-----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, Bpl6tDSLVbmqR4txRprFFsJ4n9DSgb4wPVx1Kxux/iywRt4WjbBU+eEZXURf3ej5 bQBzo/OBrOpmd5Cl3bZYNQ== 0000912057-96-026649.txt : 19961120 0000912057-96-026649.hdr.sgml : 19961120 ACCESSION NUMBER: 0000912057-96-026649 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 19961115 SROS: NYSE GROUP MEMBERS: FLI HOLDING CORP. GROUP MEMBERS: FOOD LION INC GROUP MEMBERS: KK ACQUISTION CORP. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: KASH N KARRY FOOD STORES INC CENTRAL INDEX KEY: 0000842913 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 954161591 STATE OF INCORPORATION: DE FISCAL YEAR END: 0730 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-44157 FILM NUMBER: 96667836 BUSINESS ADDRESS: STREET 1: 6422 HARNEY RD CITY: TAMPA STATE: FL ZIP: 33610 BUSINESS PHONE: 8136210276 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: KASH N KARRY FOOD STORES INC CENTRAL INDEX KEY: 0000842913 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 954161591 STATE OF INCORPORATION: DE FISCAL YEAR END: 0730 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: 1934 Act SEC FILE NUMBER: 005-44157 FILM NUMBER: 96667837 BUSINESS ADDRESS: STREET 1: 6422 HARNEY RD CITY: TAMPA STATE: FL ZIP: 33610 BUSINESS PHONE: 8136210276 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: FOOD LION INC CENTRAL INDEX KEY: 0000037912 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 560660192 STATE OF INCORPORATION: NC FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: SC 14D1 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 TOWN STORES INC DATE OF NAME CHANGE: 19830510 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: FOOD LION INC CENTRAL INDEX KEY: 0000037912 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 560660192 STATE OF INCORPORATION: NC FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: SC 14D1 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 TOWN STORES INC DATE OF NAME CHANGE: 19830510 SC 14D1 1 SC 14D1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE 14D-1 TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 AND AMENDMENT NO. 1 TO SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 --------------------- KASH N' KARRY FOOD STORES, INC. (Name of Subject Company) KK ACQUISITION CORP. FLI HOLDING CORP. FOOD LION, INC. (Bidder(s)) COMMON STOCK, $0.01 PAR VALUE (INCLUDING PREFERRED SHARE PURCHASE RIGHTS ISSUED WITH RESPECT THERETO) (Title of Class of Securities) 48577P106 (CUSIP Number of Class of Securities) R. WILLIAM MCCANLESS, ESQ. SENIOR VICE PRESIDENT AND CHIEF ADMINISTRATIVE OFFICER FOOD LION, INC. P.O. BOX 1330 2110 EXECUTIVE DRIVE SALISBURY, NORTH CAROLINA 28145 TELEPHONE: (704) 633-8250 (Name, address and telephone number of Persons Authorized to Receive Notices and Communications on behalf of Bidder) ------------------------ COPY TO: BRUCE S. MENDELSOHN AND RUSSELL W. PARKS, JR., P.C. AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P. 1333 NEW HAMPSHIRE AVENUE, N.W. SUITE 400 WASHINGTON, D.C. 20036 TELEPHONE: (202) 887-4000 NOVEMBER 15, 1996 ------------------------ CALCULATION OF FILING FEE
TRANSACTION VALUE AMOUNT OF FILING FEE $121,532,164(1) $24,307(2)
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Filing Amount Previously Paid: NONE Party: N/A Form or Registration No.: N/A Date Filed: N/A
- ------------------------ (1) Calculated by multiplying $26.00, the per share tender offer price, by 4,674,314, the number of shares of Common Stock sought in the Offer. (2) 1/50 of 1% of the Transaction Valuation. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Page 1 of 10 (Exhibit Index is Located on Page 10) CUSIP NO. 48577P106 14D-1 PAGE 2 OF 10 PAGES
1. Name of Reporting Person S.S. or I.R.S. Identification Nos. of Above Person KK Acquisition Corp. 56-1997232 2. Check the Appropriate Box if a Member of a Group (a) /X/ (b) / / 3. SEC Use Only 4. Sources of Funds AF 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e) or 2(f) / / 6. Citizenship or Place of Organization Delaware 7. Aggregate Amount Beneficially Owned by Each Reporting Person 3,134,942* 8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares / / N/A 9. Percent of Class Represented by Amount in Row (7) approximately 67.1%* 10. Type of Reporting Person CO
* Indicates the number of Shares to be owned by KK Acquisition Corp. ("Purchaser") in the event Purchaser exercises its option to purchase shares of Kash n' Karry Food Stores, Inc. (the "Company") pursuant to an agreement (the "Stockholders Agreement"), dated October 31, 1996, among Food Lion, Inc. ("Parent"), Purchaser, the Company and the Selling Stockholders (as defined in Item 11). Pursuant to the Stockholders Agreement, the Selling Stockholders have agreed, among other things, to validly sell and tender pursuant to the tender offer by Purchaser, a wholly owned subsidiary of FLI Holding Corp., a wholly owned subsidiary of Parent, all of the shares of the Company beneficially owned by them, which shares represent, in the aggregate, approximately 67.1% of the Company's outstanding shares on October 31, 1996. Pursuant to the Stockholders Agreement, each of the Selling Stockholders has agreed, and has also granted Parent an irrevocable proxy, to vote, or grant a consent or approval in respect of the shares subject to the Stockholders Agreement, against any competing transaction including any other merger, or any extraordinary corporate transaction such as a consolidation, combination or sale of the Company's assets or any proposal or transaction that would, in any manner, impede, frustrate, prevent or nullify the Offer (as defined below) or the transactions contemplated by the Agreement and Plan of Merger, dated as of October 31, 1996 by and among Parent, Purchaser and the Company (the "Merger Agreement"). The Stockholders Agreement is described more fully in Section 10 of the Offer to Purchase dated November 15, 1996 of Parent, Holding and Purchaser (the "Offer to Purchase"). 2 CUSIP NO. 48577P106 14D-1 PAGE 3 OF 10 PAGES
1. Name of Reporting Person S.S. or I.R.S. Identification Nos. of Above Person FLI Holding Corp. 56-1997227 2. Check the Appropriate Box if a Member of a Group (a) /X/ (b) / / 3. SEC Use Only 4. Sources of Funds AF 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e) or 2(f) / / 6. Citizenship or Place of Organization Delaware 7. Aggregate Amount Beneficially Owned by Each Reporting Person 3,134,942* 8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares / / N/A 9. Percent of Class Represented by Amount in Row (7) approximately 67.1%* 10. Type of Reporting Person HC
* Indicates the number of Shares to be owned by Purchaser in the event Purchaser exercises the option to purchase Shares pursuant to the Stockholders Agreement. Pursuant to the Stockholders Agreement, the Selling Stockholders have agreed, among other things, to validly sell and tender pursuant to the tender offer by Purchaser, all of the shares of the Company beneficially owned by them, which shares represent, in the aggregate, approximately 67.1% of the Company's outstanding shares on October 31, 1996. Pursuant to the Stockholders Agreement, each of the Selling Stockholders has agreed, and has also granted Parent an irrevocable proxy, to vote or grant a consent or approval in respect of the shares subject to the Stockholders Agreement against any competing transaction including any other merger, or any extraordinary corporate transaction such as a consolidation, combination or sale of the Company's assets or any proposal or transaction that would, in any manner, impede, frustrate, prevent or nullify the Offer or the transactions contemplated by the Merger Agreement. The Stockholders Agreement is described more fully in Section 10 of the Offer to Purchase. 3 CUSIP NO. 48577P106 14D-1 PAGE 4 OF 10 PAGES
1. Name of Reporting Person S.S. or I.R.S. Identification Nos. of Above Person Food Lion, Inc. 56-0660192 2. Check the Appropriate Box if a Member of a Group (a) /X/ (b) / / 3. SEC Use Only 4. Sources of Funds BK 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e) or 2(f) / / 6. Citizenship or Place of Organization North Carolina 7. Aggregate Amount Beneficially Owned by Each Reporting Person 3,134,942* 8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares / / N/A 9. Percent of Class Represented by Amount in Row (7) approximately 67.1%* 10. Type of Reporting Person HC
* Indicates the number of Shares to be owned by Purchaser in the event Purchaser exercises the option to purchase Shares pursuant to the Stockholders Agreement. Pursuant to the Stockholders Agreement, the Selling Stockholders have agreed, among other things, to validly sell and tender pursuant to the tender offer by Purchaser, all of the shares of the Company beneficially owned by them, which shares represent, in the aggregate, approximately 67.1% of the Company's outstanding shares on October 31, 1996. Pursuant to the Stockholders Agreement, each of the Selling Stockholders has agreed, and has also granted Parent an irrevocable proxy, to vote or grant a consent or approval in respect of the shares subject to the Stockholders Agreement against any competing transaction including any other merger, or any extraordinary corporate transaction such as a consolidation, combination or sale of the Company's assets or any proposal or transaction that would, in any manner, impede, frustrate, prevent or nullify the Offer or the transactions contemplated by the Merger Agreement. The Stockholders Agreement is described more fully in Section 10 of the Offer to Purchase. 4 This Tender Offer Statement on Schedule 14D-1 and Amendment No. 1 to Schedule 13D Statement filed on November 12, 1996 (this "Statement") relates to the offer by KK Acquisition Corp., a corporation organized and existing under the laws of the State of Delaware ("Purchaser") and a wholly owned subsidiary of FLI Holding Corp. ("Holding"), a Delaware corporation and a wholly owned subsidiary of Food Lion, Inc., a North Carolina corporation ("Parent"), to purchase all outstanding shares of common stock, par value $0.01 per share (the "Shares"), of Kash n' Karry Food Stores, Inc., a corporation organized and existing under the laws of the State of Delaware (the "Company"), including the associated Preferred Share Purchase Rights (the "Rights") issued pursuant to the Rights Agreement, dated as of April 13, 1995, between the Company and Fleet National Bank (successor in interest to Shawmut Bank Connecticut, N.A.), as Rights Agent, as amended by the First Amendment to Rights Agreement dated as of June 13, 1995, and the Second Amendment to Rights Agreement dated as of October 30, 1996 (the "Rights Agreement"), at a price of $26.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in Purchaser's Offer to Purchase dated November 15, 1996 (the "Offer to Purchase") and in the related Letter of Transmittal (which together constitute the "Offer"), copies of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively. All references herein to the Rights include all benefits which may inure to stockholders of the Company pursuant to the Rights Agreement, and unless the context requires otherwise, all references herein to Shares include the Rights. ITEM 1. SECURITY AND SUBJECT COMPANY. (a) The name of the subject company is Kash n' Karry Food Stores, Inc., a corporation organized and existing under the laws of the State of Delaware, which has its principal executive offices at 6422 Harney Road, Tampa, Florida 33610. (b) The class of equity securities and number of shares thereof being sought are the common stock, par value $0.01 per share, of the Company and all the outstanding shares thereof, including the Rights. The information set forth in the Introduction and Section 1 ("Terms of the Offer; Expiration Date") of the Offer to Purchase is incorporated herein by reference. (c) The information concerning the principal market in which the Shares are traded and certain high and low sales prices for the Shares in such principal market set forth in Section 6 ("Price Range of Shares; Dividends") of the Offer to Purchase is incorporated herein by reference. ITEM 2. IDENTITY AND BACKGROUND. (a)-(d) and (g) This Statement is filed by Purchaser, Holding and Parent. The information concerning the name, state or other place of organization, principal business and address of the principal office of each of Purchaser, Holding and Parent and the information concerning the name, business address, present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment or occupation is conducted, material occupations, positions, offices or employments during the last five years and citizenship of each of the executive officers and directors of Purchaser, Holding, Parent and Etablissements Delhaize Freres et Cie "Le Lion" S.A. ("Delhaize"), which holds a majority(1) of Parent's voting securities, are set forth in the Introduction, Section 8 ("Certain Information Concerning Purchaser, Holding and Parent") and Schedule I of the Offer to Purchase and are incorporated herein by reference. (e) and (f) During the last five years, none of Purchaser, Holding, Parent or Delhaize and, to the best knowledge of Purchaser, Holding, Parent and Delhaize, none of the persons listed on Schedule I of the Offer to Purchase has been (i) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) a party to a civil proceeding of a judicial or administrative body of competent - ------------------------ (1) Includes shares held of record by Delhaize's wholly owned subsidiary, Delhaize The Lion America, Inc., a Delaware corporation. Page 5 of 10 Pages jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY. (a) The information set forth in Section 8 ("Certain Information Concerning Purchaser, Holding and Parent") and Section 10 ("Background of the Offer; Contacts with the Company; the Stockholders Agreement; the Merger Agreement") is incorporated herein by reference. (b) The information set forth in the Introduction, Section 7 ("Certain Information Concerning the Company"), Section 8 ("Certain Information Concerning Purchaser, Holding and Parent"), Section 10 ("Background of the Offer; Contacts with the Company; the Stockholders Agreement; the Merger Agreement") and Section 11 ("Purpose of the Offer; Plans for the Company After the Offer and the Merger") of the Offer to Purchase is incorporated herein by reference. ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a)-(c) The Information set forth in Section 9 ("Financing of the Offer and the Merger") of the Offer to Purchase is incorporated herein by reference. ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER. (a)-(e) The information set forth in the Introduction, Section 10 ("Background of the Offer; Contacts with the Company; the Merger Agreement; the Stockholders Agreement") and Section 11 ("Purpose of the Offer; Plans for the Company After the Offer and the Merger") of the Offer to Purchase is incorporated herein by reference. (f) and (g) The information set forth in Section 13 ("Effect of the Offer on the Market for Shares, Exchange Listing and Exchange Act Registration") of the Offer to Purchase is incorporated herein by reference. ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a) and (b) The information set forth in the Introduction, Section 8 ("Certain Information Concerning Purchaser, Holding and Parent") and Section 10 ("Background of the Offer; Contacts with the Company; the Stockholders Agreement; the Merger Agreement") of the Offer to Purchase is incorporated herein by reference. ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES. The information set forth in the Introduction, Section 8 ("Certain Information Concerning Purchaser, Holding and Parent"), Section 10 ("Background of the Offer; Contacts with the Company; the Stockholders Agreement; the Merger Agreement") and Section 11 ("Purpose of the Offer; Plans for the Company After the Offer and the Merger") of the Offer to Purchase is incorporated herein by reference. ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The information set forth in the Introduction and Section 16 ("Fees and Expenses") of the Offer to Purchase is incorporated herein by reference. Page 6 of 10 Pages ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS. The information set forth in Section 8 ("Certain Information Concerning Purchaser, Holding and Parent") of the Offer to Purchase is incorporated herein by reference. ITEM 10. ADDITIONAL INFORMATION. (a) The information set forth in the Introduction, Section 8 ("Certain Information Concerning Purchaser, Holding and Parent"), Section 10 ("Background of the Offer; Contacts with the Company; the Stockholders Agreement; the Merger Agreement"), Section 11 ("Purpose of the Offer; Plans for the Company after the Offer and the Merger") and Section 12 ("Dividends and Distributions") of the Offer to Purchase is incorporated herein by reference. (b) and (c) The information set forth in Section 15 ("Certain Legal Matters and Regulatory Approvals") of the Offer to Purchase is incorporated herein by reference. (d) Not applicable. (e) None. (f) The information set forth in the Offer to Purchase and the Letter of Transmittal is incorporated herein by reference. ITEM 11. MATERIAL TO BE FILED AS EXHIBITS. (a)(1) Offer to Purchase dated November 15, 1996. (a)(2) Letter of Transmittal. (a)(3) Notice of Guaranteed Delivery. (a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Nominees. (a)(5) Letter from Brokers, Dealers, Commercial Banks, Trust Companies and Nominees to Clients. (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Summary Advertisement as published in THE WALL STREET JOURNAL on November 15, 1996. (a)(8) Press Release issued by Parent and the Company on October 31, 1996 (incorporated herein by reference to Exhibit 99 to Parent's Current Report on Form 8-K filed November 4, 1996). (a)(9) Press Release issued by Parent and the Company on November 8, 1996. (a)(10) Press Release issued by Parent on November 15, 1996. (b) Food Lion, Inc. Senior Credit Facilities Commitment Letter from Chase Securities Inc. and The Chase Manhattan Bank to Parent, dated October 29, 1996. (c)(1) Agreement and Plan of Merger, dated as of October 31, 1996, among Parent, Purchaser and the Company (incorporated herein by reference to Exhibit 2 to Parent's Current Report on Form 8-K filed November 4, 1996). (c)(2) Stockholders Agreement, dated as of October 31, 1996 among BankAmerica Capital Corporation, Citicorp North America, Inc., Landmark Equity Partners III, L.P., Landmark Equity Partners IV, L.P., The Prudential Insurance Company of America, Prudential Property & Casualty Company, The Prudential Insurance Company of Arizona, PaineWebber Capital Inc., UBS Capital LLC, High Yield Portfolio, IDS Page 7 of 10 Pages Bond Fund, Inc., IDS Life Advantage Fund, Pruco Life Insurance Company, Wells, Fargo & Company (collectively, the "Selling Stockholders"), the Company, Parent and Purchaser (incorporated herein by reference to Exhibit 10 to the Parent's Current Report on Form 8-K filed November 4, 1996). (c)(3) Confidentiality Agreement between Company and Parent, dated May 20, 1996. (c)(4) Confidentiality Agreement between Parent and Company, dated May 21, 1996. (d) None. (e) Not applicable. (f) Not applicable. Page 8 of 10 Pages SIGNATURE After due inquiry and to the best of each of the undersigned's knowledge and belief, the undersigned do hereby certify that the information set forth in this statement is true, complete and correct. November 15, 1996 KK ACQUISITION CORP. By: /s/ R. WILLIAM MCCANLESS ----------------------------------------- Name: R. William McCanless Title: Vice President FLI HOLDING CORP. By: /s/ R. WILLIAM MCCANLESS ----------------------------------------- Name: R. William McCanless Title: Vice President FOOD LION, INC. By: /s/ R. WILLIAM MCCANLESS ----------------------------------------- Name: R. William McCanless Title: Senior Vice President and Chief Administrative Officer Page 9 of 10 Pages EXHIBIT INDEX
EXHIBIT NO. ITEM - --------- ------------------------------------------------------------------------------------------------------- (a)(1) Offer to Purchase dated November 15, 1996 (a)(2) Letter of Transmittal (a)(3) Notice of Guaranteed Delivery (a)(4) Letter from the Information Agent to Brokers, Dealers, Commercial Banks, Trust Companies and Nominees (a)(5) Letter from Brokers, Dealers, Commercial Banks, Trust Companies and Nominees to Clients (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 (a)(7) Summary Advertisement as published in THE WALL STREET JOURNAL on November 15, 1996 (a)(9) Press Release issued by Parent and the Company on November 8, 1996 (a)(10) Press Release issued by Parent on November 15, 1996 (b) Food Lion, Inc. Senior Credit Facilities Commitment Letter from Chase Securities Inc. and The Chase Manhattan Bank to Parent, dated October 29, 1996 (c)(3) Confidentiality Agreement between Company and Parent, dated May 20, 1996 (c)(4) Confidentiality Agreement between Parent and Company, dated May 21, 1996 (d) None (e) Not applicable (f) Not applicable
Page 10 of 10 Pages EX-99.(A)(1) 2 EXHIBIT (A)(1) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE PREFERRED SHARE PURCHASE RIGHTS) OF KASH N' KARRY FOOD STORES, INC. AT $26.00 NET PER SHARE BY KK ACQUISITION CORP., A WHOLLY OWNED SUBSIDIARY OF FLI HOLDING CORP., A WHOLLY OWNED SUBSIDIARY OF FOOD LION, INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON DECEMBER 13, 1996, UNLESS THE OFFER IS EXTENDED. THE BOARD OF DIRECTORS OF KASH N' KARRY FOOD STORES, INC. (THE "COMPANY") HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS (THE "STOCKHOLDERS"), HAS APPROVED AND ADOPTED THE MERGER AGREEMENT, THE STOCKHOLDERS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER (AS SUCH TERMS ARE DEFINED BELOW), AND RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST A MAJORITY OF THE SHARES OUTSTANDING ON A FULLY DILUTED BASIS. SEE INTRODUCTION AND SECTIONS 1, 14 AND 15 OF THIS OFFER TO PURCHASE (THE "OFFER TO PURCHASE"). FOOD LION, INC. AND KK ACQUISITION CORP. HAVE ENTERED INTO A STOCKHOLDERS AGREEMENT WITH CERTAIN STOCKHOLDERS OF THE COMPANY, PURSUANT TO WHICH, AMONG OTHER MATTERS, SUCH STOCKHOLDERS HAVE AGREED TO TENDER IN THE OFFER, AND KK ACQUISITION CORP. HAS THE RIGHT TO ACQUIRE, UPON THE TERMS AND SUBJECT TO THE CONDITIONS OF THE STOCKHOLDERS AGREEMENT, APPROXIMATELY 67.1 PERCENT OF THE COMPANY'S OUTSTANDING SHARES. ------------------------ IMPORTANT Any Stockholder desiring to tender all or any portion of such Stockholder's Shares (as defined herein) should either (i) complete and sign the Letter of Transmittal (or a facsimile thereof) in accordance with the instructions in the Letter of Transmittal and mail or deliver it together with the certificate(s) evidencing tendered Shares, and any other required documents, to the Depositary, or tender such Shares pursuant to the procedure for book-entry transfer set forth in Section 3, or (ii) request such Stockholder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for such Stockholder. Any Stockholder whose Shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such broker, dealer, commercial bank, trust company or other nominee if such Stockholder desires to tender such Shares. A Stockholder who desires to tender Shares and whose certificates evidencing such Shares are not immediately available, or who cannot comply with the procedure for book-entry transfer on a timely basis, may tender such Shares by following the procedure for guaranteed delivery set forth in Section 3. Questions and requests for assistance may be directed to the Information Agent or to the Dealer Manager at their respective addresses and telephone numbers set forth on the back cover of this Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery and other related materials may also be obtained from the Information Agent, the Dealer Manager or from brokers, dealers, commercial banks or trust companies. ------------------------ THE DEALER MANAGER FOR THE OFFER IS: CHASE SECURITIES INC. 270 Park Avenue New York, New York 10017 Telephone: (212) 270-0892 November 15, 1996 TABLE OF CONTENTS
PAGE ----------- INTRODUCTION ...................................................................................... 3 1. Terms of the Offer.................................................................... 5 2. Acceptance for Payment and Payment for Shares......................................... 7 3. Procedures for Accepting the Offer and Tendering Shares............................... 8 4. Withdrawal Rights..................................................................... 11 5. Certain Federal Income Tax Consequences............................................... 12 6. Price Range of Shares; Dividends...................................................... 13 7. Certain Information Concerning the Company............................................ 13 8. Certain Information Concerning Purchaser, Holding and Parent.......................... 16 9. Financing of the Offer and the Merger................................................. 18 10. Background of the Offer; Contacts with the Company; the Merger Agreement; the Stockholders Agreement.............................................................. 19 11. Purpose of the Offer; Plans for the Company After the Offer and the Merger............ 28 12. Dividends and Distributions........................................................... 30 13. Effect of the Offer on the Market for the Shares, Exchange Listing and Exchange Act Registration........................................................................ 30 14. Certain Conditions of the Offer....................................................... 32 15. Certain Legal Matters and Regulatory Approvals........................................ 34 16. Fees and Expenses..................................................................... 35 17. Miscellaneous......................................................................... 36 Schedule I Directors and Executive Officers of Parent, Holding, Purchaser and Delhaize...........
