Delhaize America, Inc.

-----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, WrD8LGzWnP+Mf3wFfr4CoZTFKwWkeLRaKu6e7z/9YBB+rvb1D3s7azQpi1iCSYD8 oJ0IuVfkJI7FXDIqiT0Kiw== 0000950144-02-008424.txt : 20020813 0000950144-02-008424.hdr.sgml : 20020813 20020813152314 ACCESSION NUMBER: 0000950144-02-008424 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20020629 FILED AS OF DATE: 20020813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DELHAIZE AMERICA INC CENTRAL INDEX KEY: 0000037912 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 560660192 STATE OF INCORPORATION: NC FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-06080 FILM NUMBER: 02729496 BUSINESS ADDRESS: STREET 1: PO BOX 1330 STREET 2: 2110 EXECUTIVE DR CITY: SALISBURY STATE: NC ZIP: 28145 BUSINESS PHONE: 7046338250 MAIL ADDRESS: STREET 1: PO 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 FORMER COMPANY: FORMER CONFORMED NAME: FOOD LION INC DATE OF NAME CHANGE: 19920703 10-Q 1 g77659e10vq.htm DELHAIZE AMERICA, INC. Delhaize America, Inc.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 29, 2002


		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________to____________

Commission File number 0-6080

DELHAIZE AMERICA, INC.

(Exact name of registrant as specified in its charter)


NORTH CAROLINA		56-0660192

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

P.O. Box 1330, 2110 Executive Drive, Salisbury, NC 28145-1330

(Address of principal executive office) (Zip Code)

(704) 633-8250

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No box

Outstanding shares of common stock of the Registrant as of August 13, 2002.

Class A Common Stock – 91,050,642,127
Class B Common Stock – 75,287,145

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) and (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.

DELHAIZE AMERICA, INC.
INDEX TO FORM 10-Q
JUNE 29, 2002

Page

PART I.

FINANCIAL INFORMATION

Item 1.

Financial Statements

Condensed Consolidated Statements of Income for the 13 weeks ended June 29, 2002 (successor), 9 weeks from April 29, 2001 to June 30, 2001 (successor) and 4 weeks from April 1, 2001 to April 28, 2001 (predecessor)

Condensed Consolidated Statements of Income/(Loss) for the 26 weeks ended June 29, 2002(successor), 9 weeks from April 29, 2001 to June 30, 2001 (successor) and 17 weeks from December 30, 2000 to April 28, 2001 (predecessor)

Condensed Consolidated Balance Sheets as of June 29, 2002 and December 29, 2001

Condensed Consolidated Statements of Cash Flows for the 26 weeks ended June 29, 2002 (successor), 9 weeks from April 29, 2001 to June 30, 2001 (successor) and 17 weeks from December 30, 2000 to April 28, 2001 (predecessor)

Notes to Condensed Consolidated Financial Statements

7-10

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

11-19

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

PART II.

OTHER INFORMATION

Item 1.

Legal Proceedings

Item 5.

Other Information

Item 6.

Exhibits and Reports on Form 8-K

Signature

Exhibit Index

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

DELHAIZE AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the 13 weeks ended June 29, 2002 and June 30, 2001
(Dollars in thousands)


			Successor Co.		Predecessor Co.
	Successor Co.		9 Week		4 Week
	13 Weeks		Period from		Period from
	Ended		April 29, 2001		April 1, 2001
	June 29, 2002		to June 30, 2001		to April 28, 2001

Net sales and other revenues	$	3,753,362	$	2,595,031	$	1,131,902




Cost of goods sold		2,803,994		1,924,437		853,967




Selling and administrative expenses		767,561		536,562		236,004




Merger expense		—		13,721		2,610

Operating income		181,807		120,311		39,321




Interest expense, net		82,649		63,636		26,879

Income before income taxes		99,158		56,675		12,442




Provision for income taxes		38,331		27,278		6,097

Net income	$	60,827	$	29,397	$	6,345

See notes to condensed consolidated financial statements.

DELHAIZE AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME/(LOSS)
(Unaudited)
For the 26 weeks ended June 29, 2002 and June 30, 2001
(Dollars in thousands)


				Successor Co.		Predecessor Co.
	Successor Co.			9 Week		17 Week
	26 Weeks			Period from		Period from
	Ended			April 29, 2001		December 30, 2000
	June 29, 2002			to June 30, 2001		to April 28, 2001

Net sales and other revenues	$	7,501,212		$	2,595,031	$	4,734,816




Cost of goods sold		5,586,044			1,924,437		3,556,170




Selling and administrative expenses		1,546,683			536,562		980,543




Merger expense		—			13,721		25,992

Operating income		368,485			120,311		172,111




Interest expense, net		170,569			63,636		108,362

Income before income taxes		197,916			56,675		63,749




Provision for income taxes		77,862			27,278		29,551

Income before cumulative effect of a change in accounting principle		120,054			29,397		34,198




Less cumulative effect of change in accounting principle, net of tax (See Note 7)		284,097			—		—

Net (loss) income	$	(164,043	)	$	29,397	$	34,198

See notes to condensed consolidated financial statements.

DELHAIZE AMERICA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)


			Successor Co.			Successor Co.
			June 29, 2002			December 29, 2001

ASSETS




Current assets:




	Cash and cash equivalents		$	301,853		$	137,206




	Receivables			131,531			198,158




	Receivable from affiliate			4,273			14,718




	Inventories			1,270,086			1,239,470




	Income tax receivable			—			8,429




	Prepaid expenses			55,401			28,250




	Deferred tax assets			9,623			6,169

		Total current assets		1,772,767			1,632,400




Property and equipment, net				2,963,793			3,011,279




Goodwill, net				2,905,463			3,273,385




Intangibles, net				835,680			885,455




Reinsurance recoverable				105,430			104,118




Other assets				70,222			63,361

		Total assets	$	8,653,355		$	8,969,998

LIABILITIES AND SHAREHOLDERS’ EQUITY




Current liabilities:




	Short-term borrowings		$	—		$	140,000




	Accounts payable			782,851			693,729




	Dividend payable			86,802			86,093




	Accrued expenses			345,387			305,364




	Capital lease obligations — current			30,381			38,118




	Long term debt — current			18,014			17,890




	Other liabilities — current			31,218			32,534




	Income taxes payable			23,673			—

		Total current liabilities		1,318,326			1,313,728




Long-term debt				3,056,766			3,065,446




Capital lease obligations				694,130			675,746




Deferred income taxes				302,445			459,525




Other liabilities				251,213			265,784

		Total liabilities		5,622,880			5,780,229

Shareholders’ equity:




Class A non-voting common stock				53,222			53,149




Class B voting common stock				37,645			37,645




Accumulated other comprehensive loss, net of tax				(62,172	)		(64,471	)




Additional paid-in capital, net of unearned compensation				2,460,887			2,452,945




Retained earnings				540,893			710,501

		Total shareholders’ equity		3,030,475			3,189,769

		Total liabilities and shareholders’ equity	$	8,653,355		$	8,969,998

See notes to condensed consolidated financial statements.

DELHAIZE AMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the 26 weeks ended June 29, 2002 and June 30, 2001
(Dollars in thousands)


							Successor Co.			Predecessor Co.
				Successor Co.			9 Week			17 Week
				26 Weeks			Period from			Period from
				Ended			April 29, 2001			December 30, 2000
				June 26, 2002			to June 30, 2001			to April 28, 2001

CASH FLOWS FROM OPERATING ACTIVITIES




Net (loss)/ income				$	(164,043	)	$	29,397		$	34,198




Adjustments to reconcile net income/(loss) to net cash provided by operating activities:




	Cumulative effect of change in accounting principle				284,097			—			—




	Depreciation and amortization				229,595			92,440			162,259




	Non-cash portion of merger expense				—			—			21,682




	Non-cash portion of merger expense –parent acquisition				—			12,086			—




	Amortization of debt fees/costs				1,006			348			55




	Non-cash portion of debt premium/discount				583			201			430




	Amortization of deferred loss on derivative				4,255			3,291			523




	Debt swap				(1,604	)		—			—




	Loss (gain)on disposals of property and capital lease terminations				867			(2,687	)		2,048




	Store closing provisions/recovery				(4,111	)		1,212			2,288




	Deferred income taxes				3,734			(930	)		(24	)




	Other				5,680			699			1,273




Changes in operating assets and liabilities:




	Receivables				66,627			(16,201	)		45,523




	Net receivable from affiliate				11,154			—			—




	Reinsurance recoverable				(1,312	)		—			—




	Income tax receivable				8,429			(8,966	)		70,130




	Inventories				(30,616	)		(15,635	)		53,504




	Prepaid expenses				(27,151	)		(1,641	)		3,519




	Other assets				327			307			(1,243	)




	Accounts payable				89,122			100,856			(62,844	)




	Accrued expenses				45,179			73,703			(49,376	)




	Income taxes payable				23,673			—			—




	Other liabilities				(11,776	)		(3,093	)		(8,385	)

		Total adjustments			697,758			235,990			241,362

		Net cash provided by operating activities			533,715			265,387			275,560

CASH FLOWS FROM INVESTING ACTIVITIES




	Capital expenditures				(202,916	)		(68,338	)		(122,577	)




	Proceeds from disposal of property				7,769			1,745			4,230




	Other investment activity				(1,918	)		—			(816	)

		Net cash used in investing activities			(197,065	)		(66,593	)		(119,163	)

CASH FLOWS FROM FINANCING ACTIVITIES




	Net payments under short-term borrowings				(140,000	)		(174,000	)		(2,495,000	)




	Proceeds from issuance of long-term debt				—			—			2,600,000




	Principal payments on long-term debt				(11,740	)		(3,924	)		(7,317	)




	Principal payments under capital lease obligations				(14,623	)		(5,052	)		(10,210	)




	Direct financing costs				—			—			(23,105	)




	Dividends paid				—			—			(28,572	)




	Parent common stock repurchased				(9,601	)		(9,463	)		—




	Proceeds from issuance of Parent common stock for options				3,961			3,598			2,031




	Cash used to settle derivative instruments				—			—			(214,071	)

			Net cash used in financing activities		(172,003	)		(188,841	)		(176,244	)

Net increase (decrease)in cash and cash equivalents					164,647			9,953			(19,847	)




Cash and cash equivalents at beginning of period					137,206			115,789			135,636

Cash and cash equivalents at end of period				$	301,853		$	125,742		$	115,789

See notes to condensed consolidated financial statements.

Notes to Condensed Consolidated Financial Statements (Unaudited)

1) Basis of Presentation:

On April 25, 2001, Delhaize America, Inc. (“Delhaize America” or the “Company”) became a wholly-owned subsidiary of Etablissements Delhaize Frères et Cie “Le Lion” (Groupe Delhaize) (“Delhaize Group”) as a result of the Delhaize Group share exchange (see Note 5). This transaction was accounted for as a purchase, and in connection with this treatment, a new entity has been deemed created for financial reporting purposes. Accordingly, in these financial statements, the periods prior to the date of the Delhaize Group share exchange relate to the “predecessor company” and the periods subsequent to the date of the Delhaize Group share exchange relate to the “successor company” and have been labeled herein accordingly.

The financial information presented herein has been prepared in accordance with the Company’s customary accounting practices and has not been audited. In the opinion of management, the financial information includes all adjustments necessary for a fair presentation of interim results.

2) Supplemental Disclosure of Cash Flow Information:

Selected cash payments and non-cash activities during the period were as follows:


			Successor Co.		Predecessor Co.
	Successor Co.		9 Week Period		17 Week Period
	26 Weeks		From		From
	Ended		April 29, 2001		December 30, 2000
	June 29, 2002		to June 30, 2001		to April 28, 2001

(Dollars in thousands)




Cash payments (refunds) for income taxes	$	42,223	$	36,825	$	(40,206	)




Cash payments for interest, net of amounts capitalized		166,648		23,498		117,642




Non-cash investing and financing activities:




Capitalized lease obligations incurred for store properties and equipment		20,795		—		21,128




Capitalized lease obligations terminated for store properties and equipment		—		—		5,560




Acquisition of Hannaford — adjustment to purchase price allocation		—		7,225		3,893




Excess purchase price related to parent acquisition		—		913,969		—




LIFO fair value adjustment related to parent acquisition		—		78,027		—




Investment in WWRE		3,000		—		—




Delhaize Group Share Exchange — adjustment to purchase price allocation:




Property		44,433		—		—




Deferred income taxes		43,752		—		—




Capital lease obligations		4,475		—		—




Accrued expenses		5,156		—		—




Reclassification of deferred taxes related to intangible assets that did not meet the separability criteria of SFAS No. 141		117,895		—		—

3) Inventories

Inventories are stated at the lower of cost or market. Inventories valued using the last-in, first-out (LIFO) method comprised approximately 79% and 81% of inventories for June 29, 2002 and June 30, 2001, respectively. Meat, produce and deli inventories are valued on the first-in, first-out (FIFO) method. If the FIFO method was used entirely, inventories would have been $66.8 million and $65.0 million greater as of June 29, 2002 and June 30, 2001, respectively. In connection with the final accounting for the Delhaize Group share exchange discussed in Note 5, the Company recorded an adjustment to the basis for the LIFO inventories in the amount of $78.6 million at April 25, 2001. Application of the LIFO method resulted in increases in the cost of goods sold of $2.0 million for the 26 weeks ended June 29, 2002 (successor company) and $0.8 million for the 17 weeks ended April 28, 2001 (predecessor company) and $.4 million for the nine weeks ended June 30, 2001 (successor company).

4) Reclassification

Certain financial statement items in the prior periods have been reclassified to conform to the current period’s presentation.

