-----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, SVjxXIoR8poonlb9MpgQqwl18FvLLMrKq82LhBOboE6opp6ut21ksodgsWeglVnD EGpPv3OPNj+6VE3M9AZjAA== 0000950112-96-003187.txt : 19960910 0000950112-96-003187.hdr.sgml : 19960910 ACCESSION NUMBER: 0000950112-96-003187 CONFORMED SUBMISSION TYPE: SC 14F1/A PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19960909 SROS: NYSE SUBJECT COMPANY: 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: SC 14F1/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-44467 FILM NUMBER: 96627331 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 FILED BY: 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: SC 14F1/A 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 SC 14F1/A 1 GRAND UNION COMPANY THE GRAND UNION COMPANY 201 WILLOWBROOK BLVD. WAYNE, NJ 07470 INFORMATION STATEMENT TO STOCKHOLDERS SEPTEMBER 6, 1996 This is an information statement pursuant to section 14(f) of the Securities Exchange Act of 1934 and rule 14f-1 thereunder. This information statement is being mailed on or about September 7, 1996, in connection with the designation of certain persons to serve as members of the Board of Directors of the Grand Union Company (the "Company" or "Grand Union"). Such designation has been made pursuant to a stock purchase agreement among the Company, Trefoil Capital Investors, II, L.P. ("Trefoil") and GE Investments Private Placement Partners II, A Limited Partnership ("GEI"). Throughout this statement, the term "Investors" refers to Trefoil and GEI, collectively. YOU ARE NOT REQUIRED TO TAKE ANY ACTION IN CONNECTION WITH THIS STATEMENT. The information contained in this Information Statement (including information incorporated by reference) concerning Trefoil, GEI and their Designees (as defined herein) and beneficial owners of the Company's Common Stock has been furnished to the Company by Trefoil, GEI or their Designees, or has been obtained from public and other third-party records available to the Company, and the Company assumes no responsibility for the accuracy or completeness of such information. The Company has agreed to increase the Board of Directors to nine members, of whom five have been designated by the Investors. The Investors have designated Mr. Roger E. Stangeland, Mr. Clifford A. Miller, Mr. Geoffrey T. Moore, Mr. James J. Costello, and Mr. J. Richard Stonesifer. To the extent the Company's Board of Directors will consist of persons who are not Investors' designees, the Board is expected to consist of those persons who are currently directors who have not resigned. Information about current members and the Investors' designees is set forth below under the caption "Directors, Director Designees and Executive Officers". INFORMATION CONCERNING THE COMPANY'S COMMON STOCK The Company's $1.00 par value Common Stock (the "Common Stock") is the only class of voting securities of the Company currently outstanding. As of August 31, 1996, the following equity securities of the Company were outstanding: (i) 10,000,000 shares of Common Stock, (ii) warrants to purchase up to 900,000 shares of Common Stock, and (iii) stock options under the Company's 1995 Equity Incentive Plan or the Company's 1995 Non-Employee Directors Stock Option Plan, covering 235,680 shares of Common Stock. Each share of Common Stock has one vote. STOCK PURCHASE AGREEMENT On July 30, 1996, the Company entered into a definitive agreement (the "Stock Purchase Agreement") to sell $100 million of 8.5% Class A Convertible Preferred Stock, $1.00 par value per share, with a Stated Value of $50 per share (the "Preferred Stock") to an investment group comprising 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 "Investors"). Pursuant to the Stock Purchase Agreement, the Company will sell to the Investors an aggregate of 2,000,000 shares of Preferred Stock at a purchase price of $50 per share in stages through February 25, 1998. The Investors have agreed to purchase, and the Company has agreed to sell, subject to the satisfaction of certain condition prior to December 31, 1996, an aggregate of 800,000 shares of Preferred Stock for a purchase price of $50 per share (the "Principal Closing"). The Investors have further agreed to purchase, and the Company has further agreed to sell, an additional 400,000 shares of Preferred Stock on each of February 25, 1997, August 25, 1997 and February 25, 1998, in each case at a purchase price of $50 per share. Any or all of the purchases referred to in the preceding sentence may be accelerated by the Investors, with or without the approval of the Company. Each of the purchases are subject to the satisfaction or waiver of certain closing conditions as specified in the Stock Purchase Agreement. The Principal Closing, which must occur prior to December 31, 1996, is subject to satisfaction or waiver of all of the conditions set forth in the Stock Purchase Agreement, including without limitation the termination or expiration of any required waiting period pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, stockholder approval (or waiver of such approval by the National Association of Security Dealers, the "NASD") and consent of the Company's lenders. Redemption - ---------- The Preferred Stock is subject to mandatory redemption on June 1, 2005. Under certain conditions, the Company may also elect to redeem the Preferred Stock at any time on or after the second anniversary of the Principal Closing. If the price of the Company's Common Stock exceeds, for a specified period of time prior to the call for redemption, 180% of the Conversion Price of the Preferred Stock (if the redemption is between the second and third anniversaries of the Principal Closing), or 200% of the Conversion Price (if the redemption is between the third and fifth anniversaries of the Principal Closing), the Preferred Stock may be redeemed for $50 per share plus all accrued and unpaid dividends. Between the fifth and sixth anniversary of the Principal Closing, the redemption price shall be $51.5938 per share, plus all accrued and unpaid dividends. Between the sixth and seventh anniversary of the Principal Closing, the redemption price shall be $51.0625 per share. Between the seventh and eighth anniversary of the Principal Closing, the redemption price shall be $50.5313 per share, plus all accrued and unpaid dividends. After the eighth anniversary, the redemption price shall be $50 per share, plus all accrued and unpaid dividends. Voting Rights - ------------- Pursuant to the Certificate of Designation of Preferred Stock setting forth the powers, preferences, rights, qualifications, limitations and restrictions of such class of preferred stock (the "Certificate of Designation"), the holders of the Preferred Stock have the right to vote together with the holders of the Company's 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. Pursuant to the Certificate of Designation, the initial Conversion Price of the Preferred Stock is $6.375. At the Principal Closing, the Conversion Price will be adjusted to 120% of the volume-weighted average of the sales prices of the Company's Common Stock for a period of thirty (30) trading days ending on the sixth business day prior to the Principal Closing, but not lower than $6.50 nor greater than $7.25. - 2 - The Investors have agreed pursuant to the Stock Purchase Agreement to purchase an aggregate of 2,000,000 shares of Preferred Stock, convertible into an aggregate of up to 15,384,600 shares of Common Stock which could constitute up to approximately 61% of the total number of shares of Common Stock outstanding. The following table shows, for each closing, the dates, number of shares of Preferred Stock to be issued at such closing and the estimated minimum and maximum cumulative voting percentages (using conversion prices of $7.25 and $6.50, respectively), assuming no additional stock issuances. Cumulative Voting Percentage Preferred ---------------------------- Closing Date Shares Minimum Maximum ------- ----------------- ---------- ------- ------- Principal unscheduled 800,000 35.56% 38.10% Third February 25, 1997 400,000 45.28% 48.00% Fourth August 25, 1997 400,000 52.46% 55.17% Fifth February 25, 1998 400,000 57.97% 60.61% The Stock Purchase Agreement grants to Trefoil and GEI the right to acquire the Shares, subject to the terms and conditions contained therein. Until Trefoil and GEI acquire the Shares, the Shares will remain unissued by the Company. Upon issuance of the Shares, Trefoil will have the sole power to direct the vote and disposition of the 1,000,000 Shares to be purchased by it and the Conversion Shares into which such Shares are convertible, and GEI will have the sole power to direct the vote and disposition of the 1,000,000 Shares to be purchased by it and the Conversion Shares into which such Shares are convertible, in each case subject to certain restrictions pursuant to the Stockholders Agreement as described herein. Dividends - --------- Pursuant to the Certificate of Designation, the Holders of the Preferred Stock will be entitled to receive quarterly dividends in the amount of $4.25 per share per annum. Until the third anniversary of the Principal Closing, such dividends are payable in additional shares of Preferred Stock or in shares of Common Stock. From the third anniversary of the Principal Closing to the fifth anniversary of the Principal Closing, such 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 may be paid in additional 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 the fifth anniversary, all dividends are payable in cash. Pre-emptive Rights - ------------------ The Stock Purchase Agreement provides that, for so long as the Investors own at least 50% of the total number of Shares purchased by them pursuant to the Stock Purchase Agreement, the Investors 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 Investors. -3- Restrictions on Transfer - ------------------------ The Stock Purchase Agreement also provides that until the third anniversary of the Principal Closing, if one shall have occurred, the Investors will