.P., a Delaware limited partnership ("Trefoil"), and GE Investment Private Placement Partners II, a Limited Partnership, a Delaware limited partnership ("GEI," and together with Trefoil, the "Purchasers"). Capitalized terms used herein without definitions shall have the meanings given them in the Registration Rights Agreement. WHEREAS, the Company has entered into an Acceleration and Exchange Agreement, dated as of June 5, 1997 (the "Acceleration Agreement"), among the Company, Trefoil, and GEI; WHEREAS, the Company and the Purchasers desire to amend the Registration Rights Agreement for the purpose of facilitating the transactions contemplated by the Acceleration Agreement; NOW, THEREFORE, in consideration of the foregoing, and the mutual agreements and covenants contained herein, the parties hereto agree as follows: Section 1. Preamble. (a) The second paragraph of the preamble is hereby amended to read as follows: "WHEREAS, pursuant to a Stock Purchase Agreement among the Company and the Purchasers (the "Purchase Agreement"), the Company is selling to the purchasers up to 2,000,000 shares of the Company's Class A Convertible Preferred Stock, issuable in denominations of $50 stated value per share, dividends on which may be paid in additional shares of such preferred stock (collectively, the "Class A Preferred Shares"), which Class A Preferred Shares are convertible into shares of the Company's common stock, par value $1.00 per share (the "Common Stock");" (b) The Preamble of the Registration Rights Agreement is hereby amended to add a new third paragraph to read as follows: "WHEREAS, pursuant to an Acceleration and Exchange Agreement (the "Acceleration Agreement"), dated as of June 5, 1997, the Company has agreed to issue (i) 800,000 shares of the Company's Class B Convertible Preferred Stock, issuable in denominations of $50 stated value per share, dividends on which may be paid in additional shares of such preferred stock (collectively, the "Class B Preferred Shares," and collectively with the Class A Preferred Shares, the "Preferred Shares"), which Class B Preferred Shares are convertible into shares of Common Stock, and (ii) up to 2,000,000 shares of Common Stock under certain circumstances (such shares of the Common Stock, together with shares of Common Stock into which the Preferred Shares are convertible and shares of Common Stock which may be issued as dividends on the Preferred Shares, the "Common Shares" and, collectively with the Preferred Shares, the "Securities"); Section 2. Definitions. The definition of the term "Registrable Securities" in Section 1.1 of the Registration Rights Agreement is hereby amended to read as follows: ""Registrable Securities" shall mean any Securities issued at any time to any of the Purchasers pursuant to the Purchase Agreement or the Acceleration Agreement and any Securities issued at any time as dividends upon or on conversion of any of the Securities. As to any proposed offer or sale of Registrable Securities, such securities shall cease to be Registrable Securities with respect to such proposed offer or sale when (i) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement or (ii) such securities are permitted to be disposed of pursuant to Rule 144(k) (or any successor provision to such Rule) under the Securities Act as confirmed in a written opinion of counsel to the Company addressed to the Holders, or (iii) such securities shall have been otherwise transferred pursuant to an applicable exemption under the Securities Act, new certificates for such securities not bearing a legend restricting further transfer shall have been delivered by the Company and such securities shall be freely transferable to the public without registration or qualification under the Securities Act or any state securities or blue sky law then in place. Section 3. Miscellaneous. (a) Notices. Any notice under or relating to this Amendment shall be given in writing and shall be deemed sufficiently given when delivered by hand or by conformed facsimile transmission, on the second business day after a writing is consigned (freight prepaid) to a commercial overnight courier, and on the fifth business day after a writing is deposited in the mail, postage and other charges prepaid, addressed as follows: Trefoil II: 4444 Lakeside Drive Burbank, California 91505 