2 To the Holders of Common Stock of Kash n' Karry Food Stores, Inc. INTRODUCTION KK Acquisition Corp., a corporation organized and existing under the laws of the State of Delaware ("Purchaser") and a wholly owned subsidiary of, FLI Holding, Inc., a corporation organized and existing under the laws of the State of Delaware ("Holding"), and a wholly owned subsidiary of Food Lion, Inc., a corporation organized and existing under the laws of the State of North Carolina ("Parent"), hereby offers to purchase all outstanding shares of common stock, par value $0.01 per share (the "Company Common Stock"), of Kash n' Karry Food Stores, Inc., a corporation organized and existing under the laws of the State of Delaware (the "Company"), including the Preferred Share Purchase Rights (the "Rights") issued pursuant to the Rights Agreement, as amended, dated as of April 13, 1995, between the Company and Fleet National Bank (successor in interest to Shawmut Bank Connecticut, N.A.) (the "Rights Agreement"), at a price of $26.00 per share, net to the seller in cash, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which, together with any amendments or supplements hereto or thereto, constitute the "Offer" and the net per Share price paid shall be referred to herein as the "Offer Price"). All references herein to the Rights include all benefits which may inure to Stockholders pursuant to the Rights Agreement, and unless the context requires otherwise, shares of Company Common Stock together with the Rights are herein referred collectively to as the "Shares." Tendering Stockholders will not be obligated to pay brokerage fees or commissions or, except as otherwise provided in Instruction 6 of the Letter of Transmittal, stock transfer taxes with respect to the purchase of Shares by Purchaser pursuant to the Offer or in connection with the Merger. However, any tendering Stockholder or other payee who fails to complete and sign the Substitute Form W-9 that is included with the Letter of Transmittal may be subject to a required backup federal income tax withholding of 31% of the gross proceeds payable to such Stockholder or other payee pursuant to the Offer. See Section 3. Purchaser will pay all charges and expenses of Chase Securities Inc. ("Chase Securities"), which is acting as Dealer Manager for the Offer (in such capacity, the "Dealer Manager"), ChaseMellon Shareholder Services, L.L.C., which is acting as the depositary (the "Depositary") and Georgeson & Company Inc. which is acting as the information agent (the "Information Agent") incurred in connection with the Offer. See Section 16. THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND THE STOCKHOLDERS, HAS APPROVED AND ADOPTED THE MERGER AGREEMENT, THE STOCKHOLDERS AGREEMENT (EACH AS DEFINED BELOW) AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER (AS DEFINED BELOW), AND RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. PAINEWEBBER INCORPORATED ("PAINEWEBBER"), FINANCIAL ADVISOR TO THE COMPANY, HAS DELIVERED TO THE COMPANY'S BOARD OF DIRECTORS ITS WRITTEN OPINION THAT THE CONSIDERATION TO BE RECEIVED BY THE STOCKHOLDERS IN THE OFFER AND THE MERGER IS FAIR TO SUCH STOCKHOLDERS FROM A FINANCIAL POINT OF VIEW. A COPY OF THE OPINION OF PAINEWEBBER, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN BY PAINEWEBBER, IS CONTAINED IN THE COMPANY'S SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 (THE "SCHEDULE 14D-9"), WHICH IS BEING MAILED TO STOCKHOLDERS HEREWITH. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST 3 A MAJORITY OF THE SHARES THEN OUTSTANDING ON A FULLY DILUTED BASIS (THE "MINIMUM CONDITION"). THE OFFER IS SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTIONS 1 AND 14. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of October 31, 1996 (the "Merger Agreement"), among Parent, Purchaser and the Company. The Merger Agreement provides that, among other things, after the purchase of Shares pursuant to the Offer and the satisfaction of the other conditions set forth in the Merger Agreement, and in accordance with the relevant provisions of the General Corporation Law of the State of Delaware (the "DGCL"), Purchaser will be merged with and into the Company (the "Merger"). Following consummation of the Merger, the Company will continue as the surviving corporation of the Merger (the "Surviving Corporation") and will become an indirect wholly owned subsidiary of Parent. The Company has informed Purchaser that, at the close of business on October 31, 1996, 4,674,314 shares of Company Common Stock were issued and outstanding and approximately 330,938 shares of Company Common Stock were reserved for issuance pursuant to outstanding stock options granted by the Company to key employees, directors and Green Equity Investors, L.P. (the "Company Stock Options"). As an inducement and a condition to entering into the Merger Agreement, Parent required the principal stockholders of the Company (referred to individually as a "Selling Stockholder" and collectively as the "Selling Stockholders," all of whom are listed in Section 10 below), and the Selling Stockholders agreed, to enter into a Stockholders Agreement, dated October 31, 1996 (the "Stockholders Agreement"). Pursuant to the Stockholders Agreement, the Selling Stockholders agreed to validly tender (and not to withdraw) pursuant to and in accordance with the terms of the Offer an aggregate of 3,134,942 Shares (or approximately sixty-seven and one-tenth percent (67.1%) of the outstanding Shares) that are owned by them (the "Option Shares"). The tender of the Option Shares by the Selling Stockholders will be sufficient to satisfy the Minimum Condition. Pursuant to the Stockholders Agreement, Purchaser has the right to acquire from the Selling Stockholders all of the Option Shares under certain other circumstances. See Section 10. The Company has informed Purchaser that each of the Company's directors and executive officers intends to tender into the Offer all Shares owned by him or her on the date hereof or acquired by him or her prior to the Expiration Date (as defined below) and that, as of the date hereof, such persons owned an aggregate of 19,126 Shares (excluding Option Shares), representing less than one-half of one percent of the outstanding Shares. At the effective time of the Merger (the "Effective Time"), each Share issued and outstanding immediately prior to the Effective Time (other than Shares held in the treasury of the Company or owned by Purchaser, Parent or any direct or indirect wholly owned subsidiary of Parent or of the Company (collectively, "Ineligible Shares"), and other than Shares held by Stockholders who shall have demanded and properly perfected appraisal rights, if any, under the DGCL) will be cancelled and converted automatically into the right to receive $26.00 (or any greater amount paid pursuant to the Offer) in cash, without interest (the "Merger Consideration") and less any required withholding taxes. The Merger Agreement is more fully described in Section 10. The Merger Agreement provides that, promptly upon the purchase by Purchaser of Shares pursuant to the Offer and from time to time thereafter, Parent shall be entitled, subject to applicable law, to designate up to such number of directors, rounded up to the next whole number, on the Board as will give Parent representation on the Board equal to the product of the number of directors on the Board multiplied by the percentage that the aggregate number of Shares then beneficially owned by Purchaser following such purchase bears to the total number of Shares then outstanding. In the Merger Agreement, the Company has agreed to take all actions necessary to cause Parent's designees to be elected as directors of the Company, including increasing the size of the Board or securing the resignations of incumbent directors or both. 4 The consummation of the Merger is subject to the satisfaction or waiver of certain conditions, including, if required, the approval and adoption of the Merger Agreement by the requisite vote or consent of the Stockholders. See Section 11. If at least 90% of the outstanding Shares are acquired in the Offer, Purchaser will be able to effect the Merger pursuant to Section 253 of the DGCL without prior notice to, or any action or vote by, any other Stockholder. In that event, Purchaser intends to effect the Merger as promptly as practicable following the purchase of Shares in the Offer. If at least 90% of the outstanding Shares are not acquired in the Offer, the Company will furnish the Stockholders a proxy or information statement containing detailed information concerning the Merger and will either call a special meeting to vote on the Merger or solicit consents for the purpose of approving the Merger. In the event of a Stockholders' vote or consent to approve the Merger, Purchaser will vote all Shares acquired pursuant to the Offer in favor of the Merger. Under the Company's certificate of incorporation and the DGCL, the affirmative vote of the holders of a majority of the outstanding Shares is required to approve and adopt the Merger Agreement and the Merger (unless the Company is being merged with a company holding at least 90% of the Shares). Consequently, if Purchaser acquires (pursuant to the Offer or otherwise) at least a majority of the outstanding Shares, Purchaser will have sufficient voting power to approve and adopt the Merger Agreement and the Merger without the affirmative vote of any other Stockholder. Under the Stockholders Agreement, approximately sixty-seven and one-tenth percent (67.1%) of the outstanding Shares are required to be tendered by the Selling Stockholders into the Offer. Prior to the execution of the Merger Agreement and the Stockholders Agreement, the Rights Agreement was amended by a Second Amendment to Rights Agreement dated as of October 30, 1996, to enable Parent and Purchaser to enter into the Merger Agreement and consummate the transactions contemplated thereby without triggering the right to exercise the Rights under the Rights Agreement, which exercise would substantially dilute Purchaser's holdings of shares of the Company Common Stock. The Merger Agreement and Stockholders Agreement are more fully described in Section 10. Certain federal income tax consequences of the sale of Shares pursuant to the Offer, and the exchange of Shares for the Merger Consideration pursuant to the Merger, are described in Section 5. THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. 1. TERMS OF THE OFFER. Upon the terms and subject to the conditions of the Offer (including, in the event the Offer is extended or amended, the terms and conditions of such extension or amendment), Purchaser will accept for payment, and pay for, all Shares that are validly tendered prior to the Expiration Date and not withdrawn as permitted by Section 4. The term "Expiration Date" means 12:00 midnight New York City time, on December 13, 1996, unless and until Purchaser, in accordance with the terms and conditions of the Offer and the Merger Agreement, extends the period during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by Purchaser, shall expire. As used in this Offer to Purchase, "business day" shall have the meaning set forth in Rule 14d-1(c)(6) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Offer is subject to the conditions set forth in Section 14 (the "Conditions"), including satisfaction of the Minimum Condition and the expiration or termination of any applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"). Pursuant to the Merger Agreement, the Purchaser, subject to the terms and conditions of the Offer, may extend the period of time during which the Offer is open (i) for any period to the extent required by law or by any rule, regulation, interpretation or position of the Securities and Exchange Commission (the "Commission") or the staff thereof applicable to the Offer and (ii) for one or more periods of not more than five (5) business days each, but in no event for more than a total of twenty (20) business days if, following the satisfaction or waiver of each of the Conditions, Shares constituting less than 90% of the Shares have been validly 5 tendered and not properly withdrawn pursuant to the Offer; provided, that, the closing of the Offer shall occur on or before December 24, 1996 if all of the Conditions have been satisfied or waived prior to such date. In the event Purchaser is unable to consummate the Offer on or prior to the expiration date of the Offer due to the failure of any Condition, Parent shall cause Purchaser to, and Purchaser shall extend the Offer until the earlier of (A) February 28, 1997 and (B) such time as such condition is satisfied or waived; provided, that Purchaser may, but is not obligated to, extend the Offer if either (x) the Company is in breach in any material respect of its covenants, agreements, representations or warranties contained in the Merger Agreement (without reference to any materiality qualifications contained therein) or (y) there is a reasonable likelihood that one or more of the Conditions cannot be satisfied on or before February 28, 1997. Subject to the foregoing and to applicable law (including the regulations of the Commission), Purchaser also expressly reserves the right, in its sole discretion, at any time and from time to time, subject to the terms of the Merger Agreement and regardless of whether or not any of the events in Section 14 shall have occurred or shall have been determined by Purchaser to have occurred (i) to extend the period of time during which the Offer is open and thereby delay acceptance for payment of, and the payment for, any Shares, by giving oral or written notice of such extension to the Depositary, (ii) to terminate the Offer by giving oral or written notice of such termination to the Depositary, and (iii) to waive any Conditions or otherwise amend the Offer in any respect, by giving oral or written notice to the Depositary. There can be no assurance, however, that Purchaser will exercise its rights to extend the Offer. Any extension, delay in payment, termination or amendment will be followed as promptly as practicable by public announcement, the announcement in the case of an extension to be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Purchaser acknowledges that (A) Rule 14e-1(c) under the Exchange Act, requires Purchaser to pay the consideration offered or return the Shares tendered promptly after the termination or withdrawal of the Offer and (B) Purchaser may not delay acceptance for payment of, or payment for (except as provided in clause (i) of the first sentence of this paragraph), any Shares upon the occurrence of any of the Conditions without extending the period of time during which the Offer is open. Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require that material changes be promptly disseminated to stockholders in a manner reasonably designed to inform them of such changes), and without limiting the manner in which Purchaser may choose to make any public announcement, Purchaser shall have no obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a press release to the Dow Jones News Service. Pursuant to the terms of the Merger Agreement, without the prior written consent of the Company, Purchaser will not (and Parent will cause Purchaser not to) (i) decrease or change the form of consideration payable in the Offer or decrease the number of Shares sought pursuant to the Offer, (ii) change or impose additional conditions to the Offer, (iii) extend the Expiration Date (except as required by law and except as described in the preceding two paragraphs), (iv) waive the Minimum Condition or any condition relating to the expiration of the HSR Act, or (v) amend any term of the Offer in any manner adverse to holders of Shares; provided, however, that, except as set forth above and subject to applicable legal requirements, Purchaser may waive any other Condition in its sole discretion; and provided, further, that the Offer may be extended in connection with an increase in the consideration to be paid pursuant to the Offer so as to comply with the applicable rules and regulations of the Commission. Assuming the prior satisfaction or waiver of the Conditions, Purchaser will accept for payment, and pay for, in accordance with the terms of the Offer, all Shares validly tendered and not withdrawn pursuant to the Offer promptly after the Expiration Date. The Commission has announced that, under its interpretation of Rules 14d-4(c) and 14d-6(d) under the Exchange Act, material changes in the terms of a tender offer or information concerning a tender offer may require that the tender offer be extended so that it remains open a sufficient period of time to allow security holders to consider such material changes or information in deciding whether or not to tender or 6 withdraw their securities. The minimum period during which an offer must remain open following material changes in the terms of the offer or information concerning the offer, other than a change in price or a change in percentage of securities sought, will depend upon the facts and circumstances, including the relative materiality of the changed terms or information. If Purchaser decides to increase or, subject to the consent of the Company, to decrease, the consideration in the Offer, to make a change in the percentage of Shares sought, or to change or waive the Minimum Condition and if, at the time that notice of any such change is first published, sent or given to Stockholders, the Offer is scheduled to expire at any time earlier than the tenth business day after (and including) the date of that notice, the Offer will be extended at least until the expiration of ten business days. On November 1, 1996, Etablissements Delhaize Freres et Cie "Le Lion" S.A., the owner of approximately 52%(1) of the voting stock of Parent ("Delhaize"), and the Company, each, filed with the Federal Trade Commission (the "FTC") and the Antitrust Division of the Department of Justice (the "Antitrust Division") a Premerger Notification and Report Form under the HSR Act (each a "Premerger Notification"). Absent any action by the FTC or the Antitrust Division, the applicable waiting period under the HSR Act will expire at 11:59 p.m., New York City time, on December 1, 1996. Prior to the expiration or termination of such waiting period, the FTC or the Antitrust Division may extend such waiting period by requesting additional information from Delhaize and/or the Company. If such a request is made, the waiting period will expire at 11:59 p.m., New York City time, on the twentieth calendar day after substantial compliance by Delhaize and/or the Company with such a request. The waiting period under the HSR Act may be terminated prior to its expiration by the FTC and the Antitrust Division. See Section 15 for additional information regarding the HSR Act. The Company has provided Purchaser with the Company's stockholder list and security position listings for the purpose of disseminating the Offer to holders of Shares. This Offer to Purchase and the related Letter of Transmittal will be mailed to record holders of Shares whose names appear on the Company's stockholder list and will be furnished, for subsequent transmittal to beneficial owners of Shares, to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder list or, if applicable, who are listed as participants in a clearing agency's security position listing. 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject to the conditions of the Offer (including, in the event the Offer is extended or amended, the terms and conditions of any such extension or amendment), Purchaser will accept for payment, and will pay for, all Shares validly tendered prior to the Expiration Date and not properly withdrawn, promptly after the later to occur of (i) the Expiration Date, and (ii) the satisfaction or waiver of the Conditions. Subject to applicable rules of the Commission, Purchaser expressly reserves the right to delay acceptance of payment of, or payment for, Shares pending receipt of any regulatory approvals specified in Section 15 or in order to comply in whole or in part with any other applicable law. See Section 15. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) the certificates evidencing such Shares (the "Share Certificates") or timely confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company or the Philadelphia Depository Trust Company (each, a "Book-Entry Transfer Facility" and, together, the "Book-Entry Transfer Facilities") pursuant to the procedures set forth in Section 3, (ii) the Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed, with any required signature guaranties or an Agent's Message (as defined below) in connection with a book-entry transfer, and (iii) any other documents required by the Letter of Transmittal. See Section 3. - ------------------------ (1) Includes shares held of record by Delhaize's wholly owned subsidiary, Delhaize The Lion America, Inc., a Delaware corporation. 7 The term "Agent's Message" means a message, transmitted by a Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, which states that (i) such Book-Entry Transfer Facility has received an express acknowledgement from the participant in such Book-Entry Transfer Facility tendering the Shares that are the subject of such Book-Entry Confirmation, (ii) such participant has received and agrees to be bound by the terms of the Letter of Transmittal and, (iii) Purchaser may enforce such agreement against such participant. For purposes of the Offer, Purchaser will be deemed to have accepted for payment (and thereby purchased) Shares validly tendered and not properly withdrawn as, if and when Purchaser gives oral or written notice to the Depositary of Purchaser's acceptance for payment of such Shares pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering Stockholders for the purpose of receiving payments from Purchaser and transmitting such payments to tendering Stockholders whose Shares have been accepted for payment. If, for any reason, acceptance for payment of any Shares tendered pursuant to the Offer is delayed, or Purchaser is unable to accept for payment Shares tendered pursuant to the Offer, then, without prejudice to Purchaser's rights under Section 14, the Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares, and such Shares may not be withdrawn, except to the extent that the tendering Stockholders are entitled to withdrawal rights as described in Section 4 and as otherwise provided by Rule 14e-1(c) under the Exchange Act. Under no circumstances will interest on the purchase price for tendered Shares be paid, regardless of any delay in making such payment. If any tendered Shares are not accepted for payment for any reason pursuant to the terms and conditions of the Offer, Share Certificates evidencing unpurchased Shares will be returned, without expense to the tendering Stockholder (or, in the case of Shares tendered by book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility pursuant to the procedure set forth in Section 3, such Shares will be credited to an account maintained at such Book-Entry Transfer Facility), as promptly as practicable following the expiration or termination of the Offer. If, prior to the Expiration Date, Purchaser increases the consideration to be paid per Share pursuant to the Offer, Purchaser will pay the increased consideration for all the Shares purchased pursuant to the Offer (including the Option Shares), whether or not the Shares were tendered prior to the increase in consideration. Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to one or more of its affiliates, the right to purchase all or any portion of the Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve Purchaser of its obligations under the Offer and will in no way prejudice the rights of tendering Stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES. VALID TENDERS. For Shares to be validly tendered pursuant to the Offer, either (i) a Letter of Transmittal (or a manually signed facsimile), properly completed and duly executed, with any required signature guaranties or an Agent's Message in connection with a book-entry transfer and any other documents required by the Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date and either (a) certificates representing Shares must be received by the Depositary at any such address prior to the Expiration Date or (b) the Shares must be delivered pursuant to the procedures for book-entry transfer set forth below, and a Book-Entry Confirmation must be received by the Depositary prior to the Expiration Date, or (ii) the tendering Stockholder must comply with the guaranteed delivery procedures set forth below. No alternative, conditional or contingent tenders will be accepted. 8 THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. BOOK-ENTRY TRANSFER. The Depositary will establish accounts with respect to the Shares at the Book-Entry Transfer Facilities for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in the system of any Book-Entry Transfer Facility may make a book-entry delivery of Shares by causing such Book-Entry Transfer Facility to transfer such Shares into the Depositary's account at such Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility's procedures for such transfer. However, although delivery of Shares may be effected through book-entry transfer at a Book-Entry Transfer Facility, the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guaranties, or an Agent's Message in connection with a book-entry transfer, and any other required documents, must, in any case, be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date, or the tendering Stockholder must comply with the guaranteed delivery procedure described below. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. SIGNATURE GUARANTIES. Signatures on all Letters of Transmittal must be guaranteed by a firm which is a member of the Medallion Signature Guarantee Program, or by any other "eligible guarantor institution," as such term is defined in Rule 17Ad-15 under the Exchange Act (each of the foregoing being referred to as an "Eligible Institution"), except in cases where Shares are tendered (i) by a registered holder of Shares who has not completed either the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. If a Share Certificate is registered in the name of a person other than the person executing the Letter of Transmittal, or if payment is to be made, or a Share Certificate not accepted for payment or not tendered is to be returned, to a person other than the registered holder(s), then the Share Certificate must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appears on the Share Certificate, with the signature(s) on such Share Certificate or stock powers guaranteed by an Eligible Institution. See Instructions 1 and 5 of the Letter of Transmittal. GUARANTEED DELIVERY. If a Stockholder desires to tender Shares pursuant to the Offer and such Stockholder's Share Certificates evidencing such Shares are not immediately available or such Stockholder cannot deliver the Share Certificates and all other required documents to the Depositary prior to the Expiration Date, or such Stockholder cannot complete the procedure for delivery by book-entry transfer on a timely basis, such Shares may nevertheless be tendered, provided that all the following conditions are satisfied: (i) such tender is made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form attached hereto as an exhibit, is received by the Depositary prior to the Expiration Date as provided below; and (iii) the Share Certificates (or a Book-Entry Confirmation) evidencing all tendered Shares, in proper form for transfer, in each case together with the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guaranties (or, in the case of a book-entry transfer, an Agent's Message) and any other documents required by the Letter of 9 Transmittal are received by the Depositary within three NASDAQ National Market trading days after the date of execution of such Notice of Guaranteed Delivery. The Notice of Guaranteed Delivery may be delivered by hand or mail or transmitted by telegram or facsimile transmission to the Depositary and must include a guaranty by an Eligible Institution in the form set forth in the form of Notice of Guaranteed Delivery made available by Purchaser. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of the Share Certificates evidencing such Shares, or a Book-Entry Confirmation of the delivery of such Shares, and the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guaranties (or, in the case of a book-entry transfer, an Agent's Message), and any other documents required by the Letter of Transmittal. DETERMINATION OF VALIDITY. All questions as to the validity, form, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by Purchaser in its sole discretion, which determination shall be final and binding on all parties. Purchaser reserves the absolute right to reject (i) any and all tenders determined by it not to be in proper form and (ii) the acceptance for payment of, or the payment for Shares, which may, in the opinion of its counsel, be unlawful. Purchaser also reserves the absolute right to waive any condition of the Offer or any defect or irregularity, in the tender of any Shares of any particular Stockholder, whether or not similar defects or irregularities are waived in the case of any other Stockholder or Stockholders. Subject to the Merger Agreement, Purchaser also reserves the absolute right to waive any or all of the Conditions to the Offer. No tender of Shares will be deemed to have been validly made until all defects and irregularities have been cured or waived. None of Purchaser, Holder, Parent, the Dealer Manager, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding. APPOINTMENT AS PROXY. By executing the Letter of Transmittal as set forth above, a tendering Stockholder irrevocably appoints designees of Purchaser as such Stockholder's attorneys-in-fact and proxies, each with full power of substitution, in the manner set forth in the Letter of Transmittal, to the full extent of such Stockholder's rights with respect to the Shares tendered by such Stockholder and accepted for payment by Purchaser (and with respect to any and all other Shares or other securities issued or issuable in respect of such Shares on or after October 31, 1996). All such powers of attorney and proxies shall be considered coupled with an interest in the tendered Shares. Such appointment will be effective when, and only to the extent that, Purchaser accepts such Shares for payment. Upon such acceptance for payment, all prior powers of attorney and proxies given by such Stockholder (other than the proxies of the Selling Stockholders given pursuant to the Stockholders Agreement) with respect to such Shares (and such other Shares and securities issued in respect of such purchased Shares) will be revoked without further action, and no subsequent powers of attorney and proxies may be given nor any subsequent written consent executed by such Stockholder (and, if given or executed, will not be deemed to be effective) with respect thereto. The designees of Purchaser will, with respect to the Shares for which the appointment is effective, be empowered to exercise all voting and other rights of such Stockholder as they in their sole discretion may deem proper at any annual or special meeting of the Company's Stockholders or any adjournment or postponement thereof, by written consent in lieu of any such meeting or otherwise. Purchaser reserves the absolute right to require that, in order for Shares to be deemed validly tendered, immediately upon Purchaser's acceptance for payment for such Shares, Purchaser must be able to exercise full voting and other rights with respect to such Shares. 10 OTHER REQUIREMENTS. A tender of Shares pursuant to any of the procedures described above will constitute the tendering Stockholder's acceptance of the terms and conditions of the Offer, as well as the tendering Stockholder's representation and warranty to Purchaser that the Stockholder has the full power and authority to tender and assign the Shares tendered, as specified in the Letter of Transmittal. Purchaser's acceptance for payment of Shares tendered pursuant to the Offer will constitute a binding agreement between the tendering Stockholder and Purchaser upon the terms and subject to the conditions of the Offer. UNDER THE FEDERAL INCOME TAX LAWS, THE DEPOSITARY WILL BE REQUIRED TO WITHHOLD 31 PERCENT OF THE AMOUNT OF ANY PAYMENTS MADE TO CERTAIN STOCKHOLDERS PURSUANT TO THE OFFER. TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO PAYMENT TO STOCKHOLDERS OF THE PURCHASE PRICE OF SHARES PURCHASED PURSUANT TO THE OFFER, EACH TENDERING STOCKHOLDER MUST PROVIDE THE DEPOSITARY WITH SUCH STOCKHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT SUCH STOCKHOLDER IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9 IN THE LETTER OF TRANSMITTAL. SEE INSTRUCTION 9 OF THE LETTER OF TRANSMITTAL. SEE SECTION 5. 4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer are irrevocable except as provided in this Section 4. Shares tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment by Purchaser pursuant to the Offer, may also be withdrawn at any time after January 14, 1997. If Purchaser extends the Offer, is delayed in its acceptance for payment of Shares or is unable to accept Shares for payment pursuant to the Offer for any reason, then, without prejudice to Purchaser's rights under the Offer, the Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares, and such Shares may not be withdrawn except to the extent that tendering Stockholders are entitled to withdrawal rights as described in this Section 4. Any such delay will be by an extension of the Offer to the extent required by law. The reservation by Purchaser of the right to delay the acceptance for purchase of, or payment for, Shares is subject to the provisions of Rule 14e-1(c) under the Exchange Act, which requires Purchaser to pay the consideration offered or to return Shares deposited by or on behalf of Stockholders promptly after the termination or withdrawal of the Offer. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover page of this Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of such Shares, if different from that of the person who tendered such Shares. If Share Certificates evidencing Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such Share Certificates, the serial numbers shown on such Share Certificates must be submitted to the Depositary and the signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution, unless such Shares have been tendered for the account of an Eligible Institution. If Shares have been tendered pursuant to the procedure for book-entry transfer as set forth in Section 3, any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares, in which case a notice of withdrawal will be effective if delivered to the Depositary by any method described in the first sentence of this paragraph. All questions as to the form and validity (including the time of receipt) of notices of withdrawal will be determined by Purchaser, in its sole discretion, whose determination will be final and binding on all parties. No withdrawal of Shares shall be deemed to have been made until all defects and irregularities have been cured or waived. All questions as to the form and validity (including time of receipt) of any notice of withdrawal will be determined by Purchaser, in its sole discretion, whose determination will be final and binding. None of Purchaser, Holding, Parent, the Dealer Manger, the Depositary, the Information Agent 11 or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. Any Shares properly withdrawn will thereafter be deemed not to have been validly tendered for purposes of the Offer. However, withdrawn Shares may be re-tendered at any time prior to the Expiration Date by following one of the procedures described in Section 3. 5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following is a summary of the principal federal income tax consequences of the Offer and the Merger to holders whose Shares are purchased pursuant to the Offer or whose Shares are converted into the right to receive the Merger Consideration in the Merger (including any cash amounts received by dissenting Stockholders pursuant to the exercise of appraisal rights). This discussion is based upon the provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the applicable Treasury Regulations promulgated and proposed thereunder, judicial authority and administrative rulings and practice. Legislative, judicial or administrative changes or interpretations are subject to change, possibly on a retroactive basis, at any time and therefore could alter or modify the statements and conclusions set forth below. It is assumed that the Shares are held as "capital assets" within the meaning of Section 1221 of the Code (i.e., property held for investment). This discussion does not address all aspects of federal income taxation that may be relevant to a particular Stockholder in light of such Stockholder's personal investment circumstances, or those Stockholders subject to special treatment under the federal income tax laws (for example, life insurance companies, tax-exempt organizations, foreign corporations and nonresident alien individuals) or to Stockholders who acquired their Shares through the exercise of employee stock options or other compensation arrangements. In addition, the discussion does not address any aspect of foreign, state, local or estate and gift taxation that may be applicable to a Stockholder. CONSEQUENCES OF THE OFFER AND THE MERGER TO STOCKHOLDERS. The receipt of the Offer Price or the Merger Consideration, as the case may be (including any cash amounts received by dissenting Stockholders pursuant to the exercise of appraisal rights), will be a taxable transaction for federal income tax purposes (and also may be a taxable transaction under applicable state, local and other income tax laws). In general, for federal income tax purposes, a Stockholder will recognize gain or loss equal to the difference between his adjusted tax basis in the Shares sold pursuant to the Offer or converted to cash in the Merger and the amount of cash received therefor. Gain or loss must be determined separately for each block of Shares (i.e., Shares acquired at the same cost in a single transaction) sold pursuant to the Offer or converted to cash in the Merger. Such gain or loss will be capital gain or loss and will be long-term gain or loss, if, on the date of sale (or, if applicable, the date of the Merger), the Shares were held for more than one year. BACKUP TAX WITHHOLDING. Under the Code, a Stockholder may be subject, under certain circumstances, to "backup withholding" at a 31% rate with respect to payments made in connection with the Offer or the Merger. Backup withholding generally applies if the Stockholder (i) fails to furnish his social security number or other taxpayer identification number ("TIN"), (ii) furnishes an incorrect TIN, (ii) fails properly to report interest or dividends or (iv) under certain circumstances, fails to provide a certified statement, signed under penalties of perjury, that the TIN provided is his correct number and that he is not subject to backup withholding. Backup withholding is not an additional tax but merely an advance payment, which may be refunded to the extent it results in an overpayment of tax. Certain persons generally are exempt from backup withholding, including corporations and financial institutions. Certain penalties apply for failure to furnish correct information and for failure to include the reportable payments in income. Each Stockholder should consult with his own tax advisor as to his qualifications for exemption from withholding and the procedure for obtaining such exemption. THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE TO CERTAIN TYPES OF STOCKHOLDERS, INCLUDING STOCKHOLDERS WHO ACQUIRED SHARES PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION, 12 INDIVIDUALS WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED STATES, AND FOREIGN CORPORATIONS. THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND IS BASED UPON PRESENT LAW. STOCKHOLDERS ARE URGED TO CONSULT THEIR RESPECTIVE TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICATION AND EFFECT OF THE ALTERNATIVE MINIMUM TAX, AND STATE, LOCAL AND FOREIGN TAX LAWS IN VIEW OF THEIR OWN PARTICULAR CIRCUMSTANCES. 6. PRICE RANGE OF SHARES; DIVIDENDS. According to information provided by the Company: (i) the Shares have principally traded on the NASDAQ National Market since March 4, 1996; and the Shares were principally traded over the counter and prices were quoted on the NASDAQ Small Cap Market from March 2, 1995 through March 3, 1996, in both instances under the symbol "KASH"; and (ii) prior to March 2, 1995, there was no established public trading market for the Shares. The following table sets forth, for the quarters indicated, the high and low sales prices per Share on the NASDAQ National Market and the high and low bid price per share as quoted by the NASDAQ Small Cap Market, as applicable:
QUARTERS HIGH LOW - --------------------------------------------------------------------------- --------- --------- Fiscal 1995 Third Quarter.......................................................... $ 13.33 $ 12.17 Fourth Quarter......................................................... 23.50 12.75 Fiscal 1996 First Quarter.......................................................... 29.50 21.50 Second Quarter......................................................... 26.88 21.50 Third Quarter.......................................................... 25.63 19.63 Fourth Quarter......................................................... 29.75 21.63 Fiscal 1997 First Quarter.......................................................... 28.63 20.00
Over-the-market quotations on the NASDAQ Small Cap Market reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not necessarily represent actual transactions. In addition, these share prices have been adjusted to reflect the 3-for-2 stock split effected in the form of a stock dividend paid on July 17, 1995. No cash dividends have been declared or paid on the Shares during the two most recently concluded years or during the current fiscal year. The Merger Agreement prohibits the Company from declaration or payment of dividends until the consummation of the Offer. On October 31, 1996, the last trading day prior to the announcement of the execution of the Merger Agreement, the closing price per Share as reported on the NASDAQ National Market was $24.00. On November 14, 1996, the last full trading day prior to the date of this Offer to Purchase, the closing price per Share as reported on the NASDAQ National Market was $25.63. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES. 7. CERTAIN INFORMATION CONCERNING THE COMPANY. GENERAL. The Company is a corporation organized and existing under the laws of the state of Delaware with its principal executive offices located at 6422 Harney Road, Tampa, Florida 33610. The Company is a food retailer in west central Florida, operating 93 multi-department supermarkets, five conventional supermarkets and 35 liquor stores under the "Kash n' Karry" name and two super warehouse stores under the "Save 'n Pack" name, all supported by a centrally-located warehouse and distribution facility. 13 FINANCIAL INFORMATION. Set forth below is certain selected consolidated financial information relating to the Company and its subsidiaries which has been excerpted or derived from the audited financial statements contained in the Company's Annual Report on Form 10-K for the fiscal year ended July 28, 1996 (the "Form 10-K"). More comprehensive financial information is included in such report, and other documents filed by the Company with the Commission. The financial information that follows is qualified in its entirety by reference to such report and other documents, including the financial statements and related notes contained therein. Such report and other documents may be examined and copies may be obtained from the offices of the Commission in the manner set forth below under "Available Information." KASH N' KARRY FOOD STORES, INC. SELECTED CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE DATA)
REORGANIZED COMPANY PREDECESSOR COMPANY ------------------------ ---------------------------------------------------- FISCAL YEAR ENDED 52 WEEKS 30 WEEKS 22 WEEKS SUNDAY NEAREST JULY 31, ENDED ENDED ENDED ---------------------------------------- 7/28/96 7/30/95 1/1/95 1994 1993 1992 ------------ ---------- ---------- ------------ ------------ ------------ Income Statement Data: Total revenue.......................... $1,021,667 $599,320 $ 426,681 $ 1,065,165 $ 1,086,125 $ 1,071,038 Operating income....................... 31,844 22,635 6,826 7,495 31,337 37,568 Earnings (loss) before reorganization items, income taxes, extraordinary item, and change in accounting principles........................... 6,103 6,825 (6,893) (37,895) (11,920) (7,301) Net earnings (loss).................... 1,974 3,143 56,404 (37,895) (11,920) (7,301) Earnings per share(1).................. $0.41 $0.67 -- -- -- -- Average number of common and common equivalent shares outstanding.......... 4,780,810 4,712,021 -- -- -- --
- ------------------------ (1) Earnings per share are not meaningful prior to January 1, 1995 due to the significant change in the capital structure in connection with the restructuring of the Company.
