-----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, Aub/K9REK8zAsweKA1Ug4Dn7n5JY2dgeCscUwhdIdpmlSFY55dVwTaR2Ub2pJGGn P/GhsO7HEsGhig1lFe/hIQ== 0000037912-00-000004.txt : 20000331 0000037912-00-000004.hdr.sgml : 20000331 ACCESSION NUMBER: 0000037912-00-000004 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 20000101 FILED AS OF DATE: 20000330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DELHAIZE AMERICA INC CENTRAL INDEX KEY: 0000037912 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 560660192 STATE OF INCORPORATION: NC FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-15275 FILM NUMBER: 586572 BUSINESS ADDRESS: STREET 1: P O BOX 1330 STREET 2: 2110 EXECUTIVE DR CITY: SALISBURY STATE: NC ZIP: 28145 BUSINESS PHONE: 7046338250 MAIL ADDRESS: STREET 1: P O BOX 1330 STREET 2: 2110 EXECUTIVE DR CITY: SALISBURY STATE: NC ZIP: 28145 FORMER COMPANY: FORMER CONFORMED NAME: FOOD LION INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: FOOD TOWN STORES INC DATE OF NAME CHANGE: 19830510 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended January 1, 2000. Commission File No. 0-6080 DELHAIZE AMERICA, INC. (Exact name of registrant as specified in its charter) North Carolina 56-0660192 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) P.O. Box 1330, 2110 Executive Drive Salisbury, North Carolina 28145-1330 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code-- (704) 633-8250 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered Class A Common Stock, par value $.50 per share New York Stock Exchange Class B Common Stock, par value $.50 per share New York Stock Exchange 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 filing 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 ( 229.405 of this chapter) is not contained herein, and will not be contained, to the best of 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.[ ] The aggregate market value of the voting and non-voting stock held by non- affiliates of the Registrant based on the price of such stock at the close of business on March 24, 2000, was $579,046,755 and $766,122,471, respectively. For purposes of this report and as used herein, the term "non-affiliate" includes all shareholders of the Registrant other than directors, executive officers and other senior management of the Registrant and persons holding more than five percent of the outstanding voting stock of the Registrant. Outstanding shares of common stock of the Registrant as of March 24, 2000. Class A Common Stock - 79,931,607 Class B Common Stock - 75,290,542 Exhibit index is located on sequential page 15 hereof. DOCUMENTS INCORPORATED BY REFERENCE Portions of the following documents are incorporated by reference in this Form 10-K: 1. Annual Report to Shareholders for the fiscal year ended January 1, 2000, is incorporated by reference in Part II hereof. 2. Proxy Statement for the 2000 Annual Meeting of Shareholders of the Company to be held on May 4, 2000, is incorporated by reference in Part III hereof. PART I Item 1. Business. Delhaize America, Inc. (the "Company") engages in one line of business, the operation of retail food supermarkets in the Southeastern and Mid-Atlantic regions of the United States. The Company was incorporated in North Carolina in 1957 and maintains its corporate headquarters in Salisbury, North Carolina. On August 17, 1999, the Company entered into a definitive merger agreement to acquire all of the outstanding shares of Hannaford Bros. Co. in a cash and stock transaction valued at approximately $3.6 billion, including the assumption of debt. Upon completion of the transaction , Hannford will operate as a subsidiary of Delhaize America, Inc. The Company expects to finalize the acquisition of Hannaford Bros. Co. in fiscal 2000. The Company's stores, which are operated under the names of "Food Lion," "Kash n' Karry" and "Save `n Pack," sell a wide variety of groceries, produce, meats, dairy products, seafood, frozen food, deli/bakery and non-food items such as health and beauty care, prescriptions, and other household and personal products. The Company offers nationally and regionally advertised brand name merchandise as well as products manufactured and packaged for the Company under the private labels of "Food Lion" and "Kash n' Karry." The Company offers between 25,000 and 35,000 Stock Keeping Units (SKU's) in its Food Lion locations and between 35,000 and 40,000 SKU's in its Kash n' Karry locations. The Company's current Food Lion store prototype is a 38,000 square foot model. The current Kash n' Karry store prototype is a 46,000 square foot model. The products sold by the Company are purchased through a centralized buying department at the Company's headquarters. The centralization of the buying function allows the management of the Company to establish long-term relationships with many vendors providing various alternatives for sources of product supply. The business in which the Company is engaged is highly competitive and characterized by low profit margins. The Company competes with national, regional and local supermarket chains, super-centers, discount food stores, single unit stores, convenience stores, warehouse clubs and drug stores. The Company will continue to develop and evaluate new retailing strategies that will respond to its customers' needs. Seasonal changes have no material effect on the operation of the Company's supermarkets. As of January 1, 2000, 1,276 supermarkets were in operation as follows: Delaware 14 North Carolina 429 Florida 182 Pennsylvania 7 Georgia 58 South Carolina 118 Kentucky 13 Tennessee 88 Maryland 59 Virginia 291 West Virginia 17 As of March 24, 2000, the Company had opened ten supermarkets since January 1, 2000, and relocated one supermarket and signed leases for five supermarkets which are expected to open in either 2000 or 2001. Warehousing and distribution facilities, including its transportation fleet, are owned and operated by the Company and are located in Green Cove Springs and Plant City, Florida; Salisbury and Dunn, North Carolina; Greencastle, Pennsylvania; Elloree, South Carolina; Clinton, Tennessee; and Disputanta, Virginia. As of January 1, 2000, the Company employed 35,021 full-time and 58,647 part-time employees. The following table shows the number of stores opened, closed and relocated, and the number of stores open at the end of each year, for the past three fiscal years. # Stores # Stores #Stores # Stores Opened Opened Closed Relocated Year-end 1999 100 (10) (21) 1,276 1998 79 (12) (17) 1,207 1997 164 (a) (94) (b) (25) 1,157 (a) Includes 100 stores acquired from Kash n' Karry (b) Includes 61 Southwest store closings Item 2. Properties. Supermarkets operated by the Company in the Southeastern and Mid-Atlantic states average 33,715 square feet in size. The Company's current Food Lion store prototype retail format is a 38,000 square foot model with a deli/bakery department. The current Kash n' Karry store prototype is a 46,000 square foot model. All of the Company's supermarkets are self-service stores which have off- street parking facilities. With the exception of operating 72 owned supermarkets, the Company occupies its various supermarket premises under lease agreements providing for initial terms of up to 30 years, with renewal options generally ranging from five to twenty years. At the end of 1999 the Company had $18.6 million (net book value) in property held for sale. The following table identifies the location and square footage of distribution centers and office space operated by the Company as of January 1, 2000. Location of Property Square Footage Distribution Center #1 Salisbury, NC 1,630,233 Distribution Center #2 Disputanta, VA 1,123,718 Distribution Center #3 Elloree, SC 1,098,612 Distribution Center #4 Dunn, NC 1,224,652 Distribution Center #5 Green Cove Springs, FL 832,109 Distribution Center #6 Clinton, TN 833,042 Distribution Center #7 Greencastle, PA 1,236,124 Distribution Center #8 Plant City, FL 759,546 Corporate Headquarters Salisbury, NC 271,592 9,009,628 Item 3. Legal Proceedings. The Company has had no significant developments related to legal matters since the Item 1 disclosure included in the Company's Form 10-Q filed October 26, 1999 for the quarter ended September 11, 1999. Item 4. Submission of Matters to a Vote of Security Holders. This item is not applicable. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. The information pertaining to the Class A and Class B Common Stock price range, dividends and record holders discussed beneath the headings "Market Price of Common Stock" and "Dividends Declared Per Share of Common Stock" in the Annual Report to Shareholders for the fiscal year ended January 1, 2000, is hereby incorporated by reference. Item 6. Selected Financial Data. The information set forth beneath the heading "Ten Year Summary of Operations" in the Annual Report to Shareholders for the fiscal year ended January 1, 2000, is hereby incorporated by reference. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. The information set forth beneath the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Annual Report to Shareholders for the fiscal year ended January 1, 2000, which information is set forth in Exhibit 13 to this Form 10-K and is hereby incorporated by reference. Item 7A. Quantitative and Qualitative Disclosures About Market Risk The information set forth beneath the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Annual Report to Shareholders for the fiscal year ended January 1, 2000, which information is set forth in Exhibit 13 to this Form 10-K and is hereby incorporated by reference. Item 8. Financial Statements and Supplementary Data. The information required by this item is included in the Company's Annual Report under the captions "Consolidated Balance Sheets," "Consolidated Statements of Income," "Consolidated Statements of Cash Flows," "Consolidated Statements of Shareholders' Equity," "Notes to Consolidated Financial Statements," "Report of Independent Accountants" and "Results by Quarter" which information is set forth in Exhibit 13 to this Form 10-K and is hereby incorporated by reference. Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure. This item is not applicable. PART III Item 10. Directors and Executive Officers of the Registrant. The information pertaining to nominees for election as directors set forth beneath the heading "Election of Directors"and "Section 16(A) Beneficial Ownership Reporting Compliance" in the Proxy Statement for the 2000 Annual Meeting of Shareholders to be held May 4, 2000 is incorporated by reference. Executive Officers of the Registrant The names and ages of the current executive officers of the Company and their positions as of March 30, 2000, are set forth below. None of the executive officers named below is related to any other executive officer or director by blood, marriage or adoption. Officers serve at the discretion of the Board of Directors. Bill McCanless, age 42, was named President and Chief Executive Officer of the Company on April 7, 1999, and at the same time, was elected to the Company's Board of Directors. On January 1, 2000, Mr. McCanless was appointed to the Executive Committee of Delhaize, the Company's parent, based in Brussels, Belgium. Mr. McCanless joined the Company in 1989 and served from 1995 to 1999 as its Senior Vice President of Administration, Chief Administrative Officer, and Secretary responsible for administration of the Company's finance, strategic planning, real estate, information technology, human resources, diversity and legal departments. David G. Biery, age 43, was appointed Vice President of Marketing-Food Lion Division in 1999. Mr. Biery has served the Company since 1994 as Director of Marketing, coordinating local marketing initiatives and working with store operations. Robert J. Brunory, age 45, is the Senior Vice President of Sales and Marketing-Food Lion Division, overseeing category management, marketing, and procurement. He previously served the Company as its Vice President of Category Management, a position he held since 1994. Michael D. Byars, age 41, has served as Chief Operating Officer of Kash n' Karry since September, 1997. Previously, Mr. Byars served as Director of Merchandising of Food Lion's Central Division for the Company's meat operations from 1995 to 1997. Robert E. Crosslin, age 45, was named Vice President of Distribution-Food Lion Division in 1998 and is responsible for all operational functions of distribution. His responsibilities include warehousing, transportation and in-bound logistics. Mr. Crosslin joined the Company in 1996 as director of distribution and regional transportation manager. Prior to joining the Company, Mr. Crosslin served as Director of Fleet Services of Ralphs from 1983 to 1986. W. Bruce Dawson, age 47, assumed the position of President of Kash n' Karry in January, 2000. Mr. Dawson joined the Company in 1981 as an area perishable supervisor and has held numerous positions of increasing responsibility with the Company. He was named Vice President of Food Lion's Southern Division in 1995 and later that year to Vice President of Food Lion's Northern Division. James E. Egan, Jr., age 35, assumed the position of Vice President of Operations for Food Lion's Atlantic Division in January 2000. Mr. Egan previously served as Director of Store Operations in Food Lion's Northern Division from October 1998 to January 2000. Mr. Egan joined the Company in 1986. Keith M. Gehl, age 41, serves the Company as Vice President of Real Estate and Store Development-Food Lion Division, a position he has held since 1997. Mr. Gehl joined the Company as Director of Internal Audit in 1989. He became Director of Store Operations for Food Lion's Northern Division in 1996, before assuming his current position. Dwayne R. Gilley, age 51, serves as Vice President of Operations for Food Lion's Northern Division, a position he assumed in January 2000. In this position, Mr. Gilley oversees Food Lion stores in Virginia, West Virginia, Tennessee and North Carolina. Previously, Mr. Gilley served as Director of Store Operations from December 1996 to January 2000. Joseph C. Hall, age 50, is President and Chief Operating Officer of the Food Lion Division, a position he has held since September 1999. He joined the Company as a buyer in 1976 and held numerous positions before being promoted to Vice President of Purchasing in 1988. Mr. Hall has served as Vice President of Marketing and Vice President of Food Lion's Southern and Central Divisions. He was appointed to the Board of Directors in 1995. Mr. Hall was named Senior Vice President and Chief Operating Officer in 1995 and served in such position until his appointment to President and Chief Operating Officer. Carol Herncon, age 37, serves as Vice President of Information Technology - -Food Lion Division. Ms. Herndon joined the Company as financial controller in 1989 and became the Director of Financial Accounting in 1991. L. Darrell Johnson, age 47, joined the Company in 1985. In October 1997, Mr. Johnson assumed the position of Vice President of Human Resources, overseeing benefits administration, compensation, recruiting and retention of employees. Previously, Mr. Johnson served as Director of Human Resources Compensation and Administration from 1996 to 1997. Laura C. Kendall, age 48, joined the Company in 1997 as Chief Financial Officer and Vice President of Finance. In such positions, Ms. Kendall is responsible for the administration of the finance, accounting, audit and information technology departments. Before coming to the Company, she served as chief financial officer at F & M Distributors, a discount health and beauty aids retailer in Michigan. Ms. Kendall is a certified public accountant. Randall S. Miller , age 38, serves as Vice President of Operations for Food Lion's Southern Division, a position he assumed in March 2000. In this position, Mr. Miller oversees the operation of Food Lion stores in Florida, Georgia and South Carolina. Previously, Mr. Miller served as Director of Operations for the Northern Division from 1997 until promoted to Vice President. Kyle Mitchell, age 42, serves as Vice President of Construction and Engineering-Food Lion Division, a position he has held since 1999. In that position, Mr. Mitchell oversees the construction and renovation of all Food Lion and Kash n'Karry stores in 11 states. Mr. Mitchell previously served as Director of Construction and Engineering, responsible for the development and construction of new stores, remodels and expansions from 1997 to 1999. C. David Morgan, age 49, became Senior Vice President of Operations-Food Lion Division in January 2000. He joined the Company in 1990 as an area supervisor and served most recently as Vice President of Operations for the Southern Division, a position he held from December 1997 to December 1999. Elwyn G. Murray, III, age 33, was named Vice President of Procurement of the Company in 1999. Mr. Murray is responsible for overseeing all the buying functions for Food Lion and Kash n' Karry stores. Mr. Murray joined the Company in 1989, and served as Vice President of Marketing and Director of Category Management from 1995 to 1999. Lester C. Nail, age 40, joined the Company as Vice President of Legal Affairs in 1995 and was named General Counsel of the Company in 1999. Mr. Nail oversees the legal and corporate communications/public affairs departments, as well as the customer service/community affairs and food safety/regulatory compliance departments. Thomas J. Robinson, age 39, serves as Vice President of Operations for the Central Division of Food Lion, a position he has held since 1997. Mr. Robinson oversees Food Lion supermarkets in Kentucky, North Carolina, Tennessee and Virginia. Previously, Mr. Robinson served as Director of Category Management/Grocery from 1994 to 1997. Natalie Taylor, age 40, is Vice President of Diversity for the Food Lion Division, a position she has held since 1997. In her position, she is responsible for the integration of diversity initiatives within the Company, outreach efforts to serve the Company's diverse community base, and partnership opportunities through which the Company may develop state-of-the-art supermarkets for inner-city communities. Previously, Ms. Taylor served as Director of Community Affairs and Employee Development from 1993 to 1997. Item 11. Executive Compensation. The information pertaining to executive compensation set forth beneath the headings "Executive Compensation" and "Report of the Senior Management Compensation Committee, Stock Option Committee and Board of Directors" in the Proxy Statement for the 2000 Annual Meeting of Shareholders to be held on May 4, 2000, is hereby incorporated by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management. The information pertaining to security ownership of certain beneficial owners and management set forth beneath the heading "Security Ownership of Certain Beneficial Owners and Management" in the Proxy Statement for the 2000 Annual Meeting of Shareholders to be held on May 4, 2000, is hereby incorporated by reference. Item 13. Certain Relationships and Related Transactions. The information relating to certain relationships and related transactions set forth beneath the headings "Employment Plans and Agreements-Low Interest Loan Plan," "Compensation Committee Interlocks and Insider Participation" and "Certain Transactions" in the Proxy Statement for the 2000 Annual Meeting of Shareholders to be held May 4, 2000, is hereby incorporated by reference. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. (a) The following documents are filed as part of this report: 1. Financial Statements: The following financial statements are incorporated by reference in Item 8 hereof from the Annual Report to Shareholders for the fiscal year ended January 1, 2000: ANNUAL REPORT PAGE NO. Consolidated Statements of Income for the fiscal years ended January 1, 2000, January 2, 1999 and January 3, 1998 22 Consolidated Balance Sheets, as of January 1, 2000 and January 2, 1999 23 Consolidated Statements of Cash Flows for the fiscal years ended January 1, 2000, January 2, 1999 and January 3, 1998 24 Consolidated Statements of Shareholders' Equity for the fiscal years ended January 1, 2000, January 2, 1999 and January 3, 1998 25 Notes to Consolidated Financial Statements 26-31 Report of Independent Accountants 32 Results by Quarter (unaudited) 33 2. Other: All other schedules are omitted since the required information is not applicable or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the financial statements and notes thereto. With the exception of the financial statements listed in the above index, the information referred to in Items 5, 6, 7 and the supplementary quarterly financial information referred to in Item 8, all of which is included in the portions of the Annual Report to Shareholders for the fiscal year ended January 1, 2000 and incorporated by reference into this Form 10-K Annual Report, the Annual Report to Shareholders for the fiscal year ended January 1, 2000 is not to be deemed "filed" as part of this report. 3. Exhibits: Exhibit No. 2 Agreement and Plan of Merger dated as of August 17, 1999, among the Company, Hannaford Bros. Co. and FL Acquisition Sub, Inc. (incorporated by reference to Exhibit 2 of the Company's Report on Form 8-K dated August 19, 1999) 3(a) Articles of Incorporation, together with all amendments thereto (through May 5, 1988)(incorporated by reference to Exhibit 3(a) of the Company's Annual Report on Form 10-K dated March 24, 1992) 3(b) Articles of Amendment to Articles of Incorporation (incorporated by reference to Exhibit 3.1 of the Company's Current Report on Form 8-K dated September 7, 1999) 3(c) Bylaws of the Company effective September 7, 1999 (incorporated by reference to Exhibit 3.2 of the Company's Current Report on Form 8-K dated September 7, 1999) 4(a) Indenture dated as of August 15, 1991, between the Company and the Bank of New York, Trustee, providing for the issuance of an unlimited amount of Debt Securities in one or more series (incorpo- rated by reference to Exhibit 4(a) of the Company's Annual Report on Form 10-K dated March 24, 1992) 4(b) Form of Food Lion, Inc. Medium Term Note (Global Fixed Rate) (incorporated by reference to Exhibit 4(b) of the Company's Annual Report on Form 10-K dated March 24, 1992) 10(a) Low Interest Loan Plan (incorporated by reference to Exhibit 19(a) of the Company's Report on Form 8-K dated October 27, 1986) 10(b) Form of Deferred Compensation Agreement (incorporated by reference to Exhibit 19(b) of the Company's Report on Form 8-K dated October 27, 1986) 10(c) Form of Salary Continuation Agreement (incorporated by reference to Exhibit 19(c) of the Company's report on Form 8-K dated October 27, 1986) 10(d) 1994 Shareholders' Agreement dated as of September 15, 1994 among Etablissements Delhaize Freres et Cie "Le Lion" S.A., Delhaize The Lion America, Inc., and the Company (incorporated by reference to Exhibit 10 of the Company's Report on Form 8-K dated October 7, 1994) 10(e) Proxy Agreement dated January 4, 1991, between Etablissements Delhaize Freres et Cie "Le Lion" S.A. and Delhaize The Lion, America, Inc. (incorporated by reference to Exhibit 10(e) of the Company's Annual Report on Form 10-K dated March 25, 1991) 10(f) Retirement Agreement dated as of April 7, 1999, between the Company and Tom E. Smith (incorporated by reference to Exhibit 10 of the Company's Quarterly Report on Form 10-Q dated May 5, 1999) 10(g) Stock Purchase Agreement dated June 30, 1981, between the Company and Ralph W. Ketner (incorporated by reference to Exhibit 10(j) of the Company's Annual Report on Form 10-K dated April 1, 1987) 10(h) Letter Agreement dated May 10, 1990, between the Company and Ralph W. Ketner (incorporated by reference to Exhibit 10(q) of the Company's Annual Report on Form 10-K dated March 25, 1991) 10(i) U.S. Distribution Agreement dated August 20, 1991, between the Company and Goldman, Sachs & Co. and Merrill Lynch & Co. relating to the sale of up to $300,000,000 in principal amount of the Company's Medium-Term Notes (incorporated by reference to Exhibit 10(p) of the Company's Annual Report on Form 10-K dated March 24, 1992) 10(j) License Agreement between the Company and Etablissements Delhaize Freres Et Cie "Le Lion" S.A. dated January 1, 1983 (incorporated by reference to Exhibit 10(t) of the Company's Annual Report on Form 10-K dated March 31, 1994) 10(k) 1996 Employee Stock Incentive Plan of Food Lion, Inc. (incorporated by reference to Exhibit 10(a) of the Company's Quarterly Report on Form 10-Q dated July 30, 1996) 10(l) Key Executive Annual Incentive Bonus Plan (incorporated by reference to Exhibit 10(b) of the Company's Quarterly Report on Form 10-Q dated July 30, 1996) 10(m) Profit Sharing Restoration Plan effective as of May 4, 1995 (incorporated by reference to Exhibit 10(c) of the Company's 10-Q A dated August 13, 1996) 10(n) Supplemental Executive Retirement Plan effective as of May 4, 1995 (incorporated by reference to Exhibit 10(d) of the Company's 10-Q A dated August 13, 1996) 10(o) Employee Severance Agreement dated September 5, 1996, between the Company and Dan A. Boone (incorporated by reference to Exhibit 10 of the Company's Quarterly Report on Form 10-Q dated October 16, 1996) 10(p) Employment Agreement dated as of April 7, 1999, between R. William McCanless and the Company (incorporated by reference to Exhibit 10(b)of the Company's Quarterly Report on Form 10-Q dated July 29, 1999) 10(q) Agreement and Plan of Merger dated as of October 31, 1996, among the Company, KK Acquisition Corp. and Kash n' Karry Food Stores, Inc. (incorporated by reference to Exhibit 2 of the Company's Report on Form 8-K dated October 31, 1996) 10(r) Stockholders' Agreement, dated as of October 31, 1996, among the Company, KK Acquisition Corp., Kash n' Karry Food Stores, Inc. and the stockholders of Kash n' Karry Food Stores, Inc. signatory thereto (incorporated by reference to Exhibit 10 of the Company's Report on Form 8-K dated October 31, 1996) 10(s) License Agreement, dated as of June 19, 1997, among the Company, Kash n' Karry Food Stores, Inc., and Etablissements Delhaize Freres Et Cie "Le Lion" S.A. (incorporated by reference to Exhibit 10(a) of the Company's Quarterly Report on Form 10-Q dated July 25, 1997) 10(t) Food Lion Inc. and The Bank of New York, Trustee, First Supplement Indenture dated as of April 21, 1997 (incorporated by reference to Exhibit 10(a) of the Company's Quarterly Report on Form 10-Q dated May 2, 1997) 10(u) Underwriting Agreement dated as of April 16, 1997, between Food Lion, Inc. and Salomon Brothers, Inc. for itself and as representative for NationsBanc Capital Markets Inc. (incorporated by reference to Exhibit 10(b) of the Company's Quarterly Report on Form 10-Q dated May 2, 1997) 10(v) Employment Severance Agreement and Mutual Release, dated as of April 14, 1999, between Pamela K. Kohn and the Company (incorporated by reference to Exhibit 10(a) of the Company's Quarterly Report on Form 10-Q dated July 30 1999) 10(w) Agreement, dated as of January 4, 1998, between Etablissements Delhaize Freres et Cie "Le Lion" S.A. and the Company (incorporated by reference to 10(af) of the Company's Annual Report on Form 10-K dated April 8, 1998) 10(x) Credit Agreement dated as of November 19, 1999, among the Company, the lenders party thereto, and Morgan Guaranty Trust Company of New York, as Administrative Agent 10(y) Credit Agreement dated as of January 26, 2000, among the Company, the lenders party thereto, and Morgan Guaranty Trust Company of New York, as Administrative Agent, relating to $2,500,000,000 364-Day Term Loan Facility 10(z) Credit Agreement dated as of January 26, 2000, among the Company, the lenders party thereto, and Morgan Guaranty Trust Company of New York, as Administrative Agent, relating to $500,000,000 5-Year Revolving Credit Facility 10(aa) Stock Exchange Agreement dated as of August 17, 1999, among the Company, Empire Company Limited and E.C.L. Investments Limited (incorporated by reference to Exhibit 99.2 of the Company's Current Report on Form 8-K dated August 19, 1999) 10(ab) Voting Agreement dated as of August 17, 1999, among the Company, Empire Company Limited and E.C.L. Investments Limited (incorporated by reference to Exhibit 99.3 of the Company's Current Report on Form 8-K dated August 19, 1999) 10(ac) Registration Rights Agreement dated as of August 17, 1999, among the Company, Empire Company Limited, E.C.L. Investments Limited, Pension Plan for Employees of Sobeys, Inc. and Sobeys Inc. Master Trust Investment Fund (incorporated by reference to Exhibit 99.4 of the Company's Current Report on Form 8-K dated August 19, 1999) 10(ad) Employment Severance Agreement and Mutual Release dated as of January 1, 2000, between A. Edward Benner, Jr. and Food Lion, a division of Delhaize America, Inc. 10(ae) Employment Agreement dated as of January 20, 2000, between W. Bruce Dawson and Kash n' Karry Food Stores, Inc. 10(af) Employment Agreement dated as of March 13, 2000, between Joseph C. Hall, Jr. and Food Lion, a division of Delhaize America, Inc. 10(ag) Employment Agreement dated as of March 14, 2000, between Laura C. Kendall and Delhaize America, Inc. 13 Portions of the Annual Report to Shareholders for the fiscal year ended January 1, 2000 21 Subsidiaries of Registrant 23 Consent of Independent Accountants 27 Financial Data Schedules 99 Undertaking of the Company to file exhibits pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K (b) Reports on Form 8-K: Current Report on Form 8-K filed August 19, 1999 Current Report on Form 8-K filed September 17, 1999 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. Delhaize America, Inc. Date:3/30/00 By /s/Laura C. Kendall Laura C. Kendall Chief Financial Officer Principal Accounting 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 in the capacities and on the dates indicated. Date:3/30/00 By/s/Laura Kendall Laura Kendall Chief Financial Officer Principal Accounting Officer Date:3/30/00 By/s/Pierre-Olivier Beckers Pierre-Olivier Beckers Director Date:3/22/00 By/s/Jacqueline K. Collamore Dr. Jacqueline K. Collamore Director Date:3/30/00 By/s/Jean-Claude Coppieters 't Wallant Jean-Claude Coppieters 't Wallant Director Date:3/30/00 By/s/Pierre DuMont Pierre DuMont Director Date:3/30/00 By/s/William G. Ferguson William G. Ferguson Director Date:3/22/00 By/s/Bernard W. Franklin Dr. Bernard W. Franklin Director Date:3/30/00 By/s/Joseph C. Hall Joseph C. Hall President and Chief Operating Officer, Food Lion Division Director Date:3/23/00 By/s/Margaret H. Kluttz Margaret H. Kluttz Director Date:3/30/00 By/s/Bill McCanless Bill McCanless Chief Executive Officer, Delhaize America, Inc. Chief Executive Officer, Food Lion Division Director Date:3/30/00 By/s/Dominique Raquez Dominique Raquez Director EXHIBIT INDEX to ANNUAL REPORT ON FORM 10-K of Delhaize America, Inc. For the Fiscal Year Ended January 1, 2000 Sequential Exhibit No. Description Page No. 2 Agreement and Plan of Merger dated as of August 17, 1999, among the Company, Hannaford Bros. Co. and FL Acquisition Sub, Inc. (incorporated by reference to Exhibit 2 of the Company's Report on Form 8-K dated August 19, 1999) 3(a) Articles of Incorporation, together with all amendments thereto (through May 5, 1988)(incorporated by reference to Exhibit 3(a) of the Company's Annual Report on Form 10-K dated March 24, 1992) 3(b) Articles of Amendment to Articles of Incorporation (incorporated by reference to Exhibit 3.1 of the Company's Current Report on Form 8-K dated September 7, 1999) 3(c) Bylaws of the Company effective September 7, 1999 (incorporated by reference to Exhibit 3.2 of the Company's Current Report on Form 8-K dated September 7, 1999) 4(a) Indenture dated as of August 15, 1991, between the Company and the Bank of New York, Trustee, providing for the issuance of an unlimited amount of Debt Securities in one or more series (incorpo- rated by reference to Exhibit 4(a) of the Company's Annual Report on Form 10-K dated March 24, 1992) 4(b) Form of Food Lion, Inc. Medium Term Note (Global Fixed Rate) (incorporated by reference to Exhibit 4(b) of the Company's Annual Report on Form 10-K dated March 24, 1992) 10(a) Low Interest Loan Plan (incorporated by reference to Exhibit 19(a) of the Company's Report on Form 8-K dated October 27, 1986) 10(b) Form of Deferred Compensation Agreement (incorporated by reference to Exhibit 19(b) of the Company's Report on Form 8-K dated October 27, 1986) 10(c) Form of Salary Continuation Agreement (incorporated by reference to Exhibit 19(c) of the Company's report on Form 8-K dated October 27, 1986) 10(d) 1994 Shareholders' Agreement dated as of September 15, 1994 among Etablissements Delhaize Freres et Cie "Le Lion" S.A., Delhaize The Lion America, Inc., and the Company (incorporated by reference to Exhibit 10 of the Company's Report on Form 8-K dated October 7, 1994) 10(e) Proxy Agreement dated January 4, 1991, between Etablissements Delhaize Freres et Cie "Le Lion" S.A. and Delhaize The Lion, America, Inc. (incorporated by reference to Exhibit 10(e) of the Company's Annual Report on Form 10-K dated March 25, 1991) 10(f) Retirement Agreement dated as of April 7, 1999, between the Company and Tom E. Smith (incorporated by reference to Exhibit 10 of the Company's Quarterly Report on Form 10-Q dated May 5, 1999) 10(g) Stock Purchase Agreement dated June 30, 1981, between the Company and Ralph W. Ketner (incorporated by reference to Exhibit 10(j) of the Company's Annual Report on Form 10-K dated April 1, 1987) 10(h) Letter Agreement dated May 10, 1990, between the Company and Ralph W. Ketner (incorporated by reference to Exhibit 10(q) of the Company's Annual Report on Form 10-K dated March 25, 1991) 10(i) U.S. Distribution Agreement dated August 20, 1991, between the Company and Goldman, Sachs & Co. and Merrill Lynch & Co. relating to the sale of up to $300,000,000 in principal amount of the Company's Medium-Term Notes (incorporated by reference to Exhibit 10(p) of the Company's Annual Report on Form 10-K dated March 24, 1992) 10(j) License Agreement between the Company and Etablissements Delhaize Freres Et Cie "Le Lion" S.A. dated January 1, 1983 (incorporated by reference to Exhibit 10(t) of the Company's Annual Report on Form 10-K dated March 31, 1994) 10(k) 1996 Employee Stock Incentive Plan of Food Lion, Inc. (incorporated by reference to Exhibit 10(a) of the Company's Quarterly Report on Form 10-Q dated July 30, 1996) 10(l) Key Executive Annual Incentive Bonus Plan (incorporated by reference to Exhibit 10(b) of the Company's Quarterly Report on Form 10-Q dated July 30, 1996) 10(m) Profit Sharing Restoration Plan effective as of May 4, 1995 (incorporated by reference to Exhibit 10(c) of the Company's 10-Q A dated August 13, 1996) 10(n) Supplemental Executive Retirement Plan effective as of May 4, 1995 (incorporated by reference to Exhibit 10(d) of the Company's 10-Q A dated August 13, 1996) 10(o) Employee Severance Agreement dated September 5, 1996, between the Company and Dan A. Boone (incorporated by reference to Exhibit 10 of the Company's Quarterly Report on Form 10-Q dated October 16, 1996) 10(p) Employment Agreement dated as of April 7, 1999, between R. William McCanless and the Company (incorporated by reference to Exhibit 10(b)of the Company's Quarterly Report on Form 10-Q dated July 29, 1999) 10(q) Agreement and Plan of Merger dated as of October 31, 1996, among the Company, KK Acquisition Corp. and Kash n' Karry Food Stores, Inc. (incorporated by reference to Exhibit 2 of the Company's Report on Form 8-K dated October 31, 1996) 10(r) Stockholders' Agreement, dated as of October 31, 1996, among the Company, KK Acquisition Corp., Kash n' Karry Food Stores, Inc. and the stockholders of Kash n' Karry Food Stores, Inc. signatory thereto (incorporated by reference to Exhibit 10 of the Company's Report on Form 8-K dated October 31, 1996) 10(s) License Agreement, dated as of June 19, 1997, among the Company, Kash n' Karry Food Stores, Inc., and Etablissements Delhaize Freres Et Cie "Le Lion" S.A. (incorporated by reference to Exhibit 10(a) of the Company's Quarterly Report on Form 10-Q dated July 25, 1997) 10(t) Food Lion Inc. and The Bank of New York, Trustee, First Supplement Indenture dated as of April 21, 1997 (incorporated by reference to Exhibit 10(a) of the Company's Quarterly Report on Form 10-Q dated May 2, 1997) 10(u) Underwriting Agreement dated as of April 16, 1997, between Food Lion, Inc. and Salomon Brothers, Inc. for itself and as representative for NationsBanc Capital Markets Inc. (incorporated by reference to Exhibit 10(b) of the Company's Quarterly Report on Form 10-Q dated May 2, 1997) 10(v) Employment Severance Agreement and Mutual Release, dated as of April 14, 1999, between Pamela K. Kohn and the Company (incorporated by reference to Exhibit 10(a) of the Company's Quarterly Report on Form 10-Q dated July 30 1999) 10(w) Agreement, dated as of January 4, 1998, between Etablissements Delhaize Freres et Cie "Le Lion" S.A. and the Company (incorporated by reference to 10(af) of the Company's Annual Report on Form 10-K dated April 8, 1998) 10(x) Credit Agreement dated as of November 19, 1999, among the Company, the lenders party thereto, and Morgan Guaranty Trust Company of New York, as Administrative Agent 20-135 10(y) Credit Agreement dated as of January 26, 2000, among the Company, the lenders party thereto, and Morgan Guaranty Trust Company of New York, as Administrative Agent, relating to $2,500,000,000 364-Day Term Loan Facility 136-254 10(z) Credit Agreement dated as of January 26, 2000, among the Company, the lenders party thereto, and Morgan Guaranty Trust Company of New York, as Administrative Agent, relating to $500,000,000 5-Year Revolving Credit Facility 255-372 10(aa) Stock Exchange Agreement dated as of August 17, 1999, among the Company, Empire Company Limited and E.C.L. Investments Limited (incorporated by reference to Exhibit 99.2 of the Company's Current Report on Form 8-K dated August 19, 1999) 10(ab) Voting Agreement dated as of August 17, 1999, among the Company, Empire Company Limited and E.C.L. Investments Limited (incorporated by reference to Exhibit 99.3 of the Company's Current Report on Form 8-K dated August 19, 1999) 10(ac) Registration Rights Agreement dated as of August 17, 1999, among the Company, Empire Company Limited, E.C.L. Investments Limited, Pension Plan for Employees of Sobeys, Inc. and Sobeys Inc. Master Trust Investment Fund (incorporated by reference to Exhibit 99.4 of the Company's Current Report on Form 8-K dated August 19, 1999) 10(ad) Employment Severance Agreement and Mutual Release dated as of January 1, 2000, between A. Edward Benner, Jr. and Food Lion, a division of Delhaize America, Inc. 373-387 10(ae) Employment Agreement dated as of January 20, 2000, between W. Bruce Dawson and Kash n' Karry Food Stores, Inc. 388-401 10(af) Employment Agreement dated as of March 13, 2000, between Joseph C. Hall, Jr. and Food Lion, a division of Delhaize America, Inc. 402-416 10(ag) Employment Agreement dated as of March 14, 2000, between Laura C. Kendall and Delhaize America, Inc. 417-431 13 Portions of the Annual Report to Shareholders for the fiscal year ended January 1, 2000 432-468 21 Subsidiaries of Registrant 469 23 Consent of Independent Accountants 470 27 Financial Data Schedules 471-472 99 Undertaking of the Company to file exhibits pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K 473 (b) Reports on Form 8-K: Current Report on Form 8-K filed August 19, 1999 Current Report on Form 8-K filed September 17, 1999 EX-10.X 2 [CONFORMED COPY] =============================================================================== CREDIT AGREEMENT dated as of November 19, 1999 among DELHAIZE AMERICA, INC., The LENDERS Party Hereto, and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent $500,000,000 364-DAY REVOLVING CREDIT FACILITY ----------------------------------------------------------------------- J.P. MORGAN SECURITIES INC., as Lead Arranger and Bookrunner ----------------------------------------------------------------------- BANK OF AMERICA, N.A., CITIBANK, N.A. and WACHOVIA SECURITIES, INC., as Co-Arrangers =============================================================================== TABLE OF CONTENTS ---------------------- PAGE ---- ARTICLE 1 DEFINITIONS SECTION 1.01. Defined Terms..................................................1 SECTION 1.02. Classification of Loans and Borrowing.........................21 SECTION 1.03. Terms Generally...............................................21 SECTION 1.04. Accounting Terms; GAAP........................................22 ARTICLE 2 THE CREDITS SECTION 2.01. Commitments...................................................23 SECTION 2.02. Loans and Borrowings..........................................23 SECTION 2.03. Requests for Revolving Borrowings.............................24 SECTION 2.04. Reserved.....................................................24 SECTION 2.05. Funding of Borrowings.........................................24 SECTION 2.06. Interest Elections............................................25 SECTION 2.07. Termination and Reduction of Commitments......................26 SECTION 2.08. Repayment of Loans; Evidence of Debt..........................27 SECTION 2.09. Prepayment of Loans...........................................28 SECTION 2.10. Fees..........................................................28 SECTION 2.11. Interest......................................................29 SECTION 2.12. Alternate Rate of Interest....................................30 SECTION 2.13. Increased Costs...............................................30 SECTION 2.14. Break Funding Payments........................................31 SECTION 2.15. Taxes.........................................................32 SECTION 2.16. Payments Generally; Pro Rata Treatment; Sharing of Set- offs........................................................34 SECTION 2.17. Mitigation Obligations; Replacement of Lenders................36 ARTICLE 3 REPRESENTATIONS AND WARRANTIES SECTION 3.01. Organization; Powers...........................................37 SECTION 3.02. Authorization; Enforceability..................................37 SECTION 3.03. Governmental Approvals; No Conflicts...........................37 SECTION 3.04. Financial Condition; No Material Adverse Change................38 SECTION 3.05. Properties.....................................................38 SECTION 3.06. Litigation and Environmental Matters...........................38 SECTION 3.07. Compliance with Laws and Agreements............................39 SECTION 3.08. Investment and Holding Company Status..........................39 SECTION 3.09. Taxes..........................................................39 SECTION 3.10. ERISA..........................................................40 SECTION 3.11. Disclosure.....................................................40 i PAGE ---- SECTION 3.12. Margin Stock...................................................40 SECTION 3.13. No Burdensome Restrictions.....................................40 SECTION 3.14. Subsidiaries...................................................40 SECTION 3.15. Solvency.......................................................41 SECTION 3.16. Year 2000 Matters..............................................41 SECTION 3.17. Acquisition Documents..........................................41 ARTICLE 4 CONDITIONS TO FUNDING SECTION 4.01. Effective Date.................................................41 SECTION 4.02. Each Credit Event..............................................43 ARTICLE 5 AFFIRMATIVE COVENANTS SECTION 5.01. Financial Statements and Other Information.....................43 SECTION 5.02. Notices of Material Events.....................................45 SECTION 5.03. Existence; Conduct of Business.................................45 SECTION 5.04. Payment of Obligations.........................................45 SECTION 5.05. Maintenance of Properties; Insurance...........................46 SECTION 5.06. Books and Records; Inspection Rights...........................46 SECTION 5.07. Compliance with Laws and Material Contractual Obligations..................................................46 SECTION 5.08. Use of Proceeds................................................46 SECTION 5.09. Change in Ratings..............................................46 SECTION 5.10. Copies of Other Bank Agreements................................47 ARTICLE 6 NEGATIVE COVENANTS SECTION 6.01. Liens..........................................................47 SECTION 6.02. Indebtedness of Subsidiaries...................................48 SECTION 6.03. Fundamental Changes............................................49 SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions; Hedging Agreements.............................49 SECTION 6.05. Transactions with Affiliates...................................51 SECTION 6.06. Reserved.......................................................51 SECTION 6.07. Fixed Charges Coverage.........................................51 SECTION 6.08. Ratio of Consolidated Adjusted Debt to Consolidated EBITDAR......................................................52 SECTION 6.09. Limitation on Sales of Assets..................................52 SECTION 6.10. Modifications to Acquisition Documents.........................53 SECTION 6.11. Restrictions Affecting Subsidiaries............................53 ii PAGE ---- ARTICLE 7 EVENTS OF DEFAULT SECTION 7.01. Events of Default..............................................54 ARTICLE 8 THE ADMINISTRATIVE AGENT SECTION 8.01. The Administrative Agent.......................................57 ARTICLE 9 MISCELLANEOUS SECTION 9.01. Notices........................................................59 SECTION 9.02. Waivers; Amendments............................................59 SECTION 9.03. Expenses; Indemnity; Damage Waiver.............................60 SECTION 9.04. Successors and Assigns.........................................62 SECTION 9.05. Survival.......................................................64 SECTION 9.06. Counterparts; Integration; Effectiveness.......................65 SECTION 9.07. Severability...................................................65 SECTION 9.08. Right of Setoff................................................65 SECTION 9.09. Governing Law; Jurisdiction; Consent of Service of Process..............................................................65 SECTION 9.10. WAIVER OF JURY TRIAL...........................................66 SECTION 9.11. Headings.......................................................66 SECTION 9.12. Confidentiality................................................67 SECTION 9.13. Interest Rate Limitation.......................................67 ARTICLE 10 PROVISIONS RELATING TO THE REORGANIZATION SECTION 10.01. Consent to Reorganization.....................................68 SCHEDULES: Schedule 2.01 Commitments Schedule 3.06 Disclosed Matters Schedule 3.14 Subsidiaries of Borrower Schedule 6.01 Existing Liens EXHIBITS: Exhibit A Form of Assignment and Acceptance Exhibit B-1 Form of Opinion of Counsel of Borrower iii CREDIT AGREEMENT dated as of November 19, 1999, among DELHAIZE AMERICA, INC., the LENDERS party hereto and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent. The parties hereto agree as follows: ARTICLE 1 DEFINITIONS SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the meanings specified below: "ABR", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate. "Acquisition" means the Merger and all other transactions contemplated by the Acquisition Documents. "Acquisition Date" means the date of consummation of the Acquisition. "Acquisition Documents" means the Merger Agreement, including the exhibits and schedules thereto, and all agreements, documents and instruments executed and delivered pursuant thereto or in connection therewith. "Acquisition Sub" means FL Acquisition Sub, Inc., a Maine corporation. "Adjusted LIBO Rate" means, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate. "Administrative Agent" means Morgan, in its capacity as administrative agent for the Lenders hereunder. "Administrative Questionnaire" means an Administrative Questionnaire in a form supplied by the Administrative Agent. "Affiliate" means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. "Alternate Base Rate" means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate, respectively. "Amortization" means for any period the sum of all amortization expenses of the Borrower and its Consolidated Subsidiaries for such period, as determined in accordance with GAAP. "Applicable Percentage" means, with respect to any Lender, the percentage of the total Commitments represented by such Lender's Commitment. If the Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Commitments most recently in effect, giving effect to any assignments. "Applicable Rate" means, for any day, with respect to any ABR Loan or Eurodollar Revolving Loan, or with respect to the commitment fees payable hereunder, as the case may be, the applicable rate per annum set forth below under the caption "ABR Spread", "Eurodollar Spread" or "Commitment Fee Rate", as the case may be, based upon the ratings by Moody's and S&P, respectively, applicable on such date to the Index Debt: S&P/Moody's ABR Eurodollar Commitment Index Debt Ratings Eurodollar Spread Fee Rate - ------------------------------------------------------------- Category 1 A-/A3 or higher........ .0% .50% .09% Category 2 BBB+/Baa1.............. .0% .625% .10% Category 3 BBB/Baa2............... .0% .75% .125% Category 4 BBB-/Baa3.............. .25% 1.25% .175% Category 5 BB+/Ba1................ .75% 1.75% .30% - ------------------------------------------------------------- Category 6 Below.................. 1.25% 2.25% .50% ============================================================= In addition, 2 (x) if (i) the sum of (1) the aggregate principal amount of loans outstanding under the 5-Year Agreement (if the 5-Year Agreement is in effect on such date) plus (2) the aggregate principal amount of loans outstanding under the Bridge Agreement (if the Bridge Agreement is in effect on such date) plus (3) the aggregate principal amount of Revolving Loans outstanding hereunder, in each case on such date, exceeds 33% of the sum of (1) the aggregate amount of the commitments under the 5-Year Agreement (or, if the commitments under the 5- Year Agreement (if the 5-Year Agreement is in effect on such date) shall have terminated, the aggregate principal amount of loans outstanding thereunder) plus (2) the aggregate amount of the commitments under the Bridge Agreement (if the Bridge Agreement is in effect on such date) (or, if the commitments under the Bridge Agreement shall have terminated, the aggregate principal amount of loans outstanding thereunder) plus (3) the aggregate Commitments hereunder (or, if the Commitments hereunder shall have terminated, the aggregate principal amount of Revolving Loans outstanding hereunder), in each case on such date and (ii) Category 1 ratings, Category 2 ratings or Category 3 ratings are applicable on such date or (y) if any Loans are outstanding under the Bridge Agreement (if the Bridge Agreement is in effect on such date) (regardless of which Category ratings are applicable on such date), the "ABR Spread" and the "Eurodollar Spread" will each be increased by .125%; provided that on any date on which the events in clause (x) and clause (y) are both in effect, the "ABR Spread" and the "Eurodollar Spread" will each be increased by .125%. For purposes of the foregoing, (i) if either Moody's or S&P shall not have in effect a rating for the Index Debt (other than by reason of the circumstances referred to in the last sentence of this definition), then such rating agency shall be deemed to have established a rating in Category 6; (ii) if the ratings established or deemed to have been established by Moody's and S&P for the Index Debt shall fall within different Categories, the Applicable Rate shall be based on the lower of the two ratings unless one of the two ratings is two or more Categories lower than the other, in which case the Applicable Rate shall be determined by reference to the Category next below that of the higher of the two ratings; and (iii) if the ratings established or deemed to have been established by Moody's and S&P for the Index Debt shall be changed (other than as a result of a change in the rating system of Moody's or S&P), such change shall be effective as of the date on which it is first announced by the applicable rating agency. Each change in the Applicable Rate shall apply during the period commencing on the effective date of 3 such change and ending on the date immediately preceding the effective date of the next such change. If the rating system of Moody's or S&P shall change, or if either such rating agency shall cease to be in the business of rating corporate debt obligations, the Borrower and the Lenders shall negotiate in good faith to amend this definition to reflect such changed rating system or the unavailability of ratings from such rating agency and, pending the effectiveness of any such amendment, the Applicable Rate shall be determined by reference to the rating most recently in effect prior to such change or cessation. "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 9.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by the Administrative Agent. "Availability Period" means the period from and including the Effective Date to but excluding the earlier of the Maturity Date and the date of termination of the Commitments. "Base CD Rate" means the sum of (a) the Three-Month Secondary CD Rate multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate. As used in this definition, "Assessment Rate" means, for any day, the annual assessment rate in effect on such day that is payable by a member of the Bank Insurance Fund classified as "well-capitalized" and within supervisory subgroup "B" (or a comparable successor risk classification) within the meaning of 12 C.F.R. Part 327 (or any successor provision) to the Federal Deposit Insurance Corporation for insurance by such Corporation of time deposits made in Dollars at the offices of such member in the United States; provided that if, as a result of any change in any law, rule or regulation, it is no longer possible to determine the Assessment Rate as aforesaid, then the Assessment Rate shall be such annual rate as shall be determined by the Administrative Agent to be representative of the cost of such insurance to the Lenders. "Board" means the Board of Governors of the Federal Reserve System of the United States of America. "Borrower" means Delhaize America, Inc., a North Carolina corporation. "Borrowing" means Revolving Loans of the same Type, made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect. "Borrowing Request" means a request by the Borrower for a Revolving Borrowing in accordance with Section 2.03. 4 "Bridge Agreement" means the $2,500,000,000 364-Day Term Loan Agreement to be entered into by the Borrower, the lenders party thereto, and Morgan, as administrative agent, substantially on the terms described by the Borrower to the Lenders prior to the Effective Date, as amended from time to time. "Bridge Payout Date" means the first date on which the commitments under the Bridge Agreement have terminated and all loans outstanding thereunder, together with accrued and unpaid interest thereon, and all fees and expenses payable with respect thereto, have been repaid in full. "Business Day" means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed; provided that, when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in Dollar deposits in the London interbank market. "Capital Lease Obligations" of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. "Capital Stock" means any capital stock of the Borrower or any Consolidated Subsidiary (to the extent issued to a Person other than the Borrower), whether common or preferred. "Capitalized Lease" means any lease which is required to be capitalized on a consolidated balance sheet of the lessee and its subsidiaries in accordance with GAAP. "Cash Equivalents" means: (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof; 5 (b) investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, a rating of at least P-1 by Moody's or A-1 by S & P; (c) investments in certificates of deposit, banker's acceptances and time deposits maturing within 180 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof which has a combined capital and surplus and undivided profits of not less than $250,000,000; (d) investments consisting of cash deposits in operating accounts maintained by the Borrower or any Subsidiary; and (e) repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (c) above. "Change in Control" means (a) the failure of Delhaize Belgium or any wholly-owned subsidiary of Delhaize Belgium to own, directly or indirectly, beneficially or of record, shares representing more than a majority of the aggregate ordinary voting power represented by the issued and outstanding Capital Stock of the Borrower; (b) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Borrower by Persons who were neither (i) nominated by the board of directors of the Borrower nor (ii) appointed by directors so nominated; or (c) the acquisition of direct or indirect Control of the Borrower by any Person or group other than Delhaize Belgium or any wholly-owned subsidiary of Delhaize Belgium. "Change in Law" means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender (or, for purposes of Section 2.13(b), by any lending office of such Lender or by such Lender's holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement. "Charges" has the meaning set forth in Section 9.13. "Code" means the Internal Revenue Code of 1986, as amended from time to time. 6 "Commitment" means, with respect to each Lender, the commitment of such Lender to make Revolving Loans hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.07 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Lender's Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Commitment, as applicable. "Consolidated" means, when used in connection with any defined term, and not otherwise defined, such term as it applies to the Borrower and its Subsidiaries on a consolidated basis, after eliminating all intercompany items. "Consolidated Adjusted Debt" means at any date (i) the Debt of the Borrower and its Consolidated Subsidiaries plus (ii) 8 times Rentals (but excluding any payments with respect to a Capital Lease to the extent such Capital Lease is included in clause (i)) payable by the Borrower and its Consolidated Subsidiaries for the period of four consecutive Fiscal Quarters ended on or most recently prior to such date, determined on a consolidated basis as of such date. "Consolidated EBITDAR" for any period means the sum of (i) Consolidated Net Income for such period plus, in each case to the extent deducted in determining such Consolidated Net Income and without duplication, (ii) Consolidated Depreciation expenses of the Borrower and its Consolidated Subsidiaries, (iii) Consolidated Amortization expenses of the Borrower and its Consolidated Subsidiaries, (iv) all federal, state, local and foreign income taxes of the Borrower and its Consolidated Subsidiaries, and (v) Consolidated Fixed Charges. "Consolidated Fixed Charges" for any period means, without duplication, on a consolidated basis the sum of (i) all Rentals payable during such period by the Borrower and its Consolidated Subsidiaries, and (ii) Consolidated Interest Expense for such period. "Consolidated Interest Expense" for any period means interest, whether expensed or capitalized, in respect of Debt of the Borrower or any of its Consolidated Subsidiaries outstanding during such period. "Consolidated Net Income" for any period means the gross revenues of the Borrower and its Consolidated Subsidiaries for such period less all expenses and other proper charges (including taxes on income), determined on a consolidated basis after eliminating earnings or losses attributable to outstanding Minority Interests, but excluding in any event: 7 (a) any unusual or extraordinary gains or losses on the sale or other disposition of investments (excluding Cash Equivalents) or fixed or capital assets, and any taxes on such excluded gains and any tax deductions or credits on account of any such excluded losses; (b) the proceeds of any life insurance policy; (c) net earnings and losses of any Consolidated Subsidiary accrued prior to the date it became a Consolidated Subsidiary; (d) net earnings and losses of any corporation (other than a Consolidated Subsidiary and subject to Section 1.04) substantially all the assets of which have been acquired in any manner by the Borrower or any Consolidated Subsidiary, realized by such corporation prior to the date of such acquisition; (e) net earnings and losses of any corporation (other than a Consolidated Subsidiary and subject to Section 1.04(b)) with which the Borrower or a Consolidated Subsidiary shall have consolidated or which shall have merged into or with the Borrower or a Consolidated Subsidiary prior to the date of such consolidation or merger; (f) net earnings and losses of any business entity (other than a Consolidated Subsidiary) in which the Borrower or any Consolidated Subsidiary has an ownership interest unless such net earnings shall have actually been received by the Borrower or such Consolidated Subsidiary in the form of cash distributions; (g) any portion of the net earnings and losses of any Consolidated Subsidiary which for any reason is unavailable for payment of dividends to the Borrower or any other Consolidated Subsidiary; (h) earnings resulting from any reappraisal, revaluation or write-up of assets; (i) any deferred or other credit representing any excess of the equity in any Subsidiary at the date of acquisition thereof over the amount invested in such Subsidiary; (j) any gain arising from the acquisition of any Capital Stock; (k) any reversal of any contingency reserve except to the extent that provision for such contingency reserve shall have been made from 8 income arising during such period; provided, however, that any reversal of a contingency reserve from a prior period shall only be excluded from Consolidated Net Income to the extent that the aggregate amount of such reversals exceeds $10,000,000 during the immediately preceding four Fiscal Quarters; and (l) any other unusual or extraordinary gain or loss. "Consolidated Subsidiary" means at any date any Subsidiary or other entity the accounts of which, in accordance with GAAP, would be consolidated with those of the Borrower in its consolidated financial statements as of such date. "Consolidated Total Assets" means at any time the total assets of the Borrower and its Consolidated Subsidiaries, determined on a consolidated basis, as set forth or reflected on the most recent consolidated balance sheet of the Borrower and its Consolidated Subsidiaries. "Contractual Obligation" means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. "Controlling" and "Controlled" have meanings correlative thereto. "Debt" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable and accrued expenses arising in the ordinary course of business, (iv) all Capital Lease Obligations, (v) all obligations of such Person to reimburse any bank or other Person in respect of amounts payable under a banker's acceptance, (vi) all Redeemable Preferred Stock of such Person (in the event such Person is a corporation), (vii) all obligations of such Person to reimburse any bank or other Person in respect of amounts paid under a letter of credit or similar instrument, (viii) all Debt of others secured by a Lien on any asset of such Person, whether or not such Debt is assumed by such Person, and (ix) all Debt of others Guaranteed by such Person. 9 "Default" means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default. "Delhaize Belgium" means Etablissements Delhaize Freres et Cie "Le Lion" S.A., a Belgian corporation. "Depreciation" means for any period the sum of all depreciation expenses of the Borrower and its Consolidated Subsidiaries for such period, as determined in accordance with GAAP. "Disclosed Matters" means the actions, suits and proceedings and the environmental matters disclosed on Schedule 3.06. "Dollars" or "$" refers to lawful money of the United States of America. "Effective Date" means the date on which the conditions specified in Section 4.01 are satisfied (or waived in accordance with Section 9.02). "Environmental Laws" means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, release or threatened release of any Hazardous Material or health and safety matters. "Environmental Liability" means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. "ERISA Affiliate" means any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of 10 ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. "ERISA Event" means (a) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA. "Eurodollar", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate. "Event of Default" has the meaning assigned to such term in Article 7. "Excluded Taxes" means, with respect to the Administrative Agent, any Lender or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which the Borrower is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 2.17(b)), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement or is attributable to such Foreign Lender's failure or inability to comply with Section 2.15(e), except to the extent that such Foreign Lender's assignor (if any) was entitled, at the time of 11 assignment, to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 2.15(a). "Existing Public Debt" means the Borrower's $150,000,000 aggregate principal amount of 7.55% Notes due 2007 and its $150,000,000 aggregate principal amount of 8.05% Notes due 2027. "Federal Funds Effective Rate" means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. "Financial Officer" means the chief financial officer, principal accounting officer, treasurer or controller of the Borrower. "Fiscal Quarter" means any fiscal quarter of the Borrower. "Fiscal Year" means any fiscal year of the Borrower. "5-YearAgreement" means the $500,000,000 5-Year Revolving Credit Agreement to be entered into by the Borrower, the lenders party thereto and Morgan, as administrative agent, substantially on the terms described by the Borrower to the Lenders prior to the Effective Date, as amended from time to time. "Foreign Lender" means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction. "GAAP" means generally accepted accounting principles in the United States of America. "Governmental Authority" means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. 12 "Guarantee" of or by any Person (the "guarantor") means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the "primary obligor") in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided, that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. "Hazardous Materials" means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law. "Hedging Agreement" means any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement. "Indebtedness" of any Person means, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid (excluding current accounts payable incurred in the ordinary course of business), (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty and (j) all obligations, contingent or otherwise, of such Person 13 in respect of bankers' acceptances. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. "Indemnified Taxes" means Taxes other than Excluded Taxes. "Indemnitee" has the meaning set forth in Section 9.03(b). "Index Debt" means senior, unsecured, long-term indebtedness for borrowed money of the Borrower that is not guaranteed by any other Person (other than Subsidiaries) or subject to any other credit enhancement. "Information" has the meaning set forth in Section 9.12. "Interest Election Request" means a request by the Borrower to convert or continue a Revolving Borrowing in accordance with Section 2.06. "Interest Payment Date" means (a) with respect to any ABR Loan, the last day of each March, June, September and December, and (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months' duration, each day prior to the last day of such Interest Period that occurs at intervals of three months' duration after the first day of such Interest Period. "Interest Period" means, with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter, as the Borrower may elect; provided, that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, in the case of a Eurodollar Borrowing only, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, (ii) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period and (iii) any Interest Period that would otherwise end after the Maturity Date shall end on the Maturity Date. For purposes hereof, the date of a Borrowing initially shall be the date on which 14 such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing. "Lenders" means the Persons listed on Schedule 2.01 and any other Person that shall have become a party hereto pursuant to an Assignment and Acceptance, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Acceptance. "LIBO Rate" means, with respect to any Eurodollar Borrowing for any Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to Dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for Dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the "LIBO Rate" with respect to such Eurodollar Borrowing for such Interest Period shall be the rate at which Dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. "Lien" means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset and (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset. "Loans" means the loans made by the Lenders to the Borrower pursuant to this Agreement. "Majority Lenders" means, at any time, Lenders having Commitments representing more than 50% of the aggregate amount of the Commitments at such time (or, if the Commitments shall have terminated, Lenders holding Revolving Credit Exposures representing more than 50% of the total Revolving Credit Exposures at such time). 15 "Material Adverse Change" means any event, development or circumstance that has had or could reasonably be expected to have a Material Adverse Effect. "Material Adverse Effect" means a material adverse effect on (a) the business, assets, operations, prospects or condition, financial or otherwise, of the Borrower and the Subsidiaries taken as a whole, (b) the ability of the Borrower to perform any of its obligations under this Agreement or (c) the rights of or benefits available to the Lenders under this Agreement. "Material Indebtedness" means Indebtedness, or obligations in respect of one or more Hedging Agreements, of any one or more of the Borrower and its Subsidiaries in an aggregate principal amount exceeding $20,000,000. For purposes of determining Material Indebtedness, the "principal amount" of the obligations of the Borrower or any Subsidiary in respect of any Hedging Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the Borrower or such Subsidiary would be required to pay if such Hedging Agreement were terminated at such time. "Maturity Date" means November 17, 2000. "Maximum Rate" has the meaning set forth in Section 9.13. "Medium Term Notes" means the medium term notes of the Borrower having interest rates ranging from 8.32% to 8.73% with due dates ranging from 1999 to 2006 and having an aggregate principal balance of $153,300,000. "Merger" means the merger of Acquisition Sub with and into the Target (with the Target as the surviving Person) pursuant to the Merger Agreement. "Merger Agreement" means the Agreement and Plan of Merger dated as of August 17, 1999 among the Borrower, Acquisition Sub and the Target. "Minority Interests" means any shares of stock of any class of a Consolidated Subsidiary (other than directors' qualifying shares as required by law) that are not owned by the Borrower and/or one or more of its Consolidated Subsidiaries. "Moody's" means Moody's Investors Service, Inc. "Morgan" means Morgan Guaranty Trust Company of New York. 16 "Multiemployer Plan" means a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Operating Lease" means any lease other than a Capitalized Lease. "Other Taxes" means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement. "Participant" has the meaning set forth in Section 9.04(e). "PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions. "Permitted Encumbrances" means: (a) Liens imposed by law for taxes, assessments and other governmental charges that are not yet due or are being contested in compliance with Section 5.04; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's, landlords' and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or are being contested in compliance with Section 5.04; (c) Liens granted to a landlord pursuant to a lease to secure the obligations of the lessee under such lease which apply only to property or assets of the lessee located at the leased premises; (d) pledges and deposits made in the ordinary course of business in compliance with workers' compensation, unemployment insurance and other social security laws or regulations; (e) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds (so long as, with respect to any such appeal bonds posted with respect to any judgment, no Event of Default then exists under Section 7(k)), performance bonds and other obligations of a like nature, in each case in the ordinary course of business; 17 (f) judgment liens provided no Event of Default then exists under Section 7(k); and (f) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Borrower or any Subsidiary. "Person" means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity. "Plan" means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Prime Rate" means the rate of interest per annum publicly announced from time to time by Morgan as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective. "Redeemable Preferred Stock" of any Person means any preferred stock issued by such Person which is at any time prior to the Maturity Date either (i) mandatorily redeemable (by sinking fund or similar payments or otherwise) or (ii) redeemable at the option of the holder thereof. "Register" has the meaning set forth in Section 9.04(c). "Related Parties" means, with respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person's Affiliates. "Rentals" means and includes as of the date of any determination thereof all fixed payments (including as such all payments which the lessee is obligated to make to the lessor on termination of the lease or surrender of the property) payable by the Borrower or a Consolidated Subsidiary, as lessee or sublessee under an Operating Lease or Capitalized Lease of real or personal property, but shall be exclusive of any amounts required to be paid by the Borrower or a Consolidated Subsidiary (whether or not designated as rents or additional rents) 18 on account of maintenance, repairs, insurance, taxes and similar charges. Fixed rents under any so-called "percentage leases" shall be computed solely on the basis of the minimum rents, if any, required to be paid by the lessee regardless of sales volume or gross revenues. "Reorganization" means the collective reference to the following series of related transactions: The Borrower will create a new direct, wholly-owned subsidiary, to be named Food Lion, Inc. ("New Food Lion"). The Borrower will contribute to New Food Lion substantially all of the assets of the Borrower other than the capital stock of (i) the Target, (ii) FLI Holding Corp., a Delaware corporation ("FLI Holding"), (iii) Risk Management Services, Inc., a North Carolina corporation ("RMS"), (iv) FL Food Lion, Inc., a Florida corporation ("FL Food Lion") and (v) Barnwell, Inc., a Delaware corporation ("Barnwell"). After giving effect to such contribution, New Food Lion, FLI Holding, RMS, FL Food Lion and Barnwell will each be direct wholly-owned subsidiaries of the Borrower. FLI Holding will be merged into the Borrower and Kash n' Karry Food Stores, Inc. will become a direct wholly-owned Subsidiary of the Borrower. "Requirement of Law" means, as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Revolving Credit Exposure" means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender's Loans at such time. "Revolving Loan" means a Loan made pursuant to Section 2.03. "S&P" means Standard & Poor's Ratings Group, a division of The McGraw Hill Companies, Inc. "Solvent", when used with respect to any Person, means that, as of any date of determination, (a) the amount of the "present fair saleable value" of the assets of such Person and its subsidiaries, taken as a whole, will, as of such date, exceed the amount that will be required to pay all "liabilities of such Person and its subsidiaries, taken as a whole, contingent or otherwise", as of such date (as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors) as such debts become absolute and matured, (b) such Person and its subsidiaries, taken as a whole, will not have, as of such date, an unreasonably small amount of capital with which to 19 conduct their businesses, taking into account the particular capital requirements of such Person and its projected capital requirements and availability and (c) such Person and its subsidiaries, taken as a whole, will be able to pay their debts as they mature, taking into account the timing of and amounts of cash to be received by such Person and its subsidiaries, taken as a whole, and the timing of and amounts of cash to be payable on or in respect of indebtedness of such Person and its subsidiaries, taken as a whole. For purposes of this definition, (i) "debt" means liability on a "claim", and (ii) "claim" means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal or equitable, secured or unsecured or (y) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured. "Statutory Reserve Rate" means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Administrative Agent is subject (a) with respect to the Base CD Rate, for new negotiable nonpersonal time deposits in Dollars of over $100,000 with maturities approximately equal to three months and (b) with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. "subsidiary" means, with respect to any Person (the "parent") at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held by such Person or one or more subsidiaries of such Person or by such Person and one or more subsidiaries of such Person. 20 "Subsidiary" means any subsidiary of the Borrower. "Stub End Date" has the meaning set forth in Section 1.04(b). "Target" means Hannaford Bros. Co., a Maine corporation. "Taxes" means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority. "Three-Month Secondary CD Rate" means, for any day, the secondary market rate for three-month certificates of deposit reported as being in effect on such day (or, if such day is not a Business Day, the next preceding Business Day) by the Board through the public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the week following such day) or, if such rate is not so reported on such day or such next preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 a.m., New York City time, on such day (or, if such day is not a Business Day, on the next preceding Business Day) by the Administrative Agent from three negotiable certificate of deposit dealers of recognized standing selected by it. "Transactions" means the execution, delivery and performance by the Borrower of this Agreement, the borrowing of Loans and the use of the proceeds thereof. "Type", when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate. "Withdrawal Liability" means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. SECTION 1.02. Classification of Loans and Borrowing. For purposes of this Agreement, Loans may be classified and referred to by Type (e.g., a "Eurodollar Loan"). Borrowings also may be classified and referred to by Type (e.g., a "Eurodollar Borrowing"). SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the 21 context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. SECTION 1.04. Accounting Terms; GAAP. (a) Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Majority Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. (b) For purposes of calculating compliance with Section 6.07 on the last day of any Fiscal Quarter ended on or after the Acquisition Date and prior to the first date (the "Stub End Date") on which four full Fiscal Quarters have begun and ended on or after the Acquisition Date and Section 6.08 on any date on or after the Acquisition Date and prior to the Stub End Date, Consolidated EBITDAR (and each component thereof), Consolidated Fixed Charges (and each component thereof) and Rentals for purposes of determining Consolidated Adjusted Debt for any relevant period shall be adjusted on a pro forma basis as if (i) the Acquisition had been consummated on the first day of such period, (ii) the borrowings to finance the Acquisition (including without limitation the Loans and any loans 22 under the 5-Year Agreement and the Bridge Agreement) had been made on the first day of such period and (iii) any Indebtedness of the Target and its subsidiaries repaid in connection with the consummation of the Acquisition had been repaid on the first day of such period. ARTICLE 2 THE CREDITS SECTION 2.01. Commitments. Subject to the terms and conditions set forth herein, each Lender with a Commitment agrees to make Revolving Loans to the Borrower from time to time during the Availability Period in an aggregate principal amount that will not result in such Lender's Revolving Credit Exposure exceeding such Lender's Commitment. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Revolving Loans. SECTION 2.02. Loans and Borrowings. (a) Each Revolving Loan shall be made as part of a Borrowing consisting of Revolving Loans made by the Lenders ratably in accordance with their respective Commitments. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender's failure to make Loans as required. (b) Subject to Section 2.12, each Revolving Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request in accordance herewith. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement. (c) At the commencement of each Interest Period for any Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $5,000,000 and not less than $25,000,000 (or, if less, the unused portion of the Commitments). Borrowings of more than one Type may be outstanding at the same time; provided that there shall not at any time be more than a total of 10 Eurodollar Revolving Borrowings outstanding. (d) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date. 23 SECTION 2.03. Requests for Revolving Borrowings. To request a Revolving Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 11:00 a.m., New York City time, on the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in a form approved by the Administrative Agent and signed by the Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02: (i) the aggregate amount of the requested Borrowing; (ii) the date of such Borrowing, which shall be a Business Day; (iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; (iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Interest Period"; and (v) the location and number of the Borrower's account to which funds are to be disbursed, which shall comply with the requirements of Section 2.05. If no election as to the Type of Revolving Borrowing is specified, then the requested Revolving Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Revolving Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing. SECTION 2.04. Reserved. SECTION 2.05. Funding of Borrowings. (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 12:00 noon, New York City time, to the account of the Administrative Agent most recently designated by it for such purpose by 24 notice to the Lenders. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower maintained with the Administrative Agent in New York City and designated by the Borrower in the applicable Borrowing Request. (b) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the Federal Funds Effective Rate or (ii) in the case of the Borrower, the interest rate applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender's Loan included in such Borrowing. SECTION 2.06. Interest Elections. (a) Each Revolving Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Revolving Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Revolving Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. (b) To make an election pursuant to this Section, the Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Revolving Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the Borrower. 25 (c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02: (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; (iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Revolving Borrowing; and (iv) if the resulting Borrowing is a Eurodollar Revolving Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period". If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. (d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender's portion of each resulting Borrowing. (e) If the Borrower fails to deliver a timely Interest Election Request with respect to a Eurodollar Revolving Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Majority Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing (i) no outstanding Revolving Borrowing may be converted to or continued as a Eurodollar Revolving Borrowing and (ii) unless repaid, each Eurodollar Revolving Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto. SECTION 2.07. Termination and Reduction of Commitments. (a) Unless previously terminated, the Commitments shall terminate on the Maturity Date. 26 (b) The Borrower may at any time terminate, or from time to time reduce, the Commitments; provided that (i) each reduction of any Commitments shall be in an amount that is an integral multiple of $5,000,000 and not less than $25,000,000 and (ii) the Borrower shall not terminate or reduce any Commitments if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 2.09, the sum of the total Revolving Credit Exposures would exceed the total Commitments. (c) The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Commitments under paragraph (b) of this Section at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination of the Commitments delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments shall be permanent. Each reduction of the Commitments shall be made ratably among the Lenders in accordance with their respective Commitments. SECTION 2.08. Repayment of Loans; Evidence of Debt. (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Lender with a Commitment the then unpaid principal amount of such Lender's Revolving Loans on the Maturity Date. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof. (d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence 27 and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement. (e) Any Lender may request that Loans made by it be evidenced by a promissory note. In such event, the Borrower shall prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 9.04) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns). SECTION 2.09. Prepayment of Loans. (a) The Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to prior notice in accordance with paragraph (b) of this Section. (b) The Borrower shall notify the Administrative Agent by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Revolving Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of prepayment or (ii) in the case of prepayment of an ABR Revolving Borrowing, not later than 11:00 a.m., New York City time, one Business Day before the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid; provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.07, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.07. Promptly following receipt of any such notice relating to a Revolving Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Revolving Borrowing shall be in an amount that would be permitted in the case of an advance of a Revolving Borrowing of the same Type as provided in Section 2.02. Each prepayment of a Revolving Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.11. SECTION 2.10. Fees. (a) The Borrower agrees to pay to the Administrative Agent for the account of each Lender a commitment fee, which shall accrue at the Applicable Rate on the daily amount by which such Lender's Commitment exceeds the aggregate amount of such Lender's outstanding Loans 28 during the period from and including the date hereof to but excluding the date on which such Commitment terminates. Accrued commitment fees shall be payable in arrears on the last day of March, June, September and December of each year and on the date on which the Commitments terminate, commencing on the first such date to occur after the date hereof. All commitment fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). (b) The Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Borrower and the Administrative Agent. (c) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, in the case of facility fees, to the Lenders. Fees paid shall not be refundable under any circumstances. SECTION 2.11. Interest. (a) The Loans comprising each ABR Borrowing shall bear interest at a rate per annum equal to the Alternate Base Rate plus the Applicable Rate. (b) The Loans comprising each Eurodollar Borrowing shall bear interest at a rate per annum equal to the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate. (c) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided above or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Loans as provided above. (d) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan; provided that (i) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan prior to the end of the Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment, (iii) in the event of any conversion of any Eurodollar Revolving Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion 29 and (iv) all accrued interest shall be payable upon termination of the Commitments. (e) All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. SECTION 2.12. Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Eurodollar Borrowing: (a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate for such Interest Period; or (b) the Administrative Agent is advised by the Majority Lenders that the Adjusted LIBO Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period; then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Revolving Borrowing to, or continuation of any Revolving Borrowing as, a Eurodollar Borrowing shall be ineffective, and (ii) if any Borrowing Request requests a Eurodollar Revolving Borrowing, such Borrowing shall be made as an ABR Borrowing. SECTION 2.13. Increased Costs. (a) If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate); or (ii) impose on any Lender or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such Lender or any participation therein; 30 and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered. (b) If any Lender determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's capital or on the capital of such Lender's holding company, if any, as a consequence of this Agreement or the Loans made by such Lender, to a level below that which such Lender or such Lender's holding company could have achieved but for such Change in Law (taking into consideration such Lender's policies and the policies of such Lender's holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or such Lender's holding company, as the case may be, such additional amount or amounts as will compensate such Lender or such Lender's holding company for any such reduction suffered. (c) A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 15 days after receipt thereof. (d) Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender's right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender (or such Lender's holding company) pursuant to this Section for any increased costs or reductions incurred more than ninety days prior to the date that such Lender notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender's intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the ninety-day period referred to above shall be extended to include the period of retroactive effect thereof. SECTION 2.14. Break Funding Payments. In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of the Interest Period 31 applicable thereto, (c) the failure to borrow any Eurodollar Loan, convert any ABR Loan into a Eurodollar Loan, continue any Eurodollar Loan or prepay any Eurodollar Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice is permitted to be revocable under Section 2.09(b) and is revoked in accordance herewith), or (d) the assignment of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 2.17, then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurodollar Loan, the loss to any Lender attributable to any such event shall be deemed to include an amount determined by such Lender to be equal to the excess, if any, of (i) the amount of interest that such Lender would pay for a deposit equal to the principal amount of such Loan for the period from the date of such payment, conversion, failure or assignment to the last day of the then current Interest Period for such Loan (or, in the case of a failure to borrow, convert or continue, the duration of the Interest Period that would have resulted from such borrowing, conversion or continuation) if the interest rate payable on such deposit were equal to the Adjusted LIBO Rate for such Interest Period, over (ii) the amount of interest that such Lender would earn on such principal amount for such period if such Lender were to invest such principal amount for such period at the interest rate that would be bid by such Lender (or an affiliate of such Lender) for Dollar deposits from other banks in the eurodollar market at the commencement of such period. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 15 days after receipt thereof. SECTION 2.15. Taxes. (a) Any and all payments by or on account of any obligation of the Borrower hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent or Lender (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. 32 (c) The Borrower shall indemnify the Administrative Agent and each Lender, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Administrative Agent or such Lender, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender, or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error. (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent. (e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by the Borrower, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate. The Borrower shall not be obligated to make any payments to a Foreign Lender pursuant to Section 2.15(a) to the extent that such Indemnified Taxes or Other Taxes became payable as a consequence of such Foreign Lender having failed to comply with this Section 2.15(e). (f) If any Lender shall become aware that it is entitled to receive a refund or credit (such credit to include any increase in any foreign tax credit) as a result of Indemnified Taxes (including any penalties or interest with respect thereto) as to which it has been indemnified by the Borrower pursuant to this Section 2.15, it shall promptly notify the Borrower of the availability of such refund or credit and shall, within 30 days after receipt of a request by the Borrower, apply for such refund or credit at the Borrower's expense, and in the case of any application for such refund or credit by the Borrower, shall, if legally able to do so, deliver to the Borrower such certificates, forms or other documentation as may be reasonably necessary to assist the Borrower in such application. If any Lender receives a refund or credit (such credit to include any 33 increase in any foreign tax credit) in respect to any Indemnified Taxes as to which it has been indemnified by the Borrower pursuant to this Section 2.15, it shall promptly notify the Borrower of such refund or credit and shall, within 30 days after receipt of such refund or the benefit of such credit (such benefit to include any reduction of the taxes for which any Lender would otherwise be liable due to any increase in any foreign tax credit available to such Lender), repay the amount of such refund or benefit of such credit (with respect to the credit, as determined by the Lender in its sole judgment) to the Borrower (to the extent of amounts that have been paid by the Borrower under this Section 2.15 with respect to Indemnified Taxes giving rise to such refund or credit), plus any interest received with respect thereto, net of all reasonable out-of-pocket expenses of such Lender and without interest (other than interest actually received from the relevant taxing authority or other Governmental Authority with respect to such refund or credit); provided, however, that the Borrower, upon the request of such Lender, agrees to return the amount of such refund or benefit of such credit (plus interest) to such Lender in the event such Lender is required to repay the amount of such refund or benefit of such credit to the relevant taxing authority or other Governmental Authority. SECTION 2.16. Payments Generally; Pro Rata Treatment; Sharing of Set-offs. (a) The Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees, or under Section 2.13, 2.14 or 2.15, or otherwise) prior to 12:00 noon, New York City time, on the date when due, in immediately available funds, without set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices at 60 Wall Street, New York, New York, except that payments pursuant to Sections 2.13, 2.14, 2.15 and 9.03 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in Dollars. (b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, interest and fees then due hereunder, such funds shall be applied (i) first, to pay interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, to pay 34 principal then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties. (c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Revolving Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Revolving Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation. (d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the Federal Funds Effective Rate. (e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.05(b) or 2.16(d), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to 35 satisfy such Lender's obligations under such Sections until all such unsatisfied obligations are fully paid. SECTION 2.17. Mitigation Obligations; Replacement of Lenders. (a) If any Lender requests compensation under Section 2.13, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.15, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, or to file any certificate or document reasonably requested by the Borrower, if, in the judgment of such Lender, such designation or assignment or filing (i) would eliminate or reduce amounts payable pursuant to Section 2.13 or 2.15, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. (b) If any Lender requests compensation under Section 2.13, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.15, or if any Lender defaults in its obligation to fund Loans hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.13 or payments required to be made pursuant to Section 2.15, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. A Lender shall not be required to pay any fee to the Administrative Agent in connection with such assignment and delegation (any such fee to be paid by the Borrower or the assignee). 36 ARTICLE 3 REPRESENTATIONS AND WARRANTIES Representations and Warranties The Borrower represents and warrants to the Lenders (including, in the case of any representation and warranty made or deemed made before the consummation of the Acquisition, at the time such representation and warranty is made or deemed made and immediately after giving effect to the consummation of the Acquisition) that: SECTION 3.01. Organization; Powers. Each of the Borrower and its Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required. SECTION 3.02. Authorization; Enforceability. The Transactions are within the Borrower's corporate powers and have been duly authorized by all necessary corporate and, if required, stockholder action. Each of this Agreement and the other documents executed and delivered in connection with the Transactions, has been duly executed and delivered by the Borrower and constitutes a legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law. SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except such consents, approvals, registrations or filings as have been obtained or made and are in full force and effect, (b) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of the Borrower or any of its Subsidiaries or any order of any Governmental Authority, (c) will not violate or result in a default under (i) any indenture, agreement or instrument relating to the Existing Public Debt or the Medium Term Notes or (ii) any other indenture, agreement or other instrument binding upon the Borrower or any of its Subsidiaries or its assets, other than defaults or violations for which consents or waivers have been obtained or, 37 solely with respect to any indenture, agreement or instrument described in clause (ii), which defaults or violations, individually or in the aggregate could not reasonably be expected to result in a Material Adverse Effect, (d) will not give rise to a right under any indenture, agreement or other instrument binding upon the Borrower or any of its Subsidiaries or its assets to require any payment to be made by the Borrower or any of its Subsidiaries other than any payments contemplated to be made in connection with the Transactions, and (e) will not result in the creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries SECTION 3.04. Financial Condition; No Material Adverse Change. (a) The Borrower has heretofore furnished to the Lenders its consolidated balance sheet and statements of income, stockholders equity and cash flows (i) as of and for the Fiscal Year ended January 2, 1999, reported on by PricewaterhouseCoopers LLP, independent public accountants, and (ii) as of and for the fiscal quarter and the portion of the Fiscal Year ended September 11, 1999, certified by its Financial Officer. Such financial statements present fairly, in all material respects, the financial condition and results of operations and cash flows of Borrower and its Consolidated Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to year-end audit adjustments and the absence of footnotes in the case of the statements referred to in clause (ii) above. (b) Since June 19, 1999, there has been no Material Adverse Change in the business, assets, operations, prospects or condition, financial or otherwise, of the Borrower and its Subsidiaries, taken as a whole. SECTION 3.05. Properties. (a) Each of the Borrower and its Subsidiaries has good title to, or valid leasehold interests in, all its real and personal property material to its business, except for defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties for their intended purposes and except as may be permitted pursuant to Section 6.01. (b) Each of the Borrower and its Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to its business, and the use thereof by the Borrower and its Subsidiaries does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 3.06. Litigation and Environmental Matters. (a) There are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of the Borrower, threatened 38 against or affecting the Borrower or any of its Subsidiaries or that involve this Agreement or the Transactions as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect (other than the Disclosed Matters). (b) Except for the Disclosed Matters and except with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, neither the Borrower nor any of its Subsidiaries (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability. (c) Since the date of this Agreement, there has been no change in the status of the Disclosed Matters that, individually or in the aggregate, has resulted in, or materially increased the likelihood of, a Material Adverse Effect. SECTION 3.07. Compliance with Laws and Agreements. Each of the Borrower and its Subsidiaries is in compliance with all laws, regulations and orders of any Governmental Authority applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is continuing. SECTION 3.08. Investment and Holding Company Status. Neither the Borrower nor any of its Subsidiaries is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. SECTION 3.09. Taxes. Each of the Borrower and its Subsidiaries has timely filed or caused to be filed all Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which the Borrower or such Subsidiary, as applicable, has set aside on its books reserves as and to the extent required by GAAP or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect. 39 SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $8,000,000 the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $15,000,000 the fair market value of the assets of all such underfunded Plans. SECTION 3.11. Disclosure. The Borrower has disclosed to the Lenders all agreements, instruments and corporate or other restrictions to its knowledge to which it or any of its Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. None of the reports, financial statements, certificates or other information furnished by or on behalf of the Borrower to the Administrative Agent or any Lender in connection with the negotiation of this Agreement or delivered hereunder (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time. Any forward looking statements contained therein are inherently subject to risk and uncertainties, many of which cannot be predicted with accuracy, and some of which might not be anticipated. Future events and actual results, financial and otherwise, could differ materially from those set forth therein or contemplated by the forward looking statements contained therein. SECTION 3.12. Margin Stock. Not more than 25% of the consolidated assets of the Borrower consists of "margin stock" within the meaning of such term under Regulation U of the Board of Governors of the Federal Reserve System. SECTION 3.13. No Burdensome Restrictions. No Requirement of Law or Contractual Obligation of the Borrower or any of its Subsidiaries could reasonably be expected to have a Material Adverse Effect. SECTION 3.14. Subsidiaries. Schedule 3.14 sets forth all of the Subsidiaries of the Borrower at the date hereof. 40 SECTION 3.15. Solvency. As of the date hereof and on the occasion of any Borrowing, the Borrower is Solvent. SECTION 3.16. Year 2000 Matters. Any reprogramming required to permit the proper functioning (but only to the extent that such functioning would otherwise be impaired by the occurrence of the year 2000) in and following the year 2000 of computer systems and other equipment containing embedded microchips, in either case owned or operated by the Borrower or any of its Subsidiaries has been substantially completed. The costs to the Borrower and its Subsidiaries that have not been incurred as of the date hereof for such reprogramming and testing and for the other reasonably foreseeable consequences to them of any improper functioning of other computer systems and equipment containing embedded microchips due to the occurrence of the year 2000 could not reasonably be expected to result in a Default or Event of Default or to have a Material Adverse Effect. The computer systems of the Borrower and its Subsidiaries are and, with ordinary course of upgrading and maintenance, will continue for the term of this Agreement to be sufficient for the conduct of their business as currently conducted. SECTION 3.17. Acquisition Documents. As of the Acquisition Date, each of the representations and warranties made in the Acquisition Documents by each of the parties thereto is true and correct in all material respects, and such representations and warranties are hereby incorporated herein by reference with the same effect as though set forth in their entirety herein, as qualified therein. ARTICLE 4 CONDITIONS TO FUNDING SECTION 4.01. Effective Date. The obligations of the Lenders to make Loans hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 9.02): (a) The Administrative Agent shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement. (b) The Administrative Agent shall have received a favorable written opinion (addressed to the Administrative Agent and the Lenders and dated the Effective Date) of Akin, Gump, Strauss, Hauer & Feld, L.L.P., counsel for the Borrower, substantially in the form of Exhibit B-1, and covering such other matters relating to the Borrower, this Agreement or the Transactions as the 41 Majority Lenders shall reasonably request. The Borrower hereby requests such counsel to deliver such opinion. (c) The Administrative Agent shall have received evidence satisfactory to it that the commitments under the Credit Agreement dated as of December 14, 1998 among Food Lion, Inc., the lenders party thereto, The Chase Manhattan Bank and Wachovia Bank, N.A shall have terminated and all loans outstanding thereunder, together with accrued and unpaid interest thereon, and all fees and expenses payable thereunder, shall have been, or shall contemporaneously with the occurrence of the Effective Date be, paid in full. (d) The Administrative Agent shall have received such other legal opinions, documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of the Borrower, the authorization of the Transactions and any other legal matters relating to the Borrower, this Agreement or the Transactions, all in form and substance satisfactory to the Administrative Agent and its counsel. (e) All governmental and third party approvals necessary in connection with the Transactions and the continuing operations of the Borrower and its Subsidiaries shall have been obtained and be in full force and effect. (f) The Administrative Agent shall have received a certificate, dated the Effective Date and signed by the President, a Vice President or a Financial Officer of the Borrower, confirming compliance with the conditions set forth in paragraphs (a) and (b) of Section 4.02. (g) The Lenders and the Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder. (h) There shall be no actions, suits or proceedings by or before any arbitrator or Governmental Authority, or any other legal or regulatory developments pending against or, to the knowledge of the Borrower, threatened against the Borrower or any of its Subsidiaries or which involve this Agreement or the Transactions, which, in the reasonable judgment of the Administrative Agent, may prohibit or impose burdensome conditions on the Transactions contemplated hereby. The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the Lenders to make Loans hereunder shall not 42 become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 9.02) at or prior to 3:00 p.m., New York City time, on August 17, 2000 (and, in the event such conditions are not so satisfied or waived, the Commitments shall terminate at such time). SECTION 4.02. Each Credit Event. The obligation of each Lender to make a Loan on the occasion of any Borrowing (including without limitation on the date of the first Borrowing hereunder) is subject to the satisfaction of the following conditions (or waiver thereof in accordance with Section 9.02): (a) The representations and warranties of the Borrower set forth in this Agreement shall be true and correct on and as of the date of such Borrowing, including, without limitation, the representations and warranties set forth in Sections 3.04 and 3.06, except to the extent such representations and warranties expressly relate to an earlier date. (b) At the time of and immediately after giving effect to such Borrowing, no Default or Event of Default shall have occurred and be continuing. Each Borrowing shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in paragraphs (a) and (b) of this Section. ARTICLE 5 AFFIRMATIVE COVENANTS Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder shall have been paid in full, the Borrower covenants and agrees with the Lenders that: SECTION 5.01. Financial Statements and Other Information. The Borrower will furnish to the Administrative Agent and each Lender: (a) within 105 days after the end of each Fiscal Year, its audited consolidated balance sheet and related statements of operations, stockholders' equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures as of the end of and for the previous Fiscal Year, all reported on by PricewaterhouseCoopers LLP or other independent public accountants of recognized national standing (without a "going concern" or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of 43 operations of the Borrower and its Consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied; (b) within 60 days after the end of each of the first three fiscal quarters of each Fiscal Year, its consolidated balance sheet and related statements of operations, stockholders' equity and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the Fiscal Year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous Fiscal Year, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its Consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes; (c) concurrently with any delivery of financial statements under clause (a) or (b) above, a certificate of a Financial Officer of the Borrower (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations of the financial covenants set forth in Sections 6.02, 6.07 and 6.08 and (iii) stating whether any change in GAAP or in the application thereof has occurred since the date of the audited financial statements referred to in Section 3.04(a) and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate; (d) concurrently with any delivery of financial statements under clause (a) above, a certificate of the accounting firm that reported on such financial statements stating whether they obtained knowledge during the course of their examination of such financial statements of any Default (which certificate may be limited to the extent required by accounting rules or guidelines); (e) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed (excluding exhibits) by the Borrower or any Subsidiary with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, or distributed by the Borrower to its shareholders generally, as the case may be; and (f) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Borrower or any Subsidiary, or compliance with the terms of this Agreement, as the 44 Administrative Agent or any Lender through the Administrative Agent may reasonably request. SECTION 5.02. Notices of Material Events. The Borrower will furnish to the Administrative Agent and each Lender prompt written notice of the following: (a) the occurrence of any Default; (b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Borrower or any Affiliate thereof that, if adversely determined, could reasonably be expected to result in a Material Adverse Effect; (c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and its Subsidiaries in an aggregate amount exceeding $20,000,000 subsequent to the date hereof; and (d) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect. Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other executive officer of the Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto. SECTION 5.03. Existence; Conduct of Business. The Borrower will, and will cause each of its Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges and franchises material to the conduct of the business of the Borrower and its Subsidiaries taken as a whole except to that extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 6.03. SECTION 5.04. Payment of Obligations. The Borrower will, and will cause each of its Subsidiaries to, pay its obligations, including Tax liabilities, that, if not paid, could result in a Material Adverse Effect before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) the Borrower or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect. 45 SECTION 5.05. Maintenance of Properties; Insurance. The Borrower will, and will cause each of its Subsidiaries to, (a) keep and maintain all property material to the conduct of its business in adequate working order and condition, ordinary wear and tear excepted, and (b) maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations. SECTION 5.06. Books and Records; Inspection Rights. The Borrower will, and will cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities. The Borrower will, and will cause each of its Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested. SECTION 5.07. Compliance with Laws and Material Contractual Obligations. The Borrower will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property and all material Contractual Obligations, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect; provided that the foregoing shall not be construed to prevent the Borrower or any such Subsidiary from contesting any of the same by appropriate proceedings. SECTION 5.08. Use of Proceeds. The proceeds of the Loans will be used only (i) to refinance existing Indebtedness of the Borrower and its Subsidiaries and (ii) for general corporate purposes of the Borrower and its Subsidiaries, including as credit support for the Borrower's commercial paper programs. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations U and X. SECTION 5.09. Change in Ratings. The Borrower will furnish to the Administrative Agent and each Lender prompt written notice of any change in ratings established or deemed to have been established by Moody's and S&P for any of its indebtedness for borrowed money, including, without limitation, the Index Debt or its senior, unsecured, short-term indebtedness for borrowed money (including, without limitation, commercial paper). 46 SECTION 5.10. Copies of Other Bank Agreements. Promptly upon entering into the Bridge Agreement or the 5-Year Agreement, the Borrower will deliver to each Lender (other than a Lender who is a party to such Bridge Agreement or 5-Year Agreement) a true, correct and complete copy thereof. ARTICLE 6 NEGATIVE COVENANTS Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees payable hereunder have been paid in full, the Borrower covenants and agrees with the Lenders that: SECTION 6.01. Liens. The Borrower will not, and will not permit any Subsidiary to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except: (a) Permitted Encumbrances; (b) any Lien on any property or asset of the Borrower or any Subsidiary existing on the date hereof and set forth on Schedule 6.01 or resulting from operating leases existing on the date hereof being reclassified as capital leases in accordance with GAAP; provided that (i) such Lien shall not apply to any other property or asset (other than accessions, modifications and proceeds thereof) of the Borrower or any Subsidiary and (ii) such Lien shall secure only those obligations which it secures on the date hereof and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof; (c) any Lien existing on any property or asset prior to the acquisition thereof by the Borrower or any Subsidiary or existing on any property or asset of any Person that becomes a Subsidiary on or after the date hereof prior to the time such Person becomes a Subsidiary; provided that (i) such Lien is not created in contemplation of or in connection with such acquisition or such Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not apply to any other property or assets (other than accessions, modifications and proceeds thereof) of the Borrower or any Subsidiary and (iii) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such Person becomes a Subsidiary, as the case may be and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof; 47 (d) Liens on fixed or capital assets acquired, constructed or improved by the Borrower or any Subsidiary; provided that (i) such Liens and the Indebtedness secured thereby are incurred prior to or within 180 days after such acquisition or the completion of such construction or improvement, (ii) the Indebtedness secured thereby does not exceed 100% of the cost of acquiring, constructing or improving such fixed or capital assets and (iii) such Liens shall not apply to any other property or assets (other than accessions, modifications and proceeds thereof) of the Borrower or any Subsidiary; and (e) Liens not otherwise permitted pursuant to this Section 6.01 securing Indebtedness of the Borrower or any Subsidiary (not otherwise prohibited hereunder) in an aggregate principal amount at no time exceeding (i) $30,000,000 minus (ii) the aggregate principal amount of Indebtedness of Subsidiaries permitted solely by clause (e) of Section 6.02 outstanding at such time. SECTION 6.02. Indebtedness of Subsidiaries. The Borrower will not permit any Subsidiary to create, incur, assume, become liable in respect of or suffer to exist any Indebtedness, except to the extent otherwise permitted hereunder: (a) Indebtedness (including, without limitation, Capital Lease Obligations) secured by Liens permitted under Section 6.01(b); (b) (i) Indebtedness (including, without limitation, Capital Lease Obligations) secured by Liens permitted under Section 6.01(c) in an aggregate principal amount not to exceed $140,000,000, (ii) Indebtedness (other than Indebtedness permitted by clause (i)) consisting of Capital Lease Obligations and (iii) on and after the date on which Bel-Thai Supermarket Company Ltd. ("Bel- Thai") becomes a Subsidiary, Indebtedness of Bel-Thai in an aggregate principal amount not exceeding $60,000,000; (c) Indebtedness of any Subsidiary owed to the Borrower or any other Subsidiary; (d) Indebtedness of the Target and its subsidiaries outstanding on the Acquisition Date and not incurred in contemplation of the Acquisition; and (e) additional Indebtedness of the Subsidiaries in an aggregate principal amount (for all Subsidiaries) at no time exceeding (i) $30,000,000 minus (ii) the aggregate principal amount of Indebtedness secured by Liens permitted solely by clause (e) of Section 6.01 outstanding at such time; 48 provided that at any date the aggregate amount of Capital Lease Obligations of all Subsidiaries (other than any such Capital Lease Obligations incurred in reliance on clause (i) of subsection (b)) and the aggregate amount of Capital Lease Obligations of the Borrower will not exceed $1,000,000,000. SECTION 6.03. Fundamental Changes. (a) The Borrower will not, and will not permit any Subsidiary to, merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or substantially all of the assets of the Borrower and its Subsidiaries taken as a whole (whether now owned or hereafter acquired), or liquidate or dissolve, except that, if at the time thereof and immediately after giving effect thereto no Default shall have occurred and be continuing (i) the Borrower may merge into any other Person in a transaction in which the Borrower is the surviving corporation, (ii) any Subsidiary may merge into the Borrower in a transaction in which the Borrower is the surviving corporation, (iii) any Subsidiary may merge into any Subsidiary in a transaction in which the surviving entity is a Subsidiary, (iv) any Subsidiary may merge into any other Person in a transaction in which the surviving entity is a Subsidiary or in a transaction permitted by Section 6.09 and in which the surviving Person is not a Subsidiary, (v) any Subsidiary may sell, transfer, lease or otherwise dispose of its assets to the Borrower or to another Subsidiary or in a transaction not constituting all or substantially all of the assets of the Borrower and its Subsidiaries taken as a whole and which is permitted by Section 6.08, (vi) Acquisition Sub may consummate the Merger, (vii) subject to Section 10.01, the Borrower and its Subsidiaries may consummate the Reorganization and (viii) any Subsidiary may liquidate or dissolve if the Borrower determines in good faith that such liquidation or dissolution is in the best interests of the Borrower and is not materially disadvantageous to the Lenders; provided that any such merger involving a Person that is not a wholly owned Subsidiary immediately prior to such merger shall not be permitted unless also permitted by Section 6.04. (b) The Borrower will not, and will not permit any of its Subsidiaries to, engage to any material extent in any business other than businesses of the type conducted by the Borrower and its Subsidiaries and Hannaford and its subsidiaries on the date of execution of this Agreement and businesses reasonably related or incidental thereto. SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions; Hedging Agreements. (a) The Borrower will not, and will not permit any of its Subsidiaries to, purchase, hold or acquire (including pursuant to any merger with any Person that was not a wholly owned Subsidiary prior to such merger) any capital stock, evidences of Indebtedness or other securities (including 49 any option, warrant or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, guarantee any obligations of, or make or permit to exist any investment or any other interest in, any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person constituting a business unit, except: (i) Cash Equivalents; (ii) extensions of trade credit in the ordinary course of business; (iii) investments arising from the settlement of debts or as a result of bankruptcy or insolvency proceedings or as a result of enforcement proceedings; (iv) investments of the Borrower and the Subsidiaries existing on the date hereof; (v) investments by the Borrower existing on the date hereof in the capital stock of its Subsidiaries; (vi) loans, advances and other investments made by the Borrower to or in any Subsidiary and made by any Subsidiary to or in the Borrower or any other Subsidiary; (vii) Guarantees to the extent that the resulting Debt would be permitted by Section 6.08 and, if applicable, Section 6.02; (viii) the acquisition of the capital stock of the Target pursuant to the Acquisition Documents; (ix) investments of the Target and its subsidiaries (i) existing on the date hereof or (ii) made after the date hereof and prior to the Acquisition Date, so long as such investments are permitted to be made by the terms of the Merger Agreement; (x) at any time on or after the Bridge Payout Date, acquisitions of a Person or the assets of a Person constituting a business unit in the same line of business conducted by the Borrower on the date hereof in an aggregate amount not to exceed $600,000,000 over the term of this Agreement; provided that acquisitions of equity interests in a Person which do not result in such Person constituting a Subsidiary shall not exceed an aggregate amount of $200,000,000; and 50 (xi) investments not otherwise permitted pursuant to this Section 6.04 in an aggregate amount not to exceed $20,000,000 at any time outstanding. (b) The Borrower will not, and will not permit any of its Subsidiaries to, enter into any Hedging Agreement, other than (i) Hedging Agreements entered into in the ordinary course of business to hedge or mitigate risks to which the Borrower or any Subsidiary is exposed in the conduct of its business or the management of its liabilities, (ii) any Hedging Agreements to hedge interest rate risk with respect to the loans outstanding under the Bridge Agreement and (iii) Hedging Agreements constituting "treasury-locks" or similar hedging arrangements entered into by the Borrower in anticipation of an issuance of Debt by the Borrower pursuant to a capital markets transaction. SECTION 6.05. Transactions with Affiliates. The Borrower will not, and will not permit any of its Subsidiaries to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except (a) in the ordinary course of business at prices and on terms and conditions not less favorable to the Borrower or such Subsidiary than could be obtained on an arm's-length basis from unrelated third parties and (b) transactions between or among the Borrower and its wholly owned Subsidiaries not involving any other Affiliate. SECTION 6.06. Reserved. SECTION 6.07. Fixed Charges Coverage. At the end of each Fiscal Quarter set forth below, the ratio of (i) Consolidated EBITDAR for the period of four Fiscal Quarters then ended to (ii) Consolidated Fixed Charges for such period, shall not have been less than the ratio set forth below opposite such Fiscal Quarter (subject to the proviso set forth below): Period Ratio ------ ----- First Fiscal Quarter ended on or immediately after the 2.25:1 Effective Date - Third Fiscal Quarter 2001 Fourth Fiscal Quarter 2001 - Third Fiscal Quarter 2002 2.50:1 Fourth Fiscal Quarter 2002 - Third Fiscal Quarter 2003 2.75:1 Fourth Fiscal Quarter 2003 and thereafter 3.00:1 51 ; provided that at the end of any Fiscal Quarter ended prior to the Acquisition Date, such ratio shall not have been less than 3:00:1. SECTION 6.08. Ratio of Consolidated Adjusted Debt to Consolidated EBITDAR. At no date will the ratio of (i) Consolidated Adjusted Debt at such date to (ii) Consolidated EBITDAR for the period of four consecutive Fiscal Quarters ended on or most recently prior to such date exceed the ratio set forth below opposite the period in which such date falls (subject to the provisio set forth below): Period Ratio ------ ----- Effective Date - day immediately preceding last day of 4.50:1 Fourth Fiscal Quarter 2001 Last day of Fourth Fiscal Quarter 2001- day immediately 4.00:1 preceding last day of Fourth Fiscal Quarter 2002 Last day of Fourth Fiscal Quarter 2002 - day immediately 3.75:1 preceding last day of Fourth Fiscal Quarter 2003 Last day of Fourth Fiscal Quarter 2003 and thereafter 3.50:1 ; provided that at any date prior to the Acquisition Date, such ratio will not exceed 3:00:1. SECTION 6.09. Limitation on Sales of Assets. The Borrower will not, nor will it permit any Subsidiary to, convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets, whether now owned or hereafter acquired, or discontinue or eliminate any business line or segment, except: (a) the sale or other disposition of obsolete, surplus or worn out property in the ordinary course of business; (b) the sale of inventory in the ordinary course of business; (c) as permitted by Section 6.03(a); (d) (i) sales of assets in a single transaction or in a series of related transactions the aggregate book value of which is not greater than $25,000,000 in any one such transaction or series of related transactions and (ii) sales of assets the consummation of which is an express condition (either precedent or subsequent) to the approval by the Federal Trade Commission of the Acquisition; provided that the book value of the assets disposed of in assets sales consummated in 52 reliance on this clause (ii) does not exceed $258,000,000 and provided, further that if, within 180 days of any such assets sales, the Borrower or any Subsidiary acquires similar assets having a use similar to and a fair market value at least equal to the assets sold, then the value of the assets sold shall not be included in calculating future assets sales permitted under this Section 6.09; (e) dispositions and discontinuances of a business line or segment not otherwise permitted pursuant to this Section 6.09, provided that the aggregate assets to be so disposed of or the aggregate assets utilized in a business line or segment to be so discontinued (in a single transaction or in a series of related transactions), when combined with all other assets disposed of (including, without limitation, pursuant to a sale and leaseback transaction) and all other assets utilized in all other business lines or segments discontinued, during the period from the date of this Agreement through and including the date of any such disposition or discontinuation would not exceed 5% of Consolidated Total Assets as determined by reference to the Borrower's most recently audited financial statements provided to the Administrative Agent and the Lenders pursuant to Section 5.01(a) and provided, further that if, within 180 days of the sale of any assets, the Borrower or any Subsidiary acquires similar assets having a use similar to and a fair market value at least equal to the assets so sold, then the value of the assets sold shall not be included in calculating future assets permitted to be sold under this Section 6.09; and (f) conveyances, sales, leases, assignments, transfers or other dispositions of assets from the Borrower to a wholly owned Subsidiary (including without limitation pursuant to the Reorganization), from a Subsidiary to the Borrower or from a Subsidiary to a wholly owned Subsidiary. SECTION 6.10. Modifications to Acquisition Documents. The Borrower will not, and will not permit any of its Subsidiaries to, enter into any amendment, modification or waiver of any material term or condition of any Acquisition Document without the prior written consent of the Majority Lenders. SECTION 6.11. Restrictions Affecting Subsidiaries. The Borrower will not, and will not permit any of its Subsidiaries to, enter into, be bound by or suffer to exist any encumbrance or restriction on the ability of any Subsidiary to (a) pay dividends or make other distributions or pay any Debt or Indebtedness owed to the Borrower or any Subsidiary, (b) make loans or advances to the Borrower or any Subsidiary, (c) transfer any of its properties or assets to the Borrower or any Subsidiary, (d) create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, (e) Guarantee any Debt or Indebtedness of the Borrower or another Subsidiary or (f) suffer to exist any Lien on capital stock or other equity interests issued by it; 53 except for any such encumbrance or restriction existing under or by reason of (i) any agreement in effect on the Effective Date as any such agreement is in effect on such date, (ii) this Agreement, (iii) any agreement with respect to Indebtedness of any Subsidiary permitted to be incurred under Section 6.02(b) or secured by a Lien permitted to be incurred under Section 6.01(d) and provided such encumbrance or restriction shall not apply to any assets of the Borrower or its Subsidiaries other than the assets of such Subsidiary subject to such Lien, (iv) any agreement binding upon such Subsidiary prior to the date on which such Subsidiary was acquired by the Borrower and outstanding on such date and provided such encumbrance or restriction shall not apply to any assets of the Borrower or its Subsidiaries other than such Subsidiary, (v) customary provisions restricting subletting or assignment of any lease governing any leasehold interest of any Subsidiary, (vi) applicable law, (vii) licenses or other agreements, including with respect to property, in the ordinary course of business consistent with prior practice and (viii) any agreement binding upon such Subsidiary so long as such encumbrance or restriction is no more restrictive than those contained in this Agreement. ARTICLE 7 EVENTS OF DEFAULT SECTION 7.01. Events of Default. If any of the following events ("Events of Default") shall occur: (a) the Borrower shall fail to pay any principal of any Loan when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise; (b) the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in clause (a) of this Section) payable under this Agreement, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of five days; (c) any representation or warranty made or deemed made by or on behalf of the Borrower or any Subsidiary in or in connection with this Agreement or any amendment or modification hereof, or in any report, certificate, financial statement or other document delivered pursuant to this Agreement or any amendment or modification hereof, shall prove to have been incorrect in any material way when made or deemed made; (d) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 5.02, 5.03 (with respect to the Borrower's existence) or 5.08 or in Article 6; 54 (e) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in this Agreement (other than those specified in clause (a), (b) or (d) of this Article), and such failure shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent (given at the request of any Lender) to the Borrower; (f) the Borrower or any Subsidiary shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable; (g) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (g) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness; (h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower or any Subsidiary or their respective debts, or of a substantial part of their respective assets, under any federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Subsidiary or for a substantial part of their respective assets, and, in any such case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; (i) the Borrower or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Article, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Subsidiary or for a substantial part of their respective assets, (iv) file an answer admitting the material allegations of a petition filed against either of them in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing; 55 (j) the Borrower or any Subsidiary shall become unable, or admit in writing or fail generally, to pay their respective debts as they become due; (k) one or more judgments for the payment of money in an aggregate amount in excess of $10,000,000 shall be rendered against the Borrower, any Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, bonded or vacated, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of the Borrower or any Subsidiary to enforce any such judgment; (l) an ERISA Event shall have occurred that, in the opinion of the Majority Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect; or (m) a Change in Control shall occur; then, and in every such event (other than an event with respect to the Borrower described in clause (h) or (i) of this Article), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Majority Lenders shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; and in case of any event with respect to the Borrower described in clause (h) or (i) of this Article, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. 56 ARTICLE 8 THE ADMINISTRATIVE AGENT SECTION 8.01. The Administrative Agent. Each of the Lenders hereby irrevocably appoints the Administrative Agent as its agent and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof, together with such actions and powers as are reasonably incidental thereto. The bank serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder. The Administrative Agent shall not have any duties or obligations except those expressly set forth herein. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that the Administrative Agent is required to exercise in writing by the Majority Lenders, and (c) except as expressly set forth herein, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Majority Lenders or in the absence of its own gross negligence or wilful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by the Borrower or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement, (ii) the contents of any certificate, report or other document delivered hereunder or in connection herewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent. 57 The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. Subject to the appointment and acceptance of a successor Administrative Agent as provided in this paragraph, the Administrative Agent may resign at any time by notifying the Lenders and the Borrower. Upon any such resignation, the Majority Lenders shall have the right (so long as no Default has occurred and is continuing with consent of the Borrower which consent shall not be unreasonably withheld) to appoint a successor. If no successor shall have been so appointed by the Majority Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the Administrative Agent's resignation hereunder, the provisions of this Article and Section 9.03 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Administrative Agent. 58 Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any related agreement or any document furnished hereunder or thereunder. ARTICLE 9 MISCELLANEOUS SECTION 9.01. Notices. Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: (a) if to the Borrower, to it at 2110 Executive Drive, Salisbury, North Carolina 28145-1330, Attention of Richard James, Treasurer/Director of Finance (Telecopy No. 704-636-5024); (b) if to the Administrative Agent, J.P. Morgan Services Inc., 500 Stanton Christiana Road, Newark, Delaware 19713, Attention of Jeannie Mattson, Associate (Telecopy No. 302-634-1092); and (c) if to any other Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire. Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt. SECTION 9.02. Waivers; Amendments. (a) No failure or delay by the Administrative Agent or any Lender in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent and the Lenders hereunder are cumulative and are not 59 exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by the Borrower therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent or any Lender may have had notice or knowledge of such Default at the time. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Majority Lenders or by the Borrower and the Administrative Agent with the consent of the Majority Lenders; provided that no such agreement shall (i) increase the Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the scheduled date of payment of the principal amount of any Loan or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.16(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender adversely affected thereby, or (v) change any of the provisions of this Section or the definition of "Majority Lenders" or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent hereunder without the prior written consent of the Administrative Agent. SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent, and its Affiliates, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent in connection with the syndication of the credit facilities provided for herein, the preparation and administration of this Agreement or any amendments, modifications or waivers of the provisions hereof (whether or not the transactions contemplated hereby or thereby shall be consummated) and (ii) all reasonable out-of-pocket expenses incurred by the Administrative Agent or any Lender, including the fees, charges and disbursements of any counsel for the Administrative Agent or any Lender, in connection with the enforcement or protection of its rights in connection with this Agreement, including its rights under this Section, or in connection with the 60 Loans made hereunder, including in connection with any workout, restructuring or negotiations in respect thereof including, without limitation, actions in connection with this Agreement or the Loans, arising, occurring or continuing subsequent to the Maturity Date (other than any such expenses directly related to a court enforcement action in which the Borrower prevails on the merits in a final and nonappealable judgment). (b) The Borrower shall indemnify the Administrative Agent and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an "Indemnitee") against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement or any agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or the use of the proceeds therefrom, (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by the Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to the Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or wilful misconduct of such Indemnitee. (c) To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent such Lender's Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent in its capacity as such. (d) To the extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this 61 Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or the use of the proceeds thereof. (e) All amounts due under this Section shall be payable promptly after written demand therefor. SECTION 9.04. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that (i) except in the case of an assignment to a Lender or an Affiliate of a Lender, each of the Borrower and the Administrative Agent must give their prior written consent to such assignment (which consent shall not be unreasonably withheld), (ii) except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire remaining amount of the assigning Lender's Commitment, the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $10,000,000 unless each of the Borrower and the Administrative Agent otherwise consent, (iii) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500, and (iv) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire; provided further that any consent of the Borrower otherwise required under this paragraph shall not be required if an Event of Default under clause (h) or (i) of Article 7 has occurred and is continuing. Upon acceptance and recording pursuant to paragraph (d) of this Section, from and after the effective date specified in each Assignment and Acceptance, the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations 62 under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.13, 2.14, 2.15 and 9.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (e) of this Section. (c) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices in The City of New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. (d) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, the assignee's completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Acceptance and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph. (e) Any Lender may, without the consent of the Borrower or the Administrative Agent, sell participations to one or more banks or other entities (a "Participant") in all or a portion of such Lender's rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument 63 may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 9.02(b) that affects such Participant. Subject to paragraph (f) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.13, 2.14 and 2.15 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. (f) A Participant shall not be entitled to receive any greater payment under Section 2.13 or 2.15 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower's prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.15 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.15(e) as though it were a Lender. (g) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement or any promissory note issued pursuant hereto to such Lender to secure obligations of such Lender, including any such pledge or assignment to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such assignee for such Lender as a party hereto. SECTION 9.05. Survival. All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid and so long as the Commitments have not expired or terminated. The provisions of Sections 2.13, 2.14, 2.15 and 9.03 and Article 8 shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Commitments or the termination of this Agreement or any provision hereof. 64 SECTION 9.06. Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 9.07. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. SECTION 9.08. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of the Borrower against any of and all the obligations of the Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have. SECTION 9.09. Governing Law; Jurisdiction; Consent of Service of Process. (a) This Agreement shall be construed in accordance with and governed by the law of the State of New York. (b) The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court for the Southern District of New York, and any appellate court from 65 any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent or any Lender may otherwise have to bring any action or proceeding relating to this Agreement against the Borrower or its properties in the courts of any jurisdiction. (c) The Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (d) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. SECTION 9.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this 66 Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement. SECTION 9.12. Confidentiality. Each of the Administrative Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (f) subject to a written agreement containing provisions substantially the same as those of this Section, to any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement, (g) with the consent of the Borrower or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Administrative Agent or any Lender on a nonconfidential basis from a source other than the Borrower. For the purposes of this Section, "Information" means all information received from the Borrower relating to the Borrower, its Subsidiaries or their businesses, other than any such information that is available to the Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by the Borrower; provided that, in the case of information received from the Borrower after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. SECTION 9.13. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively the "Charges"), shall exceed the maximum lawful rate (the "Maximum Rate") which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and 67 Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender. ARTICLE 10 PROVISIONS RELATING TO THE REORGANIZATION SECTION 10.01. Consent to Reorganization. Notwithstanding anything to the contrary contained herein, the Borrower may effect the Reorganization or any portion thereof so long as no Default shall have occurred and be continuing or would occur after giving effect to the Reorganization or such portion thereof. Promptly upon completion of the Reorganization, the Borrower shall give the Administrative Agent notice thereof. 68 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. DELHAIZE AMERICA, INC. By: /s/ Richard James ------------------------------------ Title: Treasurer MORGAN GUARANTY TRUST COMPANY OF NEW YORK, individually and as Administrative Agent By: /s/ Kathryn Sayko-Yanes ------------------------------------ Title: Vice President BANK OF AMERICA, N.A. By: /s/ Bill Manley ------------------------------------ Title: Managing Director CITIBANK, N.A. By: /s/ Marc Merlino ------------------------------------ Title: Vice President WACHOVIA BANK, N.A. By: /s/ Timothy R. Hileman ------------------------------------ Title: Senior Vice President THE BANK OF NEW YORK By: /s/ Howard F. Bascom, Jr. ------------------------------------ Title: Vice President BANK ONE, NA By: /s/ Catherine A. Muszynski ------------------------------------ Title: Vice President BBL INTERNATIONAL (U.K.) LIMITED By: /s/ C.F. Wright / M-C Swinnen ------------------------------------ Title: Authorised Signatory / Authorised Signatory CREDIT AGRICOLE INDOSUEZ By: /s/ Craig Welch ------------------------------------ Title: First Vice President By: /s/ Rene LeBlanc ------------------------------------ Title: Vice President, Senior Relationship Manager DEUTSCHE BANK AG, NEW YORK BRANCH and/or Cayman Islands Branch By: /s/ Oliver Schwarz / Stefan Hafke ------------------------------------ Title: Assistant Vice President / Vice President FIRST UNION NATIONAL BANK By: /s/ Thomas M. Harper ------------------------------------ Title: Vice President FORTIS (USA) FINANCE LLC By: /s/ David Snyder / Eddie Matthews ------------------------------------ Title: Senior Vice President / Senior Vice President THE INDUSTRIAL BANK OF JAPAN, LIMITED By: /s/ Minami Miura ------------------------------------ Title: Vice President COOPERATIEVE CENTRALE RAIFFEISEN- BOERENLEENBANK B.A., "RABOBANK INTERNATIONAL", NEW YORK BRANCH By: /s/ Theodore W. Cox / Edward Peyser ------------------------------------ Title: Vice President / Vice President SUNTRUST BANK, ATLANTA By: /s/ Andrew J. Hines ------------------------------------ Title: Vice President COBANK, ACB By: /s/ Brian J. Klatt ------------------------------------ Title: Vice President THE DAI-ICHI KANGYO BANK, LTD. By: /s/ Nicholas A. Fiore ------------------------------------ Title: Assistant Vice President THE FUJI BANK, LIMITED By: /s/ Yuji Tanaka ------------------------------------ Title: Vice President and Manager BANQUE NATIONALE DE PARIS, HOUSTON AGENCY By: /s/ Henry F. Setina ------------------------------------ Title: Vice President BRANCH BANKING & TRUST COMPANY By: /s/ Cory Boyte ------------------------------------ Title: Vice President CIBC INC. By: /s/ Dominic Sorresso ------------------------------------ Title: Executive Director CREDIT COMMERCIALE DE FRANCE S.A. By: /s/ Chantal Peters / Bernard de Bellefroid ------------------------------------------- Title: Directeur / Directeur General FLEET NATIONAL BANK By: /s/ Thomas J. Bullard ------------------------------------------- Title: Vice President PARIBAS By: /s/ A. Boulanger / D. Stroobants ------------------------------------------- Title: Branch Manager / Structure and Finance BANK OF TOKYO-MITSUBISHI TRUST COMPANY By: /s/ Mark O' Connor ------------------------------------------ Title: Vice President UNION BANK OF CALIFORNIA, N.A. By: /s/ J. William Bloore ----------------------------------------- Title: Vice President BANCA DI ROMA-NEW YORK BRANCH By: /s/ S.F. Paley ------------------------------------ Title: Vice President By: /s/ Alessandro Paoli ------------------------------------ Title: Assistant Treasurer CREDIT COMMUNAL DE BELGIQUE-NEW YORK BRANCH By: /s/ Caroline Junius / Jan e. van Panhuys ----------------------------------------- Title: Vice President / General Manager Schedule 2.01 Commitment Schedule Bank Commitment - ---- ---------- Morgan Guaranty Trust Company of New York $30,000,000 Bank of America, N.A. $27,500,000 Citibank, N.A. $27,500,000 Wachovia Bank, N.A. $27,500,000 The Bank of New York $20,500,000 Bank One, NA $20,500,000 BBL International (U.K.) Limited $20,500,000 Credit Agricole Indosuez $20,500,000 Deutsche Bank AG-New York Branch $20,500,000 First Union National Bank $20,500,000 Fortis (USA) Finance LLC $20,500,000 The Industrial Bank of Japan, Limited $20,500,000 Cooperatieve Centrale Raiffeisen-Boerenleenbank $20,500,000 B.A., "Rabobank International", New York Branch SunTrust Bank, Atlanta $20,500,000 CoBank, ACB $19,000,000 The Dai-Ichi Kangyo Bank, Ltd. $19,000,000 The Fuji Bank, Limited $19,000,000 Banque Nationale de Paris, Houston Agency $19,000,000 Branch Banking & Trust Company $12,500,000 CIBC Inc. $12,500,000 Credit Commerciale de France S.A. $12,500,000 Fleet National Bank $12,500,000 76 Bank Commitment - ---- ---------- Paribas $12,500,000 Bank of Tokyo-Mitsubishi Trust Company $ 9,500,000 Union Bank of California, N.A. $ 9,500,000 Banca di Roma-New York Branch $12,500,000 Credit Communal de Belgique-New York Branch $12,500,000 Total: $500,000,000 77 Schedule 3.06 Disclosed Matters Incorporated by reference are the relevant portions of the following documents for the Borrower and as of the Acquisition Date, the Target: Delhaize America, Inc. 1. Annual Report on Form 10-K for the fiscal year ended January 2, 1999 filed April 1, 1999, as amended by Amendment No. 1 to Annual Report on Form 10-K/A filed August 17, 1999. 2. Quarterly Report on Form 10-Q for the quarter ended September 11, 1999 filed October 26, 1999. 3. Quarterly Report on Form 10-Q for the quarter ended June 19, 1999 filed July 30, 1999, as amended by Amendment No. 1 to Quarterly Report on Form 10-Q/A filed August 17, 1999. 4. Quarterly Report on Form 10-Q for the quarter ended March 27, 1999 filed May 5, 1999, as amended by Amendment No. 1 to Quarterly Report on Form 10-Q/A filed August 17, 1999. 5. Current Report on Form 8-K filed September 17, 1999 6. Current Report on Form 8-K filed August 19, 1999. 7. Registration Statement on Form 8-A filed September 2, 1999, as amended by Amendment No. 1 to Registration Statement on Form 8-A/A filed September 3, 1999. Hannaford Bros. Co. 1. Annual Report on Form 10-K for the fiscal year ended January 2, 1999 filed March 11, 1999. 2. Quarterly Report on Form 10-Q for the quarter ended October 2, 1999 filed November 9, 1999. 3. Quarterly Report on Form 10-Q for the quarter ended July 3, 1999 filed August 11, 1999. 78 4. Quarterly Report on Form 10-Q for the quarter ended April 3, 1999 filed May 14, 1999. 5. Current Report on Form 8-K filed September 1, 1999. 6. Current Report on Form 8-K filed August 19, 1999. 7. Current Report on Form 8-K filed June 21, 1999. 8. Current Report on Form 8-K filed June 17, 1999. 79 Schedule 3.14 Subsidiaries of Borrower FLI Holding Corp., a Delaware corporation ("FLI"), and a wholly-owned subsidiary of the Borrower. Risk Management Services, Inc., a North Carolina corporation, and a wholly- owned subsidiary of the Borrower. FL Acquisition Sub., Inc., a Maine corporation, and a wholly-owned subsidiary of the Borrower. Kash n' Karry Food Stores, Inc., a Delaware corporation, and a wholly-owned subsidiary of FLI.1 FL Food Lion, Inc., a Florida corporation, and a wholly-owned subsidiary of FLI. Barnwell, Inc., a Delaware corporation, and a wholly-owned subsidiary of FLI. - -------- 1 KNK 702 Delaware Business Trust, KNK 886 Delaware Business Trust, KNK 891 Delaware Business Trust, all Delaware business trusts, are wholly-owned by Kash n' Karry Food Stores, Inc. 80 Schedule 6.01 Existing Liens Liens representing the interest of the lessor under Capitalized Leases in existence on the date of this Agreement have an aggregate outstanding principal amount not exceeding $510,000,000. 81 EXHIBIT A FORM OF ASSIGNMENT AND ACCEPTANCE Reference is made to the Credit Agreement, dated as of _____________ ___, 1999 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among DELHAIZE AMERICA, INC., the Lenders party therein, and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent (in such capacity, the "Administrative Agent"). Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. The Assignor identified on Schedule l hereto (the "Assignor") and the Assignee identified on Schedule l hereto (the "Assignee") agree as follows: i. The Assignor hereby irrevocably sells and assigns to the Assignee without recourse to the Assignor, and the Assignee hereby irrevocably purchases and assumes from the Assignor without recourse to the Assignor, as of the Effective Date (as defined below), the interest described in Schedule 1 hereto (the "Assigned Interest") in and to the Assignor's rights and obligations under the Credit Agreement, in a principal amount as set forth on Schedule 1 hereto. ii. The Assignor (a) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or any other instrument or document furnished pursuant thereto or with respect to the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto, other than that the Assignor has not created any adverse claim upon the interest being assigned by it hereunder and that such interest is free and clear of any such adverse claim; (b) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower, any of its Subsidiaries or any other obligor or the performance or observance by the Borrower, any of its Subsidiaries or any other obligor of any of their respective obligations under the Credit Agreement or any other instrument or document furnished pursuant hereto or thereto; and (c) attaches any promissory notes held by it evidencing the Assigned Interest and (i) requests that the Administrative Agent, upon request by the Assignee, exchange the attached promissory notes for a new promissory note or promissory notes payable to the Assignee and (ii) if the Assignor has retained any interest under the Credit Agreement, requests that the A-1 Administrative Agent exchange the attached promissory notes for a new promissory note or promissory notes payable to the Assignor, in each case in amounts which reflect the assignment being made hereby (and after giving effect to any other assignments which have become effective on the Effective Date). iii. The Assignee (a) represents and warrants that it is legally authorized to enter into this Assignment and Acceptance; (b) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in Section 3.4 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (c) agrees that it will, independently and without reliance upon the Assignor, the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement or any other instrument or document furnished pursuant hereto or thereto; (d) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Credit Agreement or any other instrument or document furnished pursuant hereto or thereto as are delegated to the Administrative Agent by the terms thereof, together with such powers as are incidental thereto; and (e) agrees that it will be bound by the provisions of the Credit Agreement and will perform in accordance with its terms all the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender including, if it is organized under the laws of a jurisdiction outside the United States, its obligation pursuant to Section 2.15(e) of the Credit Agreement. iv. The effective date of this Assignment and Acceptance shall be the Effective Date of Assignment described in Schedule 1 hereto (the "Effective Date"). Following the execution of this Assignment and Acceptance, it will be delivered to the Administrative Agent for acceptance by it and recording by the Administrative Agent pursuant to the Credit Agreement, effective as of the Effective Date (which shall not, unless otherwise agreed to by the Administrative Agent, be earlier than five Business Days after the date of such acceptance and recording by the Administrative Agent). v. Upon such acceptance and recording, from and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to the Effective Date and to the Assignee for amounts which have accrued subsequent to the Effective Date. The Assignor and the Assignee shall make all appropriate adjustments in payments by the Administrative Agent for periods prior to the Effective Date or with respect to the making of this assignment directly between themselves. A-2 vi. From and after the Effective Date, (a) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and shall be bound by the provisions thereof and (b) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement. vii. This Assignment and Acceptance shall be governed by and construed in accordance with the laws of the State of New York. IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Acceptance to be executed as of the date first above written by their respective duly authorized officers on Schedule 1 hereto. A-3 Schedule 1 to Assignment and Acceptance Name of Assignor:_________________________ Name of Assignee:_________________________ Effective Date of Assignment:_____________ Principal Amount Assigned Commitment Percentage Assigned2 - --------------------------- ------------------------------------------------- $__________ __._____% [Name of Assignee] [Name of Assignor] By:_________________________________ By:___________________________________ Title: Title: Accepted: Consented To: MORGAN GUARANTY TRUST DELHAIZE AMERICA, INC., COMPANY OF NEW YORK, Borrower as Administrative Agent By:_________________________________ By:___________________________________ Title: Title: - -------- 2Calculate the Commitment Percentage that is assigned to at least 15 decimal places and show as a percentage of the aggregate commitments of all Lenders. A-1 EXHIBIT B-1 FORM OF OPINION OF COUNSEL OF BORROWER November ___, 1999 Morgan Guaranty Trust Company of New York as Administrative Agent 60 Wall Street New York, NY 10260 Each of the Lenders named on Annex A Dear Sirs: We have acted as counsel for Delhaize America, Inc., a North Carolina corporation (the "Borrower"), in connection with the Credit Agreement, dated as of November __, 1999 (the "Credit Agreement"), among the Borrower, the Lenders party thereto (the "Lenders") and Morgan Guaranty Trust Company of New York ("MGT"), as Administrative Agent. The opinions expressed here are furnished to you pursuant to Subsection 4.01(b) of the Credit Agreement. Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given in the Credit Agreement. In connection with this opinion, we have examined originals, or copies certified or otherwise identified to our satisfaction, of the Credit Agreement, the certificate referred to in Subsection 4.01(f) of the Credit Agreement, and such corporate documents and records of the Borrower as we have deemed necessary or appropriate. As to questions of fact relevant to this opinion, we have, without independent investigation, relied upon representations made to us by the Borrower including the representations contained in the Loan Documents, and in various certificates delivered by the Borrower, including, but not limited to, certificates presented to the Lenders and the Administrative Agent, and certain representations of public officials, all of which we assume to be true. In our examination, we have assumed (i) the genuineness of all signatures of all parties other than signatures of the Borrower, (ii) the authenticity of all corporate records, agreements, documents, instruments and certificates submitted to us as originals, the conformity to original agreements, documents and instruments of all agreements and instruments submitted to us as conformed, certified or photostatic copies thereof and the authenticity of the originals of such conformed, certified or B-1-1 photosttic copies; (iii) the due authorization, execution and delivery of all agreements, documents and instruments by all parties other than the Borrower; and (iv) the legal right and power of all such parties other than the Borrower under all applicable laws and regulations to enter into, execute and deliver such agreements, documents and instruments. We have further assumed that the Lenders and the Administrative Agent have the requisite power and authority to enter into the Loan Documents and to consummate the transactions contemplated thereby and the absence of any requirement of consent, approval or authorization by any Person or by any governmental body, agency or official with respect to the Lenders and the Administrative Agent and that the Loan Documents are legal, valid and binding obligations of the Lenders and the Administrative Agent enforceable against such Persons in accordance with their respective terms. This law firm is a registered limited liability partnership organized under the laws of the State of Texas. We express no opinion as to the laws of any jurisdiction other than the laws of the State of New York, the United States of America and The North Carolina Business Corporation Act. As to matters governed by the laws of the State of North Carolina, we are relying upon an opinion of Linn Evans, Esq. of even date herewith, a copy of which is attached hereto. The opinions expressed in paragraph 1(b) below are based solely upon our review of certain certificates of public officials of various jurisdictions and are not based upon any examination of the laws of any such jurisdiction. Upon the basis of the foregoing, we are of the opinion that: 1. The Borrower (a) is duly incorporated, validly existing and in good standing under the laws of North Carolina and has all requisite power and authority, to carry on its business as now conducted and (b) is qualified to do business in, and is in good standing in, each jurisdiction listed on Schedule I attached hereto. 