not sell more than one-third of the Shares (or shares of Common Stock issued upon conversion of such Shares the ("Conversion Shares")) purchased by them pursuant to the Stock Purchase Agreement. Additional Information Concerning the Investors - ----------------------------------------------- Trefoil. The general partners of Trefoil are Trefoil Investors II, Inc., a Delaware corporation ("Trefoil II"), and Sigma Hedge Partners, G.P., a Delaware partnership ("Sigma"). The general partners of Sigma are Delta PT Investors Corporation, a Delaware corporation ("Delta"), and Epsilon Equities, Inc., a Delaware corporation ("Epsilon"), each of which is wholly owned by the General Electric Pension Trust, a New York common law trust ("GEPT"). Shamrock Capital Advisors, Inc. ("SCA") is a closely held company providing management and consulting services to Trefoil and businesses in which Trefoil invests. The principal executive offices of Trefoil, Trefoil II and SCA are located at 4444 Lakeside Drive, Burbank, California 91505. The principal executive offices of Sigma, Delta, Epsilon and GEPT are located at 3003 Summer Street, P.O. Box 7900, Stamford, Connecticut 06904. Trefoil is an investment partnership organized to acquire businesses and to make strategic investments in debt or equity securities. Trefoil II was organized to serve as the managing general partner of Trefoil. GEI. GE Investment Management Incorporated, a Delaware Corporation ("GEIM") serves as the managing general partner of GEI. GEIM is a wholly owned subsidiary of General Electric Company and a registered investment advisor. The principal executive offices of GEI, GEIM and General Electric Company are located at 3003 Summer Street, P.O. Box 7900, Stamford, Connecticut 06904. The Investors have stated that the purpose of the purchase of the Preferred Stock by the Investors is to acquire a significant equity interest in the Company, primarily for investment purposes, although the Investors and SCA expect to be actively involved in the management of the Company, including having the right to select the nominees for a majority of the members of the Board of Directors of the Company, and the contractual obligation to vote their respective shares of Preferred Stock in favor of such nominees. Source And Amount Of Funds Or Other Consideration - ------------------------------------------------- By virtue of the Stock Purchase Agreement, Trefoil and GEI may be deemed to have acquired beneficial ownership of the shares of Common Stock into which the Preferred Stock is convertible (the "Conversion Shares") for purposes of Rule 13d-3(d) of the rules and regulations under the Securities Exchange Act of 1934, as amended (together with such rules and regulations, the "Exchange Act"). Trefoil. The total amount of funds required by Trefoil to purchase the Preferred Stock to be purchased by it pursuant to the Stock Purchase Agreement is $50 million. Sigma expects to obtain the necessary funds from capital contributions by its partners. Trefoil II, Delta and Epsilon each expects to obtain the necessary funds to make their respective capital contributions from capital contributions by their respective stockholders. GEPT expects to obtain the necessary funds to make its capital contributions from plan assets. GEI. The total amount of funds required by GEI to purchase the Preferred Stock to be purchased by it pursuant to the Stock Purchase Agreement is $50 million. GEI expects to obtain the necessary funds from capital contributions from its partners. -4- Pursuant to the Stock Purchase Agreement, the Company will pay to each of SCA (as investment manager for Trefoil) and GEIM (as investment manager for GEI) one-half of an aggregate transaction fee equal to 4% of the total dollar amount of Shares to be purchased pursuant to the Stock Purchase Agreement. The Company has also agreed to pay directly, or reimburse the Investors for, all fees and expenses incurred by the Investors in connection with the Stock Purchase Agreement and the transactions contemplated thereby, up to a maximum amount of $1 million. The Board of Directors - ---------------------- From and after the Principal Closing, the Company will have the obligation to cause (if necessary) the size of its Board of Directors to be increased to nine members, of whom five shall be selected by the Investors. Pursuant to the Stock Purchase Agreement, the Company is obligated to include nominees for such number of directors to be included in the Company's slate of nominees for election as directors at the Company's 1996 annual meeting of stockholders and any other meeting of stockholders at which a slate of directors is presented by the Company with a record date on or prior to September 1, 1997. Pursuant to the Stock Purchase Agreement, the Investors have agreed that (i) for so long as the Board of Directors of the Company is composed of a majority of directors nominated by the Investors and their affiliates, the Investors will cause the Board of Directors to consist of at least nine members and to cause any slate of nominees presented by the Company for election as directors to include not less than a number of Disinterested Directors (as defined in the Stock Purchase Agreement) equal to one-third (rounded to the nearest whole number) of all directors, (ii) for so long as the Investors and their affiliates hold less than 50% but more than 35% of the outstanding voting securities of the Company, the Investors will use their best efforts to cause the Board of Directors to consist of at least nine members and to cause any slate of nominees presented by the Company for election as directors to include not less than a number of Disinterested Directors equal to four-ninths (rounded to the nearest whole number) of all directors, and (iii) for so long as the Investors and their affiliates hold less than 35% of the outstanding voting securities of the Company, the Investors will use their best efforts to cause the Board of Directors to consist of at least nine members and to cause any slate of nominees presented by the Company for election as directors to include not less than a number of Disinterested Directors equal to five-ninths (rounded to the nearest whole number) of all directors. In each such case, the number of Disinterested Directors to be elected shall be calculated without regard to any directors which the holders of Preferred Stock shall be entitled to elect as a result of the default by the Company in the payment of six consecutive required quarterly dividends. The Stock Purchase Agreement provides that as long as any of the members of the Board of Directors of the Company are selected by the Investors, the affirmative vote of at least a majority of the Disinterested Directors shall be required to take any of the following actions: (i) make any decision to take, or omit to take, any action on the Company's behalf with respect to the Company's rights and obligations pursuant to the Stock Purchase Agreements or any of the Transaction Documents (as defined in the Stock Purchase Agreement); (ii) make any decision or take, or omit to take, any action on the Company's behalf with respect to the Preferred Stock, the shares of Preferred Stock purchased by the Investors pursuant to the Stock Purchase Agreement or the Company's rights and obligations under the Certificate of Designation; (iii) approve any transactions between the Company and affiliates of the Investors, or either of them; and (iv) approve the Disinterested Directors previously nominated by the nominating committee of the Board of Directors for election as directors at any meeting of stockholders or the Board of Directors of the Company, which approval shall not be unreasonably withheld. The Investors have also agreed in the Stock Purchase Agreement to vote any shares of Preferred Stock or Conversion Shares held by them from time to time in favor of the election of such Disinterested -5- Directors, and to waive any right to which it would be entitled to elect additional directors in the event of the default by the Company in the payment of six consecutive quarterly dividend payments at any time the Board of Directors of the Company is composed of a majority of directors selected by the Investors. In addition, if the Company shall have failed to pay in full dividends on the Preferred Stock for six consecutive quarters, the Certificate of Designation provides that the size of the Board of Directors of the Company shall be increased by two, and the holders of shares of Preferred Stock, voting together as a single class, shall have the right to elect such two directors. The right to elect such two directors terminates upon payment in full of all dividends payable on the Preferred Stock, at which time the Board of Directors shall return to its previous size and the directors elected by the holders of the Preferred Stock shall be removed. In addition, such right to elect two directors shall not apply where the holders of Preferred Stock have the right to elect two directors through a class vote. Other Corporate Governance Matters - ---------------------------------- Pursuant to the Stock Purchase Agreement, the Investors have agreed to vote their Shares and Conversion Shares in favor of an amendment to the Company's Certificate of Incorporation (the "Charter Amendment") and an amendment to the Company's By-Laws (the "By-Laws Amendment"). Pursuant to the Charter Amendment, any person who proposes to engage in an extraordinary transaction involving the Company must either (i) obtain the approval of at least 75% of the stockholders of the Company (other than such person or any affiliates of such person), (ii) obtain the prior approval of at least a majority of the Continuing Directors (as defined in the Charter Amendment), or (iii) pay to each of the stockholders in such transaction consideration equal to at least the highest price paid for any share of the Company's Common Stock by such person during the preceding two years (excluding any Shares or Conversion Shares purchased by the