REORGANIZED COMPANY PREDECESSOR COMPANY ---------------------- ---------------------------------- FISCAL YEAR ENDED FISCAL YEAR ENDED SUNDAY SUNDAY NEAREST JULY 31 NEAREST JULY 31 ---------------------- ---------------------------------- 1996 1995 1994 1993 1992 ---------- ---------- ---------- ---------- ---------- Balance Sheet Data: Current assets..................................... $ 116,420 $ 102,457 $ 103,835 $ 121,569 $ 110,312 Total assets....................................... $ 368,625 $ 373,572 $ 389,893 $ 423,208 $ 399,419 Current Liabilities................................ $ 85,356 $ 89,293 $ 116,582 $ 102,432 $ 84,281 Long term debt, excluding current installments..................................... $ 215,464 $ 218,131 $ 317,381 $ 329,262 $ 310,404 Other long term obligations...................................... $ 15,949 $ 16,510 $ 12,334 $ 10,023 $ 11,323 Stockholders' equity (deficit)........................................ $ 51,856 $ 49,638 $ (61,054) $ (23,159) $ (11,239)
In connection with Parent's and Purchaser's review of the Company and in the course of the negotiations among Parent, Purchaser and the Company described in Section 10, the Company provided Parent with certain business and financial information which Parent and Purchaser believe is not publicly available, including, among other things, financial projections for fiscal 1997 prepared by management of 14 the Company in order to formulate a business plan for 1997 (the "Projections"). The Projections do not take into account any of the potential effects of the transactions contemplated by the Offer and/or the Merger. According to the Projections, the Company and its financial advisor estimated that the Company will have sales of $1.046 billion and earnings before interest, taxes, depreciation and amortization of $58.8 million for the Company's 1997 fiscal year. THE COMPANY DOES NOT, AS A MATTER OF COURSE, MAKE PUBLIC ANY PROJECTIONS AS TO FUTURE PERFORMANCE OR EARNINGS, AND THE PROJECTIONS SET FORTH ABOVE ARE INCLUDED IN THIS OFFER TO PURCHASE ONLY BECAUSE THE INFORMATION WAS PROVIDED TO PURCHASER AND PARENT. THE PROJECTIONS WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR FOR COMPLIANCE WITH THE PUBLISHED GUIDELINES OF THE COMMISSION OR THE GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING PROJECTIONS OR FORECASTS. THE COMPANY HAS ADVISED PURCHASER AND PARENT THAT ITS INTERNAL FINANCIAL FORECASTS (UPON WHICH THE PROJECTIONS PROVIDED TO PARENT WERE BASED IN PART) ARE, IN GENERAL, PREPARED SOLELY FOR INTERNAL USE AND CAPITAL BUDGETING AND OTHER MANAGEMENT DECISIONS, AND ARE SUBJECTIVE IN MANY RESPECTS AND THUS SUSCEPTIBLE TO INTERPRETATIONS AND PERIODIC REVISION BASED ON ACTUAL EXPERIENCE AND BUSINESS DEVELOPMENTS. NONE OF THE COMPANY, PURCHASER OR PARENT OR THEIR RESPECTIVE FINANCIAL ADVISORS OR ANY OR THEIR RESPECTIVE DIRECTORS OR OFFICERS ASSUMES ANY RESPONSIBILITY FOR THE ACCURACY OF ANY OF THE PROJECTIONS. BECAUSE THE ESTIMATES AND ASSUMPTIONS UNDERLYING THE PROJECTIONS ARE INHERENTLY SUBJECT TO SIGNIFICANT ECONOMIC AND COMPETITIVE UNCERTAINTIES AND CONTINGENCIES WHICH ARE DIFFICULT OR IMPOSSIBLE TO PREDICT ACCURATELY AND ARE BEYOND THE COMPANY'S, PURCHASER'S AND PARENT'S CONTROL, THERE CAN BE NO ASSURANCE THAT THE PROJECTIONS WILL BE REALIZED. ACCORDINGLY, IT IS EXPECTED THAT THERE WILL BE DIFFERENCES BETWEEN ACTUAL AND PROJECTED RESULTS, AND ACTUAL RESULTS MAY BE MATERIALLY HIGHER OR LOWER THAN THOSE PROJECTED. The Company is subject to the informational filing requirements of the Exchange Act and, in accordance therewith, is required to file periodic reports, proxy statements and other information with the Commission relating to its business, financial condition and other matters. Information as of particular dates concerning the Company's directors and officers, their remuneration, stock options granted to them, the principal holders of the Company's securities and any material interest of such persons in transactions with the Company is required to be disclosed in proxy statements distributed to the Company's stockholders and filed with the Commission. Such reports, proxy statements and other information should be available for inspection at the public reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and also should be available for inspection at the Commission's regional offices located at Seven World Trade Center, 13th Floor, New York, New York 10048 and the Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60604. Copies of such materials may also be obtained by mail, upon payment of the Commission's customary fees, by writing to its principal office at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The information should also be available for inspection at the NASDAQ National Market and such reports and other information can be inspected and copied at the National Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006. Except as otherwise stated in this Offer to Purchase, the information concerning the Company contained in this Offer to Purchase has been taken from or is based upon publicly available documents on file with the Commission and other publicly available information. Although Purchaser, Holding and Parent do not have any knowledge that any such information is untrue, neither Purchaser, Holding nor Parent takes any responsibility for the accuracy or completeness of such information or for any failure by 15 the Company to disclose events that may have occurred and may affect the significance or accuracy of any such information. 8. CERTAIN INFORMATION CONCERNING PURCHASER, HOLDING AND PARENT. Purchaser is a newly incorporated corporation organized and existing under the laws of the State of Delaware, organized in connection with the Offer and the Merger and has not carried on any activities other than in connection with the Offer and the Merger. All of the outstanding capital stock of Purchaser is owned directly by FLI Holding Corp., a Delaware corporation and a newly formed wholly owned subsidiary of Parent. The principal offices of Purchaser and Holding are located at 2110 Executive Drive, Salisbury, North Carolina 28145. Until immediately prior to the time that Purchaser purchases Shares pursuant to the Offer, it is not anticipated that either Holding or Purchaser will have any significant assets or liabilities or engage in activities other than those incident to formation and capitalization and the transactions contemplated by the Offer and the Merger. Because Purchaser and Holding are newly formed and have minimal assets and capitalization, no meaningful financial information regarding Purchaser or Holding is available. Parent is a corporation organized and existing under the laws of the State of North Carolina. Its principal offices are located at 2110 Executive Drive, Salisbury, North Carolina 28145. Parent is in the business of operating retail food supermarkets principally in the southeastern United States. Etablissements Delhaize Freres et Cie "Le Lion" S.A., a corporation organized under the laws of Belgium (defined as "Delhaize") holds 24.1% of Parent's outstanding Class A nonvoting common stock, par value $.50 per share, and 24.1% of Parent's Class B common stock, par value $.50 per share. Delhaize's wholly-owned subsidiary, Delhaize The Lion America, Inc., a Delaware corporation ("Detla"), owns 15% of Parent's Class A nonvoting common stock and 26.8% of Parent's Class B common stock. Parent's Class A common stock and Class B common stock trade on the NASDAQ Stock Market under the symbols FDLNA and FDLNB, respectively. Price quotations are reported in the NASDAQ National Market System. Delhaize's principal executive offices are located at rue Osseghem, 53, 1080 Brussels, Belgium. Detla's principal executive offices are located at Suite 2160, Atlanta Plaza, 950 East Paces Ferry Road, Atlanta, Georgia 30326. The name, citizenship, business address, principal occupation or employment, and five-year employment history for each of the directors and executive officers of Purchaser, Holding, Parent and Delhaize and certain other information are set forth on Schedule I hereto. Except as described in this Offer to Purchase, during the last five years, none of Purchaser, Holding, Parent, Delhaize or, to the best knowledge of Purchaser and Parent, any of the persons listed on Schedule I hereto (i) has been convicted in a criminal proceeding (excluding traffic violations and similar misdemeanors) or (ii) was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, Federal or state securities laws or finding any violation of such laws. CERTAIN FINANCIAL STATEMENTS. Set forth below are certain selected consolidated financial data relating to Parent and its subsidiaries for Parent's last three fiscal years, which have been excerpted or derived from the audited financial statements contained in Parent's Annual Report on Form 10-K for the fiscal year ended December 30, 1995 and from the unaudited financial statements contained in Parent's Quarterly Report on Form 10-Q for the fiscal quarter ended September 7, 1996, in each case filed by Parent with the Commission. More comprehensive financial information is included in such report and other documents filed by Parent with the Commission, and the following financial data are qualified by reference to such reports and other documents, including the financial information and related notes contained therein. Such report and other documents may be inspected and copies may be obtained from the offices of the Commission in the same manner as set forth with respect to information about the Company in Section 7. 16 FOOD LION, INC. SELECTED CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE DATA)
FISCAL YEAR ENDED 36 WEEKS ENDED ---------------------------------------- -------------------------- DECEMBER 30, DECEMBER 31, JANUARY 1, SEPTEMBER 7, SEPTEMBER 9, 1995 1994 1994 1996 1995 ------------ ------------ ------------ ------------ ------------ Income Statement Data: Net Sales............................... $8,210,884 $7,932,592 $ 7,609,817 $6,233,257 $5,675,452 Cost of Goods Sold...................... $6,516,637 $6,323,693 $ 6,121,274 $4,915,927 $4,503,631 Income before income taxes.............. $ 283,061 $ 252,698 $ 6,352 $ 228,614 $ 192,969 Net income.............................. $ 172,361 $ 152,898 $ 3,852 $ 139,455 $ 117,400 Common shares and common share equivalents used in the calculation of net income per common share........... 481,154 483,708 483,701 470,786 482,695 Net income per common share from continuing operations................. $ 0.3582 $ 0.3161 $ 0.0080 $ 0.2962 $ 0.2432
AT AT -------------------------- -------------------------- DECEMBER 30, DECEMBER 31, SEPTEMBER 7, SEPTEMBER 9, 1995 1994 1996 1995 ------------ ------------ ------------ ------------ Balance Sheet Data: Current assets........................................ $1,152,413 $1,128,686 $1,253,502 $1,191,994 Total assets.......................................... 2,645,265 2,481,941 2,821,723 2,585,068 Current liabilities................................... 698,695 690,062 796,552 710,807 Long term debt........................................ 355,300 355,300 314,689 355,300 Stockholders' equity.................................. 1,102,510 1,027,353 1,160,481 1,084,455
Except as described in the Merger Agreement, the Stockholders Agreement and this Offer to Purchase, (i) none of Purchaser, Holding, Parent, Delhaize nor, to the best knowledge of Purchaser, Holding and Parent, any of the persons listed on Schedule I to this Offer to Purchase or any associate or majority owned subsidiary of Purchaser, Parent or any of the persons so listed beneficially owns or has any right to acquire, directly or indirectly, any securities of the Company and (ii) none of Purchaser, Holding, Parent, Delhaize nor, to the best knowledge of Purchaser, Holding and Parent, any of the persons or entities referred to above nor any director, executive officer or subsidiary of any of the foregoing has effected any transaction in the securities of the Company during the past 60 days. Except as described in this Offer to Purchase, none of Purchaser, Holding, Parent, Delhaize nor, to the best knowledge of Purchaser, Holding and Parent, any of the persons listed on Schedule I to this Offer to Purchase, has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company, including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or voting of such securities, joint ventures, loan or option arrangements, puts or calls, guaranties of loans, guaranties against loss or the giving or withholding of proxies. Except as set forth in this Offer to Purchase, neither Purchaser, Holding, Parent, Delhaize nor, to the best knowledge of Purchaser, Holding and Parent, any of the persons listed on Schedule I hereto, has had any business relationship or transaction with the Company or any of its executive officers, directors or affiliates that is required to be reported under the rules and regulations of the Commission applicable to the Offer. Except as set forth in this Offer to Purchase, there have been no contacts, negotiations or transactions between any of Purchaser, Holding, Parent, Delhaize or any of their respective subsidiaries or, to the best knowledge of Purchaser, Holding and Parent, any of the persons listed on Schedule I to this Offer to Purchase, on the one hand, and the Company or its affiliates, on the other hand, concerning a 17 merger, consolidation or acquisition, tender offer or other acquisition of securities, an election of directors or a sale or other transfer of a material amount of assets. 9. FINANCING OF THE OFFER AND THE MERGER. The Offer is not conditioned upon any financial arrangements. The total amount of funds required by Purchaser to consummate the Offer and the Merger, including the refinancing of $221 million of the Company's existing debt related to the Offer and the Merger is estimated to be approximately $341 million. Purchaser will obtain all of such funds from Parent in the form of capital contributions and/or loans. Parent will provide such funds from a revolving credit facility to be arranged by Chase Securities. Chase Securities has agreed, pursuant to a commitment letter dated October 29, 1996 among Chase Securities, The Chase Manhattan Bank ("CMB") and Parent (the "Chase Commitment Letter"), subject to the satisfaction of certain conditions customary for financings of this type, to arrange and syndicate a five-year revolving credit facility ("Long-term Facility") for Parent in the amount of $350 million (the loans thereunder are referred to herein as the "Long-term Loans") and a 364-day revolving credit facility (the "364-day Facility" and together with the Long-term Facility, the "Facilities") in the amount of $350 million (the loans thereunder are referred to herein as the "364-day Loans"). The Chase Manhattan Bank has agreed to be the Administrative Agent and a member of the syndicate. The Facilities will be unsecured. Parent may elect that the loans under the Facilities bear interest at an annual rate equal to the ABR (as defined below) plus the Applicable Margin ("ABR Loans") or the Eurodollar Rate (as defined below) plus the Applicable Margin ("Eurodollar Loans"). In addition, a facility fee of 8 to 25 basis points per annum is payable on commitments under the Long-term Facility and 7 to 8 basis points per annum under the 364-day Facility. "ABR" means the highest of (i) the rate of interest publicly announced by CMB as its prime rate in effect at its principal office in New York City (the "Prime Rate"), (ii) the secondary market rate for three-month certificates of deposit (adjusted for statutory reserve requirements) plus 1% and (iii) the federal funds effective rate from time to time PLUS 0.5%. "Eurodollar Rate" means the rate (adjusted for statutory reserve requirements for eurocurrency liabilities) at which eurodollar deposits for one, two, three or six months (as selected by the Parent) are offered to CMB in the interbank eurodollar market. "Applicable Margin" means (a) 0%, in the case of ABR Loans and (b) (i) in the case of Eurodollar Loans that are Long-term Loans, from 14.5 to 50 basis points and (ii) in the case of Eurodollar Loans that are 364-day Loans, from 15.5 basis points to 17 basis points. The foregoing margins applicable to loans under the Facilities are to be increased by 5 basis points per annum for any period during which the aggregate outstanding amount of the loans under the Facilities and certain competitively bid loans is greater than 50% of the original maximum amount of the loans under the Facilities. The foregoing is a summary of the Chase Commitment Letter and is qualified in its entirety by reference to the full text thereof which is incorporated herein by reference and a copy of which has been filed with the Commission as an exhibit to the Schedule 14D-1. It is anticipated that the borrowings described above will be repaid from funds generated internally by Parent (including, after the Merger, if consummated, funds generated by the Company) and from other sources. No final decisions have been made concerning the repayment of such borrowings and decisions will be made based on Parent's review from time to time of the advisability of particular actions, as well as on prevailing interest rates and financial and other economic conditions. 18 10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY; THE STOCKHOLDERS AGREEMENT; THE MERGER AGREEMENT. On February 22, 1994, Parent was contacted by Morgan Stanley, as representative of the Company, regarding the possibility of Parent making a strategic investment in or acquiring the Company. On March 22, 1994, members of management of the two companies met at the Company's headquarters in Tampa, Florida, and the Company made a presentation to the members of management of Parent. No acquisition proposal was made at or in response to this meeting. On May 13, 1996, members of senior management of Parent met with the Chief Executive Officer of the Company as well as representatives of Chase Securities, acting as Parent's financial advisor. At this meeting, in Charlotte, North Carolina, the parties conducted preliminary discussions of a potential acquisition of the Company by Parent. On May 17, 1996, the Chief Administrative Officer of Parent and the Chief Executive Officer of the Company held a follow-up meeting in New York. This meeting was attended by both companies' outside legal counsel and by representatives of Chase Securities and PaineWebber. At this meeting, the parties continued to discuss the possibility of an acquisition of the Company by Parent and set forth a timetable for conducting due diligence with respect to a possible business combination. No acquisition proposal was made at this meeting. Representatives of the two companies and their financial advisors continued to be in communication. On May 20, 1996, Parent and the Company entered into a confidentiality agreement (the "May 20 Confidentiality Agreement") pursuant to which Parent agreed to keep confidential all confidential information the Company makes available to Parent and its affiliates and representatives in connection with the Offer and the Merger. Parent also agreed, for a period of eighteen months, not to solicit to employ any officer or management employee of the Company above the store level, so long as such persons are employed by the Company. For a period of two years after the date of the agreement, Parent also agreed not to, directly or indirectly, seek to acquire the Company, or any of its assets, businesses or securities unless specifically requested by the Company. The Company granted Parent, in the May 20 Confidentiality Agreement, a 45-day exclusivity period during which the Company agreed to refrain from engaging in certain actions to solicit or encourage any business combination transaction with any person other than Parent. The foregoing is a summary of the May 20 Confidentiality Agreement and is qualified in its entirety by reference to the full text thereof which is incorporated herein by reference and a copy of which has been filed with the Commission as an exhibit to the Schedule 14D-1. On May 21, 1996, Parent and the Company entered into a confidentiality agreement (the "May 21 Confidentiality Agreement") pursuant to which the Company agreed to keep confidential all confidential information Parent makes available to the Company in connection with the Offer and the Merger. The Company also agreed, for a period of eighteen months, not to solicit to employ any officer or management employee of Parent above the store level, so long as such persons are employed by Parent. The foregoing is a summary of the May 21 Confidentiality Agreement and is qualified in its entirety by reference to the full text thereof which is incorporated herein by reference and a copy of which has been filed with the Commission as an exhibit to the Schedule 14D-1. On May 22, 1996, members of senior management of Parent and the Company met again in Salisbury, North Carolina. At this meeting, the parties engaged in general discussions of how the companies would operate after the acquisition, if an acquisition took place. On May 29, 1996, Tom E. Smith, President and Chief Executive Officer of Parent met with Ronald E. Johnson, President and Chief Executive Officer of the Company, in Salisbury, North Carolina. They discussed generally the operations of the Company, its performance and future plans. On June 12, 1996, Parent's board of directors held a meeting by telephone conference call in which executives of the Company and the board of directors discussed a potential merger between the Company 19 and Parent. The board of directors determined that Parent should continue to conduct its due diligence investigation and to evaluate the operations and performance of the Company. During June and July of 1996, Parent conducted a legal and financial due diligence investigation of the Company's business. During this time, management of Parent and the Company, as well as Chase Securities and PaineWebber, engaged in continued discussions about the projected structure and operations of the combined entity. Representatives of Parent engaged in negotiations relating to a stockholders agreement with certain principal Stockholders of the Company pursuant to which such Stockholders would agree to vote in favor of a merger of the Company with Parent and would grant the Company an option to purchase such Stockholders' Company Common Stock. Representatives of Parent also engaged in negotiations relating to a merger agreement with representatives of the Company. In August 1996, Parent and the Company determined not to proceed with their negotiations, and on August 9, the Company issued a press release to that effect. Parent and the Company terminated their discussions in August 1996 without executing a stockholders agreement or a merger agreement. During September and early October, the financial advisors and certain representatives of the Company and Parent held informal discussions and exchanged additional information. No formal proposals were made during that period. On October 24, 1996, Chase Securities, acting on behalf of Parent, contacted PaineWebber to formally renew the negotiations for Parent to acquire the Company. On October 24, 1996, the Board of Directors of Parent held a meeting by conference telephone call and authorized the making of an offer to purchase the Shares and to enter into the Merger Agreement. Subsequently, the Selling Stockholders, the Company and Parent agreed that the Common Shares would be purchased for $26.00 per share. On October 31, 1996, Parent, Purchaser, the Company and the Selling Stockholders executed the Stockholders Agreement, and Parent, Purchaser and the Company executed the Merger Agreement. THE STOCKHOLDERS AGREEMENT As an inducement and a condition to entering into the Merger Agreement, Parent required that the Selling Stockholders agree, and each Selling Stockholder agreed, to enter into the Stockholders Agreement. Each of the following is a "Selling Stockholder": BankAmerica Capital Corporation, Citicorp North America, Inc., Landmark Equity Partners III, L.P., Landmark Equity Partners IV, L.P., The Prudential Insurance Company of America, Prudential Property & Casualty Company, The Prudential Insurance Company of Arizona, PaineWebber Capital Inc., UBS Capital LLC, High Yield Portfolio, IDS Bond Fund, Inc., IDS Life Advantage Fund, Pruco Life Insurance Company, Wells, Fargo & Company. All of such persons are referred to collectively herein as the "Selling Stockholders." The following is a summary of the material terms of the Stockholders Agreement. This summary is not a complete description of the terms and conditions thereof and is qualified in its entirety by reference to the full text thereof which is incorporated herein by reference and a copy of which has been filed on November 4, 1996 with the Commission as an exhibit to Parent's Current Report on Form 8-K. The Stockholders Agreement may be examined, and copies thereof may be obtained, as set forth in Section 7 above. TENDER OF SHARES. Each Selling Stockholder has agreed to validly tender (and not to withdraw) pursuant to and in accordance with the terms of the Offer (provided that the Offer is not amended in a manner adverse to the Selling Stockholder), not later than the tenth business day after commencement of the Offer, the Shares owned on the date of the Stockholders Agreement and any Shares acquired thereafter and prior to the termination of the Stockholders Agreement. The Selling Stockholders are entitled to receive the highest price paid by Purchaser pursuant to the Offer. STOCK OPTION. The Selling Stockholders have granted to Parent an irrevocable option to purchase all (but not less than all) of the Shares held by such Stockholders (the "Option Shares") at a purchase price per share equal to $26.00, or such higher price as is paid by Purchaser for Shares in the 20 Offer, the Merger, or otherwise, other than in connection with the exercise of appraisal rights or other resolution of dispute (the "Option Price"). The options to purchase the Option Shares shall become exercisable, in whole but not in part as to all the outstanding Stock Options, when all waiting periods under the HSR Act required for the purchase of the Option Shares upon such exercise shall have expired or been waived, unless there shall then be in effect any preliminary or final injunction or other order issued by any court or governmental administrative or regulatory agency or authority prohibiting the exercise of the Stock Options and shall remain exercisable until the termination of the Stockholders Agreement. VOTING. Each Selling Stockholder has agreed that during the period commencing on the date of the Stockholders Agreement and continuing until the first to occur of the effective time of the Merger as set forth in the Merger Agreement (the "Effective Time") or termination of the Stockholders Agreement, at any meeting of the Stockholders or in connection with any written consent of the Stockholders, each Selling Stockholder will vote (or cause to be voted) the Shares held by such Selling Stockholder solely in its capacity as Stockholder, (i) in favor of the Merger, the execution and delivery by the Company of the Merger Agreement and the approval of the terms thereof and each of the other actions contemplated by the Merger Agreement and the Stockholders Agreement and any actions required in furtherance thereof; (ii) against any action, any failure to act or agreement that would result in a breach in any respect of any covenant, representation or warranty or any other obligation or agreement of the Company under the Merger Agreement or the Stockholders Agreement (after giving effect to any materiality or similar qualifications contained therein); and (iii) except as otherwise agreed to in writing in advance by Parent, against the following actions (other than the Merger and the transactions contemplated by the Merger Agreement): (A) any extraordinary corporate transaction, such as a merger, consolidation or other business combination involving the Company or its subsidiaries; (B) a sale, lease or transfer of a material amount of assets of the Company or its subsidiaries, or a reorganization, recapitalization, dissolution or liquidation of the Company or its subsidiaries; (C) (1) any change in a majority of the persons who constitute the board of directors of the Company; (2) any change in the present capitalization of the Company or any amendment of the Company's certificate of incorporation or bylaws; (3) any other material change in the Company's corporate structure or business; or (4) any other action involving the Company or its subsidiaries which is intended, or could reasonably be expected, to impede, interfere with, delay, postpone, or materially adversely affect the Merger and the transactions contemplated by the Stockholders Agreement or the Merger Agreement. Each Selling Stockholder has further agreed not to enter into any agreement or understanding with any person or entity the effect of which would be to violate the provisions and agreements described above. REPRESENTATIONS, WARRANTIES, COVENANTS AND OTHER AGREEMENTS. In the Stockholders Agreement, each Selling Stockholder has made certain representations, warranties and covenants, including with respect to (i) ownership of the Shares held by such Stockholder, (ii) authority to enter into and perform its obligations under the Stockholders Agreement, (iii) the absence of liens and encumbrances on and in respect of the Shares held by such Stockholder, (iv) restrictions on the transfer of the Shares held by such Stockholder, and (v) the waiver of its appraisal rights. Each Selling Stockholder has agreed that, until the earlier of the Effective Time and termination of the Stockholders Agreement in accordance with its terms, it will not, in its capacity as such, directly or indirectly solicit (including by way of furnishing information) or respond to any inquiries or the making of any proposal by any person or entity (other than Parent or any affiliate of Parent) with respect to the Company that constitutes an Alternative Proposal (as defined in the Stockholders Agreement). The Stockholders Agreement does not prevent any of the Selling Stockholders' designees on the Company's Board of Directors from taking any actions, subject to the applicable provisions of the Merger Agreement, while acting in the capacity of a director of the Company, provided that such action does not affect such Stockholder's obligations under the Stockholders Agreement. PROXY. Each Selling Stockholder, concurrently with the execution of the Stockholders Agreement, executed and delivered to Purchaser an irrevocable proxy to exercise all voting and other rights with 21 respect to the Shares held by such Stockholder (i) in favor of the Merger, the execution and delivery by the Company of the Merger Agreement and the Stockholders Agreement and all other actions contemplated by the Merger Agreement or the Stockholders Agreement; (ii) against any action, any failure to act, or agreement that would result in a breach in any respect of any covenant, representation or warranty or any other obligation or agreement of the Company under the Merger Agreement or the Stockholders Agreement; and (iii) against the following actions (other than the Merger and the transactions contemplated by the Merger Agreement): (A) any extraordinary corporate transaction, such as a merger, consolidation or other business combination involving the Company or its subsidiaries; (B) a sale, lease or transfer of a material amount of assets of the Company or its subsidiaries, or a reorganization, recapitalization, dissolution or liquidation of the Company or its subsidiaries; (C) (1) any change in a majority of the persons who constitute the board of directors of the Company; (2) any change in the present capitalization of the Company or any amendment of the Company's certificate of incorporation or bylaws; (3) any other material change in the Company's corporate structure or business; or (4) any other action involving the Company or its subsidiaries which is intended, or could reasonably be expected, to impede, interfere with, delay, postpone, or materially adversely affect the Merger or the transactions contemplated by the Stockholders Agreement or the Merger Agreement. TERMINATION. The Stockholders Agreement may be terminated and the transactions contemplated thereby may be abandoned, by any Selling Stockholder at any time prior to the exercise of the option to purchase such Selling Stockholder's Option Shares (i) at any time after the Merger Agreement is terminated in accordance with its terms by the Company due to the material breach of any representation, warranty, covenant or agreement on the part of Parent or Purchaser set forth in the Merger Agreement or (ii) at any time after the earlier of (A) 5:00 p.m. Eastern Time on the date which is five business days after the date of termination of the Merger Agreement for any reason not specified in (i) above and (B) 5:00 p.m. Eastern Time on March 7, 1997. THE MERGER AGREEMENT. The following is a summary of the Merger Agreement. The summary is not a complete description of the terms and conditions thereof and is qualified in its entirety by reference to the full text thereof which is incorporated herein by reference to the full text thereof which is incorporated herein by reference and a copy of which has been filed on November 4, 1996 with the Commission as an exhibit to Parent's Current Report on Form 8-K. The Merger Agreement may be examined and copies thereof may be obtained, as set forth in Section 7 hereof. THE OFFER. At any time after November 7, 1996 and prior to December 2, 1996, the Company has the right to require that Purchaser commence the Offer no later than five (5) business days after the date of the Company's exercise of its right to require that the Offer be commenced (the "Tender Option"). (The Company exercised the Tender Option on November 8, 1996.) The obligation of Purchaser to accept for payment or pay for Shares tendered pursuant to the Offer is subject to the satisfaction of the Minimum Condition and certain other conditions that are described in Section 14 hereof (which are referred to herein as the "Conditions"). The Purchaser has reserved the right to modify any of the terms and conditions of the Offer, except that neither Parent nor Purchaser will decrease the consideration, or change the form of consideration, payable in the Offer, decrease the number of Shares sought pursuant to the Offer, change the conditions to the Offer, impose additional conditions to the Offer, change the Expiration Date, or amend any term of the Offer in any manner adverse to holders of the Shares. However, the Offer may be extended (i) for any period to the extent required by law or by any rule, regulation, interpretation or position of the Commission or the staff thereof applicable to the Offer and (ii) for one or more periods of not more than five (5) business days each, but in no event for more than a total of twenty (20) business days if, following the satisfaction or waiver of each of the Conditions, shares constituting less than 90% of the Shares have been validly tendered and not properly withdrawn pursuant to the Offer; PROVIDED, that, the closing of the Offer shall occur on or before 22 December 24, 1996 if all of the Conditions have been satisfied or waived prior to such date. In the event Purchaser is unable to consummate the Offer on or prior to the expiration date of the Offer due to the failure of any Condition, Parent shall cause Purchaser to, and Purchaser shall, extend the Offer until the earlier of (A) February 28, 1997 and (B) such time as such condition is satisfied or waived; PROVIDED, that Purchaser may, but is not obligated to, extend the Offer if either (x) the Company is in breach in any material respect of its covenants, agreements, representations or warranties contained in the Merger Agreement (without reference to any materiality qualifications contained therein), or (y) there is a reasonable likelihood that one or more of the Conditions cannot be satisfied on or before February 28, 1997. BOARD RECOMMENDATION. The Board of Directors of the Company (at a meeting duly called and held) has, based upon, among other things, a fairness opinion of PaineWebber, its financial advisor, that the proposed consideration to be paid in the Offer and the Merger is fair from a financial point of view to the holders of Shares, (i) determined that the Offer and the Merger are fair to, and in the best interests of, the Stockholders, (ii) taken all actions to approve the Offer, the Merger and the Stockholders Agreement for purposes of Section 203 of the DGCL, and (iii) resolved to recommend acceptance of the Offer and approval and adoption of the Merger Agreement by the Stockholders. (The recommendation of the Board of Directors of the Company is set forth in the Schedule 14D-9 of the Company included herewith.) BOARD REPRESENTATION. The Merger Agreement provides that promptly upon the payment by Purchaser for shares of Common Stock acquired pursuant to the Offer or the Stockholders Agreement, Parent will be entitled to designate such number of directors, rounded up to the next whole number, equal to the product of the number of directors on the Board of Directors of the Company and the percentage that such number of Shares so purchased bears to the number of Shares outstanding, and the Company shall, upon request by Parent, promptly increase the size of the Board of Directors of the Company or exercise its best efforts to secure the resignations of such number of directors as is necessary to enable Parent's designees to be elected to the Board of Directors of the Company and shall cause Parent's designees to be so elected. The Company shall take all actions necessary to effect any such election, including mailing to its Stockholders the information required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. Following the election of designees of Parent and prior to the effective time of the Merger as set forth in Section 2.03 of the Merger Agreement (the "Effective Time"), any amendment of the Merger Agreement or the certificate of incorporation or bylaws of the Company, any termination of the Merger Agreement by the Company, any extension by the Company of the time for the performance of any of the obligations or other acts of Parent or Purchaser or waiver of any of the Company's rights thereunder shall require the concurrence of a majority of the directors of the Company then in office who neither were designated by Parent nor are employees of the Company or any of its subsidiaries (the "Independent Directors"). If the number of Independent Directors shall be reduced below two for any reason whatsoever, the remaining Independent Director shall designate a person to fill such vacancy who shall be deemed to be an Independent Director for purposes of the Merger Agreement or, if no Independent Directors then remain, the other directors shall designate two persons to fill such vacancies who shall not be officers or affiliates of the Company or any of its subsidiaries, or officers or affiliates of Parent or any of its subsidiaries, and such persons shall be deemed to be Independent Directors for purposes of the Merger Agreement. The Independent Directors shall have the authority to retain such counsel and other advisors at the expense of the Company as are reasonably appropriate to the exercise of their duties in connection with the Merger Agreement, subject to approval by the Company of the terms of such retention, which approval shall not be unreasonably withheld. In addition, the Independent Directors shall have the authority to institute any action, on behalf of the Company, to enforce performance of the Merger Agreement. 