2. The Transactions to be effected on the date hereof are each within the Borrower's corporate powers and have each been duly authorized by all necessary corporate and, if required, stockholder action. The Credit Agreement has been duly executed and delivered by the Borrower and constitutes a legal, valid and binding obligation of the Borrower. 3. To our knowledge, the Transactions to be effected on the date hereof (a) will not require any consent or approval of, registration or filing with, or any other action by, any Federal, New York or North Carolina Governmental Authority, except for consents, approvals, registrations, filings or other actions as have been obtained, made or waived and are in full force and effect and which are not required to have been effected prior to the date hereof, (b) will not violate any B-1-2 applicable Federal, New York or North Carolina corporate law or regulations or the charter, bylaws or other organizational documents of the Borrower or any order of any Federal or New York Governmental Authority, (c) will not violate or result in a default under any indenture, agreement or other instrument binding upon the Borrower or its assets other than defaults or violations for which consents or waivers have been obtained or which defaults or violations, individually or in the aggregate, could not have a Material Adverse Effect, or (d) will not give rise under any indenture, agreement or other instrument binding upon the Borrower to any requirement for any payments be made by the Borrower, or (e) will not result in the creation or imposition of any Lien on any asset of the Borrower. 4. To our knowledge, there are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or threatened against the Borrower (i) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect (other than the Disclosed Matters) or (ii) that involve the Credit Agreement or the Transactions to be effected on the date hereof. 5. The Borrower is not (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. The foregoing opinions are subject to the exceptions, limitations and qualifications contained herein, including the following: A. The enforceability of the Loan Documents may be (a) limited by applicable bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent conveyance or transfer and other similar laws affecting creditors' rights, (b) subject to general principles of equity (regardless of whether considered in a proceeding in equity or at law), commercial reasonableness and good faith, and (c) limited by the power of courts to award damages in lieu of equitable remedies. In addition, the right to indemnification contained in the Loan Documents may be limited by Federal or New York state laws or the policies of such laws. B. We express no opinions as to enforceability of any provisions (i) purporting to vest jurisdiction on any property of the Borrower in the Supreme Court of the State of New York sitting in New York County or the United States District Court of the Southern District of New York to the extent that such property is not situated in New York, New York, (ii) purporting to waive or B-1-3 restrict access to legal or equitable remedies (including venue, forum non conveniens or the right to assert a setoff) or the right to collect damages (including special, indirect, consequential or punitive damages), (iii) prohibiting oral amendments or waivers of provisions of the Loan Documents; (iv) establishing evidentiary standards or (v) permitting a Lender to set off against any debtor's accounts any amounts belonging to a third party or otherwise held in a fiduciary capacity. C. When used in this opinion, the phrase "to our knowledge" means known to attorneys in our firm who have rendered services to the Borrower in connection with the Transactions. This opinion is as of the date hereof, and we undertake no, and hereby disclaim any, obligation to advise you of any change in any matter set forth herein, whether based on a change in the law, a change in any fact relating to the Borrower or any other Person or any other circumstance. This opinion is delivered to you in connection with the transactions referenced above and may be relied upon only by you and any permitted assignee of an assigning Lender or Participant under the Credit Agreement in connection with such transaction and may not be relied upon in any manner or for any purpose by any other person without our prior written consent. Very truly yours, B-1-4 SCHEDULE I Delaware Certificate of the Secretary of State of the State of Delaware dated October 8, 1999 Florida Certificate of the Secretary of State of the State of Florida dated October 11, 1999 Georgia Certificate of Existence of the Secretary of State of the State of Georgia dated October 22, 1999 Kentucky Certificate of Authorization of the Secretary of State of the Commonwealth of Kentucky dated October 18, 1999 Maryland Certificate of the State Department of Assessments and Taxation of the State of North Carolina dated October 12, 1999 North Carolina Articles of Incorporation of Food Lion, Inc., certified by the Secretary of State of the State of North Carolina dated October 8, 1999 Certificate of Existence of the Secretary of State of the State of North Carolina dated October 8, 1999 Pennsylvania Certificate of the Secretary of the Department of State of the Commonwealth of Pennsylvania dated October 8, 1999 South Carolina Certificate of Authorization of the Secretary of the State of South Carolina dated October 8, 1999 Tennessee Certificate of Authorization of the Secretary of State of the State of Tennessee dated October 19, 1999 Virginia Certificate of Authority of the State Corporate Commission of the Commonwealth of Virginia dated October 21, 1999 West Virginia Certificate of Authority of the Secretary of the State of West Virginia dated October 12, 1999 Certificate of Good Standing of the Secretary of State of the State of West Virginia dated October 18, 1999 B-1-5 ANNEX A LENDER Morgan Guaranty Trust Company of New York Bank of America, N.A. Citibank, N.A. Wachovia Bank, N.A. The Bank of New York Bank One, NA BBL International (U.K.) Limited Credit Agricole Indosuez Deutsche Bank AG-New York Branch First Union National Bank Fortis (USA) Finance LLC The Industrial Bank of Japan, Limited Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank International", New York Branch SunTrust Bank, Atlanta CoBank, ACB The Dai-Ichi Kangyo Bank, Ltd. The Fuji Bank, Limited Banque Nationale de Paris, Houston Agency Branch Banking & Trust Company CIBC Inc. Credit Commerciale de France S.A. Fleet National Bank Paribas Bank of Tokyo-Mitsubishi Trust Company Union Bank of California, N.A. Banca di Roma-New York Branch Credit Communal de Belgique-New York Branch B-1-6 EX-10.Y 3 [CONFORMED COPY] ================================================================================ CREDIT AGREEMENT dated as of January 26, 2000 among DELHAIZE AMERICA, INC., The LENDERS Party Hereto, and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent $2,500,000,000 364-DAY TERM LOAN FACILITY -------------------------------------------------------------------- J.P. MORGAN SECURITIES INC., as Lead Arranger and Bookrunner -------------------------------------------------------------------------- BANK OF AMERICA, N.A., CITIBANK, N.A. and WACHOVIA SECURITIES, INC., as Co-Arrangers ================================================================================ TABLE OF CONTENTS ---------------------- PAGE ARTICLE 1 DEFINITIONS SECTION 1.01. Defined Terms...................................................2 SECTION 1.02. Classification of Loans and Borrowing..........................24 SECTION 1.03. Terms Generally................................................24 SECTION 1.04. Accounting Terms; GAAP.........................................25 ARTICLE 2 THE CREDITS SECTION 2.01. Commitments....................................................26 SECTION 2.02. Loans and Borrowings...........................................26 SECTION 2.03. Requests for Borrowing.........................................26 SECTION 2.04. Reserved.......................................................27 SECTION 2.05. Funding of Borrowings..........................................27 SECTION 2.06. Interest Elections.............................................28 SECTION 2.07. Termination and Reduction of Commitments.......................29 SECTION 2.08. Repayment of Loans; Evidence of Debt...........................30 SECTION 2.09. Mandatory and Optional Prepayment of Loans.....................31 SECTION 2.10. Fees...........................................................32 SECTION 2.11. Interest.......................................................32 SECTION 2.12. Alternate Rate of Interest.....................................33 SECTION 2.13. Increased Costs................................................34 SECTION 2.14. Break Funding Payments.........................................35 SECTION 2.15. Taxes..........................................................36 SECTION 2.16. Payments Generally; Pro Rata Treatment; Sharing of Set-offs........................................37 SECTION 2.17. Mitigation Obligations; Replacement of Lenders.................39 ARTICLE 3 REPRESENTATIONS AND WARRANTIES SECTION 3.01. Organization; Powers...........................................40 SECTION 3.02. Authorization; Enforceability..................................40 SECTION 3.03. Governmental Approvals; No Conflicts...........................41 SECTION 3.04. Financial Condition; No Material Adverse Change................41 SECTION 3.05. Properties.....................................................42 SECTION 3.06. Litigation and Environmental Matters...........................42 i PAGE SECTION 3.07. Compliance with Laws and Agreements............................43 SECTION 3.08. Investment and Holding Company Status..........................43 SECTION 3.09. Taxes..........................................................43 SECTION 3.10. ERISA..........................................................43 SECTION 3.11. Disclosure.....................................................43 SECTION 3.12. Margin Stock...................................................44 SECTION 3.13. No Burdensome Restrictions.....................................44 SECTION 3.14. Subsidiaries...................................................44 SECTION 3.15. Solvency.......................................................44 SECTION 3.16. Year 2000 Matters..............................................44 SECTION 3.17. Acquisition Documents..........................................45 ARTICLE 4 CONDITIONS TO FUNDING SECTION 4.01. Effective Date.................................................45 SECTION 4.02. First Credit Event.............................................46 SECTION 4.03. Each Credit Event..............................................48 ARTICLE 5 AFFIRMATIVE COVENANTS SECTION 5.01. Financial Statements and Other Information.....................48 SECTION 5.02. Notices of Material Events.....................................50 SECTION 5.03. Existence; Conduct of Business.................................50 SECTION 5.04. Payment of Obligations.........................................51 SECTION 5.05. Maintenance of Properties; Insurance...........................51 SECTION 5.06. Books and Records; Inspection Rights...........................51 SECTION 5.07. Compliance with Laws and Material Contractual Obligations................................................51 SECTION 5.08. Use of Proceeds................................................52 SECTION 5.09. Change in Ratings..............................................52 SECTION 5.10. Copies of Other Bank Agreements................................52 ARTICLE 6 NEGATIVE COVENANTS SECTION 6.01. Liens..........................................................52 SECTION 6.02. Indebtedness of Subsidiaries...................................53 SECTION 6.03. Fundamental Changes............................................54 SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions; Hedging Agreements...........................55 ii PAGE SECTION 6.05. Transactions with Affiliates...................................56 SECTION 6.06. Reserved.......................................................56 SECTION 6.07. Fixed Charges Coverage.........................................57 SECTION 6.08. Ratio of Consolidated Adjusted Debt to Consolidated EBITDAR....................................................57 SECTION 6.09. Limitation on Sales of Assets..................................58 SECTION 6.10. Modifications to Acquisition Documents.........................59 SECTION 6.11. Restrictions Affecting Subsidiaries............................59 ARTICLE 7 EVENTS OF DEFAULT SECTION 7.01. Events of Default..............................................59 ARTICLE 8 THE ADMINISTRATIVE AGENT SECTION 8.01. The Administrative Agent.......................................62 ARTICLE 9 MISCELLANEOUS SECTION 9.01. Notices........................................................64 SECTION 9.02. Waivers; Amendments............................................65 SECTION 9.03. Expenses; Indemnity; Damage Waiver.............................66 SECTION 9.04. Successors and Assigns.........................................67 SECTION 9.05. Survival.......................................................69 SECTION 9.06. Counterparts; Integration; Effectiveness.......................70 SECTION 9.07. Severability...................................................70 SECTION 9.08. Right of Setoff................................................70 SECTION 9.09. Governing Law; Jurisdiction; Consent of Service of Process....................................................71 SECTION 9.10. WAIVER OF JURY TRIAL...........................................71 SECTION 9.11. Headings.......................................................72 SECTION 9.12. Confidentiality................................................72 SECTION 9.13. Interest Rate Limitation.......................................73 ARTICLE 10 PROVISIONS RELATING TO THE REORGANIZATION SECTION 10.01. Consent to Reorganization.....................................73 iii SCHEDULES: Schedule 2.01 Commitments Schedule 3.06 Disclosed Matters Schedule 3.14 Subsidiaries Schedule 6.01 Existing Liens EXHIBITS: Exhibit A Form of Assignment and Acceptance Exhibit B Form of Opinion of Borrower's Counsel - First Borrowing Date 1 CREDIT AGREEMENT dated as of January 26, 2000, among DELHAIZE AMERICA, INC., the LENDERS party hereto and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent. The parties hereto agree as follows: ARTICLE 1 DEFINITIONS SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the meanings specified below: "ABR", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate. "Acquisition" means the Merger and all other transactions contemplated by the Acquisition Documents to be consummated on or before the First Borrowing Date. "Acquisition Date" means the date of consummation of the Acquisition. "Acquisition Documents" means the Merger Agreement, including the exhibits and schedules thereto, and all agreements, documents and instruments executed and delivered pursuant thereto or in connection therewith. "Acquisition Sub" means FL Acquisition Sub, Inc., a Maine corporation. "Adjusted LIBO Rate" means, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate. "Administrative Agent" means Morgan, in its capacity as administrative agent for the Lenders hereunder. "Administrative Questionnaire" means an Administrative Questionnaire in a form supplied by the Administrative Agent. "Affiliate" means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. 2 "Alternate Base Rate" means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate, respectively. "Amortization" means for any period the sum of all amortization expenses of the Borrower and its Consolidated Subsidiaries for such period, as determined in accordance with GAAP. "Applicable Percentage" means, with respect to any Lender, the percentage of the total Commitments represented by such Lender's Commitment. If the Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Commitments most recently in effect, giving effect to any assignments. "Applicable Rate" means, for any day, with respect to any ABR Loan or Eurodollar Loan, or with respect to the commitment fees payable hereunder, as the case may be, the applicable rate per annum set forth below under the caption "ABR Spread", "Eurodollar Spread" or "Commitment Fee Rate", as the case may be, based upon the ratings by Moody's and S&P, respectively, applicable on such date to the Index Debt: S&P/Moody's ABR Eurodollar Commitment Index Debt Ratings: Spread Spread Fee Rate - --------------------------------------------------------------------- Category 1 A-/A3 or higher.......... .0% .50% .09% Category 2 BBB+/Baa1................ .0% .625% .10% Category 3 BBB/Baa2................. .0% .75% .125% Category 4 BBB-/Baa3................ .25% 1.25% .175% Category 5 BB+/Ba1.................. .75% 1.75% .30% - ------------------------- ----------------------------------------- Category 6 Below.................... 1.25% 2.25% .50% ========================= ========================================= In addition, 3 (a) On any date on which: (x) (i) the sum of (1) the aggregate principal amount of loans outstanding under the 5-Year Agreement (if the 5-Year Agreement is in effect on such date) plus (2) the aggregate principal amount of loans outstanding under the 364-Day Credit Agreement (if the 364-Day Credit Agreement is in effect on such date) plus (3) the aggregate principal amount of Loans outstanding hereunder, in each case on such date, exceeds 33% of the sum of (1) the aggregate amount of the commitments under the 5-Year Agreement (or, if the commitments under the 5- Year Agreement (if the 5-Year Agreement is in effect on such date) shall have terminated, the aggregate principal amount of loans outstanding thereunder) plus (2) the aggregate amount of the commitments under the 364-Day Credit Agreement (if the 364-Day Credit Agreement is in effect on such date) (or, if the commitments under the 364-Day Credit Agreement shall have terminated, the aggregate principal amount of loans outstanding thereunder) plus (3) the aggregate Commitments hereunder (or, if the Commitments hereunder (or if the Commitments hereunder shall have terminated, the aggregate principal amount of Loans outstanding hereunder), in each case on such date and (ii) Category 1 ratings, Category 2 ratings or Category 3 ratings are applicable on such date or (y) any Loans are outstanding hereunder (regardless of which Category ratings are applicable on such date), the "ABR Spread" and the "Eurodollar Spread" will each be increased by .125%; provided that on any date on which the events in clause (x) and clause (y) are both in effect, the "ABR Spread" and the "Eurodollar Spread" will each be increased by .125%; and (b) On any date on or after the date that falls six months after the First Borrowing Date, the "ABR Spread" and the "Eurodollar Spread" will each be increased by .375% (regardless in each case of which Category ratings are applicable on such date). For purposes of the foregoing, (i) if either Moody's or S&P shall not have in effect a rating for the Index Debt (other than by reason of the circumstances referred to in the last sentence of this definition), then such rating agency shall be deemed to have established a rating in Category 6; (ii) if the ratings established or deemed to have been established by Moody's and S&P for the Index Debt shall fall within different Categories, the Applicable Rate shall be based on the lower of the two ratings unless one of the two ratings is two or more Categories lower than the other, in which case the Applicable Rate shall be determined by reference to 4 the Category next below that of the higher of the two ratings; and (iii) if the ratings established or deemed to have been established by Moody's and S&P for the Index Debt shall be changed (other than as a result of a change in the rating system of Moody's or S&P), such change shall be effective as of the date on which it is first announced by the applicable rating agency. Each change in the Applicable Rate shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change. If the rating system of Moody's or S&P shall change, or if either such rating agency shall cease to be in the business of rating corporate debt obligations, the Borrower and the Lenders shall negotiate in good faith to amend this definition to reflect such changed rating system or the unavailability of ratings from such rating agency and, pending the effectiveness of any such amendment, the Applicable Rate shall be determined by reference to the rating most recently in effect prior to such change or cessation. "Asset Sale" means any sale, lease or other disposition (including any such transaction effected by way of merger or consolidation) by the Borrower or any of its Subsidiaries of any asset, including without limitation any sale-leaseback transaction, whether or not involving a capital lease, but excluding (i) dispositions in the ordinary course of business of inventory, (ii) dispositions of Cash Equivalents and cash payments otherwise permitted under this Agreement, (iii) dispositions to the Borrower or a Subsidiary, (iv) dispositions constituting mergers or consolidations permitted by Section 6.03, (v) dispositions constituting Investments permitted by Section 6.04, (vi) dispositions of obsolete, unused or worn out equipment, (vii) dispositions of assets not described in clauses (i) through (vi) hereof in any single transaction or series of related transactions so long as the Net Cash Proceeds therefrom do not exceed $1,000,000, and (viii) any disposition of assets not described in clauses (i) through (vii) hereof consummated in any Fiscal Year, but only to the extent that the Net Cash Proceeds therefrom, together with the Net Cash Proceeds of all other dispositions consummated in such Fiscal Year and not constituting an "Asset Sale" by reliance on this clause (viii), do not exceed $5,000,000. "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 9.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by the Administrative Agent. "Base CD Rate" means the sum of (a) the Three-Month Secondary CD Rate multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate. As used in this definition, "Assessment Rate" means, for any day, the annual assessment rate in effect on such day that is payable by a member of the Bank Insurance Fund classified as "well-capitalized" and within supervisory subgroup 5 "B" (or a comparable successor risk classification) within the meaning of 12 C.F.R. Part 327 (or any successor provision) to the Federal Deposit Insurance Corporation for insurance by such Corporation of time deposits made in Dollars at the offices of such member in the United States; provided that if, as a result of any change in any law, rule or regulation, it is no longer possible to determine the Assessment Rate as aforesaid, then the Assessment Rate shall be such annual rate as shall be determined by the Administrative Agent to be representative of the cost of such insurance to the Lenders. "Board" means the Board of Governors of the Federal Reserve System of the United States of America. "Borrower" means Delhaize America, Inc., a North Carolina corporation. "Borrowing" means Loans of the same Type, made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect. "Borrowing Request" means a request by the Borrower for a Borrowing in accordance with Section 2.03. "Business Day" means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed; provided that, when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in Dollar deposits in the London interbank market. "Capital Lease Obligations" of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. "Capital Stock" means any capital stock of the Borrower or any Consolidated Subsidiary (to the extent issued to a Person other than the Borrower), whether common or preferred. "Capitalized Lease" means any lease which is required to be capitalized on a consolidated balance sheet of the lessee and its subsidiaries in accordance with GAAP. 6 "Cash Equivalents" means: (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof; (b) investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, a rating of at least P-1 by Moody's or A-1 by S&P; (c) investments in certificates of deposit, banker's acceptances and time deposits maturing within 180 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof which has a combined capital and surplus and undivided profits of not less than $250,000,000; (d) investments consisting of cash deposits in operating accounts maintained by the Borrower or any Subsidiary; and (e) repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (c) above. "Change in Control" means (a) the failure of Delhaize Belgium or any wholly-owned subsidiary of Delhaize Belgium to own, directly or indirectly, beneficially or of record, shares representing more than a majority of the aggregate ordinary voting power represented by the issued and outstanding Capital Stock of the Borrower; (b) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Borrower by Persons who were neither (i) nominated by the board of directors of the Borrower nor (ii) appointed by directors so nominated; or (c) the acquisition of direct or indirect Control of the Borrower by any Person or group other than Delhaize Belgium or any wholly-owned subsidiary of Delhaize Belgium. "Change in Law" means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender (or, for purposes of Section 2.13(b), by any lending office of such Lender or by such Lender's holding 7 company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement. "Charges" has the meaning set forth in Section 9.13. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Commitment" means, with respect to each Lender, the commitment of such Lender to make Loans hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.07 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Lender's Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Commitment, as applicable. "Consolidated" means, when used in connection with any defined term, and not otherwise defined, such term as it applies to the Borrower and its Subsidiaries on a consolidated basis, after eliminating all intercompany items. "Consolidated Adjusted Debt" means at any date (i) the Debt of the Borrower and its Consolidated Subsidiaries plus (ii) 8 times Rentals (but excluding any payments with respect to a Capital Lease to the extent such Capital Lease is included in clause (i)) payable by the Borrower and its Consolidated Subsidiaries for the period of four consecutive Fiscal Quarters ended on or most recently prior to such date, determined on a consolidated basis as of such date. "Consolidated EBITDAR" for any period means the sum of (i) Consolidated Net Income for such period plus, in each case to the extent deducted in determining such Consolidated Net Income and without duplication, (ii) Consolidated Depreciation expenses of the Borrower and its Consolidated Subsidiaries, (iii) Consolidated Amortization expenses of the Borrower and its Consolidated Subsidiaries, (iv) all federal, state, local and foreign income taxes of the Borrower and its Consolidated Subsidiaries, and (v) Consolidated Fixed Charges. "Consolidated Fixed Charges" for any period means, without duplication, on a consolidated basis the sum of (i) all Rentals payable during such period by the Borrower and its Consolidated Subsidiaries, and (ii) Consolidated Interest Expense for such period. 8 "Consolidated Interest Expense" for any period means interest, whether expensed or capitalized, in respect of Debt of the Borrower or any of its Consolidated Subsidiaries outstanding during such period. "Consolidated Net Income" for any period means the gross revenues of the Borrower and its Consolidated Subsidiaries for such period less all expenses and other proper charges (including taxes on income), determined on a consolidated basis after eliminating earnings or losses attributable to outstanding Minority Interests, but excluding in any event: (a) any unusual or extraordinary gains or losses on the sale or other disposition of investments (excluding Cash Equivalents) or fixed or capital assets, and any taxes on such excluded gains and any tax deductions or credits on account of any such excluded losses; (b) the proceeds of any life insurance policy; (c) net earnings and losses of any Consolidated Subsidiary accrued prior to the date it became a Consolidated Subsidiary; (d) net earnings and losses of any corporation (other than a Consolidated Subsidiary and subject to Section 1.04) substantially all the assets of which have been acquired in any manner by the Borrower or any Consolidated Subsidiary, realized by such corporation prior to the date of such acquisition; (e) net earnings and losses of any corporation (other than a Consolidated Subsidiary and subject to Section 1.04(b)) with which the Borrower or a Consolidated Subsidiary shall have consolidated or which shall have merged into or with the Borrower or a Consolidated Subsidiary prior to the date of such consolidation or merger; (f) net earnings and losses of any business entity (other than a Consolidated Subsidiary) in which the Borrower or any Consolidated Subsidiary has an ownership interest unless such net earnings shall have actually been received by the Borrower or such Consolidated Subsidiary in the form of cash distributions; (g) any portion of the net earnings and losses of any Consolidated Subsidiary which for any reason is unavailable for payment of dividends to the Borrower or any other Consolidated Subsidiary; 9 (h) earnings resulting from any reappraisal, revaluation or write-up of assets; (i) any deferred or other credit representing any excess of the equity in any Subsidiary at the date of acquisition thereof over the amount invested in such Subsidiary; (j) any gain arising from the acquisition of any Capital Stock; (k) any reversal of any contingency reserve except to the extent that provision for such contingency reserve shall have been made from income arising during such period; provided, however, that any reversal of a contingency reserve from a prior period shall only be excluded from Consolidated Net Income to the extent that the aggregate amount of such reversals exceeds $10,000,000 during the immediately preceding four Fiscal Quarters; and (l) any other unusual or extraordinary gain or loss. "Consolidated Subsidiary" means at any date any Subsidiary or other entity the accounts of which, in accordance with GAAP, would be consolidated with those of the Borrower in its consolidated financial statements as of such date. "Consolidated Total Assets" means at any time the total assets of the Borrower and its Consolidated Subsidiaries, determined on a consolidated basis, as set forth or reflected on the most recent consolidated balance sheet of the Borrower and its Consolidated Subsidiaries. "Contractual Obligation" means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. "Controlling" and "Controlled" have meanings correlative thereto. "Credit Exposure" means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender's Loans at such time. "Debt" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person 10 evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable and accrued expenses arising in the ordinary course of business, (iv) all Capital Lease Obligations, (v) all obligations of such Person to reimburse any bank or other Person in respect of amounts payable under a banker's acceptance, (vi) all Redeemable Preferred Stock of such Person (in the event such Person is a corporation), (vii) all obligations of such Person to reimburse any bank or other Person in respect of amounts paid under a letter of credit or similar instrument, (viii) all Debt of others secured by a Lien on any asset of such Person, whether or not such Debt is assumed by such Person, and (ix) all Debt of others Guaranteed by such Person. "Default" means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default. "Delhaize Belgium" means Etablissements Delhaize Freres et Cie "Le Lion" S.A., a Belgian corporation. "Depreciation" means for any period the sum of all depreciation expenses of the Borrower and its Consolidated Subsidiaries for such period, as determined in accordance with GAAP. "Disclosed Matters" means the actions, suits and proceedings and the environmental matters disclosed on Schedule 3.06. "Dollars" or "$" refers to lawful money of the United States of America. "Effective Date" means the date on which the conditions specified in Section 4.01 are satisfied (or waived in accordance with Section 9.02). "Environmental Laws" means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, release or threatened release of any Hazardous Material or health and safety matters. "Environmental Liability" means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any 11 Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. "Equity Issuance" means any issuance of equity securities (including any Redeemable Preferred Stock or other preferred equity securities) by the Borrower or a Subsidiary, other than (i) equity securities issued to the Borrower or a Subsidiary, (ii) common stock of the Borrower issued as consideration for the Acquisition, (iii) equity securities issued to officers and directors of the Borrower pursuant to the exercise of stock options held by such Persons so long as the Net Cash Proceeds therefrom do not exceed $5,000,000 and (iv) equity securities issued pursuant to employee benefit plans in the ordinary course of business. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. "ERISA Affiliate" means any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. "ERISA Event" means (a) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA. 12 "Eurodollar", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate. "Event of Default" has the meaning assigned to such term in Article 7. "Excluded Taxes" means, with respect to the Administrative Agent, any Lender or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which the Borrower is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 2.17(b)), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement or is attributable to such Foreign Lender's failure or inability to comply with Section 2.15(e), except to the extent that such Foreign Lender's assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 2.15(a). "Existing Public Debt" means the Borrower's $150,000,000 aggregate principal amount of 7.55% Notes due 2007 and its $150,000,000 aggregate principal amount of 8.05% Notes due 2027. "Federal Funds Effective Rate" means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. "Financial Officer" means the chief financial officer, principal accounting officer, treasurer or controller of the Borrower. "First Borrowing Date" means the date of the first Borrowing hereunder. "Fiscal Quarter" means any fiscal quarter of the Borrower. 13 "Fiscal Year" means any fiscal year of the Borrower. "5-YearAgreement" means the $500,000,000 5-Year Revolving Credit Agreement dated as of January 26, 2000 among the Borrower, the lenders party thereto and Morgan, as administrative agent, as amended from time to time. "Foreign Lender" means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction. "GAAP" means generally accepted accounting principles in the United States of America. "Governmental Authority" means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. "Guarantee" of or by any Person (the "guarantor") means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the "primary obligor") in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided, that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. "Hazardous Materials" means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law. 14 "Hedging Agreement" means any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement. "Indebtedness" of any Person means, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid (excluding current accounts payable incurred in the ordinary course of business), (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty and (j) all obligations, contingent or otherwise, of such Person in respect of bankers' acceptances. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. "Indebtedness Incurrence" means the incurrence of Indebtedness by the Borrower or any of its Subsidiaries, other than (i) Indebtedness of the Borrower under the 364-Day Credit Agreement or the 5-Year Credit Agreement, (ii) Indebtedness of the Borrower incurred pursuant to uncommitted existing lines of credit in existence on the Effective Date in an aggregate principal amount outstanding at any time not in excess of $90,000,000 and maturing no more than 30 days after the date of incurrence thereof, (iii) Indebtedness of the Borrower consisting of Capital Lease Obligations, (iv) Indebtedness of the Borrower secured by a Lien permitted by Section 6.01(d) and (v) Indebtedness of any Subsidiary permitted by Section 6.02. "Indemnified Taxes" means Taxes other than Excluded Taxes. "Indemnitee" has the meaning set forth in Section 9.03(b). 15 "Index Debt" means senior, unsecured, long-term indebtedness for borrowed money of the Borrower that is not guaranteed by any other Person (other than Subsidiaries) or subject to any other credit enhancement. "Information" has the meaning set forth in Section 9.12. "Interest Election Request" means a request by the Borrower to convert or continue a Borrowing in accordance with Section 2.06. "Interest Payment Date" means (a) with respect to any ABR Loan, the last day of each March, June, September and December, and (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months' duration, each day prior to the last day of such Interest Period that occurs at intervals of three months' duration after the first day of such Interest Period. "Interest Period" means, with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter, as the Borrower may elect; provided, that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, in the case of a Eurodollar Borrowing only, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, (ii) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period and (iii) any Interest Period that would otherwise end after the Maturity Date shall end on the Maturity Date. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing. "Lenders" means the Persons listed on Schedule 2.01 and any other Person that shall have become a party hereto pursuant to an Assignment and Acceptance, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Acceptance. "LIBO Rate" means, with respect to any Eurodollar Borrowing for any Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on 16 such page of such Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to Dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for Dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the "LIBO Rate" with respect to such Eurodollar Borrowing for such Interest Period shall be the rate at which Dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. "Lien" means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset and (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset. "Loans" means the loans made by the Lenders to the Borrower pursuant to this Agreement. "Major Casualty Proceeds" means (i) the aggregate insurance proceeds received in connection with one or more related events by the Borrower or any of its Subsidiaries under any insurance policy maintained by the Borrower or any of its Subsidiaries covering losses with respect to tangible real or personal property or improvements (including coverage for losses from business interruption) or (ii) any award or other cash compensation with respect to any one or more related condemnations of property (or any transfer or disposition of property in lieu of condemnation) received by the Borrower or any of its Subsidiaries if, in the case of either clause (i) or (ii), the amount of such aggregate insurance proceeds or award or other cash compensation exceeds $15,000,000. "Majority Lenders" means, at any time, Lenders having Commitments representing more than 50% of the aggregate amount of the Commitments at such time (or, if the Commitments shall have terminated, Lenders holding Credit Exposures representing more than 50% of the total Credit Exposures at such time). "Material Adverse Change" means any event, development or circumstance that has had or could reasonably be expected to have a Material Adverse Effect. 17 "Material Adverse Effect" means a material adverse effect on (a) the business, assets, operations, prospects or condition, financial or otherwise, of the Borrower and the Subsidiaries taken as a whole, (b) the ability of the Borrower to perform any of its obligations under this Agreement or (c) the rights of or benefits available to the Lenders under this Agreement. "Material Indebtedness" means Indebtedness, or obligations in respect of one or more Hedging Agreements, of any one or more of the Borrower and its Subsidiaries in an aggregate principal amount exceeding $20,000,000. For purposes of determining Material Indebtedness, the "principal amount" of the obligations of the Borrower or any Subsidiary in respect of any Hedging Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the Borrower or such Subsidiary would be required to pay if such Hedging Agreement were terminated at such time. "Maturity Date" means the date that falls 364 days after the First Borrowing Date. "Maximum Rate" has the meaning set forth in Section 9.13. "Medium Term Notes" means the medium term notes of the Borrower having interest rates ranging from 8.40% to 8.73% with due dates ranging from 2000 to 2006 and having an aggregate principal balance of $123,300,000. "Merger" means the merger of Acquisition Sub with and into the Target (with the Target as the surviving Person) pursuant to the Merger Agreement on the First Borrowing Date concurrently with the making of the initial Loans hereunder, thereby consummating the Acquisition. "Merger Agreement" means the Agreement and Plan of Merger dated as of August 17, 1999, as amended by Amendment No. 1 dated as of November, 1999 to be effective as of August 17, 1999, among the Borrower, Acquisition Sub and the Target. "Minority Interests" means any shares of stock of any class of a Consolidated Subsidiary (other than directors' qualifying shares as required by law) that are not owned by the Borrower and/or one or more of its Consolidated Subsidiaries. "Moody's" means Moody's Investors Service, Inc. "Morgan" means Morgan Guaranty Trust Company of New York. 18 "Multiemployer Plan" means a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Net Cash Proceeds" means, with respect to any Reduction Event, an amount equal to the cash proceeds received by the Borrower or any of its Subsidiaries from or in respect of such Reduction Event (including any cash proceeds received as interest or similar income on, or other cash proceeds of, any noncash proceeds of any Asset Sale, but only as and when received), less (a) any out-of-pocket fees, costs and expenses incurred by such Person in respect of such Reduction Event and (b) if such Reduction Event is an Asset Sale, (i) any taxes actually paid or to be payable by such Person (as estimated by the chief financial officer or chief accounting officer of the Borrower, giving effect to the overall tax position of the Borrower) in respect of such Asset Sale, including any taxes resulting from the transfer of the proceeds of such sale to such Person, (ii) the amount of all Indebtedness secured by any assets subject to such Asset Sale and subject to mandatory prepayment or repayment as a result of such Asset Sale and (iii) the amount of any reserves established by the Borrower and its Subsidiaries to fund contingent liabilities payable by the Borrower and its Subsidiaries attributable to such Asset Sale (as estimated by the chief financial officer or chief accounting officer of the Borrower) including, without limitation, liabilities under any indemnification obligations, environmental liabilities and liabilities with respect to employee benefit plans and other post retirement benefit liabilities, in each case associated with such Asset Sale, until such time as such amounts are no longer reserved or such reserve is no longer necessary (at which time any remaining amounts will become Net Cash Proceeds). Solely for purposes of calculating Net Cash Proceeds pursuant to this definition, a "Reduction Event" shall include any disposition of assets not constituting an "Asset Sale" by reliance on clauses (vii) and (viii) of the definition thereof and any issuance of equity securities not constituting an "Equity Issuance" by reliance on clause (iii) of the definition thereof. "Operating Lease" means any lease other than a Capitalized Lease. "Other Taxes" means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement. "Participant" has the meaning set forth in Section 9.04(e). "PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions. 19 "Permitted Encumbrances" means: (a) Liens imposed by law for taxes, assessments and other governmental charges that are not yet due or are being contested in compliance with Section 5.04; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's, landlords' and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or are being contested in compliance with Section 5.04; (c) Liens granted to a landlord pursuant to a lease to secure the obligations of the lessee under such lease which apply only to property or assets of the lessee located at the leased premises; (d) pledges and deposits made in the ordinary course of business in compliance with workers' compensation, unemployment insurance and other social security laws or regulations; (e) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds (so long as, with respect to any such appeal bonds posted with respect to any judgment, no Event of Default then exists under Section 7(k)), performance bonds and other obligations of a like nature, in each case in the ordinary course of business; (f) judgment liens provided no Event of Default then exists under Section 7(k); and (f) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Borrower or any Subsidiary. "Person" means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity. "Plan" means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the 20 Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Prime Rate" means the rate of interest per annum publicly announced from time to time by Morgan as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective. "Redeemable Preferred Stock" of any Person means any preferred stock issued by such Person which is at any time prior to the Maturity Date either (i) mandatorily redeemable (by sinking fund or similar payments or otherwise) or (ii) redeemable at the option of the holder thereof. "Reduction Event" means (i) any Asset Sale, (ii) any Indebtedness Incurrence, (iii) any Equity Issuance or (iv) the receipt by the Borrower or any Subsidiary of Major Casualty Proceeds, provided that clause (iv), so long as no Default has occurred and is continuing, shall not give rise to a Reduction Event to the extent that (x) within 5 Business Days after receipt of the related Major Casualty Proceeds, the Borrower shall have delivered to the Agent the certificate referred to in Section 5.01(f) with respect thereto and (y) within 180 days after receipt of the related Major Casualty Proceeds, the Borrower or a Subsidiary shall have actually expended such Major Casualty Proceeds for the restoration or replacement of the related asset(s) so that the Reduction Event, if any, occurring by reason of the receipt of such Major Casualty Proceeds shall be deemed to occur on (1) the 5th Business Day following receipt thereof, as to the amount thereof, if no certificate with respect thereto has been delivered by the Borrower to the Agent pursuant to Section 5.01(f) and (2) the 180th day following receipt thereof, with respect to 100% of the amount thereof not so expended. The description of any transaction as falling within the above definition does not affect any limitation on such transaction imposed by Article 6 of this Agreement. "Register" has the meaning set forth in Section 9.04(c). "Related Parties" means, with respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person's Affiliates. "Rentals" means and includes as of the date of any determination thereof all fixed payments (including as such all payments which the lessee is obligated to make to the lessor on termination of the lease or surrender of the property) payable by the Borrower or a Consolidated Subsidiary, as lessee or sublessee under an Operating Lease or Capitalized Lease of real or personal property, but 21 shall be exclusive of any amounts required to be paid by the Borrower or a Consolidated Subsidiary (whether or not designated as rents or additional rents) on account of maintenance, repairs, insurance, taxes and similar charges. Fixed rents under any so-called "percentage leases" shall be computed solely on the basis of the minimum rents, if any, required to be paid by the lessee regardless of sales volume or gross revenues. "Reorganization" means the collective reference to the following series of related transactions: The Borrower will create a new direct, wholly-owned subsidiary, to be named Food Lion, Inc. ("New Food Lion"). The Borrower will contribute to New Food Lion substantially all of the assets of the Borrower other than the capital stock of (i) the Target, (ii) FLI Holding Corp., a Delaware corporation ("FLI Holding"), (iii) Risk Management Services, Inc., a North Carolina corporation ("RMS"), (iv) FL Food Lion, Inc., a Florida corporation ("FL Food Lion") and (v) Barnwell, Inc., a Delaware corporation ("Barnwell"). After giving effect to such contribution, New Food Lion, FLI Holding, RMS, FL Food Lion and Barnwell will each be direct wholly-owned subsidiaries of the Borrower. FLI Holding will be merged into the Borrower and Kash n' Karry Food Stores, Inc. will become a direct wholly-owned Subsidiary of the Borrower. "Requirement of Law" means, as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "S&P" means Standard & Poor's Ratings Group, a division of The McGraw Hill Companies, Inc. "Solvent", when used with respect to any Person, means that, as of any date of determination, (a) the amount of the "present fair saleable value" of the assets of such Person and its subsidiaries, taken as a whole, will, as of such date, exceed the amount that will be required to pay all "liabilities of such Person and its subsidiaries, taken as a whole, contingent or otherwise", as of such date (as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors) as such debts become absolute and matured, (b) such Person and its subsidiaries, taken as a whole, will not have, as of such date, an unreasonably small amount of capital with which to conduct their businesses, taking into account the particular capital requirements of such Person and its projected capital requirements and availability and (c) such Person and its subsidiaries, taken as a whole, will be able to pay their debts as they mature, taking into account the timing of and amounts of cash to be received 22 by such Person and its subsidiaries, taken as a whole, and the timing of and amounts of cash to be payable on or in respect of indebtedness of such Person and its subsidiaries, taken as a whole. For purposes of this definition, (i) "debt" means liability on a "claim", and (ii) "claim" means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal or equitable, secured or unsecured or (y) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured. "Statutory Reserve Rate" means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Administrative Agent is subject (a) with respect to the Base CD Rate, for new negotiable nonpersonal time deposits in Dollars of over $100,000 with maturities approximately equal to three months and (b) with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. "subsidiary" means, with respect to any Person (the "parent") at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held by such Person or one or more subsidiaries of such Person or by such Person and one or more subsidiaries of such Person. "Subsidiary" means any subsidiary of the Borrower. "Stub End Date" has the meaning set forth in Section 1.04(b). 23 "Target" means Hannaford Bros. Co., a Maine corporation. "Taxes" means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority. "Termination Date" means the earlier of the close of business, New York City time, on the First Borrowing Date or 3:00 p.m., New York City time, on August 17, 2000. "364-Day Credit Agreement" means the $500,000,000 364-Day Revolving Agreement dated as of November 19, 1999 among the Borrower, the lenders party thereto and Morgan, as administrative agent, as amended from time to time. "Three-Month Secondary CD Rate" means, for any day, the secondary market rate for three-month certificates of deposit reported as being in effect on such day (or, if such day is not a Business Day, the next preceding Business Day) by the Board through the public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the week following such day) or, if such rate is not so reported on such day or such next preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 a.m., New York City time, on such day (or, if such day is not a Business Day, on the next preceding Business Day) by the Administrative Agent from three negotiable certificate of deposit dealers of recognized standing selected by it. "Transactions" means the execution, delivery and performance by the Borrower of this Agreement, the borrowing of Loans and the use of the proceeds thereof and the consummation of the Acquisition and all other transactions contemplated by the Acquisition Documents. "Type", when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate. "Withdrawal Liability" means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. SECTION 1.02. Classification of Loans and Borrowing. For purposes of this Agreement, Loans may be classified and referred to by Type (e.g., a 24 "Eurodollar Loan"). Borrowings also may be classified and referred to by Type (e.g., a "Eurodollar Borrowing"). SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. SECTION 1.04. Accounting Terms; GAAP. (a) Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Majority Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. (b) For purposes of calculating compliance with Section 6.07 on the last day of any Fiscal Quarter ended on or after the Acquisition Date and prior to the first date (the "Stub End Date") on which four full Fiscal Quarters have begun and ended on or after the Acquisition Date and Section 6.08 on any date on or after the Acquisition Date and prior to the Stub End Date, Consolidated EBITDAR (and 25 each component thereof), Consolidated Fixed Charges (and each component thereof) and Rentals for purposes of determining Consolidated Adjusted Debt for any relevant period shall be adjusted on a pro forma basis as if (i) the Acquisition had been consummated on the first day of such period, (ii) the borrowings to finance the Acquisition (including without limitation the Loans and any loans under the 5-Year Agreement and the 364-Day Credit Agreement) had been made on the first day of such period and (iii) any Indebtedness of the Target and its subsidiaries repaid in connection with the consummation of the Acquisition had been repaid on the first day of such period. ARTICLE 2 THE CREDITS SECTION 2.01. Commitments. Subject to the terms and conditions set forth herein, each Lender with a Commitment agrees to make one term Loan to the Borrower on the First Borrowing Date in an aggregate principal amount not exceeding such Lender's Commitment. The Commitments are not revolving in nature, and amounts repaid or prepaid may not be reborrowed. SECTION 2.02. Loans and Borrowings. (a) Each Loan shall be made as part of a Borrowing consisting of Loans made by the Lenders ratably in accordance with their respective Commitments. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender's failure to make Loans as required. (b) Subject to Section 2.12, each Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request in accordance herewith. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement. (c) At the commencement of each Interest Period for any Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $5,000,000 and not less than $25,000,000 (or, if less, the unused portion of the Commitments). (d) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date. 26 SECTION 2.03. Requests for Borrowing. To request a Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 11:00 a.m., New York City time, on the date of the proposed Borrowing; provided that the Borrower may request only one Borrowing pursuant to this Section 2.03. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in a form approved by the Administrative Agent and signed by the Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02: (i) the aggregate amount of the requested Borrowing; (ii) the date of such Borrowing, which shall be a Business Day; (iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; (iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Interest Period"; and (v) the location and number of the Borrower's account to which funds are to be disbursed, which shall comply with the requirements of Section 2.05. If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing. SECTION 2.04. Reserved. SECTION 2.05. Funding of Borrowings. (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 12:00 noon, New York City time, to the account of the Administrative Agent most recently designated by it for such purpose by 27 notice to the Lenders. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower maintained with the Administrative Agent in New York City and designated by the Borrower in the applicable Borrowing Request. (b) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the Federal Funds Effective Rate or (ii) in the case of the Borrower, the interest rate applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender's Loan included in such Borrowing. SECTION 2.06. Interest Elections. (a) Each Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. (b) To make an election pursuant to this Section, the Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the Borrower. 28 (c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02: (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; (iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and (iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period". If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. (d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender's portion of each resulting Borrowing. (e) If the Borrower fails to deliver a timely Interest Election Request with respect to a Eurodollar Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Majority Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto. 29 SECTION 2.07. Termination and Reduction of Commitments. (a) The Commitments shall terminate on the Termination Date (regardless of whether any Loans have been made on the Termination Date). (b) On the date on which the Borrower or any of its Subsidiaries receives any Net Cash Proceeds in respect of any Reduction Event, the Commitments shall be reduced by an amount equal to such Net Cash Proceeds; provided that if the Net Cash Proceeds in respect of any Reduction Event is less than $5,000,000, no such reduction shall be required until the Net Cash Proceeds with respect to such Reduction Event, together with the Net Cash Proceeds with respect to all other Reduction Events in respect of which no reduction under this paragraph (b) shall have theretofore been made, is equal to at least $5,000,000. (c) The Borrower may at any time terminate, or from time to time reduce, the Commitments; provided that each reduction of any Commitments shall be in an amount that is an integral multiple of $5,000,000 and not less than $25,000,000. (d) The Borrower shall notify the Administrative Agent of any mandatory reduction of the Commitments under paragraph (b) of this Section or any election to terminate or reduce the Commitments under paragraph (c) of this Section, in each case at least three Business Days prior to the effective date of such termination or reduction, specifying such mandatory reduction or such election, as the case may be, and, in the case of any such election, the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section shall be irrevocable; provided that a notice of election to terminate the Commitments as permitted under paragraph (c) delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments shall be permanent. Each reduction of the Commitments shall be made ratably among the Lenders in accordance with their respective Commitments. SECTION 2.08. Repayment of Loans; Evidence of Debt. (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Lender with a Commitment the then unpaid principal amount of such Lender's Loans on the Maturity Date. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender 30 resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof. (d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement. (e) Any Lender may request that Loans made by it be evidenced by a promissory note. In such event, the Borrower shall prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 9.04) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns). SECTION 2.09. Mandatory and Optional Prepayment of Loans. (a) On the date on which the Borrower or any of its Subsidiaries shall receive Net Cash Proceeds in respect of any Reduction Event, the Borrower shall prepay Loans in an aggregate amount equal to such Net Cash Proceeds; provided that if the Net Cash Proceeds in respect of any Reduction Event is less than $10,000,000, no such prepayment shall be required until the Net Cash Proceeds with respect to such Reduction Event, together with the Net Cash Proceeds with respect to all other Reduction Events in respect of which no prepayment under this paragraph (a) shall have theretofore been made, is equal to at least $10,000,000. (b) The Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to prior notice in accordance with paragraph (c) of this Section. 31 (c) The Borrower shall notify the Administrative Agent by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of prepayment or (ii) in the case of prepayment of an ABR Borrowing, not later than 11:00 a.m., New York City time, one Business Day before the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid; provided that, if a notice of prepayment permitted by paragraph (b) is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.07, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.07. Promptly following receipt of any such notice relating to a Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof. Each prepayment of Loans pursuant to paragraph (a) shall be applied to such Borrowings as the Borrower may designate (or, failing such designation, as determined by the Administrative Agent). Each partial prepayment of any Borrowing permitted by paragraph (b) shall be in an amount that would be permitted in the case of an advance of a Borrowing of the same Type as provided in Section 2.02. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.11. SECTION 2.10. Fees. (a) The Borrower agrees to pay to the Administrative Agent for the account of each Lender a commitment fee, which shall accrue at the Applicable Rate on the daily amount by which such Lender's Commitment exceeds the aggregate amount of such Lender's outstanding Loans during the period from and including the date hereof to but excluding the date on which such Commitment terminates. Accrued commitment fees shall be payable in arrears on the last day of March, June, September and December of each year and on the date on which the Commitments terminate, commencing on the first such date to occur after the date hereof. All commitment fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). (b) The Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Borrower and the Administrative Agent. (c) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, in the case of facility fees, to the Lenders. Fees paid shall not be refundable under any circumstances. 32 SECTION 2.11. Interest. (a) The Loans comprising each ABR Borrowing shall bear interest at a rate per annum equal to the Alternate Base Rate plus the Applicable Rate. (b) The Loans comprising each Eurodollar Borrowing shall bear interest at a rate per annum equal to the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate. (c) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided above or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Loans as provided above. (d) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan; provided that (i) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Loan prior to the end of the Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment, (iii) in the event of any conversion of any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion and (iv) all accrued interest shall be payable upon termination of the Commitments. (e) All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. SECTION 2.12. Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Eurodollar Borrowing: (a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate for such Interest Period; or 33 (b) the Administrative Agent is advised by the Majority Lenders that the Adjusted LIBO Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period; then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective, and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing. SECTION 2.13. Increased Costs. (a) If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate); or (ii) impose on any Lender or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such Lender or any participation therein; and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered. (b) If any Lender determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's capital or on the capital of such Lender's holding company, if any, as a consequence of this Agreement or the Loans made by such Lender, to a level below that which such Lender or such Lender's holding company could have achieved but for such Change in Law (taking into consideration such Lender's policies and the policies of such Lender's holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or such Lender's holding company, as the case may be, such additional amount or amounts as will compensate such Lender or such Lender's holding company for any such reduction suffered. 34 (c) A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 15 days after receipt thereof. (d) Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender's right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender (or such Lender's holding company) pursuant to this Section for any increased costs or reductions incurred more than ninety days prior to the date that such Lender notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender's intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the ninety-day period referred to above shall be extended to include the period of retroactive effect thereof. SECTION 2.14. Break Funding Payments. In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow any Eurodollar Loan, convert any ABR Loan into a Eurodollar Loan, continue any Eurodollar Loan or prepay any Eurodollar Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice is permitted to be revocable under Section 2.09(c) and is revoked in accordance herewith), or (d) the assignment of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 2.17, then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurodollar Loan, the loss to any Lender attributable to any such event shall be deemed to include an amount determined by such Lender to be equal to the excess, if any, of (i) the amount of interest that such Lender would pay for a deposit equal to the principal amount of such Loan for the period from the date of such payment, conversion, failure or assignment to the last day of the then current Interest Period for such Loan (or, in the case of a failure to borrow, convert or continue, the duration of the Interest Period that would have resulted from such borrowing, conversion or continuation) if the interest rate payable on such deposit were equal to the Adjusted LIBO Rate for such Interest Period, over (ii) the amount of interest that such Lender would earn on such principal amount for such period if such Lender were to invest such 35 principal amount for such period at the interest rate that would be bid by such Lender (or an affiliate of such Lender) for Dollar deposits from other banks in the eurodollar market at the commencement of such period. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 15 days after receipt thereof. SECTION 2.15. Taxes. (a) Any and all payments by or on account of any obligation of the Borrower hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent or Lender (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) The Borrower shall indemnify the Administrative Agent and each Lender, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Administrative Agent or such Lender, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender, or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error. (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent. 36 (e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by the Borrower, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate. The Borrower shall not be obligated to make any payments to a Foreign Lender pursuant to Section 2.15(a) to the extent that such Indemnified Taxes or Other Taxes became payable as a consequence of such Foreign Lender having failed to comply with this Section 2.15(e). (f) If any Lender shall become aware that it is entitled to receive a refund or credit (such credit to include any increase in any foreign tax credit) as a result of Indemnified Taxes (including any penalties or interest with respect thereto) as to which it has been indemnified by the Borrower pursuant to this Section 2.15, it shall promptly notify the Borrower of the availability of such refund or credit and shall, within 30 days after receipt of a request by the Borrower, apply for such refund or credit at the Borrower's expense, and in the case of any application for such refund or credit by the Borrower, shall, if legally able to do so, deliver to the Borrower such certificates, forms or other documentation as may be reasonably necessary to assist the Borrower in such application. If any Lender receives a refund or credit (such credit to include any increase in any foreign tax credit) in respect to any Indemnified Taxes as to which it has been indemnified by the Borrower pursuant to this Section 2.15, it shall promptly notify the Borrower of such refund or credit and shall, within 30 days after receipt of such refund or the benefit of such credit (such benefit to include any reduction of the taxes for which any Lender would otherwise be liable due to any increase in any foreign tax credit available to such Lender), repay the amount of such refund or benefit of such credit (with respect to the credit, as determined by the Lender in its sole judgment) to the Borrower (to the extent of amounts that have been paid by the Borrower under this Section 2.15 with respect to Indemnified Taxes giving rise to such refund or credit), plus any interest received with respect thereto, net of all reasonable out-of-pocket expenses of such Lender and without interest (other than interest actually received from the relevant taxing authority or other Governmental Authority with respect to such refund or credit); provided, however, that the Borrower, upon the request of such Lender, agrees to return the amount of such refund or benefit of such credit (plus interest) to such Lender in the event such Lender is required to repay the amount of such refund or benefit of such credit to the relevant taxing authority or other Governmental Authority. 37 SECTION 2.16. Payments Generally; Pro Rata Treatment; Sharing of Set- offs. (a) The Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees, or under Section 2.13, 2.14 or 2.15, or otherwise) prior to 12:00 noon, New York City time, on the date when due, in immediately available funds, without set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices at 60 Wall Street, New York, New York, except that payments pursuant to Sections 2.13, 2.14, 2.15 and 9.03 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in Dollars. (b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, interest and fees then due hereunder, such funds shall be applied (i) first, to pay interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, to pay principal then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties. (c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions 38 of this paragraph shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation. (d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the Federal Funds Effective Rate. (e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.05(b) or 2.16(d), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender's obligations under such Sections until all such unsatisfied obligations are fully paid. SECTION 2.17. Mitigation Obligations; Replacement of Lenders. (a) If any Lender requests compensation under Section 2.13, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.15, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, or to file any certificate or document reasonably requested by the Borrower, if, in the judgment of such Lender, such designation or assignment or filing (i) would eliminate or reduce amounts payable pursuant to Section 2.13 or 2.15, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. (b) If any Lender requests compensation under Section 2.13, or if the Borrower is required to pay any additional amount to any Lender or any 39 Governmental Authority for the account of any Lender pursuant to Section 2.15, or if any Lender defaults in its obligation to fund Loans hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.13 or payments required to be made pursuant to Section 2.15, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. A Lender shall not be required to pay any fee to the Administrative Agent in connection with such assignment and delegation (any such fee to be paid by the Borrower or the assignee). ARTICLE 3 REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants to the Lenders (including, in the case of any representation and warranty made or deemed made before the consummation of the Acquisition, at the time such representation and warranty is made or deemed made and immediately after giving effect to the consummation of the Acquisition) that: SECTION 3.01. Organization; Powers. Each of the Borrower and its Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required. SECTION 3.02. Authorization; Enforceability. The Transactions are within the Borrower's corporate powers and have been duly authorized by all necessary 40 corporate and, if required, stockholder action. Each of this Agreement, the Acquisition Documents and the other documents executed and delivered in connection with the Transactions, has been duly executed and delivered by the Borrower and constitutes a legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law. SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except (x) such consents, approvals, registrations or filings with respect to the Acquisition which will be obtained or made prior to the consummation of the Acquisition and will thereafter be in full force and effect, (y) such consents, approvals, registrations or filings with respect to the Acquisition which will be obtained or made after the consummation of the Acquisition and the failure to obtain or make prior to the Acquisition will not, individually or in the aggregate, have a Material Adverse Effect and (z) such other consents, approvals, registrations or filings as have been obtained or made and are in full force and effect, (b) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of the Borrower or any of its Subsidiaries or any order of any Governmental Authority, (c) will not violate or result in a default under (i) any indenture, agreement or instrument relating to the Existing Public Debt or the Medium Term Notes or (ii) any other indenture, agreement or other instrument binding upon the Borrower or any of its Subsidiaries or its assets, other than defaults or violations for which consents or waivers have been obtained or, solely with respect to any indenture, agreement or instrument described in clause (ii), which defaults or violations, individually or in the aggregate could not reasonably be expected to result in a Material Adverse Effect, (d) will not give rise to a right under any indenture, agreement or other instrument binding upon the Borrower or any of its Subsidiaries or its assets to require any payment to be made by the Borrower or any of its Subsidiaries other than any payments contemplated to be made in connection with the Transactions, and (e) will not result in the creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries. SECTION 3.04. Financial Condition; No Material Adverse Change. (a) The Borrower has heretofore furnished to the Lenders its consolidated balance sheet and statements of income, stockholders equity and cash flows (i) as of and for the Fiscal Year ended January 2, 1999, reported on by PricewaterhouseCoopers LLP, independent public accountants, and (ii) as of and for the fiscal quarter and the portion of the Fiscal Year ended September 11, 1999, certified by its Financial Officer. Such financial statements present fairly, in all 41 material respects, the financial condition and results of operations and cash flows of Borrower and its Consolidated Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to year-end audit adjustments and the absence of footnotes in the case of the statements referred to in clause (ii) above. (b) The Borrower has heretofore furnished to the Lenders the consolidated balance sheet and statements of income, stockholders equity and cash flows of the Target and its subsidiaries (i) as of and for the Fiscal Year ended January 2, 1999, reported on by PricewaterhouseCoopers LLP, independent public accountants, and (ii) as of and for the fiscal quarter and the portion of the Fiscal Year ended July 3, 1999, certified by a Financial Officer of the Borrower. Such financial statements present fairly, in all material respects, the financial condition and results of operations and cash flows of the Target and its consolidated subsidiaries as of such dates and for such periods in accordance with GAAP, subject to year-end audit adjustments and the absence of footnotes in the case of the statements referred to in clause (ii) above. (c) Since June 19, 1999, there has been no Material Adverse Change in the business, assets, operations, prospects or condition, financial or otherwise, of the Borrower and its Subsidiaries, taken as a whole. SECTION 3.05. Properties. (a) Each of the Borrower and its Subsidiaries has good title to, or valid leasehold interests in, all its real and personal property material to its business, except for defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties for their intended purposes and except as may be permitted pursuant to Section 6.01. (b) Each of the Borrower and its Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to its business, and the use thereof by the Borrower and its Subsidiaries does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 3.06. Litigation and Environmental Matters. (a) There are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any of its Subsidiaries or that involve this Agreement or the Transactions as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect (other than the Disclosed Matters). 42 (b) Except for the Disclosed Matters and except with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, neither the Borrower nor any of its Subsidiaries (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability. (c) Since the date of this Agreement, there has been no change in the status of the Disclosed Matters that, individually or in the aggregate, has resulted in, or materially increased the likelihood of, a Material Adverse Effect. SECTION 3.07. Compliance with Laws and Agreements. Each of the Borrower and its Subsidiaries is in compliance with all laws, regulations and orders of any Governmental Authority applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is continuing. SECTION 3.08. Investment and Holding Company Status. Neither the Borrower nor any of its Subsidiaries is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. SECTION 3.09. Taxes. Each of the Borrower and its Subsidiaries has timely filed or caused to be filed all Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which the Borrower or such Subsidiary, as applicable, has set aside on its books reserves as and to the extent required by GAAP or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect. SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than 43 $8,000,000 the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $15,000,000 the fair market value of the assets of all such underfunded Plans. SECTION 3.11. Disclosure. The Borrower has disclosed to the Lenders all agreements, instruments and corporate or other restrictions to its knowledge to which it or any of its Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. None of the reports, financial statements, certificates or other information furnished by or on behalf of the Borrower to the Administrative Agent or any Lender in connection with the negotiation of this Agreement or delivered hereunder (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time. Any forward looking statements contained therein are inherently subject to risk and uncertainties, many of which cannot be predicted with accuracy, and some of which might not be anticipated. Future events and actual results, financial and otherwise, could differ materially from those set forth therein or contemplated by the forward looking statements contained therein. SECTION 3.12. Margin Stock. Not more than 25% of the consolidated assets of the Borrower consists of "margin stock" within the meaning of such term under Regulation U of the Board of Governors of the Federal Reserve System. SECTION 3.13. No Burdensome Restrictions. No Requirement of Law or Contractual Obligation of the Borrower or any of its Subsidiaries could reasonably be expected to have a Material Adverse Effect. SECTION 3.14. Subsidiaries. Schedule 3.14 sets forth all of the Subsidiaries of the Borrower at the date hereof. SECTION 3.15. Solvency. As of the date hereof and on the occasion of any Borrowing, the Borrower is Solvent. SECTION 3.16. Year 2000 Matters. Any reprogramming required to permit the proper functioning (but only to the extent that such functioning would otherwise be impaired by the occurrence of the year 2000) in and following the 44 year 2000 of computer systems and other equipment containing embedded microchips, in either case owned or operated by the Borrower or any of its Subsidiaries has been substantially completed. The costs to the Borrower and its Subsidiaries that have not been incurred as of the date hereof for such reprogramming and testing and for the other reasonably foreseeable consequences to them of any improper functioning of other computer systems and equipment containing embedded microchips due to the occurrence of the year 2000 could not reasonably be expected to result in a Default or Event of Default or to have a Material Adverse Effect. The computer systems of the Borrower and its Subsidiaries are and, with ordinary course of upgrading and maintenance, will continue for the term of this Agreement to be sufficient for the conduct of their business as currently conducted. SECTION 3.17. Acquisition Documents. As of the Acquisition Date, each of the representations and warranties made in the Acquisition Documents by each of the parties thereto is true and correct in all material respects, and such representations and warranties are hereby incorporated herein by reference with the same effect as though set forth in their entirety herein, as qualified therein. ARTICLE 4 CONDITIONS TO FUNDING SECTION 4.01. Effective Date. The obligations of the Lenders to make Loans hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 9.02): (a) The Administrative Agent shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement. (b) (i) The Lenders shall have received true, correct and complete copies of the Acquisition Documents as in effect on the Effective Date, and (ii) the material terms of such Acquisition Documents shall be in form and substance satisfactory to the Majority Lenders. With respect to the condition set forth in paragraph (b)(ii) of this Section, each Lender shall be deemed to have determined that such condition has been satisfied unless the Administrative Agent shall have received notice from such Lender prior to the Effective Date that such Lender does not consider such condition to have been satisfied. 