5) Acquisition

DELHAIZE GROUP SHARE EXCHANGE

On April 25, 2001, the Company and Delhaize Group consummated a share exchange whereby Delhaize Group exchanged each outstanding share of the Company’s Class A and Class B common stock not already directly or indirectly held by Delhaize Group for 0.4 Delhaize Group American Depository Shares listed on The New York Stock Exchange or, at the option of each of our shareholders, 0.4 Delhaize Group ordinary shares listed on Euronext Brussels. The Company became a wholly-owned subsidiary of Delhaize Group as a result of the Delhaize Group share exchange. Prior to this time, Delhaize Group owned approximately 44.88% of the Company’s outstanding common stock. The Delhaize Group share exchange was accounted for using the

purchase method of accounting. Effective as of the April 28, 2001 fiscal period end, the Company recorded adjustments to reflect the historical basis of 44.88% owned by Delhaize Group and the fair value of the purchased net assets as the new accounting basis in the Company’s financial statements.

As consideration, Delhaize Group issued approximately 40.2 million of its ordinary shares having an aggregate value of approximately $1.9 billion for the remaining 55.12% of the Company’s stock not previously owned by Delhaize Group. Additional direct costs incurred in connection with the acquisition, primarily legal and other professional fees, in the amount of $26.4 million have been included in the purchase price allocation. Additional goodwill related to prior step acquisitions by Delhaize Group in the approximate amount of $198.1 million has also been reflected in the accompanying financial statements of the Successor Company.

During the first quarter of 2002, the Company finalized its purchase price allocation. The net purchase price was allocated as follows:


(Dollars in thousands)
Current assets	$	943,206




Property and equipment		1,707,637




Goodwill		1,835,906




Identified intangible and other non-current assets		1,007,982




Current liabilities		(792,178	)




Non-current liabilities		(2,597,469	)

Purchase price	$	2,105,084

The Company’s accounting for the share exchange transaction resulted in an allocation of the purchase price to the Company’s assets and liabilities, which are comprised of 44.88% of historical basis and 55.12% of new basis as of the transaction date.

Significant fair value step adjustments to property and equipment were primarily related to buildings and improvements of approximately $141.3 million and capital equipment of approximately $9.7 million. Increases to identified intangible and other non-current assets consisted primarily of economic lease values of approximately $310.7 million, trademarks of approximately $242.5 million, assembled workforce of approximately $52.7 million, distribution network of approximately $84.3 million partially offset by reductions in the fair value of the prescription files of approximately $11.7 million and reductions in the fair value of the pension asset of approximately $12.7 million. The primary changes in the values of non-current liabilities as a result of the share exchange were fair value adjustments to decrease long-term debt by approximately $4.5 million, increase capital lease obligations by approximately $63.3 million, increase deferred income tax liabilities by approximately $313.4 million and to reduce approximately $73.0 million of the deferred loss on settlement of a hedge arrangement.

6) Derivative Financial Instruments

On December 31, 2000, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended, which requires that all derivative instruments be recognized as assets or liabilities in the financial statements. The Company entered into interest rate hedge agreements against potential increases in interest rates prior to the offering of debt securities in April 2001, which were used to refinance short-term borrowings entered into in connection with the Company’s acquisition of Hannaford Bros. Co. (“Hannaford”). The notional amount of the hedge agreements totaled $1.75 billion. These hedge agreements were structured to hedge against the risk of increasing market interest rates based on U.S. treasury rates, with the specified rates based on the anticipated maturities of the securities that were expected to be issued. The hedge agreements were settled as planned in connection with the completion of the private offering of debt securities resulting in a payment in the amount of the unrealized loss of approximately $214 million in April 2001. Upon adoption of SFAS No. 133 at the beginning of fiscal 2001, the unrealized loss associated with these hedge agreements was recorded in other comprehensive income, net of deferred taxes, and is being amortized to interest expense over the term of the associated debt securities. The Company amortized approximately $2.6 million, net of tax, of the other comprehensive loss associated with these hedge agreements to interest expense during the period from December 30, 2001 to June 29, 2002. The unrealized loss was reduced as of the date of the Delhaize Group share exchange (see Note 5). The unrealized loss remaining at June 29, 2002 totaled approximately $53.2 million, net of deferred taxes.

During the fourth quarter of 2001, the Company entered into interest rate swap agreements to manage its exposure to interest rate movements by effectively converting a portion of its debt from fixed to variable rates. Maturity dates of interest rate swap arrangements match those of the underlying debt. These agreements, which mature in 2006, involve the exchange of fixed rate payments for variable rate payments without the exchange of the underlying principal amounts. Variable rates for our agreements are based on six-month or three-month U.S. dollar LIBOR and are reset on a semiannual basis or quarterly basis. The differential between fixed and variable rates to be paid or received is accrued as interest rates change in accordance with the agreements and recognized over the life of the agreements as an adjustment to interest expense. Interest expense was reduced by $4.6 million during the second quarter in connection with these agreements. The notional amounts of interest rate swap arrangements were approximately $300 million at June 29, 2002. These agreements are accounted for as fair value hedges. These agreements met the criteria for using the short-cut method, which assumes 100% hedge effectiveness, as prescribed by SFAS No. 133. The fair value of the Company’s debt has been increased by $2.6 million at June 29, 2002 in connection with these agreements.

7) Recently Adopted Accounting Standards

supersedes Accounting Principles Board, or APB, Opinion No. 16, “Business Combinations,” and SFAS No. 38, “Accounting for Pre-acquisition Contingencies of Purchased Enterprises.” All business combinations that come within the scope of SFAS No. 141 are to be accounted for using the purchase method of accounting. The provisions of SFAS No. 141 apply to all business combinations initiated after June 30, 2001 and all business combinations accounted for using the purchase method of accounting for which the date of acquisition is July 1, 2001 or later. SFAS No. 141 also sets forth new criteria for separability and in-separability of intangible assets. The application of SFAS No. 141 resulted in the Company’s identification of certain intangible assets such as assembled work force and distribution network that did not meet the separability criteria of SFAS No. 141, which were re-classified into goodwill.

On December 30, 2001, the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets,” which required that we cease amortizing goodwill and other intangible assets with indefinite lives, and begin an annual assessment of potential impairment of goodwill and other intangible assets by comparing the book value of these assets to their current fair value.

The Company performed its assessment for potential impairment at each of our three operating banners, since each chain represents a separate operating segment as defined by SFAS No. 131 and a separate reporting unit as defined by SFAS No. 142. In performing its assessment, the carrying value of assets and liabilities was determined for each reporting unit and compared to the fair value of each reporting unit, which was obtained from independent appraisals. If the carrying value of the reporting unit exceeded its fair value, an assessment of impairment was then necessary.

The Company’s impairment assessment at its individual operating banners resulted in a non-cash impairment charge totaling approximately $288 million before taxes ($284 million net of taxes), which was recorded as a change in accounting principle in the first quarter 2002 condensed consolidated statements of income/(loss). This impairment charge relates primarily to goodwill associated with the Delhaize Group share exchange and with the Company’s acquisitions of Kash n’ Karry and Hannaford. Impairment at the Kash n’ Karry banner is due to a combination of factors including post-acquisition capital expenditures and operating performance. The Company has seen a heightened level of competition in the Florida area, where Kash n’ Karry is concentrated. The Hannaford banner carries a significant goodwill balance due to the initial acquisition in 2000 and the allocation of goodwill to this banner related to the share exchange. The Company has experienced changes in economic conditions within the retail sector subsequent to these events.

As a result of the adoption of SFAS No. 142, amortization expense of approximately $22 million and $44 million of goodwill and other indefinite life assets was appropriately not reflected in the current quarter and for the 26 weeks ended June 29, 2002, respectively.

The following schedule reconciles the Income before cumulative effect of change in accounting principle adjusted to exclude after-tax amortization expense in the three months and six months ended June 30, 2001 prior to the adoption of SFAS No.142:


(Dollars in millions)	13 Weeks		26 Weeks		13 Weeks		26 Weeks
	Ended		Ended		Ended		Ended
	June 29, 2002		June 29, 2002		June 30, 2001		June 30,2001

Income Before Cumulative Effect of Change in Accounting Principle	$	61	$	120	$	36	$	64




Add: Goodwill Amortization		—		—	$	14	$	27

Adjusted Income Before Cumulative Effect of Change in Accounting Principle	$	61	$	120	$	50	$	91

The carrying amount of goodwill and trademarks at each of the Company’s reporting units follows:


	June 29, 2002

(Dollars in millions)	Goodwill		Trademarks

Food Lion	$	1,144	$	249




Hannaford		1,761		223




Kash n’ Karry		—		27

Total	$	2,905	$	499

As of June 29, 2002 and June 30, 2001, the Company’s amortized intangible assets consist of favorable leasehold improvements, liquor licenses, pharmacy files, and developed software. The components of its amortized intangible assets are as follows:


			June 29, 2002							June 30, 2001

	Gross							Gross
	Carrying		Accumulated					Carrying		Accumulated
(Dollars in millions)	Value		Amortization			Net		Value		Amortization			Net

Favorable Leasehold Interest	$	360	$	(46	)	$	314	$	440	$	(14	)	$	426




Other		26		(4	)		22		37		(2	)		35

Total	$	386	$	(50	)	$	336	$	477	$	(16	)	$	461

Estimated amortization expense (for amortized intangibles) for the remainder of 2002 and the five succeeding fiscal years follows:


(Dollars in millions)
2002(remainder)	$	18.1




2003		36.5




2004		36.1




2005		34.8




2006		32.7




2007		31.1

In August 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” which is effective for financial statements issued for years beginning after December 15, 2001. The objectives of SFAS No. 144 are to address significant issues relating to the implementation of SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,” and to develop a single accounting model, based on the framework established in SFAS No. 121 for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired. SFAS No. 144 was effective as of the beginning of the current fiscal year. The effect of adopting this standard did not have a significant effect on the Company’s financial statements.

8) Recently Issued Accounting Standards

In June 2001, the FASB also issued SFAS No. 143, “Accounting for Asset Retirement Obligations.” SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs, and applies to the legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or normal operation of a long- lived asset, except for certain obligations of lessees. SFAS No. 143 is effective for financial statements issued for fiscal years beginning after June 15, 2002. The Company is currently assessing the potential effect of SFAS No. 143 on its financial statements.

On April 30, 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13 and Technical Corrections.” SFAS No. 145 rescinds both SFAS No. 4 “Reporting Gains and Losses from Extinguishment of Debt” and the amendment to SFAS No. 4, SFAS No. 64 “Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements.” SFAS No. 145 eliminates the requirement set forth in both SFAS No. 4 and SFAS No. 64 that gains and losses from the extinguishment of debt be aggregated and, if material, classified as an extraordinary item, net of the related income tax effect. However, an entity is not prohibited from classifying these types of gains and losses as extraordinary items so long as they meet the criteria in paragraph 20 of Accounting Principles Board Opinion No. 30, “Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions.” In addition, SFAS No. 145 amends paragraph 14(a) of SFAS No. 13, “Accounting for Leases,” to eliminate an inconsistency between the accounting for sale-leaseback transactions and certain lease modifications that have economic effects that are similar to sale-leaseback transactions. Specifically, SFAS No. 145 requires that a lease modification:

• results in recognition of the gain or loss in the financial statements;

• is subject to FASB Statement No. 66, “Accounting for Sales of Real Estate,” if the leased asset is real estate, including integral equipment; and

• is subject in its entirety to the sale-leaseback rules of SFAS No. 98, “Accounting for Leases: Sale-Leaseback Transactions Involving Real Estate, Sales-Type Leases of Real Estate, Definition of the Lease Term, and Initial Direct Costs of Direct Financing Leases.”

Generally, SFAS No. 145 is effective for transactions occurring after May 15, 2002. We have not yet evaluated the effect of SFAS No. 145 on our financial statements.

On July 29, 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS No. 146 requires that a liability for a cost that is associated with an exit or disposal activity be recognized when the liability is incurred. It nullifies the guidance of the Emerging Issues Task Force, or EITF, in EITF Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” Under EITF Issue No. 94-3, an entity recognized a liability for an exit cost on the date that the entity committed itself to an exit plan. In SFAS No. 146, the FASB acknowledged that an entity’s commitment to a plan does not, by itself, create a present obligation to other parties that meets the definition of a liability. SFAS No. 146 also establishes that fair value is the objective for the initial measurement of the liability. SFAS No. 146 will be effective for exit or disposal activities that are initiated after December 31, 2002. We have not yet evaluated the effect of SFAS No. 146 on our financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (13 weeks and 26 weeks ended June 29, 2002 compared to the 13 and 26 weeks ended June 30, 2001).

The accompanying financial statements are presented in accordance with the requirements of Form 10-Q and, consequently, do not include all the disclosures normally required by generally accepted accounting principles or those normally made in the Company’s Annual Report on Form 10-K. Accordingly, the reader of this Form 10-Q should refer to the Company’s Form 10-K for the year ended December 29, 2001 for further information. Reclassifications have been made for all current and historical information presented herein from that contained in the Company’s prior annual reports to shareholders and SEC filings on forms 10-Q, 10-K and 8-K.

On April 25, 2001, Delhaize America, Inc. became a wholly-owned subsidiary of Delhaize Group as a result of the Delhaize Group share exchange. This transaction was accounted for as a purchase and in connection with this treatment, a new entity has been deemed created for financial reporting purposes. Accordingly, in the financial statements, the periods prior to the date of the Delhaize Group share exchange relate to the “predecessor company” and the periods subsequent to the date of the Delhaize Group share exchange relate to the “successor company” and have been labeled accordingly. The results of the predecessor company and the successor company have been combined for the 13 and 26 weeks ended June 30, 2001, since separate results and discussions of the predecessor company and the successor company are not meaningful in comparison to the related periods of the current year.