Attention: Mr. Geoffrey T. Moore Telecopy: (818) 842-3142 with a copy to: Fried, Frank, Harris, Shriver & Jacobson 350 South Grand Avenue Los Angeles, California 90071 Attention: David K. Robbins, Esq. Telecopy: (213) 473-2222 GEI: GE Investment Management Incorporated 3003 Summer Street Stamford, Connecticut 06904 Attention: Michael Pastore, Esq. Telecopy: (203) 326-4177 with a copy to: Dewey Ballantine 1301 Avenue of the Americas New York, New York 10019 Attention: Sanford W. Morhouse, Esq. Telecopy: (212) 259-6333 the Company: Chief Executive Officer The Grand Union Company 201 Willowbrook Boulevard Wayne, NJ 07470-0966 Telecopy: (201) 890-6012 with a copy to: General Counsel The Grand Union Company 201 Willowbrook Boulevard Wayne, New Jersey 07470-0966 Telecopy: (201) 890-6012 and Davis Polk & Wardwell 450 Lexington Avenue New York, NY 10017 Attn: William L. Rosoff, Esq. Telecopy: (212) 450-4800 and Fried, Frank, Harris, Shriver & Jacobson 350 South Grand Avenue Los Angeles, California 90071 Attention: David K. Robbins, Esq. Telecopy: (213) 473-2222 and Dewey Ballantine 1301 Avenue of the Americas New York, New York 10019 Attention: Sanford W. Morhouse, Esq. Telecopy: (212) 259-6333 or to such other address or facsimile number as either party may, from time to time, designate in a written notice given in like manner. (b) Binding Effect. The provisions of this Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns, heirs, and personal representatives. (c) Modification. This Amendment may only be modified by a written instrument duly executed by each party hereto. (d) Waiver. Any waiver by either party of a breach of any provision of this Amendment shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Amendment. Any waiver of any provision of this Amendment must be in writing. (e) Headings. The headings to the sections of this Amendment are inserted for convenience only and shall not constitute a part hereof or affect in any way the meaning or interpretation of this Amendment. (f) Separability. If any provision of this Amendment is invalid, illegal or unenforceable, the balance of this Amendment shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances. (g) Counterparts. This Amendment may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (h) Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed and to be fully performed within the State of New York. IN WITNESS WHEREOF, the parties have duly executed this Amendment No. 1 to the Registration Rights Agreement dated as of July 30, 1996 as of the date first written above. TREFOIL CAPITAL INVESTORS II, L.P. By: Trefoil Investors II, Inc. its general partner By: ---------------------------------- Name: Michael J. McConnell Title: Vice President GE INVESTMENT PRIVATE PLACEMENT PARTNERS II, A LIMITED PARTNERSHIP By: GE INVESTMENT MANAGEMENT INCORPORATED, its general partner By: ---------------------------------- Name: Don W. Torey Title: Executive Vice President THE GRAND UNION COMPANY By: ---------------------------------- Name: Jeffrey P. Freimark Title: Executive Vice President, Chief Financial Officer and Chief Administrator Officer EXHIBIT F THE STANGELAND FAMILY LIMITED PARTNERSHIP 300 North Lake Avenue, Suite 925 Pasadena, California 91101 June 5, 1997 Trefoil Capital Investors II, L.P. The Grand Union Company 4444 Lakeside Drive 201 Willowbrook Boulevard Burbank, California 91505 Wayne, New Jersey 07470-0966 Attn: Geoffrey T. Moore Attn: Roger Stangeland GE Investment Private Placement Partners II, A Limited Partnership c/o GE Investment Management Incorporated 3003 Summer Street Stamford, Connecticut 06904 Attn: Michael Pastore, Esq. Dear Messrs. Moore, Pastore and Stangeland: Reference is made to the Stockholder Agreement (the "Stockholder Agreement"), dated February 25, 1997, among Trefoil Capital Investors II, L.P., a Delaware limited partnership ("Trefoil II"), GE Investment Private Placement Partners II, A Limited Partnership, a Delaware limited partnership ("GEIPPPII" and collectively with Trefoil II, the "Purchasers"), The Stangeland Family Limited Partnership, a California limited partnership, as successor to all of the rights and obligations of Roger Stangeland pursuant to an Addendum to Stockholder Agreement dated March 20, 1997 ("Stangeland") and The Grand Union Company (the "Company"), and to the Acceleration