23 THE MERGER. The Merger Agreement provides that upon the terms and subject to the provisions thereof, and in accordance with the relevant provisions of the DGCL, Purchaser shall be merged with and into the Company. Following the Merger, the Company shall continue as the surviving corporation (the "Surviving Corporation") and shall continue its existence under the laws of Delaware, and the separate corporate existence of Purchaser shall cease. The Merger Agreement further provides that (i) the certificate of incorporation of the Surviving Corporation after the Effective Time shall be as set forth in Exhibit B to the Merger Agreement, and the bylaws of Purchaser as in effect immediately prior to the Effective Time shall be the bylaws of the Surviving Corporation until thereafter amended, (ii) the directors of Purchaser immediately prior to the Effective Time shall become the directors of the Surviving Corporation, and (iii) the officers of Purchaser immediately prior to the Effective Time shall become the officers of the Surviving Corporation. CONSIDERATION TO BE PAID IN THE MERGER. The Merger Agreement provides that at the Effective Time, each Share outstanding immediately prior to the Effective Time (other than Shares owned by Purchaser or any affiliate of Purchaser or held in the treasury of the Company or by any subsidiary of the Company, all of which shall be cancelled and no payment shall be made with respect thereto, and other than Dissenting Shares (as defined below under "Dissenters' Rights")) shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into a right to receive in cash an amount per Share equal to the highest price that may be paid pursuant to the Offer, payable to the holder thereof, without interest thereon, upon surrender of the certificate representing such Share. Each share of common stock of Purchaser issued and outstanding immediately prior to the Effective Time will, by virtue of the Merger and without any action on the part of the holder thereof, be converted into and exchanged for one share of common stock of the Surviving Corporation. COMPANY OPTIONS. All outstanding options pursuant to the Company's stock option plans (the "Stock Option Plans") shall, upon consummation of the Merger, be cancelled, and the holders thereof shall be entitled to receive in the Merger an amount (subject to any applicable withholding tax) in cash equal to the difference between the Offer Price and the per share exercise price of such option, to the extent such difference is a positive number. The Merger Agreement provides that the Company will take reasonable actions to effect the provisions of the Merger Agreement related to the options, including obtaining the written acknowledgement of each holder of options that the payment of such amount will fully discharge the Company's obligations with respect thereto. Subsequent to the Effective Time, options will no longer be issued or outstanding under the Stock Option Plans. (Such acknowledgements have been obtained.) STOCKHOLDERS' MEETING. In the Merger Agreement, the Company has agreed, if required by Parent, through its Board of Directors, to duly call, give notice of, convene and hold a meeting of its stockholders, or solicit consents from a sufficient number of Stockholders, as soon as practicable following the expiration of the Offer, for the purpose of adopting the Merger Agreement. In connection with any vote to approve the Merger Agreement, all Shares acquired by Parent, Purchaser or any other affiliate of Purchaser, pursuant to the Offer, the Stockholders Agreement or otherwise will be voted in favor of the Merger. The Board of Directors of the Company will recommend that Stockholders of the Company vote in favor of the approval and adoption of the Merger Agreement. DISSENTERS' RIGHTS. Holders of Shares will not have appraisal rights as a result of the Offer. If the Merger is consummated, however, persons who hold Shares at such time will have the right to appraisal of their Shares in accordance with Section 262 of the DGCL ("Dissenters' Rights"). See Section 11. REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains representations and warranties by the Company relating to, among other things, (i) the organization of the Company and its subsidiaries and other corporate matters, (ii) the capital structure of the Company, (iii) the authorization, execution, delivery and consummation of the transactions contemplated by the Merger Agreement, (iv) the absence of certain changes and events, (v) documents filed by the Company with the Commission and the 24 accuracy of the information contained therein, (vi) the accuracy of the information contained in documents filed with the Commission in connection with the Offer and the Merger, (vii) consents and approvals, (viii) the non-existence of undisclosed brokerage fees and commissions, (ix) the existence of employment agreements, (x) litigation, (xi) the absence of undisclosed liabilities, (xii) compliance with laws and agreements, (xiii) environmental matters, (xiv) tax matters, (xv) labor matters and (xvi) matters relating to the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder. In the Merger Agreement, Parent and Purchaser have made certain representations and warranties to the Company relating to, among other things, (a) the comparable matters with respect to Parent and Purchaser set forth in clauses (i), (iii), (vii), (viii) and (x) above, and (b) the sufficiency of funds to be available to purchase Shares pursuant to the Offer and to pay all fees and expenses of Parent and Purchaser related to the transactions contemplated by the Merger Agreement. The representations and warranties contained in the Merger Agreement are qualified in certain respects by materiality standards. AGREEMENTS WITH RESPECT TO THE CONDUCT OF BUSINESS PENDING THE MERGER. The Merger Agreement provides that, except as specifically contemplated by the Merger Agreement, during the period from the date of the Merger Agreement to the time when designees of Parent control the Board of Directors of the Company, the Company will, and will cause each of its subsidiaries to, conduct their respective businesses only in, and not take any action except in, the ordinary and usual course of business and consistent with past practice, and use their best efforts to preserve intact their respective business organizations and goodwill, keep available the services of their respective present officers and key employees and preserve the goodwill and business relationships with suppliers, distributors, customers and others having business relationships with them. In addition, subject to certain exceptions, during such period, the Company will not, and will not permit any of its subsidiaries to (i) make or propose any change or amendment to their respective certificates of incorporation or bylaws; (ii) split, combine or reclassify their outstanding capital stock or declare, set aside or pay any dividend or distribution payable in cash, stock, property or otherwise, (iii) authorize the issuance of, or issue, sell, pledge or dispose of, or agree to issue, sell, pledge or dispose of, any additional shares of or any options, warrants or rights of any kind to acquire any shares of, its capital stock of any class or any debt or equity securities convertible into or exchangeable for such capital stock, (iv) sell, pledge, dispose of, license or encumber any material assets, or any interests therein, other than in the ordinary course of business and consistent with past practice, (v) redeem, purchase, or acquire any shares of its capital stock, (vi) make any changes in the kinds of business in which the Company is engaged, (vii) assume or incur any indebtedness for borrowed money or issue or sell debt securities, voluntarily prepay any debt obligations, (viii) adopt, enter into or amend any bonus, profit sharing, severance, termination, stock option, pension, retirement, deferred compensation, health care, change in control agreement, restricted stock, employment or other employee benefit plan, agreement, trust, fund or arrangement for the benefit or welfare of any employee, director, officer or retiree, (ix) enter into any contract out of the ordinary course of business if such contract or a series of related contracts calls for payments in excess of $500,000, (x) make any capital expenditures out of the ordinary course of business, (xi) permit any material change in (A) any pricing, marketing, purchasing, investment, accounting, financial reporting inventory, credit, allowance or tax procedure, or (B) any method of calculating any bad debt, contingency or other reserve for accounting, financial reporting or tax purposes, or make any material tax election or settle or compromise any material income tax liability with any governmental authority, (xii) acquire all or any substantial part of the business and properties or capital stock of any person, whether by merger, purchase of assets, tender offer or otherwise, or (xiii) agree in writing, or otherwise, to take any of the foregoing actions or any other action which would make any representation or warranty contained in the Merger Agreement untrue or incorrect in any material respect. In addition, the Company shall and shall cause each of its subsidiaries to (i) confer on a regular and frequent basis with one or more representatives of Parent to discuss operational matters of materiality and the general status of ongoing operations and (ii) promptly notify Parent of any significant changes in the business, financial condition or results of operations of the Company or its subsidiaries taken as a whole. In addition, the Company has agreed to use its reasonable best efforts to 25 (a) exempt the Company, the Offer, the Stockholders Agreement and the Merger from the requirements of any state takeover law by action of the Company's Board of Directors or otherwise and (b) assist in any challenge by the Purchaser to the validity or applicability to the Offer or the Merger of any state takeover law. NO SOLICITATION. The Merger Agreement provides that the Company shall not, shall not permit any of its subsidiaries and shall use its best efforts to cause their respective officers, directors, employees, representatives, agents or affiliates not to, directly or indirectly, encourage, solicit, initiate or participate in any way in any discussions or negotiations with, or provide any non-public information to, or afford any access to the properties, books or records of the Company or any of its subsidiaries, or otherwise assist or facilitate any corporation, partnership, person or other entity or group concerning any acquisition transaction and will notify Parent immediately if any inquiries, proposals or offers are received concerning an acquisition transaction; PROVIDED, HOWEVER, that prior to the acquisition of Shares pursuant to the Offer or the Stockholders Agreement, the Board of Directors of the Company is not prohibited by the terms of the Merger Agreement from complying with Rule 14e-2 promulgated under the Exchange Act with regard to an Alternative Proposal (as defined in the Merger Agreement). CONDITIONS TO THE MERGER. The respective obligations of each party to effect the Merger are subject to the satisfaction or waiver, where permissible, prior to the Effective Time, of the following conditions: (a) the Merger Agreement shall have been adopted by the requisite vote of the Stockholders in accordance with applicable law, if such vote is required by applicable law; (b) no statute, rule, regulation, executive order, decree or injunction shall have been enacted, entered, promulgated or enforced by any federal or state court or governmental authority which is in effect and has the effect of making the acquisition of Shares pursuant to the Merger illegal or otherwise prohibiting the consummation of the Merger; and (c) the waiting period, if any, applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated. The obligations of Parent and Purchaser to effect the Merger are also subject to each of the following conditions: (i) the Merger Agreement shall have been adopted by the requisite vote of the Stockholders under the DGCL, unless such approval is not required under the DGCL; (ii) any waiting period applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated; (iii) all governmental and regulatory and other consents and approvals shall have been obtained; (iv) there shall not have been any law or order enacted or issued which (A) prohibits, or imposes any material limitations on Parent's or Purchaser's ownership or operation of the Company's businesses or assets, (B) prohibits, restrains or makes illegal the Merger, (C) imposes material limitations on the ability of Parent or Purchaser to acquire, hold or to exercise the full rights of ownership of the Shares, (D) imposes limitations on the ability of Parent or Purchaser to effectively control the businesses or assets of the Company, or (E) has the effect of making illegal or otherwise restricting or prohibiting consummation of the Merger or other transactions contemplated by the Merger Agreement; (v) there shall be no action or proceeding before any governmental or regulatory authority which seeks to have any effect set forth in item (iv) immediately above; (vi) there shall be no extraordinary, adverse market conditions (as described in the Merger Agreement); (vii) the representations and warranties of the Company that are subject to, or qualified by, "material adverse effect," "material adverse change" or other materiality qualification shall be true and correct, and the representations and warranties made by the Company that are not so qualified shall be true and correct in any respect which could reasonably be expected to have a material adverse effect on the Company and its subsidiaries taken as a whole, or the Parent and its subsidiaries, taken as a whole, in each case when made and on, and as of the Closing Date (as defined in the Merger Agreement); and (viii) the Company shall have performed its obligations, in all material respects, under the Merger Agreement. The obligation of the Company to effect the Merger is also subject to each of the following conditions: (i) the Merger Agreement shall have been adopted by the requisite vote of the Stockholders under the DGCL, unless such approval is not required under the DGCL; (ii) any waiting period applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated; (iii) there shall 26 not have been any law or order enacted or issued which prohibits, restrains or makes illegal the Merger and (iv) there shall be no action or proceeding by any governmental or regulatory authority seeking to have any effect set forth in item (iii) immediately above. DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE. The Company and, from and after the Effective Time, the Surviving Corporation (each, an "Indemnifying Party"), shall indemnify, defend and hold harmless each person who is, or has been at any time prior to the date of the Merger Agreement, or who becomes prior to the Effective Time, a director or officer of the Company or any of its subsidiaries (the "Indemnified Parties") against (i) all losses, claims, damages, costs and expenses (including attorneys' fees), liabilities, judgments and settlement amounts that are paid or incurred in connection with any claim, action, suit, proceeding or investigation (whether civil, criminal, administrative or investigative and whether asserted or claimed prior to, at or after the Effective Time) that is based in whole or in part on, or arises in whole or in part out of, the fact that such Indemnified Party is or was a director or officer of the Company or any of its subsidiaries and relates to or arises out of any action or omission occurring at or prior to the Effective Time ("Indemnified Liabilities"), and (ii) all Indemnified Liabilities based in whole or in part on, or arising in whole or in part out of, or pertaining to, the Merger Agreement or the transactions contemplated thereby, in each case to the full extent a corporation is permitted under applicable law to indemnify its own directors or officers, as the case may be; PROVIDED that no Indemnifying Party shall be liable for any settlement of any claim effected without its written consent, which consent shall not be unreasonably withheld. Without limiting the foregoing, in the event that any such claim, action, suit, proceeding or investigation is brought against any Indemnified Party (whether arising prior to or after the Effective Time), (w) the Indemnifying Parties will pay expenses in advance of the final disposition of any such claim, action suit, proceeding or investigation to each Indemnified Party to the full extent permitted by applicable law; PROVIDED that the person to whom expenses are advanced provides any undertaking required by applicable law to repay such advance if it is ultimately determined that such person is not entitled to indemnification; (x) the Indemnified Parties shall retain counsel reasonably satisfactory to the Indemnified Parties; (y) the Indemnifying Parties shall pay all reasonable fees and expenses of such counsel for the Indemnified Parties promptly as statements therefor are received; and (z) the Indemnifying Parties shall use all commercially reasonable efforts to assist in the vigorous defense of any such matter. Except to the extent required by law, Parent will not take any action so as to amend, modify or repeal the provisions for indemnification of directors or officers contained in the certificates or articles of incorporation or bylaws (or other comparable charter documents) of the Surviving Corporation or its subsidiaries (which as of the Effective Time shall be no more favorable to such individuals than those maintained by the Company and its subsidiaries on the date of the Merger Agreement) in such a manner as would adversely affect the rights of any individual who shall have served as a director or officer of the Company or any of its subsidiaries prior to the Effective Time to be indemnified by such corporations in respect of their serving in such capacities prior to the Effective Time. Parent and the Surviving Corporation shall, until the sixth anniversary of the Effective Time and for so long thereafter as any claim asserted prior to such date has not been fully adjudicated by a court of competent jurisdiction, cause to be maintained in effect, to the extent available, the policies of directors' and officers' liability insurance maintained by the Company and its subsidiaries as of the date of the Merger Agreement (or policies of at least the same coverage and amounts containing terms that are no less advantageous to the insured parties) with respect to claims arising from facts or events that occurred on or prior to the Effective Time; provided that in no event shall Parent or the Surviving Corporation be obligated to expend in order to maintain or procure insurance coverage in an amount per annum in excess of two hundred percent (200%) of the aggregate premiums payable by the Company and its subsidiaries in 1996 (on an annualized basis) for such purpose. TERMINATION. The Merger Agreement may be terminated, and the transactions contemplated thereby may be abandoned, at any time prior to the Effective Time, whether prior to or after the Company obtains Stockholder approval therefor: (i) by mutual written agreement of the parties thereto duly 27 authorized by action taken by or on behalf of their respective Boards of Directors; (ii) by either the Company or Parent upon notification to the non-terminating party by the terminating party: (A) any time after February 28, 1997, if neither the Merger, the Offer nor the purchase of Company Common Stock pursuant to the Stockholders Agreement has been consummated and the failure to consummate any of the foregoing is not caused by a breach of the Merger Agreement by the terminating party; (B) if the Offer is commenced and shall have terminated or expired in accordance with its terms without Purchaser having accepted for payment and paid for any shares of Company Common Stock pursuant to the Offer; PROVIDED, HOWEVER, that Parent may not terminate the Merger Agreement if Purchaser's termination of, or failure to accept for payment or pay for any Shares tendered pursuant to, the Offer does not follow the occurrence, or failure to occur, as the case may be, of any condition to the Offer set forth on Annex A to the Merger Agreement or if Parent or Purchaser is otherwise in breach of the terms of the Offer or the Merger Agreement; or (C) if any court of competent jurisdiction or other competent governmental or regulatory authority shall have issued an order making illegal or otherwise restricting, preventing or prohibiting the Merger and such order shall have become final and nonappealable; or (iii) by the Company if (I) there has been a material breach of any representation, warranty, covenant or agreement on the part of Parent or Purchaser set forth in the Merger Agreement, which breach is not curable or, if curable, has not been cured within thirty (30) days following receipt by Parent of notice of such breach from the Company; or (II) if the Offer has not been timely commenced in accordance with the Merger Agreement upon the Company's exercise of the Tender Option; or (iv) by Parent, prior to the purchase of Shares pursuant to the Offer, if (x) there has been a breach of any of the representations or warranties made by the Company in the Merger Agreement that are subject to, or qualified by, any "material adverse effect," "material adverse change" or other materiality qualification, or there has been a breach of any of the representations or warranties made by the Company in the Merger Agreement that are not so qualified in any respect which could reasonably be expected to have a material adverse effect on the Company and its subsidiaries taken as a whole, or Parent and its subsidiaries, taken as a whole, or (y) there has been a material breach of any covenant or agreement (without reference to any materiality qualification contained therein) on the part of the Company set forth in the Merger Agreement, which breach, in either instance, is not curable or, if curable, has not been cured within thirty (30) days following receipt by the Company of notice of such breach from Parent. 11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY AFTER THE OFFER AND THE MERGER. PURPOSE OF THE OFFER. The purpose of the Offer and the Merger is for Parent to acquire control of, and the entire equity interest in, the Company. The purpose of the Merger is for Parent to acquire all Shares not purchased pursuant to the Offer. Upon consummation of the Merger, the Company will become an indirect wholly owned subsidiary of Parent. The Offer is being made pursuant to the Merger Agreement. Under the DGCL, approval by the Board and the affirmative vote of the holders of a majority of the outstanding Shares is required to approve and adopt the Merger Agreement and the transactions contemplated thereby, including the Merger, the Offer and the Stockholders Agreement, except as set forth in the next succeeding paragraph in the event the Merger qualifies as a merger of a parent and a subsidiary for the purposes of Section 253 of the DGCL. On October 29, 1996, the Board of Directors of the Company approved and adopted the Merger Agreement and the transactions contemplated thereby, by a unanimous vote of the directors present at a meeting held on that date, and the only remaining required corporate action of the Company to approve the Merger Agreement is the approval and adoption of the Merger Agreement and the transactions contemplated thereby by the affirmative vote of the holders of a majority of the Shares. Accordingly, if the Minimum Condition is satisfied, Purchaser will have sufficient voting power to cause the approval and adoption of the Merger Agreement and the transactions contemplated thereby without the affirmative vote of any other Stockholder. Assuming tender of Shares in the Offer by each Selling Stockholder in accordance with the terms of the Stockholders Agreement, consummation of the Offer will provide the Purchaser with at least 67% of 28 the Shares. In the Merger Agreement, the Company has agreed to take all action necessary to convene a meeting, or solicit requisite consents, of the Stockholders as soon as practicable after the consummation of the Offer for the purpose of considering and taking action on the Merger Agreement and the transactions contemplated thereby, if such action is required by the DGCL. Parent and Purchaser have agreed that all Shares owned by them and their subsidiaries will be voted in favor of the Merger Agreement and the transactions contemplated thereby. In the event Purchaser acquires at least 90% of the Shares upon consummation of the Offer, Purchaser may effect the Merger under Section 253 of the DGCL without a vote of stockholders of the Company. If Purchaser purchases Shares pursuant to the Offer, the Merger Agreement provides that Purchaser will be entitled to designate representatives to serve on the Board in proportion to Purchaser's ownership of Shares following such purchase. See Section 10. Purchaser expects that such representation would permit Purchaser to exert substantial influence over the Company's conduct of its business and operations. APPRAISAL RIGHTS. No appraisal rights are available in connection with the Offer. However, if the Merger is consummated, Stockholders will have certain rights under Section 262 of the DGCL to dissent and demand appraisal of, and to receive payment in cash of the fair value of, their Shares. Such rights to dissent, if the statutory procedures are complied with, could lead to a judicial determination of the fair value of the Shares (excluding any element of value arising from the accomplishment or expectation of the Merger), required to be paid in cash to such dissenting holders for their Shares. In addition, such dissenting Stockholders would be entitled to receive payment of a fair rate of interest from the date of consummation of the Merger on the amount determined to be the fair value of their Shares. In determining the fair value of the Shares, the court is required to take into account all relevant factors. Accordingly, such determination could be based upon considerations other than, or in addition to, the market value of the Shares, including, among other things, asset values and earning capacity. In WEINBERGER V. UOP, INC., the Delaware Supreme Court stated, among other things, that "proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court" should be considered in an appraisal proceeding. Therefore, the value so determined in any appraisal proceeding could be the same, more, or less than the purchase price per Share in the Offer. If a Stockholder who demands appraisal under Section 262 of the DGCL fails to perfect, or effectively withdraws or loses, his right of appraisal under applicable law, the Shares of that Stockholder will be converted into the Merger Consideration in accordance with the Merger Agreement. A Stockholder may withdraw his demand for appraisal by delivering to Purchaser a written withdrawal of such demand for appraisal and acceptance of the Merger. Failure to follow the steps required by Section 262 of the DGCL for perfecting appraisal rights may result in the loss of those rights. In addition, several decisions by Delaware courts have held that, in certain circumstances, a controlling stockholder of a company involved in a merger has a fiduciary duty to other stockholders which requires that the merger be fair to such other stockholders. In determining whether a merger is fair to minority stockholders, Delaware courts have considered, among other things, the type and amount of consideration to be received by the stockholders and whether there was fair dealing among the parties. The Delaware Supreme Court stated in WEINBERGER and RABKIN V. PHILIP A. HUNT CHEMICAL CORP. that the remedy ordinarily available to minority stockholders in a cash-out merger is the right to appraisal described above. However, a damages remedy or injunctive relief may be available if a merger is found to be the product of procedural unfairness, including fraud, misrepresentation or other misconduct. The Commission has adopted Rule 13e-3 under the Exchange Act which is applicable to certain "going private" transactions and which may under certain circumstances be applicable to the Merger or another business combination following the purchase of Shares pursuant to the Offer in which Purchaser seeks to acquire the remaining Shares not held by it. However, Rule 13e-3 will not be applicable to the Merger or any such other business combination if (i) the Shares are deregistered under the Exchange Act 29 prior to the Merger or other business combination or (ii) the Merger or other business combination is consummated within one year after the purchase of the Shares pursuant to the Offer and the value of the consideration paid per Share in the Merger or other business combination (measured at the time of consummation of the Merger) is at least equal to the amount paid per Share in the Offer. If applicable, Rule 13e-3 requires, among other things, that certain financial information concerning the Company and certain information relating to the fairness of the proposed transaction and the consideration offered to minority stockholders in such transaction be filed with the Commission and disclosed to stockholders prior to consummation of the transaction. PLANS FOR THE COMPANY. It is expected that, initially following the Merger, the business and operations of the Company will, except as set forth in this Offer to Purchase, be continued substantially as they are currently being conducted. Parent will continue to evaluate the business and operations of the Company during the pendency of the Offer and after the consummation of the Offer and the Merger, and will take such actions as it deems appropriate under the circumstances then existing. Parent intends to seek additional information about the Company during this period. Thereafter, Parent intends to review such information as part of a comprehensive review of the Company's business, operations, capitalization and management with a view to optimizing exploitation of the Company's potential in conjunction with Parent's businesses. Except as indicated in this Offer to Purchase, Parent does not have any present plans or proposals which relate to or would result in an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Company or any of its subsidiaries, a sale or transfer of a material amount of assets of the Company or any of its subsidiaries or any material change in the Company's capitalization or any other material changes in the Company's corporate structure or business. 12. DIVIDENDS AND DISTRIBUTIONS. If, on or after the date of the Merger Agreement, the Company should (a) split, combine or otherwise change the Shares of its capitalization, (b) acquire or otherwise cause a reduction in the number of outstanding Shares or other securities or (c) issue or sell additional Shares (other than the issuance of Shares under option prior to the date of the Merger Agreement, in accordance with the terms of such options as then publicly disclosed), shares of any other class of capital stock, other voting securities or any securities convertible into or exchangeable for, or rights, warrants or options, conditional or otherwise, to acquire, any of the foregoing, then, without prejudice to Purchaser's rights under Sections 1 and 14, Purchaser, in its sole discretion, may make such adjustments as it deems appropriate in the Offer Price and other terms of the Offer, including, without limitation, the number or type of securities offered to be purchased. Pursuant to the terms of the Merger Agreement, the Company is prohibited from taking any of the actions described in the preceding paragraph, and nothing in this Offer to Purchase shall constitute a waiver by Purchaser or Parent of any of its rights under the Merger Agreement or a limitation of remedies available to Purchaser or Parent for any breach of the Merger Agreement, including termination of the Merger Agreement. 13. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, EXCHANGE LISTING AND EXCHANGE ACT REGISTRATION. The purchase of Shares by Purchaser pursuant to the Offer will reduce the number of Shares that might otherwise trade publicly and will reduce the number of holders of Shares, which reduction could adversely affect the liquidity and market value of the remaining Shares, if any, held by Stockholders other than Purchaser. Purchaser cannot predict whether the reduction in the number of Shares that might otherwise trade publicly would have an adverse or beneficial effect on the market price for, or marketability of, the Shares or whether such reduction would cause future market prices to be greater or less than the Offer Price. 30 On March 2, 1995, the Common Stock was listed for trading on the NASDAQ Small Cap Market. On March 4, 1996, the Common Stock began trading on the NASDAQ National Market which constitutes the principal trading market for the Shares. Depending upon the number of Shares purchased pursuant to the Offer, the Shares may no longer meet the requirements of the National Association of Securities Dealers (the "NASD") for continued listing on the NASDAQ National Market. The NASDAQ National Market's published guidelines require that (1) an issuer have at least 200,000 publicly held shares, (2) the market value of publicly traded shares be at least $1,000,000, (3) an issuer have net tangible assets of at least $1,000,000, $2,000,000 or $4,000,000, depending on profitability levels during the issuer's four most recent fiscal years, (4) shares be held by at least 400 shareholders or 300 shareholders of round lots, and (5) the minimum bid price per share be $1 or, in the alternative, market value of public float be $3,000,000, and an issuer have net tangible assets of $4,000,000. If these standards are not met, the Shares might nevertheless continue to be included in the NASDAQ Stock Market (the "NASDAQ Stock Market") with quotations published in the NASDAQ "additional list" or in one of the "local lists," but if the number of holders of the Shares were to fall below 300, or if the number of publicly held Shares were to fall below 100,000, or there were not at least two registered and active market makers for the Shares, the NASD's rules provide that the Shares would no longer be "qualified" for NASDAQ Stock Market reporting, and the NASDAQ Stock Market would cease to provide any quotations. Shares held directly or indirectly by directors, officers or beneficial owners of more than 10% of the Shares are not considered as being publicly held for this purpose. According to information provided by the Company, as of October 31, 1996 there were approximately 22 holders of record of Shares and 4,674,314 Shares were outstanding. If, as a result of the purchase of Shares pursuant to the Offer or otherwise, the Shares no longer meet the requirements for continued inclusion in the NASDAQ National Market or in any other tier of the NASDAQ Stock Market and the Shares are no longer included in the NASDAQ Stock Market and the Shares are no longer included in the NASDAQ National Market or in any other tier of the NASDAQ Stock Market, as the case may be, the market for Shares could be adversely affected. In the event that the Shares no longer meet the requirements for continued inclusion in any tier of the NASDAQ Stock Market, it is possible that the Shares would continue to trade in the over-the-counter market and that price quotations would be reported by other sources. The extent of the public market for the Shares and the availability of such quotations would, however, depend upon the number of holders of Shares remaining at such time, the aggregate market value of the publicly held Shares at such time, the interests in maintaining a market in Shares on the part of securities firms, the possible termination of registration of the Shares under the Exchange Act, as described below, and other factors. The Shares are currently "margin securities", as such term is defined under the rules of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which has the effect, among other things, of allowing brokers to extend credit on the collateral of such securities. Depending upon factors similar to those described above regarding listing and market quotations, following the Offer it is possible that the Shares might no longer constitute "margin securities" for purposes of the margin regulations of the Federal Reserve Board, in which event such Shares could no longer be used as collateral for loans made by brokers. The Shares are currently registered under the Exchange Act. Such registration may be terminated upon application by the Company to the Commission if, among other things, the Shares are not listed on a national securities exchange and there are fewer than 300 record holders of Shares. The termination of the registration of the Shares under the Exchange Act would reduce substantially the information required to be furnished by the Company to holders of Shares and to the Commission and would make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b), the requirement of furnishing a proxy statement in connection with stockholders' meetings and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions, no longer applicable to the Shares. In addition, "affiliates" of the Company and persons holding "restricted securities" of the Company may be deprived of the ability to dispose of such securities pursuant to 31 Rule 144 promulgated under the Securities Act of 1933, as amended. If registration of the Shares under the Exchange Act were terminated, the Shares would no longer be "margin securities" or be eligible for NASDAQ reporting. Purchaser currently intends to seek to cause the Company to terminate the registration of the Shares under the Exchange Act as soon after consummation of the Offer as the requirements for termination of registration are met. 14. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision of the Offer, Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the Commission, including Rule 14e-1(c) under the Exchange Act (relating to Purchaser's obligation to pay for or return tendered Shares promptly after termination or withdrawal of the Offer), pay for, and may (subject to any such rule or regulation) delay the acceptance for payment of or payment for any tendered Shares, and may (except as provided in the Merger Agreement) amend or terminate the Offer as to any Shares not then paid for, if (i) the condition that Shares representing at least a majority of the number of Shares outstanding on a fully diluted basis shall have been validly tendered and not properly withdrawn prior to the expiration of the Offer shall not have been satisfied (referred to herein as the "Minimum Condition"), (ii) (x) any applicable waiting period under the HSR Act shall not have expired or terminated, prior to the expiration of the Offer, or (y) all permits, consents, approvals, waivers and actions of, filings with and notices to any governmental or regulatory authority or any other public or private third parties required of Parent, the Company or any of their respective subsidiaries to consummate the transactions contemplated by the Merger Agreement shall not have been obtained or taken prior to the expiration of the Offer (other than those the failure of which to be obtained or taken could not be reasonably expected to have a material adverse effect on Parent and its subsidiaries or the Company and its subsidiaries, in each case taken as a whole, or on the ability of Parent and the Company to consummate the transactions contemplated by the Merger Agreement) and no such permit, consent, approval or waiver received or action taken shall be subject to any condition which could reasonably be expected prior to or following the consummation of the Offer to have a material adverse effect on either Parent and its subsidiaries taken as a whole, or on the Company and its Subsidiary taken as a whole, or otherwise result in a material diminution of the benefits of the Merger to Parent, or (iii) at any time on or after the date of the Merger Agreement and before the time of payment for any such Shares (whether or not any Shares have theretofore been accepted for payment or paid for pursuant to the Offer), any of the following events shall have occurred and remain in effect other than as a result of any action or inaction of Parent or any of its subsidiaries that constitutes a breach of the Merger Agreement: (a) there shall have been any law or order promulgated, entered, enforced, enacted, issued or deemed applicable to the Offer, the Merger or the Stockholders Agreement by any court of competent jurisdiction or other competent governmental or regulatory authority which, directly or indirectly, (1) prohibits, or imposes any material limitations on, Parent's or Purchaser's ownership or operation (or that of any of their respective subsidiaries or affiliates) of any portion of their or the Company's businesses or assets which is material to the business of the Company and its subsidiaries taken as a whole, or material to the business or assets of Parent or its subsidiaries taken as a whole or compels Parent or Purchaser (or their respective subsidiaries or affiliates) to dispose of or hold separate any portion of their or the Company's business or assets which is material to the business of the Company and its subsidiaries taken as a whole, or material to the business of Parent and its subsidiaries taken as a whole, (2) prohibits, restrains or makes illegal the acceptance for payment, payment for or purchase of Shares pursuant to the Offer or the Stockholders Agreement or the consummation of the Merger, (3) imposes material limitations on the ability of Purchaser or Parent (or any of their respective subsidiaries or affiliates) effectively to acquire or to hold or to exercise full rights of ownership of the Shares purchased pursuant to the Offer or the Stockholders Agreement 32 including, without limitation, the right to vote such Shares on all matters properly presented to the Stockholders, (4) imposes limitations on the ability of Purchaser or Parent (or any of their respective subsidiaries or affiliates) effectively to control in any material respect any material portion of the business or assets of the Company and its subsidiaries taken as a whole, or any material portion of the business or assets of Parent and its subsidiaries taken as a whole, or (5) has the effect of making illegal or otherwise restricting, preventing or prohibiting consummation of the Offer or the other transactions contemplated by the Merger Agreement; (b) there shall be no instituted or pending action or proceeding before any governmental or regulatory authority (or any such action threatened by any governmental or regulatory authority) which (x) in the case of any such action or proceeding brought by any governmental or regulatory authority, seeks any order, decree or injunction having any effect set forth in (a) above or (y) in the case of any such action or proceeding brought by any other person, could reasonably be expected to result in any order, decree or injunction having any effect set forth in (a) above. (c) there shall have occurred and be continuing (1) any general suspension of trading in, or limitation on prices for, securities on any United States national securities exchange or in the over-the-counter market, (2) a decline of at least 35% in either the Dow Jones Average of Industrial Stock or the Standard & Poors Index after the date hereof, (3) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States (whether or not mandatory) (4) any limitation (whether or not mandatory) by any governmental or regulatory authority on the extension of credit by banks or other financial institutions; (5) a commencement of a war or armed hostilities or other national or international crisis directly or indirectly involving the United States having a significant adverse effect on the functionality of the financial markets in the United States or (6) in the case of any of the foregoing existing on the date of the Merger Agreement, in the good faith judgment of the Parent a material acceleration or worsening thereof; (d) the representations and warranties made by the Company in the Merger Agreement that are subject to, or qualified by, "material adverse effect," "material adverse change" or other materiality qualification shall not be true and correct or the representations and warranties made by the Company in the Merger Agreement that are not so qualified shall not be true and correct in any respect which could reasonably be expected to have a material adverse effect on the Company and its subsidiaries taken as a whole, or Parent and its subsidiaries taken as a whole, in each case as of the date of the consummation of the Offer as though made on and as of such date or, in the case of representations and warranties made as of a specific date earlier than the date of the consummation of the Offer, on and as of such earlier date; (e) the Company shall not have performed and complied with, in all material respects (without reference to any materiality qualifications contained therein), each agreement and covenant required by the Merger Agreement to be performed or complied with by it; or (f) the Merger Agreement shall have been terminated in accordance with its terms; which (in the case of paragraph (a), (b), (c), (d) or (e) above) makes it inadvisable, as determined by Purchaser in good faith, to proceed with the Offer or with such acceptance for payment or payment. The foregoing conditions are for the sole benefit of Parent and Purchaser, may be asserted by Parent and Purchaser regardless of the circumstances giving rise to any such condition and, subject to the terms and conditions of the Merger Agreement, may be waived by Parent and Purchaser, in whole or in part, at any time and from time to time, in the sole discretion of Parent and Purchaser. Any good faith determination by Purchaser concerning any of the events described herein shall be final and binding. The failure by Parent and Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. 33 15. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS. GENERAL. Based upon examination of publicly available information with respect to the Company but without any independent investigation thereof, neither Purchaser nor Parent is aware of any license or other regulatory permit that appears to be material to the business of the Company and its subsidiaries, taken as a whole, that is reasonably expected to be adversely affected by the acquisition of Shares by Purchaser pursuant to the Offer, or the Merger or, except as set forth below, of any approval or other action by any domestic (federal or state) or foreign governmental, administrative or regulatory authority or agency that would be required for the acquisition or ownership of Shares by Purchaser pursuant to the Offer, or the Merger. Should any such approval or other action be required, it is Purchaser's present intention to seek such approval or action. While, except as otherwise expressly described in this Offer to Purchase, Purchaser does not at present intend to delay the acceptance for payment of or payment for Shares tendered pursuant to the Offer pending the outcome of any such matter, there can be no assurance that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that failure to obtain any such approval or other action might not result in consequences adverse to the Company's business or that certain parts of the Company's or Parent's business might not have to be disposed of if such approvals were not obtained or other actions were not taken or in order to obtain any such approval or other action. Purchaser's obligation under the Offer to accept for payment and pay for Shares is subject to certain conditions, including conditions relating to the legal matters discussed in this Section 15. See Section 14. STATE TAKEOVER LAWS. A number of states have adopted laws and regulations that purport to apply to attempts to acquire securities of corporations that are incorporated, or have substantial assets, stockholders, principal executive offices or principal places of business, or whose business operations otherwise have substantial economic effects, in such states. In EDGAR V. MITE CORP., the Supreme Court of the United States invalidated on constitutional grounds the Illinois Business Takeover Statute, which, as a matter of state securities law, made takeovers of corporations meeting certain requirements more difficult. However, in 1987 in CTS CORP. V. DYNAMICS CORP. OF AMERICA, the Supreme Court held that the State of Indiana may, as a matter of corporate law and, in particular, with respect to those aspects of corporate law concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without the prior approval of the remaining stockholders; provided that such laws were applicable only under certain conditions. The state law before the Supreme Court was by its terms applicable only to corporations that had a substantial number of stockholders in the state and were incorporated there. The Company is incorporated under the laws of the State of Delaware. In general, Section 203 of the DGCL prevents an "interested stockholder" (generally a person who owns or has the right to acquire 15% or more of a corporation's outstanding voting stock, or an affiliate or associate thereof) from engaging in a "business combination" (defined to include mergers and certain other transactions) with a Delaware corporation for a period of three years following the date such person became an interested stockholder unless, among other things, prior to such date the board of directors of the corporation approved either the business combination or the transaction in which the interested stockholder became an interested stockholder. On October 29, 1996, prior to the execution of the Merger Agreement, the Board of Directors of the Company, by unanimous vote of all directors present at a meeting held on such date, approved the Merger Agreement and the Stockholders Agreement, and determined that each of the Offer and the Merger is fair to, and in the best interest of, the stockholders of the Company. Accordingly, Section 203 is inapplicable to the Offer and the Merger. The Company, directly or through subsidiaries, conducts business in a number of states throughout the United States, some of which have enacted takeover laws. Purchaser does not know whether any of these laws will, by their terms, apply to the Offer or the Merger and has not complied with any such laws. Should any person seek to apply any state takeover law, Purchaser will take such action as then appears desirable, which may include challenging the validity or applicability of any such statute in appropriate 34 court proceedings. In the event it is asserted that one or more state takeover laws is applicable to the Offer or the Merger, and an appropriate court does not determine that it is inapplicable or invalid as applied to the Offer, Purchaser might be required to file certain information with, or receive approvals from, the relevant state authorities. In addition, if enjoined, Purchaser might be unable to accept for payment any Shares tendered pursuant to the Offer, or be delayed in continuing or consummating the Offer, and the Merger. In such case, Purchaser may not be obligated to accept for payment any Shares tendered. See Section 14. ANTITRUST. Under the HSR Act and the rules that have been promulgated thereunder by the FTC, certain transactions may not be consummated unless certain information has been furnished to the Antitrust Division and the FTC and certain waiting period requirements have been satisfied. The acquisition of Shares by Purchaser pursuant to the Offer is subject to such requirements. See Section 2. Pursuant to the HSR Act, Parent (acting on behalf of Delhaize, as provided under the HSR Act and the regulations thereunder) and Company each filed a Premerger Notification and Report Form (the "Premerger Notification") with the Antitrust Division and the FTC. Under the provisions of the HSR Act, the purchase of Shares pursuant to the Offer may not be consummated until the expiration of the applicable waiting period. The waiting period is currently scheduled to expire at 11:59 p.m., New York City time, on December 1, 1996. Pursuant to the HSR Act, Parent has requested early termination of the waiting period, but there can be no assurance that early termination will be granted. Furthermore, if either the FTC or the Antitrust Division were to request additional information or documentary material from Parent and/or Company with respect to the Offer, the applicable waiting period would expire at 11:59 p.m., New York City time, on the twentieth calendar day after the date of substantial compliance by both Parent and Company with such request. If the acquisition of Shares is delayed pursuant to a request by the FTC or the Antitrust Division for additional information or documentary material pursuant to the HSR Act, the Offer will be extended and, in any event, the purchase of and payment for Shares will be deferred until twenty days after the request is substantially complied with and for such additional time that the Parent voluntarily agrees to grant the FTC and/or the Antitrust Division to review this matter. Any such extension of the Offer will not give rise to any withdrawal rights not otherwise provided for by applicable law. See Section 4. It is a condition to the Offer that the waiting period applicable under the HSR Act to the Offer expire or be terminated and no legal action against Parent be pending under the antitrust laws. See Section 2 and Section 14. The FTC and the Antitrust Division frequently scrutinize the legality under the antitrust laws of transactions such as the proposed acquisition of Shares by Purchaser pursuant to the Merger Agreement, including purchases pursuant to the Offer. At any time before or after the purchase of Shares pursuant to the Offer by Purchaser, the FTC or the Antitrust Division could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the purchase of Shares pursuant to the Offer or seeking the divestiture of Shares purchased by Purchaser or the divestiture of substantial assets of Parent, the Company or their respective subsidiaries. Private parties and state attorneys general may also bring legal action under federal or state antitrust laws under certain circumstances. Based upon an examination of information available to Parent relating to the businesses in which Parent, the Company and their respective subsidiaries are engaged, Parent and Purchaser believe that the Offer will not violate the antitrust laws. Nevertheless, there can be no assurance that a challenge to the Offer on antitrust grounds will not be made or, if such a challenge is made, what the result would be. See Section 14 for certain conditions to the Offer, including conditions with respect to litigation. 16. FEES AND EXPENSES. Except as set forth below, Purchaser will not pay any fees or commissions to any broker, dealer or other person for soliciting tenders of Shares pursuant to the Offer. Chase Securities is acting as financial advisor in connection with the acquisition of the Company and as Dealer Manager in connection with the Offer pursuant to an engagement letter between Parent and Chase Securities. In accordance with such engagement letter, Parent has agreed to pay Chase Securities a 35 retainer fee of $100,000 and a fee of $300,000 upon the execution of the Merger Agreement, each of which are creditable against a fee equal to .69% of the aggregate consideration (as defined in such letter) involved in the acquisition of the Company which is payable to Chase Securities at the closing of the Offer. Parent has also agreed to reimburse Chase Securities for all reasonable out-of-pocket expenses incurred by Chase Securities including the reasonable fees and expenses of legal counsel, and to indemnify Chase Securities against certain liabilities and expenses in connection with its engagement, including certain liabilities under federal securities laws. Purchaser and Parent have retained Georgeson & Company Inc., as the Information Agent, and ChaseMellon Shareholder Services, L.L.C., as the Depositary, in connection with the Offer. The Information Agent may contact holders of Shares by mail, telephone, telex, telecopy, telegraph and personal interview and may request banks, brokers, dealers and other nominee Stockholders to forward materials relating to the Offer to beneficial owners. As compensation for acting as Information Agent in connection with the Offer, Georgeson & Company Inc., will be paid a fee of $10,000 and will also be reimbursed for certain out-of-pocket expenses and may be indemnified against certain liabilities and expenses in connection with the Offer, including certain liabilities under federal securities laws. Purchaser will pay the Depositary reasonable and customary compensation for its services in connection with the Offer, plus reimbursement for out-of-pocket expenses, and will indemnify the Depositary against certain liabilities and expenses in connection therewith, including under federal securities laws. Brokers, dealers, commercial banks and trust companies will be reimbursed by Purchaser for customary handling and mailing expenses incurred by them in forwarding material to their customers. 17. MISCELLANEOUS. Purchaser is not aware of any jurisdiction where the making of the Offer is prohibited by any administrative or judicial action pursuant to any valid state statute. If Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of Shares pursuant thereto, Purchaser will make a good faith effort to comply with any such state statute. If, after such good faith effort, Purchaser cannot comply with any such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such state. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of Purchaser by the Dealer Manager or by one or more registered brokers or dealers licensed under the laws of such jurisdiction. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF PURCHASER OR THE COMPANY NOT CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. Pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange Act, Parent and Purchaser have filed with the Commission the Schedule 14D-1, together with exhibits, furnishing certain additional information with respect to the Offer. The Schedule 14D-1 and any amendments thereto, including exhibits, may be inspected at, and copies may be obtained from, the same places and in the same manner as set forth in Section 7 (except that they will not be available at the regional offices of the Commission). KK Acquisition Corp. FLI Holding Corp. Food Lion, Inc. November 15, 1996 36 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF PARENT, PURCHASER, HOLDING AND DELHAIZE 1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. The following table sets forth the name, current business address, citizenship and present principal occupation or employment, and material occupations, positions, offices or employments and business addresses thereof for the past five years of each director and executive officer of Parent. Unless otherwise indicated, the current business address of each person is 2110 Executive Drive, Salisbury, North Carolina 28145-1330. Unless otherwise indicated, each such person is a citizen of the United States of America and has held his or her present position as set forth below for the past five years.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS HELD DURING THE PAST NAME, TITLE AND FIVE YEARS AND BUSINESS ADDRESSES CURRENT BUSINESS ADDRESS THEREOF/CITIZENSHIP - -------------------------------------------------------- -------------------------------------------------------- PIERRE-OLIVIER BECKERS President and Chief Operating Officer of DETLA/Belgian Director rue Osseghem, 53 1080 Brussels, Belgium DR. JACQUELINE KELLY COLLAMORE Associate, Credit Suisse; Vice President and Chief of Director Staff of Credit Suisse Asset Management, Inc.; 5206 Norway Drive Consultant, Arthur D. Little, (1991-1992); Independent Chevy Chase, Maryland 20815 Business Consultant (1986-1991). JEAN-CLAUDE COPPIETERS 't WALLANT Chief Financial Officer of Delhaize; Vice- President, Director Treasurer and Assistant Secretary of DETLA/Belgian. rue Osseghem, 53 1080 Brussels, Belgium WILLIAM G. FERGUSON Executive Vice President of Snow Aviation International, Director Inc. Rickenbacker Airport 7201 Paul Tibbers Street Columbus, Ohio 43217 DR. BERNARD W. FRANKLIN President of St. Augustine's College, Raleigh, North Director Carolina; President of Livingstone College and Hood Saint Augustine's College Theological Seminary, 701 West Monroe Street, Salisbury, 1315 Oakwood Avenue North Carolina 28144 (1989-1995). Raleigh, North Carolina 27610-2298 JOSEPH C. HALL, JR. Senior Vice President of Operations and Chief Operating Director Officer. MARGARET H. KLUTTZ Mayor of Salisbury, North Carolina, City Hall, 132 North Director Main, Salisbury, North Carolina 28144. 520 South Fulton Street Salisbury, North Carolina 28144 TOM E. SMITH Chairman of the Board, President and Chief Executive Director Officer.
1
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS HELD DURING THE PAST NAME, TITLE AND FIVE YEARS AND BUSINESS ADDRESSES CURRENT BUSINESS ADDRESS THEREOF/CITIZENSHIP - -------------------------------------------------------- -------------------------------------------------------- PHILIPPE STROOBANT Director, Officer and Chairman of Management Committee Director of Delhaize/Belgian. rue Osseghem, 53 1080 Brussels, Belgium GUI DE VAUCLEROY Director and Chief Executive Officer of Delhaize; Director Chairman of the Board, Chief Executive Officer and rue Osseghem, 53 Director of DETLA/Belgian. 1080 Brussels, Belgium R. WILLIAM MCCANLESS Senior Vice President of Administration and Chief Administrative Officer.
2. DIRECTORS AND EXECUTIVE OFFICERS OF HOLDING. The following table sets forth the name, current business address, citizenship and present principal occupation or employment, and material occupation, position, offices or employments and business addresses thereof for the past five years of each director and executive officer of Holding. The current business address of each person is 2110 Executive Drive, Salisbury, North Carolina 28145-1330. Each such person is a citizen of the United States of America.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS HELD DURING THE PAST NAME, TITLE AND FIVE YEARS AND BUSINESS ADDRESSES CURRENT BUSINESS ADDRESS THEREOF - -------------------------------------------------------- -------------------------------------------------------- TOM E. SMITH Chairman of the Board, President and Chief Executive Director and President Officer of Parent. JOSEPH C. HALL, JR. Senior Vice President of Operations and Chief Operating Director and Vice President Officer of Parent. R. WILLIAM MCCANLESS Senior Vice President of Administration and Chief Director, Vice President, Treasurer Administrative Officer of Parent. and Secretary
3. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER. The following table sets forth the name, current business address, citizenship and present principal occupation or employment, and material occupation, position, offices or employments and business addresses thereof for the past five years of each director and executive officer of Purchaser. The current business address of each person is 2110 Executive Drive, Salisbury, North Carolina 28145-1330. Each such person is a citizen of the United States of America.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS HELD DURING THE PAST NAME, TITLE AND FIVE YEARS AND BUSINESS ADDRESSES CURRENT BUSINESS ADDRESS THEREOF - -------------------------------------------------------- -------------------------------------------------------- TOM E. SMITH Chairman of the Board, President, and Chief Executive Director and President Officer of Parent. JOSEPH C. HALL, JR. Director, Senior Vice President of Operations and Chief Director and Vice President Operating Officer of Parent. R. WILLIAM MCCANLESS Senior Vice President of Administration and Chief Director, Vice President, Treasurer Administrative Officer of Parent. and Secretary
2 4. DIRECTORS AND EXECUTIVE OFFICERS OF DELHAIZE. The following table sets forth the name, current business address, citizenship and present principal occupation or employment, and material occupations, positions, offices or employments and business addresses thereof for the past five years of each director and executive officer of Delhaize. Unless otherwise indicated, the current business address of each person is rue Osseghem 53, 1080 Brussels, Belgium. Each such person is a citizen of Belgium. Unless otherwise indicated, each such person has held his or her present position as set forth below for the past five years. Unless otherwise indicated, each occupation set forth opposite an individual's name refers to employment with Delhaize.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS HELD DURING THE PAST FIVE NAME, TITLE AND YEARS AND BUSINESS ADDRESSES CURRENT BUSINESS ADDRESS THEREOF - -------------------------------------------------------- -------------------------------------------------------- Pierre-Olivier BECKERS President and Chief Operating Officer of DETLA. Director PHILIPPE STROOBANT Chairman of Management Committee Director GUI DE VAUCLEROY Chief Executive Officer; Chairman of the Board, Chief Director Executive Officer and Director of DETLA. CHARLES de COOMAN d'HERLINCKHOVE Member of Management Committee Director MARCEL DEGROOF Partner, Bank Degroof Director rue de l'Industrie '44 1000 Brussels, Belgium FRANS VREYS Director of Companies Director boulevard Emil Jacqumain, 112 1000 Brussels, Belgium JACQUES LE CLERCQ Retired. President of DETLA through August 1994 and Director Director of Parent through April, 1995. Atlanta Plaza--Suite 2160 950 East Paces Ferry Road Atlanta, Georgia 30326 JACQUES BOEL Executive Director, Usines G. Boel Director rue Ducale, 21 1000 Brussels, Belgium ROGER BOIN Manager Director RAYMOND-MAX BOON Retired. Prior to retiring, Member of Management Director Committee CLAUDE ALLARD Member of Management Committee RENARD COGELS Member of Management Committee MICHAEL EECKHOUT Member of Management Committee ARTHUR GOETHOLS Member of Management Committee PAUL VAN DER VLIET Member of Management Committee JEAN-CLAUDE COPPIETERS 't WALLANT Chief Financial Officer
3 Facsimile copies of the Letter of Transmittal, properly completed and duly signed, will be accepted. The Letter of Transmittal, certificates for Shares and any other required documents should be sent or delivered by each stockholder of the Company or his broker, dealer, commercial bank, trust company or other nominee to the Depositary, at one of the addresses set forth below: THE DEPOSITARY IS: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
BY MAIL: BY FACSIMILE: BY HAND OR OVERNIGHT: REORGANIZATION DEPARTMENT (201) 329-8936 REORGANIZATION DEPARTMENT MIDTOWN STATION 120 BROADWAY, 13TH FLOOR P.O. BOX 798 NEW YORK, NEW YORK 10271 NEW YORK, NEW YORK 10018 FACSIMILE CONFIRMATION: (201) 296-4209 OR (201) 296-4381
Questions and requests for assistance may be directed to the Information agent or the Dealer Manager at their respective addresses and telephone numbers listed below. Additional copies of this Offer to Purchase, the Letter of Transmittal and other tender offer materials may be obtained form the Information Agent as set forth below and will be furnished promptly at Purchaser's expense. You may also contact your broker, dealer, commercial bank, trust company or other nominees for assistance concerning the Offer. THE INFORMATION AGENT FOR THE OFFER IS: GEORGESON & COMPANY INC. Wall Street Plaza, 30th Floor New York, New York 10005 BROKERS AND BANKS PLEASE CALL COLLECT (212) 440-9800 ALL OTHERS CALL TOLL FREE 1-800-223-2064 THE DEALER MANAGER FOR THE OFFER IS: CHASE SECURITIES INC. 270 Park Avenue New York, New York 10017 Telephone: (212) 270-0892 EX-99.(A)(2) 3 EXHIBIT (A)(2) EXHIBIT (A)(2) LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK (INCLUDING THE PREFERRED SHARE PURCHASE RIGHTS) OF KASH N' KARRY FOOD STORES, INC. PURSUANT TO THE OFFER TO PURCHASE DATED NOVEMBER 15, 1996 OF KK ACQUISITION CORP., AN INDIRECT WHOLLY OWNED SUBSIDIARY OF FOOD LION, INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON DECEMBER 13, 1996, UNLESS THE OFFER IS EXTENDED. THE DEPOSITARY FOR THE OFFER IS: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. BY MAIL: BY HAND OR OVERNIGHT COURIER: BY FACSIMILE: Reorganization Department Reorganization Department (For Eligible Institutions Midtown Station 120 Broadway Only) P.O. Box 798 13th Floor (201) 329-8936 New York, New York 10018 New York, New York 10271 CONFIRM BY TELEPHONE: (201) 296-4209 or (201) 296-4381
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. This Letter of Transmittal is to be completed by stockholders either if certificates evidencing Shares (as defined below) are to be forwarded herewith or, unless an Agent's Message (as defined in the Offer to Purchase (as defined below)), is utilized, if delivery of Shares is to be made by book-entry transfer to the Depositary's account at The Depository Trust Company ("DTC") or the Philadelphia Depository Trust Company ("PDTC") (each a "Book-Entry Transfer Facility" and, collectively, the "Book-Entry Transfer Facilities") pursuant to the book-entry transfer procedure described in Section 3 of the Offer to Purchase. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. Stockholders whose certificates evidencing Shares ("Share Certificates") are not immediately available or who cannot deliver their Share Certificates and all other documents required hereby to the Depositary prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase) or who cannot complete the procedure for delivery by book-entry transfer on a timely basis and who wish to tender their Shares must do so pursuant to the guaranteed delivery procedure described in Section 3 of the Offer to Purchase. See Instruction 2. / / CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND COMPLETE THE FOLLOWING: Name of Tendering Institution: Check Box of Applicable Book-Entry Transfer Facility: (check one) / / DTC / / PDTC Account Number: Transaction Code Number: / / CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s): Window Ticket No. (if any): Date of Execution of Notice of Guaranteed Delivery: Name of Institution which Guaranteed Delivery:
DESCRIPTION OF SHARES TENDERED NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) SHARE CERTIFICATE(S) AND SHARES TENDERED ON SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY) TOTAL NUMBER OF SHARES EVIDENCED SHARE BY CERTIFICATE SHARE NUMBER OF SHARES NUMBER(S)* CERTIFICATE(S)* TENDERED** TOTAL SHARES:
* Need not be completed by stockholders delivering Shares by book-entry transfer. ** Unless otherwise indicated, it will be assumed that all Shares evidenced by each Share Certificate delivered to the Depositary are being tendered hereby. See Instruction 4. NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. Ladies and Gentlemen: The undersigned hereby tenders to KK Acquisition Corp., a corporation organized and existing under the laws of the State of Delaware ("Purchaser") and an indirect wholly owned subsidiary of Food Lion, Inc., a North Carolina corporation, the above-described shares of common stock, par value $0.01 per share (the "Shares"), of Kash n' Karry Food Stores, Inc., a corporation organized and existing under the laws of the State of Delaware (the "Company"), pursuant to Purchaser's offer to purchase all outstanding Shares, including the Preferred Share Purchase Rights (the "Rights") issued pursuant to the Rights Agreement, as amended, dated as of April 13, 1995, between the Company and Fleet National Bank (successor in interest to Shawmut Bank Connecticut, N.A.) (the "Rights Agreement"), at a price of $26.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated November 15, 1996 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which together constitute the "Offer"). All references herein to the Rights include all 2 benefits which may inure to stockholders of the Company pursuant to the Rights Agreement, and unless the context requires otherwise, all references herein to Shares include the Rights. The undersigned understands that Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to one or more of its affiliates, the right to purchase all or any portion of the Shares tendered pursuant to the Offer. Subject to, and effective upon, acceptance for payment of the Shares tendered herewith in accordance with the terms of the Offer (including, if the Offer is extended or amended, the terms and conditions of such extension or amendment), the undersigned hereby sells, assigns and transfers to, or upon the order of, Purchaser all right, title and interest in and to all the Shares that are being tendered hereby and all dividends, distributions (including, without limitation, distributions of additional Shares) and rights declared, paid or distributed in respect to such Shares on or after October 31, 1996 (collectively, "Distributions") and irrevocably appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares and all Distributions, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (i) deliver Share Certificates evidencing such Shares and all Distributions, or transfer ownership of such Shares and all Distributions on the account books maintained by a Book-Entry Transfer Facility, together, in either case, with all accompanying evidences of transfer and authenticity, to or upon the order of Purchaser, (ii) present such Shares and all Distributions for transfer on the books of the Company and (iii) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares and all Distributions, all in accordance with the terms of the Offer. The undersigned hereby irrevocably appoints R. William McCanless and Joseph C. Hall, Jr. and each of them, as the attorneys and proxies of the undersigned, each with full power of substitution, to vote, and to exercise all other rights, in such manner as each such attorney and proxy or his substitute shall, in his sole discretion, deem proper and otherwise act (by written consent or otherwise) with respect to all the Shares tendered hereby which have been accepted for payment by Purchaser prior to the time of such vote or other action and all Shares and other securities issued in Distributions in respect of such Shares, which the undersigned is entitled to vote at any meeting of stockholders of the Company (whether annual or special and whether or not an adjourned or postponed meeting) or consent in lieu of any such meeting or otherwise. This proxy and power of attorney is coupled with an interest in the Shares tendered hereby, is irrevocable and is granted in consideration of, and is effective upon, the acceptance for payment of such Shares by Purchaser in accordance with other terms of the Offer. Such acceptance for payment shall, except as provided below for certain stockholders, revoke all other proxies and powers of attorney granted by the undersigned at any time with respect to such Shares (and all Shares and other securities issued in Distributions in respect of such Shares), and no subsequent proxy or power of attorney shall be given or written consent executed (and if given or executed, shall not be effective) by the undersigned with respect thereto. Notwithstanding the foregoing, the proxies granted herein shall not revoke the proxies granted by the Selling Stockholders in the Merger Agreement (as such terms are defined in the Offer to Purchase). The undersigned understands that, in order for Shares to be deemed validly tendered, immediately upon Purchaser's acceptance of such Shares for payment, Purchaser must be able to exercise full voting and other rights with respect to such Shares and all Distributions, including, without limitation, voting at any meeting of the Company's stockholders then scheduled. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby and all Distributions, and that when such Shares are accepted for payment by Purchaser, Purchaser will acquire good, marketable and unencumbered title thereto and to all Distributions, free and clear of all liens, restrictions, charges and encumbrances, and that none of such Shares and Distributions will be subject to any adverse claim. The undersigned, upon request, shall execute and deliver all additional documents deemed by the Depositary or Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the Shares tendered hereby and all Distributions. In addition, the undersigned shall remit and transfer promptly to 3 the Depositary for the account of Purchaser all Distributions in respect of the Shares tendered hereby, accompanied by appropriate documentation of transfer, and, pending such remittance and transfer or appropriate assurance thereof, Purchaser shall be entitled to all rights and privileges as owner of each such Distribution and may withhold the entire purchase price of the Shares tendered hereby, or deduct from such purchaser price, the amount or value of such Distribution as determined by Purchaser in its sole discretion. No authority herein conferred or agreed to be conferred shall be affected by, and all such authority shall survive, the death or incapacity of the undersigned. All obligations of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable. The undersigned understands that tenders of Shares pursuant to any one of the procedures described in Section 3 of the Offer to Purchase and in the instructions hereto will constitute the undersigned's acceptance of the terms and conditions of the Offer, including the undersigned's representation and warranty that the undersigned has a net long position in Shares or equivalent securities at least equal to the Shares tendered. Purchaser's acceptance of such Shares for payment will constitute a binding agreement between the undersigned and Purchaser upon the terms and subject to the conditions of the Offer. Unless otherwise indicated herein in the box entitled "Special Payment Instructions," please issue the check for the purchase price of all Shares purchased, and return all Share Certificates evidencing Shares not purchased or not tendered in the name(s) of the registered holder(s) appearing above under "Description of Shares Tendered." Similarly, unless otherwise indicated in the box entitled "Special Delivery Instructions," please mail the check for the purchase price of all Shares purchased and all Share Certificates evidencing Shares not tendered or not purchased (and accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing above under "Description of Shares Tendered." In the event that the boxes entitled "Special Payment Instructions" and "Special Delivery Instructions" are both completed, please issue the check for the purchase price of all Shares purchased and return all Share Certificates evidencing Shares not purchased or not tendered in the name(s) of, and mail such check and Share Certificates to, the person(s) so indicated. Unless otherwise indicated herein in the box entitled "Special Payment Instructions," please credit any unpurchased Shares tendered hereby and delivered by book-entry transfer by crediting the account at the Book-Entry Transfer Facility designated above. The undersigned recognizes that Purchaser has no obligation, pursuant to the Special Payment Instructions, to transfer any Shares from the name of the registered holder(s) thereof if Purchaser does not purchase any of the Shares tendered hereby. 4 SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (See Instructions 1, 5, 6 and 7) (See Instructions 1, 5, 6 and 7) To be completed ONLY if the check for To be completed ONLY if the check for the the purchase price of Shares or Share purchase price of Shares purchased or Certificates evidencing Shares not Share Certificates evidencing Shares not tendered or not purchased is to be issued tendered or not purchased are to be mailed in the name of someone other than the to someone other than the undersigned, or undersigned, or if Shares tendered hereby the undersigned at an address other than and delivered by book-entry transfer which that shown under "Description of Shares are not purchased are to be returned by Tendered." credit to an account at one of the Book-Entry Transfer Facilities other than that designated above. Issue check and/or certificate(s) to: Mail check and/or certificate(s) to: Name...................................... Name...................................... (PLEASE PRINT) (PLEASE PRINT) Address................................... Address................................... .......................................... .......................................... (INCLUDE ZIP CODE) (INCLUDE ZIP CODE) .......................................... .......................................... (TAX IDENTIFICATION OR SOCIAL SECURITY (TAX IDENTIFICATION OR SOCIAL SECURITY NO.) NO.) Credit unpurchased Shares delivered by book-entry transfer to the account set forth below: / / The Depository Trust Company / / Philadelphia Depository Trust Company .......................................... (ACCOUNT NUMBER)