CRITICAL ACCOUNTING POLICIES

We have chosen accounting policies that we believe are appropriate to accurately and fairly report our operating results and financial position and we apply those accounting policies in a consistent manner. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires that we make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. These estimates and assumptions are based on historical and other factors believed to be reasonable under the circumstances. We evaluate these estimates and assumptions on an ongoing basis and may retain outside consultants, lawyers and actuaries to assist in our evaluation. The reader should refer to Note 1 to the consolidated financial statements in our Annual Report on Form 10-K for the Fiscal year ended December 29, 2001 for further information regarding significant accounting policies.

RESULTS OF OPERATIONS

The following tables set forth the unaudited condensed consolidated statements of income/(loss) for the 13 and 26 weeks ended June 29, 2002 and for the 13 and 26 weeks ended June 30, 2001 (predecessor and successor companies combined) for informational purposes.


		13 Weeks		13 Weeks
		Ended		Ended
		June 29, 2002		June 30, 2001

Net sales and other revenues		$	3,753,362	$	3,726,933




Cost of goods sold			2,803,994		2,778,404




Selling and administrative expenses			767,561		772,566




Merger expense			—		16,331

Operating income			181,807		159,632




Interest expense, net			82,649		90,515

Income before income taxes			99,158		69,117




Provision for income taxes			38,331		33,375

	Net income	$	60,827	$	35,742


	26 Weeks			26 Weeks
	Ended			Ended
	June 29, 2002			June 30, 2001

Net sales and other revenues	$	7,501,212		$	7,329,847




Cost of goods sold		5,586,044			5,480,607




Selling and administrative expenses		1,546,683			1,517,105




Merger expense		—			39,713

Operating income		368,485			292,422




Interest expense, net		170,569			171,998

Income before income taxes		197,916			120,424




Provision for income taxes		77,862			56,829

Income before cumulative effect of a change in accounting principle		120,054			63,595




Less Cumulative effect of change in accounting principle, net of tax		284,097			—

Net (loss) / income	$	(164,043	)	$	63,595

The following tables set forth, the percentage, which the listed captions bear to net sales and other revenues for the periods indicated:


		13 Weeks		13 Weeks
		Ended		Ended
		June 29, 2002		June 30, 2001
		%		%

Net sales and other revenues			100.00		100.00




Cost of goods sold			74.71		74.55




Selling and administrative expenses			20.45		20.73




Merger expense			0.00		0.44

Operating income			4.84		4.28




Interest expense, net			2.20		2.43

Income before income taxes			2.64		1.85




Provision for income taxes			1.02		0.89

	Net income		1.62		0.96


	26 Weeks			26 Weeks
	Ended			Ended
	June 29, 2002			June 30, 2001
	%			%

Net sales and other revenues		100.00			100.00




Cost of goods sold		74.47			74.77




Selling and administrative expenses		20.62			20.70




Merger expense		0.00			0.54

Operating income		4.91			3.99




Interest expense, net		2.27			2.35

Income before income taxes		2.64			1.64




Provision for income taxes		1.04			0.77

Income before cumulative effect of a change in accounting principle		1.60			0.87




Less Cumulative effect of change in accounting principle, net of tax		3.79			0.00

Net (loss) / income		(2.19	)		0.87

Sales

We record revenues primarily from the sales of products in over 1,450 retail stores. Net sales and other revenues for the second quarter 2002 and for the 26 weeks ended June 29, 2002 were $3.8 billion and $7.5 billion, respectively, resulting in increases of 0.7% and 2.3% over the corresponding periods of 2001. Comparable store sales decreased 1.2% during the second quarter and increased 0.1% for the 26 weeks ended June 29, 2002. Sales performance during the second quarter 2002 was negatively impacted by the timing of the Easter holiday, which fell in the first quarter this year versus the second quarter last year. Excluding the negative impact of Easter in the second quarter of 2002, comparable store sales decreased 0.3%. Sales performance during 2002 has been negatively impacted by soft economic conditions in the company’s major operating areas. Most of our stores are located in the Southeast region of the United States, a region that until recently reported lower than national levels of unemployment. Currently, the Southeast region is experiencing unemployment levels that are consistent with the national average of 6.0%.

In addition, we continue to see an increase in competitive activity as all retailers battle for the shrinking consumer dollar. During the first six months of 2002, we have experienced 38 net competitive openings in our operating area — increasing the amount of grocery square footage available to consumers. Most major supermarket retailers have engaged in unplanned promotional activity that offers deep discounts and value on selected items for short periods of time. We have elected to maintain our commitment to consistent low price leadership and planned promotional activity, avoiding high cost initiatives that provide only short-term sales lifts. A constant and growing customer base at all of our banners confirms this commitment. In the short-term, customers may take advantage of special offerings on selected items by other retailers, however they are still shopping in our stores, recognizing the total basket value every day.

As of June 29, 2002, we operated 1,472 stores, which consisted of 1,220 stores operating under the Food Lion banner, 115 stores operating under the Hannaford and Shop n’ Save banners and 137 stores operating under the Kash n’ Karry banner. During the second quarter we opened thirteen new stores, all of which were Food Lion stores. In addition, we also remodeled 35 stores in the second quarter, of which 32 were Food Lion stores and three were Kash n’ Karry stores. During the quarter we relocated three Food Lion stores and closed one Food Lion and one Kash n’ Karry store.

Gross profit during the second quarter of 2002 and for the 26 weeks ended June 29, 2002 was 25.29% of sales and 25.53% of sales, respectively, compared to 25.45% and 25.23% for the same periods of 2001.

Gross profit is in line with the prior year, emphasizing the commitment to low price leadership and value noted above. Despite lower than expected sales volume we continue to post strong gross profit performance as a result of improved product mix, the implementation of zone pricing and improved private label program execution. Gross profit was negatively impacted during the quarter by an increase in product shrink resulting from lower than expected sales volumes. The change in basis of accounting related to the Delhaize Group share exchange discussed above (see Financial Note 5) had no material impact on the reported gross profits.

We have provided for a $1.4 million and $2.0 million LIFO provision during the second quarter of 2002 and for the 26 weeks ended June 29, 2002, respectively, compared with a LIFO provision of $0.6 million and $1.2 million for the same periods last year.

Selling and administrative expenses during the second quarter of 2002 were $767.6 million (including $115.5 in depreciation and amortization) or 20.45% of sales compared to $773.0 million (including $131.2 in depreciation and amortization) or 20.73% of sales for the second quarter of the prior year. For the 26 weeks ended June 29, 2002, selling and administrative expenses were $1,547.0 million (including $229.6 in depreciation and amortization) or 20.62% of sales compared to $1,517.0 million (including $254.7 in depreciation and amortization) or 20.70% of sales for the corresponding period in the prior year. Excluding depreciation and amortization, selling and administrative expenses as a percentage of sales were 17.37% for the second quarter, 2002 and 17.56% for the 26 weeks ended June 29, 2002 compared to 17.21% and 17.22% for the corresponding periods of the prior year. Excluding depreciation and amortization, the increase in selling and administrative expenses in the second quarter compared to last year is attributable primarily to increased store labor costs to support improved customer service at all banners. We believe that we continue to demonstrate rigor in cost control, even in an environment of soft sales, constantly adjusting as appropriate to sales fluctuations, and managing related variable costs. During the quarter selling and administrative expenses included a credit related to the reversal of a previously established store closing reserve. During 2000 we closed a store previously operated by the Hannaford banner as part of the merger related divestitures. At that time, we established the required store closing reserves. The Company recently made the decision to re-open the store under the Food Lion banner, and appropriately reversed these store closing reserves. The change in basis of accounting related to the Delhaize Group share exchange discussed above (see Financial Note 5) primarily impacted depreciation/amortization expense and interest expense (as discussed below). Selling and administrative expenses excluding depreciation and amortization were not materially impacted and are therefore comparable year over year.

Depreciation and amortization expense during the second quarter of 2002 was $115.5 million or 3.08% of sales compared to $131.2 million or 3.52% of sales for the second quarter of the prior year. For the 26 weeks ended June 29, 2002, depreciation and amortization expense was $229.6 million or 3.06% of sales compared to $254.7 million or 3.47% of sales for the corresponding period in the prior year. During the quarter ended March 30, 2002, we adopted SFAS No. 142, “Goodwill and Other Intangible Assets”, effective December 30, 2001. As a result, we no longer amortize goodwill and intangible assets with indefinite lives. Under SFAS No. 142 the Company is required to annually assess goodwill and other intangible assets with indefinite lives by comparing the book value of these assets to their current fair value. The Company’s transitional impairment analysis (required upon adoption of the standard) resulted in an impairment charge totaling $288 million before tax ($284 million after tax) which was recorded in the first quarter of 2002 as a change in accounting principle on the Company’s Statement of Income/Loss (See Financial Note 7). Depreciation and amortization was further impacted by the revaluation performed in conjunction with the Delhaize Group share exchange (see Financial Note 5). Excluding the impact of the discontinuance of goodwill and indefinite lived intangibles amortization and the effects of additional depreciation and amortization resulting from the valuation process, depreciation and amortization would have been approximately 3.26% of sales (or approximately $122 million) during the second quarter of 2002 and 3.25% (or $243.7 million) for the 26 weeks ended June 29, 2002.

Interest expense during the second quarter of 2002 was $82.6 million or 2.20% of sales compared to $90.5 million or 2.43% of sales for the second quarter of the prior year. For the 26 weeks ended June 29, 2002, interest expense was $170.6 million or 2.27% of sales compared to $172.0 million or 2.35% of sales for the corresponding period in the prior year. Interest expense was lower this year primarily due to lower short-term borrowings and the interest reduction as a result of the interest rate swap agreements (See Financial Note 6). Interest expense was further impacted by the purchase price allocation performed in conjunction with the Delhaize Group share exchange (see Financial Note 5). Excluding the impact of the share exchange interest expense would have been approximately 2.41% of sales (or approximately $90.4 million) during the second quarter of 2002 and 2.41% (or $180.7 million) for the 26 weeks ended June 29, 2002.

Store Closings

The following table summarizes the number of stores closed and planned to be closed as of June 29, 2002.


				Planned
	Closed			Closings			Total

As of March 30, 2002		181			8			189




Store Closings added		—			3			3




Planned closings completed		7			(7	)		—




Stores sold/lease terminated		(7	)		—			(7	)

As of June 29, 2002		181			4			185

The following table reflects closed store liabilities as of June 29, 2002, and activity during the quarter, including additions to closed store liabilities charged to and adjustments to liabilities based on changes in facts and circumstances and payments made.


	June 29,
(Dollars in millions)	2002

Balance at beginning of quarter	$	161.2




Additions charged to earnings:




Store Closings — lease obligations		1.6




Store Closings — other exit cost		0.4




Adjustment to Prior Year — lease		(9.8	)




Adjustment to Prior Year — other		(2.2	)

Total charged to earnings		(10.0	)




Reductions:




Lease payments		(4.0	)




Payments for other exit costs		(0.6	)

Total reductions		(4.6	)

Balance at end of quarter	$	146.6

The June 29, 2002 balance of approximately $146.6 million consisted of lease liabilities and exit cost liabilities of $126.0 million and $20.6 million, respectively. The Company recognized income of approximately $6.6 million in the second quarter related to a closed store location owned by Hannaford. The decision was made during the quarter to re-open this store as a Food Lion store (see discussion in selling and administrative expenses).

We provided for closed store liabilities in the quarter ended June 29, 2002 to reflect the estimated post-closing lease liabilities and other exit costs associated with the related store closing commitments. These other exit costs include estimated real estate taxes, common area maintenance fees, insurance and utility costs to be incurred after the store closes. Store closings are generally completed within one year after the decision to close. The closed store liabilities are usually paid over the lease terms associated with the closed stores having remaining terms ranging from one to 20 years. Adjustments to closed store liabilities and other exit costs primarily relate to changes in actual exit costs from original estimates. Adjustments are made for changes in estimates in the period in which the change becomes known. Any excess store closing liability remaining upon settlement of the obligation is reversed to income in the period that such settlement is determined. We use a discount rate based on the current treasury note rates to calculate the present value of the remaining rent payments on closed stores.

The revenues and operating results for stores closed are not material to our revenues and operating results for the quarter or year to date. Future cash obligations for closed store liabilities are related principally to the remaining non-cancelable lease payments less sublease payments to be received.

Asset Impairment Charge

We periodically evaluate the period of depreciation or amortization for long-lived assets to determine whether current circumstances warrant revised estimates of useful lives. We monitor the carrying value of our long-lived assets, including amortizable intangible assets, for potential impairment based on projected undiscounted cash flows. If impairment is identified for long-lived assets other than real property, we compare the asset’s future discounted cash flows to its current carrying value and record provisions for impairment as appropriate. With respect to owned property and equipment associated with closed stores, the value of the property and equipment is adjusted to reflect recoverable values based on our previous efforts to dispose of similar assets and current economic conditions. Impairment of real property is recognized for the excess of carrying value over estimated fair market value.

Goodwill and other intangible assets are tested annually for potential impairment by comparing the book value of these assets to their current fair market value.

Liquidity and Capital Resources

We fund our operations and expenditures from cash generated from our operations and borrowings. At June 29, 2002, we had cash and cash equivalents of $301.9 million. Historically we have generated positive cash flow from operations. Cash provided by operating activities totaled $533.7 million for the 26 weeks ended June 29, 2002, compared with $540.9 million for the corresponding period last year. The decrease was primarily due to an increase in inventories, a smaller decrease in income tax receivable than experienced in the prior year and an increase in prepaid expenses resulting from the prepayment of self-insurance expense. These decreases to cash flow from operating activities were offset by increases in accounts payable, accrued expenses and a decrease in accounts receivable.

Cash used in investing activities increased to $197.1 million for the 26 weeks ended June 29, 2002, compared with $185.8 million for the corresponding period last year primarily due to capital expenditures of $204.2 million for the 26 weeks ended June 29, 2002, compared to $190.9 million for the corresponding period in 2001. For the 26 weeks ended June 29, 2002, we have opened 21 new stores and completed the renovation of 64 existing stores.