Investors pursuant to the Stock Purchase Agreement). Pursuant to the By-Laws Amendment, any person who desires to have a proposal or any nominees for election as a director of the Company presented to or considered by the Company's stockholders at any stockholders meeting is required to follow certain procedures, provide certain information to the Company and meet certain timing requirements in order for such proposal or nominees to be properly presented to be acted upon. The provisions of this paragraph are qualified in their entirety by the provisions of the Charter Amendment and the By-Laws Amendment, the full text of each of which is hereby incorporated herein by reference and made part hereof. The Company has agreed in the Stock Purchase Agreement that the Company shall include in the slate of directors elected nominated and recommended by the Board of Directors of the Company one representative designated (i) by Trefoil, as long as Trefoil, together with its affiliates, owns securities of the Company representing at least 10% of the total voting power of all of the Company's outstanding securities, and (ii) by GEI, as long as GEI, together with its affiliates, owns securities of the Company representing at least 10% of the total voting power of all of the Company's outstanding securities, and that, if such nominee is not elected as a director, to permit a representative of such Purchaser to act as a non- -6- voting observer to the Board of Directors, with equal access to information, and inclusion in meetings, as though such non- voting observer were a member of the Board of Directors. In addition, the affirmative vote of the holders of at least a majority of the outstanding shares of Preferred 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 take certain other actions, as more fully described in the Certificate of Designation. Arrangements between the Investors - ---------------------------------- Pursuant to a Stockholders Agreement between the Investors, the Investors have each agreed to vote all of their Shares and Conversion Shares in favor of all nominees for election as directors selected by each of them. The Investors have further agreed that the first and third nominees which the Investors shall be entitled to select shall be selected by Trefoil, the second and fourth nominees which the Investors shall be entitled to select shall be selected by GEI, and any further nominees which the Investors shall be entitled to select shall be selected by mutual agreement between the Investors. The Investors have further agreed thereunder that if either of them shall agree to purchase or sell Shares, Conversion Shares or additional shares of Common Stock (other than on a public exchange), then the Purchaser who shall have entered into such agreement is required to permit the other Purchaser to participate in such purchase or sale on a pro rata basis. Pursuant to the Stockholders Agreement, Trefoil has agreed that GEI shall control the timing of the conversion by the Investors of Preferred Stock into Conversion Shares. Management Agreement with SCA - ----------------------------- Concurrently with the execution of the Stock Purchase Agreement, the Company entered into a three-year management and consulting agreement with SCA pursuant to which, commencing on the Principal Closing Date, SCA will consult with, and provide advice to, the officers and management employees of the Company concerning matters (i) relating to the Company's financial policies and the development and implementation of the Company's business plans and (ii) generally arising out of the business affairs of the Company. SCA will render such services to the Company on a non-exclusive basis. SCA's compensation for such management and consulting services will be $300,000 in the first year of SCA's engagement to provide such services (each such year a "Service Year"), $400,000 in the second Service Year, and $500,000 in the third Service Year. The Company will reimburse SCA (or cause SCA to be reimbursed) for all of its reasonable out-of-pocket costs and expenses in connection with the performance of its services under such agreement. In addition to the foregoing compensation, the officers, directors or employees of any of the Investors or their respective affiliates serving as directors of the Company will also be paid customary director fees paid to non-employee directors of the Company and will be reimbursed for all of their reasonable out-of-pocket costs and expenses in connection therewith. The foregoing descriptions of the Stock Purchase Agreement, Charter Amendment, By-Laws Amendment, Certificate of Designation, Registration Rights Agreement and Stockholder Agreement are qualified in their entirety by reference to the full text thereof, filed as Exhibits to the Schedule 13D of the Investors, filed with the Securities and Exchange Commission on August 10, 1996, incorporated by reference herein and made a part hereof. -7- PREFERRED STOCK OWNERSHIP BY MANAGEMENT AND CERTAIN BENEFICIAL OWNERS Set forth below is certain information as of August 31, 1996, regarding the beneficial ownership of the Company's Class A Convertible Preferred Stock by (i) any person known by the Company to beneficially own more than 5% of the Preferred Stock of the Company; (ii) each director and nominee for director designated by the Investors or otherwise supported by the Board of Directors; (iii) each of the Named Executive Officers identified in the Summary Compensation Table; and (iv) all directors and executive officers as a group. Except as otherwise indicated, the Company believes, based on information furnished by such owners, that the beneficial owners of the Company's Preferred Stock listed below have sole investment and voting power with respect to such shares, subject to applicable community property laws.
FIVE PERCENT STOCKHOLDERS, NOMINEES FOR DIRECTOR, AMOUNT AND EXECUTIVE OFFICERS NAMED IN SUMMARY NATURE OF COMPENSATION TABLE, AND DIRECTORS BENEFICIAL PERCENT AND EXECUTIVE OFFICERS AS A GROUP OWNERSHIP OF CLASS ------------------------------------------------- --------- -------- Trefoil Capital Investors II, L.P..................................... 2,000,000 (1)(2)(4) 100.00% 4444 Lakeside Dr. Burbank, CA 91505 GE Investments Private Placement Partners II, A Limited Partnership... 2,000,000 (1)(3) 100.00% 3003 Summer Street P.O. Box 7900 Stamford, CT 06904 Clifford A. Miller................................................ 0 * Geoffrey T. Moore................................................. 0 * James J. Costello................................................. 0 * J. Richard Stonesifer............................................. 0 * Roger E. Stangeland............................................... 0 * Daniel E. Josephs................................................. 0 * William G. Kagler................................................. 0 * Douglas T. McClure, Jr............................................ 0 * David Y. Ying..................................................... 0 * Joseph J. McCaig.................................................. 0 * William A. Louttit................................................ 0 * Darrell W. Stine.................................................. 0 * Kenneth R. Baum................................................... 0 * Gilbert C. Vuolo.................................................. 0 * All Directors and Executive Officers as a group (10 persons)...... 0 *
- --------------- *......Less than 1%. (1) Pursuant to the Stock Purchase Agreement, Trefoil and GEI have agreed to purchase an aggregate of 2,000,000 shares of Preferred Stock. Pursuant to a Stockholders Agreement between the -8- Investors, the Investors have each agreed to certain joint action relating to conversion of the Preferred Stock into Common Stock, and voting and disposition of the Preferred Stock or the Common Stock issuable on conversion of the Preferred Stock. (2) Trefoil has agreed pursuant to the Stock Purchase Agreement to purchase 1,000,000 shares of Preferred Stock. Trefoil would hold sole voting power and sole dispositive power with respect to 1,000,000 shares of Preferred Stock. Trefoil Investors II, Inc. is the managing general partner of Trefoil and would hold sole voting power and shared dispositive power with respect to such 1,000,000 shares of Preferred Stock. (3) GEI has agreed pursuant to the Stock Purchase Agreement to purchase 1,000,000 shares of Preferred Stock. GEI would hold sole voting power and sole dispositive power with respect to such shares. GE Investment Management, Inc. is the managing general partner of GEI, and would hold sole voting power and sole dispositive power with respect to such 1,000,000 shares of Preferred Stock. (4) Trefoil Investors II, Inc. and Sigma Hedge Partners, G.P. are the general partners of Trefoil. Delta Pt. Investors Corporation and Epsilon Equities, Inc., each of which is wholly owned by General Electric Pension Trust, are the general partners of Sigma Hedge Partners, G.P. Sigma Hedge partners, G.P., Delta Pt. Investors Corporation and the Trustees of General Electric Pension Trust each would hold shared dispositive power over 1,000,000 shares of Preferred Stock. -9- COMMON STOCK OWNERSHIP BY MANAGEMENT AND CERTAIN BENEFICIAL OWNERS Set forth below is certain information as of August 31, 1996, regarding the beneficial ownership of the Company's Common Stock by (i) any person known by the Company to beneficially own more than 5% of the Common Stock of the Company; (ii) each director and nominee for director designated by the Investors or otherwise supported by the Board of Directors; (iii) each of the Named Executive Officers identified in the Summary Compensation Table; and (iv) all directors and executive officers as a group. Except as otherwise indicated, the Company believes, based on information furnished by such owners, that the beneficial owners of the Company's Common Stock listed below have sole investment and voting power with respect to such shares, subject to applicable community property laws.