5 IMPORTANT STOCKHOLDER(S): SIGN HERE (PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE) ................................................................................ ................................................................................ SIGNATURE(S) OF HOLDER(S) Dated:.................................................................... , 199 (Must be signed by registered holder(s) exactly as name(s) appear(s) on Share Certificates or on a security position listing by a person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please provide the following information and SEE INSTRUCTION 5). Name(s): ....................................................................... ................................................................................ PLEASE PRINT Capacity: ...................................................................... PLEASE PROVIDE FULL TITLE Address: ....................................................................... ................................................................................ INCLUDE ZIP CODE Telephone No.: ................................................................. INCLUDE AREA CODE Taxpayer Identification or Social Security Number: ........................................................ SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE GUARANTEE OF SIGNATURES (IF REQUIRED--SEE INSTRUCTIONS 1 AND 5) SPACE BELOW IS FOR USE BY FINANCIAL INSTITUTIONS ONLY. FINANCIAL INSTITUTIONS: PLACE MEDALLION GUARANTEE IN SPACE PROVIDED BELOW. 6 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. GUARANTEE OF SIGNATURES. All signatures on this Letter of Transmittal must be medallion guaranteed by a firm which is a member of the Medallion Signature Guarantee Program, or by any other "eligible guarantor institution," as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (each of the foregoing being referred to as an "Eligible Institution") unless (i) this Letter of Transmittal is signed by the registered holder(s) of the Shares (which term, for purposes of this document, shall include any participant in a Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares) tendered hereby and such holder(s) has (have) completed neither the box entitled "Special Payment Instructions" nor the box entitled "Special Delivery Instructions" on the reverse hereof or (ii) such Shares are tendered for the account of an Eligible Institution. See Instruction 5. 2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARE CERTIFICATES. This Letter of Transmittal is to be used either if Share Certificates are to be forwarded herewith or, unless an Agent's Message (as defined in the Offer to Purchase) is utilized, if Shares are to be delivered by book-entry transfer pursuant to the procedure set forth in Section 3 of the Offer to Purchase. Share Certificates evidencing all physically tendered Shares, or a confirmation of a book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility of all Shares delivered by book-entry transfer as well as a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, or an Agent's Message in the case of a book-entry delivery, and any other documents required by this Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the reverse hereof prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase). If Share Certificates are forwarded to the Depositary in multiple deliveries, a properly completed and duly executed Letter of Transmittal must accompany each such delivery. Stockholders whose Share Certificates are not immediately available, who cannot deliver their Share Certificates and all other required documents to the Depositary prior to the Expiration Date or who cannot complete the procedure for delivery by book-entry transfer on a timely basis may tender their Shares pursuant to the guaranteed delivery procedure described in Section 3 of the Offer to Purchase. Pursuant to such procedure, (i) such tender must be made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by Purchaser, must be received by the Depositary prior to the Expiration Date; and (iii) the Share Certificates evidencing all physically delivered Shares in proper form for transfer by delivery, or a confirmation of a book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility of all Shares delivered by book-entry transfer, in each case together with a Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees (or, in the case of book-entry delivery, an Agent's Message), and any other documents required by this Letter of Transmittal, must be received by the Depositary within three New York Stock Exchange, Inc. trading days after the date of execution of such Notice of Guaranteed Delivery, all as described in Section 3 of the Offer to Purchase. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted, and no fractional Shares will be purchased. By execution of this Letter of Transmittal (or a facsimile hereof), all tendering stockholders waive any right to receive any notice of the acceptance of their Shares for payment. 7 3. INADEQUATE SPACE. If the space provided herein under "Description of Shares Tendered" is inadequate, the Share Certificate numbers, the number of Shares evidenced by such Share Certificates and the number of Shares tendered should be listed on a separate schedule and attached hereto. 4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY TRANSFER). If fewer than all the Shares evidenced by any Share Certificate delivered to the Depositary herewith are to be tendered hereby, fill in the number of Shares which are to be tendered in the box entitled "Number of Shares Tendered." In such cases, new Share Certificate(s) evidencing the remainder of the Shares that were evidenced by the Share Certificates delivered to the Depositary herewith will be sent to the person(s) signing this Letter of Transmittal, unless otherwise provided in the box entitled "Special Delivery Instructions" on the reverse hereof, as soon as practicable after the expiration or termination of the Offer. All Shares evidenced by Share Certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond with the name(s) as written on the face of the Share Certificates evidencing such Shares without alteration, enlargement or any other change whatsoever. If any Share tendered hereby is owned of record by two or more persons, all such persons must sign this Letter of Transmittal. If any of the Shares tendered hereby are registered in the names of different holders, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of such Shares. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, no endorsements of Share Certificates or separate stock powers are required, unless payment is to be made to, or Share Certificates evidencing Shares not tendered or not purchased are to be issued in the name of, a person other than the registered holder(s), in which case the Share Certificate(s) evidencing the Shares tendered hereby must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on such Share Certificate(s). Signatures on such Share Certificate(s) and stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Shares tendered hereby, the Share Certificate(s) evidencing the Shares tendered hereby must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on such Share Certificate(s). Signatures on such Share Certificate(s) and stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal or any Share Certificate or stock power is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to Purchaser of such persons authority so to act must be submitted. 6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction 6, Purchaser will pay all stock transfer taxes with respect to the sale and transfer of any Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price of any Shares purchased is to be made to, or Share Certificate(s) evidencing Shares not tendered or not purchased are to be issued in the name of, a person other than the registered holder(s), the amount of any stock transfer taxes (whether imposed on the registered holder(s), such other person or otherwise) payable on account of the transfer to such other person will be deducted from the purchase price of such Shares purchased, unless evidence satisfactory to Purchaser of the payment of such taxes, or exemption therefrom, is submitted. 8 EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE SHARE CERTIFICATES EVIDENCING THE SHARES TENDERED HEREBY. 7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase price of any Shares tendered hereby is to be issued, or Share Certificate(s) evidencing Shares not tendered or not purchased are to be issued, in the name of a person other than the person(s) signing this Letter of Transmittal or if such check or any such Share Certificate is to be sent to someone other than the person(s) signing this Letter of Transmittal or to the person(s) signing this Letter of Transmittal but at an address other than that shown in the box entitled "Description of Shares Tendered" on the reverse hereof, the appropriate boxes on the reverse of this Letter of Transmittal must be completed. Stockholders delivering Shares tendered hereby by book-entry transfer may request that Shares not purchased be credited to such account maintained at a Book-Entry Transfer Facility as such stockholder may designate in the box entitled "Special Payment Instructions" on the reverse hereof. If no such instructions are given, all such Shares not purchased will be returned by crediting the account at the Book-Entry Transfer Facility designated on the reverse hereof as the account from which such Shares were delivered. 8. QUESTIONS AND REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses or telephone numbers set forth below. Additional copies of the Offer to Purchase, this Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained from the Information Agent or the Dealer Manager or from brokers, dealers, commercial banks or trust companies. 9. SUBSTITUTE FORM W-9. Each tendering stockholder is required to provide the Depositary with a correct Taxpayer Identification Number ("TIN") on the Substitute Form W-9 which is provided under "Important Tax Information" below, and to certify whether such stockholder is subject to backup withholding of federal income tax. If a tendering stockholder has been notified by the Internal Revenue Service that such stockholder is subject to backup withholding, such stockholder must cross out item (2) of the Certification box of the Substitute Form W-9, unless such stockholder has since been notified by the Internal Revenue Service that such stockholder is no longer subject to backup withholding. Failure to provide the information on the Substitute Form W-9 may subject the tendering stockholder to 31% federal income tax withholding on the payment of the purchase price of all Shares purchased from such stockholder. If the tendering stockholder has not been issued a TIN and has applied for one or intends to apply for one in the near future, such stockholder should write "Applied For" in the space provided for the TIN in Part I of the Substitute Form W-9, and sign and date the Substitute Form W-9. If "Applied For" is written in Part I and the Depositary is not provided with a TIN within 60 days, the Depositary will withhold 31% on all payments of the purchase price to such stockholder until a TIN is provided to the Depositary. IMPORTANT TAX INFORMATION Under the federal income tax law, a stockholder whose tendered Shares are accepted for payment is required by law to provide the Depositary (as payer) with such stockholder's correct TIN on Substitute Form W-9 below. If such stockholder is an individual, the TIN is such stockholder's social security number. If the Depositary is not provided with the correct TIN, the stockholder may be subject to a $500 penalty imposed by the Internal Revenue Service. In addition, payments that are made to such stockholder with respect to Shares purchased pursuant to the Offer may be subject to backup withholding. Certain stockholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, such individual must submit an Internal Revenue Form W-8, signed under penalties of perjury, attesting to such individual's exempt status. A Form W-8 may be obtained from the Depositary. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. 9 If backup withholding applies, the Depositary is required to withhold 31% of any payments made to the stockholder. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. PURPOSE OF SUBSTITUTE FORM W-9 To prevent backup withholding on payments that are made to a stockholder with respect to Shares purchased pursuant to the Offer, the stockholder is required to notify the Depositary of such stockholder's correct TIN by completing the form below certifying that the TIN provided on Substitute Form W-9 is correct (or that such stockholder is awaiting a TIN), and that (i) such stockholder has not been notified by the Internal Revenue Service that he is subject to backup withholding as a result of a failure to report all interest or dividends, or (ii) the Internal Revenue Service has notified such stockholder that such stockholder is no longer subject to backup withholding. WHAT NUMBER TO GIVE THE DEPOSITARY The stockholder is required to give the Depositary the social security number or employer identification number of the record holder of the Shares tendered hereby. If the Shares are in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidance on which number to report. If the tendering stockholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, the stockholder should write "Applied For" in the space provided for the TIN in Part I, and sign and date the Substitute Form W-9. If "Applied For" is written in Part I and the Depositary is not provided with a TIN within 60 days, the Depositary will withhold 31% of all payments of the purchase price to such stockholder until a TIN is provided to the Depositary. 10. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate(s) representing Shares has been lost, destroyed or stolen, the stockholder should promptly notify the Depositary. The stockholder will then be instructed as to the steps that must be taken in order to replace the certificate(s). This letter of transmittal and related documents cannot be processed until the procedures for replacing lost or destroyed certificates have been followed. 11. WAIVER OR CONDITIONS. Subject to the terms of the Offer, the Purchaser reserves the absolute right in its sole discretion to waive any of the specified conditions to the Offer, in whole or in part, in the case of any Shares tendered. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF), PROPERLY COMPLETED AND DULY EXECUTED (TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES, OR AN AGENT'S MESSAGE IN THE CASE OF BOOK-ENTRY DELIVERY, AND SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE OFFER TO PURCHASE). 10 SUBSTITUTE FORM W-9 DEPARTMENT OF THE TREASURY--INTERNAL REVENUE SERVICE PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NO. PAYER'S NAME: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. PART 1--Please provide your TIN in the box at the right PART 2--Please check the box at and certify by signing and dating below. the right if you have applied Social Security Number for, and are awaiting receipt / / / / / / - / / / / - / / / / / / / / of, your TIN. OR Employer identification number / / / / - / / / / / / / / / / / / / / CERTIFICATION--under penalties of perjury, I certify that: (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me), and (2) I am not subject to backup withholding either because I have not been notified by the Internal Revenue Service ("IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or the IRS has notified me that I am no longer subject to backup withholding. CERTIFICATION INSTRUCTIONS.--You must cross out item (2) above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you receive another notification from IRS that you are no longer subject to backup withholding, do not cross out item (2). (Also see Certification under Specific Instructions in the Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.) Signature Date NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. FOR ADDITIONAL DETAILS, PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9.
Facsimiles of the Letter of Transmittal will be accepted. The Letter of Transmittal and Certificates evidencing Shares and any other required documents should be sent or delivered by each stockholder or his broker, dealer, commercial book, trust company or other nominee to the Depositary at one of its addresses set forth below. 11 THE DEPOSITARY FOR THE OFFER IS: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. BY MAIL: BY HAND OR OVERNIGHT COURIER: BY FACSIMILE: Reorganization Department Reorganization Department (For Eligible Institutions Midtown Station 120 Broadway Only) P.O. Box 798 13th Floor (201) 329-8936 New York, New York 10018 New York, New York 10271 CONFIRM BY TELEPHONE: (201) 296-4209 or (201) 296-4381
Questions or requests for assistance may be directed to the Dealer Manager or Information Agent at their respective addresses and telephone numbers listed below. Additional copies of the Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained from the Information Agent. A stockholder may also contact brokers, dealers, commercial banks or trust companies for assistance concerning the Offer. THE INFORMATION AGENT FOR THE OFFER IS: GEORGESON & COMPANY INC. Wall Street Plaza, 30th Floor New York, New York 10005 Telephone : (212) 440-9800 Brokers and Banks please call collect (212) 440-9800. All others call toll free 1-800-223-2064. THE DEALER MANAGER FOR THE OFFER IS: CHASE SECURITIES INC. 270 Park Avenue New York, New York 10017 Telephone: (212) 270-0892 12 EX-99.(A)(3) 4 EXHIBIT (A)(3) EXHIBIT (A)(3) NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF COMMON STOCK (INCLUDING THE PREFERRED SHARE PURCHASE RIGHTS) OF KASH N' KARRY FOOD STORES, INC. (NOT TO BE USED FOR SIGNATURE GUARANTEES) This Notice of Guaranteed Delivery, or one substantially in the form hereof, must be used to accept the Offer (as defined below) (i) if certificates ("Share Certificates") evidencing shares of common stock, par value $0.01 per share (the "Shares"), of Kash n' Karry Food Stores, Inc., a corporation organized and existing under the laws of the State of Delaware (the "Company"), including the Preferred Share Purchase Rights (the "Rights") issued pursuant to the Rights Agreement, as amended, dated as of April 13, 1995, between the Company and Fleet National Bank (successor in interest to Shawmut Bank Connecticut, N.A.) (the "Rights Agreement"), are not immediately available, (ii) if Share Certificates and all other required documents cannot be delivered to ChaseMellon Shareholder Services, L.L.C., as Depositary (the "Depositary"), prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase (as defined below)) or (iii) if the procedure for delivery by book-entry transfer cannot be completed on a timely basis. This Notice of Guaranteed Delivery may be delivered by hand or mail or transmitted by telegram or facsimile transmission to the Depositary. All references herein to the Rights include all benefits which may inure to stockholders of the Company pursuant to the Rights Agreement, and unless the context requires otherwise, all references herein to Shares include the Rights. See Section 3 of the Offer to Purchase. THE DEPOSITARY FOR THE OFFER IS: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. BY MAIL: BY HAND OR OVERNIGHT COURIER: BY FACSIMILE: Reorganization Department Reorganization Department (For Eligible Institutions Midtown Station 120 Broadway Only) P.O. Box 798 13th Floor (201) 329-8936 New York, New York 10018 New York, New York 10271 CONFIRM BY TELEPHONE: (201) 296-4209 or (201) 296-4381
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. This form is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an "Eligible Institution" under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. Ladies and Gentlemen: The undersigned hereby tenders to KK Acquisition Corp., a corporation organized and existing under the laws of the State of Delaware and an indirect wholly owned subsidiary of Food Lion, Inc., a North Carolina corporation, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated November 15, 1996 (the "Offer to Purchase"), and the related Letter of Transmittal (which together constitute the "Offer"), receipt of each of which is hereby acknowledged, the number of Shares specified below pursuant to the guaranteed delivery procedure described in Section 3 of the Offer to Purchase. Number of Shares: Certificate Nos. (if available): SIGNATURE(S) OF HOLDER(S) Check one box if Shares will be delivered by Dated: , 199 book-entry transfer: Name(s) of Record Holder(s): / / The Depository Trust Company / / Philadelphia Depository Trust Company Account Number: PLEASE TYPE OR PRINT ADDRESS ZIP CODE AREA CODE AND TELEPHONE NO.
THE GUARANTEE BELOW MUST BE COMPLETED GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm which is a member of a registered national securities exchange or of the National Association of Securities Dealers, Inc. or which is a commercial bank or trust company having an office or correspondent in the United States, guarantees to deliver to the Depositary, at one of its addresses set forth above, Share Certificates evidencing the Shares tendered hereby, in proper form for transfer, or confirmation of book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company or the Philadelphia Depository Trust Company, in each case with delivery of a Letter of Transmittal (or facsimile thereof) properly completed and duly executed, with any required signature guarantees or an Agent's Message (as defined in the Offer to Purchase) in the case of a book-entry delivery, and any other required documents, all within three New York Stock Exchange, Inc. trading days of the date hereof. NAME OF FIRM AUTHORIZED SIGNATURE ADDRESS TITLE Name: AREA CODE AND TELEPHONE NO. Dated:, 199
DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. 2 EX-99.(A)(4) 5 EXHIBIT (A)(4) EXHIBIT (A)(4) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE PREFERRED SHARE PURCHASE RIGHTS) OF KASH N' KARRY FOOD STORES, INC. AT $26.00 NET PER SHARE BY KK ACQUISITION CORP., AN INDIRECT WHOLLY OWNED SUBSIDIARY OF FOOD LION, INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON DECEMBER 13, 1996, UNLESS THE OFFER IS EXTENDED. November 15, 1996 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: We have been appointed by KK Acquisition Corp., a corporation organized and existing under the laws of the State of Delaware ("Purchaser") and an indirect wholly owned subsidiary of Food Lion, Inc., a North Carolina corporation ("Parent"), to act as financial advisor and Dealer Manager in connection with Purchaser's offer to purchase of all the outstanding shares of Common Stock, par value $0.01 per share (the "Shares"), of Kash n' Karry Food Stores, Inc., a corporation organized and existing under the laws of the State of Delaware (the "Company"), including the Preferred Share Purchase Rights (the "Rights") issued pursuant to the Rights Agreement, as amended, dated April 13, 1995, between the Company and Fleet National Bank (successor in interest to Shawmut Bank Connecticut, N.A.) (the "Rights Agreement"), at a price of $26.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in Purchaser's Offer to Purchase, dated November 15, 1996 (the "Offer to Purchase"), and the related Letter of Transmittal (which together constitute the "Offer") enclosed herewith. All references herein to the Rights include all benefits which may inure to stockholders of the Company pursuant to the Rights Agreement, and unless the context requires otherwise, all references herein to Shares include the Rights. Please furnish copies of the enclosed materials to those of your clients for whose accounts you hold Shares registered in your name or in the name of your nominee. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST THE NUMBER OF SHARES THAT WHEN ADDED TO THE SHARES ALREADY OWNED BY PARENT WILL CONSTITUTE A MAJORITY OF THE THEN OUTSTANDING SHARES ON A FULLY DILUTED BASIS AND THE EXPIRATION OR TERMINATION OF APPLICABLE ANTITRUST WAITING PERIODS. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS CONTAINED IN THE OFFER TO PURCHASE. SEE THE INTRODUCTION AND SECTIONS 1, 14, AND 15 OF THE OFFER TO PURCHASE. Enclosed for your information and use are copies of the following documents: 1. Offer to Purchase, dated November 15, 1996; 2. Letter of Transmittal to be used by holders of Shares in accepting the Offer and tendering Shares; 3. Notice of Guaranteed Delivery to be used to accept the Offer if the Shares and all other required documents are not immediately available or cannot be delivered to ChaseMellon Shareholder Services, L.L.C. (the "Depositary") by the Expiration Date (as defined in the Offer to Purchase) or if the procedure for book-entry transfer cannot be completed by the Expiration Date; 4. A letter to stockholders of the Company from Ronald E. Johnson, Chairman of the Board and Chief Executive Officer of the Company, together with a Solicitation/Recommendation Statement on Schedule 14D-9 filed with the Securities and Exchange Commission by the Company; 5. A form of a letter which may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space provided for obtaining such clients instructions with regard to the Offer; and 6. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON DECEMBER 13, 1996, UNLESS THE OFFER IS EXTENDED. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates evidencing such Shares (or a confirmation of a book-entry transfer of such Shares into the Depositary's account at one of the Book-Entry Transfer Facilities (as defined in the Offer to Purchase)), (ii) a Letter of Transmittal (or facsimile thereof) properly completed and duly executed, with any required signature guarantees, or an Agent's Message (as defined in the Offer to Purchase) in connection with a book-entry delivery of Shares and (iii) and any other required documents required by the Letter of Transmittal. The Board of Directors of the Company has by a unanimous vote of those members present at the meeting approved the Offer, the Merger (as defined below) and the Merger Agreement (as defined below), determined that the terms of the Merger Agreement, and the Offer and the Merger contemplated thereby, are fair to and in the best interests of, the stockholders of the Company and recommends that the stockholders of the Company accept the Offer and tender their Shares pursuant to the Offer. The Offer is being made pursuant to the Agreement and Plan of Merger dated as of October 31, 1996 (the "Merger Agreement"), among the Parent, the Purchaser and the Company pursuant to which, following the consummation of the Offer and the satisfaction of waiver of certain conditions, the Purchaser will be merged with and into the Company, with the Company surviving the merger as an indirect wholly owned subsidiary of the Parent (the "Merger"). In the Merger, each issued and outstanding Share (other than shares owned by the Company as treasury stock, Shares owned by any subsidiary of the Company, Shares owned by the Parent or the Purchaser or any subsidiary thereof, or by stockholders, if any, who are entitled to and who properly exercise dissenters' rights under Delaware law) will be converted into the right to receive $26.00 per Share, in cash, without interest thereon, as set forth in the Merger Agreement and described in the Offer to Purchase. If holders of Shares wish to tender Shares, but cannot deliver such holders' certificates or other required documents, or cannot comply with the procedure for book-entry transfer, prior to the expiration of the Offer, a tender may be effected by following the guaranteed delivery procedure described in Section 3 of the Offer to Purchase. Purchaser will not pay any fees or commissions to any broker, dealer or other person (other than the Dealer Manager, Depositary and Information Agent as described in the Offer) in connection with the solicitation of tenders of Shares pursuant to the Offer. However, Purchaser will reimburse you for customary mailing and handling expenses incurred by you in forwarding any of the enclosed materials to your clients. Purchaser will pay or cause to be paid any stock transfer taxes payable with respect to the transfer of Shares to it, except as otherwise provided in Instruction 6 of the Letter of Transmittal. 2 Any inquiries you may have with respect to the Offer should be addressed to, and additional copies of the enclosed materials may be obtained by contacting, Chase Securities, Inc., the Dealer Manager, or Georgeson & Company Inc., the Information Agent, at their respective addresses and telephone numbers set forth on the back cover page of the Offer to Purchase. Additional copies of the enclosed material may be obtained from the Information Agent at the address and telephone number set forth on the back cover page of the Offer to Purchase. Very truly yours, Georgeson & Company Inc. NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL AUTHORIZE YOU OR ANY OTHER PERSON TO ACT ON BEHALF OF OR AS THE AGENT OF PARENT, PURCHASER, THE COMPANY, THE DEALER MANAGER, THE INFORMATION AGENT OR THE DEPOSITARY, OR OF ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR TO MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN. 3 EX-99.(A)(5) 6 EXHIBIT (A)(5) EXHIBIT (A)(5) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE PREFERRED SHARE PURCHASE RIGHTS) OF KASH N' KARRY FOOD STORES, INC. AT $26.00 NET PER SHARE BY KK ACQUISITION CORP., AN INDIRECT WHOLLY OWNED SUBSIDIARY OF FOOD LION, INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON DECEMBER 13, 1996, UNLESS THE OFFER IS EXTENDED. To Our Clients: Enclosed for your consideration are an Offer to Purchase, dated November 15, 1996 (the "Offer to Purchase"), and a related Letter of Transmittal in connection with the offer by KK Acquisition Corp., a corporation organized and existing under the laws of the State of Delaware ("Purchaser") and an indirect wholly owned subsidiary of Food Lion, Inc., a North Carolina corporation ("Parent"), to purchase all outstanding shares of common stock, par value $0.01 per share (the "Shares"), of Kash n' Karry Food Stores, Inc., a corporation organized and existing under the laws of the State of Delaware (the "Company"), at a price of $26.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal (which together constitute the "Offer"). All references herein to the Rights include all benefits which may inure to stockholders of the Company pursuant to the Rights Agreement (as defined in the Offer to Purchaser), and unless the context requires otherwise, all references herein to Shares include the Rights. We are (or our nominee is) the holder of record of Shares held by us for your account. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT. We request instructions as to whether you wish to have us tender on your behalf any or all of the Shares held by us for your account, upon the terms and subject to the conditions set forth in the Offer. Your attention is invited to the following: 1. The tender price is $26.00 per Share, net to the seller in cash. 2. The Offer is being made for all outstanding Shares. 3. The Board of Directors of the Company has determined that each of the Offer and the Merger (as defined below) is fair to, and in the best interests of, the stockholders of the Company, and recommends that stockholders accept the Offer and tender all of their Shares pursuant to the Offer. 4. The Offer is being made pursuant to the Agreement and Plan of Merger dated as of October 31, 1996 (the "Merger Agreement"), among the Parent, the Purchaser and the Company pursuant to which, following the consummation of the Offer and the satisfaction or waiver of certain conditions, the Purchaser will be merged with and into the Company, with the Company surviving the 1 merger as an indirect wholly owned subsidiary of the Parent (the "Merger"). In the Merger, each issued and outstanding Share (other than Shares owned by the Company as treasury stock, Shares owned by any subsidiary of the Company, Shares owned by the Parent or the Purchaser or any subsidiary thereof, or by stockholders, if any, who are entitled to and who properly exercise dissenters' rights under Delaware law) will be converted into the right to receive $26.00 per Share, in cash, without interest, as set forth in the Merger Agreement and described in the Offer to Purchase. 5. The Offer and withdrawal rights will expire at 12:00 midnight, New York City time, on December 13, 1996, unless the Offer is extended. 6. The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn prior to the expiration of the Offer at least the number of Shares that when added to the Shares already owned by Parent will constitute a majority of the then outstanding Shares on a fully diluted basis and the expiration or termination of applicable antitrust waiting periods. The Offer is also subject to other terms and conditions contained in the Offer to Purchase. See the Introduction and Sections 1, 14, and 15 of the Offer to Purchase. 7. Tendering stockholders will not be obligated to pay brokerage fees or commissions or, except as otherwise provided in Instruction 6 of the Letter of Transmittal, stock transfer taxes with respect to the purchase of Shares by Purchaser pursuant to the Offer. 8. Payment for Shares purchased pursuant to the Offer will in all cases be made only after timely receipt by ChaseMellon Shareholder Services, L.L.C. (the "Depositary") of (a) Share Certificates or timely confirmation of the book-entry transfer of such Shares into the account maintained by the Depositary at the Depository Trust Company or the Philadelphia Depository Trust Company (collectively, the "Book-Entry Transfer Facilities"), pursuant to the procedures set forth in Section 3 of the Offer to Purchase, (b) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees or an Agent's Message (as defined in the Offer to Purchase), in connection with a book-entry delivery, and (c) any other documents required by the Letter of Transmittal. Accordingly, payment may not be made to all tendering stockholders at the same time depending upon when certificates for confirmations of book-entry transfers of such Shares into the Depositary's account at a Book-Entry Transfer Facility are actually received by the Depositary. If you wish to have us tender any or all of your Shares, please so instruct us by completing, executing and returning to us the instruction form contained in this letter. An envelope in which to return your instructions to us is enclosed. If you authorize the tender of your Shares, all such Shares will be tendered unless otherwise specified in your instructions. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER. The Offer is made solely by the Offer to Purchase and the related Letter of Transmittal and is being made to all holders of Shares. Purchaser is not aware of any jurisdiction where the making of the Offer is prohibited by administrative or judicial action pursuant to any valid state statute. If Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of Shares pursuant thereto, Purchaser will make a good faith effort to comply with such state statute. If, after such good faith effort, Purchaser cannot comply with such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such state. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of Purchaser by Chase Securities, Inc. or one or more registered brokers or dealers licensed under the laws of such jurisdiction. 2 INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF KASH N' KARRY FOOD STORES, INC. BY KK ACQUISITION CORP. The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase, dated November 15, 1995 (the "Offer to Purchase"), and the related Letter of Transmittal (which together constitute the "Offer") in connection with the offer by KK Acquisition Corp., a Delaware corporation and an indirect wholly owned subsidiary of Food Lion, Inc., a North Carolina corporation, to purchase all outstanding shares of Common Stock, par value $0.01 per share (the "Shares"), of Kash n' Karry Food Stores, Inc., a Delaware corporation, at a purchase price of $26.00 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase. This will instruct you to tender to the Purchaser the number of Shares indicated below (or if no number is indicated below, all Shares) which are held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer. Number of Shares to Be Tendered:_________* - ------------------------ * Unless otherwise indicated, it will be assumed that you instruct us to tender all Shares held by us for your account. SIGN HERE Signature(s): __________________________________________________________________ (Print Name(s)): _______________________________________________________________ (Print Address(es)): ___________________________________________________________ (Area Code and Telephone Number(s)): ___________________________________________ (Taxpayer Identification or Social Security Number(s)): ________________________ 3 EX-99.(A)(6) 7 EXHIBIT (A)(6) EXHIBIT (A)(6) GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER-- Social Security numbers have nine digits separated by two hyphens: i.e., 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e., 00-0000000. The tables below will help determine the number to give the payer.