With our fiscal 2002 growth plan, we anticipate a net increase in store square footage of approximately 3.0%. This plan is subject to change and review as conditions warrant. Capital expenditures currently estimated for fiscal 2002 are $510 million.

Capital expenditures for fiscal 2002 will be financed through funds generated from operations and existing bank credit facilities, if necessary.

Cash used in financing activities for the quarter ended June 30, 2002 were $172.0 million compared to $365.1 million for the same period last year. The decrease in cash used in financing activities was primarily the result of a cash settlement on April 19, 2001 for the hedge contracts related to the $2.6 billion bond offering used as long-term financing for the Hannaford acquisition. In addition, last year the Company made a dividend payment during the second quarter while this year, the Company will make a dividend payment in third quarter.

Adjusted EBITDA was $596.0 million for the 26 weeks ended June 29, 2002, compared to $591.5 million for the 26 weeks ended June 30, 2001. Management and industry analysts generally consider adjusted EBITDA to be a measurement of the financial performance of the Company that provides a relevant basis for comparison among companies. Adjusted EBITDA is not a measurement of financial performance under U.S. GAAP and should not be considered as a substitute for net income as a measure of performance, or for cash flow as a measure of liquidity. Investors should note that our calculation of adjusted EBITDA might differ from similarly titled measures for other companies. The following table sets forth, for the periods indicated, a calculation of our adjusted EBITDA:


		26 Weeks Ended

(Dollars in millions)		June 29, 2002			June 30, 2001

Net (loss)/income		$	(164.0	)	$	63.6




	Add Cumulative effect of change in accounting principle		284.1			—




	LIFO expense		2.0			1.2




	Depreciation		210.6			202.0




	Amortization of intangible assets		19.0			52.7




	Store closing provision/recoveries		(4.1	)		3.5




	Merger expense		0.0			39.7




	Interest expense, net		170.6			172.0




	Income taxes		77.8			56.8

Adjusted EBITDA		$	596.0		$	591.5

Adjusted EBITDA as a percent of net sales and other revenues			8.0	%		8.1	%

Debt

We maintain a revolving credit facility with a syndicate of commercial banks providing $500.0 million in committed lines of credit, which expires in July 2005. As of June 29, 2002, there were no outstanding borrowings under this arrangement. During the quarter ended June 29, 2002, we made no borrowings under this credit facility. There were borrowings of $25.0 million outstanding at June 30, 2001. This facility is utilized to provide short-term capital to meet our liquidity needs as necessary.

At March 31, 2001, we had $2.4 billion in outstanding borrowings at 8.19% under a $2.5 billion 364-day term loan facility that expired in July 2001. The borrowings under this facility were used to initially fund the cash portion of the purchase price of the Hannaford acquisition in fiscal 2000. On April 19, 2001, we completed a private offering of $600 million of 7.375% notes due 2006, $1.1 billion of 8.125% notes due 2011 and $900 million in 9.000% debentures due 2031, which we refer to in this report as the old securities. The Company used the proceeds of this offering to repay in full the $2.4 billion outstanding under the term loan facility. On November 16, 2001, we offered to exchange the old securities for exchange securities that are identical in all material respects to the old securities except that such exchange securities are registered under the Securities Act, are not subject to the transfer restrictions applicable to the old securities and are not subject to any covenants regarding exchange or registration rights. The exchange offer expired on December 17, 2001. $2,542,142,000 of old securities were tendered for exchange securities. $57,858,000 in old securities remain outstanding.

At June 29, 2002, we had outstanding medium-term notes of $16.9 million due from 2002 to 2006 at interest rates of 8.53% to 8.73% and outstanding other notes of $85.1 million due from 2002 to 2016 at interest rates of 6.16% to 14.15%. We also had long-term debt securities outstanding of $293.7 million, of which $149.5 million matures in 2007, at an interest rate of 7.55% and $144.2 million, which matures in 2027 at an interest rate of 8.05%. The Company had mortgage notes payable of $38.5 million due from 2003 to 2016 at interest rates of 7.5% to 10.2% at June 29, 2002.

On December 12, 2001, the Company was granted a term loan facility by Delhaize The Lion Coordination Center S.A., a Belgian company wholly-owned by Delhaize Group, in the amount of $38 million intended for general corporate and working capital requirements. Until the note’s maturity on December 12, 2006, the Company will pay interest at a rate equal to the US LIBOR for the relevant interest period plus 1.25% per annum. This loan is recorded in long-term debt in the Company’s consolidated balance sheet.

As mentioned above, during the fourth quarter of 2001, the Company entered into interest rate swap agreements to manage its exposure to interest rate movements by effectively converting a portion of its debt from fixed to variable rates. Maturity dates of interest rate swap arrangements match those of the underlying debt. These agreements, which mature in 2006, involve the exchange of fixed rate payments for variable rate payments without the exchange of the underlying principal amounts. Variable rates for our agreements are based on six-month or three-month U.S. dollar LIBOR and are reset on a semiannual basis or quarterly basis. The differential between fixed and variable rates to be paid or received is accrued as interest rates change in accordance with the agreements and recognized over the life of the agreements as an adjustment to interest expense. Interest expense was reduced by $4.6 million during the second quarter in connection with these agreements. The notional amounts of interest rate swap arrangements were approximately $300 million at June 29, 2002. These agreements are accounted for as

fair value hedges. These agreements are accounted for using the short-cut method, which assumes 100% hedge effectiveness, as prescribed by SFAS No. 133. The fair value of the Company’s debt has been increased by $2.6 million at June 29, 2002 in connection with these agreements.

We enter into significant leasing obligations related to our store properties. Capital lease obligations outstanding at June 29, 2002 were $724.5 million compared with $631.4 million at June 30, 2001. These leases generally have terms of up to 20 years.

As set forth in the tables below, we also have periodic short-term borrowings under informal credit arrangements that are available to us at our lenders’ discretion.

Informal Credit Arrangements


(Dollars in millions)	June 29, 2002			June 30, 2001

Outstanding borrowings at the end of the second quarter	$	—		$	46.0




Average borrowings	$	3.6		$	34.8




Maximum amount outstanding	$	80.0		$	95.0




Daily weighted average interest rate		2.84	%		6.10	%

Market Risk

We are exposed to changes in interest rates primarily as a result of our long-term debt requirements. Our interest rate risk management objectives are to limit the effect of interest rate changes on earnings and cash flows and to lower overall borrowing costs. We maintain certain variable-rate debt to take advantage of lower relative interest rates currently available. We have not entered into any of our financial instruments for trading purposes.

As mentioned above during the fourth quarter of 2001, the Company entered into interest rate swap agreements to manage its exposure to interest rate movements by effectively converting a portion of our debt from fixed to variable rates. Maturity dates of interest rate swap arrangements match those of the underlying debt. These agreements, which mature in 2006, involve the exchange of fixed rate payments for variable rate payments without the exchange of the underlying principal amounts. Variable rates for our agreements are based on six-month or three-month U.S. dollar LIBOR and are reset on a semiannual basis or quarterly basis. The differential between fixed and variable rates to be paid or received is accrued as interest rates change in accordance with the agreements and recognized over the life of the agreements as an adjustment to interest expense. Interest expense was reduced by $4.6 million during the second quarter in connection with such agreements. The notional amounts of interest rate swap arrangements were approximately $300 million at June 29, 2002. These agreements are accounted for as fair value hedges. These agreements are accounted for using the short-cut method, which assumes 100% hedge effectiveness, as prescribed by SFAS No. 133. The fair value of the Company’s debt has been increased $2.6 million at June 29, 2002 in connection with these agreements.

Prior to the offering of the old securities discussed in Debt above, we entered into interest rate hedge agreements to hedge against potential increases in interest rates. The notional amount of these hedge agreements was $1.75 billion. These hedge agreements were structured to hedge against the risk of increasing market interest rates based on U.S. treasury rates, with the specified rates based on the expected maturities of the related securities. These hedge agreements were settled in connection with the completion of the offering of the old securities, resulting in a payment in the amount of an unrealized loss of approximately $214 million. As a result of the adoption of SFAS No. 133 at the beginning of fiscal 2001, the unrealized loss was recorded in Other Comprehensive Loss, net of taxes and is being amortized to interest expense over the term of the associated debt securities. The unrealized loss was reduced as of the date of the Delhaize Group share exchange as a result of the application of purchase accounting. The remaining unrealized loss at the end of second quarter 2002 was approximately $53.2 million, net of taxes.

The table set forth below provides the expected principal payments (net of related discounts or premiums) and related interest rates of our long-term debt by fiscal year of maturity as of December 29, 2001.


																			Fair
(Dollars in millions)	2002			2003			2004			2005			2006			Thereafter			Value

Notes, due 2006													$	600.0					$	635.3




Average interest rate														7.38	%




Notes, due 2011																$	1,100.0		$	1,201.3




Average interest rate																	8.13	%




Debentures, due 2031																$	900.0		$	1,059.5




Average interest rate																	9.00	%




Medium term notes	$	1.1		$	10.7								$	5.2					$	17.8




Average interest rate		8.58	%		8.63	%								8.71	%




Debt securities (discount)	$	(0.3	)	$	(0.3	)	$	(0.3	)	$	(0.3	)	$	(0.3	)	$	295.0		$	316.1




Average interest rate		7.89	%		7.89	%		7.89	%		7.89	%		7.89	%		7.80	%




Note to Parent Co.													$	38.0					$	38.0




Average interest rate														3.69	%




Mortgage payables	$	6.0		$	6.2		$	5.4		$	3.0		$	3.2		$	16.0		$	42.5




Average interest rate		9.60	%		9.65	%		9.64	%		9.10	%		9.09	%		8.80	%




Other notes	$	9.5		$	10.0		$	7.9		$	11.3		$	11.4		$	41.4		$	97.8




Average interest rate		6.88	%		6.85	%		6.91	%		6.59	%		7.00	%		7.16	%




Other note Payable	$	1.6		$	1.9														$	3.5




Average interest rate		11.25	%		11.25	%

We do not trade in foreign markets or in commodities, nor do we have significant concentrations of credit risk. Accordingly, we do not believe that foreign exchange risk, commodity risk or credit risk pose a significant threat to our company.

Contractual Obligations and Commitments

The following table summarizes our contractual obligations and commitments as of December 29, 2001. Note that the $140 million in “Lines of Credit” was paid down subsequent to December 29, 2001:


	Total		2002		2003		2004		2005		2006		Thereafter

(Dollars in millions) Lines of credit	$	140.0								140.0




Long-term debt		3,083.3		17.9		28.5		13.0		14.0		657.5		2,352.4




Capital lease payments		1,500.2		111.8		111.6		110.8		109.9		109.3		946.8




Operating lease payments		2,881.8		234.6		230.9		225.7		220.5		213.2		1,756.9

Recently Adopted Accounting Standards

In June 2001, the Financial Accounting Standards Board, or FASB, issued SFAS, No. 141, “Business Combinations.” SFAS No. 141 addresses financial accounting and reporting for business combinations and supersedes Accounting Principles Board, or APB, Opinion No. 16, “Business Combinations,” and SFAS No. 38, “Accounting for Pre-acquisition Contingencies of Purchased Enterprises.” All business combinations that come within the scope of SFAS No. 141 are to be accounted for using the purchase method of accounting. The provisions of SFAS No. 141 apply to all business combinations initiated after June 30, 2001 and all business combinations accounted for using the purchase method of accounting for which the date of acquisition is July 1, 2001 or later. SFAS No. 141 also sets forth new criteria for separability and in separability of intangible assets. The application of SFAS No. 141 resulted in the Company’s identification of certain intangible assets such as assembled work force and distribution network that did not meet the separability criteria of SFAS No. 141, which were re-classified into goodwill.

On December 30, 2001, we adopted Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets,” which required that we cease amortizing goodwill and other intangible assets with indefinite lives, and begin an annual assessment of potential impairment of goodwill and other intangible assets by comparing the book value of these assets to their current fair value.

The Company performed its assessment for potential impairment at each of our three operating banners, since each chain represents a separate operating segment as defined by SFAS 131 and a separate reporting unit as defined by SFAS 142. In performing its assessment, the carrying value of assets and liabilities was determined for each reporting unit and compared to the fair value of each reporting unit, which was obtained from independent appraisals. If the carrying value of the reporting unit exceeded its fair value, an assessment of impairment was then necessary.

The Company’s impairment assessment at its individual operating banners resulted in a non-cash impairment charge totaling approximately $288 million before taxes ($284 million net of taxes), which was recorded as a change in accounting principle in the first quarter 2002 condensed consolidated statements of income/(loss). This impairment charge relates primarily to goodwill associated with the Delhaize Group share exchange and with the Company’s acquisitions of Kash n’ Karry and Hannaford. Impairment at the Kash n’ Karry banner is due to a combination of factors including post-acquisition capital expenditures and operating performance. The Company has seen a heightened level of competition in the Florida area, where Kash n’ Karry is concentrated. The Hannaford banner carries a significant goodwill balance due to the initial acquisition in 2000 and the allocation of goodwill to this banner related to the share exchange. The Company has experienced changes in the economic conditions subsequent to these events.

As a result of the adoption of SFAS 142, amortization expense of approximately $22 and $44 million of goodwill and other indefinite life assets was appropriately not reflected in the second quarter and for the 26 weeks ended June 29, 2002, respectively.