FIVE PERCENT STOCKHOLDERS, NOMINEES FOR DIRECTOR, AMOUNT AND EXECUTIVE OFFICERS NAMED IN SUMMARY NATURE OF COMPENSATION TABLE, AND DIRECTORS BENEFICIAL PERCENT AND EXECUTIVE OFFICERS AS A GROUP OWNERSHIP OF CLASS ------------------------------------------------- ----------- --------- Trefoil Capital Investors II, L.P.....................................15,384,600 (1)(2)(4) 60.61% 4444 Lakeside Dr. Burbank, CA 91505 GE Investments Private Placement Partners II, A Limited Partnership...15,384,600 (1)(3) 60.61% 3003 Summer Street P.O. Box 7900 Stamford, CT 06904 Putnam Investments, Inc............................................... 3,243,830 (5)(6) 12.78% One Post Office Square Boston, MA 02109 Putnam Investment Management.......................................... 3,125,089 (5)(7) 12.31% One Post Office Square Boston, MA 02109 Putnam High Yield Trust (Equity Convertible).......................... 1,688,770 (5)(8) 6.65% One Post Office Square Boston, MA 02109 Kemper Financial Services, Inc........................................ 1,172,683 (7) 4.62% 120 South LaSalle Street Chicago, IL 60603 Clifford A. Miller................................................ 0 * Geoffrey T. Moore................................................. 0 * James J. Costello................................................. 0 * J. Richard Stonesifer............................................. 0 * Roger E. Stangeland............................................... 15,000 * Daniel E. Josephs................................................. 0 * William G. Kagler................................................. 500 * Douglas T. McClure, Jr............................................ 0 * David Y. Ying..................................................... 0 * Joseph J. McCaig.................................................. 10,000 * William A. Louttit................................................ 3,000 * Darrell W. Stine.................................................. 3,000 * Kenneth R. Baum................................................... 0 * Gilbert C. Vuolo.................................................. 0 * All Directors and Executive Officers as a group (10 persons)...... 31,500 *
-10- - --------------- *......Less than 1%. (1) Pursuant to the Stock Purchase Agreement, Trefoil and GEI have agreed to purchase an aggregate of 2,000,000 shares of Preferred Stock, which are convertible into a maximum of 15,384,600 shares of Common Stock, based on a conversion price of $6.50 per share. Pursuant to a Stockholders Agreement between the Investors, the Investors have each agreed to certain joint action relating to voting, disposition, and conversion of the Preferred Stock into Common Stock. (2) Trefoil has agreed pursuant to the Stock Purchase Agreement to purchase 1,000,000 shares of Preferred Stock, convertible into a maximum of 7,692,300 shares of Common Stock, based on a conversion price of $6.50 per share. Trefoil would hold sole voting power and sole dispositive power with respect to such 7,692,300 shares of Common Stock. Trefoil Investors II, Inc. is the managing general partner of Trefoil and would hold sole voting power and shared dispositive power with respect to such 7,692,300 shares of Common Stock. (3) GEI has agreed pursuant to the Stock Purchase Agreement to purchase 1,000,000 shares of Preferred Stock, convertible into a maximum of 7,692,300 shares of Common Stock, based on a conversion price of $6.50 per share. GEI would hold sole voting power and sole dispositive power with respect to such 7,692,300 shares of Common Stock. GE Investment Management, Inc. is the managing general partner of GEI, and would hold sole voting power and sole dispositive power with respect to such 7,692,300 shares of Common Stock. (4) Trefoil Investors II, Inc. and Sigma Hedge Partners, G.P. are the general partners of Trefoil. Delta Pt. Investors Corporation and Epsilon Equities, Inc., each of which is wholly owned by General Electric Pension Trust, are the general partners of Sigma Hedge Partners, G.P. Sigma Hedge partners, G.P., Delta Pt. Investors Corporation and the Trustees of General Electric Pension Trust each would hold shared dispositive power over 7,692,300 shares of Common Stock, assuming a conversion price of $6.50 per share. (5) Putnam Investments, Inc. wholly owns two registered investment advisers: Putnam Investment Management, Inc. and The Putnam Advisory Company, Inc. Shares of Common Stock beneficially held by Putnam Investments, Inc. are as a result of the holdings of various investment funds and other institutional investors for which Putnam Investment Management, Inc., The Putnam Advisory Company or affiliated entities act as investment advisers. These shares of Common Stock include the shares held by Putnam High Yield Trust and Putnam Diversified Income Fund, whose holdings are also separately reported in the table. See Note (8). (6) Includes 3,243,830 shares held with shared dispositive power, and no shares held with shared voting power, sole dispositive power or sole voting power. (7) Includes 3,125,089 shares held with shared dispositive power, and no shares held with shared voting power, sole dispositive power or sole voting power. (8) Includes 1,688,770 shares held with shared dispositive power and shared voting power, and no shares held with sole dispositive power or sole voting power. These shares of Common Stock are also beneficially owned by Putnam Investment Management. See Note (5) above. (9) Includes 1,172,683 shares with shared voting power and shared dispositive power, and no shares with sole dispositive power or sole voting power. -11- DIRECTORS, DIRECTOR DESIGNEES AND EXECUTIVE OFFICERS The term of office for each person selected as a director will continue until the next Annual Meeting of Stockholders or until his successor has been elected and qualified. The names and certain information concerning the experience and background of the current members of the Board of Directors and each person designated by the Investors as one of their nominees to the Board of Directors (a "Designee") are set forth below.
NAME AGE POSITION WITH THE COMPANY ---- --- ------------------------- Roger E. Stangeland 66 Chairman of the Board of Directors and Designee Joseph J. McCaig 51 Chief Executive Officer, President and Director William A. Louttit 49 Executive Vice President, Chief Operating Officer and Director Darrell W. Stine 58 Executive Vice President -Operations Kenneth R. Baum 48 Senior Vice President, Chief Financial Officer and Secretary Gilbert C. Vuolo 52 Senior Vice President, Human Resources and Labor Relations Daniel E. Josephs 64 Director William G. Kagler 64 Director Douglas T. McClure, Jr. 43 Director David Y. Ying 41 Director Clifford A. Miller 68 Designee Geoffrey T. Moore 39 Designee James J. Costello 66 Designee J. Richard Stonesifer 59 Designee
ROGER E. STANGELAND has been Chairman of the Board and a Director of Grand Union since June 15, 1995. Mr. Stangeland is a Director and Chairman Emeritus of The Vons Companies, Inc. ("Vons"), a large Southern California based grocery retailer. From 1985 until his retirement on May 3, 1995, he was Chairman of the Board of Vons. Mr. Stangeland is the immediate Past Chairman of the Board of the Food Marketing Institute, a national supermarket trade organization, and continues as a Director of that organization. He is also a Director of Quality Drug Corporation, a retail drug company. Mr. Stangeland is a current director and is also one of the Investors' Designees. JOSEPH J. MCCAIG became President and Chief Executive Officer of Grand Union in July 1989. He served as President and Chief Operating Officer from 1981 until July 1989 and has been a Director of Grand Union since 1981. Mr. McCaig has been with the Company for 35 years. WILLIAM A. LOUTTIT has been Executive Vice President and Chief Operating Officer of Grand Union since July 1989. He served as Executive Vice President in charge of Merchandising from 1984 until July 1989 and has been a Director of Grand Union since 1981. Mr. Louttit has been with the Company for 31 years. DANIEL E. JOSEPHS is currently a self-employed consultant and has been a Director since June 15, 1995. Mr. Josephs served as Director, President and Chief Operating Officer of Dominick's Finer Foods, a -12- supermarket chain based in the Chicago area, from 1985 until March 1995. Mr. Josephs is also a director of Great Lakes Real Estate Investment Trust, which acquires and manages small suburban office buildings. WILLIAM G. KAGLER has been a Director since June 15, 1995. Mr. Kagler served Skyline Chili, Inc. as Chairman of the Executive Committee of the Board from November 1994 until November 1995, as Chairman of the Board and Chief Executive Officer from November 1993 until November 1994, and as President and Chief Executive Officer from November 1991 until November 1993. Prior thereto, he served as President of The Kroger Co., a Cincinnati based food retailer. He also serves as a director of The Fifth Third Bank, a bank, Union Central Life Insurance Co., a life insurance company, and The Ryland Group Inc., a home builder and mortgage insurance firm. DOUGLAS T. MCCLURE, JR. has been a Director since June 15, 1995. Mr. McClure is a managing director of The Private Merchant Banking Company, a position he has held since February 1996. From April 1992 until February 1994, he was a managing director of New Street Capital Corp., a merchant banking firm. From 1987 to 1992 he was a managing director with the investment firm of Drexel Burnham Lambert. Mr. McClure is a Director of AMPEX Corporation, a manufacturer and distributor of recording products and systems, and of WestPoint Stevens Inc., a textile manufacturer. DAVID Y. YING has been a Director since June 15, 1995. Mr. Ying has been a managing director at Donaldson, Lufkin & Jenrette Securities Corporation since January 1993, and is the head of the firm's Restructuring Group. From January 1990 to January 1993, Mr. Ying was a managing director with the investment firm of Smith Barney. CLIFFORD A. MILLER has been designated by the Investors to serve as a director of the Company. Mr. Miller has served as Chairman of The