FOR THIS TYPE OF ACCOUNT: - ---------------------------------------------------------------------- 1. An individual's account 2. Two or more individuals (joint account) 3. Husband and wife (joint account) 4. Custodian account of a minor (Uniform Gift to Minors Act) 5. Adult and minor (joint account) 6. Account in the name of guardian or committee for a designated ward, minor, or incompetent person 7. a. The usual revocable savings trust account (grantor is also trustee) b. So-called trust account that is not a legal or valid trust under State law 8. Sole proprietorship account 9. A valid trust, estate, or pension trust 10. Corporate account 11. Religious, charitable, or educational organization account 12. Partnership 13. Association, club, or other tax-exempt organization 14. A broker or registered nominee 15. Account with the Department of Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments FOR THIS GIVE THE SOCIAL SECURITY NUMBER OF-- - --------- ---------------------------------------------------------------- 1. The individual 2. The actual owner of the account or, if combined funds, any one of the individuals (1) 3. The actual owner of the account or, if joint funds, either person (1) 4. The minor (2) 5. The adult or, if the minor is the only contributor, the minor (1) 6. The ward, minor, or incompetent person (3) 7. The grantor-trustee (1) The actual owner (1) 8. The owner (4) 9. The legal entity (Do not furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title) (5) 10. The corporation 11. The organization 12. The partnership 13. The organization 14. The broker or nominee 15. The public entity
- -------------------------- (1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) Show the name of the owner. You may also enter your business or "doing business as" name. Furnish the owner's social security number or the employer identification number of the sole proprietorship. (5) List first and circle the name of the legal trust, estate, or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9* OBTAINING A NUMBER If you don't have a taxpayer identification number, obtain Form SS-5, Application for a Social Security NumberCard, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. If you don't know your Social Security Number, call the Social Security Administration at 1-800-772-1213. To complete Substitute Form W-9, if you do not have a taxpayer identification number, write "Applied For" in the space for the taxpayer identification number in Part 1, sign and date the Form, and give it to the requester. Generally, you will then have 60 days to obtain a taxpayer identification number and furnish it to the requester. If the requester does not receive your taxpayer identification number within 60 days, backup withholding, if applicable, will begin and will continue until you furnish your taxpayer identification number to the requester. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on ALL payments include the following: - A corporation. - A financial institution. - An organization exempt from tax under section 501(a), or an individual retirement plan. - The United States or any agency or instrumentality thereof. - A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. - A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. - As international organization or any agency, or instrumentality thereof. - A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. - A real estate investment trust. - A common trust fund operated by a bank under section 584(a). - An exempt charitable remainder trust, or a non-exempt trust described in section 4947(a)(1). - An entity registered at all times under the Investment Company Act of 1940. - A foreign central bank of issue. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: - Payments to nonresident aliens subject to withholding under section 1441. - Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. - Payments of patronage dividends where the amount received is not paid in money. - Payments made by certain foreign organizations. - A futures commission merchant registered with the Commodity Futures Trading Commission. - A middleman known in the investment community as a nominee or listed in the most recent publication of the American Society of Corporate Secretaries, Inc., Nominee list. 2 Payments of interest not generally subject to backup withholding include the following: - Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. - Payments of tax-exempt interest (including exempt-interest dividends under section 852). - Payments described in section 6049(b)(5) to non-resident aliens. - Payments on tax-free covenant bonds under section 1451. - Payments made by certain foreign organizations. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. Certain payments other than interest, dividends, and patronage dividends, that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under section 6041. PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to IRS. IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE - -------------------------- * UNLESS OTHERWISE NOTED HEREIN, ALL REFERENCES TO SECTION NUMBERS OR TO REGULATIONS ARE REFERENCES TO THE INTERNAL REVENUE CODE AND THE REGULATIONS PROMULGATED THEREUNDER. 3 EX-99.(A)(7) 8 EXHIBIT (A)(7) THIS ANNOUNCEMENT IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF AN OFFER TO SELL SHARES. THE OFFER IS MADE SOLELY BY THE OFFER TO PURCHASE, DATED NOVEMBER 15, 1996, AND THE RELATED LETTER OF TRANSMITTAL, AND IS NOT BEING MADE TO NOR WILL TENDERS BE ACCEPTED FROM OR ON BEHALF OF HOLDERS OF SHARES RESIDING IN ANY JURISDICTION IN WHICH THE MAKING OF THE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION. IN ANY JURISDICTION THE SECURITIES LAWS OF WHICH REQUIRE THE OFFER TO BE MADE BY A LICENSED BROKER OR DEALER, THE OFFER SHALL BE DEEMED MADE ON BEHALF OF KK ACQUISITION CORP. BY THE DEALER MANAGER OR ONE OR MORE REGISTERED BROKERS OR DEALERS LICENSED UNDER THE LAWS OF SUCH JURISDICTION. NOTICE OF OFFER TO PURCHASE FOR CASH ALL OF THE ISSUED AND OUTSTANDING SHARES OF COMMON STOCK (INCLUDING PREFERRED SHARE PURCHASE RIGHTS) OF KASH N' KARRY FOOD STORES, INC. AT $26.00 NET PER SHARE BY KK ACQUISITION CORP., A WHOLLY OWNED SUBSIDIARY OF FLI HOLDING CORP., A WHOLLY OWNED SUBSIDIARY OF FOOD LION, INC. KK Acquisition Corp., a Delaware corporation ("Purchaser") and an indirect wholly owned subsidiary of Food Lion, Inc., a North Carolina corporation ("Parent"), is offering to purchase all of the outstanding shares of the common stock, par value $.01 per share (the "Shares"), of Kash n' Karry Food Stores, Inc., a Delaware corporation (the "Company"), including the associated Preferred Share Purchase Rights (the "Rights") issued pursuant to the Rights Agreement, dated as of April 13, 1995, between the Company and Fleet National Bank (successor to Shawmut Bank Connecticut, N.A.), as Rights Agent, as amended by the First Amendment to Rights Agreement dated June 13, 1995 and the Second Amendment to Rights Agreement dated as of October 30, 1996 (the "Rights Agreement"), at a price of $26.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated November 15, 1996 (the "Offer to Purchase"), and the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"). Subject to satisfaction of the conditions to (as set forth in the Offer to Purchase), and successful completion of, the Offer, Purchaser will merge with and into the Company, with the Company continuing as the surviving corporation and as an indirect wholly owned subsidiary of Parent. All references herein to the Rights include all benefits which may inure to Stockholders of the Company pursuant to the Rights Agreement, and unless the context requires otherwise, all references herein to Shares include the Rights. Capitalized terms used herein and not otherwise defined have the respective meanings ascribed to such terms in the Offer to Purchase. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON DECEMBER 13, 1996, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF SHARES MAY BE WITHDRAWN ONLY UNDER THE CIRCUMSTANCES DESCRIBED IN THE OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE AT LEAST A MAJORITY OF SHARES OUTSTANDING. THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER, DATED AS OF OCTOBER 31, 1996 (THE "MERGER AGREEMENT"), AMONG PARENT, PURCHASER AND THE COMPANY PURSUANT TO WHICH, FOLLOWING THE CONSUMMATION OF THE OFFER, PURCHASER WILL BE MERGED WITH AND INTO THE COMPANY (THE "MERGER"). ON THE EFFECTIVE DATE OF THE MERGER, EACH OUTSTANDING SHARE WILL BE CONVERTED INTO THE RIGHT TO RECEIVE $26.00 IN CASH, WITHOUT INTEREST. THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS, HAS APPROVED AND ADOPTED THE MERGER AGREEMENT, THE STOCKHOLDERS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, AND RECOMMENDS THAT THE STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. Parent and Purchaser have entered into a Stockholders Agreement with the Company and certain stockholders of the Company, pursuant to which, among other matters, such stockholders have agreed to tender in the Offer, and Purchaser has the right to acquire, upon the terms and subject to the conditions of the Stockholders Agreement, approximately 67 percent of the Company's outstanding Shares. Tendering stockholders will not be obligated to pay brokerage fees or commissions or, except as otherwise provided in Instruction 6 of the Letter of Transmittal, stock transfer taxes with respect to the purchase of Shares by purchaser pursuant to the Offer or in connection with the Merger. For purposes of the Offer, Purchaser will be deemed to have accepted for payment (and thereby purchased) Shares validly tendered and not properly withdrawn, as, if and when Purchaser gives oral or written notice to ChaseMellon Shareholder Services, L.L.C. (the "Depositary") of Purchaser's acceptance of such Shares pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering Stockholders for the purpose of receiving payments from Purchaser and transmitting such payments to tendering Stockholders whose Shares have been accepted for payment. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) the certificates evidencing such Shares (the "Share Certificates") or timely confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company or the Philadelphia Depository Trust Company (each, a "Book-Entry Transfer Facility" and, collectively, the "Book-Entry Transfer Facilities") pursuant to the procedures set forth in the Offer to Purchase, (ii) the Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed, with any required signature guarantees or an Agent's Message in connection with a book-entry transfer, and (iii) any other documents required by the Letter of Transmittal. Under no circumstances will interest on the purchase price for tendered Shares be paid regardless of any delay in making such payment. The term "Expiration Date" means 12:00 midnight New York City time, on December 13, 1996, unless and until Purchaser, in accordance with the terms and conditions of the Offer and the Merger Agreement, extends the period during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by Purchaser, shall expire. Purchaser expressly reserves the right, in its sole discretion, at any time or from time to time, subject to the terms of the Merger Agreement, to extend the period of time during which the Offer is open and thereby delay acceptance for payment of, and the payment for, any Shares, by giving oral or written notice of such extension to the Depositary and by making a public announcement of such extension. Any such extension will be followed by a public announcement thereof not later than 9:00 a.m. New York City time, on the next business day after the previously scheduled Expiration Date. During any such extension, all Shares previously tendered and not properly withdrawn will remain subject to the Offer, subject to the right of a tendering Stockholder 2 to withdraw such Stockholder's Shares. Without limiting the manner in which Purchaser may choose to make any public announcement, Purchaser shall have no obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a release to the Dow Jones News Service or as otherwise may be required by law. Except as otherwise provided in the Offer to Purchaser, tenders of Shares made pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment by Purchaser pursuant to the Offer, may also be withdrawn at any time after January 14, 1997. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of the Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of such Shares, if different from that of the person who tendered such Shares. If Share Certificates evidencing Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then prior to the physical release of such Share Certificates, the serial numbers shown on such Share Certificates must be submitted to the Depositary, and the signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution, unless such Shares have been tendered for the account of an Eligible Institution. If Shares have been tendered pursuant to the procedure for book-entry transfer set forth in the Offer to Purchase, any notice of withdrawal must specify the name and number of the account at the applicable Book-Entry Transfer Facility to be credited with the withdrawn Shares, in which case a notice of withdrawal will be effective if delivered to the Depositary by any method described in the third sentence of this paragraph. All questions as to the form and validity (including the time of receipt) of notices of withdrawal will be determined by Purchaser, in its sole discretion, whose determination shall be final and binding on all parties. Any Shares properly withdrawn will thereafter be deemed not to have been validly tendered for purposes of the Offer. However, withdrawn Shares may be re-tendered at any time prior to the Expiration Date by following any of the procedures described in the Offer to Purchase. The Company has provided Purchaser with the Company's stockholder list and security position listings for the purpose of disseminating the Offer to holders of Shares. The Offer to Purchase, the related Letter of Transmittal and all relevant materials will be mailed to record holders of Shares whose names appear on the Company's stockholder list and will be furnished, for subsequent transmittal to beneficial owners of Shares, to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the Company's stockholder list or, if applicable, who are listed as participants in a clearing agency's security position listing. The information required to be disclosed by paragraph (e)(1)(vii) of Rule 14d-6 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE BY STOCKHOLDERS WITH RESPECT TO THE OFFER. 3 Requests for copies of the Offer to Purchase, the Letter of Transmittal and other Offer documents may be directed to the Information Agent as set forth below, and copies will be furnished promptly at Purchaser's expense. Questions or requests for assistance may be directed to the Information Agent or the Dealer Manager. You may also contact your broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. Neither Purchaser nor Parent will pay any fees or commissions to any broker or dealer or other person (other than the Dealer Manager, the Depositary and the Information Agent) in connection with the solicitation of tenders of Shares pursuant to the Offer. THE INFORMATION AGENT FOR THE OFFER IS: GEORGESON & COMPANY INC. Wall Street Plaza New York, New York 10005 Banks and Brokers call collect (212) 440-9800 CALL TOLL FREE: 1-800-223-2064 THE DEPOSITARY FOR THE OFFER IS: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. BY MAIL: BY HAND/OVERNIGHT DELIVERY: ChaseMellon Shareholder Services, ChaseMellon Shareholder Services, L.L.C. L.L.C. Reorganization Department Reorganization Department P.O. Box 798 120 Broadway Midtown Station 13th Floor New York, NY 10018 New York, NY 10271
BY FACSIMILE TRANSMISSION: (201) 329-8938 (For Eligible Institutions Only) Confirm by Telephone: (201) 296-4209 or (201) 296-4381 THE DEALER MANAGER FOR THE OFFER IS: CHASE SECURITIES INC. 270 Park Avenue New York, New York 10017 (212) 270-0892 November 15, 1996 4 EX-99.(A)(9) 9 EXHIBIT (A)(9) November 8, 1996 Contact: Chris Ahearn (704) 633-8250, Ext. 2892 FOR IMMEDIATE RELEASE FOOD LION, INC. TO COMMENCE ALL-CASH, $26.00 PER SHARE TENDER OFFER AS FIRST STEP IN KASH N' KARRY FOOD STORES, INC. MERGER SALISBURY, NC and TAMPA, FL--Food Lion, Inc. (Nasdaq-NNM: FDLNA, FDLNB) of Salisbury, North Carolina, and Kash n' Karry Food Stores, Inc. (Nasdaq-NNM: KASH) of Tampa, Florida, announced today that Food Lion will commence, within five business days, an all-cash tender offer for all of the issued and outstanding common shares of Kash n' Karry at the price of $26.00 per share. This announcement comes pursuant to the previously announced definitive merger agreement between the two companies. Food Lion and Kash n' Karry said that the decision to effect the transaction by means of a first-step tender offer reflected their shared objective of allowing the shareholders, customers, and employees of both companies to realize the benefits of the transaction at the earliest possible date. It is contemplated that the merger will be effected without the necessity of a Kash n' Karry stockholder vote if more than 90% of Kash n' Karry's outstanding shares are acquired in the tender offer. As announced on October 31, 1996, Kash n' Karry's Board of Directors has unanimously approved the transaction and recommended approval and adoption of the merger by Kash n' Karry's stockholders. Institutional investors, who together own approximately 67% of Kash n' Karry's outstanding common stock, have committed to support the transaction, have granted proxies and options on their shares in favor of Food Lion, and have agreed to tender their shares in the tender offer. Consummation of the merger, which is subject to satisfaction of certain conditions, including the expiration of applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, is expected to occur later this year or early next year. Food Lion and its more than 72,000 employees serve more than nine million customers per week by providing Extra Low Prices and More at more than 1,100 stores in 14 states. EX-99.(A)(10) 10 EXHIBIT (A)(10) EXHIBIT (A)(10) November 15, 1996 Contact: Chris Ahearn (704) 633-8250, Ext. 2892 FOOD LION, INC. COMMENCES ALL-CASH, $26.00 PER SHARE, TENDER OFFER FOR KASH N' KARRY FOOD STORES, INC. SALISBURY, NC--Food Lion, Inc. (Nasdaq: FDLNA and FDLNB) of Salisbury, North Carolina announced today that, pursuant to its previously announced definitive merger agreement with Kash n' Karry Food Stores, Inc., Food Lion has commenced its previously announced all-cash tender offer (the "Offer") for all of the issued and outstanding common shares of Kash n' Karry at a cash price of $26.00 per share. The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn prior to the expiration date at least a majority of the shares then outstanding on a fully diluted basis. The Offer and withdrawal rights will expire at 12:00 midnight, New York City time, on December 13, 1996, unless extended or withdrawn. The Information Agent for the Offer is Georgeson & Company Inc. As previously indicated, the decision to effect the transaction by means of a first-step tender offer reflects the shared objective of Food Lion and Kash n' Karry of allowing the shareholders, customers and employees of both companies to realize the benefits of the transaction at the earliest possible date. It is contemplated that the merger will be effected without the necessity of a Kash n' Karry stockholder vote if more than 90% of Kash n' Karry's outstanding shares are acquired in the Offer. As announced on October 31, 1996, Kash n' Karry's Board of Directors has approved the transaction and recommended approval and adoption of the merger by Kash n' Karry's stockholders. Institutional investors who together own approximately 67.1% of Kash n' Karry's outstanding common stock have committed to support the transaction, have granted proxies and options on their shares in favor of Food Lion, and have agreed to tender their shares in the Offer. Consummation of the merger, which is subject to satisfaction of certain conditions, including the expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, is expected to occur later this year or early next year. Food Lion and its more than 72,000 employees serve more than nine million customers per week by providing Extra Low Prices and More at more than 1,100 stores in 14 states. EX-99.(B) 11 EXHIBIT (B) October 29, 1996 FOOD LION, INC. SENIOR CREDIT FACILITIES COMMITMENT LETTER Food Lion, Inc. 2110 Executive Drive Salisbury, North Carolina 28145-1330 Attention: Mr. Mike Price, Treasurer and Director of Finance Ladies and Gentlemen: You have advised The Chase Manhattan Bank ("CMB") and Chase Securities Inc. ("CSI") that Food Lion, Inc., a North Carolina corporation (the "Borrower"), proposes to acquire all of the issued and outstanding shares of the common stock (the "Stock") of Kash N' Karry Food Stores, Inc. (the "Target") pursuant to a merger agreement (the "Merger Agreement") to be entered into on a friendly basis between the Borrower and the Target. The Merger Agreement will provide for the merger of a subsidiary of the Borrower into the Target resulting in the acquisition for all cash consideration of the Stock (the "Merger"). The Merger Agreement will permit the Target to require such subsidiary to commence a cash tender offer for the Stock prior to the Merger (the "Tender Offer"; the Tender Offer and the Merger, collectively, the "Acquisition"). In that connection, you have requested that CSI agree to structure, arrange and syndicate a senior revolving credit facilities in an amount aggregating up to $700,000,000 (the "Facilities"), and that CMB commit to provide the entire principal amount of the Facilities and agree to serve as administrative agent for the Facilities. CSI is pleased to advise you that it is willing to act as exclusive advisor and arranger for the Facilities. Furthermore, CMB is pleased to advise you of its commitment to provide the entire amount of the facilities upon the terms and subject to the conditions set forth or referred to in this commitment letter (the "Commitment Letter") and in the Summary of Terms and Conditions attached hereto as Exhibit A (the "Term Sheet"). It is agreed that CMB will act as the sole and exclusive Administrative Agent, and that CSI will act as the sole and exclusive advisor and arranger, for the Facilities, and each will, in such capacities, perform the duties and exercise the authority customarily performed and exercised by it in such roles. In addition, if requested by you and if acceptable to them, Wachovia Bank of Georgia, N.A. will be awarded the title of Documentation Agent for the Facilities. You agree that no other agents, co-agents or arrangers will be appointed, no other titles will be awarded and no compensation (other than that expressly contemplated by the Term Sheet and the Fee Letter referred to below) will be paid in connection with the Facilities unless you and we shall so agree. We intend to syndicate the Facilities to a group of financial institutions (together with CMB, the "Lenders") identified by us in consultation with you. CSI intends to commence syndication efforts promptly upon the execution of this Commitment Letter, and you agree actively to assist CSI in completing a syndication satisfactory to it. Such assistance shall include (a) your using commercially reasonable efforts to ensure that the syndication efforts benefit materially from your existing lending relationships and the existing lending relationships of the Target, (b) direct contact between senior management and advisors of the Borrower and the Target and the proposed Lenders, (c) assistance in the preparation of a Confidential Information Memorandum and other marketing materials to be used in connection with the syndication and (d) the hosting, with CSI, of one or more meetings of prospective Lenders. CSI will manage all aspects of the syndication, including decisions as to the selection of institutions to be approached and when they will be approached, when their commitments will be accepted, which institutions will participate, the allocations of the commitments among the Lenders and the amount and distribution of fees among the Lenders. To assist CSI in its syndication efforts, you agree promptly to prepare and provide to CSI and CMB all information with respect to the Borrower, the Target, the Acquisition and the other transactions contemplated hereby, including all financial information and projections (the "Projections"), as we may reasonably request in connection with the arrangement and syndication of the Facilities. You hereby represent and covenant that (a) all information other than the Projections (the "Information") that has been or will be made available to CMB or CSI by you or any of your representatives is or will be, when furnished, complete and correct in all material respects and does not or will not, when furnished, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements are made and (b) the Projections that have been or will be made available to CMB or CSI by you or any of your representatives have been or will be prepared in good faith based upon reasonable assumptions. You understand that in arranging and syndicating the Facilities we may use and rely on the Information and Projections without independent verification thereof. As consideration for CMB's commitment hereunder and CSI's agreement to perform the services described herein, you agree to pay to CMB the nonrefundable fees set forth in Annex I to the Term Sheet and in the Fee Letter dated the date hereof and delivered herewith (the "Fee Letter"). CMB's commitment hereunder and CSI's agreement to perform the services described herein are subject to (a) there not occurring or becoming known to us any material adverse condition or material adverse change in or affecting the business, operations, property, condition (financial or otherwise) or prospects of the Borrower and its subsidiaries, taken as a whole (including the Target after the Acquisition), (b) our completion of and satisfaction in all respects with a due diligence investigation of the Borrower and the Target, (c) our not becoming aware after the date hereof of any information or other matter affecting the Borrower, the Target or the transactions contemplated hereby which is inconsistent in a material and adverse manner with any such information or other matter disclosed to us prior to the date hereof, (d) there not having occurred a material disruption of or material adverse change in financial, banking or capital market conditions that, in our judgment, could materially impair the syndication of the Facilities, (e) our satisfaction that prior to and during the syndication of the Facilities there shall be no competing offering, placement or arrangement of any debt securities or bank financing by or on behalf of the Borrower or the Target or any affiliate thereof, (f) the negotiation, execution and delivery on or before December 31, 1996, of definitive documentation with respect to the Facilities satisfactory to CMB and its counsel and (g) the other conditions set forth or referred to in the Term Sheet. The terms and conditions of CMB's commitment hereunder and of the Facilities are not limited to those set forth herein and in the Term Sheet. Those matters that are not covered by the provisions hereof and of the Term Sheet are subject to the approval and agreement of CMB, CSI and the Borrower. You agree (a) to indemnify and hold harmless CMB, CSI, their affiliates and their respective officers, directors, employees, advisors, and agents (each, an "indemnified person") from and against any and all losses, claims, damages and liabilities to which any such indemnified person may become subject arising out of or in connection with this Commitment Letter, the Facilities, the use of the proceeds thereof, the Acquisition or any related transaction or any claim, litigation, investigation or proceeding relating to any of the foregoing, regardless of whether any indemnified person is a party thereto, and to reimburse each indemnified person upon demand for any legal or other expenses incurred in connection with investigating or defending any of the foregoing, PROVIDED that the foregoing indemnity will not, as to any indemnified person, apply to losses, claims, damages, liabilities or related expenses to the extent they are found by a final, non-appealable judgment of a court to arise from the willful misconduct or gross negligence of such indemnified person, and (b) to reimburse CMB, CSI and their affiliates on demand for all out-of-pocket expenses (including due diligence expenses, syndication expenses, travel expenses, and reasonable fees, charges and disbursements of counsel) incurred in connection with the Facilities and any related documentation (including this Commitment Letter, the Term Sheet, the Fee Letter and the definitive financing documentation) or the administration, amendment, modification or waiver thereof. No indemnified person shall be liable for any indirect or consequential damages in connection with its activities related to the Facilities. This Commitment Letter shall not be assignable by you without the prior written consent of CMB and CSI (and any purported assignment without such consent shall be null and void), is intended to be solely for the benefit of the parties hereto and is not intended to confer any benefits upon, or create any rights in favor of, any person other than the parties hereto. This Commitment Letter may not be amended or waived except by an instrument in writing signed by you, CMB and CSI. This Commitment Letter may be executed in any number of counterparts, each of which shall be an original, and all of which, when taken together, shall constitute one agreement. Delivery of an executed signature page of this Commitment Letter by facsimile transmission shall be as effective as delivery of a manually executed counterpart hereof. This Commitment Letter and the Fee Letter are the only agreements that have been entered into among us with respect to the Facilities and set forth the entire understanding of the parties with respect thereto. This Commitment Letter shall be governed by, and construed in accordance with, the laws of the State of New York. This Commitment Letter is delivered to you on the understanding that neither this Commitment Letter, the Term Sheet or the Fee Letter nor any of their terms or substance shall be disclosed, directly or indirectly, to any other person except (a) to your officers, agents and advisors who are directly involved in the consideration of this matter or (b) as may be compelled in a judicial or administrative proceeding or as otherwise required by law (in which case you agree to inform us promptly thereof), provided, that the foregoing restrictions shall cease to apply (except in respect of the Fee Letter and its terms and substance) after this Commitment Letter has been accepted by you. The compensation, reimbursement, indemnification and confidentiality provisions contained herein and in the Fee Letter shall remain in full force and effect regardless of whether definitive financing documentation shall be executed and delivered and notwithstanding the termination of this Commitment Letter or CMB's commitment hereunder. If the foregoing correctly sets forth our agreement, please indicate your acceptance of the terms hereof and of the Term Sheet and the Fee Letter by returning to us executed counterparts hereof and of the Fee Letter not later than 5:00 p.m., New York City time, on October 31, 1996. CMB's commitment and CSI's agreements herein will expire at such time in the event CMB has not received such executed counterparts in accordance with the immediately preceding sentence. CMB and CSI are pleased to have been given the opportunity to assist you in connection with this important financing. Very truly yours, THE CHASE MANHATTAN BANK By: /s/ ELLEN GERTZOG ----------------------------------- Name: Ellen Gertzog Title: Vice President CHASE SECURITIES INC. By: /s/ AMANDA TEPPER ----------------------------------- Name: Amanda Tepper Title: Vice President Accepted and agreed to as of the date first written above by: FOOD LION, INC. By: /s/ MIKE PRICE ------------------------------------------------ Name: Mike Price Title: Treasurer FOOD LION REVOLVING CREDIT FACILITY SUMMARY OF TERMS AND CONDITIONS OCTOBER 29, 1996 ------------------------ Food Lion, Inc., a North Carolina corporation (the "Borrower"), proposes to acquire all of the issued and outstanding shares of the common stock (the "Stock") of Kash N' Karry Food Stores, Inc. (the "Target") pursuant to a merger agreement (the "Merger Agreement") to be entered into on a friendly basis between the Borrower and the Target. The Merger Agreement will provide for an all cash tender offer for the Stock by the Borrower or a wholly owned subsidiary of the Borrower (the "Tender Offer") followed by a merger (the "Merger") resulting in the acquisition by the Borrower (or such subsidiary) of the remaining Stock (the Tender Offer and the Merger, collectively, the "Acquisition"). I. PARTIES Borrower: Food Lion, Inc. Advisor and Arranger: Chase Securities Inc. (in such capacity, the "Arranger"). Administrative Agent: The Chase Manhattan Bank ("CMB" and, in such capacity, the "Administrative Agent"). Documentation Agent: To be determined. Lenders: A syndicate of banks, financial institutions and other entities, including CMB, arranged by the Arranger (collectively, the "Lenders"). II. TYPES AND AMOUNTS OF CREDIT FACILITIES 1. LONG-TERM FACILITY Type and Amount of Facility: Five-year revolving credit facility (the "Long-term Facility") in the amount of $350,000,000 (the loans thereunder, the "Long-term Loans") Availability: The Long-term Facility shall be available on a revolving basis during the period commencing on the Closing Date and ending on the fifth anniversary of the effective date thereof (the "Long-term Facility Termination Date"). Competitive Loans: The Borrower shall have the option to request that the Lenders bid for loans ("LTF Competitive Loans") bearing interest at an absolute rate or a margin over the eurodollar rate, with specified maturities ranging from 7 to 360 days. Each Lender shall have the right, but not the obligation, to submit bids at its discretion. The Borrower, by notice given four business days in advance in the case of eurodollar rate bids and one business day in advance in the case of absolute rate bids, shall specify the proposed date of borrowing, the interest period, the amount of the LTF Competitive Loan and the maturity date thereof, the interest rate basis to be used by the Lenders in bidding as such other terms and the Borrower may specify. The Administrative Agent shall advise the Lenders of the terms of the Borrower's notice, and, subject to acceptance by the Borrower, bids shall be allocated to each Lender in ascending order from the lowest bid to the highest bid acceptable to the Borrower. While LTF
Competitive Loans are outstanding, the available commitments under the Long-term Facility shall be reduced by the aggregate amount of such LTF Competitive Loans. Maturity: The Long-term Facility Termination Date. Purpose: The proceeds of the Long-term Loans shall be used for general corporate purposes of the Borrower and its subsidiaries including to finance the Acquisition. 364-DAY FACILITY Type and Amount of Facility: 364-day revolving credit facility (the "364-day Facility"; together with the Long-term Facility, the "Facilities") in the amount of $350,000,000 (the loans thereunder, the "364-day Loans"; together with the Long-term Loans, the "Loans"). Availability: The 364-day Facility shall be available on a revolving basis during the period commencing on the Closing Date and ending on the date that is 364 days following the effective date thereof (the "364-day Facility Termination Date"). Competitive Loans: The Borrower shall have the option to request that the Lenders bid for loans ("364-day Competitive Loans"; together with the LTF Competitive Loans, the "Competitive Loans") bearing interest at an absolute rate or a margin over the eurodollar rate, with specified maturities ranging from 7 to 360 days. Each Lender shall have the right, but not the obligation, to submit bids at its discretion. The Borrower, by notice given four business days in advance in the case of eurodollar rate bids and one business day in advance in the case of absolute rate bids, shall specify the proposed date of borrowing, the interest period, the amount of the 364-day Competitive Loan and the maturity date thereof, the interest rate basis to be used by the Lenders in bidding and such other terms as the Borrower may specify. The Administrative Agent shall advise the Lenders of the terms of the Borrower's notice, and, subject to acceptance by the Borrower, bids shall be allocated to each Lender in ascending order from the lowest bid to the highest bid acceptable to the Borrower. While 364-day Competitive Loans are outstanding, the available commitments under the 364-day Facility shall be reduced by the aggregate amount of such 364-day Competitive Loans. Maturity: The 364-day Facility Termination Date. Purpose: The proceeds of the 364-day Loans shall be used for general corporate purposes of the Borrower and its subsidiaries.