	13 Weeks		26 Weeks		13 Weeks		26 Weeks
	Ended		Ended		Ended		Ended
(Dollars in millions)	June 29, 2002		June 29, 2002		June 30, 2001		June 30, 2001

Income Before Cumulative Effect of Change in Accounting Principle	$	61	$	120	$	36	$	64




Add: Goodwill Amortization		—		—	$	14	$	27

Adjusted Income Before Cumulative Effect of Change in Accounting Principle	$	61	$	120	$	50	$	91

The carrying amount of goodwill and trademarks at each of the Company’s reporting units follows:


	June 29, 2002

(Dollars in millions)	Goodwill		Trademarks

Food Lion	$	1,144	$	249




Hannaford		1,761		223




Kash n’ Karry		—		27

Total	$	2,905	$	499


			June 29, 2002							June 30, 2001
	Gross							Gross
	Carrying		Accumulated					Carrying		Accumulated
(Dollars in millions)	Value		Amortization			Net		Value		Amortization			Net

Favorable Leasehold Interest	$	360	$	(46	)	$	314	$	440	$	(14	)	$	426




Other		26		(4	)		22		37		(2	)		35

Total	$	386	$	(50	)	$	336	$	477	$	(16	)	$	461

Estimated amortization expense (for amortized intangibles) for the remainder of 2002 and the five succeeding fiscal years follows:


(Dollars in millions)
2002(remainder)	$	18.1




2003		36.5




2004		36.1




2005		34.8




2006		32.7




2007		31.1

In August 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” which is effective for financial statements issued for years beginning after December 15, 2001. The objective of SFAS 144 is to address significant issues relating to the implementation of SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,” and to develop a single accounting model, based on the framework established in SFAS No. 121 for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired. SFAS No. 144 was effective as of the beginning of the current fiscal year. The effect of adopting this standard did not have a significant effect on the Company’s financial statements.

Recently Issued Accounting Standards

Generally, SFAS No. 145 is effective for transactions occurring after May 15, 2002. We have not yet evaluated the effect of SFAS No. 145 on our financial statements.

Other

All statements in this report, other than statements of historical facts, which address activities, events or developments that the Company expects or anticipates will or may occur in the future, including such things as expansion and growth of the Company’s business, future capital expenditures and the Company’s business strategy, are “forward-looking statements” within the meaning of the Securities Litigation Reform Act. In reviewing such information, it should be kept in mind that actual results may differ materially from those projected or suggested in such forward-looking statements. This forward-looking information is based on various factors and was derived utilizing numerous assumptions. Many of these factors have previously been identified in filings or statements made by or on behalf of the Company, including filings with the Securities and Exchange Commission of Forms 10-Q, 10-K and 8-K.

Important assumptions and other important factors that could cause actual results to differ materially from those set forth in the forward-looking statements include: changes in the general economy or in the Company’s primary markets, changes in consumer spending, competitive factors, the nature and extent of continued consolidation in the industry, changes in the rate of inflation and interest costs on borrowed funds, changes in state or federal legislation or regulation, changes in the availability and cost of labor, adverse determinations with respect to litigation or other claims, inability to develop new stores or complete remodels as rapidly as planned, the ability to integrate and achieve operating improvements at Hannaford as well as other companies Delhaize America, Inc. acquires, and stability of product costs — supply or quality control problems with the Company’s vendors detailed from time-to-time in the Company’s filings with the Securities and Exchange Commission.

The Company does not undertake to update forward-looking information contained herein or elsewhere to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking information.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The information set forth under the heading “Market Risk” under Item 2 of Part I of this Form 10-Q is hereby incorporated herein by reference.

PART II OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 5. Other Information

None.

Item 6. Exhibits and Reports on Form 8-K

(a). Exhibits

4.1   Delhaize America, Inc. 2000 Stock Incentive Plan, as amended and restated effective May 23, 2002

4.2   Delhaize America, Inc. 2002 Restricted Stock Unit Plan

99.1   Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

99.2   Certification of Chief Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b). Reports on Form 8-K

The Company filed a report on Form 8-K on March 21, 2002 and Amendment No. 1 to such report on April 5, 2002 in connection with the Company’s dismissal of PricewaterhouseCoopers LLP as the Company’s independent accountant and the selection of Deloitte & Touche LLP as the Company’s new independent accountant.

SIGNATURE

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.


	DELHAIZE AMERICA, INC.

DATE: August 13, 2002	BY:	/s/ Carol M. Herndon Carol M. Herndon Executive Vice President of Accounting and Analysis and Chief Accounting Officer

Exhibit Index


Exhibit		Description

4.1		Delhaize America, Inc. 2000 Stock Incentive Plan, as amended and restated effective May 23, 2002




4.2		Delhaize America, Inc. 2002 Restricted Stock Unit Plan




99.1		Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002




99.2		Certification of Chief Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

21 EX-4.1 3 g77659exv4w1.htm 2000 STOCK INCENTIVE PLAN 2000 Stock Incentive Plan

Exhibit 4.1

DELHAIZE AMERICA, INC.

AMENDED AND RESTATED 2000 STOCK INCENTIVE PLAN

(Effective as of May 23, 2002)

DELHAIZE AMERICA, INC.

AMENDED AND RESTATED 2000 STOCK INCENTIVE PLAN

(Effective as of May 23, 2002)

1. Purpose.

The purpose of this Plan is to provide an incentive to the employees, individuals who have accepted an offer of employment, officers, consultants and eligible directors of Delhaize America, Inc., a North Carolina corporation (the “Company”), its Subsidiaries and Parent and thereby encourage them to devote their abilities and industry to the success of the Company’s business enterprise. It is intended that this purpose be achieved by extending to employees, individuals who have accepted an offer of employment, officers, consultants and directors of the Company, its Subsidiaries, or Parent an added long-term incentive for high levels of performance and unusual efforts through the grant of Incentive Stock Options, Nonqualified Stock Options and Restricted Stock (as each term is herein defined). Effective as of April 25, 2001, all Shares subject to outstanding and future Awards and Options under the Plan were converted to American Depositary Shares of Parent as evidenced by American Depositary Receipts. The Plan is further amended and restated as of May 23, 2002.

2. Definitions.

For purposes of the Plan:

2.1. “Agreement” means the written agreement between the Company and an Optionee or Grantee evidencing the grant of an Option or Award and setting forth the terms and conditions thereof.

2.2. “Award” means a grant of Restricted Stock.

2.3. “Board” means the Board of Directors of the Company.

2.4. “Change in Capitalization” means any increase or reduction in the number of Shares, or any change (including, but not limited to, a change in value) in the Shares or exchange of Shares for a different number or kind of shares or other securities of Parent or another corporation, by reason of a reclassification, recapitalization, merger, consolidation, reorganization, reincorporation, spin-off, split-up, issuance of warrants or rights or debentures, stock dividend, stock split or reverse stock split, cash dividend, property dividend, combination or exchange of shares, repurchase of shares, change in corporate structure or otherwise.

2.5. “Change in Control” means

(a) an acquisition or series of acquisitions (other than directly from Parent) by a Person or a group of Persons acting in concert (excluding Parent, an employee benefit plan of Parent or any Subsidiary or an entity controlled by Parent’s stockholders) of twenty-five percent (25%) of the common stock or voting securities of Parent;

(b) at any time during the term of this Plan there is a change in the composition of the Parent Board resulting in a majority of the directors who are in office on the date hereof (“Incumbent Directors”) no longer constituting a majority of the directors of Parent; provided that, in making such determination, persons who are elected to serve as directors of Parent and who are proposed by all of the directors in office who are present or represented at the meeting at which such proposal is voted on (other than in connection with an actual or threatened proxy contest) shall be treated as Incumbent Directors;

(c) consummation of a merger, consolidation or sale of all or substantially all of Parent’s assets (in each case, a “Business Combination”) other than a Business Combination in which all or substantially all of the holders of voting securities of Parent receive sixty percent (60%) or more of the voting securities of the company or entity resulting from the Business Combination (“Resulting Company”), of which at least a majority of the board of directors of the Resulting Company were Incumbent Directors, and after which no person or entity beneficially owns twenty-five percent (25%) or more of the voting securities of the Resulting Company, who did not beneficially own such stock immediately before the Business Combination;

(d) stockholder approval of a complete liquidation or dissolution of Parent, other than in connection with a transaction described in Section 2.5(c);

(e) a direct or indirect sale or transfer of the voting securities of the Company following which one or more persons (other than Parent) beneficially own fifty percent (50%) or more of the voting power of the Company; and

(f) a sale of all or substantially all of the Company’s assets or the liquidation or dissolution of the Company.

Notwithstanding the foregoing, provisions (e) and (f) of this definition shall not apply to any Optionee or Grantee hereunder who is not either an employee or partially paid by the Company unless the Committee shall determine otherwise.

2.6. “Code” means the Internal Revenue Code of 1986, as amended.

2.7. “Committee” means the Board or a committee authorized by the Board from time to time to administer the Plan and to perform the functions set forth herein.

2.8. “Company” means Delhaize America, Inc.

2.9. “Director” means a director of the Company.

2.10. “Disability” means:

(a) in the case of an Optionee or Grantee whose employment with the Company or a Subsidiary is subject to the terms of an employment agreement between such Optionee or Grantee and the Company or Subsidiary, which employment agreement includes a definition of “Disability,” the term “Disability” as used in this Plan or any Agreement shall have the meaning set forth in such employment agreement during the period that such employment agreement remains in effect; and

(b) in all other cases, the term “Disability” as used in this Plan or any Agreement shall mean a physical or mental infirmity which impairs the Optionee’s or Grantee’s ability to perform substantially his or her duties for a period of one hundred eighty (180) consecutive days.

2.11. “Division” means any of the operating units or divisions of the Company designated as a Division by the Committee.

2.12. “EBITDA” means earnings before interest, taxes, depreciation and amortization.

2.13. “Eligible Director” means a director of the Company who is not an employee of the Company or any Subsidiary.

2.14. “Eligible Individual” means any director (other than an Eligible Director), officer, employee of the Company, the Parent (or any subsidiary of the Parent) or a Subsidiary, or any individual who has accepted an offer of employment from the Company, the Parent (or any subsidiary of the Parent) or a Subsidiary, or any consultant of the Company, the Parent (or any subsidiary of the Parent) or a Subsidiary, designated

by the Committee as eligible to receive Options or Awards subject to the conditions set forth herein; provided, however, that with respect to Incentive Stock Options, only employees of the Company, the Parent and any Subsidiary shall be Eligible Individuals.

2.15. “Exchange Act” means the Securities Exchange Act of 1934, as amended.

2.16. “Fair Market Value” on any date means the closing sales price of the Shares on such date on the principal national securities exchange on which such Shares are listed or admitted to trading, or, if such Shares are not so listed or admitted to trading, the average of the per Share closing bid price and per Share closing asked price on such date as quoted on the National Association of Securities Dealers Automated Quotation System or such other market in which such prices are regularly quoted, or, if there have been no published bid or asked quotations with respect to Shares on such date, the Fair Market Value shall be the value established by the Board in good faith and, in the case of an Incentive Stock Option, in accordance with Section 422 of the Code.

2.17. “Grantee” means a person to whom an Award has been granted under the Plan.

2.18. “Incentive Stock Option” means an Option satisfying the requirements of Section 422 of the Code and designated by the Committee as an Incentive Stock Option.

2.19. “Nonqualified Stock Option” means an Option that is not an Incentive Stock Option.

2.20. “Option” means a Nonqualified Stock Option or an Incentive Stock Option or either or both of them.

2.21. “Optionee” means a person to whom an Option has been granted under the Plan.

2.22. “Parent” means any corporation that is a parent corporation (within the meaning of Section 424(e) of the Code) with respect to the Company, and as of the Effective Date, specifically means Etablissements Delhaize Frères et Cie “Le Lion” S.A., a company organized under the laws of the Kingdom of Belgium, or any successor thereto.

2.23. “Parent Board” means the Board of Directors of Parent.

2.24. “Performance Cycle” means the time period specified by the Committee at the time a performance-based Award is granted during which the performance of the Company, a Subsidiary or a Division will be measured.

2.25. “Performance Objectives” has the meaning set forth in Section 6.4(b) hereof.

2.26. “Plan” means the Delhaize America, Inc. Amended 2000 Stock Incentive Plan, as amended and restated from time to time.

2.27. “Reload Option” means an Option that may be granted when an Optionee pays all or a portion of the purchase price and withholding taxes of an Option with previously owned Shares.

2.28. “Restricted Stock” means Shares issued or transferred to an Eligible Individual or Eligible Director pursuant to Section 6 hereof.

2.29. “Shares” means the American Depositary Shares of Parent, as evidenced by American Depositary Receipts.

2.30. “Subsidiary” means any corporation that is a subsidiary corporation (within the meaning of Section 424(f) of the Code) with respect to the Company, including any limited liability company that is disregarded for Federal tax purposes or treated as a corporate subsidiary under the Code.

2.31. “Taxable Event” means any event in connection with the receipt of Shares or cash hereunder with respect to which an Optionee or Grantee recognizes taxable income.

2.32. “Ten-Percent Stockholder” means an Eligible Individual, who, at the time an Incentive Stock Option is to be granted to him or her, owns (within the meaning of Section 422(b)(6) of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, or Parent or a Subsidiary.

2.33. “Withholding Taxes” means the employer’s minimum statutory withholding (based on minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to a Taxable Event).

3. Administration.

3.1. The entire Board may comprise the Committee or the Board may delegate administration of the Plan to a Committee or Committees designated by it. The term “Committee” shall apply to any person or persons to whom such authority has been delegated. Furthermore, unless one or more Committees have been designated by the Board, any reference to the Committee in the Plan shall mean the Board. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board

may abolish the Committee at any time and reassume the administration of the Plan. No member of the Committee shall be liable for any action, failure to act, determination or interpretation made in good faith with respect to this Plan or any transaction hereunder, except for liability arising from his or her own willful misfeasance, gross negligence or reckless disregard of his or her duties. The Company hereby agrees to indemnify each member of the Committee for all costs and expenses and, to the extent permitted by applicable law, any liability incurred in connection with defending against, responding to, negotiating for the settlement of or otherwise dealing with any claim, cause of action or dispute of any kind arising in connection with any actions in administering this Plan or in authorizing or denying authorization to any transaction hereunder.