and Exchange Agreement, dated the date hereof, among the Company and the Purchasers (the "Acceleration and Exchange Agreement"). Stangeland hereby acknowledges that the transactions contemplated by the Acceleration and Exchange Agreement will not create any Tag-Along Rights in favor of Stangeland, individually or collectively, pursuant to Section 2 of the Stockholder Agreement. Very truly yours, THE STANGELAND FAMILY LIMITED PARTNERSHIP, a California limited partnership By: THE ROGER AND LILAH STANGELAND LIVING TRUST Its: General Partner By: ----------------------------- Roger Stangeland, Co-Trustee By: ----------------------------- Lilah Stangeland, Co-Trustee Exhibit G RATIFICATION AND VOTING AGREEMENT RATIFICATION AND VOTING AGREEMENT (the "Agreement"), dated as of June --, 1997, among Trefoil Capital Investors II, L.P., a Delaware limited partnership ("Trefoil II"), GE Investment Private Placement Partners II, A Limited Partnership, a Delaware limited partnership (together with Trefoil II, the "Purchasers"), and the shareholders of The Grand Union Company, a Delaware corporation (the "Company") named on Schedule I hereto (each, a "Stockholder" and collectively, the "Stockholders"). PREAMBLE The Company and the Purchasers are parties to a Stock Purchase Agreement (the "Purchase Agreement"), dated as of July 30, 1996, which provided, among other things, for the acquisition by the Purchasers of shares of the Company's Class A Convertible Preferred Stock (the "Class A Preferred Stock"). A copy of the Purchase Agreement has previously been made available to the Stockholders. The Company and the Purchasers are parties to an Acceleration and Exchange Agreement (the "Acceleration and Exchange Agreement"), dated as of June 5, 1997, which provides, among other things, for the acquisition by the Purchasers of shares of the Company's Class B Convertible Preferred Stock (the "Class B Preferred Stock"). A copy of the Acceleration and Exchange Agreement has previously been made available to the Stockholders. As of the date hereof, each of the Stockholders named on Schedule I hereto is the beneficial owner of and holds sole voting power with respect to shares of Class A Preferred Stock of the Company entitled to the number of votes, or the number of shares of the common stock of the Company, par value $1.00 per share (the "Common Stock" and, together with the number of votes represented by the shares of Class A Preferred Stock set forth on Schedule I hereto, the "Voting Securities") set forth opposite such Stockholder's name on Schedule I (the "Subject Shares"). In order to induce the Purchasers to consummate the transactions contemplated by the Acceleration and Exchange Agreement (the "Transactions") and for other good and valuable consideration, each Stockholder agrees to take reasonable steps to facilitate the Transactions and to vote the Subject Shares held by it as contemplated by this Agreement. ACCORDINGLY, the parties hereto agree as follows: 1. Voting in Favor of Acceleration and Exchange Agreement. Each Stockholder agrees to support the Acceleration and Exchange Agreement and the Transactions in any reasonable manner, including by taking any reasonable action requested by the Purchasers; provided, however, that the foregoing shall not be deemed to restrict such Stockholder's ability to transfer or dispose of such Subject Shares. Each Stockholder will vote all of the Subject Shares held by it in favor of the Acceleration and Exchange Agreement and the Transactions, and against any agreement or course of action that would prohibit, delay, interfere with or otherwise be inconsistent with the Acceleration and Exchange Agreement or the Transactions, (a) at any annual or special meeting (or any adjournment or postponement thereof) of the stockholders of the Company at which the Acceleration and Exchange Agreement or the Transactions are submitted to a vote or (b) at the request of the Purchasers, by its written consent. 