45 The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding. SECTION 4.02. First Credit Event. The obligation of each Lender to make a Loan on the occasion of the Borrowing to occur on the First Borrowing Date is subject to the satisfaction of the following conditions (or waiver thereof in accordance with Section 9.02): (a) The Effective Date shall have occurred. (b) (i) The Merger shall have been consummated (or shall be consummated contemporaneously with the making of the Loans on the First Borrowing Date) in accordance with the Acquisition Documents on or prior to August 17, 2000, and (ii) no term or condition of any Acquisition Document shall have been amended, modified or waived except as permitted by Section 6.10 hereof. (c) The Administrative Agent shall have received true, correct and complete copies of the Acquisition Documents as in effect on the First Borrowing Date. (d) (i) All governmental, shareholder and third-party consents (including Hart-Scott-Rodino clearance) and approvals necessary or desirable in connection with the Acquisition shall have been obtained and shall be in full force and effect, except for such consents or approvals the failure of which to obtain will not, individually or in the aggregate, have a Material Adverse Effect, (ii) all applicable waiting periods shall have expired without any action being taken by any competent authority that could restrain, prevent or impose any materially adverse conditions on the Acquisition or that could seek or threaten to restrain, prevent or impose any materially adverse conditions on any of the foregoing, and (iii) no law or regulation shall be applicable which in the judgment of the Lenders could have any such effect. (e) There shall be no actions, suits or proceedings by or before any arbitrator or governmental authority pending against or to the knowledge of the Borrower threatened against or affecting the Borrower or any of its Subsidiaries or the Target or any of its subsidiaries or that involve the credit facility contemplated by this Agreement or the refinancing thereof or this Agreement as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected to have a Material Adverse Effect or that challenge the Acquisition. 46 (f) The Administrative Agent shall have received a favorable written opinion (addressed to the Administrative Agent and the Lenders and dated the First Borrowing Date) of Akin, Gump, Strauss, Hauer & Feld, L.L.P., counsel for the Borrower, substantially in the form of Exhibit B, and covering such other matters relating to the Borrower, this Agreement or the Transactions as the Majority Lenders shall reasonably request. The Borrower hereby requests such counsel to deliver such opinion. (g) The Administrative Agent shall have received a certificate, dated the First Borrowing Date and signed by the President, a Vice President or a Financial Officer of the Borrower, confirming compliance with the conditions set forth in paragraphs (b), (d) and (e) of this Section and paragraphs (a) and (b) of Section 4.03. (h) The Lenders and the Administrative Agent shall have received all fees and other amounts due and payable on or prior to the First Borrowing Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder. (i) The Administrative Agent shall have received such other legal opinions, documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of the Borrower, the authorization of the Transactions and any other legal matters relating to the Borrower, this Agreement or the Transactions, all in form and substance satisfactory to the Administrative Agent and its counsel. With respect to any condition set forth in paragraph (d)(iii) of this Section, each Lender shall be deemed to have determined that such condition has been satisfied unless the Administrative Agent shall have received notice from such Lender prior to the First Borrowing Date that such Lender does not consider such condition to have been satisfied. The obligations of the Lenders to make Loans hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 9.02) at or prior to 3:00 p.m., New York City time, on August 17, 2000 (and, in the event such conditions are not so satisfied or waived, the Commitments shall terminate at such time). SECTION 4.03. Each Credit Event. The obligation of each Lender to make a Loan on the occasion of any Borrowing (including without limitation on the First Borrowing Date) is subject to the satisfaction of the following conditions (or waiver thereof in accordance with Section 9.02): 47 (a) The representations and warranties of the Borrower set forth in this Agreement shall be true and correct on and as of the date of such Borrowing, including, without limitation, the representations and warranties set forth in Sections 3.04 and 3.06, except to the extent such representations and warranties expressly relate to an earlier date. (b) At the time of and immediately after giving effect to such Borrowing, no Default or Event of Default shall have occurred and be continuing. Each Borrowing shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in paragraphs (a) and (b) of this Section. ARTICLE 5 AFFIRMATIVE COVENANTS Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder shall have been paid in full, the Borrower covenants and agrees with the Lenders that: SECTION 5.01. Financial Statements and Other Information. The Borrower will furnish to the Administrative Agent and each Lender: (a) within 105 days after the end of each Fiscal Year, its audited consolidated balance sheet and related statements of operations, stockholders' equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures as of the end of and for the previous Fiscal Year, all reported on by PricewaterhouseCoopers LLP or other independent public accountants of recognized national standing (without a "going concern" or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Borrower and its Consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied; (b) within 60 days after the end of each of the first three fiscal quarters of each Fiscal Year, its consolidated balance sheet and related statements of operations, stockholders' equity and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the Fiscal Year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous Fiscal Year, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its 48 Consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes; (c) concurrently with any delivery of financial statements under clause (a) or (b) above, a certificate of a Financial Officer of the Borrower (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations of the financial covenants set forth in Sections 6.02, 6.07 and 6.08 and (iii) stating whether any change in GAAP or in the application thereof has occurred since the date of the audited financial statements referred to in Section 3.04(a) and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate; (d) concurrently with any delivery of financial statements under clause (a) above, a certificate of the accounting firm that reported on such financial statements stating whether they obtained knowledge during the course of their examination of such financial statements of any Default (which certificate may be limited to the extent required by accounting rules or guidelines); (e) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed (excluding exhibits) by the Borrower or any Subsidiary with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, or distributed by the Borrower to its shareholders generally, as the case may be; (f) within 5 Business Days of receipt of any Major Casualty Proceeds that would constitute a Reduction Event but for the delivery of a certificate pursuant to this subsection, a certificate of the Borrower setting forth the amount of such Major Casualty Proceeds, the transaction giving rise to them and setting forth the amount of such Major Casualty Proceeds that will be expended by the Borrower and its Subsidiaries for the restoration or replacement of related assets within 180 days of receipt thereof and a reasonably detailed plan of such restoration or replacement; and (g) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Borrower or any Subsidiary, or compliance with the terms of this Agreement, as the Administrative Agent or any Lender through the Administrative Agent may reasonably request. 49 SECTION 5.02. Notices of Material Events. The Borrower will furnish to the Administrative Agent and each Lender prompt written notice of the following: (a) the occurrence of any Default; (b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Borrower or any Affiliate thereof that, if adversely determined, could reasonably be expected to result in a Material Adverse Effect; (c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and its Subsidiaries in an aggregate amount exceeding $20,000,000 subsequent to the date hereof; and (d) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect. Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other executive officer of the Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto. SECTION 5.03. Existence; Conduct of Business. The Borrower will, and will cause each of its Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges and franchises material to the conduct of the business of the Borrower and its Subsidiaries taken as a whole except to that extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 6.03. SECTION 5.04. Payment of Obligations. The Borrower will, and will cause each of its Subsidiaries to, pay its obligations, including Tax liabilities, that, if not paid, could result in a Material Adverse Effect before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) the Borrower or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect. SECTION 5.05. Maintenance of Properties; Insurance. The Borrower will, and will cause each of its Subsidiaries to, (a) keep and maintain all property 50 material to the conduct of its business in adequate working order and condition, ordinary wear and tear excepted, and (b) maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations. SECTION 5.06. Books and Records; Inspection Rights. The Borrower will, and will cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities. The Borrower will, and will cause each of its Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested. SECTION 5.07. Compliance with Laws and Material Contractual Obligations. The Borrower will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property and all material Contractual Obligations, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect; provided that the foregoing shall not be construed to prevent the Borrower or any such Subsidiary from contesting any of the same by appropriate proceedings. SECTION 5.08. Use of Proceeds. The proceeds of the Loans will be used only (i) to finance the Acquisition (including the payment of related transaction fees and expenses), (ii) to refinance existing Indebtedness of the Target and (iii) for general corporate purposes of the Borrower and its Subsidiaries, including as credit support for the Borrower's commercial paper programs. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations U and X. SECTION 5.09. Change in Ratings. The Borrower will furnish to the Administrative Agent and each Lender prompt written notice of any change in ratings established or deemed to have been established by Moody's and S&P for any of its indebtedness for borrowed money, including, without limitation, the Index Debt or its senior, unsecured, short-term indebtedness for borrowed money (including, without limitation, commercial paper). SECTION 5.10. Copies of Other Bank Agreements. Promptly upon entering into the 5-Year Agreement, the Borrower will deliver to each Lender 51 (other than a Lender who is a party to such 5-Year Agreement) a true, correct and complete copy thereof. ARTICLE 6 NEGATIVE COVENANTS Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees payable hereunder have been paid in full, the Borrower covenants and agrees with the Lenders that: SECTION 6.01. Liens. The Borrower will not, and will not permit any Subsidiary to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except: (a) Permitted Encumbrances; (b) any Lien on any property or asset of the Borrower or any Subsidiary existing on the date hereof and set forth on Schedule 6.01 or resulting from operating leases existing on the date hereof being reclassified as capital leases in accordance with GAAP; provided that (i) such Lien shall not apply to any other property or asset (other than accessions, modifications and proceeds thereof) of the Borrower or any Subsidiary and (ii) such Lien shall secure only those obligations which it secures on the date hereof and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof; (c) any Lien existing on any property or asset prior to the acquisition thereof by the Borrower or any Subsidiary or existing on any property or asset of any Person that becomes a Subsidiary on or after the date hereof prior to the time such Person becomes a Subsidiary; provided that (i) such Lien is not created in contemplation of or in connection with such acquisition or such Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not apply to any other property or assets (other than accessions, modifications and proceeds thereof) of the Borrower or any Subsidiary and (iii) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such Person becomes a Subsidiary, as the case may be and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof; (d) Liens on fixed or capital assets acquired, constructed or improved by the Borrower or any Subsidiary; provided that (i) such Liens and the Indebtedness 52 secured thereby are incurred prior to or within 180 days after such acquisition or the completion of such construction or improvement, (ii) the Indebtedness secured thereby does not exceed 100% of the cost of acquiring, constructing or improving such fixed or capital assets and (iii) such Liens shall not apply to any other property or assets (other than accessions, modifications and proceeds thereof) of the Borrower or any Subsidiary; and (e) Liens not otherwise permitted pursuant to this Section 6.01 securing Indebtedness of the Borrower or any Subsidiary (not otherwise prohibited hereunder) in an aggregate principal amount at no time exceeding (i) $30,000,000 minus (ii) the aggregate principal amount of Indebtedness of Subsidiaries permitted solely by clause (e) of Section 6.02 outstanding at such time. SECTION 6.02. Indebtedness of Subsidiaries. The Borrower will not permit any Subsidiary to create, incur, assume, become liable in respect of or suffer to exist any Indebtedness, except to the extent otherwise permitted hereunder: (a) Indebtedness (including, without limitation, Capital Lease Obligations) secured by Liens permitted under Section 6.01(b); (b) (i) Indebtedness (including, without limitation, Capital Lease Obligations) secured by Liens permitted under Section 6.01(c) in an aggregate principal amount not to exceed $140,000,000, (ii) Indebtedness (other than Indebtedness permitted by clause (i)) consisting of Capital Lease Obligations and (iii) on and after the date on which Bel-Thai Supermarket Company Ltd. ("Bel- Thai") becomes a Subsidiary, Indebtedness of Bel-Thai in an aggregate principal amount not exceeding $60,000,000; (c) Indebtedness of any Subsidiary owed to the Borrower or any other Subsidiary; (d) Indebtedness of the Target and its subsidiaries outstanding on the Acquisition Date and not incurred in contemplation of the Acquisition; and (e) additional Indebtedness of the Subsidiaries in an aggregate principal amount (for all Subsidiaries) at no time exceeding (i) $30,000,000 minus (ii) the aggregate principal amount of Indebtedness secured by Liens permitted solely by clause (e) of Section 6.01 outstanding at such time; provided that at any date the aggregate amount of Capital Lease Obligations of all Subsidiaries (other than any such Capital Lease Obligations incurred in reliance 53 on clause (i) of subsection (b)) and the aggregate amount of Capital Lease Obligations of the Borrower will not exceed $1,000,000,000. SECTION 6.03. Fundamental Changes. (a) The Borrower will not, and will not permit any Subsidiary to, merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or substantially all of the assets of the Borrower and its Subsidiaries taken as a whole (whether now owned or hereafter acquired), or liquidate or dissolve, except that, if at the time thereof and immediately after giving effect thereto no Default shall have occurred and be continuing (i) the Borrower may merge into any other Person in a transaction in which the Borrower is the surviving corporation, (ii) any Subsidiary may merge into the Borrower in a transaction in which the Borrower is the surviving corporation, (iii) any Subsidiary may merge into any Subsidiary in a transaction in which the surviving entity is a Subsidiary, (iv) any Subsidiary may merge into any other Person in a transaction in which the surviving entity is a Subsidiary or in a transaction permitted by Section 6.09 and in which the surviving Person is not a Subsidiary, (v) any Subsidiary may sell, transfer, lease or otherwise dispose of its assets to the Borrower or to another Subsidiary or in a transaction not constituting all or substantially all of the assets of the Borrower and its Subsidiaries taken as a whole and which is permitted by Section 6.08, (vi) Acquisition Sub may consummate the Merger, (vii) subject to Section 10.01, the Borrower and its Subsidiaries may consummate the Reorganization and (viii) any Subsidiary may liquidate or dissolve if the Borrower determines in good faith that such liquidation or dissolution is in the best interests of the Borrower and is not materially disadvantageous to the Lenders; provided that any such merger involving a Person that is not a wholly owned Subsidiary immediately prior to such merger shall not be permitted unless also permitted by Section 6.04. (b) The Borrower will not, and will not permit any of its Subsidiaries to, engage to any material extent in any business other than businesses of the type conducted by the Borrower and its Subsidiaries and Hannaford and its subsidiaries on the date of execution of this Agreement and businesses reasonably related or incidental thereto. SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions; Hedging Agreements. (a) The Borrower will not, and will not permit any of its Subsidiaries to, purchase, hold or acquire (including pursuant to any merger with any Person that was not a wholly owned Subsidiary prior to such merger) any capital stock, evidences of Indebtedness or other securities (including any option, warrant or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, guarantee any obligations of, or make or 54 permit to exist any investment or any other interest in, any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person constituting a business unit, except: (i) Cash Equivalents; (ii) extensions of trade credit in the ordinary course of business; (iii) investments arising from the settlement of debts or as a result of bankruptcy or insolvency proceedings or as a result of enforcement proceedings; (iv) investments of the Borrower and the Subsidiaries existing on the date hereof; (v) investments by the Borrower existing on the date hereof in the capital stock of its Subsidiaries; (vi) loans, advances and other investments made by the Borrower to or in any Subsidiary and made by any Subsidiary to or in the Borrower or any other Subsidiary; (vii) Guarantees to the extent that the resulting Debt would be permitted by Section 6.08 and, if applicable, Section 6.02; (viii) the acquisition of the capital stock of the Target pursuant to the Acquisition Documents; (ix) investments of the Target and its subsidiaries (i) existing on the date hereof or (ii) made after the date hereof and prior to the Acquisition Date, so long as such investments are permitted to be made by the terms of the Merger Agreement; and (x) investments not otherwise permitted pursuant to this Section 6.04 in an aggregate amount not to exceed $20,000,000 at any time outstanding. (b) The Borrower will not, and will not permit any of its Subsidiaries to, enter into any Hedging Agreement, other than (i) Hedging Agreements entered into in the ordinary course of business to hedge or mitigate risks to which the Borrower or any Subsidiary is exposed in the conduct of its business or the management of its liabilities, (ii) any Hedging Agreements to hedge interest rate risk with respect to the loans outstanding hereunder and (iii) Hedging Agreements 55 constituting "treasury-locks" or similar hedging arrangements entered into by the Borrower in anticipation of an issuance of Debt by the Borrower pursuant to a capital markets transaction. SECTION 6.05. Transactions with Affiliates. The Borrower will not, and will not permit any of its Subsidiaries to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except (a) in the ordinary course of business at prices and on terms and conditions not less favorable to the Borrower or such Subsidiary than could be obtained on an arm's-length basis from unrelated third parties and (b) transactions between or among the Borrower and its wholly owned Subsidiaries not involving any other Affiliate. SECTION 6.06. Reserved. SECTION 6.07. Fixed Charges Coverage. At the end of each Fiscal Quarter set forth below, the ratio of (i) Consolidated EBITDAR for the period of four Fiscal Quarters then ended to (ii) Consolidated Fixed Charges for such period, shall not have been less than the ratio set forth below opposite such Fiscal Quarter (subject to the proviso set forth below): Fiscal Quarter Ratio - -------------------------------------------------------------------------------- First Fiscal Quarter ended on or immediately after the 2.25:1 Effective Date - Third Fiscal Quarter 2001 Fourth Fiscal Quarter 2001 - Third Fiscal Quarter 2002 2.50:1 Fourth Fiscal Quarter 2002 - Third Fiscal Quarter 2003 2.75:1 Fourth Fiscal Quarter 2003 and thereafter 3.00:1 ; provided that at the end of any Fiscal Quarter ended prior to the Acquisition Date, such ratio shall not have been less than 3:00:1. SECTION 6.08. Ratio of Consolidated Adjusted Debt to Consolidated EBITDAR. At no date will the ratio of (i) Consolidated Adjusted Debt at such date to (ii) Consolidated EBITDAR for the period of four consecutive Fiscal Quarters ended on or most recently prior to such date exceed the ratio set forth below opposite the period in which such date falls (subject to the proviso set forth below): 56 Period Ratio - -------------------------------------------------------------------------------- Effective Date - day immediately preceding last day of 4.50:1 Fourth Fiscal Quarter 2001 Last day of Fourth Fiscal Quarter 2001- day immediately 4.00:1 preceding last day of Fourth Fiscal Quarter 2002 Last day of Fourth Fiscal Quarter 2002 - day immediately 3.75:1 preceding last day of Fourth Fiscal Quarter 2003 Last day of Fourth Fiscal Quarter 2003 and thereafter 3.50:1 ; provided that at any date prior to the Acquisition Date, such ratio will not exceed 3:00:1. SECTION 6.09. Limitation on Sales of Assets. The Borrower will not, nor will it permit any Subsidiary to, convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets, whether now owned or hereafter acquired, or discontinue or eliminate any business line or segment, except: (a) the sale or other disposition of obsolete, surplus or worn out property in the ordinary course of business; (b) the sale of inventory in the ordinary course of business; (c) as permitted by Section 6.03(a); (d) (i) sales of assets in a single transaction or in a series of related transactions the aggregate book value of which is not greater than $25,000,000 in any one such transaction or series of related transactions and (ii) sales of assets the consummation of which is an express condition (either precedent or subsequent) to the approval by the Federal Trade Commission of the Acquisition; provided that the book value of the assets disposed of in assets sales consummated in reliance on this clause (ii) does not exceed $258,000,000 and provided, further that if, within 180 days of any such assets sales, the Borrower or any Subsidiary acquires similar assets having a use similar to and a fair market value at least equal to the assets sold, then the value of the assets sold shall not be included in calculating future assets sales permitted under this Section 6.09; (e) dispositions and discontinuances of a business line or segment not otherwise permitted pursuant to this Section 6.09, provided that the aggregate assets to be so disposed of or the aggregate assets utilized in a business line or segment to be so discontinued (in a single transaction or in a series of related 57 transactions), when combined with all other assets disposed of (including, without limitation, pursuant to a sale and leaseback transaction) and all other assets utilized in all other business lines or segments discontinued, during the period from the date of this Agreement through and including the date of any such disposition or discontinuation would not exceed 5% of Consolidated Total Assets as determined by reference to the Borrower's most recently audited financial statements provided to the Administrative Agent and the Lenders pursuant to Section 5.01(a) and provided, further that if, within 180 days of the sale of any assets, the Borrower or any Subsidiary acquires similar assets having a use similar to and a fair market value at least equal to the assets so sold, then the value of the assets sold shall not be included in calculating future assets permitted to be sold under this Section 6.09; and (f) conveyances, sales, leases, assignments, transfers or other dispositions of assets from the Borrower to a wholly owned Subsidiary (including without limitation pursuant to the Reorganization), from a Subsidiary to the Borrower or from a Subsidiary to a wholly owned Subsidiary. SECTION 6.10. Modifications to Acquisition Documents. The Borrower will not, and will not permit any of its Subsidiaries to, enter into any amendment, modification or waiver of any material term or condition of any Acquisition Document without the prior written consent of the Majority Lenders. SECTION 6.11. Restrictions Affecting Subsidiaries. The Borrower will not, and will not permit any of its Subsidiaries to, enter into, be bound by or suffer to exist any encumbrance or restriction on the ability of any Subsidiary to (a) pay dividends or make other distributions or pay any Debt or Indebtedness owed to the Borrower or any Subsidiary, (b) make loans or advances to the Borrower or any Subsidiary, (c) transfer any of its properties or assets to the Borrower or any Subsidiary, (d) create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, (e) Guarantee any Debt or Indebtedness of the Borrower or another Subsidiary or (f) suffer to exist any Lien on capital stock or other equity interests issued by it; except for any such encumbrance or restriction existing under or by reason of (i) any agreement in effect on the Effective Date as any such agreement is in effect on such date, (ii) this Agreement, (iii) any agreement with respect to Indebtedness of any Subsidiary permitted to be incurred under Section 6.02(b) or secured by a Lien permitted to be incurred under Section 6.01(d) and provided such encumbrance or restriction shall not apply to any assets of the Borrower or its Subsidiaries other than the assets of such Subsidiary subject to such Lien, (iv) any agreement binding upon such Subsidiary prior to the date on which such Subsidiary was acquired by the Borrower and outstanding on such date and provided such encumbrance or restriction shall not apply to any assets of the 58 Borrower or its Subsidiaries other than such Subsidiary, (v) customary provisions restricting subletting or assignment of any lease governing any leasehold interest of any Subsidiary, (vi) applicable law, (vii) licenses or other agreements, including with respect to property, in the ordinary course of business consistent with prior practice and (viii) any agreement binding upon such Subsidiary so long as such encumbrance or restriction is no more restrictive than those contained in this Agreement. ARTICLE 7 EVENTS OF DEFAULT SECTION 7.01. Events of Default. If any of the following events ("Events of Default") shall occur: (a) the Borrower shall fail to pay any principal of any Loan when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise; (b) the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in clause (a) of this Section) payable under this Agreement, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of five days; (c) any representation or warranty made or deemed made by or on behalf of the Borrower or any Subsidiary in or in connection with this Agreement or any amendment or modification hereof, or in any report, certificate, financial statement or other document delivered pursuant to this Agreement or any amendment or modification hereof, shall prove to have been incorrect in any material way when made or deemed made; (d) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 5.02, 5.03 (with respect to the Borrower's existence) or 5.08 or in Article 6; (e) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in this Agreement (other than those specified in clause (a), (b) or (d) of this Article), and such failure shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent (given at the request of any Lender) to the Borrower; 59 (f) the Borrower or any Subsidiary shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable; (g) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (g) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness; (h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower or any Subsidiary or their respective debts, or of a substantial part of their respective assets, under any federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Subsidiary or for a substantial part of their respective assets, and, in any such case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; (i) the Borrower or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Article, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Subsidiary or for a substantial part of their respective assets, (iv) file an answer admitting the material allegations of a petition filed against either of them in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing; (j) the Borrower or any Subsidiary shall become unable, or admit in writing or fail generally, to pay their respective debts as they become due; (k) one or more judgments for the payment of money in an aggregate amount in excess of $10,000,000 shall be rendered against the Borrower, any Subsidiary or any combination thereof and the same shall remain undischarged for 60 a period of 30 consecutive days during which execution shall not be effectively stayed, bonded or vacated, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of the Borrower or any Subsidiary to enforce any such judgment; (l) an ERISA Event shall have occurred that, in the opinion of the Majority Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect; or (m) a Change in Control shall occur; then, and in every such event (other than an event with respect to the Borrower described in clause (h) or (i) of this Article), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Majority Lenders shall, by notice to the Borrower, take either of the following actions: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, or (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; and in case of any event with respect to the Borrower described in clause (h) or (i) of this Article, the Commitments shall automatically terminate or the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. ARTICLE 8 THE ADMINISTRATIVE AGENT SECTION 8.01. The Administrative Agent. Each of the Lenders hereby irrevocably appoints the Administrative Agent as its agent and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof, together with such actions and powers as are reasonably incidental thereto. The bank serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in 61 any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder. The Administrative Agent shall not have any duties or obligations except those expressly set forth herein. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that the Administrative Agent is required to exercise in writing by the Majority Lenders, and (c) except as expressly set forth herein, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Majority Lenders or in the absence of its own gross negligence or wilful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by the Borrower or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement, (ii) the contents of any certificate, report or other document delivered hereunder or in connection herewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the 62 Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. Subject to the appointment and acceptance of a successor Administrative Agent as provided in this paragraph, the Administrative Agent may resign at any time by notifying the Lenders and the Borrower. Upon any such resignation, the Majority Lenders shall have the right (so long as no Default has occurred and is continuing with consent of the Borrower which consent shall not be unreasonably withheld) to appoint a successor. If no successor shall have been so appointed by the Majority Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the Administrative Agent's resignation hereunder, the provisions of this Article and Section 9.03 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Administrative Agent. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any related agreement or any document furnished hereunder or thereunder. 63 ARTICLE 9 MISCELLANEOUS SECTION 9.01. Notices. Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: (a) if to the Borrower, to it at 2110 Executive Drive, Salisbury, North Carolina 28145-1330, Attention of Richard James, Treasurer/Director of Finance (Telecopy No. 704-636-5024); (b) if to the Administrative Agent, J.P. Morgan Services Inc., 500 Stanton Christiana Road, Newark, Delaware 19713, Attention of Jeannie Mattson, Associate (Telecopy No. 302-634-1092); and (c) if to any other Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire. Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt. SECTION 9.02. Waivers; Amendments. (a) No failure or delay by the Administrative Agent or any Lender in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by the Borrower therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent or any Lender may have had notice or knowledge of such Default at the time. 64 (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Majority Lenders or by the Borrower and the Administrative Agent with the consent of the Majority Lenders; provided that no such agreement shall (i) increase the Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the scheduled date of payment of the principal amount of any Loan or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.16(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender adversely affected thereby, or (v) change any of the provisions of this Section or the definition of "Majority Lenders" or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent hereunder without the prior written consent of the Administrative Agent. SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent, and its Affiliates, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent in connection with the syndication of the credit facilities provided for herein, the preparation and administration of this Agreement or any amendments, modifications or waivers of the provisions hereof (whether or not the transactions contemplated hereby or thereby shall be consummated) and (ii) all reasonable out-of-pocket expenses incurred by the Administrative Agent or any Lender, including the fees, charges and disbursements of any counsel for the Administrative Agent or any Lender, in connection with the enforcement or protection of its rights in connection with this Agreement, including its rights under this Section, or in connection with the Loans made hereunder, including in connection with any workout, restructuring or negotiations in respect thereof including, without limitation, actions in connection with this Agreement or the Loans, arising, occurring or continuing subsequent to the Maturity Date (other than any such expenses directly related to a court enforcement action in which the Borrower prevails on the merits in a final and nonappealable judgment). (b) The Borrower shall indemnify the Administrative Agent and each Lender, and each Related Party of any of the foregoing Persons (each such Person 65 being called an "Indemnitee") against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement or any agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or the use of the proceeds therefrom, (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by the Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to the Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or wilful misconduct of such Indemnitee. (c) To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent such Lender's Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent in its capacity as such. (d) To the extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or the use of the proceeds thereof. (e) All amounts due under this Section shall be payable promptly after written demand therefor. SECTION 9.04. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder 66 without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that (i) except in the case of an assignment to a Lender or an Affiliate of a Lender, each of the Borrower and the Administrative Agent must give their prior written consent to such assignment (which consent shall not be unreasonably withheld), (ii) except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire remaining amount of the assigning Lender's Commitment, the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $10,000,000 unless each of the Borrower and the Administrative Agent otherwise consent, (iii) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500, and (iv) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire; provided further that any consent of the Borrower otherwise required under this paragraph shall not be required if an Event of Default under clause (h) or (i) of Article 7 has occurred and is continuing. Upon acceptance and recording pursuant to paragraph (d) of this Section, from and after the effective date specified in each Assignment and Acceptance, the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.13, 2.14, 2.15 and 9.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (e) of this Section. 67 (c) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices in The City of New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. (d) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, the assignee's completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Acceptance and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph. (e) Any Lender may, without the consent of the Borrower or the Administrative Agent, sell participations to one or more banks or other entities (a "Participant") in all or a portion of such Lender's rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 9.02(b) that affects such Participant. Subject to paragraph (f) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.13, 2.14 and 2.15 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. (f) A Participant shall not be entitled to receive any greater payment under Section 2.13 or 2.15 than the applicable Lender would have been entitled to 68 receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower's prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.15 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.15(e) as though it were a Lender. (g) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement or any promissory note issued pursuant hereto to such Lender to secure obligations of such Lender, including any such pledge or assignment to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such assignee for such Lender as a party hereto. SECTION 9.05. Survival. All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid and so long as the Commitments have not expired or terminated. The provisions of Sections 2.13, 2.14, 2.15 and 9.03 and Article 8 shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Commitments or the termination of this Agreement or any provision hereof. SECTION 9.06. Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received 69 counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 9.07. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. SECTION 9.08. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of the Borrower against any of and all the obligations of the Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have. SECTION 9.09. Governing Law; Jurisdiction; Consent of Service of Process. (a) This Agreement shall be construed in accordance with and governed by the law of the State of New York. (b) The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court for the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent or any Lender may otherwise 70 have to bring any action or proceeding relating to this Agreement against the Borrower or its properties in the courts of any jurisdiction. (c) The Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (d) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. SECTION 9.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement. SECTION 9.12. Confidentiality. Each of the Administrative Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by 71 any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (f) subject to a written agreement containing provisions substantially the same as those of this Section, to any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement, (g) with the consent of the Borrower or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Administrative Agent or any Lender on a nonconfidential basis from a source other than the Borrower. For the purposes of this Section, "Information" means all information received from the Borrower relating to the Borrower, its Subsidiaries or their businesses, other than any such information that is available to the Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by the Borrower; provided that, in the case of information received from the Borrower after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. SECTION 9.13. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively the "Charges"), shall exceed the maximum lawful rate (the "Maximum Rate") which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender. 72 ARTICLE 10 PROVISIONS RELATING TO THE REORGANIZATION SECTION 10.01. Consent to Reorganization. Notwithstanding anything to the contrary contained herein, the Borrower may effect the Reorganization or any portion thereof so long as no Default shall have occurred and be continuing or would occur after giving effect to the Reorganization or such portion thereof. Promptly upon completion of the Reorganization, the Borrower shall give the Administrative Agent notice thereof. 73 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. DELHAIZE AMERICA, INC. By: /s/ Richard James ------------------------------- Title: Treasurer MORGAN GUARANTY TRUST COMPANY OF NEW YORK, individually and as Administrative Agent By: /s/ Kathryn Sayko-Yanes ------------------------------- Title: Vice President 74 BANK OF AMERICA, N.A. By: /s/ Timothy H. Spanos ----------------------------- Title: Managing Director CITIBANK, N.A. By: /s/ Marc Merlino ----------------------------- Title: Vice President WACHOVIA BANK, N.A. By: /s/ Christopher L. Fincher ----------------------------- Title: Senior Vice President THE BANK OF NEW YORK By: /s/ Michael V. Flannery ----------------------------- Title: Vice President BANK ONE, NA By: /s/ Catherine A. Muszynski ----------------------------- Title: Vice President 75 BBL INTERNATIONAL (U.K.) LIMITED By: /s/ C.F. Wright/G.R.M. Walker ------------------------------ Title: Authorised Signatories CREDIT AGRICOLE INDOSUEZ By: /s/ Craig Welch ----------------------------- Title: First Vice President By: /s/ Rene LeBlanc ----------------------------- Title: Vice President DEUTSCHE BANK AG NEW YORK AND/OR CAYMAN ISLANDS BRANCH By: /s/ Stefan Hafke ----------------------------- Title: Vice President By: /s/ Barbara Anne Hoeltz ----------------------------- Title: Vice President FIRST UNION NATIONAL BANK By: /s/ Mary J. Amatore ----------------------------- Title: Vice President 76 FORTIS (USA) FINANCE LLC By: /s/ Eddie Matthews ----------------------------- Title: Senior Vice President By: /s/ Robert Fakhoury ----------------------------- Title: Treasurer THE INDUSTRIAL BANK OF JAPAN, LIMITED By: /s/ Minami Miura ----------------------------- Title: Vice President COOPERATIEVE CENTRALE RAIFFEISEN- BOERENLEENBANK B.A., "RABOBANK INTERNATIONAL", NEW YORK BRANCH By: /s/ Polly Coe/Karen Boyer ----------------------------- Title: Senior Vice President/ Vice President SUNTRUST BANK, ATLANTA By: /s/ Jennifer P. Harrelson ----------------------------- Title: Managing Director COBANK, ACB By: /s/ Brian J. Klatt ----------------------------- Title: Vice President/ Relationship Manager 77 THE DAI-ICHI KANGYO BANK, LTD. By: /s/ Nicholas A. Fiore ----------------------------- Title: Assistant Vice President THE FUJI BANK, LIMITED By: /s/ Raymond Ventura ----------------------------- Title: Vice President & Manager BANQUE NATIONALE DE PARIS, HOUSTON AGENCY By: /s/ Henry F. Setina ----------------------------- Title: Vice President BRANCH BANKING & TRUST COMPANY By: /s/ Cory Boyte ----------------------------- Title: Vice President CIBC INC. By: /s/ Dominic Sorresso ----------------------------- Title: Executive Director 78 CREDIT COMMERCIAL DE FRANCE S.A. By: /s/ Bernard de Bellefroid/Chantal Peters ------------------------------------------ Title: Directeur General/Directeur FLEET NATIONAL BANK By: /s/ Thomas J. Bullard ------------------------------------------ Title: Vice President PARIBAS By: /s/ Andre Boulanger/Dimitri Stroobants ------------------------------------------ Title: Branch Manager/Structured Finance BANK OF TOKYO-MITSUBISHI TRUST COMPANY By: /s/ Mark O'Connor ------------------------------------------ Title: Vice President UNION BANK OF CALIFORNIA, N.A. By: /s/ J. William Bloore ------------------------------------------ Title: Vice President 79 Schedule 2.01 Commitment Schedule Bank Commitment - --------------------------------------------------------- ------------ Morgan Guaranty Trust Company of New York $185,000,000 Bank of America, N.A. $155,000,000 Citibank, N.A. $155,000,000 Wachovia Bank, N.A. $155,000,000 The Bank of New York $150,000,000 Bank One, NA $150,000,000 BBL International (U.K.) Limited $150,000,000 Credit Agricole Indosuez $150,000,000 Deutsche Bank AG New York and/or Cayman Islands $150,000,000 Branch First Union National Bank $150,000,000 Fortis (USA) Finance LLC $150,000,000 The Industrial Bank of Japan, Limited $150,000,000 Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., $150,000,000 "Rabobank International", New York Branch SunTrust Bank, Atlanta $150,000,000 CoBank, ACB $ 50,000,000 The Dai-Ichi Kangyo Bank, Ltd. $ 50,000,000 The Fuji Bank, Limited $ 50,000,000 Banque Nationale de Paris, Houston Agency $ 25,000,000 Branch Banking & Trust Company $ 25,000,000 CIBC Inc. $ 25,000,000 Credit Commercial de France S.A. $ 25,000,000 Fleet National Bank $ 25,000,000 80 Paribas $25,000,000 Bank of Tokyo-Mitsubishi Trust Company $25,000,000 Union Bank of California, N.A. $25,000,000 Total: $2,500,000,000 81 Schedule 3.06 Disclosed Matters Incorporated by reference are the relevant portions of the following documents for the Borrower and as of the Acquisition Date, the Target: Delhaize America, Inc. 1. Annual Report on Form 10-K for the fiscal year ended January 2, 1999 filed April 1, 1999, as amended by Amendment No. 1 to Annual Report on Form 10-K/A filed August 17, 1999. 2. Quarterly Report on Form 10-Q for the quarter ended September 11, 1999 filed October 26, 1999. 3. Quarterly Report on Form 10-Q for the quarter ended June 19, 1999 filed July 30, 1999, as amended by Amendment No. 1 to Quarterly Report on Form 10-Q/A filed August 17, 1999. 4. Quarterly Report on Form 10-Q for the quarter ended March 27, 1999 filed May 5, 1999, as amended by Amendment No. 1 to Quarterly Report on Form 10-Q/A filed August 17, 1999. 5. Current Report on Form 8-K filed September 17, 1999 6. Current Report on Form 8-K filed August 19, 1999. 7. Registration Statement on Form 8-A filed September 2, 1999, as amended by Amendment No. 1 to Registration Statement on Form 8-A/A filed September 3, 1999. Hannaford Bros. Co. 1. Annual Report on Form 10-K for the fiscal year ended January 2, 1999 filed March 11, 1999. 2. Quarterly Report on Form 10-Q for the quarter ended October 2, 1999 filed November 9, 1999. 3. Quarterly Report on Form 10-Q for the quarter ended July 3, 1999 filed August 11, 1999. 82 4. Quarterly Report on Form 10-Q for the quarter ended April 3, 1999 filed May 14, 1999. 5. Current Report on Form 8-K filed September 1, 1999. 6. Current Report on Form 8-K filed August 19, 1999. 7. Current Report on Form 8-K filed June 21, 1999. 8. Current Report on Form 8-K filed June 17, 1999. 83 Schedule 3.14 Subsidiaries of Borrower FLI Holding Corp., a Delaware corporation ("FLI"), and a wholly-owned subsidiary of the Borrower. Risk Management Services, Inc., a North Carolina corporation, and a wholly- owned subsidiary of the Borrower. FL Acquisition Sub., Inc., a Maine corporation, and a wholly-owned subsidiary of the Borrower. Kash n' Karry Food Stores, Inc., a Delaware corporation, and a wholly-owned subsidiary of FLI.1/ - FL Food Lion, Inc., a Florida corporation, and a wholly-owned subsidiary of FLI. Barnwell, Inc., a Delaware corporation, and a wholly-owned subsidiary of FLI. - -------- 1/ KNK 702 Delaware Business Trust, KNK 886 Delaware Business Trust, KNK 891 Delaware Business Trust, all Delaware business trusts, are wholly-owned by Kash n' Karry Food Stores, Inc. 84 Schedule 6.01 Existing Liens Liens representing the interest of the lessor under Capitalized Leases in existence on the date of this Agreement have an aggregate outstanding principal amount not exceeding $510,000,000. 85 EXHIBIT A FORM OF ASSIGNMENT AND ACCEPTANCE Reference is made to the Credit Agreement, dated as of January 26, 2000 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among DELHAIZE AMERICA, INC., the Lenders party therein, and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent (in such capacity, the "Administrative Agent"). Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. The Assignor identified on Schedule l hereto (the "Assignor") and the Assignee identified on Schedule l hereto (the "Assignee") agree as follows: i. The Assignor hereby irrevocably sells and assigns to the Assignee without recourse to the Assignor, and the Assignee hereby irrevocably purchases and assumes from the Assignor without recourse to the Assignor, as of the Effective Date (as defined below), the interest described in Schedule 1 hereto (the "Assigned Interest") in and to the Assignor's rights and obligations under the Credit Agreement, in a principal amount as set forth on Schedule 1 hereto. ii. The Assignor (a) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or any other instrument or document furnished pursuant thereto or with respect to the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto, other than that the Assignor has not created any adverse claim upon the interest being assigned by it hereunder and that such interest is free and clear of any such adverse claim; (b) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower, any of its Subsidiaries or any other obligor or the performance or observance by the Borrower, any of its Subsidiaries or any other obligor of any of their respective obligations under the Credit Agreement or any other instrument or document furnished pursuant hereto or thereto; and (c) attaches any promissory notes held by it evidencing the Assigned Interest and (i) requests that the Administrative Agent, upon request by the Assignee, exchange the attached promissory notes for a new promissory note or promissory notes payable to the Assignee and (ii) if the Assignor has retained any interest under the Credit Agreement, requests that the Administrative Agent exchange the attached promissory notes for a new promissory note or promissory notes payable to the Assignor, in each case in amounts which reflect the assignment being made hereby (and after giving effect to any other assignments which have become effective on the Effective Date). 86 iii. The Assignee (a) represents and warrants that it is legally authorized to enter into this Assignment and Acceptance; (b) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in Section 3.04 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (c) agrees that it will, independently and without reliance upon the Assignor, the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement or any other instrument or document furnished pursuant hereto or thereto; (d) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Credit Agreement or any other instrument or document furnished pursuant hereto or thereto as are delegated to the Administrative Agent by the terms thereof, together with such powers as are incidental thereto; and (e) agrees that it will be bound by the provisions of the Credit Agreement and will perform in accordance with its terms all the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender including, if it is organized under the laws of a jurisdiction outside the United States, its obligation pursuant to Section 2.15(e) of the Credit Agreement. iv. The effective date of this Assignment and Acceptance shall be the Effective Date of Assignment described in Schedule 1 hereto (the "Effective Date"). Following the execution of this Assignment and Acceptance, it will be delivered to the Administrative Agent for acceptance by it and recording by the Administrative Agent pursuant to the Credit Agreement, effective as of the Effective Date (which shall not, unless otherwise agreed to by the Administrative Agent, be earlier than five Business Days after the date of such acceptance and recording by the Administrative Agent). v. Upon such acceptance and recording, from and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to the Effective Date and to the Assignee for amounts which have accrued subsequent to the Effective Date. The Assignor and the Assignee shall make all appropriate adjustments in payments by the Administrative Agent for periods prior to the Effective Date or with respect to the making of this assignment directly between themselves. vi. From and after the Effective Date, (a) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and shall be bound by the provisions thereof and (b) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement. vii. This Assignment and Acceptance shall be governed by and construed in accordance with the laws of the State of New York. 87 IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Acceptance to be executed as of the date first above written by their respective duly authorized officers on Schedule 1 hereto. 88 Schedule 1 to Assignment and Acceptance Name of Assignor:________________________________ Name of Assignee:________________________________ Effective Date of Assignment:____________________ Principal - --------------------------- ------------------------------------------------ $________ __._____________% [Name of Assignee] [Name of Assignor] By:___________________________ By:___________________________ Title: Title: Accepted: Consented To: MORGAN GUARANTY TRUST DELHAIZE AMERICA, INC., COMPANY OF NEW YORK, Borrower as Administrative Agent By:___________________________ By:___________________________ Title: Title: - -------- 2/ Calculate the Commitment Percentage that is assigned to at least 15 decimal places and show as a percentage of the aggregate commitments of all Lenders. 89 EXHIBIT B FORM OF OPINION OF COUNSEL OF BORROWER March ___, 2000 Morgan Guaranty Trust Company of New York as Administrative Agent 60 Wall Street New York, NY 10260 Each of the Lenders named on Annex A Dear Sirs: We have acted as counsel for Delhaize America, Inc., a North Carolina corporation (the "Borrower"), in connection with the Credit Agreement, dated as of January 26, 2000 (the "Credit Agreement"), among the Borrower, the Lenders party thereto (the "Lenders") and Morgan Guaranty Trust Company of New York ("MGT"), as Administrative Agent. The opinions expressed here are furnished to you pursuant to Subsection 4.02(f) of the Credit Agreement. Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given in the Credit Agreement. In connection with this opinion, we have examined originals, or copies certified or otherwise identified to our satisfaction, of the Credit Agreement, the certificate referred to in Subsection 4.02(g) of the Credit Agreement, and such corporate documents and records of the Borrower as we have deemed necessary or appropriate. As to questions of fact relevant to this opinion, we have, without independent investigation, relied upon representations made to us by the Borrower including the representations contained in the Loan Documents, and in various certificates delivered by the Borrower, including, but not limited to, certificates presented to the Lenders and the Administrative Agent, and certain representations of public officials, all of which we assume to be true. In our examination, we have assumed (i) the genuineness of all signatures of all parties other than signatures of the Borrower, (ii) the authenticity of all corporate records, agreements, documents, instruments and certificates submitted to us as originals, the conformity to original agreements, documents and instruments of all agreements and instruments submitted to us as conformed, certified or photostatic copies thereof and the authenticity of the originals of such conformed, certified or photostatic copies; (iii) the due authorization, execution and delivery of all agreements, documents and instruments by all parties other than the Borrower; and (iv) the legal right and power of all such parties other than the Borrower under all applicable laws and regulations to enter into, execute and deliver such agreements, documents and instruments. We have further assumed that the Lenders and the Administrative Agent have the B-1 - 1 requisite power and authority to enter into the Loan Documents and to consummate the transactions contemplated thereby and the absence of any requirement of consent, approval or authorization by any Person or by any governmental body, agency or official with respect to the Lenders and the Administrative Agent and that the Loan Documents are legal, valid and binding obligations of the Lenders and the Administrative Agent enforceable against such Persons in accordance with their respective terms. This law firm is a registered limited liability partnership organized under the laws of the State of Texas. We express no opinion as to the laws of any jurisdiction other than the laws of the State of New York, the United States of America and The North Carolina Business Corporation Act. As to matters governed by the laws of the State of North Carolina, we are relying upon an opinion of Linn Evans, Esq. of even date herewith, a copy of which is attached hereto. The opinions expressed in paragraph 1(b) below are based solely upon our review of certain certificates of public officials of various jurisdictions and are not based upon any examination of the laws of any such jurisdiction. Upon the basis of the foregoing, we are of the opinion that: 1. The Borrower (a) is duly incorporated, validly existing and in good standing under the laws of North Carolina and has all requisite power and authority, to carry on its business as now conducted and (b) is qualified to do business in, and is in good standing in, each jurisdiction listed on Schedule I attached hereto. 2. The Transactions to be effected on the date hereof are each within the Borrower's corporate powers and have each been duly authorized by all necessary corporate and, if required, stockholder action. The Credit Agreement has been duly executed and delivered by the Borrower and constitutes a legal, valid and binding obligation of the Borrower. 3. To our knowledge, the Transactions to be effected on the date hereof (a) will not require any consent or approval of, registration or filing with, or any other action by, any Federal, New York or North Carolina Governmental Authority, except for consents, approvals, registrations, filings or other actions as have been obtained, made or waived and are in full force and effect or which are not required to have been effected prior to the date hereof, (b) will not violate any applicable Federal, New York or North Carolina corporate law or regulations or the charter, bylaws or other organizational documents of the Borrower or any order of any Federal or New York Governmental Authority, (c) will not violate or result in a default under any indenture, agreement or other instrument binding upon the Borrower or its assets other than defaults or violations for which consents or waivers have been obtained or which defaults or violations, individually or in the aggregate, could not have a Material Adverse Effect, or (d) will not give rise under any indenture, agreement or other instrument binding upon the Borrower to any requirement for any payments be made by the Borrower, or (e) will not result in the creation or imposition of any Lien on any asset of the Borrower. B-1 - 2 4. To our knowledge, there are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or threatened against the Borrower (i) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect (other than the Disclosed Matters) or (ii) that involve the Credit Agreement or the Transactions to be effected on the date hereof. 5. The Borrower is not (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. The foregoing opinions are subject to the exceptions, limitations and qualifications contained herein, including the following: A. The enforceability of the Loan Documents may be (a) limited by applicable bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent conveyance or transfer and other similar laws affecting creditors' rights, (b) subject to general principles of equity (regardless of whether considered in a proceeding in equity or at law), commercial reasonableness and good faith, and (c) limited by the power of courts to award damages in lieu of equitable remedies. In addition, the right to indemnification contained in the Loan Documents may be limited by Federal or New York state laws or the policies of such laws. B. We express no opinions as to enforceability of any provisions (i) purporting to vest jurisdiction on any property of the Borrower in the Supreme Court of the State of New York sitting in New York County or the United States District Court of the Southern District of New York to the extent that such property is not situated in New York, New York, (ii) purporting to waive or restrict access to legal or equitable remedies (including venue, forum non conveniens or the right to assert a setoff) or the right to collect damages (including special, indirect, consequential or punitive damages), (iii) prohibiting oral amendments or waivers of provisions of the Loan Documents; (iv) establishing evidentiary standards or (v) permitting a Lender to set off against any debtor's accounts any amounts belonging to a third party or otherwise held in a fiduciary capacity. C. When used in this opinion, the phrase "to our knowledge" means known to attorneys in our firm who have rendered services to the Borrower in connection with the Transactions. This opinion is as of the date hereof, and we undertake no, and hereby disclaim any, obligation to advise you of any change in any matter set forth herein, whether based on a change in the law, a change in any fact relating to the Borrower or any other Person or any other circumstance. This opinion is delivered to you in connection with the transactions referenced above and may be relied upon only by you and any permitted assignee of an assigning Lender or Participant under the Credit Agreement in connection with such transaction and may not be B-1 - 3 relied upon in any manner or for any purpose by any other person without our prior written consent. Very truly yours, B-1 - 4 SCHEDULE I Delaware Certificate of the Secretary of State of the State of Delaware dated ____________ ___, 2000 Florida Certificate of the Secretary of State of the State of Florida dated ____________ ___, 2000 Georgia Certificate of Existence of the Secretary of State of the State of Georgia dated ____________ ___, 2000 Kentucky Certificate of Authorization of the Secretary of State of the Commonwealth of Kentucky dated ____________ ___, 2000 Maryland Certificate of the State Department of Assessments and Taxation of the State of North Carolina dated ____________ ___, 2000 North Carolina Articles of Incorporation of Food Lion, Inc., certified by the Secretary of State of the State of North Carolina dated ____________ ___, 2000 Certificate of Existence of the Secretary of State of the State of North Carolina dated ____________ ___, 2000 Pennsylvania Certificate of the Secretary of the Department of State of the Commonwealth of Pennsylvania dated ____________ ___, 2000 South Carolina Certificate of Authorization of the Secretary of the State of South Carolina dated ____________ ___, 2000 Tennessee Certificate of Authorization of the Secretary of State of the State of Tennessee dated ____________ ___, 2000 Virginia Certificate of Authority of the State Corporate Commission of the Commonwealth of Virginia dated ____________ ___, 2000 West Virginia Certificate of Authority of the Secretary of the State of West Virginia dated ____________ ___, 2000 Certificate of Good Standing of the Secretary of State of the State of West Virginia dated ____________ ___, 2000 B-1 - 5 ANNEX A LENDER - ------ Morgan Guaranty Trust Company of New York Bank of America, N.A. Citibank, N.A. Wachovia Bank, N.A. The Bank of New York Bank One, NA BBL International (U.K.) Limited Credit Agricole Indosuez Deutsche Bank AG New York and/or Cayman Islands Branch First Union National Bank Fortis (USA) Finance LLC The Industrial Bank of Japan, Limited Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank International", New York Branch SunTrust Bank, Atlanta CoBank, ACB The Dai-Ichi Kangyo Bank, Ltd. The Fuji Bank, Limited Banque Nationale de Paris, Houston Agency Branch Banking & Trust Company CIBC Inc. Credit Commercial de France S.A. Fleet National Bank Paribas Bank of Tokyo-Mitsubishi Trust Company Union Bank of California, N.A. B-1 - 6 EX-10.Z 4 [EXECUTION COPY] ================================================================================ CREDIT AGREEMENT dated as of January 26, 2000 among DELHAIZE AMERICA, INC., The LENDERS Party Hereto, and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent $500,000,000 5-YEAR REVOLVING CREDIT FACILITY ----------------------------------------------------------------------- J.P. MORGAN SECURITIES INC., as Lead Arranger and Bookrunner ----------------------------------------------------------------------- BANK OF AMERICA, N.A., CITIBANK, N.A. and WACHOVIA SECURITIES, INC., as Co-Arrangers ================================================================================ TABLE OF CONTENTS ---------------------- PAGE ---- ARTICLE 1 DEFINITIONS SECTION 1.01. Defined Terms...................................................2 SECTION 1.02. Classification of Loans and Borrowing..........................22 SECTION 1.03. Terms Generally................................................23 SECTION 1.04. Accounting Terms; GAAP.........................................23 ARTICLE 2 THE CREDITS SECTION 2.01. Commitments....................................................24 SECTION 2.02. Loans and Borrowings...........................................24 SECTION 2.03. Requests for Revolving Borrowings..............................25 SECTION 2.04. Reserved.......................................................25 SECTION 2.05. Funding of Borrowings..........................................25 SECTION 2.06. Interest Elections.............................................26 SECTION 2.07. Termination and Reduction of Commitments.......................28 SECTION 2.08. Repayment of Loans; Evidence of Debt...........................28 SECTION 2.09. Prepayment of Loans............................................29 SECTION 2.10. Fees...........................................................30 SECTION 2.11. Interest.......................................................30 SECTION 2.12. Alternate Rate of Interest.....................................31 SECTION 2.13. Increased Costs................................................31 SECTION 2.14. Break Funding Payments.........................................33 SECTION 2.15. Taxes..........................................................33 SECTION 2.16. Payments Generally; Pro Rata Treatment; Sharing of Set- offs.......................................................35 SECTION 2.17. Mitigation Obligations; Replacement of Lenders.................37 ARTICLE 3 REPRESENTATIONS AND WARRANTIES SECTION 3.01. Organization; Powers...........................................38 SECTION 3.02. Authorization; Enforceability..................................38 SECTION 3.03. Governmental Approvals; No Conflicts...........................38 SECTION 3.04. Financial Condition; No Material Adverse Change................39 SECTION 3.05. Properties.....................................................39 SECTION 3.06. Litigation and Environmental Matters...........................40 i PAGE ---- SECTION 3.07. Compliance with Laws and Agreements............................40 SECTION 3.08. Investment and Holding Company Status..........................40 SECTION 3.09. Taxes..........................................................41 SECTION 3.10. ERISA..........................................................41 SECTION 3.11. Disclosure.....................................................41 SECTION 3.12. Margin Stock...................................................42 SECTION 3.13. No Burdensome Restrictions.....................................42 SECTION 3.14. Subsidiaries...................................................42 SECTION 3.15. Solvency.......................................................42 SECTION 3.16. Year 2000 Matters..............................................42 SECTION 3.17. Acquisition Documents..........................................42 ARTICLE 4 CONDITIONS TO FUNDING SECTION 4.01. Effective Date.................................................43 SECTION 4.02. First Credit Event.............................................44 SECTION 4.03. Each Credit Event..............................................46 ARTICLE 5 AFFIRMATIVE COVENANTS SECTION 5.01. Financial Statements and Other Information.....................46 SECTION 5.03. Existence; Conduct of Business.................................48 SECTION 5.04. Payment of Obligations.........................................48 SECTION 5.05. Maintenance of Properties; Insurance...........................49 SECTION 5.06. Books and Records; Inspection Rights...........................49 SECTION 5.07. Compliance with Laws and Material Contractual Obligations................................................49 SECTION 5.08. Use of Proceeds................................................49 SECTION 5.09. Change in Ratings..............................................49 SECTION 5.10. Copies of Other Bank Agreements................................50 ARTICLE 6 NEGATIVE COVENANTS SECTION 6.01. Liens..........................................................50 SECTION 6.02. Indebtedness of Subsidiaries...................................51 SECTION 6.03. Fundamental Changes............................................52 SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions; Hedging Agreements...........................53 SECTION 6.05. Transactions with Affiliates...................................54 ii PAGE ---- SECTION 6.06. Reserved.......................................................54 SECTION 6.07. Fixed Charges Coverage.........................................54 SECTION 6.08. Ratio of Consolidated Adjusted Debt to Consolidated EBITDAR....................................................55 SECTION 6.09. Limitation on Sales of Assets..................................55 SECTION 6.10. Modifications to Acquisition Documents.........................56 SECTION 6.11. Restrictions Affecting Subsidiaries............................56 ARTICLE 7 EVENTS OF DEFAULT SECTION 7.01. Events of Default..............................................57 ARTICLE 8 THE ADMINISTRATIVE AGENT SECTION 8.01. The Administrative Agent.......................................60 ARTICLE 9 MISCELLANEOUS SECTION 9.01. Notices........................................................62 SECTION 9.02. Waivers; Amendments............................................62 SECTION 9.03. Expenses; Indemnity; Damage Waiver.............................63 SECTION 9.04. Successors and Assigns.........................................65 SECTION 9.05. Survival.......................................................67 SECTION 9.06. Counterparts; Integration; Effectiveness.......................68 SECTION 9.07. Severability...................................................68 SECTION 9.08. Right of Setoff................................................68 SECTION 9.09. Governing Law; Jurisdiction; Consent of Service of Process....................................................68 SECTION 9.10. WAIVER OF JURY TRIAL...........................................69 SECTION 9.11. Headings.......................................................69 SECTION 9.12. Confidentiality................................................70 SECTION 9.13. Interest Rate Limitation.......................................70 ARTICLE 10 PROVISIONS RELATING TO THE REORGANIZATION SECTION 10.01. Consent to Reorganization.....................................71 iii SCHEDULES: Schedule 2.01 Commitments Schedule 3.06 Disclosed Matters Schedule 3.14 Subsidiaries Schedule 6.01 Existing Liens EXHIBITS: Exhibit A Form of Assignment and Acceptance Exhibit B Form of Opinion of Borrower's Counsel - First Borrowing Date 2 CREDIT AGREEMENT dated as of January 26, 2000, among DELHAIZE AMERICA, INC., the LENDERS party hereto and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent. The parties hereto agree as follows: ARTICLE 1 DEFINITIONS SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the meanings specified below: "ABR", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate. "Acquisition" means the Merger and all other transactions contemplated by the Acquisition Documents to be consummated on or before the First Borrowing Date. "Acquisition Date" means the date of consummation of the Acquisition. "Acquisition Documents" means the Merger Agreement, including the exhibits and schedules thereto, and all agreements, documents and instruments executed and delivered pursuant thereto or in connection therewith. "Acquisition Sub" means FL Acquisition Sub, Inc., a Maine corporation. "Adjusted LIBO Rate" means, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate. "Administrative Agent" means Morgan, in its capacity as administrative agent for the Lenders hereunder. "Administrative Questionnaire" means an Administrative Questionnaire in a form supplied by the Administrative Agent. "Affiliate" means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. 3 "Alternate Base Rate" means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate, respectively. "Amortization" means for any period the sum of all amortization expenses of the Borrower and its Consolidated Subsidiaries for such period, as determined in accordance with GAAP. "Applicable Percentage" means, with respect to any Lender, the percentage of the total Commitments represented by such Lender's Commitment. If the Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Commitments most recently in effect, giving effect to any assignments. "Applicable Rate" means, for any day, with respect to any ABR Loan or Eurodollar Revolving Loan, or with respect to the commitment fees payable hereunder, as the case may be, the applicable rate per annum set forth below under the caption "ABR Spread", "Eurodollar Spread" or "Commitment Fee Rate", as the case may be, based upon the ratings by Moody's and S&P, respectively, applicable on such date to the Index Debt: ABR Eurodollar Commitment S&P/Moody's Spread Spread Fee Rate - ----------------------------------------------------------------------- Category 1 A-/A3 or higher.......... .0% .50% .11% Category 2 BBB+/Baa1................ .0% .625% .125% Category 3 BBB/Baa2................. .0% .75% .15 Category 4 BBB-/Baa3................ .25% 1.25% .225% Category 5 BB+/Ba1.................. .75% 1.75% .375% - -------------------------------------------------------------------- Category 6 Below.................... 1.25% 2.25% .50% ==================================================================== In addition, 4 (x) if (i) the sum of (1) the aggregate principal amount of loans outstanding under the Bridge Agreement (if the Bridge Agreement is in effect on such date) plus (2) the aggregate principal amount of loans outstanding under the 364-Day Credit Agreement (if the Credit Agreement is in effect on such date) plus (3) the aggregate principal amount of Revolving Loans outstanding hereunder, in each case on such date, exceeds 33% of the sum of (1) the aggregate amount of the commitments under the Bridge Agreement (or, if the commitments under the Bridge Agreement (if the Bridge Agreement is in effect on such date) shall have terminated, the aggregate principal amount of loans outstanding thereunder) plus (2) the aggregate amount of the commitments under the 364-Day Credit Agreement (if the Credit Agreement is in effect on such date) (or, if the commitments under the 364-Day Credit Agreement shall have terminated, the aggregate principal amount of loans outstanding thereunder) plus (3) the aggregate Commitments hereunder (or, if the Commitments hereunder shall have terminated, the aggregate principal amount of Revolving Loans outstanding hereunder), in each case on such date and (ii) Category 1 ratings, Category 2 ratings or Category 3 ratings are applicable on such date or (y) if any Loans are outstanding under the Bridge Agreement (if the Bridge Agreement is in effect on such date) (regardless of which Category ratings are applicable on such date), the "ABR Spread" and the "Eurodollar Spread" will each be increased by .125%; provided that on any date on which the events in clause (x) and clause (y) are both in effect, the "ABR Spread" and the "Eurodollar Spread" will each be increased by .125%. For purposes of the foregoing, (i) if either Moody's or S&P shall not have in effect a rating for the Index Debt (other than by reason of the circumstances referred to in the last sentence of this definition), then such rating agency shall be deemed to have established a rating in Category 6; (ii) if the ratings established or deemed to have been established by Moody's and S&P for the Index Debt shall fall within different Categories, the Applicable Rate shall be based on the lower of the two ratings unless one of the two ratings is two or more Categories lower than the other, in which case the Applicable Rate shall be determined by reference to the Category next below that of the higher of the two ratings; and (iii) if the ratings established or deemed to have been established by Moody's and S&P for the Index Debt shall be changed (other than as a result of a change in the rating system of Moody's or S&P), such change shall be effective as of the date on which it is first announced by the applicable rating agency. Each change in the Applicable Rate shall apply during the period commencing on the effective date of 5 such change and ending on the date immediately preceding the effective date of the next such change. If the rating system of Moody's or S&P shall change, or if either such rating agency shall cease to be in the business of rating corporate debt obligations, the Borrower and the Lenders shall negotiate in good faith to amend this definition to reflect such changed rating system or the unavailability of ratings from such rating agency and, pending the effectiveness of any such amendment, the Applicable Rate shall be determined by reference to the rating most recently in effect prior to such change or cessation. "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 9.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by the Administrative Agent. "Availability Period" means the period from and including the Effective Date to but excluding the earlier of the Maturity Date and the date of termination of the Commitments. "Base CD Rate" means the sum of (a) the Three-Month Secondary CD Rate multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate. As used in this definition, "Assessment Rate" means, for any day, the annual assessment rate in effect on such day that is payable by a member of the Bank Insurance Fund classified as "well-capitalized" and within supervisory subgroup "B" (or a comparable successor risk classification) within the meaning of 12 C.F.R. Part 327 (or any successor provision) to the Federal Deposit Insurance Corporation for insurance by such Corporation of time deposits made in Dollars at the offices of such member in the United States; provided that if, as a result of any change in any law, rule or regulation, it is no longer possible to determine the Assessment Rate as aforesaid, then the Assessment Rate shall be such annual rate as shall be determined by the Administrative Agent to be representative of the cost of such insurance to the Lenders. "Board" means the Board of Governors of the Federal Reserve System of the United States of America. "Borrower" means Delhaize America, Inc., a North Carolina corporation. "Borrowing" means Revolving Loans of the same Type, made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect. "Borrowing Request" means a request by the Borrower for a Revolving Borrowing in accordance with Section 2.03. 