3.2. Subject to the express terms and conditions set forth herein, the Committee shall have the power from time to time to:

(a) determine those Eligible Individuals and Eligible Directors to whom Options shall be granted under the Plan and the number of such Options to be granted and to prescribe the terms and conditions (which need not be identical) of each such Option, including the purchase price per Share subject to each Option, and make any amendment or modification to any Option Agreement consistent with the terms of the Plan;

(b) select those Eligible Individuals and Eligible Directors to whom Awards shall be granted under the Plan and determine the number of Shares to be granted pursuant thereto, determine the terms and conditions of each Award including the restrictions or Performance Objectives relating to Shares, and to make any amendment or modification to any Agreement consistent with the terms of the Plan;

(c) construe and interpret the Plan, Options and Awards granted hereunder and to establish, amend and revoke rules and regulations for the administration of the Plan, including, but not limited to, correcting any defect or supplying any omission, or reconciling any inconsistency in the Plan or in any Agreement, in the manner and to the extent it shall deem necessary or advisable so that the Plan complies with applicable law the Code to the extent applicable, and otherwise to make the Plan fully effective. All decisions and determinations by the Committee in good faith in the exercise of this power shall be final, binding and conclusive upon the Company, its Subsidiaries, the Optionees and Grantees, and all other persons having any interest therein;

(d) determine the duration and purposes for leaves of absence which may be granted to an Optionee or Grantee on an individual basis without constituting a termination of employment or service for purposes of the Plan;

(e) exercise its discretion with respect to the powers and rights granted to it as set forth in the Plan;

(f) except to the extent prohibited by applicable law or the applicable rules of a stock exchange, the Committee may allocate all or any part of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it, which allocation or delegation may be revoked by the Committee at any time; and

(g) generally, to exercise such powers and to perform such acts as are deemed necessary or advisable to promote the best interests of the Company with respect to the Plan.

4. Stock Subject to the Plan.

4.1. An aggregate of 5,000,000 Shares may be issued pursuant to Incentive Stock Options granted under this Plan, (i) minus, as of April 25, 2001, the number of Shares that have been issued pursuant to Incentive Stock Options under the Plan or are covered by outstanding Incentive Stock Options but that have not been issued as of April 25, 2001, (ii) plus the number of Shares that are covered by outstanding Options and Awards as of the Amendment Date and that are forfeited or cancelled whether such Options or Awards were granted under this Plan, the 1996 Employee Stock Incentive Plan of Food Lion, Inc. (the “1996 Plan”), or any of the stock incentive plans of Hannaford Bros. Co. prior to July 30, 2000 (the 1996 Plan and the plans of Hannaford Bros. Co. being referred to hereafter as the “Prior Plans”).

In the event of a Change in Capitalization, the Board or Committee shall conclusively determine the appropriate adjustments, if any, to (i) the maximum number of Shares which may be granted pursuant to Incentive Stock Options, (ii) the number of Shares or other stock or securities which are subject to outstanding Options or Awards and the purchase price therefor, if applicable, and (iii) the Performance Objectives.

In connection with the grant of an Incentive Stock Option, the number of Shares available for grant under the Plan that may be subject to Incentive Stock Options shall be reduced by the number of Shares in respect of which the Incentive Stock Option is granted.

4.2. Effective as of May 23, 2002, or such later date or dates as decided by the Board, certain Options granted under the Plan shall be assumed by Parent and transferred to the Delhaize Group 2002 Stock Incentive Plan, subject to Optionee approval of such assumption and transfer. Such transferred Options shall no longer be exercisable under this Plan.

5. Option Grants.

5.1. Authority of Committee. Subject to the provisions of the Plan, the Committee, or the persons to whom authority has been delegated under Paragraph (f) of Section 3.2 hereof, shall have full and final authority to select those Eligible Individuals and Eligible Directors who will receive Options, and the terms and conditions that shall be set forth in the applicable Agreements. Some terms and conditions that may, but are not required to be included are: a provision allowing the issuance of a Reload Option and a provision providing acceleration of exercisability under certain conditions as may be determined by the Committee. Other terms and conditions not inconsistent with this Plan may be included in Agreements in the discretion of the Committee.

5.2. Purchase Price. The purchase price or the manner in which the purchase price is to be determined for Shares under each Option shall be determined by the Committee and set forth in the Agreement; provided, however, that the purchase price per Share under each Incentive Stock Option shall not be less than 100% of the Fair Market Value of a Share on the date the Option is granted (110% in the case of an Incentive Stock Option granted to a Ten-Percent Stockholder).

5.3. Maximum Duration. Options granted hereunder shall be for such term as the Committee shall determine, provided that an Incentive Stock Option shall not be exercisable after the expiration of ten (10) years from the date it is granted (five (5) years in the case of an Incentive Stock Option granted to a Ten-Percent Stockholder) and a Nonqualified Stock Option shall not be exercisable after the expiration of ten (10) years from the date it is granted. The Committee may, subsequent to the granting of any Option, extend the term thereof, but in no event shall the term as so extended exceed the maximum term provided for in the preceding sentence.

5.4. Vesting. Each Option shall become exercisable in such installments (which need not be equal) and at such times as may be designated by the Committee and set forth in the Agreement. To the extent not exercised, installments shall accumulate and be exercisable, in whole or in part, at any time after becoming exercisable, but not later than the date the Option expires. The Committee may accelerate the exercisability of any Option or portion thereof at any time.

5.5. Modification. No modification of an Option shall adversely alter or impair any rights or obligations under the Option without the Optionee’s consent.

5.6. Non-Transferability. Unless set forth in the Agreement evidencing the Option (other than an Incentive Stock Option) at the time of grant or at any time thereafter, an Option granted hereunder shall not be transferable by the Optionee to whom granted except by will or the laws of descent and distribution or pursuant to a domestic relations order, and an Option may be exercised during the lifetime of such Optionee only by the Optionee or his or her guardian or legal representative. The terms of such Option shall be final, binding and conclusive upon the beneficiaries, executors, administrators, heirs and successors of the Optionee.

5.7. Method of Exercise. The exercise of an Option shall be made only by a written notice delivered in person or by mail to the Secretary of the Company at the Company’s principal executive office, specifying the number of Shares to be purchased and accompanied by payment therefor and otherwise in accordance with the Agreement pursuant to which the Option was granted. The purchase price for any Shares purchased pursuant to the exercise of an Option shall be paid, as determined by the Committee in its discretion, in either of the following forms (or any combination thereof): (i) cash or (ii) the transfer or attestation of Shares that have been held at least six months to the Company upon such terms and conditions as determined by the Committee. In addition, Options may be exercised through a registered broker-dealer pursuant to such cashless exercise procedures (other than Share withholding) which are, from time to time, deemed acceptable by the Committee, and the Committee may authorize that the purchase price payable upon exercise of an Option may be paid by having Shares withheld that otherwise would be acquired upon such exercise. Any Shares transferred to the Company (or withheld upon exercise) as payment of the purchase price under an Option shall be valued at their Fair Market Value on the date of exercise of such Option. The value of the number of Shares that may be withheld for the payment of taxes may not be in excess of the minimum withholding requirements. At the Company’s request, the Optionee shall deliver the Agreement evidencing the Option to the Secretary of the Company who shall endorse thereon a notation of such exercise and return such Agreement to the Optionee. No fractional Shares (or cash in lieu thereof) shall be issued upon exercise of an Option and the number of Shares that may be purchased upon exercise shall be rounded to the nearest number of whole Shares. The Committee, in its discretion, may also permit simultaneous sale of Shares upon exercise through a broker-dealer.

5.8. Rights of Optionees. An Optionee shall not be deemed for any purpose to be the owner of any Shares subject to any Option unless and until (i) the Option shall have been exercised pursuant to the terms thereof and (ii) the Company shall have delivered Shares to the Optionee. Thereupon, the Optionee shall have voting, dividend and other ownership rights with respect to such Shares, subject to such terms and conditions as may be set forth in the applicable Agreement and further subject to the terms and conditions of any deposit agreement between Parent and its depositary.

5.9. Incentive Stock Options. An Option shall be treated as an Incentive Stock Option only to the extent that the aggregate Fair Market Value (determined at the time the Option is granted) of the Shares with respect to which all Incentive Stock Options held by an Optionee (under the Plan and all other plans of the Company or its Parent or any Subsidiary), become exercisable for the first time during any calendar year does not exceed $100,000. This limitation shall be applied by taking Options into account in the order in which they were granted. To the extent this limitation is exceeded, an Option shall be treated as a Nonqualified Stock Option regardless of its designation as an Incentive Stock Option.

6. Restricted Stock.

6.1. Grant. The Committee may grant Awards to Eligible Individuals and Eligible Directors, which shall be evidenced by an Agreement between the Company and the Grantee. Each Agreement shall contain such restrictions, terms and conditions as the Committee may, in its discretion, determine and (without limiting the generality of the foregoing) such Agreements may require that an appropriate legend be placed on Share certificates. Awards shall be subject to the terms and provisions set forth below in this Section 6.

6.2. Rights of Grantee. Shares of Restricted Stock granted pursuant hereunder shall be recorded in the name of the Grantee as soon as reasonably practicable after the Award is granted provided that the Grantee has executed an Agreement evidencing the Award and any other documents which the Committee may require as a condition to the issuance of such Shares. If a Grantee shall fail to execute the Agreement evidencing an Award or any other documents which the Committee may require within the time period prescribed by the Committee at the time the Award is granted, the Award shall be null and void. Unless the Committee determines otherwise and as set forth in the Agreement, the Grantee shall have no rights of a stockholder with respect to such Shares, including no right to vote the Shares or receive dividends or other distributions with respect to the Shares, until the restrictions with respect to such Shares shall have lapsed in the manner set forth in Section 6.4.

6.3. Non-transferability. Until all restrictions upon the Shares of Restricted Stock awarded to a Grantee shall have lapsed in the manner set forth in Section 6.4, such Shares shall not be sold, transferred or otherwise disposed of and shall not be pledged or otherwise hypothecated, nor shall they be delivered to the Grantee.

6.4. Lapse of Restrictions.

(a) Generally. Restrictions upon Shares of Restricted Stock awarded hereunder shall lapse at such time or times and on such terms and conditions as the Committee may determine. The Agreement evidencing the Award shall set forth any such restrictions. The Board may accelerate the lapse of all or a portion of the restrictions on an Award at any time.

(b) Performance Objectives. If the Committee has determined that the restrictions on Shares of Restricted Stock awarded shall only lapse in accordance with Performance Objectives, the Performance Objectives may be expressed in terms of (i) earnings per Share, (ii) Share price, (iii) pre-tax profits, (iv) net earnings, (v) return on equity or assets, (vi) revenues, (vii) EBITDA, (viii) market share or market penetration or (ix) any combination of the foregoing. Performance Objectives may be in respect of the performance of Parent, the Company and its Subsidiaries (which may be on a consolidated basis), a

Subsidiary or a Division. Performance Objectives may be absolute or relative and may be expressed in terms of a progression within a specified range. The Performance Objectives with respect to a Performance Cycle shall be established in writing by the Committee by the earlier of (i) the date on which a quarter of the Performance Cycle has elapsed or (ii) the date which is ninety (90) days after the commencement of the Performance Cycle, and in any event while the performance relating to the Performance Objectives remain substantially uncertain. At the time of grant of a performance-base Award, the Committee may provide for the manner in which the Performance Objectives will be measured to reflect the impact of specified corporate transactions, extraordinary events, accounting changes and other similar events.

6.5. Delivery of Shares. Upon the lapse of the restrictions on Shares of Restricted Stock, the Committee shall cause a stock certificate to be delivered to the Grantee with respect to such Shares, free of all restrictions hereunder.

7. Effect of a Termination of Employment.

The Agreement evidencing the grant of each Option and each Award shall set forth the terms and conditions applicable to such Option or Award upon a termination or change in the status of the employment of the Optionee or Grantee by the Company, Parent, a Subsidiary or a Division which shall be as the Committee may, in its discretion, determine at the time the Option or Award is granted or thereafter.

8. Adjustment Upon Changes in Capitalization.

8.1. Adjustments to Incentive Stock Options. Any adjustment that may be made pursuant to Section 4.1 hereof in the Shares or other stock or securities subject to outstanding Incentive Stock Options upon a Change in Capitalization, (including any adjustments in the purchase price) shall be made in such manner as not to constitute a modification as defined by Section 424(h)(3) of the Code and only to the extent otherwise permitted by Sections 422 and 424 of the Code.

8.2. Terms of Adjusted Options and Awards. If, by reason of a Change in Capitalization, a Grantee of an Award shall be entitled to, or an Optionee shall be entitled to exercise an Option with respect to, new, additional or different shares of stock or securities, such new, additional or different shares shall thereupon be subject to all of the conditions, restrictions and performance criteria which were applicable to the Shares subject to the Award or Option, as the case may be, prior to such Change in Capitalization.

9. Effect of Certain Transactions.

Except as otherwise provided in an Agreement, in the event of (i) the liquidation or dissolution of the Company or (ii) a merger or consolidation of the

Company (a “Transaction”), the Plan and the Options and Awards issued hereunder shall continue in effect in accordance with their respective terms, except that following a Transaction each Optionee and Grantee shall be entitled to receive in respect of each Share subject to any outstanding Options or Awards, as the case may be, upon exercise of any Option or payment or transfer in respect of any Award, the same number and kind of stock, securities, cash, property or other consideration that each holder of a Share was entitled to receive in the Transaction in respect of a Share; provided, however, that such stock, securities, cash, property or other consideration shall remain subject to all of the conditions, restrictions and performance criteria which were applicable to the Options and Awards prior to such Transaction.