Clifford Group, Inc., a national business consulting organization, since January 1992. From December 1986 through December 1991, Mr. Miller was an Executive Vice President and a Director of Great Western Financial Corporation and Great Western Bank. Mr. Miller has also served as a Senior Consultant to Shamrock since 1978 and is a director of First American Corporation and First American Bankshares, Inc. GEOFFREY T. MOORE has been designated by the Investors to serve as a director of the Company. Mr. Moore has been a Managing Director of Shamrock Capital Advisors since March 1992. Prior to that, he was a First Vice President with Paine Webber Incorporated. He is also Vice President of Trefoil Investors II, Inc., and President of Trefoil Natural Foods Company, Inc., and since October 1994 has been a director of Fantastic Foods, Inc. JAMES J. COSTELLO has been designated by the Investors to serve as a director of the Company. Mr. Costello was employed with the General Electric Company as Comptroller (Chief Accounting Officer) for 14 years prior to his retirement in 1992. J. RICHARD STONESIFER has been designated by the Investors to serve as a director of the Company. Mr. Stonesifer has served as Senior Vice President, GE Appliances, and an executive officer of the General Electric Company from January 1992 until his retirement in 1996. DARRELL W. STINE was appointed Executive Vice President of Grand Union in July 1994. He served as Senior Vice President with responsibility for the Company's New York Region from 1988 until July 1994. Mr. Stine has been with the Company for 42 years. KENNETH R. BAUM was appointed Senior Vice President, Chief Financial Officer, and Secretary of Grand Union in July 1994. Mr. Baum served as Vice President and Controller from 1983 until July 1994 and as a Director of Grand Union from July 1994 until June 15, 1995. Mr. Baum has been with the Company for 14 years. -13- GILBERT C. VUOLO was appointed Senior Vice President, Human Resources and Labor Relations, effective April 1, 1996. Prior to that, he served as Corporate Vice President, Personnel and Labor Relations, and Vice President, Labor Relations, from 1989 to 1994. Mr. Vuolo has been with the Company for 34 years. Executive officers of Grand Union are appointed and serve at the discretion of the Board of Directors. Each director of Grand Union is elected for a period of one year and will serve until his successor is duly elected and qualified. On January 25, 1995, the Company filed a voluntary petition for relief under Chapter 11 of the federal bankruptcy laws. Prior to June 15, 1995, the Board of Directors of the Company consisted of Messrs. McCaig, Louttit, Baum, Gary D. Hirsch (Chairman) and Martin A. Fox. Messrs. McCaig, Louttit and Baum were also executive officers of the Company within two years prior to the date of the bankruptcy filing. Mr. McCaig was also a director of Grand Union Capital Corporation and Grand Union Holdings Corporation, both of which became subject to Chapter 11 proceedings on February 16, 1995. The current directors of Grand Union were selected by certain members of the Official Committee of Unsecured Creditors which was appointed by the United States Trustee for the District of Delaware, pursuant to the Chapter 11 proceedings discussed above. BOARD MEETINGS AND COMMITTEES The Board of Directors of the Company currently comprises seven members and there are no vacancies on the Board. Each director serves a term of one year or until his successor is duly elected and qualified or until his earlier death, resignation or removal. The Board of Directors has two standing committees: a Compensation Committee and an Audit Committee. The Board of Directors of the Company held seventeen (17) meetings during the fiscal year ended March 30, 1996, fifteen of which were held after June 15, 1995. Prior to June 15, 1995 the Board was comprised of Messrs. Gary D. Hirsch, Martin A. Fox, Joseph J. McCaig, William A. Louttit, and Kenneth R. Baum. After June 15, 1996 the Board was comprised of Messrs. Stangeland, McCaig, Josephs, Kagler, Louttit, McClure, and Ying. Each incumbent Director attended at least 75% of the aggregate of the number of meetings of the Board and the number of meetings held by all committees of the Board on which he or she served. The Audit Committee reviews the results and scope of audit and other services provided by the Company's independent auditors and considers other matters related to the financial condition of the Company. The Audit Committee presently consists of Messrs. Ying, Josephs, and McClure. Former directors comprised the Audit Committee during the part of the first quarter of 1995, until the Board was reconstituted effective June 15, 1995, at which time the current members of the Audit Committee were elected. During the fiscal year ended March 30, 1996, the Audit Committee held a total of ten (10) meetings, all of which were held after June 15, 1995. The Compensation Committee sets the compensation for the chief executive officer, makes recommendations concerning salaries and incentive compensation for executive officers and key personnel, and determines to whom stock options and other equity incentive awards will be granted under the 1995 Equity Incentive Plan and the terms of those awards. Members of the Compensation Committee are not eligible to receive discretionary equity incentive awards while they serve on the Committee, except for formula-based awards made under the terms of the 1995 Non-employee Directors' Stock Option Plan. The -14- Compensation Committee presently consists of Messrs. Kagler, Josephs and Stangeland. Former directors comprised the Compensation Committee during the part of the first quarter of 1995, until the Board was reconstituted effective June 15, 1995, at which time the current members of the Compensation Committee were elected. During the fiscal year ended March 30, 1996, the Compensation Committee held a total of three (3) meetings, all of which were held after June 15, 1995. The Board of Directors does not have a standing nominating committee. Instead, the Board of Directors, as a whole, identifies and screens candidates for membership on the Company's Board of Directors. Procedures for Nominations for Director by Security Holders - ----------------------------------------------------------- Nominations of persons for election to the Board of Directors at the annual meeting or by the written consent of the shareholders, may be made by any shareholder of the Company entitled to vote for the election of directors at the meeting who complies with certain notice procedures. A shareholder's nomination of a person for election to the Board of Directors must be delivered to or mailed and received at the principal executive offices of the Company, addressed to the attention of the Secretary of the Company, not less than sixty days prior to the meeting or the date the shareholders are first solicited for their consents as the case may be; provided, however, that, in the case of an annual meeting and in the event that less than fifty days' notice or prior public disclosure of the date of the meeting is given or made to shareholders, notice by the shareholder to be timely must be so received not later than the earlier of (a) the close of business on the fifteenth day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made, whichever first occurs, or (b) two days prior to the date of the meeting. Such shareholder's notice to the Secretary shall set forth (a) as to each person whom the shareholder proposes to nominate for election or reelection as a director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of capital stock of the Company which are beneficially owned by the person, (iv) a statement as to the person's citizenship, and (v) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to Section 14 of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, and (b) as to the shareholder giving the notice, (i) the name and record address of the shareholder and (ii) the class, series and number of shares of capital stock of the Company which are beneficially owned by the shareholder. The Company may require any proposed nominee to furnish such other information as may reasonably be required by the Company to determine the eligibility of such proposed nominee to serve as a director of the Company. In connection with any annual meeting, the Chairman of the Board of Directors shall, if the facts warrant, determine and declare to the meeting that a nomination not made in accordance with the foregoing procedure, or otherwise properly made by the Board of Directors, was defective and shall be disregarded. -15- EXECUTIVE COMPENSATION The following table sets forth compensation paid or accrued by the Company to the Company's Chief Executive Officer, and the four other executive officers whose salary and bonus exceeded $100,000 for the fiscal year ended March 30, 1996 (collectively, the "Named Executive Officers"), for services rendered to the Company and its subsidiaries in all capacities during the three fiscal years ended March 30, 1996: SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION AWARDS SECURITIES ALL OTHER NAME AND ANNUAL COMPENSATION UNDERLYING COMPENSATION PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) OPTIONS/SARS (#) ($)(2) ------------------ ---- --------- ----------- ---------------- ------------- Joseph J. McCaig 1996 454,310 90,000 47,800 181,786 President and Chief 1995 502,165 22,493 - 980,968 Executive Officer 1994 523,712 123,479 - 30,109 William A. Louttit 1996 354,019 71,540 28,000 82,742 Executive Vice President 1995 335,669 15,037 - 437,355 and Chief Operating Officer 1994 349,731 66,392 - 14,038 Darrell W. Stine 1996 281,142 56,780 19,000 40,070 Executive Vice President - 1995 257,077 18,000 - 621,911 Operations 1994 251,134 17,446 - 14,535 Kenneth R. Baum 1996 203,654 42,000 11,720 9,392 Senior Vice President, 1995 152,769 7,154 - 31,691 Chief Financial Officer 1994 143,715 20,603 - 4,739 and Secretary Gilbert C. Vuolo 1996 145,792 29,440 6,560 4,244 Senior Vice President, Human 1995 132,885 6,231 - 4,450 Resources and Labor Relations 1994 121,399 23,906 - 3,553