2. Granting of Irrevocable Proxy. Upon the request of the Purchasers, each Stockholder will deliver to one or more persons an irrevocable proxy (the "Proxy") with respect to all of the Subject Shares held by it, which such Proxy shall be deemed to be coupled with an interest, to vote all of the Subject Shares held by it in favor of the Acceleration and Exchange Agreement and the Transactions at any annual or special meeting of the stockholders of the Company at which the Acceleration and Exchange Agreement or the Transactions are submitted to a vote in the same manner and with the same effect as if such Stockholder was personally present at such meeting. Any such Proxy shall expire upon the Expiration Date as defined in Section 5 hereof. 3. Third Party Offers. Between the date hereof and the Expiration Date, each Stockholder agrees that it shall not directly or indirectly solicit, initiate or encourage inquiries or proposals, or participate in any negotiations leading to any proposal, concerning any transaction involving the Company that would cause the Company to fail to consummate the Transactions or that would otherwise be inconsistent with, violate or breach the terms of this Agreement or the Acceleration and Exchange Agreement. Each Stockholder will promptly advise the Purchasers of any offers or proposals it may receive relating to any such transaction. 4. Representations and Warranties of the Stockholder. Each Stockholder hereby severally, not jointly, represents and warrants to each of the Purchasers as follows: 4.1. The Stockholder is validly existing and in good standing under the laws of the jurisdiction of its organization. 4.2. The Stockholder is the sole true and lawful record and beneficial owner of the Subject Shares set forth opposite its name on Schedule I hereto and has all necessary power and authority to enter into this Agreement and to perform such Stockholder's obligations hereunder. 4.3. None of the Subject Shares owned by any Stockholder other than the Purchasers and the Roger and Lilah Stangeland Family Limited Partnership (the "Stangeland Partnership") is subject to any voting trust or, except pursuant to this Agreement, other agreement or arrangement with respect to the voting of such Subject Shares. None of the Subject Shares owned by the Purchasers or the Stangeland Partnership is subject to any voting trust or, except pursuant to this Agreement, the Stockholders Agreement dated as of February 25, 1997, and the Addendum thereto, among the Company, the Purchasers and the Stangeland Partnership (the "Stangeland Stockholder Agreement") or the Stockholder Agreement dated as of July 30, 1996 between the Purchasers, as amended (the "Purchasers Stockholder Agreement"), other agreement or arrangement with respect to the voting of such Subject Shares. 4.4. The execution, delivery and performance of this Agreement by the Stockholder and the consummation by it of the transactions contemplated hereby have been approved by all necessary action on the part of the Stockholder. 4.5. This Agreement is the legal, valid and binding agreement of the Stockholder. 4.6. The execution, delivery and performance of this Agreement by the Stockholder does not and will not constitute a violation of, conflict with or result in a default under (a) any contract, understanding or arrangement to which the Stockholder is a party or by which such Stockholder is bound, or require the consent of any other person or any party pursuant thereto, or (b) any judgment, decree or order applicable to the Stockholder. 4.7. The number of Subject Shares set forth opposite such Stockholder's name on Schedule I hereto are the only Voting Securities of the Company beneficially owned by the Stockholder and the Stockholder owns no options to purchase or rights to subscribe for or otherwise acquire any other Voting Securities of the Company except for (i) pursuant to the Acceleration and Exchange Agreement, or (ii) certain warrants of the Company issued pursuant to the Warrant Agreement between the Company and American Stock Transfer & Trust Company, dated as of June 15, 1995. 5. Termination. This Agreement shall terminate on the earlier of (a) the date of the Exchange Closing (as defined in the Acceleration and Exchange Agreement) and (b) the tenth (10th) day following termination of the Acceleration and Exchange Agreement in accordance with its terms (the "Expiration Date"). 6. Remedies. The parties hereto acknowledge that damages would be an inadequate remedy for a breach of the provisions of this Agreement and that, in addition to any other remedy available at law, the obligations of the Stockholder shall be specifically enforceable. 7. Miscellaneous. 