10. Termination and Amendment of the Plan.

The Plan shall terminate on the day preceding the tenth anniversary of the date of its adoption by the Board and no Option or Award may be granted thereafter. The Board may sooner terminate the Plan, may at any time and from time to time amend, modify or suspend the Plan, and may amend or modify an outstanding Option or Award; provided, however, that: (a) no such amendment, modification, suspension or termination shall impair or adversely alter any Options or Awards theretofore granted under the Plan, except with the consent of the Optionee or Grantee, nor shall any amendment, modification, suspension or termination deprive any Optionee or Grantee of any Shares which he or she may have acquired through or as a result of the Plan; and (b) to the extent necessary under applicable law, no amendment shall be effective unless approved by the stockholders of Parent in accordance with applicable law.

11. Non-Exclusivity of the Plan.

The adoption of the Plan by the Board shall not be construed as amending, modifying or rescinding any previously approved incentive arrangement or as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options otherwise than under the Plan, and such arrangements may be either applicable generally or only in specific cases.

12. Limitation of Liability.

As illustrative of the limitations of liability of the Company, but not intended to be exhaustive thereof, nothing in the Plan shall be construed to:

(i) give any person any right to be granted an Option or Award other than at the sole discretion of the Committee;

(ii) give any person any rights whatsoever with respect to Shares except as specifically provided in the Plan;

(iii) limit in any way the right of the Company or any Subsidiary to terminate the employment of any person at any time; or

(iv) be evidence of any agreement or understanding, expressed or implied, that the Company will employ any person at any particular rate of compensation or for any particular period of time.

13. Regulations and Other Approvals; Governing Law.

13.1. Except as to matters of United States federal law, the Plan and the rights of all persons claiming hereunder shall be construed and determined in accordance with the laws of the State of North Carolina without giving effect to conflicts of laws principles thereof.

13.2. The obligation of the Company to sell or deliver Shares with respect to Options and Awards granted under the Plan shall be subject to all applicable laws, rules and regulations, including all applicable federal and state securities laws, and the obtaining of all such approvals by governmental agencies as may be deemed necessary or appropriate by the Committee.

13.3. The Board may make such changes as may be necessary or appropriate to comply with the rules and regulations of any government authority, or to obtain for Eligible Individuals granted Incentive Stock Options the tax benefits under the applicable provisions of the Code and regulations promulgated thereunder.

13.4. Each Option and Award is subject to the requirement that, if at any time the Committee determines, in its discretion, that the listing, registration or qualification of Shares issuable pursuant to the Plan is required by any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the grant of an Option or Award or the issuance of Shares, no Options or Awards shall be granted or payment made or Shares issued, in whole or in part, unless listing, registration, qualification, consent or approval has been effected or obtained free of any conditions as acceptable to the Committee.

13.5. Notwithstanding anything contained in the Plan or any Agreement to the contrary, in the event that the disposition of Shares acquired pursuant to the Plan is not covered by a then current registration statement under the Securities Act of 1933, as amended (the “Securities Act”), and is not otherwise exempt from such registration, such Shares shall be restricted against transfer to the extent required by the Securities Act and Rule 144 or other regulations thereunder. The Committee may require any individual receiving Shares pursuant to an Option or Award granted under the Plan, as a condition precedent to receipt of such Shares, to represent and warrant to the Company in writing

that the Shares acquired by such individual are acquired without a view to any distribution thereof and will not be sold or transferred other than pursuant to an effective registration thereof under said Act or pursuant to an exemption applicable under the Securities Act or the rules and regulations promulgated thereunder. The certificates evidencing any of such Shares shall be appropriately amended to reflect their status as restricted securities as aforesaid.

14. Miscellaneous.

14.1. Multiple Agreements. The terms of each Option or Award may differ from other Options or Awards granted under the Plan at the same time, or at some other time. The Committee may also grant more than one Option or Award to a given Eligible Individual or Eligible Director during the term of the Plan, either in addition to, or in substitution for, one or more Options or Awards previously granted to that Eligible Individual or Eligible Director.

14.2. Withholding of Taxes.

(a) Upon the occurrence of a Taxable Event, an Optionee or Grantee shall pay an amount equal to the applicable Withholding Taxes prior to his or her receipt of any Shares or the payment of any cash due to him or her as the result of the exercise of any portion of an Option. The Company shall have the right to deduct from any payment of cash to an Optionee or Grantee an amount equal to the Withholding Taxes in satisfaction of the obligation to pay Withholding Taxes. In satisfaction of the obligation to pay Withholding Taxes to the Company, the Optionee or Grantee may make a written election, which may be accepted or rejected in the discretion of the Committee, to have withheld a portion of the Shares then due to him or her for payment of Withholding Taxes, but not in excess of such individual’s required withholding obligation.

(b) If (i) the purchase of Shares pursuant to the exercise of an Incentive Stock Option or (ii) an Optionee’s disposition (within the meaning of Section 424(c) of the Code and the regulations promulgated thereunder) of any such Shares within the two-year period commencing on the day after the date of the grant or within the one-year period commencing on the day after the date of transfer of such Shares to the Optionee pursuant to such exercise, becomes a Taxable Event that requires the Company to collect Withholding Taxes, the Optionee shall cooperate with the Company in the procedures it may establish to track any such dispositions and to make appropriate arrangements with the Company for any taxes which the Company is obligated to collect.

14.3. Effective Date. The original effective date of this Plan was March 27, 2000. The effective date of the amended and restated Plan shall be May 23, 2002; provided, however, that Section 4.2 of the amended and restated Plan shall not become effective unless the Delhaize Group 2002 Stock Incentive Plan is approved by the stockholders of Parent.

14 EX-4.2 4 g77659exv4w2.htm 2002 RESTRICTED STOCK UNIT PLAN 2002 Restricted Stock Unit Plan

Exhibit 4.2

DELHAIZE AMERICA, INC.

2002 RESTRICTED STOCK UNIT PLAN

(Effective May 23, 2002)

DELHAIZE AMERICA, INC.

2002 RESTRICTED STOCK UNIT PLAN

1. Purpose.

The purpose of the Delhaize America, Inc. 2002 Restricted Stock Unit Plan (the “Plan”) is to enhance the ability of Delhaize America, Inc. (“DZA”), a subsidiary of Etablissements Delhaize Frères et Cie “Le Lion” S.A. (“Parent”), and the subsidiaries of DZA to attract and retain officers, employees, directors and consultants of outstanding ability and to provide selected officers, employees, directors, consultants and individuals who have accepted an offer of employment from any of these entities with an interest in Parent parallel to that of Parent’s stockholders.

2. Definitions.

For purposes of the Plan:

2.1. “Agreement” means the written agreement between DZA and a Participant evidencing the grant of an Award and setting forth the terms and conditions thereof.

2.2. “Award” means a grant of Restricted Stock Units.

2.3. “Board” means the Board of Directors of DZA.

2.5. “Change in Control” means

(b) at any time during the term of this Plan there is a change in the composition of the Parent Board resulting in a majority of the directors who are in office on the date hereof (“Incumbent Directors”) no longer constituting a majority of the directors of Parent; provided that, in making such determination, persons who are elected to serve as directors of Parent and who are proposed by all of the directors in office on the date of such proposal (other than in connection with an actual or threatened proxy contest) shall be treated as Incumbent Directors;

(c) consummation of a merger, consolidation or sale of all or substantially all of Parent’s assets (collectively, a “Business Combination”) other than a Business Combination in which all or substantially all of the holders of voting securities of Parent receive sixty percent (60%) or more of the voting securities of the company or entity resulting from the Business Combination (“Resulting Company”), of which at least a majority of the board of directors of the Resulting Company were Incumbent Directors, and after which no person or entity beneficially owns twenty-five percent (25%) or more of the voting securities of the Resulting Company, who did not beneficially own such stock immediately before the Business Combination;

(d) shareholder approval of a complete liquidation or dissolution of Parent, other than in connection with a transaction described in Section 2.5(c);

(e) a direct or indirect sale or transfer of the voting securities of DZA following which one or more persons (other than Parent) beneficially owns fifty (50%) percent or more of the voting power of DZA; and

(f) a sale of all or substantially all of DZA’s assets or the liquidation or dissolution of DZA.

Notwithstanding the foregoing, provisions (e) and (f) of this definition shall not apply to any Participant hereunder who is not either an employee or partially paid by the Company unless the Committee shall determine otherwise.

2.6. “Code” means the Internal Revenue Code of 1986, as amended.

2.7. “Committee” means the Board or a committee authorized by the Board from time to time to administer the Plan and to perform the functions set forth herein.

2.8. “Company” means, as the context requires, any of Parent, DZA or any Subsidiary, either alone or collectively.

2.9. “Disability” means:

(a) in the case of a Participant whose employment with the Company is subject to the terms of an employment agreement between such Participant and the Company, which employment agreement includes a definition of “Disability,” the term “Disability” as used in this Plan or any Agreement shall have the meaning set forth in such employment agreement during the period that such employment agreement remains in effect; and

(b) in all other cases, the term “Disability” as used in this Plan or any Agreement shall mean a physical or mental infirmity which impairs the Participant’s ability to perform substantially his or her duties for a period of one hundred eighty (180) consecutive days.

2.10. “DZA” means Delhaize America, Inc.

2.11. “DZA Subsidiary” means an indirect Subsidiary of Parent that is also a direct or indirect subsidiary of DZA.

2.12. “Effective Date” means May 23, 2002 subject only to approval by the Board prior thereto.

2.13. “Eligible Individual” means any director, officer, or employee of Parent or any Subsidiary, or any individual who has accepted an offer of employment from any of these entities, designated by the Committee as eligible to receive Awards subject to the conditions set forth herein.

2.14. “Exchange Act” means the Securities Exchange Act of 1934, as amended.

2.15. “Fair Market Value” on any date means the closing sales price of the Shares on such date on the principal national securities exchange on which such Shares are listed or admitted to trading, or, if such Shares are not so listed or admitted to trading, the average of the per Share closing bid price and per Share closing asked price on such date as quoted on the New York Stock Exchange or such other market in which such prices are regularly quoted, or, if there have been no published bid or asked quotations with respect to Shares on such date, the Fair Market Value shall be the value established by the Board in good faith.

2.16. “Parent” means any corporation that is a parent corporation (within the meaning of Section 424(e) of the Code), and as of the Effective Date, specifically means Etablissements Delhaize Frères et Cie “Le Lion” S.A., a company organized under the laws of the Kingdom of Belgium, or any successor thereto.

2.17. “Parent Board” means the Board of Directors of Parent.

2.18. “Participant” means an Eligible Individual who has been granted an Award under the Plan.

2.19. “Person” means any individual, partnership, joint venture, corporation, limited partnership, limited liability company, trust, estate, unincorporated organization, association, or other entity.

2.20. “Plan” means the Delhaize America, Inc. 2002 Restricted Stock Unit Plan, as amended and restated from time to time.

2.21. “Restricted Stock Unit” means a right to receive one Share from DZA subject to the terms of the Plan and the applicable Agreement.

2.22. “Securities Act” means the Securities Act of 1933, as amended.

2.23. “Shares” means the American Depositary Shares of Parent, as evidenced by American Depositary Receipts.

2.24. “Subsidiary” means any corporation that is a subsidiary corporation (within the meaning of Section 424(f) of the Code), including any limited liability company or other entity that is disregarded for Federal tax purposes or treated as a corporate subsidiary under the Code.

2.25. “Taxable Event” means any event in connection with the receipt of Shares or cash hereunder with respect to which a Participant recognizes taxable income.

2.26. “Withholding Taxes” means the employer’s minimum statutory withholding (based on minimum statutory withholding rates for federal and state tax purposes including payroll taxes, that are applicable to a Taxable Event).

3. Administration.

interpretation made in good faith with respect to this Plan or any transaction hereunder, except for liability arising from his or her own willful misfeasance, gross negligence or reckless disregard of his or her duties. DZA hereby agrees to indemnify each member of the Committee for all costs and expenses and, to the extent permitted by applicable law, any liability incurred in connection with defending against, responding to, negotiating for the settlement of or otherwise dealing with any claim, cause of action or dispute of any kind arising in connection with any actions in administering this Plan or in authorizing or denying authorization to any transaction hereunder.

3.2. Subject to the express terms and conditions set forth herein, the Committee shall have the power from time to time to:

(a) select those Eligible Individuals to whom Awards shall be granted under the Plan and determine the number of Restricted Stock Units to be granted pursuant thereto, determine the terms and conditions of each Award, and to make any amendment or modification to any Agreement consistent with the terms of the Plan;

(b) construe and interpret the Plan and Awards granted hereunder, and to establish, amend and revoke rules and regulations for the administration of the Plan, including, but not limited to, correcting any defect or supplying any omission, or reconciling any inconsistency in the Plan or in any Agreement, in the manner and to the extent it shall deem necessary or advisable so that the Plan complies with applicable law and the Code (to the extent applicable), and otherwise to make the Plan fully effective. All decisions and determinations by the Committee in good faith in the exercise of this power shall be final, binding and conclusive upon Parent, DZA, all Subsidiaries, the Participants, and all other persons having any interest therein;

(c) determine the duration and purposes for leaves of absence which may be granted to a Participant on an individual basis without constituting a termination of employment or service for purposes of the Plan;

(d) exercise its discretion with respect to the powers and rights granted to it as set forth in the Plan;

(e) except to the extent prohibited by applicable law or the applicable rules of a stock exchange, the Committee may allocate all or any part of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it, which allocation or delegation may be revoked by the Committee at any time; and

(f) generally, to exercise such powers and to perform such acts as are deemed necessary or advisable to promote the best interests of the Company with respect to the Plan.

4. Restricted Stock Units Subject to the Plan.

4.1. The Board, in its sole discretion, shall determine the number of Restricted Stock Units that shall be covered by an Award.