III. CERTAIN PAYMENT PROVISIONS Fees and Interest Rates: As set forth on Annex I. Optional Prepayments and Commitment Reductions: Loans may be prepaid and commitments may be reduced by the Borrower in minimum amounts to be agreed upon, provided, that Competitive Loans may not be prepaid without the consent of the relevant Lender. IV. CERTAIN CONDITIONS Initial Conditions: The availability of the Facilities shall be conditioned upon satisfaction of, among other things, the following conditions precedent (the date upon which all such conditions precedent shall be satisfied, the "Closing Date") on or before December 31, 1996: (a) The Borrower shall have executed and delivered satisfactory definitive financing documentation with respect to the Facilities (the "Credit Documentation"). (b) The Lenders shall be reasonably satisfied with the structure and terms of the Acquisition and the Tender offer shall have been or shall be simultaneously consummated in accordance with applicable law and the Merger Agreement and the Merger Agreement shall have been approved by the respective boards of directors of the Borrower and the Target. (c) The Lenders, the Administrative Agent and the Arranger shall have received all fees required to be paid, and all expenses for which invoices have been presented, on or before the Closing Date. (d) All governmental and third party approvals necessary in connection with the Acquisition, the financing contemplated hereby and the continuing operations of the Borrower and its subsidiaries shall have been obtained and be in full force and effect, and all applicable waiting periods shall have expired without any action being taken or threatened by any competent authority which would restrain, prevent or otherwise impose adverse conditions on the Acquisition or the financing thereof. (e) There shall be no litigation or administrative proceedings or other legal or regulatory developments, actual or threatened that, in the reasonable judgment of the Administrative Agent, involve a reasonable possibility of prohibiting or imposing burdensome conditions on the Acquisition or the transactions contemplated hereby. (f) The Lenders shall have received a satisfactory pro forma consolidated balance sheet of the Borrower as at the date of the most recent consolidated balance sheet of the Borrower, adjusted to give effect to the consummation of the Acquisition and the financing contemplated hereby as if such transactions had occurred on such date. (g) The Lenders shall have received such legal opinions, documents and other instruments as are customary for transactions of this type or as the Administrative Agent may reasonably request.
On-Going Conditions: The making of each Loan shall be conditioned upon (a) the accuracy of all representations and warranties in the Credit Documentation (including, without limitation, the material adverse change and litigation representations) and (b) there being no default or event of default in existence at the time of, or after giving effect to the making of, such Loan. As used herein and in the Credit Documentation a "material adverse change" shall mean any event, development or circumstance that has had or could reasonably be expected to have a material adverse effect on (a) the Acquisition, (b) the business, assets, property, condition (financial or otherwise) or prospects of the Borrower and its subsidiaries taken as a whole, or (c) the validity or enforceability of any of the Credit Documentation or the rights and remedies of the Administrative Agent and the Lenders thereunder. V. CERTAIN DOCUMENTATION MATTERS The Credit Documentation shall contain representations, warranties, covenants and events of default customary for financings of this type and other terms deemed appropriate by the Lenders, including, without limitation: Representations and Warranties: Financial statements (including pro forma financial statements); absence of undisclosed liabilities; no material adverse change; corporate existence; compliance with law; corporate power and authority; enforceability of Credit Documentation; no conflict with law or contractual obligations; no material litigation; no default; ownership of property; liens; intellectual property; no burdensome restrictions; taxes; Federal Reserve regulations; ERISA; Investment Company Act; subsidiaries; environmental matters; solvency; and accuracy of disclosure; after giving effect to the Tender Offer not more than 25% of the consolidated assets of the Borrowers will consist of margin stock. Affirmative Covenants: Delivery of financial statements, reports, accountants' letters, officers' certificates and other information requested by the Lenders; payment of other obligations; continuation of business and maintenance of existence and material rights and privileges; compliance with laws and material contractual obligations; maintenance of property and insurance; maintenance of books and records; right of the Lenders to inspect property and books and records; notices of defaults, litigation and other material events; compliance with environmental laws. Financial Covenants: 1. Fixed charge coverage. 2. Debt to capitalization. Negative Covenants: Consistent with those for borrowers and transactions of this type. Events of Default: Nonpayment of principal when due; nonpayment of interest, fees or other amounts after a grace period to be agreed upon; material inaccuracy of representations and warranties; violation of covenants (subject, in the case of certain affirmative covenants, to a grace period to be agreed upon); cross-payment default; cross-acceleration; bankruptcy events; certain ERISA events; material judgments; and a change of control (the definition of which is to be
agreed). Voting: Amendments and waivers with respect to the Credit Documentation shall require the approval of Lenders holding not less than a majority of the aggregate amount of the Long-term Loans and the 364-day Loans and unused commitments under the Facilities, except that (a) the consent of each Lender directly affected thereby shall be required with respect to (i) reductions in the amount or extensions of the scheduled date of final maturity of any Loan, (ii) reductions in the rate of interest or any fee or extensions of any due date thereof, (iii) increases in the amount or extensions of the expiry date of any Lender's commitment and (iv) modifications to the pro rata provisions of the Credit Documentation and (b) the consent of 100% of the Lenders shall be required with respect to modifications to any of the voting percentages. Assignments and Participations: The Lenders shall be permitted to assign and sell participations in their Loans and commitments, subject, in the case of assignments (other than to another Lender or to an affiliate of a Lender), to the consent of the Administrative Agent and the Borrower (which consent in each case shall not be unreasonably withheld). Non-pro rata assignments shall be permitted. In the case of partial assignments (other than to another Lender or to an affiliate of a Lender), the minimum assignment amount shall be $5,000,000 unless otherwise agreed by the Borrower and the Administrative Agent. Participations shall have the same benefits as the Lenders with respect to yield protection and increased cost provisions. Voting rights of participants shall be limited to those matters with respect to which the affirmative vote of the Lender from which it purchased its participation would be required as described under "Voting" above. Pledges of Loans in accordance with applicable law shall be permitted without restriction. Promissory notes shall be issued under the Facilities only upon request. Yield Protection: The Credit Documentation shall contain customary provisions (a) protecting the Lenders against increased costs or loss of yield resulting from changes in reserve, tax, capital adequacy and other requirements of law and from the imposition of or charges in withholding or other taxes and (b) indemnifying the Lenders for "breakage costs" incurred in connection with, among other things, any prepayment of a Eurodollar Loan (as defined in Annex I) on a day other than the last day of an interest period with respect thereto and any prepayment of a Competitive Loan. Expenses and Indemnification: The Borrower shall pay (a) all reasonable out-of-pocket expenses of the Administrative Agent and the Arranger associated with the syndication of the Facilities and the preparation, execution, delivery and administration of the Credit Documentation and any amendment or waiver with respect thereto (including the reasonable fees, disbursements and other charges of counsel) and (b) all out-of-pocket expenses of the Administrative Agent and the Lenders (including the fees, disbursements and other charges of counsel) in connection with the enforcement of the Credit Documentation.
The Administrative Agent, the Arranger and the Lenders (and their affiliates and the respective officers, directors, employees, advisors, and agents) will have no liability for, and will be indemnified and held harmless against, any loss, liability, cost or expense incurred in respect of the financing contemplated hereby of the use or the proposed use of proceeds thereof (except to the extent resulting from the gross negligence or willful misconduct of the indemnified party). Governing Law and Forum: State of New York. Counsel to the Administrative Agent and the Arranger: Simpson Thacher & Bartlett.
ANNEX I INTEREST AND CERTAIN FEES Interest Rate Options: The Borrower may elect that the Loans (other than Competitive Loans) comprising each borrowing bear interest at a rate per annum equal to: the ABR plus the Applicable Margin; or the Eurodollar Rate plus the Applicable Margin. As used herein: "ABR" means the highest of (i) the rate of interest publicly announced by CMB as its prime rate in effect at is principal office in New York City (the "Prime Rate"), (ii) the secondary market rate for three-month certificates of deposit (adjusted for statutory reserve requirements) plus 1% and (iii) the federal funds effective rate from time to time plus 0.5%. "APPLICABLE MARGIN" means (a) 0% in the case of ABR Loans and (b) (i) in the case of Eurodollar Loans that are Long-term Loans, the number of basis points determined in accordance with the pricing grid attached hereto as Annex I-A and (ii) in the case of Eurodollar Loans that are 364-day Loans, 15.5 basis points when the Borrower has Category 1 status as set forth on such grid and otherwise 17 basis points. The foregoing margins applicable to Long-term Loans shall be increased by 5 basis points per annum for any period during which the aggregate outstanding amount of the Long-term Loans and LTF Competitive Loans is greater than 50% of the original maximum amount of the Long-term Facility. "EURODOLLAR RATE" means the rate (adjusted for statutory reserve requirements for ecurocurrency liabilities) at which eurodollar deposits for one, two, three or six months (as selected by the Borrower) are offered to CMB in the interbank eurodollar market. Facility Fee: The Borrower shall pay a facility fee calculated at the rate per annum of, in the case of the Long-term Facility, as specified in Annex I-A, and in the case of the 364-days Facility, 7 basis points when the Borrower has Category 1, status as set forth on such grid and otherwise 8 basis points, in each case on the average daily amount of such facility (whether used or unused), payable quarterly in arrears. Interest Payment Dates: In the case of Loans bearing interest based upon the ABR ("ABR Loans"), quarterly in arrears. In the case of Loans bearing interest based upon the Eurodollar Rate ("Eurodollar Loans"), on the last day of each revelant interest period and, in the case of any interest period longer than three months, on each successive date three months after the first day of such interest period.
Default Rate: At any time when the Borrower is in default in the payment of any amount due under the Facilities, the principal of all Loans shall bear interest at 2% above the rate otherwise applicable thereto. Overdue interest, fees and other amounts shall bear interest at 2% above the rate applicable to ABR Loans. Rate and Fee Basis: All per annum rate shall be calculated on the basis of a year of 360 days (or 365/366 days, in the case of ABR Loans the interest rate payable on which is then based on the Prime Rate) for actual days elapsed.
ANNEX I-A FEE AND SPREAD TABLE--LONG-TERM FACILITY(1)
RATINGS FACILITY FEE LIBOR SPREAD DRAWN COST (S&P/MOODY'S)(2) (BP) (BP) (BP) --------------------- ------------- --------------- ------------- Category 1...................................... A-/A3 or higher 8.00 14.50 22.50 Category 2...................................... BBB+/Baal 9.00 16.00 25.00 Category 3...................................... BBB/Baa2 10.00 20.00 30.00 Category 4...................................... BBB-/Baa3 15.00 35.00 50.00 Category 5...................................... BB+/Bal or lower(3) 25.00 50.00 75.00
- ------------------------ (1) Fees and spreads will be based upon the Borrower's senior, unsecured, non-credit-enhanced, long-term debt ratings as determined by Standard & Poor's Ratings Group ("S&P") and Moody's Investors Service, Inc. ("Moody's"). (2) In the event of split Ratings, Fees and Spreads will be based on the Category corresponding to the higher rating. (3) Or unrated. EX-99.(C)(3) 12 EXHIBIT (C)(3) May 20, 1996 Food Lion, Inc. P.O. Box 1330 2110 Executive Drive Salisbury, NC 28145-1330 Ladies and Gentlemen: We have advised you that PaineWebber Incorporated ("PaineWebber") is acting as exclusive financial advisor to Kash n' Karry Foods Stores, Inc. (the "Company"), a Delaware corporation, to explore a possible transaction relating to the business and assets of the Company (a "Transaction"). You have requested certain information relating to the Company in connection with your consideration of a possible negotiated Transaction between the Company and/or its stockholders and you. As a condition to the furnishing of the requested information to you and your Representatives (as defined below), you agree that (i) all information relating to the Company furnished by or on behalf of the Company and its Representatives to you or your Representatives, whether prior to or after your acceptance of this letter and irrespective of the form of communication, or learned by you in connection with visits to the Company's facilities, in connection with your consideration of a Transaction (such information, together with notes, memoranda, summaries, analyses, compilations and other writings relating thereto or based thereon prepared by you or your Representatives being referred to herein as the "Evaluation Material") will be kept strictly confidential, and (ii) the Evaluation Material will be used solely for the purpose of determining the desirability of Transaction; PROVIDED, HOWEVER, that the Evaluation Material may be disclosed to any of your Representatives who need to know such information for the purpose of assisting you in evaluating a Transaction (it being understood that such Representatives will be informed by you of the contents of this agreement and that, by receiving such information, such Representatives are agreeing to be bound by this agreement). The term "Evaluation Material" does not include information which is or becomes available to you or any of your Representatives, on a non-confidential basis from a source other than the Company or its affiliates or Representatives, PROVIDED that neither you nor any of your Representatives is aware that such source is under an obligation (whether contractual, legal or fiduciary) to the Company to keep such information confidential. For purposes hereof, the "Representatives" of any entity means such entity's directors, officers, employees, legal and financial advisers, accountants and other agents and representatives. You will be responsible for any breach of this agreement by any of your Representatives and agree to take all reasonable measures to restrain your Representatives from prohibited or unauthorized disclosure or use of Evaluation Material. In addition, each of the parties hereto agrees that, except with the prior written consent of the other party hereto or as required or permitted by this agreement, such party will not, and will direct its Representatives not to, make any release to the press or other public disclosure concerning either (i) the existence of this letter or that the Evaluation Material has been made available to you or (ii) in the event that the Company or any of its Representatives engages in discussions or negotiations with you or your Representatives, the fact that discussions or negotiations are taking place concerning a possible Transaction, or any of the terms, conditions or other facts with respect to any such possible Transaction, including the status thereof, except for such public disclosure as may be necessary, in the written opinion of such party's outside counsel, for such party not to be in violation of or default under any applicable law, regulation or governmental order. If either party hereto proposes to make any disclosure based upon such an opinion, such party will deliver a copy of such opinion to the other party hereto together with the text of the proposed disclosure as far in advance of its disclosure as is practicable, and will in good faith consult with and consider the suggestions of the other party hereto and its Representatives concerning the nature and scope of the information proposed to be disclosed. If you or any of your Representatives are requested in any judicial or administrative proceeding or by any governmental or regulatory authority to disclose any Evaluation Material, you will (i) give the Company prompt notice of such request so that it may seek an appropriate protective order and (ii) consult with the Company as to the advisability of taking legally available steps to resist or narrow such a request. You will cooperate fully with the Company in obtaining such an order. If in the absence of a protective order you are nonetheless compelled to disclose Evaluation Material, the Company agrees that you may make such disclosure without liability hereunder, PROVIDED that you give the Company written notice of the information to be disclosed as far in advance of its disclosure as is practicable and, upon the Company's request and at its expense, use your best efforts to obtain reasonable assurances that confidential treatment will be accorded to such information. If at any time you decide that you do not wish to proceed with a Transaction or, if earlier, upon the Company's request (which request may not be given prior to June 10, 1996), you will promptly (and in no event later than five (5) business days after such request) redeliver or cause to be redelivered to the Company all copies of the Evaluation Material furnished to you by or on behalf of the Company and destroy or cause to be destroyed all Evaluation Material prepared by you or any of your Representatives. Notwithstanding the return or destruction of the Evaluation Material, you and your Representatives will continue to be bound by your obligations hereunder. Although the Company will endeavor to include in the Evaluation Material information it believes to be relevant to the evaluation of a Transaction, you hereby acknowledge that neither the Company nor any of its Representatives or affiliates makes any representation or warranty, express or implied, as to the accuracy or completeness of any of the Evaluation Material. You agree that neither the Company nor any of its Representatives or affiliates will have any liability to you or your representatives resulting from use of any of the Evaluation Material. You hereby acknowledge that you are aware (and that your Representatives who have been apprised of this agreement and your consideration of a Transaction have been, or upon becoming so apprised will be, advised) of the restrictions imposed by Federal and state securities laws on a person possessing material nonpublic information about a company. In this regard, you hereby agree that while you are in possession of material nonpublic information with respect to the Company, you will not purchase or sell any securities of the Company, or communicate such information to any third party, in violation of any such laws. In consideration for access to the Evaluation Material which you have requested, you agree not to initiate or maintain contact (other than in the ordinary course of business) with any officer, director, employee or agent of the Company regarding its business, operations, prospects, finances or any other matter pertaining to the Company or to any proposed Transaction, other than by contacting PaineWebber or Ronald E. Johnson or his designee(s) first. It is understood that PaineWebber will arrange for appropriate contacts for due diligence purposes. It is further understood that all (i) communications regarding a possible Transaction, (ii) requests for additional information, (iii) requests for facility tours or management meetings and (iv) discussions or questions regarding procedures, will be submitted or directed first to PaineWebber or Ronald E. Johnson or his designee(s). As a further condition to the furnishing of the Evaluation Material, unless specifically requested in writing in advance by or on behalf of the Company, neither you nor any of your affiliates or associates (as such terms are defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the "1934 Act")) will, and you and they will not assist or encourage others (including by providing financing) to, directly or indirectly, for a period of two (2) years from the date of this agreement (i) acquire or agree, offer, seek or propose (whether publicly or otherwise) to acquire ownership (including but not limited to beneficial ownership (as defined in Rule 13d-3 under the 1934 Act) of (x) the Company or any of its assets or businesses, (y) any securities issued by the Company or (z) any rights or options to acquire such ownership (including from a person other than the Company), whether by means of a negotiated purchase of securities or assets, tender or exchange offer, merger or other business combination, recapitalization, restructuring or other extraordinary transaction (a "Business Combination Transaction"), (ii) engaged in any "solicitation" of "proxies" (as such terms are used in the proxy rules promulgated under the 1934 Act, but disregarding clause (iv) of Rule 14a-1(l)(2) and including any exempt solicitation pursuant to Rule 14a-2(b)(1) or (2)), or form, join or in any way participate in a "group" (as defined under the 1934 Act), with respect to any securities issued by the Company, (iii) otherwise seek or propose to control the Board of Directors, management or policies of the Company, (iv) take any action that could reasonably be expected to force the Company to make a public announcement regarding any of the types of matters referred to in clause (i), (ii) or (iii) above, or (v) enter into any discussions, negotiations, agreements, arrangements or understandings with any third party with respect to any of the foregoing. You also agree during such period not to request the Company or any of its representatives to amend or waive any provision of this paragraph (including this sentence). You hereby acknowledge that neither you nor any of your affiliates or associates is on the date hereof the beneficial owner of any shares of capital stock of the Company. Notwithstanding the foregoing, you shall be entitled to make a non-public offer to engage in a merger transaction with the Company at any time prior to June 10, 1996 by delivery of such an offer to PaineWebber or to Ronald E. Johnson. You further agree that, for a period of 18 months from the date hereof, neither you nor any of your affiliates will solicit, either directly or indirectly through recruiters or other agents, to employ any officer or management employee of the Company above the store level, so long as they are employed by the Company, without obtaining the prior written consent of the Company. The term "solicit to employ" does not include general solicitations of employment not specifically directed towards employees of the Company. The Company hereby undertakes and agrees that, for the period from the date hereof through and including July 3, 1996 (the "Exclusivity Period"), the Company will not, nor will the Company authorize or permit any of its Representatives to take, directly or indirectly, any action to initiate, or to assist, solicit, receive, negotiate, encourage or accept, any offer or inquiry from any person to engage in any Business Combination Transaction. In the event that the Company shall receive an inquiry or offer relating to any Business Combination Transaction during the Exclusivity Period, it shall promptly notify you thereof, identifying the party making such inquiry or offer and, if an offer has been received, describing the material terms thereof, except to the extent that such notification would, in the written opinion of the Company's outside counsel (a copy of which shall be delivered to you), cause the Company or its Board of Directors to be in violation of any applicable law, regulation or governmental order. The Company represents that neither the Company nor any of its Representatives is currently a party to any negotiations, agreements, discussions or transactions relating to any Business Combination Transaction, except as contemplated by this agreement. It is expressly understood by the parties hereto that this agreement is not intended to, and does not, constitute an agreement to consummate a Transaction or to enter into a definitive Transaction agreement, and neither the Company nor you will have any rights or obligations of any kind whatsoever with respect to a Transaction by virtue of this agreement or any other written or oral expression by either party hereto or their respective Representatives unless and until a definitive agreement relating thereto between the Company and you is executed and delivered, other than for the matters specifically agreed to herein. You further acknowledge that (i) following the Exclusivity Period, the Company and its Representatives shall be free to negotiate with any other person and enter into a definitive agreement with regard to a Transaction without prior notice to you or any other person, (ii) the Company reserves the right to reject any and all proposals made by you or any of your Representatives with regard to a possible Transaction and to terminate any discussions or negotiations with you at any time and (iii) neither the Company nor any of its affiliates or Representatives nor any third party with whom the Company enters into any agreement for, or completes, a Business Combination Transaction shall have any liability to you arising out of or relating to such a Business Combination Transaction (other than any liability arising under a definitive Transaction agreement with you in accordance with the terms thereof). You hereby acknowledge and agree that this agreement is for the benefit of the Company and its successors and assigns and Representatives, and that they shall be entitled to enforce the provisions hereof as though parties hereto. You acknowledge and agree that money damages would not be a sufficient remedy for any breach of any provision of this agreement by you, and that in addition to all other remedies which the Company may have, the Company will be entitled to specific performance and injunctive or other equitable relief as a remedy for any such breach. No failure or delay by the Company in exercising any right, power or privilege hereunder will operate as a waiver thereof, nor will any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder. This agreement contains the sole and entire agreement between the parties with respect to the subject matter hereof. This agreement may be amended, modified or waived only by a separate written instrument duly executed by or on behalf of the Company and you. This agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to the conflicts of laws principles thereof. Except to the extent that any provision of this agreement by its terms terminates sooner, this agreement shall terminate on the second anniversary of the date hereof. If the foregoing correctly, sets forth our agreement with respect to the matters set forth herein, please so indicate by signing two copies of this agreement and returning such signed copies to us for our signatures, whereupon this agreement will constitute a binding agreement with respect to the matters set forth herein. Very truly yours, PAINEWEBBER INCORPORATED on behalf of Kash n' Karry Food Stores, Inc. By: /s/ DAVID M. REED, JR. ------------------------------------------ Name: David M. Reed, Jr. Title: Managing Director Accepted and agreed to as of the date first written above: FOOD LION, INC. By: /s/ R. WILLIAM MCCANLESS ------------------------- Name: R. William McCanless Title: Senior Vice President of Administration KASH N' KARRY FOOD STORES, INC. By: /s/ RONALD E. JOHNSON ------------------------- Name: Title: EX-99.(C)(4) 13 EXHIBIT (C)(4) May 21, 1996 Kash n' Karry Food Stores, Inc. 6422 Harney Road Tampa, Florida 33610 Ladies and Gentlemen: We have agreed to provide to you certain information relating to Food Lion, Inc. (the "Company") in connection with the Company's possible negotiated transaction relating to your business and assets (a "Transaction"). As a condition to the furnishing of the requested information to you, you agree that: (i) all information relating to the Company furnished by or on behalf of the Company to you, whether prior to or after your acceptance of this letter and irrespective of the form of communication, or learned by you in connection with visits to the Company's facilities (such information, together with notes, memoranda, summaries, analyses, compilations and other writings relating thereto or based thereon prepared by you, being referred to herein as the "Evaluation Material"), will be kept strictly confidential and not disclosed to any person or entity (including your Representatives (as defined below), agents or employees or officers) other than those designated on Schedule 1 hereto (the "Designated Recipients"); and (ii) the Evaluation Material will be used solely for the purpose of discussions with the Company relating to a Transaction. The term "Evaluation Material" does not include information which is or becomes available to you on a non-confidential basis from a source other than the Company or its affiliates or Representatives, provided that you are not aware that such source is under an obligation (whether contractual, legal or fiduciary) to the Company to keep such information confidential. For purposes hereof, the "Representatives" of any entity mean such entity's directors, officers, employees, legal and financial advisers, accountants and other agents and representatives. You will be responsible for any breach of this agreement by the Designated Recipients and agree to take all reasonable measures to restrain: (i) your Representatives (other than the Designated Recipients) from obtaining any Evaluation Material; and (ii) the Designated Recipients from disclosing or using the Evaluation Material. You shall advise the Designated Recipients of the existence of this Agreement and their obligations hereunder. In addition, each of the parties hereto agree that, except with the prior written consent of the other party hereto or as required or permitted by this agreement, such party will not, and will direct its Representatives not to, make any release to the press or other public disclosure concerning the existence of this letter or that the Evaluation Material has been made available to you, except for such public disclosure as may be necessary, in the written opinion of such party's outside counsel, for such party not to be in violation of or default under any applicable law, regulation or governmental order. If either party hereto proposes to make any disclosure based upon the opinion, such party will deliver a copy of such opinion to the other party hereto together with the text of the proposed disclosure as far in advance of its disclosure as is practicable, and will in good faith consult with and consider the suggestions of the other party hereto and its Representatives concerning the nature and scope of the information proposed to be disclosed. If you or any of your Representatives are requested in any judicial or administrative proceeding or by any governmental or regulatory authority to disclose any Evaluation Material, you will (i) give the Company prompt written notice of such request so that it may seek an appropriate protective order, and (ii) consult with the Company as to the advisability of taking legally available steps to resist or narrow such a request. You will cooperate fully with the Company in obtaining such an order. If, in the absence of a protective order, you are nonetheless compelled to disclose Evaluation Material, the Company agrees that you may make such disclosure without liability hereunder, provided that you give the Company written notice of the information to be disclosed as far in advance of its disclosure as is practicable and, upon the Company's request and at its expense, use your best efforts to obtain reasonable assurance that confidential treatment will be accorded to such information. At any time, upon the Company's request, you will promptly (and in no event later than five (5) business days after such request) redeliver or cause to be redelivered to the Company all copies of the Evaluation Material furnished to you by or on behalf of the Company and destroy or cause to destroyed all Evaluation Material prepared by you. Notwithstanding the return or destruction of the Evaluation Material, you will continue to be bound by your obligations hereunder. You hereby acknowledge that you are aware of the restrictions imposed by Federal and state securities laws on a person possessing material nonpublic information about a company. In this regard, you hereby agree that, while you are in possession of material nonpublic information with respect to the Company, you will not purchase or sell any securities of the Company, or communicate such information to any third party, in violation of such laws. In consideration for access to the Evaluation Material which you have requested, you agree not to initiate or maintain contact with any officer, director, employee or agent of the company regarding its business, operations, prospects, finances or any other matter pertaining to the Company, other than by contacting R. William McCanless or his designee(s) first. You further agree that, for a period of eighteen (18) months from the date hereof, neither you nor any of your affiliates will solicit, either directly or indirectly through recruiters or other agents, to employ any officer or management employee of the Company above the store level, so long as they are employed by the Company, without obtaining the prior written consent of the Company. The term "solicit to employ" does not include general solicitations of employment not specifically directed towards employees of the Company. Neither the Company nor you will have any rights or obligations of any kind whatsoever with respect to a Transaction by virtue of this agreement. You hereby acknowledge and agree that this agreement is for the benefit of the Company and its successors and assigns, and that they shall be entitled to enforce the provisions hereof as though parties hereto. You acknowledge and agree that money damages would not be a sufficient remedy for any breach of any provision of this agreement by you, and that, in addition to all other remedies which the Company may have, the Company will be entitled to specific performance and injunctive or other equitable relief as a remedy for any such breach. No failure or delay by the Company in exercising any right, power or privilege hereunder will operate as a waiver thereof, nor will any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder. This agreement contains the sole and entire agreement between the parties with respect to the subject matter hereof. This agreement may be amended, modified or waived only by a separate written instrument duly executed by or on behalf of the Company and you. This agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to the conflicts of laws or principles thereof. Except to the extent that any provision of this agreement by its terms terminates sooner, this agreement shall terminate on the second anniversary of the date hereof. If the foregoing correctly sets forth our agreement with respect to the matters set forth herein, please so indicate by signing two copies of this agreement and returning one such signed copies to us, whereupon this agreement will constitute a binding agreement with respect to the matters set forth herein. Very truly yours, FOOD LION, INC. By: /s/ R. WILLIAM MCCANLESS ----------------------------------------- Name: R. William McCanless Title: Senior Vice President ACCEPTED AND AGREED AS OF THE DATE FIRST WRITTEN ABOVE: KASH N' KARRY FOOD STORES, INC. By: /s/ RONALD E. JOHNSON ------------------------- Name: Ronald E. Johnson Title: President SCHEDULE 1 Ronald E. Johnson Richard D. Coleman Clifford C. Smith, Jr. B.J. Mehaffey Bruce Talvy David Heuermann -----END PRIVACY-ENHANCED MESSAGE-----