7.1. Assignment. This Agreement shall not be assignable by the parties hereto, except by operation of law and except that any Proxy granted pursuant to the terms of this Agreement may be assigned by the Purchasers to any person affiliated with the Purchasers. 7.2. Amendments. This Agreement may not be modified, amended, altered or supplemented, except upon the execution and delivery of a written agreement executed by the Purchasers and the Stockholder. 7.3. Notices. All notices, requests, claims, demands and other communications hereunder shall be given in writing and shall be deemed sufficiently given when delivered by hand or by conformed facsimile transmission, on the second business day after a writing is consigned (freight prepaid) to a commercial overnight courier, and on the fifth business day after a writing is deposited in the mail, postage and other charges prepaid, addressed as follows: (a) If to the Purchasers: Trefoil Capital Investors II, L.P. c/o Shamrock Capital Advisors, Inc. 4444 Lakeside Drive Burbank, CA 91505 Attn: Stanley P. Gold, President Telecopier No.: (818) 845-9718 Telephone No.: (818) 845-4444 and GE Investment Private Placement Partners II, A Limited Partnership 3003 Summer Street Stamford, CT 06905 Attn: Michael Pastore Telecopier No.: (303) 326-4177 Telephone No.: (303) 326-2300 With copies to: Fried, Frank, Harris, Shriver & Jacobson 350 South Grand Avenue, Suite 3200 Los Angeles, CA 90071 Attn: David K. Robbins, Esq. Telecopier No.: (213) 473-2222 Telephone No.: (213) 473-2000 and Dewey Ballantine 1301 Avenue of the Americas New York, NY 10019 Attn: Sanford W. Morhouse, Esq. Telecopier No.: (212) 259-6333 Telephone No.: (212) 259-8000 With copies to: Chief Executive Officer The Grand Union Company 201 Willowbrook Boulevard Wayne, NJ 07470-0966 Telecopier No.: (201) 890-6012 Telephone No.: (201) 890-6000 and Davis Polk &Wardwell 450 Lexington Avenue New York, NY 10017 Attn: William L. Rosoff, Esq. Telecopier No.: (212) 450-4800 Telephone No.: (212) 450-4000 (b) If to the Stockholder, to the address set forth on Schedule I hereto. With copies to: Chief Executive Officer The Grand Union Company 201 Willowbrook Boulevard Wayne, NJ 07470-0966 Telecopier No.: Telephone No.: (201) 890-6000 and Fried, Frank, Harris, Shriver & Jacobson 350 South Grand Avenue, Suite 3200 Los Angeles, CA 90071 Attn: David K. Robbins, Esq. Telecopier No.: (213) 473-2222 Telephone No.: (213) 473-2000 and Dewey Ballantine 1301 Avenue of the Americas New York, NY 10019 Attn: Sanford W. Morhouse, Esq. Telecopier No.: (212) 259-6333 Telephone No.: (212) 259-8000 or to such other address as the Purchasers may have furnished to the Stockholders or a Stockholder may have furnished to the Purchasers, in either case in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 7.4. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York. 7.5. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall continue in full force and effect and shall in no way be affected, impaired or invalidated. 7.6. Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original, but all of which together shall constitute one and the same Agreement. IN WITNESS WHEREOF, the Purchasers and the Stockholders have caused this Ratification and Voting Agreement to be duly executed as of the day and year first above written. TREFOIL CAPITAL INVESTORS II, L.P. By: TREFOIL INVESTORS II, INC., its managing general partner By: ----------------------------- Name: Title: GE INVESTMENT PRIVATE PLACEMENT PARTNERS II, A LIMITED PARTNERSHIP By: GE INVESTMENT MANAGEMENT INCORPORATED, a general partner By: ---------------------------- Name: Title: Stockholder's Signature Page to Ratification and Voting Agreement: ------------------------------ Stockholder By: -------------------------- Name: Title: SCHEDULE I Currently Outstanding Number of Voting Voting Securities Name and Address of Securities of the Stockholder Held Company Trefoil Capital Investors II, 7,035,994 28.74% L.P. c/o Shamrock Capital Advisors, Inc. 4444 Lakeside Drive Burbank, CA 91505 GE Investment Private 7,035,994 28.74% Placement Partners II, A Limited Partnership 3003 Summer Street Stamford, CT 06905 EX-10.58 20 EXHIBIT 10.58 AM #1 TO REG RIGHTS AGREE. Exhibit 10.58 AMENDMENT NO. 1 TO THE REGISTRATION RIGHTS AGREEMENT DATED AS OF JULY 30, 1996, AMONG THE GRAND