6 "Bridge Agreement" means the $2,500,000,000 364-Day Term Loan Agreement dated as of January 26, 2000 among the Borrower, the lenders party thereto, and Morgan, as administrative agent, as amended from time to time. "Bridge Payout Date" means the first date on which the commitments under the Bridge Agreement have terminated and all loans outstanding thereunder, together with accrued and unpaid interest thereon, and all fees and expenses payable with respect thereto, have been repaid in full. "Business Day" means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed; provided that, when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in Dollar deposits in the London interbank market. "Capital Lease Obligations" of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. "Capital Stock" means any capital stock of the Borrower or any Consolidated Subsidiary (to the extent issued to a Person other than the Borrower), whether common or preferred. "Capitalized Lease" means any lease which is required to be capitalized on a consolidated balance sheet of the lessee and its subsidiaries in accordance with GAAP. "Cash Equivalents" means: (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof; (b) investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, a rating of at least P-1 by Moody's or A-1 by S&P; 7 (c) investments in certificates of deposit, banker's acceptances and time deposits maturing within 180 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof which has a combined capital and surplus and undivided profits of not less than $250,000,000; (d) investments consisting of cash deposits in operating accounts maintained by the Borrower or any Subsidiary; and (e) repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (c) above. "Change in Control" means (a) the failure of Delhaize Belgium or any wholly-owned subsidiary of Delhaize Belgium to own, directly or indirectly, beneficially or of record, shares representing more than a majority of the aggregate ordinary voting power represented by the issued and outstanding Capital Stock of the Borrower; (b) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Borrower by Persons who were neither (i) nominated by the board of directors of the Borrower nor (ii) appointed by directors so nominated; or (c) the acquisition of direct or indirect Control of the Borrower by any Person or group other than Delhaize Belgium or any wholly-owned subsidiary of Delhaize Belgium. "Change in Law" means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender (or, for purposes of Section 2.13(b), by any lending office of such Lender or by such Lender's holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement. "Charges" has the meaning set forth in Section 9.13. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Commitment" means, with respect to each Lender, the commitment of such Lender to make Revolving Loans hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.07 and (b) reduced or increased 8 from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Lender's Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Commitment, as applicable. "Consolidated" means, when used in connection with any defined term, and not otherwise defined, such term as it applies to the Borrower and its Subsidiaries on a consolidated basis, after eliminating all intercompany items. "Consolidated Adjusted Debt" means at any date (i) the Debt of the Borrower and its Consolidated Subsidiaries plus (ii) 8 times Rentals (but excluding any payments with respect to a Capital Lease to the extent such Capital Lease is included in clause (i)) payable by the Borrower and its Consolidated Subsidiaries for the period of four consecutive Fiscal Quarters ended on or most recently prior to such date, determined on a consolidated basis as of such date. "Consolidated EBITDAR" for any period means the sum of (i) Consolidated Net Income for such period plus, in each case to the extent deducted in determining such Consolidated Net Income and without duplication, (ii) Consolidated Depreciation expenses of the Borrower and its Consolidated Subsidiaries, (iii) Consolidated Amortization expenses of the Borrower and its Consolidated Subsidiaries, (iv) all federal, state, local and foreign income taxes of the Borrower and its Consolidated Subsidiaries, and (v) Consolidated Fixed Charges. "Consolidated Fixed Charges" for any period means, without duplication, on a consolidated basis the sum of (i) all Rentals payable during such period by the Borrower and its Consolidated Subsidiaries, and (ii) Consolidated Interest Expense for such period. "Consolidated Interest Expense" for any period means interest, whether expensed or capitalized, in respect of Debt of the Borrower or any of its Consolidated Subsidiaries outstanding during such period. "Consolidated Net Income" for any period means the gross revenues of the Borrower and its Consolidated Subsidiaries for such period less all expenses and other proper charges (including taxes on income), determined on a consolidated basis after eliminating earnings or losses attributable to outstanding Minority Interests, but excluding in any event: (a) any unusual or extraordinary gains or losses on the sale or other disposition of investments (excluding Cash Equivalents) or fixed or 9 capital assets, and any taxes on such excluded gains and any tax deductions or credits on account of any such excluded losses; (b) the proceeds of any life insurance policy; (c) net earnings and losses of any Consolidated Subsidiary accrued prior to the date it became a Consolidated Subsidiary; (d) net earnings and losses of any corporation (other than a Consolidated Subsidiary and subject to Section 1.04) substantially all the assets of which have been acquired in any manner by the Borrower or any Consolidated Subsidiary, realized by such corporation prior to the date of such acquisition; (e) net earnings and losses of any corporation (other than a Consolidated Subsidiary and subject to Section 1.04(b)) with which the Borrower or a Consolidated Subsidiary shall have consolidated or which shall have merged into or with the Borrower or a Consolidated Subsidiary prior to the date of such consolidation or merger; (f) net earnings and losses of any business entity (other than a Consolidated Subsidiary) in which the Borrower or any Consolidated Subsidiary has an ownership interest unless such net earnings shall have actually been received by the Borrower or such Consolidated Subsidiary in the form of cash distributions; (g) any portion of the net earnings and losses of any Consolidated Subsidiary which for any reason is unavailable for payment of dividends to the Borrower or any other Consolidated Subsidiary; (h) earnings resulting from any reappraisal, revaluation or write-up of assets; (i) any deferred or other credit representing any excess of the equity in any Subsidiary at the date of acquisition thereof over the amount invested in such Subsidiary; (j) any gain arising from the acquisition of any Capital Stock; (k) any reversal of any contingency reserve except to the extent that provision for such contingency reserve shall have been made from income arising during such period; provided, however, that any reversal of a contingency reserve from a prior period shall only be excluded from 10 Consolidated Net Income to the extent that the aggregate amount of such reversals exceeds $10,000,000 during the immediately preceding four Fiscal Quarters; and (l) any other unusual or extraordinary gain or loss. "Consolidated Subsidiary" means at any date any Subsidiary or other entity the accounts of which, in accordance with GAAP, would be consolidated with those of the Borrower in its consolidated financial statements as of such date. "Consolidated Total Assets" means at any time the total assets of the Borrower and its Consolidated Subsidiaries, determined on a consolidated basis, as set forth or reflected on the most recent consolidated balance sheet of the Borrower and its Consolidated Subsidiaries. "Contractual Obligation" means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. "Controlling" and "Controlled" have meanings correlative thereto. "Debt" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable and accrued expenses arising in the ordinary course of business, (iv) all Capital Lease Obligations, (v) all obligations of such Person to reimburse any bank or other Person in respect of amounts payable under a banker's acceptance, (vi) all Redeemable Preferred Stock of such Person (in the event such Person is a corporation), (vii) all obligations of such Person to reimburse any bank or other Person in respect of amounts paid under a letter of credit or similar instrument, (viii) all Debt of others secured by a Lien on any asset of such Person, whether or not such Debt is assumed by such Person, and (ix) all Debt of others Guaranteed by such Person. "Default" means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default. 11 "Delhaize Belgium" means Etablissements Delhaize Freres et Cie "Le Lion" S.A., a Belgian corporation. "Depreciation" means for any period the sum of all depreciation expenses of the Borrower and its Consolidated Subsidiaries for such period, as determined in accordance with GAAP. "Disclosed Matters" means the actions, suits and proceedings and the environmental matters disclosed on Schedule 3.06. "Dollars" or "$" refers to lawful money of the United States of America. "Effective Date" means the date on which the conditions specified in Section 4.01 are satisfied (or waived in accordance with Section 9.02). "Environmental Laws" means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, release or threatened release of any Hazardous Material or health and safety matters. "Environmental Liability" means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. "ERISA Affiliate" means any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. "ERISA Event" means (a) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan 12 (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA. "Eurodollar", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate. "Event of Default" has the meaning assigned to such term in Article 7. "Excluded Taxes" means, with respect to the Administrative Agent, any Lender or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which the Borrower is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 2.17(b)), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement or is attributable to such Foreign Lender's failure or inability to comply with Section 2.15(e), except to the extent that such Foreign Lender's assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 2.15(a). 13 "Existing Public Debt" means the Borrower's $150,000,000 aggregate principal amount of 7.55% Notes due 2007 and its $150,000,000 aggregate principal amount of 8.05% Notes due 2027. "Federal Funds Effective Rate" means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. "Financial Officer" means the chief financial officer, principal accounting officer, treasurer or controller of the Borrower. "First Borrowing Date" means the date of the first Borrowing hereunder. "Fiscal Quarter" means any fiscal quarter of the Borrower. "Fiscal Year" means any fiscal year of the Borrower. "Foreign Lender" means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction. "GAAP" means generally accepted accounting principles in the United States of America. "Governmental Authority" means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. "Guarantee" of or by any Person (the "guarantor") means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the "primary obligor") in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or 14 other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided, that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. "Hazardous Materials" means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law. "Hedging Agreement" means any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement. "Indebtedness" of any Person means, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid (excluding current accounts payable incurred in the ordinary course of business), (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty and (j) all obligations, contingent or otherwise, of such Person in respect of bankers' acceptances. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. 15 "Indemnified Taxes" means Taxes other than Excluded Taxes. "Indemnitee" has the meaning set forth in Section 9.03(b). "Index Debt" means senior, unsecured, long-term indebtedness for borrowed money of the Borrower that is not guaranteed by any other Person (other than Subsidiaries) or subject to any other credit enhancement. "Information" has the meaning set forth in Section 9.12. "Interest Election Request" means a request by the Borrower to convert or continue a Revolving Borrowing in accordance with Section 2.06. "Interest Payment Date" means (a) with respect to any ABR Loan, the last day of each March, June, September and December, and (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months' duration, each day prior to the last day of such Interest Period that occurs at intervals of three months' duration after the first day of such Interest Period. "Interest Period" means, with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months (or, to the extent available to each Lender, twelve months) thereafter, as the Borrower may elect; provided, that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, in the case of a Eurodollar Borrowing only, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, (ii) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period and (iii) any Interest Period that would otherwise end after the Maturity Date shall end on the Maturity Date. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing. "Lenders" means the Persons listed on Schedule 2.01 and any other Person that shall have become a party hereto pursuant to an Assignment and Acceptance, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Acceptance. 16 "LIBO Rate" means, with respect to any Eurodollar Borrowing for any Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to Dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for Dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the "LIBO Rate" with respect to such Eurodollar Borrowing for such Interest Period shall be the rate at which Dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. "Lien" means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset and (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset. "Loans" means the loans made by the Lenders to the Borrower pursuant to this Agreement. "Majority Lenders" means, at any time, Lenders having Commitments representing more than 50% of the aggregate amount of the Commitments at such time (or, if the Commitments shall have terminated, Lenders holding Revolving Credit Exposures representing more than 50% of the total Revolving Credit Exposures at such time). "Material Adverse Change" means any event, development or circumstance that has had or could reasonably be expected to have a Material Adverse Effect. "Material Adverse Effect" means a material adverse effect on (a) the business, assets, operations, prospects or condition, financial or otherwise, of the Borrower and the Subsidiaries taken as a whole, (b) the ability of the Borrower to perform any of its obligations under this Agreement or (c) the rights of or benefits available to the Lenders under this Agreement. 17 "Material Indebtedness" means Indebtedness, or obligations in respect of one or more Hedging Agreements, of any one or more of the Borrower and its Subsidiaries in an aggregate principal amount exceeding $20,000,000. For purposes of determining Material Indebtedness, the "principal amount" of the obligations of the Borrower or any Subsidiary in respect of any Hedging Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the Borrower or such Subsidiary would be required to pay if such Hedging Agreement were terminated at such time. "Maturity Date" means the date that falls 5 years after the First Borrowing Date. "Maximum Rate" has the meaning set forth in Section 9.13. "Medium Term Notes" means the medium term notes of the Borrower having interest rates ranging from 8.40% to 8.73% with due dates ranging from 2000 to 2006 and having an aggregate principal balance of $123,300,000. "Merger" means the merger of Acquisition Sub with and into the Target (with the Target as the surviving Person) pursuant to the Merger Agreement on the First Borrowing Date concurrently with the making of the initial Loans hereunder, thereby consummating the Acquisition. "Merger Agreement" means the Agreement and Plan of Merger dated as of August 17, 1999, as amended by Amendment No. 1 dated as of November, 1999 to be effective as of August 17, 1999, among the Borrower, Acquisition Sub and the Target. "Minority Interests" means any shares of stock of any class of a Consolidated Subsidiary (other than directors' qualifying shares as required by law) that are not owned by the Borrower and/or one or more of its Consolidated Subsidiaries. "Moody's" means Moody's Investors Service, Inc. "Morgan" means Morgan Guaranty Trust Company of New York. "Multiemployer Plan" means a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Operating Lease" means any lease other than a Capitalized Lease. 18 "Other Taxes" means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement. "Participant" has the meaning set forth in Section 9.04(e). "PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions. "Permitted Encumbrances" means: (a) Liens imposed by law for taxes, assessments and other governmental charges that are not yet due or are being contested in compliance with Section 5.04; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's, landlords' and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or are being contested in compliance with Section 5.04; (c) Liens granted to a landlord pursuant to a lease to secure the obligations of the lessee under such lease which apply only to property or assets of the lessee located at the leased premises; (d) pledges and deposits made in the ordinary course of business in compliance with workers' compensation, unemployment insurance and other social security laws or regulations; (e) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds (so long as, with respect to any such appeal bonds posted with respect to any judgment, no Event of Default then exists under Section 7(k)), performance bonds and other obligations of a like nature, in each case in the ordinary course of business; (f) judgment liens provided no Event of Default then exists under Section 7(k); and (f) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not 19 materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Borrower or any Subsidiary. "Person" means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity. "Plan" means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Prime Rate" means the rate of interest per annum publicly announced from time to time by Morgan as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective. "Redeemable Preferred Stock" of any Person means any preferred stock issued by such Person which is at any time prior to the Maturity Date either (i) mandatorily redeemable (by sinking fund or similar payments or otherwise) or (ii) redeemable at the option of the holder thereof. "Register" has the meaning set forth in Section 9.04(c). "Related Parties" means, with respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person's Affiliates. "Rentals" means and includes as of the date of any determination thereof all fixed payments (including as such all payments which the lessee is obligated to make to the lessor on termination of the lease or surrender of the property) payable by the Borrower or a Consolidated Subsidiary, as lessee or sublessee under an Operating Lease or Capitalized Lease of real or personal property, but shall be exclusive of any amounts required to be paid by the Borrower or a Consolidated Subsidiary (whether or not designated as rents or additional rents) on account of maintenance, repairs, insurance, taxes and similar charges. Fixed rents under any so-called "percentage leases" shall be computed solely on the basis of the minimum rents, if any, required to be paid by the lessee regardless of sales volume or gross revenues. 20 "Reorganization" means the collective reference to the following series of related transactions: The Borrower will create a new direct, wholly-owned subsidiary, to be named Food Lion, Inc. ("New Food Lion"). The Borrower will contribute to New Food Lion substantially all of the assets of the Borrower other than the capital stock of (i) the Target, (ii) FLI Holding Corp., a Delaware corporation ("FLI Holding"), (iii) Risk Management Services, Inc., a North Carolina corporation ("RMS"), (iv) FL Food Lion, Inc., a Florida corporation ("FL Food Lion") and (v) Barnwell, Inc., a Delaware corporation ("Barnwell"). After giving effect to such contribution, New Food Lion, FLI Holding, RMS, FL Food Lion and Barnwell will each be direct wholly-owned subsidiaries of the Borrower. FLI Holding will be merged into the Borrower and Kash n' Karry Food Stores, Inc. will become a direct wholly-owned Subsidiary of the Borrower. "Requirement of Law" means, as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Revolving Borrowing" means a Borrowing made pursuant to Section 2.03. "Revolving Credit Exposure" means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender's Revolving Loans at such time. "Revolving Loan" means a Loan made under the Commitments pursuant to Section 2.03. "S&P" means Standard & Poor's Ratings Group, a division of The McGraw Hill Companies, Inc. "Solvent", when used with respect to any Person, means that, as of any date of determination, (a) the amount of the "present fair saleable value" of the assets of such Person and its subsidiaries, taken as a whole, will, as of such date, exceed the amount that will be required to pay all "liabilities of such Person and its subsidiaries, taken as a whole, contingent or otherwise", as of such date (as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors) as such debts become absolute and matured, (b) such Person and its subsidiaries, taken as a whole, will not have, as of such date, an unreasonably small amount of capital with which to conduct their businesses, taking into account the particular capital requirements of 21 such Person and its projected capital requirements and availability and (c) such Person and its subsidiaries, taken as a whole, will be able to pay their debts as they mature, taking into account the timing of and amounts of cash to be received by such Person and its subsidiaries, taken as a whole, and the timing of and amounts of cash to be payable on or in respect of indebtedness of such Person and its subsidiaries, taken as a whole. For purposes of this definition, (i) "debt" means liability on a "claim", and (ii) "claim" means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal or equitable, secured or unsecured or (y) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured. "Statutory Reserve Rate" means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Administrative Agent is subject (a) with respect to the Base CD Rate, for new negotiable nonpersonal time deposits in Dollars of over $100,000 with maturities approximately equal to three months and (b) with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. "subsidiary" means, with respect to any Person (the "parent") at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held by such Person or one or more subsidiaries of such Person or by such Person and one or more subsidiaries of such Person. 22 "Subsidiary" means any subsidiary of the Borrower. "Stub End Date" has the meaning set forth in Section 1.04(b). "Target" means Hannaford Bros. Co., a Maine corporation. "Taxes" means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority. "364-Day Credit Agreement" means the $500,000,000 364-Day Revolving Agreement dated as of November 19, 1999 among the Borrower, the lenders party thereto and Morgan, as administrative agent, as amended from time to time. "Three-Month Secondary CD Rate" means, for any day, the secondary market rate for three-month certificates of deposit reported as being in effect on such day (or, if such day is not a Business Day, the next preceding Business Day) by the Board through the public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the week following such day) or, if such rate is not so reported on such day or such next preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 a.m., New York City time, on such day (or, if such day is not a Business Day, on the next preceding Business Day) by the Administrative Agent from three negotiable certificate of deposit dealers of recognized standing selected by it. "Transactions" means the execution, delivery and performance by the Borrower of this Agreement, the borrowing of Loans and the use of the proceeds thereof and the consummation of the Acquisition and all other transactions contemplated by the Acquisition Documents. "Type", when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate. "Withdrawal Liability" means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. SECTION 1.02. Classification of Loans and Borrowing. For purposes of this Agreement, Loans may be classified and referred to by Type (e.g., a 23 "Eurodollar Loan"). Borrowings also may be classified and referred to by Type (e.g., a "Eurodollar Borrowing"). SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. SECTION 1.04. Accounting Terms; GAAP. (a) Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Majority Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. (b) For purposes of calculating compliance with Section 6.07 on the last day of any Fiscal Quarter ended on or after the Acquisition Date and prior to the first date (the "Stub End Date") on which four full Fiscal Quarters have begun and ended on or after the Acquisition Date and Section 6.08 on any date on or after the Acquisition Date and prior to the Stub End Date, Consolidated EBITDAR (and 24 each component thereof), Consolidated Fixed Charges (and each component thereof) and Rentals for purposes of determining Consolidated Adjusted Debt for any relevant period shall be adjusted on a pro forma basis as if (i) the Acquisition had been consummated on the first day of such period, (ii) the borrowings to finance the Acquisition (including without limitation the Loans and any loans under the Bridge Agreement and the 364-Day Credit Agreement) had been made on the first day of such period and (iii) any Indebtedness of the Target and its subsidiaries repaid in connection with the consummation of the Acquisition had been repaid on the first day of such period. ARTICLE 2 THE CREDITS SECTION 2.01. Commitments. Subject to the terms and conditions set forth herein, each Lender with a Commitment agrees to make Revolving Loans to the Borrower from time to time during the Availability Period in an aggregate principal amount that will not result in such Lender's Revolving Credit Exposure exceeding such Lender's Commitment. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Revolving Loans. SECTION 2.02. Loans and Borrowings. (a) Each Revolving Loan shall be made as part of a Borrowing consisting of Revolving Loans made by the Lenders ratably in accordance with their respective Commitments. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender's failure to make Loans as required. (b) Subject to Section 2.12, each Revolving Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request in accordance herewith. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement. (c) At the commencement of each Interest Period for any Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $5,000,000 and not less than $25,000,000 (or, if less, the unused portion of the Commitments). Borrowings of more than one Type may be outstanding at the same time; provided that there shall not at any time be more than a total of 10 Eurodollar Revolving Borrowings outstanding. 25 (d) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date. SECTION 2.03. Requests for Revolving Borrowings. To request a Revolving Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 11:00 a.m., New York City time, on the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in a form approved by the Administrative Agent and signed by the Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02: (i) the aggregate amount of the requested Borrowing; (ii) the date of such Borrowing, which shall be a Business Day; (iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; (iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Interest Period"; and (v) the location and number of the Borrower's account to which funds are to be disbursed, which shall comply with the requirements of Section 2.05. If no election as to the Type of Revolving Borrowing is specified, then the requested Revolving Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Revolving Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing. SECTION 2.04. Reserved. 26 SECTION 2.05. Funding of Borrowings. (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 12:00 noon, New York City time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower maintained with the Administrative Agent in New York City and designated by the Borrower in the applicable Borrowing Request. (b) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the Federal Funds Effective Rate or (ii) in the case of the Borrower, the interest rate applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender's Loan included in such Borrowing. SECTION 2.06. Interest Elections. (a) Each Revolving Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Revolving Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Revolving Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. (b) To make an election pursuant to this Section, the Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Revolving Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election 27 Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the Borrower. (c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02: (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; (iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Revolving Borrowing; and (iv) if the resulting Borrowing is a Eurodollar Revolving Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period". If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. (d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender's portion of each resulting Borrowing. (e) If the Borrower fails to deliver a timely Interest Election Request with respect to a Eurodollar Revolving Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Majority Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing (i) no outstanding Revolving Borrowing may be converted to or continued as a Eurodollar Revolving Borrowing and (ii) unless 28 repaid, each Eurodollar Revolving Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto. SECTION 2.07. Termination and Reduction of Commitments. (a) Unless previously terminated, the Commitments shall terminate on the Maturity Date. (b) The Borrower may at any time terminate, or from time to time reduce, the Commitments; provided that (i) each reduction of any Commitments shall be in an amount that is an integral multiple of $5,000,000 and not less than $25,000,000 and (ii) the Borrower shall not terminate or reduce any Commitments if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 2.09, the sum of the total Revolving Credit Exposures would exceed the total Commitments. (c) The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Commitments under paragraph (b) of this Section at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination of the Commitments delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments shall be permanent. Each reduction of the Commitments shall be made ratably among the Lenders in accordance with their respective Commitments. SECTION 2.08. Repayment of Loans; Evidence of Debt. (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Lender with a Commitment the then unpaid principal amount of such Lender's Revolving Loans on the Maturity Date. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due 29 and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof. (d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement. (e) Any Lender may request that Loans made by it be evidenced by a promissory note. In such event, the Borrower shall prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 9.04) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns). SECTION 2.09. Prepayment of Loans. (a) The Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to prior notice in accordance with paragraph (b) of this Section. (b) The Borrower shall notify the Administrative Agent by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Revolving Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of prepayment or (ii) in the case of prepayment of an ABR Revolving Borrowing, not later than 11:00 a.m., New York City time, one Business Day before the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid; provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.07, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.07. Promptly following receipt of any such notice relating to a Revolving Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Revolving Borrowing shall be in an amount that would be permitted in the case of an advance of a Revolving Borrowing of the same Type as provided in Section 2.02. Each prepayment of a Revolving Borrowing shall be applied ratably to the Loans 30 included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.11. SECTION 2.10. Fees. (a) The Borrower agrees to pay to the Administrative Agent for the account of each Lender a commitment fee, which shall accrue at the Applicable Rate on the daily amount by which such Lender's Commitment exceeds the aggregate amount of such Lender's outstanding Loans during the period from and including the date hereof to but excluding the date on which such Commitment terminates. Accrued commitment fees shall be payable in arrears on the last day of March, June, September and December of each year and on the date on which the Commitments terminate, commencing on the first such date to occur after the date hereof. All commitment fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). (b) The Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Borrower and the Administrative Agent. (c) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, in the case of facility fees, to the Lenders. Fees paid shall not be refundable under any circumstances. SECTION 2.11. Interest. (a) The Loans comprising each ABR Borrowing shall bear interest at a rate per annum equal to the Alternate Base Rate plus the Applicable Rate. (b) The Loans comprising each Eurodollar Borrowing shall bear interest at a rate per annum equal to the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate. (c) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided above or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Loans as provided above. (d) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan; provided that (i) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in the event of any 31 repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan prior to the end of the Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment, (iii) in the event of any conversion of any Eurodollar Revolving Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion and (iv) all accrued interest shall be payable upon termination of the Commitments. (e) All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. SECTION 2.12. Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Eurodollar Borrowing: (a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate for such Interest Period; or (b) the Administrative Agent is advised by the Majority Lenders that the Adjusted LIBO Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period; then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Revolving Borrowing to, or continuation of any Revolving Borrowing as, a Eurodollar Borrowing shall be ineffective, and (ii) if any Borrowing Request requests a Eurodollar Revolving Borrowing, such Borrowing shall be made as an ABR Borrowing. SECTION 2.13. Increased Costs. (a) If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the 32 account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate); or (ii) impose on any Lender or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such Lender or any participation therein; and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered. (b) If any Lender determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's capital or on the capital of such Lender's holding company, if any, as a consequence of this Agreement or the Loans made by such Lender, to a level below that which such Lender or such Lender's holding company could have achieved but for such Change in Law (taking into consideration such Lender's policies and the policies of such Lender's holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or such Lender's holding company, as the case may be, such additional amount or amounts as will compensate such Lender or such Lender's holding company for any such reduction suffered. (c) A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 15 days after receipt thereof. (d) Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender's right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender (or such Lender's holding company) pursuant to this Section for any increased costs or reductions incurred more than ninety days prior to the date that such Lender notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender's intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the ninety-day period 33 referred to above shall be extended to include the period of retroactive effect thereof. SECTION 2.14. Break Funding Payments. In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow any Eurodollar Loan, convert any ABR Loan into a Eurodollar Loan, continue any Eurodollar Loan or prepay any Eurodollar Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice is permitted to be revocable under Section 2.09(b) and is revoked in accordance herewith), or (d) the assignment of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 2.17, then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurodollar Loan, the loss to any Lender attributable to any such event shall be deemed to include an amount determined by such Lender to be equal to the excess, if any, of (i) the amount of interest that such Lender would pay for a deposit equal to the principal amount of such Loan for the period from the date of such payment, conversion, failure or assignment to the last day of the then current Interest Period for such Loan (or, in the case of a failure to borrow, convert or continue, the duration of the Interest Period that would have resulted from such borrowing, conversion or continuation) if the interest rate payable on such deposit were equal to the Adjusted LIBO Rate for such Interest Period, over (ii) the amount of interest that such Lender would earn on such principal amount for such period if such Lender were to invest such principal amount for such period at the interest rate that would be bid by such Lender (or an affiliate of such Lender) for Dollar deposits from other banks in the eurodollar market at the commencement of such period. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 15 days after receipt thereof. SECTION 2.15. Taxes. (a) Any and all payments by or on account of any obligation of the Borrower hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent or Lender (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions 34 and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) The Borrower shall indemnify the Administrative Agent and each Lender, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Administrative Agent or such Lender, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender, or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error. (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent. (e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by the Borrower, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate. The Borrower shall not be obligated to make any payments to a Foreign Lender pursuant to Section 2.15(a) to the extent that such Indemnified Taxes or Other Taxes became payable as a consequence of such Foreign Lender having failed to comply with this Section 2.15(e). (f) If any Lender shall become aware that it is entitled to receive a refund or credit (such credit to include any increase in any foreign tax credit) as a result of Indemnified Taxes (including any penalties or interest with respect thereto) as to which it has been indemnified by the Borrower pursuant to this Section 2.15, it shall promptly notify the Borrower of the availability of such 35 refund or credit and shall, within 30 days after receipt of a request by the Borrower, apply for such refund or credit at the Borrower's expense, and in the case of any application for such refund or credit by the Borrower, shall, if legally able to do so, deliver to the Borrower such certificates, forms or other documentation as may be reasonably necessary to assist the Borrower in such application. If any Lender receives a refund or credit (such credit to include any increase in any foreign tax credit) in respect to any Indemnified Taxes as to which it has been indemnified by the Borrower pursuant to this Section 2.15, it shall promptly notify the Borrower of such refund or credit and shall, within 30 days after receipt of such refund or the benefit of such credit (such benefit to include any reduction of the taxes for which any Lender would otherwise be liable due to any increase in any foreign tax credit available to such Lender), repay the amount of such refund or benefit of such credit (with respect to the credit, as determined by the Lender in its sole judgment) to the Borrower (to the extent of amounts that have been paid by the Borrower under this Section 2.15 with respect to Indemnified Taxes giving rise to such refund or credit), plus any interest received with respect thereto, net of all reasonable out-of-pocket expenses of such Lender and without interest (other than interest actually received from the relevant taxing authority or other Governmental Authority with respect to such refund or credit); provided, however, that the Borrower, upon the request of such Lender, agrees to return the amount of such refund or benefit of such credit (plus interest) to such Lender in the event such Lender is required to repay the amount of such refund or benefit of such credit to the relevant taxing authority or other Governmental Authority. SECTION 2.16. Payments Generally; Pro Rata Treatment; Sharing of Set- offs. (a) The Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees, or under Section 2.13, 2.14 or 2.15, or otherwise) prior to 12:00 noon, New York City time, on the date when due, in immediately available funds, without set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices at 60 Wall Street, New York, New York, except that payments pursuant to Sections 2.13, 2.14, 2.15 and 9.03 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in Dollars. 36 (b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, interest and fees then due hereunder, such funds shall be applied (i) first, to pay interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, to pay principal then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties. (c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Revolving Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Revolving Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation. (d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the Federal Funds Effective Rate. 37 (e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.05(b) or 2.16(d), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender's obligations under such Sections until all such unsatisfied obligations are fully paid. SECTION 2.17. Mitigation Obligations; Replacement of Lenders. (a) If any Lender requests compensation under Section 2.13, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.15, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, or to file any certificate or document reasonably requested by the Borrower, if, in the judgment of such Lender, such designation or assignment or filing (i) would eliminate or reduce amounts payable pursuant to Section 2.13 or 2.15, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. (b) If any Lender requests compensation under Section 2.13, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.15, or if any Lender defaults in its obligation to fund Loans hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.13 or payments required to be made pursuant to Section 2.15, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result 38 of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. A Lender shall not be required to pay any fee to the Administrative Agent in connection with such assignment and delegation (any such fee to be paid by the Borrower or the assignee). ARTICLE 3 REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants to the Lenders (including, in the case of any representation and warranty made or deemed made before the consummation of the Acquisition, at the time such representation and warranty is made or deemed made and immediately after giving effect to the consummation of the Acquisition) that: SECTION 3.01. Organization; Powers. Each of the Borrower and its Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required. SECTION 3.02. Authorization; Enforceability. The Transactions are within the Borrower's corporate powers and have been duly authorized by all necessary corporate and, if required, stockholder action. Each of this Agreement, the Acquisition Documents and the other documents executed and delivered in connection with the Transactions, has been duly executed and delivered by the Borrower and constitutes a legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law. SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except (x) such consents, approvals, registrations or filings with respect to the Acquisition, all of which will be obtained or made prior to the consummation of the Acquisition and will thereafter be in full force and effect, (y) such consents, approvals, registrations or filings with respect to the Acquisition which will be obtained or made after the consummation of the Acquisition or the failure to obtain or make prior to the Acquisition will not, individually or in the aggregate, have a Material Adverse 39 Effect and (z) such other consents, approvals, registrations or filings as have been obtained or made and are in full force and effect, (b) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of the Borrower or any of its Subsidiaries or any order of any Governmental Authority, (c) will not violate or result in a default under (i) any indenture, agreement or instrument relating to the Existing Public Debt or the Medium Term Notes or (ii) any other indenture, agreement or other instrument binding upon the Borrower or any of its Subsidiaries or its assets, other than defaults or violations for which consents or waivers have been obtained or, solely with respect to any indenture, agreement or instrument described in clause (ii), which defaults or violations, individually or in the aggregate could not reasonably be expected to result in a Material Adverse Effect, (d) will not give rise to a right under any indenture, agreement or other instrument binding upon the Borrower or any of its Subsidiaries or its assets to require any payment to be made by the Borrower or any of its Subsidiaries other than any payments contemplated to be made in connection with the Transactions, and (e) will not result in the creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries. SECTION 3.04. Financial Condition; No Material Adverse Change. (a) The Borrower has heretofore furnished to the Lenders its consolidated balance sheet and statements of income, stockholders equity and cash flows (i) as of and for the Fiscal Year ended January 2, 1999, reported on by PricewaterhouseCoopers LLP, independent public accountants, and (ii) as of and for the fiscal quarter and the portion of the Fiscal Year ended September 11, 1999, certified by its Financial Officer. Such financial statements present fairly, in all material respects, the financial condition and results of operations and cash flows of Borrower and its Consolidated Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to year-end audit adjustments and the absence of footnotes in the case of the statements referred to in clause (ii) above. (b) The Borrower has heretofore furnished to the Lenders the consolidated balance sheet and statements of income, stockholders equity and cash flows of the Target and its subsidiaries (i) as of and for the Fiscal Year ended January 2, 1999, reported on by PricewaterhouseCoopers LLP, independent public accountants, and (ii) as of and for the fiscal quarter and the portion of the Fiscal Year ended July 3, 1999, certified by a Financial Officer of the Borrower. Such financial statements present fairly, in all material respects, the financial condition and results of operations and cash flows of the Target and its consolidated subsidiaries as of such dates and for such periods in accordance with GAAP, subject to year-end audit adjustments and the absence of footnotes in the case of the statements referred to in clause (ii) above. 40 (c) Since June 19, 1999, there has been no Material Adverse Change in the business, assets, operations, prospects or condition, financial or otherwise, of the Borrower and its Subsidiaries, taken as a whole. SECTION 3.05. Properties. (a) Each of the Borrower and its Subsidiaries has good title to, or valid leasehold interests in, all its real and personal property material to its business, except for defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties for their intended purposes and except as may be permitted pursuant to Section 6.01. (b) Each of the Borrower and its Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to its business, and the use thereof by the Borrower and its Subsidiaries does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 3.06. Litigation and Environmental Matters. (a) There are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any of its Subsidiaries or that involve this Agreement or the Transactions as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect (other than the Disclosed Matters). (b) Except for the Disclosed Matters and except with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, neither the Borrower nor any of its Subsidiaries (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability. (c) Since the date of this Agreement, there has been no change in the status of the Disclosed Matters that, individually or in the aggregate, has resulted in, or materially increased the likelihood of, a Material Adverse Effect. SECTION 3.07. Compliance with Laws and Agreements. Each of the Borrower and its Subsidiaries is in compliance with all laws, regulations and orders of any Governmental Authority applicable to it or its property and all 41 indentures, agreements and other instruments binding upon it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is continuing. SECTION 3.08. Investment and Holding Company Status. Neither the Borrower nor any of its Subsidiaries is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. SECTION 3.09. Taxes. Each of the Borrower and its Subsidiaries has timely filed or caused to be filed all Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which the Borrower or such Subsidiary, as applicable, has set aside on its books reserves as and to the extent required by GAAP or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect. SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $8,000,000 the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $15,000,000 the fair market value of the assets of all such underfunded Plans. SECTION 3.11. Disclosure. The Borrower has disclosed to the Lenders all agreements, instruments and corporate or other restrictions to its knowledge to which it or any of its Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. None of the reports, financial statements, certificates or other information furnished by or on behalf of the Borrower to the Administrative Agent or any Lender in connection with the negotiation of this Agreement or delivered hereunder (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any 42 material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time. Any forward looking statements contained therein are inherently subject to risk and uncertainties, many of which cannot be predicted with accuracy, and some of which might not be anticipated. Future events and actual results, financial and otherwise, could differ materially from those set forth therein or contemplated by the forward looking statements contained therein. SECTION 3.12. Margin Stock. Not more than 25% of the consolidated assets of the Borrower consists of "margin stock" within the meaning of such term under Regulation U of the Board of Governors of the Federal Reserve System. SECTION 3.13. No Burdensome Restrictions. No Requirement of Law or Contractual Obligation of the Borrower or any of its Subsidiaries could reasonably be expected to have a Material Adverse Effect. SECTION 3.14. Subsidiaries. Schedule 3.14 sets forth all of the Subsidiaries of the Borrower at the date hereof. SECTION 3.15. Solvency. As of the date hereof and on the occasion of any Borrowing, the Borrower is Solvent. SECTION 3.16. Year 2000 Matters. Any reprogramming required to permit the proper functioning (but only to the extent that such functioning would otherwise be impaired by the occurrence of the year 2000) in and following the year 2000 of computer systems and other equipment containing embedded microchips, in either case owned or operated by the Borrower or any of its Subsidiaries has been substantially completed. The costs to the Borrower and its Subsidiaries that have not been incurred as of the date hereof for such reprogramming and testing and for the other reasonably foreseeable consequences to them of any improper functioning of other computer systems and equipment containing embedded microchips due to the occurrence of the year 2000 could not reasonably be expected to result in a Default or Event of Default or to have a Material Adverse Effect. The computer systems of the Borrower and its Subsidiaries are and, with ordinary course of upgrading and maintenance, will continue for the term of this Agreement to be sufficient for the conduct of their business as currently conducted. SECTION 3.17. Acquisition Documents. As of the Acquisition Date, each of the representations and warranties made in the Acquisition Documents by each of the parties thereto is true and correct in all material respects, and such 43 representations and warranties are hereby incorporated herein by reference with the same effect as though set forth in their entirety herein, as qualified therein. ARTICLE 4 CONDITIONS TO FUNDING SECTION 4.01. Effective Date. The obligations of the Lenders to make Loans hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 9.02): (a) The Administrative Agent shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement. (b) (i) The Lenders shall have received true, correct and complete copies of the Acquisition Documents as in effect on the Effective Date, and (ii) the material terms of such Acquisition Documents shall be in form and substance satisfactory to the Majority Lenders. With respect to the condition set forth in paragraph (b)(ii) of this Section, each Lender shall be deemed to have determined that such condition has been satisfied unless the Administrative Agent shall have received notice from such Lender prior to the Effective Date that such Lender does not consider such condition to have been satisfied. The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding. SECTION 4.02. First Credit Event. The obligation of each Lender to make a Loan on the occasion of the Borrowing to occur on the First Borrowing Date is subject to the satisfaction of the following conditions (or waiver thereof in accordance with Section 9.02): (a) The Effective Date shall have occurred. (b) (i) The Merger shall have been consummated (or shall be consummated contemporaneously with the making of the Loans on the First Borrowing Date) in accordance with the Acquisition Documents on or prior to August 17, 2000, and (ii) no term or condition of any Acquisition Document shall have been amended, modified or waived except as permitted by Section 6.10 hereof. 44 (c) The Administrative Agent shall have received true, correct and complete copies of the Acquisition Documents as in effect on the First Borrowing Date. (d) (i) All governmental, shareholder and third-party consents (including Hart-Scott-Rodino clearance) and approvals necessary or desirable in connection with the Acquisition shall have been obtained and shall be in full force and effect, except for such consents or approvals the failure of which to obtain will not, individually or in the aggregate, have a Material Adverse Effect, (ii) all applicable waiting periods shall have expired without any action being taken by any competent authority that could restrain, prevent or impose any materially adverse conditions on the Acquisition or that could seek or threaten to restrain, prevent or impose any materially adverse conditions on any of the foregoing, and (iii) no law or regulation shall be applicable which in the judgment of the Lenders could have any such effect. (e) There shall be no actions, suits or proceedings by or before any arbitrator or governmental authority pending against or to the knowledge of the Borrower threatened against or affecting the Borrower or any of its Subsidiaries or the Target or any of its subsidiaries or that involve the credit facility contemplated by this Agreement or the refinancing thereof or this Agreement as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected to have a Material Adverse Effect or that challenge the Acquisition. (f) The Administrative Agent shall have received a favorable written opinion (addressed to the Administrative Agent and the Lenders and dated the First Borrowing Date) of Akin, Gump, Strauss, Hauer & Feld, L.L.P., counsel for the Borrower, substantially in the form of Exhibit B, and covering such other matters relating to the Borrower, this Agreement or the Transactions as the Majority Lenders shall reasonably request. The Borrower hereby requests such counsel to deliver such opinion. (g) The Administrative Agent shall have received a certificate, dated the First Borrowing Date and signed by the President, a Vice President or a Financial Officer of the Borrower, confirming compliance with the conditions set forth in paragraphs (b), (d) and (e) of this Section and paragraphs (a) and (b) of Section 4.03. (h) The Lenders and the Administrative Agent shall have received all fees and other amounts due and payable on or prior to the First Borrowing Date, 45 including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder. (i) The Administrative Agent shall have received such other legal opinions, documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of the Borrower, the authorization of the Transactions and any other legal matters relating to the Borrower, this Agreement or the Transactions, all in form and substance satisfactory to the Administrative Agent and its counsel. With respect to any condition set forth in paragraph (d)(iii) of this Section, each Lender shall be deemed to have determined that such condition has been satisfied unless the Administrative Agent shall have received notice from such Lender prior to the First Borrowing Date that such Lender does not consider such condition to have been satisfied. The obligations of the Lenders to make Loans hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 9.02) at or prior to 3:00 p.m., New York City time, on August 17, 2000 (and, in the event such conditions are not so satisfied or waived, the Commitments shall terminate at such time). SECTION 4.03. Each Credit Event. The obligation of each Lender to make a Loan on the occasion of any Borrowing (including without limitation on the First Borrowing Date) is subject to the satisfaction of the following conditions (or waiver thereof in accordance with Section 9.02): (a) The representations and warranties of the Borrower set forth in this Agreement shall be true and correct on and as of the date of such Borrowing, including, without limitation, the representations and warranties set forth in Sections 3.04 and 3.06, except to the extent such representations and warranties expressly relate to an earlier date. (b) At the time of and immediately after giving effect to such Borrowing, no Default or Event of Default shall have occurred and be continuing. Each Borrowing shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in paragraphs (a) and (b) of this Section. 46 ARTICLE 5 AFFIRMATIVE COVENANTS Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder shall have been paid in full, the Borrower covenants and agrees with the Lenders that: SECTION 5.01. Financial Statements and Other Information. The Borrower will furnish to the Administrative Agent and each Lender: (a) within 105 days after the end of each Fiscal Year, its audited consolidated balance sheet and related statements of operations, stockholders' equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures as of the end of and for the previous Fiscal Year, all reported on by PricewaterhouseCoopers LLP or other independent public accountants of recognized national standing (without a "going concern" or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Borrower and its Consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied; (b) within 60 days after the end of each of the first three fiscal quarters of each Fiscal Year, its consolidated balance sheet and related statements of operations, stockholders' equity and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the Fiscal Year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous Fiscal Year, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its Consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes; (c) concurrently with any delivery of financial statements under clause (a) or (b) above, a certificate of a Financial Officer of the Borrower (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations of the financial covenants set forth in Sections 6.02, 6.07 and 6.08 and (iii) stating whether any change in GAAP or in the application thereof has occurred since the date of the audited financial statements referred to in Section 3.04(a) and, if any such change has 47 occurred, specifying the effect of such change on the financial statements accompanying such certificate; (d) concurrently with any delivery of financial statements under clause (a) above, a certificate of the accounting firm that reported on such financial statements stating whether they obtained knowledge during the course of their examination of such financial statements of any Default (which certificate may be limited to the extent required by accounting rules or guidelines); (e) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed (excluding exhibits) by the Borrower or any Subsidiary with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, or distributed by the Borrower to its shareholders generally, as the case may be; and (f) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Borrower or any Subsidiary, or compliance with the terms of this Agreement, as the Administrative Agent or any Lender through the Administrative Agent may reasonably request. Section 5.02. Notices of Material Events. The Borrower will furnish to the Administrative Agent and each Lender prompt written notice of the following: (a) the occurrence of any Default; (b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Borrower or any Affiliate thereof that, if adversely determined, could reasonably be expected to result in a Material Adverse Effect; (c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and its Subsidiaries in an aggregate amount exceeding $20,000,000 subsequent to the date hereof; and (d) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect. Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other executive officer of the Borrower setting 48 forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto. SECTION 5.03. Existence; Conduct of Business. The Borrower will, and will cause each of its Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges and franchises material to the conduct of the business of the Borrower and its Subsidiaries taken as a whole except to that extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 6.03. SECTION 5.04. Payment of Obligations. The Borrower will, and will cause each of its Subsidiaries to, pay its obligations, including Tax liabilities, that, if not paid, could result in a Material Adverse Effect before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) the Borrower or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect. SECTION 5.05. Maintenance of Properties; Insurance. The Borrower will, and will cause each of its Subsidiaries to, (a) keep and maintain all property material to the conduct of its business in adequate working order and condition, ordinary wear and tear excepted, and (b) maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations. SECTION 5.06. Books and Records; Inspection Rights. The Borrower will, and will cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities. The Borrower will, and will cause each of its Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested. SECTION 5.07. Compliance with Laws and Material Contractual Obligations. The Borrower will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property and all material Contractual Obligations, except 49 where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect; provided that the foregoing shall not be construed to prevent the Borrower or any such Subsidiary from contesting any of the same by appropriate proceedings. SECTION 5.08. Use of Proceeds. The proceeds of the Loans will be used only (i) to finance the Acquisition (including the payment of related transaction fees and expenses), (ii) to refinance existing Indebtedness of the Target and (iii) for general corporate purposes of the Borrower and its Subsidiaries, including as credit support for the Borrower's commercial paper programs. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations U and X. SECTION 5.09. Change in Ratings. The Borrower will furnish to the Administrative Agent and each Lender prompt written notice of any change in ratings established or deemed to have been established by Moody's and S&P for any of its indebtedness for borrowed money, including, without limitation, the Index Debt or its senior, unsecured, short-term indebtedness for borrowed money (including, without limitation, commercial paper). SECTION 5.10. Copies of Other Bank Agreements. Promptly upon entering into the Bridge Agreement, the Borrower will deliver to each Lender (other than a Lender who is a party to such Bridge Agreement) a true, correct and complete copy thereof. ARTICLE 6 NEGATIVE COVENANTS Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees payable hereunder have been paid in full, the Borrower covenants and agrees with the Lenders that: SECTION 6.01. Liens. The Borrower will not, and will not permit any Subsidiary to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except: (a) Permitted Encumbrances; (b) any Lien on any property or asset of the Borrower or any Subsidiary existing on the date hereof and set forth on Schedule 6.01 or resulting from 50 operating leases existing on the date hereof being reclassified as capital leases in accordance with GAAP; provided that (i) such Lien shall not apply to any other property or asset (other than accessions, modifications and proceeds thereof) of the Borrower or any Subsidiary and (ii) such Lien shall secure only those obligations which it secures on the date hereof and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof; (c) any Lien existing on any property or asset prior to the acquisition thereof by the Borrower or any Subsidiary or existing on any property or asset of any Person that becomes a Subsidiary on or after the date hereof prior to the time such Person becomes a Subsidiary; provided that (i) such Lien is not created in contemplation of or in connection with such acquisition or such Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not apply to any other property or assets (other than accessions, modifications and proceeds thereof) of the Borrower or any Subsidiary and (iii) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such Person becomes a Subsidiary, as the case may be and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof; (d) Liens on fixed or capital assets acquired, constructed or improved by the Borrower or any Subsidiary; provided that (i) such Liens and the Indebtedness secured thereby are incurred prior to or within 180 days after such acquisition or the completion of such construction or improvement, (ii) the Indebtedness secured thereby does not exceed 100% of the cost of acquiring, constructing or improving such fixed or capital assets and (iii) such Liens shall not apply to any other property or assets (other than accessions, modifications and proceeds thereof) of the Borrower or any Subsidiary; and (e) Liens not otherwise permitted pursuant to this Section 6.01 securing Indebtedness of the Borrower or any Subsidiary (not otherwise prohibited hereunder) in an aggregate principal amount at no time exceeding (i) $30,000,000 minus (ii) the aggregate principal amount of Indebtedness of Subsidiaries permitted solely by clause (e) of Section 6.02 outstanding at such time. SECTION 6.02. Indebtedness of Subsidiaries. The Borrower will not permit any Subsidiary to create, incur, assume, become liable in respect of or suffer to exist any Indebtedness, except to the extent otherwise permitted hereunder: (a) Indebtedness (including, without limitation, Capital Lease Obligations) secured by Liens permitted under Section 6.01(b); 51 (b) (i) Indebtedness (including, without limitation, Capital Lease Obligations) secured by Liens permitted under Section 6.01(c) in an aggregate principal amount not to exceed $140,000,000, (ii) Indebtedness (other than Indebtedness permitted by clause (i)) consisting of Capital Lease Obligations and (iii) on and after the date on which Bel-Thai Supermarket Company Ltd. ("Bel- Thai") becomes a Subsidiary, Indebtedness of Bel-Thai in an aggregate principal amount not exceeding $60,000,000; (c) Indebtedness of any Subsidiary owed to the Borrower or any other Subsidiary; (d) Indebtedness of the Target and its subsidiaries outstanding on the Acquisition Date and not incurred in contemplation of the Acquisition; and (e) additional Indebtedness of the Subsidiaries in an aggregate principal amount (for all Subsidiaries) at no time exceeding (i) $30,000,000 minus (ii) the aggregate principal amount of Indebtedness secured by Liens permitted solely by clause (e) of Section 6.01 outstanding at such time; provided that at any date the aggregate amount of Capital Lease Obligations of all Subsidiaries (other than any such Capital Lease Obligations incurred in reliance on clause (i) of subsection (b)) and the aggregate amount of Capital Lease Obligations of the Borrower will not exceed $1,000,000,000. SECTION 6.03. Fundamental Changes. (a) The Borrower will not, and will not permit any Subsidiary to, merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or substantially all of the assets of the Borrower and its Subsidiaries taken as a whole (whether now owned or hereafter acquired), or liquidate or dissolve, except that, if at the time thereof and immediately after giving effect thereto no Default shall have occurred and be continuing (i) the Borrower may merge into any other Person in a transaction in which the Borrower is the surviving corporation, (ii) any Subsidiary may merge into the Borrower in a transaction in which the Borrower is the surviving corporation, (iii) any Subsidiary may merge into any Subsidiary in a transaction in which the surviving entity is a Subsidiary, (iv) any Subsidiary may merge into any other Person in a transaction in which the surviving entity is a Subsidiary or in a transaction permitted by Section 6.09 and in which the surviving Person is not a Subsidiary, (v) any Subsidiary may sell, transfer, lease or otherwise dispose of its assets to the Borrower or to another Subsidiary or in a transaction not constituting all or substantially all of the assets of the Borrower and its Subsidiaries taken as a whole 52 and which is permitted by Section 6.08, (vi) Acquisition Sub may consummate the Merger, (vii) subject to Section 10.01, the Borrower and its Subsidiaries may consummate the Reorganization and (viii) any Subsidiary may liquidate or dissolve if the Borrower determines in good faith that such liquidation or dissolution is in the best interests of the Borrower and is not materially disadvantageous to the Lenders; provided that any such merger involving a Person that is not a wholly owned Subsidiary immediately prior to such merger shall not be permitted unless also permitted by Section 6.04. (b) The Borrower will not, and will not permit any of its Subsidiaries to, engage to any material extent in any business other than businesses of the type conducted by the Borrower and its Subsidiaries and Hannaford and its subsidiaries on the date of execution of this Agreement and businesses reasonably related or incidental thereto. SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions; Hedging Agreements. (a) The Borrower will not, and will not permit any of its Subsidiaries to, purchase, hold or acquire (including pursuant to any merger with any Person that was not a wholly owned Subsidiary prior to such merger) any capital stock, evidences of Indebtedness or other securities (including any option, warrant or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, guarantee any obligations of, or make or permit to exist any investment or any other interest in, any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person constituting a business unit, except: (i) Cash Equivalents; (ii) extensions of trade credit in the ordinary course of business; (iii) investments arising from the settlement of debts or as a result of bankruptcy or insolvency proceedings or as a result of enforcement proceedings; (iv) investments of the Borrower and the Subsidiaries existing on the date hereof; (v) investments by the Borrower existing on the date hereof in the capital stock of its Subsidiaries; (vi) loans, advances and other investments made by the Borrower to or in any Subsidiary and made by any Subsidiary to or in the Borrower or any other Subsidiary; 53 (vii) Guarantees to the extent that the resulting Debt would be permitted by Section 6.08 and, if applicable, Section 6.02; (viii) the acquisition of the capital stock of the Target pursuant to the Acquisition Documents; (ix) investments of the Target and its subsidiaries (i) existing on the date hereof or (ii) made after the date hereof and prior to the Acquisition Date, so long as such investments are permitted to be made by the terms of the Merger Agreement; (x) at any time on or after the Bridge Payout Date, acquisitions of a Person or the assets of a Person constituting a business unit in the same line of business conducted by the Borrower on the date hereof in an aggregate amount not to exceed $600,000,000 over the term of this Agreement; provided that acquisitions of equity interests in a Person which do not result in such Person constituting a Subsidiary shall not exceed an aggregate amount of $200,000,000; and (xi) investments not otherwise permitted pursuant to this Section 6.04 in an aggregate amount not to exceed $20,000,000 at any time outstanding. (b) The Borrower will not, and will not permit any of its Subsidiaries to, enter into any Hedging Agreement, other than (i) Hedging Agreements entered into in the ordinary course of business to hedge or mitigate risks to which the Borrower or any Subsidiary is exposed in the conduct of its business or the management of its liabilities, (ii) any Hedging Agreements to hedge interest rate risk with respect to the loans outstanding under the Bridge Agreement and (iii) Hedging Agreements constituting "treasury-locks" or similar hedging arrangements entered into by the Borrower in anticipation of an issuance of Debt by the Borrower pursuant to a capital markets transaction. SECTION 6.05. Transactions with Affiliates. The Borrower will not, and will not permit any of its Subsidiaries to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except (a) in the ordinary course of business at prices and on terms and conditions not less favorable to the Borrower or such Subsidiary than could be obtained on an arm's-length basis from unrelated third parties and (b) transactions between or among the Borrower and its wholly owned Subsidiaries not involving any other Affiliate. 54 SECTION 6.06. Reserved. SECTION 6.07. Fixed Charges Coverage. At the end of each Fiscal Quarter set forth below, the ratio of (i) Consolidated EBITDAR for the period of four Fiscal Quarters then ended to (ii) Consolidated Fixed Charges for such period, shall not have been less than the ratio set forth below opposite such Fiscal Quarter (subject to the proviso set forth below): Fiscal Quarter Ratio - ------------------------------------------------------------------------------ First Fiscal Quarter ended on or immediately after the 2.25:1 Effective Date - Third Fiscal Quarter 2001 Fourth Fiscal Quarter 2001 - Third Fiscal Quarter 2002 2.50:1 Fourth Fiscal Quarter 2002 - Third Fiscal Quarter 2003 2.75:1 Fourth Fiscal Quarter 2003 and thereafter 3.00:1 - ------------------------------------------------------------------------------ ; provided that at the end of any Fiscal Quarter ended prior to the Acquisition Date, such ratio shall not have been less than 3:00:1. SECTION 6.08. Ratio of Consolidated Adjusted Debt to Consolidated EBITDAR. At no date will the ratio of (i) Consolidated Adjusted Debt at such date to (ii) Consolidated EBITDAR for the period of four consecutive Fiscal Quarters ended on or most recently prior to such date exceed the ratio set forth below opposite the period in which such date falls (subject to the proviso set forth below): Period Ratio - ------------------------------------------------------------------------------ Effective Date - day immediately preceding last day of 4.50:1 Fourth Fiscal Quarter 2001 Last day of Fourth Fiscal Quarter 2001- day immediately 4.00:1 preceding last day of Fourth Fiscal Quarter 2002 Last day of Fourth Fiscal Quarter 2002 - day immediately 3.75:1 preceding last day of Fourth Fiscal Quarter 2003 Last day of Fourth Fiscal Quarter 2003 and thereafter 3.50:1 - ------------------------------------------------------------------------------ ; provided that at any date prior to the Acquisition Date, such ratio will not exceed 3:00:1. 55 SECTION 6.09. Limitation on Sales of Assets. The Borrower will not, nor will it permit any Subsidiary to, convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets, whether now owned or hereafter acquired, or discontinue or eliminate any business line or segment, except: (a) the sale or other disposition of obsolete, surplus or worn out property in the ordinary course of business; (b) the sale of inventory in the ordinary course of business; (c) as permitted by Section 6.03(a); (d) (i) sales of assets in a single transaction or in a series of related transactions the aggregate book value of which is not greater than $25,000,000 in any one such transaction or series of related transactions and (ii) sales of assets the consummation of which is an express condition (either precedent or subsequent) to the approval by the Federal Trade Commission of the Acquisition; provided that the book value of the assets disposed of in assets sales consummated in reliance on this clause (ii) does not exceed $258,000,000 and provided, further that if, within 180 days of any such assets sales, the Borrower or any Subsidiary acquires similar assets having a use similar to and a fair market value at least equal to the assets sold, then the value of the assets sold shall not be included in calculating future assets sales permitted under this Section 6.09; (e) dispositions and discontinuances of a business line or segment not otherwise permitted pursuant to this Section 6.09, provided that the aggregate assets to be so disposed of or the aggregate assets utilized in a business line or segment to be so discontinued (in a single transaction or in a series of related transactions), when combined with all other assets disposed of (including, without limitation, pursuant to a sale and leaseback transaction) and all other assets utilized in all other business lines or segments discontinued, during the period from the date of this Agreement through and including the date of any such disposition or discontinuation would not exceed 5% of Consolidated Total Assets as determined by reference to the Borrower's most recently audited financial statements provided to the Administrative Agent and the Lenders pursuant to Section 5.01(a) and provided, further that if, within 180 days of the sale of any assets, the Borrower or any Subsidiary acquires similar assets having a use similar to and a fair market value at least equal to the assets so sold, then the value of the assets sold shall not be included in calculating future assets permitted to be sold under this Section 6.09; and (f) conveyances, sales, leases, assignments, transfers or other dispositions of assets from the Borrower to a wholly owned Subsidiary (including 56 without limitation pursuant to the Reorganization), from a Subsidiary to the Borrower or from a Subsidiary to a wholly owned Subsidiary. SECTION 6.10. Modifications to Acquisition Documents. The Borrower will not, and will not permit any of its Subsidiaries to, enter into any amendment, modification or waiver of any material term or condition of any Acquisition Document without the prior written consent of the Majority Lenders. SECTION 6.11. Restrictions Affecting Subsidiaries. The Borrower will not, and will not permit any of its Subsidiaries to, enter into, be bound by or suffer to exist any encumbrance or restriction on the ability of any Subsidiary to (a) pay dividends or make other distributions or pay any Debt or Indebtedness owed to the Borrower or any Subsidiary, (b) make loans or advances to the Borrower or any Subsidiary, (c) transfer any of its properties or assets to the Borrower or any Subsidiary, (d) create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, (e) Guarantee any Debt or Indebtedness of the Borrower or another Subsidiary or (f) suffer to exist any Lien on capital stock or other equity interests issued by it; except for any such encumbrance or restriction existing under or by reason of (i) any agreement in effect on the Effective Date as any such agreement is in effect on such date, (ii) this Agreement, (iii) any agreement with respect to Indebtedness of any Subsidiary permitted to be incurred under Section 6.02(b) or secured by a Lien permitted to be incurred under Section 6.01(d) and provided such encumbrance or restriction shall not apply to any assets of the Borrower or its Subsidiaries other than the assets of such Subsidiary subject to such Lien, (iv) any agreement binding upon such Subsidiary prior to the date on which such Subsidiary was acquired by the Borrower and outstanding on such date and provided such encumbrance or restriction shall not apply to any assets of the Borrower or its Subsidiaries other than such Subsidiary, (v) customary provisions restricting subletting or assignment of any lease governing any leasehold interest of any Subsidiary, (vi) applicable law, (vii) licenses or other agreements, including with respect to property, in the ordinary course of business consistent with prior practice and (viii) any agreement binding upon such Subsidiary so long as such encumbrance or restriction is no more restrictive than those contained in this Agreement. 