- --------------- The "Other Annual Compensation" column was omitted since the aggregate amount of perquisites and other personal benefits in respect of Fiscal 1996, Fiscal 1995 and Fiscal 1994 is less than the lower of $50,000 or 10% of the total annual salary and bonus reported for each of the named executive officers and no other compensation of the type required to be described in the "Other Annual Compensation" column was paid in Fiscal 1996, Fiscal 1995 or Fiscal 1994. (1) Included in the bonus column for Fiscal 1994 are amounts paid during Fiscal 1995 for performance in Fiscal 1994, and included in the bonus column for Fiscal 1995 are amounts paid during Fiscal 1996 for performance in Fiscal 1995. All amounts included in the bonus column for Fiscal 1996 are retention payments paid for remaining in the Company's employ through the bankruptcy and the end of Fiscal 1996. (2) "All Other Compensation" includes the following: (i) contributions to the Company's Savings Plan under Section 401(k) made by the Company in Fiscal 1996, Fiscal 1995 and Fiscal 1994, respectively, for each of the named executive officers as follows: Mr. McCaig - $1,414, $1,455, and $2,964; Mr. Louttit - $1,526, $765, and $2,331; Mr. -16- Stine - $1,563, $1,547, and $2,313; Mr. Baum - $1,546, $1,525, and $1,650; and Mr. Vuolo - $1,516, $1,526, and $1,439; and (ii) premium payments for life insurance made by the Company in Fiscal 1996, Fiscal 1995 and Fiscal 1994, respectively, for each of the named executive officers as follows: Mr. McCaig - $10,843, $31,090, and $27,145; Mr. Louttit - $4,795, $10,013, and $11,707; Mr. Stine - $7,795, $13,522, and $12,222; Mr. Baum - $2,741, $3,302, and $3,089; and Mr. Vuolo - $2,416, $2,612, and $1,802. The Fiscal 1996 and Fiscal 1995 amounts for Messrs. McCaig, Louttit, Stine and Baum also include the value of securities distributed from custodial accounts established pursuant to non-competition and confidentiality agreements entered into by Messrs. McCaig, Louttit, Stine and Baum in August 1993. Such amounts were distributed as a result of the Company's filing for bankruptcy in 1995, and offset the Company's obligations to such executives under Grand Union's Supplemental Retirement Program for Key Executives. Such distributions were made in Fiscal 1996 and Fiscal 1995, respectively, in the following amounts: Mr. McCaig - $169,217 and $948,423; Mr. Louttit - $76,109 and $426,577; Mr. Stine - $30,401 and $606,842; and Mr. Baum - $4,793 and $26,864. OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Individual Grants Option Term - ------------------------------------------------------------------- --------------------- (a) (b) (c) (d) (e) (f) (g) Number of % of Total Securities Options/SARs Exercise Underlying Granted to Price or Options/SARs Employees in Base Price Expiration Name Granted Fiscal Year ($/Sh) Date 5% ($) 10% ($) - ---- -------- ------------ ---------- ------------ ------- ------- J. McCaig 47,800 22.69% 6.625 Dec 11, 2005 119,155 504,698 W. Louttit 28,000 13.29% 6.625 Dec 11, 2005 116,660 295,639 D. Stine 19,000 9.02% 6.625 Dec 11, 2005 79,162 200,612 K. Baum 11,720 5.56% 6.625 Dec 11, 2005 48,831 123,746 G. Vuolo 6,560 3.11% 6.625 Dec 11, 2005 27,332 69,264 Aggregate Increase for All Stockholders 41,664,269 105,585,438 AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES Number of Securities Value of Underlying Unexercised Unexercised In-the-Money Options/SARs at FY-End (#) Options/SARs at FY-End ($) Name Exercisable Unexercisable Exercisable Unexercisable - ---- ----------- ------------- ----------- ------------- J. McCaig 0 47,800 - $ 0 W. Louttit 0 28,000 - 0 D. Stine 0 19,000 - 0 K. Baum 0 11,720 - 0 G. Vuolo 0 6,560 - 0
-17- PENSION PLAN TABLE The table below shows, on a combined basis for the Grand Union Company Employees' Retirement Plan (the "Retirement Plan"), and The Grand Union Company Supplemental Retirement Program for Key Executives (the "Supplemental Plan"), the estimated annual benefit payable upon retirement to specified compensation and years of service classifications of 5, 10 and 15 or more years of service. The credited years of service under these Plans for Messrs. McCaig, Louttit, Stine, Baum and Vuolo are 22 years, 20 years, 28 years, 13 years and 22 years, respectively. The current base compensation set forth in "salary" column of the Summary Compensation Table does not differ substantially from covered compensation under these Plans. The retirement benefits shown are based upon retirement at age 62 and the payment of a single-life annuity to the employee. Years of Service Final Average --------------------------------------- Compensation 5 10 15 or more ----------------- ------- ------- ---------- $100,000 $21,667 $43,333 $65,000 150,000 32,500 65,000 97,500 200,000 43,333 86,667 130,000 250,000 54,167 108,333 162,500 300,000 65,000 130,000 195,000 350,000 75,833 151,667 227,500 400,000 86,667 173,333 260,000 450,000 97,500 195,000 292,500 500,000 108,333 216,667 325,000 550,000 119,167 238,333 357,500 600,000 130,000 260,000 390,000 The benefits actually payable to an individual executive are reduced, in some cases substantially, through offsets for primary Social Security benefits and the actuarial equivalent of the value of securities received by those executives who received distributions from custodial accounts in 1995 and 1994. Below, for each named executive, is the estimated total offset amount - the primary social security benefit offset plus and the actuarial equivalent of amounts distributed from custodial accounts - in each case determined as a single life annuity payable beginning at age 62. Estimated Annual Payment Offset Amounts From Prior Social Total Distributions Security Offset ------------- -------- ------ J. McCaig $ 209,000 $ 17,000 $ 226,000 W. Louttit 105,000 18,000 123,000 D. Stine 77,000 14,000 91,000 K. Baum 7,000 19,000 26,000 G. Vuolo -- 17,000 17,000 -18- THE GRAND UNION COMPANY EMPLOYEES' RETIREMENT PLAN The Retirement Plan is a tax-qualified, noncontributory retirement plan, providing retirement benefits for its eligible salaried and hourly non-union employees, union employees not covered by other pension plans, and all of its officers. Under the Retirement Plan, a participant's benefit is generally 1.5% of the average of his five consecutive years of highest annual compensation multiplied by years of service not in excess of 35 minus primary social security benefits. Benefits under the plan are paid under several alternatives, including monthly or lump sum payments at the employee's election. Benefits are normally payable at age 65, however, the plan provides for early retirement with reduced benefits commencing at age 55. The Internal Revenue Code places certain limits on pension benefits which may be paid under plans qualified under the Internal Revenue Code. SUPPLEMENTAL RETIREMENT PLAN FOR KEY EXECUTIVES The Supplemental Plan is a non-qualified pension plan pursuant to which certain key employees of Grand Union and its affiliates ("Participants"), including Messrs. McCaig, Louttit, Stine, Baum and Vuolo, earn a supplemental pension in addition to the pension benefit to which they are entitled under the Retirement Plan. The pension benefit under the Supplemental Plan is calculated as an annual pension, payable monthly (i) if the Participant is not married on his retirement date, for the Participant's life, or (ii) if the Participant is married on his retirement date, the same amount as described in clause (i) for the duration of the Participant's life and thereafter 50% of such amount for the duration of the life of the Participant's surviving spouse. The amount of the annual pension payable upon retirement at age 62 or later is determined as the "target benefit" minus the "plan offsets". The "target benefit" is an annual pension equal to the product of 4-1/3% of the Participant's final year's base salary rate in effect immediately prior to his separation multiplied by the Participant's number of years of credited service (up to 15 years) under the Supplemental Plan. "Plan offsets" for Participants retiring at age 62 or later are equal to the sum of the Participant's (i) primary Social Security benefits payable at the later of age 62 or the Participant's actual retirement age, (ii) benefits under the Retirement Plan payable at the later of age 62 or the Participant's actual retirement age in the form of a single life annuity, and (iii) benefits, if any, payable from the qualified retirement plan(s) of the Participant's previous employer(s). Participants may also retire early (i) at or after attaining age 50 but prior to attaining age 55, with the consent of Grand Union (the consent requirement is waived for a Participant who becomes disabled or is involuntarily terminated other than for cause), or (ii) at or after age 55, without any requirement for consent by Grand Union. For Participants who retire early, the "target benefit" is reduced by 5% per year for each year the Participant is under age 62. Supplemental Plan benefits are payable in an actuarially determined single sum no later than 30 days following the Participant's date of retirement or other termination of employment. In general, no Supplemental Plan benefits will be paid to a Participant whose employment with Grand Union terminates prior to the Participant's attaining age 50. In May 1995, the Bankruptcy Court approved a modification to the Supplemental Plan which provides that (x) in the case of Joseph J. McCaig, final year's base salary shall be deemed to be an amount not less than $500,000 and (y) notwithstanding the general requirement of the Supplemental Plan that benefits will not be paid to persons who retire prior to age 50, persons who were Participants in the Supplemental Plan prior to April 1, 1995 will be eligible for early retirement without forfeiture of benefits under the Supplemental Plan from and after age 47. In August 1993, in consideration of non-competition and confidentiality agreements entered into by certain executives of Grand Union, including Messrs. McCaig, Louttit, Stine and Baum, Grand Union agreed to transfer to a custodial