UNION COMPANY, TREFOIL CAPITAL INVESTORS II, L.P., AND GE INVESTMENT PRIVATE PLACEMENT PARTNERS II, A LIMITED PARTNERSHIP Amendment (this "Amendment"), dated as of June 5, 1997, to the Registration Rights Agreement (the "Registration Rights Agreement"), dated as of July 30, 1996, among each of (i) The Grand Union Company, a Delaware corporation (the "Company"), and (ii) Trefoil Capital Investors II, L.P., a Delaware limited partnership ("Trefoil"), and GE Investment Private Placement Partners II, a Limited Partnership, a Delaware limited partnership ("GEI," and together with Trefoil, the "Purchasers"). Capitalized terms used herein without definitions shall have the meanings given them in the Registration Rights Agreement. WHEREAS, the Company has entered into an Acceleration and Exchange Agreement, dated as of June 5, 1997 (the "Acceleration Agreement"), among the Company, Trefoil, and GEI; WHEREAS, the Company and the Purchasers desire to amend the Registration Rights Agreement for the purpose of facilitating the transactions contemplated by the Acceleration Agreement; NOW, THEREFORE, in consideration of the foregoing, and the mutual agreements and covenants contained herein, the parties hereto agree as follows: Section 1. PREAMBLE. (a) The second paragraph of the preamble is hereby amended to read as follows: "WHEREAS, pursuant to a Stock Purchase Agreement among the Company and the Purchasers (the "Purchase Agreement"), the Company is selling to the purchasers up to 2,000,000 shares of the Company's Class A Convertible Preferred Stock, issuable in denominations of $50 stated value per share, dividends on which may be paid in additional shares of such preferred stock (collectively, the "Class A Preferred Shares"), which Class A Preferred Shares are convertible into shares of the Company's common stock, par value $1.00 per share (the "Common Stock");" (b) The Preamble of the Registration Rights Agreement is hereby amended to add a new third paragraph to read as follows: "WHEREAS, pursuant to an Acceleration and Exchange Agreement (the "Acceleration Agreement"), dated as of June 5, 1997, the Company has agreed to issue (i) 800,000 shares of the Company's Class B Convertible Preferred Stock, issuable in denominations of $50 stated value per share, dividends on which may be paid in additional shares of such preferred stock (collectively, the "Class B Preferred Shares," and collectively with the Class A Preferred Shares, the "Preferred Shares"), which Class B Preferred Shares are convertible into shares of Common Stock, and (ii) up to 2,000,000 shares of Common Stock under certain circumstances (such shares of the Common Stock, together with shares of Common Stock into which the Preferred Shares are convertible and shares of Common Stock which may be issued as dividends on the Preferred Shares, the "Common Shares" and, collectively with the Preferred Shares, the "Securities"); Section 2. DEFINITIONS. The definition of the term "Registrable Securities" in Section 1.1 of the Registration Rights Agreement is hereby amended to read as follows: ""REGISTRABLE SECURITIES" shall mean any Securities issued at any time to any of the Purchasers pursuant to the Purchase Agreement or the Acceleration Agreement and any Securities issued at any time as dividends upon or on conversion of any of the Securities. As to any proposed offer or sale of Registrable Securities, such securities shall cease to be Registrable Securities with respect to such proposed offer or sale when (i) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement or (ii) such securities are permitted to be disposed of pursuant to Rule 144(k) (or any successor provision to such Rule) under the Securities Act as confirmed in a written opinion of counsel to the Company addressed to the Holders, or (iii) such securities shall have been otherwise transferred pursuant to an applicable exemption under the Securities Act, new certificates for such securities not bearing a legend restricting further transfer shall have been delivered by the Company and such securities shall be freely transferable to the public without registration or qualification under the Securities Act or any state securities or blue sky law then in place. Section 3. MISCELLANEOUS. (a) NOTICES. Any notice under or relating to this Amendment shall be given in writing