57 ARTICLE 7 EVENTS OF DEFAULT SECTION 7.01. Events of Default. If any of the following events ("Events of Default") shall occur: (a) the Borrower shall fail to pay any principal of any Loan when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise; (b) the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in clause (a) of this Section) payable under this Agreement, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of five days; (c) any representation or warranty made or deemed made by or on behalf of the Borrower or any Subsidiary in or in connection with this Agreement or any amendment or modification hereof, or in any report, certificate, financial statement or other document delivered pursuant to this Agreement or any amendment or modification hereof, shall prove to have been incorrect in any material way when made or deemed made; (d) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 5.02, 5.03 (with respect to the Borrower's existence) or 5.08 or in Article 6; (e) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in this Agreement (other than those specified in clause (a), (b) or (d) of this Article), and such failure shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent (given at the request of any Lender) to the Borrower; (f) the Borrower or any Subsidiary shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable; (g) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled 58 maturity; provided that this clause (g) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness; (h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower or any Subsidiary or their respective debts, or of a substantial part of their respective assets, under any federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Subsidiary or for a substantial part of their respective assets, and, in any such case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; (i) the Borrower or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Article, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Subsidiary or for a substantial part of their respective assets, (iv) file an answer admitting the material allegations of a petition filed against either of them in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing; (j) the Borrower or any Subsidiary shall become unable, or admit in writing or fail generally, to pay their respective debts as they become due; (k) one or more judgments for the payment of money in an aggregate amount in excess of $10,000,000 shall be rendered against the Borrower, any Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, bonded or vacated, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of the Borrower or any Subsidiary to enforce any such judgment; (l) an ERISA Event shall have occurred that, in the opinion of the Majority Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect; or (m) a Change in Control shall occur; 59 then, and in every such event (other than an event with respect to the Borrower described in clause (h) or (i) of this Article), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Majority Lenders shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; and in case of any event with respect to the Borrower described in clause (h) or (i) of this Article, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. ARTICLE 8 THE ADMINISTRATIVE AGENT SECTION 8.01. The Administrative Agent. Each of the Lenders hereby irrevocably appoints the Administrative Agent as its agent and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof, together with such actions and powers as are reasonably incidental thereto. The bank serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder. The Administrative Agent shall not have any duties or obligations except those expressly set forth herein. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the 60 Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that the Administrative Agent is required to exercise in writing by the Majority Lenders, and (c) except as expressly set forth herein, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Majority Lenders or in the absence of its own gross negligence or wilful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by the Borrower or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement, (ii) the contents of any certificate, report or other document delivered hereunder or in connection herewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. 61 Subject to the appointment and acceptance of a successor Administrative Agent as provided in this paragraph, the Administrative Agent may resign at any time by notifying the Lenders and the Borrower. Upon any such resignation, the Majority Lenders shall have the right (so long as no Default has occurred and is continuing with consent of the Borrower which consent shall not be unreasonably withheld) to appoint a successor. If no successor shall have been so appointed by the Majority Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the Administrative Agent's resignation hereunder, the provisions of this Article and Section 9.03 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Administrative Agent. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any related agreement or any document furnished hereunder or thereunder. ARTICLE 9 MISCELLANEOUS SECTION 9.01. Notices. Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: 62 (a) if to the Borrower, to it at 2110 Executive Drive, Salisbury, North Carolina 28145-1330, Attention of Richard James, Treasurer/Director of Finance (Telecopy No. 704-636-5024); (b) if to the Administrative Agent, J.P. Morgan Services Inc., 500 Stanton Christiana Road, Newark, Delaware 19713, Attention of Jeannie Mattson, Associate (Telecopy No. 302-634-1092); and (c) if to any other Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire. Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt. SECTION 9.02. Waivers; Amendments. (a) No failure or delay by the Administrative Agent or any Lender in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by the Borrower therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent or any Lender may have had notice or knowledge of such Default at the time. (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Majority Lenders or by the Borrower and the Administrative Agent with the consent of the Majority Lenders; provided that no such agreement shall (i) increase the Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the scheduled date of payment of the principal amount of any Loan or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such 63 payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.16(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender adversely affected thereby, or (v) change any of the provisions of this Section or the definition of "Majority Lenders" or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent hereunder without the prior written consent of the Administrative Agent. SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent, and its Affiliates, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent in connection with the syndication of the credit facilities provided for herein, the preparation and administration of this Agreement or any amendments, modifications or waivers of the provisions hereof (whether or not the transactions contemplated hereby or thereby shall be consummated) and (ii) all reasonable out-of-pocket expenses incurred by the Administrative Agent or any Lender, including the fees, charges and disbursements of any counsel for the Administrative Agent or any Lender, in connection with the enforcement or protection of its rights in connection with this Agreement, including its rights under this Section, or in connection with the Loans made hereunder, including in connection with any workout, restructuring or negotiations in respect thereof including, without limitation, actions in connection with this Agreement or the Loans, arising, occurring or continuing subsequent to the Maturity Date (other than any such expenses directly related to a court enforcement action in which the Borrower prevails on the merits in a final and nonappealable judgment). (b) The Borrower shall indemnify the Administrative Agent and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an "Indemnitee") against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement or any agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or the use of the proceeds therefrom, (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by the Borrower or any of its 64 Subsidiaries, or any Environmental Liability related in any way to the Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or wilful misconduct of such Indemnitee. (c) To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent such Lender's Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent in its capacity as such. (d) To the extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or the use of the proceeds thereof. (e) All amounts due under this Section shall be payable promptly after written demand therefor. SECTION 9.04. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its 65 Commitment and the Loans at the time owing to it); provided that (i) except in the case of an assignment to a Lender or an Affiliate of a Lender, each of the Borrower and the Administrative Agent must give their prior written consent to such assignment (which consent shall not be unreasonably withheld), (ii) except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire remaining amount of the assigning Lender's Commitment, the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $10,000,000 unless each of the Borrower and the Administrative Agent otherwise consent, (iii) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500, and (iv) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire; provided further that any consent of the Borrower otherwise required under this paragraph shall not be required if an Event of Default under clause (h) or (i) of Article 7 has occurred and is continuing. Upon acceptance and recording pursuant to paragraph (d) of this Section, from and after the effective date specified in each Assignment and Acceptance, the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.13, 2.14, 2.15 and 9.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (e) of this Section. (c) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices in The City of New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. 66 (d) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, the assignee's completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Acceptance and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph. (e) Any Lender may, without the consent of the Borrower or the Administrative Agent, sell participations to one or more banks or other entities (a "Participant") in all or a portion of such Lender's rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 9.02(b) that affects such Participant. Subject to paragraph (f) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.13, 2.14 and 2.15 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. (f) A Participant shall not be entitled to receive any greater payment under Section 2.13 or 2.15 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower's prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.15 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.15(e) as though it were a Lender. (g) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement or any promissory note issued pursuant hereto to such Lender to secure obligations of such Lender, including any such pledge or assignment to a Federal Reserve Bank, and this Section shall not 67 apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such assignee for such Lender as a party hereto. SECTION 9.05. Survival. All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid and so long as the Commitments have not expired or terminated. The provisions of Sections 2.13, 2.14, 2.15 and 9.03 and Article 8 shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Commitments or the termination of this Agreement or any provision hereof. SECTION 9.06. Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 9.07. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining 68 provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. SECTION 9.08. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of the Borrower against any of and all the obligations of the Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have. SECTION 9.09. Governing Law; Jurisdiction; Consent of Service of Process. (a) This Agreement shall be construed in accordance with and governed by the law of the State of New York. (b) The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court for the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent or any Lender may otherwise have to bring any action or proceeding relating to this Agreement against the Borrower or its properties in the courts of any jurisdiction. (c) The Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. 69 (d) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. SECTION 9.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement. SECTION 9.12. Confidentiality. Each of the Administrative Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (f) subject to a written agreement containing provisions substantially the same as those of this Section, to any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement, (g) with the consent of the Borrower or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Administrative Agent or any Lender on a nonconfidential basis from a source other than the Borrower. For the 70 purposes of this Section, "Information" means all information received from the Borrower relating to the Borrower, its Subsidiaries or their businesses, other than any such information that is available to the Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by the Borrower; provided that, in the case of information received from the Borrower after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. SECTION 9.13. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively the "Charges"), shall exceed the maximum lawful rate (the "Maximum Rate") which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender. ARTICLE 10 PROVISIONS RELATING TO THE REORGANIZATION SECTION 10.01. Consent to Reorganization. Notwithstanding anything to the contrary contained herein, the Borrower may effect the Reorganization or any portion thereof so long as no Default shall have occurred and be continuing or would occur after giving effect to the Reorganization or such portion thereof. Promptly upon completion of the Reorganization, the Borrower shall give the Administrative Agent notice thereof. 71 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. DELHAIZE AMERICA, INC. By:\s\Richard James ------------------------------------ Name: Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, individually and as Administrative Agent By:\s\Kathryn Sayko Yanes ------------------------------------ Name: Kathryn Sayko Yanes Title: Vice President BANK OF AMERICA, N.A. By:\s\Timothy H. Spanos ------------------------------------ Name:Timothy H. Spanos Title:Managing Director CITIBANK, N.A. By: \s\Marc Merlino ------------------------------------ Name: Marc Merlino Title: Vice President WACHOVIA BANK, N.A. By:\s\ Christopher L. Fincher ------------------------------------ Name:Christopher L. Fincer Title:Senior Vice President THE BANK OF NEW YORK By:\s\Michael V. Flannery ------------------------------------ Name:Michael V. Flannery Title: Vice President BANK ONE, NA By:\s\Catherine A. Muszynski ------------------------------------ Name: Catherine A. Muszynski Title: Vice President BBL INTERNATIONAL (U.K.) LIMITED By:\s\C.F.Wright, Authorised Signatory \s\G.R.M. Walker, Authorised Signatory ------------------------------------ Name: Title: CREDIT AGRICOLE INDOSUEZ By: \s\Craig Welch ------------------------------------ Name:Craig Welch Title:First Vice President By:\s\Rene LeBlanc ------------------------------------ Name:Rene LeBlanc Title:Vice President, Senior Relationship Manager DEUTSCHE BANK AG NEW YORK AND/OR CAYMAN ISLANDS BRANCH By:\s\Stefan Hafke ------------------------------------ Name:Stefan Hafke Title:Vice President By:\s\Barbara Anne Hoeltz ------------------------------------ Name:Barbara Anne Hoeltz Title:Vice President FIRST UNION NATIONAL BANK By:\s\Mary J. Amatore ------------------------------------ Name:Mary J. Amatore Title:Vice President FORTIS (USA) FINANCE LLC By:\s\Eddie Matthews ------------------------------------ Name:Eddie Matthews Title:Senior Vice President By:\s\David Snyder ------------------------------------ Name:David Snyder Title:Senior Vice President THE INDUSTRIAL BANK OF JAPAN, LIMITED By:\s\Minami Miura ------------------------------------ Name: Minami Miura Title: Vice President COOPERATIEVE CENTRALE RAIFFEISEN- BOERENLEENBANK B.A., "RABOBANK INTERNATIONAL", NEW YORK BRANCH By:\s\Polly Coe \s\ Karen Boyer ------------------------------------ Name:Polly Coe,Karen Boyer Title:Senior Vice President, Vice President SUNTRUST BANK, ATLANTA By:\s\Jennifer P. Harrelson ------------------------------------ Name:Jennifer P. Harrelson Title:Managing Director COBANK, ACB By:\s\Brian J. Klatt ------------------------------------ Name:Brian J.Klatt Title:Vice President THE DAI-ICHI KANGYO BANK, LTD. By:\s\Nicholas A. Fiore ------------------------------------ Name:Nicholas A. Fiore Title:Assistant Vice President THE FUJI BANK, LIMITED By:\s\Raymond Ventura ------------------------------------ Name:Raymond Ventura Title:Vice President & Manager BANQUE NATIONALE DE PARIS, HOUSTON AGENCY By:\s\Henry F. Setina ------------------------------------ Name:Henry F. Setina Title:Vice President BRANCH BANKING & TRUST COMPANY By:\s\Cory Boyte ------------------------------------ Name:Cory Boyte Title:Vice President CIBC INC. By:\s\Dominic Sorresso ------------------------------------ Name: Dominic Sorresso Title:Executive Director CIBC World Markets Corp. as agent CREDIT COMMERCIAL DE FRANCE S.A. By:\s\Bernard de Bellefroid \s\Chantal Peters ------------------------------------ Name:Bernard de Bellefroid Title: Directeur General Name: Chantal Peters Directeur FLEET NATIONAL BANK By:\s\Thomas J. Bullard ------------------------------------ Name:Thomas J. Bullard Title: Vice President PARIBAS By:\s\Andre Boulanger \s\Dimitri Stroobants ------------------------------------ Name:Andre Boulanger Title:Branch Manager Name: Dimitri Stroobants Title: Structure and Finance BANK OF TOKYO-MITSUBISHI TRUST COMPANY By:\s\Mark O'Connor ------------------------------------ Name:Mark O'Connor Title:Vice President UNION BANK OF CALIFORNIA, N.A. By:\s\J.William Bloore ------------------------------------ Name:J.William Bloore Title:Vice President BANCA DI ROMA-NEW YORK BRANCH By:\s\Alessandro Paoli,\s\S.F. Paley ------------------------------------ Name:Alessandro Paoli, S.F. Paley Title: Assistant Treasurer, Vice President CREDIT COMMUNAL DE BELGIQUE-NEW YORK BRANCH By:\s\Caroline Junius,Jan E. van Panhuys ------------------------------------ Name:Caroline Junius, Jan E. van Panhuys Title:Vice President, General Manager Schedule 2.01 Commitment Schedule Bank Commitment - ----------------------------------------------------------------------------- Morgan Guaranty Trust Company of New York $30,000,000 Bank of America, N.A. $27,500,000 Citibank, N.A. $27,500,000 Wachovia Bank, N.A. $27,500,000 The Bank of New York $20,500,000 Bank One, NA $20,500,000 BBL International (U.K.) Limited $20,500,000 Credit Agricole Indosuez $20,500,000 Deutsche Bank AG New York and/or Cayman $20,500,000 Islands Branch First Union National Bank $20,500,000 Fortis (USA) Finance LLC $20,500,000 The Industrial Bank of Japan, Limited $20,500,000 Cooperatieve Centrale Raiffeisen-Boerenleenbank $20,500,000 B.A., "Rabobank International", New York Branch SunTrust Bank, Atlanta $20,500,000 CoBank, ACB $19,000,000 The Dai-Ichi Kangyo Bank, Ltd. $19,000,000 The Fuji Bank, Limited $19,000,000 Banque Nationale de Paris, Houston Agency $19,000,000 Branch Banking & Trust Company $12,500,000 CIBC Inc. $12,500,000 Credit Commercial de France S.A. $12,500,000 79 Fleet National Bank $12,500,000 Paribas $12,500,000 Bank of Tokyo-Mitsubishi Trust Company $ 9,500,000 Union Bank of California, N.A. $ 9,500,000 Banca di Roma-New York Branch $12,500,000 Credit Communal de Belgique-New York Branch $12,500,000 - ----------------------------------------------------------------------------- Total: $500,000,000 - ----------------------------------------------------------------------------- 80 Schedule 3.06 Disclosed Matters Incorporated by reference are the relevant portions of the following documents for the Borrower and as of the Acquisition Date, the Target: Delhaize America, Inc. 1. Annual Report on Form 10-K for the fiscal year ended January 2, 1999 filed April 1, 1999, as amended by Amendment No. 1 to Annual Report on Form 10-K/A filed August 17, 1999. 2. Quarterly Report on Form 10-Q for the quarter ended September 11, 1999 filed October 26, 1999. 3. Quarterly Report on Form 10-Q for the quarter ended June 19, 1999 filed July 30, 1999, as amended by Amendment No. 1 to Quarterly Report on Form 10-Q/A filed August 17, 1999. 4. Quarterly Report on Form 10-Q for the quarter ended March 27, 1999 filed May 5, 1999, as amended by Amendment No. 1 to Quarterly Report on Form 10-Q/A filed August 17, 1999. 5. Current Report on Form 8-K filed September 17, 1999 6. Current Report on Form 8-K filed August 19, 1999. 7. Registration Statement on Form 8-A filed September 2, 1999, as amended by Amendment No. 1 to Registration Statement on Form 8-A/A filed September 3, 1999. Hannaford Bros. Co. 1. Annual Report on Form 10-K for the fiscal year ended January 2, 1999 filed March 11, 1999. 2. Quarterly Report on Form 10-Q for the quarter ended October 2, 1999 filed November 9, 1999. 3. Quarterly Report on Form 10-Q for the quarter ended July 3, 1999 filed August 11, 1999. 81 4. Quarterly Report on Form 10-Q for the quarter ended April 3, 1999 filed May 14, 1999. 5. Current Report on Form 8-K filed September 1, 1999. 6. Current Report on Form 8-K filed August 19, 1999. 7. Current Report on Form 8-K filed June 21, 1999. 8. Current Report on Form 8-K filed June 17, 1999. 82 Schedule 3.14 Subsidiaries of Borrower FLI Holding Corp., a Delaware corporation ("FLI"), and a wholly-owned subsidiary of the Borrower. Risk Management Services, Inc., a North Carolina corporation, and a wholly-owned subsidiary of the Borrower. FL Acquisition Sub., Inc., a Maine corporation, and a wholly-owned subsidiary of the Borrower. Kash n' Karry Food Stores, Inc., a Delaware corporation, and a wholly-owned subsidiary of FLI.1/ FL Food Lion, Inc., a Florida corporation, and a wholly-owned subsidiary of FLI. Barnwell, Inc., a Delaware corporation, and a wholly-owned subsidiary of FLI. - -------- 1 KNK 702 Delaware Business Trust, KNK 886 Delaware Business Trust, KNK 891 Delaware Business Trust, all Delaware business trusts, are wholly-owned by Kash n' Karry Food Stores, Inc. 83 Schedule 6.01 Existing Liens Liens representing the interest of the lessor under Capitalized Leases in existence on the date of this Agreement have an aggregate outstanding principal amount not exceeding $510,000,000. 84 EXHIBIT A FORM OF ASSIGNMENT AND ACCEPTANCE Reference is made to the Credit Agreement, dated as of January 26, 2000 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among DELHAIZE AMERICA, INC., the Lenders party therein, and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent (in such capacity, the "Administrative Agent"). Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. The Assignor identified on Schedule l hereto (the "Assignor") and the Assignee identified on Schedule l hereto (the "Assignee") agree as follows: i. The Assignor hereby irrevocably sells and assigns to the Assignee without recourse to the Assignor, and the Assignee hereby irrevocably purchases and assumes from the Assignor without recourse to the Assignor, as of the Effective Date (as defined below), the interest described in Schedule 1 hereto (the "Assigned Interest") in and to the Assignor's rights and obligations under the Credit Agreement, in a principal amount as set forth on Schedule 1 hereto. ii. The Assignor (a) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or any other instrument or document furnished pursuant thereto or with respect to the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto, other than that the Assignor has not created any adverse claim upon the interest being assigned by it hereunder and that such interest is free and clear of any such adverse claim; (b) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower, any of its Subsidiaries or any other obligor or the performance or observance by the Borrower, any of its Subsidiaries or any other obligor of any of their respective obligations under the Credit Agreement or any other instrument or document furnished pursuant hereto or thereto; and (c) attaches any promissory notes held by it evidencing the Assigned Interest and (i) requests that the Administrative Agent, upon request by the Assignee, exchange the attached promissory notes for a new promissory note or promissory notes payable to the Assignee and (ii) if the Assignor has retained any interest under the Credit Agreement, requests that the Administrative Agent exchange the attached promissory notes for a new 85 promissory note or promissory notes payable to the Assignor, in each case in amounts which reflect the assignment being made hereby (and after giving effect to any other assignments which have become effective on the Effective Date). iii. The Assignee (a) represents and warrants that it is legally authorized to enter into this Assignment and Acceptance; (b) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in Section 3.04 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (c) agrees that it will, independently and without reliance upon the Assignor, the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement or any other instrument or document furnished pursuant hereto or thereto; (d) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Credit Agreement or any other instrument or document furnished pursuant hereto or thereto as are delegated to the Administrative Agent by the terms thereof, together with such powers as are incidental thereto; and (e) agrees that it will be bound by the provisions of the Credit Agreement and will perform in accordance with its terms all the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender including, if it is organized under the laws of a jurisdiction outside the United States, its obligation pursuant to Section 2.15(e) of the Credit Agreement. iv. The effective date of this Assignment and Acceptance shall be the Effective Date of Assignment described in Schedule 1 hereto (the "Effective Date"). Following the execution of this Assignment and Acceptance, it will be delivered to the Administrative Agent for acceptance by it and recording by the Administrative Agent pursuant to the Credit Agreement, effective as of the Effective Date (which shall not, unless otherwise agreed to by the Administrative Agent, be earlier than five Business Days after the date of such acceptance and recording by the Administrative Agent). v. Upon such acceptance and recording, from and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to the Effective Date and to the Assignee for amounts which have accrued subsequent to the Effective Date. The Assignor and the Assignee shall make all appropriate adjustments in payments by the Administrative Agent for periods prior to the Effective Date or with respect to the making of this assignment directly between themselves. 86 vi. From and after the Effective Date, (a) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and shall be bound by the provisions thereof and (b) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement. vii. This Assignment and Acceptance shall be governed by and construed in accordance with the laws of the State of New York. IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Acceptance to be executed as of the date first above written by their respective duly authorized officers on Schedule 1 hereto. 87 Schedule 1 to Assignment and Acceptance Name of Assignor:__________________________ Name of Assignee:__________________________ Effective Date of Assignment:______________ Principal Amount Assigned Commitment Percentage Assigned(2) - ------------------- --------------------------------- $______ ___.______% [Name of Assignee] [Name of Assignor] By:_________________________________ By:_________________________________ Title: Title: Accepted: Consented To: MORGAN GUARANTY TRUST DELHAIZE AMERICA, INC., COMPANY OF NEW YORK, Borrower as Administrative Agent By:_________________________________ By:_________________________________ Title: Title: - ------------------ 2 Calculate the Commitment Percentage that is assigned to at least 15 decimal places and show as a percentage of the aggregate commitments of all Lenders. EXHIBIT B FORM OF OPINION OF COUNSEL OF BORROWER March ___, 2000 Morgan Guaranty Trust Company of New York as Administrative Agent 60 Wall Street New York, NY 10260 Each of the Lenders named on Annex A Dear Sirs: We have acted as counsel for Delhaize America, Inc., a North Carolina corporation (the "Borrower"), in connection with the Credit Agreement, dated as of January 26, 2000 (the "Credit Agreement"), among the Borrower, the Lenders party thereto (the "Lenders") and Morgan Guaranty Trust Company of New York ("MGT"), as Administrative Agent. The opinions expressed here are furnished to you pursuant to Subsection 4.02(f) of the Credit Agreement. Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given in the Credit Agreement. In connection with this opinion, we have examined originals, or copies certified or otherwise identified to our satisfaction, of the Credit Agreement, the certificate referred to in Subsection 4.02(g) of the Credit Agreement, and such corporate documents and records of the Borrower as we have deemed necessary or appropriate. As to questions of fact relevant to this opinion, we have, without independent investigation, relied upon representations made to us by the Borrower including the representations contained in the Loan Documents, and in various certificates delivered by the Borrower, including, but not limited to, certificates presented to the Lenders and the Administrative Agent, and certain representations of public officials, all of which we assume to be true. In our examination, we have assumed (i) the genuineness of all signatures of all parties other than signatures of the Borrower, (ii) the authenticity of all corporate records, agreements, documents, instruments and certificates submitted to us as originals, the conformity to original agreements, documents and instruments of all agreements and instruments submitted to us as conformed, certified or photostatic copies thereof and the authenticity of the originals of such conformed, certified or 2 photostatic copies; (iii) the due authorization, execution and delivery of all agreements, documents and instruments by all parties other than the Borrower; and (iv) the legal right and power of all such parties other than the Borrower under all applicable laws and regulations to enter into, execute and deliver such agreements, documents and instruments. We have further assumed that the Lenders and the Administrative Agent have the requisite power and authority to enter into the Loan Documents and to consummate the transactions contemplated thereby and the absence of any requirement of consent, approval or authorization by any Person or by any governmental body, agency or official with respect to the Lenders and the Administrative Agent and that the Loan Documents are legal, valid and binding obligations of the Lenders and the Administrative Agent enforceable against such Persons in accordance with their respective terms. This law firm is a registered limited liability partnership organized under the laws of the State of Texas. We express no opinion as to the laws of any jurisdiction other than the laws of the State of New York, the United States of America and The North Carolina Business Corporation Act. As to matters governed by the laws of the State of North Carolina, we are relying upon an opinion of Linn Evans, Esq. of even date herewith, a copy of which is attached hereto. The opinions expressed in paragraph 1(b) below are based solely upon our review of certain certificates of public officials of various jurisdictions and are not based upon any examination of the laws of any such jurisdiction. Upon the basis of the foregoing, we are of the opinion that: 1. The Borrower (a) is duly incorporated, validly existing and in good standing under the laws of North Carolina and has all requisite power and authority, to carry on its business as now conducted and (b) is qualified to do business in, and is in good standing in, each jurisdiction listed on Schedule I attached hereto. 2. The Transactions to be effected on the date hereof are each within the Borrower's corporate powers and have each been duly authorized by all necessary corporate and, if required, stockholder action. The Credit Agreement has been duly executed and delivered by the Borrower and constitutes a legal, valid and binding obligation of the Borrower. 3. To our knowledge, the Transactions to be effected on the date hereof (a) will not require any consent or approval of, registration or filing with, or any other action by, any Federal, New York or North Carolina Governmental Authority, except for consents, approvals, registrations, filings or other actions as have been obtained, made or waived and are in full force and effect or which are not required to have been effected prior to the date hereof, (b) will not violate any 3 applicable Federal, New York or North Carolina corporate law or regulations or the charter, bylaws or other organizational documents of the Borrower or any order of any Federal or New York Governmental Authority, (c) will not violate or result in a default under any indenture, agreement or other instrument binding upon the Borrower or its assets other than defaults or violations for which consents or waivers have been obtained or which defaults or violations, individually or in the aggregate, could not have a Material Adverse Effect, or (d) will not give rise under any indenture, agreement or other instrument binding upon the Borrower to any requirement for any payments be made by the Borrower, or (e) will not result in the creation or imposition of any Lien on any asset of the Borrower. 4. To our knowledge, there are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or threatened against the Borrower (i) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect (other than the Disclosed Matters) or (ii) that involve the Credit Agreement or the Transactions to be effected on the date hereof. 5. The Borrower is not (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. The foregoing opinions are subject to the exceptions, limitations and qualifications contained herein, including the following: A. The enforceability of the Loan Documents may be (a) limited by applicable bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent conveyance or transfer and other similar laws affecting creditors' rights, (b) subject to general principles of equity (regardless of whether considered in a proceeding in equity or at law), commercial reasonableness and good faith, and (c) limited by the power of courts to award damages in lieu of equitable remedies. In addition, the right to indemnification contained in the Loan Documents may be limited by Federal or New York state laws or the policies of such laws. B. We express no opinions as to enforceability of any provisions (i) purporting to vest jurisdiction on any property of the Borrower in the Supreme Court of the State of New York sitting in New York County or the United States District Court of the Southern District of New York to the extent that such property is not situated in New York, New York, (ii) purporting to waive or 4 restrict access to legal or equitable remedies (including venue, forum non conveniens or the right to assert a setoff) or the right to collect damages (including special, indirect, consequential or punitive damages), (iii) prohibiting oral amendments or waivers of provisions of the Loan Documents; (iv) establishing evidentiary standards or (v) permitting a Lender to set off against any debtor's accounts any amounts belonging to a third party or otherwise held in a fiduciary capacity. C. When used in this opinion, the phrase "to our knowledge" means known to attorneys in our firm who have rendered services to the Borrower in connection with the Transactions. This opinion is as of the date hereof, and we undertake no, and hereby disclaim any, obligation to advise you of any change in any matter set forth herein, whether based on a change in the law, a change in any fact relating to the Borrower or any other Person or any other circumstance. This opinion is delivered to you in connection with the transactions referenced above and may be relied upon only by you and any permitted assignee of an assigning Lender or Participant under the Credit Agreement in connection with such transaction and may not be relied upon in any manner or for any purpose by any other person without our prior written consent. Very truly yours, 5 SCHEDULE I Delaware Certificate of the Secretary of State of the State of Delaware dated ____________ ___, 2000 Florida Certificate of the Secretary of State of the State of Florida dated ____________ ___, 2000 Georgia Certificate of Existence of the Secretary of State of the State of Georgia dated ____________ ___, 2000 Kentucky Certificate of Authorization of the Secretary of State of the Commonwealth of Kentucky dated ____________ ___, 2000 Maryland Certificate of the State Department of Assessments and Taxation of the State of North Carolina dated ____________ ___, 2000 North Carolina Articles of Incorporation of Food Lion, Inc., certified by the Secretary of State of the State of North Carolina dated ____________ ___, 2000 Certificate of Existence of the Secretary of State of the State of North Carolina dated ____________ ___, 2000 Pennsylvania Certificate of the Secretary of the Department of State of the Commonwealth of Pennsylvania dated ____________ ___, 2000 South Carolina Certificate of Authorization of the Secretary of the State of South Carolina dated ____________ ___, 2000 Tennessee Certificate of Authorization of the Secretary of State of the State of Tennessee dated ____________ ___, 2000 Virginia Certificate of Authority of the State Corporate Commission of the Commonwealth of Virginia dated ____________ ___, 2000 West Virginia Certificate of Authority of the Secretary of the State of West Virginia dated ____________ ___, 2000 Certificate of Good Standing of the Secretary of State of the State of West Virginia dated ____________ ___, 2000 6 ANNEX A LENDER Morgan Guaranty Trust Company of New York Bank of America, N.A. Citibank, N.A. Wachovia Bank, N.A. The Bank of New York Bank One, NA BBL International (U.K.) Limited Credit Agricole Indosuez Deutsche Bank AG New York and/or Cayman Islands Branch First Union National Bank Fortis (USA) Finance LLC The Industrial Bank of Japan, Limited Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank International", New York Branch SunTrust Bank, Atlanta CoBank, ACB The Dai-Ichi Kangyo Bank, Ltd. The Fuji Bank, Limited Banque Nationale de Paris, Houston Agency Branch Banking & Trust Company CIBC Inc. Credit Commercial de France S.A. Fleet National Bank Paribas Bank of Tokyo-Mitsubishi Trust Company Union Bank of California, N.A. Banca di Roma-New York Branch Credit Communal de Belgique-New York Branch 7 EX-13 5 Exhibit 13 Portions of the Annual Report to Shareholders for the fiscal year ended January 1, 2000 Ten Year Summary of Operations (Dollars in thousands except per share amounts) 1999 1998 1997 (52 weeks) (52 weeks) (53 weeks) Financial Data: 1. Net sales $ 10,878,684 10,219,474 10,194,385 2. Same store sales percent change % 1.82 2.57 0.22 3. Cost of goods sold $ 8,370,894 7,925,844 7,975,659 4. Selling and administrative expenses $ 1,919,396 1,770,314 1,736,559 5. Asset impairment reserve $ 0 0 0 6. Store closing $ 0 0 84,402 charge/(income) 7. Operating income $ 588,394 523,316 397,765 8. Depreciation and $ 258,512 236,021 219,833 amortization 9. Interest expense $ 103,820 95,334 115,389 10. Income before income taxes $ 484,574 427,982 282,376 11. Net income $ 300,435 272,585 172,250 12. Current assets $ 1,676,227 1,512,277 1,328,511 13. Non-current assets $ 2,297,185 2,163,684 2,167,625 14. Total assets $ 3,973,412 3,675,961 3,496,136 15. Current liabilities $ 1,280,193 1,040,417 960,788 16. Long-term debt $ 426,930 429,763 586,355 17. Capital lease obligations, deferred taxes and other liabilities $ 587,423 606,859 615,808 18. Shareholders' equity $ 1,678,866 1,598,922 1,333,185 19. Cash dividends Class A $ 41,045 36,832 31,825 Class B $ 37,949 34,439 30,923 20. Weighted average shares outstanding (000) 157,109 159,361 156,305 21. Basic earnings per share(a) $ 1.91 1.71 1.10 22. Dividends per share (a) $ .503 .447 .401 23. Book value per share (a) $ 10.69 10.03 8.53 24. Asset turnover X 2.84 2.85 2.88 25. Return on sales % 2.76 2.67 1.69 26. Return on assets % 7.86 7.60 4.86 27. Total debt/ total capital % 42.38 39.59 46.94 28. Return on equity % 18.33 18.59 13.47 29. Return on investment % 19.56 18.64 15.81 30. Current ratio X 1.31 1.45 1.38 Other Data: 31. Store count 1,276 1,207 1,157 32. Stores opened/acquired 100 79 164 33. Stores relocated (21) (17) (25) 34. Stores closed (10) (12) (94) 35. Total retail square footage (000) 43,020 38,887 36,107 36. Capital expenditures $ 410,888 356,058 346,134 37. Number of employees 93,668 92,125 83,871 38. Recapitalization and stock splits 1 for 3 -20- Ten Year Summary of Operations (Dollars in thousands except per share amounts) 1996 1995 1994 (52 (52 (52 weeks) weeks) weeks) Financial Data: 1. Net sales $ 9,005,932 8,210,884 7,932,592 2. Same store sales percent change % 5.70 2.33 3.34 3. Cost of goods sold $ 7,087,177 6,516,637 6,323,693 4. Selling and administrative expenses $ 1,490,878 1,337,702 1,269,637 5. Asset impairment reserve $ 22,187 0 0 6. Store closing $ (27,600) 0 0 charge/(income) 7. Operating income $ 433,290 356,545 339,262 8. Depreciation and $ 165,286 146,170 139,834 amortization 9. Interest expense $ 80,520 73,484 86,564 10. Income before income taxes $ 352,770 283,061 252,698 11. Net income $ 215,220 172,361 152,898 12. Current assets $ 1,539,039 1,149,235 1,125,471 13. Non-current assets $ 2,052,496 1,496,030 1,356,470 14. Total assets $ 3,591,535 2,645,265 2,481,941 15. Current liabilities $ 1,248,028 698,695 690,062 16. Long-term debt $ 495,111 355,300 355,300 17. Capital lease obligations, deferred taxes and other liabilities $ 623,308 488,760 409,226 18. Shareholders' Equity $ 1,225,088 1,102,510 1,027,353 19. Cash dividends Class A $ 26,436 23,621 22,021 Class B $ 25,874 22,672 21,131 20. Weighted average shares outstanding (000) 156,739 160,385 161,236 21. Basic earnings per share(a) $ 1.37 1.07 .95 22. Dividends per share (a) $ .334 .0289 .0268 23. Book value per share (a) $ 7.82 6.87 6.37 24. Asset turnover X 2.89 3.20 3.18 25. Return on sales % 2.39 2.10 1.93 26. Return on assets % 6.90 6.72 6.13 27. Total debt/total capital % 50.24 40.26 40.16 28. Return on equity % 18.49 16.18 15.72 29. Return on investment % 18.61 17.31 16.69 30. Current ratio X 1.23 1.64 1.63 Other Data: 31. Store count 1,112 1,073 1,039 32. Stores opened/acquired 64 47 30 33. Stores relocated (22) (12) (3) 34. Stores closed (3) (1) (84) 35. Total retail square footage (000) 32,615 30,056 27,335 36. Capital expenditures $ 283,564 219,905 117,312 37. Number of employees 73,170 69,345 64,840 38. Recapitalization and stock splits -21- Ten Year Summary of Operations (Dollars in thousands except per share amounts) 1993 1992 1991 (52 (53 (52 weeks) weeks) weeks) Financial Data: 1. Net sales $ 7,609,817 7,195,923 6,438,507 2. Same store sales percent change % (2.58) (0.42) 2.68 3. Cost of goods sold $ 6,121,274 5,759,534 5,102,977 4. Selling and administrative expenses $ 1,239,348 1,096,727 960,423 5. Asset impairment reserve $ 0 0 0 6. Store closing $ 170,500 0 0 charge/(income) 7. Operating income $ 78,695 339,662 375,107 8. Depreciation and $ 143,042 121,616 104,614 amortization 9. Interest expense $ 72,343 49,057 34,436 10. Income before income taxes $ 6,352 290,605 340,671 11. Net income $ 3,852 178,005 205,171 12. Current assets $ 1,135,200 1,147,849 982,112 13. Non-current assets $ 1,368,483 1,373,643 1,037,180 14. Total assets $ 2,503,683 2,521,492 2,019,292 15. Current liabilities $ 619,271 986,274 676,768 16. Long-term debt $ 569,350 240,537 240,810 17. Capital lease obligations, deferred taxes and other liabilities $ 397,508 338,962 270,659 18. Shareholders' Equity $ 917,554 955,719 831,055 19. Cash dividends Class A $ 21,483 27,355 24,393 Class B $ 20,603 26,457 23,638 20. Weighted average shares outstanding (000) 161,234 161,221 161,172 21. Basic earnings per share $ .02 1.10 1.27 (a) 22. Dividends per share (a) $ .261 .334 .298 23. Book value per share (a) $ 5.69 5.93 5.16 24. Asset turnover X 3.03 3.17 3.58 25. Return on sales % .05 2.47 3.19 26. Return on assets % .15 7.84 11.40 27. Total debt / total capital % 49.19 49.89 40.41 28. Return on equity % .41 19.92 27.28 29. Return on investment % 5.68 20.02 26.09 30. Current ratio X 1.83 1.16 1.45 Other Data: 31. Store count 1,096 1,012 881 32. Stores opened/acquired 100 140 111 33. Stores relocated (4) (4) (6) 34. Stores closed (12) (5) (2) 35. Total retail square footage (000) 28,950 26,428 22,480 36. Capital expenditures $ 159,857 402,327 305,879 37. Number of employees 65,494 59,721 53,583 38. Recapitalization and 3 for 2 stock splits -21- Ten Year Summary of Operations (Dollars in thousands except per share amounts) 1990 (52 weeks) Financial Data: 1. Net sales $ 5,584,410 2. Same store sales percent change % 4.50 3. Cost of goods sold $ 4,447,177 4. Selling and administrative expenses $ 820,175 5. Asset impairment reserve $ 0 6. Store closing $ 0 charge/(income) 7. Operating income $ 317,058 8. Depreciation and $ 81,432 amortization 9. Interest expense $ 32,587 10. Income before income taxes $ 284,471 11. Net income $ 172,571 12. Current assets $ 787,869 13. Non-current assets $ 791,996 14. Total assets $ 1,579,865 15. Current liabilities $ 597,392 16. Long-term debt $ 91,721 17. Capital lease obligations, deferred taxes and other liabilities $ 217,694 18. Shareholders' Equity $ 673,058 19. Cash dividends Class A $ 21,926 Class B $ 21,082 20. Weighted average shares outstanding (000) 161,070 21. Basic earnings per share(a) $ 1.07 22. Dividends per share (a) $ .267 23. Book value per share (a) $ 4.18 24. Asset turnover X 3.90 25. Return on sales % 3.09 26. Return on assets % 12.06 27. Total debt/ total capital % 36.06 28. Return on equity % 28.49 29. Return on investment % 29.33 30. Current ratio X 1.32 Other Data: 31. Store count 778 32. Stores opened/acquired 121 33. Stores relocated (5) 34. Stores closed (1) 35. Total retail square footage (000) 19,424 36. Capital expenditures $ 206,391 37. Number of employees 47,276 38. Recapitalization and stock splits -21- Notes to Ten Year Summary of Operations (a) Amounts are based upon the weighted average number of the Class A and Class B common shares outstanding. DEFINITIONS Line 20. Weighted average shares outstanding: Weighted average shares outstanding have been restated to reflect the reverse stock split in 1999 and the stock split in 1992. 21. Basic earnings per share: Net income per common share (line 11 , line 20). 22. Dividends per share: Cash dividends per common share (line 19 , line 20). 23. Book value per share: Book value of shareholders' equity per common share (line 18 , line 20). 24. Asset turnover: The ratio of sales per dollar of assets employed during the year. It is calculated by dividing sales by the average total assets (line 1 , average line 14). 25. Return on sales: The percentage of net income earned on each dollar of sales (line 11 , line 1). 26. Return on assets: The percentage of net income earned on average total assets (line 11 , average line 14). 27. Total debt/ total capital: The percentage of debt to shareholders' equity. It is calculated by dividing long-term debt and capital lease obligations by debt and shareholders' equity. 28. Return on equity: The percentage of net income earned on average shareholders' equity (line 11 , average line 18). 29. Return on investment: The percentage of net income, excluding interest expense, to invested capital ([line 11 + line 9] , [average line 16 + average line 18]). 30. Current ratio: The ratio of current assets to current liabilities (line 12 , line 15). 31. Store count: Number of stores operating at year-end. 37. Number of employees: Number of full-time and part-time employees at year-end. -21- Consolidated Statements of Income Year Ended Year Ended Year Ended (Dollars in thousands January 1, January 2, January 3, except per share 2000 2000 2000 amounts) Net sales $10,878,684 $10,219,474 $10,194,385 Cost of goods sold 8,370,894 7,925,844 7,975,659 Selling and administrative expenses 1,919,396 1,770,314 1,736,559 Store closing charge - - 84,402 Operating income 588,394 523,316 397,765 Interest expense 103,820 95,334 115,389 Income before income taxes 484,574 427,982 282,376 Provision for income taxes 184,139 155,397 110,126 Net income $300,435 $272,585 $172,250 Earnings per share: Basic $1.91 $1.71 $1.10 Diluted $1.91 $1.71 $1.09 (Results as a percentage of net sales) Net sales 100.00% 100.00% 100.00% Cost of goods sold 76.95 77.56 78.24 Selling and administrative expenses 17.65 17.32 17.04 Store closing charge - - .82 Operating income 5.40 5.12 3.90 Interest expense 0.95 0.93 1.13 Income before income taxes 4.45 4.19 2.77 Provision for income taxes 1.69 1.52 1.08 Net income 2.76% 2.67% 1.69% The accompanying notes are an integral part of the consolidated financial statements. -22- Consolidated Balance Sheets (Dollars in thousands January January except per share amounts) 1, 2000 2, 1999 Assets Current assets: Cash and cash equivalents $ 195,502 123,592 Receivables 235,457 199,101 Inventories 1,157,695 1,103,635 Prepaid expenses 31,962 20,552 Deferred tax asset 55,611 65,397 Total current assets 1,676,227 1,512,277 Property, at cost, less accumulated depreciation 2,039,314 1,897,080 Deferred tax asset - 4,707 Intangible assets less accumulated 254,276 258,402 amortization Other assets 3,595 3,495 Total asset $3,973,412 $3,675,961 Liabilities and Shareholders' Equity Current liabilities: Short-term borrowings $ 302,000 $ 61,000 Accounts payable 569,592 545,015 Accrued expenses 369,230 360,105 Capital lease obligations - current 23,877 21,940 Long term debt - current 2,834 42,518 Other liabilities - current 12,660 9,839 Total current liabilities 1,280,193 1,040,417 Long-term debt 426,930 429,763 Capital lease obligations 478,942 492,660 Deferred income taxes 7,421 - Other liabilities 101,060 114,199 Total liabilities 2,294,546 2,077,039 Shareholders' equity: Class A non-voting common stock, $.50 par value; authorized 1,500,000,000 shares; issued and outstanding 79,931,000 shares at January 1, 2000 and 82,631,000 shares at January 2, 1999 39,965 123,946 Class B voting common stock, $.50 par value; authorized 1,500,000,000 shares; issued and outstanding 75,290,000 shares at January 1, 2000 and 76,943,333 shares at January 2, 1999 37,645 115,415 Additional capital 155,280 60,332 Retained earnings 1,445,976 1,299,229 Total shareholders' equity 1,678,866 1,598,922 Total liabilities and shareholders'equity $3,973,412 $3,675,961 The accompanying notes are an integral part of the consolidated financial statements. -23- Consolidated Statements of Cash Flows January January 1, 2000 2, 1999 (Dollars in thousands) Cash flows from operating activities Net income $ 300,435 $ 272,585 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 258,512 236,021 (Gain)loss on disposals of property (2,819) (8,953) Store closing charge - - Deferred income taxes 30,116 44,999 Changes in operating assets and liabilities: Receivables (36,356) (32,311) Inventories (54,060) (120,891) Prepaid expenses (11,410) 1,962 Other assets (100) 2,225 Accounts payable and accrued 33,702 56,040 expenses Income taxes payable - - Other liabilities (10,318) (10,598) Total adjustments 207,267 168,494 Net cash provided by operating activities 507,702 441,079 Cash flows from investing activities Capital expenditures (410,888) (356,058) Proceeds from sale of property 19,622 109,850 Net cash used in investing activities (391,266) (246,208) Cash flows from financing activities Net proceeds(payments) under short-term borrowings 241,000 (19,000) Principal payments on long-term debt (42,517) (6,154) Proceeds from issuance of long- - - term debt Principal payments under capital lease obligations (22,518) (22,172) Dividends paid (78,994) (71,271) Repurchase of common stock (142,694) (50,192) Net proceeds from issuance of common stock 1,197 4,170 Net cash used in financing activities (44,526) (164,619) Net increase (decrease) in cash and cash equivalents 71,910 30,252 Cash and cash equivalents at beginning of year 123,592 93,340 Cash and cash equivalents at end of year $ 195,502 $ 123,592 The accompanying notes are an integral part of the consolidated financial statements -24- Consolidated Statements of Cash Flows January 3, 1998 (Dollars in thousands) Cash flows from operating activities Net income $ 172,250 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 219,833 (Gain)loss on disposals of property 964 Store closing charge 84,402 Deferred income taxes (36,527) Changes in operating assets and liabilities: Receivables (15,627) Inventories 82,999 Prepaid expenses 8,377 Other assets (2,951) Accounts payable and accrued expenses (116,816) Income taxes payable (5,578) Other liabilities (36,416) Total adjustments 182,660 Net cash provided by operating activities 354,910 Cash flows from investing activities Capital expenditures (346,134) Proceeds from sale of property 32,572 Net cash used in investing activities (313,562) Cash flows from financing activities Net (payments)proceeds under short-term borrowings (170,010) Principal payments on long-term debt (212,027) Proceeds from issuance of long- term debt 304,823 Principal payments under capital lease obligations (22,076) Dividends paid (62,748) Repurchase of common stock (2,960) Proceeds from issuance of common stock 1,555 Net cash used in financing activities (163,443) Net increase (decrease) in cash and cash equivalents (122,095) Cash and cash equivalents at beginning of year 215,435 Cash and cash equivalents at end of year $ 93,340 The accompanying notes are an integral part of the consolidated financial statements -24- Consolidated Statements of Shareholders' Equity Class A Class B (Dollars and shares in Common Common thousands except per share Stock Stock amounts) Shares Shares Amount Shares Amount Balances December 28, 1996 236,166 $118,083 232,902 $116,451 Cash dividends declared: Class A - $.4044 per share Class B - $.3984 per share Sale of stock 293 147 Repurchase of common stock (235) (118) (175) (87) Net income Balances January 3, 1998 236,224 118,112 232,727 116,364 Cash dividends declared: Class A - $.4500 per share Class B - $.4440 per share Sale of stock 746 373 Repurchase of common stock (3,086) (1,543) (1,897) (949) Restricted shares 29 14 Converted debt 13,980 6,990 Net income Balances January 2, 1999 247,893 123,946 230,830 115,415 Cash dividends declared: Class A - $.5040 per share Class B - $.4980 per share Sale of stock 158 79 Repurchase of common stock (8,279) (4,140) (4,908) (2,454) Restricted shares 84 42 Reverse split (159,925) (79,962) (150,632) (75,316) Net income Balances January 1, 2000 79,931 $39,965 75,290 $37,645 The accompanying notes are an integral part of the consolidated financial statements -25- Additional Retained Total Capital Earnings Balances December 28, 1996 $, 1,708 $988,846 $1,225,088 Cash dividends declared: Class A - $.4044 per share (31,825) (31,825) Class B - $.3984 per share (30,923) (30,923) Sale of stock 1,408 1,555 Repurchase of common stock (2,322) (433) (2,960) Net income 172,250 172,250 Balances January 3, 1998 794 1,097,915 1,333,185 Cash dividends declared: Class A - $.4500 per share (36,832) (36,832) Class B - $.4440 per share (34,439) (34,439) Sale of stock 3,585 3,958 Repurchase of common stock (47,700) (50,192) Restricted shares 198 212 Converted debt 103,455 110,445 Net income 272,585 272,585 Balances January 2, 1999 60,332 1,299,229 1,598,922 Cash dividends declared: Class A - $.5040 per share (41,045) (41,045) Class B - $.4980 per share (37,949) (37,949) Sale of stock 1,137 1,216 Repurchase of common stock (62,026) (74,074) (142,694) Restricted shares 578 620 Reverse split 155,259 (620) (639) Net income 300,435 300,435 Balances January 1, 2000 $155,280 $1,445,976 $1,678,866 -25- Notes to Consolidated Financial Statements 1. Summary of Significant Accounting Policies Nature of Operations As of January 1, 2000, the Company operated 1,276 retail food supermarkets and eight distribution centers in 11 states in the Southeast and Mid-Atlantic United States. The Company's stores, which are operated under the names of "Food Lion," "Kash n' Karry" and "Save `n Pack," sell a wide variety of groceries, produce, meats, dairy products, seafood, frozen foods, deli/bakery and non-food items, such as health and beauty care, prescriptions, and other household and personal products. Principles of Consolidation On September 7, 1999, the shareholders of the Company approved a holding company structure. Delhaize America, Inc., the holding company, will serve as the consolidating entity for all of the Company's supermarket chains, currently including stores carrying the Food Lion, Kash n' Karry and Save `n Pack banners. The consolidated financial statements include the accounts of Delhaize America, Inc. and its wholly-owned subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation. Operating Segment The Company engages in one line of business, the operation of general food supermarkets. Fiscal Year The Company's fiscal year ends on the Saturday nearest to December 31. The years ended January 1, 2000 and January 2, 1999 each included 52 weeks. The year ended January 3, 1998 included 53 weeks. The 1999 disclosed amounts represent the year ended January 1, 2000. Use of Estimates in Financial Statements 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 disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents The Company considers all highly liquid investment instruments purchased with an original maturity of three months or less to be cash equivalents. Inventories Inventories are stated at the lower of cost or market. Inventories valued using the last-in, first out (LIFO) method comprised approximately 83% and 87% of inventories, in 1999 and 1998, respectively. Meat, produce and deli inventories are valued on the first-in, first-out (FIFO) method. If the FIFO method were used entirely, inventories would have been $142.9 million and $139.1 million greater in 1999 and 1998, respectively. Application of the LIFO method resulted in increases in the cost of goods sold of $3.8, $24.7 and $10.0 million for 1999, 1998 and 1997, respectively. -26- Statements of Cash Flows Selected cash payments and non-cash activities were as follows: (Dollars in thousands) 1999 1998 1997 Cash payments for income taxes $175,816 $127,352 $158,543 Cash payments for interest, net of amounts capitalized 103,717 103,820 108,743 Non-cash investing and financing activities: Capitalized lease obligations incurred for store properties and equipment 43,173 62,608 80,207 Capitalized lease obligations terminated for store properties and equipment 32,436 36,191 38,781 Conversion of long term debt to - 110,445 - stock Deferred tax asset(see Note 4) 8,202 - - Property Property is stated at historical cost and depreciated on a straight-line basis over the estimated service lives of assets, generally as follows: Buildings 40 years Furniture, fixtures and equipment 3 - 14 years Leasehold improvements 8 years Vehicles 7 - 10 years Property under capital leases Lease term In conjunction with the Company's compliance with Financial Accounting Standards Board Statement No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" (FAS No. 121), the Company reviews the value of all long-lived assets by store location whenever events or changes in business circumstances indicate the carrying value of the assets may not be recoverable. Intangible Assets Intangible assets primarily include goodwill, tradenames and favorable leasehold interests, all of which have been acquired in conjunction with acquisitions accounted for under the purchase method of accounting. Intangible assets are amortized on a straight-line basis over the estimated useful lives ranging from three to 40 years. The Company evaluates the period of amortization for intangible assets, on an ongoing basis, to determine whether current circumstances warrant revised estimates of useful lives. In addition, the Company evaluates, on an ongoing basis, the carrying value of intangible assets based on projections of undiscounted cash flows. If impairment is identified, the Company compares the asset's future discounted cash flows to its current carrying value and records specific provisions as appropriate. Deferred Income Taxes Deferred tax liabilities or assets are established for temporary differences between financial and tax reporting bases and are subsequently adjusted to reflect changes in tax rates expected to be in effect when the temporary differences reverse. Revenue Recognition Revenues from the sale of products are recognized at the point of sale to the Company's customers. Cost of Goods Sold Purchases are recorded net of cash discounts and other supplier discounts. Cost of goods sold includes warehousing and distribution costs. -26- Advertising Costs Advertising costs are expensed as incurred. The Company recorded advertising expense of $67.3 million in 1999, $67.0 million in 1998 and $72.0 million in 1997. Capitalized Interest The Company capitalizes interest costs incurred to bring certain assets to their intended use. Store Opening Costs Costs associated with the opening of new stores are expensed as incurred. Store Closing Costs When a decision is made to close a store, the Company records a charge to cover the estimated costs of the planned store closing, including (1) the unrecoverable portion of the present value of the remaining lease payments on leased stores (recorded in Other Liabilities on the Company's Consolidated Balance Sheet), (2) the write down of store assets (building, equipment, etc.) to reflect estimated realizable values (recorded as a reduction of the recorded asset cost on the Company's Consolidated Balance Sheet), and (3) other costs associated with the store closing (recorded in Accrued Expenses on the Company's Consolidated Balance Sheet). The Company intends to close stores within a year after the decision to close is made. Recoverable and realizable values are determined based on historical disposition of similar assets and current economic conditions, and are reviewed as new information becomes available or economic conditions change. The Company makes adjustments to the valuation reserves as needed. At the store closing date, the Company discontinues depreciation on all assets related to closed store properties. Disposition efforts on these assets begin immediately following the store closing. Significant cash outflows associated with store closings relate to ongoing rent payments on leased stores. The principal portion of the rent payments is charged against the lease liability established for closed stores (discussed above), while the interest portion of the rent payments is recorded against current year earnings in interest expense. Self Insurance The Company is self-insured for workers' compensation, general liability and vehicle accident claims. The self-insurance liability is determined actuarially, based on claims filed and an estimate of claims incurred but not yet reported. Maximum self-insured retention, including defense costs per occurrence, is $500,000 for workers' compensation, automobile liability and general liability. The Company is insured for covered costs, including defense costs, in excess of these limits. Self insurance expense related to the above totaled $32.0 million in 1999, $34.2 million in 1998, and $32.9 million in 1997. Total claim payments were $32.9 million in 1999, $31.2 million in 1998, and $30.3 million in 1997. Earnings Per Share Basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding (157,109,000 shares in 1999, 159,361,000 shares in 1998 and 156,305,000 shares in 1997). Diluted earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding and the weighted average number of potential common shares outstanding. The common stock equivalents that were added to the weighted average shares outstanding for purposes of diluted EPS were 188,000, 346,000 and 246,000 for outstanding stock options in 1999, 1998 -26- and 1997, respectively. Additionally, common stock equivalents in 1997 included 4,813,000 shares issuable upon conversion of 5% convertible subordinated debentures due 2003. During the second quarter of 1998, the Company's convertible subordinated debentures were redeemed. Fair Value of Financial Instruments Generally accepted accounting principles require the disclosure of the fair value of certain financial instruments where estimates of fair value are practicable. Significant judgment is required to develop estimates of fair value. Estimates presented are not necessarily indicative of the amounts that the Company could realize in a current market exchange. Fair values stated are as of year-end and may differ significantly from current estimates. Cash and cash equivalents: The carrying amount of these items approximates fair value. Long-term debt: At January 1, 2000 and January 2, 1999, the Company estimated that the fair value of its long-term debt was approximately $413.6 million and $522.0 million, respectively. The fair value of the Company's long-term debt is estimated based on the current rates offered to the Company for debt with the same remaining maturities. Off-balance sheet instruments: The fair value of "Treasury Lock" agreements is estimated using the present value of the difference between the locked Treasury yield and the forward Treasury yield. At January 1, 2000, the net unrealized gain on such agreements was $7.2 million. Reclassification Certain financial statement items have been reclassified to conform to the current year's format. Recently Issued Accounting Standards In June of 1998, the FASB issued FAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which requires entities to report all derivatives at fair value as assets or liabilities in their statements of financial position. This pronouncement will be effective in fiscal 2001. The Company has not yet determined the impact of this pronouncement. 2. Acquisition On August 17, 1999, the Company entered into a definitive merger agreement to acquire all the outstanding shares of Hannaford Bros. Co. in a cash and stock transaction valued at approximately $3.6 billion, including the assumption of debt. The aggregate cash consideration is expected to be approximately $2.7 billion and the balance of the total consideration will be paid in Class A common stock based on the closing price of such stock for the 10 trading days prior to the closing of the acquisition, subject to certain limitations. Delhaize America will also assume approximately $300 million of Hannaford debt. The Company expects to finalize the acquisition in fiscal 2000. Upon completion of the acquisition, Hannaford will operate as a subsidiary of Delhaize America. The acquisition will be accounted for as a purchase transaction. -27- 3. Property Property consists of the following: 1999 1998 (Dollars in thousands) Land and improvements $107,811 $103,820 Buildings 395,168 377,736 Furniture, fixtures and equipment 1,484,643 1,343,514 Vehicles 98,863 100,370 Leasehold improvements 602,105 478,848 Construction in progress 57,307 44,895 2,745,897 2,449,183 Less accumulated depreciation 1,149,260 1,012,193 1,596,637 1,436,990 Property under capital leases 588,038 584,931 Less accumulated depreciation 145,361 124,841 442,677 460,090 $2,039,314 $1,897,080 Depreciation expense totaled $248,895, $226,030 and $209,703 for 1999, 1998 and 1997, respectively. At January 1, 2000 and January 2, 1999, the Company had $18.6 million and $21.0 million (net book value), respectively, in property held for sale. 4. Intangible Asset Intangible assets is comprised of the following: (Dollars in thousands) 1999 1998 Goodwill $207,901 $203,286 Tradenames 58,000 58,000 Leasehold interests 17,750 18,438 283,651 279,724 Less accumulated amortization 29,375 21,322 $254,276 $258,402 During 1999, Goodwill increased by $14.4 million related to the acquisition of individual stores during the year and was partially offset by a decrease of $8.2 million from the reversal of a valuation allowance established at the time of the Kash n' Karry acquisition in 1996. The valuation allowance was originally established to reflect the uncertainty associated with full utilization of the acquired Kash n' Karry tax loss carryforwards. Due to the issuance of revised Treasury Regulations in 1999, the allowance is no longer necessary as the tax loss carryforwards are expected to be fully utilized in the future. 5. Accrued Expenses Accrued expenses consist of the following: (Dollars in thousands) 1999 1998 Employee benefit plan $114,875 $100,647 Self insurance 73,540 76,207 Payroll 75,061 66,887 Other 105,754 116,364 $369,230 $360,105 -27- 6. Employee Benefit Plan The Company has a non-contributory retirement plan covering all employees with one or more years of service. Employees' benefits under the plan become vested after five years of consecutive service. Forfeitures of the plan are treated as contributions and are allocated to the remaining participants at year end. The plan provides benefits to participants upon death, retirement or termination of employment with the Company. Contributions to the retirement plan are determined by the Company's Board of Directors. Expense related to the plan totaled $108.8 million in 1999, $94.9 million in 1998 and $97.8 million in 1997. 7. Long-Term Debt Long-term debt consists of the following: (Dollars in thousands) 1999 1998 Medium-term notes, due from 2000 to 2006. Interest ranges from 8.40% to 8.73%. $123,300 $150,300 Debt securities, 7.55%, due 2007. 150,000 150,000 Debt securities, 8.05%, due 2027. 150,000 150,000 Mortgage payables due from 2000 through 2011. Interest ranges from 7.50% to 9.30%. 5,148 19,029 Other 1,316 2,952 429,764 472,281 Less current portion 2,834 42,518 $426,930 $429,763 At January 1, 2000, $10.7 million (net book value) in property was pledged as collateral for mortgage payables. Approximate maturities of long-term debt in the years 2000 through 2004 are $2.8, $106.3, $1.6, $11.0 and $.1 million, respectively. The Company entered into "Treasury Lock" agreements to hedge against a potential increase in interest rates on future bond issues related to the announced acquisition of Hannaford Bros. Co.(see Note 2). The notional amount of the agreements totals $1.75 billion. At January 1, 2000, the unrealized gain related to these agreements was $7.2 million. The differential to be paid or received will be recognized as an adjustment to interest expense over the life of the underlying debt. The Company is subject to risk of nonperformance by the counterparties to the agreement. The Company does not anticipate nonperformance by the counterparties, who are major U.S. financial institutions. The Company believes that market risk associated with changes in interest rates should not be significant. -28- 8. Credit Arrangements The Company maintains a revolving credit facility with a syndicate of commercial banks providing $500.0 million in committed lines of credit, which will expire on November 17, 2000. These lines replaced the previous $625.0 million revolving credit facility. There was $205.0 million outstanding at January 1, 2000 at a weighted average interest rate of 7.75%. The Company had average borrowings of $81.2 million at a daily weighted average interest rate of 7.53% during 1999. There were no borrowings outstanding at January 2, 1999. Additionally, the Company had other committed short-term lines of credit with banks totaling $20.0 million, of which the full amount was outstanding at both January 1, 2000 and January 2, 1999. During 1999, the Company had average borrowings of $8.3 million at a daily weighted average interest rate of 5.33% with a maximum amount outstanding of $20.0 million. In addition, the Company has periodic short-term borrowings under other informal arrangements. Outstanding borrowings under these arrangements were $77.0 million at January 1, 2000 at an average interest rate of 6.37% and $41.0 million at January 2, 1999 at an average interest rate of 5.64%. The Company has a $250.0 million commercial paper program. No borrowings were outstanding during the years ended January 1, 2000 and January 2, 1999. 9. Leases The Company's stores operate principally in leased premises. Lease terms for open stores generally range from 10 to 20 years with renewal options ranging from five to 20 years. The average remaining lease term for closed stores is 8.6 years. The following schedule shows, as of January 1, 2000, the future minimum lease payments under capital and operating leases. Captial Leases Operating Leases (Dollars in thousands) Open Closed Stores Stores 2000 $82,899 $172,505 $21,166 2001 82,352 171,747 20,709 2002 82,265 170,734 20,569 2003 82,003 168,616 19,175 2004 81,364 165,677 17,345 Thereafter 770,019 1,533,911 109,898 Total minimum payments 1,180,902 $2,383,190 $208,862 Less estimated executory costs 50,096 Net minimum lease payments 1,130,806 Less amount representing interest 627,987 Present value of net minimum lease payments $ 502,819 -28- Minimum payments have not been reduced by minimum sublease income of $38.1 million due over the term of non-cancelable subleases. Total rent payments (net of sublease income) under operating leases for open and closed stores are as follows: (Dollars in 1999 1998 1997 thousands) Minimum rents $169,954 $172,481 $133,786 Contingent rents, based on sales 101 255 371 $170,055 $172,736 $134,157 In addition, the Company has signed lease agreements for additional store facilities, the construction of which were not complete at January 1, 2000. The leases expire on various dates extending to 2024 with renewal options generally ranging from 10 to 20 years. Total future minimum rents under these agreements are approximately $683 million. -28- 10. Income Taxes Provisions for income taxes for 1999, 1998 and 1997 consist of the following: (Dollars in Current Deferred Total thousands) 1999 Federal $134,195 $ 27,123 $161,318 State 19,828 2,993 22,821 $154,023 $ 30,116 $184,139 1998 Federal $ 95,839 $ 40,199 $136,038 State 14,559 4,800 19,359 $110,398 $ 44,999 $155,397 1997 Federal $119,553 $(30,327) $ 89,226 State 27,100 (6,200) 20,900 $146,653 $(36,527) $110,126 The Company's effective tax rate varied from the federal statutory rate as follows: 1999 1998 1997 Federal statutory 35.0% 35.0% 35.0% rate State income taxes, net of federal tax benefit 3.1 2.9 4.8 Federal refund 0.0 (1.7) 0.0 Other (0.1) 0.1 (0.8) 38.0% 36.3% 39.0% The components of deferred income tax assets and liabilities at January 1, 2000 and January 2, 1999 are as follows: (Dollars in thousands) 1999 1998 Current assets: Inventories $ 5,233 $14,818 Accrued expenses 50,378 50,579 Total current assets 55,611 65,397 Non-current assets/(liability): Depreciation (145,853)(142,389) Leases 45,786 43,560 Provision for store closings 68,116 73,777 Tax loss carryforwards 18,358 22,737 Other deferred charges 6,172 7,022 Total non-current assets/(liability) (7,421) 4,707 Net deferred taxes $ 48,190 $ 70,104 As of January 1, 2000, the Company had net operating loss carryforwards for tax purposes of approximately $46.7 million related to Kash n' Karry. Due to certain change of ownership requirements of Section 382 of the Internal Revenue Code, utilization of the Kash n' Karry net operating losses is expected to be limited to approximately $3.6 million or $6.9 million per year, depending upon the year in which the loss was generated. Loss carryovers will expire during the years 2008 through 2011. -29- 11. Other Liabilities Other liabilities consist of the following: (Dollars in thousands) 1999 1998 Remaining lease liability - closed stores $104,277 $113,161 Other 9,443 10,877 113,720 124,038 Less current portion 12,660 9,839 $101,060 $114,199 The Company uses a discount rate based on the current treasury note rates to calculate the present value of the remaining rent payments on closed stores. 12. Stock Options and Restricted Stock Plans The Company has a stock option plan under which options to purchase up to 3.3 million shares of Class A common stock may be granted to officers and key employees at prices equal to fair market value on the date of the grant. Options become exercisable as determined by the Stock Option Committee of the Board of Directors of the Company on the date of grant, provided that no option may be exercised more than ten years after the date of grant. The Company has a restricted stock plan for executive employees pursuant to the 1996 Stock Incentive Plan. Under this stock plan, the Company granted 62,317 shares in 1999 (15,160 shares forfeited), 53,848 shares in 1998 (8,920 shares forfeited) and 65,334 shares in 1997 (3,508 shares forfeited). Currently, the Company has 160,048 shares of restricted Class A common stock outstanding under the plan. These shares of stock will vest over five years from the grant dates. The weighted average grant date fair value for these shares is $27.17, $24.42 and $21.09 for 1999, 1998 and 1997, respectively. As of January 1, 2000, 37,770 of these restricted shares had vested. A summary of shares reserved for outstanding options and restricted stock for the last three fiscal years, activity during each year and related weighted average exercise price is presented below: Weighted Average Shares Exercise Price 1999 Outstanding at beginning of 1,081,105 $21.42 year Granted 650,670 26.33 Exercised (81,493) 14.72 Forfeited/expired (144,639) 22.85 Outstanding at end of year 1,505,643 23.77 Options exercisable at end of 93,165 25.20 year 1998 Outstanding at beginning of 1,107,597 $19.89 year Granted 393,906 26.19 Exercised (257,045) 15.30 Forfeited/expired (163,353) 19.29 Outstanding at end of year 1,081,105 21.42 Options exercisable at end of year 45,535 26.31 1997 Outstanding at beginning of year 851,278 $18.24 Granted 467,170 24.39 Exercised (96,611) 15.81 Forfeited/expired (114,240) 34.05 Outstanding at end of year 1,107,597 19.89 Options exercisable at end of year 319,532 17.13 -29- As of January 1, 2000, there were 1,197,352 shares of Class A common stock available for future grants. The following table summarizes options outstanding and options exercisable as of January 1, 2000, and the related weighted average remaining contractual life (years) and weighted average exercise price (excluding restricted stock). Options Outstanding Range of Weighted exercise Number Weighted Average prices Outstanding Average Exercise Remaining Price Contractual Life $15.37 - $23.10 475,598 6.6 $20.71 $23.11 - $34.65 836,644 8.5 29.53 $34.66 - $37.78 33,353 2.7 36.87 $15.37 - $37.78 1,345,595 7.7 $26.59 Options Exercisable Range of Weighted exercise Number Average prices Exercisable Exercise Price $15.37 - $23.10 67,773 $21.18 $23.11 - $34.65 2,892 25.96 $34.66 - $37.78 22,500 37.25 $15.37 - $37.78 93,165 $25.20 The weighted average fair value at date of grant for options granted during 1999, 1998, and 1997 was $10.57, $7.86, and $6.42 per option, respectively. The fair value of options at date of grant was estimated using the Black-Scholes model with the following weighted average assumptions: 1999 1998 1997 Expected dividend 1.8 1.5 1.5 yield (%) Expected volatility 35.0 30.0 25.0 (%) Risk-free interest 5.4 5.6 6.5 rate (%) Expected term (years) 7.5 5.0 5.5 The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation." Accordingly, no compensation cost has been recognized for the stock options granted in 1999, 1998 or 1997. Had compensation cost been determined based on the fair value at the grant date consistent with the provisions of this statement, the Company's pro forma net earnings and earnings per share would have been as follows: (Dollars in thousands, 1999 1998 1997 except per share data) Net earnings - as reported $300,435 $272,585 $172,250 Net earnings - pro forma 299,687 272,144 171,656 Basic earnings per share - as reported 1.91 1.71 1.10 Basic earnings per share - pro forma 1.91 1.71 1.10 -30- 13. Common Stock The Company listed on the New York Stock Exchange beginning on September 9, 1999, after authorizing a one-for-three reverse stock split of all outstanding shares of common stock at the close of business 12:01 a.m. on September 9, 1999. All share and per share data have been restated to give retroactive effect to the reverse stock split, except in the Statement of Shareholders' Equity. The Company's two classes of stock are traded on the New York Stock Exchange under the symbols "DZA" and "DZB." On January 1, 2000, approximately 31.5% and 15.0% of the issued and outstanding Class A non-voting common stock and 27.5% and 28.0% of the issued and outstanding Class B voting common stock was held, respectively, by Etablissements Delhaize Freres et Cie "Le Lion" S.A. (Delhaize) and Delhaize The Lion America, Inc. (Detla), a wholly owned subsidiary of Delhaize. In the aggregate, Delhaize and Detla owned approximately 55.5% of the Class B voting common stock and 46.5% of the Class A non-voting common stock. Holders of Class B common stock are entitled to one vote for each share of Class B common stock held, while holders of Class A common stock are not entitled to vote except as required by law. The Board of Directors of the Company may declare dividends with respect to Class A common stock without declaring and paying any dividends with respect to the Class B common stock. When dividends are declared with respect to the Class B common stock, the Board of Directors of the Company must declare a greater per share dividend to the holders of Class A common stock. 