4.2. In the event of a Change in Capitalization, the Board or Committee shall conclusively determine the appropriate adjustments, if any, to the number of Restricted Stock Units or other stock or securities which are subject to Awards.

5. Terms of Restricted Stock Units.

5.1. Grant. The Committee may grant Awards to Eligible Individuals, which shall be evidenced by an Agreement between DZA and the Participant. Each Agreement shall contain such restrictions, terms and conditions as the Committee may, in its discretion, determine, subject to the terms and provisions set forth below in this Section 5.

5.2. Rights of Participant. Until the Restricted Stock Units vest, the Participant shall have no rights of a shareholder.

5.3. Non-transferability. No Award shall be transferable by the Participant other than by will or by the laws of descent and distribution. The terms of an Award shall be final, binding and conclusive upon the beneficiaries, executors, administrators, heirs and successors of the Participant.

5.4. Vesting of Awards. The Restricted Stock Units shall vest at such time or times and on such terms and conditions as the Committee may determine. The Board may accelerate the vesting schedule of an Award at any time.

5.5. Delivery of Shares. As the Restricted Stock Units vest, the Participant shall receive Shares free of all restrictions hereunder.

5.6. Effect of a Termination of Employment.

The Agreement evidencing the grant of each Award shall set forth the terms and conditions applicable to such Award upon a termination or change in the status of employment of the Participant.

6. Adjustment Upon Changes in Capitalization.

If, by reason of a Change in Capitalization, a Participant shall be entitled to an Award that covers new, additional or different shares of stock or securities, such new, additional or different shares shall thereupon be subject to all of the conditions, restrictions and performance criteria which were applicable to the Shares subject to the Award prior to such Change in Capitalization.

7. Effect of Change in Control.

Notwithstanding any other provision of the Plan (including but not limited to Section 8) or any provision in any Agreement to the contrary, upon, prior to or within three (3) months after the occurrence of a Change in Control, the Committee may, in its discretion, terminate any outstanding Awards without the Participants’ consent as long as it provides for Participant realization of the value of such Awards through the vesting of all outstanding Awards and the settlement thereof, at the discretion of the Committee in either cash or Shares or the same securities or other property that shareholders have received or will receive in exchange for their shares of common stock of Parent. Further, if such Awards continue following a Change in Control, such Awards may be adjusted in accordance with Sections 4.2 and 6 of the Plan.

8. Termination and Amendment of the Plan.

The Plan shall terminate on the day preceding the tenth anniversary of the date of its adoption by the Board, and no Award may be granted thereafter. The Board may sooner terminate the Plan, may at any time and from time to time amend, modify or suspend the Plan, and may amend or modify an outstanding Award; provided, however, that: (a) except as permitted under Section 7 hereof, no such amendment, modification, suspension or termination shall impair or adversely alter any Awards theretofore granted under the Plan, except with the consent of the Participant, nor shall any amendment, modification, suspension or termination deprive any Participant of any Shares which he or she may have acquired through or as a result of the Plan; and (b) to the extent necessary under applicable law, no amendment shall be effective unless approved by the stockholders of DZA or Parent in accordance with applicable law.

9. Non-Exclusivity of the Plan.

10. Limitation of Liability.

As illustrative of the limitations of liability of DZA and each DZA Subsidiary, but not intended to be exhaustive thereof, nothing in the Plan shall be construed to:

(i) give any person any right to be granted an Award other than at the sole discretion of the Committee;

(ii) give any person any rights whatsoever with respect to Shares unless and until the Restricted Stock Units vest;

(iii) limit in any way the right of DZA or any DZA Subsidiary to terminate the employment of any person at any time; or

(iv) be evidence of any agreement or understanding, expressed or implied, that DZA or any DZA Subsidiary will employ any person at any particular rate of compensation or for any particular period of time.

11. Regulations and Other Approvals; Governing Law.

11.1. Except as to matters of United States federal law, the Plan and the rights of all persons claiming hereunder shall be construed and determined in accordance with the laws of the State of North Carolina without giving effect to conflicts of laws principles thereof.

11.2. The grant of Awards under the Plan, and the obligation of DZA to deliver Shares with respect to Awards granted under the Plan shall be subject to all applicable laws, rules and regulations, including all United States federal and state securities laws, and the obtaining of all such approvals by governmental agencies or regulatory or corporate bodies as may be deemed necessary or appropriate by the Committee.

11.3. The Board may make such changes as may be necessary or appropriate to comply with the rules and regulations of any governmental or regulatory authority.

11.4. Each Award is subject to the requirement that, if at any time the Committee determines, in its discretion, that the listing, registration or qualification of Shares issuable pursuant to the Plan is required by any securities exchange or under any Belgian, state or federal law, or the consent or approval of any governmental, regulatory or corporate body is necessary or desirable as a condition of, or in connection with, the grant of an Award or the issuance of Shares, no Awards shall be granted or payment made or Shares issued, in whole or in part, unless listing, registration, qualification, consent or approval has been effected or obtained free of any conditions as acceptable to the Committee.

11.5. Notwithstanding anything contained in the Plan or any Agreement to the contrary, in the event that the disposition of Shares acquired pursuant to the Plan is not covered by a then current registration statement under the Securities Act, and is not otherwise exempt from such registration, such Shares shall be restricted against transfer to the extent required by the Securities Act and Rule 144 or other regulations thereunder. The Committee may require any individual receiving Shares pursuant to an Award granted under the Plan, as a condition precedent to receipt of such Shares, to represent and warrant to DZA in writing that the Shares acquired by such individual are acquired without a view to any distribution thereof and will not be sold or transferred other than pursuant to an effective registration thereof under said Act or pursuant to an exemption applicable under the Securities Act or the rules and regulations promulgated thereunder.

12. Miscellaneous.

12.1. Multiple Agreements. The terms of each Award may differ from other Awards granted under the Plan at the same time, or at some other time. The Committee may also grant more than one Award to a given Eligible Individual during the term of the Plan, either in addition to, or in substitution for, one or more Awards previously granted to that Eligible Individual.

12.2. Withholding of Taxes. Upon the occurrence of a Taxable Event, the Participant shall pay an amount equal to the applicable Withholding Taxes either, in the discretion of the Company, (i) prior to the issuance of Shares or the payment of cash, or (ii) after such issuance or payment through payroll withholding. The Company shall have the right to deduct from any payment of cash to a Participant an amount equal to the Withholding Taxes in satisfaction of the obligation to pay Withholding Taxes. In satisfaction of the obligation to pay Withholding Taxes to the Company, the Participant may make a written election, which may be accepted or rejected in the discretion of the Committee, to have withheld a portion of the Shares then issuable to him or her for payment of Withholding Taxes.

12.3. Effective Date. The effective date of this Plan is May 23, 2002.

9 EX-99.1 5 g77659exv99w1.htm SECTION 906 CERTIFICATION OF THE CEO Section 906 Certification of the CEO

Exhibit 99.1

CERTIFICATION OF
CHIEF EXECUTIVE OFFICER
OF DELHAIZE AMERICA, INC.

This certification is provided pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and accompanies the quarterly report on Form10-Q (the “Form 10-Q”) for the quarter ended June 29, 2002 of Delhaize America, Inc. (the “Issuer”).

I, R. William McCanless, the President and Chief Executive Officer of the Issuer, certify that, to the best of my knowledge:

(i) the Form 10-Q fully complies with the requirements of section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and

(ii) the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Issuer.


Dated: August 13, 2002



		/s/ R. William McCanless R. William McCanless President and Chief Executive Officer



Subscribed and sworn to before me this 13th day of August, 2002.



/s/ Melinda W. Dabbs
Name: Melinda W. Dabbs
Title: Notary Public

My commission expires: July 26, 2003

10 EX-99.2 6 g77659exv99w2.htm SECTION 906 CERTIFICATION OF THE CAO Section 906 Certification of the CAO

Exhibit 99.2

CERTIFICATION OF
CHIEF ACCOUNTING OFFICER
OF DELHAIZE AMERICA, INC.

This certification is provided pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and accompanies the quarterly report on Form 10-Q (the “Form 10-Q”) for the quarter ended June 29, 2002 of Delhaize America, Inc. (the “Issuer”).

I, Carol M. Herndon, the Chief Accounting Officer and Executive Vice President of Accounting and Analysis of the Issuer, certify that, to the best of my knowledge:


Dated: August 13, 2002



		/s/ Carol M. Herndon Carol M. Herndon Chief Accounting Officer and Executive Vice President of Accounting and Analysis



Subscribed and sworn to before me this 13th day of August, 2002



/s/ Melinda W. Dabbs
Name: Melinda W. Dabbs
Title: Notary Public

My commission expires: July 26, 2003

11 GRAPHIC 7 g77659box.gif GRAPHIC begin 644 g77659box.gif M1TE&.#EA#``,`/?^``````$!`0("`@,#`P0$!`4%!08&!@<'!P@("`D)"0H* M"@L+"PP,#`T-#0X.#@\/#Q`0$!$1$1(2$A,3$Q04%!45%186%A<7%Q@8&!D9 M&1H:&AL;&QP<'!T='1X>'A\?'R`@("$A(2(B(B,C(R0D)"4E)28F)B7IZ>GM[>WQ\?'U]?7Y^?G]_?X"`@(&!@8*" M@H.#@X2$A(6%A8:&AH>'AXB(B(F)B8J*BHN+BXR,C(V-C8Z.CH^/CY"0D)&1 MD9*2DI.3DY24E)65E9:6EI>7EYB8F)F9F9J:FIN;FYRGI^?GZ"@ MH*&AH:*BHJ.CHZ2DI*6EI::FIJ>GIZBHJ*FIJ:JJJJNKJZRLK*VMK:ZNKJ^O MK["PL+&QL;*RLK.SL[2TM+6UM;:VMK>WM[BXN+FYN;JZNKN[N[R\O+V]O;Z^ MOK^_O\#`P,'!P<+"PL/#P\3$Q,7%Q<;&QL?'Q\C(R,G)RWM_?W^#@X.'AX>+BXN/CX^3DY.7EY>;FYN?GY^CHZ.GIZ>KJZNOK MZ^SL[.WM[>[N[N_O[_#P\/'Q\?+R\O/S\_3T]/7U]?;V]O?W]_CX^/GY^?KZ M^OO[^_S\_/W]_?[^_O___R'Y!`$``/X`+``````,``P`!P@Z`/\)'$APX)L? M"!,J_/<#F;B'$!\:8"BNX,`#%"T*Q/BCHD:.'BV"U/AOY,>,)SN2Y&C@@,N7 &+@$$!``[ ` end -----END PRIVACY-ENHANCED MESSAGE-----

	•		results in recognition of the gain or loss in the financial statements;

	•		is subject to FASB Statement No. 66, “Accounting for Sales of Real Estate,” if the leased asset is real estate, including integral equipment; and

	•		is subject in its entirety to the sale-leaseback rules of SFAS No. 98, “Accounting for Leases: Sale-Leaseback Transactions Involving Real Estate, Sales-Type Leases of Real Estate, Definition of the Lease Term, and Initial Direct Costs of Direct Financing Leases.”

		4.1 Delhaize America, Inc. 2000 Stock Incentive Plan, as amended and restated effective May 23, 2002

		4.2 Delhaize America, Inc. 2002 Restricted Stock Unit Plan

		99.1 Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

		99.2 Certification of Chief Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

	(a)		an acquisition or series of acquisitions (other than directly from Parent) by a Person or a group of Persons acting in concert (excluding Parent, an employee benefit plan of Parent or any Subsidiary or an entity controlled by Parent’s stockholders) of twenty-five percent (25%) of the common stock or voting securities of Parent;

	(b)		at any time during the term of this Plan there is a change in the composition of the Parent Board resulting in a majority of the directors who are in office on the date hereof (“Incumbent Directors”) no longer constituting a majority of the directors of Parent; provided that, in making such determination, persons who are elected to serve as directors of Parent and who are proposed by all of the directors in office who are present or represented at the meeting at which such proposal is voted on (other than in connection with an actual or threatened proxy contest) shall be treated as Incumbent Directors;

	(c)		consummation of a merger, consolidation or sale of all or substantially all of Parent’s assets (in each case, a “Business Combination”) other than a Business Combination in which all or substantially all of the holders of voting securities of Parent receive sixty percent (60%) or more of the voting securities of the company or entity resulting from the Business Combination (“Resulting Company”), of which at least a majority of the board of directors of the Resulting Company were Incumbent Directors, and after which no person or entity beneficially owns twenty-five percent (25%) or more of the voting securities of the Resulting Company, who did not beneficially own such stock immediately before the Business Combination;

	(d)		stockholder approval of a complete liquidation or dissolution of Parent, other than in connection with a transaction described in Section 2.5(c);

	(e)		a direct or indirect sale or transfer of the voting securities of the Company following which one or more persons (other than Parent) beneficially own fifty percent (50%) or more of the voting power of the Company; and

	(f)		a sale of all or substantially all of the Company’s assets or the liquidation or dissolution of the Company.


	(iii) limit in any way the right of the Company or any Subsidiary to terminate the employment of any person at any time; or

	(iv) be evidence of any agreement or understanding, expressed or implied, that the Company will employ any person at any particular rate of compensation or for any particular period of time.


	(i)		give any person any right to be granted an Award other than at the sole discretion of the Committee;

	(ii)		give any person any rights whatsoever with respect to Shares unless and until the Restricted Stock Units vest;

	(iii)		limit in any way the right of DZA or any DZA Subsidiary to terminate the employment of any person at any time; or

	(iv)		be evidence of any agreement or understanding, expressed or implied, that DZA or any DZA Subsidiary will employ any person at any particular rate of compensation or for any particular period of time.

	(i)		the Form 10-Q fully complies with the requirements of section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and

	(ii)		the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Issuer.