and shall be deemed sufficiently given when delivered by hand or by conformed facsimile transmission, on the second business day after a writing is consigned (freight prepaid) to a commercial overnight courier, and on the fifth business day after a writing is deposited in the mail, postage and other charges prepaid, addressed as follows: Trefoil II: 4444 Lakeside Drive Burbank, California 91505 Attention: Mr. Geoffrey T. Moore Telecopy: (818) 842-3142 with a copy to: Fried, Frank, Harris, Shriver & Jacobson 350 South Grand Avenue Los Angeles, California 90071 Attention: David K. Robbins, Esq. Telecopy: (213) 473-2222 2 GEI: GE Investment Management Incorporated 3003 Summer Street Stamford, Connecticut 06904 Attention: Michael Pastore, Esq. Telecopy: (203) 326-4177 with a copy to: Dewey Ballantine 1301 Avenue of the Americas New York, New York 10019 Attention: Sanford W. Morhouse, Esq. Telecopy: (212) 259-6333 the Company: Chief Executive Officer The Grand Union Company 201 Willowbrook Boulevard Wayne, NJ 07470-0966 Telecopy: (201) 890-6012 with a copy to: General Counsel The Grand Union Company 201 Willowbrook Boulevard Wayne, New Jersey 07470-0966 Telecopy: (201) 890-6012 and Davis Polk & Wardwell 450 Lexington Avenue New York, NY 10017 Attn: William L. Rosoff, Esq. Telecopy: (212) 450-4800 and Fried, Frank, Harris, Shriver & Jacobson 350 South Grand Avenue Los Angeles, California 90071 Attention: David K. Robbins, Esq. Telecopy: (213) 473-2222 and 3 Dewey Ballantine 1301 Avenue of the Americas New York, New York 10019 Attention: Sanford W. Morhouse, Esq. Telecopy: (212) 259-6333 or to such other address or facsimile number as either party may, from time to time, designate in a written notice given in like manner. (b) BINDING EFFECT. The provisions of this Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns, heirs, and personal representatives. (c) MODIFICATION. This Amendment may only be modified by a written instrument duly executed by each party hereto. (d) WAIVER. Any waiver by either party of a breach of any provision of this Amendment shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Amendment. Any waiver of any provision of this Amendment must be in writing. (e) HEADINGS. The headings to the sections of this Amendment are inserted for convenience only and shall not constitute a part hereof or affect in any way the meaning or interpretation of this Amendment. (f) SEPARABILITY. If any provision of this Amendment is invalid, illegal or unenforceable, the balance of this Amendment shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances. (g) COUNTERPARTS. This Amendment may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (h) GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed and to be fully performed within the State of New York. 4 IN WITNESS WHEREOF, the parties have duly executed this Amendment No. 1 to the Registration Rights Agreement dated as of July 30, 1996 as of the date first written above. TREFOIL CAPITAL INVESTORS II, L.P. By: Trefoil Investors II, Inc. its general partner By: /s/ Michael J. McConnell -------------------------------- Name: Michael J. McConnell Title: Vice President GE INVESTMENT PRIVATE PLACEMENT PARTNERS II, A LIMITED PARTNERSHIP By: GE INVESTMENT MANAGEMENT INCORPORATED, its general partner By: /s/ Don W. Torey ------------------------------------ Name: Don W. Torey Title: Executive Vice President THE GRAND UNION COMPANY By: /s/ Jeffrey P. Freimark -------------------------------------- Name: Jeffrey P. Freimark Title: Executive Vice President, Chief Financial Officer and Chief Administrator Officer EX-21.1 21 EX-21.1 Exhibit 21.1 The Grand Union Company Subsidiary Listing Grand Union Stores of New Hampshire, Inc. Grand Union Stores of Vermont Merchandising Services, Inc. Specialty Merchandising Services, Inc. EX-27 22 EX 27 FDS
5 The schedule contains summary financial information extracted from the company's consolidated financial statements and is qualified in its entirety by reference to such financial statements. 1,000 YEAR MAR-29-1997 MAR-31-1996 MAR-29-1997 34,119 0 17,975 0 131,409 197,829 910,820 446,643 1,060,839 172,640 600,063 65,000 0 100 (153,310) 1,060,839 2,312,673 2,312,673 1,606,926 1,606,926 780,755 0 105,823 (180,831) (2,523) (183,354) 0 0 0 (185,354) (18.54) 0
-----END PRIVACY-ENHANCED MESSAGE-----