account to be held by an independent custodian securities having a -19- specified value intended to approximate the benefits payable to the specified executives under the Supplemental Plan (plus a reserve for claims and expenses of the custodian). Such securities were to have been transferred to the custodian over a four-year period. Pursuant to the terms of the agreements, the executives for whose benefit securities had been transferred to the custodian were entitled to receive a distribution of such securities upon Grand Union's filing of the Chapter 11 petition in January 1995. Accordingly, in February and September of 1995, securities having an aggregate value of approximately $1,855,576 (representing securities on deposit with the custodian as of the Filing Date plus interest thereon) were distributed to the executives entitled thereto. In addition, under a separate agreement, Mr. Stine received a payment of $433,650, representing an advance payment of a portion of the benefits to which he would be entitled had he retired under the SERP. The value of the securities so distributed to each executive reduced the future amounts payable to such executive pursuant to the Supplemental Plan. Upon distribution of the securities to the executives for whose benefit they were held, the custodial accounts were terminated. COMPENSATION OF DIRECTORS Effective from June 15, 1995, each non-employee director other than Mr. Stangeland receives an annual fee of $25,000 for serving on the Board, and meeting fees of $1,500 for each Board meeting attended in person, $750 for each committee meeting attended in person and each telephonic Board meeting attended, and $375 for each telephonic committee meeting attended. In addition, the Chairman of the Audit Committee, Mr. Ying, and the Chairman of the Compensation Committee, Mr. Kagler, receive $500 for each Committee meeting they attend in person as Chairman and $250 for each telephonic committee meeting they attend as Chairman. Prior to the June 15, 1995, the directors of Grand Union were not compensated for their services as such. Directors receive reimbursement of reasonable expenses incidental to attendance at meetings of the Board of Directors. Effective from January 1, 1996, Mr. Stangeland receives an annual retainer of $100,000 for serving as Chairman of the Board. In addition, Mr. Stangeland receives a $4,000 daily fee for days spent at the Company and when undertaking substantial travel on the Company's behalf. Mr. Stangeland absorbs incidental expenses incurred when working on the Company's behalf from his office in California. Mr. Stangeland was paid $204,000 in daily fees with respect to services performed during Fiscal 1996. Mr. Josephs and Mr. Kagler receive a $2,000 daily fee for activity on the Company's behalf which requires substantial travel. Mr. Josephs and Mr. Kagler received $11,000 and $9,000, respectively, with respect to services performed during Fiscal 1996. Each non-employee director also receives an automatic initial grant of options to purchase 5,000 shares of Common Stock, and additional grants to purchase 1,500 shares with each re-election by stockholders. All directors are reimbursed for expenses incurred on the Company's behalf. SEVERANCE POLICY In May 1995, Grand Union adopted a severance policy, which was approved by the Bankruptcy Court, with respect to its salaried employees whereby a salaried employee whose employment is terminated without cause or whose employment is constructively terminated is entitled to receive a lump-sum severance payment equal to (i) in the case of salaried employees holding the office of President, Executive Vice President or Senior Vice President, 18 months' base salary; (ii) in the case of salaried employees holding the office of Corporate Vice President, 12 months' base salary; (iii) in the case of salaried employees holding the office of appointed vice president or director, 6 months' base salary; and (iv) in the case of all other salaried employees, one week's base salary for each year of service to the Company up to a -20- maximum of 26 weeks. Constructive termination is defined under the policy to mean an involuntary transfer that would require relocation outside the Company's current operating area or (x) with respect to persons holding the position of chief executive officer, chief operating officer or chief financial officer, either removal from such position, or a reduction in salary of 5% or more in any year and (y) with respect to any other salaried employee, either a reduction in salary of 10% or more in any year or a reduction in grade level of more than two grades in any year. CHANGE-IN-CONTROL PROVISIONS Under the Company's 1995 Equity Incentive Plan and 1995 Non-Employee Directors Stock Option Plan, certain provisions take effect on a change-in-control of the Company. Under both plans, on the twentieth (20th) trading day prior to the effective date of the change in control all stock options not otherwise vested become fully vested, and any restrictions or other conditions applicable to restricted stock or other incentives awarded under the 1995 Equity Incentive Plan lapse or are deemed satisfied and such awards become fully vested and/or immediately payable. In addition, the value of any canceled award is paid out in cash unless the award holder receives either (i) the right to acquire the same basket of cash and securities available to holders of Common Stock, or (ii) if pooling of interests is a condition of the transaction, an equivalent right in a successor security which would enable the transaction to qualify for pooling of interests. Under both plans, a change-in-control is defined to include: (1) any person, entity or Group (persons or entities acting together) is or becomes the beneficial owner of more than 50% of the Voting Stock of the Company; (2) a consolidation, merger, or sale of substantially all of the assets of the Company, with the effect that any person, entity or Group becomes the beneficial owner of more than 50% of the Voting Stock of the Company or the Company is not the surviving entity; (3) during any consecutive two-year period commencing July 1, 1996, individuals who constituted the Board of Directors at the beginning of such period, together with any new directors whose election by the Board or nomination for election by stockholders was approved by 2/3 of the directors who were in office at the beginning of the period or whose election or nomination was so approved, cease to constitute a majority of the Board then in office; or (4) any order, judgment or decree of dissolution or split-up of the Company, and such order remains undischarged or unstayed for a period in excess of 60 days. For purposes of determining whether a change in control has occurred, "more than 50% of the Voting Stock" means more than 50% of one or more classes of stock pursuant to which the holders have the general power to vote for the election of members of the Board of Directors, and the aggregate of such classes for which the person, entity or Group holds more than 50% has the power to elect more than 50% of the members of the Board of Directors. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Board of Directors maintains a personnel and compensation committee (the "Compensation Committee") consisting of three directors. Since June 15, 1995, the members of the Compensation Committee have been Messrs. Kagler, Josephs and Stangeland, with Mr. Kagler acting as Chairman. No member of the Board participates in decisions regarding his own compensation as an executive officer of Grand Union. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Pre-Bankruptcy Relationships and Transactions. -21- On January 25, 1995 the Company filed a petition under Chapter 11 of the federal bankruptcy laws. The Company emerged from bankruptcy on June 15, 1995, the effective date of the bankruptcy court's approval of the Company's reorganization plan. Prior to June 15, 1995, the Company was a wholly owned subsidiary of Grand Union Capital Corporation ("Capital"), which in turn was a wholly owned subsidiary of Grand Union Holdings Corporation ("Holdings"). Holdings was controlled by Miller Tabak Hirsch & Co. ("MTH") and its affiliates, which also control Penn Traffic. The following applies to relationships which existed prior to June 15, 1995. Mr. Gary D. Hirsch served as Chairman and a Director of Grand Union and also as Chairman and a Director of Penn Traffic. Mr. Martin A. Fox served as a Director, Vice President and Assistant Secretary of Grand Union and Vice Chairman - Finance and Assistant Secretary of Penn Traffic. Messrs. Hirsch and Fox received compensation from MTH, of which Mr. Hirsch is a general partner of the managing partner, and Mr. Fox is Executive Vice President. Messrs. Hirsch and Fox did not receive salaries from Penn Traffic and did not participate in cash bonus plans of Penn Traffic, and received no compensation in their capacities as executive officers or directors of Grand Union. Until May 31, 1995, Mr. McCaig was a member of the Board of Directors of Penn Traffic, for which he received compensation of $10,000 per annum and $1,000 per Board of Directors meeting attended. Mr. McCaig became a Director of Holdings in July 1989 and a Director of Capital in July 1992. He became President of Holdings and Capital in May 1993. Mr. McCaig served as a Director of Penn Traffic from September 1992 until May 1995. Mr. Hirsch is no longer a director of the Company, but he is an indirect beneficiary of the following transactions, entered into while he was a director. Prior to June 15, 1995, MTH was engaged as financial advisor to Penn Traffic and as a financial advisor to the Company, in the latter case pursuant to an agreement (the "MTH Agreement"), under which MTH was to have provided certain financial consulting and business management services to the Company through July 1997. In accordance with the Company's post-bankruptcy Reorganization Plan, the MTH Agreement was terminated on June 15, 1995 and Grand Union executed a settlement agreement (the "MTH Settlement Agreement"). The MTH Settlement Agreement provides for the