14. Interest Expense Interest expense consists of the following: (Dollars in thousands) 1999 1998 1997 Interest on capital leases $58,138 $58,774 $56,809 Other interest (net of $2.8, $2.4 and $2.0 million capitalized in 1999, 1998 and 1997, respectively) 45,682 36,560 58,580 $103,820 $95,334 $115,389 15. Reserves for Closed Stores (Dollars in millions) Reduction Lease Accrued of Asset Liabilities Expenses Total Values Balance at December 28, 1996 $ 38.7 $150.1 $ 1.0 $ 189.8 Additions 98.8 22.6 13.7 135.1 Reductions (12.9) (20.0) (3.6) (36.5) Recognition of unused reserves (20.8) (29.6) (3.7) (54.1) Balance at January 3, 1998 103.8 123.1 7.4 234.3 Additions 2.7 19.2 9.4 31.3 Reductions (90.7) (21.9) (15.7) (128.3) Recognition of unused reserves 0.0 (7.2) 0.0 (7.2) Balance at January 2, 1999 15.8 113.2 1.1 130.1 Additions 2.5 9.5 5.2 17.2 Reductions (9.8) (18.4) (3.9) (32.1) Balance at January 1, 2000 $ 8.5 $104.3 $ 2.4 $ 115.2 -30- 1999 Activity: During the year, the Company recorded $13.0 million in store closing costs (included in Selling and Administrative Expenses on the Company's Consolidated Statement of Income). These costs are included in the "Additions" line in the table above. Other significant additions of approximately $3.2 million were generated upon the purchase of several store locations that the Company does not plan to open. The costs associated with closing these stores were charged against Goodwill. Significant reductions during the year include (1)ongoing rent payments of $8.3 million (net of $3.0 million in sub-lease income) made on remaining lease obligations, (2) fees of $10.5 million for lease terminations, (3) incremental direct costs to dispose of closed store properties and expenses arising from contractual obligations totaling $7.0 million and (4) approximately $6.5 million related to the disposition efforts of 23 closed stores. During 1999, the Company closed 31 stores in the normal course of business, including 21 relocation closings and 10 closings due to poor performance. The revenues and operating results of these stores were not significant to the Company's total revenues and operating results. Of the 31 closings in 1999, eight were Kash n' Karry closings. Four of the eight Kash n' Karry closings were included in the 23 planned closings at the time of acquisition (see discussion below in 1998 activity). During 1999, the Company completed disposition efforts related to 23 closed stores. At the end of 1999, the Company had $115.2 million in store closing costs related to 161 stores and one closed distribution center. Of the 161 stores, 154 stores are closed, while 7 stores are scheduled to close over the next 12 months. 1998 Activity: During the year, the Company recorded $15.2 million in store closing costs (included in Selling and Administrative Expenses on the Company's Consolidated Statement of Income), related to 26 stores which the Company plans to close in the normal course of business generally over the next 12 months. These costs are included in the "Additions" line in the table above. Significant additions also include gains ($11.1 million) related to the disposal of various properties ($5.1 million) and the sale of the Company's distribution center in the Southwest market ($6 million). Significant reductions in the reserves for closed stores in 1998 include $89.9 million for the disposition of 51 owned stores and the distribution center facility in the Southwest market, which the Company closed in 1997 (see discussion under 1997 Activity). Other significant reductions include (1) ongoing rent payments of $7.3 million made on remaining lease obligations, (2) fees of $17.5 million for lease terminations, and (3) incremental direct costs to dispose of closed store properties and expenses arising from contractual obligations totaling $13.2 million. The Kash n' Karry acquisition strategy included plans to close 23 stores in conjunction with the Company's store relocation program, and as a result of identifying underperforming units. The purchase price allocation included $52.3 million in reserves related to these stores. Through the end of 1998, -31- the Company had closed 13 of these store locations. The Company made a decision in 1998 not to close three of the original 23 stores due to improved performance. The original estimated store closing costs related to these three stores totals $7.2 million and comprises the unused reserves recognized as a reduction to Goodwill in fiscal 1998. It has taken the Company longer than anticipated to execute this store closing plan due to a strategic repositioning of the Kash n' Karry stores and a thorough review of the impact of such store closings on plans for neighboring Food Lion store locations. During 1998, the Company closed 29 stores in the normal course of business, including 17 relocation closings and 12 closings due to poor performance. The revenues and operating results of these stores were not significant to the Company's total revenues and operating results. During 1998, the Company completed disposition efforts related to 74 closed stores. At the end of 1998, the Company had $130.1 million in store closing costs related to 157 stores and one closed distribution center. Of the 157 stores, 131 stores were closed, while 26 stores were scheduled to close over the next 12 months. 1997 Activity: During 1997, the Company recorded a pre-tax charge of $116.5 million related to the divestiture of its Southwest market. This charge included the write-down of store and distribution center assets to reflect estimated realizable values ($92.1 million), the present value (calculated by applying an 8% discount rate) of remaining rent payments on leased stores ($17.1 million) included in Other Liabilities above, and other costs associated with the store closings. These other costs include legal fees, commissions, severance costs, and certain other costs to sell the related assets and/or expenses arising from contractual obligations ($7.3 million) included in Accrued Expenses above. The Southwest market had negatively impacted the Company's operating results by approximately $0.01 per share annually. During 1997, the Company reduced store closing costs by $54.1 million in unused reserves which arose primarily from changes in estimated liabilities on remaining lease obligations and in estimated recoverable values of owned properties. Of this amount, $14.4 million related to stores closed in previous years, and $17.7 million related to the 1997 store closings in the Southwest market. These unused reserves were recorded into income. The remaining $22.0 million related to Kash n' Karry store closings and was reflected as an adjustment to Goodwill. The remaining 1997 activity represents store closing costs incurred, the disposition of properties held for sale, and payments made on remaining lease obligations, related to store closings in the normal course of business. During 1997, the Company closed 58 stores in the normal course of business, including 25 relocation closings and 33 closings due to poor performance. The revenues and operating results of these stores were not significant to the Company's total revenues and operating results. During 1997, the Company completed disposition efforts related to 33 closed stores. -31- 16. Commitments and Contingencies The Company is involved in various claims and lawsuits arising out of the normal conduct of its business. Although the ultimate outcome of these legal proceedings cannot be predicted with certainty, the management of the Company believes that the resulting liability, if any, will not have a material effect upon the Company's consolidated results of operations, financial position or liquidity. -31- Report of Independent Accountants To the Shareholders of Delhaize America, Inc.: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, shareholders' equity, and cash flows present fairly, in all material respects, the financial position of Delhaize America, Inc. and subsidiaries (the "Company") at January 1, 2000 and January 2, 1999, and the results of their operations and their cash flows for each of the three years in the period ended January 1, 2000, in conformity with accounting principles generally accepted in the United States. 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 auditing standards generally accepted in the United States, which require that we plan and perform the 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. PricewaterhouseCoopers LLP Charlotte, North Carolina February 9, 2000 -32- Results by Quarter (unaudited) (Dollars in thousands except per share amounts) 1999 First Second Third Fourth Quarter Quarter Quarter Quarter (12 Weeks) (12 Weeks) (12 Weeks) (16 Weeks) Net sales $2,407,046 $2,509,240 $2,583,945 $3,378,453 Cost of goods sold 1,856,862 1,933,085 1,994,185 2,586,762 Selling and administrative expenses 431,301 440,528 447,404 600,163 Operating income 118,883 135,627 142,356 191,528 Net income $58,608 $68,351 $73,019 $ 100,457 Basic and diluted earnings per common share $0.36 $0.43 $0.47 $0.65 (Dollars in thousands except per share amounts) 1998 First Second Third Fourth Quarter Quarter Quarter Quarter (12 Weeks) (12 Weeks) (12 Weeks) (16 Weeks) Net sales $2,305,473 $2,353,260 $2,378,922 $3,181,819 Cost of goods sold 1,800,115 1,826,657 1,843,988 2,455,084 Selling and administrative 388,713 406,621 411,820 563,160 expenses Operating income 116,645 119,982 123,114 163,575 Net income $ 55,234 $ 60,033 $ 72,769 $ 84,549 Basic and diluted earnings per common share $0.35 $0.38 $0.45 $0.53 -33- Market Price of Common Stock Year Ended January 1, 2000 Year Ended January 2, 1999 Class A Class B Class A Class B Quater High Low High Low High Low High Low First 33.38 27.56 32.06 27.38 33.75 25.41 34.14 24.39 Second 36.00 25.88 36.00 25.50 32.64 27.75 33.18 27.39 Third 38.16 23.44 37.50 24.00 34.32 26.43 33.18 27.00 Fourth 24.19 17.38 25.06 18.75 33.18 25.14 32.43 23.64 The Company's Class A and Class B common stock trade on the New York Stock Exchange under the symbols DZA and DZB, respectively. Price quotations are reported on the New York Stock Exchange. The closing market prices per share for both Class A and Class B common stock at January 1, 2000 were $20.31 and $20.88, respectively compared with $31.89 and $30.18, respectively for both Class A and Class B common stock at January 2, 1999. On March 16, 2000, there were 16,751 holders of record of Class A common stock and 12,217 holders of record of Class B common stock. The closing market prices per share for the Class A and the Class B common stock at March 16, 2000 were $17.94 and $18.00, respectively. Dividends Declared Per Share of Common Stock Year Ended January 1, 2000 Year Ended January 2, 1999 Quarter Class A Class B Class A Class B First $.1260 $.1245 $.1125 $.1110 Second .1260 .1245 .1125 .1110 Third .1260 .1245 .1125 .1110 Fourth .1260 .1245 .1125 .1110 Total $.5040 $.4980 $.4500 $.4440 -33- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations During fiscal 1999, the Company posted record sales of $10.9 billion and net earnings of $300.4 million, increases of 6.5% and 10.2%, respectively, compared with fiscal 1998. The Company accomplished these results in a highly competitive retail environment while continuing to sharpen its focus on "low price leadership" and "convenience." The Company opened 100 new stores and closed 31 existing stores (including 21 relocations) during the year. As a result, at the end of 1999, the Company operated 1,276 stores compared with 1,207 at the end of 1998. The Company renovated 145 stores in 1999. The Company announced in August 1999 its plan to acquire Hannaford Bros. Co. for $3.6 billion, including the assumption of debt. Shareholders of Hannaford approved the merger agreement at its shareholder meeting on February 10, 2000. Delhaize America expects this transaction to be completed in the second quarter of 2000, and as a result, Delhaize America will have approximately 1,400 stores throughout the eastern United States from Maine to Florida and annual sales of approximately $15 billion in the first full year of acquisition. Sales Sales were $10.9 billion for the 52 weeks of fiscal 1999 compared with $10.2 billion during the 52 week period of fiscal 1998, and $10.2 billion for the 53 week period in 1997, resulting in annual increases of 6.5%, 0.2%, and 13.2% , respectively. The Company's 1999 total sales are not comparable to 1998 and 1997 total sales due to a change in the method of collecting sales tax on products discounted through the Food Lion MVP customer and the Kash n' Karry Preferred Customer Club (PCC) loyalty card programs. This change impacted both 1998 and 1999 sales as the new method of reporting sales tax began in May 1998 (see discussion below). On a comparable basis, total sales increased 7.1% for fiscal 1999 and 6.1% for fiscal 1998. In 1999, same store sales increased 1.8% as compared with increases of 2.6% for 1998 and 0.2% for 1997. Beginning in May 1998, after receiving permission from all state departments of revenue, the Company began collecting sales tax on the net sales price, after considering the MVP/PCC discount granted, rather than the full retail price of the MVP/PCC items. The related impact to fiscal 1999 and 1998 sales for a prior year comparison is to reduce reported sales by approximately $70.4 million and $127.1 million, respectively. This change does not impact the same store sales calculation or the Company's net income, as gross profit and expense dollars are the same under either method. The only difference is that under the new method the discount granted is reflected in sales as opposed to in cost of goods sold under the original method. During 1999, the sales increase of 7.1% (on a comparable basis) resulted from the Company's new store additions and renovations of existing stores, as well as continued emphasis on category management and marketing initiatives. The Company opened 100 new stores in 1999 and closed 31 existing stores (including 21 relocations), a net increase of 69 stores. The Company continues to aggressively pursue store renovations and additions which, on average, add 10 to 20 percent to a store's sales. During 1999, 145 existing stores were renovated to update equipment and properties, and in many locations, to add square footage and deli/bakery departments. The average age of the Company's stores is five years which compares favorably with the industry average of seven years. The Company continued to benefit from the MVP card program and the PCC program. These programs, which are primarily vendor supported, reward customers with additional discounts on the Company's every day low prices on a selection of featured -34- items. Each week, 1,500 to 2,000 items are featured under the MVP/PCC programs. In 1999, promotions using these programs included a back-to-school campaign, a NASCAR-themed promotion, and participation in the "Delhaize 2000" global price promotion. New in 1999 was the MVP Partners program, which offers MVP cardholders discounts with local and national business partners such as dry cleaners, hotels, and theme parks. In 2000, the Company plans to increase usage of the expansive database to support targeted marketing and promotional activity. The 2000 business plan currently includes opening 85 new stores (approximately 18 of these will replace older stores) and renovating approximately 150 existing stores. The Company is committed to a growth strategy, which includes plans to open new stores and strengthen existing stores through renovations in order to maintain a competitive edge in its current markets. In addition, the Company will continue to evaluate its store base and may close stores to take advantage of relocation opportunities or to eliminate operating losses in under-performing stores. The Company's growth strategy is flexible, and the Company will listen to its consumers and revise its strategy accordingly in an effort to meet current and future customer needs. Gross Profit In fiscal 1999, gross profit was 23.05% of sales compared with 22.44% and 21.76% in 1998 and 1997, respectively. The gross profit increase of .61% of sales in 1999 is attributable to a continued focus on category management initiatives designed to maximize product selection and merchandising through increased variety (new items) and promotional activity through the Company's customer loyalty card programs. Gross profit improvements were achieved in the higher margin categories of perishables and nonfoods and gross profits continue to be positively impacted by the Company's private label sales, which currently represent 16.0% of consolidated total sales. Additional gross profit benefits were achieved through efficient distribution and logistics operations. Selling and Administrative Expenses Selling and administrative expenses as a percentage of sales were 17.65 % in 1999, 17.32% in 1998, and 17.04% in 1997. The Company has seen increasing labor costs throughout the year due to the low unemployment rates in all operating markets, which in turn has created higher turnover as well as wage and benefit increases. In addition, rent costs have increased primarily as a result of 92 new leased stores and expansions of existing stores. Depreciation was 2.38% of sales in 1999 compared with 2.31% in 1998 and 2.16% in 1997. The Company constructed and equipped 92 leased stores and eight owned stores and renovated an additional 145 stores in 1999. During 1998, the Company constructed and equipped 72 leased stores and seven owned stores, and renovated 141 existing stores. During 1997, the Company constructed and equipped 61 leased stores and three owned stores, and renovated 99 existing stores. Delhaize America's 1999 business plan reflected the Company's commitment to maintaining its existing store base as 145 store renovations were completed in 1999 compared with 141 in 1998 and 99 in 1997. The Company anticipates completing approximately 150 renovations to existing stores in 2000. Store renovations result in an average sales increase of 10% to 20% in the year following the renovation. The Company plans to continue an aggressive renovation program to maintain a modern and convenient shopping environment for customers in all stores. Store Closings The Company continues to constantly evaluate its store base, and make decisions about store openings and closings that are in the best interest of shareholders. These store closings consist of both relocations, where a new store is opened to replace an older location in the same neighborhood, and the closing of stores due to poor performance. During 1999, 31 stores were closed in the normal course of business as discussed above. The average cost to close a store as part of the -34- Company's normal business strategy is approximately $500,000 to $1,000,000. During 1999, the Company recorded $13.0 million in store closing costs (included in Selling and Administrative Expenses on the Company's Consolidated Statement of Income), related to planned store closings (see Note 15 to the Consolidated Financial Statements). During 1998, the Company closed 29 stores in the normal course of business and recorded store closing costs of $15.2 million. In 1997, the Company recorded a pre-tax charge of $116.5 million related to the divestiture of stores in its Southwest market. This charge included the write-down of store and distribution center assets to reflect estimated realizable values ($92.1 million), the present value (calculated by applying an 8% discount rate) of remaining rent payments on leased stores ($17.1 million), and other costs associated with the store closings such as legal fees, commissions, severance costs, and certain other costs to sell the related assets and/or expenses arising from contractual obligations ($7.3 million). The Southwest market had negatively impacted the Company's operating results by approximately $0.01 per share annually. Significant cash outflows associated with store closings relate to ongoing rent payments on leased stores. These rent payments are funded by income from operations. The projected rental payments on closed stores are included in Note 9 to the consolidated financial statements. In conjunction with the Company's compliance with Financial Accounting Standards Board Statement No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" (FAS No.121), the Company reviews the value of all long-lived assets by store location whenever events or changes in business circumstances indicate the carrying value of the assets may not be recoverable. No adjustments were recorded during 1999. Interest Expense During 1999, interest expense increased slightly over the prior year. Interest was 0.95% of sales in 1999, 0.93% in 1998 and 1.13% in 1997. This increase was due to an increase in short-term borrowings for the year. During 1998, the Company reached an agreement with the U.S. Internal Revenue Service ("IRS") regarding its examination of tax years 1991-1994. As a result of this agreement, the Company received a refund related to tax paid in previous years. The refund included $7.2 million in tax (recorded during the year as a reduction to the Provision for Income Taxes) and related interest income of $7.6 million (recorded during the year as a reduction to Interest Expense). In addition, interest expense was impacted by (1) the conversion of the Company's convertible subordinated debentures in 1998, and (2) the pre-payment of $50 million in note purchase agreements in late 1997. LIFO The LIFO reserve increased $3.8 million in 1999 as compared with increases of $24.7 million in 1998 and $10.0 million in 1997. In 1999 and 1998, the increase was primarily due to an increase in cigarette costs. In 1997, coffee, paper and cigarette costs were the primary contributors to the LIFO increase. Income Taxes The provision for income taxes was $184.1 million in 1999, $155.4 million in 1998, and $110.1 million in 1997. The Company's effective tax rate was 38.0% in 1999, 36.3% in 1998 and 39.0% in 1997. The effective tax rate for 1998 was reduced by a $7.2 million tax refund received from the IRS. Notwithstanding the acquisition of Hannaford Bros. Co. (see Note 2 of the Financial Statements), the Company expects its continuing effective tax rate to be 38.0%. -35- Liquidity and Capital Resources Cash provided by operating activities was $507.7 million in 1999 compared with $441.1 million in 1998 and $354.9 million in 1997. The increase in 1999 over prior years was mainly due to improved earnings and a comparatively smaller increase in inventory levels, net of trade payables. The increase in 1998 was due to improved earnings, an increase in inventory levels, net of trade payables, an increase in accrued expenses, and a reduction in deferred taxes. The increase in 1997 over the prior years was due primarily to a decrease in inventory levels resulting from continued inventory management efforts, the consolidation of the Kash n' Karry warehouse operation into Food Lion's Plant City, Florida distribution center, and closing the Southwest distribution center. Cash flows used in investing activities increased to $391.3 million in 1999 compared with $246.2 million in 1998 and $313.6 million in 1997. The increase in investing activities in 1999 compared to 1998 is primarily the result of an increase in capital expenditures. In addition, 1998 included proceeds from the sale of properties associated with the divestiture of the Southwest market. The decrease in investing activities in 1998 compared to 1997 is the result of an increase in the proceeds received from the disposition of the assets related to stores in the Southwest market. The decrease in investing activities in 1997 compared to 1996 reflects the investment in Kash n' Karry during 1996, partially offset by an increase in capital expenditures in 1997. Capital expenditures increased to $410.9 million in 1999 compared with $356.1 million in 1998 and $346.1 million in 1997. During 1999, the Company equipped a total of 100 new stores and renovated 145 existing stores (including expanding square footage and adding deli/bakeries in many of these stores). During 1998, the Company equipped a total of 79 new stores and renovated 141 existing stores. During 1997, the Company equipped a total of 64 new stores and renovated 99 existing stores. Total store square footage increased 10.6% from 38.9 million in 1998 to 43.0 million at the end of 1999. Total distribution space operated by the Company was 8.7 million square feet at the end of each of 1999, 1998, and 1997. In 2000, the Company plans to continue its three-fold growth plan, which focuses on a combination of new store openings and renovations, as well as growth through acquisitions, as appropriate. The Company anticipates opening 85 new stores (18 of these will replace older stores) and renovating approximately 150 stores in 2000. The Company anticipates that the majority of the new stores will be opened under conventional leasing arrangements and, as a result, the impact on liquidity of owning stores will be insignificant in 2000. Capital expenditures for 2000 are expected to total $375 million, which includes approximately $128 million for store expansion and new store construction and $164 million to equip new and renovated stores. The Company plans to finance capital expenditures for 2000 through funds generated from operations and existing bank and credit lines. The Company will consider the possibility of sale-leaseback transactions on certain free-standing Company-owned stores in the future if advantageous opportunities are presented by potential lessors. Cash flows used in financing activities decreased to $44.5 million, from $164.6 million in 1998, and $163.4 million in 1997. The decrease in 1999 was primarily the result of proceeds received under short-term borrowings offset partially by shares purchased under the Company's share repurchase plan as described below and principal payments on long-term debt. The increase in 1998 over 1997 was primarily the result of shares purchased under the Company's share repurchase plan as described below, partially offset by a decrease in net payments on debt. -35- During the third quarter of 1999, the Company suspended the share repurchase program as a result of the announced plan to acquire Hannaford Bros. Co. (see discussion in "Debt" section below). During 1999, the Company expended $142.7 million (including commissions) for the purchase of Class A and Class B shares as part of its repurchase program, compared to $50.2 million in 1998, and $3.0 million in 1997. See table below. Class A Class B 1999 Shares purchased 2,759,700 1,636,100 Average purchase $32.37 $32.61 price Total purchased $89,331,489 $53,353,221 1998 Shares purchased 1,028,567 632,333 Average purchase $31.11 $28.80 price Total purchased $31,998,719 $18,211,190 1997 Shares purchased 78,333 58,333 Average purchase $22.02 $21.18 price Total purchased $1,724,893 $1,235,493 Additional purchases may be made in the open market under the current program as deemed in the best interest of shareholders (if the program is reinstated). Debt The Company currently has outstanding medium-term notes of $123.3 million due from 2000 to 2006 at interest rates of 8.40% to 8.73%. Additionally, the Company has long-term debt securities of $300.0 million of which $150.0 million is due 2007 at 7.55% and $150.0 million matures in 2027 at an interest rate of 8.05%. In December 1999, the Company replaced its $625.0 million revolving credit facility. The current credit facility with a syndicate of commercial banks provides for $500.0 million in committed lines of credit, which will expire on November 17, 2000. As of January 1, 2000, the Company had $205.0 million in outstanding borrowings related to this credit facility. The Company had average borrowings of $81.2 million at a daily weighted average interest rate of 7.53% during 1999. The Company also maintains additional committed lines of credit totaling $20.0 million, which are available when needed. The Company is not required to maintain compensating balances related to these lines of credit, and borrowings may occur periodically. As of January 1, 2000, the Company had outstanding borrowings of $20.0 million. During 1999, the Company had average borrowings of $8.3 million at a daily weighted average interest rate of 5.33% with a maximum amount outstanding of $20.0 million. The Company has a $250.0 million commercial paper program, of which no borrowings were outstanding at January 1, 2000, January 2, 1999, and January 3, 1998, nor was the program used during these years. Finally, the Company has periodic short-term borrowings under informal credit arrangements which are available to the Company at the discretion of the lender (see table below): -36- Informal Credit Arrangements (Dollars in millions) 1999 1998 1997 Outstanding borrowings at year end $77.0 $41.0 $80.0 Average borrowings 20.7 12.2 8.2 Maximum amount outstanding 105.0 100.0 80.0 outstanding Daily weighted average interest 5.60% 5.47% 5.76% On August 17, 1999, the Company entered into a definitive merger agreement to acquire all of the outstanding shares of Hannaford Bros. Co. in a cash and stock transaction valued at approximately $3.6 billion, including the assumption of debt. Upon completion of the transaction, Hannaford will operate as a subsidiary of Delhaize America, Inc. The Company expects to finalize the acquisition in fiscal 2000. The Company estimates that the total amount of cash required to complete the merger with Hannaford will be approximately $2.7 billion. The cash consideration required to complete the merger will be funded through (i) a 364- day capital markets bridge facility for up to $2.5 billion; and (ii) a $500 million five-year syndicated revolving credit facility. The Company plans a public bond offering for long term financing of the transaction. Market Risk Delhaize America finances its daily working capital requirements, when necessary, through the use of its various committed and uncommitted lines of credit. These financial instruments are sensitive to interest rate changes. Outstanding borrowings under such agreements are discussed in Note 8 "Credit Arrangements" of the financial statements. Self Insurance The Company is self-insured for its workers' compensation, general liability and vehicle accident claims. The Company establishes reserves based on an actuarial valuation of open claims reported and an estimate of claims incurred but not yet reported. It is possible that the final resolution of some of these claims may require significant expenditures by the Company in excess of its existing reserves, over an extended period of time, and in a range of amounts that cannot be reasonably estimated. Impact of Inflation During 1999, the inflation rate on merchandise purchases was 0.6%. The Company experienced a 5% increase in its average hourly rate during the year. Inventory and Labor, the Company's primary costs, increase with inflation and, where possible, are recovered through operating efficiencies and gross profits. Year 2000 The Company has not experienced any material adverse effects on its operations relating to the century change. In addition, the Company has not experienced any material adverse effects with its critical vendors and -36- suppliers related to the century change. Except for the cost of replacement systems, the Company expensed the cost of its Year 2000 Project as incurred. The Company funded the costs associated with its Year 2000 Project through operating cash flows and did not defer any Information Technology projects in order to complete the Year 2000 Project. The total incremental cost of the Year 2000 Project was approximately $17 million, which included equipment and software replacements, reprogramming, systems testing, and outside consulting services. Approximately $4 million of the total cost for the Year 2000 Project related to reprogramming or remediation of existing software and new systems, while the remaining cost of approximately $13 million related to the implementation of certain replacement systems. The Company expensed approximately $4 million as incurred and capitalized approximately $13 million for replacement systems. Other Information provided by the Company, including written or oral statements made by its representatives, may contain forward-looking information as defined in the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, which address activities, events or developments that the Company expects or anticipates will or may occur in the future, including such things as expansion and growth of the Company's business, future capital expenditures and the Company's business strategy, are forward-looking statements. In reviewing such information, it should be kept in mind that actual results may differ materially from those projected or suggested in such forward-looking statements. This forward-looking information is based on various factors and was derived utilizing numerous assumptions. Many of these factors have previously been identified in filings or statements made by or on behalf of the Company, including filings with the Securities and Exchange Commission of Forms 10-Q, 10-K and 8-K. Important assumptions and other important factors that could cause actual results to differ materially from those set forth in the forward- looking statements include: changes in the general economy or in the Company's primary markets, changes in consumer spending, competitive factors, the nature and extent of continued consolidation in the industry, changes in the rate of inflation, changes in state or federal legislation or regulation, changes in the availability of labor, adverse determinations with respect to litigation or other claims, inability to develop new stores or complete remodels as rapidly as planned, and stability of product costs -- supply or quality control problems with the Company's vendors detailed from time-to-time in the Company's filings with the Securities and Exchange Commission. -37- EX-21 6 Exhibit 21 Subsidiaries of Delhaize America, Inc.: Entity State of Incorporation Kash n' Karry Food Stores, Inc. DE FLI Holding Corp. DE Barnwell, Inc. DE Risk Management Services, Inc. NC FL Food Lion, Inc. FL FL Acquisition Sub.Inc. ME Food Lion, LLC NC Food Lion (Thailand), Inc. DE EX-23 7 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (File No. 33-03669) and Form S-3 (File Nos. 33-40457 and 33-49620) of Delhaize America,Inc. of our report dated February 9, 2000 relating to the financial statements, which appears in the Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K. PRICEWATERHOUSECOOPERS, LLP Charlotte, North Carolina March 30, 2000 EX-27 8
5 This schedule contains summary financial information extracted from the Consolidated Balance Sheets, the Consolidated Statements of Income and the Consolidated Statement of Cash Flows and is qualified in its entirety by reference to such financial statements. 1,000 YEAR JAN-01-2000 JAN-03-1999 JAN-01-2000 195,502 0 235,457 0 1,157,695 1,676,227 3,333,935 1,294,621 3,973,412 1,280,193 426,930 0 0 232,890 1,445,976 3,973,412 10,878,684 10,878,684 8,370,894 8,370,894 0 0 103,820 484,574 184,139 300,435 0 0 0 300,435 1.91 1.91
EX-99 9 Exhibit 99 UNDERTAKING TO FILE EXHIBITS PURSUANT TO ITEM 601(b)(4)(iii)(A) OF REGULATIONS S-K The undersigned registrant acknowledges that it has not filed with the Securities and Exchange Commission (the "Commission") copies of certain instruments with respect to long-term debt of the registrant representing obligations not exceeding 10% of the registrant's total assets as of January 1, 2000, pursuant to the provisions of Item 601(b)(4)(iii)(A) of Regulation S-K of the Commission (the "Regulation"). Pursuant to the Regulation, the undersigned registrant hereby undertakes to furnish to the Commission upon its request a copy of any such instrument. This is the 30th day of March, 2000. DELHAIZE AMERICA, INC. /s/Laura Kendall Laura C. Kendall Chief Financial Officer Principal Accounting Officer EX-10.AD 10 EMPLOYMENT SEVERANCE AGREEMENT AND MUTUAL RELEASE Food Lion, a division of Delhaize America, Inc. (the "Company") and A. Edward Benner, Jr. (the "Executive") hereby agree as follows: 1. Purpose of Severance Agreement and Release The purpose of this Employment Severance Agreement and Mutual Release of Liability ("Severance Agreement and Release") is to set forth the terms of the Executive's severance from employment with the Company, to resolve fully any and all obligations arising out of his employment and severance from employment, and to protect the Company's legitimate interest in maintaining the confidentiality of information pertaining to its business plans and operations known to, or possessed by, the Executive. 2. Termination of Employment A. The Executive's employment with the Company shall terminate by his retirement effective January 1, 2000 (the "termination date"). B. The Executive's participation in the Company's Profit Sharing Retirement Plan and Profit Sharing Restoration Plan shall terminate effective January 1, 2000. The Executive shall be entitled to receive all vested benefits owing under the Company's profit sharing and employee benefit plans in which the Executive is participating as of the date of his retirement to the extent specifically provided for by such plans and/or to the extent otherwise required by law. C. The Executive's 1999 Profit Sharing contribution will be determined by the Board of Directors on the same basis as amounts are determined for vice presidents of the Company who were employed through January 1, 2000. D. As provided in the stock option agreements governing such stock options, all vested stock options of the Company held by the Executive as of the retirement date shall remain exercisable for eighty-nine (89) days following the retirement date. 3. Consideration A. In consideration of the Executive's release of all claims that may exist against the Company in connection with his employment as more specifically set forth below in Paragraph 4, and in consideration of the Executive's compliance with the obligations set forth below in Paragraphs 7 and 8, and provided the Executive complies with all other terms and conditions of this Severance Agreement and Release, the Company agrees that: 1. The Company will pay the Executive an amount equal to his weekly salary of $5,074.63 from January 1, 2000 through June 4, 2000. These payments shall be subject to all legally required state and federal tax deductions and withholdings. 2. The Company shall continue until March 4, 2000 the participation of the Executive and his eligible dependents in the Group Benefit Plan and Executive Medical Plan. Following such period, the Executive shall be entitled to continuation of health care under COBRA. 3. The Executive will receive a 1999 incentive bonus in an amount to be determined by the Board of Directors on the same basis as amounts are determined for vice presidents of the Company who were employed through January 1, 2000. 4. The Executive will receive annual bonus and wellness payments for 1999. The Company may withhold from any compensation or benefits payable under this Agreement all federal, state or other taxes as may be required pursuant to any law or regulation or ruling. Except as specifically provided herein or as otherwise may be required by law, the Executive shall not be entitled to receive any other payment benefits or severance amount from the Company following the retirement date. B. The Executive acknowledges that the rights and payments provided in Paragraph 3(A): 1. represent valuable consideration over and above what he is otherwise entitled to in connection with the termination of his employment and that his release of claims in Paragraph 4 and his agreement to comply with the obligations of Paragraphs 7 and 8 of this Severance agreement and Release are in return for this consideration; 2. shall be in lieu of any and all claims for severance pay, additional wages, bonus, salary, accrued vacation and sick leave pay or other compensation, or benefits, or claim of damages he may have as of his termination date other than vested benefits described in Paragraph 2(C) and such rights as Executive may have to obtain continued insurance coverage under COBRA; and 3. arise solely out of the terms of this Severance Agreement and Release and are not part of any Company severance pay plan. C. The Company acknowledges that its promises and releases contained in this Severance Agreement and Release are for good and valuable consideration. 4. Waiver and Release As a material inducement for Executive and Company to enter this Severance Agreement and Release, each of them hereby irrevocably and unconditionally releases and forever discharges the other as detailed below. A. The Executive releases and forever discharges all claims he may have against the Company, its subsidiaries, affiliates, parents, predecessors, and all officers, directors, representatives, agents or employees in any manner arising out of or attributable to his employment with the Company. This release includes all claims that may have existed on his termination date relating to the Executive's employment with and termination from the Company, including all claims and rights under his employment contract whether brought by Executive or by a third party on his behalf, including, but not limited to: 1. discrimination on the basis of age, including claims under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act as amended, the Americans with Disabilities Act, or other applicable federal statutes and other applicable state and local statutes; 2. any claim under any statute, law or regulation, based on any fact, matter, event or cause, whether known or unknown, arising out of or relating to the employment relationship between the Executive and the Company or the Executive's separation therefrom. B. The Executive agrees not to institute any legal or administrative proceedings against the Company or those persons described in Paragraph 4(A) as to any matter based upon, arising out of or related to his employment, compensation during his employment, or termination of his employment with the Company. C. The Company, on behalf of its officers, directors, employees, agents, counsel, successors, assigns and related entities hereby releases and forever discharges the Executive, his heirs, assigns and representatives from any and all claims, liabilities, damages, costs, and other obligations in any manner arising out of or attributable to his employment with the Company, and will indemnify and hold harmless the Executive to the fullest extent permitted under North Carolina law, including, without limitation, the provisions of Part 5 (or any successor provision) of the North Carolina Business Corporation Act, from and against all losses, claims, damages, liabilities, costs and expenses (including, without limitation, attorneys' fees), which may, at any time, be suffered by the Executive as a result of the fact that the Executive was an officer of the Company, or was serving at the request of the Company as an officer, employee or agent of an affiliate of the Company. The expenses incurred by the Executive in any proceeding shall be paid promptly by the Company in advance of the final disposition of any proceeding at the written request of the Executive to the fullest extent permitted by North Carolina law. D. This Severance Agreement and Release does not waive or release rights or claims for occurrences after the effective date of this Severance Agreement and Release. This Severance Agreement and Release does not preclude the Executive or Company from filing a lawsuit against the other for purposes of enforcing rights conferred to each other under this Severance Agreement and Release. 5. Company Property The Executive represents and agrees that he has not and will not retain, distribute, or cause to be distributed, any Company property, including but not limited to, originals and copies of Company documents, files, memoranda, notes, computer-readable information (maintained in disc or any other form) and video or tape recordings of any kind other than personal materials relating solely to the Executive. 6. Loans The Company and the Executive acknowledges that, as of the date of this Agreement, there is an outstanding balance in the amount of $177,699.63 (the "Loan") owed by the Executive to the Company pursuant to the Company's Low Interest Loan Plan. The Executive agrees to repay the full outstanding balance on or before March 31, 2003. 7. Confidentiality A. The Executive agrees that the existence and terms of the Severance Agreement and Release are and shall remain confidential, and further agrees not to disclose the existence or terms of the Severance Agreement and Release to any third party, except that: 1. the Executive may disclose to his family that he retired from the Company and the amount of consideration he received in connection with his separation and disclose the terms and conditions of this Severance Agreement and Release to his attorneys, tax consultants, state and federal authorities or as may be required by law; 2. it is understood that the Company will disclose the terms and conditions of this Severance Agreement and Release to the extent necessary to carry out the terms of this Agreement to its managers, officers and board of directors, insurers, consultants, accountants, attorneys, state and federal tax authorities, or as may be required by law, including but not limited to disclosure as may be required in the Company's proxy statement and as required by SEC public reporting requirements; 3. disclosure only that the Executive retired voluntarily and that the parties parted amicably will not violate this Paragraph 7(A). B. The Executive acknowledges that as a result of his employment by the Company, he has acquired valuable proprietary information of a sensitive and confidential nature pertaining to the Company's business operations, trade secrets, its strategies and plans, which, if disclosed to individuals or entities not employed by the Company, would materially harm the Company and/or provide an unfair advantage to its competitors. The Executive covenants and agrees: 1. that he shall not, directly or indirectly, orally or in writing, at any time in the future disclose any information of the Company as defined in Paragraph 7(B)(2), whether such information is a trade secret, confidential or proprietary, to any person, partnership, corporation or other business entity, except with the written permission of the Company. 2. That for purposes of Paragraph 7(B)(1), the term "any information of the Company" means all information which relates to matters such as, but not necessarily limited to, trade secrets, research and development activities, books and records, expansion strategies, operational plans or strategies, real estate strategies, or other processes or strategies, distribution channels, pricing information and private processes, real estate site selection, projected store openings or closings, employee communications, training or development strategies, and advice given by any legal counsel or other consultants retained by the Company whether or not protected by the attorney-client or work product privileges. 3. Paragraph 7(B)(1) or (2) shall not be violated by the disclosure of information pursuant to a court order or as otherwise required by law, on condition that notice of the requirement for such disclosure is given to the Company before the Executive's making any disclosure and the Executive cooperates in resisting such disclosure upon reasonable request by the Company at the Company's expense. C. The Executive acknowledges that, by virtue of the responsibilities assigned to him throughout his employment, in the event he should make any public statements relating to the Company after his termination, such statements could be attributed to the Company or be viewed as authoritative, and based on information to which the Executive had access while employed by the Company. Accordingly, the Executive agrees that he will make no public comment in any way relating to the Company, without the express written permission of the Company. 8. Agreement Not to Compete The Executive acknowledges that the Company has legitimate business interests in assuring that the skills and knowledge to the nature and character of the Company's business obtained by the Executive during his employment with the Company are not converted to the use of entities in competition with the Company or who are engaged in activities aimed at damaging the Company's public image or are otherwise antithetical to the Company's lawful interests. In recognition of these legitimate interests, the Executive agrees that: A. From the date of execution of this Severance Agreement and Release until December 31, 2000, the Executive will not compete with the Company, directly or indirectly, by acting either individually or as an advisor, representative, agent, employee, partner, shareholder, investor, consultant, or in any other similar capacity, on behalf of any other membership clubs selling groceries or other retail formats selling food products (but which shall not include manufacturers of food products not engaged in the retail grocery business, and shall not include stores of 10,000 square feet or less), in the geographical area defined in Paragraph 8(B). The Executive's ownership of not more than one percent (1%) of the stock of any publicly-held grocery chain shall not be deemed a violation of this Paragraph. B. The Executive agrees not to act in the capacities set forth in Paragraph 8(A) for entities operating in North Carolina, South Carolina, Virginia, Tennessee, Georgia, Florida, Maryland, Delaware, Kentucky, West Virginia, and Pennsylvania. C. From the date of execution of this Severance Agreement and Release to December 31, 2000, the Executive will not recruit, solicit or otherwise contact employees of the Company on behalf of any other entity, either directly or as an agent, in order to solicit or induce any employee of the Company to accept employment with another entity. D. In the event the Company ceases to operate in any of the states included above, then the restriction with respect to said state shall cease upon the date the Company ceases operations in said state. 9. Enforcement The Executive agrees that he has received good and valuable consideration for his agreement both to adhere to the confidentiality provisions of Paragraph 7 and to the non-compete provisions of Paragraph 8 and that in the event the Company obtains evidence that Executive has violated Paragraphs 7 and 8 in any respect, the Company shall have the option to: A. cease payment of any additional amounts provided for in Paragraph 3(A) of this Severance Agreement and Release; or B. obtain temporary and permanent injunctive relief in a Superior Court of the State of North Carolina to remedy such violation. The Executive consents to jurisdiction of that court or provide such injunctive relief. The Executive agrees that failure to comply with his obligations under Paragraphs 7(B), 7(C), or 8(A), 8(B) or 8(C) of this Severance Agreement and Release shall constitute irreparable harm to the Company, without regard to any demonstrable economic harm to the Company from Executive's breach, and that the appropriate remedy for partial or total breach of those provisions shall be an interim and permanent order directing specific performance with each and every term of this Severance Agreement and Release, with damages resulting from the breach, and all costs and attorneys fees incurred in obtaining enforcement of this Severance Agreement and Release to be awarded to the Company. The Executive further agrees that in such proceeding, he shall make no assertion of mitigation in defense to the Company's prayer for injunctive relief. 10. Acknowledgement of Voluntary Nature of Severance Agreement and Release By signing this Severance Agreement and Release, the Executive and the Company acknowledge: A. That each has entered into this Severance Agreement and Release voluntarily and fully understands all of its terms; B. That the Executive has been advised and has had the opportunity to consult with an attorney prior to signing this Severance Agreement and Release; C. That the Executive has been given the opportunity to consider this Severance Agreement and Release for a period of at least twenty-one (21) days, and, after consulting with his attorney, has voluntarily and freely executed this Agreement prior to the expiration of the twenty-one day period, and has voluntarily and freely waived the right to consider the Severance Agreement and Release for the full twenty-one day period; and D. That the Executive and Company are not relying on any statement or promise other than as contained in this Severance Agreement and Release. 11. Assistance Upon reasonable notice, the Executive agrees to willingly give his assistance, including his attendance, where appropriate, to the Company's defense or prosecution of any existing or future claims or litigation. The Company will reimburse the Executive for all reasonable travel expenses incurred by the Executive in complying with this section. In the event the Executive is no longer entitled to the payments set forth in Section 3 of this Agreement, then the Executive shall be compensated at the rate of $100 per day for such assistance. 12. Revocation Period The Executive understands that he has a seven (7) day period after signing this Severance Agreement and Release in which to revoke or rescind his agreement and release of claims by informing the Company's Vice President of Legal Affairs in writing of his decision to revoke. To be effective, the rescission must either be delivered to the Company's Vice President of Legal Affairs by hand within the seven day period, or be sent by certified mail, return receipt requested, properly addressed to the Company's Vice President of Legal Affairs in accordance with Paragraph 16 of this Severance Agreement and Release, and be postmarked within the seven day period. 13. Binding Agreement A. This Severance Agreement and Release will become effective and enforceable upon the expiration of the seven day revocation period referred to in Section 12 (the "effective date"). The Executive and the Company understand that following the seven day revocation period, this Severance Agreement and Release will be final and binding. B. This Severance Agreement and Release constitutes the entire agreement of the parities with respect to the subject matter set forth herein and there are no promises, understandings or representations, oral or written, other than those set forth herein. C. The Executive and the Company agree that, after the Severance Agreement and Release becomes final and binding, they will not pursue any claim which has been waived under the Severance Agreement and Release and will not challenge the enforceability of the Severance Agreement and Release by filing or instigating any lawsuit or administrative complaint or investigation arising out of the Executive's employment or termination. 14. Law of North Carolina This Severance Agreement and Release, having been prepared, executed and delivered in the State of North Carolina, and shall be governed by the laws of the State of North Carolina. 15. Severability Each provision of this Severance Agreement and Release is intended to be severable. If any provision, sentence, phrase or word of this Severance Agreement and Release or the application thereof to any person or circumstance shall be held invalid or unenforceable, the remainder of this Severance Agreement and Release, or the application of such provision, sentence, phrase or word to persons or circumstances, other than those as to which it is held invalid, shall not be affected thereby. 16. Notices Any notices required or permitted to be given by the parties shall be given in writing by certified mail, return receipt requested, or by prepaid telegram, delivered to: Lester C. Nail Vice President of Legal Affairs 2110 Executive Drive Post Office Box 1330 Salisbury, NC 28145-1330 and A. Edward Benner, Jr. 7620 Bringle Ferry Road Salisbury, NC 28146 17. Death of Executive In the event of the death of the Executive, any payment due under this Severance Agreement and Release will be made to the beneficiary designated by the Executive in writing, and, if no beneficiary is designated, to his Estate. FOOD LION, a division of DELHAIZE AMERICA, INC. Dated:1/1/00 By: /s/Darrell Johnson DARRELL JOHNSON VICE PRESIDENT OF HUMAN RESOURCES EXECUTIVE Dated:1/1/00 By:/s/Edward Benner, Jr. A. EDWARD BENNER, JR. EX-10.AE 11 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT, made this 20 day of January, 2000 (the "Effective Date"), between KASH N' KARRY FOOD STORES, INC., a Delaware corporation (the "Company") and a wholly-owned subsidiary of Delhaize America, Inc., a North Carolina corporation, with its principal place of business in Salisbury, North Carolina, and W. Bruce Dawson, an individual residing at 18500 Peninsula Club Drive, Cornelius, North Carolina 28031 ("Employee"), W I T N E S S E T H: WHEREAS, Employee is currently employed by the Company as its President; WHEREAS, the Board of Directors of the Company recognizes that it is in the best interests of the Company and its shareholders to retain capable and experienced executive officers such as Employee; WHEREAS, the Board of Directors recognizes that Employee has made substantial contributions to the growth and success of the Company and desires to provide for the continuing employment of Employee and to encourage the continued dedication and attention of Employee to the Company; WHEREAS, Employee is willing to continue to serve the Company; and WHEREAS, the Company and Employee desire to enter into this Employment Agreement. NOW, THEREFORE, in consideration of the premises, and the mutual agreements herein contained, the Company and Employee hereby agree as follows: 1. Continue to Employ. The Company hereby agrees to continue to employ Employee as its President for the Term of Employment as herein set forth, and Employee hereby agrees to continue to serve in such positions for such term. 2. Term of Employment. The "Term of Employment," as used herein, will commence on the date hereof and, unless sooner terminated as hereinafter provided, shall terminate on the third (3rd) anniversary of such date; provided, however, that the Term of Employment shall automatically be extended for additional periods of one (1) year each on the terms and conditions provided herein unless either party shall give written notice to the other party no less than ninety (90) days prior to the expiration of the applicable Term of Employment. 3. Employment During the Term. During the Term of Employment, Employee shall devote Employee's full professional time to the business of the Company, shall use Employee's best efforts to promote the interests of the Company and shall serve as its President and in such other senior executive capacities (at the Company, Delhaize America, Inc. or subsidiaries of the Company or Delhaize America, Inc.) as the Board of Directors of the Company or Delhaize America, Inc. shall hereafter designate from time to time. 4. Vacation. Employee shall be entitled to annual vacations in accordance with the vacation policy and practices of the Company. 5. Compensation. (a) Base Salary. As compensation for Employee's services hereunder and for Employee's covenants set forth in Sections 10, 11 and 12 below, the Company shall pay to Employee a base salary which shall not be less than Two Hundred Thirty-Eight Thousand Seven Hundred Six Dollars ($238,706) per annum; provided, however, such amount may be reviewed for increase from time to time by the Board of Directors of the Company. In no event shall such review result in any reduction in base salary provided in this Employment Agreement. Such compensation shall be payable in accordance with the Company's payroll practices for executive employees. (b) Bonus Plans. In addition, Employee shall be eligible to participate in the annual incentive bonus plan, stock option plans and other compensation plans of the Company, as they shall be administered by the Board of Directors of the Company and the relevant committees thereof and in their sole discretion. 6. Benefits. Employee shall be entitled to participate in all health, accident, disability, medical, life and other insurance programs and other benefit and compensation plans maintained by the Company for the benefit of Employee and/or other executive employees of the Company in accordance with the Company's policies. 7. Termination. Termination of Employee's employment under any of the following circumstances shall not constitute a breach of this Employment Agreement: (a) Death. Termination upon the death of Employee. (b) Cause. Termination by the Company for "Cause" as described in this Section 7(b). For purposes of this Employment Agreement, "Cause" shall mean (i) willful failure (other than by reason of incapacity due to physical or mental illness) to perform Employee's material duties hereunder and Employee's inability or unwillingness to correct such failure within thirty (30) days after receipt of written notice, (ii) conviction of Employee of a felony or plea of guilty or no contest to a felony, (iii) perpetration of a material dishonest act or fraud against the Company or any affiliate thereof or (iv) a material violation of any Company policy or any state, federal or other governmental statute or regulation. The definition of "Cause" also includes the termination of Employee's employment by the Company in connection with an assignment of this Employment Agreement to Delhaize America, Inc. or a successor or subsidiary of the Company or Delhaize America, Inc. in accordance with Section 18 hereof. The definition of "Cause" also includes subsequent terminations of Employee's employment in connection with subsequent assignments of this Employment Agreement to the Company or Delhaize America, Inc. or the successors or direct or indirect subsidiaries of the Company or Delhaize America, Inc. The definition of "Cause" expressly excludes any mistake of fact or judgment made by Employee in good faith with respect to the Company's business. (c) Good Reason. Termination by Employee for "Good Reason" as described in this Section 7(c). For purposes of this Employment Agreement, "Good Reason" shall mean the occurrence of any of the following circumstances without Employee's consent, provided that Employee has provided notice to the Company of Employee's intention to terminate his or her employment for Good Reason within thirty (30) days after the occurrence of such event and the Company has failed to cure such circumstance, if curable, within thirty (30) days after receipt of notice thereof: (i) a material diminution of the professional responsibilities of Employee as such responsibilities existed on the date of this Agreement, (ii) assignment of duties to Employee which are materially adverse to and inconsistent with Employee's position, (iii) failure of the Company to provide compensation and benefits obligations to Employee as set forth herein, (iv) transfer of Employee more than 50 miles from Tampa, Florida, without good business reasons, as determined by the Company's Board of Directors or (v) failure of the Company to require any successor to the Company to assume and comply with this Employment Agreement. The definition of "Good Reason" expressly excludes any assignment of this Employment Agreement to Delhaize America, Inc. or a successor or subsidiary of the Company or Delhaize America, Inc. in accordance with Section 18 hereof and any changes in responsibilities or duties resulting therefrom. In addition, the definition of "Good Reason" expressly excludes subsequent terminations of Employee's employment in connection with subsequent assignments of this Employment Agreement to the Company or its successors or direct or indirect subsidiaries of the Company or Delhaize America, Inc. An election by Employee to terminate his or her employment under this Section 7(c) shall not be deemed a voluntary termination of employment by Employee for the purpose of this Employment Agreement or any plan, arrangement or program of the Company. (d) Disability. Termination by the Company or Employee upon Disability of Employee. For the termination by the Company to be valid, (i) the Company must first give forty- five (45) days' written Notice of Termination, as defined below (which may occur before or after the end of the 180-day period specified in the definition of Disability below), and (ii) Employee shall not have returned to the performance of Employee's duties hereunder on a full-time basis during such 180-day period. For purposes of this Employment Agreement, "Disability" shall mean Employee's absence from continuous full-time employment with the Company for a period of at least 180 consecutive days by reason of a mental or physical illness. The Company shall have the right to have Employee examined at such reasonable times by such physicians satisfactory to Employee as the Company may designate, and Employee will make himself available for and submit to such examination as and when requested. Except as otherwise provided in this Section 7(d), the inability of Employee to perform Employee's duties hereunder, whether by reason of injury, illness (physical or mental), or otherwise shall not result in the termination of Employee's employment hereunder, and Employee shall be entitled to continue to receive Employee's base salary and other benefits as provided herein. (e) Without Cause. Termination by the Company without Cause. (f) Date and Notice of Termination. Any termination of Employee's employment by the Company or by Employee (other than termination pursuant to Section 7(a) above) shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Employment Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Employment Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee's employment under the provision so indicated. "Date of Termination" shall mean (i) if Employee's employment is terminated by Employee's death, the date of Employee's death, and (ii) if Employee's employment is terminated pursuant to a Notice of Termination, the date specified in the Notice of Termination; provided that, if within thirty (30) days after any Notice of Termination is given the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date which is finally determined to be the Date of Termination, either by mutual written agreement of the parties, by a binding and final arbitration award or by a final judgment, order or decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected). 8. Effect of Termination. In the event of termination of employment as described in Section 7 hereof, and provided that Employee (or Employee's beneficiary in the event of death) has signed and agreed to be bound by a general release of claims against the Company in form reasonably satisfactory to the Company, the Company shall compensate Employee as follows: (a) Death. If Employee's employment is terminated as a result of Employee's death, as specified in Section 7(a), the Company shall pay Employee's beneficiary the benefit called for under the Salary Continuation Agreement, if any, between Employee and the Company. Employee's beneficiary shall accept the payment provided for in this Section 8(a) in full discharge and release of the Company of and from any further obligations under this Employment Agreement, except for any other benefits due under any applicable plan or policy of the Company (including life insurance policies and pension or similar plans), as determined under the provisions of such plans or policies. (b) Disability. If Employee's employment is terminated by the Company or Employee as a result of Employee's disability as specified in Section 7(d), then the Company shall pay Employee his or her full compensation until the Date of Termination. Within thirty (30) days after the termination of Employee's employment, the Company shall pay Employee a lump sum payment equal to fifty percent (50%) of the present value of the future base salary payable to Employee during the remainder of the Term of Employment under this Employment Agreement or for a period of one (1) year, whichever is longer. Such lump sum amount shall be calculated by using a discount rate equal to the applicable Federal rate that is in effect on the date of payment as determined under Section 1274(d) of the Internal Revenue Code of 1986 (the "Code") and the regulations thereunder, and by assuming that Employee's annual salary in effect on the Date of Termination would continue for the remainder of the Term of Employment, or for a period of one (1) year, whichever is longer. This payment shall be in addition to any payments Employee shall be entitled to receive under any applicable disability insurance policies maintained by the Company for Employee. (c) Cause. If Employee's employment is terminated for any reason specified in Section 7(b) hereof, the Company shall no longer be obligated to make any payments to Employee pursuant to this Employment Agreement, except for the full amount of Employee's base salary and all compensation earned prior to the Date of Termination and payments pursuant to plans, programs or arrangements, as determined under the provisions of such plans or policies. (d) Good Reason or Without Cause. (i) If Employee's employment is terminated by Employee for Good Reason as specified in Section 7(c) hereof, or if Employee's employment is terminated by the Company without Cause as specified in Section 7(e): (A) the Company shall pay Employee the full amount of Employee's base salary and other compensation earned prior to the Date of Termination; and (B) the Company shall pay Employee an amount (the "Termination Payment") equal to the product of the Employee's current monthly base salary multiplied by the greater of (x) twelve (12) months or (y) the number of full months remaining in the Term of this Agreement. The Company may elect to pay the Termination Payment (i) in monthly installments, beginning thirty (30) days after the Date of Termination and payable thereafter on the date of the last regularly scheduled payroll for each month, or (ii) in one lump sum payment, due and payable thirty (30) days after the Date of Termination, in an amount equal to the present value of all such monthly payments calculated by using a discount rate equal to the applicable Federal rate that is in effect on the date of payment as determined under Section 1274(d) of the Code and the regulations thereunder. (ii) If prior to a Change in Control of the Company (as defined below) (and if Section 8(d)(iii) hereof does not apply), Employee's employment is terminated by Employee for Good Reason or by the Company without Cause, the Company shall maintain in full force and effect for the continued benefit of Employee and Employee's eligible dependents for one (1) year after the Date of Termination (or for the number of years remaining in the Term of this Agreement, whichever is greater), the employee fringe benefit plans and programs relating to medical, dental, health and life insurance in which Employee was entitled to participate immediately prior to the Date of Termination, if Employee's continued participation is permitted under the general terms and provisions of such plans and programs and applicable law, but not including the Annual Incentive Bonus Plan, the Wellness Bonus Plan, the Profit Sharing Plan and the Profit Sharing Restoration Plan and any other bonus, retirement or similar compensation plan. (iii) If (A) Employee's employment is terminated by the Company without Cause in contemplation of a Change in Control of the Company within six (6) months prior to such Change in Control or (B) Employee's employment is terminated by the Company without Cause or by Employee with Good Reason within one (1) year following a Change in Control of the Company, the Company shall pay Employee the compensation and benefits set forth in clauses (i) and (ii) above, and in addition, for one (1) year following the Date of Termination (or for the number of years remaining in the Term of this Agreement, whichever is greater), Employee shall be paid an annual amount equal to the amounts, if any, which would have been payable to Employee under the Annual Incentive Bonus Plan, the Wellness Bonus Plan, the Profit Sharing Plan and the Profit Sharing Restoration Plan (or such other plans in which Employee was entitled to participate as of the Date of Termination) assuming Employee had remained employed for such one (1) year (or greater) period and received an annual salary at the rate in effect on Employee's Date of Termination. (iv) For purposes of this Employment Agreement, "a Change in Control of the Company" shall mean a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"); provided that, without limitation, a Change in Control of the Company shall be deemed to have occurred if: (A) an acquisition (other than directly from the Company) by a Person (as defined below) (excluding the Company or an employee benefit plan of the Company or an entity controlled by the Company's shareholders) results in the aggregate number of shares of the Company's voting securities beneficially owned by any other Person to exceed the number of shares of the Company's voting securities beneficially owned, in the aggregate, by Etablissements Delhaize Freres et Cie "Le Lion" S.A. ("Delhaize") and Delhaize The Lion America, Inc.; (B) at any time during the term of this Employment Agreement there is a change in the composition of the Board of Directors of the Company resulting in a majority of the directors of the Company who are in office on the date hereof ("Incumbent Company Directors") no longer constituting a majority of the directors of the Company; provided that, in making such determination, persons who are elected to serve as directors of the Company and who are approved by at least 70% of the Incumbent Company Directors in office on the date of such election (other than in connection with an actual or threatened proxy contest) shall be treated as Incumbent Company Directors; (C) consummation of a complete liquidation or dissolution of the Company or a merger, consolidation or sale of all or substantially all of the Company's assets (collectively, a "Business Combination") other than a Business Combination in which all or substantially all of the beneficial holders of voting securities of the Company receive or retain fifty percent (50%) or more of the voting securities of the company or entity resulting from the Business Combination ("Resulting Company"), at least a majority of the board of directors of the resulting corporation were Incumbent Company Directors, and after which no person or entity beneficially owns twenty percent (20%) or more of the voting securities ("Beneficial Ownership Threshold") of the Resulting Company, who did not beneficially own such stock immediately before the Business Combination; or (D) occurrence of any of the events described in Section 8(d)(iv)(B) or (C) to Delhaize or the acquisition by any Person of more than thirty percent (30%) of the stock of Delhaize. Notwithstanding any other provision of this paragraph, for purposes of the definition of "Change in Control of the Company," a change in control of Delhaize shall not constitute a Change in Control of the Company unless it involves an event contemplated by this Section 8(d)(iv)(D). With respect to Section 8(d)(iv)(C) as it applies to Delhaize under Section 8(d)(iv)(D), the Beneficial Ownership Threshold shall be thirty percent (30%). For the purpose of this paragraph, the term "beneficially owned" shall have the meaning set forth in Rule 13d-3 promulgated under the Exchange Act, the term "Person" shall have the meaning set forth in Sections 3(a)(2) and 13(d)(3) of the Exchange Act and the term "voting securities" shall have the meaning set forth in Rule 12b-2 under the Exchange Act. 9. Business Expenses. The Company agrees that during the Term of Employment, the Company will reimburse Employee for actual travel and other out-of-pocket expenses reasonably incurred by Employee in connection with the performance of Employee's duties hereunder and accounted for in accordance with the policies and procedures currently established by the Company. 10. No Competing Employment. (a) Employee agrees that, during the Term of Employment and for a period of two (2) years after the date specified in the Notice of Termination or, if applicable, the date of Employee's resignation ("Restricted Period"), Employee will not, without the written consent of the Board of Directors, own, operate, control or be employed as an officer, director, manager or consultant, or as an employee with management or executive level duties or responsibilities, in any case, for or by any business engaged in any retail or wholesale grocery or supermarket business within ten (10) miles of any store operated by the Company or Delhaize America, Inc. or a subsidiary of the Company or of Delhaize America, Inc. on the date on which Employee's employment with the Company ends; provided, however, that this restriction contained in this Section 10(a) shall not apply if Employee works, consults or accepts employment with a business that does not directly compete with the Company or Delhaize America, Inc. or a subsidiary of the Company or Delhaize America, Inc. (b) Employee agrees that, during the Restricted Period, Employee will not, without the written consent of the Board of Directors, own, operate, control or be employed as an officer, director, manager or consultant, or as an employee with management or executive level duties or responsibilities, in any case, for or by any entity whose business, or whose direct or indirect parent entity's or direct or indirect subsidiary entity's business is any retail or wholesale grocery or supermarket business within ten (10) miles of any store operated by the Company, Delhaize America, Inc. or subsidiaries of the Company or Delhaize America, Inc. on the date on which Employee's employment with the Company ends. (c) Employee understands and agrees that a portion of the amounts payable to Employee under Section 5(a) and Section 8, if applicable, is in consideration for Employee's covenants set forth in Sections 10, 11 and 12. 11. No Solicitation. Employee agrees that, during the Restricted Period, Employee will not, without the prior written consent of the Board of Directors, directly or indirectly solicit or recruit any employee or independent contractor of the Company for the purpose of being employed by Employee, directly or indirectly, or any other person or entity on behalf of which Employee is acting as an agent, representative or employee. Notwithstanding the above, if Employee's employment is terminated for any reason specified in Section 7 hereof prior to the first anniversary of the date on which a Change in Control (as defined above) occurred, the covenants of Sections 10 and 11 shall not be applicable. 12. Confidentiality. Employee agrees that, during the Term of Employment and thereafter, Employee will not, without the prior written consent of the Company, disclose to anyone not entitled thereto, any confidential information relating to the business, sales, financial condition or products of the Company or any affiliate thereof. Employee also recognizes and acknowledges that Employee has a common law and statutory law obligation not to disclose trade secrets and other proprietary information of the Company. Employee further agrees that, should Employee leave the active service of the Company, Employee will not take or retain, without the written authorization of the Board of Directors, any papers, files or other documents or copies thereof or other confidential information of any kind belonging to the Company pertaining to its business, sales, financial condition or products. Employee understands and agrees that the rights and obligations set forth in this Section 12 are perpetual and, in any case, shall extend beyond the Restricted Period. 13. Failure to Comply. All payments to Employee hereunder, including without limitation all such payments made pursuant to Section 8 of this Agreement, are conditional upon Employee's full compliance with the provisions of this Agreement, including specifically Sections 10, 11 and 12 hereof, which provisions are hereby expressly incorporated by reference as conditions to all such payment. The provisions of sections 10, 11 and 12 will remain incorporated as conditions to payments under this Agreement, regardless of any judicial declaration of their invalidity or unenforceability as affirmative covenants. In the event that the Employee shall fail to comply with any provision of Sections 10, 11 and 12, (a) all rights hereunder of the Employee and any person claiming under or through him shall thereupon terminate and no person shall be entitled to receive any payments or benefits under this Agreement and (b) the Employee agrees to immediately pay to the Company any and all amounts previously paid to the Employee by the Company pursuant to Section 8 of this Agreement. In addition to the foregoing and without limiting any other remedies available to the Company, Employee acknowledges that a breach of the covenants contained in Sections 10, 11 and 12 herein may result in material irreparable injury to the Company for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat thereof, the Company shall be entitled to obtain a temporary restraining order or a preliminary injunction restraining Employee from engaging in activities prohibited by Sections 10, 11 and 12 or such other relief as may be required to specifically enforce any of the covenants in such Sections. 14. Indemnification. The Company shall indemnify and hold harmless Employee to the fullest extent permitted under North Carolina law, including, without limitation, the provisions of Article 8, Part 5 (or any successor provision) of the North Carolina Business Corporation Act, from and against all losses, claims, damages, liabilities, costs and expenses (including, without limitation, attorneys' fees), which may, at any time, be suffered by Employee as a result of the fact that Employee is or was an officer of the Company, or is or was serving at the request of the Company as an officer, employee or agent of an affiliate of the Company. The expenses incurred by Employee in any proceeding shall be paid promptly by the Company in advance of the final disposition of any proceeding at the written request of Employee to the fullest extent permitted under North Carolina law. The indemnification provision of this Section 14 shall survive the termination or expiration of this Employment Agreement. 15. Gross-Up Payment. In the event that any payments to which Employee becomes entitled under this Employment Agreement (the "Agreement Payments") will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the Code (or any similar tax that may hereafter be imposed), the Company shall pay to Employee at the time specified below, an additional amount (the "Gross-Up Payment") such that the net amount retained by Employee (taking into account the Total Payments (as hereinafter defined) and the Gross-Up Payment), after deduction of any Excise Tax on the Total Payments and any federal, state and local income tax and Excise Tax upon the Gross-Up Payment provided for by this Section 15, but before deduction for any federal, state or local income tax on the Total Payments, shall be equal to the "Total Payments," as defined below. Except as otherwise provided below, the Gross-Up Payment or portion thereof provided for in this Section 15 shall be paid not later than the thirtieth (30th) day following payment of any amounts under the Employment Agreement that will be subject to the Excise Tax; provided, however, that if the amount of such Gross-Up Payment or portion thereof cannot be finally determined on or before such day, the Company shall pay on such day an estimate, as determined in good faith by the Company, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined, but in no event later than the forty-fifth (45th) day after payment of any amounts under the Employment Agreement that will be subject to the Excise Tax. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to Employee, payable on the fifth (5th) day after demand by the Company (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code). For purposes of determining whether any of the Agreement Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) any other payments, accruals, vestings or other compensatory benefits received or to be received by Employee in connection with a Change in Control of the Company or the termination of Employee's employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company), any person whose actions result in a Change in Control of the Company or any person affiliated with the Company or such person (which, together with the Agreement Payments, shall constitute the "Total Payments") shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless, in the opinion of tax counsel selected by the Company's independent auditors, such other payments or benefits (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code or are otherwise not subject to the Excise Tax, (ii) the amount of the Total Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of (a) the total amount of the Total Payments, and (b) the amount of excess parachute payments within the meaning of Section 280G(b)(1) of the Code (after applying clause (i) above) and (iii) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Company's independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, Employee shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation for the calendar year in which the Gross-Up Payment is to be made and the applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the Gross-Up Payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time the Gross-Up Payment is made, Employee shall repay to the Company, at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus the portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local income tax imposed on the portion of the Gross-Up Payment being repaid) if such repayment results in a reduction in Excise Tax and/or a federal, state and local income tax deduction, plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time the Gross-Up Payment is made (including, by reason of any payment, the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional gross-up payment in respect of such excess (plus any interest payable with respect to such excess) at the time that the amount of such excess is finally determined. 16. Vesting. Upon a Change in Control of the Company or if Employee's employment is terminated for reasons specified in Sections 7(a), 7(c), 7(d) or 7(e) hereof, all of the rights granted to Employee by the Company to own or acquire stock of Delhaize America, Inc. (including, without limitation, stock options and restricted stock granted under its Stock Option Plan) shall automatically vest upon the date of such Change in Control or Date of Termination, respectively, without the need for further action or consent by the Company; provided, however, that (assuming no occurrence of a Change in Control) such rights shall not vest if Employee's employment is terminated for Employee's failure to adequately perform Employee's duties hereunder as determined by an affirmative vote of at least seventy percent (70%) of the Board of Directors of the Company. For purposes of the preceding sentence, "Change in Control of the Company" shall have the meaning set forth in Section 8(d)(iv) hereof except for the portion thereof describing a Change in Control at Delhaize as set forth in subsection 8(d)(iv)(D). 17. Mitigation. The Company recognizes that Employee has no duty to mitigate the amounts due to Employee upon termination of this Employment Agreement, and the obligations of the Company will not be diminished in the event Employee is employed by another employer after the termination of Employee's employment with the Company. 18. Successors. This Employment Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns and upon Employee and his or her legal representatives. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company to expressly assume and agree to perform this Employment Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. For purposes of this Section 18, Delhaize America, Inc. shall be deemed a successor to which this Employment Agreement may be assigned. In addition, this Employment Agreement may be assigned to an existing or future direct or indirect subsidiary of the Company or Delhaize America, Inc. Furthermore, after an assignment of this Employment Agreement to Delhaize America, Inc. or any existing or future direct or indirect subsidiary of the Company or Delhaize America, Inc., this Employment Agreement may be reassigned to the Company or Delhaize America, Inc., as the case may be. 19. Amendments. This Employment Agreement contains the entire contractual understanding between the parties and supersedes all prior agreements and understandings, both written and oral, between the parties hereto with respect to the subject matter hereof (except for the Salary Continuation Agreement, if any, between Employee and the Company). This Employment Agreement may not be changed orally but only by a written instrument signed by the parties hereto. 20. Governing Law. This Employment Agreement shall be governed by and construed in accordance with the laws of the State of North Carolina without regard to the conflicts of law principles thereof. 21. Waiver. The waiver of breach of any term or condition of this Employment Agreement shall not be deemed to constitute the waiver of any other breach of the same or any other term or condition. 22. Arbitration. Except as otherwise necessary to secure the remedy specified in Section 13 of this Employment Agreement (which remedy may be secured in a court of competent jurisdiction), any dispute arising between the Company and Employee with respect to the performance or interpretation of this Employment Agreement shall be submitted to arbitration in Salisbury, North Carolina for resolution in accordance with the commercial arbitration rules of the American Arbitration Association, modified to provide that the decision by the arbitrators shall be binding on the parties, shall be furnished in writing, separately and specifically stating the findings of fact and conclusions of law on which the decision is based and shall be rendered within ninety (90) days following impanelment of the arbitrators. The cost of arbitration shall initially be borne by the party requesting arbitration. Following a decision by the arbitrators, the costs of arbitration shall be divided as directed by the arbitrators. Pursuant to North Carolina General Statutes section 1-567.2, the provisions of Chapter 1, Subchapter XV, Article 45A of the North Carolina General Statutes shall apply to this Employment Agreement. 23. Severability. In the event that any provision or portion of this Employment Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions and portions of this Employment Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent provided by law. 24. Notices. Any notices or other communications required or permitted hereunder shall be deemed sufficiently given if sent by registered mail, postage prepaid, as follows: (a) If to Employee: W. Bruce Dawson 18500 Peninsula Club Drive Cornelius, North Carolina 28031 (b) If to the Company: Kash n' Karry Food Stores, Inc. c/o Delhaize America, Inc. Post Office Box 1330 2110 Executive Drive Salisbury, North Carolina 28145-1330 Attention: Secretary with a copy to: Akin, Gump,Strauss, Hauer & Feld, L.L.P. 1700 Pacific Avenue Suite 4100 Dallas, TX 75201-4675 Attention: Michael E. Dillard, P.C. or to such other address as shall have been specified in writing by either party to the other. Any such notice or communication shall be deemed to have been given on the second day (excluding any days U.S. Post Offices are not open) after the date so mailed. [The next page is the signature page] IN WITNESS WHEREOF, the Company has caused this Employment Agreement to be executed by its duly authorized representative, and Employee has hereunto set Employee's hand as of the date first above written. KASH N' KARRY FOOD STORES, INC. Attest: /s/Darrell Johnson By:/s/R.William McCanless Name:R. William McCanless EMPLOYEE: Attest: /s/Darrell Johnson /s/ W. Bruce Dawson W. Bruce Dawson EX-10.AF 12 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT, made this 13 day of March, 2000 (the "Effective Date"), between FOOD LION, a division of Delhaize America, Inc., a North Carolina corporation with its principal place of business in Salisbury, North Carolina (the "Company"), and Joseph C. Hall, Jr., an individual residing at 345 Gregory Road, Salisbury, North Carolina 28147 ("Employee"), W I T N E S S E T H: WHEREAS, Employee is currently employed by the Company in its Food Lion division as its President; WHEREAS, the Board of Directors of the Company recognizes that it is in the best interests of the Company and its shareholders to retain capable and experienced executive officers such as Employee; WHEREAS, the Board of Directors recognizes that Employee has made substantial contributions to the growth and success of the Company and desires to provide for the continuing employment of Employee and to encourage the continued dedication and attention of Employee to the Company; WHEREAS, the Company is in the process of converting into a holding company and will transfer substantially all of the assets of the Food Lion division to a newly-formed, wholly-owned subsidiary (the "Subsidiary") (such transfer is referred to herein as the "Holding Company Restructuring"); WHEREAS, at the time of the Holding Company Restructuring, Employee will continue in Employee's position as President but at the Subsidiary level only, and this Employment Agreement will be assigned to and assumed by the Subsidiary; WHEREAS, Employee is willing to continue to serve the Company and, from and after the Holding Company Restructuring, the Subsidiary; and WHEREAS, the Company and Employee desire to enter into this Employment Agreement. NOW, THEREFORE, in consideration of the premises, and the mutual agreements herein contained, the Company and Employee hereby agree as follows: 1. Continue to Employ. The Company hereby agrees to continue to employ Employee, prior to the Holding Company Restructuring, as President at the Food Lion division level and, after the Holding Company Restructuring, as President at the Subsidiary level, for the Term of Employment as herein set forth, and Employee hereby agrees to continue to serve the Company in such positions for such term. 2. Term of Employment. The "Term of Employment," as used herein, will commence on the date hereof and, unless sooner terminated as hereinafter provided, shall terminate on the fifth (5th) anniversary of such date; provided, however, that the Term of Employment shall automatically be extended for additional periods of one (1) year each on the terms and conditions provided herein unless either party shall give written notice to the other party no less than ninety (90) days prior to the expiration of the applicable Term of Employment. 3. Employment During the Term. During the Term of Employment, Employee shall devote Employee's full professional time to the business of the Company, shall use Employee's best efforts to promote the interests of the Company and shall serve, prior to the Holding Company Restructuring, as President of the Food Lion division and, after the Holding Company Restructuring, as President of the Subsidiary, and in such other senior executive capacities (at the Company or at subsidiaries of the Company) as the Board of Directors of the Company shall hereafter designate from time to time. 4. Vacation. Employee shall be entitled to annual vacations in accordance with the vacation policy and practices of the Company. 5. Compensation. (a) Base Salary. As compensation for Employee's services hereunder and for Employee's covenants set forth in Sections 10, 11 and 12 below, the Company shall pay to Employee a base salary which shall not be less than Five Hundred Twenty-One Thousand Three Hundred Ninety Dollars ($521,390) per annum; provided, however, such amount may be reviewed for increase from time to time by the Board of Directors of the Company. In no event shall such review result in any reduction in base salary provided in this Employment Agreement. Such compensation shall be payable in accordance with the Company's payroll practices for executive employees. (b) Bonus Plans. In addition, Employee shall be eligible to participate in the Company's annual incentive bonus plan, stock option plans and other compensation plans of the Company, as they shall be administered by the Board of Directors of the Company and the relevant committees thereof and in their sole discretion. 6. Benefits. Employee shall be entitled to participate in all health, accident, disability, medical, life and other insurance programs and other benefit and compensation plans maintained by the Company for the benefit of Employee and/or other executive employees of the Company in accordance with the Company's policies. In addition, the Company shall maintain in full force and effect on the life of Employee a life insurance policy, subject to a split dollar arrangement, in the face amount of three and one-half (3.5) times Employee's base salary if his death occurs prior to his retirement (provided his retirement is on terms consistent with the terms of the life insurance policy and any split dollar arrangements between Employee and the Company relating thereto) and two (2) times Employee's last base salary if his death occurs after any such retirement. Employee shall be the owner of such policy with the authority to designate the beneficiary thereof. 7. Termination. Termination of Employee's employment under any of the following circumstances shall not constitute a breach of this Employment Agreement: (a) Death. Termination upon the death of Employee. (b) Cause. Termination by the Company for "Cause" as described in this Section 7(b). For purposes of this Employment Agreement, "Cause" shall mean (i) willful failure (other than by reason of incapacity due to physical or mental illness) to perform Employee's material duties hereunder and Employee's inability or unwillingness to correct such failure within thirty (30) days after receipt of written notice, (ii) conviction of Employee of a felony or plea of guilty or no contest to a felony, (iii) perpetration of a material dishonest act or fraud against the Company or any affiliate thereof or (iv) a material violation of any Company policy or any state, federal or other governmental statute or regulation. The definition of "Cause" also includes the termination of Employee's employment by the Company in connection with an assignment of this Employment Agreement to a successor or subsidiary of the Company, including but not limited to the Subsidiary, in accordance with Section 18 hereof. The definition of "Cause" also includes subsequent terminations of Employee's employment in connection with subsequent assignments of this Employment Agreement to the Company or its successors or direct or indirect subsidiaries of the Company. The definition of "Cause" expressly excludes any mistake of fact or judgment made by Employee in good faith with respect to the Company's business. (c) Good Reason. Termination by Employee for "Good Reason" as described in this Section 7(c). For purposes of this Employment Agreement, "Good Reason" shall mean the occurrence of any of the following circumstances without Employee's consent, provided that Employee has provided notice to the Company of Employee's intention to terminate his or her employment for Good Reason within thirty (30) days after the occurrence of such event and the Company has failed to cure such circumstance, if curable, within thirty (30) days after receipt of notice thereof: (i) a material diminution of the professional responsibilities of Employee as such responsibilities existed on the date of this Agreement, (ii) assignment of duties to Employee which are materially adverse to and inconsistent with Employee's position, (iii) failure of the Company to provide compensation and benefits obligations to Employee as set forth herein, (iv) transfer of Employee more than 50 miles from Salisbury, North Carolina, without good business reasons, as determined by the Company's Board of Directors or (v) failure of the Company to require any successor to the Company to assume and comply with this Employment Agreement. The definition of "Good Reason" expressly excludes any assignment of this Employment Agreement to a successor or subsidiary of the Company, including but not limited to the Subsidiary, in accordance with Section 18 hereof and any changes in responsibilities or duties resulting therefrom. In addition, the definition of "Good Reason" expressly excludes subsequent terminations of Employee's employment in connection with subsequent assignments of this Employment Agreement to the Company or its successors or direct or indirect subsidiaries of the Company. An election by Employee to terminate his or her employment under this Section 7(c) shall not be deemed a voluntary termination of employment by Employee for the purpose of this Employment Agreement or any plan, arrangement or program of the Company. (d) Disability. Termination by the Company or Employee upon Disability of Employee. For the termination by the Company to be valid, (i) the Company must first give forty- five (45) days' written Notice of Termination, as defined below (which may occur before or after the end of the 180-day period specified in the definition of Disability below), and (ii) Employee shall not have returned to the performance of Employee's duties hereunder on a full-time basis during such 180-day period. For purposes of this Employment Agreement, "Disability" shall mean Employee's absence from continuous full-time employment with the Company for a period of at least 180 consecutive days by reason of a mental or physical illness. The Company shall have the right to have Employee examined at such reasonable times by such physicians satisfactory to Employee as the Company may designate, and Employee will make himself available for and submit to such examination as and when requested. Except as otherwise provided in this Section 7(d), the inability of Employee to perform Employee's duties hereunder, whether by reason of injury, illness (physical or mental), or otherwise shall not result in the termination of Employee's employment hereunder, and Employee shall be entitled to continue to receive Employee's base salary and other benefits as provided herein. (e) Without Cause. Termination by the Company without Cause. (f) Date and Notice of Termination. Any termination of Employee's employment by the Company or by Employee (other than termination pursuant to Section 7(a) above) shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Employment Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Employment Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee's employment under the provision so indicated. "Date of Termination" shall mean (i) if Employee's employment is terminated by Employee's death, the date of Employee's death, and (ii) if Employee's employment is terminated pursuant to a Notice of Termination, the date specified in the Notice of Termination; provided that, if within thirty (30) days after any Notice of Termination is given the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date which is finally determined to be the Date of Termination, either by mutual written agreement of the parties, by a binding and final arbitration award or by a final judgment, order or decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected). 8. Effect of Termination. In the event of termination of employment as described in Section 7 hereof, and provided that Employee (or Employee's beneficiary in the event of death) has signed and agreed to be bound by a general release of claims against the Company in form reasonably satisfactory to the Company, the Company shall compensate Employee as follows: (a) Death. If Employee's employment is terminated as a result of Employee's death, as specified in Section 7(a), the Company shall pay Employee's beneficiary the benefit called for under the Salary Continuation Agreement, if any, between Employee and the Company. Employee's beneficiary shall accept the payment provided for in this Section 8(a) in full discharge and release of the Company of and from any further obligations under this Employment Agreement, except for any other benefits due under any applicable plan or policy of the Company (including life insurance policies and pension or similar plans), as determined under the provisions of such plans or policies. (b) Disability. If Employee's employment is terminated by the Company or Employee as a result of Employee's disability as specified in Section 7(d), then the Company shall pay Employee his or her full compensation until the Date of Termination. Within thirty (30) days after the termination of Employee's employment, the Company shall pay Employee a lump sum payment equal to fifty percent (50%) of the present value of the future base salary payable to Employee during the remainder of the Term of Employment under this Employment Agreement or for a period of one (1) year, whichever is longer. Such lump sum amount shall be calculated by using a discount rate equal to the applicable Federal rate that is in effect on the date of payment as determined under Section 1274(d) of the Internal Revenue Code of 1986 (the "Code") and the regulations thereunder, and by assuming that Employee's annual salary in effect on the Date of Termination would continue for the remainder of the Term of Employment, or for a period of one (1) year, whichever is longer. This payment shall be in addition to any payments Employee shall be entitled to receive under any applicable disability insurance policies maintained by the Company for Employee. (c) Cause. If Employee's employment is terminated for any reason specified in Section 7(b) hereof, the Company shall no longer be obligated to make any payments to Employee pursuant to this Employment Agreement, except for the full amount of Employee's base salary and all compensation earned prior to the Date of Termination and payments pursuant to plans, programs or arrangements, as determined under the provisions of such plans or policies. (d) Good Reason or Without Cause. (i) If Employee's employment is terminated by Employee for Good Reason as specified in Section 7(c) hereof, or if Employee's employment is terminated by the Company without Cause as specified in Section 7(e): (A) the Company shall pay Employee the full amount of Employee's base salary and other compensation earned prior to the Date of Termination; and (B) the Company shall pay Employee an amount (the "Termination Payment") equal to the product of the Employee's current monthly base salary multiplied by the greater of (x) twelve (12) months or (y) the number of full months remaining in the Term of this Agreement. The Company may elect to pay the Termination Payment (i) in monthly installments, beginning thirty (30) days after the Date of Termination and payable thereafter on the date of the last regularly scheduled payroll for each month, or (ii) in one lump sum payment, due and payable thirty (30) days after the Date of Termination, in an amount equal to the present value of all such monthly payments calculated by using a discount rate equal to the applicable Federal rate that is in effect on the date of payment as determined under Section 1274(d) of the Code and the regulations thereunder. (ii) If prior to a Change in Control of the Company (as defined below) (and if Section 8(d)(iii) hereof does not apply), Employee's employment is terminated by Employee for Good Reason or by the Company without Cause, the Company shall maintain in full force and effect for the continued benefit of Employee and Employee's eligible dependents for one (1) year after the Date of Termination (or for the number of years remaining in the Term of this Agreement, whichever is greater), the employee fringe benefit plans and programs relating to medical, dental, health and life insurance in which Employee was entitled to participate immediately prior to the Date of Termination, if Employee's continued participation is permitted under the general terms and provisions of such plans and programs and applicable law, but not including the Annual Incentive Bonus Plan, the Wellness Bonus Plan, the Profit Sharing Plan and the Profit Sharing Restoration Plan and any other bonus, retirement or similar compensation plan. (iii) If (A) Employee's employment is terminated by the Company without Cause in contemplation of a Change in Control of the Company within six (6) months prior to such Change in Control or (B) Employee's employment is terminated by the Company without Cause or by Employee with Good Reason within one (1) year following a Change in Control of the Company, the Company shall pay Employee the compensation and benefits set forth in clauses (i) and (ii) above, and in addition, for one (1) year following the Date of Termination (or for the number of years remaining in the Term of this Agreement, whichever is greater), Employee shall be paid an annual amount equal to the amounts, if any, which would have been payable to Employee under the Annual Incentive Bonus Plan, the Wellness Bonus Plan, the Profit Sharing Plan and the Profit Sharing Restoration Plan (or such other plans in which Employee was entitled to participate as of the Date of Termination) assuming Employee had remained employed for such one (1) year (or greater) period and received an annual salary at the rate in effect on Employee's Date of Termination. (iv) For purposes of this Employment Agreement, "a Change in Control of the Company" shall mean a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"); provided that, without limitation, a Change in Control of the Company shall be deemed to have occurred if: (A) an acquisition (other than directly from the Company) by a Person (as defined below) (excluding the Company or an employee benefit plan of the Company or an entity controlled by the Company's shareholders) results in the aggregate number of shares of the Company's voting securities beneficially owned by any other Person to exceed the number of shares of the Company's voting securities beneficially owned, in the aggregate, by Etablissements Delhaize Freres et Cie "Le Lion" S.A. ("Delhaize") and Delhaize The Lion America, Inc.; (B) at any time during the term of this Employment Agreement there is a change in the composition of the Board of Directors of the Company resulting in a majority of the directors of the Company who are in office on the date hereof ("Incumbent Company Directors") no longer constituting a majority of the directors of the Company; provided that, in making such determination, persons who are elected to serve as directors of the Company and who are approved by at least 70% of the Incumbent Company Directors in office on the date of such election (other than in connection with an actual or threatened proxy contest) shall be treated as Incumbent Company Directors; (C) consummation of a complete liquidation or dissolution of the Company or a merger, consolidation or sale of all or substantially all of the Company's assets (collectively, a "Business Combination") other than a Business Combination in which all or substantially all of the beneficial holders of voting securities of the Company receive or retain fifty percent (50%) or more of the voting securities of the company or entity resulting from the Business Combination ("Resulting Company"), at least a majority of the board of directors of the resulting corporation were Incumbent Company Directors, and after which no person or entity beneficially owns twenty percent (20%) or more of the voting securities ("Beneficial Ownership Threshold") of the Resulting Company, who did not beneficially own such stock immediately before the Business Combination; or (D) occurrence of any of the events described in Section 8(d)(iv)(B) or (C) to Delhaize or the acquisition by any Person of more than thirty percent (30%) of the stock of Delhaize. Notwithstanding any other provision of this paragraph, for purposes of the definition of "Change in Control of the Company," a change in control of Delhaize shall not constitute a Change in Control of the Company unless it involves an event contemplated by this Section 8(d)(iv)(D). With respect to Section 8(d)(iv)(C) as it applies to Delhaize under Section 8(d)(iv)(D), the Beneficial Ownership Threshold shall be thirty percent (30%). For the purpose of this paragraph, the term "beneficially owned" shall have the meaning set forth in Rule 13d-3 promulgated under the Exchange Act, the term "Person" shall have the meaning set forth in Sections 3(a)(2) and 13(d)(3) of the Exchange Act and the term "voting securities" shall have the meaning set forth in Rule 12b-2 under the Exchange Act. 9. Business Expenses. The Company agrees that during the Term of Employment, the Company will reimburse Employee for actual travel and other out-of-pocket expenses reasonably incurred by Employee in connection with the performance of Employee's duties hereunder and accounted for in accordance with the policies and procedures currently established by the Company. 10. No Competing Employment. (a) Employee agrees that, during the Term of Employment and for a period of two (2) years after the date specified in the Notice of Termination or, if applicable, the date of Employee's resignation ("Restricted Period"), Employee will not, without the written consent of the Board of Directors, own, operate, control or be employed as an officer, director, manager or consultant, or as an employee with management or executive level duties or responsibilities, in any case, for or by any business engaged in any retail or wholesale grocery or supermarket business within ten (10) miles of any store operated by the Company or any subsidiary thereof on the date on which Employee's employment with the Company ends; provided, however, that this restriction contained in this Section 10(a) shall not apply if Employee works, consults or accepts employment with a business that does not directly compete with the Company or any subsidiary thereof. (b) Employee agrees that, during the Restricted Period, Employee will not, without the written consent of the Board of Directors, own, operate, control or be employed as an officer, director, manager or consultant, or as an employee with management or executive level duties or responsibilities, in any case, for or by any entity whose business, or whose direct or indirect parent entity's or direct or indirect subsidiary entity's business is any retail or wholesale grocery or supermarket business within ten (10) miles of any store operated by the Company or any subsidiary thereof on the date on which Employee's employment with the Company ends. (c) Employee understands and agrees that a portion of the amounts payable to Employee under Section 5(a) and Section 8, if applicable, is in consideration for Employee's covenants set forth in Sections 10, 11 and 12. 11. No Solicitation. Employee agrees that, during the Restricted Period, Employee will not, without the prior written consent of the Board of Directors, directly or indirectly solicit or recruit any employee or independent contractor of the Company for the purpose of being employed by Employee, directly or indirectly, or any other person or entity on behalf of which Employee is acting as an agent, representative or employee. Notwithstanding the above, if Employee's employment is terminated for any reason specified in Section 7 hereof prior to the first anniversary of the date on which a Change in Control (as defined above) occurred, the covenants of Sections 10 and 11 shall not be applicable. 12. Confidentiality. Employee agrees that, during the Term of Employment and thereafter, Employee will not, without the prior written consent of the Company, disclose to anyone not entitled thereto, any confidential information relating to the business, sales, financial condition or products of the Company or any affiliate thereof. Employee also recognizes and acknowledges that Employee has a common law and statutory law obligation not to disclose trade secrets and other proprietary information of the Company. Employee further agrees that, should Employee leave the active service of the Company, Employee will not take or retain, without the written authorization of the Board of Directors, any papers, files or other documents or copies thereof or other confidential information of any kind belonging to the Company pertaining to its business, sales, financial condition or products. Employee understands and agrees that the rights and obligations set forth in this Section 12 are perpetual and, in any case, shall extend beyond the Restricted Period. 13. Failure to Comply. All payments to Employee hereunder, including without limitation all such payments made pursuant to Section 8 of this Agreement, are conditional upon Employee's full compliance with the provisions of this Agreement, including specifically Sections 10, 11 and 12 hereof, which provisions are hereby expressly incorporated by reference as conditions to all such payment. The provisions of sections 10, 11 and 12 will remain incorporated as conditions to payments under this Agreement, regardless of any judicial declaration of their invalidity or unenforceability as affirmative covenants. In the event that the Employee shall fail to comply with any provision of Sections 10, 11 and 12, (a) all rights hereunder of the Employee and any person claiming under or through him shall thereupon terminate and no person shall be entitled to receive any payments or benefits under this Agreement and (b) the Employee agrees to immediately pay to the Company any and all amounts previously paid to the Employee by the Company pursuant to Section 8 of this Agreement. In addition to the foregoing and without limiting any other remedies available to the Company, Employee acknowledges that a breach of the covenants contained in Sections 10, 11 and 12 herein may result in material irreparable injury to the Company for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat thereof, the Company shall be entitled to obtain a temporary restraining order or a preliminary injunction restraining Employee from engaging in activities prohibited by Sections 10, 11 and 12 or such other relief as may be required to specifically enforce any of the covenants in such Sections. 14. Indemnification. The Company shall indemnify and hold harmless Employee to the fullest extent permitted under North Carolina law, including, without limitation, the provisions of Article 8, Part 5 (or any successor provision) of the North Carolina Business Corporation Act, from and against all losses, claims, damages, liabilities, costs and expenses (including, without limitation, attorneys' fees), which may, at any time, be suffered by Employee as a result of the fact that Employee is or was an officer of the Company, or is or was serving at the request of the Company as an officer, employee or agent of an affiliate of the Company. The expenses incurred by Employee in any proceeding shall be paid promptly by the Company in advance of the final disposition of any proceeding at the written request of Employee to the fullest extent permitted under North Carolina law. The indemnification provision of this Section 14 shall survive the termination or expiration of this Employment Agreement. 15. Gross-Up Payment. In the event that any payments to which Employee becomes entitled under this Employment Agreement (the "Agreement Payments") will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the Code (or any similar tax that may hereafter be imposed), the Company shall pay to Employee at the time specified below, an additional amount (the "Gross-Up Payment") such that the net amount retained by Employee (taking into account the Total Payments (as hereinafter defined) and the Gross-Up Payment), after deduction of any Excise Tax on the Total Payments and any federal, state and local income tax and Excise Tax upon the Gross-Up Payment provided for by this Section 15, but before deduction for any federal, state or local income tax on the Total Payments, shall be equal to the "Total Payments," as defined below. Except as otherwise provided below, the Gross-Up Payment or portion thereof provided for in this Section 15 shall be paid not later than the thirtieth (30th) day following payment of any amounts under the Employment Agreement that will be subject to the Excise Tax; provided, however, that if the amount of such Gross-Up Payment or portion thereof cannot be finally determined on or before such day, the Company shall pay on such day an estimate, as determined in good faith by the Company, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined, but in no event later than the forty-fifth (45th) day after payment of any amounts under the Employment Agreement that will be subject to the Excise Tax. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to Employee, payable on the fifth (5th) day after demand by the Company (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code). For purposes of determining whether any of the Agreement Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) any other payments, accruals, vestings or other compensatory benefits received or to be received by Employee in connection with a Change in Control of the Company or the termination of Employee's employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company), any person whose actions result in a Change in Control of the Company or any person affiliated with the Company or such person (which, together with the Agreement Payments, shall constitute the "Total Payments") shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless, in the opinion of tax counsel selected by the Company's independent auditors, such other payments or benefits (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code or are otherwise not subject to the Excise Tax, (ii) the amount of the Total Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of (a) the total amount of the Total Payments, and (b) the amount of excess parachute payments within the meaning of Section 280G(b)(1) of the Code (after applying clause (i) above) and (iii) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Company's independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, Employee shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation for the calendar year in which the Gross-Up Payment is to be made and the applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the Gross-Up Payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time the Gross-Up Payment is made, Employee shall repay to the Company, at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus the portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local income tax imposed on the portion of the Gross-Up Payment being repaid) if such repayment results in a reduction in Excise Tax and/or a federal, state and local income tax deduction, plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time the Gross-Up Payment is made (including, by reason of any payment, the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional gross-up payment in respect of such excess (plus any interest payable with respect to such excess) at the time that the amount of such excess is finally determined. 16. Vesting. Upon a Change in Control of the Company or if Employee's employment is terminated for reasons specified in Sections 7(a), 7(c), 7(d) or 7(e) hereof, all of the rights granted to Employee by the Company to own or acquire stock of the Company (including, without limitation, stock options and restricted stock granted under the Company's Stock Option Plan) shall automatically vest upon the date of such Change in Control or Date of Termination, respectively, without the need for further action or consent by the Company; provided, however, that (assuming no occurrence of a Change in Control) such rights shall not vest if Employee's employment is terminated for Employee's failure to adequately perform Employee's duties hereunder as determined by an affirmative vote of at least seventy percent (70%) of the Board of Directors of the Company. For purposes of the preceding sentence, "Change in Control of the Company" shall have the meaning set forth in Section 8(d)(iv) hereof except for the portion thereof describing a Change in Control at Delhaize as set forth in subsection 8(d)(iv)(D). 17. Mitigation. The Company recognizes that Employee has no duty to mitigate the amounts due to Employee upon termination of this Employment Agreement, and the obligations of the Company will not be diminished in the event Employee is employed by another employer after the termination of Employee's employment with the Company. 18. Successors. This Employment Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns and upon Employee and his or her legal representatives. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company to expressly assume and agree to perform this Employment Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. For purposes of this Section 18, the Subsidiary shall be deemed a successor to which this Employment Agreement may be assigned. In addition, this Employment Agreement may be assigned to an existing or future direct or indirect subsidiary of the Company. Furthermore, from and after the Holding Company Restructuring and after an assignment of this Employment Agreement to the Subsidiary or any other existing or future direct or indirect subsidiary of the Company, this Employment Agreement may be reassigned to the Company. 19. Amendments. This Employment Agreement contains the entire contractual understanding between the parties and supersedes all prior agreements and understandings, both written and oral, between the parties hereto with respect to the subject matter hereof (except for the Salary Continuation Agreement, if any, between Employee and the Company and except for the life insurance policy, subject to a split dollar arrangement, currently maintained by the Company with respect to Employee and of which Employee is the owner). This Employment Agreement may not be changed orally but only by a written instrument signed by the parties hereto. 20. Governing Law. This Employment Agreement shall be governed by and construed in accordance with the laws of the State of North Carolina without regard to the conflicts of law principles thereof. 21. Waiver. The waiver of breach of any term or condition of this Employment Agreement shall not be deemed to constitute the waiver of any other breach of the same or any other term or condition. 22. Arbitration. Except as otherwise necessary to secure the remedy specified in Section 13 of this Employment Agreement (which remedy may be secured in a court of competent jurisdiction), any dispute arising between the Company and Employee with respect to the performance or interpretation of this Employment Agreement shall be submitted to arbitration in Salisbury, North Carolina for resolution in accordance with the commercial arbitration rules of the American Arbitration Association, modified to provide that the decision by the arbitrators shall be binding on the parties, shall be furnished in writing, separately and specifically stating the findings of fact and conclusions of law on which the decision is based and shall be rendered within ninety (90) days following impanelment of the arbitrators. The cost of arbitration shall initially be borne by the party requesting arbitration. Following a decision by the arbitrators, the costs of arbitration shall be divided as directed by the arbitrators. Pursuant to North Carolina General Statutes section 1-567.2, the provisions of Chapter 1, Subchapter XV, Article 45A of the North Carolina General Statutes shall apply to this Employment Agreement. 23. Severability. In the event that any provision or portion of this Employment Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions and portions of this Employment Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent provided by law. 24. Notices. Any notices or other communications required or permitted hereunder shall be deemed sufficiently given if sent by registered mail, postage prepaid, as follows: (a) If to Employee: Joseph C. Hall, Jr. 345 Gregory Road Salisbury, North Carolina 28147 (b) If to the Company: Delhaize America, Inc. Post Office Box 1330 2110 Executive Drive Salisbury, North Carolina 28145-1330 Attention: Secretary with a copy to: Akin, Gump,Strauss, Hauer & Feld, L.L.P. 1700 Pacific Avenue Suite 4100 Dallas, TX 75201-4675 Attention: Michael E. Dillard, P.C. or to such other address as shall have been specified in writing by either party to the other. Any such notice or communication shall be deemed to have been given on the second day (excluding any days U.S. Post Offices are not open) after the date so mailed. [The next page is the signature page] IN WITNESS WHEREOF, the Company has caused this Employment Agreement to be executed by its duly authorized representative, and Employee has hereunto set Employee's hand as of the date first above written. FOOD LION, a division of Delhaize America, Inc. Attest: /s/ Darrell Johnson By:/s/ R. William McCanless R. William McCanless Chief Executive Officer EMPLOYEE: Attest: /s/ Darrell Johnson /s/ Joseph C. Hall, Jr. Joseph C. Hall, Jr. EX-10.AG 13 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT, made this 14 day of March, 2000 (the "Effective Date"), between DELHAIZE AMERICA, INC., a North Carolina corporation with its principal place of business in Salisbury, North Carolina (the "Company"), and Laura C. Kendall, an individual residing at 18900 River Wind Lane, Davidson, North Carolina 28036 ("Employee"), W I T N E S S E T H: WHEREAS, Employee is currently employed by the Company at the Company level as its Vice President and Chief Financial Officer and in its Food Lion division as its Executive Vice President of Finance and Chief Financial Officer; WHEREAS, the Board of Directors of the Company recognizes that it is in the best interests of the Company and its shareholders to retain capable and experienced executive officers such as Employee; WHEREAS, the Board of Directors recognizes that Employee has made substantial contributions to the growth and success of the Company and desires to provide for the continuing employment of Employee and to encourage the continued dedication and attention of Employee to the Company; WHEREAS, the Company is in the process of converting into a holding company and will transfer substantially all of the assets of the Food Lion division to a newly-formed, wholly-owned subsidiary (the "Subsidiary") (such transfer is referred to herein as the "Holding Company Restructuring"); WHEREAS, at the time of the Holding Company Restructuring, Employee will continue in Employee's position as Vice President of Finance and Chief Financial Officer at the Company level, and Employee will continue in Employee's position as Executive Vice President and Chief Financial Officer at the Subsidiary level; WHEREAS, Employee is willing to continue to serve the Company and, from and after the Holding Company Restructuring, the Subsidiary; and WHEREAS, the Company and Employee desire to enter into this Employment Agreement. NOW, THEREFORE, in consideration of the premises, and the mutual agreements herein contained, the Company and Employee hereby agree as follows: 1. Continue to Employ. The Company hereby agrees to continue to employ Employee (i) as Vice President of Finance and Chief Financial Officer at the Company level and (ii) prior to the Holding Company Restructuring, as Executive Vice President and Chief Financial Officer at the Food Lion division level and, after the Holding Company Restructuring, at the Subsidiary level, for the Term of Employment as herein set forth, and Employee hereby agrees to continue to serve the Company in such positions for such term. 2. Term of Employment. The "Term of Employment," as used herein, will commence on the date hereof and, unless sooner terminated as hereinafter provided, shall terminate on the third (3rd) anniversary of such date; provided, however, that the Term of Employment shall automatically be extended for additional periods of one (1) year each on the terms and conditions provided herein unless either party shall give written notice to the other party no less than ninety (90) days prior to the expiration of the applicable Term of Employment. 3. Employment During the Term. During the Term of Employment, Employee shall devote Employee's full professional time to the business of the Company, shall use Employee's best efforts to promote the interests of the Company and shall serve (i) as Vice President of Finance and Chief Financial Officer of the Company and (ii) prior to the Holding Company Restructuring, as Executive Vice President of Finance and Chief Financial Officer of the Food Lion division and, from and after the Holding Company Restructuring, of the Subsidiary, and in such other senior executive capacities (at the Company or at subsidiaries of the Company) as the Board of Directors of the Company shall hereafter designate from time to time. 4. Vacation. Employee shall be entitled to annual vacations in accordance with the vacation policy and practices of the Company. 5. Compensation. (a) Base Salary. As compensation for Employee's services hereunder and for Employee's covenants set forth in Sections 10, 11 and 12 below, the Company shall pay to Employee a base salary which shall not be less than Three Hundred Thirty-Six Thousand Two Hundred Six Dollars ($336,206) per annum; provided, however, such amount may be reviewed for increase from time to time by the Board of Directors of the Company. In no event shall such review result in any reduction in base salary provided in this Employment Agreement. Such compensation shall be payable in accordance with the Company's payroll practices for executive employees. (b) Bonus Plans. In addition, Employee shall be eligible to participate in the Company's annual incentive bonus plan, stock option plans and other compensation plans of the Company, as they shall be administered by the Board of Directors of the Company and the relevant committees thereof and in their sole discretion. 6. Benefits. Employee shall be entitled to participate in all health, accident, disability, medical, life and other insurance programs and other benefit and compensation plans maintained by the Company for the benefit of Employee and/or other executive employees of the Company in accordance with the Company's policies. 7. Termination. Termination of Employee's employment under any of the following circumstances shall not constitute a breach of this Employment Agreement: (a) Death. Termination upon the death of Employee. (b) Cause. Termination by the Company for "Cause" as described in this Section 7(b). For purposes of this Employment Agreement, "Cause" shall mean (i) willful failure (other than by reason of incapacity due to physical or mental illness) to perform Employee's material duties hereunder and Employee's inability or unwillingness to correct such failure within thirty (30) days after receipt of written notice, (ii) conviction of Employee of a felony or plea of guilty or no contest to a felony, (iii) perpetration of a material dishonest act or fraud against the Company or any affiliate thereof or (iv) a material violation of any Company policy or any state, federal or other governmental statute or regulation. The definition of "Cause" also includes the termination of Employee's employment by the Company in connection with an assignment of this Employment Agreement to a successor or subsidiary of the Company, including but not limited to the Subsidiary, in accordance with Section 18 hereof. The definition of "Cause" also includes the termination of Employee's employment at either the Company or any direct or indirect subsidiary so long as Employee is also then employed by any direct or indirect subsidiary of the Company or a successor to the Company. The definition of "Cause" also includes subsequent terminations of Employee's employment in connection with subsequent assignments of this Employment Agreement to the Company or its successors or direct or indirect subsidiaries of the Company. The definition of "Cause" expressly excludes any mistake of fact or judgment made by Employee in good faith with respect to the Company's business. (c) Good Reason. Termination by Employee for "Good Reason" as described in this Section 7(c). For purposes of this Employment Agreement, "Good Reason" shall mean the occurrence of any of the following circumstances without Employee's consent, provided that Employee has provided notice to the Company of Employee's intention to terminate his or her employment for Good Reason within thirty (30) days after the occurrence of such event and the Company has failed to cure such circumstance, if curable, within thirty (30) days after receipt of notice thereof: (i) a material diminution of the professional responsibilities of Employee as such responsibilities existed on the date of this Agreement, (ii) assignment of duties to Employee which are materially adverse to and inconsistent with Employee's position, (iii) failure of the Company to provide compensation and benefits obligations to Employee as set forth herein, (iv) transfer of Employee more than 50 miles from Salisbury, North Carolina, without good business reasons, as determined by the Company's Board of Directors or (v) failure of the Company to require any successor to the Company to assume and comply with this Employment Agreement. The definition of "Good Reason" expressly excludes any assignment of this Employment Agreement to a successor or subsidiary of the Company, including but not limited to the Subsidiary, in accordance with Section 18 hereof and any changes in responsibilities or duties resulting therefrom. The definition of "Good Reason" also expressly excludes subsequent terminations of Employee's employment in connection with subsequent assignments of this Employment Agreement to the Company or its successors or direct or indirect subsidiaries of the Company. In addition, the definition of "Good Reason" expressly excludes the termination of Employee's employment at either the Company or any direct or indirect subsidiary so long as Employee is also then employed by any direct or indirect subsidiary of the Company or a successor to the Company. An election by Employee to terminate his or her employment under this Section 7(c) shall not be deemed a voluntary termination of employment by Employee for the purpose of this Employment Agreement or any plan, arrangement or program of the Company. (d) Disability. Termination by the Company or Employee upon Disability of Employee. For the termination by the Company to be valid, (i) the Company must first give forty- five (45) days' written Notice of Termination, as defined below (which may occur before or after the end of the 180-day period specified in the definition of Disability below), and (ii) Employee shall not have returned to the performance of Employee's duties hereunder on a full-time basis during such 180-day period. For purposes of this Employment Agreement, "Disability" shall mean Employee's absence from continuous full-time employment with the Company for a period of at least 180 consecutive days by reason of a mental or physical illness. The Company shall have the right to have Employee examined at such reasonable times by such physicians satisfactory to Employee as the Company may designate, and Employee will make himself available for and submit to such examination as and when requested. Except as otherwise provided in this Section 7(d), the inability of Employee to perform Employee's duties hereunder, whether by reason of injury, illness (physical or mental), or otherwise shall not result in the termination of Employee's employment hereunder, and Employee shall be entitled to continue to receive Employee's base salary and other benefits as provided herein. (e) Without Cause. Termination by the Company without Cause. (f) Date and Notice of Termination. Any termination of Employee's employment by the Company or by Employee (other than termination pursuant to Section 7(a) above) shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Employment Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Employment Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee's employment under the provision so indicated. "Date of Termination" shall mean (i) if Employee's employment is terminated by Employee's death, the date of Employee's death, and (ii) if Employee's employment is terminated pursuant to a Notice of Termination, the date specified in the Notice of Termination; provided that, if within thirty (30) days after any Notice of Termination is given the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date which is finally determined to be the Date of Termination, either by mutual written agreement of the parties, by a binding and final arbitration award or by a final judgment, order or decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected). 8. Effect of Termination. In the event of termination of employment as described in Section 7 hereof, and provided that Employee (or Employee's beneficiary in the event of death) has signed and agreed to be bound by a general release of claims against the Company in form reasonably satisfactory to the Company, the Company shall compensate Employee as follows: (a) Death. If Employee's employment is terminated as a result of Employee's death, as specified in Section 7(a), the Company shall pay Employee's beneficiary the benefit called for under the Salary Continuation Agreement, if any, between Employee and the Company. Employee's beneficiary shall accept the payment provided for in this Section 8(a) in full discharge and release of the Company of and from any further obligations under this Employment Agreement, except for any other benefits due under any applicable plan or policy of the Company (including life insurance policies and pension or similar plans), as determined under the provisions of such plans or policies. (b) Disability. If Employee's employment is terminated by the Company or Employee as a result of Employee's disability as specified in Section 7(d), then the Company shall pay Employee his or her full compensation until the Date of Termination. Within thirty (30) days after the termination of Employee's employment, the Company shall pay Employee a lump sum payment equal to fifty percent (50%) of the present value of the future base salary payable to Employee during the remainder of the Term of Employment under this Employment Agreement or for a period of one (1) year, whichever is longer. Such lump sum amount shall be calculated by using a discount rate equal to the applicable Federal rate that is in effect on the date of payment as determined under Section 1274(d) of the Internal Revenue Code of 1986 (the "Code") and the regulations thereunder, and by assuming that Employee's annual salary in effect on the Date of Termination would continue for the remainder of the Term of Employment, or for a period of one (1) year, whichever is longer. This payment shall be in addition to any payments Employee shall be entitled to receive under any applicable disability insurance policies maintained by the Company for Employee. (c) Cause. If Employee's employment is terminated for any reason specified in Section 7(b) hereof, the Company shall no longer be obligated to make any payments to Employee pursuant to this Employment Agreement, except for the full amount of Employee's base salary and all compensation earned prior to the Date of Termination and payments pursuant to plans, programs or arrangements, as determined under the provisions of such plans or policies. (d) Good Reason or Without Cause. (i) If Employee's employment is terminated by Employee for Good Reason as specified in Section 7(c) hereof, or if Employee's employment is terminated by the Company without Cause as specified in Section 7(e): (A) the Company shall pay Employee the full amount of Employee's base salary and other compensation earned prior to the Date of Termination; and (B) the Company shall pay Employee an amount (the "Termination Payment") equal to the product of the Employee's current monthly base salary multiplied by the greater of (x) twelve (12) months or (y) the number of full months remaining in the Term of this Agreement. The Company may elect to pay the Termination Payment (i) in monthly installments, beginning thirty (30) days after the Date of Termination and payable thereafter on the date of the last regularly scheduled payroll for each month, or (ii) in one lump sum payment, due and payable thirty (30) days after the Date of Termination, in an amount equal to the present value of all such monthly payments calculated by using a discount rate equal to the applicable Federal rate that is in effect on the date of payment as determined under Section 1274(d) of the Code and the regulations thereunder. (ii) If prior to a Change in Control of the Company (as defined below) (and if Section 8(d)(iii) hereof does not apply), Employee's employment is terminated by Employee for Good Reason or by the Company without Cause, the Company shall maintain in full force and effect for the continued benefit of Employee and Employee's eligible dependents for one (1) year after the Date of Termination (or for the number of years remaining in the Term of this Agreement, whichever is greater), the employee fringe benefit plans and programs relating to medical, dental, health and life insurance in which Employee was entitled to participate immediately prior to the Date of Termination, if Employee's continued participation is permitted under the general terms and provisions of such plans and programs and applicable law, but not including the Annual Incentive Bonus Plan, the Wellness Bonus Plan, the Profit Sharing Plan and the Profit Sharing Restoration Plan and any other bonus, retirement or similar compensation plan. (iii) If (A) Employee's employment is terminated by the Company without Cause in contemplation of a Change in Control of the Company within six (6) months prior to such Change in Control or (B) Employee's employment is terminated by the Company without Cause or by Employee with Good Reason within one (1) year following a Change in Control of the Company, the Company shall pay Employee the compensation and benefits set forth in clauses (i) and (ii) above, and in addition, for one (1) year following the Date of Termination (or for the number of years remaining in the Term of this Agreement, whichever is greater), Employee shall be paid an annual amount equal to the amounts, if any, which would have been payable to Employee under the Annual Incentive Bonus Plan, the Wellness Bonus Plan, the Profit Sharing Plan and the Profit Sharing Restoration Plan (or such other plans in which Employee was entitled to participate as of the Date of Termination) assuming Employee had remained employed for such one (1) year (or greater) period and received an annual salary at the rate in effect on Employee's Date of Termination. (iv) For purposes of this Employment Agreement, "a Change in Control of the Company" shall mean a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"); provided that, without limitation, a Change in Control of the Company shall be deemed to have occurred if: (A) an acquisition (other than directly from the Company) by a Person (as defined below) (excluding the Company or an employee benefit plan of the Company or an entity controlled by the Company's shareholders) results in the aggregate number of shares of the Company's voting securities beneficially owned by any other Person to exceed the number of shares of the Company's voting securities beneficially owned, in the aggregate, by Etablissements Delhaize Freres et Cie "Le Lion" S.A. ("Delhaize") and Delhaize The Lion America, Inc.; or (B) at any time during the term of this Employment Agreement there is a change in the composition of the Board of Directors of the Company resulting in a majority of the directors of the Company who are in office on the date hereof ("Incumbent Company Directors") no longer constituting a majority of the directors of the Company; provided that, in making such determination, persons who are elected to serve as directors of the Company and who are approved by at least 70% of the Incumbent Company Directors in office on the date of such election (other than in connection with an actual or threatened proxy contest) shall be treated as Incumbent Company Directors; or (C) consummation of a complete liquidation or dissolution of the Company or a merger, consolidation or sale of all or substantially all of the Company's assets (collectively, a "Business Combination") other than a Business Combination in which all or substantially all of the beneficial holders of voting securities of the Company receive or retain fifty percent (50%) or more of the voting securities of the company or entity resulting from the Business Combination ("Resulting Company"), at least a majority of the board of directors of the resulting corporation were Incumbent Company Directors, and after which no person or entity beneficially owns twenty percent (20%) or more of the voting securities ("Beneficial Ownership Threshold") of the Resulting Company, who did not beneficially own such stock immediately before the Business Combination; or (D) occurrence of any of the events described in Section 8(d)(iv)(B) or (C) to Delhaize or the acquisition by any Person of more than thirty percent (30%) of the stock of Delhaize. Notwithstanding any other provision of this paragraph, for purposes of the definition of "Change in Control of the Company," a change in control of Delhaize shall not constitute a Change in Control of the Company unless it involves an event contemplated by this Section 8(d)(iv)(D). With respect to Section 8(d)(iv)(C) as it applies to Delhaize under Section 8(d)(iv)(D), the Beneficial Ownership Threshold shall be thirty percent (30%). For the purpose of this paragraph, the term "beneficially owned" shall have the meaning set forth in Rule 13d-3 promulgated under the Exchange Act, the term "Person" shall have the meaning set forth in Sections 3(a)(2) and 13(d)(3) of the Exchange Act and the term "voting securities" shall have the meaning set forth in Rule 12b-2 under the Exchange Act. 9. Business Expenses. The Company agrees that during the Term of Employment, the Company will reimburse Employee for actual travel and other out-of-pocket expenses reasonably incurred by Employee in connection with the performance of Employee's duties hereunder and accounted for in accordance with the policies and procedures currently established by the Company. 10. No Competing Employment. (a) Employee agrees that, during the Term of Employment and for a period of two (2) years after the date specified in the Notice of Termination or, if applicable, the date of Employee's resignation ("Restricted Period"), Employee will not, without the written consent of the Board of Directors, own, operate, control or be employed as an officer, director, manager or consultant, or as an employee with management or executive level duties or responsibilities, in any case, for or by any business engaged in any retail or wholesale grocery or supermarket business within ten (10) miles of any store operated by the Company or any subsidiary thereof on the date on which Employee's employment with the Company ends; provided, however, that this restriction contained in this Section 10(a) shall not apply if Employee works, consults or accepts employment with a business that does not directly compete with the Company or any subsidiary thereof. (b) Employee agrees that, during the Restricted Period, Employee will not, without the written consent of the Board of Directors, own, operate, control or be employed as an officer, director, manager or consultant, or as an employee with management or executive level duties or responsibilities, in any case, for or by any entity whose business, or whose direct or indirect parent entity's or direct or indirect subsidiary entity's business is any retail or wholesale grocery or supermarket business within ten (10) miles of any store operated by the Company or any subsidiary thereof on the date on which Employee's employment with the Company ends. (c) Employee understands and agrees that a portion of the amounts payable to Employee under Section 5(a) and Section 8, if applicable, is in consideration for Employee's covenants set forth in Sections 10, 11 and 12. 11. No Solicitation. Employee agrees that, during the Restricted Period, Employee will not, without the prior written consent of the Board of Directors, directly or indirectly solicit or recruit any employee or independent contractor of the Company for the purpose of being employed by Employee, directly or indirectly, or any other person or entity on behalf of which Employee is acting as an agent, representative or employee. Notwithstanding the above, if Employee's employment is terminated for any reason specified in Section 7 hereof prior to the first anniversary of the date on which a Change in Control (as defined above) occurred, the covenants of Sections 10 and 11 shall not be applicable. 12. Confidentiality. Employee agrees that, during the Term of Employment and thereafter, Employee will not, without the prior written consent of the Company, disclose to anyone not entitled thereto, any confidential information relating to the business, sales, financial condition or products of the Company or any affiliate thereof. Employee also recognizes and acknowledges that Employee has a common law and statutory law obligation not to disclose trade secrets and other proprietary information of the Company. Employee further agrees that, should Employee leave the active service of the Company, Employee will not take or retain, without the written authorization of the Board of Directors, any papers, files or other documents or copies thereof or other confidential information of any kind belonging to the Company pertaining to its business, sales, financial condition or products. Employee understands and agrees that the rights and obligations set forth in this Section 12 are perpetual and, in any case, shall extend beyond the Restricted Period. 13. Failure to Comply. All payments to Employee hereunder, including without limitation all such payments made pursuant to Section 8 of this Agreement, are conditional upon Employee's full compliance with the provisions of this Agreement, including specifically Sections 10, 11 and 12 hereof, which provisions are hereby expressly incorporated by reference as conditions to all such payment. The provisions of sections 10, 11 and 12 will remain incorporated as conditions to payments under this Agreement, regardless of any judicial declaration of their invalidity or unenforceability as affirmative covenants. In the event that the Employee shall fail to comply with any provision of Sections 10, 11 and 12, (a) all rights hereunder of the Employee and any person claiming under or through him shall thereupon terminate and no person shall be entitled to receive any payments or benefits under this Agreement and (b) the Employee agrees to immediately pay to the Company any and all amounts previously paid to the Employee by the Company pursuant to Section 8 of this Agreement. In addition to the foregoing and without limiting any other remedies available to the Company, Employee acknowledges that a breach of the covenants contained in Sections 10, 11 and 12 herein may result in material irreparable injury to the Company for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat thereof, the Company shall be entitled to obtain a temporary restraining order or a preliminary injunction restraining Employee from engaging in activities prohibited by Sections 10, 11 and 12 or such other relief as may be required to specifically enforce any of the covenants in such Sections. 14. Indemnification. The Company shall indemnify and hold harmless Employee to the fullest extent permitted under North Carolina law, including, without limitation, the provisions of Article 8, Part 5 (or any successor provision) of the North Carolina Business Corporation Act, from and against all losses, claims, damages, liabilities, costs and expenses (including, without limitation, attorneys' fees), which may, at any time, be suffered by Employee as a result of the fact that Employee is or was an officer of the Company, or is or was serving at the request of the Company as an officer, employee or agent of an affiliate of the Company. The expenses incurred by Employee in any proceeding shall be paid promptly by the Company in advance of the final disposition of any proceeding at the written request of Employee to the fullest extent permitted under North Carolina law. The indemnification provision of this Section 14 shall survive the termination or expiration of this Employment Agreement. 15. Gross-Up Payment. In the event that any payments to which Employee becomes entitled under this Employment Agreement (the "Agreement Payments") will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the Code (or any similar tax that may hereafter be imposed), the Company shall pay to Employee at the time specified below, an additional amount (the "Gross-Up Payment") such that the net amount retained by Employee (taking into account the Total Payments (as hereinafter defined) and the Gross-Up Payment), after deduction of any Excise Tax on the Total Payments and any federal, state and local income tax and Excise Tax upon the Gross-Up Payment provided for by this Section 15, but before deduction for any federal, state or local income tax on the Total Payments, shall be equal to the "Total Payments," as defined below. Except as otherwise provided below, the Gross-Up Payment or portion thereof provided for in this Section 15 shall be paid not later than the thirtieth (30th) day following payment of any amounts under the Employment Agreement that will be subject to the Excise Tax; provided, however, that if the amount of such Gross-Up Payment or portion thereof cannot be finally determined on or before such day, the Company shall pay on such day an estimate, as determined in good faith by the Company, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined, but in no event later than the forty-fifth (45th) day after payment of any amounts under the Employment Agreement that will be subject to the Excise Tax. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to Employee, payable on the fifth (5th) day after demand by the Company (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code). For purposes of determining whether any of the Agreement Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) any other payments, accruals, vestings or other compensatory benefits received or to be received by Employee in connection with a Change in Control of the Company or the termination of Employee's employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company), any person whose actions result in a Change in Control of the Company or any person affiliated with the Company or such person (which, together with the Agreement Payments, shall constitute the "Total Payments") shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless, in the opinion of tax counsel selected by the Company's independent auditors, such other payments or benefits (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code or are otherwise not subject to the Excise Tax, (ii) the amount of the Total Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of (a) the total amount of the Total Payments, and (b) the amount of excess parachute payments within the meaning of Section 280G(b)(1) of the Code (after applying clause (i) above) and (iii) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Company's independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, Employee shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation for the calendar year in which the Gross-Up Payment is to be made and the applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the Gross-Up Payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time the Gross-Up Payment is made, Employee shall repay to the Company, at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus the portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local income tax imposed on the portion of the Gross-Up Payment being repaid) if such repayment results in a reduction in Excise Tax and/or a federal, state and local income tax deduction, plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time the Gross-Up Payment is made (including, by reason of any payment, the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional gross-up payment in respect of such excess (plus any interest payable with respect to such excess) at the time that the amount of such excess is finally determined. 16. Vesting. Upon a Change in Control of the Company or if Employee's employment is terminated for reasons specified in Sections 7(a), 7(c), 7(d) or 7(e) hereof, all of the rights granted to Employee by the Company to own or acquire stock of the Company (including, without limitation, stock options and restricted stock granted under the Company's Stock Option Plan) shall automatically vest upon the date of such Change in Control or Date of Termination, respectively, without the need for further action or consent by the Company; provided, however, that (assuming no occurrence of a Change in Control) such rights shall not vest if Employee's employment is terminated for Employee's failure to adequately perform Employee's duties hereunder as determined by an affirmative vote of at least seventy percent (70%) of the Board of Directors of the Company. For purposes of the preceding sentence, "Change in Control of the Company" shall have the meaning set forth in Section 8(d)(iv) hereof except for the portion thereof describing a Change in Control at Delhaize as set forth in subsection 8(d)(iv)(D). 17. Mitigation. The Company recognizes that Employee has no duty to mitigate the amounts due to Employee upon termination of this Employment Agreement, and the obligations of the Company will not be diminished in the event Employee is employed by another employer after the termination of Employee's employment with the Company. 18. Successors. This Employment Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns and upon Employee and his or her legal representatives. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company to expressly assume and agree to perform this Employment Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. For purposes of this Section 18, the Subsidiary shall be deemed a successor to which this Employment Agreement may be assigned. In addition, this Employment Agreement may be assigned to an existing or future direct or indirect subsidiary of the Company. Furthermore, from and after the Holding Company Restructuring and after an assignment of this Employment Agreement to the Subsidiary or any other existing or future direct or indirect subsidiary of the Company, this Employment Agreement may be reassigned to the Company. 19. Amendments. This Employment Agreement contains the entire contractual understanding between the parties and supersedes all prior agreements and understandings, both written and oral, between the parties hereto with respect to the subject matter hereof (except for the Salary Continuation Agreement, if any, between Employee and the Company). This Employment Agreement may not be changed orally but only by a written instrument signed by the parties hereto. 20. Governing Law. This Employment Agreement shall be governed by and construed in accordance with the laws of the State of North Carolina without regard to the conflicts of law principles thereof. 21. Waiver. The waiver of breach of any term or condition of this Employment Agreement shall not be deemed to constitute the waiver of any other breach of the same or any other term or condition. 22. Arbitration. Except as otherwise necessary to secure the remedy specified in Section 13 of this Employment Agreement (which remedy may be secured in a court of competent jurisdiction), any dispute arising between the Company and Employee with respect to the performance or interpretation of this Employment Agreement shall be submitted to arbitration in Salisbury, North Carolina for resolution in accordance with the commercial arbitration rules of the American Arbitration Association, modified to provide that the decision by the arbitrators shall be binding on the parties, shall be furnished in writing, separately and specifically stating the findings of fact and conclusions of law on which the decision is based and shall be rendered within ninety (90) days following impanelment of the arbitrators. The cost of arbitration shall initially be borne by the party requesting arbitration. Following a decision by the arbitrators, the costs of arbitration shall be divided as directed by the arbitrators. Pursuant to North Carolina General Statutes section 1-567.2, the provisions of Chapter 1, Subchapter XV, Article 45A of the North Carolina General Statutes shall apply to this Employment Agreement. 23. Severability. In the event that any provision or portion of this Employment Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions and portions of this Employment Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent provided by law. 24. Notices. Any notices or other communications required or permitted hereunder shall be deemed sufficiently given if sent by registered mail, postage prepaid, as follows: (a) If to Employee: Laura C. Kendall 18900 River Wind Lane Davidson, North Carolina 28036 (b) If to the Company: Delhaize America, Inc. Post Office Box 1330 2110 Executive Drive Salisbury, North Carolina 28145-1330 Attention: Secretary with a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P. 1700 Pacific Avenue Suite 4100 Dallas, TX 75201-4675 Attention: Michael E. Dillard, P.C. or to such other address as shall have been specified in writing by either party to the other. Any such notice or communication shall be deemed to have been given on the second day (excluding any days U.S. Post Offices are not open) after the date so mailed. [The next page is the signature page] IN WITNESS WHEREOF, the Company has caused this Employment Agreement to be executed by its duly authorized representative, and Employee has hereunto set Employee's hand as of the date first above written. DELHAIZE AMERICA, INC. Attest: /s/Darrell Johnson BY: /s/R. William McCanless R. William McCanless Chief Executive Officer EMPLOYEE: Attest: /s/ Darrell Johnson /s/ Laura C. Kendall Name: Laura C. Kendall -----END PRIVACY-ENHANCED MESSAGE-----