termination of the MTH Agreement, payment by Grand Union of accrued and unpaid fees under the MTH Agreement through June 15, 1995, and for the indemnification of MTH and certain entities related to MTH (the "MTH Entities") from certain claims and liabilities, subject to the terms and limitations set forth in the MTH Settlement Agreement. During Fiscal 1996, Fiscal 1995 and Fiscal 1994, the Company paid $315,000, $750,000, and $900,000, respectively, to MTH, pursuant to the MTH Agreement. In July 1989, Grand Union and P&C Foods, which is indirectly controlled by MTH, operated stores in some of the same geographic areas in Vermont and upstate New York. In connection with the acquisition, agreements were entered into with federal antitrust authorities which required the divestiture of 16 Grand Union stores or P&C Foods stores. The divestitures required by these agreements were completed on July 30, 1990. Thirteen of the sixteen stores divested were P&C Foods stores. In a related transaction, on July 30, 1990, P&C Foods and Grand Union entered into an 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, with an option to extend the term of such operation for an additional five years. P&C Foods also granted Grand Union an option to purchase such stores. In connection with these transactions, Grand Union agreed to pay P&C Foods a minimum annual fee which will average $10.7 million per year during the ten-year lease term plus, beginning with the year commencing July 31, 1992, additional contingent fees of up to $700,000 per year based upon sales performance of the stores operated by Grand Union. In addition, Grand Union paid P&C Foods $7.5 million for the option to purchase the stores. Pursuant to the terms of the Operating Agreement, a $15 million prepayment of the annual fee was made to P&C Foods in connection with the recapitalization of -22- the Company in 1992. The Operating Agreement was assumed during the Chapter 11 bankruptcy case and will continue on its current terms. Pursuant to the terms of the Operating Agreement, in April 1992, Grand Union purchased P&C Foods' White River Junction, Vermont warehouse for cash consideration of approximately $5 million. From September 1993 until September 1995, Grand Union was in a program to consolidate the purchasing, storage and distribution of health and beauty care and general merchandise product with Penn Traffic. Under this program, the inventory of health and beauty care and general merchandise product was owned by Penn Traffic and stored in Grand Union's warehouse in Montgomery, New York. The products were distributed from the warehouse to Grand Union stores and certain Penn Traffic stores and wholesale customers. Grand Union reimbursed Penn Traffic for shipments to Grand Union stores based on terms defined in the agreement. Grand Union purchased the health and beauty care products for both Grand Union and those Penn Traffic stores and wholesale customers serviced by the warehouse and was reimbursed by Penn Traffic for such purchases based on terms defined in the agreement. Penn Traffic purchased the general merchandise product for both Grand Union and Penn Traffic. Under the arrangement, Grand Union and Penn Traffic shared the cost of operating the warehouse based on their proportionate usage of the product. In connection with this agreement, Penn Traffic purchased all of the health and beauty care and general merchandise inventories previously owned by Grand Union for approximately $12,821,000. During Fiscal 1996, Fiscal 1995 and Fiscal 1994, Grand Union purchased from vendors approximately $48,696,000, $120,027,000 and $75,262,000, respectively, of health and beauty care products under the agreement. Additionally, Grand Union purchased approximately $30,119,000, $87,208,000 and $48,163,000, respectively, from Penn Traffic's inventory of health and beauty care and general merchandise products at cost. At April 1, 1995 and April 2, 1994, respectively, Grand Union had recorded a net receivable of approximately $7,705,000 and $5,014,000 related to this agreement. Post-Bankruptcy Relationships. Mr. Ying, a director of the Company since June 15, 1995, has been a managing director of Donaldson Lufkin & Jenrette Securities Corporation ("DLJ") since January 1993. During Fiscal 1995 and Fiscal 1996, DLJ acted as financial advisor to the Informal Committee of certain holders of Subordinated Notes in connection with the restructuring of Grand Union and received compensation from the Company of $1,278,000 for such services. Near the end of Fiscal 1996, the Company entered into an agreement with DLJ to provide investment banking services and advice to the Company. During the term of DLJ's engagement, it has the exclusive right to act as sole managing underwriter, exclusive placement agent, sole dealer manager or exclusive solicitation agent with respect to any public offering of the Company's securities, any private offering of any of the Company's debt securities, or any exchange offer or refinancing transaction relating to the Company's Senior Notes or other securities of the Company. Under the agreement, DLJ receives a retainer fee of $200,000, a Transaction Fee, and, if a fairness opinion is requested, a Fairness Fee. In the case of a private placement, the Transaction Fee is 5% of the gross proceeds of the private placement, offset by the retainer fee, and the Fairness Fee is 1.5% of the gross proceeds of the private placement. In the case of a divestiture, the Transaction Fee is a percentage of the aggregate consideration, based on a sliding scale, from 2% of a $50 million consideration to 0.9% if the aggregate consideration is $450 million or more. The Fairness Fee in a divestiture is the greater of $350,000 or 25% of the Transaction Fee. In the case of a sale of 36% to 100% of the business, securities or assets of the Company, the Transaction Fee varies ratably from 0.4% of the aggregate consideration to 0.6% of the aggregate consideration, offset by the retainer fee and the Fairness Fee. In the case of a sale, the Fairness Fee is $1 million. In connection with the transaction described above, DLJ is expected to earn aggregate fees of approximately $4,750,000, plus an additional fee of -23- $250,000 for services rendered in connection with solicitation of consents and waivers from the holders of the Company's Senior Notes. The agreement also contains various other provisions, including an obligation by DLJ to keep confidential certain information provided to it by the Company, and an obligation by the Company to indemnify and hold harmless DLJ, its parent and its affiliates, and the directors, officers, agents and employees of DLJ, its parent and its affiliates ("Indemnified Persons"), from and against various potential losses and liabilities arising out of or in connection with misstatements or omissions in disclosure documents or in connection with advice or services rendered by an Indemnified Person. COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934 Section 16(a) of the Exchange Act requires the Company's directors and executive officers and persons who beneficially own more than 10% of a registered class of the Company's equity securities to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Officers, directors and greater than 10% beneficial stockholders are required by regulations promulgated by the Securities and Exchange Commission to furnish the Company with copies of all Section 16(a) reports they file. Based solely on its review of the copies of reporting forms furnished to the Company, or written representations that no annual Form 5 reports were required, the Company believes that all filing requirements under Section 16(a) of the Securities Exchange Act of 1934 applicable to its directors, officers and any persons holding 10% or more of the Company's Common Stock with respect to the Company's fiscal year ended March 30, 1996, were satisfied. 1995 CHANGE IN CONTROL On January 25, 1995 the Company filed a voluntary petition for relief under chapter 11 ("Chapter 11") of Title 11 of the United States Code in the United States Bankruptcy Court for the District of Delaware. The Court confirmed the Company's plan of reorganization on May 31, 1995, and the Company emerged from Chapter 11 on June 15, 1995. Prior to Chapter 11, the Company was controlled by Mr. Gary D. Hirsch. Through a network of holding companies and partnerships, Mr. Hirsch was the beneficial owner of more than 75% of the Company's Common Stock. Pursuant to the Company's plan of reorganization, effective June 15, 1995, the Company's Senior Subordinated Notes were canceled and former holders of those notes were issued 10,000,000 shares of the Company's new Common Stock. Claims in the aggregate amount of $602,494,000 from the holders of those Senior Subordinated Notes were canceled. Approximately 3,243,830 shares (32.44% of the voting power currently outstanding) are beneficially owned, directly or indirectly, by Putnam Investments, Inc. Putnam Investments, Inc. wholly owns two registered investment advisers: Putnam Investment Management, Inc. and The Putnam Advisory Company, Inc. Shares of Common Stock beneficially held by Putnam Investments, Inc. are as a result of the holdings of various investment funds and other institutional investors for which Putnam Investment Management, Inc., The Putnam Advisory Company or affiliated entities act as investment advisers. These shares of Common Stock include the shares held by Putnam High Yield Trust and Putnam Diversified Income Fund, whose holdings are also separately reported in the table above. The current directors of the Company were selected by certain members of the Official Committee of -24- Unsecured Creditors which was appointed by the United States Trustee for the District of Delaware. Putnam Investments, Inc. was also a member of the Official Committee of Unsecured Creditors. For further details, see the Company's Second Amended Chapter 11 Plan of Reorganization, incorporated herein by reference to Exhibit T3E1 to the Company's Form T-3 dated May 8, 1995 and filed with the Securities and Exchange Commission. -----END PRIVACY-ENHANCED MESSAGE-----